With Manchin bill stalled, will FERC ever site power lines?

Source: By Miranda Willson, E&E News • Posted: Thursday, September 29, 2022

Members of the Federal Energy Regulatory Commission during a meeting this month at the agency's headquarters.

Members of the Federal Energy Regulatory Commission during a meeting this month at the agency’s headquarters. Francis Chung/E&E News

Sen. Joe Manchin this week pulled back a permitting proposal that would have authorized the Federal Energy Regulatory Commission to permit certain long-distance power lines — a major change for the independent agency.

Now, the uncertain fate of the West Virginia Democrat’s permitting package is reviving an old question: Why can’t the nation’s top energy regulator already approve high-voltage transmission projects that cross state lines?

FERC has long been able to approve permits for new interstate natural gas pipelines and gas export terminals, a process that has become contentious in recent years as affected landowners and climate-conscious states have sought to block projects. But that same federal authority doesn’t extend to electric transmission lines that similarly run through multiple states.

The reason for the different paradigms has roots in how each resource — natural gas and electricity — was consumed in the early to mid-20th century. Today, however, the lack of federal permitting authority for transmission lines compared to natural gas pipelines has significant implications for the pace at which the country shifts toward carbon-free energy, experts say.

“It’s sort of the missing piece that would allow for massive renewables integration,” Josh Macey, an assistant professor at the University of Chicago Law School, said of the expanded authority for FERC in Manchin’s permitting proposal. “It’s not impossible and there are things that FERC can do, but it’s much easier for FERC to have authority to [permit] a subset of projects.”

FERC oversees the bulk power system, including the sale of electricity in interstate commerce. It also regulates the transmission of natural gas across state lines, oversees the interstate transport of oil and authorizes gas pipelines, among other authorities.

When the commission grants gas pipeline permits, it enables developers to seize private property to make way for their projects. While states often need to sign off on certain additional permits, the commission can ultimately approve pipelines without the consent of states — and developers frequently begin construction before they’ve received state permits.

Transmission lines work differently. State regulators need to issue permits for those projects in order for them to move forward. And prior to the growth of renewable energy in the 21st century, many transmission projects ran primarily from a power plant — such as a coal or nuclear plant — to cities and towns, so interstate lines were not always needed.

Historically, “the electricity industry was a local industry, and primarily a state-regulated industry,” said Jeff Dennis, managing director and general counsel at Advanced Energy Economy, a clean energy trade association.

By contrast, the natural gas industry required a pipeline network to move gas resources “from one region of the country — originally, the Gulf Coast region — to population centers,” Dennis said.

Manchin’s permitting package, which he and other lawmakers have said they hope to continue discussing for potential future bills, proposed an update to the transmission siting framework (Climatewire, Sept. 22).

Specifically, the package would have allowed FERC to permit certain transmission projects deemed by the secretary of Energy to be in the national interest, even if states weren’t necessarily on board. To qualify, projects would need to be “consistent with the public interest,” as in protect or benefit consumers, as well as be in harmony with national energy policy, according to the bill text.

Aspects of the permitting package were controversial, including the changes proposed to the National Environmental Policy Act and the bill’s attempt to mandate completion of the Mountain Valley pipeline in West Virginia and Virginia. The National Association of Regulatory Utility Commissioners, attorneys general from Republican-leaning states and others also opposed provisions that would have expanded FERC’s authority over power lines.

Nonetheless, clean energy groups lauded the changes to FERC’s authority that could have made it easier to advance transmission lines for renewable energy and other projects. In addition to the siting changes, the bill would have asserted that FERC could determine who should pay for new transmission lines — an issue that has been a sticking point for many regional projects.

“The theory of the Manchin bill was, ‘Let’s just give some power lines as well as hydrogen pipelines, etc. federal review, and so that will make it easier to approve, even if there’s some state and local objections,’” said James Coleman, a professor of law at Southern Methodist University.

Eminent domain and gas shortages

Originally, however, federal authority to permit pipelines was somewhat limited, making projects more vulnerable to challenges from states and landowners that didn’t want the projects.

The passage of the Natural Gas Act in 1938 created a process whereby FERC’s precursor — the now-defunct Federal Power Commission — would issue permits formally known as “certificates of public convenience and necessity” for interstate gas pipelines after reviewing their benefits and potential adverse impacts. But a crucial piece was missing from the original act, said Alison Gocke, an associate professor of law at the University of Virginia.

“It did not include the authority FERC now has, which is that they can convey eminent domain authority to successful certificate holders,” Gocke said.

In the following years, natural gas companies faced difficulty breaking into markets where coal was a dominant source for heating, she said. Pennsylvania, for example, passed laws that were unfavorable to new natural gas lines to protect their coal industries, Gocke said.

Natural gas companies responded at the time using a familiar tactic — lobbying Congress to change the law, Gocke said. But in addition, immediately following World War II and decades before the rise of hydraulic fracturing that boosted oil and gas production, there was a growing concern about natural gas shortages, according to a 2015 journal article in the UC Davis Law Review.

