United States: Federal District Court Dismisses Suit Accusing FERC Of Pro-Industry Bias

On March 22, 2017, the U.S. District Court for the District of Columbia ("District Court") dismissed a complaint by the Delaware Riverkeeper Network ("DRN") alleging that its members had been deprived of constitutional due process because FERC is unable to make unbiased determinations on the issuance of natural gas pipeline certificates of public convenience and necessity ("CPCNs"). Specifically, DRN argued that because FERC's funding mechanism requires FERC to recover its budget through a charge to regulated natural gas companies, it has a pro-industry bias.

On September 25, 2015, the PennEast Pipeline Company ("PennEast") filed an application for a CPCN to construct a new pipeline in New Jersey and Pennsylvania. DRN intervened in the proceeding to oppose the proposed pipeline. Prior to FERC's decision on whether to issue the CPCN, DRN filed a complaint with the District Court alleging that FERC's review process itself is constitutionally deficient, arguing that FERC's bias deprives the DRN's members of their Fifth Amendment due process rights. Specifically, DRN argued that FERC is structurally biased because: (1) its funding mechanism requires FERC to recover its budget by charging regulated natural gas companies; (2) Commissioners may be removed only for cause; and (3) FERC "is insulated from Congressional budgetary oversight." DRN contended that FERC is able to effectuate this bias by exercising eminent domain and preempting state and local laws. As a result, DRN also claimed that FERC's due process violation deprived DRN members of their right to a clean environment afforded to the public under the Pennsylvania Constitution and the potential impact to their real property. In response to DRN's complaint, FERC and PennEast filed motions to dismiss.

In its opinion, the District Court rejected DRN's arguments that FERC was depriving them of a property right in the environment pursuant to the Pennsylvania Constitution. In doing so, the District Court held that the Pennsylvania Constitution's provision of a public right in a clean environment does not create a federally protected property interest for purposes of the Fifth Amendment or the Fourteenth Amendment to the U.S. Constitution. Moreover, the District Court held that any actual impact to real property would occur through the process of eminent domain, which is a separate proceeding from the issuance of a CPCN and which has its own due process jurisprudence. Because DRN did not identify a liberty or property interest, the District Court found that DRN failed to state a claim upon which relief could be granted. Nevertheless, the District Court addressed DRN's claim of bias, concluding that Congress determines FERC's budget – not charges to natural gas companies – which has no relationship to the number of approved pipeline projects. As such, the District Court found that FERC does not directly benefit from the approval of a particular pipeline project. Rather, the District Court found that FERC's budget remains the same and that FERC is statutorily required to eliminate any over-recovery or under-recovery. Accordingly, the District Court granted the motions to dismiss DRN's complaint.

A copy of the District Court's opinion is available here.

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