In today’s issue:
- The deal that Manchin and Schumer made to bring permitting reform (facilitating energy infrastructure projects) to a vote fell apart on Sept. 27. What happened?
- The concept of permitting reform still has bipartisan support – for good reason.
- Four months after being nominated for another term, FERC Chairman Glick’s confirmation hearing still isn’t scheduled. What’s his future?
- Worry increases that energy policy makers are neglecting reliability in favor of other goals.
- The SEC’s climate proposed disclosure rules run into criticism.
- California orders the sale of gas-powered vehicles to end by 2035, but can the state’s electric grid handle the mounting load?
- Offshore wind is part of an all-of-the-above energy strategy, and the Biden Administration is setting new ambitious goals for floating wind farms.
Reform to Speed Up Permitting of Energy Infrastructure is Pulled From the Stopgap Funding Measure
Permitting reform was part of the deal – endorsed by Senate Majority Leader Chuck Schumer (D-NY), House Speaker Nancy Pelosi (D-CA) and the White House — that secured the support of Sen. Joe Manchin (D-WV) for the Inflation Reduction (IRA), which was signed into law last month. The idea was to attach the legislation to the government-funding Continuing Resolution (CR) that must pass by Sept. 30.
But as opposition developed, from both the left and the right, Manchin agreed on Sept. 27 to remove permitting reform from the CR, “eliminating what had been the chief obstacle to bipartisan support” for the stopgap funding measure, according to Roll Call. The Senate then voted, 72-23, to end debate and move forward with the CR.
Manchin said he agreed to drop the measure because a failed vote would have emboldened Vladimir Putin and other adversaries and push the government toward a shutdown.
The fate of permitting reform is now uncertain. According to Bloomberg, “Talks on how to advance the measure before the end of the year will continue, Schumer said in remarks on the Senate floor.”
It’s instructive to review what Manchin wants and why it has met opposition. The Senator released his legislation on September 21 as the “Energy Independence and Security Act.” According to an eight-page summary, the legislation would give the administration authority to designate 25 large projects of “strategic national importance,” updated every six months, that would receive “priority Federal review.” The list would include projects involving “critical minerals, fossil fuel (including biofuel), non-fossil fuel (including storage), electric transmission, carbon capture, and hydrogen projects.”
Review of the projects would have to be completed within two years. According to a study by the White House Council on Environmental Quality, it currently takes an average of four and a half years to complete an environmental impact statement, and 25% of the reviews took more than six years.
The bill also set a 150-day statute of limitations on lawsuits over projects, and it would expedite the “Mountain Valley Pipeline, which would transport natural gas about 300 miles from West Virginia to Virginia and is a key priority of Manchin’s,” reported the Washington Post. The project is roughly 95 percent complete, but has been subject to frivolous lawsuits by special interests who want to see the pipeline indefinitely stalled.
While the concept of permitting reform has broad bipartisan support, some progressives have pushed back hard against Senator Manchin’s proposal. In early September, 77 House Democrats, led by Natural Resources Committee Chair Raúl M. Grijalva (D-Ariz) signed a letter in opposition to adding permitting reform to the end of year funding package. They argue that “fundamental public health and environmental protections, like the National Environmental Policy Act (NEPA) would effectively be weakened.” When the Manchin measure was pulled from the CR on Sept. 27, Grijalva said, “Taking the dirty permitting rider out of must-pass government funding is the right decision.”
Other Democrats have issued their own plans for reform, as have Republicans, led by Sen. Shelley Moore Capito (R-WV), Manchin’s home state colleague. Republicans want legislation that removes even more obstacles to infrastructure than Manchin’s does. They are also generally unhappy with the deal Manchin made with Schumer to get the IRA passed.
Shortly before the decision to pull the permitting measure, Politico reported that Senate Minority Leader Mitch McConnell (R-KY) was actively pressuring his caucus to kill it – even though Republicans have long sought the reforms. “Given what Senator Manchin did on the reconciliation bill, [it’s] engendered a lot of bad blood,” said Sen. John Cornyn (R-TX).
