The Ninth Circuit Court of Appeals has vacated the U.S. Department of Energy’s (DOE’s) electrical congestion study, ruling that the agency failed to adequately consult with state environmental agencies before it approved two new national electric transmission corridors. Cal. Wilderness Coal. v. DOE, No. 08-71074 (9th Cir. 2/1/11).

The Energy Policy Act of 2005 directed DOE, in consultation with affected states, to conduct a study of electric transmission capacity constraints. It authorized the agency to use that grid study to designate any congested area a “national interest electric transmission corridor,” allowing the possibility of expedited transmission project approvals that could prevent states from stalling the projects. DOE requested comments from the states and conferred with state officials, then issued its study of grid congestion and sought comments on possible transmission corridor designations. DOE sought additional comments on draft corridor designations and determined that an environmental impact study was unnecessary.

State agencies and environmental groups filed 13 petitions for review challenging DOE’s study. They argued that (i) the agency failed to consult with the affected states in undertaking the study; (ii) the agency failed to consider the environmental impact of its study as required by NEPA; and (iii) designations of two transmission corridors were arbitrary and not supported by the evidence. DOE argued that the requirement to “consult” with the states was satisfied by notice-and-comment proceedings, national corridor designations have no environmental impact because they are simply designations of geographical areas where the agency has identified electric congestion or constraint problems, and the designations were not arbitrary and were supported by the evidence.

In a 2-1 decision, the court ruled that DOE’s definition of consultation was “contrary to applicable rules of statutory interpretation as it would render Congress’s choice of language meaningless.” According to the majority, DOE should have circulated drafts to the states, included state representatives on committees working on the project and provided the states with access to supporting data. The majority also held that the agency’s failure to conduct an environmental analysis did not allow the court to determine whether DOE took a “hard look” at potential environmental consequences. The dissenting judge agreed that DOE had not consulted sufficiently with the states but argued that the failure was “harmless error.” She also disagreed that NEPA required an environmental analysis.