Manchin Permitting Deal Teeters Despite Gas Industry Support

‘We sure as hell don’t owe Joe Manchin anything now,’ says one Democrat.

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In late July, when the White House climate agenda seemed well and truly dead, President Biden gave a speech, flanked by a despairing Sen. Ed Markey (D-MA), where he nearly declared a climate emergency, and then stopped short.

It’s one sign that Biden was aware of just-resumed talks between Energy and Natural Resources Committee Chair Joe Manchin (D-WV) and Senate Majority Leader Chuck Schumer (D-NY) over the deal that would become the Inflation Reduction Act (IRA), which will be signed into law by the president today.

But the final deal between Schumer and Manchin still has a missing component: a privately negotiated side deal that would overhaul the permitting process for energy infrastructure. The agreement, which calls for the approval of a gas pipeline in Manchin’s home state of West Virginia, could undercut the IRA’s down payment on clean energy by accelerating approval for energy projects that could ramp up U.S. fossil fuel production and exports of natural gas.

The legislation requires 60 votes, and although its text has not been released even to members of Congress, it is set to be attached to a must-pass government funding bill, making it politically dicey to dispute Manchin’s terms. But so far, opponents in both parties are resisting the gambit.

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Manchin, who made permitting reform a condition of his signing on to the IRA, has received assurances from Schumer that this deal would go through. Yet after key leaders in both parties did not agree to the contents or the manner of passing the bill, the privately struck deal could unravel.

Since the IRA will be law either way, there’s nothing holding other Democrats to agree to deregulating what are considered bedrock environmental programs. Now, multiple representatives are pushing to peel off the permitting agreement from any must-pass legislation and run it as its own bill, lowering the political cost of opposing it. House Natural Resources Committee Chair Raúl Grijalva (D-AZ) said he doesn’t feel an “obligation” to support the deal, since he was not part of the negotiations.

“Handshake deals made by others in closed rooms do not dictate how I vote, and we sure as hell don’t owe Joe Manchin anything now. He and his fossil fuel donors already got far too much in the IRA,” Rep. Rashida Tlaib (D-MI) told the Prospect in a statement. “I support Chair Grijalva’s call for a standalone vote, and we will vote this dirty deal down, one way or another.”

REPUBLICANS MAY HAVE ALREADY named their price for support on Manchin’s permitting deal.

A leaked one-page summary of the permitting bill says that it would designate 25 critical energy projects, including clean-energy projects, critical minerals, and fossil fuels, to receive special dispensation. Those priority projects would be chosen according to a list of criteria that includes “decarbonization potential.”

But giving priority to climate-friendly infrastructure is unpopular with Republican members. In a symbolic vote earlier this month, Sen. Dan Sullivan (R-AK) introduced a resolution to overturn a new White House rule expanding environmental review for major projects. The Biden rule asks agencies to consider the effects of a project that relate to climate change, rather than the most local and direct environmental consequences of a new development.

The agreement could undercut the IRA’s down payment on clean energy by accelerating approval for energy projects that could ramp up U.S. fossil fuel production.

Manchin sided with Republicans on Sullivan’s resolution, calling it a “step in the right direction” and adding, “I hope every Republican that voted for this legislation today will support the bipartisan permitting reform bill when it comes before the Senate in September.”

While the resolution is unlikely to pass the House, it would be hard to find a clearer signal that Republicans, as the cost of their votes for the permitting deal, will demand that it keep climate change out of project review—or even exclude renewable-energy projects altogether.

Renewable-energy developers, and many on the left, argue that permitting reform is needed to speed the construction of wind and solar, which received heavy financing in the IRA. But the Senate Republican vote suggests that the GOP, whose votes would be needed, could block or disadvantage those projects.

A Republican Senate staffer told the Prospect that Louisiana Rep. Garret Graves, chair of the Energy, Climate, and Conservation Task Force, plans to introduce a parallel CRA resolution in the House.

“It’s getting harder to take the Democrats seriously when it comes to strong permitting reforms,” the staffer added. “People claim there’s reforms in there, but they’re just giving money to agencies to essentially make permitting better. It’s not serious, strong reforms, it’s throwing money at the problem.”

The IRA includes over $750 million for implementation of the National Environmental Policy Act (NEPA), one of the less controversial ways to address permitting delays at underresourced agencies.

Other Republicans, bitter over the passage of the deal, say they are prepared to withhold their votes. As Lindsey Graham (R-SC) said, “I will not vote for a continuing resolution that is part of a political payback scheme.”

Republicans might be reasoning that they have time to pass their own, stronger permitting revamp if they take back the House in November. But they face enormous pressure from the oil and gas sector, which has no time to wait and will lean on Republicans who might otherwise bitterly sit out the permitting deal to fall in with Manchin. (A leaked draft of the permitting deal included the watermark of the American Petroleum Institute.)

Fossil fuel producers are racing to export more rapidly as energy traders make extraordinary returns in Europe and parts of Asia, where fuel prices have skyrocketed since Russia’s war in Ukraine. The gas crunch is largely a problem of meeting short-term demand, as Europe simultaneously pursues campaigns of demand destruction and deploys renewable energy. But domestic producers have reoriented their entire strategy around that short-term crisis. Chesapeake Energy, a pioneer of shale oil fracking, announced earlier this month that it will ditch oil and pivot entirely into natural gas.

INSTEAD OF UNLEASHING A GAS BOOM, climate activists would rather the Biden administration made good on its commitment to reduce greenhouse gas emissions. For 20 months, Biden has held back on the full armory of tools for climate action at his disposal, like blocking oil and gas leases on federal lands, to avoid upsetting Manchin and spoiling a reconciliation deal. With a deal now passed, clean-energy groups say Biden should move on those long-delayed executive actions.

“The IRA is pure carrot. It’s only giving incentives for people to buy and consume things,” said Center for Biological Diversity attorney Jean Su. She believes that the task now is adding regulatory sticks.

Those could include declaring a climate emergency and empowering the Interior Department to suspend drilling, as well as a raft of measures available to the president under his ordinary powers.

There are also subtler ways the administration could sidestep its recent commitments to the fossil fuel sector.

The IRA creates a new parity rule for federal leasing, tying new wind and solar leases and rights of way to federal oil and gas lease sales. But Biden could craft the terms of those sales to make them unappealing to operators, according to Kevin Book, a managing director of the consulting firm ClearView Energy Partners. For example, the Interior Department could offer non-contiguous or unattractive parcels of land, increase royalties for oil and gas leases, and hold its wind lease sales earlier.

That said, new oil and gas leases aren’t necessarily that attractive to start with. Companies might buy them to show investors they have proven reserves, but public lands have been picked over during the last century. Many of the more attractive offshore parcels are held by the states.

The bigger worry is that the energy industry uses hot demand to push for new pipelines and LNG export terminals—facilities built to last decades. When the crisis fades, the facilities would be an incentive for U.S. producers to sustain foreign demand for American gas.

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