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[House Report 112-586]
[From the U.S. Government Publishing Office]

112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-586

======================================================================

 
   RESOLVING ENVIRONMENTAL AND GRID RELIABILITY CONFLICTS ACT OF 2012

                                _______
                                

  July 9, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Upton, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 4273]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 4273) to clarify that compliance with an 
emergency order under section 202(c) of the Federal Power Act 
may not be considered a violation of any Federal, State, or 
local environmental law or regulation, and for other purposes, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     8
Committee Consideration..........................................     9
Committee Votes..................................................     9
Committee Oversight Findings.....................................     9
Statement of General Performance Goals and Objectives............     9
New Budget Authority, Entitlement Authority and Tax Expenditures.     9
Earmarks.........................................................    10
Committee Cost Estimate..........................................    10
Congressional Budget Office Estimate.............................    10
Federal Mandates Statement.......................................    11
Advisory Committee Statement.....................................    11
Applicability to Legislative Branch..............................    11
Section-by-Section Analysis of Legislation.......................    12
Changes in Existing Law Made by the Bill, as Reported............    13

                               Amendment

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Resolving Environmental and Grid 
Reliability Conflicts Act of 2012''.

SEC. 2. AMENDMENTS TO THE FEDERAL POWER ACT.

  (a) Compliance With or Violation of Environmental Laws While Under 
Emergency Order.--Section 202(c) of the Federal Power Act (16 U.S.C. 
824a(c)) is amended--
          (1) by inserting ``(1)'' after ``(c)''; and
          (2) by adding at the end the following:
  ``(2) With respect to an order issued under this subsection that may 
result in a conflict with a requirement of any Federal, State, or local 
environmental law or regulation, the Commission shall ensure that such 
order requires generation, delivery, interchange, or transmission of 
electric energy only during hours necessary to meet the emergency and 
serve the public interest, and, to the maximum extent practicable, is 
consistent with any applicable Federal, State, or local environmental 
law or regulation and minimizes any adverse environmental impacts.
  ``(3) To the extent any omission or action taken by a party, that is 
necessary to comply with an order issued under this subsection, 
including any omission or action taken to voluntarily comply with such 
order, results in noncompliance with, or causes such party to not 
comply with, any Federal, State, or local environmental law or 
regulation, such omission or action shall not be considered a violation 
of such environmental law or regulation, or subject such party to any 
requirement, civil or criminal liability, or a citizen suit under such 
environmental law or regulation.
  ``(4)(A) An order issued under this subsection that may result in a 
conflict with a requirement of any Federal, State, or local 
environmental law or regulation shall expire not later than 90 days 
after it is issued. The Commission may renew or reissue such order 
pursuant to paragraphs (1) and (2) for subsequent periods, not to 
exceed 90 days for each period, as the Commission determines necessary 
to meet the emergency and serve the public interest.
  ``(B) In renewing or reissuing an order under subparagraph (A), the 
Commission shall consult with the primary Federal agency with expertise 
in the environmental interest protected by such law or regulation, and 
shall include in any such renewed or reissued order such conditions as 
such Federal agency determines necessary to minimize any adverse 
environmental impacts to the maximum extent practicable. The 
conditions, if any, submitted by such Federal agency shall be made 
available to the public. The Commission may exclude such a condition 
from the renewed or reissued order if it determines that such condition 
would prevent the order from adequately addressing the emergency 
necessitating such order and provides in the order, or otherwise makes 
publicly available, an explanation of such determination.''.
  (b) Temporary Connection or Construction by Municipalities.--Section 
202(d) of the Federal Power Act (16 U.S.C. 824a(d)) is amended by 
inserting ``or municipality'' before ``engaged in the transmission or 
sale of electric energy''.

                          Purpose and Summary

    H.R. 4273, the ``Resolving Environmental and Grid 
Reliability Conflicts Act of 2012,'' was introduced by 
Representatives Pete Olson, Mike Doyle, and Gene Green on March 
28, 2012. The legislation provides that actions necessary to 
comply with an emergency order under section 202(c) of the 
Federal Power Act may not be considered a violation of any 
conflicting Federal, State, or local environmental law or 
regulation.

