Revisions to BAAJA permitting certainty provisions fall short of addressing risks
The following blog is part of a series examining specific provisions in the Bipartisan American Affordability and Jobs Act (BAAJA). Clean Air Task Force is taking a close look at the bill to identify opportunities to strengthen its provisions, address potential gaps, and improve its effectiveness in meeting the country’s energy needs reliably and affordably.
CATF has constructively engaged in the permitting reform policy discussion throughout the 119th Congress because we believe that the country needs more effective permitting processes to build clean energy infrastructure and electricity generation required to meet broadly shared economic and emissions reduction goals. Delivering project certainty has been a key bipartisan goal of these permitting reform conversations. Negotiators of the Bipartisan American Affordability and Jobs Act (BAAJA) have on many occasions expressed concerns with the myriad ways the administration has canceled, delayed, or otherwise stymied offshore wind and other clean energy projects. The drafters have included Title IV of BAAJA, which covers permitting certainty, as a way to prevent further meddling.
This post focuses not on whether BAAJA would provide an effective deterrent against future cancellations, but instead on the risk that it could inadvertently make it more difficult for future administrations to issue pollution control standards, including for greenhouse gas emissions. Even after the release of the manager’s amendment, which included changes intended to allay that concern, the problem has been lessened but not eliminated. This post explains how section 1401 of BAAJA creates that risk, why the manager’s amendment fails to resolve it, and provides suggestions for how to ensure future pollution limits do not wind up facing new headwinds.
BAAJA’s permitting certainty title creates risks for future pollution control standards
The goal of section 1401 is to maintain validly-issued federal authorizations and permits by preventing the executive branch from taking actions to cancel or modify them. A particularly egregious example of improper cancellations occurred last December when the administration issued stop-work orders for five offshore wind projects that were under construction. After the wind project developers sued, courts blocked each of those orders. Section 1401 would create legal avenues for the holders of similarly canceled or thwarted projects to seek judicial relief, not only in the form of injunctions and reinstated permits but also including damages awarded from the Judgment Fund, a permanent, indefinite appropriation that is not impacted by the annual appropriations process. The section’s logic is that the threat of costly litigation filed by project developers facing cancelations or delays would deter future actions with those effects.
The terms of section 1401 are remarkably broad. It covers a sweeping range of federal authorizations or permits that are “necessary for the construction or operation at normal capacity of a project,” and, unlike section 1402, is not limited to energy projects or infrastructure. The section would restrict a federal department or agency from taking “any new action that would revoke, rescind, withdraw, terminate, suspend, vacate, remand, reopen, materially amend, or materially alter” such a federal authorization or project. If an agency were to do so, it provides for judicial review in federal district court under a favorable standard for the project applicant—where the government has the burden of proof—and where a court can order reinstatement of the authorization or permit, injunctive relief to prevent further meddling, attorneys’ fees, costs associated with delay, and damages where the agency acted in bad faith.
One concern with this section is that it would make it more difficult for future administrations to adopt pollution control standards that result in changes to permits that affect how projects operate. For instance, if EPA were to issue a future greenhouse-gas pollution limit for power plants, that standard may require changes to existing permits. If that standard is based on a pollution control technology that requires auxiliary energy to operate and thereby drops the net output of the power plant, a plant operator could argue that the revised permit to comply with that standard prevents it from operating at “normal capacity.” Under the Clean Air Act’s judicial review provision, challenges to nationally applicable regulations issued by EPA such as this possible rule can only be filed in the U.S. Court of Appeals for the D.C. Circuit. However, section 1401 does not have this jurisdictional restriction. It therefore creates a new risk that multiple, project-specific challenges could instead be filed in numerous district courts that, if successful, could not only enjoin the rule’s application but also provide payouts to the polluters.
The section also does not differentiate between unlawfully issued permits or applications—for instance, an authorization for polluting infrastructure rushed through without proper reviews or oil and gas leases that conflict with land use plan requirements or fail to comply with procedural safeguards—and those issued with proper observance of legal requirements. The section therefore creates a risk that it would be difficult for future administrations to unwind hastily issued or unlawful permits and authorizations without facing significant penalties or subsidizing the recipients of those leases.
A major problem with this section is just how uncertain its application would be. As a Congressional Research Service analysis published before the manager’s amendment put it, “Section 1401’s impact on other statutes is uncertain but could be significant if courts were to construe that provision to bar agencies from taking actions authorized by other laws. Under such a reading, Section 1401 could prevent agencies from fulfilling statutory duties to revisit and revise prior permitting and regulatory decisions upon certain triggering conditions.” That risk should give members of Congress significant pause, and it needs thoughtful solutions to eliminate it.
