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To Innovate, We Need To Build: Permitting Reform Is Innovation Policy

To Innovate, We Need To Build: Permitting Reform Is Innovation Policy

September 23, 2022

With billions on the way to support large-scale clean energy demonstration projects and first-of-a-kind deployments, permitting these projects will now become a major obstacle to vital climate innovation. It takes too long to get projects sited and built. And each delay not only impacts that project, but each subsequent project, sacrificing potential learning, cost reductions, and first mover advantages. Congress must not miss this opportunity to leverage the billions in clean energy funding by reforming cumbersome permitting requirements.

Congress has been busy passing a bevy of legislation to support American climate technology innovation and deployment. There’s $369 billion in funding over ten years for everything from heat pumps to battery storage to hydrogen and offshore wind in the recently-passed Inflation Reduction Act (IRA). Another $62 billion over five years was invested in climate-tech in last year’s Infrastructure Investment and Jobs Act (IIJA). And more than $50 billion was authorized on a continuing basis by the CHIPS and Science Act.

This massive new federal funding could jumpstart critical domestic industries needed to meet ambitious economy-wide net-zero targets, while developing much-needed new technologies. Estimates of the emissions impact of the IRA and IIJA found that together they could reduce emissions roughly 42 percent below 2005 levels, keeping the U.S. in line with its Paris Agreement target. That could happen, but only if all those projects can be sited, permitted, and built.

Clean energy and climate innovation to make products cheaper, cleaner, and better, requires policy support to continue through the early phases of deployment, while private investment ramps up and ultimately takes over entirely. Hydrogen, carbon capture and storage, advanced nuclear, and next generation renewables like floating wind-turbines are among the technologies where the feedback between deployment and innovation to drive down costs will be vital.

Today, a major hurdle to getting many of these projects built is not technology, financing, or cost uncertainty, but regulatory and permitting hurdles that can delay projects for years or scuttle them entirely. Many of these delays can be attributed to the procedural requirements of the National Environmental Protection Act (NEPA), which was enacted in 1970, a very different era in American history.

NEPA requires federally-funded projects to go through a detailed, arduous, and expensive environmental review process. Offshore wind farms, carbon capture facilities and pipelines, transmission lines to bring renewables to population centers, and more will all require the difficult process of writing and developing environmental impact statements (EIS).

EISs can range from 200 to 1,800 pages or even more, with times ranging from two to seven years. To put that in perspective, the Manhattan Project, involving an unprecedented nationwide program, took only six years from Einstein’s letter to the president warning that Germany might be developing an atomic bomb to the first successful U.S. test in 1945.

In 2019, the median length of a federal EIS was 447 pages, the result of a process averaging 4.5 years, as reported by the White House Council on Environmental Quality. Such figures conceal more than they are reveal, however. They are gleaned from diverse sources of varied quality. Accurate information on the NEPA process is extremely difficult to get. A 2014 Government Accountability Office report noted that agencies do not readily track compliance costs nor is there clear information about the costs and benefits of completing NEPA analysis. And these delays and subsequent litigation have real world effects. For instance, recent challenges have delayed the creation of a new offshore wind development zone off the coast of New York State (Save Long Beach Island v. Haaland) and much needed transmission corridors in New England and in the Midwest.

One problem with the process is that even though one agency is nominally in charge, various others must often sign off independently. For example, a bridge or road replacement project must be approved by a half-dozen agencies, including the Department of Transportation, the Army Corps of Engineers, the Fish and Wildlife Service, the National Marine Fisheries Service, and the Forest Service. All these approvals come at a significant cost, up to $7.5 million for the Department of Energy on average according to one assessment.

Beyond the cost, complexity, and time requirements that it imposes on project developers, NEPA opens up robust avenues for litigation. Plaintiffs frequently argue that agencies’ NEPA processes fail to conform to the Administrative Procedure Act (APA), leading courts to delay projects. According to the Congressional Research Service, NEPA is the most litigated federal environmental statute. The NEPA litigation process, for example, has been cited as a key hurdle to development of geothermal resources on federal lands, even as offshore oil and gas exploration is exempted. Ultimately, a statute meant to protect environmental interests may end up stymieing environmental progress.

