US Energy Law

Constitutional Foundations and Federal–State Division

US energy law is shaped by a federalist structure in which the Commerce Clause of the US Constitution (Art. I, § 8, cl. 3) provides the primary constitutional basis for federal energy regulation. The Shreveport Rate Cases (1914) and Federal Power Commission v. Hope Natural Gas Co. (1944) established broad federal authority over interstate energy transactions, while state jurisdiction remains over local distribution and retail sales. This division produces a dual regulatory system in which wholesale electricity and natural gas sales are governed federally while retail regulation falls to the states.

Federal Power Act and FERC Jurisdiction

The Federal Power Act (FPA) of 1935, as amended, grants the Federal Energy Regulatory Commission (FERC) jurisdiction over the transmission of electric energy in interstate commerce and the sale of electric energy at wholesale. FERC also licenses non-federal hydroelectric projects under Part I of the FPA. The Mobile-Sierra doctrine, derived from United Gas Pipe Line Co. v. Mobile Gas Service Corp. (1956) and FPC v. Sierra Pacific Power Co. (1956), provides that FERC must presume that freely negotiated wholesale energy contracts are just and reasonable, a principle later codified in the Energy Policy Act of 2005.

FERC Order No. 888 (1996) mandated open-access transmission and functionally unbundled generation, transmission, and marketing functions. Order No. 2000 (1999) encouraged the formation of Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs), which now operate competitive wholesale electricity markets covering roughly two-thirds of US load.

Natural Gas Act

The Natural Gas Act (NGA) of 1938 gives FERC authority over the transportation and sale of natural gas in interstate commerce. The NGA established a certificate of public convenience and necessity requirement for new interstate pipeline construction, a regime later extended to liquefied natural gas (LNG) terminals through section 3 of the NGA. The Hinshaw Amendment carves out from federal jurisdiction certain pipelines that are intrastate in character. The critical distinction between FERC-jurisdictional interstate pipelines and state-regulated intrastate pipelines was examined in Idaho v. FERC (2019).

Department of Energy and Federal Agencies

The Department of Energy (DOE) Organization Act of 1977 created the DOE to centralize federal energy policy. DOE administers the Strategic Petroleum Reserve (SPR) under the Energy Policy and Conservation Act, the nation’s emergency crude oil stockpile. The Energy Information Administration (EIA), an independent statistical agency within DOE, provides data and analysis. The Nuclear Regulatory Commission (NRC), established by the Energy Reorganization Act of 1974, licenses and regulates civilian nuclear reactors and materials.

Public Utility Regulatory Policies Act (PURPA)

Enacted in 1978 as part of the National Energy Act, PURPA sought to promote energy conservation and renewable energy by requiring utilities to purchase power from qualifying facilities (QFs) — small power producers and cogenerators. FERC’s implementing regulations required utilities to purchase QF output at the utility’s avoided cost. PURPA has been substantially modified by the Energy Policy Act of 2005 and subsequent FERC orders, which removed mandatory purchase obligations for QFs with market access. The Freeport Energy litigation explored the limits of state implementation of PURPA’s requirements.

Energy Policy Act of 2005

The Energy Policy Act of 2005 (EPAct 2005) was a comprehensive energy law that amended PURPA, the FPA, and the NGA. Key provisions included: repeal of the Public Utility Holding Company Act (PUHCA) of 1935, which had restricted utility corporate structures; creation of mandatory electric reliability standards enforceable by FERC through the Electric Reliability Organization (ERO) (now North American Electric Reliability Corporation, NERC); expanded FERC authority to impose civil penalties for market manipulation; and tax incentives for nuclear and fossil energy. EPAct 2005 also addressed LNG terminal siting and pipeline safety.

Inflation Reduction Act of 2022

The Inflation Reduction Act (IRA) of 2022 represents the most significant federal climate and energy legislation in US history. The IRA amended the Clean Air Act to define carbon dioxide, methane, and other greenhouse gases as air pollutants subject to regulation, codifying the approach of Massachusetts v. EPA (2007) while limiting EPA’s authority to regulate greenhouse gases from existing power plants under § 111(d). Key energy provisions include: expanded and modified tax credits for renewable electricity (§ 45, § 45Y), carbon capture (§ 45Q), nuclear production (§ 45U), and clean hydrogen (§ 45V); prevailing wage and apprenticeship requirements for enhanced credit rates; and grant programs for rural energy, transmission planning, and domestic manufacturing of clean energy technologies.

EPA Regulation of Energy Emissions

The Environmental Protection Agency (EPA) regulates air emissions from the energy sector under the Clean Air Act. EPA’s authority over greenhouse gases was affirmed in Massachusetts v. EPA (2007), though subsequent litigation — notably West Virginia v. EPA (2022), applying the major questions doctrine — has limited the agency’s ability to require generation shifting under § 111(d). The EPA regulates mercury and air toxics from power plants (MATS rule), cross-state air pollution (CSAPR), and effluent limitations for power plant wastewater. The Clean Power Plan (2015) and the later Affordable Clean Energy (ACE) Rule (2019) were both vacated or replaced, with the IRA’s § 111(d) amendment now providing the statutory framework.

State-Level Energy Regulation

State public utility commissions (PUCs) regulate retail electricity and gas rates, resource adequacy, and integrated resource planning. Over 30 states have Renewable Portfolio Standards (RPS) or Clean Energy Standards (CES) . States also exercise authority over transmission siting for intrastate lines, while interstate transmission siting remains contested — FERC’s limited backstop siting authority under EPAct 2005 was narrowed by Piedmont Environmental Council v. FERC (4th Cir. 2016). Net metering, decoupling, and value-of-solar tariffs are established through state proceedings. California’s AB 32 (Global Warming Solutions Act) and New York’s CLCPA (Climate Leadership and Community Protection Act) exemplify aggressive state-level decarbonization mandates.

Strategic Petroleum Reserve and Energy Security

The Strategic Petroleum Reserve (SPR) , established by the Energy Policy and Conservation Act of 1975, maintains crude oil storage in salt domes along the Gulf Coast. The SPR has been drawn down on multiple occasions, including in 2011 (Libyan supply disruption), 2022 (following Russia’s invasion of Ukraine), and for test sales. The Northeast Home Heating Oil Reserve and Northeast Gasoline Supply Reserve supplement the SPR. Emergency authority under the Federal Power Act (§ 202(c)) and the Natural Gas Act (§ 7(a)) allows DOE and FERC to order emergency generation, transmission, or gas deliveries during supply crises.