[Federal Register Volume 73, Number 48 (Tuesday, March 11, 2008)]
[Notices]
[Pages 12959-12971]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-4811]


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DEPARTMENT OF ENERGY

[Docket No. 2007-OE-01, Mid-Atlantic Area National Interest Electric 
Transmission Corridor; Docket No. 2007-OE-02, Southwest Area National 
Interest Electric Transmission Corridor]


National Electric Transmission Congestion Report; Order Denying 
Rehearing

AGENCY: Department of Energy.

ACTION: Order Denying Rehearing.

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[[Page 12960]]

SUMMARY: On October 5, 2007, the Department of Energy (Department or 
DOE) published in the Federal Register a National Electric Transmission 
Congestion Report and Order (Report and Order) in the above dockets in 
which it designated the Mid-Atlantic Area and the Southwest Area 
National Interest Electric Transmission Corridors (National Corridors) 
(72 FR 56992). Numerous parties in each of the above named dockets 
filed timely applications for rehearing of DOE's Report and Order. Some 
parties also requested that the National Corridor designations be 
stayed. On December 3, 2007, in order to afford additional time for 
consideration of all of the matters raised in the timely-filed 
rehearing applications, the Department granted rehearing of DOE's 
Report and Order in both of the dockets for the limited purpose of 
further consideration (72 FR 69202, December 7, 2007). As discussed in 
greater detail in this Order Denying Rehearing (Order), the Department 
has completed its consideration of the issues raised in the rehearing 
applications, as well as in the requests for stay, and has concluded 
that they are without merit. Therefore, the rehearing applications and 
requests for stay in both dockets are denied.

DATES: This Order denying rehearing applications and requests for stay 
is effective March 11, 2008. The National Corridor designations were 
effective October 5, 2007, and will remain in effect until October 7, 
2019, unless the Department rescinds or renews the designations after 
notice and opportunity for comment.

FOR FURTHER INFORMATION CONTACT: For technical information, David 
Meyer, DOE Office of Electricity Delivery and Energy Reliability, (202) 
586-1411, [email protected]. For legal information, Warren Belmar, 
DOE Office of the General Counsel, (202) 586-6758, 
[email protected], or Lot Cooke, DOE Office of the General 
Counsel, (202) 586-0503, [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    A detailed discussion of the statutory framework and procedural 
background underlying the Department's authority to designate National 
Corridors and its rationale for doing so is contained in the Report and 
Order. Most of the issues raised in the rehearing applications were 
raised earlier, prior to the issuance of the Report and Order, in 
comments filed in response to: (1) DOE's August 8, 2006, National 
Electric Transmission Congestion Study (the Congestion Study); and (2) 
DOE's May 7, 2007, Federal Register notice (May 7 notice) which 
presented and solicited comment on the draft designations of the Mid-
Atlantic Area and the Southwest Area National Corridors (72 FR 25838). 
The Department addressed these issues in either or both the May 7 
notice and the Report and Order, and those two documents, as well as 
the Congestion Study, are incorporated by reference in this Order. 
While DOE has considered all of the arguments advanced in the timely 
filed rehearing applications, this Order will briefly address only some 
of these issues again, it will not readdress at length determinations 
the Department made in the Report and Order for which no new or 
substantive argument has been advanced in rehearing. The Department's 
decisions on the designation of the two National Corridors are based on 
the totality of the record in these proceedings, including the 
Congestion Study, the May 7 notice, all public comments submitted to 
DOE, the Report and Order, and this Order.

A. Statutory Framework

    Section 1221(a) of the Energy Policy Act of 2005 (EPAct) (Pub. L. 
109-58) added a new section 216 to the Federal Power Act (FPA) (16 
U.S.C. 824p). FPA section 216(a) requires the Secretary of Energy 
(Secretary) \1\ to conduct a national study of electric transmission 
congestion within one year from the date of enactment of EPAct (i.e., 
by August 2006) and every three years thereafter. FPA section 216(a)(2) 
provides ``interested parties'' with an opportunity to offer 
``alternatives and recommendations.'' 16 U.S.C. 824p(a)(2). Following 
consideration of such alternatives and recommendations, the Secretary 
is required to issue a report, based on the study, ``which may 
designate any geographic area experiencing electric energy transmission 
capacity constraints or congestion that adversely affects consumers as 
a national interest electric transmission corridor.'' FPA section 
216(a)(2),16 U.S.C. 824p(a)(2).
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    \1\ This Order uses the terms ``Secretary,'' ``Department,'' and 
``DOE'' interchangeably.
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    FPA section 216(a) assigns to the Department the role of 
identifying transmission congestion and constraints, and the geographic 
areas in which these problems exist. FPA section 216(a) does not, 
however, shift to the Department the roles exercised by electric system 
planners or siting authorities in evaluating solutions to congestion 
and constraint problems. A National Corridor designation is not a 
determination that transmission must, or even should, be built, nor is 
it a determination that any particular transmission facility is needed 
or where any such facility should be located. Transmission expansion is 
but one possible solution to a congestion or constraint problem, and 
other potential solutions include increased demand response, improved 
energy efficiency, deployment of advanced energy technologies, and 
siting of additional generation, including distributed generation, 
close to load centers.

B. Procedural Background

    In accordance with the requirement in FPA section 216(a)(1), the 
Department issued the Congestion Study on August 8, 2006 and requested 
comments. The Congestion Study gathered historical congestion data 
obtained from existing studies prepared by the regional reliability 
councils, RTOs and ISOs, and regional planning groups. The Congestion 
Study also modeled future congestion: the years 2008 and 2011 for the 
Eastern Interconnection, and the years 2008 and 2015 for the Western 
Interconnection. Based on the historical data and the modeling results, 
the Congestion Study identified and classified the most significant 
congestion areas in the country. Two ``Critical Congestion Areas'' 
(i.e., areas where the current and/or projected effects of congestion 
are especially broad and severe) were identified: the Atlantic coastal 
area from metropolitan New York through northern Virginia (the Mid-
Atlantic Critical Congestion Area); and southern California (the 
Southern California Critical Congestion Area).
    In the May 7 notice, the Department noted that the term 
``constraints or congestion that adversely affects consumers'' as used 
in FPA section 216(a)(2) is ambiguous and interpreted the phrase to 
include congestion that is persistent. Thus, the Department stated that 
FPA section 216(a) gives the Secretary the discretion to designate a 
National Corridor upon a showing of persistent congestion because 
persistent congestion has adverse effects on consumers. Further, the 
Department stated that it would use a source-and-sink approach to 
delineate the boundaries of the Mid-Atlantic Area National Corridor and 
the Southwest Area National Corridor.\2\
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    \2\ ``Source'' refers to an area of existing or potential future 
generation, and ``sink'' refers to an area of consumer demand or 
``load.''
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    With regard to the Mid-Atlantic Critical Congestion Area, the 
Department noted that the Congestion Study had identified this area 
based on

[[Page 12961]]

evidence of historical, persistent congestion caused by numerous well-
known constraints that are projected to continue and worsen unless 
addressed through remedial measures. The Department determined that if 
action is not taken to address congestion, consumers in the Baltimore-
Washington-Northern Virginia area, the northern New Jersey area, and 
southeastern New York face threats to the reliability of their 
electricity supply. The Department also documented that congestion 
exacerbates the degree to which consumers in the eastern portion of the 
PJM Interconnection and in southeastern New York rely on generation 
fueled by natural gas and oil. Finally, the Department described the 
importance of the Mid-Atlantic Critical Congestion Area to the security 
and economic health of the Nation as a whole. Thus, the Department 
stated its belief that economic development, reliability, supply 
diversity and energy independence, and national defense and homeland 
security considerations warrant exercise of the Secretary's discretion 
to designate a National Corridor for the Mid-Atlantic Critical 
Congestion Area.\3\
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    \3\ Section VIII.C of the May 7 notice, 72 FR 25884-25896.
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    With regard to the Southern California Critical Congestion Area, in 
the May 7 notice the Department noted that the Congestion Study had 
identified evidence of historical, persistent congestion caused by 
numerous well-known constraints that are projected to continue and 
worsen unless addressed through remedial measures. The Department 
determined that if action is not taken to address congestion, consumers 
in the Southern California Critical Congestion Area face threats to the 
reliability of their electricity supply. The Department also described 
the importance of the Southern California Critical Congestion Area to 
the security and economic health of the Nation as a whole. Thus, the 
Department stated its belief that reliability, supply diversity, and 
national defense and homeland security considerations warrant exercise 
of the Secretary's discretion to designate a National Corridor for the 
Southern California Critical Congestion Area.
    To delineate the boundaries of both the Mid-Atlantic Area National 
Corridor and the Southwest Area National Corridor, the Department 
identified source areas that would enable a range of generation options 
and then identified the counties linking the identified source areas 
with the respective sink areas, i.e., the Mid-Atlantic Critical 
Congestion Area and the Southern California Critical Congestion Area. 
The Department stated that both the Mid-Atlantic Area National Corridor 
and the Southwest Area National Corridor would have 12-year terms, and 
explained why that was an appropriate length of time for a 
designation.\4\
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    \4\ Section VI of the May 7 notice, 72 FR 25851.
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    The Department provided a sixty day period to intervene and file 
comments on the draft National Corridor designations announced in the 
May 7 notice. In addition, DOE held a series of public meetings on the 
draft designations during the public comment period.\5\ All timely 
filed comments, as well as written comments submitted at the public 
meetings and transcripts of those public meetings, were posted on the 
Department's website in order to facilitate public review. In addition, 
the Department consulted with each of the States within the two draft 
National Corridors \6\, as well as with the Regional Entities (as 
provided in FPA section 216(a)(3)) that have authority within the draft 
National Corridors.\7\
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    \5\ Arlington, VA, May 15, 2007; San Diego, CA, May 17, 2007; 
New York City, NY, May 23, 2007; Rochester, NY, June 12, 2007; 
Pittsburgh, PA, June 13, 2007; Las Vegas, NV, June 20, 2007; and 
Phoenix, AZ, June 21, 2007.
    \6\ See 72 FR 56996, footnote 18.
    \7\ Id., footnote 19.
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II. Mid-Atlantic Area National Corridor (Docket No. 2007-OE-01) 
Rehearing Issues