The Idea of Permitting Reform Still Has Bipartisan Support
Still, the concept of permitting reform does have bipartisan support – a rarity these days. Jeremiah Johnson, policy director of the center-left Progressive Policy Institute’s Center for New Liberalism, urged passage in an op-ed on Sept. 14 in the New York Daily News. He began the piece by relating the story of Seattle’s attempts to expand the city’s light rail transit system. The plan was approved by voters in November 2016, but the project still hasn’t started. Johnson continued:
Instead, in January 2022 the city’s Sound Transit released a draft of their required Environmental Impact Statement, which ran more than 8,000 pages long. The final version of this EIS won’t be ready until 2023, at which point the project will already have spent hundreds of millions of dollars before a single shovel hits the ground. Current timelines, which might be delayed, call for services on the new lines to be open by 2039.
If you think this is nuts, you aren’t alone, he writes. “America has a huge problem with not being able to build anything cheaply or quickly. One of the key obstacles is our environmental permitting process.”
The Progressive Policy Institute recently issued a report on the subject that began with this premise:
America must lead the world as a whole toward a rapid clean energy revolution and decarbonization. But a big obstacle stands in our way: A broken U.S. domestic energy permitting system that imposes tremendously high costs in time and money to build clean energy infrastructure projects, if they get built at all.
The report concludes, “The quickest and best step available to speed up permitting immediately and unleash the investments made in the IIJA, CHIPS, and IRA package is to pass the Manchin-Schumer proposal.”
Additionally, on Sept. 21, the Grow America’s Infrastructure Now (GAIN) Coalition — a group of businesses, trade associations, and labor organizations — urged passage of “comprehensive permitting reform…which responsibly address bureaucratic roadblocks inhibiting construction of our nation’s critical infrastructure.”
The group – which includes organizations that range from the Ohio Chamber of Commerce to the Louisiana Oil & Gas Association to Pipeliners Local Union 798 in Oklahoma – did not specifically endorse the Manchin legislation. Instead, spokesman Craig Stevens said GAIN backs “efforts from both parties to streamline the environmental review process and ensure that NEPA achieves the original intent of protecting the environment in a way that doesn’t compromise American jobs or energy security.”
Stevens referred to both the Manchin and Capito plans are “important,” and in a separate statement, criticized the position of the 77 Democratic opponents. “U.S. energy development,” he said, “is critical to a stable global economy and maintaining a balance of power around the globe.
Key Questions About the Fate of FERC Chairman Glick and His Policies
Richard Glick, the chairman of the Federal Energy Regulatory Commission, has been called “Biden’s most effective climate warrior.” But he’s in a precarious position. He was nominated for a new term in May, but, if he isn’t reconfirmed by the end of the year, he’ll have to step down. And, as Catherine Morehouse writes in Politico, “the agency’s ambitious climate agenda could go out the door with him.”
In an article on Sept. 16, Morehouse reminds us that Glick has used his “status as chair to push the adoption of policies he advocated as a minority voice on the commission, including efforts to consider the climate impacts of natural gas infrastructure and changes to the power system that could deliver more renewable energy into the U.S. economy.”
But Glick faces at least one potential obstacle: Sen. Manchin, the chairman of the Energy and Natural Resources Committee, has yet to schedule a confirmation hearing for Glick. Morehouse notes that in an interview, “Manchin indicated he is warming toward the FERC chair, saying Glick has been making some ‘better decisions.’” That’s hardly an overwhelming vote of confidence. To get this nominee confirmed, Democrats cannot afford to lose a single vote on their side of the aisle given the current 50-50 Senate, assuming every Republican votes “no.”
In February, Glick and the other members of the Commission’s Democratic majority attempted to expand the scope of FERC by establishing a framework for determining how pipelines and other facilities contribute to climate change.
