Court Opinion

ID: 1040708
Source: CourtListenerOpinion
Date Created: 2013-09-13 15:14:15.159064+00
Date Added: 2024-06-11T15:27:36.281457
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                ______________________

        ROCKIES EXPRESS PIPELINE LLC,
                  Appellant,

                          v.

     KEN SALAZAR, Secretary of the Interior,
                  Appellee.

              ----------------------

     KEN SALAZAR, Secretary of the Interior
                 Appellant,

                          v.

        ROCKIES EXPRESS PIPELINE LLC,
                    Appellee.
             ______________________

                   2012-1055, -1174
                ______________________

    Appeals from the Civilian Board of Contract Appeals
in No. 1821, Administrative Judge Allan H. Goodman.
                ______________________

             Decided: September 13, 2013
               ______________________

   L. POE LEGGETTE, Fulbright & Jaworski, L.L.P., of
Denver, Colorado, argued for Rockies Express Pipeline
2                   ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR

LLC. With him on the brief were OSBORNE J. DYKES, III,
BENJAMIN M. VETTER and LUCY D. ARNOLD.

    DOMENIQUE KIRCHNER, Senior Trial Counsel, Com-
mercial Litigation Branch, Civil Division, United States
Department of Justice, of Washington, DC, argued for
KEN SALAZAR, Secretary of the Interior. With her on the
brief were STUART F. DELERY, Acting Assistant Attorney
General, JEANNE E. DAVIDSON, Director, and HAROLD D.
LESTER, JR., Assistant Director.
                 ______________________

    Before RADER, Chief Judge, REYNA, Circuit Judge, and
                   DAVIS ∗, Chief Judge.
REYNA, Circuit Judge.
     This case involves a dispute over the interpretation of
a series of contracts entered into by Rockies Express
Pipeline LLC (“Rockies Express”) and Minerals Manage-
ment Service, a unit of the Department of the Interior
(collectively “Interior”). The dispute centers on the Royal-
ty-in-Kind (RIK) provisions found in the contracts. The
Civilian Board of Contract Appeals (“Board”) determined
that Interior had materially breached the contract, but
that Rockies Express was only entitled to damages that
had accrued before the Secretary of the Interior an-
nounced a decision to phase-out RIK contracts. We agree
that Interior materially breached the contract, but we
reverse the Board’s decision to limit damages. According-
ly, we affirm-in-part, reverse-in-part, and remand.

     ∗
        The Honorable Leonard Davis, Chief Judge of the
United States District Court for the Eastern District of
Texas, sitting by designation.
ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR                  3

                      I. BACKGROUND
     In 2005, Rockies Express set out to build a $6.8 billion
pipeline to ship natural gas from Wyoming to Eastern
Ohio. The pipeline was to be built in two phases. The
first phase, Rockies Express West, would be completed
first and would stretch from Wyoming to Missouri. The
second phase, Rockies Express East, would connect to
Rockies Express West and continue from Missouri to
Ohio. In exchange for building the pipeline, Interior
agreed to pay Rockies Express a reservation charge for at
least ten years per section, reserving 2.5% of the gas
shipped on the pipeline. 1 Interior would receive the
natural gas as a royalty-in-kind for gas Rockies Express
extracted from federal land. 2 Interior agreed to pay the
reservation charge regardless of whether or not it shipped
gas on the pipeline and Rockies Express agreed to main-
tain shipping capacity for Interior. Interior also agreed to
initial reservation charges for Rockies Express West of
$1,207,540/month. Upon completion of Rockies Express
East, Interior promised to pay reservation charges of

    1   In addition to reservation charges, Interior was
obligated to pay commodity charges, which included usage
charges, fuel-burn charges, lost and unaccounted for gas
charges, and annual cost of gas adjustment charges.
    2   Under the RIK program, the government receives
its royalty for mineral resources extracted pursuant to
federal leases “in kind,” i.e., in natural gas, rather than in
value, or cash. See 30 U.S.C. § 192; 42 U.S.C. § 15902(b).
In exchange, the government makes monthly payments to
ensure that a certain quantity of the mineral resources is
made available for its purposes. The government then
enters into processing and transportation contracts to sell
the mineral royalties, often at a substantial profit over
royalties received in value.
4                 ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR

