Energy Legislation And Regulation To Watch In 2024

In this Law360 article on energy legislative and regulatory trends in 2024, partner Brooksany Barrowes discusses the Federal Energy Regulatory Commission and the future of its commissioners heading into the new year. 

For energy policy watchers, there's a general rule of thumb in a presidential election year: Look to the regulators, not the legislators.

And attorneys say 2024 will likely heed that rule, especially with a divided Congress.

"You don't tend to see big, dramatic legislation coming in an election year, and I have no reason to think that's going to change this year," said Sean Atkins, who co-chairs Davis Wright Tremaine LLP's energy, environmental and natural resources practice.

But 2024 could be a hugely consequential year for energy regulation, with the Biden administration trying to push out rules before a potential shift in the White House, as well as potential rescissions under the Congressional Review Act. That includes U.S. Environmental Protection Agency rules on greenhouse gas emissions, as well as the U.S. Securities and Exchange Commission's climate change disclosure rules.

"It would not be surprising to see big-ticket rules. There will be a push to finalize those by mid-summer," said Sidley Austin LLP counsel Brittany Bolen, a former EPA official during the Trump administration.

Industry eyes will also be on the Federal Energy Regulatory Commission and its efforts to move electric transmission policies forward amid a continued churn of commissioners.

Here are several legislative and regulatory moves that energy attorneys will be watching in 2024.

Infrastructure Permitting Reform

The odds of some form of legislation that would accelerate the federal permitting process for transmission lines, pipelines and other energy infrastructure advancing in a divided Congress have only grown slimmer, attorneys say.

Neither Republicans nor Democrats will be eager to hand their counterparts any major legislative victories before Election Day. And Senate Energy and Natural Resources Committee Chairman Joe Manchin, D-W.Va., who introduced permitting legislation last year, isn't running for reelection.

Still, permitting bills continue to be introduced, including some with bipartisan support.

"Me being an optimist, I would like to think that those conversations will continue," said Hogan Lovells senior adviser Neil Chatterjee, a former FERC chairman who also served as an energy adviser to Senate Minority Leader Mitch McConnell, R-Ky. "Maybe in a lame-duck session there could be a path forward."

Wilson Sonsini Goodrich & Rosati PC associate Jaron Goddard, formerly chief counsel and climate policy adviser to Sen. Patty Murray, D-Wash., said the best vehicle for any permitting changes to make it through Congress may be through the 2024 National Defense Authorization Act, as opposed to any general spending bill.

"Rep. [Sean] Casten's bill on interconnection and transmission reform has garnered some significant bipartisan support," she said. "Between that ... and Sen. Manchin's permitting reform priorities ... those would be the two areas that I'd be looking at."

Power Plant Greenhouse Gas Emissions Rules

The eyes of the power sector will be on the EPA and the finalization of rules curbing greenhouse gas emissions from power plants.

The EPA's draft rules focus on emissions control methods at the plants themselves to meet the rules' GHG reduction targets, including carbon capture and storage, co-firing with gas and co-firing with low-GHG hydrogen. The proposal is an attempt to stay within the legal lines drawn by the Supreme Court in West Virginia v. EPA , in which the court found the agency doesn't have the authority to force power plants to change the source of their energy, as was contemplated in the Obama-era Clean Power Plan.

Bolen said that while the EPA wants to get the final rules out before any potential electoral shift, the agency appears to be taking a deliberate pace, noting a November request for supplemental comments on the rule, including possible concerns over grid reliability.

"You may see the agency potentially revisiting some of the timelines set," she said. "I think it is trying to see what kind of projects may be able to advance to help bolster its case."

EPA Methane Emissions Fee

The Biden administration made its big methane policy move in December, when the EPA finalized sweeping methane emissions standards for oil and gas infrastructure that included the first-ever standards for existing infrastructure.

But there's a companion policy that industry is eagerly waiting for the EPA to finalize: the implementation of an Inflation Reduction Act-mandated fee that certain oil and gas companies must pay if their methane emissions exceed certain thresholds starting in 2024.

"That's going to be a big one, because the methane fee was one of the big pay-fors out of the IRA, and it's a big part of the administration's methane climate policy," Bolen said.

The law says that if the EPA finalizes its methane rules and accepts state implementation plans before them, companies within those states may be able to avoid paying the fee, and in releasing the emissions rules in December, agency officials said they considered the fee a "bridge" to complying with the new standards.

But Poe Leggette, who leads BakerHostetler's energy industry team, said the EPA may have trouble enforcing the fee. The Inflation Reduction Act amended the Clean Air Act to charge a fee based on the weight of the excess methane emissions, but exemptions are tied to the volumes of gas sold, and that's not an apples-to-apples comparison, he said.

