Podcast: An Update on the General Energy and Climate Legislative Landscape

Elizabeth Craddock: Welcome, everyone, to the Eyes on Washington podcast. I'm Liz Craddock, partner at Holland & Knight, and today, Beth Viola and I are here to talk through the general energy and climate legislative landscape heading into the 118th Congress. Despite our youthful appearances, Beth and I have spent decades in D.C. working on these issues. Beth is a climate and clean energy expert, helping her clients navigate through the transition to a low-carbon economy. She worked for the Clinton Administration as a senior advisor to the White House Council on Environmental Quality and now leads our firm's Energy and Natural Resources Industry Group Sector. I spent two decades working in D.C. on these issues, serving as staff director of the Senate Energy and Natural Resources Committee, and also working for a trade association in the upstream oil and natural gas space before moving into private practice. With those introductions out of the way, let's move on to the substance of this podcast. So, Beth, what an exciting year and a half it's been for energy and climate in D.C. Between the IIJA and the IRA, there's been a ton of movement in this space, which frankly begs the question of what else can get enacted in the 118th Congress pertaining to energy and climate. So, before we go there, perhaps you can quickly walk our listeners through those two bills and how their enactment sets up the framework for what Congress might do next year.

Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA)

Beth Viola: Awesome. Thanks, Liz. And it's fun to join you today. I think it's really important to take a step back and think about then-candidate Biden and what his agenda was when he was running for president, and he very much ran on an agenda of we're going to build back our nation's infrastructure, we're going to do it in a way that creates lots of good, high-paying jobs, and we're going to do it in a way that helps address the climate crisis and really move towards a low-carbon economy. And I think what we just saw over the last, almost now, two years, but really in the last 18 months, was the passage of some very major legislation, which has really created a tremendous amount of momentum as you're looking about making that transition to a low-carbon economy. So, I look at it as sort of three legs of the stool and looking at it as the bipartisan Infrastructure Act, the IIJA, and then, even the CHIPS Act. And recall two of the three of those bills were bipartisan in order to get done, so a lot of good momentum there, not just from this administration and from Democrats, but on a lot of them very much bipartisan. I will tell you, I just came back from Egypt, where I went to the Conference of the Parties climate meeting, and it was fascinating to be there after attending the last several years, but for the Biden Administration to really be able to walk in to this summit and be able to say we are now walking the walk, given the unprecedented amounts of money that is contained in those three pieces of legislation that are very much designed to help us reduce emissions. So, I think it's been a really interesting couple of years. And so, I think with that in mind, it begs the question, what's next? And so, for a lot of the work that I think is going to happen going forward, so much of it is going to transition to implementation of these three major pieces of legislation. And so, for the Biden Administration, a large focus dealing with the regulatory components that need to be addressed, especially as it relates to Treasury and the tax incentives contained in the Inflation Reduction Act, but also very much getting the money out the door, given the amount of money that were contained in those bills. I think it's going to be interesting to see. You know, we've already started to see top Republicans on the Science Committee expressing concerns about the Department of Energy and some of the way the money is going out the door there. So, it's going to be a lot of checks and balances, if you will. But Liz, you tell me, I can't help but think with the new Republican Congress, you know, do we expect there to be a greater shift or focus in the next Congress to back to more traditional sources of energy? And I do think it's worth noting that there was a lot of money, actually, in the Inflation Reduction Act. There were a lot of provisions that were definitely designed to help the oil and gas sector. So, I'll be curious how, from your perspective, how those things all fit together and what your outlook is.

So, I look at it as sort of three legs of the stool and looking at it as the bipartisan Infrastructure Act, the IIJA, and then, even the CHIPS Act. And recall two of the three of those bills were bipartisan in order to get done, so a lot of good momentum there, not just from this administration and from Democrats, but on a lot of them very much bipartisan.

