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Power & Pipes

FERC, CFTC, and State Energy Law Developments

On January 7, 2011, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) in Murray Energy Corp. v. FERC, No. 09-1207 (D.C. Cir. Jan. 7, 2011), denied a petition for review By Murray Energy Corporation (Murray) of Federal Energy Regulatory Commission (FERC) orders authorizing construction of Rockies Express Pipeline LLC’s (REX’s) REX-East pipeline. The court rejected arguments concerning agency delegation of authority, fulfillment of certificate conditions, and consideration of safety issues.

The D.C. Circuit first explained that REX filed an application in April 2007 for a certificate of public convenience and necessity under Natural Gas Act (NGA) Section 7 to construct and operate the REX-East pipeline. In the FERC proceeding, Murray stated that the proposed pipeline would cross approximately eight miles of coal deposits that Murray was either already mining or might mine in the future, and expressed concern that land subsidence might occur along those eight miles, placing strain on the pipeline. FERC granted the REX application, subject to numerous conditions, including Condition No. 147 concerning the maintenance of pipeline integrity and operation while not impeding the mining operation. In March 2009 the Chief of Gas Branch 2 in the Office of Energy Projects authorized construction of the pipeline. On rehearing, FERC affirmed the delegation of authority to the Chief of Gas Branch 2 and adopted the Chief’s action as its own. FERC also found that REX had satisfied Condition No. 147 and that REX’s construction and operations plans adequately protected the safety of the pipeline and Murray’s mining operations.

Reviewing the FERC orders under the arbitrary and capricious/substantial evidence standard, the D.C. Circuit rejected Murray’s three arguments regarding (1) delegation to the Chief of Gas Branch 2; (2) whether REX had fulfilled Condition No. 147; and (3) the safety of the pipeline. The court quickly dismissed the first argument, finding that FERC’s ratification of the action of the Chief of Gas Branch 2 resolved any delegation problems. With respect to the second issue, the court found that there was substantial evidence that REX had satisfied Condition No. 147, which required REX to collaborate with Murray.

Finally, the D.C. Circuit rejected Murray’s argument that REX’s construction plan failed to ensure the safety of the pipeline. Murray cited four reasons for this claim: (1) REX’s experts lacked adequate qualifications; (2) REX’s experts suggested the plan was unsafe; (3) the special trench design was untested; and (4) the plan did not bind REX to any actual protective measures. The court found that FERC’s judgment that REX’s proposed safety measures were sound was adequately supported By substantial record evidence and that FERC offered satisfactory explanations for its conclusions.