In a March 3 hearing. Manchin blasted FERC for its “shortsighted attack on fossil fuel resources.” The new policy was especially ill-timed, he said, with an “energy war” underway, a reference to the Russian invasion of Ukraine. Manchin told reporters that Glick “went way out of his wheelhouse” with the policy statement and told him to “just do your damn job.”
In response, FERC made what Manchin called a “course correction,” delaying but not definitively ending implementation of the new rules. Glick “said he hopes to revisit the proposals soon and potentially finalize them with changes supported by one or more of his Republican colleagues,” according to a July 6 Energywire report.
Since then, there’s been no resolution of FERC’s position on the climate framework for pipelines, but several important events have intervened.
First, the U.S. Supreme Court ruled three months ago that the Environmental Protection Agency was not authorized to craft broad regulations targeting emissions from power plants (see more on this below in the section on the SEC). That decision cast doubt on the legality of FERC’s original proposal to assess emissions of interstate natural gas projects before they are approved for construction.
Next, Manchin and Schumer worked out their deal to pass the IRA, and FERC will certainly play a role in deciding critical policies around the bill’s $369 billion in spending on climate change and energy security.
Finally, in return for his vote, Manchin won assurances that a permitting reform bill would come to the floor. As we noted above, permitting reform may now be in doubt, but there is no doubt that bipartisan support for the concept is strong.
With no replacement on the horizon, if Glick is not reconfirmed, FERC will have just four commissioners at the start of next year, split evenly along party lines.
The uncertainty is clouded by the possibility that Republicans could recapture the Senate in the November elections, now little more than a month away. The odds of GOP success have fallen sharply to just 30 percent, according to FiveThirtyEight, but the situation is fluid with the Cook Political Report rating 10 races either as toss-ups or merely leaning toward one party or the other. No matter who wins in November, the majority’s margin will be slim.
If Republicans do take the Senate, Sen. John Barrasso (R-WY) would likely succeed Manchin as chair of the Energy and Natural Resources Committee. In what Morehouse called a “scathing letter” recently, Barrasso was highly critical of Glick. At the March hearing, Barrasso said, “These policies are going to make it next to impossible to build any new natural gas infrastructure or upgrade our existing facilities in the United States.”
How it will all turn out, with three months left before Glick becomes a pumpkin, is anyone’s guess.
Meanwhile, as serious disruptions threaten the nation this winter, with California narrowly avoiding rolling blackouts, that state’s legislature passed numerous bills in August aimed at reducing statewide emissions and requiring 3,200-foot buffers (that’s more than half a mile) between communities and oil and gas developments. The laws, which include a codification of carbon neutrality by 2045, are likely to have an adverse effect on reliability of transitional resources like natural gas (more on California’s shaky energy-delivery system in the section on electric vehicles below).
In a Sept. 12 op-ed in the Washington Examiner, Todd Snitchler, the CEO of the Electric Power Supply Association, wrote, “Investing in new technologies does not mean we should rush to unplug the reliable resources that ensure power grids operate effectively through extreme weather and spikes in demand.” He added:
Allowing the government to pick winners and losers — or subsidizing green energy while punishing traditional energy resources like coal mining — is a recipe for an unreliable grid that costs more than it should. The government has an exceedingly poor track record of predicting the future, and when tens of billions of dollars are at stake, there is no such thing as a small mistake.
Snitchler argues that “the best long-term dispatchable resource is fueled by clean, safe, and abundant natural gas. It is able to maintain reliability through the peaks and valleys of intermittent resources such as wind and solar. Sadly, it’s increasingly rare to find a politician these days who is willing to acknowledge natural gas’s value as a key partner in the energy transition.”
In short, he writes, our energy transition must be grounded in reality.
