Overview
Since the beginning of the year we have issued a couple client alerts discussing landowners complaints against the Federal Energy Regulatory Commission's (FERC or Commission) use of tolling orders in natural gas certificate proceedings before the agency. On June 30, 2020, in Allegheny Defense Project v. FERC,[1] the United States Court of Appeals for the District of Columbia Circuit (DC Circuit) reversed its precedent affirming the use of tolling orders upon a review of the "plain statutory text." Consequently, going forward, FERC must rule on any pending rehearing requests within 30 days or the rehearing request may be deemed denied, which would permit an aggrieved party to proceed with an appeal of the order in controversy. Based on the Commission's own actions, discussed below, the Commission appears to be interpreting this case to also apply to the Federal Power Act (FPA) in addition to the Natural Gas Act (NGA).
What options remain after this ruling? At least two Commissioners believe that a legislative fix is needed. As a legislative fix is unlikely in the near future, entities must consider what steps they should take to preserve their rights before FERC and on judicial review. Our recommendation on this score is two-fold. If FERC has issued a tolling order in an NGA or FPA proceeding and the time has not run for filing a petition for review (i.e., if FERC issued a tolling order less than 60 days ago), it would be prudent to file a petition for review in the appropriate court of appeals out of an abundance of caution to preserve one's appellate rights. Is this step necessary if one is filing an appeal in a court of appeals other than the DC Circuit? We would say yes because other courts of appeals have adopted the DC Circuit's previous rulings approving tolling orders and they may reverse those rulings at the next opportunity such issues are raised. For those entities facing a situation where a rehearing request remains pending and FERC issues its tolling order more than 60 days ago, such entities’ decision would depend on a number of factors and require a case specific analysis.
Background
The NGA vests the Commission with jurisdiction over the transportation and wholesale sale of natural gas in interstate commerce.[2] Before an entity can construct a natural gas pipeline, it must obtain a certificate of public convenience and necessity pursuant to section 7(c) of the NGA. Once FERC grants a certificate of public convenience and necessity, the NGA authorizes the certificate holder to exercise eminent domain authority if it "cannot acquire by contract, or is unable to agree with the owner of property to the compensation to be paid for, the necessary right-of-way to construct, operate, and maintain a pipe line or pipe lines for the transportation of natural gas[.]"[3]
Pursuant to section 19 of the NGA,[4] and section 313 of the FPA,[5] a party may appeal a Commission order to the appropriate federal court of appeals[6] only after it has sought rehearing of such order before the Commission. On rehearing, FERC may grant or deny the request, or abrogate or modify its order. If the Commission does not act on the rehearing request within 30 days, the rehearing request may be deemed denied.[7] A petition for review must be filed "within sixty days after the order of the Commission upon application for rehearing[.]"[8] Even after federal court jurisdiction attaches and a petition for review is filed, the Commission retains the power to "modify or set aside" its findings and orders "[u]ntil the record in a proceeding [is] filed in a court of appeals."[9]
Allegheny Defense Decision
In Allegheny Defense, the court examined the statutory construction of the NGA's rehearing provision and its application to FERC's 2017 issuance of a certificate of public convenience and necessity to Transcontinental Gas Pipe Line Company (Transco). Less than two weeks after receiving its certificate, Transco initiated condemnation proceedings against various landowners. Those landowners filed rehearing requests of the certificate order and FERC's Secretary issued a tolling order "grant[ing rehearing] for the limited purpose of further consideration." The tolling order added that the timely rehearing requests would not be "deemed denied by operation of law. The landowners sought judicial review while the rehearing requests remained pending before FERC. Five months after FERC issued its tolling order, the district court in the eminent domain case granted partial summary judgement and a preliminary injunction to Transco "effectively [giving] the company immediate possession" of the rights of way it needed to build its pipeline across the landowners' land. Lastly, nine months after issuing its tolling order, FERC denied rehearing, and the landowners filed further petitions for review.[10]
The issue before the court was whether FERC "'acts upon' an application for rehearing within the meaning of section 717r of the [NGA] by issuing a tolling order that does nothing more than prevent the application from being deemed denied by agency inaction and preclude the applicant from seeking judicial review until the Commission acts?" The court ruled that it does not. Specifically, the court made six significant rulings in this regard:
- A grant of rehearing cannot consist solely of a grant of additional time to decide whether to grant rehearing. In other words, FERC may not undercut the ability of a party who sought rehearing to seek judicial review by kicking the can of a decision on a rehearing request down the road.
