BP America v. FERC ( 2022 )

Case: 16-60604 Document: 00516516011 Page: 1 Date Filed: 10/20/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
October 20, 2022
No. 16-60604 Lyle W. Cayce
consolidated with Clerk
No. 21-60083
BP America, Incorporated; BP Corporation North
America, Incorporated; BP America Production
Company; BP Energy Company,
Petitioners,
versus
Federal Energy Regulatory Commission,
Respondent.
Petitions for Review of Orders of the
Federal Energy Regulatory Commission
Agency Nos. IN13-15-000, IN13-15-001, IN13-15-002
Before Jolly, Willett, and Oldham, Circuit Judges.
E. Grady Jolly, Circuit Judge:
Hurricane Ike made landfall over southeastern Texas on
September 13, 2008. Although more than a decade has elapsed since the
hurricane’s passage, there yet remains some legal rubble for this court to
clear.
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The Federal Energy Regulatory Commission (FERC) has brought this
enforcement action against BP, alleging the company capitalized on the
hurricane-induced chaos in commodities markets by devising a scheme to
manipulate the market for natural gas.1 Now, years later, BP seeks judicial
review of FERC’s order finding that BP engaged in market manipulation and
imposing a $20 million civil penalty.
BP makes a bevy of arguments as to why FERC’s order should be
overturned, but all are meritless save one. Contrary to FERC’s position, we
hold that the Commission has jurisdiction only over transactions in interstate
natural gas directly regulated by the Natural Gas Act (NGA). Specifically, we
reject FERC’s broader theory that its authority to address market
manipulation extends to any natural gas transaction which affects the price
of a transaction under the NGA. Otherwise, however, we uphold the
Commission’s order. Nevertheless, because FERC predicated its penalty
assessment on its erroneous position that it had jurisdiction over all (and not
just some) of BP’s transactions, we must remand for reassessment of the
penalty in the light of our jurisdictional holding. Thus, we GRANT in part
and DENY in part BP’s petition for review and REMAND to the agency
for reassessment of the penalty.
I
A
To understand BP’s scheme, some background on the natural gas
industry is necessary. In addition to producing and selling their own oil and
gas, participants in the natural gas market are permitted to engage in a variety
of trades. In general, traders may make either “physical” or “financial”
1
In reality, FERC brought its enforcement action against various BP-related
entities, but we refer to these entities collectively as BP.
2
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transactions. Physical trading involves the purchase or sale of actual natural
gas, which must then be physically delivered from one party to another.
Financial trades, on the other hand, are more in the nature of bets on the
future price of gas; a financial transaction can be settled in cash without the
need for any natural gas to actually change hands.
Shortly before Hurricane Ike arrived, traders on BP’s Texas team had
amassed a significant financial position known as a “spread.” The value of
this spread position was determined by the difference in natural gas prices at
Henry Hub, a major natural gas market in Louisiana frequently used as a
national benchmark, and Houston Ship Channel (HSC), a gas hub in
Houston. When gas prices at Henry Hub were higher than those at HSC,
BP’s financial position became more valuable; the greater the difference, the
more money BP stood to make.
When the hurricane hit, natural gas prices at HSC plummeted,
causing BP to realize a sizeable profit. And amidst the tumult in the market,
BP spied an opportunity; the company would make millions more if the price
differential between HSC and Henry Hub persisted after the hurricane
became history. According to FERC, BP capitalized on this opportunity by
engaging in a glut of physical gas sales at HSC, intending to depress the prices
on which the value of its financial position depended. BP’s task was eased by
the fact that it did not need to cause a sudden spike or dip in prices—a change
which would have been easily detected by regulators—but only needed to
delay the market’s return to normal following the hurricane.
Central to BP’s plan was the Houston Pipeline (HPL). The HPL
connects HSC to Katy, another natural gas hub approximately thirty miles
away. BP had purchased the right to transport a certain amount of natural gas
on the HPL per day in order to satisfy its various business needs, but the
pipeline was generally underutilized. BP thus allowed its Texas trading desk
3
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to engage in arbitrage using the HPL; when there was a price difference
between Katy and HSC, traders could transport gas accordingly between the
two to make a profit while incurring only minor transportation costs.
