Alongside your irregularly-scheduled Green Tape programming, we will also be posting Right of Way episodes and transcripts here. If you prefer to listen on Spotify or Apple Podcasts, click the links here or here.
In this episode, we discuss:
How permitting is constraining manufacturing and data center deployment
End-users’ permitting wishlists
How political dynamics have shifted on both sides of the aisle
Thomas: Welcome to Right-of-Way, a podcast about energy policy, energy politics, and above all the upcoming permitting reform negotiations. I’m Thomas Hochman, director of infrastructure policy at the Foundation for American Innovation, and I’m joined by Pavan Venkatakrishnan, an infrastructure fellow at the Institute for Progress.
Pavan: The conversation around permitting reform is so often centered on energy developers, whether it be the geothermal companies running into NEPA out west or the pipeline companies getting blocked by the Clean Water Act in the northeast.
But of course, permitting reform is not just about energy development. It’s also about all of the industries that rely on affordable, reliable and available energy to function – hyperscalers, manufacturers, and electric vehicle companies, to name just a couple.
Thomas: For them, our inability to build and deliver new energy infrastructure is increasingly existential. NVIDIA has said that energy availability is already the most important consideration when siting new data centers. Sam Altman has said the price of AI training will converge to the price of electricity. And companies like Intel have said that the permitting burden sometimes determines whether they choose to build their chip fabs in the United States or abroad.
Simply put, the manufacturing and AI worlds have a major stake in this round of negotiations.
And so we’re lucky to have two movers-and-shakers in the space joining us today in Chris Phalen and Cy McNeill.
Chris is the Vice President for Domestic Policy at the National Association of Manufacturers. He has deep expertise in energy, conservation, agriculture, and global trade challenges facing governments and the business community, and before joining NAM, was Senior Policy Advisor to Senator Kyrsten Sinema working on energy, natural resources, and beyond.
Cy McNeill is the director of federal affairs for the Data Center Coalition, the association serving as the voice for the U.S. data center industry. Before joining DCC, Cy worked in the regulated energy sector and in public service, most recently with Alliant Energy in Washington, DC managing the company’s federal regulatory strategy. Cy also spent time serving in the federal government working for the Department of Commerce and FERC, advising on issues such as tax reform implementation and wholesale gas market policy.
Chris and Cy, welcome to Right of Way.
Chris: Great to be here.
Cy: Good to be here.
Pavan: Most people listening to this podcast probably know a little bit about permitting laws in general. They’ve heard about NEPA, they’ve heard about the Clean Water Act, the Endangered Species Act, and the National Historic Preservation Act (NHPA).
So when both of you all talk to your members, what is their hierarchy of concerns? Is it NEPA at the top, then Clean Water Act, then ESA, then NHPA? Is it local zoning laws? How do they read it?
Chris: Great question. So, it’s all of them – NEPA definitely being at the top. The judicial review piece of NEPA is probably the most important.
There are definitely also local zoning issues. We don’t really get quite as involved with those because they are just very diverse depending on what industry you are in, where you are in the country, and what local elected officials are like there. Again, it depends on what you are building.
One that comes up a lot is the Clean Air Act as well. There’s quite a bit of difficulty in my home state of Arizona, actually, with non-attainment areas, and that’s impacting the manufacturing sector pretty significantly.
I describe it as “no way out.” Maricopa County is in a non-attainment situation. A lot of that is for ozone and a lot of that is driven by out of state emissions – from China, from Mexico or wildfires and forest fires. And the permitting system of the Clean Air Act – you know, Title V or other smaller permits that you might need – is not designed to allow for the construction of large-scale manufacturing in such a situation. So the semiconductor fabs out there, the data centers – all of those are being significantly impacted.
When I was with Senator Sinema, we tried to address this issue – and it gets into forest management, some of our trade agreements, and how we categorize different pollutants in the air and where they’re coming from. But I think we really need to include the Clean Air Act in this [conversation] and how it’s actually stalling – somewhat ironically – a lot of clean energy developments, such as batteries, critical minerals, and semiconductors.
But to your question: NEPA, the Clean Water Act, and the Endangered Species Act are all really, really critical. It’ll depend on if you’re a mining company, a semiconductor firm, or a steel or aluminum company, but it runs the gamut. They’re all super important, but I think it’s important that we remember the Clean Air Act really does need to be part of these negotiations and hopefully a final deal, because it is in all parties’ interest to see more projects of all kinds get built.
