Like the deeply destructive “Inflation Reduction Act” that will do no such thing, the “permitting reform” bill (summarized here) released last week by Senator Joe Manchin carries a title — “The Energy Independence and Security Act of 2022” — utterly divorced from its actual prospective impacts. Its ostensible objective is the speedier development of conventional energy resources and such ancillary capital investments as pipelines, for many decades afflicted by a deeply perverse and politicized permitting and litigation process. In reality its central objective is political cover for Manchin to justify his deciding vote in favor of the aforementioned IRA.
The bill will fail in both dimensions.
Subtitle A establishes a two-year “target” for environmental reviews under the National Environmental Policy Act (NEPA) for major projects that require the preparation of environmental impact statements; designates a “lead agency” to coordinate policy reviews; establishes a statute of limitations of 150 days for court challenges of permits; and requires the President to designate for review a priority list of 25 “strategically important” projects.
Put those provisions together and the result is no actual reform of the real central problem, to wit, the litigation process under NEPA, the Clean Air Act, the Clean Water Act, and the Endangered Species Act, with which the environmental left and other opponents of conventional energy projects can go to court and engage in obstruction lasting years or decades. Note that subsection (j) provides that nothing in this section supersedes, amends, or modifies Federal environmental laws or agencies’ obligations under those laws; nothing pre-empts public comment procedures; and nothing pre-empts any other provision of law or powers, jurisdictions, responsibilities, or authorities of Federal, State, or local government agencies, Indian Tribes, or project sponsors under those laws; or affects judicial reviewability of federal agency actions…
Translation: The litigation business model for the environmental left will continue. Subsection (k) establishes some time limits on agency actions following court decisions, but the blatant reality is that these time limits on revised environmental reviews — for which there is no enforcement mechanism — impose no constraint upon the litigation process itself. This can surprise no one, in that a bill facilitating fossil-fuel investments — even apart from all the obvious reasons that congressmen and senators allied with the mainstream environmental groups will oppose it — simply cannot receive the requisite majorities in Congress if it does anything to disrupt the business model of the environmental left. And therefore the Manchin bill fails to do so, and in any event there is little evidence in the record that such real reform is anywhere to be found on Manchin’s priority list.
Similarly, the “lead agency” gambit is worthless, because said agency has no powers to force other agencies to adhere to given time limits. More fundamentally, the “lead agency” cannot instruct others on how to do their analyses of issues germane to their respective areas of authority, and a fortiori with respect to the conclusions that they formulate. What will the lead agency do when (not if) important disagreements emerge, or more fundamentally when a given agency, driven by its own ideological or political agenda, simply decides to obstruct a particular project, and digs in its heels?
It will prove almost impossible to resolve such conflicts, which will arise continually because each of the numerous agencies involved in the process will serve as the “lead” agency on particular projects. These many “lead” agencies will find themselves negotiating behind the scenes about numerous projects as a bundle; and there is no particular reason to predict that the negotiating agencies will find it advantageous bureaucratically to make the requisite compromises. Why should they?
Thus will Manchin’s ostensible objective to be furthered by the “lead agency” nostrum — facilitation of approvals for conventional energy projects — be frustrated happily by the agencies in flagrante delicto. At best the respective administrators and secretaries will have to be dragged in; for obvious political reasons they will be reluctant to take stances subjecting them to criticism both harsh and highly visible. And so they will prefer, strongly, that the Office of Management and Budget and the White House make the politically-difficult choices, a process that would consume considerable time. And if OMB and the White House prefer to remain bystanders — they have enough headaches, thank you very much — perhaps the lead agencies will sue each other, a fitting sideshow in the larger environmental litigation circus.
As for the 150-day statute of limitations: So the lawsuits challenging the permits will be filed sooner than otherwise would be the case. Would Manchin please explain how that is supposed to change anything not wholly cosmetic?
The requirement that the President “designate and prioritize reviews for a list of [25] strategically important energy and mineral projects” is an explicit system of central planning; it would have been more honest for Manchin to have required a Five Year Plan update rather than one every six months. The list, therefore, would be deeply politicized, notwithstanding the laughable requirement that “the list of designated projects include a minimum number of critical minerals, fossil fuel (including biofuel), non-fossil fuel (including storage), electric transmission, carbon capture, and hydrogen projects…”
For any number of reasons only one of which is the ambiguity inherent in the phrase “strategically important,” this “requirement” does not actually require the president to do anything other than make up a list. Precisely whom does Manchin believe he’s kidding? Moreover, the list of “strategically important” priority projects would be afflicted by the same litigation problem already discussed, and it is impossible to believe that Manchin does not understand this.