A. Procedural Matters

1. Rehearing Applications and Requests for Stays
    The May 7 notice provided instructions on how to provide comments 
and how to become a party to the proceeding in this docket. Consistent 
with those instructions, the Department granted party status in this 
docket to all persons who either: (1) Filed comments electronically at 
http://nietc.anl.gov on or before July 6, 2007; (2) mailed written 
comments marked ``Attn: Docket No. 2007-OE-01'' to the Office of 
Electricity Delivery and Energy Reliability, OE-20, U.S. Department of 
Energy, 1000 Independence Avenue SW., Washington, DC 20585, that were 
received on or before July 6, 2007; or (3) hand-delivered written 
comments marked ``Attn: Docket No. 2007-OE-01'' at one of the public 
meetings. Ordering Paragraph E of the Report and Order provided 
instructions on how to apply for rehearing. Consistent with those 
instructions, the Department received numerous applications for 
rehearing from parties in this docket.\8\ In addition, DOE received 
filings which did not meet the requirements of FPA section 313 (16 
U.S.C. 825I) to seek rehearing, either because they were filed by non-
parties or were filed late.\9\ The Department has reviewed and 
considered all of the submissions, treating as comments the submissions 
from filers who do not qualify as applicants for rehearing. However, 
those commenters will not be able to seek review of the Report and 
Order and this Order in a United States Court of Appeal. See, FPA 
section 313. For convenience, when referring to a filing in this Order, 
the term ``rehearing application'' will be used whether the filing is 
an actual application for rehearing or a comment.
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    \8\ Listed in Appendix A of this order.
    \9\ Those filings and their status are listed in Appendix B of 
this order.
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    On November 5, 2007, the State of New York (New York) submitted a 
timely application for rehearing; however, it had not filed comments on 
the May 7 notice and therefore was not a party to the proceeding. New 
York asserted that ``to the extent New York has previously commented on 
the Designation Order through its political subdivisions including, but 
not limited to, the New York State Department of Environmental 
Conservation (NYSDEC) and the New York State Public Service Commission 
(NYSPSC), the State has the right to petition for rehearing.'' \10\ In 
the alternative, New York moved to intervene late. In addition, on 
January 31, 2008, New York made another submission, which it styled as 
a supplement to its November 5 filing, in which it raised issues 
concerning CRA International, Inc. (CRA), a contractor used by the 
Department to assist in the preparation of the Congestion Study.
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    \10\ New York Motion for Intervention at 1.
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    A person seeking to intervene in a proceeding out of time, 
particularly after the Department has issued a final order, must 
provide good justification for being permitted to do so. In this 
instance, given New York's stated interest in the designation of the 
Mid-Atlantic Area National Corridor, the fact that subordinate state 
agencies already are parties in the proceeding, and the fact that New 
York's initial petition raises no issues that were not previously 
raised by New York state agencies, DOE believes there is good cause to 
grant New York's motion and that other parties will not be prejudiced 
thereby. Therefore, DOE grants New York's late-filed petition to 
intervene and will accept for filing New York's November 5, 2007 
request for rehearing. However, FPA section 313 requires that 
applications for rehearing shall be made

[[Page 12962]]

within thirty days after the issuance of an order. The Report and Order 
was issued on October 5, 2007, and rehearing requests therefore must 
have been filed by November 5, 2007. Moreover, the Report and Order 
specified that DOE would not accept responses to requests for 
rehearing. Therefore, New York's January 31, 2008, supplemental filing 
is rejected.\11\
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    \11\ The January 31, 2008, submittal also inquired about a 
Freedom of Information Act (FOIA) request made to DOE by New York. 
That FOIA request will be addressed by the Department separately 
outside of this proceeding.
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    DOE received requests that the Department stay the designation of 
the Mid-Atlantic Area National Corridor from the Southern Environmental 
Law Center (SELC), the Pennsylvania Public Utility Commission (PaPUC), 
in a joint filing from the Wilderness Society, the Natural Resources 
Defense Council, Inc., Forest Guardians, Western Resource Advocates, 
and the California Wilderness Coalition (Wilderness Society et al.), 
and New York.\12\ The Department has decided to deny the applications 
for rehearing as discussed in this Order and affirm the determination 
to designate the Mid-Atlantic Area National Corridor. Therefore, the 
Department also denies the requests for a stay, which would delay the 
effectiveness of the designation, on the grounds that they fail to 
satisfy the burden necessary for DOE to grant such relief.
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    \12\ New York's request for a stay was made in its untimely 
January 31, 2008, submission
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2. Authority For, and Fairness of, the Designation Process
Summary of Rehearing Arguments
    As in the comments filed in response to the May 7 notice, many 
rehearing applications argued that the Department had failed to provide 
adequate opportunity for the public to review and comment on the 
National Corridors.\13\ For example, Greg Bandel stated that the 
Department ``did not include adequate input from affected states, 
counties, local governments, communities, and affected home owners.'' 
\14\ Communities Against Regional Interconnection (CARI) contended that 
the designation of the Mid-Atlantic Area National Corridor is a 
``rule'' subject to the notice and comment rulemaking requirements in 
the Administrative Procedure Act (APA) (5 U.S.C. 553) and that DOE 
failed to follow rulemaking procedures.\15\ New York contended that FPA 
section 216(a) does not authorize DOE to issue either an adjudicatory 
order or a rule that is binding on the affected States.\16\ It further 
argued that neither FPA section 309 (16 U.S.C. 824h) nor the APA 
authorizes DOE to issue a designation order. Moreover, New York argued 
that in issuing the Report and Order, DOE failed to follow the APA's 
adjudicatory hearing requirements in 5 U.S.C. 554, 556-557, as well as 
DOE's adjudicatory hearing regulations. New York also stated that if 
the Report and Order is viewed as a rule, DOE did not comply with the 
procedural requirements for rulemaking in the APA (5 U.S.C. 553). 
Finally, New York asserted that DOE improperly relied on a report 
prepared by CRA and failed to consider certain relevant economic 
factors in issuing the Report and Order. Various other rehearing 
applications asserted that the Department did not conduct a wholly 
independent study of congestion, improperly relying on data and 
analyses from utilities or others with a vested interest in 
transmission expansion.\17\
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    \13\ See, e.g., the applications for rehearing of Faith 
Bjalobok, New York, and the Commonwealth of Virginia.
    \14\ Application for rehearing of Greg Bandel at 1.
    \15\ CARI rehearing application, at 4-6.
    \16\ New York rehearing application, at 6-9.
    \17\ See, e.g., rehearing applications of Jeffery Brown, Rick 
Layton, and CARI.
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DOE Response
    In the Report and Order, the Department concluded that its process 
has been fair, open, and transparent, and that it has provided ample 
opportunity for public comment.\18\ In addition, DOE stated that the 
designation of National Corridors constitutes informal adjudication 
under the APA, and concluded that it ``employed procedures that satisfy 
all applicable procedural requirements.'' \19\ Nothing in the requests 
for rehearing persuades the Department that its conclusions and 
decisions on these issues, and discussed in the Report and Order, were 
incorrect.
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    \18\ 72 FR 57001.
    \19\ Id.
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    Although some issues regarding the Department's authority and 
choice of procedures were raised in comments on the draft designations 
in the May 7 notice and were addressed in the Report and Order, other 
issues were raised for the first time in rehearing applications. The 
Department addresses these issues here.
    As stated in the Report and Order, the Department does not agree 
that its designation of a National Corridor is a ``rule'' subject to 
the APA's informal rulemaking provisions (5 U.S.C. 553) .\20\ Instead, 
the designation of National Corridors is properly viewed as informal 
adjudication under the APA. The term ``informal adjudication'' is used 
to describe the residual category of agency actions that are not 
rulemakings and that need not be conducted through formal 
adjudication.\21\ FPA section 216(a) does not require DOE to issue a 
rule in order to designate a National Corridor. It also does not 
require a decision on the record after opportunity for an agency 
hearing, which would make the APA's formal adjudication provisions 
applicable.\22\ The fact that designation orders under FPA section 
216(a) have future effect, as noted by CARI, does not preclude DOE from 
treating this action as informal adjudication. The APA defines 
``adjudication'' as ``an agency process for the formulation of an 
order.'' \23\ An order is ``the whole or a part of a final disposition, 
whether affirmative, negative, injunctive, or declaratory in form, of 
an agency in a matter other than rule making but including licensing.'' 
\24\ The Department's Report and Order designating National Corridors 
is the final disposition in declaratory form of how DOE chooses to 
address the results of the study it must conduct under FPA section 
216(a) and, therefore, is properly characterized as an informal 
adjudication. The Supreme Court has long held that absent a statutory 
or other legal requirement providing otherwise, whether to use 
rulemaking or adjudication in a particular matter is the administrative 
agency's decision to make.\25\
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    \20\  Id.
    \21\ See A Guide to Federal Agency Adjudication 146 (Michael 
Asimow, ed., 2003) (co-authored book published by the American Bar 
Association's Section on Administrative Law & Regulatory Policy)
    \22\ 5 U.S.C. 554(a).
    \23\ 5 U.S.C. 551(7).
    \24\ 5 U.S.C. 551(6) (emphasis added).
    \25\ NLRB v. Bell Aerospace Co., 416 U.S. 267 (1974), affirming 
the principle enunciated in SEC v. Chenery Corp., 332 U.S. 194 
(1947).
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    The Department rejects New York's argument that FPA section 216(a) 
does not authorize issuance of either an adjudicatory order or a rule 
that has binding effect on the affected States. New York is correct 
that the statute unambiguously requires DOE to conduct a study of 
electric transmission congestion and issue a report based on the 
study.\26\ FPA section 216(a)(2) provides that after conducting the 
study required by FPA section 216(a)(1), and after considering 
alternatives and recommendations from interested parties, including 
affected States, the Secretary ``shall issue a report, based on the 
study, which may designate any geographic area experiencing electric 
energy transmission capacity constraints

