On December 15, 2022, the Federal Energy Regulatory Commission (“FERC”) issued a notice of proposed rulemaking in which the Commission proposes to implement its newly clarified authority under the 2021 Infrastructure Investment and Jobs Act (“IIJA”) to issue permits if a state denies an applicant's request to site transmission facilities in a designated National Interest Electric Transmission Corridor (“National Corridor”).

Such change has potential—in certain cases—to tilt the balance of transmission permitting authority toward FERC and away from the states (where such authority traditionally has been held), accelerating much-needed siting of interstate transmission projects.  Although no National Corridor designations are currently in effect, the Inflation Reduction Act provides $2 billion for loans to support electric transmission lines in National Corridors.  And the Department of Energy, which makes National Corridor designations, has said that it intends to provide a process to designate such corridors on a route-specific, applicant-driven basis to address roadblocks as they arise.  Whether that process will be successful—thus allowing FERC to exercise its expanded permitting authority—remains to be seen.

Background

In 2005, the Energy Policy Act provided FERC authority to issue permits for construction or modification of electric transmission facilities in National Corridors—i.e., geographic areas designated as transmission-constrained or congested—if an applicant was unable to obtain a state permit for certain specific reasons.

These reasons included when a state “withheld approval” of the facilities for more than one year after the application was filed or the National Corridor was designated, whichever was later.  FERC Order No. 689 had interpreted this to include any action that resulted in an applicant not receiving state approval within one year, including a state's express denial of an application.  But a 2009 decision of the Fourth Circuit struck down that interpretation.  That decision—along with a 2011 decision of the Ninth Circuit vacating the only two National Corridor designations—brought FERC's transmission permitting activity to a halt.

Fast forward to 2021: the IIJA amended various aspects of the Energy Policy Act, including by removing the phrase “withheld approval” and expressly providing that FERC's power to approve siting of transmission facilities in National Corridors includes when a state has denied an application.

Proposed Rulemaking

FERC, among other things, proposes to:

• Implement FERC's authority to issue a permit upon a state's express denial of an application to site transmission facilities in a National Corridor. As already provided under the Energy Policy Act, FERC could also issue a permit if a state fails to act on an application or “has conditioned its approval in such a manner that the proposed construction or modification will not significantly reduce transmission capacity constraints or congestion in interstate commerce or is not economically feasible.”
• Remove the existing one-year delay following the submission of a state application before FERC's pre-filling process can start. This would allow simultaneous processing of state applications and FERC pre-filing proceedings, such that FERC could issue permits more quickly following a state's decision (or lack thereof).
• Establish a new Applicant Code of Conduct. The IIJA amended the conditions for a permit holder to acquire necessary rights-of-way by eminent domain, requiring a determination that the permit holder has demonstrated good-faith efforts to engage with landowners early in the permitting process.  FERC proposes to allow an applicant to make such showing by complying with a code of conduct in its communications with affected landowners.  Applicants would, for example, need to keep records of communications, maintain truthfulness and respect in communications, obtain permission to enter property, and provide landowners with copies of appraisals.
• Require additional public engagement and environmental review filings. Applicants would have to file an Environmental Justice Public Engagement Plan as part of their already required Project Participation Plan, as well as various additional filings as part of their National Environmental Policy Act review, including an Air Quality and Environmental Noise Resource Report, a Tribal Resources Report, and an Environmental Justice Report.

Conclusion

As we've previously reported, expansion of interstate transmission infrastructure is one of the greatest challenges facing national decarbonization and is a key item on FERC's agenda.  This most recent proposed rulemaking holds promise to accelerate the siting of such projects by expanding FERC's ability to step in where states reject, delay, or obstruct interstate transmission development.

Comments on the notice will be due 90 days after publication in the Federal Register.