Cy: Yeah, for sure. I agree with Chris here. It’s a bit of everything. For us, the data center industry is definitely heavily involved at state and local levels. We’re seeing things like data center moratoriums popping up in certain markets. So we continue to do a lot of work to be good partners to local communities. And I could probably spend this whole podcast talking about local issues. But at the federal level, our members are laser-focused on transmission permitting reform. We’ve seen real world examples of transmission constraints stopping data center development in its tracks in places like Northern Virginia and more and more around the country.
I don’t think it comes as a surprise to anybody listening to this podcast that the current transmission permitting regime in the U.S. is time-consuming and difficult. If a transmission project crosses state lines, that transmission developer has to get approval from each state, which likely has their own unique process and regulatory timeline. They may also need federal permits, which adds a whole other complexity to this. And Thomas, I’m going to steal a little bit from your HNR testimony. We’re going to need a whole lot more transmission. I think the DOE predicts that the US will need to build 5,000 miles of high capacity transmission each year to maintain reliability and to enable economic growth. And I think we added something like 300 – so a small fraction of that – in 2024, so we’re already behind.
To this end, DCC was supportive of a lot of the transmission reforms laid out in EPRA. Anybody following the permitting world knows that was close to the finish line there. But one recently-introduced piece of legislation that closely mirrors a lot of those sections is the SPEED and Reliability Act from Representatives Peters and Barr.
DCC endorsed that bill. We see this as a bipartisan framework to help alleviate a lot of unnecessary delays in transmission development – things like helping modernize nationwide transmission permitting, cost allocation and planning. I won’t get too far into that because I know you had Daniel Palken on a previous episode of the podcast and he did a great job walking through the three P’s. But it would also help reform the existing backstop siting authority for interstate transmission lines, removing that redundant top-down role of DOE.
And then second to transmission permitting reform is NEPA reform. Our president, Josh Levy, recently testified at the House Natural Resources Committee on the SPEED Act, and he emphasized that any package under consideration to modernize the federal permitting process should encapsulate some of those reforms. Things like focusing environmental reviews on significant direct impacts, setting clear timelines and deadlines for agency decision-making, and then also streamlining judicial review, improving efficiency and clarifying that federal grants don’t constitute a major federal action. There’s low-hanging fruit too – things like the e-Permit Act to digitize the permitting process, for example, we think is smart reform. So for us, comprehensive permitting reform would help unleash investment, lower project costs, and deliver affordable, reliable energy when and where it’s needed.
Chris: I think it’s really important to add: People might be listening to this and thinking that permitting reform equals less stringency, or this isn’t a sustainability story. I was up in New York for Climate Week a few weeks ago, and I think, especially regarding what Cy is talking about for transmission lines, there is no silver bullet that will just allow transmission to be built, no matter what energy source it’s bringing to projects.
I think there’s been a sort of naivete on some people’s parts. I dealt with this in Senator Sinema’s office: There was a giant transmission line bringing five gigawatts of wind energy into central Arizona and California. You’d think it’s a no-brainer. No. It took 15 years. I’m sure you guys know what I’m talking about here. But at the very end, folks tried again to block that project. And it’s a 100% clean energy project into Arizona and California. You’d think that would only happen to a pipeline, right? But no – NEPA, NHPA, all of these really need a common-sense update.
Otherwise, like Cy said, any project that is crossing land or getting close to people is going to face issues. We need to make it fair and easy to at least get to an answer of yes or no in a timely fashion without continued delays 15 years later where someone says, “You’re crossing this river and you didn’t do a review.” It’s been 15 years. Someone looked at this.
We’re going to need that certainty for pipelines, for transmission, for energy generation, and for the facilities that my members are looking to build.
I know we’re going to talk reindustrialization later, but I think permitting reform is really also a good sustainability story, and that shouldn’t be lost for anyone that’s listening and may think otherwise. When we say “all of the above,” we mean it. Nobody gets special treatment right now, and it’s really messed up a lot of projects.
Pavan: Chris, you you bring up a good point on transmission barriers, because one of the things we’ve been trying to do on this podcast is point out that we haven’t seen all of the ways that traditional permitting barriers can block transmission development because we aren’t building quite as much transmission as we need to be building. But all the barriers you kind of see on the pipeline end – if we’re moving a transmission title and it works – transmission will run into those barriers too.
Thomas: Totally. So, Chris, there are all these issues that come along with the construction and operation of manufacturing facilities themselves. You got at some of them with the Clean Air Act, for example. Myfirst ever foray into permitting reform was actually thinking about the Clean Air Act and semiconductor manufacturing. But the reshoring of manufacturing – reindustrialization, if you will – is also very much an energy story, right? So while much of the load growth conversation to date has been focused on AI and data centers, the load growth picture really breaks down into three main buckets: AI for sure, but also electrification and reindustrialization. So can you walk us through what the energy issues are and concerns are for manufacturers?
