Category: Climate Regulation

Can Weak Manchin Permitting Bill Be Strengthened?

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After authorizing $370 billion in new funding for new, cleaner energy sources, Congress is turning to permitting reform: All the money in the world will not help if projects don’t have permission to build. Wednesday evening, Senator Manchin released proposed text for his permitting bill, which he apparently negotiated in return for his vote to authorize the energy funding. Unfortunately, the bill is not well-designed to speed up construction of new energy sources. But with a few strategic additions it could go a long way toward speeding up permitting to secure a cleaner, more reliable, and affordable energy future for the United States.

The biggest roadblock to energy sources is not financial; it is receiving permission to build. And many of the projects that we most need for a clean energy transition face particular permitting difficulties because they need permits from multiple states or local communities and the federal government. Our traditional energy commodities, oil and coal, are less dependent on building long-distance infrastructure because they can rely on existing railroads and pipelines, and they are easier to ship by multiple pathways using rail, road, and water transport. By contrast, cleaner energy products such as renewable electricity, natural gas, and hydrogen can only be shipped by new long-distance infrastructure.

Think of a long-distance power-line designed to bring renewable energy to market, a pipeline shipping natural gas to communities hoping to move away from coal, or a hydrogen pipeline designed to help replace fossil fuels. These linear infrastructure projects often need approvals from each state they cross and may also need approval from the federal government as well whenever they cross federal lands, borders, or streams.

There are two huge legal permitting challenges for these new cleaner energy projects.

So if we want to clean up our energy system and address the global energy crisis, which is causing energy shortages and price spikes around the globe, we need to speed up permitting. If the $370 billion authorized by Congress just goes to the few projects that would already have passed the permitting gauntlet, it will be money wasted. So we’ve seen a growing chorus of voices demanding reform to the permitting process to ensure this money isn’t squandered and that we can build a cleaner energy future.

The federal and state permitting challenges are linked because perhaps the most common proposal to speed permitting is to replace state and local siting processes with federal processes. For example, in 2005, the U.S. Congress gave the federal Department of Energy the power to designate areas that particularly needed more electricity transmission and gave the Federal Energy Regulatory Commission power to, in some circumstances, permit power-lines that hadn’t been approved by the states in those areas. Senator Manchin’s bill leans heavily on this method of speeding permitting: it gives federal government more power over permitting new power-lines and hydrogen pipelines.

The problem is that this is not an improvement at all when federally-approved projects are facing Kafkaesque challenges when they seek approval to actually build their projects. The energy sector where federal permitting is most common is in interstate natural gas permitting and these projects are routinely stopped by local objections even when they have federal approval. In fact, the two highest-profile recent gas pipeline projects—the Atlantic Coast Pipeline and the PennEast Pipeline—eventually had to give up on building their projects after years of expense and struggle, even though the federal government repeatedly backed both pipelines and both pipelines won blockbuster decisions in the U.S. Supreme Court.

If the Manchin bill passes as is, the gas pipeline industry can welcome the power-line and hydrogen industries to national regulation with this unwelcome news: “Even if the federal government backs you on every permit, and even if the Supreme Court backs you in every decision, no matter how long you wait, or how much you spend, states and lower courts will make life so difficult that your proposed project will never be built.”

The dysfunctions of federal permitting under court review are well known in energy policy. Congress’s 2005 grant of power to the Department of Energy and the Federal Energy Regulatory Commission was eviscerated by two federal appeals court decisions over the next six years. This is why the single project that really will be helped by the current Manchin proposal is the Mountain Valley Pipeline. The bill makes special provision for this project, directing that all actions “necessary for the construction and initial operation at full capacity of the Mountain Valley Pipeline shall not be subject to judicial review.”

The Manchin bill does almost nothing to help other energy projects stop endless court demands for further environmental review. The bill does address some less important timing issues so it’s important to keep straight three kinds of time limits:

  1. Time limit for the federal government to complete environmental review. The proposal directs a two year limit for environmental review of major projects and a one year limit for minor projects. Unfortunately, such deadlines are unenforceable—the federal government routinely misses even the statutory deadlines it is trying to meet. The deadlines may even be counterproductive if they encourage courts to stop projects and order further reviews because of concern that review was rushed to meet an artificial deadline.
  2. Time limit for plaintiffs to challenge a project after it receives its permit. This kind of “statute of limitations” is not harmful but of very little use. Smart plaintiffs hoping to stop infrastructure generally sue at the earliest opportunity because the best chance to stop an infrastructure project is before construction begins. So big projects are almost never held up by plaintiffs that waited years after the project was approved to bring their lawsuit.
  3. Time limit for courts to order more review on projects that have already been under review for years. Unfortunately, the Manchin proposal does not put any time limits on courts’ ability to hold up nationally-approved projects other than the Mountain Valley Pipeline. The federal environmental review law, the National Environmental Policy Act (NEPA), is a procedural statute simply intended to ensure the government did sufficient environmental review of a project. If the federal government has been reviewing the environmental consequences of a project for years and has approved it, and the court would still like more review, the court can order the government to do more review. But it is not reasonable to make a nationally-approved project, and all the consumers and producers that depend upon it, wait for the court and government to reach agreement on how much environmental review is enough.