[[Page 12963]]

or congestion that adversely affects consumers as a national interest 
electric transmission corridor.'' \27\ Thus, while not mandating that 
the Secretary designate National Corridors, the statute clearly 
authorizes the Secretary to designate such corridors. Designation of 
National Corridors may occur in the statutorily-required report, and 
designation may affect the procedural rights of potential applicants 
for transmission line siting within the corridor and of citizens in the 
affected States.
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    \26\ New York rehearing application at 6.
    \27\ 16 U.S.C. 824p(a)(2) (emphasis added).
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    Under the APA, agency actions are either rules or orders.\28\ As 
previously explained, the designation of National Corridors is properly 
characterized as informal adjudication, and issuance of the Report and 
Order designating the Mid-Atlantic Area National Corridor clearly is 
authorized by FPA section 216(a). While FPA section 216(a) provides 
ample authority for issuance of the designation order, FPA section 309 
provides additional authority. FPA section 309 provides that the 
Federal Power Commission, whose powers (in relevant part here) were 
transferred to DOE in the Department of Energy Organization Act (42 
U.S.C. 7151(b)), ``shall have the power to perform any and all acts, 
and to prescribe, issue, make, amend, and rescind such orders, rules, 
and regulations as it may find necessary or appropriate to carry out 
the provisions of this Act.'' \29\
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    \28\ Attorney General's Manual on the Administrative Procedure 
Act at 15 (1947).
    \29\ 16 U.S.C. 825h.
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    New York acknowledges that the Department has latitude and 
discretion in performing its regulatory functions pursuant to FPA 
section 309. However, New York argues that neither such latitude nor 
discretion apply to the designation of National Corridors because 
``[t]he APA, 5 U.S.C. 554, 556 and 557, does not authorize DOE's 
issuance of the Designation Order, nor the `informal' process DOE 
followed in issuing it.'' \30\ As explained previously, the Department 
concludes there is ample authority for issuance of the Report and 
Order, and FPA section 216(a) does not require use of formal 
adjudication for the designation of corridors.
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    \30\ New York rehearing application at 7.
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    The APA does not prescribe procedures that agencies must follow 
when engaging in informal adjudication. Subject to any constraints 
imposed by due process, or by particular statutes or regulations, 
agencies are free to establish procedures for informal 
adjudication.\31\ The Department has provided ample opportunities for 
public comment, both written and oral, in carrying out its 
responsibilities under FPA section 216(a). The Department solicited 
comments on the Congestion Study through a notice of availability and 
request for comments published in the Federal Register on August 8, 
2006. (71 FR 45047). The Department allowed 60 days for submission of 
public comments on the Congestion Study. After considering the comments 
received on the Congestion Study, the Department published the May 7 
notice in the Federal Register and provided a 60-day public comment 
opportunity on the draft National Corridor designations. The May 7 
notice stated that public comments would be considered prior to DOE 
issuing the report required by FPA section 216(a)(2). The Department 
provided this comment opportunity even though FPA section 216(a) does 
not require DOE to solicit comments on the report or on any proposed or 
draft National Corridor designations. Section 216(a) only requires that 
DOE solicit comments on the study, upon which the report and any 
designation of National Corridors are based.
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    \31\ See Pension Benefit Guaranty Corp. v. LTV Corp., 496 U.S. 
633, 655-56 (1990); see also A Guide to Federal Agency Adjudication, 
supra footnote 19 at 147-48.
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    The May 7 notice announced the locations of three public meetings, 
which were held in Arlington, Virginia, New York, New York, and San 
Diego, California. Thus, two hearings were initially held in areas that 
would be affected by the draft Mid-Atlantic Area National Corridor and 
one in an area that would be affected by the draft Southwest Area 
National Corridor. On June 7, 2007, the Department announced four 
additional public meetings, two in the area of the Mid-Atlantic Area 
National Corridor (in Rochester, New York, and Pittsburgh, 
Pennsylvania) and two in the area of the Southwest Area National 
Corridor (in Las Vegas, Nevada, and Phoenix, Arizona). 72 FR 31571. 
Thus, a total of seven public meetings on the draft National Corridors 
were held in the areas that potentially would be affected by the draft 
National Corridors in order to obtain public views, data and arguments. 
Additional information about the Department's process for receiving 
comments on the Congestion Study and the National Corridors is 
contained in the Report and Order. The Report and Order sets forth the 
Department's detailed responses to written and oral comments received 
from members of the public and an explanation of the bases for the 
National Corridor designations.
    Finally, DOE disagrees with New York's comments that DOE improperly 
relied on a report prepared for the Department by its contractor CRA, 
and failed to consider certain relevant economic factors in designating 
the National Corridors.\32\ CRA produced its report under contract to 
and with the supervision of the Department, and as such the CRA report 
is a Departmental document. For that reason and because the document 
was properly a part of the record for this proceeding, DOE could 
properly rely on it in producing the Congestion Study. Moreover, as 
stated in the Report and Order:
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    \32\ In a related matter, New York filed a FOIA request for a 
Cambridge Energy Research Associates (CERA) Study titled ``Grounded 
in Reality: Eastern Interconnection'' which is listing number 7 in 
Appendix I of the Congestion Study. As was noted in that Appendix I, 
the CERA study was reviewed by CRA in preparing its report to DOE 
but was not used by CRA in its report or by DOE in the preparation 
of the Congestion Study because it was considered confidential. 
Therefore, the CERA study is not in the record of this proceeding 
and was not used as a basis for the Department's decisions. In 
addition, CERA and CRA International, Inc. are separate, non-
affiliated companies.

    The Department did not rely solely on data and information from 
any single source or category of sources. While conducting the 
Congestion Study, the Department contacted a wide range of 
stakeholders for publicly available and current data, and then, 
through the notice of inquiry and technical conference, opened the 
call for data to all entities. The Department then performed its own 
review of the information provided. All interested persons had an 
opportunity to comment on the May 7 notice, and the Department has 
considered all timely filed comments.\33\
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    \33\ 71 FR 57001.
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3. Adequacy of State Consultation
Summary of Rehearing Arguments
    Several rehearing applications asserted that the Department failed 
to consult adequately with affected States. For example, the 
Commonwealth of Virginia stated that ``(d)espite the clear and 
unambiguous statutory consultation language, the DOE's August 2006 
congestion study, upon which DOE's NIETC designation is based, was 
conducted without any consultation with the Commonwealth of Virginia.'' 
\34\ New York stated that ``DOE was required to formally consult with 
the affected States in the proposed designated Corridor'' \35\ and 
``DOE failed to initially create a formal consultation process in which 
the States could

[[Page 12964]]

pursue a dialogue about the Corridor.'' \36\
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    \34\ Virginia rehearing applications at 4.
    \35\ New York rehearing application at 13.
    \36\ Id.
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DOE Response
    The Department fully addressed these arguments in the Report and 
Order and the applications for rehearing raise no new issues or 
arguments. As stated in the Report and Order:

* * * the Department believes that its consultation with States, as 
documented in the May 7 notice, satisfied the requirements of FPA 
section 216(a)(1). Moreover, in recognition of the importance of 
National Corridor designation to States, upon issuance of the May 7 
notice, the Department engaged in additional consultation with each 
of the States within the draft National Corridors and the District 
of Columbia, as documented in Section I.C above.\37\

    \37\ 72 FR 57002.
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    The Report and Order documents the Department's extensive 
consultations with the affected States. The Department finds the 
arguments that DOE inadequately consulted with the States to be without 
merit. Indeed, DOE provided even more consultation and comment 
opportunities to the States and to the public than is called for by FPA 
section 216(a).

