U.S. urged to fix ‘broken’ permitting process to bolster American energy development

As the global energy crisis demonstrated last year that the energy security of certain countries hangs by a thread, the American Petroleum Institute (API), a trade association representing the oil and gas industry, has called on the Biden administration to address – what it sees as – the broken permitting process, which is halting U.S. energy development.

Illustration; Source: API

API disclosed on Monday, 10 April 2023, that “the harmful provisions” of CEQ’s Interim Guidance on Consideration of Greenhouse Gas Emissions and Climate Change under the National Environmental Policy Act (NEPA) was outlined in a comment letter submitted to the White House Council on Environmental Quality (CEQ). In addition, the letter detailed how this guidance could further delay the development of critical energy projects, not only those related to oil and natural gas but also renewables.

Jennifer Stewart, API Director of Climate and ESG Policy, remarked: “API shares the Biden administration’s goal of reducing GHG emissions across the economy and specifically from the production, transportation, and use of energy resources. We also share the administration’s goal of permitting reform to reduce American energy bills, promote energy security for the U.S. and our allies, and boost our ability to build energy projects. However, we do not believe that the Interim Guidance helps agencies advance these goals in a lawful or effective manner.”

Furthermore, API pointed out the various concerning provisions of CEQ’s guidance, including the duplication and disregard of other agencies’ NEPA reviews and GHG regulations. According to the trade association, this could result in significant delays in agency processing time, compromise the U.S. energy supply and the deployment of lower carbon solutions.

“Absent reasonable improvements to agencies’ NEPA permitting processes, this administration’s efforts to invest trillions of dollars in infrastructure improvements and environmentally beneficial projects may be suppressed or significantly delayed. As currently drafted, the Interim Guidance will perpetuate and exacerbate the undue delay, complexity, and inconsistency that have been the unfortunate hallmarks of NEPA reviews for decades, highlighting the need for comprehensive permitting reform,” added Stewart.

Moreover, the average environmental impact statement under the current NEPA process takes four and a half years to complete, and 25 per cent of completed impact statements took more than six years. Previously, API underlined within its report, titled State of American Energy 2023: The Solution is Here, that permitting and review delays were the main roadblocks in building the U.S. energy infrastructure. The organisation’s research has shown that $157 billion in energy investment is waiting in the NEPA pipeline, and a two-year NEPA review time limit could spur $67 billion in energy investment.

In line with this, API further explains that the U.S. needs to advance low-carbon infrastructure, highlighting that the permitting regime for low-carbon infrastructure “should be consistent, timely and predictable to encourage investment.” While proposals to expedite infrastructure projects are making the rounds in Congress, Wood Mackenzie recently underlined that permitting reform could be part of the solution to the strains created by rapid growth in renewables, as this could help ease U.S. grid bottlenecks.

“The Interim Guidance reveals the futility of attempting to establish broad national energy policies through unenduring agency guidance that changes from Presidential administration to administration, undermining the certainty that project developers need to make significant capital investments in energy projects. API will continue to work across industry sectors and political parties to achieve meaningful and enduring permitting reform in Congress,” concluded Stewart.

API’s urgings come at a time when the Organization of the Petroleum Exporting Counties (OPEC+), consisting of 23 oil-exporting countries – including Russia – announced further production cuts, which were expected to result in an increase in oil prices of more than $4 a barrel.

However, during a recent interview on Bloomberg Television, Ed Morse, Citigroup’s global head of commodities research, emphasised that oil demand was being “crippled” by the prospects of an economic slowdown.

Therefore, Morse believes that oil prices are likely to fall below $80 a barrel despite OPEC’s recent efforts to support that level with new production cuts. Morse also forecasts that oil prices could fall even below $70 a barrel.