Permitting reform and the politics of building the grid | Live from the ACORE Grid Forum in Washington, D.C.

0:00If we're talking about the race for AI in these kind of advanced manufacturing, the commanding heights of the 21st century economy, we are losing sorely in the race to bring on new electrical capacity, and it's something we need to address. Where do we want to end up on permitting and where do we want to end up on transmission? That first principle, I think we've seen fits and starts. Now that all generation sources are being impacted, we're starting to realize the problem is the same for everyone. I don't think states inherently want to stand in the way of transmission facilities. We have built a lot of line miles of transmission over the last couple decades, maybe less than I think we need, but still a substantial number.

0:37And that is the constant story of transmission. You can't plan it when you can plan it, you can't build it.

0:47Hello and welcome to The Energy Gang, a discussion show from Wood Mackenzie about the fast-changing world of energy. I'm Ed Crooks. And today we're coming to you from the ACOR Grid Forum in Washington, D.C. This is a gathering of some of the biggest names in the U.S. electricity industry and policy and regulation to talk about the challenges facing the grid and some of the possible solutions. Now, one of the hottest topics here has been one of the thorniest issues in U.S. energy policy, which is permitting reform. There is widespread agreement that building new infrastructure in the U.S. takes too long and costs too much.

1:20Of course, that's an issue we've covered many times on this show in the past. The question is, what exactly needs fixing and how can we fix it without weakening environmental safeguards or cutting communities out of the process? And that's the question we're going to be discussing on this show. In a moment, we're going to be hearing from three people who are in the thick of it in the debates over permitting here in Washington, D.C. But first, we're going to hear from Matt Christensen. He's a partner at Wilson Sincini, and he's a former general counsel of the Federal Energy Regulatory Commission, FERC, which has been trying for many years to expedite the process of building out new grid infrastructure.

1:54Hello, Matt. Welcome to the show. Thank you. It's a pleasure to be here. Thank you very much for joining us. So, look, I wanted to carry on on this theme of permitting reform and to really try and drill down a bit into the details of what we mean when we talk about permitting reform. often seems to me that it's one of those things that people talk about as this kind of deus ex machina. This is the wonderful thing that's going to save us. It's too hard to build stuff in America, but once we get permitting reform, everything will be great. And people, I think, often are quite vague about what they actually mean when they say that permitting needs to be reformed.

2:30So I'm interested in your perspective, both now in the private sector and previously when you were working at FERC. When you look at the issues around permitting, what are the real choke points? What is it that actually stops infrastructure getting built, and grid infrastructure in particular, getting built in the United States? Yeah, so I think you're entirely correct that permitting reform is one of those things that's a little bit in the eye of the beholder, and it means a slightly different thing to different folks. When I think about the specific challenges to energy infrastructure, though, I do think there is a challenge in getting the actual permits that you need from the relative resource agency, or the relevant, I should say, resource agencies, to getting through NEPA review and the litigation that inevitably follows the relevant documents for any major piece of infrastructure.

3:18And I think I have the strong sense that people on both sides of the aisle recognize that that is a barrier, and that that needs to get reformed one way or another. There may be some disagreement as to exactly which of those ways is the right one, but I think those are sort of table stakes. When you move beyond that to different types of infrastructure, I think that sort of challenge applies generally. Different types of energy infrastructure, be them LNG export facilities, interstate natural gas pipelines, electric transmission facilities. There are particular challenges that are sort of idiosyncratic to each of those types of infrastructure.

3:50And I think that's where you are going to start to see significant disagreement from different sections about which challenges to fix and how exactly to go about doing that. Right, that's really interesting. And I want to come on later to the question of the politics of all this and the possibility of finding some kind of bipartisan compromise that everyone will agree on that moves permitting forward in a kind of constructive way that helps all kinds of infrastructure to get built. But before we get into that, let's dig into some of those details a little bit more. So you mentioned NEPA, the National Environmental Policy Act, which is the law that governs environmental approvals for infrastructure projects, among other things.

