Washington Gas Light Company v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 15, 2008 Decided July 18, 2008
No. 07-1015
WASHINGTON GAS LIGHT COMPANY,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION ,
RESPONDENT
DOMINION T RANSMISSION, I NC., ET AL .,
I NTERVENORS
On Petition for Review of Orders
of the Federal Energy Regulatory Commission
Barbara K. Heffernan argued the cause for petitioner.
With her on the briefs were Debra Ann Palmer, William S.
Lavarco, Beverly J. Burke, Bernice K. McIntyre, and Rose T.
Lennon.
Paula M. Carmody and Cynthia G. Warren were on the
brief for intervenor Maryland People’s Counsel.
Judith A. Albert, Senior Attorney, Federal Energy
Regulatory Commission, argued the cause for respondent.

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With her on the brief were Cynthia A. Marlette, General
Counsel, and Robert H. Solomon, Solicitor.
Christopher T. Handman argued the cause for
intervenors Dominion Transmission, Inc., et al. On the brief
were Georgia B. Carter, Margaret H. Peters, J. Patrick
Nevins, Catherine E. Stetson, Jessica L. Ellsworth, Charles H.
Shoneman, Kirstin E. Gibbs, David L. Wochner, Jason F.
Leif, and Peter I. Trombley.
Before: SENTELLE , Chief Judge, ROGERS and BROWN,
Circuit Judges.
Opinion for the Court filed by Circuit Judge BROWN.
BROWN, Circuit Judge: The Federal Energy Regulatory
Commission (“FERC”) approved a project that will expand
the liquefied natural gas (“LNG”) capacity of the Cove Point
LNG Terminal (“Cove Point”). Washington Gas Light
Company (“WGL”), a local distribution company that
receives natural gas from Cove Point, brought a petition for
review arguing the expansion project will cause severe
leakage throughout its distribution system. We find that
substantial evidence supports FERC’s conclusion that any
threat of increased leakage is due to defects in WGL’s
system, but we grant WGL’s petition because substantial
evidence does not support FERC’s conclusion that WGL can
address safety concerns before the project’s in-service date.
I
Dominion Cove Point LNG, LP and Dominion
Transmission, Inc. (collectively “Dominion”) applied to
FERC for authorization to build the Cove Point Expansion
Project (“Expansion”). Slated for completion in November

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2008, the Expansion will significantly increase Cove Point’s
LNG output and cause LNG that has not been blended with
traditional natural gas to flow to local distribution
companies.1 WGL objected to the Expansion, arguing that
the influx of LNG would cause its distribution system in the
Mid-Atlantic region to suffer severe leakage. It pointed out
that in the two-year period after it began receiving a limited
amount of unblended LNG from Cove Point in its Prince
George’s County, Maryland (“PG County”) facilities, starting
in August 2003, those facilities experienced a sixteen-fold
increase in leakage. WGL also submitted a report finding the
low heavy-hydrocarbon content of LNG caused the seals
inside of the couplings connecting its pipes to leak.
To address WGL’s concerns, FERC permitted the parties
to submit written evidence and held a “procedural
conference” to hear witness testimony. It then issued several
orders approving the Expansion. See Dominion Cove Point
LNG, LP, 115 F.E.R.C. ¶ 61,337 (2006) (“Certificate
Order”); Dominion Cove Point LNG, LP, 118 F.E.R.C. ¶
61,007 (2007) (“Rehearing Order”). These orders found
factors such as damaged couplings, colder temperatures, and
changes in pressure played a larger role in creating the leaks
in PG County than the LNG. Certificate Order at 62,268.
Specifically, FERC found LNG “would not have adversely
affected WGL’s system if a subset of the compression
couplings had not been compromised during the installation
process.” Rehearing Order at 61,029. It also concluded the
Expansion could proceed consistent with the public interest
because “there is time for WGL to complete any remaining
1 LNG is natural gas that has been supercooled into liquid
form, reheated back into gas form at natural gas terminals like Cove
Point, and then shipped to customers through local distribution
companies like WGL. LNG has a lower heavy-hydrocarbon
content than traditional natural gas.