B. Adequacy of Showing of Congestion That Adversely Affects Consumers

Summary of Rehearing Arguments
    Many rehearing applications argued that the Department had failed 
to show the presence of congestion adversely affecting consumers. The 
rehearing applications took particular issue with the Department's 
position that it has the discretion to designate the Mid-Atlantic Area 
National Corridor upon a showing of the existence of persistent 
congestion, without further demonstration of adverse effects on 
consumers. For example, NYPSC stated that ``DOE's assertion that it 
would be too daunting to document all adverse affects of persistent 
congestion does not excuse DOE's decision to adopt a definition of 
`congestion that adversely affects consumers' that does not identify 
the costs such congestion imposes on consumers or the costs of 
relieving such congestion.'' \38\ Toll Bros. Inc. (Toll Bros.) asserted 
that, when identifying congestion, it is impermissible for DOE to 
consider economic factors, and the only determination DOE should make 
is whether the existing transmission is in compliance with applicable 
reliability standards.\39\
---------------------------------------------------------------------------

    \38\ NYPSC rehearing application at 7 (emphasis in the 
original).
    \39\ Toll Bros. rehearing application at 7-8.
---------------------------------------------------------------------------

DOE Response
    The Department affirms the conclusion in the Report and Order that 
it has sufficiently demonstrated and found the existence of congestion 
that adversely affects consumers in the Mid-Atlantic Area National 
Corridor.\40\ In the Report and Order, referencing the Congestion 
Study, the Department defined ``congestion'' as the condition that 
occurs when transmission capacity is not sufficient to enable safe 
delivery of all scheduled or desired wholesale electricity transfers 
simultaneously.\41\ Under this definition, any congestion prevents some 
users of the transmission grid from completing their preferred power 
transactions. In the Report and Order, the Department concluded, based 
on its technical expertise and policy judgment, that it is reasonable 
to interpret the phrase ``congestion that adversely affects consumers'' 
to include congestion that is persistent.\42\ Thus, the Secretary 
appropriately exercised his authority and discretion to designate the 
Mid-Atlantic Area National Corridor after finding the existence of 
persistent congestion.
---------------------------------------------------------------------------

    \40\ 72 FR 57003.
    \41\ Id.
    \42\ 72 FR 57004.
---------------------------------------------------------------------------

    DOE disagrees with the assertion by Toll Bros. that DOE cannot 
consider economic factors in identifying congestion that adversely 
affects consumers. Toll Bros. offers no persuasive rationale for its 
preferred interpretation of the term ``congestion.'' Instead, Toll 
Bros.' view--that FPA Section 216's references to transmission 
congestion should be understood as pertaining only to reliability--is 
inconsistent with industry usage. Having identified congestion in the 
Congestion Study, DOE can and did properly look to the FPA section 
216(a)(4) considerations, including those dealing with the economic 
impacts of congestion, in making both its determination that the 
congestion adversely affects consumers and that a National Corridor 
should be designated.

C. Boundaries of the Mid-Atlantic Area National Corridor

Summary of Rehearing Arguments
    Numerous rehearing applications reiterated arguments made in 
response to the May 7 notice that the Mid-Atlantic Area National 
Corridor is impermissibly broad. For example, Willard R. Burns stated 
that ``(d)esignation of an area spanning the entire Mid-Atlantic 
region--and 52 of 67 counties in Pennsylvania--exceeds the Secretary's 
authority, and renders the definition of `corridor' so broad as to be 
meaningless.'' The PaPUC refers to the designation as a ``Transmission 
Park'' rather than a corridor. SELC reiterated its position that the 
definition employed by DOE in establishing corridors under EPAct 
section 368 should also apply to National Corridors designated under 
FPA section 216(a).
    New York objected to the Department's use of the source-and-sink 
approach, saying that that ``approach is contrary to the express 
language of section 216(a), which directs DOE to include in the 
Corridor only those geographic areas found to be experiencing 
constraints that adversely affect consumers in the retail consumer end 
markets or `sinks' of congestion.'' \43\ The Pennsylvania Department of 
Environmental Protection (PaDEP) asserted that the source-and-sink 
approach is inconsistent with the express language of FPA section 216 
which only supports a project-based approach to designating 
corridors.\44\
---------------------------------------------------------------------------

    \43\ New York rehearing application at 11.
    \44\ PaDEP application for rehearing at 4.
---------------------------------------------------------------------------

DOE Response
    The Department's approach to defining the boundaries of the Mid-
Atlantic Area National Corridor is consistent with EPAct and with FPA 
section 216(a). FPA section 216(a) does not limit the shape, 
proportion, or size of a National Corridor. In addition, as was stated 
in detail in the Report and Order, the Department concludes that the 
differences in the language and intent of FPA section 216(a) and EPAct 
section 368, underscore the appropriateness of the Department's overall 
approach to establishing the boundaries of the Mid-Atlantic Area 
National Corridor. As stated in the Report and Order:

    The Department does not think it is reasonable, as some 
commenters have suggested, to interpret the term ``geographic area 
experiencing electric energy transmission capacity constraints or 
congestion that adversely affects consumers'' as restricting a 
National Corridor designation to the specific confines of the load 
being adversely affected by congestion or the constrained 
transmission lines causing such congestion. FPA section 216(a)(4)(A) 
and (B) both refer to the Department considering economic factors in 
``the corridor, or the end markets served by the corridor.'' Since 
the end markets served by a National Corridor are the load centers 
where consumers are being adversely affected by congestion, this 
language indicates that Congress envisioned designation of National 
Corridors that extend beyond the location of the adversely affected 
consumers.\45\
---------------------------------------------------------------------------

    \45\ 72 FR 57007.


[[Page 12965]]


---------------------------------------------------------------------------

    Moreover, as explained in detail in the May 7 notice and in the 
Report and Order, DOE believes the source-and-sink approach to 
designating National Corridor boundaries is a permissible and 
reasonable way of delineating the corridors, and that using county 
boundaries is a reasonable means of establishing precise and readily 
identifiable limits for corridors. PaDEP's assertion that the only 
valid approach to designating National Corridors is a project-based 
approach is not consistent with the statutory design of FPA section 
216. That provision authorizes the Department to exercise its 
discretion in determining whether and where to designate a geographic 
area as a National Corridor, and vests in FERC the authority to issue 
one or more permits for the construction or modification of electric 
transmission facilities in a National Corridor. It would make little 
sense to interpret FPA section 216 as requiring DOE to designate 
narrowly-defined corridors that, in effect, would constitute siting 
decisions by DOE, since any siting authority to be exercised under FPA 
section 216 is plainly the responsibility of FERC, not DOE. Thus, if 
Congress had intended a National Corridor designation to pertain only 
to a specific electric transmission project, and had intended DOE to 
select specific routings, it seems likely that Congress would have 
authorized DOE to both make the National Corridor designation and issue 
the construction or modification permit. Congress did not do so. 
Finally, the inclusion of the phrase ``1 or more permits'' in FPA 
section 216(b) would be rendered largely meaningless, if, as PaDEP 
asserts, DOE could only designate corridors using a project-based 
approach. As explained at length in the Report and Order, DOE's source-
and-sink approach is entirely appropriate and reflects the designation 
of a National Corridor in a geographic area experiencing electric 
energy transmission capacity constraints or congestion that adversely 
affects consumers.

