Are FERC’s Tolling Orders “Kafkaesque”?
January 30, 2020
On March 20, 2020, all of the members of the U.S. Court of Appeals for the District of Columbia Circuit (“Court”) will hear arguments challenging the Federal Energy Regulatory Commission’s (“FERC”) use of so-called “tolling orders.” The Court’s decision in this matter could have major impacts on FERC, which routinely fails to issue substantive orders on rehearing in a timely manner.
Parties that object to any FERC order have 30 days to file a request for rehearing of such decision. Congress statutorily requires FERC to issue orders addressing challenges to their initial orders within 30 days of the filing of requests for rehearing. Both the Federal Power Act (“FPA”) (16 U.S.C. § 8251(a)) and the Natural Gas Act (“NGA”) (15 U.S.C. § 717r(a)) expressly state that “Unless [FERC] acts upon the application for rehearing within thirty days after it is filed, such application may be deemed to have been denied.” In practice, however, FERC has routinely met this statutory requirement by issuing what are called “tolling orders” within 30 days after requests for rehearing are filed at FERC.
FERC’s tolling orders are normally entitled an “Order Granting Rehearing for Further Consideration”. Such orders frequently state that “in order to afford additional time for consideration of the matters raised or to be raised, rehearing of the Commission’s order is hereby granted for the limited purpose of further consideration, and timely-filed rehearing requests will not be deemed denied by operation of law. Rehearing requests of the above-cited order filed in this proceeding will be addressed in a future order.” In other words, FERC simply “tolls” the 30-day requirement under law that it either issue a substantive order or have the request for rehearing deemed to be denied.
This 30-day time limitation is very significant, in part, because aggrieved parties are only entitled to seek appellate review of FERC orders after FERC has issued an order denying a request for rehearing. Therefore, until FERC issues an Order on Rehearing, parties are effectively prevented from seeking legal redress from a FERC order.
The consequences of tolling orders might not be too significant if FERC routinely issued Orders on Rehearing in a relatively timely manner. That, however, has not been FERC’s common practice for many decades. In part due to the complexity of cases, FERC does not issue some Orders on Rehearing until 6 to 12 months (or more) after parties file requests for rehearing with FERC. During this “tolling period”, parties that are aggrieved by a FERC order have no practical recourse.
The subject Court hearing on FERC’s use of tolling orders is based, in part, upon a situation where FERC had issued an order on February 3, 2017 granting a certificate of public convenience and necessity to an interstate pipeline, Transcontinental Gas Pipe Line Company (“Transco”). This certificate allowed Transco to condemn property along the pipeline’s proposed right of way and to commence construction of the pipeline. Affected landowners filed timely requests for rehearing of FERC’s certificate decision, and on March 3, 2017 FERC issued a tolling order in which it offered no explanation whatsoever for its delay in responding to the rehearing requests. FERC did not issue a final, appealable certificate decision, however, until December 6, 2017, several months after Transco had already begun construction of the pipeline.
The affected landowners ultimately sought judicial review of the matter, and the Court issued its decision on August 2, 2019 upholding FERC’s certificate order. Judge Patricia Millett, one of the Court judges deciding the matter, concurred with the Majority that Circuit Court precedent “tied [the Court’s] hands” in objecting to FERC’s use of tolling orders. Judge Millett argued in a concurring opinion, however, that FERC’s tolling orders were basically inequitable:
[FERC] has twisted our precedent into a Kafkaesque regime. Under it, [FERC] can keep homeowners in seemingly endless administrative limbo while energy companies plow ahead seizing land and constructing the very pipeline that the procedurally handcuffed homeowners seek to stop. [FERC] so by casting aside the time limit on rehearing that Congress ordered—treating its decision as final-enough for the pipeline companies to go forward with their construction plans, but not final for the injured landowners to obtain judicial review. . . My concern is about fair process and, in particular, the ability of those who are directly injured—the individuals whose property is taken in whole or in part by Commission order—to have their day in court before it is too late. [Concurring opinion, p. 1]
Some have defended FERC’s practice of issuing tolling order because: (1) the 30-day requirement in the FPA and the NGA are simply too short to afford FERC a reasonable opportunity to review allegations of error in its decisions; and (2) parties are permitted to seek stays or interim relief from the courts.
In practice however, FERC’s final orders on rehearing generally just endorse the initial order; and thus, in a practical sense, the majority of rehearing requests “may be deemed to have been denied”. Second, courts do not uniformly grant stays or interim relief while FERC orders are pending rehearing. In the Transco pipeline matter, for example, the landowners promptly sought relief from federal courts. However, both FERC and Transco sought dismissal of the landowner’s petitions as “incurably premature”, because FERC had not resolved the pending rehearing requests; the court denied the request for stay.
Moreover, the Transco situation is not an isolated example. On December 19, 2019, FERC issued a critically important PJM Interconnection, L.L.C. (“PJM”) order implementing Minimum Offer Pricing Rule (“MOPR”) price floors in Docket No. EL18-178-000, et al., for many new resources that arguably receive State subsidies (“Order”). On January 21, 2020, over 30 parties filed requests for rehearing regarding provisions of the Order that will significantly affect the financial outcome of PJM’s next capacity auction. It is very likely that FERC will issue a tolling order in February of 2020 that will prevent parties from seeking judicial review of the Order. If FERC does not issue a substantive rehearing order in a timely manner, then the next capacity auction may be conducted without any appellate review. Given the length of time that the Court will take to hear arguments and to issue an opinion, it is conceivable that PJM will conduct more than one capacity auction based upon the Order, prior to a Court decision on the just an reasonableness of the MOPR price floors. Once PJM conducts such capacity auctions, of course, it will be virtually impossible to “squeeze the toothpaste back in the tube” and to ever know what the appropriate capacity prices should have been in PJM’s Region.
On the other hand, a timely decision by the Court regarding the March 20, 2020 arguments could accelerate judicial review by determining that the December 2019 Order should be “deemed to have been denied” by FERC, 30 days after requests for rehearing were filed. This result would be equitable because, as the legal maxim says, “justice delayed is justice denied.”
This Eckert Seamans Energy Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice.
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