January 01, 2020

For Whom the Toll Tolls

Scott Grover

The U.S. Circuit Court of Appeals for the District of Columbia (D.C. Circuit) recently ruled on a petition for review of orders from the Federal Energy Regulatory Commission (FERC) relating to the approval of a new interstate natural gas pipeline expansion project called the Atlantic Sunrise Project. Allegheny Defense Project v. FERC, 932 F.3d 940 (D.C. Cir. 2019) (Allegheny). In the per curiam opinion, the D.C. Circuit denied the petitions and upheld FERC’s decision to issue a certificate of public convenience and necessity for the project. While the decision is notable for, among other things, its attention to FERC’s consideration of downstream greenhouse gas emissions associated with the project, the concurring opinion issued by Judge Patricia Millett warrants a more careful examination. In that opinion, Judge Millett tackles a common practice of FERC to issue “tolling orders” on requests for rehearing of agency orders and challenges the ongoing legality (from both a statutory and constitutional perspective) of that practice. Not surprisingly, Judge Millet’s concurrence has prompted a petition to the D.C. Circuit for rehearing en banc.

For those unfamiliar, the Natural Gas Act (NGA) requires a party aggrieved by a final agency order to file a request for rehearing of the order before seeking judicial review. See 15 U.S.C. § 717r(a)–(b); see also 16 U.S.C. § 825l(a)–(b) (establishing a comparable requirement for judicial review of agency actions under the Federal Power Act (FPA)). Under the statute, FERC must “act” on the rehearing request within 30 days; otherwise, the request is deemed denied as a matter of law. See 15 U.S.C. § 717r(a). When presented with a rehearing request, however, FERC typically issues an order granting rehearing for further consideration, noting that in the absence of action the request would be deemed denied, and the action will “afford additional time for consideration of the matters raised or to be raised . . .” See, e.g., Transcontinental Gas Pipe Line Co., Docket No. CP15-138, Order Granting Rehearings for Further Consideration (Mar. 13, 2017) (granting rehearing for the limited purpose of affording additional time to consider the matters raised in the rehearing petitions of the Atlantic Sunrise certificate order). While such orders serve the stated ends, they also delay access to judicial review until FERC has issued an order on the rehearing request. The result—for pipeline certificate cases, as well as for other proceedings under the NGA and also the FPA—is that the non-aggrieved party may proceed under the authority of the FERC order as a final agency action, while the aggrieved party must wait for FERC to complete its consideration of the rehearing petition and issue an order on the merits. For the parties to the Allegheny petition, this meant that the certificate-holding pipeline could proceed with construction activities (as directed by FERC), including exercise rights of eminent domain on the property of private landowners.

Consider the timeline for Atlantic Sunrise. FERC issued its certificate order on February 3, 2017. Requests for rehearing were filed less than two weeks later, resulting in a FERC-issued tolling order on March 13, 2017. An eventual decision on rehearing did not come until December 6, 2017, with the property owners only then free to seek judicial review. And appellate review does not happen overnight, of course—Allegheny was not decided until August 2, 2019. In the intervening two-and-a-half years, construction activities on Atlantic Sunrise not only proceeded, but the project was completed and placed into service (two months before the December 2018 oral argument).

FERC frequently advises pipelines (and similarly situated parties) that they act at their own risk when they proceed to act under a final order that remains subject to judicial review. But given the state of Atlantic Sunrise by the time judicial review began in earnest, one cannot help but share Judge Millett’s skepticism as to how well the egg could have been unscrambled, if at all. Cf. Allegheny, 932 F.3d at 953 (Millett, J., concurring). The immediate problem for Judge Millett though is circuit precedent upholding the tolling order practice. See id. at 951; see also Delaware Riverkeeper Network v. FERC, 895 F.3d 102, 113 (D.C. Cir. 2018) (“We have long held that FERC’s use of tolling orders is permissible under the Natural Gas Act, which requires only that the Commission ‘act upon’ a rehearing request within 30 days, 15 U.S.C. § 717r(a), not that it finally dispose of it.”). The concurrence endeavors to chart the path to overturn that precedent, but that path is not so clear.

The first argument pivots off of the statutory language in the NGA. The concurrence reads the text of the statute as requiring the agency to act on the merits of the rehearing petition within 30 days. See Allegheny, 932 F.3d at 950–51. If such were not the case, what purpose would the 30-day deadline have? It is an interesting proposition, particularly when one considers what a U.S. Congress might have been thinking when it enacted the statute nearly a century ago. However, when the D.C. Circuit initially considered this question, it could not find any legislative history elaborating on the point. See California Co. v. FPC, 411 F.2d 720, 721 (D.C. Cir. 1969). And the statute simply says that unless FERC “acts” on the application within 30 days, the request for rehearing may be deemed denied—squarely leaving open the prospect for interlocutory action.

