United States: FERC Revises Policy On Authorizing Pipelines To Commence Construction Pending Requests For Rehearing Of Certificate Orders

On May 4, 2021, FERC issued Order No. 871-B, clarifying that the rule established in Order No. 871, which precludes FERC from authorizing natural gas pipeline companies to proceed with construction of approved pipeline projects, only applies until the earlier of either (a) the date that a qualifying rehearing request is no longer pending before FERC or (b) 90 days following the date that a qualifying request for rehearing may be deemed denied by operation of law. FERC also limited the application of this rule to requests for rehearing that raise issues reflecting opposition to project construction, operation, or need. Finally, FERC announced a general policy to stay Natural Gas Act ("NGA") section 7 certificate orders during the rehearing period and pending resolution of any timely requests for rehearing. Commissioner James Danly dissented, arguing that the need for Order No. 871 is obviated by further developments on appeal of FERC's practice of indefinite tolling orders before the U.S. Court of Appeals for the D.C. Circuit ("D.C. Circuit") and that presumptively staying pipeline project construction is contrary to the NGA and is "bad policy." Commissioner Mark Christie concurred with Order No. 871-B.

Order No. 871 precludes liquefied natural gas and pipeline project construction while FERC considers requests for rehearing (see June 11, 2020 edition of the WER). Three weeks after the issuance of Order No. 871, the D.C. Circuit issued the en banc Allegheny decision prohibiting FERC's long-standing practice of relying upon tolling orders to delay answering requests for rehearing, which raised significant implementation questions for pending and future NGA proceedings (see July 1, 2020 edition of the WER). In response to requests for rehearing of Order No. 871, FERC issued FERC Order No. 871-A to provide interested parties the opportunity to comment on issues raised in the requests for rehearing.

In Order No. 871-B, FERC clarified that the prohibition on issuing authorizations to proceed with construction during the rehearing period will not apply in proceedings where no party has requested rehearing opposing project construction, operation, or need. Likewise, FERC clarified that the prohibition would not apply once a rehearing request has been deemed denied by operation of law due to FERC inaction on the request for 30 days. More specifically, the limit on construction authorization will apply until the earlier of the date that: (1) a qualifying rehearing request is no longer pending before the Commission or (2) 90 days following the date that a qualifying request for rehearing may be deemed denied. FERC published a flowchart illustrating the application of Order No. 871, as clarified.

FERC also announced a general policy of staying section 7 certificates during the rehearing period and pending FERC resolution of any timely-filed request for rehearing. FERC described this policy as a compromise between competing interests, including stakeholders that wish to challenge a FERC decision before irreparable harm may occur and the project developers' interest in proceeding once it has obtained all of the necessary permits.

Commissioner Danly wrote separately in dissent to explain his view that delaying issuances of notices to proceed is no longer required following the D.C. Circuit's prohibition of FERC's policy of issuing indefinite tolling orders in Allegheny. Commissioner Danly also argued that the majority failed to respond to arguments that Order Nos. 871 and 871-A did not satisfy Administrative Procedure Act requirements, including arguments that the requisite notice-and-comment process was not followed prior to issuance of Order No. 871. Lastly, Commissioner Danly argued that the decision to presumptively stay certificate orders is contrary to the NGA and is "bad policy." While Commissioner Mark Christie acknowledged some imperfections with Order No. 871-B, he noted it provides clear limits on how long FERC is required to withhold a notice to proceed with construction while considering a request for rehearing and a new prospective policy for property owners opposing the involuntary use of eminent domain. Commissioner Neil Chatterjee did not participate in the order.

A copy of Order No. 871-B and the flowchart are available here.

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