Is It Time for Congress to Modify the FERC Rehearing Requirement?

Unhappy enough with a FERC order that you want to challenge it in a federal appeals court? Unfortunately, your itch for justice will take a while to be scratched, as you cannot proceed directly to court. You must first seek rehearing of the order, and explain to FERC why its order was wrong. That often means repeating the arguments made in earlier briefs, with FERC rehashing, and occasionally elaborating on, its position in its rehearing order. Although orders on rehearing can provide some clarification, rarely does a rehearing petition cause the agency to alter its position appreciably.

Compounding the burden of the rehearing requirement is FERC’s failure to act quickly on rehearing petitions. Although the agency is attempting to speed up its handling of rehearing petitions, it still typically takes months, and in many cases, years, to issue decisions on rehearing. What makes these delays particularly vexing is that the Federal Power Act, Natural Gas Act, and Natural Gas Policy Act contemplate quicker action. Those statutes state that rehearing petitions may be deemed to have been denied—thereby entitling the aggrieved party to pursue an appeal—if FERC does not act upon the petition within 30 days.

For decades, FERC has finessed this statutory deadline by interpreting broadly what it means to “act upon” a rehearing application. Typically, its “action” consists simply of issuing a tolling order, in which it grants rehearing “for the limited purpose of further consideration.” In other words, it issues a short order within 30 days to buy more time to actually rule on the rehearing petition.

Courts, perhaps sensitive to the agency’s workload, so far have indulged this maneuver and found that it does not contravene Congress’ mandate that rehearing petitions be acted upon in 30 days. Yet, FERC’s decision to keep issuing tolling orders even in the absence of a quorum for most of 2017 has led some parties to challenge the concept of tolling orders. Pending before the D.C. Circuit is the question whether FERC can toll the 30-day period for acting on a rehearing application if it does not have three Commissioners to constitute a quorum. The court potentially could revisit the broader issue of whether FERC can issue tolling orders at all. See Allegheny Defense Project v. FERC, No. 17-1098.

From FERC’s perspective, having to address rehearing petitions is a burden, as the lawyers who toil in its Office of the General Counsel presumably can attest. And this is a burden that FERC really does not need, given its workload, the backlog of orders awaiting decision, and the recent criticism it has taken from the D.C. Circuit for its sluggishness. See, e.g., Orangeburg, South Carolina v. FERC, No. 15-1274 (July 14, 2017) (commenting on FERC’s “exceptional delay and foot-dragging”).

To be sure, the rehearing requirement can have a valid purpose: to ensure that the agency has the opportunity to consider arguments before they are raised on appeal. Insisting that FERC first address a party’s position is not just a matter of comity or judicial efficiency. Not only are appellate courts loath to predict how an agency would have ruled, the Chenery doctrine bars courts from affirming agency decisions on grounds not relied upon by the agency. That being said, forcing parties to seek rehearing is pointless when they already have presented all of their arguments to FERC and the agency has addressed—or had the opportunity to address—all of the arguments in its initial order.

What is the solution? Perhaps the easiest course would be for Congress to simply abolish the rehearing requirement. But a better alternative may be for Congress to modify the obligation, and adapt in part provisions from the Communications Act. Under this modification, a party seeking to appeal a FERC order could in most circumstances proceed directly to a federal appeals court. If, however, the party relies on arguments upon which the Commissioners have not been afforded an opportunity to pass judgment (such as objections to delegated hydro orders), then the party must first file a rehearing petition. A party also could elect to seek rehearing or clarification if it thinks that it might persuade FERC to amend or reverse the initial order, but it would be required to seek rehearing only if it wishes to raise an argument not previously addressed by the Commission.

Such a modification to the rehearing requirement may necessitate some other changes, such as allowing other parties the opportunity to respond to rehearing petitions. But overall, there would be a net benefit. Dispensing with mandatory rehearing petitions would give parties a quicker path to a federal appeals court should they feel aggrieved by a FERC order. Perhaps more importantly, amending the rehearing mandate would spare parties the expense of having to prepare needless rehearing petitions and relieve FERC from the burden of having to rule on them.