                  Background and Need for Legislation

Reliability of the electric grid

    Electricity is generated from a variety of different energy 
sources, moved to substations by large, high-voltage 
transmission lines, and then ultimately delivered to consumers 
over smaller, low-voltage distribution lines. Thousands of 
miles of transmission lines and distribution lines function 
together to form the ``electric grid''--a vast network of 
interconnected transmission lines, local distribution systems, 
generation facilities, and related communications systems, with 
more than 800,000 megawatts of installed capacity, and serving 
more than 300 million people.
    Unlike other commodities, electricity currently cannot be 
economically stored and thus it must be generated as it is 
needed, and supply must be kept in near constant balance with 
demand. This means generation and transmission operations must 
be monitored and controlled at all times to ensure a consistent 
flow of electricity--a complex process requiring the close 
coordination and cooperation of electricity industry 
participants and regulators. Deviations from this constant 
balancing of supply and demand can impair the ``reliability'' 
of the electric grid, resulting in a failure of electric power 
being delivered to customers.\1\
---------------------------------------------------------------------------
    \1\Reliability can be understood as the ``ability to meet the 
electricity needs of end-use customers, even when unexpected equipment 
failures or other factors reduce the amount of available electricity.'' 
North American Electric Reliability Corporation (NERC): ``Reliability 
Terminology,'' available at: http://www.nerc.com/page.php?cid=1|15|122.
---------------------------------------------------------------------------
    As evidenced by recent reliability emergencies--the August 
2003 Northeast Blackout, the February 2011 Southwest Blackout, 
and the September 2011 power outage in parts of Southern 
California, Arizona, and Mexico--impaired reliability can have 
significant economic, national security, public health, and 
safety consequences. Disruptions to adequate energy supply can 
cut off power to homes, hospitals, schools, offices, and farms, 
and commerce can come to a standstill, as airports, factories, 
and businesses sit idle. Moreover, defense facilities and 
military installations rely predominantly on power from the 
commercial electric grid and thus a loss of power supply can 
have serious national defense implications.
    Reliability-related emergencies are not limited to bad 
weather, natural disasters, or terrorist attacks. For instance, 
a dramatic shift in the nation's electric generation portfolio 
is underway. Although proper planning and coordination can 
mitigate most reliability concerns, this shift could 
nevertheless trigger reliability-related emergencies.

The Department of Energy's emergency authority

    The Secretary of Energy and the Department of Energy's 
(DOE) Office of Electricity Delivery and Energy Reliability 
play an important role in ensuring the reliability of grid 
infrastructure, particularly in emergency situations.\2\ One 
tool available to DOE to address reliability-related 
emergencies is section 202(c) of the Federal Power Act (FPA) 
(16 U.S.C. 824a(c)), which provides DOE authority to require 
the temporary interconnection of facilities and to direct power 
plants to continue operating in order to maintain the 
reliability of the electric grid during an emergency. 
Specifically, section 202(c) provides:
---------------------------------------------------------------------------
    \2\Reliability-related concerns, particularly the August 2003 
Northeast Blackout, led Congress to establish a greater federal role in 
ensuring the reliability of the electric grid in the Energy Policy Act 
of 2005. Section 215 of the Federal Power Act charged the Federal 
Energy Regulatory Commission with oversight of the reliability of the 
nation's bulk power system and enforcement of reliability standards 
developed by NERC.

          During the continuance of any war in which the United 
        States is engaged, or whenever the Commission 
        determines that an emergency exists by reason of a 
        sudden increase in the demand for electric energy, or a 
        shortage of electric energy or of facilities for the 
        generation or transmission of electric energy, or of 
        fuel or water for generating facilities, or other 
        causes, the Commission shall have authority, either 
        upon its own motion or upon complaint, with or without 
        notice, hearing, or report, to require by order such 
        temporary connections of facilities and such 
        generation, delivery, interchange, or transmission of 
        electric energy as in its judgment will best meet the 
        emergency and serve the public interest. If the parties 
        affected by such order fail to agree upon the terms of 
        any arrangement between them in carrying out such 
        order, the Commission, after hearing held either before 
        or after such order takes effect, may prescribe by 
        supplemental order such terms as it finds to be just 
        and reasonable, including the compensation or 
        reimbursement which should be paid to or by any such 
        party.\3\
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    \3\16 U.S.C. 824a(c) (2006).

