Federal Energy Permitting Reform: A Step Towards a Future with Affordable and Reliable Power

The Senate Natural Resources Committee recently voted 15 to 4 to approve the Energy Permitting Reform Act. Senator Joe Manchin (I., W.Va.) and Senator John Barraso (R., Wyo.) authored the bill. Although the bill breezed through committee, it is unclear whether it will receive a vote before the end of this Congress.

If signed into law, the bill would modernize and streamline the permitting processes for energy infrastructure projects in the United States. The House of Representatives has considered similar reforms to expand U.S. energy production in the Lower Energy Costs Act. Inefficient permitting processes limit energy companies’ ability to meet growing demand and ensure Americans’ access to abundant, affordable, and reliable electricity.

Excessive red tape and prolonged litigation create delays and uncertainties that discourage infrastructure investment and thus drive up costs borne by American families and businesses. Energy inflation hits lower-income American families particularly hard. Research from the American Council for an Energy-Efficient Economy found that U.S. households spend an average 5.6 percent of their income on electricity and fuel. By contrast, low-income households spend 17.8 percent on average, stressing their already limited budgets. Electricity and fuel are essential purchases, so high prices can force poorer families to cut costs elsewhere or take on debt.

The Energy Permitting Reform Act contains provisions that would accelerate project approvals, reduce delays, and provide greater regulatory certainty for developers. This analysis examines the bill’s key provisions relating to judicial review, federal land leasing, offshore energy development, transmission infrastructure, and critical mineral access. I assess the potential to streamline permitting, reduce costs, and bolster U.S. energy security and also identify additional reforms that should garner bipartisan support.

Accelerating claims and judicial review

Energy infrastructure projects are subject to the National Environmental Policy Act (NEPA). NEPA requires federal agencies to evaluate the impacts of projects that may significantly affect the environment. However, after agency approval, a project can still be subject to legal challenges under NEPA. At present, the law does not set a strict window of time after project approval for legal challenges, potentially threatening a project for years. Furthermore, these cases can be lengthy, leaving developers in project limbo while waiting to have their day in court. These delays increase the cost of building critical infrastructure. Without the additional clarity provided by permitting reforms, many projects will not even be pursued as bureaucratic uncertainty and unexpected delays can result in unprofitability. This problem is particularly acute since the cost of capital has risen significantly since 2022. Macroeconomic analysis from Aswath Damodaran at New York University’s Stern Business School found that the median cost of capital for an American firm rose from 5.8 percent at the start of 2022 to 7.9 percent at the start of 2024. These higher rates are significant for large infrastructure projects where a year of interest payments could total more than 100 million dollars.

The Energy Permitting Reform Act contains several provisions to limit excessive NEPA litigation for infrastructure projects for energy production, transmission, and mineral extraction. If the bill becomes law, a petitioner could challenge a project within 150 days after the lead agency approves it. After that deadline, the developer would be able to act with greater certainty of the approval. Additionally, the bill would require courts to fast-track any lawsuits that challenge project approvals. If a court returned a decision to an agency, the agency would need to respond within 180 days. These provisions would streamline the legal process surrounding project approvals, creating greater certainty for developers and investors, while ensuring a thorough environmental review.

Federal onshore energy leasing and permitting

The process for leasing federal lands for oil and gas development can be overly bureaucratic and add uncertainty for companies. At present, the Bureau of Land Management (BLM) manages the leasing process on federal lands with significant discretion. Companies interested in leasing land for oil and gas projects can nominate parcels. BLM may subdivide these nominated parcels and offer the fragments in lease offerings. This subdivision process creates unnecessary project risk for companies and can result in significant delays. Before a company can begin drilling on federal land, they must file for and secure approval for their Application for Permit to Drill (APD). An approved APD is valid for two years, unless the lease term expires. An APD can be extended for another two years with BLM approval.

The Energy Permitting Reform Act includes reforms that would encourage leasing of federal lands for oil and gas projects. According to Section 201, BLM would be prevented from unnecessarily subdividing parcels. The bureau would instead lease the parcels as companies nominated them, unless the approved resource management plan does not allow a subpart to be open for oil or gas leasing. This change would reduce uncertainty and mitigate project delays for oil and gas companies that want to develop projects on federal lands. BLM can still preserve parcels from development by making the appropriate changes to the resource management plan. The bill would also ensure an approved APD is valid for a single non-renewable four-year period that begins on the date of approval. This change would remove unnecessary paperwork and uncertainty for companies that have leases that extend beyond the current two-year limit for an APD. These changes should lower the costs of development of new projects on federal lands and help expand the supply of affordable oil and gas.

