WASHINGTON (Legal Newsline) - A federal judge has refused to side with an environmental group that sued the Federal Energy Regulatory Commission over allegations that the commission’s review process is “constitutionally deficient.”

Judge Tanya S. Chutkan for the U.S. District Court for the District of Columbia filed her decision March 22, granting FERC and the PennEast Pipeline Company’s motions to dismiss.

“Plaintiff’s claim of structural bias is that the Budget Act’s provision requiring that FERC recoup its annual operating budget through a proportional charge on the regulated entities means that FERC cannot make unbiased determinations on applications for certificates,” Chutkan wrote in her 20-page opinion. “FERC argues, and the court agrees, that Plaintiffs have not plausibly pleaded that the funding structure results in bias.”

The judge continued, “Plaintiffs do not dispute that Congress determines FERC’s budget, which has no relationship to the number of approved pipelines or the quantity of gas being transported within FERC’s jurisdiction. Plaintiffs do claim that there are ‘contested issues of fact’ surrounding whether FERC can ‘increase its annual revenues beyond the amount appropriated by Congress.’ But this statement, without more, is insufficient; the court is not required to assume the truth of allegations by Plaintiffs that directly conflict with the statutory scheme at issue.”

Chutkan said the plain language of the statute indicates FERC does not have control over its own budget.

Plaintiff Delaware Riverkeeper Network, or DRN, asserts FERC is unable to make unbiased determinations on the issuance of pipeline certificates because of a provision of the Omnibus Budget Reconciliation Act of 1986, which requires FERC to recover its annual operating costs directly from the entities it regulates.

DRN is a non-profit organization established in 1988 to protect and restore the Delaware River and its associated watershed, tributaries and habitats. According to court documents, it has more than 16,000 members, some of whom own land that has been impacted by pipelines authorized by the commission in the past.

DRN claims FERC’s structure and the “resulting actual or perceived bias” has deprived them of constitutional due process under the Fifth Amendment.

The commission is empowered to issue certificates of public convenience and necessity allowing entities to transport natural gas and to construct, extend, acquire or operate natural gas pipelines.

In this case, PennEast applied for a certificate of public convenience and necessity allowing it to build a new natural gas pipeline system in New Jersey and Pennsylvania. In September 2015, DRN filed a motion to intervene in the FERC review process opposing the request. Pursuant to FERC regulations, its unopposed motion to intervene was granted.

Before FERC’s review process could be completed, DRN filed its lawsuit in the D.C. federal court March 2016, alleging the commission’s review process itself is constitutionally deficient.

More specifically, it asked the court to either declare FERC’s reimbursement mechanism to be unconstitutional, or declare the commission’s power of eminent domain or authority to preempt state and local laws to be unconstitutional.

It also asked the court to declare the PennEast certification procedure specifically, along with the procedure the commission utilized for any project in the Delaware River Basin, to be a violation of due process.

In May 2016, PennEast intervened in the lawsuit as a defendant. Soon after, the company, joined by FERC, filed motions to dismiss DRN’s complaint.

At a recent hearing, counsel for FERC noted that the commission has delayed the PennEast project twice to conduct additional environmental reviews and it had not yet approved the project or granted a certificate.

The federal court, in its ruling last month, said while it finds DRN has stated “sufficiently” concrete and imminent injury, the nonprofit had not identified any liberty or property interest that is cognizable under the Fifth Amendment’s due process clause.

“The declarations attached to Plaintiffs’ opposition allege some degree of past property damage caused by FERC-approved pipelines, but those allegations do not allege a ‘deprivation’ of a protected liberty or property interest within the meaning of the Fifth Amendment,” Chutkan wrote. “Negligent conduct on the part of the government does not constitute a Fifth Amendment deprivation.

“Additionally, Plaintiffs have not alleged a sufficient connection between the Commission’s conduct and the potential deprivations they foresee in the form of damage to property from drilling or potential dangers from pipeline accidents.”

As Chutkan explained in the court’s ruling, DRN does not appear to be challenging a lack of due process in the exercise of eminent domain, but FERC proceedings, which sometimes lead to eminent domain.

“... the real property at stake in potential subsequent eminent domain proceedings does not constitute a protected property interest granting the Plaintiffs additional, pre-eminent domain due process rights during the certificate approval stage,” the judge wrote.

The court noted that the commission’s budget cannot be increased by approving pipelines. Instead, under the law, FERC must make adjustments to “eliminate any overrecovery or underrecovery.”

“If Plaintiffs are unhappy with Congress’s chosen appropriations to the Commission, Plaintiffs’ recourse lies with their legislative representatives,” Chutkan pointed out, adding that the connection between the act of approving an individual pipeline and FERC’s financial sustainability as a whole is “simply too remote to create any such bias.”

Delaware Riverkeeper Maya K. van Rossum told Legal Newsline in an email that how DRN will proceed legally is “certainly under consideration.”

“My biggest concern about this decision is that it means that, at this point, all branches of government have now taken a pass on checking FERC’s abuses of process and law when it comes to their pipeline review and approval process,” she said. “Congress will continue to rubber stamp their budget, the President will continue to appoint bad commissioners who will perpetuate the practices of abuse, and now the courts have denied their responsibility to oversee the abuses of power and law by FERC.”

She added, “Now that FERC has been given a license to continue business as usual, I anticipate that FERC’s abuses will continue to get worse”

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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U.S. Federal Energy Regulatory Commission
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U.S. District Court for the District of Columbia
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