FERC’s Authority Over Electric Transmission Likely Still Not Enough to Overcome State Objections

What’s the issue?

On Wednesday, the Department of Energy released a draft notice of intent announcing its Building a Better Grid Initiative, which is a series of actions designed to accelerate the development of new and upgraded high-capacity transmission lines around the nation. One aspect of that plan would be the first step in a process that could lead to FERC taking control of the permitting for stalled projects. As part of the Infrastructure Bill that was passed late last year, FERC’s authority over electric transmission lines was strengthened in an effort to overcome a court decision dating back to 2009.

Why does it matter?

The law now allows FERC to authorize a transmission line, even if it has been denied by the state or states that it crosses.

What’s our view?

There are so many preconditions to FERC’s authority that it is unlikely to have any near-term impact, and the revised statute will most likely still allow any objecting state to block a proposed project that it opposes.


 

On Wednesday, the Department of Energy released a draft notice of intent announcing its Building a Better Grid Initiative, which is a series of actions designed to accelerate the development of new and upgraded high-capacity transmission lines around the nation. One aspect of that plan would be the first step in a process that could lead to FERC taking control of the permitting for stalled projects. As part of the Infrastructure Bill that was passed late last year, FERC’s authority over electric transmission lines was strengthened in an effort to overcome a court decision dating back to 2009. The law now allows FERC to authorize a transmission line, even if it has been denied by the state or states that it crosses. However, as we discuss below, there are so many preconditions to FERC’s authority, it is unlikely to have any near-term impact, and the revised statute will most likely still allow any objecting state to block a proposed project that it opposes.

 

History of FERC’s Backstop Authority

The Energy Policy Act of 2005 (EPACT) amended the Federal Power Act (FPA) to grant FERC authority over electric transmission lines that are proposed to be built in a national interest electric transmission corridor (NIETC). The goal of this legislation was to facilitate the construction of electric transmission lines that may serve a regional or national interest but that were being blocked by a state in which the line was located. The authority granted to FERC was severely limited before it could even be exercised when the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) overturned FERC regulations that would have allowed FERC to issue a construction permit for a transmission line project following the project’s denial by a state authority with jurisdiction over the line. The Fourth Circuit held that EPACT only granted FERC authority over transmission line projects where the applicable state agency had failed to act for more than one year, but not over projects that the state agency had affirmatively denied.

It was this limitation that Congress remedied when it enacted the Infrastructure Act last year. In that Act, the authority granted to FERC was expanded to include not only projects on which no decision had been issued within one year, but also to projects which were approved by the agency with conditions that impede the project’s ability to significantly reduce transmission capacity constraints or congestion in interstate commerce or which make the project economically infeasible, as well as projects that were outright denied by the state agency.

 

Conditions to FERC’s Authority Will Delay any Near-Term Cases

Before FERC can exercise the authority it was granted, however, there are a number of conditions that must be satisfied. First, and most significantly, the Department of Energy (DOE) must designate certain electric transmission corridors as being an NIETC. It is this step that the announcement on Wednesday by the DOE is intended to facilitate. Under the statute, the DOE is required, at least once every three years, to conduct a study to determine if there are any transmission corridors that would fit the statutory definition of an NIETC. The Infrastructure Act also modified this authority of the DOE by broadening its authority to designate NIETCs not just for areas currently experiencing electric energy transmission capacity constraints or congestion that adversely affects consumers, but also areas that are “expected to experience'' such problems. The Act also broadened the factors the DOE is to consider in making this determination to not only include the economic vitality and development of the corridor, or the end markets served by the corridor, the diversification of supply, the energy independence of the U.S., national energy policy, national defense and homeland security. The Act also requires the DOE to consider the nation’s energy security, and the ability to allow firm or intermittent energy to connect to the grid.

However, the DOE has run into its own problems in the past under the 2005 version of this statute when it tried to designate NIETCs, and the Infrastructure Act may have complicated those issues. In its first attempt to designate NIETCs, DOE, in 2007, issued an order formally designating two NIETCs. Following rehearing of that decision, it was immediately subject to thirteen separate appeals around the country, all of which were consolidated for consideration by the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit). In a 2011 decision, the Ninth Circuit determined that the DOE’s designations should be reversed because it had failed to comply with the statutory requirement to consult with the “affected states.” In particular, the court found that consultation required more than providing notice and allowing comment by the affected states, but rather included actual consultation about the intended designation.

