Will Congress Step up to the Plate on FERC's Tolling Orders?

Both the Natural Gas Act and the Federal Power Act provide that the Federal Energy Regulatory Commission (FERC) has 30 days to act on an application for rehearing or the request will be deemed denied, triggering the immediate right to seek judicial review.¹ FERC routinely has relied upon the issuance of so-called tolling orders to negate the automatic denial of the rehearing request if an order has not issued within 30 days, thereby giving itself an unlimited additional time within which to act.

In Allegheny Defense Project v. FERC,² the Court of Appeals for the District of Columbia Circuit (DC Circuit) dealt a major blow to this practice, holding that the Commission did not have the authority to issue tolling orders for the "sole purposes of preventing rehearing from being deemed denied by its inaction and the statutory right to judicial review from attaching."³ The court found that judicial review cannot be impeded by a tolling order versus a substantive order that grants or denies rehearing, or that modifies or abrogates a prior order. The use of tolling orders, on the other hand, served only to unravel the statutory balance between providing FERC sufficient time to reach a reasoned decision and ensuring applicants can seek meaningful judicial review.⁴ The ruling promptly led FERC Chairman Neil Chatterjee and Commissioner Richard Glick to make a plea for Congressional action to provide more than the present 30 days to act on rehearings, to clarify FERC would be prohibited from issuing a notice to proceed with construction while rehearing is pending,⁵ and to preclude the initiation of eminent domain proceedings during that time.

Following the DC Circuit's ruling, FERC requested the court stay the mandate in Allegheny, explaining it would need an additional 90 days to assess how to implement the court's decision relating to both new rehearing requests and those as to which tolling orders already had issued. In addition, FERC could use the extra time to decide whether to appeal to the Supreme Court, especially given the circuit split created by Allegheny between the D.C. Circuit and other courts of appeal that have upheld FERC's use of tolling orders on rehearing requests, including the First and Fourth Circuits.⁶

Fortunately for FERC, on July 23, 2020, the DC Circuit granted FERC until at least October 5, 2020 to determine its next steps.⁷ In the meantime, Congress already has taken notice. Our advisory analyzes and provides context for the DC Circuit's decision and recent congressional and FERC action that could set the stage for potential changes.

The Case

The facts underlying the appeal considered in Allegheny make obvious the importance of the ability to seek judicial review promptly. There an applicant sought and obtained from FERC a certificate of public convenience and necessity to build a new pipeline over the objection of local landowners and environmental groups. Relying on the FERC order, the applicant initiated a process in federal court to condemn needed land. The landowners and environmental groups filed for rehearing with FERC and moved to stay the order granting the certificate so as to halt the condemnation proceeding. The pipeline company, however, was able to use the tolling order—in a process the court termed to "split the atom of finality"⁸—to argue both that a) judicial review of the order granting the certificate was "incurably premature" and b) "as to . . . the eminent domain process . . . the [certificate] order is final."⁹ Although petitions for review ultimately were filed, by the time the DC Circuit held oral argument on the merits, the pipeline was already in operation.

FERC revised its tolling language the day after Allegheny was decided in a matter involving the Federal Power Act as opposed to the Natural Gas Act at issue in Allegheny. On July 1, 2020, FERC issued an order in Midcontinent Independent System Operator, Inc.,¹⁰ stating that, while the rehearing request may be deemed denied for purposes of the petitioner seeking judicial review, the "rehearing request of the . . . order . . . will be addressed in a future order. . . . As also provided in 16 U.S.C. § 825(a), the Commission may modify or set aside its . . . order, in whole or in part, in such manner as it shall deem proper."¹¹ The cited statute permits FERC to revise its order at any time before the administrative record is filed with the reviewing court, which typically would occur up to 100 days after the order issued (given the petition for review must be filed up to 60 days from the date of the order, and the record is due 40 days from the date of the petition).

Congress Takes Notice

That FERC's use of tolling orders might delay the opportunity to review such that the remedy of receiving an order that precludes construction of a project is effectively unavailable came to light in an investigation led by Representative Jamie Raskin (D-MD) and the House Oversight Committee's Subcommittee on Civil Rights and Civil Liberties. The Subcommittee found, "in the last twelve years, FERC issued a tolling order to every single landowner who requested a rehearing. In every single case, FERC eventually denied the request . . . . While those cases are tolled, the eminent domain cases can continue."¹² In fact, in "73 cases—64%—FERC authorized construction of pipelines before ruling on rehearing requests."¹³

Post-Allegheny. Several Members of Congress expressed their support for the Allegheny ruling, including Representative Frank Pallone (D-NJ), who is the Chair of the House Energy and Commerce Committee; Representative Jamie Raskin (D-MD); and Representative Tom Malinowski (D-NJ). Notably, the D.C. Circuit's ruling aligns with Rep. Malinowski's previously introduced legislation, the Landowners' Right to Due Process in Rehearings at FERC Act, which would amend the Natural Gas Act to grant due process rights to petitioners who request a rehearing on a pipeline project; require that FERC respond within a fixed timeline; and prohibit pipeline companies from exercising eminent domain until the rehearing window expires.

Potential Proposals. The House Select Committee on the Climate Crisis included a similar recommendation in its recent report on solving the climate crisis, pointing to Rep. Malinowski's bill and to a similar bill from Rep. Sean Casten (D-IL) (H.R. 6963) relating to the Federal Power Act. Specifically, the Select Committee recommends Congress amend the Natural Gas Act and the Federal Power Act to grant FERC 60 days, instead of the current 30 days, to issue a final agency order with regard to an application for rehearing, or else the application will be deemed denied. In addition, the Select Committee recommends Congress amend the Natural Gas Act to preclude pipeline developers from exercising the right of eminent domain or beginning construction until the 60-day period expires.

Whether Congress will respond to provide FERC with more time on rehearing requests is unclear. The DC Circuit acknowledged in its decision the substantial task before the Commission of reviewing applications for rehearing within 30 days but explained its hands were tied by Congress's mandate, hinting that Congress could, and perhaps should, change FERC's review period. This appears to show an alignment between certain Members of Congress, FERC, and the court that could lead to some legislative changes.

Conclusion

It is easy to understand the difficulty that FERC would face issuing rehearing orders within 30 days of the rehearing request due date for complex matters as to which there may be dozens of rehearing requests to be considered. However, the use of a tolling order to preclude the ability to seek court review of the underlying order has led to petitioners effectively being unable to obtain their desired remedy of halting construction, regardless of the merits. Judicial review of FERC orders under the Natural Gas Act, and presumably the Federal Power Act, will now be available after the 30-day statutory deadline for FERC action, although FERC has preserved the ability to take additional time to issue a substantive order. Going forward, additional changes are to be expected.

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.