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FERC Spells Out Process for Imposing Civil Penalties

FERC Thursday issued an administrative policy statement that identifies the process it will use in assessing civil penalties in enforcement actions that are not resolved through settlement.

The policy statement, which applies to both natural gas and electric companies, is in large part a response to the Energy Policy Act of 2005 (EPAct), which significantly enhanced the Federal Energy Regulatory Commission's authority to levy civil penalties for violations of the Natural Gas Act (NGA), the Federal Power Act (FPA) and the Natural Gas Policy Act of 1978 (NGPA).

It also authorized the agency to issue civil penalties of up to $1 million per day per violation for violations of rules, regulations and orders arising from the statutes. Prior to EPAct, FERC had no legal authority to impose civil penalties for violations of the NGA, and a very limited ability to penalize violators of the FPA.

While the specific processes required by each of the statutes differs, in all cases the Commission first will issue a notice of proposed penalty, including a statement of the material facts describing the violation, and will give the alleged offender an opportunity to respond with information that could justify reducing, modifying or eliminating a penalty, FERC said.

"With respect to Commission enforcement actions, I would expect that in many cases they would result in settlements," said Chairman Joseph Kelliher. But in cases where a settlement is not possible, "we are prepared to litigate." The process "we will use to assess civil penalties will not be uniform; it will vary from statute to statute. That is driven by the differences in the laws themselves," he said.

For violations of the NGA, which does not specify a procedure to follow in assessing penalties, the Commission said it will issue an order for a paper hearing or a hearing before an administrative law judge (ALJ), depending on the nature of the facts or issues that need to be resolved.

With respect to the NGPA, FERC noted that it will, after considering an alleged violator's response to a notice of proposed penalty, issue an order and assess any appropriate penalty, which then would be subject to review in U.S. District Court.

Those who are accused of violating Part II of the FPA can elect to have a hearing before a FERC ALJ or be assessed a penalty immediately, which would then be subject to review in district court. With respect to Part I of the FPA, the process for imposing penalties depends in part on whether there has been a violation of a final compliance order, the agency said. If a final compliance order is involved, then there will be a hearing before and ALJ. However, if there is no compliance order, then the alleged violator can elect to either have a hearing before an ALJ or be assessed a penalty immediately, which would be eligible for court review.

In all cases, FERC said alleged violators being assessed civil penalties will have either a hearing before the Commission or review in federal court, and then can appeal final orders assessing penalties to the U.S. Court of Appeals.

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