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D.C. Circuit Opinion Further Clouds FERC's Rehearing Authority

On May 26, 2023, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) issued an opinion in Sierra Club v. FERC remanding to the Federal Energy Regulatory Commission (FERC) for further review FERC’s most recent orders approving development of the Mountain Valley Pipeline (MVP). While the substantive matters of the opinion are important, the decision may be more notable for the significant procedural findings regarding FERC’s authority to address matters on rehearing announced in it.

Purporting to build on certain aspects of Allegheny Defense Project v. FERC, 964 F.3d 1 (D.C. Cir. 2020) (en banc)—which repudiated FERC’s practice of issuing “tolling orders” to allow FERC more time to act on requests for rehearing—the D.C. Circuit explained in Sierra Club that, once thirty days has passed from the date a rehearing request is filed, the Natural Gas Act (NGA)—and, by extension, the Federal Power Act (FPA)—prohibits FERC from “granting” rehearing and allows FERC only to “modify” a previous order. In so doing, the D.C. Circuit appeared not to reconcile its decision with other language in the NGA/FPA that permits FERC to “set aside” a previous order “in whole or in part” beyond the thirty-day statutory deadline to act on rehearing. The court clarified, however, that parties that seek rehearing of an initial FERC order on the merits need not file subsequent petitions for review or amend their earlier petition to appeal subsequent orders on rehearing.

The D.C. Circuit issued these procedural findings in response to arguments that the court did not have jurisdiction because the petitioners sought judicial review of FERC’s initial order extending MVP’s construction window but never filed a separate petition seeking review of a subsequent FERC order modifying the initial order. The D.C. Circuit disagreed.

Importantly, the court announced that petitioners seeking judicial review of an initial FERC order are under no obligation to file a second petition or even amend the first petition to appeal FERC’s order modifying the initial order. The court held that the initial order “remains the operative order” and thus, “[p]etitioners were under no obligation to file a new petition for review challenging that additional order.” The court also stated that it “can fairly infer from the petitions for review that petitioners intended to seek review not only of the [initial order] but also of any amendment to it.”

In reaching that conclusion, the court also opined on FERC’s ability to grant rehearing after the statutory thirty-day clock expires (upon which rehearing is denied by operation of law). The court stated that once FERC issues an order denying rehearing but reserving the right to modify the order, FERC cannot later grant rehearing, but instead can only supply further justification for its initial order. The court stated that it did not matter whether FERC’s notice denying rehearing by operation of law included a statement declaring its intent to act on the matter in the future. Nothing, the court explained, stops FERC’s initial order from becoming final if FERC does not rule on the merits of a rehearing request within the statutory thirty days. When FERC fails to act on a request for rehearing within thirty days, the court explained, rehearing is denied by operation of law and FERC is limited to “updating” the initial order “rather than granting rehearing of it.”

However, that pronouncement may conflict with the controlling NGA/FPA statutory language, which states that FERC may not only “modify,” but also “set aside” an order “in whole or in part” prior to the filing of the record in a court of appeals. The court did not explain how denying FERC the opportunity to grant “rehearing” after thirty days comports with authority FERC has under the plain language of the statutes to “set aside” prior orders, nor did it explain the difference between granting rehearing and setting aside a prior order.

FERC may continue to interpret the statutory language as permitting it to vacate an order in whole or in part under the “set aside” authority. Moreover, the court may clarify its Sierra Club holding once presented with a case where FERC actually changed its ruling in a case after a denial of rehearing by operation of law. Until then, it will be up to FERC to interpret and apply the court’s language to its rehearing process.