FERC Amends Regulations, Precludes Natural Gas Facility Construction While Rehearing Is Pending

June 12, 2020

On June 9, 2020, the Federal Energy Regulatory Commission (FERC) issued a final rule amending its regulations to ensure that construction of an approved natural gas project will not commence until FERC has acted upon the merits of any request for rehearing. Specifically, FERC added new § 157.23 to its regulations, which states the following:

With respect to orders issued pursuant to 15 U.S.C. 717b or 15 U.S.C. 717f(c) authorizing the construction of new natural gas transportation, export, or import facilities, no authorization to proceed with construction activities will be issued:
(a) until the time for the filing of a request for rehearing under 15 U.S.C. 717r(a) has expired with no such request being filed, or
(b) if a timely request for rehearing is filed, until the Commission has acted upon the merits of that request.

Prior to the rule change, a certificate holder could commence construction as soon as it met the environmental conditions in a FERC certificate order and obtained a FERC order issuing a notice to proceed. Construction could begin even if there were pending requests for rehearing or if FERC issued an order “tolling,” or extending, the amount of time for it to issue an order on rehearing. The U.S. Court of Appeals for the D.C. Circuit, sitting en banc, recently held oral argument on the legality of FERC’s practice of issuing such “tolling” orders. (For details, see McGuireWoods’ May 11, 2020, legal alert.) Interestingly, FERC’s new rule seems to address one of the arguments advanced by challengers to FERC’s use of tolling orders — that authorizing construction to commence while agency rehearing is pending is contrary to due process. Review of the issue is still pending.

In a press release accompanying the rule’s issuance, FERC characterized the rule as a “critical step” to protect landowners that “reinforce[es] FERC’s commitment to transparency and fairness to the public and [] improve[s] procedural protections for landowners.” Commissioner Richard Glick, however, in his partial dissent, criticized the rule for allowing pipelines to condemn an individual’s land via eminent domain before the landowner has a chance to appeal the basis for the condemnation in court:

[T]his final rule deals only with construction without making any effort to address the exercise of eminent domain during that period when the courthouse doors are closed to landowners seeking to challenge the certificate. That is a shame. And the failure to do anything in that regard is a striking contrast to the Commission’s supposed concern for landowners. Rather than remaining silent on this situation, we ought to do everything in our power to address it and ensure that certificate holders are not permitted to go to court before landowners.

Commissioner Glick’s proposed remedy to this issue is for FERC to adopt a practice of presumptively staying § 7 Natural Gas Act (NGA) certificates pending FERC action on the merits of any timely filed requests for rehearing. According to Commissioner Glick, a practice along those lines would help protect landowners from an action seeking to condemn their property by delaying the issuance of the condition precedent for a condemnation action pursuant to the NGA.

FERC did not issue a notice of proposed rulemaking before issuing this rule, claiming that the rule concerns only matters of agency procedure and is therefore exempt from the Regulatory Flexibility Act of 1980. The rule will take effect 30 days from publication in the Federal Register.