Construction of Utility Infrastructure: In Search of a ‘Reliable’ Process

As if developers of critical infrastructure and utility facilities don’t have enough problems in getting projects built and operating, a battle currently playing out before the DC Circuit Court of Appeals and the District Court for the District of Columbia demonstrates the tough and risky decisions that must often be made to ensure reliable service to customers is maintained.

In National Parks Conservation Association v. Todd T. Semonite, Lieutenant General, et. al,¹ Virginia Electric Power Company (VEPCO) retired two coal-fired electric generating facilities that previously served a portion of southeastern Virginia in order to comply with the Environmental Protection Agency’s mercury and air toxic standards established under the Clean Air Act. However, to ensure that customers formerly served by these retired plants had needed electricity, VEPCO proposed to build a transmission line to address a possible electric reliability emergency. In fact, absent the new transmission line, the regional transmission organization, PJM, planned to impose rolling blackouts in this portion of Virginia to avoid multi-state electric grid collapse.

In 2013, VEPCO applied to the United States Army Corps of Engineers (Corps) to obtain a permit for its transmission project in accordance with the Corps’ jurisdiction over certain projects concerning “waters of the United States.”² The permit was for VEPCO to construct a new electrical substation and two transmission lines. The specific line giving rise to the litigation was intended to run for eight miles, four miles of which would cross the James River and go through an historic district encompassing Jamestown and other historic locations.

Before issuing VEPCO the permit, the Corps was required to satisfy several statutory obligations. First, under the National Environmental Protection Act (NEPA), the Corps, as a federal agency issuing a construction permit, opening new lands to drilling, or undertaking any other “major” project, was required to evaluate the project’s environmental consequences, including the impacts it might have on “important historic . . . aspects of our national heritage.”³ In particular, NEPA required the Corps to consider alternatives to VEPCO’s transmission project and to prepare an “environmental impact statement” if the project would “significantly affect the quality of the human environment.”⁴

Second, under the Clean Water Act, the Corps was required to determine that no “practicable alternative” existed that “would have less adverse impact on the aquatic system.” Finally, the National Historic Preservation Act required the Corps to “take into account the effect of the undertaking on any historic property."⁵ And, if the project might “directly and adversely affect any National Historic Landmark,” to take steps to “minimize harm to the landmark.”⁶

As part of this process, the Corps studied the environmental impacts and nearly thirty alternatives to the VEPCO transmission project, evaluated cultural resources effects, reached out to “consulting parties” (such as local governments and other individuals and organizations with a demonstrated interest in the project), and invited other federal agencies and the public to comment on the NEPA process. In fact, the Corps received 50,000 responses/submissions, many of which urged it to prepare an Environmental Impact Statement (EIS). Some commenters took issue with the Corps’ determination that the project would not significantly impact historic properties, while others found serious flaws with the Corp’s methodologies and evaluation of the alternatives.

The Corps implemented its responsibilities and, in its initial environmental assessment, concluded that the project would adversely -- but not significantly -- affect historic resources. Therefore, the Corps deemed the preparation of an EIS unnecessary and issued the permit.

The National Parks Conservation Association (NPCA) challenged the Corps’ issuance of the permit in the D.C. District Court. The District Court found that the “Corps made a ‘fully informed and well-considered’ decision” and granted summary judgment to the agency.⁷ After the District Court’s decision, the NPCA asked the court for an injunction to prevent VEPCO from building the electric transmission towers needed to support the line pending resolution of its appeal of the decision. That motion was denied. NPCA appealed to the District of Columbia Circuit Court of Appeals (DC Circuit) and renewed with that Court its request for an injunction, which was again denied.

So the electric transmission line was constructed and energized in late February 2019, just before the DC Circuit ruled in March 2019 that the Corps was required, because of the project’s significant impacts, to prepare an EIS. Importantly, the appeals court reversed the District Court and remanded the matter to that court with instructions to vacateVEPCO’s permit and direct the Corps to prepare an environmental impact statement.

As a result, the Corps immediately sought rehearing and a finding that vacatur of its permit was not warranted. On May 31, 2019, the en banc DC Circuit rejected these requests.⁸ In subsequent filings with the District Court, NPCA claimed it was duped by the Corps and VEPCO during the litigation process into believing it would be entitled to “meaningful relief” (i.e., that the transmission line would be taken down) if the permit authorization was reversed because the Corps now takes issue with the permit being vacated during the remand directed by the DC Circuit. The effect of the vacatur would be to cause the $400 million now-constructed and operating transmission line to be taken down!

What has been lost in the midst of the massive finger pointing and claims of deceit, estoppel and maintaining the integrity of the EIS process is the need in this country – both at the federal and state level -- for orderly, predictable and timely review of major infrastructure projects like transmission lines intended to preserve reliable service on a timetable that allows utilities to meet the energy needs of the public. Irrespective of the merits of the underlying claims about the Corps’ alleged errors in evaluating VEPCO’s permit application, thousands of electric consumers were facing potential serious and sustained electric service interruptions without the electric transmission line that was built to supplant the two retired coal facilities to comply with federal environmental requirements. Having been granted the required permit by the Corps and in the absence of an injunction during the appeal, VEPCO was confronted with the terrible choice of either 1.) delaying construction of the transmission line and substation for an unknown period of time until litigation was completed and risking claims it was not fulfilling its statutory duty to provide safe, adequate and reasonable service to the public, or 2.) proceeding with construction and risking spending significant investor funds, only later to have to dismantle the facilities; compounded by the need to make the expenditure a second time if, after remand, the permit is again issued and later upheld on appeal.

Versions of this dilemma occur at the state level as well. There, utilities’ facility siting authorizations and needed certificates of public convenience can be delayed or indefinitely held up when appeals are filed and no stay or supersedeas is imposed on the state Public Utility Commission’s authorization.

No one disagrees with the need for a process that fully and fairly evaluates all requirements for a permit for a major infrastructure project and allows for participation by all relevant stakeholders. However, when the project is reliability driven and intended to remedy a service deficiency, open-ended agency and court review periods cannot be allowed. If provided clear and defined time periods for agency and judicial review of necessary authorizations, utilities can and will analyze reliability issues and submit evidence on the merits of a project so that appropriate review can be made and decisions rendered before a reliability concern reaches the point of no return. The choice should not be between service reliability and adverse environmental impact. If the project is not needed to preserve adequate service it should not be built, and if it needs to be built reasonable mitigation of environmental impacts must be imposed.

Reliability and environmental impacts necessarily co-exist and the process must be geared to striking the right balance based on the facts but always in a reasonable and predictable time frame. When the time needed for completing court review threatens reliable service, that issue should be presented by the parties and addressed by the forum rendering a decision. The end result should either provide the utility with a safe harbor against future poor service accusations or establish a clear understanding that in the event environmental shortcomings are adjudicated, they will have to be remedied and a costly and inefficient removal of the facility will not be required. No utility should be forced to choose between allowing service to deteriorate during litigation or wasting significant amounts of capital. Failure to set meaningful and enforceable time limits for review of reliability infrastructure projects leads inescapably to the regulatory morass now being litigated among the Corps, VEPCO and NPCA. No one wins and the James River runs “dry.”