On September 30, 2025, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) vacated and remanded FERC’s order approving a two-tiered fuel rate structure for Antero Resource Corporation’s (“Antero”) usage of Tennessee Gas Pipeline Company, L.L.C.’s (“Tennessee Gas”) Broad Run Expansion Project (“Expansion Project”). The D.C. Circuit held FERC’s approval of the rate structure was arbitrary and capricious because it required Antero to always pay for the highest fuel rates irrespective of the segment’s actual operations.
Tennessee Gas designed the Expansion Project to add new firm capacity to meet Antero’s natural gas transportation needs. Following FERC’s approval of the Expansion Project in 2016 and in response to FERC’s directive to incrementally price the Expansion Project’s fuel rates, Tennessee Gas proposed a two-tiered fuel rate structure under which Antero would pay the incremental fuel costs beyond the average fuel rates paid by other shippers, which FERC approved. Tennessee Gas’ 2021 fuel rate tariff filing incorporated higher fuel rates for Antero as compared to other shippers, which Antero protested. Following FERC’s final approval of Tennessee Gas’ rates as just and reasonable, Antero filed for review in the D.C. Circuit.
The D.C. Circuit held that FERC’s approval of the two-tiered rate structure was arbitrary and capricious because Antero’s costs under the tariff departed from FERC’s cost causation principles, which require rates charged to shippers to reflect the cost of shipping their associated gas. The D.C. Circuit held that, in practice, Antero’s gas is always treated as the “last” gas on the system and therefore Antero is always subject to the highest fuel rates compared to other shippers, who pay an average rate. The D.C. Circuit determined that because all other shippers contributed to the total volume of gas on Tennessee Gas’ system, Antero’s higher costs were improper.
The D.C. Circuit rejected FERC’s arguments that Antero should pay the higher costs because Antero is the “but for” cause of the Expansion Project. Of note, the D.C. Circuit held FERC’s argument only justifies Antero’s higher costs when the post-Expansion Project capacity increases fuel costs above the pre-Expansion Project maximum. However, the D.C. Circuit found that, under the tiered rate structure, Antero always pays the highest costs whether or not the Expansion Project is fully utilized, thus violating cost causation principles.
Further, the D.C. Circuit rejected FERC’s arguments that a departure from cost causation principles was permitted here. The D.C. Circuit determined that existing shippers were not impermissibly subsidizing the Expansion Project under FERC’s policies, nor were the existing shippers’ reliance interests justification for Antero’s high rates. Finally, the D.C. Circuit held that Antero’s choice of firm service, rather than interruptible service, did not justify the higher rates.
Thus, the D.C. Circuit vacated and remanded FERC’s approval of Tennessee Gas’ 2021 fuel tariff filing. On remand, FERC must decide whether to direct Tennessee Gas to file a new fuel rate tariff under the NGA or utilize NGA authority to establish a just and reasonable fuel rate for Tennessee Gas.
The D.C. Circuit’s opinion, issued in Case No. 24-1076, is available here.
