The Federal Government’s High-Wire Act: Setting FERC up to Employ its Transmission Siting Backstop Authority

Much of the nation’s electric transmission grid is old and deteriorating, designed well before the recent transition from coal and oil-fired generation to renewable and distributed generation. There is widespread agreement that more transmission needs to be built, not only to replace the aging infrastructure, but to integrate these new generation resources. Many in the industry and the government have seen this coming for decades, but the results of past federal efforts to get new transmission built have made only minor progress towards solving this massive problem. Greater attention has been given to this problem under the Biden administration, with the U.S. Department of Energy (“DOE”) and the Federal Energy Regulatory Commission (“FERC”) currently evaluating measures to get transmission sited and built without lengthy delays.

However, many questions remain regarding whether DOE’s and FERC’s recently expanded authority under the Infrastructure Investment and Jobs Act (“IIJA”) is enough to override historical state jurisdiction over the transmission siting processes, and whether the implementation of this federal authority can withstand judicial review. It will likely be years before the new promulgation of this authority is tested in practice, but in the short-term there are plenty of opportunities, as discussed below, for interested entities to help shape these processes going forward.

Background

It has been 18 months since the passage of the IIJA and nine months since the passage of the Inflation Reduction Act (“IRA”). The IIJA and the IRA drove billions of dollars towards clean energy investment and development. However, the Biden administration’s clean energy goals hinge on development of an efficient, reliable, and resilient electric transmission system. Attention has shifted to FERC and DOE to catalyze the construction of additional transmission infrastructure.

Congress promulgated FERC’s authority to issue permits for the construction or modification of certain interstate transmission lines, i.e., FERC’s “backstop authority,” in the Energy Policy Act of 2005 (“EPAct of 2005”). The EPAct of 2005 added Section 216 to the Federal Power Act (“FPA”), which allows FERC to issue a federal permit to site projects located in National Interest Electric Transmission Corridors (“NIETCs”) once they are designated by DOE. However, as we have previously explained, federal circuit court decisions over a decade ago stymied FERC’s backstop authority and vacated the only two NIETCs that DOE designated. DOE has not designated a NIETC since that time. The IIJA attempted to rectify this quagmire by adding more objective criteria to the list of considerations DOE uses to select and designate NIETCs and by clarifying when FERC can exercise its backstop authority. As discussed in more detail herein, both DOE and FERC have acted in response to the IIJA by soliciting comments and proposing regulations regarding the exercise of their respective authorities under the IIJA and the EPAct of 2005.

The Announcement of DOE’s NOI

On May 9, 2023, the DOE’s Grid Deployment Office issued a Notice of Intent and Request for Information (“NOI”) regarding the designation of NIETCs. DOE’s NOI is the first step in establishing a process to designate NIETCs under FPA Section 216(a), as amended by the IIJA. As discussed above, NIETC designations open the door statutorily to all federal siting powers for transmission facilities. Under the prior process, DOE would study and designate a generally defined NIETC area. DOE now seeks comments from the public and interested parties to identify program elements that should be included to assist in developing final guidelines, procedures, and evaluation criteria for creating an applicant-driven, route-specific NIETC designation process. Through this process, DOE plans to designate a specific route where one or more transmission projects could be located based on applications from active project developers, in a geographic area where the DOE has identified transmission needs. Designation of a NIETC would not mean that the applicant’s project has been selected for preferential financial, siting, or planning purposes, but instead merely that the project’s associated route would be covered by a NIETC designation. DOE hopes that where NIETCs encompass areas with the capacity for multiple projects that environmental reviews can be coordinated to improve the efficiency and timeliness in the permitting of this new and needed infrastructure. The NOI emphasizes that DOE plans to coordinate with FERC for National Environmental Policy Act (“NEPA”) reviews to avoid regulatory redundancy. DOE specifically seeks comments on the following proposals:

• Eligible Applicants: Whether to restrict NIETC applicants to transmission developers or whether to also allow Tribal authorities, states, non-transmission owning utilities, local governments, generation developers, and other interested entities to apply. As proposed, an applicant’s project would need to already be under development.
• “Route-Specific” NIETCs: Whether to limit NIETC route proposals to locations DOE has previously identified as needing transmission and also whether applicants should be required to demonstrate that their route balances a number of factors including definitional specificity, environmental impacts, construction viability, and general reliability concerns.
• Required Application Information: The breadth of what it will require applicants to submit with their proposed NIETC request. FPA Section 216(a)(2) requires DOE to consider a proposed NEITC’s potential economic vitality and growth, impact on energy independence and security, ability to enhance generation facilities connection to the transmission system, existing rights-of-way and disruption to sensitive environmental and cultural areas, and ability to reduce consumers’ electricity costs. The NOI proposes a robust amount of applicant disclosure to enable DOE to meet this statutory requirement.
• Evaluation and Designation Process and Decision: The framework that it will use to prepare and evaluate applications that ultimately produce an adequate “Designation of National Interest Electric Transmission Corridors Report,” as statutorily required.

Outside of these specific categories, the NOI seeks stakeholder buy-in on topics ranging from the minutiae of program administration to the NIETCs role in high-level environmental policy objectives. Comments are due June 29, 2023.

