United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 25, 2023 Decided July 26, 2024

No. 22-1045

LIQUID ENERGY PIPELINE ASSOCIATION,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION AND UNITED 

STATES OF AMERICA,

RESPONDENTS

ENERGY INFRASTRUCTURE COUNCIL AND ENBRIDGE INC.,

INTERVENORS

Consolidated with 22-1103, 22-1104, 22-1105, 22-1110, 

22-1257, 22-1258

On Petitions for Review of Orders

of the Federal Energy Regulatory Commission

Miguel A. Estrada argued the cause for Carrier Petitioners. 

With him on the joint briefs were Amy L. Hoff, Elizabeth B. 

Kohlhausen, Charles F. Caldwell, Matthew S. Rozen, Aaron 

Smith, Daniel J. Poynor, Linda C. Bailey, Hyland Hunt, and 
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Ruthanne M. Deutsch. William S. Scherman, Jason J. 

Fleischer, and Steven M. Kramer, entered appearances.

Steven A. Adducci argued the cause for Shipper 

Petitioners. With him on the briefs were Richard E. Powers, 

Jr., Matthew D. Field, Gregory S. Wagner, and William G. 

Bolgiano.

Matthew J. Glover, Attorney, Federal Energy Regulatory 

Commission, argued the cause for respondent. With him on 

the brief were Robert B. Nicholson and Robert J. Wiggers, 

Attorneys, U.S. Department of Justice, and Matthew R. 

Christiansen, General Counsel, and Robert H. Solomon, 

Solicitor, Federal Energy Regulatory Commission.

Miguel A. Estrada, Matthew S. Rozen, and Aaron Smith

were on the brief for intervenor Liquid Energy Pipeline 

Association in support of respondents. Jason J. Fleischer, 

Steven M. Kramer, and William S. Scherman entered 

appearances.

Richard E. Powers, Jr., Matthew D. Field, Steven A. 

Adducci, Gregory S. Wagner, William G. Bolgiano, Elizabeth 

A. Zembruski, Matthew T. Rick, and James Harrison Holt were 

on the brief for Shipper-Intervenors in support of respondents.

Before: SRINIVASAN, Chief Judge, MILLETT and WILKINS, 

Circuit Judges.

Opinion for the Court filed by Chief Judge SRINIVASAN.

SRINIVASAN, Chief Judge: Every five years, the Federal 

Energy Regulatory Commission reviews the methodology used 

by oil pipelines to set their maximum annual rate increases. 

That methodology is called the Index. In 2020, the 
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Commission conducted its five-year review and set the Index

level for the next cycle. After that Index took effect, the 

Commission modified it on rehearing. We vacate that order 

because the Commission was obligated to—but did not—

adhere to notice-and-comment procedures when resetting the 

Index on rehearing.

I.

A.

The Interstate Commerce Act (ICA) charges the Federal 

Energy Regulatory Commission with ensuring that the rates 

charged by interstate oil pipelines are “just and reasonable.” 49 

U.S.C. App. § 1(5) (1988). In the Energy Policy Act of 1992, 

Congress required the Commission to “establish[] a simplified 

and generally applicable ratemaking methodology” for 

producing just and reasonable rates. Pub. L. No. 102-486, 

§ 1801, 106 Stat. 2776, 3010 (citing 49 U.S.C. App. § 1(5)

(1988)).

The Commission implements that congressional mandate 

through the Index, a methodology for setting the maximum rate

increases pipelines may charge customers each year. Ass’n of 

Oil Pipe Lines v. FERC (AOPL I), 83 F.3d 1424, 1429–31 

(D.C. Cir. 1996). While pipelines are required to file their

initial rates with the Commission, “pipelines may increase their 

rates without seeking the Commission’s approval, so long as 

the increase does not exceed the annual limit, computed using 

the index.” Ass’n of Oil Pipe Lines v. FERC, 876 F.3d 336, 

339 (D.C. Cir. 2017). The Index is “designed to enable 

pipelines to recover costs by allowing pipelines to raise rates at 

the same pace as they are predicted to experience cost 

increases.” AOPL I, 83 F.3d at 1430.
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B. 

The Commission reviews the Index every five years. In 

June 2020, the Commission began the process for its next fiveyear review by inviting comments on a new proposed Index. 

