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On the afternoon of Aug. 14, 2003, the lights went out. While there may be a number of explanations for the multistate blackout, most agree that an aging electrical transmission system was a prime factor behind the Blackout of 2003. Pending federal legislation responds to certain of the existing impediments to the expansion and upgrade of our transmission system. A primary concern is the authority now vested in state and local authorities over the siting of the electric transmission facilities across state lines. States and, in some instances, local authorities, approve the siting of transmission facilities. The ability to regulate and restrict siting can create barriers to expansion, thereby adversely affecting the overall reliability of the system. Whether inter- or intrastate, the construction of large electrical transmission projects often faces delay and higher cost because of regulation by multiple authorities. Today’s power transmission system is nearly 160,000 miles of high-voltage transmission lines across the continent. These lines, dating back to the 1900s, were not designed to carry bulk power over vast distances. Use of the grid expanded with greater competition in electricity markets. This grid is now a national trading floor and superhighway for bulk power. There is tremendous congestion in some geographical areas, reducing reliability and increasing the chances of another blackout. The Public Utility Regulatory Policy Act of 1978, 16 U.S.C. 2601, et seq., encouraged the development of independent wholesale power producers, but most use of transmission lines still was confined to the utility serving its local customers. In 1996, however, the Federal Energy Regulatory Commission (FERC) issued Order 888. This order required electric companies, which were typically vertically integrated, owning both generating and transmission facilities and even the lines into people’s homes, to give wholesale power companies access to their transmission facilities to “wheel” power to wholesale customers, sometimes over more than one utility’s transmission system. The underlying theory in support of competitive markets is that enhanced competition will, in the long run, reduce costs. But the unanticipated, additional demand has strained the current transmission system. An upgraded and expanded system is one way to address or ease this pressure. The Federal Power Act of 1935, 16 U.S.C. 791a, et seq., gives FERC jurisdiction over the transmission of electric energy in interstate commerce, wholesale energy transactions and all facilities for such transmission. However, states retain jurisdiction over the siting of electric transmission facilities, unlike the siting of interstate pipelines. A review of state siting regulations by the Edison Electric Institute in 2001 concluded that approximately 78% of the states reported having a lead state agency responsible for the siting of certain types of electric transmission lines. This lead agency does not always seek input from other state agencies. States may require separate and independent approvals from additional state and/or local authorities. These scenarios contrast with what occurs in approximately 12% of states-these states either do not conduct a review of electric transmission lines or they are unaware that they have jurisdiction of electric transmission siting. State approaches In New Hampshire, for example, a site evaluation committee performs an initial review of an application. This committee’s membership is from the state’s public utilities, environmental, health services, transportation and energy authorities. Once accepted, the application is shared with a list of agencies for further processing. The state’s Department of Environmental Services reviews the location and potential environmental impact of the proposed transmission line. The Public Utilities Commission evaluates need, reliability and safety. Finally, before the committee’s siting decision, other agencies represented on the committee evaluate issues, including land use, transportation, infrastructure requirements, public health consequences, natural resource impact, fish and wildlife impact and statewide energy and economic policy considerations. Depending on a state’s regulatory scheme, local zoning may play a significant role in siting. A state’s siting authority may partially or completely pre-empt local zoning and land use regulations. When an electrical transmission project requires approval by local authorities, the approvals needed to build such a facility, and the time to secure them, increase. Today, when power generated in one state often powers a community in another, the siting of a generation facility or transmission line is arguably of primary importance for interstate commerce. So why hasn’t Congress provided a mechanism for the siting of transmission lines as it has for natural gas pipelines? Why isn’t there a federal agency such as the FERC to issue siting and construction permits for electric transmission lines? As the 2d U.S. Circuit Court of Appeals noted in National Fuel Gas Supply Corp. v. Public Service Commission of the State of New York, 894 F.2d 571, 579 (2d Cir. 1997), siting decisions for interstate gas pipelines made only by agencies with “local constituencies would delay or prevent construction that has won approval after federal consideration of environmental factors and interstate need, with the increased cost, or lack of gas, to be borne by utility consumers in other states.” Applying this rationale, should decisions affecting the location and construction of interstate electric transmission lines also rest with a central, presumably federal, authority? Under the federal Natural Gas Act of 1938 (NGA), 15 U.S.C. 717, et seq., FERC regulates both the construction of natural gas pipeline facilities and the transport of natural gas in interstate commerce. FERC establishes criteria for determining need and assessing whether a natural gas project is in the public interest. The U.S. Supreme Court and the 2d Circuit have affirmed FERC’s pre-emption of state actions under the NGA. In Schneidewind v. ANR Pipeline Co., 485 U.S. 293 (1988), the Supreme Court held that the NGA confers upon FERC exclusive jurisdiction over the transportation and sale of natural gas in interstate commerce. In National Fuel, the 2d Circuit held that the NGA pre-empts state and local agencies’ regulation of the construction and operation of interstate pipeline facilities. Under the NGA, any