By David Lieberman
Over the past year, the federal government has made two landmark investments in infrastructure and clean energy production included in the Infrastructure Investment & Jobs Act (IIJA) and the recently passed Inflation Reduction Act (IRA). The IIJA and the IRA will stimulate construction in traditional infrastructure, including surface transportation and rail and transit, as well as spur the largest investment—through a combination of subsidies and tax incentives—on climate initiatives and the building of clean, renewable energy sources. With these initiatives, the engineering and construction industries are facing a very exciting time.
However, anyone in one of the aforementioned trades knows that while direct investment and tax incentives by the federal government are nice, even necessary to a large extent, if project delivery isn’t streamlined and made more accessible, then much of the federal government’s initiatives will be made less impactful because project timelines will be slowed. Having intuitively understood this, Congress included in the IIJA and the IRA important changes and updates to the environmental review process for projects funded with these investments.
Before we dive into these changes, it is important to have a baseline understanding of the federal environmental review process. Any major infrastructure project that is built with federal funding must go through a series of environmental reviews and authorizations, and the overarching federal statute for environmental review is the National Environmental Policy Act (NEPA): (1) NEPA establishes a decision-making process that federal agencies must follow to study the environmental impacts of proposed projects, including infrastructure and construction projects; (2) Federal agencies must go through this process so that the federal government, states and localities, and stakeholders all have a common understanding of what impact a proposed project might have on the surrounding environment. While completing a NEPA review is important, it can be a lengthy and arduous process. NEPA is but one federal statute detailing the environmental review process. There are many others, including the Clean Water Act, Endangered Species Act, and the National Marine Sanctuaries Act, all of which have unique authorizations. These authorizations must be cleared before construction using federal dollars begins.
The IIJA makes notable changes to the permitting review process. First, it codifies into law the One Federal Decision policy mandating that federal agencies coordinate on a project schedule to complete reviews within two years for highway, transit, rail, and most other infrastructure sectors. Further, the IIJA incorporates the two-year permitting timetable for “major infrastructure projects,” defined as having multiple federal approvals, reasonably available funds, and requiring an environmental impact statement. The IIJA creates other requirements for the U.S. Department of Transportation, including an annual report on the average timeline to complete environmental documents.
The other milestone passed by Congress recently is the IRA, and it includes language to advance separate legislation that would speed up permitting for energy projects. Including this provision was critical to securing Senator Joe Manchin’s support (D-WV) and therefore allowing the IRA to become law. The permitting deal would impose maximum two-year limits for environmental reviews for major projects; direct the President to designate 25 energy projects as high priority and prioritize permitting review for them; and curb legal challenges that delay energy projects by setting a 150-day time limit for court challenges after a project is authorized. While it is unclear at this point whether these policy priorities will become law, it is unmistakable that Congress and the Biden administration are serious about streamlining environmental reviews and the permitting process in general.
There are likely two predominant reasons for this newfound interest in permitting reform for infrastructure projects. The first is the acute need to begin shovel-ready projects quickly and efficiently as inflation in the economy is an ever-present issue. More efficient and predictable project delivery means less risk that the project will be slowed, endangering the full realization of the project plan’s economic value. The second reason is that to achieve the Biden administration’s goal of carbon-free power generation by 2035, restructuring and making the federal and state permitting process easier is crucial. Very simply, it is unlikely that the full potential of the IIJA and the IRA’s policy priorities to build out our infrastructure in clean and sustainable ways will be realized unless it becomes easier to build infrastructure using federal dollars.
Make no mistake, the environmental review process has led to significant improvements in the quality of our nation’s air and water. However, as detailed previously, its regulations are time consuming and labor intensive and have also slowed the deployment of critical infrastructure, including renewable energy projects. Balance is, therefore, necessary to ensure that federal projects are completed more efficiently while at the same time ensuring that doing so will not endanger the surrounding environment. R&B
David Lieberman is the Director of U.S. Government Relations for Bentley Systems.