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FERC must clarify why Dominion could treat customers differently at Cove Point

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FERC must clarify why Dominion could treat customers differently at Cove Point

Afederal appeals court asked FERC to explain why a deal allowing to giveup contracted services at Dominion Resources Inc.'s Cove Point LNG import terminalwas not unfair to BP EnergyCo., another Dominion customer that did not get the sameopportunity.

TheU.S. Court of Appeals for the District of Columbia Circuit said FERC appearedto treat the BP plcsubsidiary differently from Statoil because BP Energy possessed protectionsunder Natural Gas Act Section 7, such as the release and retention ofcontracted-for terminal services, that Statoil, which had a contract basedunder Section 3 of the Natural Gas Act, did not.

"Ifthe reasonable inference from the challenged orders is that the turn backopportunity is intended to compensate for the open access protections providedto BP Energy but not Statoil by NGA § 7, then the commission has not so fardemonstrated that Statoil does not receive the same or comparable benefitsunder its contract with Dominion," the D.C. Circuit wrote.

"Thecommission acknowledges that it did not review the Statoil contract, and statesnow that the contract terms are 'irrelevant' to its determination that BPEnergy and Statoil are not similarly situated," the court said."Maybe so, but the commission has not explained why."

Thecourt's July 15 opinion remanded the case to FERC.

Onthe same day, the D.C. Circuit gave FERC a win when it the commission's decision toapprove the Dominion Cove Point LNG export project against a challenge fromenvironmental groups.

BPEnergy had asked the D.C. Circuit to review a FERC decision that didnot discriminate against BP Energy when it agreed to reduce the contract termof a non-open-access terminal services contract with Statoil, without giving asimilar option to turn back services to open-access customers such as BPEnergy. According to the court, FERC had ruled in 2015 that turn-back options are outside thescope of an undue discrimination provision in Natural Gas Act Section 3 andthat BP Energy, which receives terminal services under Section 7, was not inthe same situation as Statoil.

Thedeal between Dominion and Statoil Natural Gas was put together when Dominionwas considering expanding the Cove Point import terminal to include LNG exportactivity and trying to free up pipeline capacity that could be used to feednatural gas to the export facilities. Dominion negotiated the agreement after a2012 reverse open season to allow the return of pipeline services produced noresponses. (U.S. Court of Appeals for the District of Columbia Circuit No.15-1205)