The FERC today issued Order No. 871-A, seeking further comment on modifications last summer to its regulations under Natural Gas Act Sections 3 and 7 that prohibited initiating pipeline construction, pending timely filing of any rehearing request, or a rehearing order on the merits. The Commission has requested initial briefs promptly, by February 16, and reply briefs by March 3. Perhaps not coincidentally, Order No. 871 is currently pending judicial review.

Order No. 871-A inquires whether the Commission should

  • prohibit construction while a rehearing request is pending, even though traditionally construction could begin before that (i.e., following an order authorizing construction); or
  • prohibit construction only if rehearing requests raise certain issues (presumably requiring that project sponsors wait through the 30 days allotted for filing rehearing applications);
  • specify, in the latter alternative, what issues would trigger the construction prohibition;
  • prohibit construction activities under both NGA Section 3 and Section 7;
  • establish a specified stage of the certification process at which the prohibition should terminate (g., 90 days from the filing of the rehearing request); and
  • reform eminent domain processes around pipeline construction, although this discussion in Order No. 871-A does not address the relevant statutory standards.

Order No. 871-A also seeks to understand how the process contemplated by Order No. 871, issued June 9, 2020, would interact with the D.C. Circuit’s June 30, 2020 Allegheny decision. Order No. 871-A further purports to be effective as of August 2020, creating greater risk for projects between that date and any final order issued following Order No. 871-A.

The circumstances are further complicated by the terms of  Commissioner (now Chair) Glick’s partial dissent regarding Order No. 871, which contended that “[w]e should be doing everything in our power to prevent . . . a patently unfair result” because

a pipeline developer should not be able to begin . . . condemning private land before the owners of that land can go to court to challenge the certificate.  [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 . . .  compensation. . . .  [T]here is something fundamentally unfair about . . . allow[ing] a private entity to start the process of condemning an individual’s land before the landowner can go to court to contest . . . that condemnation. . . .

. . .  [The] Allegheny Defense Project [decision concurrence]. . . . pointed repeatedly to the exercise of eminent domain prior to rehearing as an example of how the . . . use of tolling orders “runs roughshod over basic principles of fair process.”

And yet . . . [Order No. 871] deals only with construction without making any effort to address the exercise of eminent domain during that period when the courthouse doors are closed to landowners. . . .  [W]e ought to do everything in our power to . . .  ensure that certificate holders are not permitted to go to court before landowners.

. . . . [W]e should . . .  presumptively stay[ ] § 7 certificates  pending Commission action on the merits of any timely filed requests for rehearing [to] protect landowners from an action seeking to condemn their property by delaying the issuance of the condition precedent for a condemnation action pursuant to the NGA. [Citations omitted].

The foregoing issues critically impact pipelines and other market participants (e.g., gas-fired generators and utilities). The elimination of construction authorization pending rehearing could effectively undermine many projects’ economics with additional unpredictable delays and escalating costs as their construction becomes hostage to an order on rehearing.  Delay in construction also provides additional openings for alternative energy technologies to access markets in advance of an often-lengthy pipeline construction schedule.  Similarly, a Commission hostile to a new project could effectively bottle it up by issuing an order (in lieu of a tolling order) indicating that the Commission was reconsidering certificate authorization, or terms and conditions that should apply to a certificate.  Further, at what point would underlying environmental studies become stale as the legal process grinds through multiple years of litigation?

This issue is now up in the air, given changes in FERC’s composition and leadership since Order No. 871 was issued, which may change again in a few months, plus the pending court review. Perhaps attempting to mitigate uncertainty, the Commission states it intends to act within 60 days of receiving reply briefs, resulting in an order before the current term of Commissioner Chatterjee (who has the shortest remaining term of any current Commissioner) expires in June.