On October 11, 2011, the United States Department of Energy (DOE) announced that it will work more closely with the Federal Energy Regulatory Commission (FERC) in reviewing proposed electric transmission projects under section 216 of the Federal Power Act (FPA). DOE was considering a delegation of its obligation to conduct triennial congestion studies and its authority to designate national interest electric transmission corridors (NIETC) under the Energy Policy Act of 2005 (EPAct 2005) to the FERC. However, DOE determined that working with FERC is the "best way" to help "build the electric grid of the 21st century to compete in the global economy."1 DOE's decision not to delegate its authority was in response to comments on the proposed delegation submitted by various stakeholder groups.

One reason that was offered for the proposed delegation is that transfer of the DOE-designated functions could make it easier to site interstate electric transmission projects, including those intended to facilitate the delivery of renewable energy across states. As suggested in the FERC staff narrative posted on DOE's website, the delegation could have also avoided duplicative and possibly overbroad environmental review under the National Environmental Policy Act (NEPA). The delegation to FERC would have consolidated the congestion studies and NIETC designation authority with the backstop construction permitting authority for interstate transmission that was granted to FERC in EPAct 2005. Instead, DOE and FERC will work together to prepare drafts of the transmission congestion studies mandated by EPAct 2005, supplements to the congestion studies based on regional and inter-regional transmission plans to be prepared pursuant to FERC Order nos. 890 and 1000, and the NEPA analysis for any proposed NIETC. In addition, DOE announced other measures it would take to execute its FPA Section 216 powers "better, faster, with more transparency, and more effectively."2

Background

Section 1221 of EPAct 2005 establishes the federal transmission backstop siting authority.3 DOE was directed to conduct, in consultation with affected states, a study of electric transmission congestion every three years. The DOE could, after considering recommendations from interested parties, including the states, designate a geographic area experiencing transmission congestion as a NIETC. Following notice and opportunity for hearing, FERC could authorize the construction of electric transmission facilities in a NIETC, if it finds that (i) a state does not have authority to approve the siting of the interstate transmission facilities or to consider the interstate benefits, (ii) the applicant is a transmitting utility under the Federal Power Act, but does not qualify to apply for state authorization of the transmission project because the applicant does not serve end-users in the state or (iii) the state that has authority to approve the siting of the interstate transmission facilities has withheld approval for more than a year after the applicant filed for authorization or conditioned its approval in a manner that the transmission project will not significantly reduce congestion or is not economically feasible.4

The implementation of the section 1221 of EPAct 2005 has already been the subject of two U.S. Court of Appeals decisions. The Court of Appeals for the Ninth Circuit vacated DOE's congestion study and NIETC designations of eastern and western corridors when it determined that "DOE failed to properly consult with the affected states in conducting the Congestion Study and failed to undertake any environmental study for its NIETC Designation as required by the National Environmental Protection Act."5 In a proceeding on FERC's implementing regulations, the Court of Appeals for the Fourth Circuit found, among other things, that FERC's siting jurisdiction, which applies when a state withholds approval for more than a year, does not include, as FERC concluded in its implementing regulations, the situation in which a state denied an application.6

Comments on DOE Proposal

In light of the impediments to DOE's and FERC's ability to effectively use the backstop authority, DOE posted FERC staff comments on the proposal for DOE delegation under which FERC would consider applications for both a project-specific NIETC and construction permits within that NIETC in proceedings that run concurrent with state siting proceedings. DOE established a comment date for these proposals of September 9, 2011. DOE received numerous comments from interested parties, including state utility commissions, electric utilities, trade organizations, and not-for-profit entities. The state utility commissions predominantly opposed the delegation as an attempt to usurp the traditional transmission siting authority vested in the states. Interested parties that are opposed to the delegation argued that (i) DOE does not have the authority to delegate to FERC because it would be contrary to the specific division of responsibility in EPAct 2005, (ii) the states are not the impediment to interstate transmission siting, (iii) FERC's statement that the Piedmont case is limited to the Fourth Circuit demonstrates FERC's intent to ignore the precedent outside of the Fourth Circuit, (iv) ex parte rules would prohibit the states from meaningfully participating in the FERC proceeding on project-specific NIETCs and construction permits, and (v) EPAct 2005 required NIETCs that apply to a geographic area and not project-specific NIETCs. Many comments also raised questions on the interaction between the DOE delegation and FERC's Order No. 1000 on regional and inter-regional transmission planning.

