Federal Climate Initiatives Aim to Speed Siting of Transmission Lines

Most long-distance transmission lines continue to be developed without federal siting assistance or funding. Projects like the Champlain Hudson Power Express, located entirely within Canada and New York State, have historically moved quicker to construction than federally assisted projects. However, recent statutory changes and federal initiatives have increased the federal government’s role in transmission line development, and the statutes addressing clean energy passed during the Biden Administration – the Infrastructure Investment and Jobs Act of 2021 (“IIJA”) and the Inflation Reduction Act of 2022 (“IRA”) – have provided new funding opportunities. Together, these authorities are key policy moves towards renewable energy and grid decarbonization.

FERC’s Backstop Siting Authority

Under the Federal Power Act of 1935,[1] FERC has authority over transmission rates and facilities, but the statute long maintained states’ pre-existing authority over transmission siting. So, while federal control allowed long-distance, interstate natural gas lines to develop with relative speed and ease over the twentieth century, developers of comparable electricity transmission facilities struggled to compile the requisite local and state approvals.[2] The Energy Power Act of 2005 (“EPAct 2005”) altered this dynamic by granting FERC limited “backstop” siting authority over interstate transmission lines and granting the Department of Energy (“DOE”) authority to partner with developers to help get transmission lines developed.[3] However, because of unfavorable court decisions and political opposition, these powers have never been exercised to successfully shepherd an interstate transmission line to completion.

Use of FERC’s backstop siting authority requires the completion of two steps. First, DOE must designate a “National Corridor” – a specific geographic area that DOE concludes needs additional transmission line capacity. Second, once a National Corridor is designated, FERC may exercise backstop siting authority over transmission line developments within those corridors.

The first step, designating National Corridor, requires DOE to conduct a nation-wide study of transmission capacity and constraints – a National Transmission Needs Study.[4] Based on this study and other information available to DOE, the agency must then release another report, in which DOE may designate specific areas as National Corridors. [5] Two National Corridors were designated in 2007, but these designations were vacated in 2011 by the Ninth Circuit in California Wilderness Coalition v. U.S. Dep’t of Energy.[6] California Wilderness held that DOE had insufficiently consulted with affected states on the Needs Study,[7] and that the National Corridor designations were final actions requiring additional environmental study under the National Environmental Policy Act (“NEPA”).[8] In the decade since the Ninth Circuit decision, DOE has not attempted to designate any new National Corridors.

Once a National Corridor is designated, FERC may grant construction permits to proposed transmission lines within that corridor. Eligible projects must meet one of five threshold criteria and one of six “state inaction criteria.”[9] Since the passage of EPAct 2005, a major question regarding backstop siting authority has been whether the statute maintains a state veto over interstate transmission lines. As originally enacted, the statute allowed the federal government to exercise siting authority if a state had “withheld approval for more than 1 year after the filing of an application” – this provision was one of the state inaction criteria.[10] FERC issued findings during rulemaking where it interpreted this criterion to include circumstances where a state had denied an application.[11] But in 2009, the Fourth Circuit in Piedmont Environmental Council v. FERC overturned FERC’s interpretation, holding that the plain reading of the requirement included only circumstances in which a state had not decided the fate of an application after one year – not circumstances in which a state had already affirmatively rejected an application.[12] After Piedmont maintained the state veto, federal backstop siting authority lay dormant.

Recent Legislation May Revive Federal Backstop Siting Authority

The federal government is showing renewed focus on National Corridor designations and backstop siting authority following the enactment of the IIJA and IRA. Congress increased the frequency with which DOE must consider designating National Corridors, and regulatory amendments now permit corridor designation to occur on a project-level basis. Congress also negated the Piedmont decision, removing a major hurdle to the exercise of backstop authority. Finally, to further promote use of the authority, FERC will allow state review and federal pre-review of permit applications to occur simultaneously, but require projects to engage with local stakeholders before the Commission exercises siting authority.

Congress recently affirmed the importance of having DOE regularly evaluate whether to designate National Corridors. DOE must release a National Transmission Needs Study every three years, and, pursuant to a new provision in the IIJA, DOE must now release a report considering whether to designate any National Corridors every three years as well.[13] The current administration reports that it is actively evaluating national transmission needs as required by the statute. In February, DOE released the draft 2023 National Transmission Needs Study, which concluded that almost every region in the country will need to develop new transmission lines by 2040.[14]

If DOE chooses to designate new National Corridors, it is likely to strongly consider designating project-specific corridors. The first two proposed National Corridors were very broad geographic areas, respectively covering nearly all southern California and the mid-Atlantic.[15] The breadth of these designations contributed to the extent of the opposition the designations faced.[16] To provide for narrower designations in the future, in May 2023, DOE issued a Notice of Intent and Request for Information proposing a process for designating corridors on a route-specific basis.[17] DOE expects that most route-specific National Corridor proposals will be submitted by transmission project developers, which will help expedite the project review process, but DOE is also considering expanding the applicant pool to other stakeholders with an interest in national corridor designations, such as local governments and generation developers.[18]

But the major advance regarding federal backstop siting authority is the IIJA’s negation of the Piedmont decision. The IIJA added a new state inaction criteria, giving FERC the ability to grant permits where a state “has denied an application seeking approval pursuant to applicable law.”[19] This amendment removed the state veto over interstate transmission lines. Now, the federal government can grant construction permits for projects in National Corridors even when such projects have been rejected by state authorities.

