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Why the Manchin-Barrasso bill might not be worth it.
Senator Joe Manchin’s new permitting deal is the best shot Congress will get this year to boost transmission and renewables. It may also lock in generations of future fossil fuel production and exports.
To many climate activists, that’s not a trade worth making.
Tomorrow, the Senate Energy and Natural Resources Committee will vote on a deal Manchin struck with the panel’s top Republican, John Barrasso, that couples faster transmission and renewable energy approvals and restrictions on litigation with much stronger requirements for regular oil, gas, and coal lease sales on federal lands. It would also restrict the Energy Department from continuing its pause on liquified natural gas export terminal approvals (an action that has already been overturned in court) and also, activists note, potentially bar the federal government from having authority over oil and gas drill sites on private lands. Critics say this would take away a tool regulators in Washington can use to require a well — a potential source of methane, the hyper-potent greenhouse gas — be plugged in the event the owner goes bankrupt and abandons the site.
The environmentalist reaction to the bill has been swift and loud, with a broad swath of organizations coming out fiercely against its passage. Even some groups seen as more business-friendly, such as the Environmental Defense Fund, praised the transmission bits while calling out “permitting proposals drafted without meaningful consultation of frontline communities” and proclaiming the fossil fuel language objectionable.
In a development that has quietly befuddled activists, a growing number of climate-friendly Democrats are coming out in favor of the legislation. Senators John Hickenlooper and Martin Heinrich, whose transmission proposals landed in the deal, are likely to vote in favor of the bill in committee this week.
“This legislation is our opportunity to unlock an American-made clean energy future,” Heinrich told Politico’s E&E News in a statement last week. “It will create good-paying jobs, grow our workforce, and help us deliver affordable and reliable electricity to all Americans — all while helping to meet our ambitious and urgent climate goals.”
Fossil fuels produced on federal lands for energy represent a substantial portion of the greenhouse gas emissions produced by the United States, a fact even Biden regulators have acknowledged while allowing more sales.
Whether this legislation can get to a full vote in the Senate is far from certain, and it’s a longshot for passage in this Congress. The bill goes further in favor of fossil fuels than the 2022 Manchin permitting deal, which was blocked by a confluence of opposition from environmentalists and far-right legislators that wanted an even more aggressive approach to overhauling environmental laws.
The same sort of coalition could stall this bill. But it would not surprise me if many more Democrats added their voices and votes in support. Over my years of reporting in Congress, I found a growing sense of frustration in Democratic circles at the lack of shovel-ready projects funded by the Inflation Reduction Act. They blame the National Environmental Policy Act, the Federal Energy Regulatory Commission, and pencil-pushing government officials. They’re tired of being asked “will they or won’t they” questions by Hill reporters about an ever-elusive permitting deal. So they may take any leap of faith to see those visual victories come to fruition faster — and help shore up political support for keeping the landmark climate law in place.
But that’s not how climate activists want them to see the bill. At all.
“Honestly, the amount of fossil fuels that can be deployed out of this far outweighs to me the gains we would get in transmission,” Johanna Bozuwa, executive director of the Climate and Community Project, told me. “I can understand the ‘for’ side of this. People are frustrated and they are sick of transmission not being deployed. Whereas the people who are against this bill are like, you need to think about the ramifications right now. Because what is being built into this bill is not next year’s emissions. It’s thirty years of emissions.”
Under Manchin-Barrasso, it would be much harder for the federal government to reduce how much land and sea it sells to fossil fuel companies every year.
The federal government regularly offers land for oil and gas companies to purchase for drilling sites. Deciding what land to sell and how much acreage to offer is normally a process decided at the bureaucratic level in tandem with industry input and environmental analyses. Under the Trump administration, lease sales were plentiful, though some had to be canceled because of inadequate climate and species reviews. Biden’s gone the opposite direction, but in order to win Manchin’s crucial vote, the IRA also complicated efforts to wind down fossil fuel auctions. One of Manchin’s non-negotiables for passing the bill was tying renewables leasing to millions of acres in mandatory oil and gas lease sales. In other words, to sell land for renewables, the government must now sell fossil fuels too.
Specifically, the IRA required the government to sell either millions of acres or the acreage that industry expresses interest in. So far, the Interior Department has found wiggle room by saying the acres they sell do not need to align precisely with properties requested by developers. Some in the oil and gas industry have accused the Biden administration of deliberately offering land the industry doesn’t want.
What Manchin-Barrasso would do, activists say, is essentially tie the hands of the government on this requirement. One provision would insert the phrase “for which expressions of interest have been submitted” into the mandatory onshore oil and gas leasing totals in the IRA, in effect putting industry’s desired land for leasing into statute as a requirement.