D. Consideration of Alternatives Under FPA Section 216(a)(2) Summary of 
Rehearing Arguments

    Several rehearing applications argued that the Department should 
evaluate non-transmission solutions to congestion before designating 
the Mid-Atlantic Area National Corridor. Maryland Governor Martin 
O'Malley stated that DOE failed to properly consider non-transmission 
solutions to congestion and constraint issues.\46\ Willard R. Burns 
said that ``the Department has not considered alternative solutions for 
constraints and congestion other than corridor designations and new 
high-voltage lines.'' \47\ The State of New Jersey said the designation 
of a National Corridor gives transmission facilities a huge competitive 
advantage, and therefore DOE must consider non-transmission 
alternatives prior to making a designation.\48\ SELC stated that 
``energy efficiency, conservation, distributed generation, demand-side 
management, and other tools are alternatives not just to transmission 
construction, but also to corridor designation itself.'' \49\
---------------------------------------------------------------------------

    \46\ Governor Martin O'Malley rehearing application at 1.
    \47\ Willard Burns rehearing application at 1.
    \48\ State of New Jersey rehearing application at 6.
    \49\ SELC rehearing application at 33.
---------------------------------------------------------------------------

    CARI asserted that the designation of the Mid-Atlantic Area 
National Corridor was not warranted because New York already has 
mechanisms in place to relieve transmission congestion and that there 
``is no legal or institutional barrier to the licensing or construction 
of new or modified transmission facilities under state law.'' \50\ 
Furthermore, CARI asserted that DOE should consider the potential 
effects of the New York Independent System Operator's August 2006 
Comprehensive Reliability Plan, New York Governor Eliot Spitzer's 
comprehensive plan for reducing electricity use, and New York City 
Mayor Michael Bloomberg's energy plan for reducing projected demand for 
energy. Toll Bros. stated that DOE should have considered alternatives 
such as Virginia's 2007 Energy Plan prior to issuing the Congestion 
Study.
---------------------------------------------------------------------------

    \50\ CARI rehearing application at 14.
---------------------------------------------------------------------------

DOE Response

    The Department concludes that consideration of non-transmission 
solutions to the congestion problems facing the Mid-Atlantic Critical 
Congestion Area is neither required nor necessary as a precondition to 
designating the Mid-Atlantic Area National Corridor. As stated in the 
Report and Order:

    The very structure of FPA section 216 indicates that the 
Department's role is limited to the identification of congestion and 
constraint problems and the geographic areas in which these problems 
exist, and does not extend to the functions of electric system 
planners or siting authorities in evaluating solutions to congestion 
and constraint problems. Even the statutory requirement to consider 
alternatives is not couched in terms of an independent analysis of a 
reasonable range of alternatives, as one would expect if Congress 
had intended the Department to analyze and select a solution, but 
rather refers merely to the Department considering those 
alternatives and recommendations offered by interested parties. The 
Department believes that expanding its role to include analyzing and 
making findings on competing remedies for congestion could supplant, 
duplicate, or conflict with the traditional roles of States and 
other entities.\51\
---------------------------------------------------------------------------

    \51\ 72 FR 57010.

    The CARI and Toll Bros. rehearing applications suggested that prior 
to making a determination on whether to designate a National Corridor 
the Department needs to examine in detail the feasibility, advantages, 
and disadvantages of all possible alternatives to building additional 
electric transmission facilities. Nothing in FPA section 216(a) 
requires DOE to do so. Nor is it clear why such examining would be 
helpful, much less necessary, for DOE when it decides whether and where 
there are problem transmission capacity constraints and congestion that 
adversely affects consumers and a National Corridor should be 
designated. The examination envisioned by CARI and Toll Bros. 
apparently would include reviewing the impacts of all regional, State 
and local energy plans to determine if the cumulative effects of the 
plans would provide alternatives to transmission that would obviate the 
need to designate a National Corridor. In order to make this 
examination, DOE presumably would need to review the underlying data, 
assumptions, and analyses in each plan and determine what the effects 
of the plans would be and whether those effects would be sufficient to 
eliminate the need to make a corridor designation. In other words, DOE 
would assume the role of electricity planning czar in all areas of the 
country experiencing constraints or congestion, ruling on the 
acceptability of the methodology and data used in the formulation of 
regional, State and local energy plans, and the adequacy and efficacy 
of each area's electricity planning, as part of DOE's National Corridor 
decision making process. FPA section 216(a) does not require the 
Department to play such a large and invasive role in electricity 
planning, nor does it require the Department to undertake this level of 
scrutiny before designation of a National Corridor. The Department has 
engaged in a searching review and analysis of reasonably available data 
and information, and has exercised its professional and technical 
judgment and expertise in making determinations based on that 
information. It is not

[[Page 12966]]

required to explore and examine a wide range of possible future actions 
by many persons or organizations before issuing a designation.

E. Whether DOE Should Exercise Its Discretion To Designate the Mid-
Atlantic Area National Corridor

Summary of Rehearing Arguments
    Many of the rehearing applications raised issues previously 
addressed in the Report and Order. For example, CARI and PaPUC asserted 
that the economic development, reliability, supply diversity, energy 
independence, and national defense and homeland security considerations 
contained in FPA section 216(a)(4) do not support designation of the 
Mid-Atlantic Area National Corridor.\52\ Other rehearing applications 
reiterated the argument that the Department should accord more 
deference to existing State and regional planning and siting processes 
and delay any designation of a Mid-Atlantic Area National Corridor 
unless and until it has become clear that a Federal siting forum is 
needed.
---------------------------------------------------------------------------

    \52\ CARI rehearing application at 29.
---------------------------------------------------------------------------

DOE Response
    As the Department stated in the Report and Order:

    The Department recognizes that FPA section 216 adopted a novel 
approach to addressing congestion problems, and that many commenters 
have grave concerns about the effects of this new approach. However, 
after careful consideration of these concerns, the Department 
concludes that designation of the draft Mid-Atlantic Area National 
Corridor is consistent with the intent of FPA section 216(a).\53\
---------------------------------------------------------------------------

    \53\ 72 FR 57012.

    This is particularly so given the limited function that FPA section 
216 assigns to DOE and which a designation is to accomplish-- i.e., the 
role of identifying transmission congestion and constraints, and the 
geographic area in which the problems exist. The Department also 
reaffirms its conclusions, as the May 7 notice documented, that 
economic development, reliability, supply diversity, energy 
independence, and national defense and homeland security considerations 
all warrant designation of the Mid-Atlantic Area National Corridor.\54\
---------------------------------------------------------------------------

    \54\ See May 7 notice, Section VIII.C, 72 FR 25884 and FPA 
216(a)(4), 16 U.S.C. 824p(a)(4).
---------------------------------------------------------------------------

    Finally, the Department notes that it strongly supports State and 
regional efforts to address collectively the congestion problems 
confronting the region, whether those efforts are focused on 
transmission solutions, non-transmission solutions, or a combination of 
both, and the Department does not believe that designation of the Mid-
Atlantic Area National Corridor necessarily will disrupt ongoing State 
or regional planning processes. Further, as stated in the May 7 notice 
and reiterated in the Report and Order, DOE does not believe that 
Congress envisioned the adoption of a wait-and-see approach to National 
Corridor designation. National Corridor designation provides, in a 
defined set of circumstances, a potential mechanism for analyzing the 
need for transmission from a national, rather than State or local, 
perspective.

III. Southwest Area National Corridor (Docket No. 2007-OE-02)

A. Procedural Matters

1. Rehearing Applications and Requests for Stay
    The May 7 notice provided instructions on how to provide comments 
and how to become a party to the proceeding in this docket. Consistent 
with those instructions, the Department granted party status in this 
docket to all persons who either: 1) filed comments electronically at 
http://nietc.anl.gov on or before July 6, 2007; 2) mailed written 
comments marked ``Attn: Docket No. 2007-OE-02'' to the Office of 
Electricity Delivery and Energy Reliability, OE-20, U.S. Department of 
Energy, 1000 Independence Avenue, SW., Washington, DC 20585, that were 
received on or before July 6, 2007; or 3) hand-delivered written 
comments marked ``Attn: Docket No. 2007-OE-02'' at one of the public 
meetings. Ordering Paragraph E of the Report and Order provided 
instructions on how to apply for rehearing in this docket. Consistent 
with those instructions, the Department received, reviewed and 
considered all timely filed applications for rehearing from parties in 
this docket.\55\
---------------------------------------------------------------------------

    \55\ Listed in Appendix C of this order.
---------------------------------------------------------------------------

    DOE received requests that the Department stay its Report and Order 
designating the Southwest Area National Corridor from the Arizona 
Corporation Commission (ACC), SELC, and the Wilderness Society et al. 
The Department has decided to deny the applications for rehearing as 
discussed in this Order and affirm the determination to designate the 
Southwest Area National Corridor. Therefore, the Department also denies 
the requests for a stay, which would delay the effectiveness of the 
designation, on the grounds that they fail to satisfy the burden 
necessary for DOE to grant such relief.
2. Adequacy of State Consultation
    ACC asserted that DOE did not meet its statutory obligation to 
consult with affected States in making the determination to designate 
the Southwest Area National Corridor. ACC stated that while it 
appreciates the Department's consultations with the Governors of 
affected states, FPA section 216 requires consultation with State 
siting authorities.\56\
---------------------------------------------------------------------------

    \56\ ACC rehearing application at 8.
---------------------------------------------------------------------------

DOE Response
    FPA section 216(a)'s provision that DOE consult with affected 
States does not require it to consult with a particular State agency as 
opposed to the State's chief executive. In any case, as evidenced by 
its filings in this proceeding, ACC has been given the opportunity to 
participate in the Department's decision making process. As discussed 
in Section II.A.3 above, the Department's consultation with States, as 
documented in the May 7 notice and in the Report and Order, satisfied 
the requirements of FPA section 216(a)(1).

