A federal appeals court in Washington, DC, Friday rejected Colorado Interstate Gas Co.’s (CIG) petition for review of an order denying the pipeline’s efforts to recover from its shippers a substantial amount of natural gas that was lost during an accidental storage leak.
CIG, an El Paso Corp. pipeline, lost between 451,000 Dth and 720,000 Dth from its storage facility in Fort Morgan, CO, in October 2006. CIG subsequently asked the Federal Energy Regulatory Commission (FERC) to approve its request for an increase in its fuel retention percentage to 0.06% from 0.00% to recover the lost gas from its shippers. Several shippers protested the filing, and FERC sided with the shippers.
The U.S. Court of Appeals for the District of Columbia found the Commission’s decision to be reasonable. “FERC held that under its tariff CIG could only recover from its shippers gas that was lost in the course of normal pipeline operations, which this was not. We deny CIG’s petition for review because FERC’s interpretation of the tariff was reasonable, and its conclusion that the loss did not result from normal operations was supported by substantial evidence,” said Judge Thomas B. Griffith in the decision.
To determine whether the gas losses were recoverable in the CIG case, the court said FERC used a standard that it developed in a 1995 case involving Williams Natural Gas Co. There, it made the distinction between “two categories of losses: losses resulting from normal pipeline operations, which are recoverable; and losses resulting from the malfunction of underground storage mechanics, which are not recoverable” from shippers.
“The circumstances of the Fort Morgan incident amply support FERC’s finding that this accident, which led to substantial gas loss over the period of a few days, was not normal. FERC reasonably described the accident as a ‘totally unexpected non-routine malfunction of underground storage mechanics…not associated with routine maintenance or other normal operations activity,'” the court said.
“We give deference to FERC’s interpretations of its own precedents and conclude that it was reasonable for FERC to use the approach sanctioned in Williams to determine the outcome here,” the judge said.
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