Midship Pipeline Co. v. Fed. Energy Regulatory Comm'n

• Decision Date: 18 August 2022
• Docket Number: 22-60225
• Citation: 45 F.4th 867
• Parties: MIDSHIP PIPELINE COMPANY, L.L.C., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Fifth Circuit

45 F.4th 867

MIDSHIP PIPELINE COMPANY, L.L.C., Petitioner,

v.FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

No. 22-60225

United States Court of Appeals, Fifth Circuit.

Filed August 18, 2022

Robert Mark Loeb, Orrick, Herrington & Sutcliffe, L.L.P., Washington, DC, for Petitioner.

Matthew J. Glover, U.S. Department of Justice, Office of the Solicitor, Washington, DC, Carol Jayne Banta, Robert Harris Solomon, Esq., Solicitor, Federal Energy Regulatory Commission, Washington, DC, for Respondent.

David Gabriel Bookbinder, Niskanen Center, Incorporated, Washington, DC, for Intervenor Sandy Creek Farms, Incorporated.

Before Higginbotham, Haynes, and Wilson, Circuit Judges.

Cory T. Wilson, Circuit Judge:

Midship Pipeline Company, L.L.C. challenges part of a Federal Energy Regulatory Commission (FERC) order directing an administrative law judge to determine the "reasonable cost" for Midship to complete remediation activities at Sandy Creek Farms in Oklahoma. The FERC, like all administrative agencies, must ground its actions "in a valid grant of authority from Congress," Food & Drug Admin. v. Brown & Williamson Tobacco Corp. , 529 U.S. 120, 161, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000), and Midship contends that the FERC's governing statutes do not grant the agency authority to determine "reasonable cost" of remediation. Thus, Midship asserts the FERC's order is ultra vires. The FERC counters that this issue is not ripe for appeal, and, in any event, its order is entitled to deference. We conclude this dispute is ripe for our review and vacate the provision of the FERC's order requiring a determination of "reasonable cost." We otherwise remand for further proceedings.

I.

On August 13, 2018, the FERC issued a certificate order under the Natural Gas Act (NGA) allowing Midship to construct and operate a 200-mile natural gas pipeline crossing privately held land in Oklahoma. 164 F.E.R.C. ¶ 61,103. Midship's certificate, like most issued under the NGA, contained requirements related to rates, environmental analyses, and restoration of affected land. Id.

Midship completed the pipeline in March 2020. 174 F.E.R.C. ¶ 61,220, 62,111. It then put the pipeline in operation and proceeded to restore land impacted by the construction. Id. A year later, the FERC directed Midship "to take immediate action to remedy unresolved restoration issues on certain landowner tracts." Id. at 62,110. This included "[c]orrect[ing] ponding, restor[ing] preconstruction contours," and "[r]emov[ing] known construction debris" on property held by Sandy Creek. Id. at 62,113. The FERC noted that it had previously directed Midship to address these issues, id. at 62,113 n.1, and recommended that Midship and the landowners negotiate a settlement through the FERC's Dispute Resolution Service, id. at 62,112. The FERC caveated this suggestion by acknowledging that if negotiations failed it lacked the authority to require Midship to compensate the landowners, id. at 62,112 n.13.¹

After several months, Sandy Creek and Midship were unable to reach a settlement. 177 F.E.R.C. ¶ 61,186. Sandy Creek filed a statement before the FERC indicating that, although its land still needed to be restored, it did not want Midship to remediate the land because Midship's continued presence would lead to "irreparable impacts." Id. Instead, Sandy Creek preferred a settlement that would compensate Sandy Creek for restoring its land itself. Id.

In response, the FERC entered another order recognizing that Midship and Sandy Creek remained at an impasse. Id. It found that "despite general agreement as to the proper scope of the restoration work needed ..., Midship and Sandy Creek Farms have not been able to agree on a specific plan or cost thereof." Id. at *4. The FERC then appointed an administrative law judge (ALJ) to resolve two questions: "(1) the methods and scope of work activities remaining in order to restore the Sandy Creek Farms property in accordance with the Certificate Order ... and (2) the reasonable cost to complete such activities." Id. The FERC again acknowledged that it could not award damages but stated that "developing a record as to the necessary measures and their cost will assist [the FERC] in evaluating what further remediation is required and what further steps to take to resolve the issues here." Id.

Midship filed a petition for rehearing, asserting that the FERC lacked authority to determine the "reasonable cost" of remediation. 178 F.E.R.C. ¶ 61,202, *2. The FERC denied Midship's petition and reiterated the rationale from its prior order. Id. at *3. Roughly three weeks later, Midship filed a request for a stay with the FERC and a petition for review before this court challenging the directive that the ALJ determine the reasonable cost of remediation. Shortly thereafter, while its stay motion before the FERC remained pending, Midship requested a stay from this court pending appeal.

