Appeals Court Rules On FERC's Use of "Tolling Orders" To Delay Acting On Rehearing Requests

by Paul Ciampoli
APPA News Director
Posted July 15, 2020

The U.S. Court of Appeals for the District of Columbia Circuit recently issued a ruling that addresses the Federal Energy Regulatory Commission’s use of “tolling orders” to delay ruling on rehearing requests under the Natural Gas Act (NGA).

The case, Allegheny Defense Project v. FERC, involved several consolidated appeals challenging a FERC order that issued a certificate of public convenience and necessity for a gas pipeline expansion project under section 7 of the NGA.

The parties challenging the pipeline project (including several landowners located in the proposed route) requested rehearing of FERC’s initial certificate order, which is a prerequisite for appealing a FERC order under the NGA.

The NGA requires FERC to act upon rehearing requests within 30 days, or they are deemed denied, at which point a party can appeal the challenged order.

For a long time, FERC has almost universally issued tolling orders that “grant” rehearing for the limited purpose of giving FERC more time to consider rehearing requests.

The Commission issued a tolling order in the Allegheny Defense Project v. FERC case, deferring consideration of the rehearing requests filed by parties objecting to the pipeline project.

A pipeline company that receives a certificate under NGA section 7 is given eminent domain authority for the approved pipeline route. Because filing of a request for rehearing does not stay the effectiveness of a FERC order, pipelines can move forward with eminent domain proceedings while opponents’ rehearing requests — and their right to appeal — remain subject to further FERC action, delayed by the issuance of a tolling order.

Also, FERC has frequently even allowed pipeline construction to begin while rehearing requests of a certificate order remain pending, as was the case in this proceeding.

FERC recently modified its rules to prohibit pipeline construction activities until it rules on the merits of any rehearing request.

Seeking to bypass the usual FERC process, a number of parties challenging the pipeline project filed an appeal soon after FERC issued its tolling order in this proceeding, arguing that FERC did not have authority to extend the 30-day deadline to act on rehearing through a tolling order, and, thus, FERC’s approval of the pipeline expansion project could be appealed without waiting for further FERC action on the rehearing requests.

Although the challengers also filed appeals once FERC denied their rehearing requests nine months later, the tolling order issues remained open in the case.

Details on court’s ruling

The court’s ruling focused on the section of the Natural Gas Act (15 U.S.C. § 717r) governing rehearing requests and judicial review under the statute. The Federal Power Act (FPA) includes a virtually identical provision.

The central issue in the case was whether, in issuing a tolling order, FERC “acts upon” a rehearing request within the meaning of NGA section 717r, such that any appeal at that point would be premature.

The court concluded that issuance of a tolling order does not amount to “acting upon” a rehearing application. Therefore, a tolling order is insufficient to prevent the deemed denial of a rehearing application or to deprive aggrieved parties of the right to seek judicial review following such deemed denial.

The court reasoned that, to act upon a rehearing application, FERC must either (i) grant rehearing, (ii) deny rehearing, (iii) abrogate the order without further hearing; or (iv) modify the order without further hearing.

The court turned aside FERC’s arguments that its tolling orders fall within the statute because they technically “grant” rehearing for the purpose of giving FERC more time to consider the rehearing requests.

The court determined instead that tolling orders “amount only to inaction on the application, which would trigger the possibility of judicial review as a deemed denial.”

Among the reasons for this conclusion, the court observes that a “grant” of rehearing, as opposed to inaction on an application for rehearing, requires at least some substantive engagement with the application. A grant of rehearing cannot consist solely of a grant of additional time to decide whether to grant rehearing, the court said.

In response to FERC’s arguments that it needs more than 30 days to address rehearing requests, the court said “that the only question we decide is that the Commission cannot use tolling orders to change the statutorily prescribed jurisdictional consequences of its inaction. That is not the same thing as saying the Commission must actually decide the rehearing application within that thirty-day window.”

The court said that in this regard it is not deciding “how Section 717r(a), the ripeness doctrine, or exhaustion principles might apply if the Commission were to grant rehearing for the express purpose of revisiting and substantively reconsidering a prior decision, and needed additional time to allow for supplemental briefing or further hearing processes.”

The court also points to language in section 717r that allows FERC to modify or set aside an order at any time up until the record of the FERC proceeding is filed in a federal court of appeals. Since the record is usually filed in court 40 days after an appeal is filed and served on FERC, the court observes that, in practice, FERC will have at least 70 days to act on rehearing requests (the original 30 days plus the 40 days before the record is filed in federal appeals court).

The court considered and rejected arguments that it should stand by previous D.C. Circuit rulings upholding the use of tolling orders.

The court concluded that after thirty days elapsed from the filing of a rehearing application without Commission action, the tolling order “could neither prevent a deemed denial nor alter the jurisdictional consequences of agency inaction.”

Having addressed the tolling order issues, the court denies the substantive challenges to FERC’s approval of the pipeline project.

FERC on July 6 filed a request with the D.C. Circuit asking it to delay the mandate (i.e., the formal judgment in the case for 90 days.)

FERC said there was good cause for a stay of the mandate, citing the need for time for the Commission to assess how to implement the opinion into the Commission’s “decades-old, judicially-sanctioned rehearing process.”

Chatterjee, Glick issue joint statement

Following the court’s ruling, FERC Chairman Neil Chatterjee and Commissioner Richard Glick on July 2 issued a joint statement in which they asked Congress to consider providing FERC with a reasonable amount of additional time to act on rehearing requests involving orders under both the NGA and FPA.

“We believe that any such legislation should make clear that, while rehearing requests are pending, the Commission should be prohibited from issuing a notice to proceed with construction and no entity should be able to begin eminent domain proceedings involving the projects addressed in the orders subject to those rehearing requests,” Chatterjee and Glick said.

In comments made at the American Public Power Association’s Wholesale Markets Virtual Summit on July 14, Glick said that “in my view, I think Congress should just revise the Natural Gas Act and the Federal Power Act to give us slightly more time – 45 days, 90 days, 120 days – you could argue what that might be. I tend to think 90 days is a good number, but different people might have different views on it.”

FERC “would have more time,” but it would still need to “move forward and get these orders out in a relatively timely fashion,” he said.

“In addition, I think we need to reconsider what we do on rehearing. In a lot of cases, rehearing requests are filed by parties that essentially repeat the same arguments they made before the original order went out and then we end up saying that these are the same arguments, but we’re going to address all these arguments and it takes forever,” he said.

In cases where nothing new has been said or argued in a rehearing request, FERC should say, “you know what, we’re just going to let it slide. Under the law, after 30 days, if we don’t act on it, the rehearing request is deemed automatically denied. We’ll let that happen, will go to court with the original order and to me that will solve a lot of our administrative issues from not having enough staff and resources to address all the rehearing requests we get in thirty days,” Glick said.