    DOE has used its section 202(c) authority only sparingly. 
In fact, the authority has only been used on six occasions:
     On December 14, 2000, a section 202(c) emergency 
order was issued in response to the California energy crisis.
     On August 16, 2002, due to concerns regarding the 
availability of electricity on Long Island in the State of New 
York, a section 202(c) order was issued directing Cross-Sound 
Cable Company to operate the Cross-Sound Cable from Connecticut 
to Long Island and related facilities.
     On August 14, 2003, in response to the August 2003 
Northeast Blackout, a section 202(c) order was issued directing 
the New York Independent System Operator and ISO New England to 
require Cross-Sound Cable Company to operate the Cross-Sound 
Cable and related facilities.
     On September 28, 2005, in response to Hurricane 
Rita and Hurricane Katrina, a section 202(c) emergency order 
was issued authorizing CenterPoint Energy to temporarily 
connect electricity lines to restore power to Entergy Gulf 
States, Inc., as well as electric cooperatives and municipal 
customers within the State of Texas.
     On December 20, 2005, in response to a request by 
the District of Columbia Public Service Commission, a section 
202(c) emergency order was issued requiring operation of Mirant 
Corporation's Potomac River Generating Station to ensure 
compliance with reliability standards for the Washington, D.C. 
area.
     On September 14, 2008, in response to Hurricane 
Ike, a section 202(c) emergency order was issued authorizing 
CenterPoint Energy to temporarily connect electricity lines to 
restore power to Entergy Gulf States, Inc., as well as electric 
cooperatives and municipal customers within the State of 
Texas.\4\
---------------------------------------------------------------------------
    \4\DOE's Use of Federal Power Act Emergency Authority, available 
at: http://energy.gov/oe/does-use-federal-power-act-emergency-
authority. 
---------------------------------------------------------------------------
    Of the six instances, only two were generation-related, 
while the remaining four directed the interconnection of 
certain transmission lines and related facilities.

Potential conflicts with environmental laws and regulations

    A party subject to a section 202(c) emergency order may be 
unable to comply with environmental requirements that impose 
limitations on the way in which the party can operate its 
generation facilities or other infrastructure. For example, a 
generator operating in compliance with a section 202(c) order 
may be forced to exceed an air pollution limit in a Clean Air 
Act (CAA) permit, and thus violate the CAA. Under current law, 
the Environmental Protection Agency (EPA) could enforce CAA 
requirements against the generator through administrative, 
civil, or, in some cases, criminal actions. Similarly, a State 
may enforce State and Federal environmental regulations through 
State or Federal courts, and most environmental laws provide 
for civil enforcement actions by citizens in the absence of 
Federal or State enforcement action.
    As explained below, there are two recent cases that 
demonstrate the potential problems that may arise when an 
entity is operating pursuant to a section 202(c) emergency 
order to maintain reliability and such operation conflicts with 
applicable environmental requirements.
            Potrero Power Plant (2001)
    From December 14, 2000, until February 7, 2001, DOE 
exercised its authority under section 202(c) of the FPA to 
compel operation of generation facilities during the California 
energy crisis, ordering certain generators to make energy 
available to the California Independent System Operator 
(CAISO). On April 6, 2001, EPA issued an administrative order 
on consent to Mirant Corporation's (Mirant) Potrero Power Plant 
after CAISO informed Mirant that the plant would be directed to 
operate over its permit limits during 2001. The Potrero Power 
Plant, located in the San Francisco area, had a relatively low 
annual operating limit of 877 hours. In order to ensure that 
the plant could operate as needed to preserve reliability, 
Mirant obtained approval from local and Federal regulators--the 
Bay Area Air Quality Management District and EPA--to operate 
for more than 877 hours.\5\ Despite these approvals, the City 
of San Francisco and certain environmental advocates brought a 
citizen enforcement action against Mirant for exceeding the 
operating limit.\6\ The alleged violations occurred when the 
plant continued to operate for reliability purposes after the 
expiration of the section 202(c) order.
---------------------------------------------------------------------------
    \5\See Compliance and Mitigation Agreement between Mirant Potrero, 
LLC and the Bay Area Air Quality Management District (Mar. 29, 2001); 
Mirant Potrero LLC, R9-2001-04, Administrative Order on Consent (Apr. 
6, 2001), available at http://www.epa.gov/region9/energy/ generators/
r9200104mirant.pdf.
    \6\See Rachel Gordon, Potrero Hill power plant operator sued/S.F. 
groups seek pollution controls, San Francisco Chronicle (June 19, 
2001), available at http://articles.sfgate.com/2001_06_19/news/
17605126_1_mirant-corporation-pollution-clean-air-act; First Amended 
Complaint for Injunctive and Other Relief and Demand for Jury Trial, 
City & County of San Francisco v. Mirant Potrero, LLC, No. C-01-2356 
PJH (N.D. Cal. Aug. 20, 2001); First Amended Complaint, Bayview Hunters 
Point Community Advocates v. Mirant Potrero, LLC, No. C-01-02348-PJH 
(N.D. Cal. Aug. 20, 2001).
---------------------------------------------------------------------------
            Potomac River Generating Station
    On August 22, 2005, Mirant announced that it would shut 
down its Potomac River Generating Station (Potomac River 
Plant), which supplied power to the District of Columbia 
through several transmission lines. The stated reason for the 
shutdown was to comply with orders of the Virginia Department 
of Environmental Quality (Virginia DEQ) in response to modeled, 
localized NAAQS exceedances. Two days later, on August 24, 
2005, Mirant shut down the plant. The District of Columbia 
Public Service Commission (DC PSC) responded by filing 
petitions with DOE pursuant to section 202(c) of the FPA and 
with FERC under sections 207 and 309 of the FPA requesting that 
Mirant be ordered to operate the Potomac River Plant for 
reliability purposes. As described in testimony provided by the 
Honorable Betty Ann Kane, Chairman of the DC PSC, the continued 
operation of the Potomac River Plant was ``critical to ensuring 
that the downtown sectors of the District, including the White 
House, the Capitol, and other important Federal, as well as 
District government agencies, had adequate access to 
electricity supplies.''\7\
---------------------------------------------------------------------------
    \7\See Testimony of the Honorable Betty Ann Kane, Chairman of the 
DC PSC, before the Subcommittee on Energy and Power (May 9, 2012).
---------------------------------------------------------------------------
    On December 20, 2005, pursuant to section 202(c), DOE 
ordered Mirant to resume operating the Potomac River Plant in 
order to maintain the electric supply to Washington, D.C. and 
avoid a potential reliability emergency.\8\ DOE extended the 
original order on subsequent occasions, determining that 
emergency conditions would persist until the necessary 
transmission upgrades were completed, a process that took 
nearly 16 months after the emergency certificate of convenience 
and necessity was issued.\9\
---------------------------------------------------------------------------
    \8\See DC Pub. Serv. Comm'n, DOE Order No. 202-05-3 (Dec. 20, 2005) 
(the ``2005 DOE Order''), available at http://www.gc.doe.gov/oe/
downloads/department-energy-order-no_202_05_3.
    \9\See Testimony of the Honorable Betty Ann Kane, Chairman of the 
DC PSC, before the Subcommittee on Energy and Power (May 9, 2012).
---------------------------------------------------------------------------
    On February 23, 2007, the Potomac River Plant exceeded its 
3-hour NAAQS limit while operating under a section 202(c) 
order. Subsequently, in 2007, the Virginia DEQ issued a Notice 
of Violation (NOV) and later fined Mirant for NAAQS 
exceedances.\10\ The NOV was issued by the Virginia DEQ 
notwithstanding the fact that EPA had previously issued an 
Administrative Compliance Order by Consent, which set forth 
certain operating standards ``taking into account the 
seriousness of the modeled NAAQS exceedances and the concerns 
of DOE regarding electric reliability in the Central D.C. 
area,'' and required Mirant to operate the Potomac River Plant 
``as specified by PJM and in accordance with the [2005] DOE 
Order.''\11\
---------------------------------------------------------------------------
    \10\See Letter from Jeffery A. Steers, Regional Director, 
Commonwealth of Virginia, Dep't of Environmental Quality to Michael 
Stumpf, Group Leader Plant Operations, Mirant Potomac River Generating 
Station, Notice of Violation Re: Mirant Potomac River Generating 
Station, Facility Registration No. 70228 (Mar. 23, 2007).
    \11\See Mirant Potomac River LLC, Administrative Compliance Order 
by Consent at 4, Docket No. CAA-03-2006-0163DA (June 1, 2006).
---------------------------------------------------------------------------