Offshore energy development

Offshore leases are essential to the development of offshore wind, oil, and natural gas projects. For the 10 years following the passage of the Inflation Reduction Act of 2022, the Department of the Interior can only offer leases for offshore wind if it holds offshore lease sales for oil and gas of at least 60,000 acres in the prior year. This provision was intended to ensure that the federal government would continue to offer up leases for oil and gas following the act’s passage. The Biden administration decided it would only offer these leases in 2025, 2027, 2029 to limit the development of new oil and gas projects on federal land. This policy decision is an attempt to fulfill a campaign promise to stop new offshore oil and gas leases, while still allowing for the development of new offshore wind projects on federal lands. Secretary of the Interior Deb Haaland said this policy would lead to, “the smallest number of oil and gas lease sales in history.”

The Energy Permitting Reform Act would instead mandate that the Interior secretary conduct at least one offshore oil and gas lease sale and one offshore wind lease sale for every year from 2025 to 2029. This change will help to reduce energy costs for all Americans by expanding production of gas and oil.

The bill also requires the secretary to offer at least 400,000 acres per year for offshore wind. The secretary also would need to set an initial target date for offshore wind energy production to reach a goal of 30 gigawatts of capacity. The bill would limit the next administration from constraining the development of offshore wind and oil and gas on federal lands. 

Transmission infrastructure

The bill would streamline the approval process for transmission infrastructure. Such infrastructure is essential for transporting high voltage electricity from power plants, including wind and solar farms, to substations and ultimately to consumers. Companies must build new transmission lines to connect new, often remote power plants to population centers that need the electricity.

The Energy Permitting Reform Act would give the Federal Energy Regulatory Commission (FERC) greater authority to approve new transmission if it meets all these specific criteria: 1) the proposed facility will transmit electricity interstate, including from offshore; 2) it is in the national interest; 3) the project will significantly reduce transmission congestion, protect or benefit customers, and provide improved reliability; and 4) notice is given to the public followed by a public hearing. 

Within one year of the enactment, the U.S. Department of Energy (DoE) secretary would be required to study electricity transmission capacity constraints and congestion. DoE already conducts these transmission studies, but they would be required to specifically identify geographic areas experiencing or expected to experience transmission constraints or congestion. This would help FERC identify regions where new transmission infrastructure is essential and use its new authority to expedite the permitting process. Although new transmission can reduce congestion and help improve reliability, it can add further complexity when trying to balance the grid. If this change is enacted into law, it will be essential for the grid regions to monitor changes in the energy mix of their neighbor regions.

The United States has several transmission planning regions that ensure the residents will have access to reliable electricity. These planning regions coordinate efforts between utilities, power generators, and regulatory bodies. For example, most of the eastern United States is under the authority of the Eastern Interconnection. This interconnection is further divided into smaller planning regions such as PJM Interconnection and the Midcontinent Independent System Operator. Furthermore, each transmission planning region must submit a joint interregional transmission plan to FERC, in concert with its neighboring planning regions. This requirement makes interregional planning more formalized by codifying it into law. 

The costs of new interregional transmission would be allocated according to the cost-causation principle. The cost-causation principle aims to allocate costs so that customers pay in proportion to the benefit they receive from the transmission infrastructure. In practice, it is difficult to quantify who receives what proportion of the benefits. At present, cost allocation disputes often delay and limit investment in transmission. This change may help to mitigate disputes and provide clarity about the cost allocation for new interregional transmission. The bill would provide clearer guidance and statutory backing for FERC’s decision making process for allocating costs. Ultimately, this would only be an incremental change and regions will continue to challenge FERC’s decisions around cost allocation when they believe the costs are falling disproportionately on their ratepayers.

The United States must build transmission as it aims to increase its energy supply. Regulatory reforms that reduce uncertainty and streamline permitting processes for transmission would encourage the development of necessary infrastructure. However, transmission is not in itself a solution to energy scarcity or various grid regions’ reliability issues. Interregional transmission must be coupled with investments in dispatchable power sources—natural gas, geothermal, and nuclear power—to effectively balance the grid and mitigate volatility. 

