On June 30, 2020, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”), sitting en banc, upset FERC’s long-used practice of granting itself more time to consider requests for rehearing of its orders by issuing “tolling orders.” FERC’s prior use of tolling orders prevented parties from seeking judicial review of a Commission order, but did not stay the effect of that order. The crux of the court’s decision is that the Natural Gas Act (“NGA”) gives FERC four express options to address a request for rehearing, all of which must be taken within thirty days, but deciding only to grant itself more time is not one of those options. The decision marks a sea change in FERC procedure, and raises a host of questions for pending and future proceedings under both the NGA and its companion statute, the Federal Power Act (“FPA”).
On July 2, 2020, FERC Chairman Neil Chatterjee and Commissioner Richard Glick issued a joint statement requesting that Congress pass legislation “providing FERC with a reasonable amount of additional time to act on rehearing requests involving orders under both the Natural Gas Act and the Federal Power Act.” The statement goes on to say 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.”
The June 30 decision overruled the D.C. Circuit’s prior decisions upholding FERC’s use of tolling orders to prevent requests for rehearing from being “deemed denied” under NGA section 717r(a) if FERC failed to “act upon” the request within the prescribed thirty-day period. The D.C. Circuit’s decision stems from a series of FERC orders, some of which were delayed through FERC’s tolling practice, on Transcontinental Gas Pipe Line Co.’s (“Transco”) application for a Certificate of Public Convenience and Necessity for its Atlantic Sunrise Project. The court held that FERC’s obligation to “act upon” rehearing requests within thirty days under the NGA does not include the ability to “grant” requests solely to allow “additional time” for more consideration. The court expressly declined to address other potential mechanisms under the NGA and appellate procedure to allow FERC more time for deliberation.
Although the decision directly addressed NGA section 717r(a) and (b), the FPA contains substantively identical provisions to those at issue before the D.C. Circuit, and courts have acknowledged the two statutes should be interpreted the same way. As a result, the decision may have impacts that reach beyond the NGA to the FPA. The decision raises significant questions regarding the status of pending rehearing requests, the availability of judicial review despite previously-issued tolling orders, and whether the D.C. Circuit opinion creates a split among appellate courts.
NGA section 717r(a) sets out the procedure for seeking review of FERC’s decisions under the statute, and provides that before parties can seek judicial review, they must first request rehearing before FERC. Upon receiving a request for rehearing, section 717r(a) states that FERC can: grant rehearing; deny rehearing; abrogate its order without further hearing; or modify its order without further hearing. Section 717r(a) provides that “unless [FERC] acts upon the application for rehearing within thirty days after it is filed, the application may be deemed to have been denied” (emphasis added). For decades, FERC’s routine practice has been to issue a tolling order within the thirty-day statutory period after receiving a rehearing request. Rather than address the requests for rehearing on the merits, tolling orders state that FERC is “grant[ing rehearing] for the limited purpose of further consideration, and timely-filed rehearing requests will not be deemed denied by operation of law.” Tolling orders, which are issued by the FERC Secretary through delegated authority, generally signal FERC’s intent to address the requests for rehearing on the merits at a later, undefined date. The use of tolling orders in pipeline projects has come under increasing scrutiny, as pipeline developers can often seek eminent domain authority, construct, and begin operation of a pipeline while the underlying orders authorizing the project remain pending at FERC and unable to proceed to judicial review. Nonetheless, as the D.C. Circuit pointed out in its June 30 decision, the court has upheld FERC’s practice of issuing tolling orders under NGA section 717r(a) since 1969.
The issue of FERC’s use of tolling orders arrived before the D.C. Circuit through appeals from various FERC orders related to Transco’s Atlantic Sunrise Project. On February 3, 2017, FERC approved the construction and operation of Transco’s Atlantic Sunrise Project (“Certificate Order”). Certain homeowners and environmental associations (together, “Protestors”) opposed Transco’s project, and requested rehearing of the Certificate Order. To prevent the requests from being “deemed denied” through FERC inaction (thereby triggering the Protestors’ appeal rights), FERC issued a tolling order in March 2017. FERC later denied the requests for rehearing in December 2017, nine months after the thirty-day period under NGA section 717r(a) had passed (see December 12, 2017 edition of the WER). The D.C. Circuit initially denied the petitions for review on the merits of the Protestors’ NGA claims, but subsequently granted petitions for rehearing en banc to address a “focused question of statutory construction”: whether FERC, by issuing a tolling order, “acts upon” an application for rehearing within the meaning of NGA section 717r (see December 11, 2019 edition of the WER).
