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They might not be worried now, but Democrats made the same mistake earlier this year.
Permitting reform is dead in the 118th Congress.
It died earlier this week, although you could be forgiven for missing it. On Tuesday, bipartisan talks among lawmakers fell apart over a bid to rewrite parts of the National Environmental Policy Act. The changes — pushed for by Representative Bruce Westerman, chairman of the House Natural Resources Committee — would have made it harder for outside groups to sue to block energy projects under NEPA, a 1970 law that governs the country’s process for environmental decisionmaking.
When those talks died, they also killed a separate deal over permitting struck earlier this year between Senator Joe Manchin of West Virginia and Senator John Barrasso of Wyoming. That deal, as I detailed last week, would have loosened some federal rules around oil and gas drilling in exchange for a new, quasi-mandatory scheme to build huge amounts of long-distance transmission.
Rest in peace, I suppose. Even if lawmakers could not agree on NEPA changes, I think Republicans made a mistake by not moving forward with the Manchin-Barrasso deal. (I still believe that the standalone deal could have passed the Senate and the House if put to a vote.) At this point, I do not think we will see another shot at bipartisan permitting reform until at least late 2026, when the federal highway law will need fresh funding.
But it is difficult to get too upset about this failure because larger mistakes have since compounded the initial one. On Wednesday, Republican Speaker Mike Johnson’s bipartisan deal to fund the government — which is, after all, a much more fundamental task of governance than rewriting some federal permitting laws — fell apart, seemingly because Donald Trump and Elon Musk decided they didn’t like it. If I can indulge in the subjunctive for a moment: That breakdown might have likely killed any potential permitting deal, too. So even in a world where lawmakers somehow did strike a deal earlier this week, it might already be dead. (As I write this, the House GOP has reportedly reached a new deal to fund the government through March, which has weakened or removed provisions governing pharmacy benefit managers and limiting American investments in China.)
The facile reading of this situation is that Republicans now hold the advantage. The Trump administration will soon be able to implement some of the fossil fuel provisions in the Manchin-Barrasso deal through the administrative state. Trump will likely expand onshore and offshore drilling, will lease the government’s best acreage to oil and gas companies, and will approve as many liquified natural gas export terminals as possible. His administration will do so, however, without the enhanced legal protection that the deal would have provided — and while those protections are not a must-have, especially with a friendly Supreme Court, their absence will still allow environmental groups to try to run down the clock on some of Trump’s more ambitious initiatives.
Republicans believe that they will be able to get parts of permitting reform done in a partisan reconciliation bill next year. These efforts seem quite likely to run aground, at least as long as something like the current rules governing reconciliation bills hold. I have heard some crazy proposals on this topic — what if skipping a permitting fight somehow became a revenue-raiser for the federal government? — but even they do not touch the deep structure of NEPA in the way a bipartisan compromise could. As Westerman told Politico’s Josh Siegel: “We need 60 votes in the Senate to get real permitting reform … People are just going to have to come to an agreement on what permitting reform is.” In any case, Manchin and the Democrats already tried to reform the permitting system via a partisan reconciliation bill and found it essentially impossible.
Even if reconciliation fails, Republicans say, they will still be in a better negotiating position next year than this year because the party will control a few more Senate votes. But will they? The GOP will just have come off a difficult fight over tax reform. Twelve or 24 months from now, demands on the country’s electricity grid are likely to be higher than they are today, and the risk of blackouts will be higher than before. The lack of a robust transmission network will hinder the ability to build a massive new AI infrastructure, as some of Trump’s tech industry backers hope. But 12 or 24 months from now, too, Democrats — furious at Trump — are not going to be in a dealmaking mood, and Republicans have relatively few ways to bring them to the table.
In any case, savvy Republicans should have realized that it is important to get supply-side economic reforms done as early in a president’s four-year term as possible. Such changes take time to filter through the system and turn into real projects and real economic activity; passing the law as early as possible means that the president’s party can enjoy them and campaign on them.
All of it starts to seem more and more familiar. When Manchin and Barrasso unveiled their compromise earlier this year, Democrats didn’t act quickly on it. They felt confident that the window for a deal wouldn’t close — and they looked forward to a potential trifecta, when they would be able to get even more done (and reject some of Manchin’s fossil fuel-friendly compromises).
Democrats, I think, wound up regretting the cavalier attitude that they brought to permitting reform before Trump’s win. But now the GOP is acting the same way: It is rejecting compromises, believing that it will be able to strike a better deal on permitting issues during its forthcoming trifecta. That was a mistake when Democrats did it. I think it will be a mistake for Republicans, too.
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The department creates a seemingly impossible new permitting criteria for renewable energy.
The Interior Department released a new secretarial order Friday saying it may no longer issue any permits to a solar or wind project on federal lands unless the agency believes it will generate as much energy per acre as a coal, gas, or nuclear power plant.
Hypothetically, this could kill off any solar or wind project going through permitting that is sited on federal lands, because these facilities would technically be less energy dense than coal, gas, and nuclear plants. This is irrespective of the potential benefits solar and wind may have for the environment or reducing carbon emissions – none of which are mentioned in the order.
