The GOP-led House on Thursday passed a fossil-fuel friendly energy infrastructure package that Democratic Senate Majority Leader Chuck Schumer said will be “dead-on-arrival” in his chamber.
H.R. 1, the Lower Energy Costs Act, passed on a 225-204 vote with just four Democrats voting in favor: Jared Golden of Maine, Marie Gluesenkamp Perez of Washington and Henry Cuellar and Vicente Gonzalez of Texas.
At the heart of the bill is a raft of changes to the Mineral Leasing Act, National Environmental Policy Act (NEPA) and Clean Air Act intended to accelerate the permitting of oil, natural gas and mining projects, in part by reducing environmental reviews and protests.
The bill directs the Department of the Interior to “immediately resume” quarterly onshore oil and gas lease sales, requiring four such sales annually in nine Western and Plains states, while increasing the fees associated with protesting the sales. It also seeks to streamline the permitting process for drilling for oil and gas in the Gulf of Mexico and off the coast of Alaska.
H.R. 1 would additionally roll back Obama-era restrictions on leasing of coal mines on public lands and ease the process for the mining of other materials, such as uranium and minerals considered critical to the supply chain of clean energy resources, such as lithium. It also restricts ownership of that supply chain by China-based entities.
But conspicuously absent from the bill are any of the kind measures that Democrats — including West Virginia Sen. Joe Manchin — and clean energy advocates have been seeking to expedite permitting of new electric transmission. (See Republicans Opening Offer on Permitting is Missing Electric Tx.)
After Thursday’s vote, House Speaker Kevin McCarthy (R-Calif.) tweeted that H.R. 1 is “an important bill that lowers energy costs, reduces global emissions and strengthens America’s national security” — although that second claim sparked criticism from Twitter users who pointed out the bill actually contains a provision to repeal the Inflation Reduction Act’s greenhouse gas reduction fund, which provided competitive grants, emphasizing projects that benefit disadvantaged communities.
Cathy McMorris Rodgers (R-Wash.), chair of the House Committee on Energy and Commerce, said the vote showed her party is “prioritizing the American people over the Democrat’s radical climate agenda.”
“Reform of our broken permitting process will spur greater energy production, boost economic growth, create jobs and bring down costs for American families. It will limit the threat posed by hostile nations like Russia and China,” said Sen. John Barrasso (R-Wyo.), ranking member of the Senate Committee on Energy and Natural Resources.
Reactions
House passage of the bill predictably received support from the fossil fuel sector and its allies.
“It is clear now that both Republicans and Democrats share the common goal of providing reliable energy to Americans and making energy safer, cleaner and more affordable,” American Petroleum Institute CEO Mike Sommers said in a statement. “This is a positive step towards enacting serious, bipartisan permitting reform, and we look forward to continuing to collaborate on real solutions that will modernize our infrastructure and benefit all Americans.”
Thomas Pyle, CEO of the American Energy Alliance, a group with financial ties to participants in the oil and gas industry, said the bill signals that Republicans “are keeping their promise to fight the Biden administration’s radical approach to energy policy.”
Pyle said the bill will reduce the U.S.’s dependence on China for minerals and mineral processing.
The National Rural Electric Cooperative Association (NRECA) called the development a “meaningful step forward” on permitting modernization, citing a provision to expedite reviews under NEPA and other federal processes.
“As threats to electric reliability mount and our nation increasingly relies on electricity to power more of the economy, it is critical that Congress streamline the process to permit, build and maintain the infrastructure that keeps the lights on across the country,” NRECA CEO Jim Matheson said.
Critics of the bill pointed to the lack of provisions pertaining to electric infrastructure.
Steven Nadel, executive director of the American Council for an Energy-Efficient Economy, criticized H.R. 1 for attempting to repeal energy efficiency and electrification investments from the Inflation Reduction Act, including the greenhouse gas reduction fund.
“This bill would leave many Americans continuing to live in homes with outdated heating equipment, poor insulation and high energy costs,” Nadel said. “This is a repeal of investments that enable households and businesses to make energy-saving improvements. It’s a repeal of funding for low-carbon technologies in low-income and disadvantaged communities. It’s a repeal of job training programs.”
Gregory Wetstone, CEO of the American Council on Renewable Energy (ACORE), said “any truly comprehensive permitting bill needs to help streamline the nation’s unworkable approval process for electric transmission lines.”
DOA — or Possible Compromise?
Wetstone also was among those calling for compromise as the bill heads to the Democrat-controlled Senate.
“We remain hopeful Congress can negotiate a bipartisan, bicameral solution this year,” Wetstone said.
Utah Gov. Spencer Cox (R) and Louisiana Gov. John Bel Edwards (D), co-chairs of the National Governors Association’s Energy and Infrastructure Working Group, issued a joint statement calling for Congress and the Biden administration “to work together to find common ground to improve the energy and infrastructure delivery process.”
A spokesperson for Sen. Joe Manchin, chair of the Senate’s Energy and Natural Resources Committee, said Manchin could see the bill becoming the foundation for a cross-party effort on permitting.
“Sen. Manchin is taking a close look at HR1 and is hopeful there might be a pathway to permitting legislation that could gain bipartisan support,” spokesperson Sam Runyon said in a statement.
But the response from other Congressional Democrats suggests H.R. 1 might not be the right vehicle for such compromise.
“By passing this legislation today, House Republicans are putting polluters over people. This bill is nothing more than a grab bag of Big Oil giveaways and loopholes that endanger the health, safety and security of Americans,” said Rep. Frank Pallone (D-N.J.), ranking member of the House’s Energy and Commerce Committee.
“The House has passed HR1 — the GOP ‘energy package’ that would gut environmental safeguards and lock us into dirty energy sources. It would set the U.S. back decades in our transition to clean energy,” Schumer tweeted Thursday. “HR1 is dead-on-arrival in the Senate.”
WASHINGTON — FERC received passionate, emotional and sometimes angry testimony from panelists Wednesday at its roundtable on incorporating environmental justice and equity into its infrastructure permitting (AD23-5).