According to FERC, however, BP traders effectively abandoned their
arbitrage strategy after the hurricane, instead using the HPL to transport
significant quantities of natural gas from Katy to HSC, thereby lowering
prices at the latter. Although BP incurred some losses in its physical trading
by buying at Katy and selling at HSC regardless of whether it was economical
to do so, these losses were dwarfed by the increase in value to BP’s financial
position. Access to transportation capacity on the HPL was therefore
essential to the BP traders’ scheme. 2
The Texas trading desk’s machinations went undetected until
November 5, 2008. On that day, Clayton Luskie, a junior member of the
Texas team, was attending a BP assessment program designed to determine
whether aspiring traders were qualified for advancement in the company.
While there, Luskie described the team’s trading strategy to a member of
BP’s senior management, who became concerned that what Luskie had
described “could be perceived as market manipulation.” Alarmed, Luskie
called Gradyn Comfort, a senior member of the Texas team and primary
trader in charge of transactions at Katy and HSC. Because Luskie called
Comfort at his trading desk, BP recorded the call, which is laid out in
pertinent part below:
LUSKIE: So I was telling [the senior BP executive] how we,
you know, what we are doing at Ship Channel this month. And
you know, he just started asking me about, you know, what,
2
Although BP theoretically could have depressed prices without the HPL by
simply buying large quantities of natural gas at HSC and then selling the same gas at lower
prices, such a strategy would have been both easier to detect and far more costly.
4
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kind of what we do and strategy and what not. And I was telling
him about our HPL transport. And the way I explained it was
not very good. And I came off sounding like we either transport
or don’t transport solely on the—kind of how we think it’s
going to affect the index and help our paper position. Which as
I was explaining, I realized that’s not right and that’s the exact
same thing that we’re sort of accusing [a rival company] of
currently. So how would you explain our dealings on HPL and
with our paper position that don’t make it sound like we’re—
COMFORT: [Interposing] Clayton, Clayton—
LUSKIE: —manipulating the index.
COMFORT: Clayton.
LUSKIE: Yeah.
COMFORT: I think . . .
[Fifteen second pause]
COMFORT: Most of the time we ship economically.
LUSKIE: Right.
COMFORT: And the—
LUSKIE: [Interposing] I mean, it’s just that we’re not—
COMFORT: [Interposing] Clayton, Clayton.
LUSKIE: Yeah.
[Ten second pause]
COMFORT: You know, the—there’s times we can’t unwind
all of our positions, but most of the time we tend to ship
economically.
LUSKIE: Right.
COMFORT: Okay?
LUSKIE: Is it just that we’re not—
COMFORT: [Interposing] Clayton.
5
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[Fifteen second pause]
COMFORT: And then . . . the aspects that go into cash I think
are multiple. And . . .
[Fifteen second pause]
COMFORT: Just give me a second here, okay?
LUSKIE: Yeah.
[Pause]
LUSKIE: Hey, I tell you what, I need to actually, I need to run.
COMFORT: Yeah.
LUSKIE: Can I call you back?
COMFORT: Yeah, that would be a good idea.
LUSKIE: Okay.
COMFORT: Okay, thanks.
Despite claiming that that he “need[ed] to run,” Luskie called Comfort back
on Comfort’s unrecorded cell phone less than one minute later. Comfort did
not answer but returned the call two minutes later. Comfort and Luskie then
had two unrecorded cell phone conversations lasting nine and ten minutes,
respectively. Neither party was able to recall with specificity what was
discussed during those phone conversations. In the last such conversation,
however, Luskie and Comfort decided to report the initial, recorded phone
conversation to BP’s internal compliance team, which led FERC to initiate
an investigation and which culminated in this enforcement proceeding. 3
3
FERC suggests that Luskie and Comfort reported the phone call because Luskie
had already let slip revealing statements to a staff member of the independent monitor
installed pursuant to a settlement with the Commodity Futures Trading Commission
(CFTC), meaning that the pair knew regulatory scrutiny was imminent. The record before
us, however, does not indicate what precisely Luskie revealed and does not unambiguously
establish why Luskie and Comfort decided to disclose the phone call.