$1,663,800/month. For Interior, the reservation charges
created firm transportation capacity for its reserved
natural gas. For Rockies Express, the reservation charges
enabled it to recoup the massive capital investment it
incurred in building the pipeline. The parties unques-
tionably intended for the relationship to continue for at
least ten years following the completion of Rockies Ex-
press East. The terms guiding the relationship were
considered and agreed upon prior to construction begin-
ning on the pipelines.
    As required by the Federal Energy Regulatory Com-
mission, before construction could begin, Rockies Express
and Interior entered into a Precedent Agreement in order
to memorialize the parties’ agreement. The Precedent
Agreement is a primary agreement that obligated the
parties to enter into follow-on agreements. During nego-
tiations on the Precedent Agreement, Interior requested a
termination for convenience clause or a clause that would
allow it to terminate the agreements if Interior later
abandoned the RIK program, but Rockies Express refused
to agree to either clause. As a result, the parties agreed
that under Provision 3(b) of the Precedent Agreement,
Interior could terminate the agreement only if it was
“directed by Legislative Action or required by a change in
the Federal or State policy to discontinue taking gas in
kind . . . upon (30) thirty days written notice to [Rockies
Express].” Joint App’x 273 (emphasis added). Converse-
ly, Rockies Express could be excused from liability to
Interior upon the occurrence of certain events listed in
Section 9(b) provided that it gave Interior a five-day
notice. Most notably, Section 9(b)(v) provided that
    Transporter [i.e., Rockies Express] shall have the
    right to terminate this Precedent Agreement with
    no liability to Shipper [i.e., Interior] by giving
    Shipper five (5) days advance written notice
    (which notice must be given, if at all, within ten
    (10) days after the occurrence or nonoccurrence of
ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR                    5

   the relied upon-event) . . . , in the event: . . . Ship-
   per fails to comply with any of its material obliga-
   tions hereunder or under any FTSA then in effect
   ....
Joint App’x 279.
    The Federal Energy Regulatory Commission reviewed
the Precedent Agreement between Rockies Express and
Interior, as well as the precedent agreements that Rockies
Express entered into with eleven other shippers of natu-
ral gas, to determine if approval of the pipeline project
was in the public interest. After reviewing the precedent
agreements, the commission found that construction of
the pipeline was in the public interest and treated all the
precedent agreements as binding.
    Section 8(a) of the Precedent Agreement obligated In-
terior to enter into Firm Transportation Service Agree-
ments (FTSA) and Negotiated Rate Agreements, which
would govern the shipment of gas over each segment of
the pipeline:
   Shipper agrees that it will execute a minimum of
   three[ 3] Firm Transportation Service Agreements
   consistent with the form of Service Agreement as
   contained in Appendix B hereto, as finally ap-
   proved by [the Federal Energy Regulatory Com-
   mission] which, if Shipper shall have elected the
   Negotiated Reservation Rate Option, shall reflect
   the fixed nature of the reservation rate as de-
   scribed in Section 4, within five (5) business days
   after tender by Transporter.
Joint App’x 277. Pursuant to Section 8(a), an unexecuted,
but agreed-upon, FTSA for Rockies Express West and

   3   Three FTSAs were required because Rockies Ex-
press East actually consisted of two segments initially.
6                  ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR

Rockies Express East was attached as Appendix B to the
Precedent Agreement.
    Based on the foregoing contracts, construction on the
Rockies Express West pipeline commenced in 2006. Once
construction concluded, Interior executed an FTSA on
April 24, 2007, and the Rockies Express West pipeline
went into service. Interior shipped gas on Rockies Ex-
press West for over a year without incident, including
during the time construction was progressing on Rockies
Express East. On May 16, 2008, shortly before Rockies
Express East was completed, Rockies Express sent Interi-
or the FTSAs for Rockies Express East, which had been
drawn up from Appendix B of the Precedent Agreement.
Rather than executing the FTSAs as required under the
Precedent Agreement, Interior decided that the FTSA
required Federal Acquisition Regulations (FAR) provi-
sions, basing that decision on a non-binding memorandum
from Interior’s Office of Solicitor. 4 The parties negotiated
FAR provisions, but failed to reach an agreement, and
Interior ultimately refused to sign the Rockies Express
East FTSA that Rockies Express tendered on November
25, 2008. On December 11, 2008, Rockies Express termi-
nated the Precedent Agreement on the grounds that
Interior was in material breach. Interior also stopped
shipping gas on Rockies Express West on March 31, 2009,
even though the Precedent Agreement obligated it to do
so until Rockies Express East entered service. When
Rockies Express East entered interim service on June 29,
2009, Interior refused to ship gas on it based on the
parties’ failure to execute an FTSA for Rockies Express
East.

