Midterms 2022 in the United States: the composition of the next American Congress weighs on the authorization of reforms

Stalled efforts to reform the federal energy infrastructure licensing process could resurface after the Nov. 8 U.S. midterm elections, even if Democrats lose one or both houses of Congress.

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But the close contest for control of the federal legislature also has significant implications for how and when the next crack in passing authorizing legislation could take shape.

Nonpartisan public polls suggest close races for control of the equally divided U.S. Senate as well as the House of Representatives, where Democrats have an eight-vote majority. If Republicans win the House, as election forecasters project, some Washington watchers still see the possibility of a compromise measure.

“It’s close enough to a quantum leap to enable reform under current political dynamics,” Rob Rains, senior energy analyst at independent research firm Washington Analysis, said in an interview. “It will depend on the outcome of the election.”

Lawmakers from both major parties released proposals to authorize bills that offered a sense of policy priorities and potential battle lines. US Senator Joe Manchin, Democrat of West Virginia, tried unsuccessfully to tie the permission policy updates to a continued resolution to fund the government in September. Seventy-two House Democrats had opposed that approach.

Still, there was talk of the potential for a compromise between Manchin’s proposal and a more aggressive proposal from West Virginia Republican Sen. Shelley Moore Capito, which most Senate Republicans favored.

Each package aimed to streamline permits and speed up federal reviews for a range of energy projects, and Manchin and Capito have expressed their willingness to negotiate a new version of a reform bill.

The stakes for the energy sector are high.

Electric transmission projects face serious permitting hurdles that come with building interstate infrastructure in the United States, and Democratic lawmakers want to help site transmission projects in support of the the recently adopted reduction in inflation, with its billions in energy and climate expenditure. Republicans and some Democrats, including Manchin, also want to streamline the licensing process for interstate gas pipeline companies and other infrastructure developers under the National Environmental Policy Act and Environmental Quality Act. after a series of major legal setbacks for oil and gas projects upended billions of dollars in spending over the past few years.

Trade-off window

If Democrats return to Washington on November 14 after losing both houses of Congress, they could feel greater pressure to pursue permit reform during the lame duck session before the start of the 118th Congress in January 2023, according to Christi. Tezak, managing director of ClearView Energy Partners. . Potential vehicles could be an omnibus spending bill after the midterm elections or a defense authorization bill.

“If the chambers flip, then Democrats would have the incentive to move something this session to say it’s already been done, so we won’t need the Republican Congress to authorize reform,” Tezak said. “You’d get something softer. That’s exactly why Republicans would want to find a way to prevent it so they can do more and possibly tie it to something they think Biden could. veto.”

Washington’s analysis pegged “odds just above the likelihood that a deal will be struck to allow reform to move forward.”

“We recognize that the window is small and, depending on the election outcome, Republicans may not want to negotiate a compromise measure, choosing instead to wait until after the 2024 presidential election when the party could hold trifecta rule. “Rains said in a recent note to clients.

“A possible future to enable reform”

Manchin’s proposal sought to limit environmental permit reviews to two years, shorten the time frame for public comment, and limit states’ ability to delay pipeline projects due to water quality concerns.

Capito’s proposal called for enshrining in law Trump-era reforms that sought to curb state water quality reviews under the Clean Water Act that some states like New York have used. to oppose pipeline projects. The Republican Permit Reform Bill would also have codified a 2020 regulation aimed at limiting the scope of environmental reviews and, like Manchin’s proposal, established a two-year time limit for reviews. The Biden administration decided to roll back the regulations in June.

Another provision of Capito’s proposal would seek to give states more control over leasing oil and gas on certain federal lands within their borders.

The separate permit packages also called for expediting approval of the Mountain Valley Pipeline natural gas transmission project, a priority for the two West Virginia senators. According to James Coleman, a professor of energy law at Southern Methodist University, the Mountain Valley provisions represented “a recognition that the biggest problem is the endless judicial scrutiny of these projects.”

S&P Global Ratings also described litigation as the “most significant source of construction delays and cost increases” for the midstream industry. Ratings said “any reforms that may be enacted” would be unlikely to prevent litigation against projects. But Ratings nevertheless described Manchin’s proposed permit review as a “more immediate and impactful driver of intermediate credit quality” than the Cut Inflation Act.

“This illuminates a possible future for permit reform, one that limits the scope and timing of environmental reviews of major energy projects such as pipelines, transmission lines and wind farms,” ​​Ratings said.

mountain valley

A controversial provision for Republicans in Manchin’s permit reform push was a section intended to expedite the implementation of electric transmission. Some Republicans have raised concerns that the bill would trump state authorities by giving federal regulators power over transmission projects across the country.

The federal government tightly regulates the location of gas transmission infrastructure under the Natural Gas Act. The government does not have the same authority over power infrastructure siting, which is primarily left to the states under the Federal Power Act, although large transmission lines often require some sort of federal permit.

“The Capito bill and the Manchin bill seemed to be jostling the authorities,” Coleman said in an interview. “A real permissions reform bill that actually gets passed would need to be more thorough.”

The recent campaign for permission changes nevertheless presented a promising sign for the long-term prospects of permission reform, as it showed that “it’s not just industry or market voices saying that we need to expedite clearance,” Coleman said. The provisions of the permit package have also been applauded by grid expansion advocates and some clean energy groups.

“If it’s not addressed in this Congress, it will definitely be a priority for the 118th Congress, whoever is in charge,” said Kellie Donnelly, former chief counsel for the Senate Energy and Natural Resources Committee. , at an event at Columbia University. Focus on global energy policy days after Manchin’s failed bill.

“But it’s a big priority for the Republican caucus,” Donnelly said.

S&P Global Commodity Insights reporter Corey Paul produces content for distribution on Capital IQ Pro.

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