B. Adequacy of Showing of Congestion That Adversely Affects Consumers

Summary of Rehearing Arguments
    Several rehearing applications argued that the Department 
improperly concluded that there was congestion adversely affecting 
consumers, which the applications assert is a prerequisite to 
designation of the Southwest Area National Corridor. Essentially, the 
submissions take issue with the Department's position that it has the 
discretion to designate the Southwest Area National Corridor upon a 
showing of the existence of persistent congestion without a further 
demonstration of adverse effects on consumers. For example, ACC stated 
that ``not all congestion, even persistent congestion, requires a 
remedy.'' \57\ The California Public Utilities Commission (CPUC) 
reiterated its position that congestion and constraints do not, in and 
of themselves, adversely affect consumers, and that DOE must develop 
valid criteria for measuring congestion and transmission constraints 
and show how they impact consumers.\58\ CPUC also questioned the 
Western Area Power Administration (WAPA) data on denial of transmission 
service applications cited in the May 7 notice.\59\ The Imperial 
Irrigation District (IID) stated that DOE's designation is flawed

[[Page 12967]]

because it failed to demonstrate that consumers are adversely affected 
in each of the counties included in the Southwest Area National 
Corridor.\60\
---------------------------------------------------------------------------

    \57\ ACC rehearing application at 12.
    \58\ CPUC rehearing application at 16.
    \59\ Id. at 15.
    \60\ IID rehearing application at 18.
---------------------------------------------------------------------------

DOE Response
    The Department has established a record and has found the existence 
of congestion that adversely affects consumers in the Southwest Area 
National Corridor. As discussed in Section II.B above, the Department 
concludes, based on its technical expertise and policy judgment, that 
it is reasonable to interpret the phrase ``congestion that adversely 
affects consumers'' to include congestion that is persistent. Thus, the 
Department believes that FPA section 216(a) gives the Secretary 
sufficient authority and discretion to designate the Southwest Area 
National Corridor upon a showing of the existence of persistent 
congestion. Whether this persistent congestion requires a ``remedy''--
i.e., construction of new facilities or any other action--is not a 
decision that FPA section 216(a) calls on DOE to make, nor does the 
designation of the Southwest Area National Corridor require DOE to make 
any such decision.
    In response to CPUC's questioning of the WAPA data, DOE addressed 
that issue in the Report and Order, saying that the WAPA data 
questioned by CPUC is but one category of data used in the May 7 notice 
to establish the presence of persistent congestion and noting that ``if 
FERC jurisdiction under FPA section 216(b) were triggered, parties 
could raise any concerns they had about the contractual nature of the 
congestion.'' \61\
---------------------------------------------------------------------------

    \61\ 72 FR 57016.
---------------------------------------------------------------------------

    Finally, regarding IID's contention, the Department's approach to 
delineating the Southwest Area National Corridor was designed to 
connect the sink area containing consumers adversely affected by 
congestion with a range of source areas separated from the identified 
sink area by the transmission constraints causing such congestion. 
Given the overall framework of FPA section 216 and the physical 
properties of the electric grid, the Department concludes that this 
approach is consistent with the statutory authorization in FPA 216(a) 
for DOE to designate as a National Corridor a ``geographic area 
experiencing electric energy transmission capacity constraints or 
congestion that adversely affects consumers.''

C. Boundaries of the Southwest Area National Corridor

Summary of Rehearing Arguments
    Some of the rehearing applications reiterated arguments made in 
response to the May 7 notice that the Southwest Area National Corridor 
is impermissibly broad. CPUC opposes designation of a Southwest Area 
National Corridor that would include all of southern California, but 
supports designation of a National Corridor that is more narrowly 
targeted than the corridor DOE has designated, such as a National 
Corridor along the Arizona section of the proposed Devers-PaloVerde 2 
route.\62\ CPUC also states that while the focus of FPA section 216(a) 
is on interstate transmission, more than 48,000 square miles of the 
Southwest Area National Corridor falls within California alone.\63\ 
CPUC states that the prospect of Federal transmission siting over this 
in-State area effectively trumps California's ability to establish and 
pursue its own energy goals.\64\ The ACC argues that DOE's source-and-
sink approach is fundamentally flawed.\65\
---------------------------------------------------------------------------

    \62\ CPUC rehearing application at 20.
    \63\ Id. at 5.
    \64\ Id. at 29.
    \65\ ACC rehearing application at 14.
---------------------------------------------------------------------------

DOE Response
    The Department concludes that its general approach to defining the 
boundaries of the Southwest Area National Corridor is consistent with 
the statute. As discussed in Section II.C above and in the Report and 
Order, the language of FPA section 216(a), which refers to designation 
of a ``geographic area,'' does not dictate any particular shape, 
proportion, or size for a National Corridor, and the Department's 
approach to delineating right-of-way corridors under EPAct section 368 
does not inform or constrain the delineation of National Corridors 
under FPA section 216(a). In addition, as explained in detail in the 
May 7 notice and the Report and Order, DOE continues to believe the 
source-and-sink approach to designating National Corridor boundaries is 
a permissible and reasonable way of delineating the boundaries of the 
corridors, and that using county boundaries is a reasonable means of 
providing the precise limits of National Corridors. The applications 
for rehearing have not persuaded DOE otherwise.

D. Consideration of Alternatives Under FPA Section 216(a)(2)

Summary of Rehearing Arguments
    IID claimed that DOE refused to consider any non-transmission 
solutions to congestion, did not meaningfully analyze IID's 
recommendation that DOE adopt a more reasonably-tailored corridor, or 
refrain from making a designation until FERC's new regional 
transmission planning requirement is given a reasonable opportunity to 
work.\66\
---------------------------------------------------------------------------

    \66\ IID rehearing application at 19.
---------------------------------------------------------------------------

DOE Response
    For the reasons set forth in Section II.D above and in the Report 
and Order, the Department concludes that consideration of non-
transmission solutions to the congestion problems facing the Southern 
California Critical Congestion Area is neither required nor necessary 
as a precondition to designating the Southwest Area National Corridor. 
As stated in the Report and Order:

    The very structure of FPA section 216 indicates that the 
Department's role is limited to the identification of congestion and 
constraint problems and the geographic areas in which these problems 
exist, and does not extend to the functions of electric system 
planners or siting authorities in evaluating solutions to congestion 
and constraint problems. Even the statutory requirement to consider 
alternatives is not couched in terms of an independent analysis of a 
reasonable range of alternatives, as one would expect if Congress 
had intended the Department to analyze and select a solution, but 
rather refers merely to the Department considering those 
alternatives and recommendations offered by interested parties. The 
Department believes that expanding its role to include analyzing and 
making findings on competing remedies for congestion could supplant, 
duplicate, or conflict with the traditional roles of States and 
other entities.\67\

    \67\ 72 FR 57010.
---------------------------------------------------------------------------

    In addition, as stated in section II.E above, while the Department 
strongly supports State and regional efforts to address collectively 
the congestion problems confronting the region, nothing in FPA section 
216(a) requires DOE to adopt a wait-and-see approach to National 
Corridor designation, or to ensure that all other possible venues for 
identifying and addressing transmission capacity constraints and 
congestion have been exhausted before DOE designates a National 
corridor.

[[Page 12968]]

G. Whether DOE Should Exercise Its Discretion To Designate the 
Southwest Area National Corridor

Summary of Rehearing Arguments
    ACC stated that DOE failed to consider the costs of externalities, 
including but not limited to, State energy, regulatory and 
environmental policy choices when determining to designate the 
Southwest Area National Corridor.\68\ Further, ACC reiterated comments 
it made in response to the May 7 notice that differences in locational 
marginal prices between California and Arizona ``are appropriate if 
they reflect non-monetized externalities.'' \69\
---------------------------------------------------------------------------

    \68\ ACC rehearing application at 12.
    \69\ Id. at 13.
---------------------------------------------------------------------------

DOE Response
    The concerns expressed by ACC in its application for rehearing were 
addressed in the Report and Order. As stated there, the Department 
recognizes that FPA section 216 adopted a novel approach to addressing 
congestion problems, and that some commenters are concerned with this 
new approach. However, after careful consideration of these concerns, 
and after considering the entire record in this proceeding, the 
Department concluded that designation of the Southwest Area National 
Corridor is consistent with the intent of FPA section 216(a).\70\ In 
addition, as stated in the Report and Order, ``the Department's 
designation of a Southwest Area National Corridor is not motivated by 
price differentials between California and Arizona.'' \71\ As detailed 
in the Report and Order, the Department documented that congestion 
poses a threat to reliability of supply and limits supply diversity for 
the Southern California Critical Congestion Area consumers.\72\
---------------------------------------------------------------------------

    \70\ 72 FR 57019.
    \71\ 72 FR 57020.
    \72\ 72 FR 57016.
---------------------------------------------------------------------------

