Report of the Compliance & Enforcement Committee

Article excerpt

This is the first report of the Energy Bar Association's Compliance & Enforcement Committee, and it summarizes key federal enforcement and compliance developments in 2010 of particular interest to energy law practitioners, including select decisions, orders, and rules of the Federal Energy Regulatory Commission (FERC), the Commodity Futures Trading Commission (CFTC), the Department of Justice (DOJ), the Department of Energy (DOE) and other relevant federal agencies. Certain decisions, orders, and rules from prior years are summarized to provide appropriate context.*

I. THE FEDERAL ENERGY REGULATORY COMMISSION

The Energy Policy Act of 20051 (EPAct 2005) expanded the enforcement powers of the Federal Energy Regulatory Commission (FERC). The Act amended both the Natural Gas Act (NGA) and the Federal Power Act (FPA) to provide the FERC with broad civil penalty authority.2 The FERC has issued orders implementing this authority both in generic policy statements and rules as well as in individual investigation proceedings.3

A. Rules and Policy Statements

1. Market Manipulation

EPAct 2005 added a new section 4A to the NGA making it unlawful for any market participant to use or employ any manipulative or deceptive device (as those terms are used in section 10(b) of the Securities Exchange Act) in connection with a FERC-jurisdictional transaction for the sale or purchase or transportation of natural gas.4 In 2006, the FERC promulgated rules prohibiting market manipulation closely tailored to rule 10b-5 of the Securities Exchange Commission.5

2. Enforcement Policy

In October 2005, the FERC issued its first policy statement on enforcement setting forth the factors it would take into account in determining remedies for violations, including applying its enhanced civil penalty authority under EPAct 2005.6 In May 2008, the FERC revised its enforcement policies to give the industry a fuller picture as to how its investigative processes work.7 It also issued an instant final rule amending its regulations to codify the right of an entity that is the subject to an investigation to be informed that staff intends to seek action against it and have an opportunity to provide Commissioners with a written non-public response to staff's allegations.8

3. Obtaining Guidance

In May 2008, the FERC issued an interpretive order discussing the mechanisms by which interested parties can obtain guidance regarding FERC's regulatory requirements.9 The FERC stated that to the extent that formal guidance is needed, persons could: (1) petition for a declaratory order in order to terminate a controversy or remove uncertainty regarding a matter within the FERC's jurisdiction; (2) request a no-action letter on any issue that falls within the scope of FERC's jurisdiction, with certain exceptions; (3) request an opinion letter from the General Counsel to obtain legal guidance regarding the interpretation of any statute or implementing regulation under FERC jurisdiction; (4) seek an accounting interpretation from the FERC's Chief Accountant for guidance on the implementation of standards issued by the Financial Accounting Standards Board and existing or emerging industry-wide or entity specific accounting issues within the context of the Uniform System of Accounts; and (5) contact the Enforcement Hotline to obtain informal guidance on all areas within FERC jurisdiction, except matters before FERC in docketed proceedings.10

On April 15, 2010, the FERC issued an instant final rule transferring dispute-related calls regarding the construction of interstate pipelines from the Enforcement Hotline to the Dispute Resolution Service effective May 1.11 The FERC explained that its Office of Enforcement, which operates the Enforcement Hotline, is focused on other matters, including fraud, market manipulation, violations of reliability standards, anticompetitive conduct, and conduct that threatens the transparency of regulated markets. …

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