Both parties in Congress have acknowledged the need to reform the permitting process for clean energy projects. And both Democratic and Republican administrations have made progress in improving the speed and transparency of the permitting process. The Obama administration inaugurated the Federal Permitting Improvement Steering Council (FPISC) and the Fixing America’s Surface Transportation-41 (FAST-41) permitting provisions. The Trump administration followed up by proposing significant revisions to speed up NEPA processes further and facilitate easier compliance. The Biden administration was able to make both FPISC and FAST-41 permanent in the bipartisan IIJA.

The IRA recognized the need for swifter and more efficient environmental reviews, allocating $125 million to DOE, $100 million to Federal Energy Regulatory Commission, $150 million to Department of Interior, $30 million for the Council on Environmental Quality, and $70 million for FPISC, to hire personnel and technical expertise to speed up the approval process. But while these expenditures might reduce delays, they will not ultimately reduce NEPA compliance costs.

To fully leverage the once-in-a-generation federal climate spending that this Congress has succeeded in passing, federal permitting must be reformed to make it less onerous, time intensive and costly. Commonsense steps include:

  • Codifying the One Federal Agency rule, which allows one lead federal agency to coordinate and conduct permitting reviews concurrently with and alongside partner federal agencies. Congress should allow one federal agency to sign off on a final record of decision.
  • Limiting EISs to less than 400 pages and to a two-year time frame, with efforts made to speed up the process to less than two years. To achieve these ambitious targets, Congress must continue to support agency environmental review with appropriate funding, as it has done in the IRA.
  • Congress should direct the Administration to establish a list of at least 25 critical national energy projects and hubs that would receive expedited federal permitting and preempt state and local permitting approvals. With this regulatory certainty in hand, the rights can be competitively auctioned to project developers. Texas did something similar with the establishment of the state-level Competitive Renewable Energy Zones (CREZ), which proactively identified key areas of renewable energy development, secured permitting and siting rights for transmission lines and then competitively auctioned those rights to transmission developers. The program is widely seen as a success in bringing thousands of miles of transmission across the state and encouraging renewable energy developers to build projects they knew would have transmission access.
  • Congress should mandate that each agency collect standardized data every year regarding their actions under NEPA and publish them on an accessible dashboard. They should provide detailed information on the cost, length, and time that each EA or EIS has taken as well. Finally, the agencies should periodically assess the costs and benefits of the NEPA process.
  • Expand categorical exclusions to NEPA or only require less intensive environmental assessments (EAs), rather than EIS’s, for clean energy projects that rely on proven technologies and processes. Many clean energy projects do so. For example, drilling CO2 or geothermal wells relies on essentially the same drilling technology that hydraulic fracturing does. Direct air capture facilities are in many ways similar to large data processing centers. There are over 5,000 miles of existing CO2 pipelines with years of operational experience. Reviewing the additional thousands of miles that we will need should not be overly burdensome.
  • Congress should amend NEPA to limit the time in which litigants are able to bring suit against a project to two years from the beginning of the environmental review process, rather than the current six after the project’s announcement. The current rule increases uncertainty and drives up costs.
  • Another way to limit the threat of burdensome litigation is to work in advance with stakeholders and potential litigants to avoid possible lawsuits. Agencies should be required to work collaboratively and early with potentially affected communities to improve outcomes.
  • Finally, while not an issue with NEPA, Congress should give FERC the same authority over interstate electricity transmission lines that it has over natural gas pipelines. Under the Natural Gas Act, FERC can overrule state and local objections to pipeline siting and permitting. It does not have similar authority for interstate transmission. Congress should also grant FERC authority over hydrogen and CO2 pipeline siting, both of which will be critical to building out industries need to support a lower carbon economy.

The 117th Congress passed important legislation to support climate-tech innovation and position America to lead in the industries of the future. Yet, to fully realize those benefits, demonstration and first-of-a-kind deployment projects must be built and quickly. The money is only as good as the plants, pipelines, and transmission lines it is able to build. Permitting hurdles today are too high even for experienced project developers, let alone startups, to navigate. Congress must enact comprehensive reform of permitting to unlock the innovation we need to meet the challenge of the moment.

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