Need for legislation

    Under current law, if a generating unit is ordered by DOE 
to operate pursuant to section 202(c), such operation could 
conflict with environmental requirements, and the owner of the 
unit would have to choose between violating an order from DOE 
and violating the environmental requirement. If the owner of 
the generating unit chooses to comply with the section 202(c) 
order to address the DOE-identified reliability emergency, the 
owner could be fined or sued for non-compliance with an 
environmental regulation, even though the party would not have 
violated the regulation but for its compliance with the DOE 
order. Left unresolved, therefore, the current statutory 
structure creates the potential for conflicting legal mandates 
that could threaten the reliability of the grid. Indeed, 
testimony provided before FERC at a November 2011 reliability 
technical conference summarized, as follows, the reliability-
related consequences potentially resulting from this conflict 
and the need for greater clarity in the law:

          In an emergency, electricity generators are unfairly 
        forced to weigh the risks and costs of violating 
        environmental permits against the risks and costs of 
        non-compliance with a DOE emergency order to run, 
        creating uncertainty at a time when stability is most 
        needed. It is imperative that there be clear authority 
        within the federal government to direct actions that 
        can balance an emergency reliability need with binding 
        environmental regulations.\12\
---------------------------------------------------------------------------
    \12\See Testimony of Debra Raggio, Vice President, Government and 
Regulatory Affairs, and Assistant General Counsel, GenOn Energy, Inc., 
FERC Reliability Technical Conference, Docket No. AD12-1-000 (Nov. 29, 
2011).

