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5th Circuit denies rehearing in Total manipulation case


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5th Circuit denies rehearing in Total manipulation case

Total Gas & Power North America Inc. was unable to convince a federal appeals court to revisit a decision that it is too early for Total to challenge the Federal Energy Regulatory Commission's reliance on an in-house administrative law judge in a natural gas market manipulation case.

The suit involves the assertions of Total, a subsidiary of the French energy giant Total SA, that FERC's own adjudication of such Natural Gas Act probes denies litigants basic procedural rights and sets up a situation in which FERC officers and employees serve as prosecutors, judge and jury.

In July, Total's North American natural gas trading unit asked the full U.S. Court of Appeals for the 5th Circuit to reconsider a June decision by a three-judge panel that rejected the company's challenge. Total argued that the legal costs it was incurring defending itself against accusations of price manipulation under the Natural Gas Act give an appeals court jurisdiction to hear a challenge of the agency's authority now rather than waiting until after the agency makes a final decision.

The 5th Circuit in an Aug. 8 order denied the petition for rehearing, without an accompanying opinion. The order noted that no member of the panel had asked the court to be polled on rehearing en banc. (U.S. Court of Appeals for the 5th Circuit docket 16-20642)

FERC in 2015 initiated an anti-manipulation probe against the Houston-based subsidiary of Total and disclosed that staff had made a preliminary finding that the company and a trader and a supervisor had executed a plan to manipulate natural gas prices in the Southwest between 2009 and 2012. (FERC docket IN12-17)

Total and the two employees filed suit against FERC in federal district court, saying "FERC's in-house adjudication flips the burden of proof, denies litigants basic procedural rights, and
assigns the adjudication of law and facts to ALJs who are themselves FERC officers, whose appointments violated the Constitution, and who work in offices just a few feet away from those of the commissioners."

The U.S. District Court for the Southern District of Texas in July 2016 dismissed the case without prejudice. The 5th Circuit panel affirmed the dismissal, finding that Total sought to preemptively
challenge a FERC order that may never be issued.

"All of Total's arguments are predicated on future events and are brought before FERC has even scheduled the matter for hearing — let alone issued an order finding an NGA violation and imposing a civil
penalty," Judge Carolyn Dineen King said in the decision for the panel.

In urging the full appeals court to reconsider that decision, Total said that while FERC has not made a final decision, the enforcement staff has urged it to make several conclusive factual findings and
"historically, FERC has always taken the actions urged by its enforcement staff."

The company argued that federal courts are the deciders of fact in a Natural Gas Act violation case and FERC is only allowed to assess proposed penalties.

"There is no question that plaintiffs face more expense and burden defending against a potentially binding administrative adjudication of liability, with imposition of severe penalties, than in a proceeding
where FERC can only propose penalties for alleged violations," the company argued.

Maya Weber is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.