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October 7, 2014

DC Circuit Hands FERC Procedural Victory It Did Not Want

On September 26, 2014, the DC Circuit handed down a decision dismissing a petition to review a FERC hydro licensing order filed by a group of landowners who objected to certain license conditions. Smith Lake Improvement & Stakeholders Ass’n v. FERC, No. 13-1074 (D.C. Cir. 2014). While this leaves FERC’s order intact, it was a setback to the agency.

The landowner group had proposed before FERC that the licensee, Alabama Power Company, be required to maintain impoundment water levels that differed from pre-existing levels. The Commission rejected the proposal in its licensing order, following which the group petitioned for rehearing, arguing that the license was not best adapted to a comprehensive plan of development and that the order’s comprehensive development findings were not supported by substantial evidence. The Commission denied the petition, whereupon the group filed a second rehearing petition, which the Commission also denied, this time summarily. The group then filed its petition for review in the DC Circuit.

In the court of appeals, Alabama Power intervened in support of the FERC. The company urged the court not to hear the merits of the appeal on the ground that the appeal was untimely, depriving the court of subject matter jurisdiction. The company argued that Section 313(b) of the Federal Power Act requires that petitions for review be filed within 60 days of the Commission’s ruling on a petition for rehearing, which ordinarily means the first petition for rehearing—unless the first rehearing order “modifie[d] the results of the earlier one in a significant way.” City of Norwood v. FERC, 906 F.2d 772, 775 (D.C. Cir. 1990). Alabama Power asserted that the landowner group’s petition for review was untimely because it was  filed within 60 days of the agency’s denial of its second petition for rehearing, taken from a rehearing order that did not modify the results of the original license order.

The FERC joined with the landowner group in opposing Alabama Power’s motion to dismiss the appeal. The Commission argued that prior case law was ambiguous as to when the filing of a second petition for rehearing tolled the 60 day period for filing petitions for review. It proposed that the Court resolve the ambiguity by holding that a second petition for rehearing should result in tolling unless the petition is vexatious. The landowner group agreed with FERC that prior case law was ambiguous, and claimed that the ambiguity created a trap, since a party might file a second petition for rehearing in the good faith belief that the first rehearing order changed the agency’s original “result,” only to have its subsequent petition for  review dismissed as untimely when the Court ruled that the first rehearing order’s reasoning did not change the original “result.”

The Court rejected the arguments of the landowner group and the FERC, and dismissed the petition for review on the ground that the first rehearing order did not modify the original license order. As to FERC’s proposal that a second petition for review should toll the deadline for review petitions so long as they are not “vexatious,” the Court said that that “Presumably, under FERC’s view, it would be up to FERC to determine (at least in the first instance) the petitioner’s motivation, which would then, in turn, affect our jurisdiction. That would surely be an extraordinary  manner to construe Congress’s efforts to insist that FERC cases be promptly brought before us.” Slip op. 5.

The Court was only slightly less dismissive of the “trap” argument. It acknowledged that a petitioner might be unsure whether any change in a rehearing order would be considered significant, “in which case the safer course clearly is to file a petition in our court.” The Court added that “Even if FERC disagreed with the petitioner, asserting that the change was significant, and we agreed with FERC, obliging us to dismiss the petition, we would expect that the Commission [would] allow a late rehearing petition and then if it were denied a petition for review could follow.” Slip op. 7.

One can argue that this is a troubling precedent, since it may prompt parties to file appeals that could ultimately prove unnecessary. An aggrieved party also faces the risk of having its appeal dismissed, only to find the Commission unreceptive to its subsequent petition for rehearing and reject it as untimely. That said, the message is clear: those who forego petitions for review while filing second petitions for rehearing run the risk of losing their right to judicial review.

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