by Bill Kovacs
If our great nation is going to begin creating jobs at a faster rate, we must get back in the business of building things. We also need to figure out how to do it without years and years of permit delays related to our complex regulatory process that allows almost anyone to impede or stop any energy project.
For years, we knew of anecdotal evidence that projects were being delayed or stopped throughout the nation, but there was no study that systematically examined the circumstances of such challenged projects. To address this information shortfall, Chamber staff implemented Project No Project, an initiative that assesses the broad range of energy projects that are being stalled, stopped, or outright killed nationwide due to “Not In My Back Yard” (NIMBY) activism, a broken permitting process and a system that allows limitless challenges by opponents of development. Results of the assessment are compiled onto this website, which serves as a web-based project inventory. The purpose of the Project No Project initiative is to enable the Chamber to understand potential impacts of serious project impediments on our nation’s economic development prospects.
The results of this analysis are startling! One of the most surprising findings is that it is just as difficult to build a wind farm in the U.S. as it is to build a coal-fired power plant. In fact, roughly 45 percent of the challenged projects that were identified are renewable energy projects. Often, many of the same groups urging us to think globally about renewable energy are acting locally to stop the very same renewable energy projects that could create jobs and reduce greenhouse gas emissions. NIMBY activism has blocked more renewable projects than coal-fired power plants by organizing local opposition, changing zoning laws, opposing permits, filing lawsuits, and using other long delay mechanisms, effectively bleeding projects dry of their financing.
The Chamber believes that our nation’s complex, disorganized regulatory process for siting and permitting new facilities and its frequent manipulation by NIMBY activists constitute a major impediment to economic development and job creation. To test this belief, we commissioned the economic study, Progress Denied: The Potential Economic Impact of Permitting Challenges Facing Proposed Energy Projects, which was produced by Steve Pociask of TeleNomic Research, LLC and Joseph P. Fuhr, Jr. of Widener University. They were asked to examine what might be the potential short- and long-term economic and jobs benefits if the energy projects found on the Project No Project web site were successfully implemented.
Their study has produced several significant and insightful findings: For example, Pociask and Fuhr find that successful construction of the 351 projects identified in the Project No Project inventory could produce a $1.1 trillion short-term boost to the economy and create 1.9 million jobs annually. Moreover, these facilities, once constructed, continue to generate jobs once built, because they operate for years or even decades. Based on their analysis, Pociask and Fuhr estimate that, in aggregate, each year the operation of these projects could generate $145 billion in economic benefits and involve 791,000 jobs. Unfortunately, despite the potentially significant economic and employment stimulus that could result from building these new energy facilities, the outlook for many of these projects is murky. Serious regulatory inefficiencies and permitting delays persist and NIMBY activists are winning more often than they are losing. All of this is leading to serious marketplace uncertainties, which can drive investors to opt not to finance new major construction projects or pull out of previous financial commitments.
This study, which is based on the Project No Project inventory, is just the first step in what will hopefully become a series of further economic analyses. Lawmakers and the American public should come to understand that our broken permitting process is denying across the country the opportunity to be fairly considered on their merits so the sound projects can be constructed and operated within a reasonable period of time. To be clear, we are not saying that ill-conceived projects should be allowed to move forward. Rather, all projects should be given a fair chance to prove their worth in the market within a reasonable period of time. And if a project is worthy, it should receive a permit. It is harmful to our economy to have needed projects stopped by regulatory inefficiencies or because a few individuals and entities oppose building anything anywhere!
We believe this study is the first of its kind, and hopefully, in addition, will encourage others to look further at the impact of denying permits upon other industries besides those in the energy sector. Another hope is that some organization decides to undertake a macroeconomic model to shed additional light on the impact that permit denials will have on long-term economic development, including the economic impact of having available greater supplies of energy.
The study also confirms for big energy projects what we are now finding on a day-to-day basis from the country’s efforts to implement “shovel ready projects” under the American Recovery and Reinvestment Act of 2009 (the “Recovery Act”): that is, very few projects are truly “shovel ready,” and getting through the permitting process is difficult if not impossible. At least in the case of Recovery Act projects, recognizing the problems posed by permitting impediments, Senators Barrasso and Boxer amended the Act to require the National Environmental Policy Act (NEPA) process be implemented “on an expeditious basis” and that “the shortest existing applicable process” under NEPA must be used. This amendment made all the difference in getting Recovery Act projects underway. Because of this amendment, over 179,000 of the 250,000 projects covered by the bill received the most expeditious form of compliance treatment possible with regard to NEPA—a categorical exemption—and work was able to begin and jobs were created. Moreover, only 820 projects received an environmental impact statement, the longest available process under NEPA. These circumstances confirm a recognition among some policymakers that the permitting process is harming our ability to grow our economy so we can compete with the world. But there is still work to be done, as many potential projects are not Recovery Act projects.
Finally, although the Chamber subjected the study to several rounds of peer review, and the undertaking will remain an ongoing effort to refine our understanding of the cost of permit delays and other obstructions to project development, I must caution readers that this study, like any economic forecast, is not perfect. As previously observed, this study should be viewed as a first attempt to evaluate the permit challenges. We ask others to add to the body of work being developed and help us better improve our methodology for determining the lost economic and job opportunities that result from a failed permitting process. We encourage economists, think tanks, academics, and other interested parties to not only read the study but provide us feedback that might be helpful in refining our analysis.
In the meantime, the numbers speak for themselves. The economic and job impact projections of this study show that millions of jobs, and hundreds of billions of dollars in potential economic value, continue to sit on the shelf. This is not good for the nation’s well-being. Widespread failure to move energy projects forward in a timely manner works against our ability to address two of our nation’s most significant concerns: promoting substantial job creation and stimulating economic growth. The longer it takes to get the shovels into the ground and projects underway, the more expensive these projects become (owing to rising labor and materials costs as well as other factors) and correspondingly, the less confidence investors will have for successful project outcomes; a condition that will only limit the future competitiveness of the country.
What is urgently needed now is a careful consideration of how all these permitting obstacles and uncertainties and time delays can be addressed so as to speed up the processing, consideration, approval decisions, and development of many of the job-creating projects whose progress has so far been denied. If we fail to take on this challenge, we could find ourselves faced with: an endless litany of project failures; loss of investor confidence; fewer jobs created than we have the potential to create; and an inability to provide this nation with the energy it needs. This hardly seems a way to assure America’s competitiveness in the global marketplace.
Bill Kovacs is Senior Vice President for Environment, Technology and Regulatory Affairs at the U.S. Chamber of Commerce.