A federal appeals court in Washington, DC, Friday denied a challenge by ExxonMobil Corp. to two regulations that it argued give FERC the authority to condition a certificate for an Alaska natural gas pipeline on the sponsors’ agreeing to expand the facility at a later date.
ExxonMobil, a major producer of Alaska North Slope gas and a potential developer of an Alaska gas line, argued that the regulations exceed the Federal Energy Regulatory Commission’s authority under the Natural Gas Act and the Alaska Natural Gas Pipeline Act (ANGPA), and are “arbitrary and capricious” because they would require a sponsor to bear the additional cost of building a larger pipeline in order to transport gas that may never be discovered.
ExxonMobil’s reading of the two regulations (Sections 157.37 and 157.36) is “highly strained,” the U.S. Court of Appeals for the District of Columbia Circuit said in rejecting the company’s petition for review. Its challenge “is based upon a misreading of these regulations,” which were promulgated by FERC pursuant to the ANGPA, a three-judge panel said.
The producer has interpreted Section 157.37 as “asserting the Commission has authority to condition the issuance of an initial certificate upon the project sponsor’s agreement to build a pipeline capable of carrying more gas than the project sponsor proposes,” the court said. But FERC “appears to have interpreted Section 157.37 as authority to condition the issuance of a certificate only upon the types of design change the Commission has imposed in the past — to wit, changes in routing, cost allocation and initial rates,” it noted.
And ExxonMobil “misread Section 157.36 as asserting the Commission may order an increase in the capacity of a proposed voluntary expansion to an extant Alaska pipeline. The text of the regulation simply does not support the petitioners’ reading,” the court said.
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