28 August 2017

New Executive Order Seeks to Jump Start the Effort to Rebuild America’s Infrastructure

“Crumbling infrastructure will be replaced with new roads, bridges, tunnels, airports, and railways gleaming across our very, very beautiful land.”  President Donald J. Trump

The new Executive Order on infrastructure unveiled last week on August 15, 2017 promises discipline, accountability, coordination and efficiency in regulatory vetting and approval of much needed growth in U.S. energy and infrastructure.  As such, this new order has wide ranging implications for addressing the state of energy and infrastructure in the U.S., recently rated as a D+ by the American Society of Civil Engineers in its 2017 Report Card.  The numbers behind both capital demand and the consequences of further slow growth in U.S. energy and infrastructure are staggering – so large that they are almost meaningless.  Conservative estimates project that U.S.$8 trillion will be required to meet basic infrastructure needs and prudent energy reserves in the U.S. through 2030.  This equates an annual capital demand of roughly U.S.$455 billion.  At the same time, very significant costs have been attached to slow and intransigent approval processes for new growth in the area.  Recent studies by the Government Accountability Office and National Association of Environmental Professionals identify significant lags in environmental approval processes for major infrastructure projects, with delays averaging six years for major projects, attending costs to the U.S. economy in the U.S.$ trillions and the unavailability of safe and modern infrastructure.  Thus, even with enormous pools of committed and available capital to meet this demand, smooth, effective, accountable and expeditious permitting has frustrated considerable energy and infrastructure development in the U.S.

The Trump Administration unveiled its response to what it referred to as the challenge of “the nation’s badly broken infrastructure permitting process” in the August 15, 2017 Presidential Executive Order on Establishing Discipline and Accountability in the Environmental Review and Permitting Process for Infrastructure (Infra EO).  The Infra EO has broad application to virtually all forms of infrastructure, including surface transportation, aviation, ports, water resources, energy production and generation (including renewables), electricity transmission, broadband internet, pipelines, stormwater and sewer infrastructure and drinking water infrastructure.  The Infra EO is all about unifying, streamlining and therefore speeding up the administrative approval process for major energy and infrastructure projects, and implementing mechanisms to ensure performance priority of and accountability in this new system.  The Infra EO’s two key process enhancements for new infrastructure projects are:

  1. setting performance priority goals to accelerate progress in inter-agency collaboration in the environmental review and authorization decision process (ERAD Process) and
  2. establishing a unified ERAD Process.

Performance Priority Goals

The Infra EO introduces CAP Goals1 as a means of fostering effective collaboration among the main regulatory stakeholders involved in ERAD Process for new infrastructure projects.  Specifically, the Infra EO directs the Director of the Office of Management and Budget (OMB) to establish a CAP Goal on Infrastructure Permitting with a view toward (1) achieving consistency, coordination and predictability among Federal agencies involved in the ERAD Process and (2) significantly reducing the overall ERAD Process to a target two years.  This two year target is indeed an aggressive one, especially given that a study of EIS issued in 2015 showed that only 16% of those were completed in two years or less, though it can be seen as a hopeful aspirational target.  The Infra EO also includes Agency Goals by further directing all Federal agencies involved in the ERAD Process for infrastructure projects to modify their Strategic Plans and Annual Performance Plans to incorporate performance goals consistent with the CAP Goals.

Performance Accountability through Unified Process

The Infra EO requires the OMB, within 180 days of establishing the CAP Goals, to issue guidance on a performance accountability system that will both track and score ERAD Process progress.  The tracking system will record:

  1. whether the project
    1. is processed using the “One Federal Decision” method (see below),
    2. has a permitting timetable,
    3. has a process to elevate matters where permitting milestones have not been achieved and
    4. agencies are meeting their permitting milestones, as well as
       
  2. the time and cost of completing the ERAD Process for an infrastructure project.

The scoring system requires the approval agencies involved in any project to submit reports containing data recorded using the tracking system above to OMB, enabling OMB to produce a scorecard of agency performance on CAP Goal targets for the relevant period.  As a means of tracking cost overruns linked to slow movement on the ERAD Process, approval authorities that are unable to meet a permitting milestone that leads to a “significant delay” of the project’s completion schedule must submit to the OMB an estimate of the delay’s costs to the project.  The Infra EO grants the Director of the OMB teeth to impose penalties during budget formulation on those agencies that significantly failed to meet permitting timetables.

The Infra EO also directs Federal agencies to follow a more unified ERAD Process major infrastructure projects, including:

  1. utilizing a “One Federal Decision” approach (see below) in the ERAD Process
     
  2. developing and tracking an agreed permitting timetable for each major infrastructure project that will be reviewed and updated quarterly and
     
  3. implementing a system for identifying and addressing project delays due to missed approval actions in the ERAD Process by automatically elevating a missed or extended milestone.

The One Federal Decision system contemplates that each major infrastructure project will have on lead Federal agency overseeing the ERAD Process for that project, as well as identified points of contact for each project at every lead Federal agency involved in the process.  The Infra EO seeks to streamline the approval and decision-making process by requiring:  (a) single Records of Decision (ROD) under NEPA, where practicable, and (b) completing of all Federal ERAD Process decisions within 90 days of the issuance of a ROD by the lead Federal agency (provided that the decision is supported by an adequately detailed EIS).  The Infra EO encharges the Council on Environmental Quality (CEQ) and the OMB to develop a framework for implementing the One Federal Decision system, including guidelines for cases when a State, tribal or local agency is the lead agency exercising NEPA responsibilities by assignment or delegation.

