Introduction

President Biden signed the Inflation Reduction Act of 2022 (the Act) into law on August 16, 2022. The Act represents an expansive investment in the energy industry, with many provisions targeting clean energy and climate change issues through funding and tax credits. However, several notable provisions from an environmental permitting and compliance standpoint are buried amongst the financial and tax provisions. These environmental provisions relate to permitting and compliance that the regulated industry, especially energy companies, should watch closely.

Funding for Permitting and Programmatic Development

The Act provided significant funding to regulatory authorities for a number of permitting-related activities.

For example, the National Oceanic and Atmospheric Administration (NOAA) received $20 million to assist with permitting and project review. The funds are meant to result in more efficient, accurate, and timely reviews for planning, permitting and approval processes through hiring and training personnel and obtaining new technical and scientific services and equipment.

The United States Environmental Protection Agency (U.S. EPA) received $40 million for its permitting and project review efforts. The funds will be utilized to develop efficient, accurate, and timely reviews for permitting and approval processes through hiring and training of personnel, development of U.S. EPA programmatic documents, procurement of technical or scientific services for reviews, development of environmental data and new information systems, purchase of new equipment, developing new guidance documents, and more.

The Act provided over $62.5 million to the Council on Environmental Quality to develop programmatic documents, tools, guidance, and improvement engagement. These funds will also support collection of data regarding environmental justice issues, climate change data, development of mapping/screening tools, and tracking and evaluation of cumulative impacts.

Several other federal agencies received millions in funding for review and planning of electricity generation infrastructure, like the Federal Energy Regulatory Commission, the Department of Energy, and the Department of the Interior. Funding will be used to facilitate timely and efficient reviews, as well as generate environmental programmatic documents, environmental data, and increase stakeholder and community involvement.

In sum, regulators involved in environmental and energy permitting received a substantial boost in funding targeting the permitting process, including supporting the development and build out of programmatic documents and capabilities. The funding could improve the timing of the permitting processes for these agencies, but it could also lead to additional administrative burdens in the form of new application and compliance materials and increased regulatory scrutiny where a regulator has more time and money to invest in the regulatory process.

Monitoring

The IRA provided funding to several entities that could generate new and improved monitoring efforts, potentially resulting in increased regulatory and legal scrutiny for the regulated community.

For example, the IRA provided $3 billion in Environmental and Climate Justice Block Grants for community-led projects focusing on environmental justice issues. The legislative text specifically identifies eligible projects as (i) community-led air and other pollution monitoring, prevention, and remediation projects, (ii) mitigation efforts relating to extreme weather, (iii) climate resiliency and adaptation, (iv) reduction of indoor air pollution, and (v) facilitating engagement of communities with environmental justice concerns in federal advisory groups, workshops, rulemakings, and other public processes, among other items. Additionally, the IRA provided funding through Neighborhood Access and Equity Grant Programs to fund programs for remediating/improving infrastructure relating to impacts on human and natural environments, monitoring and study of emissions, reduction of emissions, and increasing technical and local involvement in transportation projects. Eligible recipients include states, local governments, planning commissions, and other entities.

U.S. EPA received more than $117 million in funding under the Clean Air Act for its fence line air monitoring and screening efforts. Funds will be utilized for deploying, integrating, supporting, and maintaining fenceline air monitoring, screening air monitoring, national air toxic trend stations, and other air toxic and community monitoring efforts. Millions were also directed to expansion of new national ambient air quality monitoring network technology, new sensors and equipment in low-income and disadvantaged communities, monitoring for emissions of methane, and funding for states for adoption and implementation of greenhouse gas and zero-emission standards for mobile sources. U.S. EPA also received more than $20 million in funding to update its Integrated Compliance Information System and associated systems and for new inspection software.

The IRA also directed more than $250 million in funds to U.S. EPA’s efforts relating to standardization and transparency of greenhouse gas emissions. Funds will be used to enhance corporate climate change action commitments and implementation of climate change plans, and for standardization and transparency regarding greenhouse gas emissions data for construction materials.

Forthcoming Permitting Changes

Perhaps the most significant environmental fallout from the IRA is the ongoing effort to streamline permitting for key energy projects – and the lack thereof in the text of the IRA.

When Senator Manchin agreed to vote for the legislation to pass it through the Senate, he required specific action to address streamlining permitting for energy projects to be voted on by the end of the fiscal year. He outlined several permitting reform priorities:

  • Designate and prioritize projects of strategic national importance.
  • Set maximum timelines for permitting reviews, including two years for National Environmental Policy Act review for major projects and one year for lower-impact projects.
  • Revise Section 401 of the Clean Water Act by incorporating changes from both the Trump and Biden administrations.
  • Address litigation delays.
  • Clarify FERC jurisdiction regarding the regulation of interstate hydrogen pipeline, storage, import, and export facilities.
  • Enhance federal government permitting authority for interstate electric transmission facilities that have been determined by the Secretary of Energy to be in the national interest.
  • Complete the Mountain Valley Pipeline.

To date, no legislation has been introduced to advance any of these legislative goals. To the extent some or all are eventually passed, the law could have significant impact on critical energy project permitting leading to the increased development of energy infrastructure in the United States.

Environmental Outlook

Apart from the tax credits and other key elements of the IRA, several inferences and predictions can be drawn relating to the potential environmental fallout from the Act.

First, the IRA provides billions in funding and incentives to regulatory agencies and potentially third parties to participate in permitting and project review and monitoring emissions from the regulated communities. On one hand, this could result in more efficient permitting processes where agency personnel are better trained and adequately funded. Conversely, this could result in increased administrative burden as agencies could direct more funding for personnel to permitting review, thereby increasing regulatory scrutiny. Relatedly, funding designated to develop new and improved programmatic material and standards could result in new application and other compliance burdens for environmental permits and approvals.

Second, the IRA directs millions toward fenceline monitoring and other emission monitoring activities toward regulatory agencies, like the U.S. EPA. Further, the U.S. EPA received funding to update its inspection software and improve its compliance database, suggesting a potential new effort to improve, and potentially increase, inspections and review of compliance data. Funding is also available for local/community entities for projects like fence line monitoring. To the extent these efforts increase access monitoring activities around a facility, additional compliance and legal risks could arise if the data show violations of environmental law or regulation. Third, the IRA potentially paves the way for new legislation targeting environmental permitting reform that could streamline permitting required for some of the most environmentally-intensive projects. However, the exact iteration of the permit streamlining legislative priorities is not yet known.