Failed hedge fund Amaranth Advisors LLC says it plans to appeal later this week FERC’s recent decision upholding its assertion of jurisdiction in the natural gas futures market. At the same time, Amaranth and affiliates have asked the Federal Energy Regulatory Commission (FERC) to stay the enforcement proceedings at the agency pending the court’s review of the jurisdictional issue.
Amaranth intends to file its appeal with the U.S. Court of Appeals for District of Columbia Circuit at the end of the week, said Amaranth spokesman Shawn Pattison. FERC spokeswoman Mary O’Driscoll said it was “premature” for the agency to comment, noting that the case still was outstanding at FERC in light of the latest request for a stay.
Amaranth Advisors and other parties sought rehearing in August of FERC’s determination that it has jurisdiction to sanction activities in the gas futures market, arguing that this market instead was the sole purview of the Commodity Futures Trading Commission (see Daily GPI, Aug. 29).
In the Nov. 30 rehearing order, FERC said the Energy Policy Act of 2005 gave the agency broad authority to sanction manipulative conduct by any entity “in connection with” the purchase, sale or transport of natural gas within its jurisdiction [IN07-26-001]. FERC rejected Amaranth’s argument that the CFTC has exclusive jurisdiction over the manipulation of gas futures contracts.
In seeking rehearing Amaranth Advisors, affiliates and former natural gas traders, citing the jurisdictional issue, asked FERC to terminate a July show cause order that accused the parties of indirectly influencing the price of physical gas transactions in 2006 through manipulation of the New York Mercantile Exchange natural gas futures contract (see Daily GPI, July 27).
The FERC show cause order cited Greenwich, CT-based Amaranth, seven affiliates and two traders — Brian Hunter and Matthew Donohoe. The parties were given until Dec. 14 to respond to the FERC allegations.
If a stay at FERC is denied, Amaranth and affiliates asked the Commission to extend the time to answer the show cause order until a related motion for a stay is acted on by the D.C. Circuit Court.
“Justice requires the stay requested by Amaranth because the Commission’s broad interpretation of its jurisdiction has caused an inter-agency dispute and has raised serious legal, regulatory and economic concerns voiced by prominent futures industry participants as well as by members of Congress,” Amaranth told FERC. “Absent the requested stay, Amaranth would be subjected to intense and expensive litigation seeking hundreds of millions of dollars in penalties by a regulator that lacked authority to bring the action in the first place.”
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