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Environment & Energy Report

Judges Dissect Pipeline Review Process Called ‘Kafkaesque’ (1)

April 27, 2020, 5:15 PMUpdated: April 27, 2020, 6:47 PM

Federal regulators could be forced to update their review process for pipeline challenges after judges scrutinized the fairness of a longstanding policy that often keeps opponents out of court while a company builds a project.

The full slate of active judges from the U.S. Court of Appeals for the District of Columbia Circuit convened via teleconference Monday for a dispute over the Federal Energy Regulatory Commission’s use of “tolling orders” to lengthen the time the agency has to resolve complaints about pipeline approvals.

The seemingly bureaucratic debate has sweeping on-the-ground implications for energy companies, landowners, and environmentalists. A ruling against FERC could require the agency to process challenges faster, giving project opponents a better chance of blocking construction in court.

The 11-member court didn’t appear to reach clarity on the legal issues at play during more than three hours of arguments. Several judges seemed sympathetic to the notion that tolling orders result in unfairness, but questioned how an alternative process would work.

Siobhan Cole, representing Pennsylvania landowners in the path of the Atlantic Sunrise gas pipeline, frequently returned to the same point: FERC shouldn’t be allowed to frame an order as final enough for developers to move forward with construction, but not final enough for opponents to go to court.

The D.C. Circuit now has the opportunity to “right that wrong,” the White and Williams LLP attorney argued.

“Would that cause practical problems for the commission and the way it operates, if you lived in that world?” Judge David S. Tatel asked FERC at one point, getting to the heart of some judges’ apparent apprehension about the case.

How Tolling Orders Work

The legal debate centers on the Natural Gas Act, which says pipeline opponents must generally file an administrative petition with FERC and wait for the commission to resolve it before going to court to fight a project.

The statute gives FERC 30 days to act on petitions. But the agency routinely issues tolling orders that extend the review period indefinitely. Pipeline construction often moves ahead in the meantime, while challengers are blocked from court because their petition is still unresolved.

FERC lawyers say they need that additional time to review complicated pipeline challenges, and they note that the Natural Gas Act merely requires the agency to “act” on a petition within 30 days, not resolve it.

Critics say the process violates their constitutional rights to due process and runs counter to the intent of Congress.

“Congress made it clear that parties who want to challenge a FERC pipeline approval have a right to timely judicial review,” Sierra Club attorney Elly Benson, who represents environmental groups in the case, told Bloomberg Law before Monday’s arguments.

The Sierra Club has received funding from Bloomberg Philanthropies, the charitable organization founded by Michael Bloomberg. Bloomberg Law is operated by entities controlled by Michael Bloomberg.

Precedent

The D.C. Circuit effectively upheld the use of tolling orders in a 1969 case involving electric rates under the Federal Power Act, whose structure largely mirrors the Natural Gas Act.

A three-judge panel last year cited that precedent and sided with FERC when Pennsylvania landowners challenged the agency’s approval of Transcontinental Pipeline’s Atlantic Sunrise gas project, and took aim at FERC’s use of tolling orders.

Judge Patricia A. Millett, however, issued a scathing concurrence, calling the process “Kafkaesque.” Atlantic Sunrise is already in the ground, on the challengers’ land, before they’ve had a chance to fully litigate their claims against it.

The D.C. Circuit in December agreed to take the rare step of hearing the dispute en banc—before all the court’s active judges. Three-judge panels can’t overturn circuit precedent, but the en banc court can.

Millett pressed her concerns during Monday’s arguments, asking FERC’s lawyer whether there’s any limit on how long the agency can use tolling orders to prolong its review of a request, barring judicial review in the meantime.

Agency attorney Robert M. Kennedy responded that there’s no limit under the Natural Gas Act.

What’s Final?

FERC understands landowners’ general frustration with the process, and has vowed to speed up its processing of rehearing requests, Kennedy said. But, he added, that doesn’t change the fact that the agency has authority to issue tolling orders.

When Judge Judith W. Rogers questioned Cole on that policy, the landowners’ attorney responded that a general agency effort to improve its process doesn’t protect her clients’ due process rights.

Several of the judges struggled to game out how the elimination of tolling orders would affect FERC’s rehearing process. They questioned whether FERC would have unlimited time to drill down on the substance of arguments after deciding to rehear a case, and if so, whether that would really be different from a tolling order.

“A lot of this is semantics,” Judge Neomi Rao said.

Further, multiple judges asked, would a rehearing grant invalidate the underlying clearances for pipeline approval and construction?

Kennedy argued that a true grant of a rehearing request wouldn’t necessarily affect the underlying pipeline approval. Judge Gregory G. Katsas pushed back, questioning how the agency could treat the approval as final when it’s “no longer its final word.”

Judges Thomas B. Griffith and Merrick Garland suggested various options for the court to sideline tolling orders without answering all the resulting legal questions.

The landowners’ arguments meandered somewhat as judges raised a series of hypotheticals and explored different potential outcomes. Cole clarified to Chief Judge Sri Srinivasan that her clients would be satisfied if they had the opportunity to go to court after FERC takes action—tolling order or otherwise—on a rehearing petition.

Saul Ewing Arnstein & Lehr LLP attorney John F. Stoviak, representing Transco, made a brief appearance during oral arguments, urging the court to avoid “cataclysmic” effects on the Atlantic Sunrise pipeline if judges decide to set new restrictions on tolling orders.

The case is Allegheny Defense Project v. FERC, D.C. Cir. en banc, No. 17-1098, oral arguments 4/27/20.

(Additional comments by judges and attorneys throughout.)

To contact the reporter on this story: Ellen M. Gilmer in Washington at egilmer@bloombergenvironment.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergenvironment.com; Renee Schoof at rschoof@bloombergenvironment.com

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