Infrastructure

A Grand Bargain for Permitting Reform

American energy production can be transformed, if the parties can find a deal
September 29th 2023

The Need For a Deal

Over the past year, lawmakers from both parties have insisted on the need to reform the permitting process for energy infrastructure projects. But Democrats and Republicans have largely offered different solutions. Although the debt ceiling deal, also known as the Fiscal Responsibility Act (FRA), included some provisions to improve the permitting process, necessary reforms remain unaccomplished. 

With several must-pass pieces of legislation pending, permitting reform is ripe for a deal. Democrats want to accelerate the deployment of clean energy by making it easier to site and build interregional transmission lines. Republicans are concerned that this increased federal siting authority will supersede states’ rights, and that cost-allocation measures will force red states to pay for blue state renewable energy mandates. Instead they prioritize reforming NEPA, the law that enshrines environmental review, particularly by limiting legal challenges against NEPA permits, a key driver of delays. While some Democrats support reforming NEPA to speed clean energy projects, others worry that changes might weaken a tool for blocking fossil fuel projects or reduce community engagement.

Incremental changes, like those passed in the debt ceiling deal, are unlikely to satisfy either side. The clear solution is a trade, but the details matter, and a deal will need to be structured creatively to satisfy both sides.

This document offers a framework for a grand bargain in which Democrats secure meaningful transmission reform and Republicans obtain meaningful reforms to judicial review. We believe these priorities are vital for American growth and decarbonization. Both elements of a deal have genuine bipartisan appeal: reforms to interregional transmission help address Republican goals of promoting energy security and reliability, while balanced reforms to judicial review will accelerate clean energy deployment, a Democratic priority. 

A Framework for a Deal

A deal will have to trade transmission reform for judicial reforms to NEPA. We believe there is a bargain to be made if each party is willing to find pragmatic solutions that accommodate the other side’s primary concerns. 

Transmission reforms should both shorten siting and permitting timelines for large interregional transmission lines, and accommodate the rights and needs of different states. Proposals for setting interregional transfer requirements offer a compelling framework for compromise by having FERC set transfer capacity targets, while letting state governments and utilities determine which projects or upgrades are best suited to meet those standards.

Reforms to the judicial review of NEPA permits should limit bad-faith obstruction while maintaining a period for good-faith legal challenges. Limiting injunctive relief can limit legal obstruction without undermining community engagement.

A variety of smaller bipartisan policy reforms could be added to sweeten a potential deal. Both parties have expressed interest in permitting reform for geothermal energy, wildfire prevention projects, and waivers for CHIPS Act-funded projects.

A grand bargain would have transformative effects on almost every aspect of American energy production: it would increase energy independence, reduce emissions, drive down costs, and spur innovation. This deal is the win-win permitting reform advocates have been looking for.

NEPA Reform

Since NEPA became law in 1970, environmental reviews have grown from a few dozen pages to an average of 1,703 pages for environmental impact statements (EISs). NEPA has become a tax on new infrastructure and a veto point for project opponents.

Under the Administrative Procedure Act, NEPA decisions can be blocked in court if plaintiffs can show that the relevant federal agency erred when writing the mandatory documentation. These lawsuits can delay and block individual projects, but their larger effect is to cast a shadow over the process of preparing NEPA documentation. Because federal agencies know their reviews can be sued for being insufficient, officials are incentivized to write lengthy litigation-proof permitting documents. Permitting processes like NEPA also delay clean energy projects and now bottleneck investments in the Inflation Reduction Act.

Judicial reforms should cut off obstructionists and create space for agencies to complete authorizations within a reasonable time period. Policymakers have a handful of options to accomplish this: imposing a time limit on legal injunctions, shortening the statute of limitations, narrowing requirements for standing, and routing legal challenges directly to the relevant appellate court. 

Time-Limiting Injunctions 

We recommend limiting the length of time in which courts can issue injunctive relief while a lawsuit is ongoing. Under the current system, courts can issue injunctive relief against a project even after years of extensive review.1 Capping the length of time that projects can be invalidated would effectively limit the perpetual bad-faith litigation cycle that starves project developers of funding. Fewer lawsuits would lower the pressure on federal agencies to produce litigation-proof NEPA reviews, in turn shortening permitting timelines and reducing demands on staff. While Democrats have voiced concern about existing Republican proposals which would end injunctive relief in all circumstances, several mechanisms can limit obstruction while protecting good-faith legal challenges.

One thorough solution would be for Congress to create a set length of time (say, three years) that begins from the notice of intent, when an agency begins to prepare a NEPA review, and ends a short period after the agency’s final decision. Congress recently set a two-year time limit to complete environmental impact statements in the FRA, which means a three-year limit on injunctive relief would provide a reasonable one-year judicial review period after an EIS is completed. 

Another promising mechanism would be to combine a longer time limit on injunctive relief (say, four years) that begins at the notice of intent with a limit on preliminary injunctive relief. Under the current system, courts often take months before hearing a case, so obstructionists can use preliminary injunctive relief to extract lengthy delays. Congress could require that legal claims seeking preliminary injunctive relief be brought within 60 days of a record of decision. This would incentivize challengers to bring legal claims early in the process and reduce the potential for delays prior to the four-year hard deadline.

