Low-Energy Fridays: The Administration’s Permitting Push Is Too Narrow

In a recent Low-Energy Fridays post, we explain that permitting reform is the key to clean energy growth in the United States, not subsidies. The rationale is simple: Private investors are already seeking to invest in newer energy technologies, but the difficulty of siting new energy, electric transmission and energy storage assets is what truly holds back development. R Street has argued this for years, and it is good to see quite a bit of policy discussion (and progress) on permitting reform.

Earlier this month, the Department of Energy (DOE) proposed the latest expansion of categorical exclusions (CXs) for solar power, energy storage and transmission. However, while the DOE’s actions may seem good on paper, it is important to understand that they also exacerbate an existing problem with permitting that could sow the seeds for future issues. This also illustrates why R Street has consistently explained that congressional-led permitting reform is irreplaceable.

One of the major components of permitting difficulties is getting a finalized “Environmental Impact Statement” (EIS) for large projects that require approval under the processes of the National Environmental Policy Act (NEPA). This is a process that usually takes at least a few years, but it can even take 10 years or more. Most of the energy-related projects going through this process are clean energy related, so there’s been a lot of focus on improving this process as an environmental policy priority.

One simple way to make NEPA compliance easier and faster is to expand the list of CXs, which are conventionally utilized when it is reasonably expected that the environmental impact of an action is so small or well-understood that it doesn’t merit consideration in an EIS (e.g., the construction of perches or nesting structures for wildlife use). Most people expect that any permitting reform will include updates to CXs to cut down on what is needed for EISs and shorten their preparation timeline. On the surface, therefore, the DOE’s latest actions make sense—but there’s a big potential problem with the administration’s current approach.

Because the DOE’s actions are fundamentally narrow in scope––allowing more CXs for select technologies only ––it becomes easier for political preferences to override optimal economic or environmental outcomes. This has been R Street’s argument against using the Defense Production Act (DPA). We have consistently pointed out that when the administration uses its authority to prop up select industries, political connectedness and lobbying become more profitable investments for companies than productivity improvement. While the expansion of CXs isn’t quite the same as the DPA’s interventions, it does entrench an issue where the technologies that are blessed by politicians (in this case, transmission, solar, storage) get a leg up on competitors (natural gas, wind, carbon capture) that have nothing at all to do with their potential for economic improvement.

This is one of the reasons that R Street has emphasized that bipartisan, durable permitting reform that broadly addresses all energy permitting—as well as judicial review and community engagement—is better long-term policy than simply having the administration update or expand CXs. For example, the recently proposed CXs do nothing to address pipelines, which are the key to expanding carbon capture usage, as well as reducing reliance on oil-fired electricity in the Northeastern United States.

Essentially, there is some good news in the push to modernize NEPA regulations, but it is mixed in with some bad. Simply put, the administration’s scope is so narrow it could distort markets. In a perfect world, all competitors should play by the same rules, which enables markets and consumer preferences to dictate outcomes instead of politicians’ preferences. The administration should transition to a more agnostic approach toward updating regulatory requirements. This would not only be good for the economy but, in this case, also better for the environment.