How DOE is leveraging federal authority to ease transmission development
The Dept. of Energy is exercising powers that allow it to speed siting and construction of interstate transmission
No matter what fuel mix the U.S. moves toward in the coming years, one thing seems certain: The nation will need more transmission.
Last April, the North American Electricity Reliability Corporation (NERC) estimated the U.S. would need to add about 7,000 miles of transmission to meet the goals of the Obama administration's Clean Power Plan, which aims to cut carbon emissions from the power sector by 32% by 2030.
Clean numerical estimates like that are more difficult these days, following the Supreme Court's judicial stay on the regulatory package in February. But taking into account multi-year extensions of renewable energy tax breaks passed at the end of last year, renewable energy deployment is expected to increase markedly, stimulating more demand for power lines to deliver the electricity to population centers.
For years, the Obama administration has spoke about the need for an enhanced national transmission network to enable the shift a lower-carbon energy supply. But now its Department of Energy (DOE) is acting, taking advantage of a decade-old law to help companies get steel into the ground.
For the first time, the DOE is exercising a privilege granted to it by the Energy Policy Act of 2005 to partner with independent transmission developers to facilitate the siting and construction of high-value power lines to link the nation's renewable energy development with centers of electricity demand.
Together, DOE and the developer, Clean Line Energy Partners (CLEP), will use federal powers granted in Section 1222 of the Act to complete the Plains & Eastern Clean Line, a $2 billion, 705-mile, high-voltage direct current (HVDC) transmission system.
When completed, the project will enable the connection of 4,000 MW of Oklahoma and Texas wind capacity with load centers in Tennessee, Arkansas, and the wider Southeast.
“Moving remote and plentiful power to areas where electricity is in high demand is essential for building the grid of the future,” DOE Secretary Ernest Moniz said in a statement announcing the department’s action last month.
The agreement represents a "major milestone" for CLEP because “we know the route and we have the authority to build,” Michael Skelly, the company founder and president, told Utility Dive. “We expect development to accelerate now. We would like to be in construction by the end of 2017 but that means we have a lot of work to do.”
Announcement of the project approval was welcomed by the transmission industry, which for the first time will be able to use federal siting powers under the 2005 law to overrule state and local objections to transmission development along the line's route. But critics in the path of the project, who say the move infringes on private property rights and constitutes an overreach from the federal government, have vowed to fight on.
Following the DOE's backing of the Plains & Eastern project, transmission industry interests endorsed the department's commitment to expanding cross-state power line development.
“The decision is firmly within the four corners of Section 1222,” said James Hoecker, a former chair of the Federal Energy Regulatory Commission (FERC) who is now counsel for the WIRES Group, a transmission advocacy organization.
DOE’s participation, the last approval required by CLEP for the Plains & Eastern project, provides federal support for the developer's lengthy efforts to secure rights-of-way (ROWs) for the line across private property along the four-state route.
Texas, Oklahoma, and Tennessee regulators granted CLEP the ability, if necessary, to compel landowners into cooperation through eminent domain powers, with fair compensation and due process.
“Any developer would rather reach a negotiated agreement. That’s why we offer what we believe is attractive compensation for landowners,” CLEP's Skelly said. “But there are situations where it is necessary to have that [eminent domain] authority. We hope to use it as little as possible.”
The Arkansas Public Service Commission (PSC), however, reached a different decision, saying it did not have the authority to grant an independent developer such powers to name a transmission line route.
In DOE's Summary of Findings, a 69-page document explaining its decision to participate in the project, the department wrote the state's power sector regulatory model is not designed for a world where non-utility developers are the ones to construct transmission projects.
"[T]he law governing public utilities [in Arkansas] was not drafted to comprehend changes in the utility industry such as this one — where a non-utility, private enterprise endeavors to fill a void in the transmission of renewable power that is much needed but for which the Commission is unable to afford any regulatory oversight,” the department wrote.
The Arkansas PSC “lauded the project," Sierra Club Arkansas Chapter Director Glen Hooks told Utility Dive, "but said it did not have the power under Arkansas law to grant an independent developer the status it needs to obtain rights of way.”
Arkansas legislation intended to resolve the stand-off did not.
