Head of DOJ Environmental Division Announces Enforcement Priorities

Todd Kim, Assistant Attorney General at the U.S. Department of Justice (DOJ) Environment and Natural Resources Division (ENRD), delivered remarks at the American Bar Association’s National Environmental Enforcement Conference on December 14, 2021. He provided insight into what DOJ plans to prioritize in environmental enforcement, centered on criminal enforcement, climate change, and environmental justice.

Kim emphasized that the purpose of enforcement is to ensure that businesses are properly incentivized to comply with the law through deterrence and to provide a level playing field, while protecting public health and the environment. He noted that DOJ has prioritized fighting corporate crime and is revising applicable polices, so ENRD will consider pursuing potential environmental and non-environmental crimes, as well as a business’s environmental and non-environmental track record in prosecution decisions.

Kim focused on methods of sector-wide enforcement, citing the Petroleum Refinery Initiative that involved settlements covering 112 refineries in 37 states since 2000.  Kim also expressed an interest in more penetrating identification of all involved parties within a business, as well as in the full supply chain, where relevant. This focus could be especially impactful for importers of chemicals, pesticides, or wood products.

With these various tools in mind, Kim cited climate change and environmental justice as the two highest priority issues.  For climate change, he indicated greater enforcement for air emissions from petrochemical plants and from facilities with refrigeration systems.  For environmental justice, he provided a general assurance that ENRD is paying greater attention to potential violations in communities of color and low-income communities that may be disproportionately burdened by environmental hazards and harms.

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Sidley Energy Enforcement Update

This Sidley Update addresses the following:

  • District court judge finds that FERC may not pursue joint and several liability and disgorgement in Coaltrain case – FERC seeks interlocutory appeal.
  • FERC Report on Enforcement highlights increased enforcement activity in 2021.
  • FERC approves settlement between Enforcement staff and Golden Spread.
  • FERC orders penalties against GreenHat Energy, LLC and individuals.
  • DOJ and CFTC charge Puerto Rico resident and his firm for misappropriation of nonpublic information and fictitious trading.

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Energy Enforcement Update

Happy New Year!  In our first enforcement update of 2017, we cover:

  • FERC increases maximum civil penalties for violations for 2017;
  • City Power and FERC file joint stipulation requesting referral to mediation; and
  • TOTAL files supplemental authority and FERC responds in declaratory judgment action in Fifth Circuit.

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Supreme Court Affirms Insider Trader Ruling in Salman v. United States

On December 6, the Supreme Court unanimously affirmed a Ninth Circuit decision involving the scope of “personal benefit” required to find insider trading under the securities laws.  Salman involved an investment banker who provided inside information about pending mergers to his brother, intending that the brother would benefit from the information.  The brother traded on the tips and (without his brother’s knowledge) tipped additional friends – including Salman – who also traded.  The Court determined the facts of this case fell within the language of the 1983 Dirks decision, which found that a tipper breaches a fiduciary duty by making a gift of confidential information to a “trading relative.”  The Court did not agree with Salman’s position that only a clear pecuniary benefit to the tipper should trigger liability.

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Law Professors File Amicus Brief on De Novo Review, and FERC Files Opposition, in Powhatan/Chen Proceeding

On December 7, a group of ten administrative law professors filed a brief of amici curiae in the Powhatan/Chen proceeding in the U.S. District Court for the Eastern District of Virginia, which criticizes FERC’s position on what constitutes de novo review under Section 31(d) of the Federal Power Act (FPA).  The brief is substantially similar to the brief filed last month on behalf of Barclays in the U.S. District Court for the Eastern District of California, which was denied by Judge Nunley.  According to the brief, “Amici have grave concerns about the legal and policy implications of FERC’s apparent view of what constitutes a district court’s ‘de novo review’ of an agency’s civil penalty assessment.”  The professors argue that FERC’s position runs counter to the traditional understanding of court enforcement actions for civil penalties and cannot be squared with the FPA’s civil penalty assessment mechanism, which gives a defendant the choice of challenging FERC’s penalty assessment in a full trial-type proceeding before either an administrative law judge or a federal district court.

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Energy Enforcement Update

In our final enforcement update for 2016, we cover:

  • TOTAL files reply brief in declaratory judgment action against FERC in Fifth Circuit;
  • Trial concludes in the CFTC’s case against DRW and Wilson; and
  • Judge holds scheduling conference and orders briefing in ETRACOM proceeding.

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Energy Enforcement Update

This week’s enforcement update covers the following:

  • FERC Staff issues notice of alleged violations against GDF SUEZ;
  • FERC files motion to affirm civil penalties against ETRACOM; and
  • FERC files brief in TOTAL appeal proceeding in Fifth Circuit.

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Judge Denies DRW and Wilson Motion for Reconsideration, CFTC Files Pretrial Memorandum, and Trial Begins

The bench trial in the CFTC’s case against DRW is underway. On November 28, Judge Richard Sullivan denied the motions to strike testimony filed by the CFTC in its market manipulation case against defendants DRW Investments, LLC and Donald R. Wilson pending in the U.S. District Court for the Southern District of New York. In denying the motion, Judge Sullivan noted that the CFTC failed to submit its motion by the November 4 deadline to file motions in limine and failed to request leave to file this motion at the pretrial conference. In addition, on November 29, the CFTC filed its response to the defendants’ motion to exclude portions of a CFTC expert declaration, which Judge Sullivan granted in part. The trial in this proceeding began on December 1. The parties gave opening statements, and the court heard testimony from a number of DRW traders, including Wilson.

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PJM Market Monitor Files Complaint Over Approved PJM Capacity Market Rule Change

On November 22, PJM’s Independent Market Monitor (IMM) filed a complaint regarding a rule change to PJM’s capacity market approved by the PJM Markets and Reliability Committee (MRC).  At the November 17 MRC meeting, the MRC approved—over objections from the IMM—changes to PJM’s Manual 18 to delete language that imposed conditions on early replacement transactions.  In response, the IMM filed a complaint at FERC arguing that the modified rules are unjust and unreasonable, inconsistent with competitive markets, and allow behavior that defeats a well-functioning market.  The IMM argues that the modified rules “provide incentives to offer paper capacity in the PJM capacity market and to suppress market prices for actual physical capacity in the PJM market.”  According to the IMM, “The modified rules allow behavior that would otherwise be considered prohibited market manipulation because behavior permitted under the modified rules defeats PJM’s well functioning market for physical capacity.”

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PJM Market Monitor Files Complaint Ordering Production of Information

Also on November 22, PJM’s IMM filed a complaint requesting a market participant, American Electric Power Service Corp. (AEP), to provide the IMM with certain information that AEP allegedly refused to provide in response to information requests. According to the complaint, the IMM requested that AEP provide the data from which AEP calculates the variable operations and maintenance expense component of its cost-based offers, which was requested in order to determine whether the level of AEP’s cost inputs for cost-based offers raise market power concerns. The IMM claims that it is unable to obtain such information from an alternative source, so the IMM requests that FERC require AEP to provide the requested information within two weeks.

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