DOE agrees to participate in Plains & Eastern Clean Line project, with conditions

With a significant number of conditions, the U.S. Department of Energy (DOE) on March 25 agreed to participate in the Plains & Eastern Clean Line (Plains & Eastern) high-voltage, direct-current transmission project, the planned 720-mile project designed to move wind power from Texas and Oklahoma into Tennessee.

Clean Line Energy Partners finds the conditions “reasonable and appropriate” and is confident it will be able to meet them to enable construction to start in late 2017, Cary Kottler, general counsel and executive vice president, told TransmissionHub March 28. The conditions include completing commercial agreements for transmission service, financing arrangements for the $2.5bn project and technical studies for interconnections in Oklahoma, Arkansas and Tennessee, Kottler said.

The Plains & Eastern project will enable delivery of 4,000 MW of energy from wind projects in the Oklahoma and Texas panhandle regions to customers in Arkansas, Tennessee and other states in the South and Southeast, officials from developer Clean Line Energy said during a March 25 conference call.

After nearly six years of study, DOE found that the Plains & Eastern project merits participation through the Southwestern Power Administration (Southwestern), and the DOE record of decision designated a preferred route for the transmission line in Oklahoma and Arkansas, Clean Line Energy said. About 20 miles of the 720-mile HVDC line would be in Tennessee, where Clean Line Energy already has route approval, utility status and all regulatory rulings needed for the Tennessee portion of the project, Kottler said.

Although the project has a couple agreements with utilities to take wind power through the transmission line if it is built, many utilities and interested companies have been waiting for DOE’s ruling before making such commitments, Michael Skelly, president of Clean Line Energy said during the March 25 conference call.

Among the conditions in DOE’s record of decision are that before obtaining land from landowners to build the project, Plains & Eastern must complete key technical studies required by the Southwest Power Pool (SPP), Midcontinent ISO (MISO) and Tennessee Valley Authority (TVA), along with demonstrating “commercial viability” through transmission service agreements with customers. Proof of service agreements totaling at least 3,500 MW will be needed before the participation agreement among DOE and the project developer will become valid, DOE said in its March 25 summary of findings.

Clean Line Energy has lined up firm commitments for about 100 MW thus far, but it has term sheets for more than 3,500 MW that outline key terms for negotiating with customers following DOE’s decision, Kottler told TransmissionHub.

“We’re seeing vast and strong indications of interest” and Clean Line Energy will firm up commercial support for the project in the coming days and weeks, with the DOE decision an essential part of moving those discussions along, Kottler said.

Many parties in the Southeast have been waiting for DOE’s decision to reach a deal with wind project developers, Skelly said during the conference call. During a 2014 solicitation, more than 15,000 MW of wind projects expressed an interest in using the Plains & Eastern project to move energy to markets in the South and Southeast, he said.

Clean Line Energy will reach agreements with customers and it expects to begin construction in the latter part of 2017, with completion of the Plains & Eastern project in mid-2020, Skelly said during the call.

The record of decision from DOE marked the first use of congressional authority conferred to DOE under Section 1222 of the Energy Policy Act of 2005 with the objective of promoting transmission development, DOE said in a March 25 statement. Based on a thorough review of the Plains & Eastern project, it satisfied the goals for which Congress established DOE’s authority, DOE said.

“Building modern transmission that delivers renewable energy to more homes and businesses will create jobs, cut carbon emissions and enhance the reliability of our grid,” DOE Secretary Ernest Moniz said in the statement.

The record of decision includes terms for participation by Southwestern, which allows Plains & Eastern to operate in Arkansas, where the Arkansas Public Service Commission (PSC) in 2011 denied the company’s application for utility status, Skelly noted during the call.

DOE’s participation in the project through Southwestern was first indicated as a preference in the Nov. 4, 2015, final environmental impact statement (EIS), and Clean Line Energy is gratified that the record of decision includes federal participation, Skelly said. The decision shows that DOE recognizes the value of building new infrastructure, which is the biggest challenge for transforming the energy sector to cleaner resources, he said.

Both DOE and officials with Clean Line Energy emphasized that no taxpayer support for the Plains & Eastern project would result from Southwestern’s participation, with protections for utility ratepayers, taxpayers and landowners included in the participation agreement. Those protections “go well beyond the provisions established by Congress” in Section 1222 of the Energy Policy Act, DOE said.

DOE’s participation, through Southwestern, is “carefully conditioned on Clean Line meeting commercial and technical milestones to demonstrate project viability,” DOE said in its summary of findings on the Plains & Eastern project. Conditions for DOE assistance with right of way (ROW) acquisition are “extensive,” and the federal government will exercise eminent domain only as a last resort, after the project has met significant milestones to prove its viability, DOE said.

DOE will reach an agreement with Clean Line Energy that ensures that all of DOE’s costs will be paid by Clean Line Energy in advance and that the company will contribute 2% of project revenues to offset the cost of federal hydropower infrastructure improvements, DOE said.

