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Major DC Circuit gas ruling extends to FERC's power proceedings, experts say

A federal appeals court ruling requiring the Federal Energy Regulatory Commission to move faster to address pipeline disputes also carries major implications for how the agency handles contested power market proceedings, according to legal experts.

Calling the practice a "stalling tactic," a full panel of judges for the U.S. Court of Appeals for the District of Columbia Circuit on June 30 ruled 10-1 that FERC can no longer use what are known as "tolling orders" to give itself indefinite time to act on rehearing requests that effectively bar parties from seeking judicial review.

The case at issue Allegheny Defense v FERC (No. 17-1098) challenged the commission's decades-old policy of employing tolling orders under the Natural Gas Act to delay ruling on challenges to commission orders approving pipelines until after construction starts or even until after a project is completed. The full D.C. Circuit in December 2019 opted to review a three-judge panel's decision to uphold FERC orders approving the 196.5-mile Atlantic Sunrise project in which a dissenting judge slammed the agency's practice of placing landowners in "administrative limbo."

Notably, the court's statutory analysis in Allegheny will apply equally to wholesale electricity market proceedings, which are governed by the Federal Power Act, because the rehearing provision in both acts "is exactly the same," said Jeff Dennis, managing director and general counsel of Advanced Energy Economy.

Under both statutes, a rehearing request is denied by operation of law if FERC fails to act on it within 30 days. FERC has traditionally sought to avoid that outcome by issuing tolling orders that "grant rehearing for further consideration," allowing the commission to buy more time to respond to parties' legal claims before they come before a reviewing court.

"The commission cannot have it both ways, claiming to have granted rehearing in one breath, while promising in the next breath that it will decide in some future order whether to grant rehearing or not," the D.C. Circuit's en banc panel said June 30.

Dennis, a former FERC lawyer who also worked on pipeline issues, said the D.C. Circuit's ruling will broadly require the commission to make a faster assessment of perceived legal risk before deciding how to proceed.

The decision is bound to transform how FERC does business, but the D.C. Circuit was also careful to note that the commission can still ask courts for an extension to submit the record in a proceeding and make additional changes in the meantime, Dennis said.

In its June 30 opinion, the D.C. Circuit said that FERC will still typically have at least 70 days total, "with the possibility of more time," to act on a rehearing application even if an applicant files a petition for review immediately after a denial. The court also stressed that its decision only applies to tolling orders that interfere with parties' statutory right to seek timely judicial review, noting that the decision does not require FERC to fully address orders raised on rehearing within 30 days. The ruling also did not address the question of whether FERC can grant rehearing "to allow for supplemental briefing or further rehearing processes," the court noted.

Exactly how FERC plans to respond to the court's ruling will take time to sort out, Dennis said.

"But I think it's pretty certain that there will have to be some changes to the commission's processes," Dennis said. "I think the commission, in some cases, will have to decide that it's comfortable just letting the 30 days pass, relying on its first order and not actually rewriting a rehearing order."

'Can't happen anymore'

In a concurrence, Judge Thomas Griffith said FERC should receive the benefit of the doubt if it grants rehearing to establish further proceedings with a specific briefing schedule.

"But we shouldn't let down our guard — an agency given an inch might be tempted to take a mile," Griffith wrote. "If the commission promises rehearing proceedings but in fact provides nothing more than undue delay, we should entertain the possibility of mandamus relief."

In arriving at its ruling, the full D.C. Circuit also overturned prior court precedent. This drew a dissent from Judge Karen Henderson, who worried the majority showed little regard for stare decisis in overturning the court's position for over 50 years. "I would leave it for the political branches to determine whether and how to limit FERC’s use of tolling orders," Henderson wrote.

Whether FERC will restructure its Federal Power Act rehearing process in a way that closely mimics its Natural Gas process remains to be seen, said Gillian Giannetti, an attorney with the Natural Resource Defense Council's Sustainable FERC Project.

"But we can say that if a case has been subject to the standard rehearing process … and FERC has been as a matter of course issuing tolling orders, then that can't happen anymore," Giannetti said. "FERC's going to have to find another basis, be it at the courts or elsewhere, to justify extending its review beyond that 30 days."