Critical minerals and mining

The Energy Permitting Reform Act includes several provisions that would help to streamline permitting for mining sites and the development of infrastructure to extract and process minerals. Additionally, Section 210 gives mining companies greater flexibility to establish mill sites on federal lands to support their operations. A mill site is used for processing ore, storing equipment, and other activities that are essential to operations. These sites, limited to five acres, remain public lands rather than becoming the private property of the mining company. The bill would also create a fund to clean up abandoned hardrock mines. The federal government would deposit the fees it collects from mining companies for each mill site into the fund.

Unfortunately, the Senate bill doesn’t go far enough to ensure that the United States will have secure access to critical minerals. The Biden administration acknowledged in a 2022 press release that “China controls most of the market for processing and refining for cobalt, lithium, rare earths and other critical minerals.” The same memo also stated that “China controls 87 percent of the global permanent magnet market, which are used in EV motors, defense systems, electronics, and wind turbines.” At the beginning of this year, China banned exports of rare earth processing technology. If the United States is going to radically expand the proportion of its electricity generation that comes from intermittent renewables, one of the stated goals of the Inflation Reduction Act, it is essential to secure access to critical minerals and components essential to the maintenance of these technologies. The Senate should be able to identify additional points of bipartisan agreement to address regulatory issues that limit mining and investment in infrastructure for the processing of critical minerals.

The Lower Energy Costs Act (LECA), the House’s permitting reform bill, contained additional provisions to help secure access to critical minerals. Under LECA, a company could begin mineral discovery and assessment on federal lands within 15 days of notifying the Interior secretary, as long as they did not disturb more than five acres of surface land and met other conditions. This change would improve the ability to discover critical minerals on federal lands. Furthermore, mining would be a covered activity under the FAST Act. This designation would reduce the time and complexity involved in obtaining permits for mining projects. Additionally, projects that receive funds from the Defense Production Act for defense-related mining would also benefit from these streamlined processes. These changes would further augment America’s energy security, especially when coupled with the other permitting reforms in the Energy Permitting Reform Act. These provisions from LECA should receive bipartisan support as they are critical to securing the supply chain for intermittent renewables and batteries and bolstering the United States’ energy security.

LECA would also remove uranium from a list of excluded materials in the definition of critical minerals. The Interior secretary would be tasked with evaluating and updating the list of critical minerals. The secretary retains the authority to designate uranium as a critical mineral. Under the Energy Act of 2020, the designation of uranium as a critical mineral encourages domestic production, processing, and government investment in research and development to accelerate innovation in production and processing. The designation of uranium as a critical mineral should receive bipartisan support given that the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act passed the Senate 88-2. Access to uranium and relevant processing infrastructure will be essential for most of the advanced reactors that will enter the market after the Nuclear Regulatory Commission approves them. Uranium will be used as fuel for the next generation of reactors. At present, the vast majority of all fuel necessary for the United State’s nuclear reactors is imported from other countries. Only five percent of all uranium fuel is produced domestically. In 2023, the three largest foreign suppliers of uranium imports were Canada (27 percent), Kazakhstan (22 percent), and Australia (22 percent).

While the provisions related to critical minerals are an improvement over the status quo, the Senate ought to consider several changes included in the Lower Energy Costs Act. These changes are essential for the United States’ energy security as we diversify our energy mix.

Conclusion

The Energy Permitting Reform Act represents a significant step in modernizing the permitting process for critical energy infrastructure projects in the United States. By implementing targeted reforms across key areas, the act aims to reduce delays, accelerate approvals, and provide greater regulatory certainty. These reforms are essential for encouraging investment in America’s energy infrastructure to meet rising electricity demand, ultimately benefiting consumers through greater energy reliability and affordability. In particular, the poorest Americans will benefit from changes that significantly reduce the price of energy, as energy makes up a greater proportion of their monthly costs.

However, while the bill makes important progress, additional reforms should be considered to further enhance its effectiveness. In particular, Congress should consider measures from the Lower Energy Costs Act related to expanding the United States’ capacities for discovering, mining, and processing critical minerals. Securing access to these resources is crucial for bolstering U.S. energy security as the nation diversifies its energy mix. The Senate should be able to identify additional reforms to secure access to critical minerals. These critical minerals are essential for the expansion of renewables, batteries, and nuclear power in the United States.

While the bill did pass through the committee, it is unclear if it will receive a vote and eventually become law. If it does not receive a vote in the 118th Congress, the next Congress should be sure to prioritize bipartisan permitting reforms. These reforms will be essential to ensure that America has the robust and reliable energy infrastructure necessary to power economic growth and prosperity in the 21st century.