FERC Adopts New Rules for Pipeline Certificate Orders to Address Concerns of D.C. Circuit
On June 9, 2020, the Federal Energy Regulatory Commission (FERC) issued new rules designed to address concerns expressed by the U.S. Court of Appeals for the District of Columbia Circuit (DC Circuit) about abuse of landowner rights arising from FERC’s procedures when it issues certificates of public convenience and necessity authorizing construction of natural gas pipelines. As we have previously reported, the DC Circuit in March, sitting en banc, heard arguments challenging FERC’s use of “tolling orders” in the context of approving natural gas infrastructure projects, which may allow a pipeline owner to condemn private property and begin construction during the period when landowners challenging FERC’s actions have filed rehearing petitions, which generally must be resolved before landowners can access the courts. FERC’s action is of concern to sponsors of energy infrastructure projects because it entails additional delay in the already-lengthy process of obtaining FERC approval for such projects. On the other hand, the new FERC rule may head off a DC Circuit decision that could be even more adverse to energy project construction.
The use of tolling orders arises from the Natural Gas Act’s requirement that any party seeking to challenge a final FERC order must first file a petition for rehearing with the agency. The statute requires FERC to address the rehearing petition within 30 days. Otherwise, the rehearing petition is denied by operation of the law. 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. But because FERC’s orders are considered final even if rehearing is filed, once FERC issues an order permitting pipeline construction under the Natural Gas Act, the sponsor of a natural gas pipeline is permitted to condemn private property in the approved pipeline right of way and begin construction. Landowners and others challenging the certificate, on the other hand, are jurisdictionally barred from seeking remedies in court until FERC resolves their rehearing petitions. This process can take months and sometimes years.
The result, as described in a scathing opinion issued by Judge Patricia Millett last year, is 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.” Judge Millet’s opinion prompted the DC Circuit to take the highly unusual step of reviewing this FERC practice en banc. At the en banc hearing in April, several judges expressed sympathy for Judge Millet’s view, which apparently prompted FERC’s action.
The new rules prevent pipeline project sponsors from beginning construction until the rehearing process is resolved. If no rehearing petitions are filed, this would delay construction by only thirty days, the statutory period permitting interested parties to file rehearing petitions. On the other hand, the delay could be lengthy if rehearing petitions are filed because it often takes many months or even years for FERC to resolve those petitions.
Although the rules are intended to assuage the D.C. Circuit’s concerns, it is unclear whether the new rules will head off an adverse decision from the Court. This is because, as Commissioner Richard Glick’s partial dissent makes clear, although the rules suspend the pipeline owner’s right to begin construction, they do not prevent the pipeline owner from initiating procedures to condemn land in the approved pipeline right-of-way. As Commissioner Glick notes, the D.C. Circuit’s concerns focused in substantial part on the fact that landowners may be subject to condemnation proceedings even while they are barred from challenging the underlying FERC certificate of public convenience and necessity in the courts.