4:29What are the issues there as you see them? Because that seems to be when people talk about permitting reform, very often people go to thinking about NEPA immediately as one of the biggest issues. So I think there are a couple issues. I think one is NEPA review is very complicated, and it involves a lot of different, discreet, very fact-intensive questions. And so the actual work of a NEPA review, putting together an environmental impact statement or environmental assessment, the document that serves as the basis for an agency's decision, is incredibly time-intensive. It often takes years for significant pieces of infrastructure to get through that review.

5:10and that alone can be a significant delay. The other big issue, and this is the one that I get the sense people of, again, of both parties really recognize as a problem, is that almost any major piece of infrastructure is going to be subject to at least one, sometimes multiple lawsuits, and those lawsuits are often going to involve NEPA challenges. And because the regulations around NEPA are so prescriptive and the records are so big and voluminous, those lawsuits often significantly slow down the final investment decision or whatever steps need to take in order to start actually putting steel on the ground.

5:45So if you're thinking about reform, how do you think you get the balance right on this? Because of course, a lot of people will say, oh, well, reform is just code for sweeping away environmental protections, making it easier for companies to do whatever they want in terms of adding to pollution, damaging quality of life for people around the projects they're building and so on. You may say NEPA implementation is complicated. It's complicated for good reason, which is that these projects can have very large environmental impacts and it's important that the environment, nature, communities are protected from those impacts and it's important for people to be able to challenge those projects in the courts and have those issues properly resolved.

6:31Do you accept that that's a potential danger in reform, that you kind of sweep away protections that are actually needed? I think that is a potential danger. I think the risk, though, is asymmetric in the other direction. Like, I am all for environmental protections. I am all for ensuring that communities that are affected by energy infrastructure projects have a say in the process. I think my concern, though, is that that process has become bloated. It takes too long, and that by adding process on top of process, we're not actually benefiting the communities that are hosting this infrastructure, and that there are other ways that you could potentially do more for those communities, and that the time and resources that are lost in the pursuit of process actually slow down needed energy infrastructure, public interest infrastructure, without a commensurate benefit either to the environment or the communities that host that infrastructure.

7:28When you're balancing the impacts of energy infrastructure on communities versus the need to develop that energy infrastructure, let's face it, we need energy infrastructure and it's going to have to go somewhere. What I think is really important is a recognition that process alone is not going to make anyone feel better. And that what we should be thinking about is we should recognize that the communities in which infrastructure, and I mean infrastructure of all types, LNG export facilities, electric transmission facilities, you name it, that is going to have a disproportionate impact on the communities in which they physically sit.

8:02and I think a priority for federal regulators or state regulators as well, anyone involved in the siting or development of that infrastructure, is to make sure that those communities bear some of the, or sort of reap some of the benefits of that infrastructure as well. And I think ultimately that will do more to get infrastructure developed than layering on additional process. It's more about making sure that the folks that bear outsized cost get a commensurate share in the benefits as well. Right, and that is something we've not always been great at in the past. No, I think, frankly, those communities have been left behind.

8:36Again, this is not limited to any single type of infrastructure. This is true across the board, and I'm wary of the idea that more process is going to make a community feel better about a piece of infrastructure it doesn't want, when really the thing that can help those communities and the folks that live in them is to make sure that some of the benefits from that infrastructure can be kept in the communities themselves. Right. So what about the role of FERC here, the commission where you used to work? Under successive FERC chairs, it seemed like a big item on the commission's agenda was addressing exactly some of these issues, trying to make it easier to build new energy infrastructure in the US.

9:13We've just had a couple more commissioners confirmed by the Senate, expected to be appointed to FERC soon. And presumably that will kind of energize the work of the commission and lead to them being able to take on new issues and pursue their agenda the way they want to. What are you expecting now from the commission? What do you think they might try and do? Well, I think there'll probably be no single thing. There'll probably be a number of priorities. The commission's jurisdiction is very broad. But I think to pick up what you were saying there, I think one of the priorities will be around facilitating and expediting the review process for needed energy infrastructure that's cited by the commission.

