Charting Out the New Grand Bargain for Permitting Reform

Imagining a deal

Reconciliation has sucked the air out of the room over the last several months, and with good reason. But while most of the energy policy world has been fighting over tax credits, negotiations over several other infrastructure packages have gotten underway. The most important of these is the surface transportation reauthorization bill, or the “highway bill.”

The highway bill is a must-pass legislative vehicle. With the 2021 Bipartisan Infrastructure Law’s highway authorities set to expire next year, Congressional leadership has already started piecing together a new package, making it the most realistic home for a near-term permitting deal.

With the highway bill as the target vehicle, the goal of this piece is twofold: first, to stake out some initial positions that negotiations might begin from; and second, to build out a simple, workable framework for pursuing permitting reform.

With that in mind, we should start with a few theses:

1. Much of this bill will have to feel as if it originates from Republicans, or it will be dead on arrival.

2. At the same time, the nature of leadership-driven negotiations means that it’s not quite as simple as trying to peel off seven Senate Democrats. In other words, this thing will have to be genuinely bipartisan.

3. For Democrats to vote for a bill that includes significant permitting reforms, they will have to see transmission reforms.

4. For Republicans to vote for a bill that includes transmission reforms, they will have to see significant changes to NEPA and very likely something else.

We should also note that, while the transmission ask will originate from the Democratic side, grid buildout will be instrumental to any number of this administration’s goals, from AI competitiveness to onshoring critical industries. President Trump has already signed multiple executive orders relating to transmission, while Secretary of Energy Chris Wright has called for affording transmission lines permitting parity with natural gas.

This piece will focus on the permitting component of the upcoming negotiations. For simplicity, we should assume that the transmission ask is similar to the one in the bipartisan Energy Permitting Reform Act of 2024: streamlining FERC’s existing backstop siting authority plus interregional planning, codifying FERC’s existing cost-allocation principles.

A Review of the Permitting Barriers

A reasonable way to push meaningful, coherent permitting reform is to design reforms that make it easier to build linear infrastructure (transmission, pipelines), with the co-benefit being that the permitting processes that most constrain linear infrastructure buildout tend to constrain energy infrastructure in general.

The most burdensome of these laws are the National Environmental Policy Act, the Endangered Species Act, the National Historic Preservation Act, and the Clean Water Act. NEPA is increasingly well-known, but the remainder are not, so an overview may be useful:

National Environmental Policy Act:

NEPA is the nation’s most infamous environmental law. It is entirely procedural: it mandates a process, rather than an outcome, and thus does not provide for substantive environmental protections. Despite not substantively protecting the environment, it consistently drives several-year permitting timelines, high volumes of litigation, and an “invisible graveyard” of projects that never broke ground.

Readers of Green Tape are likely familiar with how burdensome NEPA is for just about everything, and the statistics for energy transportation and generation are exactly as damning as you’d might expect.

More than a quarter of all new transmission line miles from 2010 to 2020 went through an Environmental Impact Statement, the most stringent level of NEPA review. If one were to look just at interregional transmission line miles, this number would almost certainly be substantially higher. And transmission projects undergoing NEPA see 31 percent litigation rates and 12 percent cancellation rates.

Pipelines undergoing NEPA, meanwhile, saw 50 percent litigation and 22 percent cancellation rates. Solar projects undergoing NEPA saw a whopping 64 percent litigation rate and 32 percent cancellation rate.

Endangered Species Act:

The Endangered Species Act (ESA) has long been NEPA’s partner in crime, though its issues are lesser-known since the law tends to be integrated into the NEPA process. Like NEPA, the ESA is kicked off by federal actions.

The most burdensome provision of the ESA is Section 7, which mandates “consultation” with the U.S. Fish and Wildlife Service for any action that is authorized, funded, or undertaken by a federal agency and that may affect a listed species or its critical habitat.

