D.C. Circuit Examines FERC’s Use of “Tolling Orders” in Response to Rehearing Requests

May 11, 2020

On April 27, 2020, the U.S. Court of Appeals for the D.C. Circuit, sitting en banc, heard oral argument in Allegheny Defense Fund v. FERC. At issue is whether it is lawful for the Federal Energy Regulatory Commission to issue a “tolling order” in response to requests for rehearing of pipeline certificate orders under the Natural Gas Act. A tolling order effectively allows FERC to delay judicial review of a decision by extending the 30-day statutory deadline for action on a rehearing request. A challenger must wait for a final rehearing decision from FERC before filing an appeal in court. Meanwhile, pipeline construction and eminent domain proceedings may proceed. While the case involves the Natural Gas Act, FERC also issues tolling orders under the Federal Power Act, meaning there could be implications for entities regulated under that statute, as well.

During the three-and-a-half hour telephonic session, the judges questioned petitioning landowners’ counsel, Siobhan Cole of White and Williams LLP, and FERC counsel Robert Kennedy, on whether there was statutory authority for tolling orders, the practical difference between a tolling order and an “honest” grant of rehearing, what a remedy might look like, and related issues. Several judges appeared skeptical of FERC’s tolling order practice, but it was unclear what the remedy might be.

Multiple judges questioned whether tolling orders were authorized under the Natural Gas Act. In relevant part, the Natural Gas Act (NGA) states that “[u]pon such application [for rehearing] the Commission shall have power to grant or deny rehearing or to abrogate or modify its order without further hearing. Unless the Commission acts upon the application for rehearing within thirty days after it is filed, such application may be deemed to have been denied.” Kennedy took the position that FERC “acts upon” a request for rehearing when it issues a tolling order. Cole, on the other hand, argued that FERC only has authority to “grant or deny rehearing” or “abrogate or modify” its order, and that a tolling order does none of these things.

Several judges questioned whether Cole was arguing that FERC must make a final decision within 30 days. They seemed sympathetic to the idea that the issues in certificate orders can be complex and may take more than 30 days to resolve. Cole answered that FERC must decide whether to grant or deny rehearing within 30 days, but that it can decide to grant rehearing while also giving itself more time to work through complicated issues. Several judges seemed receptive to this idea, highlighting a section of FERC’s regulations that allows it to grant rehearing and requires parties to file briefs providing further information. Under this option, FERC theoretically would not have to issue a full order on the merits within 30 days, but would commit to ultimately granting rehearing. It seemed unclear, however, if there was any limit on how long FERC could give itself to work through the issues.

The judges also grappled with whether such an “honest” grant of rehearing — where FERC would grant rehearing but take the time it needs to fully decide complicated issues — would really provide a remedy, or whether it was just a difference of “semantics.” According to Cole, the concern is that when FERC issues a tolling order, the district courts treat the underlying certificate order as final, allowing pipelines to continue with eminent domain proceedings and pipeline construction. Conversely, the certificate order is not considered final for purposes of appeal, creating a situation where pipeline construction continues but landowners have no legal redress. Cole clarified in response to one question that her clients would be satisfied with the opportunity to go to court after FERC takes action, be it via a tolling order or grant of rehearing. She also stated that the “finality of an underlying certificate order has to be stripped away as soon as rehearing is granted” in order to prevent inherent unfairness. But the judges seemed to struggle with the idea that FERC could decide to grant rehearing, without issuing a final order on the merits, while still somehow allowing parties to go straight to the appellate courts for review.

Kennedy countered that Cole’s request was contrary to Congress’ intent in enacting the NGA, pointing out that the NGA explicitly allows land to be seized under eminent domain and pipeline construction to proceed when approvals are under review. He also stated that an “honest” grant of a request for rehearing would not necessarily affect the underlying certificate order. He said that while FERC has the discretion to halt pipeline construction while it considers a request for rehearing, there is nothing in the NGA mandating that it must do so. Kennedy’s response on this point drew some skepticism, with at least one judge questioning how FERC could grant rehearing of a certificate order, signaling that the order was no longer its final word on the subject, and yet still treat the order as final for all practical purposes. Kennedy also argued that a grant of rehearing for further consideration without a final order on the merits would not be appealable.

Kennedy highlighted to the judges that FERC is now prioritizing landowner petitions, and has recently reallocated resources and personnel such that it can more quickly process requests for rehearing of certificate orders. When asked by Judge Judith Rogers why this was not a satisfactory outcome for her clients, Cole responded that FERC has said only that it will “try” not to issue more tolling orders.

One day after the oral argument, U.S. Rep. Jamie Raskin (D-Md.), the chairman of the Subcommittee on Civil Rights and Civil Liberties, released a video report outlining preliminary investigative findings on FERC’s pipeline approval process and use of tolling orders. The report found that in the past 20 years, FERC has granted 1,021 certificates, while rejecting only six. It also stated that in the last 12 years, FERC issued a tolling order to every single landowner who requested a rehearing and that in every case FERC eventually denied the request. About seven months, on average, passed between the time a landowner made a request for rehearing and when FERC ultimately denied it.