Petro Star Inc. v. FERC, No. 15-1009 (D.C. Cir. 2016)Annotate this Case
This case concerns the Trans Alaska Pipeline System. Oil companies depositing crude oil extracted from their fields on the North Slope into the pipeline receive the same proportion of oil they initially contributed at the southern end of the pipeline at Valdez, but the companies do not receive the same quality of oil because the oil has been commingled in the pipeline. FERC oversees a mechanism for calibrating payments known as the Quality Bank, which assigns each company’s crude oil a value based on the quality of its components or "cuts." At issue is the formula used to value one of these cuts, called Resid. The court concluded that the Commission failed to respond meaningfully to evidence presented by Petro Star, rendering its decision arbitrary and capricious, and that Petro Star’s purported failure to provide a viable methodology does not provide an independent ground for the Commission’s decision. Therefore, the court granted the petition for review and remanded for the Commission to reconsider the methodology used to value Resid or to provide a more reasoned explanation for its approach. The court also found that Alaska lacks standing to intervene.