Moreover, the statute is without any indication as to why Congress would want to limit the agency in such a respect—a question that clearly influenced the California Co. court. See id. Not to criticize the sophistication of practitioners 60 years hence, the complexity of proceedings in the modern area render such an expectation wholly impracticable. What is more, the D.C. Circuit has made it abundantly clear that the agency must engage in reasoned decision-making. Thus, reviewing courts require FERC to afford attention to all the matters raised and will remand an order to the agency if it has not adequately addressed parties’ arguments. See, e.g., New England Power Generators Ass’n v. FERC, 881 F.3d 202, 210 (D.C. Cir. 2018) (“It is well established that the Commission must respond meaningfully to the arguments raised before it.” (internal quotations omitted)).

In perhaps an implicit recognition of this reality, the concurrence also scolds the agency for having time to issue orders relating to the pipeline construction process while the rehearing petition seemingly languished. See Allegheny, 932 F.3d at 952 (“[T]he Commission that says it is too busy to act on rehearing applications nevertheless consistently manages to find the time to grant orders authorizing construction to go forward while rehearing is still pending.”). This point, however, glosses over the organization of FERC. The construction orders noted in the concurrence issue from the Office of Energy Projects. In contrast, rehearing petitions typically are handled by the Office of General Counsel (OGC), with input from other areas as appropriate. Indeed, in 2016 under then-Chairman Norman Bay, FERC organized a rehearings group within OGC in an effort to enhance efficiencies in the agency’s review of rehearing petitions. In any case, while a single agency is acting in both situations, different staff members are handling the respective responsibilities.

The concurrence’s final push is the constitutional one, and as the discussion earlier shows, the circumstances surrounding Atlantic Sunrise serve well to launch the argument. But the same impediment to establishing an intent of Congress to limit FERC review of rehearing requests to only 30 days seemingly frustrates the constitutional argument as well. In short, the tolling order process cannot be said to deny due process, or even create the prospect for such, in every case involving its use. See Delaware Riverkeeper Network v. FERC, 895 F.3d at 113 (“To prevail on its claim here, Riverkeeper would need to show that FERC’s statutorily authorized practice of taking more than 30 days to finally dispose of a rehearing petition violates due process in each and every instance, no matter the reasons for taking more time, the complexity of the application, or the amount of development allowed or blocked in the interim.”). Furthermore, parties have the option of seeking mandamus relief under the All Writs Act, 28 U.S.C. § 1651. See id. at 113; see also Allegheny, 932 F.3d at 955. The concurrence finds that avenue empty comfort, however—a view frankly in tension with the consequential factual portrait presented.

The issuance by FERC of certificates of public convenience and necessity for the construction of new natural gas transportation facilities has become more controversial in recent years, so much so that the pressures prompted the agency to solicit comment on whether it should make changes to its existing certificate policy statement. See Certification of New Interstate Natural Gas Facilities, Docket No. PL18-1, 163 FERC ¶ 61,042 (Apr. 19, 2018); see also Certification of New Interstate Natural Gas Pipeline Facilities, 88 FERC ¶ 61,227 (1999), order on clarification, 90 FERC ¶ 61,128, order on clarification, 92 FERC ¶ 61,094 (2000). The existing policy statement does, however, take the potential impact on landowners into account (among myriad other considerations) in determining whether the issuance of a certificate would be in the public convenience and necessity. Whether and to what extent the agency chooses to modify its consideration of landowner impacts remains outstanding, but it is unlikely that FERC will abandon its tolling order process.

Which leaves Congress. The concurrence rightly observes the legislative branch as a remedy for the issue—although the concurrence would have FERC first eschew the tolling order approach altogether before obtaining relief from the perceived 30-day clock. Allegheny, 932 F.3d at 956. Harkening back to the California Co. decision though, one cannot help but struggle with the idea of an agency like FERC having only 30 days to address a rehearing request. To be sure, the sanctity of property rights is a foundational pillar of American society. But the right of certain parties to exercise condemnation authority, when properly directed by a regulatory body, is nothing new either, long coinciding with society’s decision to task certain entities with the development of energy infrastructure across the country. Accordingly, if new procedural requirements are needed to help better fashion a process that ensures all parties’ interests are properly balanced in cases that range across a vast complexity spectrum, the true representative body of the people seems like the best place to start.

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Scott Grover

Mr. Grover is an energy lawyer at Balch & Bingham LLP, and a member of the editorial board of Natural Resources & Environment. He may be reached at sgrover@balch.com. Mr. Grover does represent an intervenor in Allegheny; the views expressed here are his and his alone.