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D.C. Circuit En Banc Review of FERC Tolling Orders Could Have Profound Implications for Infrastructure Projects Requiring FERC Approval

On March 20, 2020, the U.S. Court of Appeals for the District of Columbia Circuit (DC Circuit), sitting en banc, will hear arguments challenging the Federal Energy Regulatory Commission’s (FERC) use of “tolling orders.” Because FERC routinely uses tolling orders across all areas of its responsibility, the Court’s actions could have profound, and potentially extremely negative, implications for any FERC-regulated industry. In particular, a decision forcing FERC to curtail its use of tolling orders could create new legal risks and barriers for natural gas and oil pipelines, electric transmission lines, and other energy infrastructure requiring FERC approval.

The use of tolling orders arises from the rehearing requirement, common to both the Natural Gas Act and the Federal Power Act (the primary statutes under which FERC regulates the energy industry), which requires any party seeking to challenge a final FERC order to first file a petition for rehearing with the agency raising all issues that party may raise in an appeal. FERC, in turn, is required to address the rehearing petition within 30 days. Otherwise, the rehearing petition is denied by operation of the statute. In order to fully address the arguments raised in rehearing petitions, which routinely run to 100 pages or more in complex matters, FERC has for decades issued “tolling orders,” which suspend the 30-day statutory deadline in order to allow FERC to fully address arguments raised on rehearing. 

The DC Circuit’s decision to take the highly unusual step of reviewing this FERC practice en banc arises from an otherwise routine appeal of a FERC order granting a certificate of public convenience and necessity to permit construction of the Atlantic Sunrise natural gas pipeline. Under the Natural Gas Act, once FERC issues a certificate of public convenience and necessity, the sponsor of a natural gas pipeline is permitted to condemn private property in the approved pipeline right of way. In an otherwise routine decision issued in August, the DC Circuit upheld FERC’s order granting Atlantic Sunrise’s certificate of public convenience and necessity against challenges from landowners and environmental groups opposing the pipeline.

The decision, however, includes a lengthy and impassioned concurring opinion from Judge Patricia Millett arguing that FERC’s practice of issuing tolling orders creates a “Kafkaesque” process that allows pipeline sponsors to proceed with condemnations once FERC approves the project, while property owners are “jurisdictionally locked . . . out of federal court.” That is, because FERC orders are final once issued, the pipeline sponsor is permitted to proceed with condemnation proceedings and other construction activities once FERC issues its order, unless the opponent obtains a stay. On the other hand, the order is not considered final and ripe for review until FERC issues its order addressing the petition for rehearing. Judge Millett’s opinion asserts that this process creates a procedural limbo that threatens landowner due process rights by allowing condemnations to proceed before judicial review occurs. Apparently, Judge Millett’s reasoning was sufficiently persuasive that a majority of the eleven active DC Circuit judges voted to take the highly unusual step of reviewing en banc the August decision of the three-judge panel.

An en banc decision that bars or significantly limits FERC’s use of tolling orders could have severe and negative impacts for the sponsors of pipelines and other energy infrastructure projects by creating additional procedural and legal hurdles for sponsors to overcome before construction can begin. For example, a decision requiring FERC to take final action in all cases within the 30-day deadline makes it less likely FERC can adequately address all arguments on rehearing, increasing the risk that its orders could be overturned on appeal because the agency inadequately explained its decision. Similarly, a decision barring pipeline construction from proceeding until rehearing orders are issued could add many months or even years to the already-lengthy process of obtaining regulatory approval for pipelines and other energy infrastructure projects. For energy companies operating under FERC regulation, the DC Circuit’s actions in this case bear careful scrutiny.

© 2020 Beveridge & Diamond PC National Law Review, Volume X, Number 17

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About this Author

James M. Auslander Natural Resources & Project Development Attorney Beveridge & Diamond Washington, DC
Principal

James (Jamie) M. Auslander's legal practice focuses on project development, natural resources, and administrative law and litigation.

Mr. Auslander co-chairs Beveridge & Diamond’s Natural Resources and Project Development Practice Group, including its Energy Practice. He focuses on complex legal issues surrounding the development of oil and gas, hard rock minerals, renewable energy, and other natural resources on public lands onshore and on the Outer Continental Shelf. He frequently litigates appeals before federal courts and administrative bodies regarding rulemakings, permits...

202-789-6009
Eric Christensen Energy & Natural Resources Attorney
Of Counsel

Eric is a leading energy and natural resources attorney in the Pacific Northwest.

He assists renewable and traditional energy companies, as well as major energy consumers, to navigate the complex legal and regulatory systems governing the nation’s energy industry. With more than 30 years of experience, Eric has successfully represented clients in litigation and regulatory matters, ranging from the U.S. Supreme Court to proceedings before federal and state agencies. Before entering private practice, Eric served as Assistant General Counsel at Snohomish County (WA) Public Utility District, one of the largest publicly-owned utilities in the U.S., and as a trial attorney at the U.S. Federal Energy Regulatory Commission (FERC).

Eric’s litigation experience includes successfully representing Snohomish County Public Utility District in a series of lawsuits arising from the Enron crisis involving action at every level of the federal courts, including the U.S. Supreme Court, as well as administrative litigation resulting in an order requiring Enron to disgorge more than $1 billion. He has also litigated dozens of matters in the federal and state courts. These include federal court challenges to the landmark federal orders restructuring regulation of the electricity, natural gas, and oil pipeline industries in the U.S. and critical regulatory and Constitutional issues in the Washington courts, including several matters before the Washington Supreme Court.

Eric guides clients through transactions involving renewable and traditional energy facilities, energy and derivatives trades, environmental concerns, engineering and construction services, early-stage and traditional financing, risk management, and government grants and tax incentives. He assists clients with energy and infrastructure transactions throughout Washington, including wind generation, hydroelectric, and renewable energy projects as well as the contracts governing sales of power and transmission from the Northwest’s huge federal hydroelectric and transmission systems. He has put together transactions involving financing, engineering services, construction of buildings and similar facilities, and energy and commodity trades.

Eric also assisted with landmark litigation in both the state and federal courts as well as successfully litigated claims involving liability for hazardous waste contamination and assisted developers to reclaim and redevelop brownfields sites.

206.620.3025
W. Parker Moore Environmental Attorney Beveridge & Diamond Washington, DC
Principal

Parker guides complex projects to successful completion.

His environmental law practice is an outgrowth of his love for the natural world. He co-chairs Beveridge & Diamond’s Natural Resources and Project Development Practice Group and its NEPA, Wetlands, and Endangered Species Act groups.

Parker dedicates his practice to successful project development, advising clients nationwide on activities implicating NEPA, wetlands regulation, and federal and state species protection laws, including the Endangered Species Act, Migratory Bird Treaty Act, Bald and...

202-789-6028