In a Sept. 15 piece for RealClearEnergy, Snitchler opposed additional subsidies flowing to renewable resources. Today, he writes, renewables are “mature technologies, relatively cheap to operate once built, [with] zero fuel costs. Piling subsidies on top of that means other generators are facing markets with bizarre complications such as negative power prices. That is not only a startling disruption of an efficient market, but it also makes it extremely difficult for unsubsidized resources to stay in operation.”
And we need those other resources because, unlike renewables, they “can work on demand, 24/7.” He adds:
The continued rise of “non-dispatchable” resources like wind and solar means that there must be enough “dispatchable” resources like coal, hydropower, natural gas, and nuclear available on short notice to ensure reliability. [But] retaining that capacity is extremely difficult when those plants can’t compete economically because their competitors are receiving vast federal subsidies.
Criticism of SEC’s Climate Rule Heats Up
Pressure is mounting on the Securities & Exchange Commission (SEC) to withdraw its Climate Disclosure Rule or, at a minimum, factor in the negative legal and economic implications.
As we noted in Energy Reality Report No. 15, environmental activists have been trying for years to force energy companies to make highly detailed disclosures of the possible risks to their businesses from climate change, arguing – disingenuously, according to critics – that investors would benefit by being better able to assess the company’s prospects.
The activists found a sympathetic audience in the Biden SEC, which in March issued a proposed rule termed, “The Enhancement and Standardization of Climate-Related Disclosures for Investors.” Currently, the SEC is digesting comments by outside parties. The new rule requires not just extensive reporting of both material and non-material climate-change and severe-weather risks to the registered company itself but a carbon accounting of the company’s suppliers and customers (that is, estimates of indirect greenhouse gas emissions).
In an analysis of comments to the SEC by the largest U.S. asset managers, the research firm Morningstar found that all the “respondents agree on the need for mandatory disclosures of direct greenhouse gas emissions (Scope 1) and indirect greenhouse gas emissions from purchased electricity (Scope 2), where these are material.” However, all but one of the asset managers rejected mandatory disclosure of indirect emissions (Scope 3 in the proposed rule).
According to Morningstar, the managers cite “a lack of maturity in measurement methods and an absence of materiality for many companies.” Also, said the analysis, “Most respondents’ support for the proposals is contingent on how materiality is defined. This is a key area of concern for most managers, who believe the SEC should clarify the definition in the proposals.”
In an op-ed headlined, “The SEC Can’t Transform Itself Into a Climate-Change Enforcer,” in the Wall Street Journal on Sept. 14, Bernard Sharfman, a senior corporate governance fellow with the RealClearFoundation, and James Copland, director of legal policy at the Manhattan Institute, also opposed disclosure of indirect emissions, but they went much further.
“By sweeping upstream and downstream contractors into its proposed rule,” they wrote, “the SEC seeks to regulate companies that aren’t traded on public stock exchanges and therefore should be wholly outside the commission’s regulatory reach.” The authors added that “the proposed rule would casually toss aside the ‘materiality’ standard, which limits mandated disclosures to financially material information.”
The main criticism from Sharfman and Copland is that it violates the principles laid down in the Supreme Court’s June decision in West Virginia v. Environmental Protection Agency, which we cited earlier. The SEC proposal, the authors wrote, “would convert the federal securities regulator into a greenhouse-gas enforcer looking over the shoulders of exchange-listed companies’ directors. Much like the EPA regulation the justices struck down, the new SEC proposal would exceed the authority Congress granted to the agency. If the SEC were wise, it would rethink its rule, lest it face a similar fate in court and see its rulemaking effort thrown into the regulatory waste bin.”
Sharfman and Copland point out that the High Court in recent years…
has refused to allow administrative agencies to “‘work around’ the legislative process” to resolve questions “of great political significance,” as Justice Neil Gorsuch noted in his West Virginia concurrence. Court decisions over the past three decades have blocked agencies’ efforts to resolve policy disputes without clear congressional authorization. Those cases range from regulating tobacco to changing telecommunications rate regulation—and, during the Covid pandemic forestalling tenant evictions and broadly mandating vaccines. The SEC’s regulation is of a piece with those the court has struck down.
