Proposed FERC Rule Marks Significant Shift in Approach Toward Inter-Affiliate Service Agreements

By Ken Irvin, Anna Biegelsen, Ryan Norfolk, Katrina Olsen and Katherine Vorhis

In a March 20, 2014, Notice of Proposed Rulemaking (Proposed Rule), the Federal Energy Regulatory Commission (FERC) proposed, among other things, a requirement that all interstate pipelines offer multiparty firm transportation contracts, whereby multiple shippers can share interstate gas pipeline capacity through a single service agreement.  FERC noted that, under its proposal, “[P]ermitting such entities to enter into a single contract with the pipeline gives those entities the flexibility to choose contracting partners with complementary needs for pipeline capacity and to enter into an ongoing contractual relationship concerning how they will share the capacity.”  FERC also suggested that the new requirement could make the purchase of firm pipeline capacity more affordable.  Currently, the Proposed Rule applies only to firm capacity, but FERC is also seeking comments on whether it should require companies to offer multiparty interruptible service agreements. Continue reading

Posted in FERC, Oil & Gas, Power, Regulation

Final CFTC Rule – Swap Data Repositories: Access to SDR Data by Market Participants

The U.S. Commodity Futures Trading Commission is adopting an interim final rule to  clarify the scope of permissible access by market participants to swap data and information maintained by a registered swap data repository (‘‘SDR’’). Specifically, the interim final rule clarifies that, for a swap that is executed anonymously on a swap  execution facility or designated contract market, and then cleared in accordance with the Commission’s straight-through processing requirements, the data and information maintained by a registered SDR that may be accessed by either counterparty to the swap does not include the identity of the other counterparty to the swap, the identity of
the other counterparty’s clearing member for the swap, or such counterparty’s or clearing member’s legal entity identifier.

17 CFR Part 49 Swap Data Repositories–Access to SDR Data by Market Participants
Effective Date: Wednesday, March 26, 2014

View more rules on the CFTC’s website.

Posted in CFTC, Commodity Trading, Mining/Metals, Oil & Gas, Power, Regulation

Notice of Proposed FERC Rulemaking: Coordination of the Scheduling Processes of Interstate Natural Gas Pipelines and Public Utilities

By Ken Irvin, Katrina Olsen, and Katherine Vorhis

On March 20, 2014, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking (Proposed Rule) that, if adopted, will effectively require interstate natural gas pipelines to change their scheduling practices to better align with the needs of electricity markets, as well as to offer greater flexibility to all shippers on interstate pipelines.  The Proposed Rule aims to address coordination challenges associated with increased reliance on gas-fired electric generation.   The Proposed Rule is based upon comments filed in Docket No. AD12-12-000 and discussions arising from technical conferences that focused on coordination between natural gas and electric scheduling practices. Continue reading

Posted in FERC, Oil & Gas, Power, Regulation, Uncategorized

Third Circuit Upholds FERC Orders on PJM MOPR Revisions

By Ken Irvin and Ryan Norfolk

Recently, the U.S. Court of Appeals for the Third Circuit upheld FERC’s 2011 orders accepting revisions to PJM’s Minimum Offer Price Rule (“MOPR”) that, among other things, removed the mitigation exemption for resources being developed in response to a state mandate to resolve a projected capacity deficiency.  While sharply criticizing FERC for allowing “sovereign states and private parties to be drawn into making complex and costly investments, only to later pull the rug out from under those who were persuaded that the exemption was somehow real,” the Third Circuit concluded that FERC neither exceeded its jurisdiction nor acted in an arbitrary and capricious manner.

Of particular relevance, the Third Circuit found that “FERC’s enumerated reasons for approving the elimination of the state-mandated exception relate directly to the wholesale price for capacity, which is squarely, and indeed exclusively, within FERC’s jurisdiction.”  And while sympathetic to arguments that New Jersey and Maryland “reasonably relied on the availability of the state-mandated exemption in contracting for the construction of new capacity resources,” the court found “no fault with FERC’s ability to, and reasons for, eliminating the state-mandated exemption.  Courts have repeatedly held that an agency may alter its policies despite the absence of a change in circumstances.”  As such, the court limited its review of FERC’s orders to assessing “only whether FERC’s factual conclusions were based on substantial evidence, whether, taking into account that evidence, each of the changes it made to the MOPR in its orders had a rational basis and were not arbitrary or capricious, and whether FERC adequately explained its reasoning.”

The Third Circuit’s decision in this matter may foreshadow its resolution of the pending appeal of a federal district court decision invalidating New Jersey’s capacity development initiative.

The full decision may be viewed here.