“Gargantuan, unreliable, intermittent energy projects hold America back from achieving U.S. Energy Dominance while weighing heavily on the American taxpayer and environment,” Interior Secretary Doug Burgum said in a statement included in a press release announcing the move. “By considering energy generation optimization, the Department will be able to better manage our federal lands, minimize environmental impact, and maximize energy development to further President Donald Trump’s energy goals.”
Here’s how this new regime, which I and many in the energy sector are now suddenly trying to wrap their heads around, is apparently going to work: solar and wind facilities will now be evaluated based on their “capacity density,” which is calculated based on the ratio of acres used for a project compared to its power generation capacity. If a project has a lower “capacity density” than what the department considers to be a “reasonable alternative,” then it may no longer be able to get a permit.
“On a technology-neutral basis,” the order states, “wind and solar projects use disproportionate Federal lands relative to their energy generation when compared to other energy sources, like nuclear, gas, and coal.” The document going on to give an example, claiming that data from the U.S. Energy Information Administration shows an advanced nuclear plant uses less federal acreage than an offshore wind farm and “thus, when there are reasonable alternatives that can generate the same amount of or more energy on far less Federal land, wind and solar projects may unnecessarily and unduly degrade Federal lands.” The order also includes a chart comparing the capacity density of wind and solar facilities to conventional nuclear, gas, and coal, as well as geothermal, and claims that these sources are superior as well. The document does not reference hydropower.
There’s also a whole host of other implications in this order. Crucially, does the Interior expect that by choking off the flow of permits, cities and companies will just pony up to build what the Trump administration considers “reasonable alternatives” instead? Is the federal government going to tell communities in Nevada, for example, that they must suddenly build gas plants in the desert instead of solar farms to meet their increasing energy needs?
In any case, much more is coming, as this order simply built off of a separate secretarial order earlier this week commanding staff to prepare a litany of recommendations on ending alleged “preferential treatment” for solar and wind facilities. In other words hold my beer – and hold onto yours, too.
That’s okay for clean energy firms, terrible for manufacturers, and a big risk for everyone.
Over the past few months, you could put together three different — and somewhat conflicting — pictures of the American economy.
For companies exposed to the AI boom, business has been good — excellent, even. The surge in ongoing capital investment into data centers and electricity has been larger than other recent booms, such as the telecom buildout. Electricity demand is soaring, especially in Texas and the Mid-Atlantic. Technology companies have signed power offtake deals with nuclear and hydroelectricity companies. If anything, companies exposed to artificial intelligence are more afflicted by congested supply chains and shortages than by slack demand — see the yearslong waiting lists to get a new transformer or natural gas turbine.
Outside of the AI economy, though, the economy has been a fair bit colder. You might even say it’s been frozen by indecision. When you talk to business leaders, they confess confusion about where things are heading. President Trump’s constantly changing tariffs — and his administration’s mercurial policy shifts — have made it difficult for non-AI-exposed businesses to plan long-term capital investment.
You could hear this view from clean energy manufacturing and traditional fossil firms alike. When I talked to John Henry Harris, the CEO of the medium-duty truck maker Harbinger Motors, for an episode of Heatmap’s Shift Key podcast in June, he told me that his company was just about to shift a production process to Mexico when a last-minute Trump change made it cheaper to keep it in China. Meanwhile, an oil and gas executive recently told the Dallas Federal Reserve: “The Liberation Day chaos and tariff antics have harmed the domestic energy industry. Drill, baby, drill will not happen with this level of volatility.”
But the data contradicted that tepid view. This was the third picture that we were getting of the economy. Through the summer, federal surveys showed an economy that was performing okay. In May, according to the Bureau of Labor Statistics, the U.S. economy added 139,000 jobs; it gained another 147,000 jobs, apparently, in June. The AI boom was clearly contributing to those robust reports. But how could an economy that business leaders otherwise described as difficult be going so well?
Now we can finally square these disparate pictures.
On Friday, the federal government released its newest tranche of job numbers. The headline number was mediocre — the U.S. added a mere 73,000 jobs in July — but the guts of the report were worse. The government revised down its estimate of the May and June reports by a total of 258,000 jobs. With these new numbers in hand, it’s clear that the labor market has essentially stalled out since Liberation Day in April.
The unemployment rate slightly rose to 4.2%, which was in line with what economists predicted.
These new reports clarify that the broader American economy wasn’t actually thriving. Its summer strength was a mirage the whole time. Outside of AI, things are downright frigid. And as President Trump continues to shuffle tariffs and increase trade uncertainty, we can expect conditions to worsen. Trump seems hellbent even on clouding our ability to understand the underlying economy: on Friday afternoon, he fired the Bureau of Labor Statistics commissioner, a career civil servant.
If you squint, you can see a hazy “AI sector” versus “non-AI sector” distinction in the data, even among the energy and decarbonization companies we cover at Heatmap. But it’s not obvious. Contrary to what you might expect when power demand is surging, utility employment was basically flat last month. Heavy and civil engineering construction jobs were up by 6,000, and “nonresidential specialty trade contractors” — a category that can include electricians — gained nearly 2,000 jobs.
