En Banc D.C. Circuit Delivers Big Win for Landowners

The U.S. Court of Appeals for the D.C. Circuit rejects a procedural trick used by FERC to avoid judicial review.

On Tuesday, the U.S. Court of Appeals for the D.C. Circuit issued an en banc decision that is good news for landowners and environmental advocates se eking to challenge decisions by the Federal Energy Regulatory Commission approving the construction of energy infrastructure. In Allegheny Defense Project v. FERC, the court voted 10-1 to reject a procedural trick used by FERC to prevent landowners affected by such decisions from obtaining judicial review.

Judge Millett wrote for the court. Her opinion begins:

Before a party aggrieved by an order of the Federal Energy Regulatory Commission can obtain judicial review, that party must file an application for rehearing with the Commission. Congress directed that, if the Commission fails to act on that rehearing application within thirty days, the application may be deemed denied, allowing the aggrieved party to proceed to federal court.

The question in this case is whether the Commission can eliminate that statutorily prescribed consequence of its inaction—and, in doing so, stave off judicial review—by issuing a tolling order that takes no action on the application other than buying the Commission more time. We hold that, under the plain statutory language and context, such tolling orders are not the kind of action on a rehearing application that can fend off a deemed denial and the opportunity for judicial review. We therefore deny the Commission's and Intervenor's motions to dismiss the petitions filed after thirty days of Commission inaction.

In this particular case, private landowners were trying to challenge FERC's approval of Transco's Atlantic Sunrise Project, which was slated to be built across their land. After FERC approved the project, the landowners (and some allied environmental groups) filed petitions for reconsideration with FERC. As had become FERC's practice, FERC "tolled" these petitions, thereby precluding judicial review of FERC"s decision and allowing Transco to proceed with the pipeline's construction and condemn portions of the landowners' property. So from the landowners' perpective, FERC's order was "final" in that it allowed construction across their land, but was not "final" for purposes of obtaining judicial review. As Judge Millett commented in her concurrence to the original panel decision upholding FERC's position under circuit precedent:

In cases involving private property rights, the Commission has transformed this court's decisions upholding its tolling orders into a bureaucratic purgatory that only Dante could love.

Here's more from Millett's June 30 opinion for the en banc court:

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. As the Commission acknowledged at oral argument, absent some special need for "quick action," it enters tolling orders "almost as a matter of routine," as it did in this case. . . .

The use of these tolling orders has real-world consequences. In practice, they can prevent aggrieved parties from obtaining timely judicial review of the Commission's
decision. As mentioned, Section 717r provides that a rehearing application may be deemed denied if the Commission does not act upon it within thirty days. 15 U.S.C. § 717r(a). But through the use of tolling orders, the Commission has eliminated entirely the jurisdictional consequences of its inaction, preventing rehearing applications from being deemed denied even after they have been pending for prolonged periods of time. In this case, the Commission used tolling orders to give itself roughly ten times as long as the statute allots for it to act.

On top of that, the Commission and private certificate holders use its tolling orders to split the atom of finality. They are not final enough for aggrieved parties to seek relief in court, but they are final enough for private pipeline companies to go to court and take private property by eminent domain. And they are final enough for the Commission to greenlight construction and even operation of the pipelines. Tolling orders, in other words, render Commission decisions akin to Schrödinger's cat: both final and not final at the same time.

That asymmetrical finality timetable has become commonplace in Commission cases. For the 114 natural gas pipeline cases pending before the Commission from October 1, 2008 through February 19, 2020 in which any party—landowner or otherwise—requested a rehearing, the Commission authorized construction to begin before resolving the rehearing request on the merits in 64% of the cases.

Sitting en banc, the D.C. Circuit was able to correct this problem, as it did, ruling 10-1 that FERC lacked the authority to prevent judicial review by tolling petitions for reconsideration of its decisions in this manner.

Judge Griffith, joined by Judges Katasas and Rao, wrote separately about some of the other problems landowners face seeking to protect private property in FERC proceedings.

I join the opinion for the court. The Commission "acts upon" an application for
rehearing by taking one of the four enumerated actions in 15 U.S.C. § 717r(a). And the Commission has all but conceded that the order in this case was not a "grant [of] rehearing" under the statute but merely "some action" designed to forestall a deemed denial. . . . But "tolling orders" are just one part of the legal web that can ensnare landowners in pipeline cases. Even after today's decision, that web consists of three strands: delayed judicial review, uninterrupted construction, and district courts' swift transfer of property. I write separately to clarify that the first factor, delayed review, is not the primary driver of unfairness, and to note possibilities for curtailing the remaining factors. . . .

Deferred judicial review, on its own, doesn't necessarily harm landowners. That harm stems from the Commission's actions in the interim. And the Commission has long issued construction orders—essentially qualified permission slips to begin bulldozing—while its "rehearing" is ongoing and before an Article III court has weighed in. . . . In recent weeks, however, the Commission has proven capable of changing course in the face of public criticism. After oral argument, the Commission formally amended its rehearing regulations to "preclude[] the issuance" of construction orders "while rehearing of the initial order[] is pending." Order No. 871, Limiting Authorizations to Proceed with Construction Activities Pending Rehearing, 171 FERC ¶ 61,201, at 5 (June 9, 2020). This welcome change defangs much of the injustice associated with deferred judicial review. But if the Commission ever reverts to its old policy, that approach would be ripe for a challenge under the Administrative Procedure Act. Approving irreversible construction in the midst of a properly substantive rehearing might qualify as arbitrary and capricious. . . .

The court's decision rightly jettisons the Commission's signature stalling tactic. But it doesn't alter the fact that the Commission can postpone review by granting rehearing. Those concerned about potential abuse of that power should take heart: The Commission's recent rule change is a major step in the right direction, and courts possess other tools to protect landowners.

As noted above, there was one dissent from this opinion: Judge Henderson. She wrote separately arguing that the court should adhere to its prior precedent, leaving any decision to reinterpret or amend the Natural Gas Act to the Supreme Court or Congress, respectively.

It is important to note that this decision does not change the substantive standards governing review of FERC decisions, and in this case the landowners' challenge on the merits ultimately failed. The decision is nonetheless important because it ensures that landowners (and others, such as environmental advocates) will obtain their day in court, and that is no small thing.