This update covers:
- FERC rescinds policy on Notices of Alleged Violations.
- Judge denies motion for new trial for first trader convicted of spoofing.
- CFTC charges former natural gas trader with fraudulently mismarking trades.
- CFTC’s Division of Enforcement issues first Public Enforcement Manual.
- FERC approves settlement with Dominion Energy.
- DOJ publishes new guidance on evaluating corporate compliance programs.
- CFTC staff issues research report on impact of automated orders in futures markets.
- CFTC settles case against Kraft Heinz and Mondelez International.
- Powhatan and FERC file appellate briefs on statute of limitations.
On February 21, 2019, the Federal Energy Regulatory Commission (FERC) issued Trailblazer Pipeline Company LLC (“Trailblazer”), FERC’s first order addressing how FERC applies its Revised Income Tax Allowance Policy Statement, as further revised on rehearing (collectively “Revised Policy Statement”), to a pipeline organized as a pass-through partnership that is not a master limited partnership (“MLP”) in a Natural Gas Act (“NGA”) section 4 rate case proceeding. FERC issued the Revised Policy Statement in response to the U.S. Court of Appeals for the D.C. Circuit’s (“D.C. Circuit”) decision in United Airlines, Inc. v. FERC (“United Airlines”), which found that FERC could not permit a specific MLP pipeline to recover an income tax allowance in its rates without further explaining why this did not result in the MLP’s investors “double recovering” their income tax costs, based on a concern that the investors’ pre-tax return on equity (“ROE”) also provided such compensation when calculated using the discounted cash flow (“DCF”) methodology. United Airlines did not consider other types of pass-through entities, such as non-publicly traded partnerships, or alternative methodologies to calculate ROE and the Revised Policy Statement did not address them directly. (more…)
In our first enforcement update for 2019, we cover a range of issues (including some news from the end of 2018):
- FERC opens investigations into rates charged by three interstate natural gas companies;
- Powhatan and Chen file opening appellate brief;
- Judge suspends CFTC case against Kraft because of the partial government shutdown;
- FERC increases maximum civil penalties for violations;
- FERC approves settlement between FERC Enforcement and Algonquin;
- Judge rules that FERC action against Silkman/CES is not time-barred by statute of limitations; and
- Judge finds CFTC fails to meet burden on manipulation claims against DRW and Wilson.
1 – Make-up of FERC Commissioners – FERC’s leadership already was uncertain heading into 2019 before the tragic passing of Commissioner and former Chairman Kevin McIntyre on January 3, 2019. Prior to his passing, the Commission achieved a full complement of five commissioners in December 2018, following the confirmation of Bernard McNamee who filled a spot made vacant by the August 2018 resignation of former Commissioner Robert Powelson. Commissioner McNamee is facing calls to recuse himself from certain FERC electric generation proceedings given positions he took on grid resiliency in his prior position at the Department of Energy, and he is certain to be scrutinized by environmental groups for positions he is anticipated to take on pipeline matters as a FERC commissioner. (more…)
On Jan. 12, the Federal Energy Regulatory Commission (FERC) issued data requests to four interstate pipelines that are proposing incremental recourse rates in pending Natural Gas Act (NGA) Section 7 certificate applications.1 This action was significant because it appears to be FERC’s first step toward responding to tax law changes in the Law to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, also known as the Tax Cuts and Jobs Act of 2017 (2017 Tax Act).
FERC permits pipelines and public utilities to recover their actual or potential tax expenses in their regulated rates. The 2017 Tax Act reduces the corporate tax rate to 21 percent and allows certain investments to receive bonus depreciation treatment. FERC asked each pipeline to 1) explain how the 2017 Tax Act impacts its proposed project cost of service and the resulting initial recourse rate proposal; 2) provide an adjusted cost of service and recalculated initial incremental recourse rates; and 3) provide all supporting work papers and formulas.2 (more…)
Topics discussed this week include:
- Environmental group brings Clean Water Act citizen suit against Shell and Motiva that alleges climate change-related harms.
- District court stays CERCLA unilateral administrative order.
- District court overturns Department of the Interior stay of rule governing royalties for oil, natural gas and coal production on federal and Indian lands.
- Second Circuit upholds New York State’s decision to deny Clean Water Act certification to proposed pipeline.
- C. Circuit holds that FERC should consider power plant emissions in pipeline environmental impact statement.
- Hurricane Harvey affects Gulf Coast energy and chemical resources.
In a 2-1 decision that issued today, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) in Sierra Club et. al v. Federal Energy Regulatory Commission (Sierra Club) vacated and remanded a Natural Gas Act (NGA) Section 7 certificate of public convenience and necessity granted by the Federal Energy Regulatory Commission (FERC) to the Southeast Market Pipelines Project (Project) in 2016. The Project comprises three natural gas pipelines currently under construction in Alabama, Georgia, and Florida that, once built, will transport over 1 billion cubic feet of natural gas per day over 500 miles to feed new and existing natural gas-fired electric plants in Florida and to serve the growing natural gas demand of Florida utility customers. (more…)
On July 19, 2017, the U.S. House of Representatives passed a pair of bills aimed at reforming natural gas and oil pipeline permitting, and granting additional authority to the Federal Energy Regulatory Commission (“FERC”). Both bills passed on largely party-line votes. The two bills are H.R. 2883, Promoting Cross-Border Energy Infrastructure Act, and H.R. 2910, Promoting Interagency Coordination for Review of Natural Gas Pipelines Act. H.R. 2883, removes the current requirement that gas and oil pipelines, as well as electric transmission projects, obtain a Presidential Permit to cross an international border. Instead, pipelines would obtain a certificate of crossing from FERC and transmission projects would obtain such a certificate from the Department of Energy. If enacted into law, this change would mark a significant change for oil pipeline projects. FERC currently has no authority over any aspect of interstate oil pipeline siting. Currently, all siting decisions not on federal lands are handled at the state level, with international border crossings overseen by the State Department through the presidential permit process. FERC does, however, oversee the siting of interstate natural gas pipelines, including Presidential Permits for international border crossings, under current law.