August 2020, Vol. 247, No. 8


Federal Court Disallows FERC Use of ‘Tolling Orders’

By Stephen Barlas, Contributing Editor, Washington, D.C.

A federal court tossed out a Federal Energy Regulatory Commission (FERC) policy that the commission has used to extend rehearing periods so it could spend more time examining typically landowner or environmental groups’ complaints about FERC approvals of new construction applications. 

The U.S. Court of Appeals for the District of Columbia in Allegheny Defense Council v. FERC issued July 1, prohibits use of what are called “tolling orders,” which allow the commission to extend the statutory 30-day rehearing period indefinitely. The court indicated there were other legal ways FERC could extend that 30-day period.

It is not clear whom the decision hurts more, the pipeline industry or its opponents. The appeals court did suggest that FERC could legally extend rehearing periods an additional 40 days and maybe more. But there will undoubtedly be pressure now to move more quickly on rehearing decisions, which in essence might help pipelines, since FERC published a final rule on June 30 saying construction cannot begin until rehearing is complete.

Now these tolling orders are out. However, shorter rehearing periods mean opponents can seek injunctions against construction sooner. 

There are likely to be challenges to the D.C. Circuit’s decision in the next few months by FERC and possibly pipeline companies or groups, making the finality of the appeals court’s decision on tolling orders somewhat sketchy. 

In addition, it is not clear whether other appeals courts around the country will regard the decision, according to Michael Pincus, a pipeline industry attorney with Van Ness Feldman. He points out that landowners are required to file a lawsuit against pipeline construction within 60 days of a rehearing decision.

There is some uncertainty now, with tolling orders apparently invalid, whether that 60-day clock can be considered expired for any rehearing currently pending at the FERC. 

“In that situation, parties that wish to seek review in court may still be able to do so in a circuit court other than the D.C. Circuit that still recognizes the validity of tolling order,” Pincus explained.

What has been lost in the appeals court decision is the victory it handed FERC. 

“While the court dismantled FERC’s tolling order practice, it did uphold the underlying certificate order, thereby denying the specific affected landowners any relief,” said Emily P. Mallen, an attorney with Sidley Austin LLP. “FERC thus continued its streak of prevailing on the merits when its certificate orders are challenged in court, if the basis of the challenge is whether FERC properly applied the substantive portions of the [Natural Gas Act] NGA.”

The FERC has used tolling orders extensively, according to the appeals court, which cited one study showing that, between 2009 and 2017, the commission issued tolling orders in response to 99% of all the requests for rehearing of pipeline certification decisions that it received, whether from homeowners or other parties. 

FERC’s use of tolling orders also came under fire from a House subcommittee, which issued preliminary investigative findings on April 28 “showing that the natural gas pipeline approval process used by the FERC unjustly tramples on the rights of private landowners.”

In response to those and other similar statistics, the appeals court said in somewhat scathing language: “The Commission’s use of tolling orders that do nothing more than buy itself more time to act on a rehearing application and stall judicial review has become virtually automatic.”  

A day after the court issued its decision in Allegheny, FERC Chairman Neil Chatterjee and Commissioner Richard Glick issued a joint statement asking Congress to consider 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. 

“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.”

Joan Dreskin, senior vice president, secretary & general counsel, the Interstate Natural Gas Association of America (INGAA),  said, “INGAA is still reviewing the decision by the D.C. Circuit.  That said, we believe that all parties to a pipeline proceeding should have their requests for rehearing heard by FERC in a timely manner so that all parties understand the reasoning behind the Commission’s decision-making.” 

The decision does not throw out the final rule FERC issued on June 30 that prohibits pipelines from beginning construction during a rehearing period. However, that rule does not prevent pipelines that have received construction approval from condemning private property under eminent domain during a rehearing period. Chatterjee and Glick, the latter of whom had complained about the absence of eminent domain relief when FERC issued the final rule, now want Congress to give landowners that additional protection. 

The Allegheny Defense Council and other landowner groups had gone to the Appeals Court to contest the FERC’s 2017 approval of the Atlantic Sunrise pipeline being built by the Williams’ Transcontinental Gas Line Co. subsidiary. The pipeline takes shale gas from 20 counties in northeastern Pennsylvania and carries it to markets in the Mid-Atlantic and southeastern states. 

FERC had undertaken a rehearing and then extended it via a tolling order. The Commission eventually denied the Allegheny/homeowners petition for rehearing in December 2017, more than nine months after rehearing was sought and three months after construction began. The pipeline was completed in the fall of 2018.

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