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‘Kafkaesque’ FERC Pipeline Process Needs Revamp, Court Says


June 30, 2020

Federal regulators can’t dawdle on pipeline appeals and keep challengers out of court in the process, the D.C. Circuit ruled Tuesday in a landmark decision for energy law.

The Federal Energy Regulatory Commission violated the law by routinely issuing “tolling orders” that prevent pipeline opponents from seeking judicial review while an agency petition process drags on and industrial development moves forward, the court said.

The ruling is a major victory for landowners, environmentalists, and other pipeline critics who can now get to court faster to challenge projects, and may have a better shot at blocking construction.

“Now, the government must stop allowing construction of pipelines while keeping the courthouse doors closed to those who are directly affected by them,” Kelly Martin, head of the Sierra Club’s Beyond Dirty Fuels Campaign, said in a statement.

FERC’s tolling order practice effectively rewrote federal law to say “it can take as much time as it wants; and until it chooses to act, the applicant is trapped, unable to obtain judicial review,” Judge Patricia A. Millett wrote for the court.

“But the Commission has no authority to erase and replace the statutorily prescribed jurisdictional consequences of its inaction,” she concluded.

The full slate of 11 active judges on the U.S. Court of Appeals for the District of Columbia Circuit decided the case. The court agreed to review the case en banc after Millett judge in 2019 called FERC’s review process “Kafkaesque.”

Avoiding Court

The D.C. Circuit’s ruling still allows FERC to take extra time to consider whether a contested pipeline approval was proper. But the commission can no longer use tolling orders to avoid judicial review in the meantime.

That means the agency must streamline its internal review process, or be equipped to defend against legal challenges earlier in the process. Pipeline opponents, meanwhile, can sue FERC and attempt to block construction before it begins—an option that was often impossible before.

The issue reached the D.C. Circuit in a dispute over Transcontinental Pipeline’s Atlantic Sunrise natural gas pipeline in Pennsylvania. The court rejected Pennsylvania landowners’ specific complaints about that project. Their lawyer, White and Williams LLP attorney Siobhan K. Cole, said they’re disappointed “there will never be an adequate inquiry as to whether this pipeline actually serves a public use.”

“That said,” she said in an email, “my clients are very pleased that through their efforts, future homeowners will not have to suffer through the fundamentally unfair process they were subjected to as a result of FERC’s issuance of tolling orders.”

FERC didn’t respond to requests for comment. Commissioner Rich Glick, the lone Democrat currently on the commission, took to Twitter to praise the ruling as a “resounding victory” for landowners and communities. Other members haven’t weighed in yet.

Transco’s parent company Williams Cos. said it’s “pleased that the Court denied the challenges to the merits of FERC’s certificate order authorizing Transco’s Atlantic Sunrise Project.”

The Interstate Natural Gas Association of America said it’s still reviewing the ruling, but said “we believe that all parties to a pipeline proceeding should have their requests for rehearing heard by FERC in a timely manner so that all parties understand the reasoning behind the Commission’s decision making.”

Consequences of Bureaucracy

The legal debate centers on a bureaucratic agency process with serious consequences, affecting whether landowners can even get to court before an energy company takes their land and starts building a pipeline.

Under the Natural Gas Act, pipeline opponents generally have to file a petition at FERC and wait for the commission to resolve it before going to court to fight a project.

The statute gives FERC 30 days to take action on petitions from challengers. But the agency routinely issues so-called tolling orders to extend that review period indefinitely. Land seizures and construction often move forward in the meantime.

In oral arguments in April, FERC told the D.C. Circuit the orders are legal because the Natural Gas Act merely requires the agency to “act” on a petition within 30 days, not resolve it.

Pennsylvania landowners in the path of the now-built Atlantic Sunrise pipeline argued that the approach violates their constitutional rights to due process and conflicts Congress’s intent when it passed the law. Many D.C. Circuit judges appeared sympathetic to the landowners’ plight but questioned how an alternative process would work.

Decision Details

Tuesday’s opinion leaves many of those questions unanswered, with the judges instead coalescing around a simple conclusion: The Natural Gas Act didn’t give FERC the authority to issue tolling orders and stall litigation.

The decision took aim at FERC’s insistence that a tolling orders doesn’t count as a final action allowing challengers to go to court, but does count as a final action allowing pipeline companies to seize private land.

“Tolling orders, in other words, render Commission decisions akin to Schrödinger’s cat: both final and not final at the same time,” the decision said.

The judges declined to give FERC any deference on its contrary interpretation, saying an agency is entitled to Chevron deference—when judges accept an agency’s reasonable interpretation of an ambiguous statute—only when the agency is the expert on that provision. The court, not FERC, is the expert on the Natural Gas Act’s judicial review provisions, Millett wrote.

Nearly all the D.C. Circuit’s judges joined in the opinion.

“The court gave FERC a spanking,” said David Hayes, head of New York University’s State Energy and Environmental Impact Center. “And Judge Millett’s opinion is a tour de force. She methodically goes through every argument. She obviously bases the opinion on textualism, and appropriately so and persuasively so.”

Judge Thomas B. Griffith, joined by Judges Gregory G. Katsas and Neomi Rao, wrote a concurrence to stress that factors other than tolling orders create unfairness for landowners in the pipeline development process.

Judge Karen LeCraft Henderson was sole dissenter, saying the court didn’t have enough justification for overturning its own precedent that upheld tolling orders.

FERC Changes

With the D.C. Circuit decision looming, FERC has recently updated at least two policies with an eye toward protecting landowner rights.

First, FERC vowed to process landowner petitions faster. Then it said it would continue to use tolling orders, but would no longer allow pipeline construction to start until after the agency petition process is complete. The policy would still allow land seizures during that time.

ClearView Energy Partners analyst Christine Tezak said pipeline builders should take note of Griffith’s concurring opinion, which suggests that district courts should hold off on greenlighting land takings if FERC is still reviewing objections to a project.

“We flag this for clients as a caution that conservative jurists seeking to constrain agencies from exerting too much interpretive authority under their statutes may not be excused simply because the underlying issue relates to conventional energy infrastructure supported by the current Administration,” she wrote in a client note.

Energy law experts have also noted that the outcome in the case could affect FERC’s electricity and hydropower orders, as well as its pipeline approvals, as the commission also uses tolling orders in that context, and the relevant electricity law, the Federal Power Act, largely mirrors the Natural Gas Act.

“The core problem of a party seeking rehearing and FERC issuing a tolling order as a matter of practice on day 30 cuts across its entire portfolio,” Natural Resources Defense Council attorney Gillian Giannetti told Bloomberg Law, noting that the broader impacts depend on how FERC adjusts its approach in the electricity context.

NRDC filed a friend-of-the-court brief supporting landowners and environmentalists in the Atlantic Sunrise case.

The Sierra Club is part of an environmental coalition that challenged FERC’s approval of the Atlantic Sunrise pipeline and the agency’s broader review process. The Sierra Club has received funding from Bloomberg Philanthropies, the charitable organization founded by Michael Bloomberg. Bloomberg Law is operated by entities controlled by Michael Bloomberg.

The case is Allegheny Defense Project v. FERC, D.C. Cir., No. 17-1098, 6/30/20.

(Adds comment from Williams Cos., INGAA, and NRDC in second and fifth sections.)


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