President Joe Biden and Speaker Kevin McCarthy negotiated a bill to extend the debt ceiling and prevent the United States from defaulting on its debts. On June 3, President Biden signed the Fiscal Responsibility Act of 2023 (FRA) into law. Despite grumbling from members of both parties, the final bill delivered wins to both Speaker McCarthy and President Biden. The FRA contains several provisions that reduce regulatory barriers to new critical energy infrastructure projects. While Republicans and the White House were able to compromise on small but consequential permitting changes, the FRA was ultimately another missed opportunity to pass more significant reforms. The United States needs further regulatory reform in order to streamline the permitting and building of new critical energy infrastructure that will be necessary to increase economic growth, combat inflation, and ensure grid reliability.
The FRA included provisions from the Builder Act, which had been part of the House Republicans’ more comprehensive permitting and regulatory reform package, The Lower Energy Costs Act. The Builder Act provisions streamline processes for National Environmental Protection Act (NEPA) reviews. These reforms will help to reduce costs and uncertainty for project owners seeking to build new critical energy infrastructure and other projects.
Enacted in 1970, NEPA requires federal agencies to evaluate the potential environmental impacts of their proposed actions before making permitting decisions. This process usually requires the creation of Environmental Impact Statements (EIS) and Environmental Assessments (EA); documents designed to assess the ecological impacts of proposed projects. These requirements, while intended to prevent unnecessary harms to ecosystems and the environment, have resulted in unruly regulatory complexities that prevent the development of—or unnecessarily raise the costs of—critical infrastructure and energy projects.
The FRA establishes limits on the length of both EISs and EAs. An EIS cannot exceed 150 pages, not including citations and appendices, except in circumstances of extraordinary complexity. In those circumstances, an EIS cannot exceed 300 pages. Similarly, an EA cannot exceed 75 pages, excluding citations and appendices.
According to the Council on Environmental Quality, from 2013 to 2018, the median length of an EIS was 447 pages. A maximum length of 300 pages, in cases of extreme complexity, is a decrease in length of 32.8 percent compared to this prior median. In normal circumstances, the new maximum length will be 150 pages, a decrease in length of nearly two-thirds. While certain agencies may have to adopt significant operating changes to their NEPA-related processes to adapt to these requirements, this should save significant resources for both agencies and project owners.
If multiple agencies are involved in the NEPA process, they must now designate a lead agency within 45 days. The lead agency must develop a schedule in coordination with other partner agencies and hold them to the established timeline. The FRA also requires, where possible, the lead and cooperative agencies to evaluate the proposal in a single document, request public comment with respect to the proposed agency action, and release “a statement of purpose and need” that summarizes the reasoning behind the proposed action. These changes will reduce project risk and create greater accountability for the agencies involved in these important decisions.
If an agency does not abide by the outlined process and timeline, FRA gives a developer the right to petition and pursue a court order to compel the agency to follow a schedule and deadline determined by the court. The deadline must be within 90 days of the court order unless the court determines a longer timeline is necessary to comply with applicable law. It is unclear if developers would want to pursue this remedy, but it is now available to deter an agency from dragging out an approval process.
The FRA also includes new reporting requirements for the head of each lead agency, holding them accountable for their role in the approval of projects under NEPA. They must disclose: all EISs and EAs that they did not complete by the set deadline and an explanation for why they did not meet their set deadline. This report must be submitted to the Committee on Natural Resources of the House of Representatives and the Committee on Environment and Public Works in the Senate.
To further streamline processes, the act also allows agencies to adopt categorical exclusions which have been established through another agency’s NEPA procedures. A categorical exclusion is a set of normal actions that a federal agency has determined does not significantly affect the quality of the human environment. For example, the Department of Transportation (DOT) may have categorical exclusions related to road repairs and bridge maintenance. For a relevant project, after consulting with the DOT, a different agency could adopt their categorical exclusion and avoid additional permitting requirements or other bureaucratic overhead for a proposed project.
The act also directs the Council on Environmental Quality to assess the potential for an electronic portal—E-NEPA—to modernize the permitting process, facilitate communication, and improve transparency. Applicants would be able to: submit documents through a single portal; collaborate with relevant agencies and edit submissions in real-time; upload requested renderings and visualizations; and track the process of their applications. With a proper design, this tool has the potential to reduce administrative overhead and facilitate better and more efficient communication between applicants and relevant agencies. It could also help to identify and analyze remaining bottlenecks in NEPA-related processes.
Transmission Study and Grid Fragility
The act requires the North American Electric Reliability Corporation (NERC) to consult with regional transmitting utilities to determine:
- Total transfer capability between each pair of neighboring transmission planning regions;
- Recommend additions that would demonstrably strengthen reliability within and among the regions; and
- Recommend further changes to meet and maintain total transfer capability.