6
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B
Following several years of discovery and administrative proceedings,
FERC issued its decision. See BP Am., Inc., 156 FERC 61,031 (2016). In its
decision, the Commission compared BP’s natural gas trades during the
Investigative Period—from September 18 to November 30, 2008—to its
trading during the prior portion of 2008. FERC found that, following
Hurricane Ike, BP changed its trading behavior at HSC by selling more
natural gas, selling earlier in the day, selling at lower prices, and transporting
more gas from Katy to HSC even when doing so was unprofitable. Viewing
these changes together with the phone calls already discussed, FERC
concluded that BP had engaged in market manipulation and ordered BP to
pay a civil penalty of approximately $20 million. BP petitioned this court for
review of FERC’s order but agreed to stay the case pending the
Commission’s decision on BP’s request for rehearing. In December 2020,
FERC issued its order on rehearing, which modified portions of FERC’s
jurisdictional holdings but otherwise upheld its previous decision and
penalty. See BP Am., Inc., 173 FERC 61,239 (2020). BP brought another
petition for review, which was consolidated with the previous case. These
petitions are now properly before us and are ripe for our review. 4
II
We review FERC’s order under the standards established by the
Administrative Procedure Act, 5 U.S.C. § 706. We are required to “hold
unlawful and set aside agency action” which is “in excess of statutory
jurisdiction” or “arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law.” Id.4
We have jurisdiction under 15 U.S.C. § 717r(b), which provides for direct review
of FERC’s orders in the circuit courts.
7
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The agency’s factual findings and conclusions will be upheld unless
they are unsupported by substantial evidence. Id.; see also 15 U.S.C. § 717r(b).
Substantial evidence is less than a preponderance of the evidence, but more
than a scintilla. Masterson v. Barnhart, 309 F.3d 267, 272 (5th Cir. 2002)
(quotation marks omitted) (citing Newton v. Apfel, 209 F.3d 448, 452 (5th Cir.
2000)). In reviewing for substantial evidence, we do not substitute our own
judgment for that of the agency. Id. Instead, we ask only whether the agency’s
actions were supported by “such relevant evidence as a reasonable mind
might accept as adequate to support [its] conclusion[s].” Consolo v. Fed. Mar.
Comm’n, 383 U.S. 607, 620 (1966) (quoting Consol. Edison Co. of N.Y. v.
NLRB, 305 U.S. 197, 229 (1938)).
III
BP raises a number of issues to challenge FERC’s order. First, BP
argues that FERC did not have jurisdiction over its conduct because (1)
FERC’s jurisdiction extends only to interstate activity and (2) none of the
transactions at issue were transactions in interstate gas regulated under the
Natural Gas Act. Second, BP asserts that it did not engage in market
manipulation and that FERC’s conclusion to the contrary was arbitrary,
capricious, and unsupported by substantial evidence. Third, BP contends
that, even if it did engage in market manipulation, various errors in FERC’s
penalty process improperly inflated the fine imposed. Fourth, BP claims that
FERC contravened the Administrative Procedure Act by intermingling its
investigatory and adjudicatory functions. Finally, BP argues that the
Commission’s enforcement action is barred by the statute of limitations. We
address these arguments seriatim.
A
We begin by addressing whether FERC had jurisdiction over the
allegedly manipulative transactions.
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1
The Natural Gas Act forms the cornerstone of FERC’s regulatory
power over the natural gas market. The foundational principle limiting that
power is found in section 1(b) of the Act, which provides that:
The provisions of [the NGA] shall apply to the transportation
of natural gas in interstate commerce, to the sale in interstate
commerce of natural gas for resale . . . and to natural-gas
companies engaged in such transportation or sale, and to the
importation or exportation of natural gas in foreign commerce
and to persons engaged in such importation or exportation, but
shall not apply to any other transportation or sale of natural gas
or to the local distribution of natural gas . . . or to the
production or gathering of natural gas.
15 U.S.C. § 717(b) (emphasis added). In enacting this provision, “Congress
carefully divided up regulatory power over the natural gas industry” and
declined to provide for wholesale federal regulation “to the limit of
constitutional power.” Nw. Cent. Pipeline Corp. v. State Corp. Comm’n, 489
U.S. 493, 510 (1989). Instead, the NGA grants FERC jurisdiction over
transactions in interstate natural gas but denies jurisdiction over production
and purely intrastate activity. 15 U.S.C. § 717(b).