Chris: Yeah, that’s really important and it’s something I’ve been touching on in public and with our members as well. I think there are issues, concerns, but also opportunities. At the top of my mind is reminding people that data centers are the sexy topic right now, but manufacturing uses about a third of the nation’s total energy. Obviously that’s a little different than electricity – the percentages we can get into in a different forum – but it’s a massively energy-intensive industry across everyone that we represent.
So it’s really important that we don’t get into a situation where there is too much competition for too few electrons. That doesn’t do anyone any good. And it’s going to have knock-on effects for the data center and AI industry as well. If your electricity and energy input costs are going up for the steel, the concrete, the servers, the cooling systems – everything that my members make that builds the building and puts in the servers and makes it run – that isn’t a good situation to be in.
And so, yes, we do need more transmission and distribution. But this also presents major opportunities – from electrical steel, grain-oriented steel, more aluminum. The more we can build this infrastructure out, the more you get a virtuous cycle going, where it’s done sustainably without too much negative competition. And so I view it as – yes, there are some serious issues that we have to address in the generation and the transmission and distribution space. But if we get that right and we are able to do these kinds of reforms that we’re talking about, it will be a major boon to manufacturers in the United States, which will then support AI development and data centers.
So I try to keep an optimistic eye on it. Because I think very often it’s “Oh my God, the sky is falling” with all the massive demand coming online. I also think it’s been interesting to see some folks analyze what the actual load profile is for data centers. And correct me if I’m wrong here, Cy, but it’s not like they’re running at 100% all the time. Neither is a manufacturing facility. Things go on and off based on demand or orders coming in.
So, where can we find positive stories and opportunities to work together rather than having it be such a combative narrative? I think that’s something that we view as an opportunity. And I think it would be great for the country if we think about it more like that.
Cy: Yeah, and for us, I think of it as an opportunity too. On the load shape, there’s still some work being done. Folks like EPRI are doing some work around demand response and flexibility. So I look forward to some of those results as well.
Thomas: Cy, I’m going to bring you in again on the hyperscaler perspective. We’re hearing from pretty much all of the hyperscalers, from NVIDIA to Meta, that energy availability is already the top consideration when identifying where to build new data centers.
So when we’re talking about this permitting package, we’re probably thinking about four pieces. Chris, you were talking about the Clean Air Act too. But for now: NEPA reform, Clean Water Act reform, transmission reform – we have the Peters and Barr SPEED and Reliability Act, proposals like EPRA – and lastly, a limitation on the executive branch’s ability to block or delay permitting projects.
Obviously, it’s hard to get a perfect picture, but in general terms, we hear about the AI race and the need to build as a matter of real urgency. So what’s the difference between this package passing in the next year and a world where it doesn’t? What does it mean for America’s ability to lead on AI?
Cy: Yeah, that’s a great question. I’ll try to play Dr. Strange here a little bit and predict the future. The way we see it is in a world where we don’t get a comprehensive permitting reform package in the next year or so, companies will continue to deploy digital infrastructure for sure. But they’ll do so within a system that is increasingly a bottleneck for infrastructure, right? We’re seeing transmission and generation constraints already slowing down data center development that limits broader economic growth.
Much of that constraint is tied to delays in permitting, siting, and interconnection. So these are no longer just minor bureaucratic headaches. These represent a fundamental threat to US economic competitiveness and national security. If we can’t build infrastructure at the speed innovation demands, we risk falling behind global competitors like China. I mean, we’re seeing the reporting out of there, right? They’re expanding their energy grid, manufacturing base and digital ecosystem.
But I think on a glass-half-full side, with a strong permitting reform package, we can unlock transformative gains. Our members will be able to deploy infrastructure faster in more locations and with greater certainty. And that certainty drives investment, and investment drives jobs, tax revenue, and technological leadership. We are talking about trillions – trillions – of dollars of AI-related infrastructure spending, which is great for our overall economy.
And as Chris touched on too, there’s also the ecosystem – the knock-on benefits of manufacturing facilities being put up near data center developments. There’s a whole broader ecosystem there as well. So when approvals are predictable and streamlined, investment will follow. Where approvals are slow, communities will lose out on economic opportunity, and Americans will generally be at risk of being left behind.
Thomas: So, Cy and Chris, we’ve now name-dropped the term “dark matter” when talking about permitting about eight times on this podcast, and I’m gonna keep the streak running here.
It’s always really valuable to concretize what it means for manufacturers, hyperscalers, whoever, to be making investment decisions or siting decisions in a permitting-constrained or energy-constrained world. And so what does this look like in practice, whether you’re a manufacturer or a data center developer, when you’re running into permitting challenges or energy availability challenges?