The bill would also require the government to hold annual offshore oil and gas lease sales at a time when the Biden administration is non-committal about auctioning in certain future years before environmental analyses are conducted.
There’s also the part about drilling on private land. A provision in Manchin-Barrasso appears to ban the federal government from requesting applications for permits to drill on private lands in circumstances when the government owns only the minerals beneath the surface but not above. These applications, known as APDs, are a key opportunity for federal regulators to require project developers post a bond on oil and gas wells as well as provide at least some level of info on environmental mitigation measures. Advocates emphasize this input also comes with an opportunity to intervene when an operator goes bankrupt and leaves a well unplugged, puking methane into the atmosphere. Manchin-Barrasso would instead cede that authority entirely to the states.
The bill would also require the government to process applications for coal leasing when the Biden administration is trying, essentially, to stop such leasing altogether.
Plus there’s the LNG export language which, well, explains itself.
For the energy transition, the bill would: create timetables for permitting renewables on federal rights-of-way; allow minimal environmental reviews of “low-disturbance” renewables construction projects; set a national goal of 50 gigawatts of renewables on federal land by 2030; ease geothermal permitting; provide easier environmental reviews to certain transmission activities within recently approved rights-of-way; grant FERC more authority to greenlight transmission projects that are considered to be in the “national interest;” and give hydropower projects more lenience on license extensions.
To some, that might be a worthwhile compromise — in the world of the possible, the deal may be the biggest opportunity for real gains on transmission and renewables this Congress. Should the November elections swing in the GOP’s direction, Democrats seeking a less fossil-friendly permitting deal would have essentially no chance because they could lose the House, the Senate and the White House, making this the only game in town, potentially for a long time. This bill would also achieve the elusive dream of a bipartisan compromise, where both sides get some but not all of what they want to achieve incremental progress on something viewed in D.C. as a long bemoaned problem.
“It is a really good bipartisan deal,” Xan Fishman of the Bipartisan Policy Center told me last week. “Not everyone is going to be happy.”
That argument isn’t convincing Rep. Jared Huffman, a top Democrat on the House Natural Resources Committee, who has emerged as a vocal critic of the Senate legislation. Huffman told me he wants to see transmission boosted “without massive giveaways to the fossil fuel industry.” When asked if he’s comfortable with accusations he’s holding up a bipartisan compromise, he simply said, “Whatever.”
“This is a bad deal. It just goes way too far in the direction of oil, gas and coal,” he told me. “We’ve got to stop dignifying this notion that to take one step forward on clean energy, we’ve got to take two steps backward on fossil fuel production.”
Brett Hartl, government affairs director for the Center for Biological Diversity, noted to me that when the Inflation Reduction Act was passed into law, Democrats had analyses showing the potential decarbonization benefits of the legislation — oil and gas warts and all. It ultimately showed net wins on climate, no matter how hard the other stuff may have been to swallow.
“Where’s the math that proves this is good?” he asked of the Manchin-Barrasso bill.
The truth is, we don’t know the climate impacts of this legislation yet, though experts are at work poring over the details. Meanwhile, some climate advocates are trying to get their own math out there. At the start of the week, I attended a small roundtable discussion with Jeremy Symons, a longtime environmental advocate who once worked on the Senate Environment and Public Works Committee, as well as representatives of Public Citizen and Earthjustice and other reporters from Politico and S&P Global. At that roundtable, Symons presented an analysis declaring the legislation’s impact on LNG exports reviews alone would be equivalent to that from 165 coal-fired power plants and that it would take roughly 50 large renewable electricity-powered transmission lines to make up the negative climate impacts of the provision.
“Lawmakers should do some deep dive reevaluation and reach out to other outside experts to make sure that they fully understand [this bill],” Tyson Slocum of Public Citizen said at the roundtable.
Manchin’s office did not respond to requests for comment for this story.
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A conversation with Jillian Blanchard of Lawyers for Good Government about the heightened cost of permitting delays
This week I chatted with Jillian Blanchard, vice president of climate change and environmental justice with Lawyers for Good Government, an organization that has been supporting beneficiaries of the Inflation Reduction Act navigate the uncertainties surrounding tax credits and grant programs under the Trump administration. The reason I wanted to chat with Jillian is simple: the IRA is under threat for the first time under a Republican Congress. I wanted to understand how solar and wind projects could be impacted by the House Republican reconciliation bill and putting IRA tax credits in doubt. I learned a lot.
The following conversation was lightly edited for clarity.
Okay, Jillian, what’s the topline here? How would the GOP reconciliation bill impact individual projects’ development?
