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Citing media interest, court orders FERC to pay FOIA legal fees of Powhatan brothers


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Citing media interest, court orders FERC to pay FOIA legal fees of Powhatan brothers

While it may represent a relatively small monetary victoryfor the twin brothers who co-own the Powhatan Energy Fund, a district courtruling that FERCneeds to pay their legal fees related to a Freedom of Information Act disputemay be a moral triumph and shows the value of media interest in their situation.

FERC has asked a federal district court to enforce $16.8million in penalties it assessed Rich and Kevin Gates' Powhatan Energy Fund forallegedly manipulating the PJMInterconnection LLC's power markets. The brothers have fiercelyfought the accusations, assertingthat the agency has tried to "bully" Powhatan into paying thepenalties.

That case drew the interest of the media and became highlycontroversial after the brothers launched a website telling their side of thestory and reached out to reporters long before FERC in August 2014 went publicwith the investigation. A district court is still reviewing FERC's case againstthe company.

Meanwhile, another company owned by the Gates brothers, STSEnergy Partners LP, got involved in a tussle with the commission over two FOIA requeststhe company submitted to "shin[e] light on FERC's recent and punitiveefforts against small power market traders."

The first request was for certain records related to FERCstaff's investigationof another energy trader, Oceanside Power, while the second was to obtaindocuments related to the commission's rejection of a complaint involving BlackOak Energy and the agency's subsequent reversal of that decision.

FERC initially withheld 41 documents that responded to theOceanside request and 294 documents related to the Black Oak decisions. AfterSTS Energy sued and a judge refused to summarily dispose of the matter, thecommission released more records in whole or in part. In May 2015, the partiesreached an agreement regarding the remaining documents in dispute, bringing anend to the underlying FOIA litigation.

But while the two sides could not agree on whether thecommission should bear the plaintiff's legal costs tied to the FOIA litigation,John Bates, a judge for the U.S. District Court for the District of Columbia,ruled Oct. 5 that FERC needs to pay $60,168.19 of those fees.

Bates explained that FOIA provides for the recovery ofreasonable attorneys' fees in cases brought under its provisions where thecomplainant has "substantially prevailed." In deciding whether STSEnergy should receive those fees, the judge first looked at whether the publicbenefited from the case.

FERC argued that the requested information at most wasvaluable to a few energy traders "interested in determining FERC'sinvestigative techniques and enforcement postures." According to thecommission, "those are provincial concerns, not ones shared by the publicat large."

Conversely, STS Energy argued that the released documentsgave the public strong insight into how FERC conducts its energy marketenforcement cases, including by revealing the important decision makers on thecommission's team.

Bates sided with STS Energy, reasoning that coverage of thecase by The Wall Street Journal andother news outlets as well as congressional interest in the case are strongindicators that a matter has relevance to the public. "This media coverage— even if drummed up by the litigants themselves — demonstrates significantpublic interest in this action," Bates stated. The judge also noted thatthe case convinced the inspector general at the U.S. Department of Energy toreview FERC's enforcement program, and that some federal lawmakers reportedlyconsidered developing legislation instituting several changes to thecommission's enforcement procedures.

However, Bates also agreed with FERC's assertions that theGates brothers were using STS Energy to obtain materials that would help themavoid liability for market manipulation, given FERC's refusal of Powhatan'srequest for discovery in the pending litigation. "The Gates brotherscannot hide behind the vehicle of another company to disclaim that privateinterest," Bates ruled. But the judge also found that FERClacked a reasonable basis for not disclosing the material until after STSEnergy filed suit.

Taking into account all the somewhat conflicting factors,the judge determined that the benefit the public derived from the materialsthat were eventually released and the absence of adequate justification forFERC's refusal to provide the documents carried the greatest weight.

Responding to the ruling, Rich Gates said, "FERC'sunjust withholding of FOIA documents is disgusting. We are appreciative ofJudge Bates who said we have done a public service seeking them." STS Energy v. FERC (No. 14-591)