Congress responded by amending the Natural Gas Act in 1947 to grant eminent domain authority to interstate gas pipelines that had obtained a permit from the Federal Power Commission, according to the article, written by Alexandra Klass, who is now deputy general counsel for energy efficiency and clean energy demonstrations at the Department of Energy and also a professor on leave at the University of Michigan Law School.

So why didn’t something similar happen with power lines? In sum, electricity was seen as a local or state matter, whereas gas needed to be transported across the country for all states to have access to it, according to energy lawyers.

“Bottom line — electricity was considered local while [natural gas] was at the time primarily produced in certain regions. Some coal states blocked pipelines for parochial reasons. Hence, national siting authority,” Ari Peskoe, director of the Electricity Law Initiative at Harvard University Law School, said in an email.

The impact of FERC’s oversight of gas pipelines compared to transmission lines is self-evident, Gocke said. Even as natural gas pipelines have faced increasing headwinds recently from project opponents, the interstate gas pipeline network has expanded over the past several decades, whereas comparatively fewer interstate transmission lines have been built.

“There’s a reason we see more gas lines built than transmission lines built, and that’s because of this eminent domain piece,” Gocke said.

Lobbying and next steps

As was the case for natural gas pipelines, there has been lobbying over the years to give FERC more oversight over power lines, said Macey of the University of Chicago. But there has also been lobbying against such a change, he said.

Specifically, monopoly utilities have opposed giving FERC eminent domain powers for transmission projects if utilities already have that authority in their own states, according to Macey.

Utilities and transmission owners may be concerned about possibly jeopardizing their relationship with state regulators by expanding federal involvement, he added. And some generators could view transmission as something that “eats into their market power,” he said.

The Edison Electric Institute, which represents investor-owned electric utilities, could not be reached for comment Wednesday on the recent permitting package and its transmission provisions. But POLITICO reported this week that some utilities had urged congressional lawmakers to oppose the bill because of the provisions giving FERC limited siting authority on power lines. Utility trade associations had also raised concerns about the same aspects of the proposal, the American Public Power Association said in a blog post Wednesday.

Some states criticized the measure as well. In a letter to Senate Majority Leader Chuck Schumer (D-N.Y.) and Senate Minority Leader Mitch McConnell (R-Ky.), 18 Republican state attorneys general described the proposed expanded authority for FERC as an affront to “the traditional authority between the states and the federal government” over transmission and energy policy.

“The Act would turn this commonsense authority on its head, converting FERC into a super-agency that can require new construction on state or private land. This is a gross expansion of agency authority without hearings, debate, public input, or even knowledge by the public of what is about to be foisted upon them,” said the letter, signed by Louisiana Attorney General Jeff Landry, Alabama Attorney General Steve Marshall and others.

With the package no longer moving forward, it’s still important for lawmakers and others to consider whether the current framework for siting transmission lines makes sense, experts said.

Renewable energy has proliferated in recent years across much of the United States, driven by state policies, falling prices and other factors. But resources like solar and wind are much stronger in certain parts of the country compared to others, which has led to a push for transmission among a number of advocates in order to integrate renewables into the wider grid.

In addition, more transmission can make the power grid more reliable and resilient to extreme storms, such as Hurricane Ian that is hitting Florida this week, said Dennis of Advanced Energy Economy.

“We have a more integrated electricity grid and that’s why we need to think about multiple states and customers in multiple states and regions when we think about siting of transmission,” he said.

Nonetheless, some skeptics have questioned whether the framework for transmission siting proposed in Manchin’s bill would have been an ideal solution.

Coleman of Southern Methodist University noted that federal siting authority for natural gas pipelines has not been a panacea for those projects, as courts are still able to enjoin construction of federally approved projects following challenges from project opponents.

“If you ask the gas industry, ‘Is everything hunky-dory for you guys?’ They’d tell you, ‘Absolutely not,’” Coleman said.

One approach could be to give FERC or some other federal entity the ability to suggest transmission projects or identify transmission needs, but then direct states to try to implement a solution, said Devin Hartman, director of energy and environmental policy at the R Street Institute, a think tank that promotes free markets and limited government.

That could help get needed transmission built without necessarily trampling on states’ rights or worrying environmental justice advocates who don’t want excessive infrastructure in disadvantaged communities, Hartman said.

“That gets the states to automatically come to the table and play nice,” Hartman said. “To say, ‘States, if you act in good faith and take a good first crack at this, this will get done on your terms,’ I think that’s a way to split the divide a little.”

Emphasizing that he understood the controversy around Manchin’s permitting package, Macey said that he hoped that the parts pertaining to FERC would reemerge in future legislation.

“It really was exciting to have possible transmission reform on the table, and I hope it’s not off the table. Because even if it’s not a perfect bill, there’s a viable path to significant power sector emissions reductions if we build a lot of transmission,” he said. “It’s a lot easier when we know how to allocate costs and can get siting authority.”