To manage this new authority, FERC released a Notice of Proposed Rulemaking in 2022 with amendments to the application process for projects asking the federal government to exercise backstop siting authority.[20] Most importantly, FERC will now allow the federal pre-filing review of a project to occur concurrently with state review of a permit application. If the state has not made a final determination on a project’s permit application within a year of FERC initiating its pre-decision review, FERC will also provide a 90-day window for the relevant state to comment on the pre-filing process.[21] The government further seeks to respect the primacy of local decision-making by requiring project developers to seek community support. To this effect, the IIJA added a requirement that projects seeking FERC’s permission to use eminent domain must first make “good faith efforts to engage with landowners and other stakeholders early in the applicable permitting process.”[22] Whether these initiatives revive use of federal backstop siting authority will most likely depend on how successfully project proponents and federal decisionmakers manage local- and state-level opposition to proposed transmission lines.

Federal Private-Partnerships Remain a Viable Pathway for Constructing Interstate Transmission

In addition to backstop siting authority, EPAct 2005 created another pathway for the federal government to support interstate transmission by authorizing federal-private partnerships to develop transmission lines; this power omits state control altogether.[23] Section 1222 of EPAct 2005 permits the Western Area Power Administration (“WAPA”) and the Southwestern Power Administration (“SWPA”)—two of the nation’s four power administrations—to accept contributed funds and partner with third parties to construct and own transmission lines. Projects must be located in National Corridors, accommodate an increase in demand for transmission capacity, and be consistent with transmission needs identified by a regional transmission organization.[24] After issuing a request for proposals in 2010,[25] DOE utilized its section 1222 authority to participate in only one project, the Plains and Eastern transmission line, that was ultimately abandoned in the face of ongoing state and local opposition.[26] Therefore, while section 1222 authority has never been used to shepherd a project to completion, the power remains available. WAPA and SWPA will likely solicit new section 1222 proposals to jumpstart further public-private partnerships developing interstate transmission lines.

Federal Funding Sources Have Expanded to Support Interstate Transmission Development

The federal government also provides substantial support to interstate transmission line development through several major funding programs.

The WAPA Transmission Infrastructure Program (“TIP”) authorizes WAPA to borrow $3.25 billion in revolving funds from the U.S. Treasury to construct transmission facilities.[27] The facilities simply must have a terminus within WAPA’s service area, and must deliver energy from newly constructed renewable sources.[28] The revolving loan funds were allocated in the American Recovery and Reinvestment Act of 2009, better known as President Obama’s stimulus bill,[29] and TIP has supported two operational projects and is funding four still under development.[30] TIP reviews applications for project development on a quarterly basis.[31]

The Transmission Facilitation Program was funded through a $2.5 billion allocation in the IIJA.[32] DOE can utilize the revolving funds to finance transmission line developments pursuant to three mechanisms: loans, public-private partnerships between DOE and projects in National Corridors, and through capacity contracts. For projects funded through capacity contracts, DOE serves as an “anchor customer” buying up to 50% of the project’s power output and then selling that contract to recover costs. Applications for the first round of funding closed in February 2023, but DOE plans to issue additional requests for proposals in the future.[33]

Finally, the Transmission Facility Financing Program, created by the IRA, will provide $2 billion in direct loans for financing “electric transmission facilities designated … to be necessary in the national interest under section 216(a) of the Federal Power Act (16 U.S.C. 824p(a)).”[34] The cited provision directs DOE to designate corridors in which transmission facility installation is necessary for the national interest, but it does not direct DOE to designate specific facilities to be necessary in the national interest. The financing program remains under development; further details regarding which facilities will be eligible – presumably those located in designated national corridors – will be forthcoming.[35]

Conclusion

Federal involvement, particularly through funding opportunities, will remain a catalyst for interstate transmission line development. But whether the federal government can leverage the power of its siting authority and funding programs will depend on administrations’ political willpower to intervene and shepherd projects to competition in the face of state opposition.

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The author discusses the statutory background for these issues further in the co-authored article, Building a New Grid Without New Legislation, published in Ecology Quarterly in September 2021. The Environmental Law and Policy Annual Review (“ELPAR”) selected the piece as one of the year’s best articles on environmental law and policy. For a deeper discussion of the recent developments discussed in this newsletter article, please see the Environmental Law Institute’s February 27, 2023 webinar, Building a New Grid without New Legislation.