    Currently, section 202(c) does not authorize DOE to 
override conflicting environmental laws and regulations. There 
is no express statutory language in the FPA, the CAA, or any 
other law providing that section 202(c) ``trumps'' 
environmental requirements. Notably, in challenging the 
petition filed by the DC PSC that led to the 2005 DOE Order 
requiring the continued operation of the Potomac River Plant, 
---------------------------------------------------------------------------
the Virginia DEQ explained before DOE that:

          Congress has not given the [FPA] primacy over the 
        [CAA]. Nowhere in the [FPA]--202(c) or elsewhere--is 
        there language providing that reliability concerns take 
        precedence over federal and state environmental laws. 
        Further, 201(a) of the [FPA] expressly preserves state 
        jurisdiction over electric generation. The [FPA] also 
        does not preempt Virginia law or the Director's 
        authority pursuant to Virginia law, because obligations 
        arising under the federally approved [SIP] are a matter 
        of both state and federal law.\13\
---------------------------------------------------------------------------
    \13\Letter from Commonwealth of Virginia Dep't of Environmental 
Quality to Kevin Kolevar, Director, Office of Electricity Delivery and 
Energy Reliability, U.S. Dept. of Energy at 2, Docket No. EO-05-01 
(Nov. 23, 2005), available at http://www.gc.doe.gov/oe/downloads/
letter-clarifying-position-director-virginia-department-environmental-
quality-regarding. 

Based, in part, on its assertion that section 202(c) does not 
trump environmental laws, the Virginia DEQ subsequently issued 
a NOV and fined Mirant for NAAQS exceedances resulting from 
Mirant's compliance with the section 202(c) order. As this 
example illustrates, the law is not settled with respect to 
whether section 202(c) or environmental laws take priority when 
in conflict with each other.
    To ensure that the tools needed to maintain the reliability 
of the grid are available and effective despite potentially 
conflicting environmental requirements, H.R. 4273 amends 
section 202(c) of the FPA to clarify that when a party is under 
an emergency directive to operate pursuant to section 202(c), 
it will not be deemed in violation of environmental laws or 
regulations or subject to civil or criminal liability, or 
citizen enforcement actions, as a result of actions taken that 
are necessary to comply with a DOE-issued emergency order. As 
FERC Commissioner Philip Moeller testified before the 
Subcommittee on Energy and Power, all four current FERC 
Commissioners agree that:

          [G]enerators of electricity should not be put in a 
        position of having to choose whether to violate Section 
        202(c) of the Federal Power Act or whether to violate 
        the Clean Air Act when certain generating facilities 
        are needed for crucial electric reliability needs. The 
        law should not require citizens to violate the law.\14\
---------------------------------------------------------------------------
    \14\See Testimony of the Honorable Philip Moeller, Commissioner, 
Federal Energy Regulatory Commission, before the Subcommittee on Energy 
and Power (May 9, 2012).
---------------------------------------------------------------------------

Balancing Environmental Considerations

    A legislative solution to the conflict described herein 
should balance reliability considerations with environmental 
interests. Such an approach is consistent with what DOE has 
expressly sought to do in the past when utilizing its section 
202(c) emergency authority. For example, in the 2005 DOE Order 
requiring the continued operation of the Potomac River Plant, 
DOE stated that ``[o]rdering action that may result in even 
local exceedances of the NAAQS is not a step to be taken 
lightly. . . .'' and ordered Mirant to ``operate in a manner 
that provides reasonable electric reliability, but that also 
minimizes any adverse environmental consequences from operation 
of the Plant.''\15\ Accordingly, in issuing a section 202(c) 
order that may result in a conflict with an environmental law, 
H.R. 4273 requires DOE, to the maximum extent practicable, to 
ensure the order is consistent with all applicable 
environmental laws and regulations and minimizes adverse 
environmental impacts that may occur as a result of the 
emergency directive. The Committee emphasizes that section 
202(c) provides DOE authority to address serious emergency 
threats to electricity reliability. The Committee does not 
intend for this amendment to section 202(c) to allow for long-
term or indefinite noncompliance with environmental 
requirements.
---------------------------------------------------------------------------
    \15\2005 DOE Order 8-9. See also id. at 5 (``In response to the 
environmental concerns raised, this order seeks to minimize, to the 
extent reasonable, any adverse environmental impacts. Should EPA issue 
a compliance order directed to operation of the Plant, DOE will 
consider whether and how this order should [be] conformed to such 
order.'').
---------------------------------------------------------------------------

Supporters of the legislation

    Supporters of the legislation include the American Public 
Power Association, the Edison Electric Institute, the Electric 
Power Supply Association, the Industrial Energy Consumers of 
America, the Large Public Power Council, the Midwest Power 
Coalition, the National Rural Electric Cooperatives 
Association, and the U.S. Chamber of Commerce.

