The U.S. Court of Appeals for the D.C. Circuit, sitting en banc, has ruled that the Federal Energy Regulatory Commission (FERC) cannot delay the time for a judicial appeal by issuing a tolling order. FERC's long-standing practice of granting rehearing solely for the purpose of further consideration (tolling orders), the court ruled, is contrary to the plain language of the Natural Gas Act (NGA).

Although the ruling directly applies only to the NGA, indications are that the ruling will be applied to cases under the Federal Power Act (FPA) too. In the long term, this ruling should be beneficial in quickening the pace of issue resolution, but in the short term it raises some difficult transitional issues about the time to seek judicial review in cases where FERC issued tolling orders months and years earlier.

Judicial Review under the NGA

The judicial review provisions of the NGA require a person aggrieved by a FERC order to request rehearing from FERC prior to filing for judicial review. The statute provides that FERC can grant or deny rehearing, or abrogate or modify its order, but unless FERC acts on the application for rehearing within 30 days, the application is deemed denied. At that point, the aggrieved person can file a petition for review in a court of appeals.

FERC has long had the practice of issuing a tolling order, which does not act on the merits of a rehearing request, to provide itself with more than 30 days to consider a rehearing request, and D.C. Circuit precedent had approved that practice. However, the practice has become routine in every case and FERC's delays in acting on rehearing have become very long, stretching to years in some cases.

Case Background

The case considered by the D.C. Circuit presented compelling facts for the court's ruling. Landowners and others (Petitioners) sought to appeal orders granting a certificate of public convenience and necessity authorizing the construction of a new natural gas pipeline and a new right of way. Two weeks after the order issued, the pipeline initiated condemnation proceedings to obtain the right of way for the pipeline. The Petitioners filed for rehearing and stay at FERC.

At the end of the 30-day statutory period for FERC action, FERC issued a tolling order but no action was taken on the stay motion. The Petitioners then petitioned for review in the Court of Appeals and FERC and the pipeline moved to dismiss on the grounds that the court lacked jurisdiction until FERC acted on rehearing. These are the motions considered by the en banc court.

Additional rounds of rehearing and appeals followed. However, while the rehearing and appeal processes were pending, the pipeline pressed forward with the condemnation proceedings and requested FERC permission to begin construction, both of which were granted. After the pipeline started construction on the landowners' property, FERC denied rehearing, and by the time the Court of Appeals heard the first of two oral arguments, the pipeline had been constructed and placed in operation.

FERC's use of tolling orders prevented aggrieved parties from obtaining timely judicial review, the court found, in a way that is at odds with the plain language of the statute. The court ruled that FERC has no statutory authority to defer the time for judicial review by failing to act on a rehearing application. Instead, within 30 days after rehearing is requested, the statute allows FERC to (i) grant rehearing on the merits; (ii) deny rehearing on the merits; (iii) abrogate the order; or (iv) modify the order. If FERC fails to take one of these four actions within 30 days, then the rehearing is deemed denied and the aggrieved person can file a petition for review within 60 days thereafter.

The court recognized that the statute gives FERC concurrent jurisdiction with a court of appeals until the agency record is filed with the court, so that during the period before the record is filed, FERC has the authority to modify or set aside all or parts of its order. Once the record is filed, which is at least 40 days after a petition for review is filed, the court may grant an extension to FERC, but any additional time is under the supervision of the court.

Impact on FPA Judicial Review

Although the court's ruling directly applies only to the NGA, the judicial review provisions of the FPA are identical, so the court can be expected to apply its ruling to the FPA. In fact, the opinion cites precedent and practices under the FPA interchangeably with NGA precedents and practices.

FERC itself appears to be taking the position that the court's ruling will apply equally to the FPA because the day after the opinion issued, FERC changed its tolling order practice under that Act. Instead of granting rehearing for the purpose of further consideration, FERC issued a notice that rehearing was denied by operation of law, but indicating that the rehearing request would be addressed in a future order "consistent with the requirements" of the statute. Citing the judicial review provision of the FPA, the notice states that FERC may modify or set aside its order, in whole or in part, "in such manner as it shall deem proper."

While this change of practice will enable aggrieved parties to go immediately to court, so that the court can supervise the length of FERC's further consideration, it leaves unaddressed the short-term, transitional issues for parties that were stuck with tolled rehearing petitions under the prior practice. When does the time for filing a petition for review start – when FERC acts on the merits of the rehearing petition under the prior practice, within 60 days after the D.C. Circuit's en banc opinion, or has their time to appeal passed? Any of DWT's FERC specialists would be glad to work with parties in FERC cases to determine how best to protect your interests in an individual case.