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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.

© 2020 Beveridge & Diamond PC National Law Review, Volume X, Number 164
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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
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