There are big chunks of the reconciliation bill that will have dramatic impacts on project development, including language that would repeal or phase out bipartisan and popular tax credits in a way that would make it very, very difficult to invest in projects. I can get into the weeds next.
But it’s worth saying first – the group of programs aside from tax credits that [House Republicans] would repeal represents every single part of America. Hundreds of projects that will not go forward if these programs are not going well. And they have several legally obligated grants that EPA has already mucked up in a litany of ways. But what they’re proposing to do is to pull the rug out from under those programs. On top of that they want to pull any unobligated funding out.
I think it’s extremely misrepresentative to say these are not big cuts. They’re significant cuts to clean air and clean water across the board.
Help me get into the weeds about how phasing out the credits will make it harder to invest in a project.
Right now, a bank might want to invest a certain amount of money in a clean energy project because they know on the back end they can get 30% or 40% back on their investment. A return through tax credits. They can bank on that, because tax credits are a guarantee.
Was that an intentional pun? “Bank”?
Yeah, it is. I love a good pun. You opened the floodgates, that was a mistake.
But anyway, the program itself was supposed to be around until at least 2032 and the bank could bank on those tax credits. That’s a big runway, because projects could get delayed and you could lock in the credit as soon as you started construction.
Now they’re doing a phase-out approach where if your project is not placed into service before a certain date, you don’t avoid the phase out. You don’t get any protections if you’re starting your project now or next year. It has to be placed in service before 2028 or else your project may not be eligible. You are constructing it, you are financing it, but then through no fault of your own – a storm or whatever – then suddenly that project is no longer entitled to get 30% or 40% back.
That’s a big risk. And banks don’t like risk.
Opposition on the ground also delays projects the way a storm does. Would this empower those opponents?
Oh, totally. Totally. If anyone wants to fight a project, a bank might be even less likely to invest in it. The NIMBYs for that particular project become a risk.
What would you tell a developer at this moment who is wondering about the uncertainty around the IRA?
I would tell them that now is the time to speak up. If they want to stay in this business and make sure their energy stays as low-cost as it already is, they need to speak up right now, no matter what their political party affiliation is. Make it clear solar isn’t going away, wind isn’t going away, storage isn’t going away. These are markets America needs to be competitive with the rest of the world.
Investors are only just now starting to digest what the proposed cuts will mean, especially for energy storage.
Is Wall Street too sanguine about the House of Representatives’ proposal to gut the Inflation Reduction Act? When the House Ways and Means Committee unveiled its language on the law on Monday — phasing out tax credits, implementing strict restrictions on business relationships with Chinese companies, and altering when projects are eligible for credits — some investors responded to the cutbacks by driving up the prices of some clean energy stocks.
The residential solar company Sunrun traded up on Tuesday by 8.6%, and the American solar manufacturer First Solar was up over 22%. (Stock movements on Monday were largely in response to the pause of the U.S.-China trade war, also announced that morning.)
“The early drafts of a Republican tax and spending bill weren’t as bad for renewables as feared,” wrote Barron’s. Morgan Stanley analysts used the same language — “not as bad as feared” — in a note to clients on the text. “Industry was bracing for way worse,” Don Schneider, the deputy head of public policy for Piper Sandler and a former Republican staffer on the Ways and Means Committee, wrote on X.
While many analysts — and, to be honest, journalists at Heatmap — have issued dire warnings about how the various provisions of the Ways and Means language could together make much of the IRA essentially impossible to use, even before the tax credits phase out, investors on Wall Street and in Washington seem to have shrugged them off. Some level of cutting was all but inevitable, and “not as bad as it could have been” is reason enough to celebrate — plus there’s also “it’ll probably change, anyway.”
There’s something to this. A group ofmoderate Republicans criticized the language on Wednesday as too restrictive, specifically citing changes to three overarching features of the tax credits: when projects would be eligible for tax credits, where companies are able to source components and materials, and whether companies are allowed to freely buy and sell tax credits generated by their projects. (Wouldn’t you know it, these complaints largely echo what Heatmap has written in the past few days.)
In the Senate, meanwhile, Republican Kevin Cramer of North Dakota, said that the text as written would be too damaging to advanced nuclear and enhanced geothermal generation. The phase-out timelines in the Ways and Means language are “too short for truly new technologies,” Cramer told Politico.
Pavan Venkatakrishnan, an infrastructure fellow at the Institute for Progress, told me that he expects the bill to evolve in a way to meet the concerns of Senate Republicans like Cramer.
“Given considerations both political and procedural, like the more flexible reconciliation instructions Senate Finance is afforded relative to House Ways and Means and the disproportionate impact current text entails for technologies Republicans traditionally favor, like nuclear, geothermal, and hydropower, I think it’s fair to say that this text will change over the coming weeks,” he said.
