The outcome of the Brian Hunter v. FERC case, which was argued today in the U.S. Court of Appeals for the D.C. Circuit, will help determine the scope of FERC's authority over the gas markets and the scope of FERC's enforcement authority.

FERC has found that while trading natural gas for Amaranth, Mr. Hunter violated Section 4A of the Natural Gas Act and the FERC Anti-Manipulation Rule by "banging the close"—engaging in certain high-volume trades of NYMEX futures contracts on the expiration date of those contracts to drive down the settlement price. FERC found that Mr. Hunter’s trading pattern was intended to benefit significantly larger short positions in natural gas swaps.

As a result of its findings, FERC fined Mr. Hunter $30 million. Mr. Hunter has appealed to the D.C. Circuit, arguing that FERC does not have the statutory authority to police the futures markets or to assess penalties against persons rather than corporate entities. Of particular interest, the CFTC has weighed in on Mr. Hunter's side, arguing that the CFTC has sole authority over natural gas futures markets.

The decision in this case, likely to be issued later this year, will have important implications for FERC's enforcement efforts and will help delineate the jurisdictional line between FERC and CFTC in the regulation of the natural gas markets.

If you have any questions, please contact any member of the Energy and Project Finance Group.

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