Week Ending December 6, 2019

D.C. Circuit Grants Rehearing in Decision Questioning FERC Tolling Order Authority

This Article Appears as Published in Foster Report No 3277

The U.S. Court of Appeals for the D.C. Circuit issued an order December 5, granting rehearing en banc of the court’s August 2 decision in which Judge Patricia Millett wrote an 18-page concurring statement to the 12-page order, noting that the court’s hands are tied regarding FERC’s process of not issuing rehearing orders for several months while eminent domain proceedings and pipeline construction are allowed (Allegheny Defense Project v. FERC, No. 17-1098).

Plenty of attorneys in the energy bar reacted on social media to the court’s ruling, expressing surprise and suggesting that the outcome of the case could have major implications for the gas industry. “This is going to send shockwaves through the FERC bar. Expect a big amicus push on both sides around FERC’s use of tolling orders to extend the time for rehearing,” Sean Marotta, partner at Hogan Lovells, wrote on Twitter.

Attorney Carolyn Elefant, who represents landowners and others who have challenged pipeline projects, noted that en banc reviews at the D.C. Circuit are rare, and congratulated Siobhan Cole of White Williams, who represents the landowner petitioners in Pennsylvania, for a “once-in-a-lifetime win.”

A natural gas industry source, who asked not to be named, had a more subdued reaction and said the ruling may not result in a win for the landowners who challenged FERC’s approval of Transcontinental Gas Pipe Line Corp.’s Atlantic Sunrise project. By agreeing to hear the case en banc, the D.C. Circuit signaled its discomfort with FERC’s practice of issuing tolling orders to extend its statutory requirement under the Natural Gas Act (NGA) to rule on rehearing requests within 30 days.

FERC September Directive. At the September FERC meeting, Chairman Neil Chatterjee announced that he had directed staff to prioritize rehearing requests from landowners in cases with NGA Section 7 certificate applications, so that landowners will not be in a legal purgatory, challenging a pipeline without a final order to take to an appeals court while construction is taking place or completed. The goal is address landowner concerns within 30 days of rehearing requests and avoid the use of tolling orders, while other requests for rehearing could be addressed later, Chatterjee said.[1]

He wants to see that landowners have a judicially appealable order as quickly as possible, directing the Office of General Counsel to refine the process for handling rehearing requests so that landowner rights are addressed promptly. “We’ve established a target of issuing rehearing orders within 30 days and avoiding, to the extent practicable, the use of tolling orders. I’m confident that with this reallocation of staff resources, we can substantially reduce the time we take to issue rehearing orders in these critical cases,” he said at the open meeting.

With the change announced by Chatterjee, landowners can appeal the FERC orders in prompt fashion and have the court review them before any land is condemned through eminent domain or the pipeline is built. “Industry support this change in approach at the Commission,” the gas industry source said.

The use of tolling orders to buy time for a “final” FERC order that can be appealed leaves landowners and others challenging the decisions in “a bureaucratic purgatory that only Dante could love,” Millett wrote in August.[2]

She also said FERC has twisted the court’s precedent and congressional directives into “a Kafkaesque regime,” by approving pipeline construction while a rehearing order may be pending. “This case starkly illustrates why that is not right,” Millett said.

Millett said her concern is not one of the outcome in the case, but the process of FERC issuing tolling orders and delaying a final order. The individuals whose property is taken are denied their day in court before it is too late, and the Commission is trampling basic principles of fair process.

“Circuit precedent gave the Commission the tools it has used to create this administrative quagmire for those who seek to challenge its decisions. In my view, we should put an end to it,” Millett wrote. FERC should act on rehearing requests in a timely manner or stop issuing orders that allow construction to begin until after it resolves rehearing requests, she said.

December 5 Order. In the December 5 order, the court directed the parties to address the issues raised in the opinion and concurring opinion about whether the Natural Gas Act, and specifically 15 U.S.C. § 717r(a), authorizes FERC to issue tolling orders that extend the statutory 30-day period for Commission action on an application for rehearing.

In granting rehearing, the court vacated the August 2 decision.