Alternatively, Congress could set a time limit on injunctive relief beginning at the record of decision, an agency’s public notice of project approval. The time limit could be set for a short period (such as six months), during which objections could be heard, courts could delay construction, and agencies could issue updates to their authorizations. After the period, all court injunctions would be voided and construction could not be halted under NEPA. 

Shortening the Statute of Limitations

Currently, project opponents can file one suit, then hold another suit until just before injunctive relief from the preceding suit was set to expire. Limiting who can sue and the period in which suits can be brought would restrict this practice. In theory, setting a short statute of limitations for bringing action could ensure that all legal complaints are heard quickly, preventing run-on legal challenges. However, statutes of limitations usually reset if a court remands an agency decision. Once the supplemental EIS is re-issued, plaintiffs can file a suit. Current Republican proposals do not address this loophole. Moreover, shortening the statute of limitations might cut off good-faith participants more often than bad-faith participants. Local community residents are less likely to understand the complex NEPA process, while public interest groups are highly practiced at meeting short legal deadlines. 

Policymakers could combine a shortened statute of limitations with a requirement that any plaintiffs bringing suits under NEPA must have participated in the NEPA public comment period, and must be able to demonstrate that the authorization would cause demonstrable harm. This requirement would restrict frivolous ad hoc complaints brought up to create court delays. It would also shield federal agencies from endless chain lawsuits targeting supplemental EIS reviews that involve a series of disconnected claims, because supplemental EISs do not have an additional public comment period. 

Expediting Court Assignment

Finally, policymakers could expedite legal challenges of NEPA permits directly to the relevant court of appeals. While we endorse this change, we believe policymakers should combine it with a limit on injunctive relief, or a strong statute of limitations. 

Transmission Reform

Building more interregional transmission will improve the reliability of the electric grid and accelerate a national transition to clean energy. 

The current process forces planners of interregional transmission lines to wade through a painful 10-year process of planning, permitting and siting before construction begins. Disagreements over cost allocation can delay or kill projects. A range of different regulations, including NEPA, can be veto points for project opponents. And transmission lines have to be sited, requiring developers to acquire land or use eminent domain against hundreds of landowners. 

The current system lacks sufficient incentives for state and regional utilities to build interregional transmission lines. Often, vertically-integrated utility companies are actually threatened by proposals to expand interregional transmission; new lines could bring in cheaper electricity from outside sources, and out-of-grid generation capacity can threaten a utility’s ability to recoup fixed-cost investments.2 Federal coordination and backstop authority are needed to synchronize piecemeal approvals and align incentives to build a robust, reliable grid.

The Interregional Transfer Solution

Direct federal siting of transmission lines by FERC is likely a step too far for Republicans, who oppose the federal government superseding the rights of states and utilities to set their own policies. Republicans have been especially resistant to proposed reforms that would give FERC direct control of siting and cost allocation for large transmission lines.

Instead of placing federal authority under FERC, policymakers could require regions to plan and build a minimum amount of interregional transmission capacity. This solution would create a federal standard for the transmission capacity required in a region, but leave discretion for where and how to build the lines to states and local utilities. A federal requirement for minimum interregional transfer capacity would require states and utilities to engage in interregional planning, a process they often forgo under the current system. More importantly, the federal mandate would provide a backstop for planning, permitting, and siting processes that currently result in delays or projects being canceled.

As with NEPA reform, policymakers have several options for tweaking interregional transfer requirements. Recent proposals would require regions to maintain at least 30% transfer capacity to bordering regions. For many regions, this target is ambitious. Congress could adjust the number, or require that regions increase their existing transfer capacity by a certain percentage. Alternatively, policymakers could give FERC a mandate to maintain interregional transfer capacity and delegate authority to the agency to set region-specific transfer targets. 

The Time For a Deal Is Now

Getting permitting reform done will require good-faith dealmaking. Both sides need to recognize that the only path forward is a bipartisan trade of judicial reform for transmission reform. With an election year coming up, both parties will need to come to the negotiating table soon. 

Dealmaking will benefit from policy solutions that can be dialed up or down during negotiations. The numbers on both a limitation on injunctive relief and a requirement for interregional transfer capacity can be adjusted to accommodate concerns. The time limit on injunctions could be lengthened to create more time for judicial review, or the interregional transfer capacity requirement could be lowered to accommodate planning timelines.

The good news is that the deal on permitting reform can have genuine bipartisan appeal. Substantive judicial reform for substantive transmission reform will help streamline permitting wait times, accelerate clean energy deployment, improve grid reliability and promote American energy innovation. 

References
  1. One potential exception: if a judge believes the plaintiffs are unlikely to succeed on a case’s merits, he might decline to offer preliminary injunctive relief.

  2. For example, a proposed transmission line in Maine was fought by New England utility companies who did not want to compete with cheap Canadian hydropower.