Week Ending May 1, 2020

D.C. Circuit Probes FERC Use of Tolling Orders, Possible Remedies at Oral Argument

D.C. Circuit Probes FERC Use of Tolling Orders, Possible Remedies at Oral Argument

The upshot of the rare en banc rehearing at the U.S. Court of Appeals for the D.C. Circuit will come when the court issues a decision on FERC’s use of tolling orders in natural gas pipeline approvals, but observers are anticipating changes to be forthcoming based on questioning from the panel of 11 judges.

During the lengthy oral argument April 27, several judges appeared to be seeking a way for the court to address the legal purgatory that FERC’s procedures involving tolling orders have relegated landowners and others to when pipeline approvals are challenged. A clear majority of the judges probed ways to have a more equitable process for landowners while staying within the boundaries of the Natural Gas Act (NGA) and legal precedent.

It is difficult to tell how a court will rule based on oral argument, but based on the questions posed to attorneys for FERC, landowners and Transcontinental Gas Pipe Line Corp., most of them are troubled by FERC’s practice and tried to find a way to interpret the NGA to change it, attorneys and others said afterwards.

Gary Kruse of LawIQ believes a majority of the court is in favor of requiring some type of modification to the current process, in which a tolling order suspends the finality of an NGA certificate order from FERC for legal appeals but allows pipeline construction to take place.

Christine Tezak of ClearView Energy Partners had a similar take after the oral argument, stating that Siobhan Cole of White and Williams, who represented landowners, succeeding in making the point that tolling orders pose a problem when district courts view an NGA certificate order as final, even when a rehearing order is pending. “We do think that the court seemed receptive to the argument that the process may have morphed into a situation not originally envisioned by the court that initially upheld the practice several decades ago,” Tezak said.

“It was clear that the court is sufficiently concerned to want to do something about FERC’s practices – and  figure out a way to do so within the bounds of the statute,” said Carolyn Elefant, an attorney who represents landowners before FERC and appeals courts.

Several attorneys who represent pipelines in private practice were reached but either did not respond to questions or said they did not listen to the oral argument to provide their views. The Interstate Natural Gas Association of America (INGAA) believes that FERC’s issuance of a tolling order to provide more time than 30 days to act on rehearing requests meets the statutory requirement of the NGA and is lawful, a spokeswoman said.

During questioning of FERC Trial Attorney Robert M. Kennedy, Judge Thomas Griffith said he is troubled by the statutory interpretation that has a landowner facing eminent domain and taking of land in a district court that considers a certificate order from FERC final and construction can take place, while FERC is not treating the order as final or ripe for legal appeal before the D.C. Circuit when a tolling order has been issued. “Help me reconcile those two” because “they seem out of sync,” Griffith said.

Kennedy said it is a construct of eminent domain proceedings and district court rather than FERC rules. District courts look at an NGA Section 7 certificate order from FERC as granting eminent domain rights to pipelines, as authorized by Congress in the statute.

Griffith and several other judges, including Chief Judge Sri Srinivasan, pushed back on this interpretation and suggested hypotheticals for meeting the requirements of the NGA in a different manner. Procedural steps to halt the effectiveness of NGA certificate orders until legal challenges have been completed were among the line of questioning from several judges, who asked their questions in order of seniority due to the conference call style oral argument conducted due to the COVID-19 pandemic.

Pairing a stay of construction or otherwise making a pipeline approval order not final when rehearing is granted for further consideration was one option addressed, along with having FERC only act on rehearing requests with “genuine” orders that seek more information or signal an intend to modify an NGA certificate order was another.

Judges Gregory Katsas and Merrick Garland were two of the judges that pursued those possibilities with attorneys. Srinivasan and others tried to reconcile possible steps within the bounds of NGA Section 717(r)(a) and Section 717(r)(b), where the rehearing process is spelled out. Judges Neomi Rao and Cornelia Pillard were among those who asked questions around tolling orders compared with true rehearing orders that alter the merits of a FERC certificate order at a later date.

Cole explained that action on rehearing requests should be a binary decision from FERC to either grant rehearing and address the certificate order with further analysis or deny rehearing. The Commission could take any number of steps once rehearing is granted, but what it is doing now is barring legal review with a tolling order, issuing a rehearing order more than a year later and the aggrieved parties are stuck in administrative limbo, Cole told Rao. Landowners seeking to have a FERC certificate order reviewed by a district court when eminent domain proceedings are going on are told that such reviews are not allowed under the NGA, Cole said.

What is even more egregious is that in most rehearing orders that are issued well after a tolling order, the Commission denies rehearing requests without altering its certificate order, Cole told the judges.

Judge Patricia Millett, who wrote a lengthy concurrence to the court’s August 2019 decision when it reviewed and upheld FERC’s approval of Transco’s Atlantic Sunrise project, asked Kennedy about that and the House of Representatives’ investigation into FERC’s review of pipeline applications and use of tolling orders.

The day after the oral argument, Rep. Jamie Raskin (D-Md.), chairman of the Subcommittee on Civil Rights and Civil Liberties, released preliminary results of the investigation, with a statement and video comments from different parties that FERC’s tolling order process is not fair for landowners.

The subcommittee found that in the last 12 years, FERC issued a tolling order for every landowner that sought rehearing, and in every case, rehearing was eventually denied. On average, about seven months passed between the time a landowner made the rehearing request and when FERC ultimately denied rehearing, Raskin said. In 64% of the cases, FERC authorized construction of pipelines before ruling on rehearing requests.

FERC Chairman Neil Chatterjee has shuffled staff and vowed to address issues on rehearing when landowners are involved in a prompt fashion, and in those orders since the changes have been made, it has not bifurcated the process, Kennedy said. Taking Millett’s concerns to heart, the Commission is issuing comprehensive rehearing orders that address landowner and other substantive issues, enabling legal appeals to begin, Kennedy said.

