One of the reported prices for the recently announced agreement on federal energy legislation was a pledge that Congress would also propose a new law to accelerate energy project permitting. This is a difficult topic, with tangled arguments that Congress should unravel carefully, and lawmakers should bring a healthy skepticism to claims that permit processes are impeding construction of necessary projects.
Moody’s Investors Service released a September 2020 report presenting eight examples of derailed or high-risk projects where companies failed or were failing to recognize the level of community opposition and market signals. The Institute for Energy Economics and Financial Analysis (IEEFA) issued a December 2020 report describing Federal Energy Regulatory Commission (FERC) failures to analyze market forces in its project approval process. Its failures pose risks to ratepayers, landowners and the economy.
Reviews should be efficient but they should also be thorough and effective
The IEEFA report noted that three major gas pipeline projects—the Constitution, the Northeast Supply Enhancement Project, and the Atlantic Coast Pipeline—were scrapped in 2020 after FERC had approved them, due in large part to problems that a more efficient agency would have identified and analyzed earlier.
IEEFA cautioned, “More project failures may follow.”
In September 2021, the PennEast pipeline project was cancelled. The Jordan Cove liquified natural gas and pipeline complex proposed for Oregon was cancelled two months later. Both had been approved by FERC.
Government policymakers and regulators should recognize when a project:
A permit denial or court decision on appeal that keeps an ill-advised project from going forward benefits the public. In such cases, the permit and appeals process is doing what it should do: Hold up a bad project.
A vigorous examination of permit applications is particularly important for large, capital-intensive projects that take time to build. The pace of change in the energy sector is unprecedented—a gas pipeline that looked good five years ago may no longer make economic sense where an increase in wind and solar technologies or energy efficiency would eliminate the need for more energy.
Fossil fuel energy projects have long lives—typically at least 40 years. They have substantial environmental impacts from ordinary operations, and sometimes have drastic environmental impacts from accidents, such as explosions or leaks.
Giving an agency the ability to consider alternatives carefully before permitting controversial projects is completely reasonable.
That’s a good thing. Reviews should be efficient but they should also be thorough and effective, not bound by an irrational, one-size-fits-all deadline or other misguided constraint.
The system is not skewed against the oil and gas industry. The hurdle for communities, landowners or nonprofits who seek to challenge a project is high.
Staff members at FERC and other agencies that issue permits know that suggesting a proposed denial, or even just asking challenging questions, means angry calls from powerful people and political attacks for “blocking” a project. Agencies may worry about potential impacts on their funding.
They know it is almost always easier to say “yes” than “no.”
Members of the public usually find out about a project rather late in the game. The applicant has already been meeting with the agency behind closed doors, in a prolonged “dark period” that precedes the actual filing of the application. If agency staff challenge an application, the applicant may quietly lobby agency higher-ups, or persuade an elected official to place behind-the-scenes pressure on the agency. The public employees may have no meaningful or fair opportunity to rebut the assertions.
In a survey of more than 1,700 employees at two federal agencies, more than one-third of the respondents reported they had personally experienced one or more incidents of political interference in carrying out their duties. The survey was conducted in 2010, but a smaller internal agency survey released in 2021 that focused on a unit of U.S. Environmental Protection Agency scientists raised similar concerns.
In such situations, the public generally has no notice of the dispute, no information on the nature of the debate—and no opportunity for a voice.
It cannot reasonably be argued that courts are biased in favor of those who challenge projects
Project opponents face a tough hurdle in challenging an approval of a fossil fuel energy project. Many observers don’t realize that the Administrative Procedure Act (APA) requires the court to uphold an agency action unless it is unconstitutional, exceeds the agency’s jurisdiction, or is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” A case must be exceptionally strong and compelling to meet the standard.
The National Environmental Policy Act (NEPA, 42 U.S.C. § 4321, et. seq.) requires agencies to consider alternative approaches that avoid or reduce a project’s harmful effects. Both agencies and fossil fuel energy developers often fail to meet the standard. When a community, landowner or nonprofit organization appeals an agency’s decision on a fossil fuel energy project permit, the requirement to evaluate alternatives is usually the pivotal basis of the challenge.
NEPA does not demand a particular result. It demands a rigorous decision-making process. It requires a federal agency to assess the likely environmental impacts of its actions before approving a project (Department of Transp. v. Public Citizen, 541 U.S. 752, 756–57 (2004)). If a project may have a significant environmental effect, the agency must prepare an Environmental Impact Statement (EIS) to assess the potential risks and examine alternatives to avoid or minimize harm. The law has been in place for over 50 years and was designed to ensure that agencies make properly informed decisions in the light of day, with public input.
If the courts have a bias regarding NEPA, it is certainly not in favor of permit challengers. The federal government has prevailed in about 80 percent of NEPA cases in recent years, and agencies almost always win their case if they did an EIS with a reasonably complete analysis (J. Ruple and K. Race. Measuring the NEPA litigation burden. Environmental Law 40:479-522. 2020.) Given how seldom the public wins in a challenge against an agency, it cannot reasonably be argued that courts are biased in favor of those who challenge projects.
A government permit process that affords comprehensive public scrutiny backed up by the right to judicial review prevents unnecessarily harmful, wasteful conduct. It forces decision-makers to think about alternatives that are more prudent economically and environmentally.
It represents competent, functional government.