🔒CT attempts to buckle down on overregulation with environmental permitting reform; some argue more is needed

Unpredictable, inconsistent and unfriendly are some of the more benign words that business leaders and credit rating agencies have used to describe Connecticut’s Byzantine regulatory approach. Connecticut consistently ranks poorly in national business climate studies when it comes to the cost of doing business and the complexity of its regulations. In recent years, investment bank UBS and Regulatory Research Associates, a unit of Standard & Poor’s, have placed Connecticut into their bottom-tier utilities regulatory environment rankings. Connecticut’s Public Utilities Regulatory Authority (PURA) is facing fierce criticism from utility companies Eversource Energy and Avangrid Inc. for recent decisions that have roiled investors and crippled the utilities’ ability to recover capital expenses. In June, Moody’s Ratings downgraded the credit ratings of Eversource subsidiary Connecticut Light and Power Co., calling Connecticut “the least credit supportive utility regulatory environment in the U.S.” Meantime, CNBC’s 2025 “America’s Top States for Business” index recently ranked Connecticut 28th overall, an improvement from No. 32 in 2024. However, the state ranked worse — No. 32 — in the business-friendliness category. According to a 2021 report by George Mason University’s Mercatus Center, greater regulatory burdens are correlated with regressive effects: increased poverty rates, higher levels of income inequality, reduced entrepreneurship and increased consumer prices. The report cites research that found, between 1997 and 2015, the effective federal regulatory burden in Connecticut increased by 56%, contributing to a 14% rise in the state’s poverty rate. Also, between 1999 and 2015, industry-level federal regulatory restrictions increased by an average of 3.78%, according to the study. Based on that average, Connecticut lost about 110 small firms and 1,541 jobs annually as a result of regulatory hurdles, the researchers found. Cumbersome regulations have been accumulating for decades, not just in Connecticut, but across the country. Consumer advocate Ralph Nader’s crusade for stronger consumer protections in the 1960s and 1970s led to a wave of landmark regulations, including in Connecticut, where the 91-year-old lawyer and political activist resides. But the robust regulatory environment that enhanced consumer protections also contributed, in the eyes of critics, to an overabundance of red tape that some view as burdensome for businesses and the economy. The regulatory environment covers everything from labor and health insurance mandates to the lawsuit/liability climate, industry oversight, permitting and overall bureaucracy. Now, many business leaders and some state officials — including Democrats — believe the pendulum has swung too far in favor of government regulations, and they are seeking to undo some of the bureaucratic constraints.

“I think there was a period of time where we promulgated a lot of regulations in order to protect the environment, protect health, protect lots of different things,” said Christopher Davis, vice president of public policy at the Connecticut Business & Industry Association (CBIA). “I think that over time, those things sort of build up and calcify. … Sometimes they’re redundant, sometimes they’re unnecessary, sometimes they’re no longer relevant. And it takes a concerted effort to look back and say which things are still relevant, and which ones are not.” The Department of Energy and Environmental Protection (DEEP) is one of the most notorious regulatory agencies in Connecticut — it oversees 125 state and federally mandated permitting processes. The morass of red tape has created an opportunity for improvement, which DEEP Commissioner Katie Dykes has made a hallmark of her tenure at the agency. “I hear just as much from developers as from our own staff about how important it is to make these processes work better for our goals,” Dykes said. “Because when permitting works effectively, it means that someone who wants to invest in the state is getting an answer faster with less friction.” When Gov. Ned Lamont tapped Dykes to lead the agency in 2019, he asked her to make DEEP more efficient, she recalled. “He said he’d been on the campaign trail … and he heard from lots of businesses that DEEP was a black box and that it took too long to get answers, that it was really difficult to know how to navigate the process,” Dykes said. “I think some of that was a bit misplaced,” she continued, “but we rolled up our sleeves and got to work.” Dykes launched an effort to streamline DEEP’s permitting processes through an initiative she calls 20BY26. The project outlines 20 performance goals that DEEP plans to achieve by the end of 2026, with the aim of improving the transparency, efficiency and predictability of its permitting.

Uniquely complex

As a densely populated state with an industrial legacy, Connecticut has particularly complex permitting needs, Dykes said. “As we think about new infrastructure projects, new developments coming into the state, folks are often working with parcels that have been previously disturbed,” she said. “We may be looking at a brownfield. We may be looking at a location that’s close to a lot of population centers.” Those factors not only make permitting processes more involved, but underscore their necessity to “accommodate the next generation of investments while also protecting human health and the environment,” she explained. A key component of 20BY26 was establishing a business concierge service, or a “one-stop shop” for applicants, stakeholders, municipalities and developers to obtain information and status updates about applications. The concierge service debuted in 2021. “That provides a lot of benefits for the applicant in terms of having clear communication and someone that they can call all the way through the process to help them navigate the different programs within the department,” Dykes said. “It also provides a lot of benefits to our DEEP staff, so that our technical staff, our permit writers, can conserve and focus their time on processing permits.” During an internal review, DEEP discovered that about 40% of staff time was being taken up with back-and-forth correspondence with applicants about their incomplete applications, Dykes said. DEEP’s reforms also involve guiding developers toward properties where they will face the least amount of environmental hurdles. The agency has created an online database of endangered and threatened species, which developers can use to find out if a property will trigger an endangered species review, Dykes said. Also, the newly created Community Renewable Energy Siting Tool helps solar developers find the least environmentally conflicted sites for developing solar facilities. Further, DEEP has undertaken a wide-ranging review of its 125 permitting processes to determine the reasonable amount of time that it should take to issue a decision for an application for each one. “I’m really proud to say that over the several years that we’ve been implementing this, we are achieving about 90% on-time completion rates for the 55 different types of permits that we expect to take about three months,” Dykes said. She said DEEP has made adjustments by repositioning staff resources to where they’re most needed. In addition to reducing timeframes, DEEP obtained legislative approval during the recent session to consolidate multiple permit types into a single general permit category, simplifying the review process for certain regulated activities. For example, activities under individual permits from DEEP’s pesticides division were combined into one general permit. “It’s obviously a faster process for applicants, but also it helps conserve our staff time and our staff resources,” Dykes said.

