Environmental update: August 2022

Environmental update: August 2022

August 17, 2022 | By Andrew Skroback in New York

The Senate majority leader, Chuck Schumer (D-NY), had to agree to a broad outline for a separate permitting reform bill to win support from Senator Joe Manchin (D–WV) for the Inflation Reduction Act. Manchin released a description of what he believes he was promised.

An effort will be made to fold the deal into a must-pass spending measure to keep the federal government open past the September 30 end of the fiscal year. Any such bill will require support from at least 10 Republican Senators, assuming all Democrats remain in line, to clear the Senate.

Some progressive Democrats in the House have already objected to it on grounds that the permitting reforms are not limited to green energy projects and new transmission lines, but would also help gas pipelines and other fossil-fuel projects.

Manchin also secured an agreement that any new leases for offshore wind projects off the US coasts will be coupled with new leases for oil and gas production. 

The framework remains a hand-shake agreement. It is a “side deal” because the effort falls squarely outside the bounds of the Senate budget reconciliation process that let Democrats pass one bill — the Inflation Reduction Act — with just 50 votes and a tiebreaker vote by Vice President Kamala Harris. Any other bills require 60 votes in the 100-member Senate.

According to a summary outline released by Manchin, the side deal has five elements.

It would set new two-year maximum timelines for federal agencies to conduct NEPA environmental reviews for “major” projects.

It would streamline government processes for approving energy projects by centralizing decision-making with one lead agency.

The deal would clear the way for approval of the Mountain Valley pipeline, a Manchin priority that would transport Appalachian shale gas about 300 miles from West Virginia to Virginia.

It would limit legal challenges to energy projects and make it harder for government agencies to deny new approvals based on certain environmental impacts that are not directly caused by the project itself. 

Finally, it would give the US Department of Energy more authority to approve electric transmission lines that are deemed to be “in the national interest.”

The outline remains vague, but its focus is clearly to streamline the build-out of energy infrastructure for all types of energy production, increasing reliability of the greater power infrastructure as well as advancing decarbonization.

Manchin had raised concerns about approving hundreds of billions of dollars in government subsidies for energy projects that could be defeated by red tape or climate lawsuits.

Despite any advances for fossil-fuel-based power, it has been estimated that the climate provisions in the Inflation Reduction Act would cause greenhouse gas emissions would cause US greenhouse gas emissions to fall more than 40% below 2005 levels by 2030.

NEPA Tensions

The next several months will see much rancor and debate over what to do in response to an increasingly bipartisan consensus that the United States takes too long to vet new infrastructure projects under the National Environmental Policy Act, or NEPA.

Both the Infrastructure Investment and Jobs Act signed into law last November and the new Inflation Reduction Act set speedy development goals in tension with the desire for federal agencies to assess environmental impacts of proposed projects sufficiently before approving them.

The particular development goals of both pieces of landmark legislation will necessarily face NEPA hurdles that critics claim unnecessarily slow or even stymie such development. The delay will not only hit projects like new roads and pipelines, but also development of new renewable energy power plants and storage facilities.

NEPA requires federal agencies to study the environmental effects of their actions before taking them, such as agency decisions whether to issue a required federal permit for a new power project or whether to fund a new highway or bridge. 

Environmental impact statements are the most extensive type of impact study that federal agencies are required to conduct under NEPA.

Currently, EIS’s are reportedly taking more than four years on average to complete. That period can then drag out further since the statute provides third parties with various opportunities to file suit to challenge NEPA studies.

Both political parties are concerned about the significant time required to complete NEPA assessments and then to untangle the particular project from challenges to agency actions that often follow, all of which must be done before shovels can hit the ground.

There is a divide on the environmental side of the equation.

While NEPA’s purpose is to protect the environment by weighing impacts before allowing action, the slow pace will only further delay cleaner energy infrastructure of the kind that will help address climate change.

Various options to speed the NEPA process are on the table, most of which would set time limits for agency review. These include setting maximum two-year timelines for agency review of major projects and one-year limits for lower-impact projects.

They also include setting a time limit — such as 180 days — for an agency to fix a NEPA study if a federal court finds it deficient and orders an agency to revise. 

It is unclear whether measures will be included to prevent agencies from limiting the effect of such deadlines, such as by delaying acceptance of applications to prevent the clock from even starting to run. It is also unclear whether consequences will be set for failure to meet agency deadlines, such as triggering automatic approval in the absence of agency action.

In addition to systemic fixes, the Inflation Reduction Act adds to permitting resources at several federal agencies. The idea is to ensure the agencies have the staff on hand to do the work needed to move infrastructure projects through the pipeline in a more timely fashion. The additional funding should lead to hiring more permitting staff, developing programmatic environmental documents and buying new equipment for environmental analysis.

The bill will give $40 million to the US Environmental Protection Agency, $150 million to the Department of the Interior, $125 million to the Department of Energy, and $100 million each to the Federal Energy Regulatory Commission, the Agriculture Department and the Department of Transportation to increase permitting capabilities. This money will be spread over five years.

Another $30 million will go to the White House Council on Environmental Quality and $20 million to the National Oceanic and Atmospheric Administration. There is another $350 million for the Federal Permitting Improvement Steering Council, whose job it is to bring agencies together early in the permitting process to coordinate their work.

The Biden administration, through the Council on Environmental Quality, completed the first of a two-phase process of amending federal regulations for implementing NEPA on May 20, 2022.

