On Thursday, March 30, the House passed H.R. 1, the Lower Energy Costs Act, on a 225-204 vote. House Republicans reserved the energy and permitting reform package as H.R. 1, underscoring the importance that the new Majority places on these issues. H.R. 1 reflects House Republicans' priorities on energy policy through boosting domestic production of fossil fuels, critical minerals, and accelerating the construction of energy infrastructure and natural gas pipelines. The bill also repeals climate change programs from the Inflation Reduction Act (IRA) such as the $27 billion Greenhouse Gas (GHG) Reduction Fund and methane fee, among other provisions.

Republicans have argued that the legislation would lower energy costs and streamline environmental reviews and decrease the regulatory barriers for both fossil fuel and renewable projects. Democrats have criticized the legislation, arguing that it would raise the federal deficit and reverse progress made in the IRA to benefit renewables and combat climate change.

Four Democrats, including Reps. Henry Cuellar (TX), Vicente Gonzalez (TX), Marie Glasnapp Perez (WA), and Jared Golden (ME), voted in favor of the bill. One Republican, Rep. Brian Fitzpatrick (PA), voted “no” on the legislation. 

Below is an overview of the key provisions from H.R. 1.

Hydraulic Fracturing

H.R. 1 includes a sense of Congress that states should retain primary authority for regulating hydraulic fracturing. Moreover, H.R. 1 prohibits the President from imposing a moratorium on hydraulic fracturing.

Cross-Border Energy Infrastructure

H.R. 1 revamps the approval process for cross-border energy infrastructure. In particular, H.R. 1 transfers authority for reviewing applications for cross-border oil pipelines from the State Department to the Federal Energy Regulatory Commission (FERC). The Department of Energy (DOE), under the legislation, retains authority for reviewing applications for cross-border electric transmission lines. The legislation also sets 180-day time limits for relevant agencies to issue a decision on an application for cross-border energy infrastructure after the National Environmental Policy Act (NEPA) review has been completed. In addition, the legislation expresses a sense of disapproval of President Biden’s revocation of a Presidential Permit for the Keystone XL pipeline. 

Natural Gas Infrastructure

Under H.R. 1, FERC is vested with exclusive jurisdiction with respect to LNG facilities. Currently, DOE maintains authority for issuing a national interest determination for export of LNG to countries that do not have a free trade agreement with the U.S., while FERC oversees siting related to said facilities.

FERC’s lead role in reviewing interstate natural gas pipelines is bolstered by requiring schedules, concurrent reviews, and provisions to resolve disputes among permitting agencies. States’ authority under Section 401 of the Clean Water Act to issue Water Quality Certifications (WQC) for interstate natural gas pipelines and LNG facilities is revoked by H.R. 1. Republicans have criticized New York and Washington for refusing to issue WQC for natural gas infrastructure. 

Refinery and Critical Energy Regulatory Provisions

The bill requires the National Petroleum Council to submit to Congress and the Secretary of Energy a report examining the role of petrochemical refineries in the United States. The report must also note the contributions of these refineries to U.S. energy security, identify projections for expanding refinery capacity, as well as outline actions that have contributed to a decline in capacity and recommend actions to increase capacity.

The bill permits the Environmental Protection Agency (EPA), in consultation with DOE, to issue a temporary waiver of any requirement under the Clean Air Act (CAA) or the Solid Waste Disposal Act for projects that allow for processing or refining at a critical energy resource facility. A critical energy resource is defined as a resource essential to the energy sector and energy systems, the supply chain of which is vulnerable to disruption. Such temporary waivers can be issued only if the agency determines a sudden increase in demand for (or shortage of) a critical energy resource.

H.R. 1 also provides for the broad application of CAA flexible air permits by critical energy resource facilities, which allow advance authority for greater emissions at facilities. Under current law, such permits are granted by states and EPA on a case-by-case basis. The bill specifically requires EPA to modify its rules governing CAA flexible air permits to authorize the operators of critical energy resource facilities to use such permits. 

Repeal of IRA Provisions 

The House Republican package repeals a variety of IRA provisions, including the $27 billion EPA GHG Reduction Fund, the imposition of a methane fee on the oil and gas industry and various energy efficiency incentives. 

Federal Fossil Fuel Leasing

H.R. 1 requires more oil and gas lease sales on public lands and repeals increased fees and royalties related to onshore and offshore oil and gas production. The bill requires the Department of the Interior (DOI) to immediately resume quarterly lease sales on federal lands, including at least four lease sales per year in each state with eligible lands, and it statutorily overrides any regulatory prohibition on those lease sales. The bill further requires the DOI, by September 30, 2023, to conduct all offshore lease sales described in the 2017-2023 Outer Continental Shelf Oil and Gas Leasing Proposed Final program that have not yet occurred by the date of enactment. 

The legislation also repeals increased fees associated with offshore and onshore oil and gas development that were imposed by the IRA. 

The federal moratorium on new coal leasing is also revoked by H.R. 1. 

