(CN) - The 9th Circuit on Wednesday reinstated state-law antitrust claims against natural gas trader saccused of selling gas at artificially high prices, triggering the California energy crisis of 2000 to 2002.
In the wake of the crisis, 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 was published 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.
According to a 2003 report by the Federal Energy Regulatory Commission (FERC), "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 states. "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," according to FERC.
The lawsuits were consolidated in Nevada Federal Court, where U.S. District Judge Philip Pro ruled that the federal Natural Gas Act preempted most of the buyers' state-law antitrust claims.
The three-judge panel in San Francisco reversed, 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.
"[F]ederal preemption doctrines do not preclude state law claims arising out of transactions outside of FERC's jurisdiction," Bea added.
Defendant traders include the American Electric Power Company, Duke Energy Corp., CMS Energy Corp., Reliant Energy, Xcel Energy and dozens more.
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