Elizabeth Craddock: Yes, you're right, Beth. There were several key provisions included in the IRA for the oil and gas industry. A lot of focus was related to federal lands and ensuring there was continued development on federal lands. I believe the inclusion of these provisions, at the behest of Senator Manchin, were due to pent-up frustration on behalf of the senators and House members who were fed up, frankly, that the Biden Administration had been blocking access to oil and gas leases, especially offshore, but also onshore. You know, offshore, the Biden Administration canceled the last three remaining resales and the 2017 and 2022 offshore five-year program, and they actually let that program expire without putting the next five-year program in place. I think that's actually the first time in history that's happened since Congress enacted OCSLA and mandated that we have these five-year programs. So, it's interesting because it takes years to develop leases, and a steady and consistent lease sale schedule is important to ensure that we have domestic oil and gas production. Given the war in Ukraine and the fluctuating price of crude oil on the world market impacting our domestic gasoline prices, I just think many members of Congress do not believe that this is the right time to restrict domestic oil and gas production, especially when we continue to import these commodities from 80+ countries. I think that's why we saw those provisions included in the IRA, to mandate and to hold those three offshore lease sales in particular, but also lease sales onshore as well. So, I fully expect that we'll see the House Natural Resources Committee, especially under the Republicans, dive into these issues and promote the continued use of oil and natural gas to grow our economy, and I think they'll do it in a way that certainly promotes and puts at the forefront oil and natural gas, but I also think that they'll do it in a way, adding it in to what our energy sector looks like as we add in new renewable sources of energy. You touched on this briefly, but one of the major sort of revenue raisers potentially for the IRA is going to be this new methane fee, and, fortunately, I don't think the oil and gas industry particularly likes that new fee, and it will definitely have an impact on the industry moving forward, and I think we'll see a lot of potential congressional action on it. But the new fee gets calculated in 2024, then it gets excessed in 2025. In combination with this new methane fee, the EPA is working to finalize a new methane emission reduction regulation in advance of that fee, and that regulation will ensure that all well sides are routinely monitored for methane leaks. It'll set a zero emission standard for pneumatic pumps at affected facilities. It implements alternatives to flaring of gas, and —  perhaps is noteworthy — it leverages third party monitoring and research to identify super emitters for crop mitigation. So, there's a lot happening in the methane space, and I definitely expect that we'll see the new EPA regulation brought before House Republican committees, and it'll be a forefront focal point of congressional hearings discussions on the House side. And finally, Beth, you touched on it briefly, but the permitting reform, you know, that's a critical piece not only to traditional energy, but renewable energy as well. The IIJA and the IRA authorized spending of billions of dollars into our energy industries, but getting anything permitted these days takes years, if not decades, particularly in the oil and gas sector. Interstate pipelines have really been at the brunt of the permitting stalemate. While it used to take a little over a year to get an interstate pipeline fully permitted, it's now taking almost a decade. That's not good news for those companies, investors and consumers at the end of the pipeline who need natural gas to heat their homes in the winter. But given the fact that permitting reform is equally important to the renewable energy industry, you think Democrats and Republicans can come together next year to enact permitting reform? I assume it's important to the clean energy industry as well.

The Significance of Permitting Reform

Beth Viola: You know, I think this is a great question, Liz, and I have to say that I actually, personally feel like there is an opportunity to try to get permitting reform done. I actually think there is some bipartisan support for it. I think industry is pushing for it. I think the clean energy community is pushing hard, recognizing what you touched on, which is the delay in terms of trying to get something, you know, trying to put steel in the ground. But I think at the end of the day, the administration is going to have to play ball on permitting reform because, as we've noted, they now have unprecedented amounts of money, and it would be unfortunate that you could not actually make that transition and build out the infrastructure that you need if you did not address the permitting reform issues. And I think, you know, there are still ways to maintain transparency and good stakeholder engagement, but just do it in a more efficient way that does allow for progress. But, you know, the clean energy community, they're not going to be able to put up wind turbines and deploy major solar farms if we don't start to address some of the challenges associated with permitting.

But I think at the end of the day, the administration is going to have to play ball on permitting reform because, as we've noted, they now have unprecedented amounts of money, and it would be unfortunate that you could not actually make that transition and build out the infrastructure that you need if you did not address the permitting reform issues.

Elizabeth Craddock: I completely agree. I think that there's been a lot of talk about if we don't get permitting reform this Congress, that it's dead and we're not going to get it in the next Congress. But, I potentially think that's maybe putting the horse before the cart there, or the cart before the horse. I think we'll see something in the future.

Beth Viola: It's just too important. I agree.

Elizabeth Craddock: So, Beth, as we both know, it can be hard in a split Congress heading into a presidential election to get any legislation enacted. But there are some other key laws that needs to be authorized next year that will have a major impact on energy and climate issues, such as the Farm Bill, FAA and PIPES Act reauthorization. Can you talk through how those bills have the potential to impact energy and climate matters?

