DC Circuit Rejects FERC’s Tolling Authority in Pipeline Certificate Proceedings

The Federal Energy Regulatory Commission (“FERC”) can no longer delay judicial review of its orders under the Natural Gas Act by issuing a tolling order that takes no action on a rehearing request other than granting itself more time to address the merits.  On June 30, 2020, the United States Court of Appeals for the District of Columbia Circuit issued an en banc opinion on rehearing denying motions to dismiss petitions for review filed with the court after FERC issued a “tolling” order extending the statutory 30-day time period for FERC to act on rehearing, but before FERC issued a rehearing order on the merits.  Allegheny Defense Project, et al. v. FERC, No. 17-1098 (D.C. Cir. Jun. 30, 2020).

Such tolling orders in pipeline certificate proceedings under Section 7(c) of the Natural Gas Act enable FERC to authorize pipeline developers to begin construction and seek to condemn construction rights-of-way by eminent domain if necessary before FERC issues a merits order on rehearing and before an aggrieved landowner or other party can lawfully seek judicial review of FERCs orders.  In some cases, pipelines have been completed and placed in service before the FERC’s orders are ripe for review.

The court departed from precedent dating back to 1969 that consistently upheld FERC’s use of tolling orders under the Natural Gas Act.  However, as discussed below, the court’s opinion only prohibits non-substantive tolling orders and a concurring opinion provides FERC with a potential blueprint for lawfully taking more than the statutory 30-day period to act on rehearing.

For many years, FERC’s Secretary has almost routinely issued tolling orders purporting to “grant rehearing” in order to provide more time for FERC to consider and address issues raised on rehearing beyond the 30-day period the Natural Gas Act provides.  Under the statute, if FERC does not act within 30 days after a rehearing request is filed, the request may be deemed to be denied, making FERC’s order ripe for review.  The opinion recognizes that long-standing DC Circuit precedent affirms FERC’s use of tolling orders.  However, the majority opinion found changes in law and in deference to administrative agencies on matters of judicial review justifies a change in position, contrary to the principle of stare decisis.  Slip Op. at 31-34.  (Judge Henderson, in a separate opinion concurring in part and dissenting in part, disagreed with the majority and argued that a departure from past precedent was unwarranted and stare decisis should apply.)

The opinion makes it clear that the court believes FERC used tolling orders to deprive interested parties, particularly landowners and environmental organizations, of their right to judicial review of pipeline projects.  FERC’s orders granting certificates are effective pending rehearing unless stayed.  Until a recent change in the regulations in Order No. 871, codifying a regulation deferring construction pending rehearing on the merits, pipelines could accept a certificate and commence construction.

The grant of a certificate also provides the pipeline with eminent domain authority pursuant to Section 7(h) of the Natural Gas Act, if necessary, to acquire property along the route of the pipeline project.  As the court noted, the new rule does not prevent pipelines that are granted certificates from exercising eminent domain rights.  However, the concurring opinion by Judge Griffith, joined by Judges Katsas and Rao, suggests that a district court can protect landowners by holding eminent domain proceedings in abeyance while FERC completes its reconsideration of a certificate order.  Slip Op. (Griffith, J. concurring) at 5-6.

In the matter on review, FERC issued a rehearing order nine months after the statutory 30-day period expired and four months after a US District Court granted the pipeline eminent domain authority to condemn property.  The pipeline also had started construction.  The court pointed to statistics, including FERC’s use of tolling orders in all 39 cases involving landowner requests for rehearing of pipeline construction certificate orders over the last 12 years in which FERC averaged 212 days on average from the issuance of a tolling order to the date of the actual rehearing order.  FERC also issued tolling orders in 99 percent of requests for rehearing of pipeline construction certificate orders from 2009-2017.  In addition, FERC authorized construction to proceed before addressing rehearing requests in 64 percent of the 114 pipeline construction certificate cases pending before the FERC from October 1, 2008 to February 19, 2020.  This led the court to conclude that FERC “has rewritten the statute to say that its failure to act within thirty days means nothing; it can take as much time as it wants; and until it chooses to act, the applicant is trapped, unable to obtain judicial review.”  Slip Op. at 27.

The decision prevents FERC from issuing a tolling order solely to provide additional time for consideration of rehearing requests, but it does not necessarily mean that FERC will be unable to take more than 30 days to issue a dispositive order on rehearing.  For example, the court did not decide how ripeness or exhaustion of administrative remedies principles might apply if FERC “were to grant rehearing for the express purpose of revisiting and substantively reconsidering a prior decision, and needed additional time to allow for supplemental briefing or further processes.” Id. at 29-30.  The court further noted that FERC retains authority to modify or set aside its orders even after a petition for review is filed until the administrative record is filed with the court, which typically is 40 days from the date the petition is served on FERC.  Moreover, the concurring opinion offers FERC some additional guidance.  FERC is

free to grant rehearing by agreeing to consider the applicant’s arguments for modifying or revoking its previous action – i.e., by deciding to decide.  Going forward, the Commission should receive the benefit of the doubt when it issues an order that announces a clear intention to reconsider the merits of the underlying order and a concrete step operationalizing that intent.  For example, the Commission could easily satisfy the Act by setting a briefing schedule or by ordering the pipeline company to respond to the claims made in the application.  Slip Op. (Griffith, J. concurring) at 3.

The concurring opinion also suggests that mandamus is available if FERC “promises rehearing proceedings but in fact provides nothing more than undue delay.”  Id. at 4.

Particularly combined with the new rule deferring construction, FERC appears to retain sufficient procedural tools to take the time it needs to fully address rehearing requests, even if it cannot simply toll the 30-day statutory period to act, and it can be expected to test the extent of its substantive authority, consistent with the court’s opinion, to continue to do so.  Construction delays could result, but FERC has the staffing, procedural, and substantive tools to minimize delay associated with deferral of construction pending rehearing.

For further information on FERC’s tolling authority, please contact Pierce Atwood Energy Infrastructure partners Randy Rich or Valerie Green.