FERC’s Backstop Authority NOPR

On December 15, 2022, FERC issued a NOPR to revise its existing regulations concerning the exercise of FERC’s backstop authority. The NOPR proposes five major changes to the regulations implementing the backstop authority. FERC expressed hope that the changes will ensure consistency with the IIJA’s amendments to FPA Section 216 while also addressing the legal issues that stymied earlier NIETC/backstop efforts. The NOPR includes the following proposals:

• It clarifies that FERC’s backstop authority may be used when a state has denied an application for qualifying transmission facilities. The IIJA expressly gives FERC backstop authority under these circumstances and in doing so overrides the Fourth Circuit’s decision in Piedmont Environmental Council v. FERC.
• It eliminates the one-year delay an applicant currently faces before it can pre-file with FERC. Instead, the NOPR proposes allowing a developer to simultaneously file with a state and FERC. To recognize the primacy of states’ roles in transmission siting, if a state has not made a determination on an application within one year of FERC commencing the federal pre-filing process, the NOPR proposes providing a 90-day window for the state to submit comments on any aspect of the federal pre-filing process and project proposal, including any information the applicant submitted.
• It supplements the existing “Project Participation Plan” that an applicant is required to submit in the federal pre-filing process with a voluntary “Applicant Code of Conduct” that includes additional recordkeeping and information-sharing requirements for engagement between the applicant and affected landowners and general prohibitions against misconduct by an applicant. If an applicant chooses not to use the Applicant Code of Conduct, it must specify an alternative method of demonstrating that it has made “good faith efforts” to engage with landowners and other stakeholders, as required under the IIJA and explain why the alternative method is equal or superior to the Applicant Code of Conduct.
• It requires three new resource reports: the (1) Tribal Resource Report to identify Tribes that may attach religious and cultural significance to historic properties within the project vicinity and any other potential impacts on Tribal interests; (2) Environmental Justice Report to identify and describe impacts on environmental justice communities within the project area during construction and operation of the facilities along with any proposed mitigation measures; and (3) Air Quality and Environmental Noise Report to identify and address any reasonably foreseeable air emissions and noise impacts associated with the construction, operation, and maintenance of the proposed facilities.
• It seeks comments on a number of procedural changes to FERC’s regulations regarding filing and formatting of applications, exhibits, notice and mailing requirements, and certain definitional changes. Specifically, the NOPR requests comments on revised definitions including: “environmental justice community,” “national interest electric transmission corridor,” “permitting entity,” “stakeholder,” and “affected landowners.”

Initial comments were due May 17, 2023. FERC received a number of comments from state regulators, as well as industry and interest groups. State public utility regulators largely coalesced in arguing that FERC should not remove the one-year waiting period for an applicant to pre-file with FERC out of concern that the parallel review process will erode respect for states’ siting procedures while causing administrative confusion and inefficiencies. Many state regulators are also skeptical of FERC greenlighting projects rejected by the states. Southern Company Services, Inc. raised concerns similar to the state regulators that the removal of the one-year waiting period and commencement of parallel processes is inefficient and undermines states’ interests in a manner contradictory to the FPA. The Edison Electric Institute (“EEI”) and WIRES, representing investor-owned electric utilities as well as transmission providers, regional grid managers, customers, and service companies, also warned FERC not to undermine state regulatory processes when developing federal pre-filing parameters. The EEI and WIRES joint comments also suggest increasing the length of a transmission line that would qualify for a categorical exclusion under NEPA to 100 miles (up from 10 miles or less or 20 miles or less within previously disturbed powerline or pipeline rights-of-way).

Interest groups such as the Niskanen Center, Conservation Law Foundation, and the Sabin Center for Climate Change Law are supportive of allowing FERC’s pre-filing process to proceed simultaneously with state proceedings. The Niskanen Center and the Environmental Defense Fund also suggest broadening the definition of an affected landowner to mirror that used by DOE, specifically including landowners within 0.25 miles of a proposed study corridor or route and those residences within 3,000 feet of a proposed construction work area. FERC’s current regulations define a landowner as directly affected, abutting, or containing a residence within 50 feet of a proposed construction work area. The Institute for Policy Integrity at New York University School of Law further suggest expanding the definition of environmental justice communities beyond those “overburdened by pollution” to include historically marginalized communities bearing any type of disproportionate environmental burden. Expanding these definitions would result in broadened environmental reviews and increased public participation in FERC’s review processes.

The initial comments on FERC’s NOPR show a significant measure of support for FERC’s efforts to clarify its backstop authority and in so doing increase public engagement and outreach to environmental justice communities. FERC will have its work cut out in parsing the details and analyzing nuanced differences proposed by the various stakeholders, especially regarding whether to provide for simultaneous federal pre-filing and state siting procedures. Reply comments are due June 16, 2023.

Conclusion

The DOE and FERC processes are in their relatively early stages. Stakeholders can still submit input for the agencies’ consideration. Meanwhile, the White House is pushing the ball forward where it can. On May 10, 2023, the White House issued a Memorandum of Understanding (“MOU”), directing the Secretary of Energy to establish a standard schedule for all qualifying projects under Section 216 of the FPA. The MOU recommends a final decision on all authorizations within two years of the publication of a notice of intent to prepare an environmental impact statement. The MOU also directs the Secretary of Energy and other signatory agencies to “harmonize” the milestones and deadlines under Section 216 of the FPA and FAST‑41.

As the federal government appears focused on getting transmission sited and built, interested parties are encouraged to reach out to the attorneys listed below for additional details and analysis.

¹558 F.3d 304 (4th Cir. 2009), cert. denied, 558 U.S. 1147 (2010).

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.