The Manager’s Amendment reduces, but does not eliminate, this risk
The manager’s amendment to BAAJA released on Saturday, November 7, makes several changes to section 1401, many of which improve the section by reducing future risks. However, these changes—revising “full capacity” to normal capacity, revising the list of prohibited agency actions, adding a materiality component to the prohibition on amending or altering a permit, allowing permit changes when they are necessary to prevent harm to human health or the environment, a new section 1401(b)(1)(F) allowing actions “taken pursuant to any applicable law or regulation”, and the addition of a “bad faith” requirement—are insufficient and introduce further uncertainties.
First, although the original version of the text would have barred actions that would have prevented a project’s “operation at full capacity,” the revised text now bars actions that prevent “operation at normal capacity.” This change is a marginal improvement, but the term “normal capacity” is still undefined and leaves open the potential risk that any reduction in production or operation following promulgation of a new pollution control regulation could still be argued by permit holders as interfering with what had previously been the “normal” operation of the facility.
Second, the revised list of prohibited agency actions has now been lengthened to include “vacate, remand, [or] reopen” a permit. This addition may have been motivated by recent motions filed by the Department of the Interior requesting that courts voluntarily remand and, in at least one instance, vacate an offshore wind authorization so that the department can reexamine it. However, because the text refers only to an agency vacating, remanding, or reopening a permit, it is unclear if it would prevent an agency from asking a court to take one of those actions, and then taking the action (for instance, vacating, remanding, or reopening a permit) in response to the court’s order, as acting in response to a court’s order is allowed under the revised text of section 1401.
Third, the manager’s amendment adds a materiality component to the prohibition against amending or altering a permit or authorization. Without this change, there was a risk that this administration could make truly minor changes to a permit or authorization for its favored projects so that the permit holder could challenge the altered permit and obtain injunctive relief that would lock in a future administration from ever modifying that permit. But it also introduces new uncertainties about what makes an amendment or alteration “material.” Other areas of law, such as securities law, have a corpus of caselaw on what materiality means in that context. No such precedent exists for how much a permit must be modified to cross this newly created but undefined threshold. Therefore, even after the manager’s amendment, judicial interpretation of the materiality qualifier is uncertain for agency actions such as tightening an emission standard or adding a new emission limit on a permit. Future cases would have to argue those points, with the possibility of different lines drawn in different courts.
Fourth, the manager’s amendment adds text allowing otherwise prohibited changes to permits or authorizations when “necessary to prevent … harm or damage” to “human health” or “the environment.” That change is unlikely to stop this section from being used to thwart pollution control regulations because the threat must be “immediate, specific, urgent, substantial, and proximate.” Furthermore, the section flips the normal standard for arbitrary and capricious review of agency action on its head by placing the burden on the government, rather than the challenger, to prove that criterion is satisfied. This section invites operators of power plants or other sources to challenge the application to them of any pollution control standard that includes a degree of agency discretion or judgment in setting the acceptable level, or where there is a lag between the discharge or emission and the harm to human health or the environment, or where the harm is general or not sufficiently substantial.
Fifth, and most confoundingly, the new section 1401(b)(1)(F) in the manager’s amendment would allow agencies to change permits so long as the actions are “taken pursuant to any applicable law or regulation.” On its face, this provision would seem to nullify the rest of section 1401. Agencies always point to some law or regulation as justification for their actions. For instance, last year’s stop-work orders for offshore wind projects cited the Outer Continental Lands Shelf Act (OCSLA) or agency regulations as providing purported legal authority. If this is enough, then it is hard to see how any challenger would ever succeed in a section 1401 challenge. But this cannot be what the drafters of this section intended, and a court would likely refuse to interpret this provision as making the entire section irrelevant. The question then becomes, what—if anything—does this provision do?
The answer is almost impossible to pin down, and different federal courts may interpret this unclear provision in different ways. One possibility is that the provision would apply only to some set of non-discretionary actions; in other words, where an agency had no choice. Under this reading, which would interpret “pursuant to” narrowly to mean “required by,” a new agency rulemaking to set a pollution standard, which would involve agency discretion about what level to set the standard at, could still be vulnerable to attack. This reading leaves the problem of section 1401 being used against future Clean Air Act rules very much live. Another possibility would be that only ultra vires claims could succeed—those are claims that an agency acted entirely outside its authority—which are difficult to prove and “essentially a Hail Mary pass.”1 Under that interpretation, canceled clean energy projects like the stop-work orders from last year may not actually be able to access this section’s supposed benefits without clearing a particularly difficult legal bar.
Because this section remains ambiguous, and because these claims would be brought in different courts, it is quite possible that courts would diverge in how they read this provision. Some projects may face an impossible climb to access the section’s benefits, while collateral attacks on otherwise lawful and well-reasoned pollution control standards might still go forward.