Acting Chair Willie Phillips and his colleagues seldom spoke, giving speakers plenty of time to lambast the commission for, as they said, failing to adequately assess how the projects it “rubberstamps” affect environmental justice communities.
EPA defines EJ communities as “minority, low-income, tribal or indigenous populations or geographic locations … that potentially experience disproportionate environmental harms and risks.” Speakers and audience members traveled to D.C. from the Texas cities of Port Arthur and Freeport, southwest Louisiana, Southern Virginia and West Virginia, among other U.S. locations where large-scale natural gas projects have been permitted — and are extremely controversial among residents.
Communities along the Gulf Coast have been particularly impacted by the boom in LNG exports, especially since Russia invaded Ukraine last year, causing an energy crisis in Europe. With seven active terminals, the U.S. is now the world’s No. 1 exporter of LNG, as suppliers rush to fill the void left by European countries reducing their imports of Russian gas.
John Beard, Port Arthur Community Action Network | FERC
Another terminal in Port Arthur is under construction; last year FERC granted developer Sempra Energy more time — until 2028 — to complete the project. John Beard, founder and president of the Port Arthur Community Action Network, told commissioners about the 120 years of environmental injustice his city has suffered.
Because of the city’s high levels of benzene and sulfur in the air, it has twice the national average for not only cancer, but also heart, lung and kidney disease, Beard said. Two-thirds of the city’s population of 55,000 are economically disadvantaged, with 30% of those being at or below the poverty line.
“This is what environmental injustice looks like, by the very companies, and others that share space with them, that are now coming before you with [applications for] permits to do more work; to heap more of a disproportionate burden on communities such as mine, and others along the Gulf Coast,” he said.
“If you don’t believe me, y’all come on down. … And all I will ask you is this one question: Were it your community, would you be breathing that kind of air? In a matter of minutes or in hours, in one simple visit, in and out, you will begin to feel the effects of what we have felt for 120 years.”
What Can FERC Do?
Among Phillips’ first acts upon being named acting chair was to schedule the roundtable, saying it would help the commission further its goals of its Equity Action Plan, initiated by the previous chair, Richard Glick. (See Phillips Presides over 1st FERC Meeting as Chair.)
The plan was in response to President Biden’s first executive order after taking office in 2021, 13985: Advancing Racial Equity and Support for Underserved Communities Through the Federal Government. As an independent agency, FERC is not required to comply with the order, but Glick opted to participate. As part of the commission’s minority under former president Donald Trump, Glick was a frequent critic of FERC’s decisions approving gas infrastructure without fully laying out the greenhouse gas emissions that would result from the projects.
“The Equity Action Plan is a roadmap for FERC to build a culture and program that ensures the commission is appropriately integrating environmental justice and equity issues into our decision making and day-to-day operations,” Glick said in April 2022, when the plan was first released. “FERC must meet its responsibility to ensure our decisions do not unfairly impact historically marginalized communities. This plan ensures that environmental justice and equity concerns finally get the attention they deserve at the commission.”
Among the elements of the plan was setting up the Office of Public Participation and creating a new position, senior counsel for environmental justice and equity, currently held by Conrad Bolston.
On Wednesday, Phillips and commissioners Allison Clements and Mark Christie solicited three sets of panelists for advice on how to fully integrate environmental justice into the commission’s decisions on infrastructure permits, including those for electric transmission. Commissioner James Danly listened to the conference by phone but did not ask any questions.
There were many different suggestions, but speakers tended to focus on broadening how the commission quantifies the cumulative impacts from projects when it conducts its environmental analyses, and creating meaningful opportunities for communities to engage with commission staff and project developers.
Ben Jealous, Sierra Club | FERC
“It’s important to endeavor to quantify the costs that this community has already been asked to endure and how much we are adding to that,” Ben Jealous, executive director of the Sierra Club, said. “And in that cost, I would include how much we estimate their property values have been suppressed. How much do we estimate the financial burden on their families due to the health impacts that past decisions have made? And how do we estimate the long-term earning potential of children who grew up with lead poisoning?
“We have the math; we have centuries of it. … We can make these algorithms. There’s very smart people … who are quite capable. So I would encourage us to get serious about the quantitative analysis and to really do our best to estimate all of the costs in dollar terms everybody can understand.”
“One of the things that makes me nervous is that folks want clear expectations,” said Matthew Tejada, EPA’s deputy assistant administrator for environmental justice. “And I completely value that. Businesses need clear expectations to make business decisions. But it’s going to take us a minute. We’re unwinding centuries of assumptions and policies here. … It is absolutely about changing the math. And that math has evolved over time to the benefit of some and disadvantage of others.”
Christie noted that each project has its own unique set of circumstances. He gave the hypothetical example of a transmission line in which the record shows one route would cost more than the other. “What do you mean by ‘changing the math?’” he asked Tejada.
Matthew Tejada, EPA | FERC
“In my experience, that math does not consider all of the impacts of that project,” Tejada replied. “There will be externalized costs to many of them. And we’re still not really good at fully capturing the societal costs, the health impact costs … things that are really hard to value; things like loss of heritage, loss of culture. … We need to know what the full cost impact of those projects are so we can look at things like community benefit agreements. … [In 10 years, we might say], ‘Yeah, using the math we use right now, that project would have been cheaper, but when we take in the full costs, that one that engineering-wise is twice as expensive? It’s actually cheaper because you don’t have all these externalized costs as a result of it.”
Anger over Lack of Engagement
Kari Fulton, Center for Oil and Gas Organizing | FERC
The second panel featured many familiar complaints about the commission’s process to include public participation in its decision-making: a lack of adequate notice of public hearings; companies sending employees to such hearings to express support, crowding out local residents; and the difficulty in accessing FERC’s arcane online docket system, eLibrary.
The panel was titled, “From the Front Line: Impacted Communities and their Challenges.” But Kari Fulton, a climate advocate speaking on behalf of the Center for Oil and Gas Organizing, expressed outrage that only two people from frontline communities — those that are already experiencing the effects of climate change — were invited onto the panel.
“Our ability to come here every month wouldn’t happen without the real, intentional buildout of the Office of Public Participation,” said Fulton, who wept as she spoke. “Every single month, they support us. I don’t know what happened with this roundtable.”
