A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit on Tuesday upheld a district court ruling and rejected claims by an environmental group that FERC is biased toward companies seeking certificates to build natural gas pipelines.

The Delaware Riverkeeper Network (DRN) last May filed a petition for review challenging the Federal Energy Regulatory Commission's certificate order for the PennEast Pipeline. The environmental group also complained that FERC's toll order issued in February, to give the agency more time to make a decision on PennEast, put its challenge in "legal limbo." FERC defended the use of tolling orders last month.

DRN had filed a complaint in U.S. District Court for the District of Columbia in March 2016, but a district court judge dismissed it one year later on grounds that the environmental group lacked standing and specifically, that it could not demonstrate a "liberty or property interest" to claim FERC violated its due process rights. The district court judge also rejected DRN's claims that FERC was "structurally biased" to approve pipelines in order to fund its budget.

The appellate court agreed on each point. "We conclude that the [Pennsylvania] Environmental Rights Amendment does not create federally protected liberty or property interests, much less ones that FERC could infringe," Judge Gregory Katsas wrote for the panel, which also included Judges Harry Edwards and Thomas Griffith.

Katsas added, "Congress sets FERC's annual appropriation, and it is a criminal offense for agency officials to spend even one penny more...FERC can do nothing analogous, because Congress has specified the total amount it is to charge: Regardless of how many pipelines FERC may approve, it 'shall' charge, for each year, a total amount 'equal to all of the costs incurred by the Commission in that fiscal year.’...FERC's funding structure is clearly constitutional."

On FERC's use of a tolling order, Katsas wrote "regardless of whether any protected liberty or property interests are implicated, the Commission is not a structurally biased adjudicator, and its use of tolling orders is not facially unconstitutional."

DRN attorney Aaron Stemplewicz said the environmental group was "very disappointed" by the ruling. The circuit court “found that a federal agency that is entirely and fully funded by the very industry that it regulates is an acceptable way to fund the agency. We firmly believe that such a funding structure leads to bias on part of agency in its decision-making.

"Despite the fact that FERC has a near 100% approval rate for the pipeline projects that provide the basis for its funding, the court nevertheless did not find sufficient evidence of bias. We believe the bias is self-evident, and that the case was wrongly decided."

PennEast would move more than 1 Bcf/d of gas from Northeast Pennsylvania to New Jersey. About one-third of the 120-mile pipeline would be in New Jersey, where the project is facing strong opposition from Democratic Gov. Phil Murphy’s administration, which has also filed a petition in federal court challenging the pipeline’s FERC certificate. The project is targeting a 2019 in-service date.

The appellate court case is DRN and Maya van Rossum v. FERC et al., No. 17-5084.