Is FERC Backstop Siting Authority Still Alive?

The U.S. Court of Appeals for the Ninth Circuit recently dealt another setback to the use of Section 216 of the Federal Power Act, which gives the Federal Energy Regulatory Commission (FERC) “backstop” authority to site electric transmission lines. Although enacted in 2005, this authority has never been used by FERC, and it can be questioned whether it ever will be used.

The Origins of Section 216

The siting of transmission lines has always been the responsibility of states, but a decade ago, many experts and politicians were alarmed by the fact that electric loads were growing much faster than transmission was being built. Among the identified causes for the lag in transmission construction was the difficult state siting process, which required multiple state approvals for an interstate line, and local “not in my backyard” politics. Therefore, many advocated for some form of unified federal control over the siting process for interstate transmission lines. However, there was also intense opposition to federal involvement from the states, and from some environmentalists, who feared there would be less opportunity to object to line construction.

In that atmosphere, Section 216 was enacted as an awkward compromise that established a convoluted siting framework. States retained their primary siting authority, but if they “withheld approval” of a filed application for more than a year, and under other specified circumstances, the applicant could turn to FERC for a siting permit. However, FERC’s authority could be invoked only if the proposed line was within a “corridor” designated by the U.S. Department of Energy (DOE) as an area of transmission congestion “that adversely affects consumers.”

FERC and the Fourth Circuit

The imprecise wording of Section 216 required the implementing agencies to interpret it and left opponents with opportunities to derail it. In promulgating its regulations for backstop authority, FERC was faced with the issue of whether the most significant statutory trigger for FERC jurisdiction—a state withholding approval of an application—included an outright state denial of the application. FERC held that it did.

A group of states and environmental groups appealed that decision to the U.S. Court of Appeals for the Fourth Circuit, which reached a split decision. The majority held that it was clear from the statute that a denial of an application by a state was not encompassed in the phrase “withheld approval,” and thus was not included as a trigger for FERC authority. The dissenting judge found precisely the opposite, stating that it was clear from the statute that denials were to be included in the trigger. The Supreme Court declined to review the case after the U.S. solicitor general argued that the case was not ripe for review and that FERC could look at this again when a specific case came up.

If denials are not a trigger for FERC jurisdiction, backstop authority would be largely gutted, because a state could always defeat FERC jurisdiction by simply denying an application. It remains unclear the extent to which this issue can be relitigated.

The DOE and the Ninth Circuit

Meanwhile, the DOE designated large areas in the East and the West as “corridors” in which FERC could exercise siting authority. In the Ninth Circuit, states and environmental groups appealed the DOE’s corridor boundaries and its procedures for designating them. This court was also split, with the majority holding that the DOE had not adequately met the statutory requirement to consult with states about the corridor designations and that the DOE did not fully consider the environmental effects of its decision.

Without commenting on the boundaries of the corridors, the court vacated the corridor designations and sent the case back to the DOE to redo the process. The dissent found that the DOE’s consultation process, though faulty, was a harmless error that did not warrant vacating the orders and that the majority’s environmental analysis was wrong. As of this writing, it is not known whether the DOE will seek rehearing of the court’s decision.

Requiem?

Thus, six years after enactment of Section 216, one important triggering mechanism for FERC authority has been thrown into legal uncertainty, and there are no valid DOE-designated corridors within which FERC could exercise such authority. The economic downturn has postponed the point when electric demand will exceed the capability of the grid to handle it, which means there is no clamoring by transmission providers to take advantage of FERC’s backstop authority. It is not clear whether Section 216, with its emphasis on alleviating congestion, could be used to site needed transmission for remote renewable resources.

The DOE will eventually designate new corridors, and electric loads will eventually grow again. In the meantime, federal backstop authority will lie dormant, waiting for a transmission applicant with the deep resources necessary to overcome future challenges to its use.

Brian R. Gish (briangish@dwt.com) is of counsel in Davis Wright Tremaine’s Energy Practice Group.