WASHINGTON, April 17 A U.S. appeals court on
Tuesday reversed a decision by the Federal Energy Regulatory
Commission that had ruled a crude oil pipeline in the central
United States owned by Exxon Mobil Corp had market
power, and thus the rates it charged had to be capped.
The U.S. Court of Appeals for the District of Columbia
Circuit said that the record showed that producers and shippers
of Western Canadian oil had "numerous competitive alternatives"
to the Pegasus pipeline for moving the oil.
For a pipeline operator to charge market-based rates, it
must first seek approval from FERC. The Pegasus pipeline, which
runs about 858 miles from Illinois to Texas, moves about 66,000
barrels of crude oil a day, 3 percent of the Western Canadian
crude oil produced daily, according to the court opinion.
The ExxonMobil unit, Mobil Pipe Line Co, applied to FERC for
relief to charge market-based rates and the agency's staff
backed the application after determining that the origin and
destination markets were competitive.
The commission disagreed and rejected the application.
The three-judge appeals court panel said that the commission
was wrong to deny the application based on the evidence before
it and that if Pegasus raised its rates, the producers and
shippers could easily find an alternative to getting the oil to
"There is thus no plausible way, as we see it and as FERC's
expert staff saw it, to say that Pegasus holds a hammer over
Western Canadian crude oil producers and shippers," the appeals
court said in a 13-page opinion.
The appeals court vacated FERC's order and remanded the
matter back to the agency.
A representative for FERC declined to comment because it was
a pending case. The agency could appeal the ruling to the U.S.
Supreme Court. ExxonMobil said it was pleased with the ruling.
"FERC had approved the use of market-based rates as a tariff
setting methodology for other liquids pipelines and we believed
that this FERC precedent supported the use of market based rates
on Pegasus," the company said.
ExxonMobil shares closed up $1.44, or 1.7 percent, at $85.45
in regular trading on the New York Stock Exchange.
The case is Mobil Pipe Line Co v FERC et al, in the U.S.
Court of Appeals for the District of Columbia Circuit, No.