Much like NEPA, this provision has its own lengthy timelines, but the real killer is its litigation and litigation risk, as ESA creates a “private right of action.” A study of environmental litigation from 2001 to 2016 found that 20 percent of claims were ESA-related—a similar volume to NEPA. This has led to the law being referred to as a “lightning rod for litigation” and the “pit bull” of environmental law.

The similarities to NEPA abound. Like NEPA, Section 7 is primarily procedural. And like NEPA, Section 7 consultation does little to actually protect the environment. From 2008 to 2015, just 0.03 percent of the 6,829 formal consultations (that is, two in total) resulted in a “jeopardy” finding, one of which was later overturned in court. There were also over 81,000 informal consultations over this period, which represent a finding that those proposed actions were, from the beginning, deemed unlikely to adversely affect species (somewhat like a categorical exclusion under NEPA).

For transmission in particular, from 2008 to 2016, there were 912 informal consultations and 93 formal consultations. For pipelines, ESA litigation has driven years of delays to projects like the Mountain Valley and Keystone XL pipelines. In one ESA report, the Interstate Natural Gas Association of America noted that 2-year delays translate into costs of around $350 billion of (inflation-adjusted) costs to consumers.

The ESA burden also creates significant barriers to clean energy. The land use requirements of wind and solar, in particular, mean that those projects frequently run into ESA permitting and litigation. ESA lawsuits slowed the development of the 400 MW Ivanpah solar project, for example, as well as the Beech Ridge wind project in West Virginia. The more renewables that are deployed, the greater this tension will become.

National Historic Preservation Act:

The third pillar of the “major federal action” trifecta is the National Historic Preservation Act. This Act requires agencies to consider the effects of any “federal undertaking” on historic properties via the Section 106 Consultation process.

Like NEPA, the National Historic Preservation Act is an entirely procedural law—it contains no substantive environmental protections. In fact, its similarities to NEPA in structure are such that CEQ and the Advisory Council on Historic Preservation (ACHP) released a handbook describing the two laws as “stop, look, and listen” statutes and encouraging their integration.

NHPA is also similarly open-ended in its requirements. Section 106 must include consideration of “adverse effects,” which current regulations note may include “reasonably foreseeable effects caused by the undertaking that may occur later in time, be farther removed in distance or be cumulative.” In this way, NHPA’s analysis requirements may actually be broader in scope than NEPA’s, as the recent Supreme Court ruling in Seven County limited the required scope of NEPA reviews to direct (and in narrow cases indirect) effects analysis.

Broadly speaking, there are “virtually no data and no empirical studies of NHPA consultations.” However, the limited information available suggests that there are approximately 125,000 “undertakings” under the NHPA each year. Each standard review takes around six months to complete. These review times have a long tail, however—consultations for some rail infrastructure projects have taken up to five years to complete. And Section 106 is, unsurprisingly, litigious: one study’s keyword search found nearly 1,000 cases challenging the adequacy of NHPA processes since the law’s passage. This represents roughly one-seventh of the NEPA cases over the same period. In one well-known recent case, the SunZia transmission project was halted on National Historic Preservation Act grounds.

Clean Water Act:

The Clean Water Act has three key regulatory programs: Section 401, which provides for state water quality certifications, Section 402, which regulates point sources, and Section 404, which regulates the discharge of dredged and fill activity.

More simply, Section 402 regulates facilities (factories, plants, etc.) with discrete sources of pollution, while Section 404 regulates physical alterations to water bodies through placement of solid materials like soil, rock, or construction fill. Meanwhile, Section 401 gives states the authority to review and approve (or deny) federal permits to ensure they meet state water quality standards.

For the purposes of developing major energy infrastructure, Section 404 and Section 401 represent the largest impediments, so we’ll focus on them here.

Section 404

The Section 404 process is exceptionally time-consuming. For Nationwide Permits (NWPs), which have been developed by U.S. Army Corps of Engineers (USACE) for certain categories of projects, the permitting timeline has been estimated at around 313 days. For individual (that is, case-by-case) permits, the timeline is around 788 days, or more than two years.

