Court Dismisses Complaint that FERC’s Regulatory Structure Is Biased in Favor of Pipeline Applicants


On March 22, in the case of Delaware Riverkeeper Network, et al., v. FERC, the U.S. District Court for the District of Columbia dismissed the plaintiffs’ complaint that the statutory requirement that the Federal Regulatory Energy Commission (FERC) recover its annual operating costs directly from the entities it regulates results in perceived or actual bias against plaintiffs who contest applications for needed certificates from FERC. Because of this bias, the plaintiff asked the District Court either to declare FERC’s reimbursement mechanism to be unconstitutional or declare its power of eminent domain or authority to preempt state and local laws to be unconstitutional. Holding that the plaintiffs have failed to state a claim because allegations of actual bias cannot create structural bias where the court determines there is none, and the law does not on its face create an unconstitutional funding mechanism, the District Court granted FERC’s motion to dismiss.

The District Court did find that Plaintiffs “stated sufficiently concrete and imminent injury, tethered to the alleged procedural due process violation, for the purposes of standing.” They “plausibly alleged the high likelihood of PennEast’s approval for the pipeline project, as well as the high likelihood that its members will suffer concrete and particularized injuries as a result.” If Plaintiffs were required to “wait until the project was approved, they would be effectively unable to seek review for a procedural due process violation.” The District Court further confirmed that the plaintiffs’ complaint and the declarations submitted with their opposition to FERC’s motion to dismiss “plausibly allege causation” because, “[w]hile the past harms described in the declarations do not support injunctive relief, they do demonstrate that the potential injuries Plaintiffs describe would be ‘fairly . . . traceable’ to the [FERC’s] approval of a pipeline project.”  The District Court further confirmed that plaintiffs “alleged injury is procedural, and the alleged potential aesthetic and environmental harms are the concrete interests that give Plaintiffs enough of a claim of a procedural right for purposes of standing.”

However, the District Court went onto conclude the plaintiffs had not alleged a viable claim against FERC. The District Court confirmed that plaintiffs “have not provided any precedent suggesting that there may be a procedural due process claim where there is no protected liberty or property interest.” It further found that the declarations attached to plaintiffs’ opposition to FERC’s motion to dismiss 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.’ Negligent conduct on the part of the government does not constitute a Fifth Amendment deprivation,” citing Davidson v. Cannon. And, they did not allege a “sufficient connection” between FERC’s conduct and the “potential deprivations they foresee in the form of damage to property from drilling or potential dangers from pipeline accidents.”

With regard to plaintiffs’ latter claim 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,” the Court noted 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.” This was not a contested fact.  Ultimately, the District Court concluded that the “plain language of the statute indicates that FERC does not have control over its own budget. [Its] budget cannot be increased by approving pipelines; rather, 42 U.S.C. § 7178 requires [FERC] to make adjustments to ‘eliminate any overrecovery or underrecovery.'” Accordingly, the District Court concluded that if plaintiffs “are unhappy” with Congress’s chosen appropriations to FERC, plaintiffs’ “recourse lies with their legislative representatives.”