The United States Court of Appeals for the D.C. Circuit issued an opinion in late June that has significantly altered how the Federal Energy Regulatory Commission addresses challenges to its orders.
In Allegheny Defense Project et al., v. FERC, No. 17-1098 (D.C. Cir. June 30, 2020), the court held that the National Gas Act does not allow FERC to issue “tolling orders” soley for preventing FERC’s 30-day deadline for acting on requests for rehearings from expiring.
FERC has regularly issued such tolling orders in NGA and Federal Power Act cases for the past fifty years; the opinion effectively ends this practice. FERC has moved to stay the opinion for 90 days, and, and has requested that Congress extend the 30-day statutory deadline to circumvent the opinion’s impact.
Under the NGA, parties are required to request rehearing before seeking judicial review of a final FERC order. Rehearing must be requested within 30 days after FERC issues its final order.
In response, FERC may: (1) grant rehearing, (2) deny rehearing, (3) abrogate its order without further rehearing, or (4) modify its order without further rehearing. If FERC fails to act within thirty days after the request for rehearing was filed, the request is “deemed denied.”
FERC has routinely issued orders tolling the statutory “deemed denied” language for the purpose of granting FERC additional time to consider rehearing requests. Parties have argued that this practice has prejudiced their efforts to redress FERC’s decisions. In many cases, parties have waited for months or, even years, before FERC issued a substantive rehearing order following a tolling order.
Allegheny Defense Project
In Allegheny, FERC granted Transcontinental Gas Pipe Line Co. (“Transco”) a certificate of public convenience and necessity for the Atlantic Sunrise project on February 3, 2017. Less than two weeks later, Transco initiated condemnation proceedings against affected landowners in the United States District Court for the Eastern District of Pennsylvania.
These landowners requested rehearing of FERC’s certificate order, and about three weeks later, FERC responded by issuing a tolling order. Five months later, FERC issued an order authorizing Transco to begin construction. Then three months after authorizing construction, FERC issued a substantive order denying rehearing on Transco’s certificate.
In separate petitions, the affected landowners requested that the D.C. Circuit review the certificate and tolling orders. The D.C. Circuit initially dismissed the petitions for review, but later granted rehearing en banc.
In the opinion on the rehearing en banc, the court’s majority held that the NGA does not allow FERC to automatically extend the rehearing process by issuing tolling orders.
The court found that FERC’s automatic tolling practice effectively “delete[d] the thirty-day time limit and deemed denied provision from the statute.” The court criticized the seemly contradictory operation of FERC’s tolling order practice, which “render[ed] [FERC’s] decision akin to Schrödinger’s cat: both final and not final at the same time.”
In other words, the tolling order was not final for allowing landowners to challenge the certificate in court, but was final for allowing developers to condemn land in court. The court’s rebuke of FERC’s tolling order practice did not impact its review of the underlying certificate order, which the court affirmed.
In response to the opinion, FERC Chairman Neil Chatterjee and Commissioner Richard Glick issued a statement asking Congress to amend applicable statutes to provide FERC with more than thirty days to act on rehearing requests. FERC has also requested a 90-day stay of the Opinion pending FERC’s decision whether to seek Supreme Court review.
Next Steps
The end of the automatic tolling era is expected to delay issuances of NGA certificates. Under the opinion, FERC has a strong incentive to spend additional time refining its final orders rather than issuing orders more expediently, and then bolstering weak positions on rehearing.
This will present strategic considerations for parties involved in FERC proceedings, including placing a greater emphasis on advocacy occurring before the final order stage.
The opinion, however, will also have broad impacts across the natural gas and power sectors, far beyond the natural gas certificate context. While it focuses on the NGA, it is already impacting rehearing requests under the FPA, which has rehearing provisions modelled after the NGA.
Recently, FERC began issuing standardized rehearing notices in NGA and FPA proceedings. These notices each indicate that while a rehearing request may be “deemed denied” by operation of law, FERC intends to issue a further substantive rehearing order, and reserves the right to “modify or set aside” an underlying final order until the record is filed in court.
These notices put litigants in an untenable position where they may seek judicial review, but FERC could issue a further rehearing order pending appeal or voluntarily remand a proceeding after the petition is filed. This procedural purgatory is bound to create uncertainty, but should be clarified over time in future proceedings.
Nick McTyre is a lawyer in the Austin office of Thompson & Knight. His practice focuses on energy project development and represents clients in matters involving federal and state regulatory compliance. He was previously a lawyer at FERC.