first cases rockies express versus interior mr l the court poli get peroxides express or rex rex appeals a decision of the board of contract appeals the board agreed that interior had reached a multi year contract to provide natural gas transportation but the board limited directs his damages to three point three million instead of full damages of one hundred thirty million dollars the decision i will argue in a moment is in violation of the northern helix precedent the facts can be say that stated very briefly in february two thousand and six reps and interior signed a precedent agreement p a for guaranteed transportation of natural gas under the p a interior committed to pay already present in the precedent for green and had joined appendix page twenty five that spelled that out over the course of four paragraphs and the p eight describes that appendix to seventy two what the government got once condition precedent were met first the right to affirm transportation service and second the construction and operation of interstate facilities to provide that service all of that was agreed to in advance now you may rightly wonder why two contracts it has to do with firk furcal choir's major interstate pipeline projects first to start with precedent agreements which are binding that way first can determine that there is enough demand for the service to warrant authorizing a company to dig a sixteen hundred mile pressure across north america in the approval of the president agreement further then directs the pipeline companies this appears on appendix three twenty eight directs them to execute f t s a's from transportation service agreements for the capacity levels and terms of service represented in signed precedent p s agreements were well there was one that interior was obliged to sign but did not which is why we are here and they already had one for rex west which took gas from ohio to missouri were obliged to sign rex east which would replace rex west there would not be two empty essays just one superseding f t s say that would take the gas from wyoming to ohio so the border was right that all the elements were in the president agreement and there was nothing new the president agreement was not an agreement to agree the government is simply incorrect to suggest that the two agreements had different obligations but if this did why is this just a change in federal policy first the government did not show on the facts that the secretary would have opted to terminate the contract but to answer your question more directly the board below adopted a webster's definition of what a change of policy was it's basically a selection of a particular course of events from alternatives that definition even cover a terminations for convenience and we know the parties did not mean that at appendix page one fifty the parties also you'll see language talking about we're helping time program terminations we know the parties did not agree to that so the question then is for you if the judge is wrong you still have to interpret the contract and if you look at the language of the contract it allowed for a government out into events legislative action a change in the federal policy legislative action we know requires a bi cameral process in congress change in federal policy under the administrative procedure act requires at a minimum the publication of a notice in the federal register which did not happen here and according to an cheerier precedent it requires notice an opportunity for you something in the president or the secretary of the major department makes a statement that because it's not written up in the federal register that deprives it of the status of federal policy for the purpose of this contract yes rex was very careful to do everything  could to reduce the chance that the department would do what it did in this case just decide one day we don't want to run this farai k program anymore and leave or execute him and be conflating policy with regulation if you had wished to achieve that result wouldn't it have said and any change in policy would have to take the form of a regulatory shake well the parties certainly could have written this particular terminations provision with greater precision than they dead but the phrase a question has changed in the federal policy and one thing we know about very broad language but it is but we know that there is a process required for changes in the federal policy as a matter of law and it's fair to assume that the parties had that background of federal law in mind when they struck this party because this was a terminations provision given uniquely to the interior department because of testimony before congress he said that he is going to change and and everything points to an intent to change for about four or five months and after that the policy itself apparently says or was that in place it was no longer existing because in december of two thousand and eight rex terminated the contract because of kerry's refusal to sign some but you also make a point that is worth noting that is of the secretary didn't actually terminate the program until sometime in december of two thousand and nine hundred didn't terminated in october as the district council of the determination that we're talking about if it did occur reaches a contractor of any party breaches a contract they lose the right to use a terminations clause in the defunct contract to limit damages you'll see that explained in the appendix had the federal circuit occur that's correct because their obligation in order to reserves face it was to pay us a monthly fee it is like reserving a parking space in a garage or in washington for a year you owe that money whether you actually use the space or not and under first policy our collection of that reservation fee was the means by which we were to recover the six point eight billion dollars we spend building the pipeline so the reservation fee is all we were asking for here in damages we're not asking for other things we might have gotten if they had shipped gas we took for granted in our damage calculations that they weren't we also mitigated damages and we gave evidence of future mitigation