Energy Trends

Energy Trends

What does the White House 2018 infrastructure plan hold for the power sector?

By Joshua Belcher

Improving critical infrastructure in the United States was an important topic of the 2016 election. More than a year into the Trump presidency, more concrete proposals are beginning to surface from his administration.

In his Feb. 13 "Legislative Outline for Rebuilding Infrastructure in America," the president proposed a series of measures to boost investment in energy infrastructure, including electric power generation and transmission. In line with traditional conservative policy, many of the proposed measures de-emphasize federal government involvement, promote state and local public-private partnerships and even complete privatization of certain assets.

 Key proposals target rural communities, federal asset divestiture and more support for privately funded infrastructure that produces public benefits. The plan also focuses extensively on federal permitting improvements. While it contains a number of potentially beneficial ideas, however, the infrastructure proposal remains a high-level document with ideas that need to be further developed before they can provide a practical basis for reform.

Rural Infrastructure

The infrastructure plan proposes a new program to boost investment in rural infrastructure, creating a program that would, among other things, benefit governmental generation, transmission and distribution facilities in an effort to attract industry to rural areas. A total of $50 billion is proposed to fund capital investments.

The lion’s share of these dollars would go to the states for distribution in response to their respective needs. By pushing significant funds down to the state level, the plan would give states greater ability – and responsibility – to take the lead on modernizing their rural infrastructure in a way that most effectively increases investment.

Federal Assets

Also proposed is a divestiture initiative highlighting the potential for electric generation and transmission assets. It would begin with a financial assessment and demonstration of the value that divestiture may produce.

For example, the 2018 budget has proposed selling the transmission assets of the Southwest Power Administration, the Tennessee Valley Authority and the Western Area Power Administration. This proposal could provide a major opportunity for infrastructure investment funds and other private companies to purchase strategic transmission assets.

Private Activity Bonds

To broaden eligibility and introduce flexibility into financing for public-purpose infrastructure projects, the White House has also offered a plan that extends tax-exempt bond financing to privately owned facilities. To ensure that projects funded by the program serve a public purpose, the plan would require state or local governmental ownership or facilities available for general public use. 

One significant addition is new hydroelectric construction – instead of just enhancing existing facilities. An additional extension to environmental remediation at brownfield sites, which are typically located in existing industrial areas, could further facilitate site reuse for new power generation facilities.

Permit Streamlining

The plan also proposes streamlined federal permitting for infrastructure projects in four major areas. Environmental reviews would be condensed into a “one agency-one decision” framework, more authority would be delegated to the states, pilot programs would test alternative permitting procedures and a series of judicial reforms would limit the ways legal challenges can impact new projects from moving forward.

The one agency-one decision framework proposes an expedited structure for environmental reviews through substantial reform of the National Environmental Policy Act (NEPA) process. It would impose a deadline of 21 months to complete analysis under NEPA and an additional three months thereafter to issue permits. It would also clarify the scope of action alternatives that must be considered under NEPA, an aspect of environmental review that can be burdensome and often exposes projects to significant legal challenges.

Actions clearly outside the scope of an agency’s authority to permit or that are not feasible need not be considered. Significantly, the plan proposes to eliminate independent Environmental Protection Agency (EPA) review of environmental impact statements, which would save time and avoid the need to respond to EPA comments.

Two forms of pilot programs are proposed under the infrastructure plan. Environmental performance measures, rather than the current review process, would be used to address the impacts of infrastructure projects under “performance-based” pilot programs. The standards would be developed by the lead federal agency in coordination with other cooperating agencies.

Agreeing to meet these standards would allow projects to circumvent the NEPA process altogether. “Negotiated mitigation” pilots, by comparison, would allow projects to use an alternative decision-making process and enter into mitigation agreements as a way to limit anticipated environmental impacts.

Judicial reform of the NEPA process would include cutting the period for judicial challenges of environmental reviews from six years down to less than six months. This proposal aligns with existing law applicable to surface transportation projects and recognizes the significant investment of time and money that goes into critical infrastructure projects, which can be imperiled by delays and uncertainty caused by environmental challenges. Funds could be deployed more quickly and efficiently if the long-tail risks of environmental reviews were eliminated.

Joshua Belcher is counsel in Eversheds Sutherland (US) LLP’s Houston office. He can be reached at joshuabelcher@eversheds-sutherland.com.

 

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