Last March, state lawmakers passed a resolution calling on DOE to reject support for the Plains & Eastern project, affirming their stance that CLEP should not be given eminent domain powers, as it is not a public utility. CLEP applied to the PSC for public utility status in 2010, but was rejected, pushing it to pursue eminent domain powers through federal authority.
“The vote by the legislature in 2015 prohibiting the commission from granting that power was provoked by landowner opposition,” Hooks said. “The vote became about protecting private property rights and a fear of eminent domain and what some called government overreach.”
DOE approval of the project would overrule those state and local jurisdictional concerns, citing the national benefits of interstate transmission lines. Arkansas legislators in the U.S. Congress decried DOE's exercise of its Section 1222 authority as a federal overreach.
DOE “has decided to forgo the will of the Natural State and take over the historic ability of state-level transmission control,” the Arkansas congressional delegation said a statement.
With “unprecedented executive overreach,” DOE is trying “to usurp the will of Arkansans and form a partnership with a private company — the same private company previously denied rights to operate in our state by the Arkansas Public Service Commission,” Sens. Tom Cotton and John Boozman wrote, along with Congressmen Rick Crawford, French Hill, Steve Womack, and Bruce Westerman. All are Republicans.
The DOE approval process
CLEP applied to DOE in response to the Department’s 2010 Request for Proposals (RFP) for new or upgraded transmission projects under section 1222 of the Energy Policy Act.
After the Plains & Eastern project passed DOE’s standard National Environmental Policy Act (NEPA) review, the department evaluated it for compliance with Section 1222 of the Act, in consultation with the Southwestern Power Administration.
The project was found to meet a long list of eligibility requirements, including financial viability, ability to mitigate risks, technical electric reliability, feasibility of interconnection, land acquisition, and system planning.
The DOE decision to participate also followed completion of an Environmental Impact Statement and careful review of a large body of public input. There is extensive documentation of DOE's process, including the Secretary’s Determination and the Participation Agreement between DOE and the private entities developing the project.
The challenge facing CLEP in Arkansas is recognized in the agreement, as is CLEP’s unique position as an independent, or “merchant” developer who “assumes all of the market risk of a project without resort to payment by captive customers.”
The agreement acknowledges claims from critics that the project does not meet Section 1222 status because it is “contrary to the public interest due to negative effects on individual landowner’s use and enjoyment of private property...[and might cause a] decline in property value.”
It stresses that DOE participation “requires that the Project be undertaken ‘at the sole cost and expense’ of the Clean Line parties."
The agreement allows the exercise of federal authority to obtain ROWs because DOE would own the transmission assets in Arkansas. But all costs “of acquiring, building, and maintaining those facilities would be borne by Clean Line entities.”
CLEP also commits to binding arbitration with landowners who are not satisfied with the compensation of 100% of the value of the easement land and up to $1,500 per structure per year when a transmission tower is built on it.
In its legal conclusions, the DOE agreement explains in some detail that “one of the Department’s chief activities in participating in the Project would be to acquire rights-of-way, including by exercising eminent domain authority only as a last resort.”
This exercise stems from a power granted by the federal Condemnation Act “to acquire real estate for the erection of a public building or for other public uses,” according to the agreement. In this case, the power is applied to transmission projects through Section 1222 of the Federal Power Act because transmission facilities meet the criteria of “public use.”
The DOE agreement requires multiple protections for local communities and landowners, CLEP's Skelly said. They include significant time in the project schedule to allow for negotiation and for landowners to consider the easement terms they are offered, as well as the option to enter arbitration with CLEP determine fair compensation.
Part of the force of federal authority will come from the fact that CLEP and the DOE will be working with the Southwestern Power Administration (SWPA), though “Southwestern’s costs would be carefully tracked and funded in advance by Clean Line.”
Federal authority can be imposed on state authority by Section 1222, the agreement argues, because of the savings clause of subsection 1222(d), and because DOE and CLEP are working with the SWPA.
“By its terms, the savings clause does nothing more than preserve the existing effect of federal and state siting laws," the agreement says. "Under such laws, private entities must generally obtain state regulatory approval to site and construct electric transmission lines but the federal power marketing administrations need not.”
In order to firmly establish the public use of the transmission, the agreement argues there is strong demand for new transmission in the plains states to deliver wind power to demand centers in the Southeast.
15 different transmission customers submitted a total of 29 separate requests amounting to 17,091 MW of capacity in response to CLEP’s 2014 solicitation for transmission capacity, the agreement notes.
