... Washington Watch: Changes at FERC Could Lead to Future Drama - North American Energy Pipelines

Washington Watch: Changes at FERC Could Lead to Future Drama

This column discusses changes at the Federal Energy Regulatory Commission (FERC), changes that will determine not only who makes decisions, but also how and when they are made.

“The results of political changes are hardly ever those which their
friends hope or their foes fear.”

— Thomas Huxley

Hail and Farewell

On Sept. 4, Commissioner Bernard McNamee (R) left FERC to return home to Richmond, Virginia, and spend more time with family. McNamee served less than two years, but during that time was instrumental in working with Chairman Neil Chatterjee (R) and former Commissioner Cheryl LaFleur (D) to secure approval of several key natural gas pipeline and liquefied natural gas projects, which had languished while FERC was deadlocked on how to conduct environmental analysis for infrastructure projects. With McNamee’s departure, FERC has only three commissioners — the Chairman, Commissioner James Danly (R) and Commissioner Richard Glick (D). However, President Donald Trump appointed two nominees to fill the vacancies.

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McNamee’s Republican replacement is Mark Christie. Since 2004, Christie has been a commissioner at the Virginia State Corporation Commission, which regulates the public utilities, insurance and financial industries. Christie grew up in West Virginia, graduated Phi Beta Kappa from Wake Forest University and received a law degree from Georgetown University. Prior to being a regulator, he served as a Marine Corps officer. He has also taught courses at the University of Virginia School of Law, Virginia Commonwealth University and European universities through the Fulbright program. If confirmed, Christie’s term will expire in June 2025.

The Democrat nominee is Allison Clements, who lives in Salt Lake City, Utah, where she is the founder and president of Goodgrid LLC, a clean energy consulting firm. Clements received an undergraduate degree from the University of Michigan and a law degree from the George Washington University. After practicing law at large firms, Clements worked at the Natural Resources Defense Council, where she was an attorney and director of the Sustainable FERC Project, seeking to deploy clean energy resources. If confirmed, Clements’ term will expire in June 2023.

Once Clements and Christie are confirmed, FERC will have five commissioners for the first time since July 2018. Chatterjee pledged to serve his full term, which expires in June 2021. This could make things interesting, if Joe Biden wins the presidential election. For example, the Republican majority could block an initiative of the new chairman (Glick or Clements). On the other hand, the new chairman may decline to place natural gas infrastructure projects on the FERC meeting agenda, unless the draft orders address environmental issues, such as the Social Cost of Carbon. Each side may need to compromise to achieve any progress. Further, once Chatterjee departs, an evenly divided FERC could stall major initiatives and natural gas infrastructure with two-to-two votes. In other words, FERC drama may continue.

Tolling Orders Revisited

Last summer, the DC Circuit in Allegheny Defense Project v. FERC held that FERC does not have authority to issue “tolling orders,” which grant rehearing requests “for the limited purpose of further consideration.” FERC developed tolling orders because, under the Natural Gas Act (NGA), rehearing requests are denied by operation of law, if not acted upon within 30 days. Tolling orders paused the 30-day clock, giving FERC more time to issue substantive rehearing orders, but they also delayed judicial review, which under the NGA cannot occur until after denial of a rehearing request. The court found this unfair, especially when pipelines exercise eminent domain and begin construction on contested projects before opponents can appeal. The court stayed the effectiveness of its opinion until early October, allowing time for (1) FERC to determine how to implement the court’s opinion and (2) the United States Solicitor General and the Department of Justice, in consultation with FERC, to decide whether to ask the Supreme Court review the DC Circuit opinion, that is, file a writ of certiorari.

FERC took two steps to implement the court’s opinion. First, before the DC Circuit ruled, FERC changed its regulations to prevent natural gas pipelines from constructing facilities, if the certificate order is subject to a pending rehearing request. Second, instead issuing tolling orders that “grant rehearing for the limited purpose of further consideration,” FERC now issues a “notice of denial of rehearing by operation of law and providing for further consideration.” Although the “Notice of Denial” and the tolling order look a lot alike, there is a significant difference. After issuing a tolling order, FERC had unlimited time to consider and substantively address a rehearing request. However, after FERC issues a Notice of Denial, an aggrieved party can immediately file an appeal, which means FERC has a limited amount of time for that further consideration. Specifically, after an appeal is filed, FERC and the court share concurrent jurisdiction until FERC transfers the record to the court, which usually occurs about 40 days after the appeal is filed. During this period, FERC can still modify the order under appeal. In sum, FERC now has approximately 70 days — 30 days before the Notice of Denial and approximately 40 days before the record transfers — to issue a substantive order addressing any rehearing request. Further, although Allegheny involved an NGA tolling order, FERC issues the Notice of Denial in both natural gas and electric proceedings.

Against this backdrop, Chatterjee and Glick issued a rare joint statement asking Congress for more time to act on rehearing requests and make clear that pipelines cannot exercise eminent domain on projects subject to rehearing requests. Whether the joint request results in new Congressional legislation remains to be seen. However, on May 22, in anticipation of the Allegheny opinion, a pair of bills addressing FERC rehearing requests were introduced: HR 6963, introduced by Representative Sean Casten (D-Ill.), would require FERC to act on FPA rehearing requests within 120 days; and HR 6982, introduced by Representative Tom Malinkowski (D-N.J.), would require FERC to act on NGA rehearing requests within 60 days and prohibit a pipeline from exercising eminent domain pursuant to a certificate order with a pending rehearing request. Both bills are now pending in committee.

As for Supreme Court review, FERC had until Sept. 28 (90 days from the date Allegheny was issued) to file the writ of certiorari. By the time this column is published, the Solicitor General and the Justice Department (in consultation with FERC) will have made a decision. There is a compelling case for seeking Supreme Court review: the tolling orders allow FERC to manage a large case load and address complex, technical matters prior to judicial review; and, significantly, the courts have approved of the practice for more than 50 years. However, it would be a long shot for the Court to grant “cert.” Each year, the Supreme Court receives approximately 7,000 requests for certiorari, but only grants 100 to 150 requests. Even if the Court hears the appeal, it would be hard to put the genie back in the bottle, leading some to predict that no writ of certiorari will be filed and that FERC will put tolling orders in the rearview mirror.

“He who lives by the crystal ball will eat shattered glass.”

— Ray Dalio

Washington Watch is a regular report on the oil and gas pipeline regulatory landscape. Steve Weiler is partner at Dorsey & Whitney LLC in Washington, D.C. Contact him at weiler.steve@dorsey.com.

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