    4    We note that Interior did not insist on a similar
requirement prior to executing the FTSA associated with
Rockies Express West, which was for all purposes identi-
cal to the Rockies Express East FTSA.
ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR                 7

    On June 30, 2009, Rockies Express filed claims with
the contracting officer for Interior’s breach, citing Interi-
or’s refusal to execute the Rockies Express East FTSA
and its failure to pay reservation charges on Rockies
Express West from April 1 through June 28, 2009. On
September 16, 2009, the Secretary of the Interior an-
nounced the agency’s intention to phase-out RIK contracts
and, on December 8, 2009, issued a memorandum in-
structing the Assistant Secretary of Land and Minerals
Management to “proceed with the termination of the RIK
program.” Joint App’x 1268. Termination was to proceed
according to a list of “guiding principles,” including honor-
ing all existing RIK sales contracts. Consequently, Inte-
rior allowed its RIK sales contract related to natural gas
from Wyoming to expire on October 31, 2009, when the
Rockies Express West FTSA was scheduled to conclude.
    On November 30, 2009, Interior’s contracting officer
issued a Final Decision, concluding that Interior was not
in breach for failing to enter into the Rockies Express
East FTSA because the Precedent Agreement was not a
binding contract and, in any event, Rockies Express
committed the first material breach by terminating the
agreement without a five-day notice.
    Rockies Express appealed the decision of the contract-
ing officer to the Board and argued that the Precedent
Agreement was a binding contract that Interior breached
by not signing the Rockies Express East FTSA. The
Board held that the Precedent Agreement was a contract
for procurement of services, thereby vesting it with juris-
diction, and that Interior breached the agreement by
refusing to pay reservation charges on Rockies Express
West and refusing to execute the Rockies Express East
FTSA. The Board also found that Interior would have
exercised the termination option pursuant to the agency’s
announced policy decision to stop taking RIK payments.
As a result, the Board concluded that Interior was only
liable for the reservation charges on Rockies Express
8                  ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR

West ($3,542,121) and reservation charges on Rockies
Express East through October 2009 ($3,319,104), not the
ten-years-worth of reservation charges ($173,230,601), to
which Rockies Express argued it was entitled.
    In its appeal to this court, Rockies Express challenges
the Board’s conclusion that damages were limited by
Interior’s subsequent “policy” change. Interior cross-
appeals the Board’s exercise of jurisdiction over the
Precedent Agreement and its liability under it. We have
jurisdiction pursuant to 28 U.S.C. § 1295(a)(10).
                 II. STANDARD OF REVIEW
     The Board’s factual determinations shall be set aside
if they are arbitrary, capricious, or unsupported by sub-
stantial evidence. 41 U.S.C. § 7107(b)(2); see TipTop
Constr. Inc. v. Donahoe, 695 F.3d 1276, 1281 (Fed. Cir.
2012). Its determinations on questions of law, including
jurisdiction and interpretations of contracts, statutes, and
regulations, are reviewed de novo. Parsons Global Servs.
Inc. v. McHugh, 677 F.3d 1166, 1170 (Fed. Cir. 2012);
Brownlee v. DynCorp, 349 F.3d 1343, 1349 (Fed. Cir.
2003).
                     III. JURISDICTION
     Under the Contract Disputes Act, the Board possesses
jurisdiction to hear suits over any express or implied
contract made by an Executive agency, including con-
tracts for the “procurement of services.” 41 U.S.C. §§
7102(a)(2), 7105(e)(1)(B). Interior argues that the Board
lacks jurisdiction in this case because the Precedent
Agreement was not a procurement contract within the
terms of the Contract Disputes Act because no services
were procured under it. While the Contract Disputes Act
does not define “procurement,” Interior notes that this
court has previously characterized procurement as “the
acquisition . . . of property or services for the direct bene-
fit or use of the Federal Government.” New Era Constr. v.
ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR                9

