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July 11, 2016
Damages Testimony by Brattle Principals Contributes to Favorable Outcome for U.S. Department of the Interior in Gas Pipeline Contract Dispute

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.