Posted in Cases, FERC, PJM, Power, Regulation

Lyondell Bankruptcy Court Holds That Safe Harbors Do Not Prohibit Creditors From Asserting State Law Constructive Fraudulent Transfer Claims

On January 14, 2014, Judge Robert E. Gerber of the United States Bankruptcy Court for the Southern District of New York in Weisfelner v. Fund 1. (In re Lyondell Chemical Co.), Adv. Proc. No. 10-4609 (REG), 2014 WL 118036 (Bankr. S.D.N.Y. Jan. 14, 2014) held that section 546(e) of the Bankruptcy Code did not bar or preempt state law fraudulent transfer claims asserted on behalf of creditors to recover certain leveraged buyout transfers made to shareholders.  In so holding, the Bankruptcy Court adopted the rationale of Judge Richard J. Sullivan of the United States District Court for Southern District of New York in In re Tribune Co. Fraudulent Conveyance Litig., 499 B.R. 310 (S.D.N.Y. 2013), and rejected the rationale of Judge Jed. S. Rakoff in Whyte v. Barclays Bank PLC, 494 B.R. 196 (S.D.N.Y. 2013), thus adding to the recent debate in the Southern District of New York as to what effect the Bankruptcy Code’s safe harbor provisions have on state law fraudulent transfer actions.   read more

Posted in Cases, Distressed Energy, Mining/Metals, Oil & Gas, Power

FERC Enforcement Director Calls for Legislative Fix to Address Hunter Decision

On January 15, 2014, Mr. Norman Bay, Director of the Office of Enforcement at the Federal Energy Regulatory Commission (FERC), testified at a Senate Banking Subcommittee on Financial Institutions and Consumer Protection hearing entitled “Regulating Financial Holding Companies and Physical Commodities.”  Mr. Bay’s testimony focused on FERC’s anti-fraud and manipulation oversight with respect to financial institutions trading in FERC-jurisdictional electric and natural gas markets.  Mr. Bay’s prepared remarks and testimony provide an interesting insight into FERC’s enforcement regime.  Notably, Mr. Bay called for a legislative fix to address FERC’s enforcement authority in light of the recent Hunter v. FERC decision.  read more

Posted in FERC, Oil & Gas, Power, Regulation

Markets in Financial Instruments Directive: Agreement in Principle on Revised European Rules

On 14 January 2014 the European Parliament, the Council and the Commission reached a high-level agreement in principle on updating the rules for the revised Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).  Further technical issues that remain outstanding are expected to be finalised over the coming weeks.  Moreover, a number of provisions require further delegated legislation and/or technical standards to be finalised.  As a result, implementation of final rules may not be complete until up to three years after the legislation is formally adopted, which could be late 2016 or 2017.  Drafts of MiFID II and MiFIR were first published by the European Commission (EC) on 20 October 2011.  They are intended to bring more efficiency and transparency to the financial markets (including commodity markets), and to strengthen the protection of investors.  The fact that over two years have passed and we are now into the 6th rotating EU presidency to marshal the legislative process is reflective of how contentious many of the issues being dealt with in the new legislation have been.  read

Posted in Commodity Trading, Enforcement and Investigations, MiFID, MiFIR, Oil & Gas, Power

FERC and CFTC Reach Agreement on Information Sharing and Jurisdiction

After a fair amount of back-channel arm-twisting, the two agencies with principal (and sometimes overlapping) jurisdiction over energy commodities have reached agreement on two memoranda of understanding (“MOUs”) required by the Dodd-Frank Act.  On January 2, 2014, the Federal Energy Regulatory Commission (“FERC”) and the Commodity Futures Trading Commission (“CFTC” and, with FERC, the “Participating Agencies”) entered into two MOUs addressing (i) procedures for resolving overlapping jurisdictional issues (“Jurisdictional MOU”); and (ii) the sharing of information (“Information Sharing MOU”). These MOUs are over three years in the making and roughly three years past the deadline set by Congress.  read more

Posted in CFTC, Dodd-Frank, FERC, Oil & Gas, Power, Regulation

The Volcker Rule’s Impact on Foreign Banking Organizations

On Tuesday, December 10, 2013, the three federal banking agencies – the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation – as well as the Securities & Exchange Commission and the Commodity Futures Trading Commission, approved a final regulation implementing Section 619 of the Dodd-Frank Act, a statutory provision more generally known as the “Volcker Rule.”  The 72-page final regulation with the accompanying 892-page explanatory “Preamble” were issued nearly three and a half years after the enactment of the Dodd-Frank Act, and more than two years following the proposed regulations issued in October 2011.  In conjunction with the adoption of the final regulations, the Federal Reserve issued an order delaying the conformance date for Volcker for an additional year, until July 21, 2015.  read more

Posted in CFTC, Commodity Trading, Dodd-Frank, Oil & Gas, Power, Regulation, SEC

The Volcker Rule’s Impact on Banking Entities’ Ownership and Sponsorship of Structured Finance and Securitization Transactions

On December 10, 2013, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission and the Commodity Futures Trading Commission released the long-awaited final regulations that implement Section 13 of the Bank Holding Company Act, which was added by Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  On December 10, 2013, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission and the Commodity Futures Trading Commission released the long-awaited final regulations that implement Section 13 of the Bank Holding Company Act (also known as the “Volcker Rule”), which was added by Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  read more

Posted in CFTC, Commodity Trading, Dodd-Frank, Mining/Metals, Oil & Gas, Power, Regulation, SEC