The U.S. Supreme Court on Jan. 19 declined to hear an appeal of a decision of the U.S. Court of Appeals for the 4th Circuit that interpreted an important provision of the Energy Policy Act of 2005 (the “Energy Policy Act”) that was intended to facilitate electric transmission line siting in designated “national interest” corridors. As a result, there remains uncertainty about whether the Federal Energy Regulatory Commission (FERC) has the authority to override a state’s denial of a siting permit for a new transmission line in these designated corridors. Many thought that the Energy Policy Act provided FERC with this authority.

Energy Policy Act – Section 216

The Energy Policy Act added a new Section 216 to the Federal Power Act in response to, among other things, the reluctance of state regulatory commissions to timely grant siting permits for interstate transmission lines. Section 216 instructed the Department of Energy (DOE) to designate “national interest” transmission corridors where there was transmission congestion, and DOE has done so for a section of the Eastern and Southwest United States. Section 216 then provides FERC with “backstop” siting authority for proposed transmission projects in such “national interest” corridors under specific circumstances where states could not or would not grant a siting permit on reasonable terms.

4th Circuit Ruling

The 4th Circuit’s split 2 to 1 decision construed Section 216 to forbid FERC from exercising “backstop” siting authority when a state commission denies a siting permit. In contrast, the court admitted that Section 216 grants FERC such authority when a state commission delays action or unreasonably conditions a permit. In the curious decision, the majority held that Section 216 unambiguously withholds FERC’s authority in the case of a state denial, whereas the dissent held that the statute unambiguously grants FERC such authority.

FERC’s position was that Section 216 grants FERC such authority to act in the case of state denials. However, FERC is not permitted to advocate cases before the Supreme Court on its own, but rather has to rely on the U.S. Solicitor General’s office to decide on FERC’s strategy before the Court. The Solicitor General decided against filing a Supreme Court Petition on behalf of FERC.

Supreme Court Petition

A broad coalition of the energy industry, including the Edison Electric Institute, the American Public Power Association and the National Rural Electric Cooperative Association did file a Petition and a response brief. The Petition was supported by amicus briefs by the four previous chairmen of FERC and the U.S. Chamber of Commerce.

The Solicitor General’s response to the Petition agreed that the 4th Circuit’s decision was “erroneous” and was potentially harmful energy policy. However, the Solicitor General argued against the Court hearing the case on several procedural grounds. First, the Solicitor General questioned the standing of the state commissions and environmental groups to bring the 4th Circuit challenge because they had not established that their injury was “actual or imminent.” Similarly, the Solicitor General questioned whether the case was “ripe” for the Court’s consideration because FERC’s action did not command anyone to do anything or refrain from any action. Most notably, the Solicitor General suggested that FERC would be allowed to render a decision that was not consistent with the 4th Circuit’s holding in a specific state denial case arising outside of the 4th Circuit, thus paving the way for another Court of Appeals to opine on the meaning of Section 216.

These positions asserted by the Solicitor General presented some administrative law principles that many FERC practitioners would find surprising. The Supreme Court in no way endorsed them in this case, and its refusal to hear the appeal says nothing about the merits of the 4th Circuit decision or any other issue associated with the decision.

Impact on transmission development

Allowing the 4th Circuit’s decision to stand may force transmission developers to consider whether they should propose costly projects even in “national interest” corridors, if they believe it possible that the state will reject the project and FERC has no backstop authority in that situation. To attempt to overcome the 4th Circuit’s decision, if a project is rejected by a state commission, the project developer would first have to ask FERC to exercise backstop authority, and then, depending on the way FERC rules in that specific case and the extent of the opposition, have to convince a different Court of Appeals that the 4th Circuit’s decision was incorrect. This strategy would take several years and great expense to pursue, with no reasonable assurance of the outcome

It is not known whether the Supreme Court’s decision to not review the 4th Circuit’s decision will immediately affect a specific project currently under consideration. The economic recession has somewhat diminished the need for more power in the near term. Some utilities in the eastern “national interest” corridor have recently delayed their proposed transmission projects. However, forecasters predict that power demand will increase as the U.S. economy recovers, and there will be an increasing need to transmit power from renewable resources to load centers. Proposals introduced before Congress to provide FERC more specific backstop siting authority have been tied up in the controversial climate change legislation. Unless and until clarified by such legislation, there will remain uncertainty about the scope of FERC’s backstop siting authority.