The FERC denied Midship's stay motion, but shortly after, we granted Midship a stay of the challenged portion of the FERC's order. Midship Pipeline Co., L.L.C. v. Fed. Energy Regul. Comm'n , No. 22-60225, slip. op. at 1 (5th Cir. May 25, 2022) (per curiam order). We also expedited the appeal. Id. at 5. Meanwhile, the remainder of the order is in effect, and proceedings before the ALJ are ongoing.

II.

The NGA states that:

[a]ny party to a proceeding under this chapter aggrieved by an order issued by [the FERC] in such proceeding may obtain a review of such order in the court of appeals of the United States for any circuit wherein the natural-gas company to which the order relates is located or has its principal place of business.

15 U.S.C. § 717r(b). In reviewing FERC orders pursuant to § 717r(b), we also apply the overarching appellate framework of the Administrative Procedure Act (APA), 5 U.S.C. § 701. El Paso Elec. Co. v. Fed. Energy Regul. Comm'n , 832 F.3d 495, 503 (5th Cir. 2016) (citing La. Pub. Serv. Comm'n v. Fed. Energy Regul. Comm'n , 771 F.3d 903, 909 (5th Cir. 2014) ).

A.

As threshold matters, the FERC first argues that this dispute is not ripe for review. Next, if it is, the FERC contends its interpretation of the NGA ought to be accorded deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. , 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).

1.

Whether an issue is ripe for appeal turns on "(1) the fitness of the issues for judicial decision; and (2) the hardship to the parties of withholding court consideration." Gulfport Energy Corp. v. Fed. Energy Regul. Comm'n , 41 F.4th 667, 679 (5th Cir. 2022) (quoting Cochran v. Sec. & Exch. Comm'n , 20 F.4th 194, 212 (5th Cir. 2021) ). "A matter is fit for review when it presents pure legal questions that require no additional factual development." Id. (citing Cochran , 20 F.4th at 212 ). "To assess hardship, we examine the effect of the agency decision on the petitioner"; if the effect "is ‘sufficiently direct and immediate,’ review is appropriate." Id. (quoting Abbott Lab'ys v. Gardner , 387 U.S. 136, 152, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967) ); see Energy Transfer Partners, L.P. v. Fed. Energy Regul. Comm'n , 567 F.3d 134, 139 (5th Cir. 2009) (discussing "factors set forth by the Supreme Court in Abbott Laboratories ").

The FERC contends that the challenged order is not ripe for review because it is not a "final agency action" that carries a cognizable effect on Midship. The FERC reasons that just as in Energy Transfer Partners , regardless of whether the order exceeded its authority, the ALJ or the FERC could eventually rule favorably to Midship, and Midship could appeal an adverse determination, such that the instant order has no binding effect. We disagree. "Our court has long recognized that [ Section 717r(b) ] does not require that an order be a ‘final’ one; rather, the inquiry is whether a party has been ‘aggrieved’ by an order of the [FERC]." Energy Transfer Partners , 567 F.3d at 139 (citing Atlanta Gas Light Co. v. Fed. Power Comm'n , 476 F.2d 142, 147 (5th Cir. 1973) ). "Questions of whether a petitioner is aggrieved and whether the case is ripe for review are often nestled in clusters of fact and circumstance unique to the case." Brooklyn Union Gas Co. v. Fed. Energy Regul. Comm'n , 190 F.3d 369, 374 (5th Cir. 1999). "A party has not been ‘aggrieved’ by a FERC decision unless its injury is ‘present and immediate.’ " Id. (quoting Brooklyn Union Gas Co. , 190 F.3d at 373 ). Simply put, a challenged order must be "definitive," and a party must be faced with some "substantial effect" caused by the challenged order that further action by the FERC cannot remedy. Id. (quoting Atl. Gas Light Co. , 476 F.2d at 147 ).

The FERC supports its position first by pointing to precedent indicating that orders that merely initiate agency proceedings are not ripe. See, e.g., TOTAL Gas & Power North America, Inc. v. Federal Energy Regulatory Commission , 859 F.3d 325 (5th Cir. 2017) ; Energy Transfer Partners , 567 F.3d at 141 ; Veldhoen v. U.S. Coast Guard , 35 F.3d 222, 225 (5th Cir. 1994) ; Atlanta Gas Light , 476 F.2d at 147. The FERC posits that this general rule should control because its order in this case has no substantial effect on Midship other than requiring Midship to participate in proceedings before the ALJ.

But the FERC overstates the applicability of the authority it offers. Some of the cases it cites weighed finality only under the APA's more general standards, not under the "aggrieved" standard utilized in the NGA or its predecessor statutes. See Veldhoen , 35 F.3d at 225 ; accord Federal Trade Commission v. Standard Oil Co. of California , 449 U.S. 232, 235–43, 101 S.Ct. 488, 66 L.Ed.2d 416 (1980). Others have little bearing because there were no FERC orders actually on review. See TOTAL Gas & Power , 859 F.3d at 328–32 ; accord Fed. Power Comm'n v. Metro. Edison Co. , 304 U.S. 375, 381–82, 58 S.Ct. 963, 82 L.Ed. 1408 (1938). Energy Transfer Partners , perhaps a closer case, is also...