Commissioner James Danly Dissent Regarding Limiting Authorizations to Proceed with Construction Activities Pending Rehearing

Commissioner James Danly Statement
August 2, 2021
Docket No. RM20-15-002

I dissent in full from today’s order affirming the majority’s modification and expansion of Order No. 871.[1]  As I stated in my dissent in Order No. 871-B, I would repeal the rule as it is no longer required by law or prudence.[2]  I write separately today to further explain how the Commission’s new, unnecessary, and unjustifiable presumption to stay certificate orders conflicts with the plain text of the Natural Gas Act (NGA) and is beyond the Commission’s authority.[3]  I also write to explain how the majority’s presumptive stay is not based on reasoned decision making and therefore runs afoul of the Administrative Procedure Act (APA).

The Presumptive Stay is Beyond the Commission’s Authority and Contrary to the Plain Text of the Natural Gas Act

In today’s order, the majority states “the Commission’s underlying authority derives from NGA section 16.”[4]  Specifically, the majority relies on the provisions providing the Commission authority “to perform any and all acts . . . necessary or appropriate to carry out the provisions of this [Act]” and to determine the effective date of its orders.[5]  Like many before it, the majority has turned to NGA section 16 when all else has failed, placing more weight upon this section than it can reasonably bear.  NGA section 16 “do[es] not confer independent authority to act.”[6]  It is “of an implementary rather than substantive character” and “can only be implemented ‘consistently with the provisions and purposes of the legislation.’”[7]  The majority, however, fails to confront this limitation on section 16’s reach and employs this provision in a manner that contravenes the NGA in three respects.

First, the majority’s policy denies pipelines holding certificates the ability to exercise eminent domain for up to 150 days—doing exactly what the majority explicitly concedes it cannot do: “restrict the power of eminent domain in a section 7 certificate.”[8]  NGA section 7(h) authorizes “any holder of a certificate” to exercise eminent domain authority.[9]  Other than the issuance of a certificate, Congress ordained no other condition be met in advance of a pipeline pursuing eminent domain.  The Commission can only employ NGA section 16 in a manner consistent with the other provisions of the act.  Here, the use of section 16 is in direct in conflict with the statute—and the majority does not see fit to argue otherwise. 

Second, presumptively staying a pipeline’s ability to pursue eminent domain is not appropriate under section 16 because such a delay is not a “necessary or appropriate” adjunct to the Commission’s effectuation of its responsibilities under section 7 of the NGA.  That section requires the Commission to issue certificates to applicants whose proposed natural gas facilities are found to be in the public convenience and necessity.  The timing of a pipeline’s use of eminent domain does not weigh into the Commission’s determination of whether proposed pipeline facilities are in the public convenience and necessity.  If it did, the majority would rely on the Commission’s authority under NGA section 7(e) to “attach to the issuance of the certificate . . . such reasonable terms and conditions as the public convenience and necessity may require.”[10]  The majority, however, does not.[11]  Nor does the majority cite any other provision of the NGA for which the Commission’s action would be “necessary or appropriate” under section 16.

Third, the only reasonable reading of NGA section 7 leads to the conclusion that Congress intended for certificates to be effective upon issuance and acceptance, and for the right to exercise eminent domain to attach thereupon.  NGA section 7(e) provides, “a certificate shall be issued” so long as the applicant is “able and willing properly to do the acts . . . .”[12]  Further, NGA section 7(h) authorizes “any holder of a certificate of public convenience and necessity” to acquire by eminent domain the land necessary for the construction, operation, and maintenance of its pipeline facilities.[13]  Black’s Law Dictionary defines “holder” as “[a] person with legal possession of a document of title or an investment security,” meaning that the title was issued and accepted by that person.[14]  This view has been shared by the courts[15] and the Commission.[16]  This is not to say that the Commission can never make a certificate effective after its issuance or stay a certificate order.  Both may be warranted in certain instances.  In my view, however, it is contrary to the purpose of the NGA to adopt a policy that presumptively stays certificates for the avowed purpose of delaying a pipeline’s Congressionally-authorized entitlement to exercise eminent domain.[17]

In addition to NGA section 16, the majority appears to place some reliance on APA section 705, which provides “[w]hen an agency finds that justice so requires, it may postpone the effective date of action taken by it, pending judicial review.”[18]  I presume this is the case because the majority responds to arguments raised by the Interstate Natural Gas Association of America (INGAA) that the phrase “pending judicial review” in APA section 705 means an agency stay must be “tied to litigation.”[19]  The majority asserts that a more reasonable interpretation of the phrase “pending judicial review” is “in anticipation of [judicial review].”[20]  I’ve found no court that supports that position and multiple courts, in fact, disagree.[21] 

Presumptive Stay is Not Based on Reasoned Decision Making

To the extent the majority merely argues that it can apply the three factors of the equitable standard set forth in APA section 705 to determine whether a stay is warranted, I agree.  However, the majority’s application of the equitable standard is not based on reasoned decision making, and thus violates the APA.[22] 

As I stated in my dissent to Order No. 871-B, the majority’s assumption that the mere existence of a “landowner protest” automatically means a stay is required in the interest of justice is—at best—questionable.[23]  This represents a broad category of litigant, whose mere participation in a proceeding would temporarily extinguish a certificate holder’s Congressionally-established rights.  Surely, the Commission should at least impose rational limits on the rule they are establishing.  For example, will the Commission stay a certificate where there is a protest by a landowner with property interests that abut the proposed right-of-way but are not subject to condemnation?  And the Commission’s policy applies to where there is a “landowner protest.”  Will the Commission apply the stay where a landowner protested but did not intervene and thus cannot seek rehearing or judicial review?  What about in the case where the landowner joined a protest, but may not have active interests in the proceeding? 

The majority also fails to consider the second factor “whether issuing a stay may substantially harm other parties.”  Will the Commission stay a certificate where the proposed project is delivering natural gas to municipalities that need the gas within six months of certificate issuance?  Will the Commission stay a certificate if the delay caused by its stay would cause an additional year’s delay in construction because of seasonal restrictions?  To what degree will the financial consequences for the project proponent be considered?  What about the consequences to the pipeline’s customers?  It is not inconceivable that those projects whose applications have been pending for more than a year ultimately will be canceled as a result of delay.[24]  How can the potential cancellation of a project that has been determined by the Commission to be in the public interest itself be in the public interest or, under the second factor, be found not to “substantially harm other parties”?

Conclusion

The power of eminent domain is surely profound and formidable.  I cannot fault my colleagues for the anxiety they have expressed regarding its wise and just exercise.  However, the Commission, as a mere “creature of statute,” can only act pursuant to law by which Congress has delegated its authority.[25]  Congress conferred the right to certificate holders to pursue eminent domain in federal district court or state court,[26] having recognized that states “defeat[] the very objectives of the Natural Gas Act”[27] by conditioning or withholding the exercise of eminent domain.  Congress has made that determination.  It has codified it into law.  The Commission, as an executive agency, is empowered only to implement Congressional mandate, not to second-guess Congressional wisdom or attempt to do indirectly what it cannot directly.[28]

Despite this, I doubt that the Commission’s arguments will be presented to the courts.  It will be challenging for those that are harmed by the issuance of a generally-applicable policy to show aggrievement before it is actually applied in a case.  And by the time those harmed are able seek review, the damage of the stay will have been done and the stay will have been lifted.  My pessimistic outlook is that despite this order’s obvious infirmities, the Commission will avoid judicial scrutiny and thereby thwart the intent of Congress.  

For these reasons, I respectfully dissent.