- A tolling order does nothing more than stall for time.
- The Commission's practice of issuing tolling orders "confirms" they are only issued to grant the Commission "an unbounded amount of 'additional time,'" within which rehearing could never be deemed denied and during which applicants were prevented from obtaining judicial review. But the Commission has no authority to erase and replace the statutorily prescribed jurisdictional consequences of its inaction.
- When Congress wants to allow agencies to modify the consequences of its inaction, it says so explicitly – and carefully cabins the agency's leeway in the process. For example, Congress amended the FPA to expressly authorize FERC to toll its action on certain transactions for a period of "not more than 180 days" if, and only if, it first finds, "based on good cause, that further consideration is required to determine whether" to approve the application.[11]
- Notwithstanding the complicated area of law, FERC cannot use tolling orders to change the statutorily prescribed jurisdictional consequences of its inaction.
- Stare decisis is not applicable because the court has determined "on reexamination" that the circuit's precedent on this question of law "was fundamentally flawed" and when intervening developments in the law "such as Supreme Court decisions" have removed or weakened the conceptual underpinnings from the prior decision. The court determined that intervening Supreme Court precedent mandated that courts "must take statutory language at its word" and here the language was clear that after 30 days has lapsed from the filing of a rehearing request without FERC action, the tolling order neither "prevent[s] a deemed denial nor alter[s] the jurisdictional consequents of agency inaction."[12]
Notably, the court suggests that FERC was not required to "actually decide the rehearing application within" the 30-day window.[13] The court pointed out that NGA section 717r(a) specifically gives the Commission more time to decide by providing that, "[u]ntil the record in a proceeding shall have been filed in a court of appeals," the Commission "may at any time, upon reasonable notice and in such manner as it shall deem proper, modify or set aside, in whole or in part, any finding or order made or issued by it under the provisions" of the NGA.[14] That means even after a petition for judicial review is filed, the Commission retains authority to "modify or set aside, in whole or in part" the underlying order or findings until the record is filed with the court of appeals and the court's jurisdiction becomes exclusive of FERC's.[15] To this end, the court surmised that it did not:
need to decide whether or how Section 717r(a), the ripeness doctrine, or exhaustion principles might apply if the Commission 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 hearing processes.[16]
In short, even if an applicant files a petition for review immediately after a deemed denial, the Commission will typically still have at least 70 days total, with the possibility of more time, to act on a rehearing request.
Judges Griffith, Katsas, and Rao filed a separate concurrence emphasizing that delayed review "is not the primary driver of unfairness."[17] The concurring judges raise three issues – two of which FERC has attempted to address under FERC Chairman Chatterjee's leadership.[18] First, the concurring judges agree with the majority and reiterate that the court of appeals will "take jurisdiction when the Commission fails to "act[] upon" a rehearing request within thirty days after it filed.[19] Second, the judges discuss what it means for FERC to "grant" a rehearing request. They suggest that "the possibility of mandamus relief" could be appropriate if FERC promises a rehearing proceeding but in fact provides nothing more than undue delay.[20] Third, and finally, the concurring judges take exception to the Commission's "approval of irreversible construction while rehearing is pending."[21] These judges suggest that "[n]othing in the [NGA] prevents a district court from holding an eminent domain action in abeyance until the Commission completes its reconsideration of the underlying certificate order."[22] As discussed in a prior client alert, the Commission, in Order No. 871, amended its regulations to prohibit issuance of a notice to proceed with construction until the Commission has acted on a pending rehearing request or the time period for filing a rehearing request has passed.[23]
Judge Henderson concurred in part and dissented in part. Her dissent questions how the majority ignored stare decisis and the circuit's long-standing precedent blessing tolling orders.[24] Judge Henderson, in contrast to the majority, argued that "growth of judicial doctrine" issued since it decided a prior case, cut against reversal.[25]
Are Tolling Orders Dead or Just on Life Support?
The Allegheny Defense decision interpreted the issuance of a tolling order as the Commission having "deemed denied" a rehearing request. Nonetheless, the order has not eliminated FERC's use of tolling orders. Rather, the order already has resulted in FERC reworking its tolling orders to go from them purportedly granting rehearing for further consideration to denying rehearing by operation of law. The order's impact will be felt within and outside of the agency. Most importantly, the Allegheny Defense decision's tolling order ruling will impact all aspects of FERC's programs, including those deciding issues pursuant to the Federal Power Act.
