Court Finds No Bias When Funding is Based on Decisions Made

by: Elizabeth Cooney

In 2015, PennEast Pipeline Co. sought a Natural Gas Act required certificate from the FERC to build a natural gas pipeline through Pennsylvania and New Jersey.[i] Before FERC decided whether to issue a certificate, Riverkeeper filed a complaint alleging that “FERC's funding structure creates structural bias, in violation of the Due Process Clause of the Fifth Amendment, by incentivizing the Commission to approve new pipelines in order to secure additional sources for its future funding”.[ii] The DC Circuit Court of Appeals recently affirmed the District Court’s decision to dismiss for failure to state a claim.[iii] Riverkeeper asserted the phrase “[t]he people have a right to clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment” from a Pennsylvania Constitutional amendment, created a federally recognizable property interest.[iv] The court concluded that the amendment does not create a federal constitutional right.[v] Also, the court ruled that the stated property interest is too abstract and does not carry the same recognizable characteristics as other property rights, such as the right to exclude.[vi]

 The court also addressed the issue of FERC being a biased adjudicator.[vii] Due process requires an "impartial and disinterested" adjudicator.[viii] In Tumey v Ohio, the Court held that an adjudicator cannot have "a direct, personal, substantial pecuniary interest" in reaching a particular outcome.[ix] While FERC’s budget is set by Congress,[x] “the Budget Act requires FERC to ‘assess and collect’ from the various industries that it regulates ‘fees and annual charges in any fiscal year in amounts equal to all of the costs incurred by the Commission in that fiscal year.’”[xi] The court concluded that the FERC is not a biased adjudicator.[xii] The court analogizes this case to Dugan, which held that a mayor was not biased because he served as one member of a five member city commission and had no actual ability to unilaterally make decisions, because the budget for the year is set by Congress and thus there is no ability to receive additional funding based on whether the pipeline is approved or not.[xiii] Also, the court found it persuasive that the fees are credited to the treasury rather than directly to FERC.[xiv]

I am not persuaded by the court’s reasoning in this case. I believe it is clear that there exists no definable property interest. However, it seems preposterous that FERC is not seen as a biased adjudicator. The court mentions a case that is intermediately between Dugan, who had no say at all, and Tumey, whose pay was based on money collected.[xv] In Ward, the mayor’s pay was not based on convictions; however, he was still held to be biased because it “created an impermissible incentive for the mayor ‘to maintain the high level of contribution from [his] court.’”[xvi] The main nail in the coffin in Ward was that the mayor retained executive control and the mere “possible temptation” was enough.[xvii] As the court in Ward concluded the existence of bias, so should have this court.

The first issue of the set budget by Congress does not mean bias does not exist. The mayor’s salary was fixed in Ward.[xviii] Fees charged by FERC are based solely on the “costs incurred by the Commission in that fiscal year.”[xix] However, the commission can and likely will be allocated larger budgets based on the amount of revenue brought in. While the commission does not decide the budget, it does present a proposed budget to Congress for approval.[xx] FERC also has authority to determine the amount of the fee and is even allowed to waive fees for “good cause.”[xxi] This case seems more like Ward than Dugan because Dugan was one vote of five on an executive/judicial panel.[xxii] Hence, Dugan did not have power to act on his own. Ward was allotted some executive control and judicial control.[xxiii] This case is clearly one where FERC retains most of the executive and judicial control.

 The second issue, the money being paid to the treasury rather than FERC, is not enough to prove persuasive. The fees charged are based on the budget approved by Congress.[xxiv] Obviously, the money is directed to FERC; just because it is temporarily put somewhere else is not enough to prevent actual bias or the appearance of bias.[xxv]

 In conclusion, this case was rightfully decided in the sense that there is no clearly defined liberty or property interest at issue, however, it seems clear to me that the adjudicator is biased and had there been a cognizable liberty or property interest, this case would have been a clear violation of due process.

[i] Del. Riverkeeper Network v. FERC, 895 F.3d 102, 106, (D.C. Cir. 2018).

[ii] Id at 106.

[iii] Id at 113.

[iv] Id at 108; Pa. Const. Art. I, § 27.

[v] Id at 110.

[vi] Id at 109.

[vii] Id at 111.

[viii] Marshall v. Jerrico, Inc., 446 U.S. 238, 242 (1980).

[ix] Tumey v. Ohio, 273 U.S. 510, 523 (1927).

[x] See 42 U.S.C. § 7171(j).

[xi] Del. Riverkeeper Network v. FERC, 895 F.3d 102,111 (D.C. Cir. 2018), quoting 42 U.S.C. § 7178(a)(1).

[xii] Id at 111.

[xiii] Id at 111,112; Dugan v. Ohio, 277 U.S. 61 (1928).

[xiv] Del. Riverkeeper Network v. FERC, 895 F.3d 102, 112  (D.C. Cir. 2018).

[xv] Id at 112; Dugan v. Ohio, 277 U.S. 61 (1928); Tumey v. Ohio, 273 U.S. 510 (1927); Ward v. Monroeville, 409 U.S. 57 (1972).

[xvi] Del. Riverkeeper Network v. FERC, 895 F.3d 102,112 (D.C. Cir. 2018).

[xvii] Ward v. Monroeville, 409 U.S. 57, 60 (1972).

[xviii] Id at .

[xix] 42 U.S.C. § 7178.

[xx] 42 U.S.C. § 7171.

[xxi] 42 U.S.C. § 7178.

[xxii] Dugan v. Ohio, 277 U.S. 61 (1928).

[xxiii] Ward v. Monroeville, 409 U.S. 57 (1972).

[xxiv] 42 U.S.C. § 7178.

[xxv] See Id.

Fair Treatment: Regulating Forced Pooling in the Modern Age of Resource Excavation

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In this blog post, 3L Ian Young writes on the challenges landowners face when it comes to regulated forced pooling. Young details how states, such as Colorado, are facing backlash after passing pooling statutes that could be considered unconstitutional.