The Supreme Court is slated on Monday to hear oral arguments in a case dating back to the early 2000s that could define FERC's authority to regulate natural gas and other markets.
The case Oneok Inc. v. Learjet Inc. deals with the preemptive effect of the Natural Gas Act (NGA) and the scope of the Federal Energy Regulatory Commission's enforcement authority relative to the states.
"Lower courts have been struggling to determine whether FERC has exclusive jurisdiction over the activities of energy firms and whether state regulation of activities of energy firms presents a conflict with federal law. The approach that the Court ultimately takes in addressing this issue will have potential implications for similar statutes, such as the Federal Power Act," Vanderbilt University law professor Jim Rossi wrote on the SCOTUSblogwebsite.
Learjet and other natural gas buyers filed antitrust lawsuits against Oneok and other gas sellers in multiple states for allegedly manipulating gas markets through the false reporting of price information to trade publications during the 2000-2002 energy crisis. The cases were consolidated and in 2011 a federal district court in Nevada sided with gas sellers, reasoning that the Natural Gas Act preempted claims under state law.
A panel of the U.S. Court of Appeals for the Ninth Circuit in California reversed the district court, allowing the claims to potentially go to trial.
"The Ninth Circuit's decision emphasized the narrow scope of FERC's potential jurisdiction over the claims under the NGA, which does not authorize FERC to regulate retail gas prices," Rossie wrote.
The NGA, in Section 1(b), gives FERC jurisdiction over interstate transportation of gas; wholesale gas sales; and gas companies engaged in such transportation or sale.
"This grant of authority appears very broad and has on occasion been described as 'exclusive' in its scope," Rossi wrote. "However, longstanding interpretations of the NGA by the Supreme Court emphasize that the statute distinguishes 'sharply and cleanly' between 'sales for resale and direct sales for consumptive uses.'" Rossi wrote that federal jurisdiction over sales under the NGA has been limited by Congress, which has exempted "first sales" from FERC regulation.
The district court opinion in Oneok highlights another NGA provision that potentially triggers federal jurisdiction over state antitrust claims concerning retail pricing data, Rossi said. "The district court read this provision expansively, finding preemption of the state antitrust law claims even though they involved prices for gas sales that are not within agency's jurisdiction under Section 1(b)," he wrote.
"By contrast, the Ninth Circuit reasoned that FERC's Section 5 authority over 'practices' does not extend to non-jurisdictional contacts under Section 1(b)."
Major public utilities in the western states reached settlements totalling $4.9 billion with bankrupt Enron and other major suppliers in 2005 (see Daily GPI, July 18, 2005).
A decision in the case is expected by the end of June.