The $1.2 trillion bipartisan infrastructure package has ignited discussions about energy development projects. As companies plan their financing for future projects, they should also plan their environmental permitting strategy. With concerns about climate change and environmental justice now even more widespread, permitting risk—in the form of delayed and even denied projects—is at the forefront of many companies’ minds.
Much of the infrastructure bill dedicates funding to federal and state agencies for infrastructure programs. However, the bill also allocates billions of dollars in incentives and matching funds for energy projects, including grid resiliency and the development of carbon capture projects. This includes:
- $5 billion for a dollar-for-dollar matching program to be administered by the states and tribes to reduce wildfire risks from power lines, available to entities that include electric generators and transmission owners and operators.
- $600 million annually for fiscal years 2022-23 and $300 million annually for fiscal years 2024-26 in loans and grants for carbon dioxide transportation projects.
- $2.5 billion for fiscal years 2022-26 for a new program that will provide funding for the development of new or expanded commercial large-scale carbon sequestration projects and associated carbon dioxide transport infrastructure.
- Over $550 million for fiscal year 2022 for incentive payments to owners or operators of qualified hydroelectric facilities for capital improvements directly related to grid resiliency, improving dam safety, and environmental improvements. Applicants are eligible for payments covering up to 30% of the costs of improvements, capped at $5 million.
The infrastructure package also includes provisions to streamline environmental permitting for projects, requiring agencies to prepare a single, joint environmental impact statement (EIS) for certain projects and to issue a final decision regarding a project within 90 days of the publication of a final EIS.
Energy Projects Are Under a Microscope
The new legislation is expected to spur a flurry of project development against a backdrop of climate change and environmental justice concerns, which have put energy projects under a microscope.
For example, the new Tacoma liquified natural gas (LNG) facility in Washington was designed to displace the use of high-emitting bunker fuel in shipping vessels with cleaner-burning LNG. Despite being conceived as a project with a net environmental benefit, the facility was the target of intense, organized community opposition. The opponents initiated a multi-year administrative challenge to the permit. While the permit was recently affirmed, it remains subject to potential appeal.
The types of renewable energy-related projects incentivized by the infrastructure bill are not immune from these concerns. The New England Clean Energy Connect transmission line that would connect Massachusetts with hydroelectric power from Hydro-Quebec faces fierce opposition in Maine, where certain stakeholders who oppose the project have questioned whether it will actually address climate change and where residents voted on Nov. 2 to halt the project.
Scores of environmental groups have come out against carbon capture in its various forms, with one group calling carbon capture inconsistent with the principles of environmental justice and a mechanism for prolonging the use of fossil fuels.
The risk of giving these issues insufficient attention can be high. Environmental permits issued by local and state permitting agencies typically are subject to an administrative appeals process. In many jurisdictions, administrative boards have adopted the judicial rules of civil procedure even though, in some cases, board members are not required to hold law degrees.
The rules may allow for extensive discovery, depositions, expert reports, procedural motions, dispositive briefing, and ultimately a trial-type proceeding. This can result in a lengthy and resource-intensive permit defense process with various risks, including the potential to receive an order that stays construction of a new project during the pendency of the challenge, the need to prepare numerous employees and consultants for deposition and trial testimony, and the release through discovery of internal communications and project documents that contain nonprivileged but sensitive information.
Once the administrative challenge process is complete, the final decision often can be appealed to the state court system.
Coordinating a Strategy
To help mitigate these risks, project proponents should have a coordinated strategy during the development and permitting phases to address potential climate change and environmental justice issues.
At the outset, engaging with local communities to understand their concerns and identify solutions where possible can be more fruitful at the beginning of the project, when it is less costly to make changes to project design.Relatedly, addressing concerns articulated by community groups during the public participation period is important to ensure the permitting agency has sufficient information to respond to community group comments.
Strict quality control of permit application submittals and close review of draft permitting materials from the agency with future litigation in mind is important to avoid final permit conditions or requirements that do not reflect the completed project or that are inconsistent with how monitoring and reporting programs will be established.
Ensuring that sufficient time is available for this review is key, especially in light of the many pressures associated with project development timelines.
The benefits of a proactive approach are seen with Blackstone’s 333-mile Champlain Hudson Power Express (CHPE) transmission line. CHPE—which will deliver renewable power from Canada directly into New York City—timely received multiple federal and state permits. These permits did not face substantial opposition and were not challenged in court because the developer engaged with stakeholders early and often, established a community benefits fund, completed a comprehensive environmental review, and made routing changes in response to community feedback.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Allison Watkins Mallick is special counsel with Baker Botts in San Francisco, where she advises clients facing complex environmental challenges, focusing on litigation, regulatory advocacy, and compliance counseling.
Joshua Frank is a partner in the Washington, D.C., office of Baker Botts, where he handles a wide variety of complex, high-stakes environmental litigation matters arising in all media (air, water and waste) under major environmental statutes and regulatory programs.