She also noted the absences of Christie, who had left after the first panel, and Danly. “I also don’t know why I’m only looking at the two Democratic commissioners for this one panel for frontline voices, with only two frontline voices. … How can we have meaningful participation, how can we create bipartisan collaboration, when there’s obviously one side that’s not even listening.”
One of those voices was Port Arthur’s Beard. The other was Roishetta Ozane, founder and director of The Vessel Project of Louisiana, who said she was prepared to not only reject the invitation, feeling it unfair to speak on behalf of her entire state, but to protest the event over the lack of frontline community speakers.
“But even in accepting the invitation, the injustices that we faced were prevalent,” she said. “We had two choices … do it virtually or come in person. Now as frontline folks, we’re tired of doing stuff virtually because we feel like you can’t feel our emotion and our tone. You can’t see our faces. We don’t know if you’re paying attention or if you’re watching so easily like Commissioner Danly, who is somewhere in the stratosphere somewhere, I guess watching online or pretending. …
Roishetta Ozane, Vessel Project of Louisiana | FERC
“But we’re here because we wanted you to see us; we wanted you to feel our emotion and feel our pain.”
Ozane noted that FERC did not provide compensation for travel, meals or hotels; instead, they relied on “coalitions that we have built; coalitions that should have been involved in the creation of this roundtable.”
Once the session reached the question-and-answer portion, Danly chimed in, making his only comments after his opening remarks apologizing for not being able to attend in person. “I just wanted to make one quick comment here, which is just to reassure everybody I am not stratospheric; I am firmly on terra firma, and I am listening to the entire proceeding with interest.”
Cumulative Impact Assessments
The third panel addressed how FERC and energy infrastructure applicants can better identify and minimize the impact of projects on environmental justice communities, including through cumulative impacts assessments.
EPA defines cumulative impacts as the “totality of exposures to combinations of chemical and non-chemical stressors and their effects on health, wellbeing and quality of life.”
Al Huang, NYU | FERC
Al Huang, director of environmental justice at the New York University School of Law’s Institute for Policy Integrity, said, “FERC needs to demonstrate a foundational commitment to environmental justice, and that means identifying who EJ communities are, engaging with them, providing support for them [and] building trust. Building that foundation can yield substantive advantages such as … identifying viable alternatives to opposed projects that can mitigate adverse impacts, and fully understanding the vulnerabilities that communities might face.
“FERC also, I believe, needs to adopt a systematic and transparent process for conducting … cumulative impact analyses through the publishing of a guidance or policy statement,” Huang said. “I think it’s so important to have a policy statement because it provides a clear understanding of how FERC does its assessments in the future.”
Establishing a clear policy is key, he said, because the “communities that are impacted will [then] have an expectation of what the analysis and process will be and can therefore participate in a meaningful way. The policy statement should identify the methodology of how EJ communities will be identified, what data will be used, what tools will be used … and a process for evaluating disproportionate impacts.”
Panelists emphasized the need for extensive outreach to encourage community members to participate in the planning process. They also urged FERC to consider the long-term impacts on disadvantaged communities of past decisions to site utility infrastructure such as power lines, pipelines and generation facilities in those communities.
Beth Rose Middleton Manning, UC Davis | FERC
Beth Rose Middleton Manning, a professor of Native American studies at the University of California, Davis, said her “primary engagement with FERC is in looking at the history of hydroelectric project permitting and the contemporary processes renewing those licenses.” She has worked with tribes in Alaska, California and elsewhere.
“The unique and important thing about these [hydroelectric] licenses is that they extend 30 to 50 years, so they’re very long in duration … and much has changed socially and politically in those time periods,” Middleton Manning said.
“What I think is very important to recognize is the lack of participation, the lack of ability to participate, the flooding of people’s lands, the taking of their rights, the annihilation of culturally important species,” she said. “All of those processes were set in place when the licenses were permitted 30 to 50 years ago, and they have never been remediated.”
“Licenses for some of these longstanding projects were developed under conditions of injustice,” she said. “And if we don’t analyze that and look very carefully at the very specific impacts, then we continue to perpetuate that injustice with decisions today.”
Aram Benyamin, LADWP | FERC
Aram Benyamin, chief operating officer at the Los Angeles Department of Water and Power, said public outreach needs to be more than “just putting a public notice out there and saying, ‘Please come at 5 p.m. to give your opinion to us, and if you don’t show up that means that you’re not interested.’ Some communities might have difficulties with transportation, difficulties with working multiple jobs, so that doesn’t count as public outreach.”
LADWP has plans to spend billions of dollars to transition to 100% clean energy, including projects for utility-scale battery storage, electric vehicle infrastructure and transmission, Benyamin said. Meaningful engagement with environmental justice communities means going to the communities and talking with residents, he said.
Carolyn Nelson, director of the Environmental Policy and Justice Division at the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration, also said it was important for those investigating cumulative impacts to understand lower-income communities and how they work.
Carolyn Nelson, PHMSA | FERC
“We have to go to the communities to understand their needs, but to also understand their histories,” Nelson said.
Even relatively small takings of homes and land to build infrastructure can have a large impact, she said.
“We may move only two houses out of 10,” she said. But if the residents of those houses are “babysitting for the rest of us … that’s a huge impact to the community. You don’t know that until you go to these communities and really talk to them and understand how they operate, how their livelihoods are. You cannot do a cumulative effects analysis without looking at the past and it being a bridge to the present.”
The U.S. Treasury Department just made its March deadline for issuing guidelines on the domestic content provisions for electric vehicle tax credits in the Inflation Reduction Act, with the Friday release of a Notice of Proposed Rulemaking that a senior department official said could cut the number of EVs eligible for the credit in the short term.
At present, 21 models qualify for the full $7,500 tax credit for new EVs authorized in the IRA, the official said during a prerelease press briefing. But, he said, “the critical minerals and batteries component requirements will reduce the number of electric vehicles currently eligible for the full credits in the short term in order to create incentives to bring supply chains and manufacturing to the United States. However, we believe these requirements will significantly increase the number of vehicles made and sold in the U.S. over the next decade as new investments and American production come online.”