Chris: I can jump in here. Shameless plug – we’re actually going to have a little booklet on exactly these specifics, Thomas. So for folks that are listening, maybe it’ll be out by the time this goes live. It’s our AI and Energy Dominance roadmap. And to your question at a high level, we did some survey work. 80% of manufacturers said that the length and complexity of the permitting process is harmful to increasing investment. 87% of manufacturers would expand business operations, hire more workers, or increase wages and benefits if the permitting process were more streamlined.
Now, we obviously represent a lot of different industries. So what this means will depend on your size, your geographic location. For a mining company, let’s say, getting a mine online takes a very long time and is subject to significant judicial review. If we take a step down in the mining ecosystem to rare earths, all of those different elements that we talk about all the time have a specific chemical way of being processed and refined. And so when you think about the Clean Air Act, the various niche regulations that govern different smelting or processing technology, you’re going to have to get different permits for whatever smelting or refining operation – whether it’s graphite, whether it’s molybdenum, whether it’s lithium.
All of these things are going to be different – for steel producers, for an electric arc furnace, for energy generators. Is it going to be a nuclear facility? Is it going to be gas? How do you hook up the pipeline? And for folks that use process heat, how do you get a natural gas hookup? If it’s the paper and plastic industry, the Clean Water Act obviously would impact all of that. The examples are endless, honestly, and I think the mining and critical minerals ones are the most relevant right now and the easiest to understand when you really dig down a little bit deeper.
It’s like, crap, you’re going to need to get a lot of permits that are subject to a lot of input and potentially never-ending review. So why would you really want to set up something that is already not economical to do in the rare earths space when you’re competing with China?
I liken it to tying one hand behind our back and trying to compete with China. I mean, they are setting up just massive, massive infrastructure buildout and energy buildout and manufacturing buildout. We can compete with that, but we cannot tie one hand behind our back in all of these different situations. So it has real, real-world effects on project costs, on timelines, on what your shareholders or your board are going to allow if you’re a large public company. It really can be quite a drain on all forms of energy and manufacturing, and it has real-world consequences.
Thomas: Yeah, I remember when I was looking at the Clean Air Act and semiconductors, there was a flexible permitting program – a pilot program that they ran for Intel called Project XL up in Oregon in the late ‘90s. And Intel said it was the difference between them keeping those production facilities in the US versus going abroad to where they had other operations. And when we see those one-to-one comparisons, I always think it’s valuable for understanding just how much this permitting burden matters.
Chris: Yeah, time is money, and I know we’ll have a little bit more conversation about what some of the contours on both sides of the aisle look like. But again, I don’t want anyone to have the takeaway here that there shouldn’t be any public input. That is obviously not what manufacturers want. We operate in, and our folks live in these communities. But I think just the never-ending opportunity for folks to gum up the works will have a significant impact on what your investment returns can be and your timeline of putting your capital out there. It just is impossible sometimes on the timelines that you can expect in the permitting world nowadays.
Thomas: So, as we mentioned in the intro, policymakers have often thought of permitting reform from the perspective of energy producers. But we’ve seen more efforts, at least recently, to think about the impact of permitting on end users as well, whether that be the successful Building Chips in America Act, which excluded certain semiconductor projects from NEPA and the National Historic Preservation Act, or the AI Action Plan’s executive orders to streamline NEPA and Clean Water Act permitting for data centers themselves.
I want to understand, from a political engagement or political advocacy angle, how this will play a role in the current permitting reform negotiations or maybe ones to come. Google has a major energy platform. OpenAI just endorsed the SPEED Act, the recent NEPA reform bill. Manufacturing and AI are no doubt priorities for a huge number of members, including some who maybe have not been as historically engaged on permitting, at least from an energy perspective.
So do you get the sense that advocacy from and engagement with manufacturing and AI stakeholders has changed the dynamics of permitting reform on the Hill in the last couple of years? Or do you see most members thinking of permitting in more or less the same framing?
Cy: So from my perspective, I think it has changed the dynamic for sure. If you think about much of the traditional thinking on permitting reform, you have NEPA, Clean Water Act – people think of that as an oil and gas industry win. Then you have things like transmission permitting reform, which may be seen as more beneficial for the renewables industry. But the way I look at it is that we’re in a period of load growth that we haven’t seen for decades. So we really do need as much energy as we can get.
We’re not here trying to put our thumb on the scales. We’re not here trying to pick winners and losers, but saying we need to ensure that we can build things again in this country. So for data center developers, there’s a real tension between the timelines of data center builds – it generally can take 18, 24 months, depending on the size – and power infrastructure and transmission development, which can take three to seven years approximately. Again, we’re not seeing the bulk of this time spent on construction, but a lot of it is on the permitting side for the energy infrastructure.
