27 March 2017

Energy Enforcement Update

Politico Morning Energy reported this morning FERC WAIT MAY BE COMING TO AN END—“an informed tipster tells ME that those names — Neil Chatterjee, Robert Powelson and Kevin McIntyre — are expected to become official within in the next week.”  FERC has been without a quorum for nearly two months, hamstringing its ability to act on contested gas and electric rate filings, and infrastructure projects.  Senate Energy and Natural Resources Chairwoman Lisa Murkowski has vowed to prioritize FERC nominees before her panel once the White House releases them, but getting them confirmed will likely still take several weeks, notwithstanding the two-week recess next month.

This week’s enforcement update covers:

  • Department of Energy scrutinizing natural gas import and export reporting;
  • Judge in Powhatan/Chen proceeding grants leave to file amicus brief on de novo review;
  • Judge in ETRACOM case rules that “de novo review” means an ordinary civil action;
  • TOTAL responds to plaintiffs in class action proceeding;
  • Wyoming Pipeline Authority files then withdraws request for rehearing of FERC delegation order; and
  • Sidley to host roundtable on FERC energy and capacity market technical conference.

Department of Energy scrutinizing natural gas import and export reporting.  The U.S. Department of Energy (DOE) has received several public inquiries about the validity of the monthly data reports for natural gas imports and exports based on available pipeline flow information suggesting some movements may be missing.  As a result, the DOE has been reaching out to entities to confirm the accuracy of monthly reports for natural gas imports and exports.  These inquiries are a reminder of the need to timely and accurately report natural gas imports and exports to the DOE.

Judge in Powhatan/Chen proceeding grants leave to file amicus brief on de novo review.  On March 15, Judge M. Hannah Lauck granted the motion to file a brief of amici curiae submitted by a group of ten administrative law professors in FERC’s case against Powhatan and Alan Chen in the U.S. District Court for the Eastern District of Virginia.  As we previously reported, the amicus brief criticizes FERC’s position on what constitutes de novo review under Section 31(d) of the Federal Power Act (FPA).  Judge Lauck found the amicus brief to be timely and useful, and therefore granted the motion.  In addition, Judge Lauck granted FERC leave to submit a response.
On March 24, FERC filed its response in opposition to the amicus brief.  FERC argues that Amici fail to draw the distinction between civil penalty systems where respondents have no avenue to an evidentiary hearing before the agency, and systems like the FPA that provide a path to such a hearing before an ALJ.  Second, according to FERC, Amici ignore that Section 31(d) is the enforcement mechanism designed to enable FERC to fulfill its mandate to ensure just and reasonable rates in wholesale electricity markets.  FERC also argues that Amici’s due process concerns fail to account for the availability of trial-type proceedings and mischaracterize the administrative record compiled by FERC.  In addition, FERC claims that Amici ask the court to construe the FPA based on the legislative history of different statutes enacted by different Congresses, despite no evidence supporting that interpretation.  Finally, FERC asserts that Amici wrongly frame the question as whether the Federal Rules of Civil Procedure (FRCP) should apply, not as how the FRCP should be used to facilitate the court’s review.

Judge in ETRACOM case rules that “de novo review” means an ordinary civil action.  On March 8, Judge Stanley A. Bastian of U.S. District Court for the Eastern District of California issued an order regarding the scope of review in FERC’s enforcement proceeding against ETRACOM and its founder Michael Rosenberg.  In the order, Judge Bastian ruled that the FRCP apply to the “de novo review” proceedings brought by FERC pursuant to FPA Section 31(d)(3).  Judge Bastian found no congressional intent to exempt actions FERC enforcement actions under the FPA from the application of the FRCP; rather, legislative history demonstrates that the FRCP should apply in such proceedings.  Judge Bastian also found the reasoning set forth by the Maxim Power Corp., City Power Marketing, and Silkman courts – which all previously ruled that the FRCP apply to FPA de novo review proceedings – to be highly persuasive.  Judge Bastian encouraged the parties to either stipulate to a discovery schedule or request a discovery conference with the court.

On March 9, Barclays filed a copy of Judge Bastian’s order in its case with FERC the U.S. District Court for the Eastern District of California, as supplemental authority for its position regarding discovery and de novo review.  On the same day, Powhatan and Chen made a similar filing in its case with FERC the U.S. District Court for the Eastern District of Virginia.

TOTAL responds to plaintiffs in class action proceeding.  On March 6, TOTAL filed a response to the letter and exhibits filed by the class action plaintiffs on February 22 in the U.S. District Court for the Southern District of New York to address issues raised at the February 17 oral argument.  TOTAL argues that the court should strike the plaintiffs’ letter because it is an unauthorized sur-reply.  If the court denies the request to strike, TOTAL provides substantive responses to the plaintiffs’ letter.  First, TOTAL objects to the plaintiffs’ attempts to identify and vouch for their consultant at this stage, arguing that it would be improper for plaintiffs to try to add to their complaint via their briefs.  In addition, TOTAL refutes the two articles that the plaintiffs attached to their prior letter, claiming that these articles contain material contrary to plaintiffs’ claims.  According to TOTAL, plaintiffs’ articles cannot fix the fatal failure to identify a single trade that the plaintiffs could plausibly allege was affected by any of TOTAL’s alleged conduct.

Wyoming Pipeline Authority files then withdraws request for rehearing of FERC order delegating further authority to staff in absence of quorum.  On March 6, the Wyoming Pipeline Authority filed a request for rehearing of FERC’s order February 3 order delegating further authority to staff in absence of quorum.  The Wyoming Pipeline Authority argues that FERC’s delegation order is invalid as a matter of law because FERC lacks the authority to delegate to its staff the actions under the Natural Gas Act, Federal Power Act and Interstate Commerce Act.  According to the filing, “[W]hen the commission cannot act due to a lack of a quorum, it follows that the staff cannot act in the commission’s stead under such circumstances, and the attempt of the delegation order to cure this deficiency is ultra vires and ineffective.”  On March 21, the Wyoming Power Authority withdrew its request for rehearing, without further explanation.

Sidley to host roundtable on FERC energy and capacity market technical conference.  Please join us for a lunch roundtable on Wednesday, March 29 in New York and on Tuesday, April 4 in Houston, regarding FERC’s upcoming technical conference to address matters affecting wholesale energy and capacity markets.  With market participants making dramatic claims about the ramifications to energy and capacity markets as states increasingly take action into their own hands to save their respective nuclear and coal fleets, we will hold a discussion ahead of FERC’s May 1-2 technical conference to preview the impacts of FERC-level action.

The roundtable will review the activities at the state level that continue to roil wholesale energy and capacity markets, as well as the potential for sustainable wholesale market designs that preserve the benefits of regional markets and respect state policies. Shaun D. Ledgerwood, Sam Newell (Houston event) and Kathleen Spees (New York event) from The Brattle Group will join us to discuss the issues and sort through the concerns.

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