TOTAL GAS & POWER NORTH AMERICA, INCORPORATED; AARON TRENT HALL; THERESE NGUYEN TRAN, Plaintiffs - Appellants
FEDERAL ENERGY REGULATORY COMMISSION; ACTING CHAIRMAN CHERYL A. LAFLEUR, In her official capacity; COMMISSIONER COLETTE D. HONORABLE, In her official capacity; CHIEF ALJ CARMEN A. CINTRON, In her official capacity, Defendants - Appellees
from the United States District Court for the Southern
District of Texas
KING, JOLLY, and PRADO, Circuit Judges.
presented with a challenge to the authority of the Federal
Energy Regulatory Commission to adjudicate violations of the
Natural Gas Act and to impose civil penalties on violators.
TOTAL Gas & Power North America, Inc., a company that
trades in North American natural gas markets, and two of its
trading managers brought this declaratory judgment action
against the Commission arguing that the Commission was
precluded from adjudicating violations or imposing civil
penalties because the Natural Gas Act vests authority for
those activities exclusively in federal district courts. The
district court granted the Commission's motion to
dismiss. Because we conclude that the claims are not ripe, we
FACTUAL AND PROCEDURAL BACKGROUND
case involves the process that Defendant-Appellee the Federal
Energy Regulatory Commission (FERC) uses for adjudicating
violations of the Natural Gas Act (NGA), 15 U.S.C. § 717
et seq., and imposing civil penalties on the
violators. For context, we first review the statutory and
regulatory scheme that guides FERC's process for
adjudicating NGA violations and imposing penalties, and then
we discuss the facts of this case.
an independent regulatory commission comprised of five
commissioners, each appointed by the President, who serve
five-year terms. 42 U.S.C. § 7171(b)(1). FERC primarily
administers three statutes: the Federal Power Act (FPA), 16
U.S.C. § 791a et seq.; the Natural Gas Policy
Act of 1978 (NGPA), 15 U.S.C. § 3301 et seq.;
and the NGA. The NGA, the statute at issue in this
appeal, was enacted in 1938. Natural Gas Act of 1938, Pub. L.
No. 75-688, 52 Stat. 821. It grants FERC the authority to
regulate the interstate transport and sale of natural gas by,
for example, setting pipeline rates and establishing the
conditions for transportation facilities. 15 U.S.C.
§§ 717, 717c, 717f. In the Energy Policy Act of
2005 (EPACT 2005), Congress amended the NGA to prohibit
manipulation in natural gas markets by market participants.
Pub. L. No. 109-58, 119 Stat. 594, 691 (codified at 15 U.S.C.
2005 also made changes to how the NGA was enforced. Prior to
2005, the NGA provided FERC with limited enforcement powers.
See James H. McGrew, Am. Bar Ass'n, Basic
Practice Series, FERC: Federal Energy Regulatory Commission
239-41 (2d ed. 2009). The pre-2005 NGA (like the current NGA)
permitted FERC to "investigate any facts, conditions,
practices, or matters which it may find necessary or proper
in order to determine whether any person has violated [the
NGA]." 15 U.S.C. § 717m. In addition, it authorized
FERC to conduct hearings and to establish the procedural
rules governing those hearings. Id. § 717n.
However, if the investigation yielded a finding of a
violation, FERC had limited options available to punish
violators. Under the pre-2005 NGA, FERC was limited to
seeking injunctive relief and criminal penalties against
violators in federal district court. Id. §§
significantly enhanced FERC's enforcement powers under
the NGA in EPACT 2005. McGrew, supra, at 239-45.
Section 22 added, for the first time, civil monetary
penalties (capped at $1 million per day per violation) to
those remedies available against NGA violators. Pub. L. No.
109-58, 119 Stat. 594, 691 (codified at 15 U.S.C. §
717t-1). Section 22 provides:
(a) In general
Any person that violates this chapter, or any rule,
regulation, restriction, condition, or order made or imposed
by the Commission under authority of this chapter, shall be
subject to a civil penalty of not more than $ 1, 000, 000 per
day per violation for as long as the violation continues.
