Dive Brief:

• Federal regulators, under scrutiny from the D.C. Circuit Court of Appeals, issued an order Wednesday prohibiting natural gas pipeline developers from beginning construction on a project until regulators act on rehearing requests.
• The order addresses in part issues raised during the court's April en banc hearing in Allegheny Defense Project v. FERC. The case centers on the Federal Energy Regulatory Commission's (FERC) practice of continuously delaying requests for rehearing under the Natural Gas Act. Petitioners argued in part that the commission has been delaying requests for rehearing indefinitely, while allowing construction on controversial pipeline projects to proceed.
• FERC Commissioner Richard Glick dissented in part to the order. Though the order is "a step in the right direction," it does not address the concern that pipeline developers can still begin to condemn private land before the landowner is able to challenge the developer's ability to do so, he said.

Dive Insight:

Language in the Federal Power Act (FPA) and the Natural Gas Act (NGA) prevents litigation on an order until the commission makes a ruling on requests for rehearing, but FERC is able to delay those requests through tolling orders. 

Critics say the practice has led to a legal "purgatory" of opposition to critical orders on wholesale power markets, and favors pipeline developers by allowing projects to move forward dispute despite legal challenges. 

"Tolling is a Kafkaesque process that should have no place in how FERC operates. It makes no sense to allow land to be seized and construction to proceed before a FERC decision can be challenged in court," John Moore, director of the Sustainable FERC Project at the Natural Resources Defense Council, told Utility Dive in an email.

Though the Allegheny case focuses on the NGA and pipeline construction in particular, advocates say a favorable interpretation of the gas law would likely lead to a change in policy on the FPA as well.

FERC reasoned in its April defense that the commission needs to preserve its ability to address complex requests in longer timeframes if necessary, an argument backed by utility trade group Edison Electric Institute. 

"The rehearing process serves as a mechanism for the Commission to carefully consider the arguments presented, in order to resolve disputes or bring its expertise to bear on complex, technical matters before they are potentially presented to the courts," according to FERC.

But in response to "the serious concerns posed by the possibility of construction proceeding prior to the completion of Commission review" FERC on Wednesday determined developers would not be able to proceed with construction while such a review is pending.

"This rule ensures that construction of an approved natural gas project will not commence until the Commission has acted upon the merits of any request for rehearing, regardless of land ownership," the commission wrote in its order.

Three of the four commissioners voted in favor of the order, which did not address Alleghany outright, but rather categorized the move as part of Chairman Neil Chatterjee's broader "efforts to protect stakeholders."

"The Commission has undertaken a number of initiatives to improve affected landowners' access to a fair and transparent process and today's effort is another important step forward," Chatterjee said in a statement. "These are complex issues, with a diverse array of stakeholder input, but I remain firmly committed to doing what we can to make the FERC process as fair, open, and transparent as possible for all those affected while the Commission thoroughly considers all issues."

But Commissioner Glick said the order was likely a direct response to the case in front of the D.C. Circuit.

"It is readily apparent that today's final rule attempts to address some of the concerns raised in the Allegheny Defense Project v. FERC proceeding," he wrote in his partial dissent.

He also expressed concern that the order still allows a company to exercise eminent domain over a plot of land, even if the landowner in question has raised legal issues with that condemnation.

Once a pipeline development company secures a certificate of public convenience and necessity from FERC, that company can exercise eminent domain authority on a plot of private land, allowing it to seize the property under government authority. This issue was raised with the eleven-judge D.C. Circuit panel during the April hearing, Glick noted in his dissent.

"Eminent domain is among the most significant actions that a government may take with regard to an individual's private property. And the harm to an individual from having his or her land condemned is one that may never be fully remedied, even in the event they receive their constitutionally required compensation," he wrote. "Bearing those basic facts in mind, there is something fundamentally unfair about a regulatory regime that allows a private entity to start the process of condemning an individual's land before the landowner can go to court to contest the basis for that condemnation action."

NRDC agreed condemnation should be addressed as well by FERC.

"The steps announced by FERC are a first step in correcting this egregious process, although FERC also should prohibit the initiation of land seizures during the pendency of court appeals," said Moore. "We look forward to seeing the decision from the D.C. Circuit."