The D.C. Circuit’s Decision
After concluding that the court owed no deference to FERC’s interpretation of NGA section 717r(a), a statutory provision addressing federal court jurisdiction, the D.C. Circuit held that a tolling order that merely delays FERC action is not an “act[ion] upon” a rehearing request within the meaning of section 717r(a), but rather inaction that fails to override the “deemed-denied” provision of the statute. In so holding, the court pointed back to FERC’s four procedural options under the NGA—grant rehearing, deny rehearing, abrogate, or modify the order without further rehearing. The court reasoned that because the statute plainly states that a rehearing request shall be “deemed denied” unless FERC “acts upon” it within thirty days, and because FERC’s tolling orders have served the sole purpose of preventing rehearing from being denied by FERC’s inaction, the tolling orders are insufficient to “grant” rehearing for purposes of section 717r(a). Such a “grant,” the court held, would effectively “delete the thirty-day time limit and the deemed-denied provision from the statute,” and rewrite the statute to state that FERC’s “failure to act within thirty days means nothing; that it can take as much time as it wants; and until it chooses to act, the applicant is trapped, unable to obtain judicial review.”
However, the D.C. Circuit limited its holding only to FERC’s use of tolling orders to override the deemed-denied provision of section 717r(a) and to postpone judicial review. The court did not address whether or how section 717r(a), the ripeness doctrine, or exhaustion principles might apply if FERC 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 outlined existing procedural mechanisms which could afford FERC more time to consider a rehearing request. In particular, after a petition for review has been filed, section 717r(a) authorizes FERC to “modify, or set aside, in whole or in part” the underlying order or findings until the administrative record is filed in court. This typically occurs forty days after a petition for review is filed, but can be extended for a longer period under the Federal Rules of Appellate Procedure. Thus, the court concluded that in practice, even if an applicant files a petition for review immediately after a deemed denial, FERC would typically still have at least seventy days total, with the possibility of more time, to act on a rehearing application.
On the merits of the petitions for review, the D.C. Circuit denied the petitions after a brief discussion concluding that FERC reasonably found a market need for the Atlantic Sunrise Project.
Concurring and Partial Dissenting Opinions
Circuit Judges Griffith, Katsas and Rao concurred in the court’s opinion, but wrote separately to, among other things, caution about other statutory interpretations that could still lead to delayed judicial review. For example, the court’s opinion, they argued, “leaves the Commission free to grant rehearing by agreeing to consider the applicant’s arguments for modifying or revoking its previous action—i.e., by deciding to decide.” Some ways for FERC to evince a clear intention to reconsider the merits of an underlying case, they noted, could be to set a briefing schedule or to order other parties to respond to a filed request for consideration. If undue delay continues, they noted, “we should entertain the possibility of mandamus relief.”
In a partial dissenting opinion, Circuit Judge Henderson argued that the majority’s decision failed to give proper consideration to the doctrine of stare decisis—that is, to the legal principle that cases should be decided pursuant to past precedent. In Judge Henderson’s view, there was not sufficient justification for reversing the nearly fifty years of caselaw preceding the decision, particularly when doing so “creates a circuit split that could force the Supreme Court to weigh in and further enmesh the Judiciary in a matter better left to elected officials.”
The June 30 decision forces a major change in FERC procedure. While the court ruling strictly applies to the NGA, given the similarities between the statute and the court’s statutory interpretation, there appears to be a real question about whether FERC could justify continuing its use of tolling orders in FPA cases. At a minimum, the D.C. Circuit’s decision will require FERC to reconsider its rehearing practices, and could lead to the development of other procedural mechanisms to modify its orders in response to rehearing requests. It also raises questions about whether any true grant of rehearing for further consideration keeps the record of a case open and stays the impact of the underlying order, in contrast to current tolling practices. Finally, the court presents serious questions about whether tolling orders used merely to delay rehearing are ultra vires, which could impact the rights of parties to seek judicial review and the timing for doing so.
The D.C. Circuit’s June 30 en banc decision, Allegheny Defense Project v. FERC, No. 17-1098 (June 30, 2020), is available here; Chairman Chatterjee’s and Commissioner Glick’s July 2 joint statement is available here.