                                Hearings

    On May 9, 2012, the Subcommittee on Energy and Power held a 
legislative hearing on H.R. 4273, the ``Resolving Environmental 
and Grid Reliability Conflicts Act of 2012'' and received 
testimony from:
           The Honorable Patricia Hoffman, Assistant 
        Secretary for the Office of Electricity Delivery and 
        Energy Reliability, U.S. Department of Energy;
           The Honorable Gina McCarthy, Assistant 
        Administrator for the Office of Air and Radiation, U.S. 
        Environmental Protection Agency;
           The Honorable Philip D. Moeller, 
        Commissioner, Federal Energy Regulatory Commission;
           The Honorable Betty Ann Kane, Chairman, D.C. 
        Public Service Commission;
           Ms. Debra Raggio, Vice President, Government 
        and Regulatory Affairs, and Assistant General Counsel, 
        GenOn Energy, Inc.; and,
           Mr. Stephen Brick, Consultant, on behalf of 
        the Environmental Integrity Project.

                        Committee Consideration

    On March 28, 2012, H.R. 4273, the ``Resolving Environmental 
and Grid Reliability Conflicts Act of 2012,'' was introduced by 
Representatives Pete Olson, Mike Doyle, and Gene Green.
    On May 9, 2012, the Subcommittee on Energy and Power held a 
legislative hearing on H.R. 4273.
    On June 7, 2012, the Subcommittee on Energy and Power met 
in open markup session to consider H.R. 4273. No amendments 
were offered during the markup, and the Subcommittee favorably 
forwarded H.R. 4273 to the full Committee by a voice vote.
    On June 19 and 20, 2012, the Committee on Energy and 
Commerce met in open markup session. During the markup, an 
amendment in the nature of a substitute was offered and adopted 
by a voice vote. No other amendments were offered during the 
markup and the Committee ordered H.R. 4273 favorably reported, 
by a voice vote, to the House of Representatives, as amended.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, H.R. 4273 was reported by a voice 
vote, a quorum present. There was no request for a recorded 
vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee made findings that are 
reflected in this report.

         Statement of General Performance Goals and Objectives

    H.R. 4273 clarifies that compliance with an emergency order 
under section 202(c) of the Federal Power Act may not be 
considered a violation of any Federal, State, or local 
environmental law or regulation.

    New Budget Authority, Entitlement Authority and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
4273, the ``Resolving Environmental and Grid Reliability 
Conflicts Act of 2012,'' would result in no new or increased 
budget authority, entitlement authority, or tax expenditures or 
revenues.

                                Earmarks

    In compliance with clause 9(e), 9(f), and 9(g) of rule XXI 
of the Rules of the House of Representatives, the Committee 
finds that H.R. 4273, the ``Resolving Environmental and Grid 
Reliability Conflicts Act of 2012,'' contains no earmarks, 
limited tax benefits, or limited tariff benefits.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974.

                                                     June 29, 2012.
Hon. Fred Upton,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4273, the 
Resolving Environmental and Grid Reliability Conflicts Act of 
2012.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathleen 
Gramp.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 4273--Resolving Environmental and Grid Reliability Conflicts Act 
        of 2012