As was mentioned in the final EIS, Clean Line Energy will include a 500 MW converter station in Arkansas near Entergy’s (NYSE:ETR) Arkansas Nuclear power plant to ensure that consumers in the state can benefit from renewable energy being delivered by the project, DOE noted.

Furthermore, Clean Line Energy will make payments to counties in Arkansas and Oklahoma for land and assets owned by the federal government that would otherwise be taxable, DOE said in its statement.

The Plains & Eastern project will address challenges outlined in the 2015 Quadrennial Energy Review, which focused on energy transmission, storage and distribution infrastructure and emphasized the importance of establishing transmission lines to facilitate development of remote renewable generation resources, DOE noted.

The project is expected to create supply chain jobs in Arkansas and Oklahoma, DOE added, pointing to Clean Line Energy agreements with manufacturers in both states for providing tubular steel transmission structures, glass insulators and transmission conductors.

As with previous developments involving the Plains & Eastern project, the Arkansas congressional delegation objected to the DOE decision, calling it an overreach of federal authority on state rights and vowing to pass legislation to reverse the decision. The Arkansas delegation, all Republicans, introduced legislation in 2015, dubbed the APPROVAL Act, that would grant a state the right to approve or reject a transmission project before the federal government’s execution of authority to take private property under Section 1222 of the Energy Policy Act.

Members of Congress from Arkansas and Tennessee have raised concerns about Plains & Eastern, asking Moniz to answer questions about the line and asserting that it was not needed and would trample on state siting authority.

"Today marks a new page in an era of unprecedented executive overreach as [DOE] seeks 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 PSC, the Arkansas lawmakers said in a March 25 statement.

The statement came from Sens. Tom Cotton and John Boozman, along with Reps. Rick Crawford, French Hill, Steve Womack and Bruce Westerman.

“Despite years of pushback on the local level and continuous communications between our delegation and Secretary Moniz, DOE has decided to forgo the will of the Natural State and take over the historic ability of state-level transmission control through this announcement,” they said.

The lawmakers said they will begin a careful review over DOE’s decision, including the conditions needed before the provisions of Section 1222 of the Energy Policy Act can be used.

“It is our firm belief that the DOE has overstepped its bounds, and reversing this decision through the passage of the APPROVAL Act remains a top priority,” they said.

During the conference call, Skelly addressed the lawmakers’ statement, noting that the Energy Policy Act was bipartisan legislation and that Section 1222 was included so that infrastructure projects such as Plains & Eastern could be built. Clean Line Energy is working under the framework of the law to build the project in a manner that is effective for all stakeholders, including private landowners, Skelly said.

Clean Line Energy does take issue with the prospect of changing the law when a project is underway and has invested millions of dollars thus far, but it is willing to work under whatever law is in place, Skelly said.

DOE will assist with voluntary ROW acquisitions only if certain conditions are met, including execution of firm transmission service agreements of at least 1,500 MW, demonstration of purchase options for converter station real estate rights and milestones on interconnection rights, according to the summary of findings. Use of eminent domain involves tougher conditions, with execution of firm transmission service agreements of at least 2,000 MW, all converter station real estate rights much be in effect and all interconnection agreements must be in effect.

Clean Line Energy is working with TVA and other entities on the interconnection agreements, Kottler told TransmissionHub. Some upgrades to transmission facilities or substation improvements may be needed on the TVA system, and there is a potential for a new 500-kV line to be added, but that line would be an option, not a requirement for an interconnection, he said.

The project includes converter stations at the endpoints of the HVDC line near Guymon, Okla., and Memphis, Tenn., and an intermediate converter station that would have the capacity to deliver up to 500 MW of power in central Arkansas.

The final EIS addressed route variations, and the final location for the 200-foot-wide ROW would be within a 1,000-foot-wide corridor, DOE said in the record of decision. The final location of the ROW will be determined after the record of decision is issued based on final engineering design, federal and state construction permits and authorizations, ROW acquisition activities and further siting, DOE said.

In addition to the HVDC transmission line, the project includes the possibility of up to four or six alternating current transmission lines of up to 345-kV to connect with wind energy projects in the Oklahoma Panhandle and perhaps the Texas panhandle region.

“The specific locations of these transmission lines cannot be known at this time and would depend on the locations of future wind farms in this area,” DOE said, noting that the final EIS examined possible environmental impacts from possible wind project collection lines.

To address landowner concerns, Plains & Eastern developed a fairly unique compensation package that includes annual payments for the life of the project beyond the easement value of the square footage of any land involved, Skelly and others noted during the March 25 call. The annual payments, similar to a royalty for natural gas projects, would increase 2% annually to compensate landowners for any transmission structures on their land, officials said.

Such a proposal does not have much of a history on electric transmission lines, Kottler said, noting, “It’s a market leading type of proposal.”