That process received little attention from the judges in questions, which focused mostly on the statutory text of the NGA, what should be considered a final order subject to appeals court review, and why FERC does not let most NGA certificate orders stand on their own if there is no intention of changing them on rehearing. Granting a stay of an NGA certificate order when an order granting rehearing for further consideration was discussed at several points, with questions about the administrative procedures FERC has used to deny a stay while rehearing is pending.

The questioning in the rare en banc rehearing went in several directions not addressed in briefs before the court, as the judges took turns probing attorneys on language in the NGA, congressional intent, and FERC’s practices in approving pipeline facilities. The central question involved FERC’s use of tolling orders, with Kennedy asserting that the Commission’s practice has been upheld by courts and landowner rights are protected.

FERC’s policy is not to comment on litigation or communications from Congress, but Chatterjee issued a statement on the House subcommittee video, stating that the Commission reviews pipeline applications consistent with the NGA and longstanding legal precedent. “The Commission recognizes and is sympathetic to landowner concerns, and we are committed to improving our process. We’ve taken steps to do just that, with the goal of speeding up our consideration of requests for rehearing so that landowners can have their day in court more quickly,” Chatterjee said.

The Commission has been working with the House subcommittee, and looks forward to further cooperation with lawmakers on this and other matters, Chatterjee said.

The INGAA spokeswoman said pipeline members are committed to fair and respectful treatment of landowners, and work toward reaching mutual agreements when pipelines are constructed. INGAA is pleased that FERC has taken steps to expedite rulings on landowner requests for rehearing, she said.

Pipelines use eminent domain as a last resort, the INGAA spokeswoman added. She said less than 2% of individual tracts of land needed to build pipelines in the past 10 years were acquired after judicial review.

FERC is aware of the concerns highlighted by Millett in the court’s August 2019 ruling, Kennedy told the judges. In the court’s decision on FERC’s order in the Transco case, Millett referred to the practice of tolling orders buying time before a final order can be appealed by landowners or environmental groups as “a Kafkaesque regime” that allows eminent domain to be used and construction to begin while a rehearing order on the merits can be pending for more than a year. FERC’s issuance of tolling orders is not allowed to be appealed under the NGA, while FERC considers the underlying certificate order final, enabling construction to begin and trampling principles of fairness, Millett wrote last year.

An order granting rehearing for further consideration could be used by FERC to indicate that it will do more than simply extend the time allowed to come up with a final order that can be appealed, Katsas said at several points in the discussion. That might satisfy landowner concerns, as long as the underlying certificate order is rendered not final and construction is not allowed until a final order, Cole said.

Of the 11 judges who participated in the oral argument, only Karen LeCraft Henderson did not ask questions from any of the three attorneys who presented their views.

Attorney John Stoviak argued for intervenor Transco, responding to Katsas’ questioning on what would happen if FERC grants rehearing for further consideration and that makes an NGA certificate order non-final for legal purposes. The problem is that in eminent domain proceedings, state and federal permits would be held up, creating the possibility that a few months of a delay for a final order on rehearing could extend the timeline for construction by a year or more, Stoviak said. Construction windows for following the Endangered Species Act or other statutes could drag out the process of pipeline construction further, he said.

The questioning from judges, perhaps because it was in succession in the unique format, sounded more like a law school  class on statutory interpretation instead of the usual rapid-fire questions thrown at attorneys, said Gillian Giannetti, staff attorney at the Natural Resources Defense Council. The questioning took time and the judges probed to understand the nuances of FERC proceedings on pipeline reviews, Giannetti said. The attorneys presented their views well in less-than-ideal circumstances, she said.

“Most of the judges realized that something is fundamentally wrong with how things work right now at FERC, Giannetti said. She believes that Cole drove home the point that the current system traps landowners or others who challenge a pipeline approval order from FERC until long after an injury has occurred through the taking of land for pipeline construction. “I’m optimistic that the D.C. Circuit will recognize that inequity,” Giannetti said.

The case argued involves Transco’s Atlantic Sunrise project, and neither Tezak nor Elefant believe the D.C. Circuit will vacate the underlying certificate order approving the project. Cole raised that argument early in the proceeding, which lasted 3.5 hours, but vacating the NGA certificate for the project appears to be a non-starter for the judges, Tezak and Elefant said.

“Overall, the repeated questioning suggested to us that FERC was not persuasively making the case that the current practice meets the objectives of the NGA,” Tezak said.

At the end of the session, Srinivasan told parties that the court will take the case under submission. He did not indicate when a decision might be made.

A majority opinion in the case, with a 10-1, 8-3 or similar lineup of the 11 judges is expected, with the possibility of concurrences and dissents among the panel.

The timing for a decision is difficult to forecast because of the rarity of en banc rehearings by the D.C. Circuit, but several people reached expect a ruling within a few months or during the summer. A rehearing decision in January 2018 in a different case was argued in May of 2017, Giannetti said, but she does not expect the court to take that long on this case.

Kruse of LawIQ laid out a few possible outcomes, including halting a pipeline’s use of eminent domain until an appealable order is issued on rehearing requests. That would create major delays for almost every pipeline, he said.

Other options the court could pursue include having FERC issue an order within 30 days that lists issues it will consider revisiting from a certificate order, requiring an appealable decision on rehearing within 30 days or somehow directing FERC to issue an appealable decision on rehearing before allowing construction to begin.

A “genuine” order on rehearing within 30 days could be appealed, but that could be difficult for FERC to achieve on a regular basis, Elefant said. She is in favor of an approach where the court would require a stay of a certificate order in cases where FERC needs more than 30 days to act on rehearing request.

By Tom Tiernan ttiernan@fosterreport.com

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