Briefing Schedule. The rehearing schedule requires the joint brief for petitioners to be filed by Jan. 10, 2020; the brief of the respondent and the joint brief for intervenors supporting the respondent must be filed by Feb. 10, 2020; and the joint reply brief for petitioners must be filed by March 2, 2020.

The court noted that, because the briefing schedule is keyed to the date of argument, the court will grant requests for extension of time limits only for extraordinarily compelling reasons.

Oral argument is scheduled for March 31, 2020.

Reactions. FERC’s practice of issuing tolling orders while the legal appeal is delayed pending issuance of a final order may be vulnerable to a prospective change by the D.C. Circuit, said Christine Tezak, managing director at ClearView Energy Partners. However, it is not clear what remedy the court might impose if it sides with the landowners, Tezak wrote in a December 6 note to clients.

“That said, we think that Judge Millett may have made a strong argument that Congress likely did not intend for FERC to take up to a year to act on rehearing before parties can even seek judicial review of a certificate order while pipelines are built,” Tezak said.

Regardless of the outcome on the case, ClearView sees little risk to the operation of Transco’s Atlantic Sunrise project, which went into service in 2018, Tezak said. She noted that FERC’s environmental review of the project does not appear to be an issue in the en banc review. The pipeline’s NGA certificate has not been vacated at this point.

The D.C. Circuit rarely grants en banc reviews, with nine such rulings on cases from 2000 to 2017, noted Gillian Giannetti, staff attorney at the Natural Resources Defense Council (NRDC). The ruling shows that the court has a growing reticence and frustration with FERC reviews of pipeline projects and its approval process, Giannetti said in an interview.

The concurrence of Millett, rather than a dissenting vote and statement, noted that she was bound by legal precedent to uphold FERC’s order, indicating that it is time for a fresh look at the precedent and practice of FERC using tolling orders, Giannetti said. It appears that the words of Millett were strong enough to get the attention and support of her colleagues on the D.C. Circuit, Giannetti said.

The oral argument will take place after a U.S. Supreme Court oral argument on the approval process for the Atlantic Coast Pipeline, she noted. She deemed it “truly remarkable” that in the first quarter of 2020, there will be pipeline cases heard en banc at the D.C. Circuit and at the Supreme Court.

Giannetti agreed with Tezak that the D.C. Circuit ruling may not have any effect on the Atlantic Sunrise pipeline, since that project has been built and upheld on the merits by the court. “But it could have a gargantuan effect on how FERC reviews projects” and deals with rehearing requests, she said.

August 2 Decision. The August 2 decision was per curiam by the three-judge panel of Millett, Chief Judge Merrick Garland, and Judge David Tatel. It denied the petitions of environmental groups and homeowners along the route of the pipeline project in Pennsylvania, who challenged the environmental assessment under the National Environmental Policy Act (NEPA), the market need for the project, and FERC authorizing construction before issuing a final certificate order could be judicially reviewed.

The use of tolling orders, which grant rehearing solely for the purpose of further consideration, essentially buys time for FERC to issue a final order that can be judicially reviewed. By acting within 30 days of a rehearing request, as directed by Congress — since not doing so would automatically deny rehearing – FERC can delay a determination on rehearing as a final order. It did so in the Atlantic Sunrise case, with the court noting that the initial order was issued on February 3, 2017. It did not issue a final order on rehearing until December of 2017, and in the interim period Transco was authorized to begin construction and gained eminent domain authority from a federal district court in Pennsylvania.

The environmental associations and homeowners argued that their due process rights were denied while their rehearing petitions were pending for more than nine months. Court precedent forecloses those claims, the D.C. Circuit said, listing various rulings on pipeline cases and FERC orders that were upheld. Arguments that FERC’s procedures denied them constitutional rights were dismissed because courts have held that as long as FERC’s certificate orders are not legally deficient, they satisfy the Fifth Amendment’s public-use requirement.

By Denise Ryan dryan@fosterreport.com and Tom Tiernan ttiernan@fosterreport.com

[1] See, Chatterjee Shuffles Division Functions; Prioritizes Landowner Concerns on Pipelines, FR No. 3266, pp. 1-3.

[2] For more information, see, D.C. Circuit Upholds Atlantic Sunrise Approval; Judge Blasts Use of Tolling Orders, FR No. 3261, pp. 6-8).

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