Delegation Authority

On its face, DOE's general authority of delegation in section 642 of the DOE Organization Act (DOE Act) would permit it to delegate its functions under section 1221 of EPAct 2005 to FERC. Under the DOE Act, FERC is an independent regulatory agency within DOE. section 642 states that "[e]xcept as otherwise expressly prohibited by law, and except as otherwise provided in this chapter, the Secretary may delegate any of his functions to such officers and employees of the Department as he may designate."7 As noted in the comments opposed to delegation, EPAct 2005 specifically provides for the division of responsibility. The statute does not expressly prohibit the Secretary's delegation of those responsibilities as contemplated in section 642 of the DOE Act. Furthermore, section 402 of the DOE Act provides that FERC "shall have jurisdiction over any other matter which the Secretary may assign to the Commission after public notice."8 Assuming DOE met the notice requirement, the delegation appeared to be consistent with the DOE Act.9

State Withholding Siting Authorization for More than One Year

Some issues raised in FERC's narrative addressing the delegation were not resolved by DOE's decision not to delegate its authority. One such issue is whether FERC will apply the federal backstop siting to projects rejected by states located outside the Fourth Circuit. Pursuant to EPAct 2005, FERC has authority to issue a construction permit for transmission facilities in an NIETC if the state siting authority has withheld approval for more than one year after an application or has conditioned its approval such that the project will not significantly reduce transmission congestion or will not be economically feasible. In Piedmont, the Fourth Circuit rejected FERC's interpretation that its right to issue a construction permit where a state withheld approval included a state denial of the siting application.10 However, the FERC staff indicated that the issue is not resolved in its narrative posted on DOE's website, which states that

[t]o the extent that there may be a concern that DOE, FERC, and other involved agencies are ignoring, or seeking to circumvent, the mandates of the courts of appeals in the Piedmont and California Wilderness Coalition cases, it can be correctly noted that the effect of the Piedmont case is limited to the Fourth Circuit, and that other courts might reach a different result.

In addition to comments about FERC staff's interpretation of the precedential value of the Piedmont decision, issues raised in stakeholder comments regarding the timing of review described in FERC staff's narrative are still relevant. The comments questioned whether EPAct 2005 permitted FERC to begin proceedings concurrent with state reviews, and whether concurrent proceedings would pressure state action. The issue of how EPAct 2005 balances traditional state versus federal backstop siting authority is likely to be the subject of future litigation.

Transmission Companies Without Basis to Apply for State Certificate of Public Convenience and Necessity

It remains to be seen whether DOE and FERC working together will facilitate the development of transmission projects that seek to cross states to deliver energy where the project company does not qualify to apply for state siting authorization because it does not serve end-users in the state. The comments filed with DOE expressed concern regarding federal siting authority impinging on states' authority to site transmission lines. However, the issue of states' rights is not present in cases where a transmission company is not able to request a state's approval to site transmission because the transmission company does not serve end-users within that state. In these cases, the federal backstop siting authority in EPAct 2005 is the only authority under which these transmission facilities can be sited. Although FERC has clear authority to process permit applications where the transmitting utility is unable to apply for state authority, the federal backstop authority has not been applied in these circumstances, possibly because DOE has been unsuccessful in designating NIETCs or has had prior designations vacated in California Wilderness. DOE's plan to identify narrower areas of congestion and solicit statements from transmission developers while considering NIETC may help to facilitate these types of transmission projects.

Working Together

The decision for DOE and FERC to work together will maintain the division of responsibility contemplated in EPAct 2005, but may not yield the same efficiencies as the delegation proposal. Although DOE and FERC will work together to conduct the triennial congestion studies in consultation with affected states, DOE will still be responsible for designating NIETC corridors with participation by interested parties. DOE has said that it will "[b]egin immediately to identify targeted areas of congestion based on evaluation of existing information and on comments submitted by stakeholders."11 DOE's plan to begin immediately to identify targeted areas could be more effective than the delegation proposal because it eliminates a FERC rulemaking proceeding whereby FERC would have developed the process for designating NIETC. However, even with DOE's proposal to consider narrower areas of congestion, DOE will still need to comply with California Wilderness by conducting an NEPA study of the proposed NIETC, albeit with FERC's assistance. It is not clear from the announcement whether DOE and FERC will simultaneously conduct the NEPA review for the narrower NIETC with the construction permit application as contemplated in the delegation proposal. If the proposal for a concurrent environmental review of the NIETC designation and the application for the construction permit for the project has been abandoned, two separate NEPA documents will may need to be prepared for each proposed transmission project.

Footnotes

1 DOE and FERC Joint Public Statement on Backstop Siting.

2 Id.

3 Pub. L. No. 109-58, § 1221, 119 Stat. 594, 688 (2005).

4 Id.

5 California Wilderness Coalition, et al. v Dept. of Energy, 631 F.3d 1072 (9th Cir. 2011).

6 Piedmont Environmental Council v. FERC, 558 F.3d 304 (4th Cir. 2009), cert denied, sub nom Edison Elec. Inst. v. Piedmont Envtl. Council, 130 S.Ct. 1138, 175 L. Ed. 2d 972 (2010).

7 42 U.S.C. § 7252.

8 42 U.S.C. § 7172(e).

9 Comments filed with DOE by certain interested persons question whether the notice of the proposed delegation was sufficient.

10 Note 6, supra.

11 DOE and FERC Joint Public Statement on Backstop Siting.

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