The new rule will go into effect April 18, and the Treasury Department will update its list of models that qualify for either the partial or full tax credit, the official said.
With the new rules, the Biden administration appears to be balancing implementing the IRA as written — a flashpoint between the White House and Sen. Joe Manchin (D-W.Va.) — and providing a pathway for European and Asian manufacturers to qualify for the credits and remain competitive in the U.S. market at the behest of allies.
The new rules “will give manufacturers more certainty so they can make plans to onshore more of their supply chains in the coming years, and it will ensure we can work with our allies and partners to reduce our reliance on China and bolster our national security,” a senior White House official said.
China’s global dominance in the processing of critical minerals, like lithium and cobalt, and EV battery components has become a national security issue, one that Manchin intended the EV tax credits in the IRA to address while also building out domestic supply chains.
The law originally required Treasury to issue the domestic content guidelines in December. In January, Manchin took to the Senate floor in an unsuccessful bid to get an immediate vote on a bill that would have required Treasury to immediately implement the domestic content provisions.
But the NOPR hews closely to the language and intent of the IRA provisions that require that EVs meet specific domestic content percentages to qualify for the full $7,500 tax credit. For example, this year 40% of the value of critical minerals contained in an EV battery “must be extracted or processed in the United States or a country with which the United States has a free-trade agreement, or recycled in North America,” according to the Treasury Department announcement. That percentage will go up 10% every year, through 2027, at which time the required percentage will be 80%.
Similarly, the domestic content provisions set a 50% requirement for battery components in 2023, increasing 10%/year to 100% by 2029.
In addition, beginning in 2024, “an eligible clean vehicle may not contain any battery components that are manufactured by a foreign entity of concern,” the Treasury announcement said. In 2025, critical minerals extracted, processed or recycled by a foreign entity of concern will also be prohibited. At present, the U.S. State Department identifies China, Russia, North Korea and Iran as foreign entities of concern.
The NOPR also provides a list of countries that currently have free-trade agreements with the U.S.: Australia, Bahrain, Canada, Chile, Columbia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Japan, Jordan, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Singapore and South Korea.
Chile is a key source of lithium, and Canada also mines a range of critical minerals. Japan and the U.S. signed a critical mineral agreement on Tuesday that appears to meet the free-trade provisions in the NOPR, such as refraining from imposing new trade barriers or restrictions on exports of critical minerals.
A Bumpy Road to Implementation
Since Biden signed the IRA in August, the law’s EV tax credits have had a bumpy path to implementation, with consumers and car dealers alike trying to untangle the law’s limits not only on domestic content but on consumer income and EV prices.
The 30D tax credit, as it is officially known, provides consumer incentives of up to $7,500 for the purchase of a new EV. The two-part credit includes $3,750 for EVs assembled in North America and another $3,750 based on whether the minerals in the battery are produced or processed in North America or a free-trade country.
In addition to qualify for the credit, the manufacturer’s suggested retail price for a light-duty passenger vehicle cannot exceed $55,000. The limit for SUVs and pickups is $80,000.
The income limits are $150,000 per year for individuals, $225,000 for single heads of house and $300,000 for couples filing joint tax returns. The Treasury Department issued the guidelines for these requirements in December.
Some details of the NOPR remain to be worked out. For example, the Treasury guidelines include complex, multistep processes for determining the percentages of critical minerals and battery components that will be needed to meet the domestic content requirements. For example, the three-step process for determining critical mineral content will include first determining procurement chains, then identifying qualifying critical minerals and finally calculating critical mineral content.
Senior administration officials said the Internal Revenue Service will be working with manufacturers on compliance with this process. Automakers will be incentivized to ensure they supply the IRS with accurate information, the officials said; providing false or inaccurate information could put them at risk for penalties of perjury.
WASHINGTON ― The Biden administration will deliver long-awaited guidelines for the domestic content provisions of the Inflation Reduction Act’s electric vehicle tax credits by Friday, White House Senior Adviser John Podesta told a packed ballroom at the SAFE Summit on Tuesday.
The administration has also threatened to veto H.R. 1, a Republican energy package that could roll back certain provisions of the IRA, Podesta said during a “fireside chat” with Robbie Diamond, CEO of SAFE (formerly called Securing America’s Future Energy). But the White House still hopes to work across the aisle for bipartisan legislation to streamline and accelerate permitting of energy projects.
Podesta’s top-line pronouncements kicked off the two-day summit, which focused on a “minerals to markets” analysis of U.S. efforts to end its dependence on China for the critical minerals and battery components needed to decarbonize the U.S. transportation sector, which pumps out 27% of the country’s greenhouse gas emissions. President Biden wants 50% of all new passenger vehicle sales to be EVs by 2030.
But the domestic content provisions, written into the IRA by Sen. Joe Manchin (D-W.Va.), are complicated and “very technically challenging … to implement,” Podesta said. Under the law, the Treasury Department was supposed to issue the guidelines by Dec. 31 but pushed the release back to March.
The 30D tax credit, as it is officially known, provides consumer incentives of up to $7,500 for the purchase of a new EV. The two-part credit includes $3,750 for EVs assembled in North America and another $3,750 “based on the whether the minerals [in the EV battery] are produced or processed in North America or a free-trade country,” Podesta said.
Specifically, the law requires that 40% of the value of critical minerals in an EV battery — such as lithium, cobalt and nickel — be produced and processed in North America or a free-trade country, while 50% of the value of other battery components must be similarly sourced, with the percentages increasing annually.
The law also contains a $4,000 tax credit for the purchase of a used EV, similarly, split in two.
What this means, Podesta said, is that “in the near term, auto companies are kind of scrambling to meet the terms of the credit. But over the very near term, I think we’ll see both the supply chain and the production of electric batteries [and] vehicles in the United States happening quickly. And so I’m very optimistic that this program will deliver on its promise to get people into electric vehicles.”
The Biden administration may also have found a workaround for the domestic content provisions, with its announcement on Tuesday of a new agreement with Japan on critical minerals. The agreement “memorializes the shared commitment of the United States and Japan with respect to the critical mineral sector to facilitate trade, promote fair competition and market-oriented conditions for trade in critical minerals,” according to a press release from the U.S. Trade Representative.
