Commissioner James Danly Statement
January 20, 2022
Docket No. IN19-4-000
I am not certain Rover Pipeline, LLC and Energy Transfer Partners, L.P. (collectively, Rover) violated any law or regulation within the Commission’s jurisdiction by allegedly lying about buying an old house that was “eligible” for historic preservation and tearing it down to make room for their pipeline. Destroying the house was, perhaps, untoward and Rover’s assurances that it was “committed to a solution that results in no adverse effects”[1] probably created the wrong impression. But I am not sure that it was illegal. I welcome a hearing to determine whether it was and therefore concur with this order.[2]
The Commission’s Office of Enforcement asserts that Rover violated section 157.5 of the Commission’s regulations which require “as a forthright obligation of the applicant,”[3] that applications under Natural Gas Act section 7 contain “all pertinent data and information necessary for a full and complete understanding of the proposed project.”[4] The Office of Enforcement identifies several alleged misrepresentations Rover made about their intended treatment of the “eligible” house.[5]
The key question is whether Rover had any legal duty to apprise us either way. It seems to me that there must be some meaningful materiality requirement to our candor rules. Did Rover have any legal obligation to not harm the house, or to represent how they would deal with the house at all? One could imagine any number of trivial representations that could be made in the course of a certificate application that would not significantly bear on the Commission’s (or staff’s) “full and complete understanding of the proposed project.”[6] Would such trivial declarations, if ultimately proven false, also violate section 157.5 of the Commission’s regulations? I have my doubts.
Where exactly is the line? When are false statements illegal as opposed to irrelevant? And even if lying (or, as here, allegedly failing to be 100% candid) about one’s intention to tear down a house does turn out to be illegal, can such conduct justify a penalty of over $20 million? I expect the hearing to resolve these questions.
As to Rover’s litany of procedural and Constitutional claims, the Commission is acting within the bounds of precedent.[7] The only pathway around this precedent is through appeal to a higher court.
For these reasons, I respectfully concur.
[1] See Rover Pipeline, LLC, 174 FERC ¶ 61,208, at P 4 (2021) (Order to Show Cause and Proposed Penalty); id., App. A at 2 (2021) (Office of Enforcement Staff Report).
[2] Rover Pipeline, LLC, 178 FERC ¶ 61,028 (2022).
[3] 18 C.F.R. § 157.5(b).
[4] Id. § 157.5(a).
[5] See Rover Pipeline, LLC, 178 FERC ¶ 61,028 at P 4 (listing alleged misrepresentations).
[6] 18 C.F.R. § 157.5(b) requires that the applicant make “a definite and positive showing that the information or data called for by the applicable rules is not necessary,” but was any information with respect to the old house actually “called for by the applicable rules?” If so, did Rover fail to meet its “forthright obligation” to “avoid” this required showing. Again, one can think of any number of data points that might be tangentially related to a project without being material or otherwise “called for by the applicable rules.” I expect these issues to be addressed at hearing.
[7] Interestingly, Rover does not raise the corollary of its constitutional challenge to the Commission’s appointment of Administrative Law Judges (ALJs)—the multiple layers of removal protections the ALJs enjoy. See 5 U.S.C. § 7521. The Fifth Circuit recently revived a challenge to the removal protections of the Securities and Exchange Commission’s ALJs. See Cochran v. S.E.C., 20 F.4th 194 (5th. Cir. 2021) (en banc).