Choose Site

LawFlash

DC Circuit Rejects FERC’s Use of Tolling Orders; FERC Issues Statement Asking Congress to Act

July 06, 2020

A decision by the US Court of Appeals for the DC Circuit on June 30 rejected the near routine use by the Federal Energy Regulatory Commission of tolling orders to prevent rehearing requests from being denied by operation of law.

In Allegheny Defense Project v. FERC, a near unanimous decision by the full panel of the DC Circuit held that the Natural Gas Act, 15 USC §§ 717–717z, does not permit tolling orders on rehearing applications regarding pipeline construction requests that serve only to buy the Federal Energy Regulatory Commission (FERC or Commission) time to act upon the rehearing request. The court found that FERC’s tolling orders under the Natural Gas Act thwarted statutory language that deems a rehearing application denied if not acted upon within 30 days.

Accordingly, for cases brought within the DC Circuit, FERC must act on a rehearing request within 30 days of receipt. FERC need not, however, decide the merits within 30 days, as it may act by granting the request and then allowing additional time for further substantive briefings.

While the decision related to orders under the Natural Gas Act, the Federal Power Act has similar provisions regarding rehearing orders, and FERC will likely apply the decision to its rules related to rehearings on the electric side as well. In fact, FERC Chairman Chatterjee and Commissioner Glick responded with a joint statement asking Congress to provide a reasonable amount of time in which FERC can act on a rehearing of orders involving Natural Gas Act and the Federal Power Act matters and, during the pendency of a rehearing request, both prohibit the Commission from issuing a notice to proceed with construction and prohibit the construction applicant from commencing eminent domain proceedings.

Background

Under the Natural Gas Act, before a party aggrieved by a FERC decision can proceed to judicial review, that party must seek rehearing before the Commission. The Commission then has 30 days in which to grant or deny rehearing, or to abrogate or modify its order without further hearing. If the Commission fails to act on the rehearing application within 30 days, the application is deemed as denied. Once the Commission acts, or fails to act within 30 days, the party may proceed to federal court. FERC, however, has often issued tolling orders that prevent the automatic denial despite 30 days elapsing without final action.

In February 2017, the Commission granted to Transcontinental Gas Pipe Line Company (Transco) a certificate of public convenience and necessity for a pipeline project that included construction of 200 miles of new pipeline in Pennsylvania. A homeowner whose property lay in the pipeline’s path and environmental groups opposed to the project filed timely applications for rehearing. When the 30-day window for rehearing expired in March, FERC granted the rehearing request “for the limited purpose of further consideration.” In effect, FERC’s order prevented the pending rehearing requests from being denied by operation of law, thereby granting FERC an indefinite period in which to consider the rehearing request.

When FERC later granted Transco’s subsequent request to begin construction, the homeowner and environmental groups filed for rehearing of that order. FERC also tolled the 30-day window for responding to these rehearing requests. In December 2017, the Commission denied rehearing, by which time Transco had begun construction. In March 2018, the Commission also denied rehearing of the construction order.

The Court’s Decision

At issue was whether the Natural Gas Act permits FERC from issuing a tolling order that serves only to thwart the petitioner from seeking judicial review until the Commission has acted on the request. The court held that the plain language of the Natural Gas Act “unambiguously forecloses” tolling orders that serve solely to override the provision that deemed a rehearing request as denied unless FERC acted within 30 days. The statute prescribes that the Commission may act in one of four ways and must do so within 30 days, and tolling the automatic denial was not among the permitted actions.

The court rejected FERC’s argument that its tolling orders comply with the statute because the orders grant the rehearing. “The question is not one of labels, but of signification,” and the tolling order’s effect was not to grant rehearing as permitted by the statute, but only for a limited purpose of allowing more time to decide whether to grant rehearing. The Court also noted that the tolling orders, issued by FERC’s secretary, can do nothing more than “stall for time” because the secretary lacks authority to act on the merits of a rehearing request.

Finally, the court identified other statutory language that allows agencies to extend the period for agency review, language that does not appear under the Natural Gas Act. Though FERC may benefit from additional time to act in a complicated area of law, the court remains “bound to enforce the statutory text and [FERC’s] jurisdictional grant as Congress wrote it.”

Although courts normally defer to an agency’s interpretation of statutes that Congress has charged it with administering under Chevron deference, the court found deference inappropriate for statutory provisions addressing the jurisdiction of federal courts. That is, the responsibility for interpretation federal jurisdiction falls to federal courts, not to federal agencies.

Discussing the real-world effects of FERC’s practice, the court noted that tolling has become “virtually automatic.” FERC has issued tolling orders in all 39 proceedings in the last 12 years in which an affected landowner sought rehearing in a proceeding involving a natural gas pipeline construction. And, the court noted that in nearly two-thirds of natural gas pipeline construction proceedings in the last 12 years, FERC authorized construction before resolving the rehearing request on the merits. On average, the court noted that FERC takes seven additional months to act on rehearing requests brought by landowners.

The court also found problematic that while certificate decisions subject to tolling orders do not permit aggravated parties to seek judicial review, they do permit the pipeline to exercise eminent domain, the Commission to permit construction, and the pipeline to begin construction.

Although the court’s rule applied to rehearing requests brought under the Natural Gas Act, FERC issues tolling orders on other rehearing requests to prevent automatic denial by operation of law. “Other matters before the Commission [included under the Federal Power Act] have met a similar fate, with open-ended tolling orders leaving applications awaiting action for a year or more.” Tolling orders to delay judicial review under other comparable statutory provisions will likely face a similar fate.

The court, however, clarified that it has not decided whether FERC must actually decide the rehearing application within the 30-day window. Its ruling applies only to FERC’s attempt to override the deemed denial provision. The court did not foreclose a grant of rehearing “for the express purpose of revisiting and substantively reconsidering a prior decision,” which could then allow additional time for further briefing. And as a practical matter, the court noted even if a rehearing request were deemed denied, because FERC can always modify its order until the administrative record is filed in federal court, the Commission would likely get another two months past the deemed denial to act on the rehearing application.

On the merits, however, the court denied the petitions by the homeowner and environmental groups.

Related FERC Actions

In FERC Order 871 from June 9, 2020, cited by the concurring opinion, the Commission has amended its regulations to preclude authorizing construction while a rehearing request of an underlying Natural Gas Act order remains pending. This rule intends that construction of an approved natural gas project will not commence until the Commission has acted upon the merits of any request for rehearing.

Responding to the DC Circuit’s decision, FERC Chairman Chatterjee and Commissioner Glick issued a joint statement on July 2, 2020, asking “Congress to consider providing FERC with a reasonable amount of additional time to act on rehearing requests involving orders under both the Natural Gas Act and the Federal Power Act.” The joint statement also asked that Congress clarify the law to prohibit during the pendency of a rehearing request the Commission from “issuing a notice to proceed with construction” and any entity from commencing “eminent domain proceedings involving the projects . . . subject to those rehearing requests.”

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Washington, DC
Kirstin Gibbs
Levi McAllister
Steve Spina
Dan Skees
Patrick Pennella