Expert testimony by Brattle Principals Paul Carpenter and Steve
Levine helped to secure a favorable outcome for the U.S. Department
of the Interior (DOI) in a contract dispute with Rockies Express
Pipeline LLC. On June 3, 2016, the U.S. Civilian Board of Contract
Appeals (CBCA) issued a decision approving a settlement agreement
in which the DOI will pay Rockies’ Express $65 million, over
$100 million lower than the original $173 million damages claim of
Rockies Express.
The dispute arose after the DOI entered into a precedent agreement
with Rockies Express for firm interstate natural gas pipeline
capacity. Under the agreement, the DOI reserved capacity on the
pipeline to ship gas to be received under the Minerals Management
Service’ royalty-in-kind program. After Rockies Express and
the DOI failed to reach a firm transportation service agreement for
the second phase of the pipeline, Rockies Express terminated the
precedent agreement on the grounds that the DOI had breached the
terms of the agreement which obligated DOI to sign a firm service
agreement if and when the new pipeline was placed in service. The
pipeline company sued the DOI in 2009 for breach of contract and
sought damages totaling $173 million over the 10-year life of the
contract. The suit also coincided with the DOI’s decision to
phase out the MMS royalty-in-kind program.
The CBCA first ruled in 2010 supporting Rockies Express’ claims that the precedent agreement was a valid contract for procurement of services, but lowered the company’s estimate of damages owed as a result of the breach. On appeal in 2013, the Federal Circuit Court reversed the CBCA's decision to limit the damages and it remanded the question of damages back to the CBCA for adjudication. Dr. Carpenter and Mr. Levine were retained by the DOI as economic and industry experts to calculate the appropriate quantum of damages, including any reasonable mitigation.
The settlement has been featured in a recent Law360 article.
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