On December 20, 2024, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) upheld FERC’s order authorizing Stingray Pipeline Company, L.L.C. (“Stingray”) to abandon a portion of its pipeline system on the condition that before doing so, Stingray either restore service or obtain a shipper agreement that the damaged pipeline segment remain out of service.

On September 25, 2020, Stingray requested permission from FERC to abandon by sale approximately 172.98 miles of pipeline in federal waters offshore Louisiana and Texas to a non-jurisdictional entity, Triton Gathering LLC (“Abandonment Application”).  However, due to damage from Hurricane Delta, Stingray later amended its Abandonment Application to abandon certain damaged facilities by removal rather than by sale to Triton, which included the damaged section, Segment 3394.  On June 15, 2023, FERC granted Stingray’s application for abandonment subject to condition (“Abandonment Order”).  Specifically, FERC required Stingray to either place Segment 3394 back into service prior to abandonment or obtain a shipper agreement that it remains out of service.  Stingray sought rehearing of the condition in the FERC’s Abandonment Order, arguing that the condition was not supported by substantial record evidence, was not in the public interest since it altered the commercial agreement that was the basis for the abandonment, and that FERC exceeded its condition authority.  On August 17, 2023, FERC denied Stingray’s request for rehearing (“Notice of Denial of Rehearing”).  Thereafter, on October 16, 2023, Stingray sought review of the Abandonment Order and the Notice of Denial of Rehearing before the D.C. Circuit.  On rehearing, FERC maintained that its findings conditioning Stingray’s abandonment on the operational status of Segment 3394 was appropriate since FERC considers Stingray’s continuity of service obligation to firm shippers.

The D.C. Circuit affirmed FERC’s decision, finding that FERC has broad discretion to regulate the approval of abandonment of service and that FERC did not depart from prior precedent.  In its reasoning, the D.C. Circuit explained that FERC’s condition struck a reasonable balance of competing factors, including the need to protect the public interest and ensure continuity of service.  Accordingly, the D.C. Circuit rejected Stingray’s argument that FERC exceeded its authority by imposing the condition.  The D.C. Circuit noted that Stingray bore the burden of proving that abandonment without condition was consistent with the public interest.  The D.C. Circuit determined that not only did Stingray fail to meet this burden, but Stingray also failed to develop a factual record sufficient to allow FERC to find that an unconditional abandonment was consistent with the public interest.  Lastly, the D.C. Circuit explained that their decision does not establish a bright-line rule that any interruption of service to a single firm shipper would automatically prevent unconditional abandonment, as the interests of a firm shipper may not always align with the public convenience and necessity.

The D.C. Circuit’s Opinion, issued in Case No.23-1288, can be found here.