So the delta between data center development and energy infrastructure development significantly stalls the pace at which data center investment, jobs, tax revenues, and other benefits can be deployed. At the end of the day, energy is the pacing challenge for the data center industry. And without energy, we can’t turn zeros and ones into output.
So when we bring this message to the Hill or the administration, we hope that they see this dynamic has shifted. And we also want to bring a big-tent strategy to the permitting reform debate. I’ve seen a consensus from a broad coalition of stakeholders that comprehensive permitting reform is needed that I don’t think was there in the past. To your point, this includes stakeholders that may not have been as active in previous discussions. So I think the more voices that are singing from the same hymnal here, the better chance we have to gain momentum and pass a broader permitting reform package.
Chris: Yeah, I think that advocacy has worked. It is somewhat of a change. The fact that the negotiations are ongoing, at least it sounds like positively, is a good change. I do think that just having come from the Hill, there is some institutional inertia on some of the key parts, NEPA and transmission probably being the biggest ones. But I do think to dovetail on what Cy said, there are tectonic shifts happening here where the traditional narrative around transmission being that, “We don’t want to subsidize energy going to a different part of the country,” is maybe becoming less true where there are data centers or manufacturing facilities located along a “right-of-way”, as it were.
So for local jurisdictions or states that might otherwise feel like, “Well, the easy thing to say is we don’t want to pay for California’s energy” – well, now you have stops along the way where there’s jobs and investment and you are actually able to take some of that energy and electricity off the grid for actual local development. I hope we’re going to see more of that because that’s definitely a piece that is moving the needle.
And I think there’s been a recognition that clean energy investments as well, like I said, need this. It’s just the slow inertia of Congress where folks may realize it behind the scenes, but there are vested interests or just the politics of it make it a little difficult to be out there. But I think the more folks like us manufacturers describe the positive nature of what’s happening here – and that this isn’t just an effort to undermine public input or to be bad actors, it’s in fact the exact opposite – the better.
We want to be leading on building responsibly, competing and out-competing China. Congress is frustrating to see work sometimes, but I think it’s in a good spot right now. The fact that no one has walked away from the table yet is a good sign and a sign that the principals, the folks that matter, recognize that there is a win-win to be had here. And we’re going to keep working on that with the administration and both sides of Congress, because I do think it doesn’t have to be a zero-sum where you’re undermining oil and gas, or we don’t want to see solar and wind built. We need all of them and everyone can benefit here.
Pavan: Chris, you’re totally teeing me up there. So one of the components that I think has to be in this package for it to pass is an element on executive discretion. That is, an effort to prevent this ping-ponging treatment of different technologies from administration to administration.
You had the LNG pause under Biden, some slow-walking of leasing, and now you have an Interior memo from this administration in addition to EOs looking to slow the permitting of wind and solar. So this idea of preventing that swing – it’s hard to quantify, but it’s really, really important.
Obviously, manufacturers, hyperscalers rely on being confident in the permitting process, knowing that they’ll be able to get the generation that they need. So I’d put the question to both of you. Do your members see different treatment under the permitting regime from administration to administration? If so, is that changing how they invest?
Chris: That’s a good question. I came from Congress, so I’m an Article I guy. I do think that some statutory language on executive discretion is definitely needed. Now the devil’s in the details because you don’t want to tie an executive’s hands to the extent where you’re gumming up the works again by trying to stop the ping-pong.
So it is a delicate dance, and that’s how the Constitution is set up, and it works. Sometimes it’s slow, but I do think there needs to be some reining in of the ping-ponging because it really is there. I mean, you mentioned a lot of the greatest hits from the previous administration. But I think it’s also important to remember – under Biden, we also had record oil and gas production. Under Trump, we saw Texas of all places lead the nation in battery development and deployment. So the market does still work to an extent, despite what any given party or executive might be trying to do or impose.
But I do think that there needs to be some restraint put by Congress on the executive to allow and ensure that all types of energy get built out. The LNG pause, I think, was really quite short-sighted. Some of the bans on leasing and things like that – we’re seeing those chickens come home to roost. And similarly, blocking solar and wind development on a whim – that can then swing back quite dramatically and we don’t want to see that. We would like to see everything possible built – the more manufacturing, the better. I don’t have the exact answer for what this looks like, but I do think it’s Congress’s role to do that. And it’s their job to have those deep, thoughtful discussions on how you make sure that you get that outcome.