The IRA has a very vague definition of what constitutes the kind of free-trade agreement that will qualify a foreign automakers’ EVs for the tax credit, and Biden and Ursula von der Leyen, president of the European Commission, recently agreed to work on a similar agreement for the EU.
Permit Twice as Fast
Building out that supply chain — which will require opening new mines, processing plants and other factories — will also mean cutting down the sometimes decades-long time frames needed to permit such projects, Podesta said. For example, he said, getting to Biden’s goal of 50% EV sales by 2030 will increase electricity demand and the need for high-voltage DC transmission.
“We need to increase our high-voltage, high-performance transmission in the electric sector by 60% by 2030,” Podesta said. “In order to do that, we need to permit twice as fast as we’ve been permitting, maybe even faster than that, quite frankly. … It’s a tremendous bottleneck, both [having] the ability to build high-voltage transmission as well as the problems of interconnection, of [a] balkanized grid.”
Biden supported a Manchin-proposed bill aimed at improved permitting, which died on a 47-47 vote in the Senate in December. Republican opposition was more political than based on “substance of what was in the legislation,” Podesta said. “It would have been very helpful. … It was a balanced bill that dealt with energy security.” (See Manchin Permitting Bill Falls Short in Senate.)
On the other hand, Podesta slammed H.R. 1, the Republican energy bill now in the House of Representatives, which, he said, “has nothing that deals with these clean energy challenges.”
Dubbed the Lower Energy Costs Act, the GOP bill would repeal “several very important provisions in the Inflation Reduction Act, particularly those oriented towards providing support for middle- and low-income Americans,” he said. “It’s got some very dubious environmental giveaways, including exposing workers to hydrochloric acid.”
Debate on H.R. 1 is ongoing in the House, where Republican leaders may attempt to turn some of the bill’s provisions into bargaining chips in negotiations over raising the debt ceiling, according to a report in The Hill. While the bill could pass in the House on a party-line vote, it will likely die in the Senate. Even so, “we’ve issued a veto threat,” Podesta said.
With energy policy increasingly divisive and politicized, Podesta said, Biden is not waiting on Congress to advance his clean electricity and transportation agendas.
On the permitting front, “we’ve reorganized the White House to create a permanent council amongst the cabinet secretaries,” he said. “I’ve served in in three White Houses. I have never seen the top tier of political appointees pay attention to individual permitting decisions. That’s always well down; things get stuck, they drift.
“No one sort of gets in and unties the knot, [but] the president is demanding action from us, and we’re going try to produce that,” he said.
Tax Credit Pushback
The IRA’s EV tax credits have had a bumpy path to implementation as consumers and car dealers alike try to untangle the law’s limits not only on domestic content but on consumer income and EV prices. To qualify for the credit, the manufacturer’s suggested retail price for a light-duty passenger vehicle cannot exceed $55,000. The limit for SUVs and pickups is $80,000.
The income limits are $150,000 per year for individuals, $225,000 for single heads of house and $300,000 for couples filing joint tax returns. The Treasury Department issued the guidelines for these requirements in December.
The delay on guidelines for the domestic content provisions was widely seen as a result of the pushback from U.S. allies in Europe and Asia, who argued that the requirements were exclusionary and would draw investment away from their markets to the U.S.
“At the end of the day, if we’re going to be reaching our climate goals, we need to have consumers being able to select the cars they prefer from all the available options among countries that compete fairly in trading,” Lambrinidis said. “And if we cut that off, what you have is probably cars that cost more … so we basically undermine our capacity to meet our climate goals.”
With domestic content provisions on hold, Treasury has allowed qualifying consumers to claim the full $7,500 tax credit on EVs bought since Jan. 1, provoking an angry reaction from Manchin. Taking to the Senate floor, he made an unsuccessful bid for a quick vote on a bill that would have forced Treasury to immediately implement the domestic content provisions. (See IRA’s EV Tax Credits Spark Senate Debate.)
But some U.S. automakers began thinking about domestic supply chains well before passage of the IRA, said Jeffrey Morrison, vice president of global purchasing and supply chains for General Motors, during his fireside chat with David Shepardson of Reuters.
The law is “completely aligned with what we’re trying to do,” Morrison said. “We had this strategy, probably a year or a year and a half before the IRA came out. We knew that the capacity we needed wasn’t there. We had to build new capacity, and we wanted to have a more resilient value chain … than what exists today. So, we were already on a path of how do we look at critical minerals and all the chemical processing that’s required to make battery components and battery cells and how do we rebuild that.”
GM is working with companies in “allied countries;” for example, its partnership with Korea’s LG Energy Solution (LGES) to produce the Ultium battery packs for its electric models. The two companies in December announced plans to expand a production facility in Tennessee, and LGES just announced expanded plans for an Arizona battery plant. (See LG Energy Solution Quadruples Size of Ariz. Factory Plan.)
The IRA’s tax credits, domestic content provisions and all, are “wind in our sails,” Morrison said. “The challenge really is how do you pick the right partners? And then how do you execute as fast as you possibly can to get there with what ends up being major industrialization projects?”
FORT LAUDERDALE, Fla. — Representatives of SERC Reliability’s member entities joined the regional entity’s Board of Directors here for its first meeting of the year on Wednesday, during which attendees discussed the challenges the grid faces — including severe weather and physical violence — and SERC’s role in addressing them.
“When you’re looking at how [we are] going to navigate these waters, and how SERC can be the best region for its stakeholders and for its mission, it is that we have to be strategically focused; we can’t get overwhelmed with the trees and lose sight of the bigger picture that’s happening in the forest,” CEO Jason Blake said. “We must be advancing our operations in a way that makes sure that we’re not only successful today, but we are well positioned for tomorrow.”
Peterson Warns of Vulnerabilities to ‘Bad Guys’
Bill Peterson, SERC’s senior manager of training, outreach and communication, briefed those at the members’ meeting on the threat of physical violence — or as he called it, “bad guys, guns and bullets.”
