Jump to Navigation
Jump to Content

Rockies Express Pipeline LLC v. Salazar

ELR Citation: 43 ELR 20214
Nos. 2012-1055, -1174, (Fed. Cir., 09/13/2013)

The Federal Circuit held that the Minerals Management Service (MMS) breached its contract with a natural gas pipeline construction company involving the construction of two segments of a pipeline that extends from Wyoming to Ohio. Under a "precedent agreement," MMS would pay the company roughly $1.2 million per month in reservation charges for the western portion of the pipeline, and approximately $1.6 million per month for the eastern portion. The parties would also enter "Firm Transportation Service Agreements" (FTSAs) for each segment. The western segment was completed in 2007. But in 2009, MMS refused to sign the FTSA for the eastern segment. MMS argued that the precedent agreement was not binding and that its refusal to sign the eastern FTSA was not a material breach. But the court disagreed. The precedent agreement bears all the hallmarks of a traditional contract. It contains the essential terms and conditions, it was negotiated and approved by an authorized official, it is supported by consideration, and it contains an expressed statement of an intention to be bound. The court, therefore, affirmed the Civilian Board of Contract Appeals' determination in this regard. However, it reversed the Board's conclusion that damages were limited by the agency's subsequent "policy" change. The court, therefore, remanded the case for a recalculation of the company's damages.