Antitrust Case Against Gas Traders Picked Up
WASHINGTON (CN) - Natural gas traders accused of triggering an energy crisis in California by selling gas at artificially high prices persuaded the Supreme Court to take up their case Tuesday.
In the wake of the crisis from 2000 to 2002, Learjet, Sinclair Oil and a slew of other retail gas buyers sued traders in state and federal court, claiming they manipulated the market by submitting false information to two trade publications, Gas Daily and Inside FERC. That information appeared in price indices used to determine the market price of natural gas.
Gas Daily collected its price data through phone interviews with traders and producers, while Inside FERC had traders fill out and email a spreadsheet.
A 2003 report by the Federal Energy Regulatory Commission (FERC) said that "many companies report passing around a form and using a spreadsheet on a shared drive."
"There was nothing to stop a trader from changing the numbers someone else had entered," the report continues. "In other cases, traders took an oral 'survey' to get a sense of where the market was trading. Sometimes they represented it to the trade press as an actual survey, but in other cases they made up trades to average out to a number that was consistent with this 'survey.'"
Buyers claimed traders also manipulated the market with so-called "wash sales," where a buy or sell transaction would be immediately reversed or offset by another trade to boost the appearance of demand.
The alleged market manipulation contributed to a spike in spot gas prices, "facilitating the unprecedented price increase in the electricity market," the commission reported.
Once the cases were consolidated in Nevada, U.S. District Judge Philip Pro found that the federal Natural Gas Act pre-empted most of the state-law antitrust claims.
The 9th Circuit reversed last year, favoring a narrow reading of the provision granting FERC jurisdiction over any "practice" affecting jurisdictional rates.
The sales at issue in this case were outside FERC's jurisdiction, and the Natural Gas Act "reserve[s] to the states regulatory authority over nonjurisdictional sales, such as first sales at the wellhead or from sellers in Canada and Mexico," Judge Carlos Bea explained.
"Federal preemption doctrines do not preclude state law claims arising out of transactions outside of FERC's jurisdiction," Bea added.
Defendant traders include the Oneok Inc., American Electric Power Co., Duke Energy Corp., CMS Energy Corp., Reliant Energy, Xcel Energy and dozens more.
Per its custom, the Supreme Court did not issue any comment in granting these traders a writ of certiorari Tuesday.