On April 10, 2017, the U.S. Department of Justice, on behalf of FERC, argued to the U.S. Court of Appeals for the Fifth Circuit (“Fifth Circuit”) that a recent district court order requiring de novo review of market manipulation allegations under the Federal Power Act (“FPA”) is inapplicable to similar circumstances under the Natural Gas Act (“NGA”).  FERC’s counsel challenged Total Gas & Power North America Inc.’s (“Total”) reliance on a district court order in FERC v. Barclays Bank PLC et al., (“Barclays Order”) (see April 10, 2017 edition of the WER), arguing that it does not support reading a “de novo review” option into the NGA because that order interpreted a separate FPA provision for which there is no parallel under the NGA.

The Fifth Circuit appeal follows a July 2016 order from the U.S. District Court for the Southern District of Texas (“District Court”) rejecting Total’s assertion that FERC cannot use its own enforcement proceedings to pursue civil penalties under the NGA.  When FERC’s Enforcement Division initiated the proceedings and proposed $225 million in penalties and disgorgement against Total for alleged natural gas market manipulation, Total sought a declaratory order that, under NGA Section 24, only district courts have exclusive jurisdiction over alleged NGA violations.  The District Court disagreed, noting that NGA Section 22 authorizes FERC to conduct a hearing regarding the propriety and amount of civil penalties for statutory violations.  Furthermore, the District Court explained that the judicial review provision in NGA Section 24 “provides no guidance on how a district court is to evaluate the results of the agency hearing.”  Thus, the District Court determined that Total’s request for de novo review would be “remarkable” and inefficient after a full administrative hearing at FERC.

On appeal to the Fifth Circuit, Total argued that the District Court erred by failing to order FERC to pursue the market manipulation allegations and penalties in federal court.  More recently, in a letter submitted on April 6, 2017, Total’s attorneys attached the Barclays Order as supplemental authority.  Total argued that, although the Barclays Order involved a challenge to a FERC enforcement action under the FPA for alleged manipulation of electricity markets, the order indicates that it would not have been “remarkable” for Congress to have similarly required de novo review of NGA violations after a FERC enforcement hearing.

On April 10, FERC, through its Department of Justice counsel, responded to Total’s April 6 letter.  As FERC summarized, the applicable provision associated with the Barclays Order, FPA Section 31(d), expressly allows district courts “authority to review de novo the law and facts involved” in FERC orders assessing civil penalties.  Thus, according to FERC, the Barclays Order is inapplicable to Total’s appeal because it depends on a statutory provision that is absent from the NGA.  “Tellingly,” FERC counsel stated, “the [Barclays] court did not even cite to Section 317 of the FPA, 16 U.S.C. § 825p, the FPA’s parallel to NGA § 24.”  FERC counsel also noted that when the Barclays Order was issued, FERC had already concluded its enforcement proceedings, whereas the process regarding Total’s alleged natural gas market manipulation is still on-going at FERC.