Jump to Navigation

Battle Over Transmission Siting: Congress Considers Federalizing Permit Process, While Fourth Circuit Upholds States’ Right to Control It

March 10, 2009

Senate Majority Leader Harry Reid (D-Nev) and Senator Jeff Bingaman (D-N.M.) have both proposed legislation that would expand the authority of the Federal Energy Regulatory Commission (“FERC”) over the siting of new transmission lines. While similar in many respects, Sen.

Senate Majority Leader Harry Reid (D-Nev) and Senator Jeff Bingaman (D-N.M.) have both proposed legislation that would expand the authority of the Federal Energy Regulatory Commission (“FERC”) over the siting of new transmission lines. While similar in many respects, Sen. Reid’s bill, which was introduced last week, would designate “renewable energy zones” and reserve a portion of the new transmission lines solely for renewable energy unless FERC identifies a reliability issue. Sen. Bingman’s bill, which was introduced today, calls for interconnection-wide transmission planning to be “guided by the goal of maximizing the net benefits the electricity system,” taking into consideration “the development of new renewable generation capacity.”

Meanwhile, a recent federal appeals court decision placed siting authority back in state hands – at least for now. In a decision handed down on February 18, 2009, the Fourth U.S. Circuit Court of Appeals ruled that the 2005 Energy Policy Act does not give FERC the authority to overrule states on transmission line siting.

The Senate Energy and Natural Resources Committee, which Sen. Bingaman chairs, has scheduled a hearing on transmission for March 12, and Sen. Bingaman said that he intends to include transmission provisions in energy legislation planned for April. Congressman Jay Inslee (D-Wa), the co-chairman of the House Sustainable Energy and Environment Caucus, has also announced he will introduce legislation to increase federal authority over the national energy grid.

Finally, a recently-released study from the Edison Electric Institute illustrates how large investor-owned transmission projects that are subject to both federal and state commission jurisdiction could integrate them in renewable energy projects.[1]

Federal Investment in Transmission

The American Recovery and Reinvestment Act of 2009 (H.R. 1) contains nearly $15 billion in capital investments and loan guarantees for renewable energy projects and new electric transmission lines, and $18.5 billion for energy efficiency programs. Among other energy projects, the stimulus bill increases the borrowing authority of the Bonneville Power Administration, which serves the Pacific Northwest, and the Western Area Power Administration, which serves all or part of 15 western states, by $3.25 billion each.[2] The agencies are directed to use this authority to construct new electrical transmission projects. Bonneville, which sells electric power from assets (mostly hydroelectric dams) with a peak generating capacity of 14,000 megawatts (“MW”), plans to use this new authority to build transmission lines that will connect to 4,000 MW of wind turbines.[3] The first projects on Bonneville’s drawing board will address the significant constraints on transmission across the Cascade Mountains that bisect Washington and Oregon. Bonneville has one project expected to begin construction within the year: a 79-mile, 500kV line in the Columbia Gorge.[4]

An additional 4,700 megawatts of wind-generated electricity are expected to come on line in the next five years.[5] In their recent report entitled Green Power Superhighways, proponents of renewable energy assert that major investment in new transmission lines will significantly cut greenhouse gas emissions and hold down consumers’ electricity bills by creating competition. As alternative energy development accelerates, the need for additional transmission capacity will also increase. The question is not whether there is a need for new transmission capacity, but rather, who will fulfill the demand, and whether the states or the federal government will be responsible for the siting and environmental review associated with those projects.

State vs. Federal Authority for Siting Transmission Lines

Prior to 2005, state utility officials were the only regulators with authority to site electric transmission lines. However, increasing concerns over a transmission grid that is an interconnected patchwork of state-authorized facilities led Congress to adopt the Energy Policy Act of 2005.[6]

The 2005 Energy Policy Act considerably changed the dynamic by authorizing the Secretary of Energy to designate National Interest Energy Transmission Corridors (“NIETC”) in “any geographic area that experiences electric energy transmission constraints or congestion that adversely affects consumers.”[7] Under the Act, the federal government was granted authority to condemn private property for the acquisition of rights of way for transmission corridors. Condemnation authority is delegated to FERC. The Act requires that, prior to exercising condemnation authority, FERC must find: (1) that the state where the transmission lines are to be constructed lacks authority to approve the siting of the facilities or to consider interstate benefits; (2) that the applicant for the construction of the transmission line does not provide retail service in the state were the line is to be constructed; (3) that the state siting authority has failed to approve the application within one year; or (4) that it has attached conditions that will prevent congestion reduction or make the new line economically infeasible.[8]

This shift in the balance from state to federal oversight has been a lightening rod for debate at both levels. In their meeting last month in Washington, the National Association of Regulatory Utility Commissioners rejected a draft resolution recommending that the group not oppose amendments to the Federal Power Act that would give transmission siting oversight to federal regulators for new interstate transmission lines. Despite the failure of the resolution, NARUC’s president Frederick Butler said that the group is “having a very healthy discussion on the role of the states versus the role of the federal government. We realize that the federal government may have an interest in a larger responsibility here, but the role of the states must be preserved to the maximum extent possible. And certainly the states are in a better position to play on whether transmission should be built and how much of it should be built because there is a tension between transmission and other forms of dealing with the problem, like renewable energy and distributed generation local to load service.”[9]