9:51And that includes hydroelectric facilities, interstate natural gas pipelines, LNG export facilities. There's a limited role for electric transmission facilities as well. And I think expediting those reviews is probably going to be a priority. I think, though, if there's a unifying theme, and I do think it ties back to that, this administration is very focused on data center development. And the issue of how do you ensure that data centers have access to reliable electricity in a timely fashion, I suspect that will be a through line that runs through a number of the commission's major initiatives over the next few years.

10:25And in terms of what we know about the views of the two new commissioners that are just going to be appointed, both Republican nominees, do you think that they are going to essentially sort of continue the efforts that we have seen over the past few years from FERC in terms of trying to, as I say, make it easier to build infrastructure broadly? Or do we think they're going to have a kind of completely different agenda, maybe try and undo some of the things that have been done in recent years by FERC and try and make improvements to the system on their own lines? I think there'll definitely be a change of emphasis.

10:59I think the idea of making it easier to build infrastructure, I suspect that will be a through line for all of the new commissioners, or all of the commissioners, I should say, not just the new ones. there may be slightly different spins on where you can sort of ring the efficiencies from the system in order to expedite that review. I do think, though, the focus on data center development and sort of laying the groundwork for the digital infrastructure we need to power data centers and then the energy infrastructure you need to power that digital infrastructure, I think that will become more important.

11:30That's something that Chairman Rosner has focused on. I suspect that's something that the next commission will take up with gusto. And realistically, how much change can be made at the federal level, either through federal legislation or through FERC? It often feels like when you dig into the details of why particular projects haven't gone ahead, particularly perhaps electricity transmission projects, one of the crucial reasons is that they've been opposed at the state and local level. So is that always going to be a significant obstacle, do you think, to getting the grid built out if you've got that state and local opposition, no matter what happens at a federal level?

12:11I think there's a lot that can be done at a federal level to provide either expanded backstop siting for electricity facilities, electric transmission facilities, which is what we have now. You could certainly expand that. I think there are also there have been proposals to establish that certain types of transmission facilities will be cited by the federal government in the first instance. I think that would be an improvement. I don't think states inherently want to stand in the way of transmission facilities. I mean, we have built a lot of line miles of transmission over the last couple of decades, maybe less than I think we need, but still a substantial number in its own right.

12:43Where I think the federal government has a potentially very important role to play is on those very large multi-state, what I would call national interest transmission lines, that the benefits are not going to accrue to any single state. And so a state will almost definitionally have too small an aperture when reviewing the project. And that's sort of, for me, the key place where the federal government can come in, cite the facility, and then ensure that it can recover its costs appropriately. So preempt states' rights a bit, you mean? In a limited fashion. I think the way I would describe it is where you have reason to believe that the state might not be in a position to consider the full benefits of the piece of infrastructure, then it makes sense to have the national regulator come in and have that full, that broader perspective.

13:30And I will say, I think that's essentially what we do on interstate natural gas pipelines. That's where, if a pipeline is purely an intra-state facility that's benefiting customers, we let the states do the siting. If it's an interstate facility that has more national impacts, that's when you have the federal regulators take the helm. Right. And that's a quirk of the system, right, which is the same doesn't happen for interstate electricity transmission. Exactly. And I think you'll hear people say, hey, we should have parity for interstate pipelines and interstate electric transmission facilities.

14:00And I think that can be an oversimplification sometimes because there are real differences in how those facilities get financed and paid for and their costs recovered. But I think the basic idea that regional facilities that can't have their benefits captured by any one state, that's exactly where you want the federal regulator, both on the transmissions, the electric transmission side and the interstate natural gas side as well. Right. So we're talking at a meeting in Washington, D.C. Let's talk about the politics a little bit. How can we avoid that? Certainly, I think we can't. Clearly, there's nothing happening in Washington at the moment.

14:33The government is shut down. The parties are very far apart. There is essentially political deadlock. But before we got into the situation we're in now, there did seem to be some kind of rumblings around Congress that maybe there could be bipartisan progress on permitting reform. Certainly that was some of the talk around Washington over the summer. What is your expectation now? How realistic is it that, I guess, once this whole shutdown situation gets resolved, we could see the parties coming together to pass legislation that would really make a material difference to energy infrastructure investment and grid investment in particular?