His presentation opened with December’s attacks on two Duke Energy (NYSE:DUK) substations in Moore County, N.C. More than 40,000 of the utility’s customers lost power after unknown attackers damaged transformers at the substations with rifles, causing them to leak coolant; service was restored after four days in what Peterson called a “herculean effort” on the part of Duke’s crews. (See Duke Completes Power Restoration After NC Substation Attack.)
Investigators have yet to identify the assailants involved in the incident, or any motive, but Peterson noted that the Moore County attacks have already provided inspiration for other malicious actors. For instance, he pointed out, neo-Nazi leader Brandon Russell — charged earlier this year with trying to disable electric substations in Baltimore — explicitly held up the December attacks as a model for his plot to cause mass chaos by setting off cascading outages in the city. (See Feds Charge Two in Alleged Conspiracy to Attack BGE Grid.)
Peterson also warned that transformers are more vulnerable to interference than many realize. Although the Moore County attacks drew national attention, with FERC calling for an investigation into NERC’s reliability standards, there were two other similar incidents in North Carolina in the previous and subsequent months that passed almost without comment.
In November four transformers at a substation in Jones County were found with bullet holes in their cooling fins; the incident left 17,000 customers without power. Then in January, a transformer at another substation was found leaking oil from bullet holes in its cooling fins. No outages were reported from this incident.
Peterson acknowledged that not all gunfire incidents are deliberate sabotage; he observed that bullet holes “tend to trend up around hunting season.” But he warned attendees that this should not obscure the real and growing threat of domestic violence on the system, noting that there are thousands of substations around the country, many located in rural areas and hard to protect, and that transformers in most facilities are highly visible from outside — an assessment with which board Chair Lee Xanthakos agreed.
“I was manager of [Dominion Energy’s] substation group for years, and I do remember having an incident where someone shot a fin on a transformer, [but] it didn’t cause an outage,” Xanthakos said. “So I think it happens a lot more than we think, but … it draws attention when there’s an outage. That’s when we notice it, but I think it’s happening all the time in the background.”
SERC Set for 10% Budget Rise
Board members approved SERC’s draft business plan and budget for 2024 at Wednesday’s meeting. The draft budget will now be submitted to NERC and posted for public comment; once the comments are in, SERC will revise the draft. The board will consider the final budget in June before sending it to NERC to be submitted to FERC, along with the rest of the ERO Enterprise budgets, by August.
SERC’s budget is set to rise by $2.9 million next year, CFO George Krogstie said, for a total of $31 million. The increase is partly because of the planned hiring of three full-time equivalent positions: two in information technology and security, and one in training.
Krogstie said the IT positions are needed in order to meet the growing cybersecurity challenges; as for the training hires, they will enable the RE to build a formal, comprehensive internal training program rather than the department-by-department approach in effect now. He acknowledged that the current approach is “not very efficient [and] not as effective as it needs to be.”
Krogstie reminded attendees that SERC’s lease on its office in Charlotte, N.C., expires in January 2025. The RE hopes to start setting aside money in 2024 for its office move, as well as for salary increases that will be necessary in order to keep its hiring competitive with the rest of industry.
Members Approve Director Slate
SERC also welcomed four new directors after members voted to approve them at Wednesday’s meeting. Christopher Peters from Entergy and Kevin Walz from Florida Public Utilities will represent the Investor-Owned Utility sector, replacing Ameren’s Shawn Schukar and Florida Power & Light’s Manny Miranda. Stacy Dochoda, formerly of the Florida Reliability Coordinating Council, joined as the ISO/RTO/Reliability Coordinator sector representative.
Members also agreed to renew the terms of independent Directors Deborah Wheeler and Shirley Bloomfield, along with Municipal sector representatives Tim Lyons and Ricky Erixton, and the Cooperative sector’s Greg Ford and Lisa Johnson.
Finally, Bob Dalrymple was confirmed to replace Arnold Singleton, who left the board in September. Dalrymple was chosen as his successor at the board’s last meeting in December. (See “NGC Describes Leadership Shuffle,” SERC Board of Directors Briefs: Dec. 14, 2022.)
Two competitive electricity organizations have protested FERC’s recent show-cause order to MISO that will ultimately downsize resources’ capacity accreditation values.
Vistra (NYSE:VST) and the Electric Power Supply Association (EPSA), a trade group representing competitive suppliers, said the commission should terminate its proceeding and immediately issue an order preventing MISO from updating the unforced capacity to intermediate seasonal accredited capacity ratio and lowering capacity credits.
They said a reworked ratio would upend load-serving entities’ supply plans that have been based on the capacity values MISO first published.
EPSA said a recalculated ratio “will create uncertainty by undermining bilateral agreements for the sale of capacity that have been entered into in advance of the PRA and upset the settled expectations of market participants that justifiably relied upon the ratio and seasonal accredited capacity values calculated by MISO.”
“The effect of recalculating the ratio will be to reset the seasonal accredited capacity values of [planning] resources over three months after these values were first posted and just days before the PRA offer window was scheduled to open,” Vistra said.
It said MISO’s commitment to revise seasonal accredited capacity values at the 11th hour “has cast a cloud of uncertainty over the MISO market.” It said revising the ratio at such a late stage will “fundamentally undermine” LSEs’ “carefully crafted supply plans” by decreasing resources’ accreditation.
Some LSEs’ self-supply and bilateral contracts made in advance of and outside the PRA will now be insufficient to cover resource adequacy obligations, Vistra said. It described a situation where LSEs are “forced to scramble to cover their now unmet resource adequacy requirements at the same time that other LSEs across the region are doing the same and as capacity values are decreasing — likely forcing LSEs to purchase capacity at a premium to its existing bilateral transactions and supply arrangements.”
“No amount of delay in the PRA will remedy the harm done to LSEs or customers by recalculating the ratio,” Vistra said.
More than 1,700 of New York’s 4,918 census tracts are slated to be designated as disadvantaged communities (DACs), prioritizing them for future state and federal resources to address environmental justice issues as the state advances its clean energy transition.
On Monday, New York’s independent Climate Justice Working Group, which was created by the state’s Climate Leadership and Community Protection Act, unanimously approved the final environmental, population, geographic, health, historical and individual criteria for determining the 35% of census tracts that will be designated as DACs. (See NY CJWG Poised to Select a 35% DAC Coverage Threshold.)
