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.