At the very least, this section would create new red tape for pollution control rules by requiring agencies to undertake onerous new procedural steps to provide notice to covered projects or actions with a detailed explanation of the action and evidence supporting it under 1401(b)(3). The bar for satisfying these tasks is unclear, and this process would be at best time and resource intensive for an agency issuing a new standard and at worst would leave open risk that implementation of the standard could be frustrated just for failure to jump through those hoops.
Sixth, the manager’s amendment adds a “bad faith” requirement to receive punitive damages. This change is an improvement that decreases the risk of permit holders obtaining particularly lucrative payouts even from well-supported federal rules. Unfortunately, the bad faith requirement only applies to the damages, and does not affect the availability of other relief, including reinstatement of permits, injunctive relief, or attorneys’ fees.
Four straightforward changes are needed to reduce 1401’s risks
Clearer text in section 1401 could eliminate the risk of BAAJA undermining important future pollution control standards. While maintaining the structure of this section, four ways to improve the text would be to (1) limit the scope of permits and authorizations covered by the section; (2) clarify what lawful actions would still be allowed to revise permits or authorizations due to future pollution control standards or to revisit unlawfully issued permits or authorizations; (3) eliminate the reference to “operation at normal capacity”; and (4) make the showing of “bad faith” an element for all potential remedies under section 1401, not just for damages.
- Congress should limit the scope of permits and authorizations covered by section 1401
To limit the scope of permits and authorizations covered by section 1401, one approach would be to add an “exclusions” provision to section 1401(a) to narrow the capacious definition of “federal authorization or permit.” This language could state that “In this section, the term ‘federal authorization or permit’ does not include” a defined list of actions taken under specific federal pollution control laws. One item in that list could be “any authorization or permit issued to comply with standards, regulations, or guidelines issued under the Clean Air Act (42 U.S.C. 7201 et seq.).” Other pollution control laws could also be listed. CATF advocated for this fix prior to the release of the manager’s amendment, and we still believe that this text would be preferable to the approach in the manager’s amendment.
This proposed change would require careful drafting to ensure the list of covered statutes is sufficiently comprehensive. Under the statutory interpretation principle of expressio unius est exclusio alterius, which stands for the concept that when some items in a class are specifically listed, others in the class are excluded, a court may assume that any statute not listed would be excluded. - Congress should clarify what lawful actions would still be allowed to revise permits or authorizations due to future pollution control standards or to revisit unlawfully issued permits or authorizations
To clarify what lawful actions would still be allowed to revise permits or authorizations, one option would be to allow actions that amend or alter authorizations or permits if they are carried out as part of the implementation or enforcement of lawfully promulgated regulations of general applicability. This language would make clear that section 1401 only covers actions targeting individual permits and does not restrict implementation or enforcement of lawfully issued rules, whether pollution related or not. This approach would provide greater certainty for judicial statutory interpretation than the language in section 1401(b)(1)(F) while still preserving the animating goal of this section to prevent adverse actions of particular applicability against specific projects. - Congress should eliminate the reference to “operation at normal capacity”
To cut off potential arguments that pollution control standards could interfere with the “operation at normal capacity” of a source pursuant to a permit or authorization, including in situations where an agency had previously determined that no authorization or permit was necessary, the references to “operation at normal capacity” should be eliminated. This term is unnecessarily vague and would lead to arguments that emissions restrictions that have the effect of reducing net output of power plants would be prohibited. Courts may diverge in how they respond to that argument and counterarguments, and the resulting patchwork of interpretations could frustrate effective implementation and enforcement of pollution-control standards. - Congress should make the showing of “bad faith” an element for all potential remedies under section 1401, not just for damages.
To avoid courts reinstating permits or authorizations and enjoining any future changes, including those that may be necessary to reexamine unlawfully issued permits or to comply with future regulations, one option would be to make a “bad faith” showing a requirement for any form of judicial relief, not just damages. The reinstatement of a permit, injunctive relief, and attorneys’ fees are all powerful remedies. From a pollution-reduction perspective, the reinstatement of a permit or authorization and injunction against future actions to modify or cancel a project would cause all of the potential harm. Just because punitive damages are not available under the managers’ amendment does not mean that developers will not bring cases.
Conclusion
Preventing this administration from further meddling in clean energy permits is a difficult task. It is admirable that BAAJA’s drafters attempted to address permit certainty, but the ambiguities and uncertainties in section 1401 create the possibility that vital future pollution control standards will face new legal risks. Clearer language that protects the ability of the federal government to issue valid pollution control rules would eliminate the uncertainty this section would otherwise create.
1 NRC v. Texas, 605 U.S. 665, 681 (2025).