Notice of Inquiry, Five-Year Review of the Oil Pipeline Index, 

171 FERC ¶ 61,239 (June 18, 2020). A group of pipelines 

(whom we will refer to as Carriers) and a group of pipeline 

customers (whom we will refer to as Shippers) both submitted 

comments. Carriers proposed changes that would give rise to 

a higher Index (and so would allow for higher potential cost 

increases) than the proposed Index, while Shippers sought the 

opposite. 

On December 17, 2020, the Commission issued an Initial 

Order establishing an Index level higher than the proposed 

Index. Order Establishing Index Level, Five-Year Review of 

the Oil Pipeline Index, 173 FERC ¶ 61,245 (Dec. 17, 2020). In 

calculating that Index, the Commission adopted Carriers’ 

proposals. The Commission published the Initial Order in the 

Federal Register and made the Order effective on February 16, 

2021. Five-Year Review of the Oil Pipeline Index, 86 Fed. Reg. 

9448. The Index established by the Initial Order was slated to 

become effective on July 1, 2021. Id.

Both Carriers and Shippers promptly sought rehearing of 

the Initial Order. Carriers asked for minor changes to the data 

source used in the Commission’s calculations. Shippers, by 

contrast, substantively challenged the Commission’s decisions

in calculating the Initial Order’s Index level.

On February 18, 2021, the Commission’s Deputy 

Secretary issued a tolling order on the rehearing requests to 

prevent them from being deemed denied by operation of law. 

See 18 C.F.R. § 385.713(f). Importantly for our purposes, the 
5

tolling order established that neither Carriers nor Shippers were

permitted to comment in each other’s rehearing proceedings. 

On July 1, 2021, while the tolling order remained in place, the 

Initial Order’s Index took effect as scheduled. 

Subsequently, on January 20, 2022, the Commission

issued a Rehearing Order granting Shippers’ rehearing request. 

Order on Rehearing, Five-Year Review of the Oil Pipeline 

Index, 178 FERC ¶ 61,023. The Rehearing Order adopted 

Shippers’ suggestions for recalculating the Index and set a new, 

lower Index to be effective on March 1, 2022. 

On February 22, 2022, Shippers requested rehearing or 

clarification of the Rehearing Order. They sought assurance 

that they could read the Rehearing Order to apply retroactively

to the Initial Order’s effective date, July 1, 2021. That would 

enable Shippers to seek refunds of any charged rates exceeding

the Rehearing Order’s Index. On May 6, 2022, the 

Commission denied Shippers’ request, confirming that the 

Rehearing Order applied only prospectively. 

II.

In their petitions for review, Carriers bring a variety of 

challenges to the Commission’s Rehearing Order. We grant 

the petitions based on one of the grounds Carriers assert: that 

the Commission failed to comply with the Administrative 

Procedure Act (APA) when it modified the Index in the 

Rehearing Order without adhering to notice-and-comment 

procedures. Because our ruling in favor of Carriers on that 

ground affords them all the relief they seek—vacatur of the 

Rehearing Order—we have no need to consider any of their 

other challenges.
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A.

As a threshold matter, the Commission contends that 

Carriers failed to exhaust their APA challenge before the 

agency. A party challenging agency action generally must first 

raise an issue before the agency to preserve it for judicial 

review. Advocs. for Highway & Auto Safety v. Fed. Motor 

Carrier Safety Admin., 429 F.3d 1136, 1150 (D.C. Cir. 2005). 

Here, the Commission argues that Carriers forfeited their APA 

notice-and-comment challenge by failing to assert it before the 

agency. We disagree.

Carriers had no ability to raise their notice-and-comment 

complaint before the agency granted Shippers’ rehearing 

request in the Rehearing Order. Before any party sought 

rehearing of the agency’s Initial Order, there of course would 

have been no ripe challenge to the way in which the agency 

would conduct any potential rehearing procedures: at that time, 

Carriers had no reason to know whether any rehearing 

procedures would in fact come to pass. And after Shippers 

sought rehearing of the Initial Order, the agency, as noted, 

prohibited Carriers from commenting in Shippers’ rehearing 

proceeding. In those circumstances, Carriers had no occasion 

to raise their notice-and-comment challenge to the rehearing 

procedures before the Commission issued the Rehearing Order. 

As we have explained, “courts have no authority to require 

petitioners seeking judicial review of a final agency action to 

further exhaust administrative procedures.” CSX Trans., Inc. 

v. Surface Trans. Bd., 584 F.3d 1076, 1079 (D.C. Cir. 2009). 