New natural gas certificate applications will need to be as robust as possible to provide the Commission with the best evidence to draft a certificate order that can withstand judicial review apart from any rehearing order. In this same vein, applicants may need to supplement their applications upon review of the comments and protests filed in the docket. What happens to those certificates currently pending before the Commission? Will FERC ask for additional information? Will applicants who are in proceedings where a tolling order has issued but the 60-day window for filing an appeal has not expired, now file a judicial appeal to protect the rulings in the original order?
Is a legislative fix needed to make the NGA language akin to the FPA's tolling language? How long can companies wait for this clarification when it is highly unlikely that a legislative fix would arrive before 2021 at the earliest? Commissioner Glick has suggested that the issuance of a tolling order "presumptively stays" a section 7 certificate pending Commission action on the merits of any timely filed request for rehearing. Commissioner Glick and Chairman Chatterjee's Joint Statement appears to adopt Commissioner Glick's proposal and requests Congress to immortalize in the NGA Order No. 871's prohibition of the issuance of authorizations to proceed with construction activities with respect to natural gas facilities authorized by an order issued pursuant to section 3 or section 7 of the NGA until either the time for filing a request for rehearing of such order has passed with no rehearing request being filed or the Commission has acted on the merits of any rehearing request.[26]
This is a DC Circuit decision. Is it binding precedent in other circuits? FERC or the courts will need to provide guidance how it will apply Allegheny Defense's deadlines to pending cases where the time for filing an appeal 60 days from the issuance of a tolling order has passed. Should entities file petitions for review immediately to protect against a later argument that Allegheny Defense effectively converted those tolling orders to denials of rehearing request and the time for judicial review has passed? What about the theory of detrimental reliance? Arguably, the Allegheny Defense rulings should only apply prospectively. Otherwise, those entities that relied on the DC Circuit's previous endorsements of tolling orders to allow FERC to act on the merits, will be denied their due process rights. Obviously, further review and analysis is needed on these issues.
The bottom line is that prolonged delay by FERC to act on rehearing requests results in regulatory uncertainty and potentially postpones judicial review. Tolling orders aren’t dead, as shown by the Commission's issuance of several since the Allegheny Defense order, but the meaning and significance of tolling orders post-Allegheny Defense are uncertain.
[1] No. 17-1098 (D.C. Cir. June 30, 2020) (“Allegheny Defense”).
[2] 15 U.S.C. § 717(a).
[3] 15 U.S.C. § 717f(h).
[4] 15 U.S.C. § 717r(a).
[5] 16 U.S.C. § 825l(a).
[6] 15 U.S.C. § 717r(b).
[7] 15 U.S.C. § 717r(a).
[8] 15 U.S.C. § 717r(b).
[9] Id.
[10] See Allegheny Defense, slip op. at 14. Environmental Associations also filed petitions when FERC issued its tolling order and after FERC denied rehearing. See id.
[11] See 16 U.S.C. § 824b(a)(5).
[12] Slip op. at 23-34. See United States v. Burwell, 690 F.3d 500, 504 (D.C. Cir. 2012).
[13] Slip op. at 29.
[14] Slip op. at 30.
[15] See 15 U.S.C. 717r(a)-(b); 16 U.S.C. 825l(a)-(b).
[16] Slip op. at 29-30.
[17] Concurrence slip op. at 1.
[18] The third issue – district court's decision to transfer property to pipeline companies regardless of the Commission’s decision to grant rehearing – is under the jurisdiction of the district court to rule.
[19] Concurrence slip op. at 2. Chairman Chatterjee established a separate rehearing section to prioritize landowner rehearing requests.
[20] Concurrence slip op. at 4.
[21] Concurrence slip op. at 4-5.
[22] Concurrence slip op. at 5.
[23] Limiting Authorizations to Proceed with Construction Activities, Order No. 871, 171 FERC ¶ 61,201 (2020).
[24] Dissent slip op. at 2.
[25] Dissent slip op. at 3-5. See Cal. Co. v. Fed. Power Comm’n, 411 F.2d 720, 722 (D.C. Cir. 1969) (per curiam).
[26] See Limiting Authorizations to Proceed with Construction Activities Pending Rehearing, Order No. 871, 171 FERC ¶ 61,201 (June 9, 2020).