    H.R. 4273 would amend existing law regarding actions taken 
by electric utilities when the Department of Energy (DOE) 
determines that the electric power system is experiencing 
emergency conditions. Under current law, during a designated 
emergency, DOE can require firms to produce or supply 
electricity to avoid or resolve blackouts or other risks to the 
electric power system. If those actions violate other 
regulatory requirements, such as air pollution limits, the 
affected firms may be liable for penalties under those laws. 
H.R. 4273 would revise this framework by establishing new 
procedures for ensuring compliance with environmental standards 
during designated emergencies. The bill also would exempt firms 
from certain civil and criminal liability if the actions taken 
to comply with DOE's emergency orders violate environmental or 
other regulatory standards.
    Pay-as-you-go procedures apply to this legislation because 
it could affect revenues and direct spending. CBO estimates, 
however, that the impact on the federal budget would be 
insignificant over the 2012-2022 period. According to DOE, it 
has issued emergency orders to electric utilities six times 
since 1978, and none of those transactions resulted in the 
payment of penalties. Based on that historical experience, CBO 
estimates that revenues from such penalties would not be 
significant over the next 10 years under current law; as a 
result, CBO estimates that reducing firms' liability for such 
penalties would not result in any significant loss of federal 
revenues.
    Similarly, CBO estimates that enacting H.R. 4273 would have 
no significant net effect on direct spending by the federal 
power agencies (such as the Tennessee Valley Authority) that 
could be liable for such penalties. Finally, we estimate that 
implementing the bill would have no significant effect on 
spending subject to appropriation.
    The bill would impose an intergovernmental mandate by 
preempting state and local environmental and liability laws. 
Energy facilities would be exempt from complying with such laws 
if those laws conflict with an emergency order issued by DOE. 
Because the preemption of those laws would impose no duty on 
state and local governments that would result in additional 
spending or the direct loss of revenues, CBO estimates that the 
cost of that mandate would fall well below the annual threshold 
established in UMRA for intergovernmental mandates ($73 million 
in 2012, adjusted annually for inflation).
    The bill would impose a private-sector mandate to the 
extent that it eliminates an existing right to seek 
compensation for damages under environmental laws from 
utilities operating in compliance with a federal emergency 
order issued by DOE. The cost of the mandate would be the 
forgone value of awards and settlements in such claims. Because 
DOE has issued emergency orders infrequently, CBO expects that 
claims would be uncommon in the future. Consequently, CBO 
expects that the cost of the mandates would be small and fall 
below the annual threshold for private-sector mandates ($146 
million in 2012, adjusted annually for inflation).
    The CBO staff contacts for this estimate are Kathleen Gramp 
(for federal costs), J'nell L. Blanco (for the impact on state 
and local governments), and Amy Petz (for the impact on the 
private sector). The estimate was approved by Theresa Gullo, 
Deputy Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

               Section-by-Section Analysis of Legislation

Section 1. Short title

    Section 1 provides the short title of ``Resolving 
Environmental and Grid Reliability Conflicts Act of 2012.''

Section 2. Amendments to the Federal Power Act

    Section 2(a) amends section 202(c) of the Federal Power Act 
(16 U.S.C. 824a(c)) to direct the Department of Energy (DOE), 
in issuing an order pursuant to section 202(c) that may result 
in a conflict with a requirement of any Federal, State, or 
local environmental law or regulation, to ensure that the order 
limits the generation, delivery, or transmission of electricity 
to only those hours necessary to meet the emergency and serve 
the public interest. DOE also must ensure the order, to the 
maximum extent practicable, is consistent with any applicable 
Federal, State, or local laws or regulations and minimizes any 
adverse environmental impacts that may result from such order. 
The Committee intends the term ``adverse environmental 
impacts'' to include any adverse public health impacts 
resulting from noncompliance with an environmental requirement 
that may result from such order. The Committee expects that 
DOE, to the extent practicable in light of the emergency, will 
continue its practice of consulting with federal, and where 
appropriate, other governmental, environmental regulators prior 
to the issuance of a section 202(c) order that may result in 
any adverse environmental impacts or a conflict with any 
Federal, State, or local environmental law or regulation.
    Section 2(a) further amends section 202(c) to provide that 
if a party takes an action that is necessary to comply with a 
section 202(c) order and such action results in noncompliance 
with any Federal, State, or local environmental law or 
regulation, then such action shall not be considered a 
violation of such environmental law. Nor would the action 
subject the party to any requirement, civil or criminal 
liability, or a citizen suit under such environmental law. 
Thus, a party operating pursuant to a section 202(c) emergency 
directive will not be considered in violation of an 
environmental law or regulation if an action taken necessary to 
comply with the order conflicts with such environmental law or 
regulation. With respect to parties that may not be legally 
required to comply with a section 202(c) order directed to such 
party but that voluntarily choose to comply with such order, 
this provision also would apply to any actions taken by such 
parties that are necessary to comply with such order. In 
section 2(a), the term ``environmental law or regulation'' is 
not intended to be read broadly to include statutes such as the 
Atomic Energy Act or the Occupational Health and Safety Act.
    Section 2(a) further amends section 202(c) to require that 
an order issued pursuant to section 202(c) that may result in a 
conflict with an environmental law or regulation shall expire 
not later than 90 days after issuance. DOE may renew or reissue 
such an order for subsequent periods, not to exceed 90 days, as 
DOE determines necessary to meet the emergency and serve the 
public interest. In renewing or reissuing the order, DOE must 
consult with the primary Federal agency with expertise in the 
environmental interest protected by a potentially conflicting 
environmental law. DOE must include in the renewed or reissued 
order conditions determined by such primary Federal agency to 
be necessary to minimize any adverse environmental impacts that 
may result from such renewed or reissued order to the maximum 
extent practicable. The Committee encourages such primary 
Federal agency to submit such conditions to DOE in a timely 
manner. The conditions formally submitted to DOE by such 
primary federal agency shall be made available to the public. 
DOE has discretion to exclude such a condition from the renewed 
or reissued order if it determines the condition would prevent 
the order from adequately addressing the emergency. DOE must 
provide an explanation of any determination to exclude a 
condition and make it publicly available.
    Section 2(b) amends section 202(d) of the Federal Power Act 
(16 U.S.C. 824a(d)) to clarify that section 202(d) is 
applicable to municipalities, and not solely to ``persons'' as 
defined under section 3 of the Federal Power Act (16 U.S.C. 
796).