IV. NEPA, NHPA, and ESA

    Several rehearing applications in both dockets reasserted arguments 
previously made in this proceeding that before designating any National 
Corridors, the Department must conduct reviews under the National 
Environmental Policy Act of 1969 (NEPA), the National Historic 
Preservation Act (NHPA), and the Endangered Species Act (ESA).\73\ Most 
of these contentions were previously raised in comments filed in 
response to the May 7 notice and a detailed discussion of those 
comments appears in Section IV of the Report and Order.\74\ As stated 
in Section I of this Order, DOE will not readdress at length 
determinations on matters it made in the Report and Order for which no 
new argument has been advanced in rehearing that persuades the DOE to 
alter its decision. However, DOE does address below those rehearing 
applications that raised new approaches to NEPA, NHPA, and ESA 
arguments, or that suggest the need for further clarification.
---------------------------------------------------------------------------

    \73\ See, e.g., rehearing applications of the Energy 
Conservation Council of PA, Mitchell S. Diamond (requesting a 
``comprehensive assessment of alternatives''), Jim Feeney, Michael 
B. Gerrard, New York, CARI, PaDEP, SELC, Toll Bros. and the 
Wilderness Society et al.
    \74\ 72 FR 57021.
---------------------------------------------------------------------------

A. Issues Discussed in the Report and Order

Summary of Rehearing Arguments
    Many rehearing applications included arguments contending that 
designation of a National Corridor requires NEPA review: (1) Because 
designation is part of a continuing agency action constituting a new 
federal plan or program; (2) because it permits other parties to take 
action; (3) to discuss cumulative impacts from anticipated transmission 
development; or (4) to examine non-transmission solutions to the 
congestion identified in the Congestion Study. In addition, rehearing 
applications reasserted that the Department should have conducted 
reviews under the NHPA and ESA.
DOE Response
    These rehearing applications raised no new arguments or 
perspectives that require further discussion or persuade the Department 
to alter the determinations made in the Report and Order. As stated in 
the Report and Order, section 102(2)(C) of NEPA requires that all 
Federal agencies include an Environmental Impact Statement (EIS) for 
``every recommendation or report on proposals for legislation and other 
major Federal actions significantly affecting the quality of the human 
environment.'' 42 U.S.C. 4332(2)(C). NEPA section 102(2)(C) ensures 
that Federal agencies provide full and fair discussion of significant 
environmental impacts and inform decision makers and the public of 
reasonable alternatives that would avoid or minimize adverse impacts or 
enhance the quality of the human environment. NEPA review is designed 
to examine the foreseeable, measurable, and predictable consequences of 
a proposed Federal action; it is not intended to be used to forecast 
hypothetical or unknowable proposals or results.
    As described in Section IV(B)-(D) of the Report and Order, these 
National Corridor designations are not a pre-condition to siting 
transmission lines; nor are they part of a group of concerted agency 
actions to implement a plan or program for executing projects, such as 
siting transmission lines. These two corridors are not interconnected 
or related to each other; each corridor designation is separate and 
distinct in size and location. As specified by statute, the factors 
that FERC will consider in any decision to permit a transmission line 
are different from the factors that DOE considered in designating 
National Corridors. As such, the two corridor designations are unique, 
and FERC and the Department must take distinct actions to implement 
Section 216. DOE's designation of National Corridors is not a part of 
the type of multi-agency program for which a programmatic EIS (PEIS) is 
required.
    In addition, DOE does not know what the States' or FERC's response 
will be after the designation of the National Corridors at issue here, 
or whether energy planners and utilities will use transmission or non-
transmission solutions to address transmission congestion or 
constraints that DOE has identified. Therefore, endeavoring to analyze 
hypothetical impacts from future potential transmission lines, 
including any cumulative impacts, is premature and speculative at this 
time. The designation of National Corridors only specifies geographic 
areas in which DOE has identified electric congestion or constraint 
problems; the designations have no environmental effect, and it would 
not serve NEPA's purposes to analyze alternatives that would also not 
have impacts. Therefore, the Department concludes on rehearing that the 
National Corridor designations do not comprise an action subject to 
NEPA, NHPA, or ESA review.\75\
---------------------------------------------------------------------------

    \75\ Nothing in this Order restricts the Department's authority 
or ability to prepare a NEPA document for future corridor 
designations, pursuant to Section 216 of the Federal Power Act; nor 
does this Order limit the size or form of any such future corridor 
designations.
---------------------------------------------------------------------------

B. New Issues and Issues Needing Further Clarification

    Some rehearing applications raised new arguments with respect to 
NEPA, NHPA, and ESA review. These arguments do not change DOE's 
ultimate determination that environmental and NHPA review is not 
required before the Department designates the two corridors at issue 
here. However, because they were not previously addressed, these new

[[Page 12969]]

arguments, described below, warrant discussion.
1. National Corridor Designation Itself Impacts the Environment
Summary of Rehearing Arguments
    Certain rehearing applications stated that NEPA review is required 
because the very act of designating National Corridors impacts the 
environment. For example, Mitchell S. Diamond stated that the 
Department's designation of a National Corridor alters the likely 
pattern of electricity development, impacting fuel use and air quality 
patterns.\76\ PaDEP claimed that designation promotes transmission 
based solutions, which in turn, have environmental impacts.\77\ SELC 
asserted that NEPA review cannot wait until the site-specific 
permitting stage of a particular transmission line because the 
designation is causing utilities to make investments in new 
transmission lines now. In addition, several of the rehearing 
applications suggest that the designation of National Corridors will 
inevitably result in State or Federal permitting, and the construction, 
of planned or proposed transmission lines and therefore the impacts of 
such projects should be reviewed at this time.
---------------------------------------------------------------------------

    \76\ Mitchell S. Diamond rehearing application at 1.
    \77\ PaDEP rehearing application at 9.
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DOE Response
    The Department does not agree that the very act of designating 
National Corridors impacts the environment. DOE agrees that the effect 
of a National Corridor designation is to delineate geographic areas 
within which, under certain circumstances, FERC may ultimately 
authorize the construction or modification of electric transmission 
facilities. However, the designations neither permit nor preclude the 
construction of any transmission projects (or, for that matter, any 
other type of energy-related project). DOE has no authority under FPA 
section 216 to site and authorize the construction of transmission 
facilities, and FERC's authority to approve transmission projects 
located within National Corridors is circumscribed by FPA section 
216.\78\ It is only if and when FERC issues a permit for a transmission 
line that there may be an environmental impact. Moreover, FERC 
regulations require the Commission to conduct a full NEPA review as 
part of its consideration of any permit application it accepts.\79\ 
Therefore, no construction permit will be issued under FPA section 216 
without a full NEPA review having been conducted.
---------------------------------------------------------------------------

    \78\ 16 U.S.C. 824p(b).
    \79\ See Regulations for Filing Applications for Permits to Site 
Interstate Electric Transmission Facilities, FERC Stats. and Regs. ] 
31,234
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    The Department also does not believe that the designation of 
National Corridors at issue here promotes transmission based solutions 
to the exclusion of non-transmission based solutions, or that the 
designations will necessarily lead to the development of transmission 
lines. As described in Section 1.A. of the Report and Order, FERC's 
discretion to issue permits for transmission facilities within National 
Corridors is dependent upon several factors, including the existence of 
a congestion problem and whether another response, such as a non-
transmission solution, has resolved the problem or appears likely to do 
so. Therefore, it would be highly speculative for the Department to 
make assumptions about whether, when, or where FERC might permit 
transmission facilities. Although the Department understands that 
applications are pending before State authorities for new transmission 
facilities within the two National Corridors the Department has 
designated, the Department does not know how the States will act upon 
these applications, whether the sponsors of the these proposed 
facilities will seek a permit from FERC under FPA section 216, whether 
FERC will ever have jurisdiction to address these facilities even if 
the sponsors seek a FERC permit, or, if FERC does assert jurisdiction, 
how it would act upon the permit applications.
2. State Environmental Protection Statutes
Summary of Rehearing Arguments
    In its application for rehearing, Toll Bros. asserted that the 
designation of National Corridors curtails a State's ability to issue 
conditional permits. Toll Bros. asserted that designating National 
Corridors encourages States to issue permits without conditions because 
FERC has jurisdiction to review permit applications if a State siting 
authority conditioned its approval of a transmission facility permit in 
an area designated as a National Corridor in such a manner that 
construction of the line ``is not economically feasible.'' \80\ Toll 
Bros. further asserted that FERC will not have authority to consider 
``state conservation statutes, state conservation easements, or local 
land use planning when approving or denying a permit application.'' 
\81\
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    \80\ Toll Bros. rehearing application at 16.
    \81\ Id.
---------------------------------------------------------------------------