company or person engaging in the transportation or sale in interstate commerce of natural gas must first obtain a certificate of public convenience and necessity from FERC before building or enlarging gas pipeline facilities. An applicant must establish that the proposed construction is or will be required by the present or future public convenience and necessity, and must submit plans for minimizing any adverse community, environmental and cultural resource impacts. The NGA gives FERC the authority to grant the right of eminent domain to any holder of a certificate of public convenience and necessity which is unable otherwise to construct the approved facilities. FERC thus ensures that pipeline facilities provide adequate consumer benefits, while it balances the potential impact on the public, the environment and private landowners. Environmental review The National Environmental Protection Act of 1969, 42 U.S.C. 4321, et seq., is a mechanism affording environmental review of NGA projects at the federal level. While FERC applicants must cooperate with state and local agencies, these agencies and their permitting requirements may not prohibit or unreasonably delay a project that has been issued a certificate by FERC. As part of its environmental review, FERC requires project applicants to submit detailed environmental resource information and then prepare draft and final environmental impact statements. There is public participation, as well as coordination with other federal (e.g., the Army Corps of Engineers, the Environmental Protection Agency, the National Marine Fisheries Service and the U.S. Fish and Wildlife Service), state and local regulatory agencies. With a FERC project, the state, at a minimum, still must perform a coastal-zone management consistency review and issue a water-quality certification. (Under the Coastal Zone Management Act of 1972 (CZMA), 16 U.S.C. 1451, et seq., states are authorized to implement a coastal-management program. After the state reviews the project, it must indicate whether the proposed project is consistent with the CZMA.) The secretary of commerce can override a state’s objection to a coastal-zone consistency certificate, if he or she finds that the activity is consistent with the objectives and purposes of the CZMA, or is needed in the interest of national security. The siting process applicable to gas pipeline projects seeks to avoid or deal with multiple, potentially conflicting, state and local requirements. There has been criticism of FERC’s ability to address local concerns effectively, but many view this limitation as an acceptable tradeoff for centralized siting authority that can consider national interests. Are states better able to address local concerns than the federal government? Proposed federal legislation is squarely and currently the forum for this debate. This legislation proposes, under limited circumstances, to pre-empt siting decisions by state and local authorities. Senate Bill 2095, introduced by Chairman Pete V. Domenici, R-N.M., of the Senate Energy and Natural Resources Committee, would allow states to maintain primary authority to make siting determinations, except under limited prescribed circumstances. The secretary of energy would conduct studies of electrical transmission congestion within one year and every three years thereafter. Areas experiencing electric energy transmission capacity constraints or congestion would be designated as national interest electric transmission corridors. Senate Bill 2095 responds to industry’s concerns, giving FERC the authority to issue permits for the construction or modification of electric transmission facilities in designated areas. The bill urges and encourages states to make decisions on a more regional level. When states have entered into interstate compacts consisting of three or more states with authority to make siting decisions, FERC would cede pre-emption authority. If these states were to disagree, FERC would retain authority to make the siting decision. FERC’s process for issuing construction permits would allow for notice and a hearing at which the commission must make several findings. In addition to finding that a facility will serve interstate and national needs, FERC would also find that either the state is without authority to approve the siting, or that the applicant would not qualify for state siting approval because the applicant’s project would not serve end-use customers in that state. FERC’s pre-emption authority would also kick in if the state siting authority has withheld approval for more than one year from the filing of the application or has conditioned its approval in such a manner that the proposed construction or modification will not significantly reduce transmission congestion in interstate commerce. And, predictably, permit holders would also acquire the right of way by eminent domain, as needed, to construct such a transmission line. Finally, Senate Bill 2095 authorizes the Department of Energy (DOE) to act as the lead agency for purposes of coordinating federal authorization and related environmental reviews of the facility. The DOE secretary would coordinate the review process with Native American tribes, multistate entities and state agencies responsible for conducting any separate permitting and environmental reviews of the facility. As the lead agency, the DOE would also have authority to set deadlines for accomplishing steps in the siting process. Senate Bill 2095 was introduced under Senate Rule 14, so it was immediately placed on the Senate calendar, thereby seeking to avoid committee hearings and perhaps many amendments. Changes to the bill are likely in both the Senate and House and passage is far from assured. Absent meaningful regional cooperation, some form of federal involvement is needed to address the existing barriers to necessary expansion and to create needed incentives for investment. While local interests will undoubtedly continue to be considered, energy security is a critical component of the nation’s economy and welfare and, in the aftermath of the blackout, has moved to the forefront of this national debate. Elizabeth C. Barton and Harold M. Blinderman are partners at Hartford, Conn.’s Day, Berry & Howard, where they practice in the environmental and land use department and the administrative and regulatory law department. They can be reached at [email protected] and [email protected], respectively. Ren� A. Ortega is an associate at the firm.

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