The issue is also high on the Obama administration’s agenda. National energy and climate czar Carol Browner stated that “some sort of inter-agency siting team” is being considered as a “one stop” means of siting transmission lines.[10] Browner’s statement came at a meeting of Western governors, many of whom support a more uniform federal policy for siting and building a national energy grid.[11]

While Senate Bills Differ on Renewable Energy Requirements, Both Require Environmental Review and Federal Permits Within One Year

While similar in many ways, the bills introduced by Sen. Reid and Sen. Bingaman differ with respect to renewable energy. Senator Reid’s bill requires the Energy Department to designate “renewable energy zones” and reserves 75% of the new transmission lines for connection to renewable energy generation.[12] By contrast, Sen. Bingaman’s bill states that interconnection-wide transmission planning is to be guided by the “goal” of the “development of new renewable generation capacity,” but does not necessitate designation of zones for the development of such capacity, nor set aside for transmission lines dedicated to renewable sources.[13]

Both bills would provide FERC with siting authority over new transmission lines. And under either bill, states and regional permitting entities would be required to develop “interconnection-wide green transmission plans” to determine how to connect the renewable energy resources with the regional grid.[14] The planning entities would have one year to submit the plan to FERC for approval. If the entity cannot create a plan within one year, FERC would be required to step in and craft the missing elements of the plan.[15]

In addition, both pieces of legislation mandate that FERC “serve as lead agency for purpose of coordinating any Federal authorizations and environmental reviews and analyses required for the project, including those required under [NEPA].”[16] FERC is to “prepare a single environmental review document” in conjunction with other affected agencies “that will be used as the basis for all decisions under Federal law relating to the proposed project.”[17] Apart from requiring preparation of a “memorandum of understanding” between affected agencies,[18] it is not clear whether FERC will assume responsibility for such things as ESA consultation, obtaining all necessary easements across federal land, or meeting the requirements of the National Historic Preservation Act. Under both bills, project applicants could right-of-way necessary to construct, operate or maintain a project could be acquired by eminent domain, if necessary.[19]

What is clear, however, is that “all permit decisions and related environmental review under applicable Federal law shall be completed not later than 1 year” from the date FERC deems an application to be complete.[20] Completion of environmental review and permitting within one year would be a significant reduction from current practice for such projects, many of which can require seven to ten years from inception to permitting and construction.[21] In the event that review and permitting is not completed within one year, both bills provide that the applicant may appeal directly to the President.[22]

Fourth Circuit Upholds State Challenges to FERC’s Authority

The Fourth Circuit’s decision has provided a backdrop to this Congressional debate, with the states claiming victory, in Piedmont Environmental Council v. FERC, No. 07-1651, 2009 U.S. App. LEXIS 2944 (4th Cir. Feb. 18, 2009). There, the state utilities commissions in New York and Minnesota challenged FERC’s decisions overruling the actions of the utility commissions on transmission line project siting. FERC had argued that the 2005 Energy Policy Act permitted it to order “national interest” transmission projects to go forward, and that Congress’ mandate included implicit authority to overrule state decisions to the contrary. The Fourth Circuit disagreed, finding that if states turn down transmission projects on reasonable grounds, they cannot be overruled by FERC.

In a 2-1 decision, the 4th Circuit sided with the utility commissions, holding that FERC overstepped its congressional mandate in asserting federal authority over transmission line siting:

The Commission’s reading would mean that Congress has told state commissions that they will lose jurisdiction unless they approve every permit application in a national interest corridor. Under such a reading it would be futile for a state commission to deny a permit based on traditional considerations like cost and benefit, land use and environmental impacts, and health and safety. It would be futile, in other words, for a commission to do its normal work …. In short, § 216(b)(1), read as a whole, does not indicate that Congress intended to bring about the sweeping transfer of jurisdiction suggested by FERC. Indeed, if Congress had intended to take the monumental step of preempting state jurisdiction every time a state commission denies a permit in a national interest corridor, it would surely have said so directly.[23]

The court reversed “FERC’s expansive interpretation of the language in FPA § 216(b)(1)(C)(i)” under which FERC had granted itself permitting jurisdiction when a state commission withholds approval of a permit application for more than one year.