"There may be no enforceable way to allow companies to bridge the gap," Leggette said. "Doesn't mean the charge won't be owed, but it does mean that companies will have to come up with company-specific ways to make that gap, in good faith, on their own."

The Bare Minimum of FERC Commissioners

The departure of Republican Commissioner James Danly at the end of 2023 leaves FERC with three commissioners, the minimum needed to sustain a quorum. Meanwhile, Democratic Commissioner Allison Clements' term expires at the end of June, though she can continue to serve until the end of the year.

Yet there have been no replacements nominated yet by the White House, and attorneys say the chances of nominees being confirmed by the Senate decrease as Election Day draws closer.

"It seems like if there's going to be anyone approved, it would have to be early in the year, and it would have to be a package deal with one commissioner from each side of the aisle," said Kirkland & Ellis LLP energy regulatory partner Brooksany Barrowes. "It could be a really bad situation if Commissioner Clements leaves in June and we're down to two commissioners, in terms of getting anything done at all."

Attorneys say FERC has previously pushed out major policies with only three commissioners, and the current complement — Clements along with Democratic Chairman Willie Phillips and Republican Commissioner Mark Christie — could make it easier to do so, as opposed to when FERC had four commissioners and was frequently split along partisan lines.

"If you had a paradigm in which Phillips and Christie were voting out gas projects and the three of them could find consensus on transmission [policy], I think most people would be satisfied," said Chatterjee.

But Chatterjee, whose own 2017 confirmation helped end six months of a quorum-less FERC, said a potential loss of a quorum next year won't be far from anyone's mind.

"I get nervous when you get down to three commissioners," he said. "I don't think FERC staff, the commissioners or stakeholders ever want to go through that [lack of quorum] again."

FERC Transmission Planning Rule

Attorneys say the most pressing item on the plate of a three-commissioner FERC may be the finalization of a long-awaited overhaul of how major electric transmission projects are planned and paid for.

FERC's proposal, unveiled in 2022, directs utilities and regional grid operators to create regional plans and a framework for allocating project costs. It requires transmission companies to take a more far-sighted approach to project planning and gives states a bigger say in how the costs for new projects are ultimately divvied up and charged to consumers.

With states retaining ultimate jurisdiction over transmission siting, cost allocation is frequently a sticking point, and how FERC ultimately addresses it in the final rule will be something to watch, attorneys say.

"Does FERC attempt to say, 'We're going to put our thumb on the scale in terms of cost allocation?'" Atkins said. "We need to be mindful that a couple of the commissioners are former state regulators."

Chris Jones, who leads Troutman Pepper's federal energy practice, said both FERC and the U.S. Department of Energy have focused on the relationship between federal planning and state permitting.

"Might that help close a gap between federal and state authority to get more transmission built?" he said.

There's also the question of whether a proposed partial restoration of a right of first refusal for incumbent utilities to build new projects makes it into the final rule. It has been fiercely opposed by many transmission developers, as well as clean energy and consumer advocates.

FERC Backstop Transmission Siting Authority

Another transmission policy FERC is poised to finalize is its implementation of backstop siting authority for transmission projects within national corridors designated by the Department of Energy.

The Infrastructure Investment and Jobs Act clarified that FERC had the authority to override state rejections of such projects. The agency issued its proposal in December 2022, but it's worth noting that past and present commissioners, including Phillips, have voiced hesitation about the agency using its backstop authority unless it's absolutely necessary.

"You're going to see some great reluctance to impose the federal will over states that are actively objecting to projects," Atkins said. "Having said that, it's been part of the big transmission policy puzzle."

Given the delicacy of the federal-state authority issue, Chatterjee expects the final rule to be something all three current commissioners can sign on to.

"It'd be very controversial for FERC to do something very aggressive and not get consensus," he said.

SEC Climate Disclosure Rule

The U.S. Securities and Exchange Commission's looming climate disclosure rules for corporations will be especially significant for energy companies, attorneys say.

While the rules will cover all public companies, the indirect focus is on the energy industry because the SEC in its proposal essentially signaled its desire for companies to disclose their energy footprints. That also compounds the disclosure requirement from energy firms — not only the climate risks of their own products and operations, but the business risks posed when other companies reduce their reliance on fossil fuels.

Many large energy companies already collect and publish climate data as part of voluntary environmental, social and governance or other sustainability reporting. Still, Leggette noted that the most recent report put out by the Intergovernmental Panel on Climate Change identified scores of climate risks.

"If you are a reporter in the energy industry, you will have a lot of scenarios to have to go through in order to have someone in the company make that signature of compliance under penalty of perjury," he said. "It's a very difficult task."