EnCana said late last month that it intends to seek a court ruling that FERC is the only appropriate forum for review of the natural gas market manipulation allegations raised in two private lawsuits recently filed against it in two California courts.

Modesto, CA-based E. & J. Gallo, California’s largest winery, filed a lawsuit last month in the U.S. District Court for the Eastern District of California against EnCana and one of its subsidiaries. The suit alleges a conspiracy with other unnamed competitors in the natural gas and derivatives market in California to artificially inflate natural gas prices in the state through various means. including online trading, manipulation of published price indexes and wash trading. Gallo is claiming damages in excess of $30 million before potentially trebling them under California laws (see Daily GPI, April 21).

Earlier last month, EnCana and eight other merchant energy companies were named as co-conspirators in a separate class action lawsuit filed in the San Diego Superior Court that also alleged gas price manipulation in California in 2000 and 2001.

“Class action lawsuits have become commonplace in California and their proliferation is an unfortunate negative in doing business there,” said EnCana CEO Gwyn Morgan in a statement. “All of the legal matters involving EnCana deal with the discontinued operations of a Houston-based merchant energy subsidiary of the former PanCanadian Energy Corp. At the time of the merger creating EnCana more than one year ago, the decision was made to exit this business and the Houston merchant energy office was closed.”

EnCana also noted that sales of natural gas to California consumers during 2000 and 2001 by PanCanadian Energy Services Inc., a predecessor company of EnCana, represented less than 4% of the natural gas reported to have been consumed in California during that period.

In addition, EnCana believes that FERC, which is responsible for regulating the U.S. natural gas and power industries, “has the knowledge, experience, expertise and lawful jurisdiction for dealing with natural gas markets and pricing.” It is seeking a transfer of these cases from the California courts to the Federal Energy Regulatory Commission.

In its first quarter financial report, EnCana disclosed that it received a subpoena from the Commodity Futures Trading Commission (CFTC) requiring the company to produce documents and other information for the CFTC’s investigation into inaccurate price reporting to industry trade publications. EnCana said it is cooperating fully with the CFTC on price reporting matters and with other government agencies that are looking into wash trading.

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