President Biden Signs the Bipartisan Infrastructure Bill into Law, Certain to Fuel Long Standing Debates at FERC
On November 15, 2021, President Biden signed the Infrastructure Investment and Jobs Act, better known as the “Bipartisan Infrastructure Bill,” into law during a ceremony at the White House. The $1.2 trillion package is replete with headline grabbing line items, such as $65 billion for improving the nation’s broadband infrastructure and $7.5 billion for building a nationwide network of electric vehicle charging stations. Also included are more nuanced energy measures, including $2.5 billion to fund and establish the Department of Energy (“DOE”) as an anchor tenant for new or upgraded transmission lines, as well as long-requested clarification regarding the DOE’s designation of National Interest Electric Transmission Corridors (“NIETCs”) and the backstop siting authority of the Federal Energy Regulatory Commission (“FERC”). How the DOE applies the allocated funds, and, in particular, how FERC exercises its clarified authority remain to be seen. Passage of the Bipartisan Infrastructure Bill comes at an interesting time for FERC, as it grapples with the extent of its jurisdiction across the industries it regulates, and amid increasing calls for the commission to more actively till the soil for the growth of clean energy throughout the country.
Electric Transmission and Grid Infrastructure
The new law includes $5 billion over the next five years to establish and fund a grant program to support activities that will result in the reduced likelihood and consequences of disruptive events on the electric grid, including the reduced risk of wildfires caused by electric transmission lines. It also includes an additional $5 billion to establish the “Program Upgrading Our Electric Grid Reliability and Resiliency,” which will provide financial assistance to innovative approaches to transmission, storage, and distribution infrastructure that are demonstrated to harden the resilience and reliability of the grid. The law directs FERC, along with the Department of Homeland Security and the North American Reliability Corporation, to develop a framework to assess the resilience, reliability, and security of energy infrastructure in the United States.
In regard to the siting and development of new transmission lines — a much needed reality if states are to meet their targets for adding renewable energy resources to the generation mix, not to mention President Biden’s goal of a carbon pollution-free power sector by 2035 — the law takes a two-pronged funding and regulatory approach. First, the law establishes a $2.5 billion revolving loan fund to permit DOE to serve as an “anchor-tenant” for new transmission lines or an upgrade of an existing line. The provision also permits DOE to contract for a certain portion of the planned capacity, up to 50 percent, which it may later assign to other transmission customers after determining that the project is financially viable. The goal of the so-called Transmission Facilitation Program is to encourage other entities to enter into contracts for the transmission capacity on the project. Second, the law adds more objective criteria to the list of considerations the DOE uses to select and designate a NIETC and adds clarification to FERC’s backstop authority, i.e., when FERC can issue permits for construction or modification of certain interstate transmission facilities if a state withholds or denies an application seeking approval for the siting of the proposed transmission facilities.
FERC’s backstop authority is not new. Congress legislated a backstop provision in the Energy Policy Act of 2005 (“EPAct of 2005”), which amended the Federal Power Act by adding a new Section 216, to allow FERC to override state permitting obstacles to privately developed interstate transmission lines.1 If exercised, FERC’s backstop authority would result in federal siting permits for projects located in areas that the DOE had designated as a NIETC. The DOE and FERC were never able to effectuate their respective authorities due to the chilling effect of circuit court decisions in 2009 and 2011. The Fourth Circuit in 2009 ruled that FERC could not — as it proposed in its regulations to implement Section 216 — reverse a timely state decision to deny the construction of a transmission project; rather, according to the court, FERC could only exercise its backstop authority if a state failed to act for more than one year on a request for construction.2 Then in 2011, the Ninth Circuit vacated the DOE’s designation of two NIETCs in the Mid-Atlantic and Southwest regions because the DOE failed to properly consult with the affected States or undertake an environmental study for its NIETC designations.3
Earlier this year, FERC Chairman Richard Glick referenced the Fourth Circuit decision in suggesting to Congress that it would be helpful to clarify its intent behind the backstop authority promulgated in the EPAct of 2005. The Bipartisan Infrastructure Bill does just that, clarifying FERC’s backstop authority to apply when a state commission or other authority has denied an application seeking approval of a transmission project or even when it has conditioned approval in such a way that the transmission construction or modification will not result in a significant reduction in transmission capacity constraints or congestion in interstate commerce. Commissioner Allison Clements has suggested her willingness to use the congressionally authorized backstop authority if necessary; however, Commissioner Mark Christie, a former state regulator, has pushed back on the notion that state regulators are to blame for the lack of new transmission projects and has instead highlighted cost allocation issues.
While the enhancement of FERC’s backstop authority may help overcome state permitting obstacles for certain projects, the law fails to cure what may be the fatal flaw in FERC’s authority. If FERC issues a permit pursuant to its backstop authority, the project developer is granted eminent domain authority over privately owned land along the route of the project. The eminent domain authority does not, however, extend to state-owned land. Because states own the soil under all navigable waters,4 the gap in eminent domain authority is a significant obstacle to any proposed transmission line that crosses a river or other state land or state conservation easement.