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

FEDERAL POWER ACT

           *       *       *       *       *       *       *

PART II--REGULATION OF ELECTRIC UTILITY COMPANIES ENGAGED IN INTERSTATE 
COMMERCE

           *       *       *       *       *       *       *

     INTERCONNECTION AND COORDINATION OF FACILITIES; EMERGENCIES; 
                   TRANSMISSION TO FOREIGN COUNTRIES

  Sec. 202. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) During the continuance of any war in which the United 
States is engaged, or whenever the Commission determines that 
an emergency exists by reason of a sudden increase in the 
demand for electric energy, or a shortage of electric energy or 
of facilities for the generation or transmission of electric 
energy, or of fuel or water for generating facilities, or other 
causes, the Commission shall have authority, either upon its 
own motion or upon complaint, with or without notice, hearing, 
or report, to require by order such temporary connections of 
facilities and such generation, delivery, interchange, or 
transmission of electric energy as in its judgment will best 
meet the emergency and serve the public interest. If the 
parties affected by such order fail to agree upon the terms of 
any arrangement between them in carrying out such order, the 
Commission, after hearing held either before or after such 
order takes effect, may prescribe by supplemental order such 
terms as it finds to be just and reasonable, including the 
compensation or reimbursement which should be paid to or by any 
such party.
  (2) With respect to an order issued under this subsection 
that may result in a conflict with a requirement of any 
Federal, State, or local environmental law or regulation, the 
Commission shall ensure that such order requires generation, 
delivery, interchange, or transmission of electric energy only 
during hours necessary to meet the emergency and serve the 
public interest, and, to the maximum extent practicable, is 
consistent with any applicable Federal, State, or local 
environmental law or regulation and minimizes any adverse 
environmental impacts.
  (3) To the extent any omission or action taken by a party, 
that is necessary to comply with an order issued under this 
subsection, including any omission or action taken to 
voluntarily comply with such order, results in noncompliance 
with, or causes such party to not comply with, any Federal, 
State, or local environmental law or regulation, such omission 
or action shall not be considered a violation of such 
environmental law or regulation, or subject such party to any 
requirement, civil or criminal liability, or a citizen suit 
under such environmental law or regulation.
  (4)(A) An order issued under this subsection that may result 
in a conflict with a requirement of any Federal, State, or 
local environmental law or regulation shall expire not later 
than 90 days after it is issued. The Commission may renew or 
reissue such order pursuant to paragraphs (1) and (2) for 
subsequent periods, not to exceed 90 days for each period, as 
the Commission determines necessary to meet the emergency and 
serve the public interest.
  (B) In renewing or reissuing an order under subparagraph (A), 
the Commission shall consult with the primary Federal agency 
with expertise in the environmental interest protected by such 
law or regulation, and shall include in any such renewed or 
reissued order such conditions as such Federal agency 
determines necessary to minimize any adverse environmental 
impacts to the maximum extent practicable. The conditions, if 
any, submitted by such Federal agency shall be made available 
to the public. The Commission may exclude such a condition from 
the renewed or reissued order if it determines that such 
condition would prevent the order from adequately addressing 
the emergency necessitating such order and provides in the 
order, or otherwise makes publicly available, an explanation of 
such determination.
  (d) During the continuance of any emergency requiring 
immediate action, any person or municipality engaged in the 
transmission or sale of electric energy and not otherwise 
subject to the jurisdiction of the Commission may make such 
temporary connections with any public utility subject to the 
jurisdiction of the Commission or may construct such temporary 
facilities for the transmission of electric energy in 
interstate commerce as may be necessary or appropriate to meet 
such emergency, and shall not become subject to the 
jurisdiction of the Commission by reason of such temporary 
connection or temporary construction: Provided, That such 
temporary connection shall be discontinued or such temporary 
construction removed or otherwise disposed of upon the 
termination of such emergency: Provided further, That upon 
approval of the Commission permanent connections for emergency 
use only may be made hereunder.

           *       *       *       *       *       *       *

                                  
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