Energy Law Alert: Ninth Circuit Decision Further Dismantles an Already Weakened Federal Transmission Siting Authority

2011 - Stoel Rives, LLP

Congress' experiment with establishing federal siting authority for transmission lines suffered another setback after a Ninth Circuit Court of Appeals decision issued yesterday, February 1, 2011, vacated the Department of Energy's ("DOE") 2007 Transmission Congestion Study (the "Congestion Study") that had designated national interest electric transmission corridors in mid-Atlantic and Southwestern states. This ruling is the latest of three court and agency decisions that have limited or undermined the federal siting authority established at Federal Power Act section 216 by the Energy Policy Act of 2005 ("EPAct 2005").

Congress created section 216 to confront concerns that states were acting too slowly in siting new transmission lines needed to address growing reliability and congestion problems. In part, section 216 directs the DOE to study transmission congestion in consultation with the states, and designate certain transmission-constrained areas as national interest electric transmission corridors ("NIETCs"). Section 216 also grants the Federal Energy Regulatory Commission ("FERC") authority to issue permits to construct transmission facilities in these NIETCs under certain circumstances. Congress also provided that an applicant who receives a permit to construct transmission in a NIETC would be granted with the authority to acquire rights-of-way by eminent domain. In sum, section 216 had the potential to uncork the transmission bottleneck, but that potential has not materialized.

In yesterday's decision, California Wilderness Coalition v. U.S. Dept. of Energy, No. 08-71074 (9th Cir. Feb. 1, 2011), the Ninth Circuit vacated the DOE's Congestion Study as well as the NIETCs designated therein, prompting the DOE to start anew. In vacating the DOE's actions, the Ninth Circuit ruled that the DOE (1) failed to properly consult with affected states in preparing the Congestion Study, as required by section 216, and (2) failed to consider the environmental effects of designating NIETCs under the National Environmental Protection Act ("NEPA"). One judge, Circuit Judge Ikuta, dissented, arguing that although the DOE had failed to properly consult the states, the error did not impact the NIETC designation process. Judge Ikuta further argued that the Congestion Study itself did not constitute a federal plan that precisely established the scope and limits of transmission development, and therefore any attempt to prepare an environmental analysis would have created little more than a speculative study containing estimates of potential development over a vast geographic area. He concluded that the appropriate time for NEPA determination was when specific transmission projects were proposed. In that regard, Judge Ikuta argued that the majority decision defied common sense.

Yesterday's Ninth Circuit ruling added to the effective dismantling of section 216 by the Fourth Circuit Court of Appeals and by FERC itself. In 2006, shortly after the enactment of EPAct 2005, FERC issued a rulemaking order (Order No. 689) that detailed the various requirements and procedures for applications submitted under section 216. FERC's rules created a cumbersome, multi-year process for obtaining a federal permit to construct transmission within a NIETC, and in doing so FERC effectively discouraged participation in the program altogether.

Then, in 2009, the Fourth Circuit ruled in Piedmont Environmental Council v. FERC, No. 07-1651 (4th Cir. Feb. 18, 2009), that FERC has no authority to issue permits under section 216 when a state denies an application for siting transmission facilities. Rather, the Fourth Circuit found that FERC's backstop authority is limited to instances where a state withholds approval for more than a year.

Together with these earlier decisions, yesterday's ruling in California Wilderness Coalition leaves the question—what remains of section 216?

For more information about yesterday's decision or other transmission issues, please contact:

Marcus Wood at (503) 294-9434 or mwood@stoel.com
Jason Johns at (503) 294-9618 or jajohns@stoel.com
Sarah Johnson Phillips at (612) 373-8843 or sjphillips@stoel.com