In an opinion piece for FoxBusiness.com, Steve Forbes, Forbes Media publisher and former presidential candidate, called the SEC proposed rule “reckless.” He noted the difficulty and expense of calculating emissions. “The SEC itself,” he wrote, “admits the proposed rule will increase the overall cost of disclosure and compliance for companies by up to $10.2 billion per year. This would exceed the costs for all other SEC rules combined.”
Forbes also writes that “the SEC does not quantify any supposed benefits for the investing public. If the SEC really wanted to better educate and protect investors, it would not make much sense to saddle those same investors with reports full of new indirect, immaterial data that has little or nothing to do with a company’s future economic prospects.”
What Does the Electric-Vehicle Requirement Mean for California’s Shaky Grid?
In a rule issued on Aug. 25 by its Air Resources Board, California is banning the sale of gas-powered new cars and light trucks starting in 2035. California tends to lead the nation on environmental regulation, so the decision will have sweeping impacts.” According to ABC News, 17 states are considering a prohibition on gas-powered vehicles similar to California’s.
CNBC noted that “meeting the timeline will face challenges, including installing enough charging stations across the state and having adequate access to materials needed to make batteries for electric vehicles.” Another challenge is providing the electricity to run the cars and trucks by means of a grid that has repeatedly demonstrated its unreliability.
“The state’s electric grid is already fragile and prone to blackouts,” wrote Megan McCardle on Sept. 8 in the Washington Post. She added:
Unfortunately, California’s in-state electrical generating capacity has actually fallen since 2001. And environmental groups are pushing to reduce it further…. Possibly, someday, California can power itself entirely on wind and solar. But the ideal can’t be the enemy of the real. If California wants people to run everything off electricity, the state can’t just decree it so; it needs to make it feasible, and attractive, so people will comply. That means power has to be extremely reliable and reasonably inexpensive.
That means, she continues, that California “needs more than just high ideals and ambitious mandates; it needs to commit to building the generation and transmission capacity its vision will require…. Unfortunately, energy abundance is often opposed by the people who ought to be its most ardent supporters.”
“Can California’s grid handle more EVs?” was the headline on a Sept. 19 piece by environmental reporter Eric Anderson of public station KPBS.
Recently, a heat wave in the state caused state officials to plead for consumers and businesses to cut back their electricity use. Wrote Anderson, “On one day deep into the hot spell, California sent more than 27 million text messages asking for conservation late in the afternoon, through easing back on air conditioning and refraining from charging electric vehicles.” It was just a week after EV mandate was announced.
The article quoted San Diego Gas and Electric representative Jeni Reynolds saying that the question of whether the grid can handle vastly increased numbers of EVs is “complicated.” She explained, “When you start getting into the specifics of when that load’s going to hit, how it’s going to hit, what new technology and what type of battery storage we have to help, you know, that’s a much more complex answer.”
Minnesota’s Democratic governor, Tim Walz, has been a strong advocate of electric vehicles, but there’s opposition in his state to mimicking California. Writing in the Grand Rapids, Minn., Herald Review, Isaac Orr, a policy fellow at the Center for the American Experiment, pointed out that “California’s electric grid is already struggling to meet electricity demand because it has closed too many natural gas and nuclear power plants. The Golden State is also overly reliant upon electricity imports from neighboring states.”
Recent power shortages, Orr notes, “occurred at a time when EVs only constitute 4.3 percent of registered vehicles in the state. If California can’t keep the lights on now, the problem will only get worse as more EVs are mandated in the future.”
Orr urges Minnesota not to follow California’s lead. “Doing so would be a terrible idea because the regional electric grid to which Minnesota belongs, the Midcontinent Independent Systems Operator (MISO), is at the highest risk of blackouts in the country this summer. MISO warns that the shortfall of reliable capacity on its system could grow from 1,200 megawatts (MW) this year to 10,900 MW by 2027, five short years away.” He adds:
Mandating more electric vehicles on the road when the state is pushing to shut down reliable coal and natural gas plants to indulge in an energy fantasy of a grid powered by wind, solar, and battery storage will end in skyrocketing costs and rolling blackouts.
