A Houston-based subsidiary of France's Total SA has asked a federal judge to issue a declaratory judgment that would guarantee the company a chance to have allegations currently under investigation at FERC be heard by a jury trial in a federal district court.
"This declaratory relief is necessary because in every case in which FERC accuses persons or entities of violating the NGA [Natural Gas Act], it denies them the right to have the claimed violations adjudicated in federal district court as expressly provided by the NGA -- and as required by the United States Constitution," Total Gas & Power, North America Inc. (TGPNA) said in a complaint filed last week in the U.S. District Court for the Western District of Texas Midland-Odessa Division [Civil Action No. 7:16-cv-00028].
In a Notice of Alleged Violations issued in September, staff in FERC's Office of Enforcement (OE) alleged that TGPNA and two of the company's West Desk traders and supervisors developed a scheme to manipulate the price of natural gas in the southwestern United States between June 2009 and June 2012 (see Daily GPI, Sept. 22, 2015). TGPNA's Therese Tran and Aaron Hall violated section 4A of the NGA and the Federal Energy Regulatory Commission's Anti-Manipulation Rule by devising and executing a scheme to manipulate gas prices over the three-year period, staff said in the Notice.
In the complaint for declaratory relief filed in Texas Jan. 27, TGPNA said "FERC plans to bring a purported administrative enforcement action" against the company, Tran and Hall, "charging them with violations of the Natural Gas Act and related rules, and asserts the right to adjudicate the accuracy of its own allegations in a proceeding before an administrative law judge (ALJ) in which FERC's own officers and employees serve as prosecutors, judge and jury. Once that unlawful proceeding yields a ‘finding' by FERC's ALJ to the effect that FERC has proven its own allegations, FERC will impose 'civil' penalties that will likely be in the hundreds of millions of dollars."
TGPNA isn't asking the court to stop FERC from conducting an investigation, according to the complaint, but is “simply asking the court to issue a declaratory judgment to protect plaintiff's statutory and constitutional rights to have the underlying questions at issue -- i.e, whether plaintiffs violated the NGA (or related rules) and, if so, the appropriateness of FERC's proposed penalty -- adjudicated in the first instance by a federal district court, in a proceeding overseen by a non-FERC judge...who will provide plaintiffs the basic procedural protections to which they are entitled.
"The judgment sought here will declare, in particular, that the NGA and the Constitution give plaintiffs the right to a jury trial in federal district court when FERC seeks civil penalties for alleged violations of either the NGA or any rules or regulations promulgated under the NGA."
FERC does not comment on ongoing investigations, which "remain nonpublic throughout the investigative process," according to the Commission.
In December, the U.S. Commodity Futures Trading Commission (CFTC) issued an order against TGPNA and Tran, bringing and settling charges for attempted manipulation of natural gas monthly index settlement prices during bidweeks at four major trading hubs in Texas and elsewhere in the Southwest (see Daily GPI, Dec. 7, 2015). The order also found that TGPNA and Tran "employed a manipulative device in connection with their purchasing and/or selling large volumes of fixed-price natural gas during bid-week," CFTC said.
The order required TGPNA and Tran jointly to pay a $3.6 million civil monetary penalty, and imposed sanctions including a two-year trading limitation on TGPNA and Tran from trading physical basis or physical fixed-price natural gas at hub locations when TGPNA also holds, prior to and during bidweek, any financial natural gas position whose value is derived in any material part from natural gas bidweek index pricing.
CFTC found that during bidweeks for September 2011, October 2011, March 2012 and April 2012, TGPNA, through Tran and other traders under Tran's direction, attempted to manipulate monthly index settlement prices of natural gas at El Paso Permian Basin, El Paso San Juan Basin, Southern California Gas Co., and West Texas Waha through their physical fixed-price trading during bidweek.