United States, 890 F.2d 1152, 1157 (Fed. Cir. 1989) (em-
phasis omitted). In Interior’s view, for a procurement
contract to exist, there must be a buyer-seller relationship
and the expenditure of government funds. Interior main-
tains that the Precedent Agreement is an agreement to
agree in the future and that Interior would not “acquire
any transportation service” until after execution of the
FTSAs. As a result, there was no buyer-seller relation-
ship or expenditure of government funds under the Prece-
dent Agreement. We are not persuaded by Interior’s
arguments.
    Congress defined “procurement” when it established
the Office of Federal Procurement Policy, which oversees
the direction of federal procurement policies, regulations,
and procedures. Distributed Solutions Inc. v. United
States, 539 F.3d 1340, 1345 (Fed. Cir. 2008) (citing 41
U.S.C. §§ 401-20). Specifically, 41 U.S.C. § 403(2) states
that “‘procurement’ includes all stages of the process of
acquiring property or services, beginning with the process
of determining a need for property or services and ending
with contract completion and closeout.” 41 U.S.C. §
403(2). This court has relied on this definition for pro-
curement on multiple occasions. See Res. Conservation
Grp. LLC v. United States, 597 F.3d 1238, 1244 (Fed. Cir.
2010); Distributed Solutions, 539 F.3d at 1345. While
those cases involved defining the term, “procurement,” in
the context of the Court of Federal Claims’ jurisdictional
statute, the Tucker Act, we discern no reason that un-
dermines the applicability of the definition to the portion
of the Contract Disputes Act that defines the Board’s
jurisdiction. It follows that this definition of “procure-
ment” is not limited to situations where money has
changed hands or there is a buyer-seller relationship;
rather, “procurement” covers “all stages of the process of
acquiring property or services.”
    The Board’s carefully-reasoned opinion recognizes
that the Precedent Agreement bears all the hallmarks of
10                 ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR

a traditional contract. It contains the essential terms and
conditions, it was negotiated and approved by an author-
ized official, it is supported by consideration, and it con-
tains an expressed statement of an intention to be bound.
See Rockies Express Pipeline LLC v. Dep’t of the Interior,
CBCA 1821, 10-2 BCA ¶ 34,542, at 170,356–57. Fur-
thermore, upon fulfillment of certain conditions prece-
dent, the Precedent Agreement obligated the parties to
enter into an agreed-upon FTSA, which was incorporated
as an appendix to the agreement. Id. at 170,357. Unlike
the independent contracts at issue in Wesleyan Co. v.
Harvey, 454 F.3d 1375 (Fed. Cir. 2006), the principal case
on which Interior relies, the Precedent Agreement is part
of an interlocking set of agreements through which both
parties were bound. We refuse to convert the Precedent
Agreement into a mere options contract from which
Interior could withdraw at its leisure, thereby causing
Rockies Express to bear an unanticipated share of the
expense involved in constructing a $6.8 billion pipeline.
Therefore, we hold that the Precedent Agreement is a
contract for the procurement of transportation services
justiciable under the Contract Disputes Act. Having
determined that the Board and this court have jurisdic-
tion, we now turn to the merits of the dispute.
                     IV. DISCUSSION
     We must decide whether Interior breached the Prece-
dent Agreement and, if so, the amount of damages, if any,
to which Rockies Express is entitled. The Board held that
Interior’s refusal to sign the Rockies Express East FTSA
breached the Precedent Agreement. As a defense to its
alleged breach, Interior contends that the Rockies Ex-
press East FTSA would have been an illegal contract for
three reasons. First, Interior argues that a ten-year
contract term “is contrary to statute and no government
official could have agreed to it.” Interior’s Br. 26 (citing
41 U.S.C. § 3903). At bottom, Interior argues that its
promise to enter into the Rockies Express East FTSA was
ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR               11

