posted on Wednesday, December 05, 2007 2:24 PM by Tracy Davis

Competing FERC and CFTC Jurisdictional Claims Are Court Bound

FERC in a November 30 order refused to reconsider its July 26 decision to impose $291 million in civil penalties against Amaranth Advisors (Amaranth) for gaming the natural gas futures market and manipulating the price of natural gas.  FERC upheld its own jurisdiction to impose penalties on Amaranth, rejecting the Commodities Futures Trading Commission's (CFTC) insistence that it alone has jurisdiction over manipulation of gas futures contracts.  FERC found instead that "the language and statutory purpose of Section 315 of the Energy Policy Act of 2005" (EPAct 2005) gave FERC "broad authority to sanction manipulative conduct by any entity 'in connection with' the purchase, sale or transport of natural gas within its jurisdiction." 

In the earlier July order, FERC had directed Amaranth to show cause why it had not violated the Natural Gas Act and FERC's anti-market manipulation rules, and proposed a $291 million civil penalty for allegedly manipulating the gas futures market by selling New York Mercantile Exchange (NYMEX) futures contracts just before they expired.  In an August request for rehearing, Amaranth argued that FERC did not have jurisdiction to impose the proposed civil penalties, and that the CFTC had exclusive enforcement authority for manipulation of gas futures markets.  The case has set up a turf war between FERC's expanded enforcement authority under EPAct 2005 and the CFTC's traditional regulation of commodities markets, and led the CFTC to argue that it has exclusive jurisdiction over this case.  Amaranth may now appeal FERC's orders to a US Court of Appeals, which may ultimately delineate the boundaries of FERC's expanded enforcement authority in relation to the CFTC's authority over commodity futures markets. 

Also in the November 30 order, FERC gave Amaranth 14 days to responds to the original show-cause order.