15:17Yeah, I'm optimistic. And I'm optimistic about that for two reasons. One, I think you have members of both parties recognizing that we need a lot of energy infrastructure and that we need a lot of energy infrastructure of different types. And I'm hopeful that whatever passes and gets 60 votes in the Senate is not going to be just an electric transmission bill. It's not going to be just an interstate natural gas pipeline bill. It's not going to be just an oil and gas bill. It's going to have to have a broad basis in terms of the types of infrastructure that it facilitates. And I'm hopeful that that can bring about a compromise that can get 60 senators.

15:51I mean, I recognize that you could see a little bit of naivete in that, but I do think there's a real chance that things are slightly different now. And the second reason, which relates to that point, is we are seeing a huge increase in energy demand, particularly electricity driven by data centers. And that increase is going to have impacts on reliability and affordability of our energy system if we don't build a lot more energy infrastructure. And I'm optimistic that that backdrop, which didn't exist even two years ago, is going to provide an impetus, I should say, for more potential compromise to facilitate the development of all types of energy infrastructure.

16:30Excellent. That's good to hear. Let's hope you're right. Let's hope. Matt Christensen, thanks very much indeed. Great talking to you. It's a pleasure to be here. Thank you. That was Matt Christensen, formerly General Counsel at FERC, and now a partner at the law firm Wilson's & Sini. As he explained, the barriers to building new infrastructure in the US are deeply structural. They're baked into the system by decades-old laws and overlapping jurisdictions. And given that, to talk about what can reasonably be expected in terms of reform, I sat down here at the Grid Forum with three experts on the policy and politics of infrastructure permitting.

17:04I'm joined by Elizabeth Horner, who's a partner at the law firm Aaron Fox Schiff and his former chief counsel to Senator Shelley Moore Capito. Right. Shelley Moore Capito. I served on EPW for about seven and a half years, first under Senator John Barrasso from Wyoming and then under Senator Shelley Moore Capito from West Virginia. Right. Well, thanks very much indeed. Gives you a great perspective, I think, on the issues we're about to be talking about. It's also a pleasure to welcome Daniel Polkin, who is the Director of Infrastructure for Energy and Permitting at Arnold Ventures and is also formerly somebody worked in Congress.

17:35You're a former staff member, aren't you, at the Senate Committee on Energy and Natural Resources? That's right. I worked under Chairman Joe Manchin as his lead on electrical grid policy, and prior to that worked for Senator John Hickenlooper of Colorado on a range of energy issues, including electricity. Right. And tell us a bit about what you're doing now. So Arnold Ventures, I think of it as a philanthropic foundation. How do you describe it? We are a philanthropic organization founded by John and Laura Arnold many years ago, but recently stood up an infrastructure team. So we make grants to a number of organizations that are working to advance evidence-based policy that helps us build faster, better, and at lower cost all types of energy infrastructure.

18:09And in fact, we have, you know, focuses beyond just energy, but that's what I work on. And it's also a great pleasure to welcome back to the show, Jeremy Horan, who is the lead for permitting at ACOR, the American Council on Renewable Energy, our hosts here at this forum. Hi, Jeremy, welcome back. Yeah, thanks, Ed. It's great to be back with you. Yeah, great to see you again. You were just reminding me, we last spoke just as OB3 was passing, didn't we? We did. Yeah, I think, you know, probably your most listened to episode. I think it came out right before the Fourth of July holiday. But we did we did cover, you know, the bill was pretty much done.

18:42And I remember we we touched on some of the glorious FIAC issues and just sort of the state of play. So we now now know how that's played out a little. Yeah, indeed. And that is actually a great segue in what I want to talk about, which is the next big piece of energy-related legislation that could come out of Congress, which is on permitting reform. Elizabeth, maybe you could start us off here. When people talk about permitting reform, what really is the problem that they want to address? Yeah, that's a great question. And I'm glad that Daniel and I are both here because I think we have complementary experiences.