The Clean Water Act has some NEPA-like procedural requirements, including public notice and comment, alternatives analysis, and cumulative effects analysis. This has led to many Section 404-related delays, as well as litigation against various energy projects, including a suit against the Cardinal-Hickory Creek transmission line in 2021.

Another challenge is that the issuance of a Clean Water Act 404 permit is considered a major Federal action, and thus kicks off NEPA. This has resulted in numerous CWA-originating NEPA lawsuits, including challenges to transmission line projects in Sierra Club v. U.S. Army Corps of Engineers.

Section 401

Section 401 is a bolt-on layer of review that every federal license or permit that may result in a discharge to waters of the United States must clear before it can be issued. In practice, that means any 404 permit, FERC hydropower or pipeline certificate can be held up unless the state or Tribal certifying authority signs off or waives its right to do so. Without that sign-off, the federal agency is legally barred from acting.

States have one year to issue certifications. Historically, states have gamed the clock for years by telling applicants to withdraw and resubmit identical requests just before the deadline, restarting the timer indefinitely. As a result, the Clean Water Act 401 process for big energy projects such as hydropower relicensing takes an average of 2.8 years.

Because a state can deny a project outright, or grant the project with conditions, Section 401 has become a favorite hook for lawsuits. New York’s 2016 denial of the Constitution Pipeline halted the project, for example. Transmission lines, too, consistently run into the 401 process, as long-haul lines cross hundreds of water bodies.

What Ties These Issues Together?

The key development bottlenecks consistently arise from these laws’ mandated procedures, rather than their substantive environmental protections. In particular, the core of these laws’ burdens can be traced to two specific issues: open-ended review requirements and never-ending litigation risk.

Open-ended review:

These statutes often demand that agencies chase effects “across space and time” without ever defining where space ends or when time runs out. NEPA’s “cumulative and indirect effects” standard has historically required officials to inventory every past, present, and reasonably foreseeable future action that might interact with the project—even actions the applicant does not control and that may occur years later, hundreds of miles away, or under an entirely different climate regime (the recent SCOTUS decision in Seven County may offer some respite to this end). ESA’s Section 7 pushes the same logic into biology, obliging agencies to imagine how an as-yet-unbuilt facility might combine with every other stressor on a species. NHPA regulations state that adverse effects “may occur later in time, be farther removed in distance or be cumulative.” And CWA’s “least environmentally damaging practicable alternative” test invites endless speculation about hypothetical routes or construction methods.

Because there is no principle for declaring the ledger complete, what should be a finite inquiry morphs into an administrative quest for omniscience, stretching reviews from weeks or months into years.

Endless litigation risk:

Open-ended analysis would be merely inefficient if it ended with the agency’s signature, but all four statutes make the paperwork perpetually contestable. Anyone with broadly defined standing can sue—under the Administrative Procedure Act for NEPA or NHPA claims, and under ESA’s citizen-suit provision (or, for the CWA, usually the Administrative Procedure Act or its own Section 505 provision for ongoing violations)—and they can do up to six years (or in some cases, longer) after the record of decision. Courts can still vacate a permit, then, over what is effectively a technical paperwork flaw. Faced with that threat, agencies try to bulletproof the record by layering on more modeling, more alternatives, and more public meetings. One EPA general counsel estimated that 90 percent of the information in environmental reviews is included purely to “litigation-proof” the document. The cycle feeds on itself: fear of litigation drives longer reviews; longer reviews generate more litigable material; each successful suit sets a precedent for still broader analysis next time. For capital-intensive projects like long-distance transmission, the prospect of years in court often proves fatal long before a judge rules.

Unless Congress narrows both the scope of what must be studied and the ease with which process errors can be weaponized, any new permitting bill will leave this litigation doom loop intact.

