Interstate Energy Permitting

Interstate energy permitting is the allocation of authority over routes, rights of way, and construction approval for pipelines and electricity transmission lines that cross state borders. It involves distinct constraints rather than a single permit: a developer may need route approval from each affected jurisdiction, legal power to acquire a right of way, and agreements with individual landowners. Each stage can block a project even when the others are satisfied.¹

The institutional problem is especially sharp when a line crosses a state that bears local costs while much of the benefit flows to producers or consumers elsewhere. State review can protect local interests, but it can also give one jurisdiction a veto over a project with interstate benefits. Individual landowner holdouts are a related but separate problem: even a route approved in principle still requires many voluntary transactions or a condemnation procedure.²

The 1947 natural-gas reform

The Natural Gas Act of 1938 gave the Federal Power Commission authority over interstate gas transportation and wholesale rates. Before 1947, federal approval of an interstate pipeline did not itself supply a federal condemnation power; acquisition depended on the law of each state crossed. Developers could face repeated objections, state rules that denied eminent domain to out-of-state firms or lines not serving local residents, and landowners demanding high prices.³⁴

A 1947 amendment allowed developers holding a federal certificate of public convenience and necessity to acquire rights of way in federal court when negotiations failed, with the court determining compensation. The reform therefore added federal eminent domain to an existing federal approval framework; it did not create federal pipeline regulation from nothing.⁵⁶

Liscow, Shapiro, and Williams compare interstate gas pipelines with two groups not directly covered by the amendment: interstate oil pipelines and within-state gas pipelines. Annual additions to interstate gas mileage rose nearly sixfold after 1947 while oil-pipeline growth stayed nearly constant. Interstate gas had about 10 percent less mileage than oil in 1946 but about 30 percent more by 1953. In the second comparison, the increase in interstate gas construction was nearly five times the increase for within-state gas pipelines.⁷

These results support a substantial construction effect, not a precise forecast for modern transmission. The working paper uses small year-level samples, cannot fully exclude other postwar changes, and emphasizes the visible comparisons over regression precision. Postwar demand, fuel-specific transportation needs, connected pipeline networks, and regional supply shifts remain possible confounds. The paper had not been peer reviewed at the time of ingestion.⁸

Electricity transmission differs

States still principally site electricity transmission, but current federal law does not give every state an unconditional veto over every interstate line. The Energy Policy Act of 2005 created a limited federal backstop under the Federal Power Act, amended by the Infrastructure Investment and Jobs Act of 2021. The Department of Energy can designate National Interest Electric Transmission Corridors, and FERC can permit facilities within those corridors under specified conditions, including state denial, a state decision delayed for more than a year, lack of state authority to consider interstate benefits, or conditions that make a project economically infeasible or unable to relieve congestion adequately.⁹

This backstop is narrower than a general federal siting regime: corridor designation, eligibility conditions, pre-filing, environmental review, and stakeholder participation still structure the process. The gas precedent also isolated condemnation authority within an established federal framework, whereas transmission proposals can combine route approval, eminent domain, regional planning, and cost allocation. Modern utility incentives and environmental review further limit direct extrapolation from the 1940s.¹⁰¹¹

Institutional interpretation

The case connects fragmented permitting to transaction costs. Replacing many state-by-state procedures with one federal condemnation process reduces the number of negotiations and repeated veto points, but the analogy to replacing market contracts with internal direction is limited: courts still determine compensation, and route approval remains a separate institutional choice.

It also exposes a knowledge-allocation tradeoff. State review can surface local costs and circumstances that a national process might miss; federal review can account for interstate benefits that a transit state’s process might exclude. Choosing a level of authority therefore changes which information and interests can block a decision, rather than eliminating the underlying conflict.

Open questions

• How much of the post-1947 construction increase was caused specifically by condemnation authority rather than postwar demand and supply shifts?
• Which gains come from federal route approval, and which come from federal eminent domain?
• When do planning, beneficiary-pays cost allocation, and utility incentives need to accompany siting reform?
• How should federal review preserve local evidence and meaningful landowner participation while preventing a single jurisdiction from excluding interstate benefits?

Sources

• Zachary Liscow, Joseph S. Shapiro, and Heidi Williams 2026 — Federal Eminent Domain and Interstate Energy Infrastructure: Evidence from History
• Paul W. Parfomak, Michael Ratner, and Adam Vann 2026 — The Natural Gas Act: Background, Key Provisions, and Policy Issues
• Federal Energy Regulatory Commission 2024 — Electric Transmission Siting

Footnotes

1. Zachary Liscow, Joseph S. Shapiro, and Heidi Williams 2026 — Federal Eminent Domain and Interstate Energy Infrastructure: Evidence from History ↩

2. Zachary Liscow, Joseph S. Shapiro, and Heidi Williams 2026 — Federal Eminent Domain and Interstate Energy Infrastructure: Evidence from History ↩

3. Zachary Liscow, Joseph S. Shapiro, and Heidi Williams 2026 — Federal Eminent Domain and Interstate Energy Infrastructure: Evidence from History ↩

4. Paul W. Parfomak, Michael Ratner, and Adam Vann 2026 — The Natural Gas Act: Background, Key Provisions, and Policy Issues ↩

5. Zachary Liscow, Joseph S. Shapiro, and Heidi Williams 2026 — Federal Eminent Domain and Interstate Energy Infrastructure: Evidence from History ↩

6. Paul W. Parfomak, Michael Ratner, and Adam Vann 2026 — The Natural Gas Act: Background, Key Provisions, and Policy Issues ↩

7. Zachary Liscow, Joseph S. Shapiro, and Heidi Williams 2026 — Federal Eminent Domain and Interstate Energy Infrastructure: Evidence from History ↩

8. Zachary Liscow, Joseph S. Shapiro, and Heidi Williams 2026 — Federal Eminent Domain and Interstate Energy Infrastructure: Evidence from History ↩

9. Federal Energy Regulatory Commission 2024 — Electric Transmission Siting ↩

10. Zachary Liscow, Joseph S. Shapiro, and Heidi Williams 2026 — Federal Eminent Domain and Interstate Energy Infrastructure: Evidence from History ↩

11. Federal Energy Regulatory Commission 2024 — Electric Transmission Siting ↩