But manufacturing lost 11,000 jobs last month, with the motor vehicles industry driving 2,600 of those losses. Mining, quarrying, and oil and gas jobs were down. The Institute of Supply Management report, a private survey of U.S. manufacturing activity, showed the sector shrank in July for the fifth month in a row.
And even though the Department of Government Efficiency’s deferred buyout program for more than 150,000 people has yet to hit, the federal government bled 12,000 jobs.
In a way, the clean energy industry — or at least solar, battery, nuclear, and geothermal developers — might consider themselves lucky. Despite the best efforts of Trump’s officials, and despite the chaos of President Trump’s policies, they have been able to eke through the past few months because of the AI boom. Nearly 70% of all new power-generating capacity added to the U.S. grid in the first quarter of this year came from solar panels, and the government has thrown its weight behind next-generation nuclear and geothermal technologies. A tepid jobs report might even bring some interest rate relief from the Federal Reserve.
But if that AI boom slows down, we should all watch out below.
A conversation with Heather O’Neill of Advanced Energy United.
This week’s conversation is with Heather O’Neill, CEO of renewables advocacy group Advanced Energy United. I wanted to chat with O’Neill in light of the recent effective repeal of the Inflation Reduction Act’s clean electricity tax credits and the action at the Interior Department clamping down on development. I’m quite glad she was game to talk hot topics, including the future of wind energy and whether we’ll see blue states step into the vacuum left by the federal government.
The following conversation has been lightly edited for clarity.
During Trump 1.0 we saw blue states really step into the climate role in light of the federal government. Do you see anything similar taking place now?
I think this moment we’re in – it is a different moment.
How are we handling load growth? How are we making sure consumers are not paying for expensive stranded assets? Thinking about energy affordability? All of those challenges absolutely present a different moment and will result in a different response from state leaders.
But that’s where some of the changes our industry has gone through mean we’re able to meet that moment and provide solutions to those challenges. I think we need aggressive action from state leaders and I think we’ll see that from them, because of the challenges in front of them.
What does that look like?
Every state is different. Take Virginia for example. Five years after we passed the Virginia Clean Economy Act – a big, bold promise of action – we’re not on track. So what are the things we need to do to keep the foot on the accelerator there? This last legislative session we passed the virtual power plant legislation that’ll help tremendously in terms of grid flexibility. We made a big push around siting and permitting reform, and we didn’t quite get it over the finish line but that’s the kind of thing where we made a good foundation.
Or Texas. There’s so much advanced energy powering Texas right now. You had catastrophic grid failure in Hurricane Uri and look at what they’ve been able to build out in response to that: wind, solar, and in the last few years, battery storage, and they just passed the energy waste reduction [bill].
We need to build things and make it easier to build – siting and permitting reform – but it’s also states depending on their environment looking at and engaging with their regional transmission organization.
You saw that last week, a robust set of governors across the PJM region called on them to improve their interconnection queue. It’s about pushing and finding reforms at the market level, to get these assets online and get on the grid deployed.
I think the point about forward momentum, I definitely see what you’re saying there about the need for action. Do you see state primacy laws or pre-emption laws? Like what Michigan, New York, and California have done…
I’m not a siting expert, but the reform packages that work the best include engagement from communities in meaningful ways. But they also make sure you’re not having a vocal minority drowning out the benefits and dragging out the process forever. There are timelines and certainty attached to it while still having meaningful local engagement.
Our industry absolutely has to continue to lean into more local engagement and community engagement around the benefits of a project and what they can deliver for a community. I also think there’s a fair amount of making sure the state is creating that pathway, providing that certainty, so we can actually move forward to build out these projects.
From the federal government’s perspective, they’re cracking down on wind and solar projects while changing the tax credits. Do you see states presenting their own incentives for renewables in lieu of federal incentives? I’ve wondered if that’ll happen given inflation and affordability concerns.
No, I think we have to be really creative as an industry, and state leaders have to be creative too. If I’m a governor, affordability concerns were already front and center for me, and now given what just happened, they’re grappling with incredibly tight state budgets that are about to get tighter, including health care. They’re going to see state budgets hit really hard. And there’s energy impacts – we’re cutting off supply, so we’re going to see prices go up.
This is where governors and state leaders can act but I think in this context of tight state budgets I don’t think we can expect to see states replacing incentive packages.
It’ll be: how do we take advantage of all the flexible tools that we have to help shape and reduce demand in meaningful ways that’ll save consumers money, as well as push on building out projects and getting existing juice out of the transmission system we have today.
Is there a future for wind in the United States?
It is an incredibly challenging environment – no question – for all of our technologies, wind included. I don’t want to sugar-coat that at all.
But I look at the whole picture, and I include wind in this: the technologies have improved dramatically in the past couple of decades and the costs have come down. When you look around at what resources are around to deploy, it’s advanced energy. We’re seeing it continue to grow. There’ll be headwinds, and it’ll be more expensive for all of us. But I look at what our industry and our technologies are able to offer and deliver, and I am confident we’ll continue to see growth.