Cy: Yeah, I would generally agree and people smarter than me can think about what that fix is legislatively. But I generally agree with that. First off, I have to give credit where credit is due. This administration has been super supportive of our industry. OSTP and the White House did great work on the AI Action Plan. DOE is working on opening up federal sites for data center and energy deployment. And then DOE’s Speed to Power Initiative should hopefully yield great results as well.
That said, any uncertainty in permitting regimes just makes it harder to make those long-term investment decisions. The lifespan of energy assets can vary depending on the resource, but it’s generally between 20 to 80 years. And these are also large investments. So when an energy developer makes a decision on an asset that will span multiple administrations, I would say that they expect some certainty in this process.
We’ve seen both Democratic and Republican administrations support their favored resource types. So we try to stay out of those zero-sum policy debates as much as we can. And we are really trying to make the case that every electron and molecule is needed at the moment. While our members vary in terms of their sustainability goals and business models, I can confidently say that each one would appreciate a predictable regulatory climate to ensure that they can make those informed, diligent, long-term investment decisions.
Pavan: So I want to drive more at that hyperscaler perspective a little bit. Because one of the reasons I feel so much urgency around trying to drive towards a package this year and the next year is that it seems like the infrastructure development process, unfortunately, is getting more litigious.
We’re seeing this with data centers. I don’t know if you guys are on Twitter much, but those More Perfect Union tweets are going viral. They’re out there, and data centers are getting a bit of the blame for increasing electricity prices as we struggle to bring online and move new generation.
So, Cy, how are you thinking about this cultural component? And to what extent does national permitting reform help or not help with this?
Cy: Yeah, it’s a great question. It’s a tough question. For us, affordability is top of mind at the moment. It’s a critically important issue. You mentioned what’s going on on Twitter. You can’t open it without seeing data centers and AI somewhere. But I wanted to start off with: our members are committed to paying their full cost of service, which is a technical regulatory term, so I won’t go too deep into it. For the energy that they’re using, including transmission facilities, that’s the expectation.
And we are actually seeing multiple examples from utilities across the country laying out the case for how data centers can actually help lower electricity costs. Georgia Power, for example, has kept rates frozen for the next three years because of load growth. And then we’ve also seen in Pennsylvania, PPL says that for the first gigawatt of interconnected load, they can reduce customers’ transmission costs by 10%. So there are stories around the country of utilities seeing load growth as an opportunity to help with the affordability issue.
And I would say data centers also routinely pay utilities for the infrastructure directly associated with their facilities. I’m in D.C. right across the river from Dominion Energy. Data centers routinely pay for certain pre-connection costs, connection costs, and additional facility costs to provide the appropriate assurances to the utility and protect other customers from the risk of stranded asset development.
Finally, it may not be the sexiest thing in the world, but we’re in an inflationary environment. Costs for everything have gone up, including things to build out our energy system. NRECA did a helpful study and graphic on this. Transformers are up 70 to 100% since 2020. LBNL earlier this year put out a study that said that load growth is not the primary driver of electricity rates. It’s simply inflation. So I just wanted to set the stage with those talking points first.
But to your question on permitting reform, yes, it can definitely help with cost. Red tape and regulatory overlap across multiple federal agencies and sometimes states just creates uncertainty, discourages investment, and ultimately drives up costs for consumers. McKinsey did a great report recently where they estimate that construction costs can increase 24 to 30 percent over project timelines due to permitting delays. They also estimated that 1.5 trillion dollars in capital expenditures is currently suspended in the permitting process. So is permitting reform a silver bullet for energy costs? Probably not. But it does ensure that projects can move forward in a timely manner and developers don’t see unnecessary cost increases due to these permitting delays.
Pavan: Right, I mean, I’ll turn into a little bit of an energy wonk, but I see load growth as good. And it’s good in a way because it’s demonstrating the cracks in an electricity and a permitting regime that’s decades-old. Whether it’s regulators, whether it’s Congress –, government doesn’t like to turn its homework in early.
I think we need a mechanism to make sure that people are really looking at a granular level, what are the barriers to development? It’s easy to find a scapegoat. It’s a lot harder to reform laws to make sure that costs are lower, we can compete, you can bring online generally lower carbon-intensity generation and all that. So I appreciate the points.
Chris: I think, again, there’s this opportunity that we were talking about. We have a number of members who are looking to take advantage of this opportunity, bringing transformer and gas turbine manufacturing back online across the country. We’ve had a number of companies that have announced big things like that. And I think, again, it depends on what the site is, what kind of energy you’re using or what process heat – that’s going to depend on what type of specific permit you’re going to have to get. But I think more broadly, having that culture of certainty in the regulatory and permitting space is going to help because it’s a real problem for what Cy is talking about –and it has those knock-on effects where electricity prices go up for everyone, and we’re not able to get the manufacturing online in time to get what we need in terms of transmission, distribution, generation, the bits and pieces that go into that.