19:15In the public lexicon, I'd say over the last five years, permitting has become a catch-all phrase. And to your point, what does it mean? And in the energy space, I really view it as two different but related questions, which is permitting the actual, you know, authorizations to build a new project, making sure you're not, you know, having, make sure you're complying with substantive environmental laws. And then there's the question of transmission. And that is, as we can kind of talk about, really two separate policies under our current legal system. The Senate Environment and Public Works Committee is the one that implements statutes like NEPA, the National Environmental Policy Act, and the permits.

19:57By contrast, the Senate Energy Natural Resources Committee implements policies and oversees FERC, interconnections. That's a separate. And so we have really two different issues, I would say, that are sort of coming together at the same time. But I think it's useful to think about them both as sort of independent and interrelated. and permitting is often a catch-all that sort of makes the issue seem simpler than it is. And all of those things are problematic for the industry or are some worse than others? Let me turn it over to Daniel to give the perspective on the transmission part. I don't want to say who's got it worse because I think any industry can make a credible claim that they face serious challenges.

20:35But I can speak specifically to the transmission challenges, which both kind of layer into the challenges that Elizabeth was talking about with NEPA and these laws that make it very hard to permit things, but then also have their own special challenges that kind of lie within this old statute called the Federal Power Act, which the committee I worked on oversaw and I was the principal staffer tasked with working and negotiating policy on. The problems with the Federal Power Act really can be distilled into saying that we just, you know, before you even get to permitting, you have to have a line that is planned and being developed.

21:08in order to even apply for a permit. The problem with transmission often happens before the permitting stage. And to illustrate that, you can look at the different regions around this country. We have about 10 regions that are responsible for planning transmission. There was a regulation passed in 2011 in a bipartisan manner by FERC that said you have to do planning within your regions and you have to coordinate transmission build between them. We have planned exactly zero transmission lines between regions in the 14 years since that regulation passed. Many of the regions, I think most of them, have also planned and selected zero lines through these planning processes within the regions.

21:43In the regions that have worked, when you get out of this, you often end up in a nightmare scenario where, to give one example, there was a line called the Plains and Eastern Line, which you can read about in Russell Gold's book, Superpower. Oh, great book. I always recommend that book to people. It's terrific, isn't it? Fantastic introduction to kind of the challenges that these lines face. That line, large, ambitious project constantly litigated. At one point, the federal judge overviewing the docket in which the challenges under, through NEPA and other statutes were being litigated, the parties were trying to allege that they just hadn't considered all of the relevant, you know, environmental impacts of this line and what have you.

22:21And the judge had to make the observation that this line had generated a case, a record of over 100 ,000 pages. Now, 100 ,000 pages, right? Pages eight and a half by 11. That's about a foot for government purposes. 100 ,000 feet, there's 5 ,000 feet in a mile. So that's 20 miles of paper. You could have made that transmission line out of paper mache. But instead, they didn't make it at all because that line is still under development now with a different company. And that is the constant story of transmission. You can't plan it. When you can plan it, you can't build it. You look at, you zoom out, you look at the total numbers.

22:53The entire North American continent has developed 7 gigawatts of large-scale interregional transmission since 2014. South America is beating us at 22 gigawatts. Europe at 44, China in a seven-year period from 2014 to 21, 260 gigawatts. If we're talking about the race for AI in these kind of advanced manufacturing, the commanding heights of the 21st century economy, we are losing sorely in the race to bring on new electrical capacity, and it's something we need to address. And I want to just build briefly on one additional item related to permitting, and it's judicial review. I mean, that's something, so prior to working on the Hill, I worked at another law firm, and we had a lot of energy clients.

23:33And I tell folks, while these issues perhaps to folks like those in the tech industry are relatively new, these are challenges that have existed for a long time. And even if you get the permits on time, which almost never happens, you're left with litigation. And what some agencies often do is they try to be robust in their record. They try to say as many things as they can. But when you have 10 ,000 pages, there's something in there that someone could argue conflicts with another statement. And so you almost are in this catch-22 where you have to be thorough. But if you're very thorough, it could create ammunition for an interest that doesn't want a project to go forward to try to latch onto.