Opposition in Minnesota is coming as well from farmers who grow crops to produce ethanol for combustion engines. An article in the Star Tribune on Sept. 1 said, “California’s ban on new sales of emissions-producing vehicles after 2035 has sounded alarms in Minnesota, where farmers growing corn and soybeans that power ethanol and biodiesel are expressing wariness about the decision’s long-term implications.” Biofuels contribute over $2 billion to the state’s economy.
“Gov. Walz has stated renewable fuels [are] part of this clean air solution going forward,” said Dan Glessing, a dairy farmer from Waverly and president of the Minnesota Farm Bureau Federation. “These electric cars have their place, but it’s a hard thing to sell in rural Minnesota.”
The Future of Giant Offshore Wind Farms That Float
On Sept. 15, the Biden Administration launched an initiative to develop new floating wind platforms. The President, according to a White House fact sheet, set a goal of “deploying 30 gigawatts (GW) of offshore wind by 2030, enough to power 10 million homes with clean energy, support 77,000 jobs, and spur private investment up and down the supply chain.”
The initiative includes leasing enough deep-water acreage to support 15 GW of offshore wind capacity by 2035. The reason that these floating wind farms are critical is explained in a recent Wired article:
In their endless quest to capture the most reliably energetic winds, engineers are now moving further out into the ocean, to areas of deeper water where especially strong winds are known to blow. For offshore wind turbines—whose fixed-bottom foundations can only extend down 60 meters—such areas have long been off-limits. But a new generation of floating machines looks set to change that.
According to Wind Europe, an industry association, 80% of the offshore wind resources in European waters is in places too deep for today’s fixed-bottom turbines. “Deep water has also prevented the installation of large offshore wind farms off the western coast of the US,” says Wired.
The article describes a design developed by the Norwegian firm Wind Catching Systems that features “a giant waffle-shaped frame adorned with no fewer than 126 four-rotor wind turbines—like a giant Connect 4 set studded with spinning blades. The whole structure, standing as tall as the Eiffel Tower, would perch atop a floating platform, akin to the ones used by oil rigs.”
Floating wind farms are not only challenging in an engineering sense, but also expensive to operate. The Administration has set a goal of cutting costs by more than 70% to $45/MWh.
Meanwhile, the federal government is soliciting public comment through Oct. 17 on Revolution Wind, a new offshore wind project off the coast of Rhode Island. The project – a partnership between Ørsted, a Danish company that is the world’s largest developer of offshore wind power, and Eversource, New England’s largest energy provider — will generate 304 MW of power for Connecticut and 400 MW for Rhode Island. Approximately 15 miles south of the Rhode Island coast and 12 miles southwest of Martha’s Vineyard, Mass., the project is expected to be fully operational by 2025.
The Bureau of Ocean Energy Management, the regulator charged with overseeing the deployment of offshore wind energy, is currently soliciting public comments for Revolution Wind through Oct. 17. Offshore wind development is important, but it has to be placed in context. As The Economist stated in a piece last year, “Wind will never be the sole source of the world’s energy. Farms are only effective in certain places and even then the output is intermittent, somewhat unpredictable and impossible to control. Offshore wind is also one of the most expensive forms of renewable energy.” The article added:
A more realistic prediction is that in a net-zero world, in which there is an overall balance between the amount of greenhouse gas emitted into the atmosphere and the amount removed, 7.5% of the world’s energy will come from offshore wind farms. If this were to happen tomorrow it would require increasing the number of square kilometres of offshore wind installations from roughly 7,000 currently in operation, to 525,000: hardly a breeze.
In other words, offshore wind is a key element in the all-of-the-above strategy that environmental and energy realists are adopting around the world.