Overview
The Federal Energy Regulatory Commission (FERC) possesses a little-discussed and never-used limited authority to site certain transmission lines when state siting authorities fail to approve those lines. Called FERC's "backstop" siting authority, a pair of federal appellate defeats rendered it dormant. But recent congressional amendments may have thrown it a lifeline. To implement those changes, FERC has issued a Notice of Proposed Rulemaking (NOPR). In this client alert, we begin by explaining the origin of FERC’s authority and then address new legislative developments, FERC’s proposed reforms, and potential implications of this rulemaking effort.
In short, the NOPR proposes to implement FERC’s resurrected authority to grant construction permits when a state has denied siting approval, speed the FERC filing process, address landowner protections, and achieve environmental justice objectives.
Background
Traditionally, states retained sole authority to site transmission lines. Yet because states have often stymied interstate projects, Congress in the Energy Policy Act of 2005 (EPAct 2005) gave the federal government a “backstop” role in transmission siting—section 216 of the Federal Power Act.
Under section 216, the Department of Energy (DOE) may designate parts of the United States as "national interest electric transmission corridors" (National Corridors) based on transmission capacity constraints or congestion. Once DOE has designated a National Corridor, FERC may issue construction permits for transmission facilities in those corridors under certain limited conditions. If FERC grants a construction permit, the permit holder can acquire the necessary right-of-way through eminent domain. Following the enactment of section 216, FERC issued Order No. 689, which established regulations for section 216 siting applications.
But section 216 failed to spur any transmission development for at least three reasons.
First, and most importantly, in Piedmont Environmental Council v. FERC (2009), the Fourth Circuit interpreted the original version of section 216 as enacted in EPAct 2005 so narrowly as to render it virtually useless. The original version of section 216 granted FERC permitting jurisdiction where a state had “withheld approval” of a siting application for more than a year. The Fourth Circuit, however, held that a state commission had not “withheld approval” of a permit application if it denied the permit. After the Fourth Circuit reversal, FERC never again sought to use its authority under section 216 to grant a construction permit for transmission facilities.
Second, in California Wilderness Coalition v. DOE (2011), the Ninth Circuit vacated the only two National Corridors that DOE ever designated. It held that DOE’s 2007 designations of the Mid-Atlantic Area National Corridor and the Southwest Area National Corridor were defective because, in part, DOE failed to properly consult affected states.
Third, while section 216 allows a permit holder to acquire a right-of-way through eminent domain, commentators have noted that this authority omits state-owned lands. Because of the ubiquity of state lands and the frequent importance of such lands to interstate infrastructure, states have many veto points over potential transmission lines.
Congress Amends Section 216 in 2021
The Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law, amended section 216. Among other changes, Congress—in apparent response to the Fourth Circuit’s Piedmont decision—added state denial as a trigger for FERC authority. It also expanded DOE’s authority to designate National Corridors to not only areas that experience energy transmission capacity constraints or congestion but also areas that are expected to experience either condition.
Following the enactment of the IIJA, DOE issued a Notice of Intent (NOI) for its Building a Better Grid Initiative, which was inspired by the Biden Administration’s climate goals. As part of the NOI, DOE proposed a new “route-specific, applicant-driven” approach to designating National Corridors in coordination with FERC. This proposal appears geared toward making the designation of National Corridors more efficient.
FERC Proposes NOPR on Backstop Siting Authority
FERC announced a NOPR on its backstop siting authority at its December 15, 2022 Open Meeting. The NOPR contains four main proposals.
- Implementing New Authority
Because the IIJA amended section 216 to give FERC authority to issue construction permits when a state has denied a siting application, FERC proposes to modify its current regulations to reflect that expansion of its authority.
2. Simultaneous State Applications and FERC Pre-filing Proceedings
FERC had, in Order No. 689, announced a policy that the pre-filing process for a section 216 construction permit would not begin until one year after an applicant sought state approval. FERC viewed this policy as providing states a full-year to process an application without any intervening federal proceedings. In the NOPR, however, FERC states that it is “reconsidering” this policy.
In order to “ensure that permit applicants receive as timely a decision as possible,” FERC proposes to eliminate the one-year delay. An applicant could thus pursue state and FERC approval at the same time. While FERC believes that this policy will be more efficient, it “continues to recognize the primacy of the States’ role in siting transmission infrastructure.” FERC—“out of respect for State siting processes”—accordingly proposes to allow states to provide comments on an applicant’s pre-filing process during a 90-day window one year after an applicant starts that process if the state has not made a determination.
