FERC Wednesday granted Amaranth Advisors LLC an additional month to respond to a show cause order that accuses the failed hedge fund of manipulating the price of physical natural gas transactions.

Greenwich, CT-based Amaranth, seven affiliates and former traders Brian Hunter and Matthew Donohoe had asked for the extension until Sept. 28 to respond to charges that the Federal Energy Regulatory Commission (FERC) brought against them in July (see Daily GPI, Aug. 8). In their request for more time, they stated that FERC spent more than a year investigating Amaranth, “the body of supporting material the Commission points to is massive, the case relies in significant part upon computerized modeling by an outside economic expert, and the interplay of legal and factual issues is novel and highly complex…to develop a detailed response to the Commission’s 75-page show cause order will be an enormous undertaking.”

On July 26, FERC issued show cause orders in separate investigations, one in the Amaranth case and the other naming Dallas-based Energy Transfer Partners LP (ETP) (see Daily GPI, July 27). At the same time, the Commodity Futures Trading Commission (CFTC), which had leveled a complaint against Amaranth for attempted manipulation of the natural gas futures market (see Daily GPI, July 26), followed up with an enforcement action against ETP (see Daily GPI, July 27). The civil complaint filed against Amaranth by the CFTC also listed Hunter, who directed the fund’s natural gas trading. FERC previously granted ETP an additional month to respond to the charges (see Daily GPI, Aug. 3).

FERC’s Amaranth show cause order gave the company and its traders 30 days to state why they should not be assessed civil penalties and be required to disgorge profits totaling $291 million for allegedly manipulating the price of Commission-jurisdictional transactions by trading in the Nymex natural gas futures contract in February, March and April 2006. Amaranth collapsed in September 2006 after losing $6 billion in the gas futures market (see Daily GPI, Oct. 3, 2006; Sept. 22, 2006; Sept. 19, 2006).

Hunter has argued that FERC lacks standing because its regulatory jurisdiction covers only physical natural gas trading, not futures trading. FERC said it has jurisdiction because futures market activities affect the Nymex settlement price, which determines the price of a substantial volume of jurisdictional gas sales, notably in the eastern, midwestern and Gulf Coast markets. Attorneys representing Hunter have filed documents in U.S. District Court in support of their own motion for an injunction and declatory judgment that FERC lacks the statutory authority to pursue the pending enforcement action.

In the filings, Hunter states that “FERC’s ongoing enforcement action threatens the very existence” of Solengo Capital Advisors ULC, a company Hunter founded after leaving Amaranth. Several employees have left Solengo, “prospective investors have lost interest” and “Solengo Managed Fund’s directors have now all resigned, shortly after being informed of the FERC action and the significant penalties FERC seeks,” according to Hunter’s motion.

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