an illegal promise and thus unenforceable. Second,
Interior claims that the Rockies Express East FTSA did
not include a termination for convenience clause and that
this clause was required by our predecessor court’s hold-
ing in G.L. Christian & Associates v. United States, 312
F.2d 418, 426 (Ct. Cl. 1963). According to Interior, its
refusal to sign the Rockies Express East FTSA without
this clause was not a breach of the Precedent Agreement.
Third, Interior argues that while an agency head can
authorize deviations from the FAR, the contracting officer
lacked authority to bind the government to a promise to
sign future FTSAs because no deviation eliminating the
need for a termination for convenience clause was ob-
tained prior to the Precedent Agreement’s execution. We
are not convinced by Interior’s contract-based defenses.
    We first address whether the Rockies Express East
FTSA would have been unenforceable because of its ten-
year term. We note that Interior has not established that
FAR provisions contained in the procurement statutes are
applicable to the Precedent Agreement. Where there is a
question over the applicability of the procurement stat-
utes, a contract is unenforceable only when the contractor
caused the illegal award, or the illegality was so obvious
that the contractor should have recognized it. United
States v. Ahmdal Corp., 786 F.2d 387, 395 (Fed. Cir.
1986). When an illegality is not obvious, a contractor
should be accorded the benefit of all reasonable doubts
and the award upheld. John Reiner & Co. v. United
States, 325 F.2d 438, 440 (Ct. Cl. 1963).
    The Energy Policy Act of 2005 governs RIK transpor-
tation contracts “[n]otwithstanding any other provisions
of law.” 42 U.S.C. § 15902; see also Cisneros v. Alpine
Ridge Grp., 508 U.S. 10, 18 (1993) (noting that the use of
a “notwithstanding” clause signals the drafter’s intention
that the section override conflicting provisions elsewhere).
While traditional procurement contracts are subject to
appropriations regulations requiring shorter contract
12                ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR

terms than the ten years specified in the FTSAs in this
case, RIK contracts specifically are governed by the
provisions contained in § 15902, which contain no such
limitation. The statute is clear that RIK transportation
contracts are removed from the scope of traditional pro-
curement rules.
     We agree with the government that it may cancel as
illegal a contract that violates procurement statues or
regulations, see Schoenbrod v. United States, 410 F.2d
400, 403–04 (Ct. Cl. 1969), but Interior has conceded that
the FTSAs are not illegal contracts. Specifically, Interior
is not contesting its liability under the Rockies Express
West FTSA, which in all material respects is the same as
the Rockies Express East FTSA. The Board concluded
that Interior owes Rockies Express over $3 million for
breaching the Rockies Express West FTSA, and Interior
does not dispute this finding on appeal. Interior cannot
escape liability on the grounds that the same contract
provisions in Rockies Express West for which it assumed
liability are illegal in Rockies Express East. It follows
that if Rockies Express can recover under the Rockies
Express West FTSA, it should also have a remedy for
Interior’s breach related to the Rockies Express East
FTSA. See Maxima Corp. v. United States, 847 F.2d 1549,
1556 (Fed. Cir. 1988); see also Brandt v. Hickel, 427 F.2d
53, 57 (9th Cir. 1970) (“To say to these appellants, ‘The
joke is on you. You shouldn't have trusted us,’ is hardly
worthy of our great government.”).
    Finally, the Board observed that Rockies Express does
not have a history of contracting with the government.
Thus, it was presumably unaware of whether a particular
FAR provision might be applicable. In any event, there is
no evidence that Rockies Express created or overlooked an
obvious illegality, assuming one existed. As such, we
accord Rockies Express the benefit of all reasonable
doubts and uphold the Board’s determination that the
Precedent Agreement was a legally binding contract. See
ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR                13