The crucial importance of a time limit on judicial delay of projects is well explained in the Institute for Progress’s excellent recent report on “How to Stop Environmental Review from Harming the Environment“:

The time limit that would likely have a major impact on outcomes is restricting the ability of the courts to issue injunctions against projects that have undergone extensive environmental review under NEPA. This change would provide developers the certainty they need to invest in large-scale build outs of solar, wind, transmission and other clean energy infrastructure. Without a time limit on judicial injunctions, developers have a sword of Damocles perpetually hanging over their head, threatening the entirety of the project.

As it stands, the Manchin permitting proposal would be a serious lost opportunity that would be unlikely to significantly speed up construction of new energy projects. The focus on federalizing review of clean energy projects is particularly unhelpful when the proposal doesn’t address the problems that are making federal review the bane of energy project developers.

The good news is that the Manchin proposal could be improved relatively simply if it added limits on federal court and state delays on federal projects. Speeding up permits for nationally-approved projects would accelerate construction of all the new energy projects that it designates for federal review.

Permitting Reform to Put New Energy Funding To Use

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On Sunday, August 7, the U.S. passed new legislation that provides $370 billion dollars for a wide variety of technologies in the energy and climate sector, including renewable energy, carbon capture, and electric vehicles. The House of Representatives is expected to pass this legislation tomorrow, Friday, August 12, so it may soon be enacted into law.

The strange thing about this huge spending on new energy sources is that high energy prices already promise financial rewards to anyone who can build the new energy infrastructure America needs for more reliable, affordable, and secure energy supplies. Unfortunately, these power-lines, pipelines, and clean energy projects are being held up by our sluggish permitting system. To put its new spending to good use, Congress must adopt permitting reforms that will make it easier to build America’s future energy system.

Our energy infrastructure is aging because it is simply too difficult to build new energy projects. More than half of American crude oil pipelines were built before the National Environmental Policy Act, which mandates lengthy environmental reviews was adopted in 1970; they are more than 50 years old. The nation’s largest grid manager, PJM, recently requested a two-year pause before adding any new solar projects because of how far behind it is in updating its grid to accommodate new energy sources. Opponents of new energy sources are finding more and more ways to ensure that new projects cannot get built.

Much of the massive new funding for energy will be in vain if projects cannot get the approval they need to begin construction. In the run up to the legislation, lawmakers and the media often cited models showing the bill would reduce U.S. emissions 40% by 2030. But although studies find that the average new transmission project takes over ten years to complete, these models “assume many of these projects will be built” in the next seven years to bring more renewable energy to the grid.

The good news is that, in return for supporting the energy spending bill, Senator Manchin reportedly received a commitment from Senator Schumer and Speaker Pelosi to support a bill to speed permitting for energy projects. The bad news is that the outline of the permitting bill released by Senator Manchin’s office does not yet specify serious steps to speed permitting. For example, it would “set maximum timelines for permitting reviews, including two years for National Environmental Policy Act reviews for major projects.” If accomplished, this would be a huge improvement over the current system where, as I explain in this video, National Environmental Policy Act average over five years.

The problem is that simply telling the federal government it has a two year deadline for its review will not accomplish much because the federal government routinely misses such deadlines. And courts could still strike down the review if they believed it was rushed or incomplete.

The key to watch is whether an emerging compromise imposes hard limits on courts and states’ ability to slow down federally-approved energy projects. In the past, I have proposed that if the federal government has approved a project, and more than five or six years have passed since the government began considering it, the courts should no longer be able to prevent the project from beginning construction. (Proposal is at pp. 304-305.) I defended that position in the Congressional testimony below. (My five-minute testimony starts at 49:28.)

If Senator Manchin’s permitting bill doesn’t take real steps to speed up permitting, it will be an important missed opportunity to build a better energy future.