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corrective measures that are needed on its system so that it
can safely accommodate regasified LNG.” Rehearing Order
at 61,023–24. Finally, it rejected WGL’s claim that the
procedural conference was inadequate. Id. at 61,024–28.
WGL petitions this court for review of the orders approving
the Expansion, with intervenor Maryland People’s Counsel 2
filing a brief in support of WGL’s petition, and intervenor
Dominion filing a brief in support of FERC’s opposition.
II
Under section 3 of the National Gas Act (“NGA”), FERC
“shall” approve any application to import natural gas from
abroad “unless, after opportunity for hearing, it finds that the
proposed exportation or importation will not be consistent
with the public interest.” 15 U.S.C. § 717b(a). Under section
7, FERC “shall” approve construction of facilities for
transportation or sale of natural gas if the project “is or will be
required by the present or future public convenience and
necessity.” Id. § 717f(e). Here, FERC approved different
portions of the Expansion under sections 3 and 7. We review
FERC’s orders under “the arbitrary and capricious standard
and uphold FERC’s factual findings if supported by
substantial evidence.” Fla. Mun. Power Agency v. FERC,
315 F.3d 362, 365 (D.C. Cir. 2003); 15 U.S.C. § 717r(b).
When considering FERC’s evaluation of “scientific data
within its technical expertise,” we afford FERC “an extreme
degree of deference.” Nat’l Comm. for the New River, Inc. v.
FERC, 373 F.3d 1323, 1327 (D.C. Cir. 2004).
2 The Maryland People’s Counsel is “an agency of the State of
Maryland authorized to represent the interests of the consumers of
the state in proceedings before federal regulatory agencies.” Md.
People’s Counsel v. FERC, 761 F.2d 768, 772 (D.C. Cir. 1985).

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WGL argues the Expansion will be inconsistent with the
public-interest requirements of the NGA because the influx of
unblended LNG will cause leakage throughout its system.
While WGL disagrees with much of FERC’s analysis, this
case boils down to the validity of two of FERC’s ultimate
findings: (A) the LNG “would not have adversely affected
WGL’s system [in PG County] if a subset of the compression
couplings had not been compromised during the installation
process”; and (B) “there is time for WGL to complete any
remaining corrective measures that are needed on its system
so that it can safely accommodate regasified LNG.”
Rehearing Order at 61,023–24, 61,029. We conclude
substantial evidence supports FERC’s finding that defects in
WGL’s system caused the PG County leaks, but does not
support its finding that WGL will be able to address safety
concerns before the Expansion’s in-service date.
A
FERC found the influx of unblended LNG “would not
have adversely affected WGL’s system [in PG County] if a
subset of the compression couplings had not been
compromised during the installation process.” Id. at 61,029.
WGL disputes this conclusion by noting its system functioned
properly for decades after it installed the couplings, and the
increased leak rates only began after August 2003, when
Cove Point started sending LNG to its PG County facilities.
In the two-year period that followed, these facilities
experienced a sixteen-fold increase in leaks, from 62 repairs
per year to 1,041 repairs per year, while the rest of WGL’s
system experienced only typical seasonal leakage. WGL also
points to a report by the ENVIRON International
Corporation, which found the low heavy-hydrocarbon content
of LNG caused the seals inside of WGL’s couplings to shrink
and thus contributed to leakage.

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FERC rejected WGL’s argument and concluded the leaks
in PG County occurred because WGL applied hot tar to its
couplings during the installation process decades ago. FERC
explained the hot tar damaged the seals inside of these
couplings to such an extent that any comparatively minor
leak-inducing change, like low heavy-hydrocarbon LNG or
cold temperatures, could cause leakage. Id. In support,
FERC pointed to testimony by the President of Normac, the
manufacturer of 25% of WGL’s couplings, explaining the hot
tar process exposed the couplings’ seals to temperatures of up
to 400 degrees Fahrenheit. FERC also cited a study by Neave
& Associates, which found applying hot tar at such
temperatures damaged the seals. Finally, it pointed to WGL’s
internal documents from the 1960s, which demonstrated
WGL knew applying hot tar to the couplings caused them to
leak. Certificate Order at 62,271–72.3
While FERC admitted it could not “rule out fluctuations
in [heavy hydrocarbons] as a possible contributor [to the
increased leakage in PG County],” it found other factors, such
as hot tar, changes in operating pressure, and decreases in
ground temperature, were “more significant causative factors
of the leaks experienced by WGL in Prince George’s
County.” Id. at 62,268, 62,276. In support, it pointed to a
study by the Natural Gas Technology Centre, which found
3 WGL argues FERC’s evidence is incomplete because it
focuses on Normac couplings, whereas 75% of WGL’s couplings
were manufactured by Dresser. But FERC pointed to record
evidence that Dresser couplings were also damaged by hot tar.
Rehearing Order at 61,032–33. WGL also claims that LILCO, a
local distribution company that never used hot tar, experienced
increased leakage once it began receiving LNG. But as FERC
explained, LILCO’s system leaked because LILCO installed its
couplings improperly. Id. at 61,038–39.