The clarification of FERC’s backstop authority also comes on the heels of FERC’s recent announcement of a joint federal-state taskforce between FERC and the National Association of Regulatory Utility Commissioners (“NARUC”).5 The joint taskforce will be comprised of each FERC Commissioner as well as representatives from ten state commissions, and will meet to discuss “transmission-related topics,” including transmission to facilitate generator interconnection. NARUC has previously questioned FERC’s backstop authority and stated it was “deeply troubled” by Congress’s proposal to clarify that authority in the infrastructure package.6 That joint taskforce may be the first place FERC looks for guidance on how, when, and if it will exercise the backstop authority clarified and bolstered by the Bipartisan Infrastructure Bill, and how it will respond to comments on its Advance Notice of Proposed Rulemaking regarding electric regional transmission planning and costs issued in July.
The new law emphasizes Congress’s findings on the importance of clean hydrogen in promoting energy security and resilience. The law establishes a number of clean hydrogen programs at the DOE, including $500 million for the development of a clean hydrogen manufacturing and recycling program intended to support a clean hydrogen domestic supply chain and $8 billion over five years to develop at least four regional hydrogen hubs. The legislation defines a “regional clean hydrogen hub” as a network of clean hydrogen producers, potential consumers, and connective infrastructure located in close proximity. Grants under the regional hydrogen hub program will be allocated to accelerate the commercialization, production, delivery, and storage of clean hydrogen.
The onslaught of federal funds to develop clean hydrogen products and regional hubs will inevitably exacerbate ongoing discussions at FERC and in the industry regarding the commission’s jurisdiction over the transportation and storage of the product. On October 26, 2021, Chairman Glick sent a letter to U.S. Senator Martin Heinrich stating that FERC has the authority to regulate hydrogen blending on interstate natural gas pipelines, but it has yet to determine the extent of that authority under the Natural Gas Act. Chairman Glick specified that “some aspects of the commission’s natural gas jurisdictional authority will likely be affected by industry developments that drive increased demand for hydrogen transportation by natural gas pipelines.”7 If the Bipartisan Infrastructure Bill succeeds in its intended purpose to accelerate industry developments in the field of clean hydrogen, FERC will need to grapple with its jurisdictional authority sooner than it may have anticipated.
Congress also emphasized the importance of carbon capture technology in the Bipartisan Infrastructure Bill. The law establishes a $2.1 billion program to provide flexible, low-interest loans for carbon dioxide infrastructure projects and grants for initial excess capacity on new infrastructure. It also authorizes $2.5 billion for large-scale carbon sequestration projects and $3.5 billion for projects that contribute to the development of four regional direct air capture hubs.
Not to be downplayed, the law also authorizes $6 billion in credits to be awarded to select certified nuclear reactors, i.e., subsidies for uneconomic nuclear power plants. It also directs the DOE to develop a report on the feasibility for using nuclear energy to meet resilience and carbon reduction goals.
The DOE and FERC will implement a number of these new programs and authorities over the coming months. Many of the programs include 180-day initiation and reporting deadlines. In the interim, the Senate is poised to confirm Willie Phillips to the final seat at FERC. Mr. Phillips stated in his confirmation hearing that he would pay close attention to the recommendations from the joint taskforce on electric transmission issues. President Biden’s signing of the Bipartisan Infrastructure Bill into law all but assures that Congress and stakeholders will be paying close attention as well.
1 See 16 U.S.C. § 824p (2018).
2 Piedmont Envtl. Council v. FERC, 558 F.3d 304 (4th Cir. 2009).
3 Cal. Wilderness Coalition v. U.S. Dept. of Energy, 631 F.3d 1072 (9th Cir. 2011).
4 See PPL Montana LLC v. Montana, 556 U.S. 576 (2012) (“Upon statehood, the State gains title within its borders to the beds of waters then navigable.”); Pollard’s Lessee v. Hagan, 44 U.S. (3 How.) 212, 230 (1845) (“Th[e] right of eminent domain over the shores and the soils under the navigable waters . . . belongs exclusively to the states within their respective territorial jurisdictions, and they, and they only, have the constitutional power to exercise it.”).
5 Order Listing Members, Announcing Meeting, and Inviting Agenda Topics, 176 FERC ¶ 61,131 (2021).
6 Letter from Paul Kjellander, President, Nat’l Ass’n of Reg. Util. Comm’rs, to Sen. Joe Manchin III, Chairman, and Sen. John Barrasso, Ranking Member, Senate Energy and Natural Resources Committee (July 7, 2021), https://pubs.naruc.org/pub/4B5BA2AC-1866-DAAC-99FB-8A6E338F8C59.
7 Letter to Sen. Martin Henrich from Richard Glick, Chairman, FERC Accession No. 20211027-4000 (Oct. 26, 2021).
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.