Section 1401 of the Permitting Reform Bill has sparked concerns as a potential broad repeal of federal regulatory law, extending beyond environmental regulations. Its permit certainty provisions are poised to significantly impact agency actions against projects, applying to any action (which is undefined) that would revoke, rescind, withdraw, terminate, suspend, amend, or alter a Federal authorization or permit in effect on or after September 16, 2026, or take any other action to interfere with or prevent the construction or operation at full capacity of a project that has secured all necessary Federal authorizations and permits.
The term “authorization or permit” is broadly defined to include any approval or order necessary for the construction or operation at full capacity of a project. There are limited exceptions for agency actions to interfere with permits or full capacity operation of a project, including violation of applicable law or material breach of permit conditions. However, the agency must show that this standard is met by clear and convincing evidence and faces very large potential damages if it loses.
Scope of the Bill
The scope of this bill can be illustrated by a hypothetical situation where an agency identifies a material breach of a permit condition or a violation of federal law by a permit holder. It establishes that violation by a preponderance of evidence in a judicial proceeding for injunctive relief, civil penalties or enforcement of an administrative order. But the permit holder counterclaims, using its cause of action newly established under Section 1401.
This provision, as written, effectively converts the standard for civil enforcement of all federal regulatory standards against all permit holders from preponderance of the evidence to clear and convincing evidence. And that is a massive change. It goes far beyond protecting renewable energy from the depredations of the Trump Administration. It is, in essence, a substantial deregulatory action that will benefit all sorts of permitted actions, and will likely lead to much more substantial violations of a wide range of federal laws, not just environmental ones.
Implications for Regulatory Standards
Another hypothetical situation involves the Clean Air Act, where EPA determines that protection of public health requires more rigorous air quality standards. This would require federal and state agencies to issue more rigorous permitting standards for new and existing sources, which would mean that there would be federal action that would interfere with operation at full capacity of a project that has secured all necessary federal authorizations and permits. The agency might be able to establish, with clear and convincing evidence, that the permit holder is not in compliance with applicable law, but the permit holder could argue that applicable law is the law in place before the agency action.
This could result in perpetually locking in the air quality standards for a wide range of facilities, even if that harms public health. Similarly, under the Clean Water Act, EPA or a state might determine that a water body is severely polluted, and conclude that it must ratchet down the standards for state-issued water discharge permits to ensure those water quality standards are met.
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We’re back to the same scenario as before. The best case is that EPA must show by ‘clear and convincing evidence’ that the ratcheting down of the permit is required to meet water quality standards. Worst case, EPA has no power to do this at all.
A new species listed for protection under the Endangered Species Act could also be affected, as federal agencies might require changes in the operation of a federally permitted project to avoid taking members of that listed species. However, this would again require the agency to show by clear and convincing evidence that the changes are necessary, which could be a significant increase in the burden on the agency to win. The provision could even be interpreted to exclude new legal obligations or changes in the effective terms of the permit, effectively immunizing existing projects from the ESA.
The bill‘s definition of “project” is also unclear, which could have sweeping effects. If a federally licensed bank can argue that its operations are a “project”, then Federal Reserve changes to interest rates or regulatory changes for reserve requirements could be considered covered by the provision. This could apply to all banks in the US, federally licensed or not, and could be used to argue that regulatory changes interfere with the full operation of the bank’s lending and investment activities.
The provision’s scope is not limited to environmental regulations, but could apply to any regulatory provision, of any type, in any federal law, that might affect a permit or interfere with full operation of a permitted activity. The examples provided are all environmental ones, but it is easy to see how the provision could be applied more broadly. The bill does not define “project”, which could lead to a wide range of interpretations and applications.
Uncertain Definition of “Project”
The undefined term “project” raises concerns about the provision’s scope, potentially applying to a wide range of activities, including those in the financial sector. This could have significant implications for the banking industry, potentially limiting the ability of federal agencies to regulate banking activities.