Tuesday, January 6, 2015 4:27 pm by Robert E. Pease and Catherine McCarthy
The Federal Energy Regulatory Commission’s (FERC’s) Office of Enforcement (Enforcement) recently released its annual report on enforcement activities for 2014. As is typical, Enforcement identified its primary concerns as detecting and deterring fraud and manipulation in its markets and ensuring the safety and reliability of the grid. Enforcement also released statistics on its 2014 settlements ($25 million in civil penalties, $4 million in disgorgement) but those statistics concern cases that began years earlier and shed little light on what market participants should expect in 2015. In order to predict what we are likely to see in 2015, and the potential risks that companies may face from Enforcement actions, it is helpful to examine the currently pending cases and to understand the most recent internal changes within Enforcement. Also relevant to predicting what market participants can expect in 2015 are the following: the reach of FERC’s manipulation authority is being challenged in the courts, the Department of Energy’s Inspector General (IG) is examining FERC’s enforcement process and FERC will have a new Chairman and head of Enforcement in 2015. The current pending cases and these developments shed more light on what to expect in 2015 than the statistics FERC released concerning 2014.
In 2014, market participants, for the first time, showed a willingness to challenge Enforcement actions instead of settling. Five companies have refused to pay assessed civil penalties and settle thereby causing Enforcement to go to Federal court or to an administrative law judge to enforce the penalty and manipulation claims. These cases present the first court challenges to the reach of FERC’s anti-manipulation authority. We should expect more challenges in 2015 because another company has publicly vowed to challenge FERC should FERC proceed with a charge of manipulation. However, unless and until the courts narrow Enforcement’s reach, we should expect that Enforcement will continue to be aggressive in its prosecutions. (more…)
Category: CFTC, Enforcement, FERC, Power
Wednesday, November 12, 2014 3:49 pm by Lowell Rothschild and Eric Washburn
In the latest listing driven by a huge July 2011 settlement with environmental NGOs, the U.S. Fish and Wildlife Service earlier today announced it would list the Gunnison sage-grouse as threatened under the Endangered Species Act (ESA). The listing comes in the face of objections from both sides. Colorado’s Governor and both its senators – all Democrats – had worked hard to prevent the listing, while environmentalists warned in advance that they would sue over a threatened listing, demanding that the bird be listed as endangered, not just threatened. (more…)
Category: Construction, Enforcement, Environmental, Litigation, Midstream, Natural Gas/LNG, Power, Regional Energy Law, Shale Development, Upstream Energy
Thursday, September 25, 2014 10:35 am by Lowell Rothschild
When the U.S. Supreme Court decided in Sackett v. EPA that Environmental Protection Agency (EPA) wetland compliance orders were appealable, one question was how far would other courts extend the Supreme Court’s reasoning? Two years later, the answer is becoming clear on at least one front: courts continue to hold that wetland jurisdictional determinations are not appealable. In Belle Company v. U.S. Army Corps of Engineers, the Fifth Circuit was the latest court to say so. (more…)
Category: Courts, Enforcement, Environmental, Litigation, Midstream, National Energy Law, Natural Gas/LNG, Regional Energy Law, Shale Development, Upstream Energy
Wednesday, August 13, 2014 2:58 pm by Richard Alonso, Jeff Holmstead, Tim Wilkins and Sandra Snyder
On August 12, 2014, the 9th Circuit Court of Appeals overturned a Prevention of Significant Deterioration (PSD) permit issued under the Clean Air Act (CAA) by EPA to the Avenal Power Center. Sierra Club v. EPA, No. 11-73342 (9th Cir. Aug. 12, 2014). The PSD permit authorized the construction of a 600 MW natural gas-fired plant located in California’s San Joaquin Valley. The plant was required to install state-of-the-art pollution controls for all traditionally regulated pollutants, such as nitrogen oxides, particulate matter, and carbon monoxide. The Court vacated the PSD permit because it found it was improper for EPA to issue a PSD permit that did not address new CAA requirements that were promulgated by EPA after the application was submitted.
Although EPA has the authority to grandfather pending applications, it must exercise that authority through regulation by setting an effective date for the new regulation which would make the regulation applicable to permit applications submitted after a given date. When EPA does not address grandfathering in its regulations, the court stated that all PSD permits that are not final prior to the effective date of the new rule must be revised to address any new regulatory requirement, even if the permit had already been through the public comment process. The Court implied that any new assessment would likely need to go through a separate public comment process. (more…)
Category: Air Quality/Climate Change, Courts, Electric, Enforcement, Environmental, Litigation, Midstream, National Energy Law, Power, Shale Development, Upstream Energy
Monday, August 11, 2014 12:49 pm by Michael Weller and Heather Palmer
Spurred by several recent industrial incidents, both onshore and offshore, the U.S. Environmental Protection Agency has announced several potential revisions to its Clean Air Act Risk Management Program (RMP) regulations. The RMP program Request for Information (2014 RMP RFI) contemplates a vast array of changes that could, on the one hand, increase the number of sources regulated, e.g., the addition of ammonium nitrate as a regulated substance; and on the other, increase the costs of those sources currently regulated, e.g., mandatory third-party audits, installation of automated detection and monitoring systems.
Other proposed changes could be controversial or simply difficult for sources to integrate, e.g., mandatory root cause investigations, siting requirements, mandatory disclosure of chemicals and accident history for the facility. At this time, EPA indicates that it is not committed to undertaking a rulemaking and that it is engaged only in information gathering to assess whether changes to the RMP are necessary. Comments on the RFI must be received by October 29, 2014. (more…)
Category: Air Quality/Climate Change, Electric, Enforcement, Environmental, Midstream, National Energy Law, Natural Gas/LNG, Offshore, Power, Shale Development, Upstream Energy
Wednesday, August 6, 2014 9:26 am by Robert E. Pease
On August 5, 2014, the Federal Energy Regulatory Commission’s (FERC) Secretary, at the direction of the Division of Enforcement, issued a Notice of Alleged Violations against Powhatan Energy Fund, LLC, a hedge fund owned by brothers Kevin and Richard Gates. In the Notice, FERC Enforcement alleged that Powhatan’s trader, Dr. Houlian Chen, engaged in Up to Congestion trades in the PJM market that allegedly were the equivalent of wash trades in violation of FERC’s anti-manipulation rule. FERC’s Notices generally reveal little about the matter under investigation. However, in this case we know a great deal about Enforcement’s case because Powhatan itself publically disclosed much of the investigative record. See http://ferclitigation.com/legal-back-and-forth/. It has been Powhatan’s contention that their actions have been transparent and fully consistent with the PJM tariff and FERC’s rules. Nevertheless, in staff’s preliminary findings, dated August 9, 2013, Enforcement alleged that Chen made the wash trades in order to capture millions of dollars from the Margin Loss Surplus Allocation (MLSA). FERC alleged that Powhatan entered the riskless trades in order to boost the volume of its trading thus increasing the MLSA payments. (more…)
Category: Enforcement, FERC, Organized Markets, Power