What Do We Do?

The common thread running through NEPA, ESA § 7, NHPA § 106, and CWA §§ 401/404 is not substantive environmental protection but an ever-expanding, litigation-driven paperwork regime. Therefore, the path to a workable permitting deal starts by attacking the two mechanics that turn process statutes into project killers: open-ended analysis and open-ended litigation.

Focus analysis:

First, Congress should codify the principles laid out in the Supreme Court’s Seven County Infrastructure Coalition v. Eagle County opinion. Analysis should be focused on direct effects, and open-ended “cumulative effects analysis” should not be required. For indirect effects, agencies should be given discretion over “where to draw the line,” to borrow the Court’s language. If Congress has specific concern about indirect effects analysis in the ESA or CWA, it could consider, for example, directing the Corps to consider indirect effects in narrow cases, such as effects that are downstream from the project footprint within reasonable bounds.

In practice, for NEPA, this would help agencies focus on direct and relevant indirect impacts, rather than far-flung effects over which the permitting agency has no regulatory authority. The same standard would then be mirrored in ESA § 7 consultations (only on-site or truly proximate impacts trigger a jeopardy finding), NHPA § 106 reviews (adverse effects are confined to physical alteration of the listed property itself, not cultural ripple effects), and CWA § 404 alternatives analysis (the Corps evaluates projects or methods the applicant can actually build, not hypothetical projects hundreds of miles away). By focusing these analyses, Congress can limit the pages of speculative modeling that now inflate documents into the thousands and overwhelm agency bandwidth.

Similarly, Congress should put an end to “domino” permitting, whereby one environmental review process is considered a “major Federal action” and thus inherently kicks off NEPA. This is particularly problematic when it comes to Clean Water Act § 404, in which the issuance of individual permits sets off NEPA review. It is unreasonable that one environmental review process, triggered for a discrete, specific environmental purpose, sets off another lengthy, open-ended procedural process. Furthermore, this redundancy has already been recognized by courts via the functional equivalence doctrine, whereby several EPA permitting processes (the Clean Air Act and the Safe Drinking Water Act, for example) have been deemed to be “functionally equivalent” to NEPA and thus not subject to NEPA review. While most Clean Water Act permits issued by the EPA are not subject to NEPA, Clean Water Act § 404 permits are issued by the USACE, and thus require NEPA review.

Finally, Congress should narrow the “trigger” for processes that are set off by a federal nexus. For example, NEPA is set off by any “major Federal action,” which has, over time, come to mean almost every federal action, from picnics to federal hiring. The Fiscal Responsibility Act of 2023 moved to remedy this by changing some of the key definitions of NEPA (for example, noting that a major Federal action does not include actions with “minimal” Federal funding or involvement), but this language has not been fully clarified nor implemented in agency regulations. For NEPA, in addition to the Endangered Species Act and the National Historic Preservation Act, mere federal financial assistance should only be treated as a major Federal action (or “undertaking,” etc) when that assistance clears a certain percentage threshold (say, 75 percent) of the overall project cost. For example, a federal grant to a semiconductor facility under the CHIPS Act would not be considered a major Federal action, as it would represent far less than 75 percent of the overall costs of the private project.

Congress could also go a step further and eliminate purely financial triggers altogether. Energy tax credits do not trigger environmental review, while representing (at times) billions of dollars worth of subsidy for energy projects. Yet when it comes to the federal government’s own Department of Energy, for example, the issuance of grants which are an order of magnitude smaller than a typical production tax credit ends up subjecting the grant recipient to years and millions of dollars worth of environmental analysis followed by years of legal exposure. This imbalance should be fixed.

Right-size judicial review:

Second, Congress should help make permits stick once they clear the review process. Congress can do that without touching the underlying environmental standards by addressing four vulnerabilities that plaintiffs now exploit:

1. A short statute of limitations. All challenges to a final record of decision or permit should be required to be filed within 150 days of the publishing of the relevant agency decision. This would rein in the multi-year statute of limitations, which is currently the norm, while still preserving a significant window to bring a suit.

