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US MIDTERMS 2022: Power sector focusing on federal agencies following major laws

Highlights

EPA, FERC expected to act on major rulemakings

Election could threaten Biden's nominees

In the wake of a historic US climate law, further federal action to curb planet-warming emissions from the US power sector could largely play out at administrative agencies over the second half of President Joe Biden's first term.

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With much of the heavy legislative lifting complete, observers anticipate a wave of power-sector regulations from the US Environmental Protection Agency and Federal Energy Regulatory Commission.

But the fate of the recent climate law and several other major pieces of energy and climate legislation, as well as future Biden administration nominees, could hinge on the outcome of the November midterm elections, according to policy experts.

Flurry of agency action planned

The US Supreme Court dealt the Biden EPA a blow in its recent West Virginia v. EPA climate ruling by restricting the agency's authority under the Clean Air Act to regulate in a way that would cause a nationwide shift away from coal-fired electricity.

There, the court's 6-3 conservative majority, for the first time, invoked what is known as the major questions doctrine. The doctrine holds that agencies must point to clear congressional authorization when issuing regulations of "vast political or economic significance."

Democrats subsequently used the Inflation Reduction Act to clarify the EPA's greenhouse gas authority, using a section to say that greenhouse gases are all air pollutants under the Clean Air Act.

The change did not directly address the Supreme Court's decision but could bolster future legal arguments that Congress clearly intended to give EPA broad authority to regulate greenhouse gases as air pollutants.

"While it is great that Congress confirmed that climate pollution is air pollution and therefore subject to the Clean Air Act, that was not in doubt," said Jay Duffy, an attorney with the Clean Air Task Force. "In West Virginia, the court rejected how EPA regulated greenhouse gases. It did not question its authority to regulate them."

The EPA is expected to issue a new proposed rule to address power-sector greenhouse gas emissions sometime in March 2023, and, around the same time, issue a final rule addressing harmful smog emissions that drift across state lines.

"The EPA has retained a lot of authority and actually, in fact, the [Inflation Reduction Act] was a good backstop to its authority to regulate carbon emissions and really tackle pollution in the power sector comprehensively," Holly Burke, communications director for the advocacy group Evergreen Action, said.

Also in March 2023, the EPA is planning to unveil new proposed emissions standards for passenger vehicles and light-duty trucks for model years 2027 and later. In May 2023, the agency is then expected to issue a final rule addressing methane emissions from new and existing oil and gas facilities.

FERC, an independent agency chaired by Democrat Richard Glick, could also issue multiple regulations in 2023 that help speed clean energy deployment.

In April, FERC issued a long-range transmission planning and cost allocation proposal (RM21-17) that would require regional grid planners to account for projected changes in future generation and consider factors such as expected increases in electricity demand. FERC also issued a proposed rule in June aimed at clearing a roughly 1,400-GW clean energy interconnection logjam by requiring grid operators to prioritize generation projects closest to achieving commercial operation.

Glick, who was renominated to serve a second term as chair, has stated that speeding transmission buildout is one of his top priorities.

Climate, permitting outlook

In the past two years, Biden and Democratic lawmakers scored major victories with the passage of the Inflation Reduction Act, or IRA, and the bipartisan infrastructure law of 2021. Democrats' party-line IRA dedicated nearly $370 billion over 10 years to energy and climate measures and represents the single-largest investment in climate action in US history, according to party leaders.

The two bills combined are expected to slash US greenhouse gas emissions by about 40% from 2005 levels by 2030. But those cuts are still short of Biden's pledge to slice economywide emissions in half by 2030.

If Democrats keep control of Congress, they hope to close that gap, including by passing climate and clean energy provisions that were excluded from the IRA. Among other things, the law discarded a proposed investment tax credit for transmission projects and excluded a national clean electricity standard championed by many Democrats.

Congress has made substantial climate and energy investments in the last few years -- through the IRA, infrastructure law, the CHIPS and Science Act, and the Energy Act of 2020 -- which may limit lawmakers' appetite to spend more.

"There's a pretty clear recognition that Congress is probably done for the time being spending money when it comes to energy and climate," said Sasha Mackler, executive director of the Bipartisan Policy Center's Energy Program. "That's a big, big set of priorities from the energy and climate community, and that's a lot of resources now that are coming out the door for these issues."

Mackler said Congress will likely maintain focus on permitting reform, supply chain concerns for clean energy technologies, potential trade mechanisms like a border carbon adjustment, and sectoral decarbonization policies. Permitting reform is a priority for both parties, with a lengthy and complicated project approval process slowing both clean energy and fossil fuel projects.

But divides between and among parties on how to streamline permitting could push the issue into the next Congress. If Republicans reclaim majorities in both houses of Congress in the midterm elections, they may seek more aggressive reforms that lower barriers to gas pipelines and other fossil fuel projects and support measures to boost domestic oil and gas production amid criticisms of Biden's federal leasing policies.

A Republican-majority Congress could also scrutinize spending and implementation of the IRA and bipartisan infrastructure law and use the appropriations process to slow down Biden's energy and climate agenda. GOP lawmakers are likely to conduct "antagonistic oversight of how these programs are implemented," Mackler said.

Biden nominees at risk

The midterms could also put Biden's nominees for key climate and energy positions at risk.

FERC's Glick will need to be reconfirmed by the Senate by year's end to avoid falling off the commission. Although Biden could renominate the chairman in 2023, that confirmation process would be trickier if Republicans take control of the upper chamber. GOP lawmakers have objected to Glick's stance on gas pipeline permitting and his efforts to update market rules in a way that critics say threatens grid reliability.

Without Glick, FERC would have two Republican and two Democratic commissioners, potentially resulting in 2-2 partisan deadlocks that could hamper commission action.

"The theme on all of this is uncertainty," said Larry Gasteiger, executive director of the transmission trade group WIRES. "The one thing we really don't like is uncertainty because it makes it hard to plan, it makes it hard to make decisions about what to do going forward. So, the sooner all of that's resolved, the better."

A GOP-majority Senate could also hinder Biden's efforts to confirm federal judges that hold major sway over the interpretation of energy and environmental laws.

The Supreme Court's recent ruling on the EPA's regulatory powers underlines "the importance the federal courts play in climate policy," said Craig Auster, vice president of political affairs for the League of Conservation Voters.

"Just as much as climate policies being passed, we need good federal judges being confirmed to uphold the laws," Auster said.