The Infrastructure Act continues the consultation obligation and actually expands it to include not only the “affected States,” but also affected “Indian Tribes.” In addition, in the section that describes the factors to be considered in designating NIETCs, the Infrastructure Act adds a requirement that the DOE consider whether the designation “maximizes existing rights-of-way; and avoids and minimizes, to the maximum extent practicable, and offsets to the extent appropriate and practicable, sensitive environmental areas and cultural heritage sites.”

 

Will These Changes Help?

A non-profit advocacy group, Americans for a Clean Energy Grid, recently released a report that identified 22 transmission projects that could begin construction “in the near term if more workable transmission policies were enacted.”

 

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As seen above, these projects would add about 8,000 miles to the U.S. grid, which is only about 3% of the current grid’s total mileage. However, as the report notes, because these are transmission lines of higher voltage than the average in the current grid, they would increase the total capacity of the grid by about 12%. However, as we noted in Environmental Purists May Be a Greater Risk to Climate Goals Than Climate Deniers, a recent study showed that to support the energy evolution envisioned by some, the grid needs to grow by almost 40% by 2025 and by over 400% by 2045. That would mean we need three times as many projects as these to be completed by 2025.

Some of the actions announced on Wednesday by the DOE, including over $10 billion for various grants, loans and purchase agreements, may help push some of these projects forward, but the use of FERC’s strengthened authority will not likely come into play before 2025.

In Environmental Purists May Be a Greater Risk to Climate Goals Than Climate Deniers and Greatest Risk to Future of Renewables -- State NIMBYism, we wrote about the troubles two of those projects have encountered. In particular, environmental and environmental justice concerns do not go away simply because a project is designed to bring renewable power to a region. Similarly, just as New York and New Jersey have used their state authority to block pipelines, we fully expect state governments that oppose transmission projects to wield their powers to block transmission projects that they oppose.

That is how the changes made to the DOE process and a change that was not made in the FPA may thwart efforts to accelerate the construction of these projects. The new requirement that DOE take into account how a proposed corridor maximizes existing rights-of-way and avoids and minimizes, to the maximum extent practicable, and offsets to the extent appropriate and practicable, sensitive environmental areas and cultural heritage sites, will be a fertile field for those opposing these projects. Any standards that require maximization allow those who oppose a project to choose a court willing to second guess those maximization efforts.

Similarly, the Infrastructure Act did not make any changes to a key limit on the condemnation power for transmission projects. The statute grants condemnation power to transmission projects that is similar to the right long enjoyed by interstate natural gas pipelines, but with one key distinction: the condemnation power does not extend to state-owned lands. Those who followed the PennEast appeal to the Supreme Court, which we discussed in Gas Pipeline Industry Dodges a Bullet with PennEast Win, But Spire STL May Lose Its Certificate and PennEast to Supreme Court: Constitution Did Not Make the U.S. a Junior Varsity Sovereign, know that there is a lot of land owned by the states, including navigable river bottoms, but also such things as bike and hiking trails and state parks and forests. If a state is opposed to a project, even if FERC were to grant it a permit to proceed, the state could block the project simply by refusing to grant any easement required to cross such state-owned lands.

So for now, we expect that the DOE will diligently act to designate NIETCs, but to make those decisions durable against court challenges, we don’t see that process being completed much before the current deadline for the next study, which is December of 2023. Following that, the states “affected” by such corridors would have one year to act on any proposed project within the NIETC. If the states failed to act, inappropriately conditioned, or denied the project a permit, only then could the project sponsor seek a permit from FERC. Thus, the earliest that could likely occur is December of 2024. Since FERC has never processed an application of this type, we would expect such a process to be similar in duration to a pipeline project that requires the preparation of an environmental impact statement, which our data shows typically takes about 19 months. Thus, any of these projects should not expect FERC to ride to their rescue before July of 2026, and even then they need to avoid all state-owned lands if the project has any hope of moving forward in any state that failed to act or denied the permit in the first place.

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