“Transmission service requests from Oklahoma to Tennessee, as well as the requests from Oklahoma to Arkansas, both totaled approximately four times the Project’s delivery capacity," the agreement reads.
On the demand side, the agreement quotes the latest Tennessee Valley Authority Integrated Resource Plan (IRP), which notes that “government mandates and customer demand for renewable energy support increasing renewable generation to 2,500 MW by 2020, with wind contracts playing a key role in future portfolios.”
There is also increasing demand in the Southeast from “hundreds of corporations and companies that have sustainability and clean energy commitments and want their utilities to deliver electricity generated by renewable energy,” Skelly added. “Utilities and electricity providers there are beginning to respond to that demand.”
Finally, the agreement points out that the transmission capacity demand will not be met by "existing planning processes” because no systems in the region “have been upgraded to facilitate new west-east transfers, and that is driving higher congestion costs.”
This line will help alleviate congestion by delivering nearly five times the Southeast’s current total wind and solar generation, according to Skelly.
The agreement also argues Plains & Eastern meets Southwest Power Pool (SPP) needs and standards for reliability and will not duplicate functions or services.
Finally, it concludes, it will provide economic benefits to the region.
“Construction is reasonably estimated to result in between 5,166 and 5,716 combined direct, indirect, and induced jobs in Oklahoma, and approximately 900 such jobs in Arkansas,” the agreement reports.
Economic benefits will go to local businesses from the construction, operation, and maintenance of the line and it will generate “substantial” tax revenue for Oklahoma and Arkansas.
CLEP will pay “tens of millions of dollars in revenues” to landowners for easements, upfront structure payments, and other compensation across the region, including $35 million in Oklahoma and $30 million in Arkansas, according to Skelly.
Contracts with local manufacturers represent “hundreds of millions” in purchases for products “in Oklahoma and Arkansas by Oklahomans and Arkansans,” Skelly added.
By and large, the project’s political opponents do not debate its economic viability or the value of the renewables it will carry, CLEP's Skelly said.
“The delivered cost of energy on this line will be about $0.04/kWh,” Skelly said. “Long term plans by utilities in the Southeast suggest this will be a very competitive offering. Ultimately, it will be their decision.”
The project will interconnect in the West with the SPP regional system. “They have not yet formally endorsed our project,” Skelly said. “But lines like ours are very much part of their long term planning.”
SPP is taking a wait-and-see approach.
CLEP has been “working closely with us on the necessary studies and necessary information to complete the interconnection,” SPP Engineering VP Lanny Nickell told Utility Dive. “A lot of what they have submitted was preliminary but it was done at a level that allowed us to enter into the interconnection agreement.”
Beyond economic arguments and technical capabilities, the most significant debate on the project remains over its pursuit of ROWs.
"It is our firm belief that the DOE has overstepped its bounds,” the Arkansas delegation said in their statement, using the opportunity to reiterate support for the Assuring Private Property Rights Over Vast Areas to Land (APPROVAL) Act, which Sen. Boozman introduced last year.
H.R. 3062, which remains tied up in committee, would require DOE to obtain the approval of both a state’s governor and public service commission before exercising Section 1222 authority and the use of eminent domain for transmission development.
The Act would “build grassroots support for renewable energy” because states and local communities would feel represented in the process rather than threatened by it, Senator Boozman recently argued. “When communities have this assurance, they can get behind the renewable projects that our country needs.”
The defeat of the APPROVAL Act would “solidify the federal government’s inappropriate and unjust process for future projects across the country and in many other states,” Arkansas Attorney Jordan Wimpy, counsel to Arkansas property owners concerned with the Section 1222 transmission project, told a House Natural Resources subcommittee last fall.
While the legislation remains in committee, CLEP is watching what happens with it, Skelly said. He and other transmission industry interests expressed hope that eminent domain issues would be kept to a minimum.
“Secretary Moniz said using eminent domain to site transmission is a last resort and I believe the transmission industry feels the same way,” former FERC Chair Hoecker said.
Transmission builders prefer to negotiate with landowners, offer fair compensation, and give them time to understand the benefits of their proposals, he said. “Condemnation proceedings to take peoples’ lands are difficult and transmission companies don’t like them any better than anybody else.”