Supreme Court: EPA Can’t Cap Greenhouse Gas Emissions From Power Plants

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The Supreme Court just decided “the most closely watched environmental case in decades,” West Virginia v. U.S. Environmental Protection Agency. In the 6-3, opinion, the Court holds that the EPA cannot use Clean Air Act §111(d) to set power-sector-wide greenhouse gas emissions standards for state power plants. The Court also explains that the Major Questions Doctrine is crucial to this analysis and reflects both “separation of powers principles and a practical understanding of legislative intent.”

A Justice Gorsuch concurrence, joined by Justice Alito, lays out their view of history and application of clear statements doctrines and the major questions doctrine specifically. Justice Kagan wrote a dissenting opinion, joined by Justice Breyer and Justice Sotomayor.

The opinion can be found here: https://www.supremecourt.gov/opinions/21pdf/20-1530_n758.pdf

As a reminder, here is a summary of how the case got to the court from a blog post and webinar I did last December, in anticipation of the Supreme Court argument:

Under the Clean Air Act, the Environmental Protection Agency regulates greenhouse gas emissions from various sources including new cars and new industrial sources. But a large proportion of the country’s greenhouse gas emissions come from existing sources, such as the nation’s coal and natural gas power plants, which provide over half of American electricity.

In 2015, the Obama administration issued a regulation for existing fossil fuel power plants under Clean Air Act §111(d), which allows the EPA to “establish a procedure” for each state to adopt “standards of performance” for existing sources of air pollutants. The administration called this rule the “Clean Power Plan.” It was controversial, in part, because it went beyond asking states to make their existing power plants run more efficiently. Instead, it went “beyond the fenceline” of the power plant to encourage non-fossil sources of electricity such as wind and solar power and shrink the fossil-fuel power sector.

The Clean Power Plan never went into effect because the Supreme Court stayed its implementation on February 9, 2016. The D.C. Circuit heard more than 7 hours of argument on the validity of the Clean Power Plan but never ruled on it because the Trump administration repealed it and replaced it with its own rule, which it called the “Affordable Clean Energy Rule,” and was limited to promoting efficiency measures at existing fossil fuel plants. The D.C. Circuit then heard 9 more hours of argument on this new rule, before striking it down on January 19, 2021. The court held that EPA’s authority was not so limited.

The Supreme Court granted certiorari to decide whether Clean Air Act §111(d) gives “the EPA authority not only to impose standards based on technology and methods that can be applied at and achieved by that existing source, but also allows the agency to develop industry-wide systems like cap-and-trade regimes.” The case is an important sequel in the Court’s lines of cases on how much deference executive agencies should receive to decide major questions of policy and whether Congress might authorize dramatic agency action from relatively obscure provisions—hiding an elephant in a mousehole.

The opinion can be found here: https://www.supremecourt.gov/opinions/21pdf/20-1530_n758.pdf

The Supreme Court emphasized that “the only interpretive question before” it was “narrow”: “whether the ‘best system of emission reduction’ identified by EPA in the Clean Power Plan was within the authority granted to the Agency in Section 111(d) of the Clean Air Act.” Some had thought it might explicitly limit the Chevron doctrine or return to the non-delegation doctrine. This is a narrower ruling, but may rule out some of the more aggressive steps the Biden administration might have considered to reduce sector-wide greenhouse gas emissions in areas such as utilities, refineries, and oil and gas development.

Making the Most of a New Era of American Energy

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This year, the United States emerged from history’s biggest oil boom—this boom was more than an order of magnitude bigger than previous U.S. commodity booms and seven times bigger than the world’s biggest previous oil boom, which occurred in Saudi Arabia in the 1970s.

As a result, even with the 2020 oil bust, the U.S. produces more oil than any other nation. In 2019, America produced 65% more oil than #2 Saudi Arabia. And the U.S. is also the world’s biggest producer of natural gas and may soon be the world’s biggest exporter of liquefied natural gas. America is at the dawn of a new era as the world’s #1 energy producer.

My new line of research shows that, to maximize the benefit from this new bounty, oil & gas regulators should slightly slow production. Counterintuitively, slower production will benefit oil & gas companies by marginally increasing their cash flow and significantly increasing the long-term expected value of their assets. And slower production will also limit the environmental downsides of oil & gas and maximize the environmental benefits of natural gas.

Slower production counterintuitively helps oil & gas companies for two reasons.

First, although no individual company wants its production slowed, if companies were allowed to freely negotiate with each other, they would agree to cut back production simultaneously because slower production means higher prices and higher profits. As Adam Smith put it, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in some contrivance to raise prices.” Antitrust law forbids them to negotiate a production slow down, because we usually prefer lower consumer prices. But oil & gas prices have been so low following the boom, sometimes even negative, that gas is just being wasted—flared off at thousands of wells across Texas and North Dakota. Regulators can stop this waste, which just harms consumers, by cutting back oil production. Modest production limits would also raise prices enough to increase overall cash flow to oil & gas companies immediately.