even though that was not our burden we just thought it was the ethical thing to do so our full damages one hundred seventy three we reduced it by estimated mitigation in the future down to one thirty which is the amount that we see so under northern heel lights it is very clear that the government and the board were incorrect to suggest that helix was based only on the fact that the government could not demonstrate facts showing that it could have invoked the germination provisions again on paper we consider this is a continuing breach the same as we do in the nuclear fuel cases so that you have the the contract still in force and the government's protected by its limitations on liability well we have the right both the common law and under the contract to terminate in a common law to seek full damages when the government made it clear that it was not going to honor the contract we were left in a position where we either had to get them out of the contract and find try to find a substitute or run the risk that we would be held that we  attempt to mitigate or damages so getting them out of the contract and find trying to find someone in the market would pick up that space is essential and we thought required by contract law couldn't the the government have pipeline big enough and provided the requisite pressure on the gas to make sure we can carry their gas so let me make one final point since i'm running well into my or above and that is this this pipeline created a new market for federal gas and all gas in wyoming in the rockies the government share of royalty value increased seven hundred million dollars just over the first three years  because all those rows when that new market was opened up if we are awarded damages of hundred thirty million the government still comes out financially way ahead if we have to eat that cost the government walks away with a the issues here in three areas jurisdiction reachin damages like to address jurisdiction first the board has no jurisdiction of this matter because the precedent agreement was not a contract for the this court has repeatedly interpreted procurement as meaning acquisition so you have to have an acquisition by contract with fines of supplies and service council let me ask you this if the  i think in that situation the law basically leaves the parties where they find them you had a precedent agreement that would require the government to enter into an illegal contract rex cannot enforce it and the government cannot enforce it so you know we could not force yes yes and that's what i mean by the law leaves both parties where they find them in this case just want force this president agreement or answer is no you can't enforce it because it is the the very essence of the press in agreement is an obligation to sign a contract which unfortunately conflict unfortunately is illegal it was this isn't a valid contract why is the government paying three million dollars on the breach on the western end of the situation is different as to the r l west in that case we had signed the contract we had used the contract we had used the capacity we sent gas down there and we reserved contract the government has not appealed that part of the case and the government has already paid the damages that world some of these viruses and for the way for the for the west and so what this case is only about is the president agreement you can provided the government with services the government got transportation services the government committed to pay fines for those present transportation services what is it is just some multiple order task order got any capacity and there was nothing that the government could ever have released to another ship or so we never got anything we never got any services because we didn't sign the f t s if you had a contract for the sale of natural gas that you had already signed you should fulfill that contract and what i should point out is that these contracts for sale were typically very short term contracts the sales contracts were not five year contracts ten year contracts they were short term contracts that could be terminated at ease if you gave notice you could terminate the contract so the  continued was the sale of natural gas to fulfill the contract but they could under the nose provisions they could just continue those contracts and they did so such that there was no gas to ship no gas at all available to ship on this pipeline as of pop tobar thirty first i'm getting my year wrong i can't recall the year but i think it's october thirty first two years in two thousand knife so that was the cutoff of the damage count money to ask you if they if if the department of interior is assume with me for a moment the p a is in agreement and that they agreed to pay this one point six million for the tin per month for the ten years of your ter out and that was the basis of the pipeline was build all there just something from our from our reliance standpoint or an equity standpoint i have some trouble with you explain to me what the justification could be for the department to  into a into a contract the president agreement which then require them to enter into a subsequent contract which was illegal it was contrary to law and when they realized th realized that they couldn't find the f t s say east and so they sought then to somehow modify the terms with rex so that it would be a legal contract and then they could go forward and perform been also illegal of it if you look at that what they offered they offered a contract that had provision in it said said if this contract is illegal you will go and you will get the deviations so that it is in legal contracts and it was in fact illegal and there was no way for the government to have entered into it had a ten year term the government couldn't agree to a chain your term it didn't have the f causes it also did not have a determination for convenience clause that was in accordance with the four so what they offered was essentially not a compromise it was a no other illegal agreement and having signed one the bullets and other that's close to the end of the page it's the fourth bullet from the bottom it says at