Transmission Corridors Take Two: DOE’s Proposed New Process

On May 9, 2023, the U.S. Department of Energy (DOE) published a combined Notice of Intent and Request for Information (NOI) to establish a new process to designate National Interest Electric Transmission Corridors (NIETCs, pronounced “NIT-sees”) — areas where DOE has determined that electric grid limitations, congestion, or capacity constraints are already or will eventually adversely affect electricity consumers and communities. These routes can span several hundred miles.

Building long interstate transmission remains challenging, partially because federal siting authority is triggered by DOE designating NIETCs, which it has only done once in 2007 and those NIETCs were vacated by the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit). But the urgent need to build new transmission and enact new laws that unlock financing opportunities and regulatory tools for developers building projects in NIETCs has spurred DOE’s effort to fix this broken process. DOE’s proposed approach is applicant-driven and route-specific as opposed to its previous broad regional designations. It also aims to coordinate federal permitting responsibilities with other agencies.

Although DOE’s proposed rule reflects good implementation of recent changes to the law, lessons learned from previous litigation, and a better process, we believe the rule is unlikely to result in near-term changes to transmission development. DOE has requested feedback on its proposal, and so it may change substantially and many steps remain before implementation. The new process may also be challenged in court, as was its predecessor.

DOE’s NIETC Designation Process and FERC’s Backstop Authority

There are two sections of the Federal Power Act (FPA) that grant DOE and FERC separate authorities with respect to transmission projects. First, DOE must conduct transmission congestion studies in consultation with affected states and tribes every three years. When the Ninth Circuit vacated the 2007 NIETCs in 2011, it found that DOE failed to adequately consult with affected states, and that DOE’s designation of a NIETC — regardless of the lack of any siting decision made in that corridor — required a showing of environmental compliance. As a result, to designate a NIETC, DOE must conduct robust state consultation and meet its obligations for all applicable environmental and historic preservation reviews.

NIETC designation by DOE triggers a separate section of the FPA that allows FERC to grant permits for the siting of transmission lines under its “backstop” siting authority, but there are conditions, especially on state authority. We discuss the recent statutory changes in this authority in FERC’s Authority Over Electric Transmission Likely Still Not Enough to Overcome State Objections and conclude that there are so many preconditions that it is unlikely to have any near-term impact and will probably still allow any objecting state to block proposed projects. It is worth noting that in December 2022, FERC issued its own Notice of Proposed Rulemaking proposing updated regulations governing the environmental, cultural, and environmental justice resource information that applicants for a FERC-issued construction permit in a NIETC must submit. We will discuss this in a future ArView.

The Evolution of DOE Transmission Congestion Studies and DOE’s New Needs Study

DOE’s approach to congestion studies has changed significantly over the years. The first congestion study in 2006 analyzed three classes of congestion areas:

1. Congestion Areas of Concern — where a large-scale congestion problem exists or may be emerging, but more information is needed;
2. Critical Congestion Areas — where severe congestion needs to be addressed; and
3. Conditional Congestion Areas — where some congestion exists that could grow if new generation is added without transmission.

During the Obama era, the 2009 study retained the three classes of congestion areas, but also included analysis of regions it identified as having significant potential for renewable energy development but lacking the necessary transmission to unlock it, including why transmission had not been built. DOE broke these regions into two types of “Conditional Congestion Areas” — Type I areas where existing technology could develop renewable resources, and Type II areas where renewable development was promising but would require technology that was not yet mature.

The second Obama era study in 2015 abandoned the three classes of congestion areas, and instead focused on specific indications of transmission constraints and congestion and their consequences through 2013, breaking the study into West, Midwest, Northeast, and Southeast regions. It identified trends in these regions that affected transmission such as the recession, national environmental policy, clean energy policies, and natural gas abundance.

The Trump era congestion study in 2020 was noticeably shorter than previous studies — less than half as long — and contained much less analysis. DOE divided the main sections of the report into a summary of congestion concepts and regional management practices, key findings, a forward look at the critical role of transmission resilience, and the process for preparing the study.

Up to this point, DOE was only required to consider historic congestion in its studies. But the Infrastructure Investment and Jobs Act (IIJA) expanded the scope of the required studies to include anticipated future capacity constraints and transmission congestion. In response, DOE launched a “Needs Study'' as part of its Building a Better Grid Initiative. A draft was released in February 2023 for public comment and the extended comment response deadline was July 31, 2023. The final version of this study will be a prerequisite to NIETC designation under DOE’s proposed new program.

The draft “Needs Study” breaks findings down by geographic region as shown below. It then includes a summary of each region with a brief description and indication of general need. The geographic regions align with the boundaries of established transmission planning and reliability regions.

The draft study’s capacity expansion model demonstrated that the largest growth of transmission will be needed in the Texas, Mountain, Southeast, Midwest, and Plains regions. However, each region and associated needs are discussed in more detail in the study.

The Effect of NIETC Designation

NEITC designation unlocks federal permitting tools, access to federal financing assistance, and FERC’s backstop authority. With respect to permitting tools, transmission project developers in a designated NIETC can apply to become FAST-41 covered projects — entitling them to permitting timetable management, interagency coordination, transparency, and other benefits offered by the Federal Permitting Improvement Steering Council (FPISC) (a small, independent agency that provides these services to a variety of “covered” infrastructure projects across various sectors). For more on FAST-41 and an analysis of transmission and gas projects on its dashboard, see Arbo’s report, Transmission Infrastructure for Renewables — Real Permitting Reform is Required.

With respect to financing, NIETC designation can unlock DOE’s $2.5 billion Transmission Facilitation Program, which was established under the IIJA and allows DOE to enter into public-private partnerships to co-develop transmission projects located within NIETCs. Developers also gain access to DOE’s $2 billion Transmission Facility Financing loan program to support transmission facilities designated to be necessary in the national interest under the FPA.

DOE’s New Process

To designate narrow NIETCs that are “route-specific,” DOE envisions associating them with specific transmission projects that are beyond the preliminary design phase and actively routing, siting, and conducting community outreach activities. As such, an “eligible applicant” in DOE’s rule would be a transmission developer with a project that has proceeded far enough to have a proposed route. DOE is also considering opening the pool of potential applicants to include tribes, states’ non-transmission-owning utilities, local governments, generation developers, and others. DOE lists some specific information it expects applications to contain, including:

• geographic boundaries, property rights, and co-locations with existing corridors;
• environmental analysis information;
• the potential to address transmission capacity constraints or congestion;
• impact to national policy goals;
• outreach and engagement summaries;
• for specific projects — project status including regulatory approvals, inclusion in transmission plans, status of FERC backstop siting approval, and interconnection points; and
• innovative transmission technologies used.

DOE also has interagency coordination at the heart of its new proposal, including coordinating environmental reviews with FERC’s as FERC begins to make findings before using its backstop siting authority. DOE, FERC, and the FPISC are also parties to a joint MOU aimed at process coordination, especially with respect to environmental reviews and permitting authorizations.

To summarize, before a developer can start filing applications to have its project route designated as an NIETC, unlocking all of the aforementioned financing assistance, and avail itself of FERC’s backstop siting authority, it must wait for the rulemaking processes to conclude at DOE and at FERC, including processing comments received and finalizing the rules. DOE must also finalize its Needs Study, which is a prerequisite to the designation of NIETCs and must consult with affected states and conduct any necessary environmental analysis. Finally, like DOE’s original attempt to designate NIETC, at almost every point in this process or in their implementation, there could be a challenge filed in court. So while these new procedures look to be a well-crafted improvement on the prior processes, we think it will be quite some time before we see the resulting movement in transmission.