Second, oil and gas is a long-term asset, oil and gas that is wasted today could be worth a lot in the future. American oil & gas law pushes companies to drill and pump oil more rapidly than they would like—the rule of capture, common lease terms, and covenants implied into leases by the courts all make companies drill for oil when they would rather wait. But it makes no sense to rush to produce natural gas that will simply be flared, or to flood the market with oil at rock-bottom prices, when companies could simply wait to drill until prices recover. Modest production limits would somewhat mitigate the common law’s tendency to push more oil production than a truly free market would provide.

I explain these theoretical reasons for oil & gas production limits in my forthcoming Cardozo Law Review article, State Energy Cartels. I show how oil & gas production limits are actually an idea that came from the United States, and its oil producing states, during the Great Depression. And I show that production limits also have potentially massive environmental benefits: slowing carbon emissions, boosting renewable energy, and creating a counter-intuitive coalition of oil producing countries with a powerful interest in slowing fossil fuel production.

My own state of Texas will have to be a leader in negotiating any new coalition of oil producers to impose production limits. Because of the new oil boom, Texas now produces more oil than 12 of the 13 nations that comprise the Organization of Petroleum Exporting Countries (OPEC).

The Railroad Commission, Texas’s oil and gas regulator, has coordinated oil production limits before, as I explain in this EnergyTradeoffs.com podcast. In the years before and after World War II, Texas alone produced one quarter of the world’s oil and the United States together produced two-thirds. During these years, American oil powered recovery from economic catastrophe, victory in World War II, and the post-war global economic expansion. Texas played a leading role in limiting year-by-year oil production—so much so that when Middle Eastern countries moved to the forefront of oil production and formed OPEC, they described it as “a kind of international Texas Railroad Commission.”

My newest article, published in the Oil, Gas, & Energy Law Journal, shows how the Texas Railroad Commission can reclaim its mantle as the world’s leading oil & gas regulator and take initial steps toward cooperation on restraining production. I propose that it start by phasing in modest cuts in natural gas production to stop economic flaring and marginally raise oil and gas prices.

As I explain in this new Houston Chronicle op-ed, the Commission can improve its data collection to fine-tune its phase-in of new gas limits to ensure they boost industry cash-flow. I explain the economic and environmental benefits of this proposal at greater length in this recent video presentation on why it is the best method of stopping flaring, which is also embedded below.

The United States and Texas find themselves again at the center of global energy production. It is high time for them to carefully consider how they will maximize the economic and environmental benefits of this new bounty.

Energy Tradeoffs Podcast #42 – David Konisky

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This week’s EnergyTradeoffs.com podcast episode features Indiana University’s David Konisky talking with Shelley Welton about his research on “Public Attitudes on Energy & Climate.”

David and Shelley discuss David’s research on what Americans believe about different sources of power. David finds that people mostly judge power sources based on their local environmental harms and their cost. They tend to be very favorable toward renewable sources, less favorable toward fossil fuels, and conflicted about nuclear power. David explains that many are more comfortable with traditional regulation such as emissions standards rather than market-based approaches to limiting carbon emissions. The discussion relates to a 2016 book that David wrote with Stephen Ansolabe, Cheap and Clean: How Americans Think About Energy in the Age of Global Warming.

Shelley and David also discuss a newer article that David coauthored with Sanya Carley and Stephen Ansolabe, “Are all electrons the same? Evaluating support for local transmission lines through an experiment.” In the paper, they examine local opposition to new energy infrastructure projects and find that it may be possible to provide information to landowners that would make them more favorable to new transmission lines designed to enable more renewable power.

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Energy Tradeoffs Podcast #41 – Sheila Olmstead

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For this week’s EnergyTradeoffs.com podcast interview, we have David Spence interviewing Sheila Olmstead his colleague at the University of Texas, about Sheila’s research on “Carbon Taxes: The Evolving Conventional Wisdom.”

Sheila responds to the concern that a carbon tax would have a regressive impact on lower-income households by raising the price of energy. She explains that a carbon tax is actually less likely to have a net regressive impact on low-income households than other climate policies. Nearly all climate policies place disproportionate burdens on low-income households that spend a larger share of their income on energy. But a carbon tax produces revenue that can be used to offset or eliminate the costs it imposes on vulnerable populations. (And, of course, as I argue here on Greg Mankiw’s blog, it imposes more transparent burdens than other climate policies, which means that policymakers will be more likely to address those burdens on low-income households.)