DOE Response
    The Department agrees that a National Corridor designation allows 
FERC, in limited circumstances and if all applicable requirements are 
satisfied, to issue construction permits for electric transmission 
facilities within the geographic area of a National Corridor. However, 
this does not mean that the designation itself causes any physical 
impacts or compels FERC to make decisions that would have environmental 
impacts. As stated earlier, the Department cannot foresee the proposed 
location of particular facilities that FERC may consider permitting, or 
whether or not those permits would be subject to conditions. 
Additionally, it would be pure speculation for the Department to 
attempt to assess whether FERC's standards for reviewing individual 
permit applications and permit terms would demand more or less 
environmental and other analysis than State standards or State permit 
terms. Nor can the Department make a reasoned assessment of whether any 
ultimate FERC permitting decision would be more or less environmentally 
protective than would have been a particular State's permitting 
decision. Hypothetical differences between FERC and the States, which 
might or might not lead to environmental impacts, do not constitute 
foreseeable impacts from the Department's designation of National 
Corridors such that DOE is required to conduct a NEPA analysis is 
required.
4. EPAct Section 368
Summary of Rehearing Arguments
    Certain rehearing applications, including that of SELC, stated that 
DOE should have prepared a PEIS because DOE and several other agencies 
have prepared a PEIS for the designation of corridors on Federal lands 
in eleven western States under EPAct section 368.
DOE Response
    The Department explained in detail the differences between EPAct 
sections 368 and 1221 in Section IV.J of the Report and Order, and will 
not repeat that discussion here. Subsequent to the Department issuing 
the Report and Order, the Department and several other agencies issued 
the Draft PEIS for the Section 368 energy corridors. The Section 368 
Draft PEIS clarified that the relevant federal agencies proposed 
designating the section 368 corridors with a defined width, length and 
centerline that the agencies would incorporate into land use plans. The 
agencies noted that the corridors would

[[Page 12970]]

represent the preferred location for future energy transportation 
projects and would encourage applicants to apply for permits in a 
narrow geographic area. Further, in determining where they propose to 
site the corridors, the agencies responsible for implementing Section 
368 avoided areas where local land use planners from the Bureau of Land 
Management, the Forest Service, and the Department of Defense had 
identified incompatible land uses.\82\
---------------------------------------------------------------------------

    \82\ BLM regulations provide that BLM conduct a NEPA review 
prior to any amendment to its Federal land resource management 
plans. 43 CFR Sec.  1610.5-5.
---------------------------------------------------------------------------

    In contrast, the designation of National Corridors under FPA 
section 216 has no land use component. The designation relies on no 
determination of how suitable particular areas of land are for future 
transmission lines or any other use: If FERC considers a permit 
application under its FPA section 216 authority, it will make that kind 
of land use determination at that time. In addition, unlike the text of 
EPAct section 368, FPA section 216 does not require the amendment of 
land use plans. As stated before, FPA section 216(a) merely authorizes 
the Department to designate as National Corridors geographic areas 
experiencing electricity congestion and constraints. As such, the 
designation has no environmental impacts.
5. DOE Should Have Invoked a Categorical Exclusion or Conducted an EA
Summary of Rehearing Arguments
    Certain rehearing applications stated that DOE did not follow the 
proper NEPA process in designating National Corridors. For example, the 
Wilderness Society et al. asserted that DOE should have completed an 
Environmental Assessment (EA) and then issued a Finding of No 
Significant Impact (FONSI) before designating National Corridors. SELC 
stated that if DOE did not complete an EA or EIS, it was required to 
use a categorical exclusion.
DOE Response
    The Department did not need to prepare an EA or invoke a 
categorical exclusion before designating the National Corridors at 
issue here because NEPA does not apply to the designations DOE has 
made. The Department's designation of these two National Corridors does 
not trigger NEPA because the designations are not major Federal actions 
significantly affecting the quality of the human environment. ``Major 
Federal actions,'' pursuant to regulations promulgated by the Council 
on Environmental Quality, include actions with effects that may be 
major and which are potentially subject to Federal control and 
responsibility. 40 CFR 1508.18. The designation of National Corridors 
itself has no environmental impacts.

V. Miscellaneous

    To the extent other issues were raised in applications for 
rehearing that have not been addressed in this Order or in the other 
documents incorporated by reference in this Order, they have been 
considered by the Department and are denied.

Order

    For the reasons set forth herein, it is hereby ordered that:
    A. In Docket No. 2007-OE-01, the applications for rehearing and 
stay are denied. Any party to this proceeding that submitted a timely 
application for rehearing and is aggrieved by the Report and Order and 
this Order may seek judicial review in a United States Circuit Court of 
Appeals pursuant to section 313(b) of the FPA (16 U.S.C. 825l).
    B. In Docket No. 2007-OE-02, the applications for rehearing and 
stay are denied. Any party to this proceeding that submitted a timely 
application for rehearing and is aggrieved by the Report and Order and 
this Order may seek judicial review in a United States Circuit Court of 
Appeals pursuant to section 313(b) of the FPA (16 U.S.C. 825l).

     Issued in Washington, DC on March 6, 2008.

    The Secretary of Energy has approved the publication of this 
Order.
Kevin M. Kolevar,
Assistant Secretary, Electricity Delivery and Energy Reliability.

Appendix A--Applications for Rehearing in Docket No. 2007-OE-01

Arrington, Linda
Arrington, Michael
Bair, John R.
Balasko, John A.
Bandel, Debra
Bandel, Greg
Bjalobok, Faith
Brogley, Arthur
Brogley, Kevin
Brown, Jeffrey J.
California Public Utilities Commission (Chaset, Laurence)
Communities Against Regional Interconnect (Murphy, Kevin C.)
Cooley, Frances M.
DeWeese, Bill; Pennsylvania House of Representatives
Diamond, Mitchell S.
Edison Electric Institute (Comer, Edward H.)
Eickhoff, Jane
Energy Conservation Council of Pennsylvania (Burns, Willard R.)
Feeney, Jim
Ferguson, Carol
Gerrard, Michael B.; Arnold & Porter LLP
Greene County, Pennsylvania, Department of Economic Development 
(Matesic, Robbie M.)
Groce, Dennis
Hanham, Alison
Hanham, Robert
Hendley, Martha
Hildebrand, Thomas & Kathy
Hixson, Jennifer
Hollowood, John T.
Kessinger, Barbara
Layton, Rick
Ly, Kirsten
Maize, Cindy
Martin, Dan
Martin, Tina
Maryland, Governor of (O'Malley, Martin)
McCoy-O'Donnell, Kimberly
Mid-Atlantic Concerned Citizens Energy Coalition (Kessinger, 
Barbara)
Miller, Randy Keith
Moran, Dennis & Margaret
Morin, Philip
Moyer, Ben
Murphy, Wayne
New Jersey Board of Public Utilities (Comes, Margaret)
New York Department of Environmental Conservation (Snyder, J. Jared)
New York Department of Public Service (Mullany, Sean)
New York, the State of (Leary, Maureen F.)
Nicholl, Laurie
Pennsylvania Department of Environmental Protection (Perry, Scott)
Pennsylvania Public Utilities Commission (Levin, John A.)
Piroch, Cheryl
Scherer, Lisa
Schlossberg-Kunkel, Elena
Southern Environmental Law Center et al (Jaffe, Cale, et al)
Stein, Glenn E.
Stout, J. Barry; Pennsylvania State Senate
Sullivan, J.R. & Becky
Tishok, Paula S
Toll Brothers, Inc. (Sullivan, Sean M.)
Virginia Office of the Attorney General (Matsen, Maureen Riley)
Wilderness Society, The, et al (Culver, Nada, et al)
Wood, Donna

Appendix B--Comments on Docket No. 2007-OE-01

Balasko, Mary Jane \2\
Ben-Dov, Zohar 1, 2
Citizens Campaign for the Environment (Eckel-Dalrymple, Sarah) \2\
Delaware, Lieutenant Governor of (Carney, John C.) \1\
Pike County, Pennsylvania, Commissioners (Forbes, Harry) \2\
Goroncy, George D.\1\
Grese, Chuck & Lisa \2\
Jacob, Frank \1\
New York Adirondack Park Agency (Stiles, Curtis) 1, 
2

[[Page 12971]]

Nicoloff, Richard P.\1\
Oak Ridge Farm (Warrender, Patricia and Anthony) 1, 
2
Schwartz, Allyson Y.; U.S. House of Representatives (Pennsylvania) 
\1\
Widawski, Donna \1\
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    \1\ Not a party of record in this proceeding.
    \2\ Application for Rehearing filed late.
---------------------------------------------------------------------------

Appendix C--Applications for Rehearing in Docket No. 2007-OE-02

Arizona Corporation Commission (Kempley, Christopher, et al)
California Imperial Irrigation District (Swanstrom, Deborah A.)
California Public Utilities Commission (Chaset, Laurence)
Edison Electric Institute (Comer, Edward H.)
Energy Conservation Council of Pennsylvania (Burns, Willard R.)
Hildebrand, Thomas & Kathy
Maize, Cindy
Mid-Atlantic Concerned Citizens Energy Coalition (Kessinger, 
Barbara)
Southern Environmental Law Center et al (Jaffe, Cale, et al)
Wilderness Society, et al (Culver, Nada, et al)

 [FR Doc. E8-4811 Filed 3-10-08; 8:45 am]
BILLING CODE 6450-01-P