Potential Impact of Incoming Key Energy/Climate-Related Laws 

Beth Viola: Yeah, for sure. I mean, I think those are probably the top three that are kind of top of mind in terms of must do, given that they do need to be reauthorized. You know, I think it's important when you look at the Farm Bill reauthorization, you've already seen so much effort already start to go get under way with regards to hearings and stakeholders, and you know, for the first time, we're starting to see the environmental community organize around and try to get coordinated in terms of their priorities in a way that they haven't in the past as it relates to the Farm Bill. It's important to note that the U.S. Department of Agriculture got the most money from any agency out of the Inflation Reduction Act. They got a whopping $46 billion and a lot of it for some really great conservation work that they're going to try to get done. However, I do think that there is going to be an even greater push in the Farm Bill to expand the authority of some of those programs at USDA as it relates to conservation, looking at resilience for climate, climate resilience and mitigation generally. And while there was tremendous funding in IRA to also address wildfires and prevention of wildfires, I think there will continue to be an effort to put some resources there as part of an effort to continue to move the country forward on reduction of climate emissions. You know, FAA reauthorization, that is not a place I normally play, but I'm going to be watching it really closely this time because I think again, for the first time, we're going to see a real emphasis on how do we address emissions from major airline aircraft. So, you know, we've already seen the grand challenge that came out of this administration and the new tax incentive for the development of sustainable aviation fuels. So, I think there's going to be a greater emphasis on what else can be done and to expedite the deployment — the development and deployment —  of those fuels for major aircraft that are so good for the environment. And then also even looking at things like how do you deal with short haul aircraft that is driven by batteries. So, I think there's going to be a lot of climate-related focus in those two bills. Liz, though, I have to say, I'm not the expert on pipes you are. So, let me turn it back to you to talk about pipes.

However, I do think that there is going to be an even greater push in the Farm Bill to expand the authority of some of those programs at USDA as it relates to conservation, looking at resilience for climate, climate resilience and mitigation generally. 

Talking Pipelines

Elizabeth Craddock: Yeah, I fully expect to see the PIPES Act, also known as the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act, which will expire in 2023, to be reauthorized next year or possibly Q1 of 2024. This is a usually bipartisan law, and it aims to strengthen safety authority and includes provisions to help PHMSA up the mission of protecting people and the environment while advancing the safe transportation of energy and other hazardous materials. Pipelines are instrumental to the safe transport of liquid fuels. Not only are they the safest way to transport these tools, but pipelines are also important to keeping food prices stable by keeping the transport of these fuels off our rail system. Obviously, oil, natural gas and box style wheat, corn and soybeans, as they can pay a higher price to ship via rail, and also to keeping our highways free from trucks transporting these fuels. I think, given that we still are hearing the word "inflation" around D.C., I think that word is starting to hear it less and less around town. But you know, anything that causes food prices to go up, fuel prices to go up, obviously impacts everyday lives, and members of Congress will hear about that very quickly. Pipelines, frankly, are key to ensuring that we keep those prices down. So, pipelines are key to maintaining a stable energy sector, and given the importance of them to our economy, I fully expect Congress will come together to get this important law reauthorized next year.

Not only are they the safest way to transport these tools, but pipelines are also important to keeping food prices stable by keeping the transport of these fuels off our rail system. 

Beth Viola: That's great.

Final Comments

Elizabeth Craddock: With that, Beth, while there has been a lot of movement in the energy and climate space, given the importance of these issues to keeping the lights on and fueling our cars, and the impact to our environment and climate impacts, we know these issues will continue to be at the forefront of congressional action for the foreseeable future. It's been a pleasure to do this podcast with you today, but before we go, do you have any last comments before we wrap up?

Beth Viola: Well, I would say it's also been a pleasure doing this with you today. And I would just encourage anyone who's listening to this, if they have any questions, to not hesitate to reach out and let us know. And also, we have some really great summaries of all of these major pieces of legislation that we've been talking about on our website.

Elizabeth Craddock: Yeah, definitely check those out if you have any interest. And like Beth said, please reach out if we can be of any help. And with that, we hope to see you around the halls of Congress in the near future. Thanks everyone, for listening.