After over a decade of litigation, the D.C. Circuit has upheld the quality bank methodology the Federal Energy Regulatory Commission (Commission) determined for the Trans Alaska Pipeline System (TAPS).  The Court’s decision rules in favor of Wright & Talisman clients Tesoro Alaska Company LLC and Anadarko Petroleum Corporation, who, along with other Alaska North Slope oil producers, defended the current methodology. 

On the Alaska North Slope, producers inject crude oil of different qualities into TAPS and receive a commingled stream at the pipeline’s terminus in Valdez, Alaska.  A quality bank mechanism ensures that no producer gains or loses value due to the commingling during transport. 

These proceedings began in 2013, and the case was previously remanded twice by the D.C. Circuit.  The Commission order on review was its third rejecting challenges by Petro Star Inc. contending that the formula for valuing the Resid, the lowest-quality cut, is incorrect. 

In addition to resolving this long-running case, the Court’s decision is notable for its confirmation that federal courts of appeal have jurisdiction to directly review Commission orders involving oil pipelines under the Hobbs Act.  The Court raised this issue on its own motion after oral argument had been held.  Historically, the Commission’s oil pipeline orders were understood to fall within the authority of the Interstate Commerce Commission (ICC) for purposes of judicial review under the Hobbs Act.  However, the ICC Termination Act of 1995 removed references to the ICC from the Hobbs Act and replaced them with references to the Surface Transportation Board.  While courts of appeal continued to directly review FERC oil pipeline orders as before, no court had clarified that such jurisdiction existed after the ICC Termination Act of 1995.