the going to honor all existing are i can you still contract yes those are the sales of natural gas that's the yes and that's not transportation these are the sales of natural gas now as i said these were relatively short term contracts and the government had the ability to terminate them by giving notice this was  a very different situation here this is the first time the government had ever entered into a long term multi year target for taishan contract  what's important to understand is that the agreement with rex was already over because rex had terminated it in december of two thousand and eight so that that contract with over what secretary was doing was ending the r a k program we're not going to have any more sales of natural gas and it says we're going to honor existing sales contracts there will be no more future sales of our aka and if you don't with the board found if you didn't have natural gas to ship you wouldn't be shipping it on the pipeline and that's precisely the obligations under the f t s a east if there was a change in federal policy there was a change in social policy in the normal construction of the term because the secretary of  ior at a congressional hearing said i am ending this program and our remind you that the circumstance was that this was a hearing where congress was reviewing whether congress should end the program the secretary took it upon himself to end the program because of all the big abuses in the program and that is exactly what was contemplated by this clause now on the exactly what it's supposed to it compared it compares the of pre breach world with the post breach world and it assumed that the parties would have signed the r e x east that would have gone forward and what the that agreement the the f t s and had a provision in it that allowed the government to cancel on a change in policy and the government would have exercised that a is not a contract what we've said is it is an on the on an forcible contract and an illegal contract i hope i'm not creating confusion it was the parties intended to enter into a contract but it was an illegal contract and therefore the court cannot enforce now what you have to do in the here is case there was only one contract that is at issue here if you assume that they are entitled to damages and that you going to enforce this illegal contract then the question becomes what is the stream of payments that they would foreseeable you have obtained under the f t s say east had been signed by both parties if the parties had signed it and gone forward the secretary of interior would have made the decision that he made to discontinue this program because the program was full of abuse he made that decision to close down the program you had the right under the f t s a east in the event of the secretary making that decision and then as as had the right to cancel the agreement with no liability this was provision of the contract that they negotiated and bargained for with rex and it was part of the f t s a east i think i must be over my time yes minute here so we'll keep trying and thank you judge rader judge davis you know us recently but all three judges raised very good questions about the federal terminations right in the facts allegedly supporting an amazing burst of american efficiency this hearing had been done in eight months rex would have had an award for one hundred thirty million dollars but because it took a lot longer our award became an fix in the board's view and it dropped to three million dollars that's not allowed under hicks or under felix the government made so it took some time to talk about the contract being illegal while the government in it initial no motion to dismiss appendix a twenty four argued that the contracting officer lacked authority to sign the press an agreement they abandon that position at trial and a record eight hundred ten they said to the board the government takes the position that the parties were already in the middle of the p a and therefore the p a should not be deemed void ab initio citing this court's precedent in t and t again at eight hundred ten to the same effect they entered into a request for admission agreeing with us that the precedent of the agreement was something that the contracting officer was authorized to sign but on the i believe counsel was arguing that it was a question of valid disability but question of them for stability clearly this was not a void contract this was entered into under the energy policy act of two thousand and five fifteen  forty two u s c fifty nine zero two they could enter into contracts for transportation and i was standing on the other provision of law now as opposed to that the government argues that you look at forty one u thirty nine zero three that says there's only a five year limit but that very section in subsection of says the section does not apply if another statue authorizes a multi year contract that's what the energy policy act does so there's a statute has an exception my statute has not withstanding any other provision of law i think i when that went to the nothing finally in addition to their waiver and the fact that this is an enforceable contract we remain damaged we tried to mitigate we acted in good faith with them and i think that's all i need to say  congress gave the department of interior and other agencies authority to enter into multi year contracts but at that time restricted it to a maximum of five years that's in the statute and it was a lot from nine hundred forty nine it was the  nine act that gave congress that gave the interior the authority to enter into the contract the energy policy act does not give contracting authority government had contracting authority under the the  preexisting law and there are arguments with regard to the energy policy act requires an actual conflict between the two statues there is if you look carefully at the two statutes there is no language in the statute that they are relying upon that gives contracting authority that refers to multi year contracts or anything of the sort so it's our contention that it is the that a property administrative services act that gives the authority sorry