A federal appeals court in Washington, DC, last Tuesday sent back 2005-2006 orders to FERC for a clearer understanding of why the agency had modified a shipper’s contract with Williston Basin Interstate Pipeline Co. to allow it to resell transportation capacity.

At issue is a contract allowing Northern States Power Co. (NSP) to provide transportation service on Williston in North Dakota under Part 157 of the Federal Energy Regulatory Commission’s (FERC) regulations. The contract did not give NSP the right to release unused capacity. However, in a rate proceeding filed by Williston Basin, the Commission found that the Part 157 service was no longer just and reasonable, and it granted NSP’s request to convert the service to Part 284 service with full capacity rights.

Williston Basin challenged FERC’s action, arguing that NSP’s request for the contract change — which the pipeline said amounted to contract invalidation — could only be granted if it satisfied the stricter “public interest” standard rather than the more lenient “just and reasonable” standard.

The U.S. Court of Appeals for the District of Columbia agreed that there were flaws in the FERC ruling. “NSP engaged the capacity under Part 157, which allowed Williston, not NSP, the right to resell unused capacity. Thus, the contract favors Williston’s position, not NSP’s, contrary to the Commission’s rhetoric,” the three-judge panel said.

“While the Commission [has] consistently viewed enhanced competition as a generic reason for a preference for capacity release…it has never hitherto found a case that justified ordering a pipeline to convert at the request of a shipper,” the court noted.

However, “because there seems to be a significant possibility that the Commission may find an adequate explanation for its actions,” the court remanded the case to the agency, but it did not vacate the orders.

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