Carriers therefore were not required to raise their notice-andcomment challenge to the Rehearing Order before the agency

in order to present it for judicial review.
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B.

Because the ICA does not provide its own procedural 

rules, we assume the APA’s procedural requirements apply. 

See Carlson v. Postal Regul. Comm’n, 938 F.3d 337, 348 (D.C. 

Cir. 2019); see also Asphalt Roofing Mfrs. Ass’n v. ICC, 567 

F.2d 994, 1002 n.5 (D.C. Cir. 1977). The Commission does 

not dispute the applicability of the APA. We also assume for 

present purposes that the Commission’s authority under the 

ICA to rehear its orders, see 49 U.S.C. App. § 17(6)–(7)

(1988), encompassed its rehearing of the Index level 

established in the Initial Order. The question is whether the 

Commission could conduct that rehearing and change the 

effective Index level without abiding by the APA’s notice-andcomment requirements.

“To foster public participation and facilitate reasoned 

decisionmaking, ‘the Administrative Procedure Act requires 

agencies to afford notice of a proposed rulemaking and an 

opportunity for public comment prior to a rule’s promulgation, 

amendment, modification, or repeal.’” Humane Soc’y v. 

USDA, 41 F.4th 564, 568 (D.C. Cir. 2022) (quoting Am. Hosp.

Ass’n v. Bowen, 834 F.2d 1027, 1044 (D.C. Cir. 1987)). 

Consequently, “once an agency makes a rule—that is, once it 

makes a statement prescribing law with future effect—the APA 

requires the agency to provide notice and an opportunity for 

comment before repealing [or amending] it.” Id. at 569.

Here, the Commission abided by the APA’s notice-andcomment requirements when, in the Initial Order, it first 

promulgated the Index for the 2021–2025 five-year cycle. 86 

Fed. Reg. at 9449. The agency, then, was obligated to “use the 

same procedures” to amend the Index. Perez v. Mortg. Bankers 

Ass’n, 575 U.S. 92, 101 (2015). But when the Commission

altered the Index by granting Shippers’ rehearing request in the 
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Rehearing Order, it did so without adhering to notice-andcomment procedures. 

The Commission does not suggest that its adjustment of 

the Index in the Rehearing Order fits within an exemption to 

the APA’s notice-and-comment requirements. For instance, an 

interpretive rule generally need not undergo notice-andcomment procedures. Shalala v. Guernsey Mem’l Hosp., 514 

U.S. 87, 99 (1995). See also AOPL I, 83 F.3d at 1432; AT&T 

Corp. v. FCC, 113 F.3d 225, 229 (D.C. Cir. 1997). The 

Rehearing Order, however, substantively altered the Index 

from the level prescribed in the Initial Order. The Commission 

does not contend otherwise. And “[w]hereas a clarification 

may be embodied in an interpretive rule that is exempt from 

notice and comment requirements, new rules that work 

substantive changes in prior regulations are subject to the 

APA’s procedures.” Sprint Corp. v. FCC, 315 F.3d 369, 374 

(D.C. Cir. 2003) (internal citations omitted).

The Commission’s central argument is that it afforded 

notice-and-comment procedures when first establishing the 

Index in the Initial Order, and that the Index proceeding 

remained ongoing through the completion of any agency 

rehearing proceedings. As a result, the Commission submits, 

there was no need to provide another round of notice-andcomment procedures while the same proceeding remained 

open. In the Commission’s view, in other words, the alteration 

of the Index in the Rehearing Order was not a new proceeding 

requiring a new round of notice-and-comment procedures, but 

instead was a continuation of a preexisting proceeding for

which notice-and-comment procedures had already been 

afforded.

The Commission’s theory proves too much. Under the 

Commission’s approach, it could grant rehearing of an 
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established rate methodology years after it took effect and 

became enforceable, and indeed could do so dozens of times in 

succession, without ever needing to afford notice to the public 

and an opportunity to submit comments about the desirability 

of altering (and repeatedly realtering) the prevailing 

methodology. There is no basis for allowing that kind of 

broadscale evasion of the APA’s notice-and-comment 

procedural requirements. 