3. Implementing Landowner Engagement Condition
The IIJA amended FPA section 216 to require FERC to determine, as a condition to receiving eminent domain authority, that the permit holder “has made good faith efforts to engage with landowners.” In order to implement this condition, FERC proposes to allow applicants to show they have satisfied this condition by complying with an “Applicant Code of Conduct” in communicating with affected landowners. The code of conduct includes recordkeeping and information-sharing requirements, as well as prohibitions on misconduct. For instance, it requires retaining a contact log, ensuring that communications are accurate, obtaining landowner permission for entering property, and sharing of appraisals. FERC would allow applicants to rely on alternative methods to show good-faith efforts applying a “equal or superior to” standard in comparison to the Applicant Code of Conduct.
4. Environmental Justice
FERC proposes to require applicants to file an “Environmental Justice Public Engagement Plan,” which must describe the completed and planned outreach activities targeted to identified environmental justice communities. It must also summarize comments received from potentially impacted environmental justice communities and state how the applicant will reach out to environmental justice communities about potential mitigation.
FERC also proposes to require an “Environmental Justice Resource Report” that would require the applicant to identify environmental justice communities within the project’s area of potential impacts, describe the impacts of project construction and operation (including whether impacts would be disproportionate), discuss cumulative impacts on environmental justice communities, and state any proposed mitigation measures.
FERC expressly seeks comment on the meaning of “environmental justice community,” which it proposes defining as “any disadvantaged community that has been historically marginalized and overburdened by pollution, including, but not limited to, minority populations, low-income populations, or indigenous peoples.”
Beyond the four overarching proposals described above, the NOPR proposes several other, primarily administrative reforms to its regulations implementing section 216, and it is available here.
Commissioner Statements on Backstop Siting Authority
All FERC commissioners voted for the NOPR, though Commissioners Christie and Danly criticized some aspects of the NOPR in separate concurrences.
On the proposal to allow simultaneously pursuing state and FERC approval, Commissioner Christie panned this change in policy. "One obvious reason" for the current policy, Commissioner Christie wrote, "is that if the line is truly needed, the state regulators will in all likelihood approve it, and no FERC staff time and resources will need to be expended at all."
On the environmental justice proposals, Commissioner James Danly criticized those elements of the NOPR as lacking firm statutory footing. Commissioner Clements, on the other hand, supported the environmental justice proposals at FERC's December meeting, where she stated that FERC’s backstop authority represented a "chance to do siting well."
Statements by Commissioners Christie and Clements, and by outgoing Chairman Glick, also suggest some hesitation to invoke section 216 out of deference to state commissions. Commissioner Christie went the farthest of the three in his concurrence, writing that state regulators are better positioned than FERC to handle siting and that if FERC were to approve a transmission line over a state denial, the line could face years of litigation.
Implications—A Lifeline for Federal Siting Authority?
Despite commissioners’ wariness to deploy FERC's section 216 authority, FERC's continued development of its regulations in this area could serve as a subtle warning to state commissions, operating in the background to encourage the siting of important regional and interregional transmission lines. And there are several factors that might ultimately make FERC more likely to issue a construction permit under section 216: the increasing recognition of a national need for substantial build-out of high-voltage transmission lines (including as evidenced by FERC’s recent NOPRs), recent congressional appropriation of $2 billion for loans for transmission facilities under section 216 (in section 50151 of the Inflation Reduction Act), and the DOE’s new approach to designating National Corridors.
The upcoming debate surrounding the NOPR may also focus on FERC’s environmental justice proposals. Its proposal to define “environmental justice community” could serve as a model for, and influence, future FERC action in this area. Similarly, the Applicant Code of Conduct, meant to protect the interests of landowners, could affect FERC’s approach to landowner interaction related to other infrastructure within its jurisdiction.
More broadly, the NOPR is relevant to FERC’s efforts surrounding transmission planning, cost allocation, and interregional transmission. Section 216 authority could serve as a safety valve to ensure FERC’s current goals related to large-scale transmission are met, or it may be but another effort destined to become stuck in a quagmire of state-federal controversy.
Finally, the NOPR may inform ongoing congressional activity concerning FERC’s section 216 authority (and its current slumber). Senator Joe Manchin’s (D-WV) controversial permitting bill, formally known as the Building American Energy Security Act of 2022, would expand FERC’s backstop siting authority into a more potent instrument—including allowing eminent domain on state-owned land. While certain Democrats opposed the bill on environmental grounds, Republicans specifically denounced the increase in federal transmission siting authority. FERC’s NOPR could affect the way both parties approach FERC’s authority in this area.
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Steptoe’s Energy Group is closely following FERC’s transmission proposals. Please let us know if you have questions about the NOPR or if we can otherwise be of assistance.
