D.C. Court of Appeals Rejects Constitutional Argument Challenging FERC’s Cost Recovery from Industry Participants


On July 10, the U.S. Court of Appeals for the D.C. Circuit decided another Federal Energy Regulatory Commission (FERC) case, Delaware Riverkeeper Network and Maya Van Rossum v. FERC. The plaintiffs levelled a broad US. Constitutional Due Process Clause challenge at the statutory mandate from Congress that FERC recover its costs from the industries it regulates. The plaintiffs argued that this provision “improperly incentivizes” FERC to grant more new natural gas pipeline applications to ensure itself of sufficient future funding. This argument was dismissed by both the U.S. District Court and the Court of Appeals.

Delaware Riverkeeper Network argued that FERC’s funding law creates a structural bias in violation of the of the Fifth Amendment to the U.S. Constitution; the plaintiffs also challenged FERC’s use of 30-day tolling orders to circumvent the 30-day deadline provision of the Natural Gas Act (NGA). The Due Process claim was based on the plaintiffs’ reading of their environmental and real property interests as created by Pennsylvania, in particular the 1971 Environment Rights Amendment (ERA) to the state constitution.

After reviewing the text of the ERA, the Court of Appeals concluded that the amendment creates no federally-protected liberty interest. A state-created right to clean air, pure water and preservation of the environment does not qualify as a federally-protected property interest, and the ERA binds only the state and not the federal government. The Court of Appeals further noted that the argument that FERC’s budgetary processes exhibit a structural bias are answered by reference to a 1928 decision of the U.S. Supreme Court in Dugan v. Ohio, because the funds collected by FERC are credited to the general accounts of the U.S. Finally, FERC’s use of tolling orders has been upheld for many years as an acceptable administrative practice.