Finally, days after the Ways and Means committee made its thinking public, Wall Street seems to be catching on to the implications. The new foreign entities of concern rules pose a particularly huge danger to the renewable energy sector, according to Jefferies analyst Julien Dumoulin-Smith, and especially to energy storage, which would be the key provider of reliability on a renewable-heavy grid. Energy storage looks to account for almost 30% of new generator additions this year, according to the Energy Information Administration.
“We think the market got it wrong for storage,” Dumoulin-Smith wrote in a note to clients. The market has yet to “digest and fully interpret the implications of proposed tariff and tax policy, which as currently written do not bode well for storage,” he said. The foreign sourcing language “is more restrictive than initially thought, with some industry stakeholders calling the proposal a near repeal on IRA.”
The storage supply chain is intensely entangled with China. Many companies, including Tesla,have been forced to disclose to investors just how reliant they are on China for their storage businesses.
China alone accounted for 70% of battery imports in 2024, according to industry analysts at BloombergNEF, over $14 billion worth. About a quarter of the metals used in battery manufacturing — especially graphite — came from China, BNEF figures show. For specific battery chemistry like lithium iron phosphate, which is popular for stationary storage products, the supply chain is essentially 100% Chinese.
Wall Street revenue and profit estimates “do not adequately capture the extent of risks” facing the U.S. storage industry, Dumoulin-Smith wrote. The storage company Fluence’s stock fell around 1.5% today, and is down over 5.5% since close of trading on Monday, as the market began to digest the House language.
It is possible that the foreign sourcing rules will be loosened and phase-outs for tax credits and transferability lengthened, Venkatakrishnan told me, but not in a way that would endanger the overall structure of the bill. Cuts to the Inflation Reduction Act are a key source of revenue for the Republican bill-writers to ensure as many of the tax cuts they want can fit within the budgetary scope they’ve given themselves.
“Any adjustments will be made with an eye toward ensuring budgetary offsets are sufficient to enable success of the broader enterprise,” Venkatakrishnan said. In other words, as much as some lawmakers may want to see these tax credits preserved, ultimately, they’ve got to pass a bill to ensure Trump’s tax cuts stick around.
And more of the week’s biggest conflicts around renewable energy projects.
1. St. Lawrence County, New York – It’s hard out here for a 2-megawatt solar project in upstate New York.
2. McKean County, Pennsylvania – Swift Current Energy is now dealing with an insurgent opposition campaign against its Black Cherry wind project.
3. Blair County, Pennsylvania – Good news is elsewhere in Pennsylvania though as this county has given the go-ahead for a new utility-scale Ampliform solar project, the BL Hileman Hollow Solar project.
4. Allen County, Ohio – The mayor of Lima, a small city in this county, is publicly calling on Ohio senators to make sure that the pending reconciliation bill in Congress ensures Inflation Reduction Act tax credits can still apply to municipalities.
5. Vanderburgh County, Indiana – Orion Energy’s Blue Grass Creek solar project is now facing opposition too, with Orion representatives telling local press they actually expected some locals to be against the project.
6. Otsego County, Michigan – That state forest-felling solar farm that Fox News loved to hate? That idea is no more.
7. Adams County, Illinois – The Green Key solar project we’ve been following in the town of Ursa has received its special use permit from the county after vociferous local opposition.
8. Dane County, Wisconsin – We’re getting a taste of local worry about how the GOP’s efforts to change the IRA could affect municipal energy planning, thanks to the village of Waukanee.
9. Olmsted County, Minnesota – The fight over Ranger Power’s Lemon Hill solar project is evolving into a nascent bid to give localities more control over permitting renewables projects.
10. Cherry County, Nebraska – This county is seeking an investigation into whether Sandhills Energy’s BSH Kilgore wind farm is violating zoning standards after receiving requests from residents who are against the project.
11. Albany County, Wyoming – Bird conservation activists fighting wind projects in Wyoming claim the Interior Department is providing them incomplete information under the Freedom of Information Act about wind turbines and eagle deaths.
12. Santa Fe County, New Mexico – Renowned climate activist Bill McKibben is publicly going on the attack against opponents of an individual solar project, the AES Rancho Viejo solar farm near Santa Fe.
13. Apache County, Arizona – Opponents of the Repsol Lava Run wind project are now rallying around trying to stop transmission for the project.
14. Klickitat County, Washington – The Cypress Creek Renewables solar project we told you last week got fast-tracked by the state Energy Facility Site Evaluation Council? Turns out the county had a moratorium on new solar and anticipated a chance to formally file public comments before that would happen.