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decreases in temperature have a larger impact on leak rates
than reductions in the heavy-hydrocarbon content of the gas.
Id. at 62,270–71. FERC also noted that even though Cove
Point began shipping LNG to PG County in August 2003, the
leaks did not spike until the winter and then went back to
normal levels in the spring. The same pattern recurred the
following year. Rehearing Order at 61,032.
We conclude substantial evidence supports FERC’s
conclusion that the unblended LNG would not have caused
the leaks if the couplings had not been damaged by the hot
tar. We do not dispute that WGL operated its system for
decades after applying the hot tar and only experienced the
high leak rates after it began receiving LNG in PG County.
But at the same time, the PG County facilities received LNG
for months without experiencing increased leakage, and only
suffered those leaks when the weather became cold. These
facts are consistent with FERC’s finding—based on reports,
studies, and WGL’s internal documents—that WGL’s
couplings were so damaged by the hot tar that its distribution
system became susceptible to the confluence of multiple leak-
inducing factors, such as LNG and cold weather. Given the
“extreme degree of deference” we afford FERC’s analysis of
such technical matters, we will not second-guess this finding.
B
WGL points out that even if the condition of its
couplings caused the PG County leaks, those conditions exist
through its entire system—not just in the 14% of the system
in PG County. WGL claims the Expansion will be
inconsistent with the public interest because it cannot possibly
replace the couplings in the rest of its system before the
Expansion’s November 2008 in-service date. Indeed, WGL
informed FERC that replacing all of the couplings in time was

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“not a viable option” because that could take “up to a decade
or more to perform given the number of trained contractors
available to perform the work.” Answer of WGL to Mot. for
Summ. Disposition 11 & n.23. WGL added that while
measures like re-injecting heavy hydrocarbons into the LNG
could resolve some leak problems, the efficacy of such
measures is uncertain. Id. at 11.
FERC responded to WGL’s safety concerns by finding
“there is time for WGL to complete any remaining corrective
measures that are needed on its system so that it can safely
accommodate regasified LNG.” Rehearing Order at 61,023–
24. The only evidence FERC offered to support this finding
is that WGL has effectively curbed the leaks in PG County by
replacing damaged couplings and reducing operating
pressure. Id. at 61,023–24. Yet, this merely shows that more
than three years after leaks spiked in PG County, WGL has
finally been able to fix this portion of its system. It does not
even begin to suggest WGL will be able to fix the other 86%
of its system before the Expansion begins operations in a
couple of months. For example, it does not explain how
WGL can retain a sufficient number of trained contractors to
perform the work in such short order. Perhaps realizing its
orders are inadequate, FERC raises several alternate
arguments to this court—for example, claiming that any leaks
will not pose a safety hazard. See Respt.’s Br. 21; Oral
Argument 44:18–45:10. Since FERC did not rely on these
rationales in its orders, we have no authority to uphold its
conclusions on this basis. Williams Gas Processing-Gulf
Coast Co. v. FERC, 373 F.3d 1335, 1345 (D.C. Cir. 2004).
Having found WGL’s system is defective, FERC had to
explain why the Expansion could nevertheless proceed
consistent with the public interest requirements of sections 3
and 7 of the NGA. FERC attempted to carry this burden by

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concluding WGL will be able to fix its facilities before the
Expansion’s in-service date, but did not support this finding
with substantial evidence. Accordingly, we conclude FERC
failed to carry out its obligation of ensuring the Expansion
can go forward consistent with the public interest.4
III
We grant WGL’s petition for review, vacate the orders to
the extent they approve the Expansion, and remand the case
so FERC can more fully address whether the Expansion can
go forward without causing unsafe leakage.5
So ordered.
4 WGL also claims FERC disregarded its own precedent by
approving the Expansion without requiring Dominion to pay the
costs of adapting WGL’s system to accommodate LNG or
conditioning the approval upon resolution of the safety concerns.
See Cove Point LNG Ltd. P’ship, 98 FERC ¶ 61,270 (2002);
Colorado Interstate Gas Co., 94 FERC ¶ 61,382 (2001); Columbia
Gas Transmission Corp., 1 FERC ¶ 61,312 (1977). To the extent
WGL argues Dominion must pay to fix WGL’s system, we reject
that claim because unblended LNG meets the specifications WGL
accepted in its tariff and FERC reasonably concluded WGL should
be responsible for paying to adapt its system to fulfill its
commitments. Rehearing Order at 61,020–21. We need not decide
the safety portion of WGL’s precedential argument because we are
already remanding to FERC to address the safety concerns.
5 WGL raises several other challenges but we find them
without merit. For example, FERC allowed the parties to make
written submissions and held a procedural conference. WGL
claims these procedures were inadequate but fails to explain why
the technical issues here required more process than FERC
normally has the discretion to afford. See Lomak Petroleum, Inc. v.
FERC, 206 F.3d 1193, 1199 (D.C. Cir. 2000).

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