LAW

FERC's pipeline policy review: The legal rundown

Federal regulators' decision to revisit how they evaluate pipeline projects has put a spotlight on an obscure policy document and how it's used in court.

The Federal Energy Regulatory Commission last week unveiled a plan to review its pipeline policy statement, a broad guiding document that hasn't been updated since 1999.

The commission is asking the public to weigh in on whether FERC should change how it evaluates the need for interstate natural gas pipelines, works with landowners, conducts environmental studies and processes pipeline applications.

Developers, landowner advocates, environmentalists and others will be heavily involved in the process, advocating for policy changes that range from streamlined permitting to increased consideration of climate change (Energywire, April 25).

Many of the issues up for discussion have been raised in recent legal battles, putting pressure on FERC to review its 1999 policy document.

But what exactly is a policy statement? How much legal weight does it have? Here are some key questions and answers.

What's the legal force of the policy statement? Is it like a regulation?

FERC's policy statements do not carry the same legal weight as a law or regulation. They're more akin to guidance documents that steer agency decisionmaking without creating new obligations.

"As a policy statement, by definition it does not have the force and effect of law in the way that a regulation would," said Avi Zevin, an attorney for the Institute for Policy Integrity at New York University.

Still, the statements can affect the way courts review FERC actions. Judges tend to be skeptical of agency decisions that don't reflect internal policies.

"It would have some binding value such that if FERC did something that was completely the opposite of what's in the statement, I think a court could reverse it," said attorney Carolyn Elefant, a solo practitioner who frequently litigates pipeline issues.

Judges would likely apply the same standard they use in routine Administrative Procedure Act cases: whether the commission's action is arbitrary and capricious.

But any changes FERC makes to the statement are likely to leave plenty of wiggle room — setting forth general policies but reserving broad discretion for the commissioners as they consider specific pipeline cases.

"Guidance documents tend to be a little bit more wishy-washy and provide room for a lot of movement," Earthjustice attorney Moneen Nasmith said. "I cannot imagine that the staff at the commission are not going to be pushing hard to maintain the level of flexibility and discretion that they've had historically."

Can critics sue FERC if they don't like changes to the pipeline policy?

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They can try, but it will take some creativity.

Because policy statements are intended as internal guidance, they're typically not considered a "final agency action" that would be subject to litigation under the APA.

However, if FERC adopted a document that blatantly contradicted the Natural Gas Act or another law, someone could ask a court to step in and toss the policy or a decision that relied upon it.

"If they say up is down and down is up and then make a decision that says, 'Well, because the guidance says up is down and down is up, we're going to make this decision,' the guidance doesn't shield them from the fact that, no, that's really still arbitrary and ridiculous," Nasmith said.

The commission could also face some legal pushback if it adopts changes so significant that stakeholders think they should have gone through an official rulemaking process with additional procedural requirements.

Elefant cautioned that such a lawsuit would likely be an uphill battle.

"Here, this is definitely something that falls within the parameters of policy statements because it's just explaining the standards that FERC is going to apply when it makes the decision on a pipeline," she said.

Still, groups are expected to push FERC for extensive public engagement. A large coalition of grass-roots groups that generally oppose pipelines has already asked the agency to lengthen the 60-day comment period to 90 days and add a series of public hearings.

When would policy changes kick in? Would they apply to pending projects?

We'll find out later.

FERC has pretty wide discretion to decide what projects would be subject to a new policy statement, so long as it explains its reasoning.

Zevin noted that the issue arose the last time the agency updated its approach, in the late 1990s.

When Transcontinental Gas Pipe Line Corp. proposed a change in its rate structure, FERC relied on its 1995 policy statement to guide its decision, even though the 1999 statement had just been adopted. The agency reasoned that the company's request had already gone through various agency proceedings under the earlier policy.

The U.S. Court of Appeals for the District of Columbia Circuit looked at whether FERC made the right call in applying it and ultimately sided with the agency.

"When an agency issues a policy statement that is not binding and merely signals how the agency may handle future cases, there is no legal principle that mandates retroactive application of the new policy statement to pending cases," the court said in a 2003 ruling. "Retroactive application to pending cases may be permissible, but it is not required."

The D.C. Circuit also looked at the legality of the 1995 policy statement itself and upheld it.

Would a policy update increase legal certainty for pipeline projects?

Perhaps, but don't expect litigation to slow down.

"I don't think it will in any way, shape or form deter anyone who wants to litigate," ClearView Energy Partners LLC analyst Christi Tezak said. "But I think it could make some of FERC's defenses stronger."

That's because an updated policy statement would give FERC a more recent and robust record to point to in support of its pipeline decisions, she said.

The review may also help clear up some legal questions that have dominated recent court cases, including how FERC determines project need, how it uses eminent domain authority and how it weighs climate impacts.

"I would be surprised if there was less litigation because there are strong positions among all parties," Zevin said. "But it strikes me that one of the things that the commission is trying to do is address these harder policy questions in a more holistic, considered process, rather than in the context of a single certificate."

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