2. More meaningful standards for stopping construction. Courts typically default to halting a project when they find a defect in an environmental review, without considering whether that defect has the potential to cause any significant effects.

To fix this imbalance, Congress should codify a two-step injunction test: a plaintiff must (a) show a substantial likelihood of prevailing on the merits and (b) demonstrate that the alleged defect would cause concrete, imminent, and irreparable environmental harm during the pendency of the suit. If either prong fails, the default remedy should be remand without vacatur, according to which the agency corrects the paperwork while work proceeds.

Alternatively, Congress could direct courts to treat procedural missteps as “harmless error” unless the plaintiff can show the defect is substantially likely to change the agency’s ultimate decision. (For example, in the case of NEPA, the defect would have to be sufficient for the agency to have selected the no-action alternative.) If that showing cannot be made, the court should remand the record for correction without vacatur and allow work to proceed uninterrupted.

In either case, projects should be allowed to move forward with aspects of construction unrelated to the challenge.

These safeguards would close off the tactic of hunting for trivial clerical faults simply to force a stop-work order, while still preserving full environmental review when an error is truly outcome-determinative.

3. Time limit on injunctions. There must be a clear endpoint for litigation for each individual project, such that obstructionist groups may not continually bring suits against the same project until financing for that project runs out.

One option is to create a “time limit on injunctions.” Congress would set a firm deadline on courts’ ability to halt projects through injunctive relief, starting a clock when project sponsors submit an environmental review application. That clock would run for a predetermined period—say, three years). During this window, legal challenges would proceed normally—but once the time limit expires, courts would lose the ability to halt construction.

This mechanism would preserve the comprehensive environmental review process while protecting against purposeful obstruction.

4. Fact-Based Pleading. Today, plaintiffs can sue on a bare “procedural injury,” filing boiler-plate complaints that allege paperwork defects without tying them to any real-world harm.

Congress should require that any challenge (1) allege a specific, existing, or imminently threatened environmental harm to an identifiable resource and (2) explain how the claimed analytical flaw is likely to cause that harm. Complaints must state with particularity the exact statutory provision allegedly violated, the way the review departed from that requirement, and the factual basis for believing the defect will (or already does) produce the asserted injury, quantified where feasible. This would deter shotgun litigation while preserving full access for those facing genuine environmental damage.

5. Standing Requirements. In challenges for procedural defects, only those with a direct, material, pre-existing stake in the specific resource or activity should be able to bring suit. Organizations may only proceed through named individuals who themselves meet this test; incidental or programmatic affiliations alone should be deemed insufficient. Likewise, litigants should be required to have raised the specific issue they choose to litigate during notice and comment in order to sue.

Looking Ahead

There is a path forward for a meaningful energy and permitting reform bill next year. With transmission representing the big Democratic ask (and perhaps some oil and gas leasing representing a smaller Republican ask), much of the game will be in shaping permitting reforms that will unbind American infrastructure while maintaining environmental protections.

This will look something like the reform structures outlined above:

• Focusing environmental analysis on direct effects and truly proximate indirect impacts rather than open-ended speculation across space and time;

• Ending "domino" permitting where one review automatically triggers another;

• Raising the federal nexus threshold so minor federal involvement doesn't trigger major reviews;

• Shortening the statute of limitations for challenges to 150 days;

• Requiring plaintiffs to show concrete environmental harm before courts can halt construction;

• Imposing time limits on injunctive relief;

• Protecting agencies from liability for harmless procedural errors; and

• Tightening pleading and standing requirements to ensure only those with direct stakes in affected resources can challenge permits.

This grand bargain might finally give America the infrastructure policy it deserves—one that protects the environment through smart regulation rather than endless process, and that allows us to build again.