In so doing, the administration reversed a number of changes made to NEPA during the Trump administration. For example, federal agencies will again consider the climate change impacts from proposed new infrastructure projects and other activities that require federal action.

Despite those reversals, the Biden administration did not strike the timelines adopted by the Trump administration to set an end to agency delay.

Several points of contention are in play over the coming months.

First, there is the side deal to which Senators Schumer and Manchin agreed as the price for Manchin to support the Inflation Reduction Act.

Second, a Republican-backed disapproval resolution is currently pending under the Congressional Review Act to repeal the Biden administration’s recently-adopted rule reviving core aspects of NEPA that took effect just a few months ago.

Third, the Council on Environmental Quality is supposed to propose a “phase 2” NEPA rule by summer’s end. That could set up further conflict between it and a not-yet-defined legislative action on permitting.

Clean Water

The Schumer-Manchin side deal includes provisions affecting how states are allowed to review whether federally-permitted projects meet state water quality standards under section 401 of the Clean Water Act.

Section 401 gives states and Indian tribes the ability to review any proposed activity that requires a federal license or permit and that may involve discharges into federally-regulated waters to ensure compliance with appropriate state water quality requirements, but the agreement could further define that scope of review.

If the Machin deal on permitting reforms shapes the scope of water quality review allowed to states and tribes under the Clean Water Act, that would raise questions about how it might affect EPA’s ongoing rulemaking in the same area.

The description of the permitting reforms released by Manchin suggests they would “improve” section 401 “by incorporating improvements from both the Trump and Biden administrations.”

While few details are available on what the legislative language will say, the specifics will determine whether the provisions end up looking more like the Trump or Biden approaches for state water quality certification reviews and whether the Environmental Protection Agency is forced to change its proposed 401 rule revisions to meet the requirements of new legislation, if passed. Again, speeding approval or disapproval by the states appears likely to be a key focus.

Offshore Wind

Governor Kathy Hochul (D-NY) announced in late July that the New York State Energy Research and Development Authority will release its third competitive offshore wind solicitation.

The third solicitation intends to secure offshore wind renewable energy credits for at least 2,000 megawatts of offshore wind energy, which would be enough to power more than 1.5 million homes.

New York has already contracted for approximately 4,300 MW of offshore wind projects under development and is on its way to meetings a state goal of 9,000 MW of offshore wind energy by 2035.

The New York Climate Leadership and Community Protection Act requires the state to reduce greenhouse gas emissions by 85% by 2050 from 1990 levels and to reach 100% renewable electricity generation by 2040. 

This latest procurement requires all bidders to incorporate designs for integration into a “mesh network” offshore grid that would allow the interconnection of a number of wind projects for combined transmission to onshore facilities.

Proposals are due December 22, 2022, with an award to be announced sometime in early 2023.

Fishing Industry

The US Bureau of Ocean Energy Management (BOEM) issued draft guidance in late June to lessen the impacts of offshore wind development on commercial and recreational fishing.

In March, the Biden administration released a plan to expand offshore wind capacity to 30 gigawatts by 2030.

The fishing industry stands as a potential obstacle to achieving that goal. Negotiations are ongoing to marry the potential conflicting interests among commercial fishermen, developers of offshore wind energy and federal regulators. The US commercial fishing industry generates more than $170 billion in annual sales.

The BOEM guidance is a first step in that direction. It outlines ways for the offshore wind industry and leaseholders to mitigate impacts on fisheries in a myriad of areas, such as wind farm project siting and design, construction and operational safety, and potential financial compensation if a particular project disrupts fishing operations.

BOEM suggests its guidance will help ensure consistent use of information across projects and states.

The BOEM guidance also makes several recommendations for offshore wind project design and construction to account for potential impacts to fisheries. It is intended to help both the developers and BOEM assess specific project construction and operation plans, including the design of foundations for wind turbines and minimum depths for burying subsea cables.

The guidance also recommends that project developers establish a process for compensating fisheries for any potential lost income. It suggests that process should last through the construction, operations and decommissioning phases of a project.

Many in the fishing industry have criticized the guidelines as essentially meaningless because they do not put enforceable obligations on project developers.

The fishing industry’s concerns include impacts on fish habitats, restricted fishing access and risks, and increased industry competition within smaller sea areas as fishing is restricted within areas of wind development. The industry also perceives that it has been largely excluded from the decision-making process, at least with respect to development of particular offshore wind projects.

Central to the tension may be an overall lack of information regarding the environmental impacts of offshore wind farms, though some projects are funding research and the Biden administration plan also includes research funds.

BOEM admits that it has no legal authority to create a compensation fund or to require project developers to pay into one. The agency also said it cannot require developers to address any regional impacts on fisheries unless those impacts are identified in a specific project’s environmental review.

Conflict with the fishing industry has emerged as a major source of tension in the Biden administration’s push to expand offshore wind, with fishing companies and industry groups already bringing legal challenges to BOEM’s approval of the 800-megawatt Vineyard Wind project off the coast of Massachusetts.

The Vineyard Wind project reportedly set aside $21 million to compensate fishermen for financial losses and agreed to certain changes in turbine orientation to address navigational concerns and to reduce the total number of turbines proposed.

BOEM has been holding a series of public meetings on the draft guidance, suggesting it may finalize it over the summer.