The final criteria, which were developed in consultation with state agencies, environmental justice groups and the public, are based on 20 environmental and climate risk indicators, including pollution exposure, proximity to waste or processing sites, and flood risk. The criteria also consider 25 population and health indicators, including education, race, health sensitivities or housing, as well as individualized considerations for low-income households.
Overview of CJWG calculations of criteria indicators to achieve census tract score | New York DEC
The criteria also included the 19 census tracts that are federally designated as more than 5% tribal and indigenous land.
Several indicators were considered but not included in the final criteria, including prevalence of diabetes or lead contamination data, but these factors could potentially be considered for future evaluations.
Designating DACs was done through a process where weighted factor scores, which were calculated from indicator percentile ranks, were combined into two weighted component scores that were then added together to generate an overall score.
Census tracts whose overall score was in the top 29% of either statewide or regional scores were then designated as a DAC.
Roughly a dozen other tracts that contained at least 100 people but had insufficient census data to obtain appropriate scores will be designated as DACs.
The CJWG’s approval of the final criteria is a significant step in addressing evolving environmental risks and historical burdens by ensuring future clean energy or climate-resilience projects go to communities most in need.
The CJWG will review the DAC criteria annually to consider updating the indicators or methodology and track how DAC provisions are being implemented. It will discuss this iterative process at its meeting on April 4.
Public Support
CJWG member Sonal Jessel, director of policy at the environmental justice group WE ACT, said she voted in favor of the criteria because even if the CJWG did not “fill in all the gaps,” the group “did really great due diligence in moving through all of the concerns that came in.”
Top 29% of census tract scores either statewide or regionally designated as a DAC | New York DEC
Jill Henck, clean energy program director with the Adirondack North Country Association, voted yes because, as a rural area representative, she appreciated how members were “cognizant of the fact that New York is a unique state,” and made efforts to include stakeholders living in rural communities just as much as those in New York City.
Eddie Bautista, executive director at NYC Environmental Justice Alliance, said CJWG members “all get the period of time we’re living in and understand that climate change will affect everyone, but its impacts are not evenly felt, and the [approved criteria] is a big step to rectifying that.”
Elizabeth Furth of the New York Department of Labor said the votes of approval ensure “disadvantaged communities throughout New York State can realize the many benefits from our transition to a green economy.”
Two CJWG members, who despite voting in favor, took time to share several issues about the criteria in its current form.
Rahwa Ghirmatzion, executive director at PUSH Buffalo, spoke on behalf of the Seneca Nation of Indians, who submitted a letter that outlined significant concerns, particularly about industrialization near their territories and representation.
The Tribe wrote that it rejects “the idea that destruction of territory can be offset by benefits provided by the state or a developer,” and the “cumulative impacts of industrial development on the nation, its cultural resources, and its environment cannot be counterbalanced by economic development, financial support, jobs or other forms of monetary financial benefit.”
Elizabeth Yeampierre, executive director of UPROSE, a Brooklyn-based sustainability organization, was disappointed that diabetes, which can disproportionally impact disadvantaged populations, did not make it into the final criteria.
However, Neil Muscatiello, director at the Bureau of Environmental and Occupational Epidemiology at the New York Department of Health, emphasized during his vote that, although there were “limitations and gaps,” these can all be addressed in the next annual update and diabetes will be among the first considered.
CJWG Chair Alanah Keddell-Tuckey cast her affirmative vote saying she was proud to work with a group who “did not create these problems,” but were “willing to stand up regardless of the pushback and criticism to fix the thing that they did not break.”
Keddell-Tuckey said there were “cynical” people who, particularly during the pandemic, “lay the blame on the victims, rather than admit we were dealing with generations of redlining, income inequality and malicious zoning practices.”
Basil Seggos, commissioner of the Department of Environmental Conservation, said in a statement after the vote that the CJWG’s work ensures “no less than 35% with the goal of 40% of the Climate Act’s benefits are directed to disadvantaged communities.”
Doreen Harris, CEO of the New York State Energy Research and Development Authority, said “the final adoption of this criteria solidifies New York State’s commitment to climate justice for those underserved communities,” and the CJWG’s “clearly defined guidance will help us realize the equitable distribution of benefits from clean energy investments.”
The U.S. Department of Energy received pushback this week on its proposal to increase efficiency standards for distribution transformers, with industry comments arguing that the new rule would create additional problems for already shaky supply chains.
“If this proposal is implemented as currently contemplated, it would have serious consequences to NRECA members’ ability to provide affordable, reliable electric service to millions of Americans,” the National Rural Electric Cooperative Association said in comments filed Monday. “We urge the agency to reconsider the [proposed rules] as currently drafted and to issue a final rule that maintains the current standard.”
DOE estimated that its new standards would save utilities between $260 million and $5.3 billion between 2027 and 2056, which is based on savings in operating costs minus the increased product cost for the new transformers. The department has the authority to periodically update standards for transformers, and other equipment, as long as the new requirements are economically justified and technically feasible.
But NRECA said the proposal rests on flawed assumptions and ignores the challenges facing the distribution transformer market that are impacting all electric utilities, not just co-ops. DOE could focus on incentivizing amorphous steel core transformers, the group said.
Amorphous steel is a type of electrical steel that is produced by rapidly cooling molten alloy so that crystals do not form, which produces a thinner product than the more standard grain-oriented electrical steel (GOES). Electrical steel is a special iron alloy that includes small percentages of silicon to enhance its magnetic permeability.
“DOE’s top priority should be finding ways to support domestic distribution transformer manufacturers to increase production immediately and to sustain that output over the long term as electrification of the U.S. economy grows,” NRECA said. The current distribution transformer manufacturing base is struggling to meet demand, and DOE’s proposal would make that worse, it said.
“All segments of the utility sector have been sounding the alarm for more than a year about the supply chain constraints around multiple types of equipment they require to keep the lights on, with distribution transformers being the most acute challenge,” NRECA said. “It now takes more than a year on average for utilities to receive distribution transformers, compared with 60 days just a couple of years ago. Some domestic transformer manufacturers have stopped taking orders altogether.”