Transfer Act sunset

The crown jewel of the 20BY26 initiative was developing new and less burdensome regulations to replace the antiquated and unpopular Transfer Act. The Transfer Act requires property owners to conduct site-wide environmental investigations and, if necessary, remediation whenever certain types of properties are sold. The system has been criticized for being overly broad, costly and a major obstacle to real estate transactions and economic development, especially brownfield sites. The Transfer Act will be fully phased out on March 1, 2026, and replaced by new release-based cleanup regulations, which trigger cleanup requirements by the actual discovery of a hazardous release — not by the transfer of a property or business. The new system, which has been in the works for years and was green-lighted by the legislature’s Regulations Review Committee in April, is expected to reduce costs, speed up cleanups, and encourage redevelopment of blighted or underused properties. Connecticut was one of just two states operating under the Transfer Act system. Dykes said she hopes the changes will help shift people’s perceptions about Connecticut. “I feel like Connecticut often has this problem of we’re just kind of negative on ourselves,” Dykes said. “We don’t tell our story very well, and focus on those negatives. … We’ve been making these improvements. Now we need to get the perception to change as a result of it.” CBIA applauded DEEP’s efforts to optimize its permitting processes, but says disparities between the ease of permitting in other states and Connecticut remain. “When we talk to employers who have operations in multiple states, there are certain permits, environmental permits, that are more difficult in Connecticut, but also in terms of the clarity around permits,” said Dustin Nord, director of the CBIA Foundation for Economic Growth and Opportunity, the business group’s nonprofit think tank. “To the credit of the state, I think that this has been a point of focus for DEEP in terms of making certain permit timelines more clear and trying to speed up permitting overall. But it’s still a challenge for a lot of businesses.” Some argue that regulatory reforms within DEEP need to go beyond just speeding up permitting processes.

Carol Platt Liebau, president of the Yankee Institute for Public Policy, a conservative think tank, said lawmakers and regulators must do a better job of performing a cost-benefit analysis of regulations they are imposing on residents and businesses. She said lawmakers must also have greater oversight over how agencies are implementing public policy. “Without the proper accountability, PURA and DEEP have been able to implement flawed policies, mostly expensive and stringent green energy mandates, which have driven up energy costs for ratepayers,” Liebau said, noting that Connecticut has among the highest electricity prices in the country. “… Regulators justify their existence by regulating,” she added. “When all you have is a hammer, everything looks like a nail.” State lawmakers did consider a bill this past legislative session that would have mandated closer scrutiny on existing regulations.

Rep. Lucy Dathan (D-New Canaan) proposed a bill that required all state regulations to be reviewed every seven years to make sure businesses were not facing any outdated laws that no longer make sense, or are unnecessarily burdensome. The bill passed the state House of Representatives, but was not voted on by the Senate. The CBIA said it will lobby for the legislation again in 2026.

More to be done

While Connecticut is working to improve its environmental permitting processes, the reality is, the state’s broader regulatory apparatus affects a much wider range of industries, and impacts businesses and the economy in many ways. The state, for example, has been known to have one of highest number of health benefit mandates that insurance companies are required to cover, which increases the costs of individual and employer-sponsored health insurance — a major issue for small and midsize companies. A 2014 study by UConn Health’s Center for Public Health and Health Policy noted Connecticut had 46 health benefit mandates at the time, among the most in the nation. A more recent analysis by the state’s nonpartisan Office of Legislative Research outlined more than 70 health benefit mandates that were in effect as of Jan. 1, 2024. The report noted recently adopted coverage mandates for infertility diagnosis and treatment, and in-home hospice services. There is also an annual fight in the legislature over new labor mandates. In recent years, Connecticut has adopted a Paid Family and Medical Leave program and expanded its paid sick leave law. Lawmakers have also expanded prevailing wage requirements and fought for things like eliminating the tipped minimum wage and extending unemployment benefits to striking workers. CBIA has identified areas in which Connecticut can improve the regulatory strain on businesses, particularly in the manufacturing and construction industries. “Manufacturers, especially, face a heavy burden on regulations, whether it be environmental regulations or labor mandates, things that really make it difficult for them to compete, both nationally and, quite frankly, for a lot of these manufacturers, internationally,” Davis said. The CATO Institute, a conservative think tank, consistently ranks Connecticut among the worst states in the country for land-use regulations. Because zoning requirements can vary widely from one town to another, existing Connecticut businesses face obstacles even when expanding within the state, Davis said. However, efforts by the General Assembly to ease land-use regulations in local communities often face political backlash. In June, Lamont vetoed House Bill 5002, a major piece of legislation that aimed to address the state’s ongoing housing shortage. The bill would have required towns to plan and zone for a set number of affordable housing units, using a “fair share” formula to distribute housing needs across municipalities. Lamont, a Democrat, broke with his own party in quashing the legislation, citing opposition centered around fears that the bill would undermine local zoning control.

Fred Carstensen, a professor of economics at UConn, said the state needs to look at its regulatory environment, such as restrictions on building new housing, that have led to a housing crisis. “I think sort of a comprehensive attempt to look at regulatory structure would be immensely beneficial, and it could help make us much more competitive,” Carstensen said. “… And you’ve got to do this at the granular level. You got to do it, look at each of these things closely, and you have to do it all the time.” HBJ Staff Writer Michael Juliano contributed to this story.