It will make companies and investors and manufacturers feel more comfortable to have that sense of security and stability that if you are starting a project, you’re going to get an answer one way or the other. There’s going to be sufficient electricity for you. There’s going to be affordable electricity for you and you can take advantage when the market is sending these clear signals like, “Hey, we need more transformers.” This has been a problem for three or four years now, back when I was with Sinema’s office. It’s like, why has it taken us so long to do that?
And so that’s just one micro example, but we’re going to need more gas turbines. We’re going to need more rare earths for battery development to smooth the cost curve – again, what Texas has done so effectively this year. And I think to also echo what Cy said, the administration’s AI Action Plan – we were very supportive of that. I think it is a document that seems supportive of all-of-the-above and really big thinking in these spaces. And so we just encourage this administration and whoever may come next to have that in mind, just the stability in the regulatory space. Hopefully we get a permitting reform package that can provide that in the statutory sphere as well. But it really comes down to a vibe – like, is it safe and stable to invest in America for these hundreds of millions, billions, trillions of dollars of investment from the data center all the way down into everything that goes into it?
Cy: Yeah, and just one more point on that too. I think it was Peter who was on a previous episode of your podcast that talked about his clients just completely avoiding the federal nexus because of uncertainty and timelines, right? And I think Chris made this point earlier – a lot of this we don’t know, you can’t prove a negative. There’s so many projects that just avoid the federal nexus because they’re uncertain about what the permitting regime and timelines could be. So I think if there’s legislation that could help fix that, that would be super valuable.
Thomas: Dark matter, if you will.
So Chris, your former boss, Senator Sinema, was a Democrat for 18 years, then became an independent in 2022. She was also quite engaged in a number of permitting reform packages, both in the IIJA and more recently with bipartisan Clean Air Act reforms. What do you make of Democrats’ evolution on issues like NEPA reform? Would you call it an evolution? Is it overrated? Is it understated? Something else?
Chris: Yeah, that’s a good question. One thing that we also worked on with Senator Sinema was the Fiscal Responsibility Act, those NEPA reforms, which I don’t think were correctly implemented by the previous administration. And we’ve seen a bit of a change there, which has been welcome. But I don’t want to speak for my friends who are still on the Hill on the Democratic side, who I worked closely with, and have a lot of respect and successes with.
I think there has been an evolution with the IRA, maybe those tax incentives before they were changed. In the One Big Beautiful Bill Act, I think there was a recognition that parts of those monies were not being as effective because of the delays in getting projects online. And so there’s obviously a huge focus on electric vehicles and that tax credit. There was definitely a boom in them, but I think you saw folks start to realize like, actually, where we are having the most impact from the IRA is in the grid-scale space. So the batteries, the rare earths, the wind energy.
And like we’ve said, to be a broken record here, those are subject to the same exact statutes as a pipeline or a nuclear reactor or other things that may not be traditionally quote-unquote “Democratic”, though there definitely has been an evolution of the Democratic Party for the better on nuclear energy, which has been really great. I think Ranking Member Whitehouse has been a real champion on that. So credit where it’s due for him and Chair Capito on the ADVANCE Act and things like that.
But again, the NEPA reform, there just is an inertia. There can be a difference between what folks say and the advocacy in private versus what is possible in public. I think also to be fair, what the Democratic Party really cares about is making sure that communities are protected. And I don’t think that’s necessarily a bad thing. There should be public input into all of these things.
And so when we were negotiating the Fiscal Responsibility Act – and I think Senator Whitehouse, there’s some reporting about him today as part of these negotiations – we didn’t want to cut the public out. But it can’t just be random people filing a comment just so that they can sue in the future. If there are affected people or communities along a pipeline or near a solar facility or a gas plant, they should have the opportunity in a stable and reliable timeline and process to get through that to make sure that what local people have to say is reflected. And I think there’s probably a fear among some folks in the Democratic Party that some of these reforms would do away with that.
I think telling these interesting stories about clean energy not coming online or being stymied because of these same laws – and it’s often people abusing them – is important. It’s not like a real local concern has come up in the 10th year, right? There’s a lobby for these kinds of things. And it’s important to recognize that and to say, honestly, public input is good. It builds a better product. It builds better projects. You don’t want people protesting or coming at the outside. So you see a lot of companies doing this the right way, making sure that there is that buy-in.