The court also concluded that FERC violated Council on Environmental Quality (“CEQ”) regulations when it failed to consult with CEQ before amending FERC’s NEPA-implementing regulations to cover §216 permit applications. Consequently, the court vacated FERC’s amendments to the NEPA regulations and remanded for FERC to engage in the required consultation with CEQ.[24]

Federal Designation of Transmission Corridors Also Generates Litigation

As part of the 2005 Energy Policy Act, Congress authorized the Energy Department and BLM to study and designate pathways for the development of pipelines, power lines, and other energy infrastructure. In November 2008, DOE and BLM, along with the departments of Agriculture and Defense, released a Final Programmatic Environmental Impact Statement (“FEIS”) proposing to designate more than 6,000 miles of energy transport corridors on federal lands located in 11 western states.[25] These corridors would facilitate the siting of oil, gas, and hydrogen pipelines, as well as electricity transmission and distribution on federal lands. The FEIS analyzed 6,055 miles of designated energy corridors, each of which is approximately 3,500 feet wide.

BLM plans to issue a record of decision on the Western corridors in early 2009. Because the FEIS was programmatic, rather than site-specific, each individual project proposed within the NIETC corridors will still have to acquire the necessary rights of way from landowners and conduct its own environmental review, including a determination of whether ESA consultation is necessary.

Five separate lawsuits challenging the Energy Department’s designation of NIETC corridors have been filed by environmentalists, historic preservation groups, land use and conservation groups. The petitioners maintain that their goal is not to stop the construction of transmission lines, but to force compliance with NEPA. An attorney for the Wilderness society was quoted as follows: “This lawsuit is not about stopping transmission projects. We recognize the need for increased investment in transmission solutions across the country. But we need to ensure that these transmission corridor designations take place in compliance with federal environmental law.”[26]

Opponents have argued that a programmatic EIS like the one prepared for the western states NIETC corridors is also required for the Energy Department’s October 2007 order designating the mid-Atlantic and southwest corridors, claiming that the designation qualifies as “major federal action” under both NEPA[27] and under Council on Environmental Qualify (“CEQ”) regulations.[28] The Energy Department has countered that the designations do not require NEPA review, because they do not, in and of themselves, permit or preclude construction of any transmission projects.

Conclusion

The debate over transmission siting authority continues, with no signs of clear resolution on the horizon. Even as he introduced his legislation last week, Senator Reid acknowledged that his bill has “ample room for improvement.”[29] And while other members of Congress craft their own versions of energy transmission siting legislation, the Fourth Circuit has given the states the upper hand – at least for now.

[1] The study, entitled, “Transmission Projects Supporting Renewable Resources,” (“EEI Study”) can be viewed at this link.

[2] Stimulus Bill, Secs. 401 & 402.

[3] Seattle P-I, Stimulus bill would boost state's energy system (Feb. 12, 2009).

[4] See To Get Stimulus Money, Know Who Decides and How the Money Will Be Awarded, Marten Law Group, Environmental News (February 19, 2009).

[5] Id.

[6] Pub.L. 109-58. The Energy Policy Act was codified at 16 U.S.C. § 824 et seq.

[7] Authorization for the Energy Secretary to designate NIETCs appears at section 216(a)(2) of the Act, 16 U.S.C. § 824(a)(2).

[8] See 16 U.S.C. § 824p(b).

[9] NARUC's Butler discusses transmission siting, rate decoupling, E & E News OnPoint, February 24, 2009 (subscription required).

[10] Ben Geman, Obama admin mulling ‘one stop’ team for transmission siting, Greenwire, February 23, 2009 (subscription required).

[11] Id.

[12] Senator Reid’s bill is entitled “The Clean Renewable Energy and Economic Development Act, S_____.” The requirement of 75% for renewable generation appears in Sec. 404(k).

[13] Senator Bingaman’s bill is entitled “Siting of Interstate Electric Transmission Facilities, Sec. ____.” The goals to be considered in developing transmission capacity appear at p. 7.

[14] Senator Reid’s bill, Sec. 403; Senator Bingaman’s bill at pp. 6 – 8.

[15] Id.

[16] Sen. Reid’s bill at Sec. 404(h)(A); Sen. Bingaman’s bill at 5.

[17] Id.

[18] Id.

[19] Id.

[20] Sen. Reid’s bill at Sec. 404(d); Sen. Bingaman’s bill at 5.

[21] See A Quick Economic Stimulus Meets a Slow Environmental Process – Are NEPA Waivers Needed to Reach Energy Independence?, Marten Law Group Environmental News (January 29, 2009), noting that transmission projects can take between seven to ten years to site, review and permit.

[22] Sen. Reid’s bill, Sec. 404(h)(2); Sen. Bingaman’s bill at 5.

[23] Piedmont Environmental Council v. FERC, No. 07-1651, 2009 U.S. App. LEXIS 2944 at *19-20 (4th Cir. Feb. 18, 2009)

[24] Id. at *7

[25] The states in which the corridors are planned are Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming.

[26] The press release may be viewed here.

[27] 42 U.S.C. § 4332(C).

[28] 40 C.F.R. § 1508.18 (governing projects and programs that are conducted and regulated by federal agencies and involving federal agency rulemakings).

[29] K. Ling, Reid bill calls for new federal siting rules, planning surcharge, Greenwire, March 6, 2009 (subscription required).

 

This article is not a substitute for legal advice. Please consult with your legal counsel for specific advice and/or information. Read our complete legal disclaimer.