Erring on the side of trampling on states’ rights

Source: By Jessica Bell, Utility Dive • Posted: Monday, February 10, 2020

The following is a contributed article by Jessica Bell, a clean energy attorney at the State Energy & Environmental Impact Center.

State clean energy policies. State water quality certifications. Pipeline construction on state land. Lately, when given the choice between co-existing with state authorities — as contemplated by the longstanding cooperative federalism surrounding environmental and energy regulation — and simply steamrolling those authorities, the Federal Energy Regulatory Commission (FERC) has consistently pursued the latter.

A recent example of FERC’s disdain for state authority is pipeline construction on state land. FERC is responsible for evaluating the need for and public interest in the construction of interstate pipelines that transport natural gas. Over the last twenty years, FERC has denied only two such applications while approving more than 400. Under the Natural Gas Act, once FERC grants a certificate of public convenience and necessity, the pipeline company may acquire the land it needs for its FERC-approved route, including by exercising the power of eminent domain when it is unable to agree on terms with the landowner.

Under this framework, PennEast Pipeline recently tried to take land belonging to the state of New Jersey. The federal appellate court overseeing the action — the Third Circuit Court of Appeals — agreed with New Jersey that the Eleventh Amendment to the Constitution does not allow private companies to condemn state properties, because states enjoy sovereign immunity against federal actions brought by private citizens, unless they have waived that immunity. In addition to unsuccessfully asking the Third Circuit to reconsider, PennEast asked FERC to weigh in.

Constitutional law is not within FERC’s field of expertise, and no court had asked FERC for its views on the scope of the Eleventh Amendment. Nonetheless, FERC took the private party’s side over the state’s. In a split decision, the Commission parroted the pipeline company’s argument that the eminent domain language in the Natural Gas Act overrides state sovereign immunity. Democratic Commissioner Richard Glick dissented, finding “no need for the Commission to insert itself into what is primarily a constitutional question that is being litigated where those questions belong: The federal courts.” (While the Commission split along party lines, it should be noted that Texas and Maryland have each successfully raised an Eleventh Amendment defense in prior pipeline eminent domain actions.)

In siding with PennEast, the two-Commissioner majority referenced another “state-level veto authority” that it has been quick to criticize as incompatible with its agenda — namely, state authority under Section 401 of the Clean Water Act to deny or condition water quality certification for a pipeline project. The Commission has expressed displeasure at states that have denied permit requests under their Section 401 authority. One particular issue is when states have not completed Section 401 determinations within one year, as required by statute, due to an applicant’s failure to provide necessary information about the project on a timely basis.

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A remarkable recent action provides a second example of FERC going out of its way to rule against state interests and state authority. Specifically, after the Second Circuit upheld New York State’s denial of a Section 401 water quality certification to the Constitution Pipeline, two FERC Commissioners applied a recent D.C. Circuit case, Hoopa Valley v. FERC, to conclude that New York’s delay in issuing its denial amounted to a waiver of its Section 401 rights.

Commissioner Glick dissented and pointed out the ways in which the actions in the Constitution Pipeline case differed from the facts in Hoopa Valley. He recommended additional briefing “to do justice to both the rule in Hoopa Valley as well as the important federalism and environmental values underlying section 401’s reservation of the authority to the states.”

The third example is in the Federal Power Act context, where FERC has increasingly intruded on states’ statutorily-recognized authority to determine their generation mix. Just over a month ago, FERC expanded the administratively-determined offer floor (minimum offer price rule, or MOPR) in PJM Interconnection to apply to resources receiving broadly-defined “state subsidies.” This rule covers resources seeking to participate in the wholesale capacity market across 13 states and D.C. and threatens to increase costs for electricity customers while passing revenue to fossil fuel-fired generators.

FERC’s decision in this case was again 2-1, with Commissioner Glick dissenting. One particular aspect of the majority’s decision demonstrates how predisposed it is against respecting states’ rights. Specifically, at the same time that FERC applied its preclusive new MOPR policy to penalize resources that receive state subsidies, it declined to take into account the same so-called “out of market” role played by federal subsidies. FERC attempted to justify this clear bias against state policies by claiming that it is uncomfortable “disregard[ing] or nullify[ing] the effect of federal legislation.”

In each of the three cases discussed above, FERC has consistently chosen to snub states’ rights while bolstering fossil fuel interests. States have been active in these and other proceedings to advocate for their authority, and states have told FERC that they want to work collaboratively. States and FERC are each making decisions today that will impact electricity across the nation for decades — as well as associated impacts on the economy and the environment. Now is not the time for FERC to ignore and undermine states.