Permitting Reform Gains Momentum

Jack Belcher is a principal at Cornerstone Government Affairs, where he focuses on regulatory affairs, risk management and ESG matters in the energy and transportation sectors.

In early June, U.S. House Speaker Kevin McCarthy (R-Calif.) and the White House reached a compromise agreement on the debt ceiling that resulted in the bipartisan passage and enactment of legislation to prevent the U.S. government from defaulting on its debt. As part of the compromise, provisions were included that make reforms to the National Environmental Policy Act (NEPA) and provided final approvals to complete the Mountain Valley Pipeline (MVP).

NEPA has long been considered by environmental activists to be the Magna Carta of U.S. environmental law, with attempts to reform or modify vehemently opposed. It requires the federal government to assess the environmental impact of any federal action, such as a pipeline approval, LNG permits, or oil and gas leases. Over time, NEPA has been applied inconsistently among federal agencies, and its application and resulting litigation have been the source of long delays in federal actions and approvals.  

The debt limit legislation made minor adjustments to NEPA in an attempt to clear up ambiguity over what impacts are “avoidable,” create more certainty over lead federal agencies and inter-agency coordination, shorten and simplify environmental documentation, narrow the timeline for providing environmental opinions and create a clearer pathway for categorical exclusions to be put in place.

The MVP provision essentially deems the pipeline, which has been held up for years, to be in the national interest and mandates its permitting. The law also removes the ability to challenge the pipeline in the Fourth Circuit Court of Appeals by moving jurisdiction to the D.C. Circuit Court of Appeals, which is unlikely to delay the pipeline from moving forward.

While the reforms to NEPA will not suddenly make permitting energy projects easy, the passage of these provisions is significant because it marks the first time since the early 1980s that any substantial changes have been made to NEPA. There appears to be significant momentum with regard to additional permitting reform, due in no small part to what was not included in the legislation. Items left on the cutting room floor include transmission citing authority, judicial review, hydroelectric licensing, semi-conductor permitting relief, critical minerals, federal lands access and Class 6 carbon injection wells and primacy.  

“The momentum toward a more rational regulatory and permitting environmental landscape is real.”

Given unresolved issues of interest to both parties, there appears to be an opportunity for additional permitting legislation, with champions of such an effort including Senate Energy Committee Chairman Joe Manchin (D-W.Va.), among others.

A recent unanimous U.S. Supreme Court decision will also improve the environment for permitting projects and thus contribute to the positive momentum for permitting reform momentum. On May 25, the court narrowed the ability of states and environmental activists to block infrastructure and energy projects over environmental concerns under the Clean Water Act. In Sackett v. EPA, the court significantly reduced the number of areas that would qualify as “navigable waters” under the act, which has been used widely to block pipelines, roads, ports and other infrastructure projects. The decision significantly reduces the regulatory authority that the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers can exercise over such projects. While the decision doesn’t make it more likely for Congress to reach an agreement on permitting reform, it will take away an important tool that anti-development forces have used to block energy projects.

The momentum toward a more rational regulatory and permitting environmental landscape is real. However, with presidential and congressional elections looming in 2024, time is of the essence and any such package would likely need to be passed by the end of the year.