Will DOE Punt Transmission Siting to FERC?

Washington, D.C., September 20, 2011 — Having failed to implement the provisions of the 2005 Energy Policy Act aimed at facilitating interstate electric transmission, the Department of Energy now wants to punt the problem to the Federal Energy Regulatory Commission. Whether FERC wants this political black spot isn’t clear, but in any case the idea is a loser.

Put simply, the problem is not bureaucratic. It’s the law. Scott Hempling, then the head of the National Regulatory Research Institute, wrote in these pages shortly after DOE began implementing the 2005 that the attempt to override the states in siting interstate electric transmission, historically a state function, was doomed to failure. Hempling outlined a number of time bombs buried in the act that were destined to explode once the issues hit the federal courts. His assessment was on the money, and the courts have properly frustrated DOE as it has attempted to implement a poorly written, inherently self-contradictory law.

Under the 2005 law, DOE has the authority to designate “national interest electricity transmission corridors.” Once that happens, federal law is supposed to trump state objections to transmission lines that may pass through a state without delivering any benefits to the state. If the state digs in its heels, DOE can pass the issue on to FERC, which can then overrule the states. FERC has long had clear authority under federal law to grant eminent domain for interstate natural gas pipelines.

The law says FERC can act if a state has not acted within a year on a transmission line proposed for one of these DOE-blessed corridors. What constitutes state inaction? According to the courts, a decision by a state within the time frame to deny approval to the line constitutes action, so it’s not reviewable by the feds.

Six years after Congress passed the law, after much rattling of swords and gnashing of teeth, no new transmission in these privileged corridors has been built. Hence, DOE proposes delegate all of its authority to FERC, which would then get the blame for failing to advance national transmission goals.

Predictably, the DOE punt has occasioned impassioned responses, mostly in opposition. State regulators, justly fearing an end-run around the courts, slammed the plan. Chuck Gray of the National Association of Regulatory Utility Commissioners wrote that the DOE plan “relies on a tortured reading of the statute that would cause uncertainty, litigation, damage to State and federal relations, and delays in transmission development.”

One gets a whiff of disingenuousness in Gray’s complaint, suspecting that NARC thinks delays might be just fine, but his point is well made in any case. Gray correctly predicts that the delegation of authority to FERC could lead to “developers pursuing a FERC corridor designation and running the clock on State-siting processes in an attempt to circumvent State-siting review.” It’s bad law, and slip-sliding it over to FERC won’t cure the legal problems.

Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources Committee, which largely wrote the offending Section 216 of the Federal Power Act, most recently slammed the proposed hand-off to FERC as “extremely ill-advised.” The law that Bingaman’s staff concocted depended on a compromise: DOE would make the national interest delegation and FERC would be the backstop. Otherwise, the states would have dug in against the legislation and killed it. The decision to modify Section 216, writes Bingaman, “is for Congress to make.”

Perhaps the best take on the current dispute comes from Raymond Wuslich, who watches energy policy and politics for the Winston & Strawn law firm’s Washington office. He writes that the DOE idea “has a tempest-in-a-teapot quality to it. FERC’s backstop siting authority has been in doubt since the U.S. Court of Appeals for the Fourth Circuit held two years ago in Piedmont Environmental Council v. FERC that a state’s denial of a transmission certificate application does not trigger FERC’s backstop siting authority. And the Ninth Circuit’s decision earlier this year in California Wilderness Coalition v. DOE, finding that DOE’s NIEtC designations in the Mid-Atlantic and Southwestern U.S. were procedurally flawed, raises a question whether having the authority would truly allow FERC to make transmission siting any more efficient that it already is.”