In particular, there is no omnibus “rehearing exception” to 

the APA’s notice-and-comment requirements. See Clean Air 

Council v. Pruitt, 862 F.3d 1, 8–9 (D.C. Cir. 2017); Consumer 

Energy Council of Am. v. FERC, 673 F.2d 425, 445 n.71 (D.C. 

Cir. 1982). As we have explained in the closely related context

of Commission rules under the Natural Gas Policy Act, 

“Congress did not intend . . . to permit the Commission to use 

the occasion of a petition for rehearing to make any substantive 

change whatsoever in a rule, without providing some notice 

and comment.” Consumer Energy, 673 F.2d at 446 n.71. A 

contrary conclusion “would effectively eviscerate the 

procedural protections provided by the APA.” Id. So too here.

Outside the context of agency rehearing proceedings like 

those at issue here, we have held that once an agency’s rule is 

“‘valid’ against the public at large,” the APA generally requires 

the agency to afford notice-and-comment procedures before 

amending the rule. Humane Soc’y, 41 F.4th at 570. This case 

does not require definitive resolution of exactly “when a rule 

passes this regulatory point of no return,” id. at 568, when an 

agency adjusts a rule in an exercise of its rehearing authority. 

The conferral of rehearing powerssuggestssome congressional 

desire for agency flexibility in administrative process, cf. Int’l 

Harvester Co. v. Ruckelshaus, 478 F.2d 615, 632 & n.51 (D.C. 

Cir. 1973), and this case does not require us to prescribe an 

across-the-board answer to when an agency must provide
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notice-and-comment procedures in exercising its rehearing 

authority. 

Instead, we can resolve this case on the particular facts 

before us. Specifically, the Index set by the Initial Order at 

least became sufficiently final to require that any amendment 

undergo notice-and-comment procedures once the Index’s

effective date of July 1, 2021, arrived. At that point, the Initial 

Order necessarily “carrie[d] legal consequences,” Humane 

Soc’y, 41 F.4th at 570, of a kind requiring adherence to APA 

procedures in connection with any substantive modification: as 

of the July 1, 2021, effective date, Carriers became legally 

obligated to charge rates within the ceiling set by the Initial 

Order’s Index and could have been subject to enforcement 

proceedings for failing to comply. In January 2022, after 

Carriers had been bound to comply with the Initial Order’s 

Index for several months, the Commission modified the Index 

in the Rehearing Order. Amending the Index at that point 

required the Commission to provide notice in the Federal 

Register of the changes it planned to make and seek comments 

from “interested persons.” 5 U.S.C. §§ 551(5), 553(b)-(c); see 

Perez, 575 U.S. at 101. The Commission did not do so.

The Commission notes that we have declined to review 

rules undergoing rehearing because they were not final as to 

the parties, which, to the Commission, supports the idea that 

rehearing proceedings are an extension of an ongoing

rulemaking process rather than the initiation of a new process. 

But the cases cited by the Commission concerned exhaustion

and finality with respect to judicial review. In that context, 

when the parties sought reconsideration, they rendered the 

rules nonfinal as to themselves. See City of New Orleans v. 

SEC, 137 F.3d 638, 639 (D.C. Cir. 1998); Bellsouth Corp. v. 

FCC, 17 F.3d 1487, 1489–90 (D.C. Cir. 1994). But whether 

an agency action is final as to a particular party for purposes of 
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seeking judicial review is a distinct question from whether an 

agency action is final for purposes of triggering the APA’s 

procedural requirements. Here, the Commission needed to 

adhere to those requirements when it modified the Index in the 

Rehearing Order.

In sum, the Commission failed to comply with the APA by 

issuing the Rehearing Order after the Initial Order’s Index had 

become effective without affording notice of the proposed 

modification and an opportunity for comment. We thus grant 

Carriers’ petitions for review, vacate the Rehearing Order, and 

order the Commission to reinstate the Initial Order.

That resolution also disposes of Shippers’ petitions for 

review. Shippers argue that the Commission should have made 

the Index modifications in the Rehearing Order retroactive. 

But because our grant of Carriers’ petitions entails vacatur of 

the Rehearing Order, Shippers’ challenge to the Commission’s 

treatment of that order as prospective is moot.

* * * * *

For the foregoing reasons, we grant Carriers’ petitions for 

review and vacate the Rehearing Order for failure to abide by 

the APA’s procedural requirements. We dismiss Shippers’ 

petitions for review as moot. 

So ordered.