That backlog is only expected to increase absent government support as utilities invest in grid resilience and modernization projects, while federal and state policies drive more electrification, it added.
One of the potential fixes for the backlog is to signal to manufacturers that GOES will be increasingly needed going forward, and DOE’s standard would work directly against that, NRECA said. Manufacturers would have to change their production systems and where they source input materials, taking attention away from increasing supply to deal with the backlogs.
The U.S. Chamber of Commerce also cautioned DOE in comments last week from moving ahead with the standard because of supply chain concerns. GOES represents 95% of new distribution transformer production, so amorphous steel production would need to expand greatly to meet the new standards.
“While there are only singular domestic sources for each of GOES and amorphous steel, GOES is at least already produced in levels that support the majority of domestic transformer production,” the chamber said. “Thus, shifting all distribution transformer production to rely exclusively on amorphous steel will require a dramatic increase in capacity for such steel, which will take time and will further constrain already limited transformer supplies.”
The only places amorphous steel can be imported from are China and Japan, which would only increase the industry’s reliance on components from China, the chamber said.
Six New York utilities have indicated they will apply for roughly $900 million in federal loans and grants made available from the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA) (22-M-0149).
The utilities are acting in response to Feb. 27 letters sent by the state’s Public Service Commission, which directed them to seek IIJA and IRA funds to support clean energy investments. (See Biden Signs $1.2 Trillion Infrastructure Bill.)
In the letters, PSC Chair Rory Christian wrote that he “views these federal programs as a singular opportunity to reduce costs to New York ratepayers, make critical reliability and resiliency investments in the electric grid, and further the attainment of the state’s energy policies as outlined in the state’s climate law.”
The PSC sent the letters to Orange & Rockland (O&R), Central Hudson Gas & Electric, Long Island Power Authority (LIPA), Consolidated Edison (ConEd), National Grid, New York State Electric and Gas and Rochester Gas & Electric (NYSEG/RG&E), and National Fuel Gas Distribution Corporation.
In responses submitted March 24-27 National Grid (NYSE: NGG), ConEd (NYSE: ED), ConEd subsidiary O&R, NYSEG/RG&E and Central Hudson said they will collectively be pursuing hundreds of millions in U.S. Department of Energy loans or grants for enhancing the future grid, energy storage development, and resiliency upgrades.
National Fuel (NYSE: NFG) said it would not tap into DOE funds, since as “a gas-only utility” it does “not currently have any fully developed projects that would be eligible for federal funding,” but confirmed its was investigating hydrogen opportunities, which may be eligible in the future.
LIPA had yet to submit a response as of Monday.
The National Grid and Central Hudson letters included project spending plans, while the other three confirming utilities redacted much of that information, citing confidentiality, although they did briefly dive into monetary estimates.
ConEd anticipates “pursuing approximately $244 million in DOE funding;” O&R, about $125 million. NYSEG and RG&E will be jointly applying for $260 million.
National Grid anticipates applying for $50 million from the Increase Capacity & Enhance Flexibility program for its “Future Grid” project, which the utility says will allow it “to deploy digital technology solutions to maximize the value of third-party distributed energy resources for customers.”
Additionally, the utility is applying for $200 million through the Preventing Outages and Enhancing the Resilience of the Electric Grid program, with $100 million to be invested into energy storage facilities in rural northeast New York around Ticonderoga and another $100 million spent on “weatherization of existing grid structures in eastern and western New York State and the hardening of existing infrastructure to improve resilience and speed of recovery in the face of climate change.”
National Grid said Ticonderoga “often experiences electrical outages,” so it proposes three battery storage systems be developed in the area to “improve reliability by carrying the energy load until crews arrive to make the necessary repairs.”
The Public Utility Law Project on March 15 submitted a letter to the DOE in support of the New York utilities, saying “every dollar received from these funds can lower the revenue requirement impact on ratepayers.”
The DOE’s Loan Program Office has outlined processes to apply for IIJA and IRA loans or grants and some programs have started accepting applications.
NYISO obtained its highest recorded customer satisfaction and performance score in Siena College Research Institute’s seventh annual assessment, researchers told the ISO’s Management Committee meeting on Wednesday.
Siena, a well regarded pollster, assesses two important aspects to the ISO: customer satisfaction, which measures basic consumer interfacing and engagement; and assessment of performance, a measure of whether NYISO is “realizing [its] mission through [its] performance.”
Survey participants include both market participants and senior executives of market participants.
NYISO scored a 92.3 on satisfaction and 77.6 on performance, both of which were the ISO’s highest recorded scores, Institute Director Don Levy said. Its 86.4 overall score — which Levy termed “exceptional” — combines the two with 60% weighting for satisfaction and 40% for performance.
“The satisfaction score really is quite impressive,” Levy said. “You know, we have worked with a couple of the other ISOs across the United States, and their program is not as extensive as yours. … Clearly your numbers are really standing out.”
Levy cited ISO staff’s professionalism and desire to “meaningfully address” feedback from previous surveys.
The customer inquiry satisfaction score — a measure of whether customers instituting a “ticket” with the ISO is handled efficiently and professionally — was a “near perfect” 98.7, Levy said.
The only measure that declined in 2022 was executives’ assessment of performance, which declined to 74.8 from 75.8 in 2021. Scores for market participants, by contrast, increased from 78.2 to 80.4.
Levy said the ISO could improve its explanation of its procedures and policies but added that the ISO has “already been making improvements in these areas.”
The survey also found room for improvement on considering individuals’ input, advancing its technological infrastructure and “administering open and competitive markets.”
“I think [NYISO’s] team deserves some kudos” he said. “There really is no area that has a glaring need.”
Board Compensation
NYISO CEO Rich Dewey told the MC that the Board of Directors approved a $5,000 increase in directors’ annual retainer to $76,500, based on results from a benchmarking review.
The approved adjustment will be effective in April, when the new board calendar starts.
The review resulted in no changes to:
chair retainer: $50,000/year;
vice chair retainer: $12,500/year;
board committee chair retainer: $12,500/year;
board meeting compensation: $3,750/meeting day; or