Permitting Reform

On permitting, H.R. 1 streamlines the process for approving energy projects under NEPA by limiting the scope of environmental reviews on energy projects and prohibiting federal agencies from considering indirect and cumulative environmental impacts. To limit delays in the permitting process, the bill requires environmental assessments to be completed in one year and environmental impact statements in two years. The bill also would limit judicial interventions to 120 days following the completion of the environmental review. 

The legislation also narrows the authority of states under Section 401 of the Clean Water Act in considering WQCs. 

Revenue Sharing 

Under H.R. 1, state shares of revenue from offshore oil and gas leasing will increase from 37.5% to 50%. H.R. 1 also sets a 50% split for states from offshore wind leasing. The bill’s revenue sharing requirements, which would direct royalties to the states hosting offshore oil and wind projects, is expected to increase the federal deficit by $2.3 billion. This figure, recently announced in a Congressional Budget Office (CBO) report, drew additional criticism from Democrats who have long opposed the legislation. In response to the report, House Natural Resources Committee Chairman Bruce Westerman (R-AR) submitted a manager’s amendment that would sunset energy revenue sharing provisions benefitting states after nine years, instead of 10. 

Critical Minerals

H.R. 1 designates a lead federal agency to coordinate the mine permitting process. Critical minerals projects can avail themselves of fast track NEPA permitting processes. The legislation also requires that uranium be considered a critical mineral, overturning a recent decision by the U.S. Geological Survey to exclude it from the critical minerals list.  DOE is also directed to conduct ongoing surveys related to critical minerals. 

Amendment Process

The House began consideration of the bill on March 28 under a structured rule with 37 amendments made in order, of the over 170 amendments submitted. The 37 amendment package includes seven of the 95 amendments submitted by Democrats. Notably, the House Rules Committee rejected a Republican amendment that would have approved the Mountain Valley Pipeline, a controversial project that would transport natural gas from West Virginia to Virginia.  Additional amendments failing to make the cut include measures from Democrats and moderate Republicans that would have inserted climate concerns into the base text of the legislation.

On March 29, the House voted to adopt an amendment that added bipartisan legislation from Rep. Chrissy Houlahan (D-PA) that would ban sales from the Strategic Petroleum Reserve (SPR) to China, Russia, North Korea, Iran, and other nations that are subject to U.S. sanctions.  The House also passed an amendment from Rep. Marie Gluesenkamp Perez (D-WA) which would require an annual report from federal agencies on the technological needs for permitting programs. 

Notably, the House rejected an amendment offered by Rep. Scott Perry (R-PA) to prohibit the Delaware Bay Commission, Susquehanna River Basin Commission, and the Interstate Commission on the Potomac River Basin from finalizing, implementing or enforcing any regulations related to hydraulic fracturing other than those issued by the State in which the regulation is to be implemented or enforced. The Perry amendment was rejected by a vote of 210-223.  An amendment offered by Rep. Byron Donalds (R-FL) that would require a report on the status of American uranium and how America’s uranium compares to the global supply of uranium in terms of quality and quantity was accepted.

Outlook for Senate Action

The bill now heads to the Senate, where Senate Majority Leader Chuck Schumer (D-NY) has already pronounced the bill “dead on arrival.” However, there is bipartisan support, including from the White House, for permitting reform.  This growing support indicates potential negotiations between Democrats and Republicans over the coming months on a compromise measure.

The Senate is preparing to look at a more bipartisan energy permitting reform package. Two key Senate committees, the Energy and Natural Resources (ENR) Committee and the Environment and Public Works (EPW) Committee, plan to hold hearings on permitting for energy projects as early as April. On March 29, Sen. Shelly Moore Capito (R-WV), the Ranking Member of the EPW Committee, confirmed that she was working with ENR ranking member John Barrasso (R-WY) on a permitting proposal. Barrasso indicated further that he is speaking to ENR Chairman Joe Manchin (D-WV) about coordinating the introduction of legislation with a hearing.  

Manchin will be a central player in any permitting reform legislation in the Senate, as he pledged his support for the IRA in the 117th Congress in exchange for a promise from Leader Schumer to advance permitting reform legislation. Though there are Senators from both sides of the aisle in the Senate who support permitting reform, the proposed policy changes to reach such reform differ. Republicans, and some centrist Democrats like Manchin, would like to ease permitting (primarily for gas pipelines) by making major revisions to NEPA.  Most Democratic Senators, on the other hand, seek to reform the permitting process for clean energy and other renewables by giving enhanced authority to FERC to approve interstate transmission lines. Many Republicans view increased authority for FERC as an encroachment on states’ rights. 

The White House strongly opposed H.R. 1, and President Biden is expected to veto it if it were to be taken up and passed in the Senate, which is unlikely. In a statement issued March 27, the White House said that H.R. 1 would “replace pro-consumer policies with a thinly veiled license to pollute.” The White House though is generally supportive of permitting reform, offering an opportunity, albeit difficult, for a bipartisan breakthrough over the coming months.