Columbia operates a LNG storage facility in Chesapeake, Virginia. In 1993, as a result of a record-cold winter, Columbia experiences some problems in its delivery system whereby the LNG is pumped to vaporizers which convert the LNG into natural gas. The problem, known as "cavitation" is caused by low quantities of LNG and problems with the venting system. It installs newer equipment but in 2003, the Columbia system again malfunctions at a time of high demand. It notifies its customers, including Virginia Natural Gas (VNG) that it can only meet 25% of its daily deliverability requirements under the terms of a contract. The under-delivery continues for some 41 days and also includes violation of the minimum pressure provisions of the contract. VNG brings an action seeking $37 million in damages of which $7 million is incurred during the 41 day curtailment period. Columbia admits that it violated the gas purchase contract but argues mat it has an affirmative defense of force majeure. The contractual force majeure provision defines a force majeure as an event that creates an inability to serve that "could not be prevented or overcome by the due diligence" of the party claiming the defense. The FERC rejects the force majeure defense because Columbia did not perform a "full draw-down" test to verify the LNG plant's performance capabilities in times of high demand and low storage volumes. FERC does not award any monetary relief because it finds that any relief comes under the service contract and not the supply contract. Both Columbia and VNG file requests for rehearing which are denied. They both then seek judicial review. As for Columbia's appeal of the rejection of its force majeure affirmative defense, the court applies the substantial evidence scope of judicial review and affirms the FERC decision. The finding that the "cavitation" problem may have been overcome by due diligence is supported by testimony regarding the nature of me fix on the LNG facility. While there is conflicting evidence there is more than sufficient evidence to uphold the FERC decision. On the VNG appeal the court dismisses its claim that Columbia abandoned its service obligations under the Natural Gas Act. For there to be an abandonment of service there must be a permanent cessation of that service. The court does, however, find that the FERC must re-visit its decision not to award monetary relief for what is admittedly a violation of the Natural Gas Act. The court is not as concerned with the conclusion not to award monetary relief as it is with the lack of a reasoned explanation of why it reached that decision. The FERC needs to explain the basis for its authority to award remedies, if it has any, by reference to the NGA.
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