Ninth Circuit Vacates DOE Congestion Study and Designation of National Interest Electric Transmission Corridors

On February 1, 2011, the United States Court of Appeals for the Ninth Circuit issued an opinion in California Wilderness Coalition v. U.S. Department of Energy, vacating the August 2006 Department of Energy (DOE) study of congested electric transmission corridors and subsequent designation of two “National Interest Electric Transmission Corridors” (NIETCs) in the Mid-Atlantic and the Southwest.  Importantly, the designation of an NIETC is a prerequisite to the exercise of “backstop” siting authority by the Federal Energy Regulatory Commission (FERC) pursuant to Section 216 of the Federal Power Act (FPA). 

DOE CONGESTION STUDY, NIETC DESIGNATION & FERC BACKSTOP SITING

As enacted in 2005, FPA Section 216 requires the Secretary of Energy to: (1) conduct a study of electric transmission congestion in consultation with affected states; and (2) based on the results of such study, designate NIETCs for those geographic areas experiencing electric energy transmission capacity constraints that adversely affect consumers. 

Congress imposed a deadline of one year after enactment of Section 216 (to August 8, 2006) for the completion of the congestion study.  DOE immediately initiated the study process, allowed for public comment and technical conferences in February and March of 2006, and issued a final study in August 2006.  The DOE Congestion Study is available online here.  While incorporated into the public comment process, affected States were not afforded a separate opportunity to consult on the congestion study or later NIETC designations.  

In October 2007, DOE finalized the designation of two NIETCs—one in the Mid-Atlantic Region and the second consisting of a Southwest corridor connecting Southern California to the Phoenix/Tucson area.  Maps of each NIETC can be found here.  As part of this process, DOE concluded that its administrative act of designating NIETCs would not have any environmental effects.  That conclusion led DOE to decide that it did not need to perform a detailed review of the environmental effects of such designations under the National Environmental Policy Act (NEPA).

The congestion study and NIETC designations were critical steps in the implementation of FERC’s backstop siting program.  FPA Section 216(b) provides that FERC may exercise its backstop siting authority where a project is located in a designated NIETC and if one of three conditions exist—there are limitations on state authority to grant permits or consider out-of-state benefits, a state commission fails to act on a transmission

siting application for over one year, or conditions placed on a siting permit by the state commission render the project infeasible. 

NINTH CIRCUIT DECISION

In California Wilderness, the Ninth Circuit ruled on thirteen petitions challenging DOE’s congestion study and NIETC designations.  The Ninth Circuit held that DOE violated an explicit mandate that the congestion study be undertaken “in consultation with affected States.”  Further, the court held that the designation of the NIETCs constituted a final, major federal agency action for which the “requisite ‘hard look’ at the environmental consequences” of such designation is required under NEPA.

As a final step, the court reviewed whether DOE’s failure to consult with the States and conduct further NEPA review of its NIETC designations constituted prejudicial or harmless error.  The Ninth Circuit determined that harm had occurred because the lack of consultation with the States limited the information available to DOE and potentially altered DOE’s conclusions regarding the nature and location of transmission congestion.  The court also concluded that the failure to conduct a NEPA review of the proposed NIETC designations was not harmless error because substantial questions had been raised as to whether such designations could result in significant environmental degradation.

In light of the determination of prejudicial error, the court vacated both the congestion study and designation of the NIETCs.  Accordingly, DOE must prepare a new congestion study in consultation with affected States and, presently, there are no effective NIETCs.

IMPLICATIONS

Over the past 5 years, FERC has had one application for backstop siting (later withdrawn) and has never exercised its backstop siting authority.  Moreover, the scope of the authority was already limited by the Fourth Circuit decision in Piedmont Environmental Council v. FERC.  For more information see VNF Alert of February 23, 2009.  Nonetheless, the potential invocation of FERC backstop siting authority appears to have caused a number of States to adopt streamlined procedures for consideration of transmission siting proposals in order to reduce the risk of action under Section 216.  Likewise, additional scrutiny has been placed on ensuring that state commissions have sufficient authority to act upon transmission siting applications, thereby removing another basis for possible invocation of backstop siting authority. 

With the NIETC designations vacated, FERC's backstop siting authority cannot be exercised.  On remand, DOE must reinitiate its congestion study and address the procedural shortcomings identified by the court.  Further, the results of such new congestion study may result in significantly different corridor designations than the Mid-Atlantic and Southwest NIETCs, which were established in 2007.

The new 112th Congress is expected to debate energy policy matters such as the potential adoption of a clean energy standard.  In the 111th Congress, transmission policy matters, such as regional transmission planning and cost allocation, were the focus of considerable legislative efforts and debate.  Given the Ninth Circuit vacatur and remand of the congestion study and corridor designations, as well as questions about the effectiveness of the present backstop siting mechanism, supporters and detractors may seek to revisit the extent, nature, and elements of the backstop siting authority under FPA Section 216.