A federal appeals court in Washington, DC, Wednesday remanded, but did not vacate, an order approving a lease agreement between Midcontinent Express Pipeline LLC, an interstate system, and Enogex LLC, an intrastate pipeline, to transport natural gas produced in Oklahoma.

Apache Corp., a producer in Oklahoma and shipper on Enogex, challenged the order issued by the Federal Energy Regulatory Commission, arguing that the Enogex-Midcontinent lease would reduce its own access to the Enogex pipeline. Apache transports nearly all of its Oklahoma gas over Enogex's pipeline.

Midcontinent and Enogex made the lease agreement in 2006. It called for Midcontinent to lease part of Enogex's pipeline capacity, thus allowing Midcontinent to transport gas from various points in Oklahoma to Bennington, OK, and from there into Midcontinent's interstate system. Apache objected to the agreement, saying it was discriminatory to existing customers on Enogex.

"We find that the Commission did not adequately explain one aspect of its decision to approve the lease, and we therefore remand for the Commission to clarify its ruling," said the U.S. Court of Appeals for the District of Columbia Circuit. The FERC order, however, remains legally binding.

"The problem here [in the FERC order], as Apache correctly points out, is that the Commission never concluded that the Enogex-Midcontinent lease would not adversely affect existing customers," said the three-judge panel.

"There is 'a serious possibility that the Commission will be able to substantiate its decision on remand.' And 'the disruptive consequences of vacating' are substantial. The FERC order approving the Enogex-Midcontinent lease thus remains in effect and legally binding. Because we are not vacating the order approving the lease, we expect and direct FERC to provide the necessary clarification without undue delay," the court said.

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