FERC last Thursday denied pleas filed by Amaranth Advisors LLC and affiliates seeking a stay of enforcement proceedings at the agency pending a court review of an order upholding the Federal Energy Regulatory Commission's (FERC) assertion of jurisdiction in the natural gas futures market.
Failed hedge fund Amaranth Advisors LLC last week was to file a court appeal of a Nov. 30 order in which the Federal Energy Regulatory Commission affirmed its right to sanction manipulative activities in the gas futures market, which influence prices in the FERC-jurisdictional physical gas market. The appeal was to be brought in the U.S. Court of Appeals for District of Columbia Circuit.
Last August, Amaranth and affiliates challenged FERC's determination that it has jurisdiction in the gas futures market, arguing that the market instead was the sole purview of the Commodity Futures Trading Commission (see NGI, Sept. 3). In the Nov. 30 order on rehearing, which responded to the August challenge, "we explained that the language and legislative history of the Natural Gas Act, and relevant legal precedent, support our conclusion that the Commission has jurisdiction [in the gas futures market] to punish manipulative trading so that energy markets remain fair and competitive," FERC said in last week's order denying the requests for a stay [IN07-26].
In deciding whether to grant a stay, FERC said it considered whether Amaranth would suffer irreparable harm without the stay; whether the stay would substantially harm other parties; and whether a stay is in the public interest. The key element is "irreparable harm," which Amaranth failed to demonstrate, FERC said.
"Amaranth's claimed harm amounts to monetary loss arising from the expense of litigation and the prospect of civil penalties. In determining whether an injury is irreparable, it is 'well settled that economic loss does not, in and of itself, constitute irreparable harm,'" the Commission said, quoting a 1985 ruling from the D.C. Circuit Court. "In particular, defense efforts and litigation costs do not meet the standard of irreparable harm."
Further, FERC said it disagreed "that an applicant is entitled to a stay because it claims that the agency has acted outside the scope of its jurisdiction." This issue was raised recently in a proceeding before the U.S. District Court for the Southern District of New York, which rejected Amaranth's request to enjoin FERC from proceeding with its enforcement action, the agency noted (see NGI, Nov. 5). Additionally, the Commission found that "the public interest is best served by allowing this mater to proceed at the Commission."
FERC contends that the Energy Policy Act of 2005 gives 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. The Commission also rejects Amaranth's argument that the CFTC has exclusive jurisdiction over the manipulation of gas futures contracts.
In seeking rehearing last August, 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 NGI, July 30).
The FERC show cause order cited Amaranth, seven affiliates and two traders -- Brian Hunter and Matthew Donohoe. The parties have been given until Dec. 14 to respond to the FERC allegations. The Commission said it would act separately on the requests of Hunter and Donohoe for a stay of the FERC enforcement actions against them.
With their requests for a stay rejected, 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. FERC denied their plea.
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