The penalty shall be assessed by the Commission after notice
and opportunity for public hearing.
In determining the amount of a proposed penalty, the
Commission shall take into consideration the nature and
seriousness of the violation and the efforts to remedy the
15 U.S.C. § 717t-1.
the passage of EPACT 2005, FERC issued a 2006 policy
statement interpreting its new civil penalty authority.
Statement of Administrative Policy Regarding the Process for
Assessing Civil Penalties, 117 FERC 61, 317 (2006)
[hereinafter 2006 Policy]. Crucially, FERC explained
that, for civil penalties assessed under the NGA,
"unlike the FPA and NGPA, Congress did not establish a
de novo court review." Id. ¶ 8,
117 FERC at 62, 533. Accordingly, FERC interpreted the NGA to
permit FERC itself to assess penalties under the NGA through
either "a paper hearing or a hearing before an
ALJ." Id. ¶ 2, 117 FERC at 62, 533. FERC
has established a comprehensive procedure for assessing civil
penalties under the NGA. We provide an overview in order to
situate the facts of this case within that procedure.
FERC's Office of Enforcement, the FERC division in charge
of investigating alleged violations, reviews referrals and
tips of potential NGA violations by natural gas companies and
market participants to determine whether there is a
substantial basis for opening an investigation. 2008
Revised Policy ¶¶ 23-26, 123 FERC at 62, 012;
see 18 C.F.R. § 1b.3.
After opening an investigation, Enforcement employs
conventional discovery methods such as reviewing documents,
conducting interviews and depositions, and communicating with
the subject of the investigation. 2008 Revised
Policy ¶ 28, 123 FERC at 62, 013; see 18
C.F.R. § 1b.3. Enforcement can terminate an
investigation at any point during this process. 2008
Revised Policy ¶ 31, 123 FERC at 62, 013
Enforcement concludes that a violation has occurred, it sends
the alleged violator the factual and legal conclusions of its
investigation and its proposed penalty, to which the alleged
violator may confidentially respond. Id. ¶ 32;
see 18 C.F.R. § 1b.19. In some cases, this
response has prompted Enforcement to terminate the
investigation. 2008 Revised Policy ¶ 32, 123
FERC at 62, 013.
Enforcement continues to believe that a violation has
occurred, it attempts to engage in settlement discussions
with the alleged violator. Id. ¶ 33-34, 123
FERC at 62, 013-14. This step concludes the investigation
stage of the process and commences the enforcement stage.
these settlement discussions are unavailing, Enforcement
submits to the commissioners of FERC its recommendation to
initiate an enforcement proceeding and impose a civil penalty
against the alleged violator, together with any response from
the alleged violator. Id. ¶ 35, 123 FERC at 62,
014. The alleged violator is usually notified of this
recommendation in advance. Id.
FERC deems it appropriate, it issues an order to show cause
to the alleged violator, which includes the amount of
Enforcement's proposed penalty and a statement of the
material facts constituting the violation. Id.
¶ 36, 123 FERC at 62, 014; 2006 Policy ¶
7, 117 FERC at 62, 533. In issuing this order, FERC does
not make a finding that there has been a NGA
violation. 2008 Revised Policy ¶ 37, 123 FERC
at 62, 014. Rather, issuing an order to show cause merely
triggers the procedural rules that FERC has promulgated to
govern its hearings. Id.; see 18 C.F.R.
§§ 385.101-2202. One such rule dictates that when
an order to show cause is issued, the Enforcement staff who
were involved in the investigation are designated as
"non-decisional" and are not permitted to further
advise FERC commissioners on the matter. 2008 Revised
Policy ¶ 37, 123 FERC at 62, 014; see 18
C.F.R. §§ 385.2201, 385.2202.
alleged violator may file an answer to the order to show
cause, which may include arguments on why it did not violate
the NGA and why the proposed penalty should not be assessed