Sheila also argues that a carbon tax would not have a major negative impact on the economy. And she argues that the negative impact of the tax on some fossil fuel sectors is a feature not a bug of a policy designed to cut greenhouse gas emissions. Sheila also argues that even if a carbon tax starts at $40 per ton, new research suggests that it should rise well beyond that. Finally, Sheila explains the controversy over whether governments that impose a carbon price should consider rolling back other climate regulations.

Sheila and David reference the Climate Leadership Council’s “Economist Statement on Carbon Dividends,” which was signed by all four former Chairs of the Federal Reserve, 27 Nobel Laureate economists, and 3,500 economists, including Sheila. 

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Energy Tradeoffs Podcast #40 – Doug Kysar

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This Thursday’s EnergyTradeoffs.com podcast is our 40th episode! It features Yale Law School’s Doug Kysar talking with University of Colorado’s Sharon Jacobs about his research on “Tort Law & Climate Litigation.”

Sharon and Doug first discuss the different types of climate litigation, including causes of action based on nuisance, arguments that the government holds the climate in trust for future generation, and claims that fossil fuel companies have misled investors and the public about the dangers of climate change. They go on to discuss the challenges of holding companies liable when greenhouse gas emissions were also caused by consumers around the world, and how that may prevent or dissuade judges from allowing these suits to go forward. Finally, they discuss the remedies that the various plaintiffs are looking for to protect them from climate harm.

The conversation builds on a 2017 article that Doug and Henry Weaver published in the Notre Dame Law Review, which was titled “Courting Disaster:  Climate Change and the Adjudication of Catastrophe.”

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Energy Tradeoffs Podcast #37 – Eric Biber

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Another week, another EnergyTradeoffs.com podcast episode. This week, the University of California at Berkeley’s Eric Biber talks with David Spence about his research on “How Law Must Change in the Anthropocene.”

Eric explains his argument that as humans change the global environment, legal doctrines will have to change to accommodate regulatory responses as well as to address wider problems triggered by environmental harm. Eric describes the comprehensive challenges that will arise from climate change and other global environmental challenges and how they are caused by the “full range of human activity.” As a result, he argues that these challenges will require, in David’s words, “fundamental changes in the relationship between governments and individuals.” Eric describes how governments might be forced to rethink traditional approaches to legal rules for tort causation, federalism, and state coercion.

The conversation builds on Eric’s 2017 article on “Law in the Anthropocene Epoch” , which was published in the Georgetown Law Journal.

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Energy Tradeoffs Podcast #33 – Michael Burger

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Another week, another EnergyTradeoffs.com podcast episode. This week, Michael Burger of Columbia University talks with the University of Texas’s David Spence about Michael’s work on “Climate Litigation & the Green Transition.”

Michael and David talk about the variety of lawsuits that have been brought to try and hold fossil fuel companies responsible for the costs of climate change. (A chart collecting and organizing the wide variety of these cases can be found here.) Michael and David discuss the difficulty of finding just some companies liable for global climate change caused by many companies around the world. They also describe the possibility that climate change could be attributed to the consumers that burn fossil fuels rather than the companies that sell the fuels and how plaintiffs could draw analogies to lawsuits over tobacco, opioids, and guns.

The conversation builds on some of Michael’s recently published research including co-authored papers titled “The Status of Climate Change Litigation: A Global Review,” and “The Law and Science of Climate Change Attribution.”

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Energy Tradeoffs Podcast #29 – Monika Ehrman

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Today’s EnergyTradeoffs.com podcast episode has me interviewing the University of Oklahoma’s Monika Ehrman about her research on “Energy Realism & Fossil Fuels.”

Monika describes and criticizes the “keep it in the ground” movement–a coalition that is looking to stop production of oil and gas on federal lands and has now gained support from all of the remaining Democratic candidates for President. She argues that the keep-it-in-the-ground movement is ignoring the economic and geopolitical impacts of cutting off oil and gas production and lays out her theory of energy realism: she argues that the energy industry and the keep-it-in-the ground movement could both benefit from more careful assessment of the science and math supporting both the economic necessity and climate risks of fossil fuel production. My recent op-ed supporting sustainable oil development rather than simple bans also supports this vision of energy policy.

The discussion builds on Monika’s recent article, “A Call for Energy Realism:  When Immanual Kant Met the ‘Keep It In the Ground’ Movement,” which was published last year in the Utah Law Review, and Monika described earlier in a guest blog here at EnergyLawProf.com.

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