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A 'most contentious' issue: Lawmakers brace for debate on reforming energy permits

After the seemingly endless Capitol Hill wrangling around the Inflation Reduction Act (IRA), there's a new piece of related legislation kicking up conflict on Capitol Hill.

As part of a deal for his all-important support for IRA, Sen. Joe Manchin (D-WV) secured the promise of a second vote, which is coming this month to reform energy permitting, a process Manchin called “broken” when he announced the deal.

But as lawmakers prepare to return to Washington in the coming days, the proposal has grown increasingly controversial with many skeptical that Democratic leaders will be able to fulfill their promise of a vote — much less get it passed — anytime soon.

"This is the intersection of infrastructure projects and environmental projects that has been historically one of the most contentious,” Douglas Holtz-Eakin, President of the American Action Forum, said in an interview. “For Congress to touch it and streamline would be a big deal."

WASHINGTON, DC - AUGUST 16: U.S. President Joe Biden (R) gives Sen. Joe Manchin (D-WV) (L) the pen he used to sign The Inflation Reduction Act with Senate Majority Leader Charles Schumer (D-NY) in the State Dining Room of the White House August 16, 2022 in Washington, DC. The $737 billion bill focuses on climate change, lower health care costs and creating clean energy jobs by enacting a 15% corporate minimum tax, a 1-percent fee on stock buybacks and enhancing IRS enforcement. (Photo by Drew Angerer/Getty Images)
President Joe Biden hand Sen. Joe Manchin (D-WV) the pen he used to sign The Inflation Reduction Act as Senate Majority Leader Charles Schumer (D-NY) looks on during a ceremony in the State Dining Room of the White House on August 16. (Drew Angerer/Getty Images) (Drew Angerer via Getty Images)

Reforming energy permitting

The legislation still only exists in outline form with Manchin recently confirming a sweeping list of changes that he would like to see in the final bill. Many of his ideas are focused around reforming environmental impact reviews that take place under the government’s National Environmental Policy Act (NEPA) and would be a significant change to America’s regulatory system with implications not just for fossil fuel companies but also those looking to build new clean energy projects.

The 1970 law requires government agencies and businesses to rigorously assess the environmental effects of their proposed actions before they can break ground. The resulting delays - which in some cases can stretch for a decade or longer - have been a complaint from the business community and many Republicans almost since the law was enacted.

Donald Trump streamlined the NEPA process during his administration but many of the rules reverted back after Biden took office.

“There's a lot of emotion around” the environmental issues at play here, said Philip Rossetti, an energy expert at a group called the R Street Institute and a former GOP congressional aide on the issue. He said that the partisan fights “kind of drowns out the more reasonable policy solutions that actually would improve the environment and help us to build better things.”

Rossetti and some other experts contend that clean energy projects could be the key beneficiary of energy permitting reform, even more so perhaps than those projects coming from fossil fuels companies.

“In fact, a lot of the oil and gas stuff is already exempted from NEPA,” said Rossetti, because an individual oil well or natural gas well is such a known quantity.”

An environmental movement about ‘building things’

But some liberal Democrats such as House Natural Resources Chairman Raúl Grijalva (D-AZ) don’t see it that way.

Grijalva told Yahoo Finance live in an interview Thursday that Manchin's effort has a "transparency issue" and needs a full scrubbing by Congress.

He is currently circulating a letter to organize liberal Democrats together to quash a legislative maneuver which would include the Manchin bill inside of larger legislation which must be passed October 1 to avoid a government shutdown.

That maneuver risks "digging the hole deeper while we're trying to make a transition to clean and renewable energy" Grijalva said to Yahoo Finance, adding that the two efforts "have to stand on their own merit."

“[A]ttempts to short-circuit or undermine the law in the name of ‘reform’ must be opposed,” read the letter Grijalva addressed to House Speaker Nancy Pelosi and Majority Leader Steny Hoyer. Grijalva said he has over 60 of his House colleagues on board to co-sign his letter and that it will be formally presented to the leaders next week. Grijalva is also behind a different effort that he would like to be considered instead.

DENVER, CO - FEBRUARY 11: Activists gather outside of the Alliance Center across the street from a public hearing by the Council on Environmental Quality's proposed update to NEPA Regulations on Tuesday, February 11, 2020. (Photo by AAron Ontiveroz/The Denver Post)
Activists in Denver gather in Denver in support of environmental regulations in 2020. (AAron Ontiveroz/The Denver Post) (AAron Ontiveroz/MediaNews Group/The Denver Post via Getty Images via Getty Images)

Meanwhile other Democrats have begun to acknowledge that permitting reform more broadly may be an important tool for climate efforts. “There is something to be said that it’s not just oil and gas permitting,” Rep. Alexandria Ocasio-Cortez (D-NY) told reporters in July, adding “as we build out renewable infrastructure in the United States, that too will also be subject to permitting issues.”

“We are going to have a candid conversation because the environmental movement of the previous generations was organized around stopping development,” added Sen. Brian Schatz (D-HI) in a statement. “The modern environmental movement has to be about building things.”

An uncertain path on both sides of the aisle

Republicans would seem to be inclined to support Manchin’s effort to cut red tape, but the influential Republican ranking member on the Senate Energy and Natural Resources Committee, Sen. John Barrasso (R-WY), has already said he is opposed.

In a statement to Yahoo Finance, Barrasso said “Joe Manchin’s so-called ‘permitting reform’ deal is an excuse, not a solution. In the unlikely event it even passes, it won’t stop the punishing impact of new taxes and regulations designed to drive up the cost of American energy.”

The Wyoming Senator also called the bill a “political payoff” as another reason he would vote no, echoed a similar remark from his colleague Sen. Lindsey Graham (R-SC) who is also a no.

To pass the bill, proponents will need to find 60 votes in the Senate to advance it, rather than the majority that was possible under the Senate’s budget reconciliation rules.

In the end, Holtz-Eakin remains skeptical that the bill will last for long once lawmakers return to Washington in the weeks ahead and are confronted with the twin challenge of tackling the permitting issue while also averting a government shutdown on Oct. 1.

"It's a big deal, probably too big a deal to go through,” Holtz-Eakin said, noting that Democratic leaders “didn't promise [Manchin] it would go through, they promised he'd get a vote.”

But then he added that there’s even a chance Manchin “might not even get a vote."

Ben Werschkul is a Washington correspondent for Yahoo Finance.

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