Let us turn now to the provisions of the Manchin bill not merely useless but deeply destructive. The IRA spends directly and in the form of tax credits almost $450 billion (over the ten-year budget window) for unconventional (that is, uncompetitive) energy and other climate subventions. Unlike conventional electricity plants powered with fossil fuels, which can be sited so as to optimize transmission costs and other factors, wind farms and utility-scale solar facilities must be sited where the wind blows and the sun shines.
That reality yields many adverse consequences; the central one of interest here is the need for a massive expansion in the national transmission system so as to deliver electric power to regions where electric power actually is used. A recent study of just such an expansion in wind and solar power as part of a “net-zero” goal for greenhouse gas emissions reports an estimate of about $2 trillion (inflation-adjusted dollars) in extra transmission costs over the next 30 years, or, crudely, about $67 billion per year. (For various reasons — massive land use, transmission losses, environmental issues, etc. — that estimate is biased downward significantly.) Total national spending on electric power is about $400 billion per year; the increase in transmission costs alone would be almost 17 percent.
More narrowly, transmission costs for major investor-owned electric utilities in 2020 were about $13 billion, and those utilities serve roughly 70 percent of U.S. power customers. Accordingly, a crude estimate of total system transmission costs is $18.6 billion annually, which means that under the IRA, the annual increase in electricity-sector transmission costs from $18.6 billion to $85.6 billion would be by a factor of 4.6, or 360 percent.
Who is going to pay for that? The answer in the Manchin bill is “everyone.” Section 2 of Subtitle B give[s] the Federal government increased permitting authority for transmission lines found by the Secretary of Energy to be in the national interest, requires the Federal Energy Regulatory Commission (FERC) to ensure project costs are allocated to customers that benefit, and allows FERC to approve payments from utilities to jurisdictions impacted by a project.
Translation: The Energy Department and FERC would have the power to command electric utilities to build transmission lines, and the bill authorizes FERC to define the “national interest” “benefits” of transmission investments broadly by asserting that consumers not served by the new transmission lines would receive “benefits” nonetheless, in particular in terms of a preposterous reduction in climate “risks” attendant upon the expansion in wind and solar power generation.
The 40 percent reduction in U.S. GHG emissions claimed by the proponents of the IRA would reduce global temperatures in 2100 by 0.055 degrees C, using the EPA climate model, an effect that would not be measurable in that the standard deviation of the surface temperature record is 0.11 degrees C. (This is apart from the fact that there is no evidence — none — of a climate “crisis.”) Accordingly, the assertion of climate “benefits” from the transmission provisions of the Manchin bill is ludicrous.
The traditional definition of “benefits” in this context has centered upon cost reductions for consumers, relief of congestion in the transmission system for specific markets, and improvements in reliability, that is, economic benefits for those actually served by new transmission investment. The new Manchin definition removes that constraint: Policymakers and bureaucrats would have the authority to adopt a definition of “benefits” vastly broader, and so socialize the costs of a greatly expanded transmission system by spreading them across most power consumers in the country. This essentially would overturn the 2013 decision by the 7th Circuit Court of Appeals in Illinois Commerce Commission v. Federal Energy Regulatory Commission.
Notwithstanding Manchin’s claim to be interested in facilitating investment in conventional energy infrastructure, his bill does not change the process under which pipeline operators seek from FERC a certificate of public convenience and necessity, the grant of which allows the operator to use eminent domain authority to acquire a right-of-way. The pipeline costs are incorporated into transmission tariffs paid by the actual customers of the pipelines, a longstanding market and regulatory process not affected by the Manchin bill, unlike the case for transmission lines serving uncompetitive power producers.
Accordingly, Manchin’s asserted concern for a streamlining of the permitting process for conventional energy is not to be taken seriously. The exception is section 4 of Subtitle B: It “requires federal agencies to issue all approval[s] and permits necessary for the construction of the Mountain Valley Pipeline,” and subsection (g) eliminates judicial review — that is, the litigation threat — of those approvals and permits. It can surprise no one that Mountain Valley would transport natural gas produced in West Virginia to various markets in the Atlantic region.
One would think that Manchin, hardly a neophyte to Beltway machinations, would have demanded that his permitting reforms be enacted before his deciding vote to pass the IRA. One would think that Manchin would have made an effort to obtain the same regulatory subventions for conventional energy as those afforded wind and solar power. One would think that Manchin would have recognized the absolute necessity of legal reform as the sine qua nonof a real modernization of the U.S. process of environmental protection in the context of investment in energy resources and ancillary capital assets. One would think that Manchin would have recognized the socialization of transmission costs for uncompetitive electricity as disastrous in terms of rational energy policy. One would think that Manchin might have been a bit more subtle in terms of his blatant concern for little other than the Mountain Valley project. One would think that Manchin as an experienced politician would have perceived that his machinations would fool no one and that he might wind up with nothing.
And in all of those dimensions: One would be wrong.