John Reiner & Co., 325 F.2d at 440 (“It is therefore just to
the contractor, as well as to the Government, to give him
the benefit of reasonable doubts [when the issue of legali-
ty is very close] and to uphold the award unless its inva-
lidity is clear.”).
    We now turn to Interior’s second argument that the
absence of a termination for convenience clause in the
Precedent Agreement excuses its refusal to sign the
Rockies Express East FTSA. This argument incorrectly
assumes that the Precedent Agreement required a termi-
nation clause in the first place. Christian stands for the
proposition that if the parties to a government contract
neglect to include a clause in the contract that is otherwise
required by regulation (e.g., a termination for convenience
clause), courts will read the clause into the contract as a
matter of law. 312 F.2d at 426–27. Here, Interior has not
shown that the Precedent Agreement was necessarily
covered by the FAR, or that the termination for conven-
ience clause was necessarily required. Nor has Interior
established that a termination for convenience clause is
required in RIK contracts by law or regulation such that
the parties neglected to include one. As we have previous-
ly observed, the “[n]otwithstanding any other provisions
of law” provision in § 15902 excepts RIK contracts from
provisions normally required by the procurement stat-
utes. Consistent with this exception, the Director of the
Minerals Management Service instructed the RIK pro-
gram to use standard industry contracts. As the contract-
ing officer noted, a termination for convenience clause is
the antithesis of an industry practice and would “totally
run counter to [Interior’s] approach in royalty in kind.”
Rockies Express, 11-2 BCA ¶ 34,847, at 171,414. In any
event, violation of the Christian doctrine does not render
a contract illegal; it permits the court to cure the defect
and include the clause after the fact. 312 F.2d at 427.
    Interior’s third argument is also without merit. In
pressing it, Interior essentially contends that the con-
14                 ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR

tracting officer lacked authority to enter into the Prece-
dent Agreement, which obligated Interior to sign future
FTSAs, because he had not sought a deviation from the
required termination for convenience clause. This argu-
ment essentially repackages Interior’s second argument,
which we rejected above. Additionally, Interior concedes
that it could have sought a deviation from any FAR
provision it believed applied, which it did not do. Accord-
ingly, we affirm the Board’s conclusion that even assum-
ing FAR provisions were required, Interior breached the
Precedent Agreement by refusing to seek a deviation from
the FAR provisions when negotiating the Rockies Express
East FTSA. Cf. Rockies Express, 11-2 BCA ¶ 34,847, at
171,421–22 (citing 48 C.F.R. § 1.401); see also 48 C.F.R.
§ 1.402. In particular, we affirm the Board’s conclusions
that Interior breached the following provisions of the
Precedent Agreement: Section 12, which states that the
Precedent Agreement is a “legal, valid, binding and
enforceable obligation” of the parties; Section 10, which
authorizes modifications only when ordered or required by
a “law, order, decision, rule, or regulation”; and Section
8(a), which states that Interior “agrees it will execute a
minimum of three [FTSAs]” consistent with the form
agreement attached to the Precedent Agreement. Rockies
Express, 11-2 BCA ¶ 34,847, at 171,421–22. Interior
breached Section 12 by insisting that the Precedent
Agreement was illegal and unenforceable instead of
treating it as legal, valid, binding and enforceable obliga-
tion. It breached Section 10 by requiring a modification
in the form of a termination for convenience clause that
was not required by any law, order, decision, rule or
regulation. And it breached Section 8(a) by refusing to
seek a deviation that would have allowed it to execute the
Rockies Express East FTSA without the additional FAR
provisions. Accordingly, we hold that Interior materially
breached the Precedent Agreement upon its refusal to
enter into the Rockies Express East FTSA.
ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR                  15