Within the next 18 months, NERC must report its findings to the Federal Energy Regulatory Commission (FERC) and seek public comment. Within 12 months of receiving the report, FERC must submit its report to Congress with any recommendations. It would be ideal if NERC and FERC can conduct their respective analyses and return the recommendations to Congress long before the mandated deadline. Many grid regions—which are managed by independent system operators (ISOs)—already face reliability issues that will require the ISOs to build new critical energy infrastructure, particularly additional baseload power plants.
NERC’s Summer Reliability Assessment 2023 echoed the concerns of energy analysts and staff at various regional utilities. According to the assessment:
- The Midcontinent Independent System Operator (MISO) region—serving Arkansas, Illinois, Indiana, Iowa, Kentucky, Louisiana, Michigan, Missouri, Montana, Louisiana, North Dakota, South Dakota, Wisconsin, and part of Texas—has greater firm capacity than last year, but still may run into reliability issues if wind generators produce less power than expected.
- The New England ISO’s region—serving Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont—has fewer available resources than last year and may need assistance from surrounding regions if output from renewable sources is lower than anticipated.
- Ontario, Canada has potential reliability concerns due to scheduled maintenance of a nuclear plant and projected growth in peak-power demand.
- Demand in the Southeastern Electric Reliability Council region—serving Alabama, Georgia, Mississippi, North Carolina, South Carolina, Tennessee; and parts of Arkansas, Illinois, Kentucky, Louisiana, Oklahoma, Texas, Virginia, and Florida—has increased by 950 MW, yet generation is flat. If demand exceeds expectations, grid operators will be forced to shut off customers’ access to power to balance the grid.
- The Southwest Power Pool region—serving Kansas and Oklahoma; and parts of New Mexico, Arkansas, Louisiana, Missouri, South Dakota, North Dakota, Montana, Minnesota, Iowa, Wyoming, and Nebraska—faces an outlook similar to MISO:if the region’s wind output falters, they will face reliability issues.
- The Electric Reliability Council of Texas region has expanded both capacity and demand significantly and is expected to have sufficient generation, but could struggle during a period of high heat and low wind.
With the exception of Ontario, all of these regions will face reliability challenges if wind generation is lower than expectations or peak demand is higher. If surrounding regions all struggle due to a widespread weather event, expanding inter-regional transmission may do little to promote grid reliability.
The real cause of these reliability concerns is insufficient baseload power. The nation's present permitting regime makes it unnecessarily expensive to build baseload power generators. This, in turn, results in higher energy prices and threatens rolling blackouts for businesses and families. In particular, the arduous permitting and approval processes for new nuclear plants has prevented operators from adding safe, affordable, and low-carbon baseload power to the grid. The United States desperately needs to reform the Nuclear Regulatory Commission and create a streamlined process for approving new reactors and designs.
The FRA includes a provision designed to expedite permitting for battery storage projects by adding battery storage to the list of covered projects under the Fixing America’s Surface Transportation (FAST) Act of 2015. This promises to reduce the regulatory burdens for building large-scale grid storage. To the extent that future grid scale batteries are a cost-effective solution to reliability concerns, this change will be helpful. At present, expanding firm power generation is a more practical solution to addressing reliability concerns and decreasing electricity costs.
The Mountain Valley Pipeline
In exchange for his support for the FRA, Sen. Joe Manchin (D., W. Va.) secured all remaining permitting approvals for the Mountain Valley Pipeline. As a result, the Mountain Valley pipeline is expected to be in-service by the end of this year and transport up to 2 billion cubic feet of natural gas per day. That is enough natural gas to heat and power 11 million households per day, more than the number of households in Virginia. A significant portion of this gas will power business and industry.
The Mountain Valley pipeline runs from West Virginia to Virginia. More than half of all of Virginia’s electricity is generated by natural-gas-fired plants. Many states have expanded their use of gas-fired plants to reduce emissions, lower energy prices, and respond to the volatility of intermittent power generators, like wind and solar farms. Pipelines are the most cost-efficient and lowest emissions way of transporting natural gas, as more energy and labor is required to liquify and transport natural gas. The approval of the Mountain Valley pipeline should reduce the cost of natural gas for all Virginians and spur economic growth in both states.
The energy-related provisions in the Fiscal Responsibility Act will help to reduce project overhead for the construction of new critical energy infrastructure. Permitting reform is necessary for the United States to have any hope of rapidly scaling our energy production capacity and building necessary transmission infrastructure. Barriers to building new infrastructure reduces competition between energy producers, results in higher consumer prices, and entrenches our status quo energy mix. Higher energy prices disproportionately harm the poorest Americans.
While the Fiscal Responsibility Act is a bipartisan success, significant regulatory reforms remain to be done. Nothing less is required to reduce inflation, spur economic growth, and bolster America’s energy security.