I think if you take away all the layers of the onion and leave transmission by the side, that is the crux of what Democrats want to make sure that they’re protecting. And I don’t think that there is as much disagreement as maybe the “mainstream media”, quote-unquote, says. I imagine Chair Capito would say, “Hey, if you’re building a new coal facility, the folks that live there should have an impact, a say on how it is operated.” And so that cooperative federalism, to take it back to the Clean Air and Clean Water Act space, that’s how it should work. But it should not be an unlimited amount of time for legal groups to take advantage of the very same populations that Democrats want to protect and sort of use them very... what’s the word I’m looking for?
Pavan: As a cudgel of sorts.
Chris: Yeah, use these communities as a cudgel against just any project that they don’t agree with. I think that just really, really needs to change. And there has been an evolution and recognition on NEPA from some Democrats. It’s going to take a while to get everyone there, but you only need seven right now. So that’s the hope here. If you seven are listening, it’s a good idea.
Thomas: So, Cy, you mentioned how big of a priority transmission is for your trade and your members. We were talking about an evolution among Democrats on NEPA. Do you think there’s been an evolution for Republicans on transmission? If you get granular, there are these specific questions of interregional planning, of backstops, of cost allocation. Do you think there’s been a change maybe in the administration, maybe in Congress? We were talking about the AI Action Plan, so I’d love your thoughts there.
Cy: Yeah, first off, we should get shirts that say “We just need seven.” Those would be a hot commodity.
I mean, it’s a good question. When I have discussions with Republicans, I think they understand that for a comprehensive permitting reform package to pass, it’s going to need to include something on transmission.
I think the one dynamic that has shifted is that, my understanding was, historically Democrats’ number one priority was transmission, but given what they’re seeing with this ping-ponging effect, I think that may come ahead of transmission. So I don’t know how that plays politically, whether the horse-trading takes place and transmission gets left by the wayside because of that. It’s just something I’m watching when I’m having conversations.
On some of the specifics, like interregional planning, I would say that there’s a little traction on that front. On the other two, there’s probably still a lot of work that needs to be done from the people downtown on making the case. Cost allocation has long been a sticking point, but I think if we change the narrative a little bit and focus on specific benefits that should be considered, that is probably our clearest path forward on something like that. I mean, there was a letter from a congressional delegation to FERC recently that even somewhat endorsed EPRA’s cost allocation principles, right? So there’s some positives coming out of that as well.
On the administration front, obviously we’ve seen Secretary Wright talk positively about transmission in various venues. I think just this week DOE issued its first Energy Dominance Financing Program loan guarantee to reconductor and rebuild around 5,000 miles of transmission. So if we want to accomplish these goals on transmission that the administration has put out, we’re going to need permitting reform, right? So I don’t know, maybe flipping the narrative and pointing to some of those good things coming out of the admin on transmission may be a way to tackle this with the Hill here.
But I think long story short, there’s still some work that needs to be done to make our case to Congress and Republicans in particular.
Thomas: So we like to end our show by asking our guests for an energy policy hot take. I’m going to ask both of you for one, but Chris, we’ll start with you.
Chris: Yeah, Cy set me up perfectly. I think that there’s going to be some interesting changes happening from the industry side. Now I can’t guarantee this or say exactly who, but I think you’ll start to see some folks in the gas sector become more involved and interested in the transmission piece of things because they want to get their product to as many places as possible. And where we’ve been talking about transmission as a traditional Democratic and renewable energy thing, I could see that shifting pretty significantly here. So to Cy’s point, the strange bedfellow coalitions that you need to break through some of these inertial pieces in Congress – I’m really interested to see what can happen in that space. So stay tuned, everyone. We’ll see if I’m right.
Cy: Okay, I was told I couldn’t give my hottest take here by my comms team. So, trying to stay employed, I’ll give you my second-hottest take. We’ve talked a lot about load growth and the need for permitting reform throughout today’s discussion. In terms of energy demand, one stat that comes to mind is we’re going to need 80 gigawatts by 2030. That’s what McKinsey says. And then from a data center demand side, Goldman Sachs put out a pretty cool study that says basically the delta between capacity and demand in the data center space is 11.4 gigawatts. So just putting in context what we need here.
My second-hottest take, then, is we need to spend less time in this country thinking of ways of curtailing and holding back and more time looking at how we can build the grid and infrastructure of the future. We spend a lot of time, and rightfully so, on very technical issues, but I would like to see how we can all agree on moving infrastructure development forward with smart reforms such as permitting reform. We don’t want to be sitting here three years from now saying, “Man, we should have done that,” right? I think we have a real opportunity.
Thomas: That’s a great place to end it. Gentlemen, thanks for joining Right of Way.
Cy: Thank you.
Chris: Thanks guys.