Enhancing the Process

As a means enhancing the processes contemplated and required by the Infra EO, the Infra EO directs the CEQ to take such administrative actions as are necessary to:

  • ensure “optimal interagency coordination” in the ERAD Process,
     
  • ensure coordinated, timely and efficient interagency actions in the ERAD Process,
     
  • rely, as permitted by law, on environmental actions and studies previously taken or conducted in connection with earlier Federal, State, tribal or local proceedings, and
     
  • take appropriate actions to “apply NEPA in a manner that reduces unnecessary burdens and delays as much as possible.”

The Infra EO also includes dispute resolution procedures and authorizes an interagency working group for identifying impediments to “efficient and effective” ERAD Processes for infrastructure projects.  First, the Infra EO authorizes the CEQ, upon the request of a lead Federal agency, cooperating agency or participating agency, to mediate interagency disputes relating to matters that may arise in the ERAD Process of an infrastructure project, except where the law requires a dispute resolution process otherwise.  Second, the Infra EO requires the CEQ to form an interagency working group to review NEPA and other relevant regulations impediments to the ERAD Process and formulate a plan (including a timeline for plan implementation) to address these impediments.

Critical Midstream Energy Development

The Infra EO also singles out midstream energy as a priority by directing the Departments of the Interior and Agriculture to lead in facilitating efforts to identify and designate “energy right-of-way corridors” on Federal lands for expedited ERAD Processes for the development of energy infrastructure projects.  This presumably refers to much needed capacity expansion in gas pipelines, terminals and related facilities designed to further U.S. energy security and the country’s ability to export its burgeoning gas reserves.

Federal Flood Risk Management

Finally, the Infra EO revokes Executive Order 13690 of January 30, 2015 (Establishing a Federal Flood Risk Management Standard and a Process for Further Soliciting and Considering Stakeholder Input).  This was a President Obama EO driven by climate change concerns that imposed flood risk reduction requirements on federally funded infrastructure projects.

Conclusions

The Infra EO is a bold and considered effort of the present Administration to jump start its U.S.$1 trillion infrastructure plan.  President Trump, flanked by Treasury Secretary Mnuchin,  OMB Director Mick Mulvaney and Transportation Secretary Elaine Chao, unveiled the Infra EO with much fanfare, including with graphic depictions of permitting process flowcharts showing the convoluted before and streamlined after ERAD Processes.  The Infra EO utilizes a number of measures to track costs and cut through regulatory red tape by introducing a streamlined, coordinated and unified ERAD Process for infrastructure projects with mechanisms for accountability and aspirations of shorter approval processes.

Like any other executive action, including those in this area of President Trump’s predecessors,2 the Infra EO is not an end all or fix all.  Delays will persist – some at the hands of developers themselves (and their contractors), and some due to judicial and administrative process.  Indeed, at the judicial level, just the day before the Infra EO was issued, the Federal courts overturned a favorable decision relating to the environmental assessment of a federal coal mining plan.3 In addition, only a few days later, a D.C. Circuit panel criticized the Federal Energy Regulatory Commission’s (FERC) approval of the $3.5 billion Southeast Market Pipelines project running from Alabama to Florida.4 The panel found that FERC fell short in its consideration of the greenhouse gas emissions of the project, and directed FERC to reconsider its environmental review.  In addition, it is wholly likely that administrative proceedings will continue to stand in the way of timely project development.  There are countless agencies involved in the permitting of energy and infrastructure projects (the U.S. Army Corps of Engineers, Department of Energy and Federal Highway Administration, to name but a few), each with their own detailed standards and entrenched stakeholders, that could for a variety of reasons issue a decision adverse to a project’s permitting process.  In many of these instances, an adverse decision from any of these agencies could mean a delay of months, and not infrequently years – exactly the type of action that the Infra EO seeks to address.

The Infra EO is a catalyst for much needed growth in the infrastructure and energy sector.  Without doubt, a number of the terms, concepts and processes outlined in the Infra EO will require further development and definition.  However, the Infra EO is a welcome start to what is hopefully a concerted effort by the Federal government to spur development of much needed new, modernized, fortified and improved energy and infrastructure projects throughout the country.  Beyond Federal action, with State governments initiating so many critical infrastructure projects, the Infra EO is also a strong signal to State governments to respond by coming to market with deals for the private sector.

 

 

 

For more information, contact

 
Name Telephone

Email

     
Mitchell A. Silk +1 212 610 6303 mitchell.silk@allenovery.com
     
Kent Rowey +1 212 610 6390 kent.rowey@allenovery.com
     
Ken Rivlin +1 212 610 6460 ken.rivlin@allenovery.com
     

1 These are the Federal Government Priority Goals established through the Government Performance and Results Modernization Act of 2010.

2 See President Bush’s EO 13212 to expedite energy-related projects and to create an interagency task force to help accelerate review of these projects and his EO 13274 to create an interagency Transportation Infrastructure Streamlining Task Force to identify ways to expedite review and permitting of transportation infrastructure projects and President Obama’s EO 13604 “Improving Performance of Federal Permitting and Review of Infrastructure Projects”.

3 Montana Environmental Information Center v. U.S. Office of Surface Mining, No. 9:15-cv-00106 (D. Mont. Aug. 14, 2017).

4 Sierra Club et al. v. FERC, No. 16-1329 (USCA DC Circuit Aug 22, 2017).


 

Kent Rowey +1 212 6106390
Partner, New York kent.rowey@allenovery.com
Ken Rivlin +1 212 610 6460
Partner, New York ken.rivlin@allenovery.com

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