On Wednesday, the United States Court of Appeals for the Fourth Circuit (“Court of Appeals”) reversed a Federal Energy Regulatory Commission (“FERC” or “Commission”) ruling interpreting its authority to approve certain interstate electric transmission projects that had been previously denied by state commissions.

Traditionally, only states had authority to site electric transmission projects. However, out of a growing concern for congestion and reliability issues, the Energy Policy Act of 2005 gave FERC “backstop” siting authority under certain conditions. Under section 216(b)(1) of the Federal Power Act (“FPA”), FERC could approve interstate transmission projects when a National Interest Electric Transmission Corridor (“NIETC”), as designated by the Department of Energy, was involved. The Court of Appeals analyzed the Commission’s interpretation of language allowing FERC to invoke its backstop authority when a state commission “withheld approval for more than 1 year after the filing of an application” for a permit.

When FERC implemented section 216(b)(1) into its regulations in 2006, it ruled that the provision allowed it to overrule a state commission’s denial of a project application after one year. However, several parties disagreed, arguing that the language only indicated instances in which the state commission has failed to act on the NIETC transmission application for over one year. After FERC reaffirmed its interpretation and denied rehearing in 2007, multiple petitions for appeal were eventually consolidated at the Court of Appeals.

Circuit Judge Michael, writing for the majority, stated that “FERC’s interpretation is contrary to the plain meaning of the statute” and cited three reasons for why the Court of Appeals reversed FERC’s decision. First, the plain meaning of the word “withheld” means that one has continuously withheld approval and does not include a finite and direct denial of an application as argued by FERC. Second, the surrounding language of the provision does not allow FERC to substitute “withheld” for “denied” because the resulting phrase would not make sense. Third, the context of section 216(b)(1) as a whole limits FERC’s authority. Judge Michael noted that the four remaining instances for FERC’s authority in section 216(b)(1) occurred when a state commission either could not act on the application or acted inappropriately through conditions within their approval. Therefore, Congress would not give such broad authority in one instance if the other four instances were limited to special circumstances.

In addition, the Court found that the Commission violated the Council on Environmental Quality’s (“CEQ”) regulations by failing to consult with CEQ before changing the Commission’s regulations to address section 216 applications. The Court, therefore, vacated FERC’s amended regulations and remanded them to FERC to engage in the required consultation with CEQ.

Circuit Judge Traxler disagreed with the majority’s finding regarding the interpretation of the word “withheld”. In his dissent, Judge Traxler concluded that the provision gives FERC authority to approve a NIETC application if it has not been approved for over one year, regardless of whether the state commission has directly denied the application or not. Specifically, Judge Traxler noted that the statute was created at a time when Congress was concerned about future blackouts and needed power transmitted over long distances and through several states. Additionally, Judge Traxler noted that FERC does not have authority to approve transmission projects that have been denied by three or more contiguous states who have entered into a compact under a separate part of Section 216 of the FPA. Therefore, it does not make any sense to give a single state equal power.

A copy of the Court of Appeal’s decision is available at: