Gas industry makes U.S. “permitting reform” a priority

At the Gastech conference in Houston in late September, oil and gas executives said they were very eager to see the U.S. Congress tackle “permitting reform” to make it easier to build new gas pipelines and LNG export terminals.

Following the passage of the Inflation Reduction Act in 2022, which funnelled hundreds of billions of dollars’ worth of federal money into clean energy projects and programmes, the buildout of clean energy has accelerated. But few would argue with the idea that the energy transition needs to accelerate.

In order to do that, climate and energy experts from across the political spectrum have coalesced around the notion that reforming federal permitting procedures is necessary in order to speed up the construction of wind, solar, and, crucially, long-distance transmission lines.

The issue is timely. The U.S. Congress may consider a reform package after the November 5th election, but before the new president takes office in January.

But “permitting reform” means different things to different people. Climate groups focus on the need to build transmission lines, which would unlock much higher volumes of renewable energy and clean up the electricity grid much faster.

At the same time, the oil and gas industry also sees enormous opportunities in potential congressional action that overhauls permitting procedures for energy infrastructure.

High priority at Gastech

Permitting reform was a top priority for industry executives at Gastech 2024 in Houston in September.

There was a broad consensus that global gas demand will grow, and that the vast reserves of gas in the U.S. are well-positioned to meet that demand — if only the U.S. government would make it easier to build infrastructure.

“What I fear is, can you build the midstream infrastructure necessary to connect the supply to those demand centres?” Stanley Chapman, chief operating officer at TC Energy, said at Gastech. “And what comes first and foremost to the front for me in that respect is permitting reform.”

What would reform look like? Chapman said that legislation needs to “limit judicial challenges,” which would make it more difficult for environmental groups and local communities to challenge projects in court.   

One development that struck a nerve for attendees at Gastech was the recent federal court ruling that scrapped the construction authorisation for NextDecade’s Rio Grande LNG project in Brownsville, Texas. As Gas Outlook reported, the decision was a huge setback for the project, which could result in a significant delay and impose extra costs.

It also injected uncertainty into an array of other LNG projects that are dealing with similar regulatory issues. NextDecade’s stock price tumbled in the wake of the news.

Jason Klein, the CEO of LNG Canada, said the court decision was “scary.”

“How do you finance a project but then you have a decade of litigation,” he said. The decision “doesn’t help with the uncertainty” surrounding LNG projects in the U.S., he added. 

Chapman of TC Energy said that any attempt at permitting reform should also elevate the U.S. Federal Energy Regulatory Commission (FERC) to a “lead” role. Currently, projects need to obtain permits from a variety of federal agencies. Chapman said FERC should lead on permitting, allowing it to “corral” other agencies under its purview.

It is no surprise that the industry wants FERC to take the lead. FERC has a well-known track record of favouring gas projects. One study found that out of the 425 gas and LNG projects FERC evaluated between 2000 and 2021, it only ever rejected two cases. And one of those two projects later reapplied, and was approved.

The third reform that Chapman wanted to see was restricting the ability of U.S. states to apply their own regulatory scrutiny.

“There has to be something to address this battle between FERC and the states, whereby FERC issues an order of public convenience and necessity and says ‘we need to bring this project, it’s in the nation’s best interest,’ but a state says, ‘I’m not going to give you the permits you need to build,’” Chapman said. “That has to be addressed.”

One of his peers on the same panel agreed.

“Unintended loopholes throughout the years have allowed for politicians and for activists to hinder our ability to permit infrastructure and build critical infrastructure in the areas where we need it the most,” said Payvand Fazel, VP of corporate strategic development at Williams Co., a large pipeline company. “So, our view is that state regulation of interstate natural gas projects in particular should be a part of that FERC review process, including the Clean Water Act 401 process.”

The reference to the Clean Water Act suggests the gas industry wants to restrict the ability of states to exercise regulatory oversight on water quality issues when it comes to gas pipelines and LNG. That has been an issue in the past, holding up multi-billion-dollar gas projects.

For instance, the Jordan Cove LNG project planned for Oregon, which suffered years of delays due to a variety of problems, had received FERC authorisation but was blocked when the state of Oregon denied a water quality permit in 2020. While it was not the only obstacle to Jordan Cove, the setback was devastating to the project’s momentum, and it ultimately died in 2021.

At the Gastech session, the conversation changed directions to other obstacles facing the LNG industry, but attendees repeatedly returned to the urgent need for “permitting reform.”

“We need to change the regulatory framework, the legal framework, because we need permission for the transition,” said Ben Dell, managing partner at Kimmeridge, a New York-based asset management company that has backed Commonwealth LNG in Louisiana. Commonwealth will be built on Louisiana marshland that is eroding and disappearing as the sea level continues to rise.

Commonwealth suffered a major legal blow in July of this year, when a federal court ordered FERC to redo its greenhouse gas impact assessment for the project. The decision is expected to cause a significant delay.

Permitting reform in Congress

In July 2024, a bipartisan group of Senators, led by West Virginia Senator Joe Manchin (D) and Wyoming’s John Barrasso (R) introduced a “permitting reform” bill. Among other things, the bill would remove the Biden LNG “pause.” It also reflects some of the same priorities that industry representatives laid out at Gastech.

Environmental groups are mostly opposed because it would expand oil and gas drilling on public lands, and greenlight more LNG exports. NRDC calls it a “fossil fuel wolf in clean energy clothing.”

“Permitting reform is one of the most insidious euphemisms on Capitol Hill,” Camden Weber, climate and energy policy specialist at the Center for Biological Diversity, said in July after the Manchin-Barrasso bill was published. “Sen. Manchin and other climate villains keep locking in fossil fuels dominance while far too many members of Congress are letting the wool be pulled over their eyes about the real results of permitting reform.”

A study from Symons Public Affairs says the LNG impacts alone would result in an increase in emissions equivalent to more than 100 coal plants.

But there is significant support among some clean energy proponents. Centrist think tank Third Way found net emissions reductions from the bill. The issue has created tension between environmental groups and some Democrats in the Senate who support the bill.

What happens next in Congress will depend on the outcome of the election. An election result that splits control in Congress between Republicans and Democrats may boost the chances of the reform package in December. But a sweep in the November election by one party may delay action until next year when that party has unified control.

Republican lawmakers have signalled they’d take up the issue in the next Congressional term. Vice President Harris has expressed support for permitting reform, but has remained ambiguous and has avoided details during her campaign for the White House.

Meanwhile, the oil and gas industry is also waging war on the regulatory apparatus in other venues. Republican-led attorneys general and fossil fuel interests have asked the U.S. Supreme Court to hear a case that may ultimately lead to a narrowing of federal environmental oversight when it comes to infrastructure projects. The Supreme Court will hear that case next year.