    Interior contends alternatively that Rockies Express
breached the Precedent Agreement first by prematurely
terminating it. Interior argues that under Provision 9(b)
of the Precedent Agreement, Rockies Express was re-
quired to provide a five-day notice before terminating the
Precedent Agreement. Interior misreads Provision 9(b).
Provision 9(b) sets out the procedure under which Rockies
Express may terminate the Precedent Agreement so as to
relieve itself of liability upon the occurrence of certain
events, including “[Interior’s] fail[ure] to comply with any
of its material obligations [under the Precedent Agree-
ment].” Joint App’x 279. By declaring the Precedent
Agreement breached and terminating it, Rockies Express
did not seek to relieve itself of liability, but instead sought
to establish Interior’s culpability for the breach. Conse-
quently, the five-day notice requirement of Provision 9(b)
does not apply.
     The remaining issue is the quantum of the damages
owed to Rockies Express. The Board relied on a double
inference to limit damages as of October 31, 2009. Specif-
ically, the Board reasoned that had Interior executed the
Rockies Express East FTSA, Interior would have termi-
nated the Rockies Express East FTSA under Provision
3(b) following the Secretary’s announcement of the agen-
cy’s “policy” change with respect to the RIK program.
Provision 3(b) of the Precedent Agreement provides that
interior may terminate the Precedent Agreement when it
is “directed by Legislative Action or required by a change
in Federal . . . policy.” Joint App’x 273 (emphasis added).
It follows that Interior could have terminated the Prece-
dent Agreement if one of the two following scenarios had
occurred: Congress enacted legislation that specifically
directed Interior to stop accepting RIK payments or that
declared existing RIK contracts null and void, or a change
in Federal policy was implemented that required Interior
to terminate the RIK program. It is undisputed that
there was no legislative action directing Interior to stop
16                ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR

taking gas-in-kind. The Board, however, concluded that
the Secretary initiated a change in Federal policy that
required Interior to terminate the RIK program and
withdraw from the Rockies Express East FTSA.
     We note at the outset that some members of Congress,
most notably the chair of the House Committee on Natu-
ral Resources, Congressman Rahall, had attempted to
terminate the RIK program through legislative action for
several years without success. Indeed, it was during a
hearing on Chairman Rahall’s proposed legislation for
terminating the program that the Secretary of Interior
announced the agency’s intention to phase out the RIK
program. Almost three months later, the Secretary
followed up on the announced intention by issuing a
memorandum in which he directed the Assistant Secre-
tary of Land and Minerals Management to proceed with
the termination of the RIK program. The Secretary,
however, instructed that the termination was to proceed
according to a list of “guiding principles.” One of the
principles listed was that all existing RIK sales contracts
would be honored.
    The Board’s conclusion that the Secretary’s actions
amount to a change in Federal policy overlooks the Secre-
tary’s guiding principle that all existing RIK sales con-
tracts would be honored. Assuming that the Rockies
Express East FTSA had been executed by Interior in 2008
as it was obligated to do, there is no question that the
FTSA would constitute an “existing RIK sales contract”
when the Secretary’s memorandum issued in December
2009. Accordingly, even under the Secretary’s RIK pro-
gram phase-out, Interior was obligated to honor the
Rockies Express East FTSA for the full ten-year duration
of that agreement. This means that there was no change
in Federal policy that would have affected the Rockies
Express East FTSA.
ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR               17

    The language contained in Provision 3(b) further con-
vinces us that the Secretary’s statements did not create a
change in Federal policy even in a broader sense. Under
traditional contract principles, “a change in Federal
policy” and “Legislative Action” from Provision 3(b) should
be interpreted ejusdem generis, or “of the same kinds,
class, or nature.” Cf. Avenues in Leather, Inc. v. United
States, 178 F.3d 1241, 1243 & n.1 (Fed. Cir. 1999) (quot-
ing Black’s Law Dictionary (6th ed. 1990)). Thus, any
policy change recognized by Provision 3(b) must carry the
same significance as Legislative Action. Under the Ad-
ministrative Procedure Act, there is no effective “change”
in Federal policy until various requirements are met, such
as publication in the Federal Register and opportunity for
public comment. 5 U.S.C. § 552(a)(1)(D)-(E); see Metric
Constructors, Inc. v. NASA, 169 F.3d 747, 752 (Fed. Cir.
1999); cf. Termination of the Royalty-in-Kind (RIK) Eligi-
ble Refiner Program, 75 Fed. Reg. 15,725 (Mar. 30, 2010).
There was no publication in this case and, consequently,
the Board erroneously concluded that the Secretary’s
announced intention resulted in the type of change in
Federal policy that would result in the vitiation of valid
contracts.
    Furthermore, the Board erred when it relied on a dic-
tionary definition for “policy” that was divorced from the
Precedent Agreement. See Rockies Express, 11-2 BCA ¶
34,847, at 171,423 (quoting Webster’s New Collegiate
Dictionary 882 (1979)). In particular, the Board defined
“policy” as
   a definite course of action or method of action se-
   lected among alternatives in light of given condi-
   tions to guide and determine present and future
   decisions; a high-level plan embracing the general
   goals and acceptable procedures, especially of a
   governmental body.
18                  ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR

Id. This general dictionary definition of “policy” overlooks
the context in which the term arose and the intention of
the parties—most notably, the initial negotiations by the
parties on the Precedent Agreement and Rockies Ex-
press’s unwillingness to agree to a termination for conven-
ience clause. See Metric, 169 F.3d at 752 (“[T]o interpret
disputed contract terms, the context and intention of the
contracting parties are more meaningful than the diction-
ary definition.”). We therefore conclude that the Secre-
tary’s announced intention did not constitute a “change in
Federal . . . policy” that would have limited Interior’s
liability for refusing to sign the Rockies Express East
FTSA.
    Finally, we address whether Interior may escape
damages through post-termination actions such as its
attempt to terminate the Precedent Agreement under
Provision 3(b), which occurred after it had breached the
Precedent Agreement. Relying on Northern Helex Co. v.
United States (Helex III), 524 F.2d 707 (Ct. Cl. 1975),
Rockies Express argues that Interior cannot rely on post-
breach events to limit damages. Rockies Express main-
tains that upon termination for Interior’s material breach,
the balance owed on the contract immediately became due
so it is entitled to damages equal to the full value of the
contract.
     As our predecessor court has recognized,
     [a] material breach does not automatically and ip-
     so facto end a contract. It merely gives the injured
     party the right to end the agreement; the injured
     party can choose between canceling the contract
     and continuing it. If he decides to close the con-
     tract and so conducts himself, both parties are re-
     lieved of their further obligations and the injured
     party is entitled to damages to the end of the con-
     tract term (to put him in the position he would
     have occupied if the contract had been completed).
ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR               19

Cities Serv. Helex, Inc. v. United States, 543 F.2d 1306,
1313 (Ct. Cl. 1976). In this case, Rockies Express chose to
terminate the contract upon Interior’s material breach.
As a result, under Helex III, Rockies Express is entitled to
damages through the end of the contract period regardless
of any post-termination actions performed by Interior. In
particular, Interior’s attempted termination of the con-
tract following its material breach was ineffective to limit
damages because Interior could not terminate a non-
existing contract. Helex III, 524 F.2d at 716. It follows
that Rockies Express is entitled to compensatory damages
designed “to put [it] in as good a position as that in which
[it] would have been put by full performance of the con-
tract.” Id. at 713. We conclude that it was improper for
the Board to limit damages as of October 31, 2009.
    The burden to determine the quantum of Rockies Ex-
press’s compensatory damages rests on the Board. We
observe that by claiming two alternative entitlements to
the balance due on the contract ($173,230,601 or
$130,975,417), Rockies Express is requesting not only its
profits throughout the full term of the Precedent Agree-
ment, but also the costs it avoided having never shipped
natural gas to Interior on Rockies Express East. Recovery
of the full contract price presumes that Rockies Express
was unable to find another shipper willing to assume
Interior’s 2.5% reservation after undertaking reasonable
efforts. This decision is not for this court to make and we
instruct the Board to make this determination on remand.
Nevertheless, we hold that Rockies Express is only enti-
tled to “recover its pecuniary loss of anticipated and
unearned profits” for the contract term, not the entire
value of the contract when it includes costs avoided or
offsets gained through mitigation. Helex III, 524 F.2d at
721.
20                 ROCKIES EXPRESS PIPELINE LLC   v. INTERIOR

                      V. CONCLUSION
     In sum, we conclude that review of the Precedent
Agreement fell within the Board’s jurisdiction, and we
affirm that Interior materially breached that agreement.
We reverse the Board’s decision that limited liability due
to a purported change in policy by Interior. Accordingly,
for the reasons set forth in this opinion, we affirm-in-part,
reverse-in-part, and remand for the purpose of calculating
Rockies Express’s damages.
 AFFIRMED-IN-PART, REVERSED-IN-PART, AND
               REMANDED
                           COSTS
     Costs to Rockies Express.