This statutory scheme, as originally enacted, eventually resulted in a
fragmented natural gas market, with much gas sequestered away in disparate
intrastate markets and unable to cross state lines without being subjected to
NGA regulations. Associated Gas Distribs. v. FERC, 899 F.2d 1250, 1255
(D.C. Cir. 1990). Congress responded by passing the Natural Gas Policy Act
(NGPA). Id. The NGPA permitted interstate pipelines to transport gas “on
behalf of” intrastate pipelines without subjecting the intrastate pipeline or
other downstream recipients of the gas to the full ambit of NGA regulations,
thus helping to integrate the interstate and intrastate markets. 15 U.S.C.
§ 3371; Associated Gas, 899 F.2d at 1255–56.
9
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Finally, in response to widespread reports of price manipulation in
western energy markets, Congress passed the Energy Policy Act of 2005.
Oneok, Inc. v. Learjet, Inc., 575 U.S. 373, 381–82 (2015). Among other
provisions, the Act amended the NGA by adding section 4A, which contains
the anti-manipulation provision forming the basis of this case. Energy Policy
Act of 2005, Pub. L. No. 109–58, sec. 315, § 4A, 119 Stat. 594, 691 (codified
at 15 U.S.C. § 717c-1). Section 4A provides:
It shall be unlawful for any entity, directly or indirectly, to use
or employ, in connection with the purchase or sale of natural gas
or the purchase or sale of transportation services subject to the
jurisdiction of the Commission, any manipulative or deceptive
device or contrivance (as those terms are used in [the
Securities Exchange Act of 1934]) in contravention of such
rules and regulations as the Commission may prescribe as
necessary in the public interest or for the protection of natural
gas ratepayers.
15 U.S.C. § 717c-1 (emphasis added). With these statutes set out as the
backdrop, we turn to the Commission’s jurisdictional claims.
2
FERC does not contend that all of the transactions that were part of
BP’s manipulative scheme were interstate transactions directly subject to the
NGA. Instead, the Commission argues that the anti-manipulation provision
creates a new and independent source of jurisdiction for FERC to spread its
wings. Pointing out that the statute above forbids manipulation by “any
entity” “in connection with” a jurisdictional transaction, FERC argues that
it has jurisdiction over any natural gas transaction that is part of manipulative
scheme, so long as that scheme affects the price of an NGA-jurisdictional
transaction. 15 U.S.C. § 717c-1. In other words, FERC asserts that it has
jurisdiction over otherwise non-jurisdictional intrastate transactions if those
transactions manipulate the price of interstate gas bought and sold under the
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NGA. But as earlier set forth, the NGA clearly forbids FERC from exercising
jurisdiction over intrastate transactions.
i
We first observe that, in interpreting statutes, it is seldom appropriate
to seize on single words or phrases; instead, statutory interpretation requires
consideration of the statutory scheme as an integrated whole. Context
provided by surrounding language or statutory provisions can illuminate the
meaning of an otherwise cryptic passage. See FDA v. Brown & Williamson
Tobacco Corp., 529 U.S. 120, 132 (2000) (“[A] reviewing court should not
confine itself to examining a particular statutory provision in isolation.”).
Our first look is therefore to section 1(b) of the NGA, which establishes a
basic dichotomy: FERC is given power over “the transportation [or sale] of
natural gas in interstate commerce,” but the provisions of the NGA “shall
not apply to any other transportation or sale of natural gas,” including
intrastate transportation and sales. 15 U.S.C. § 717(b). The statute thus
clearly delineates between interstate natural gas transactions, which are
subject to the NGA, and intrastate transactions, which are not.
ii
Nevertheless, FERC argues that this long-established partition
between intrastate and interstate transactions was nullified for purposes of
the anti-manipulation rule. More specifically, FERC argues that BP’s
scheme—even if conducted using only intrastate trades—was, in the words
of the anti-manipulation provision, “in connection with” interstate, NGA
transactions because it affected the price of those transactions. 5 15 U.S.C.
5
To reiterate, the anti-manipulation provision makes it “unlawful for any entity,
directly or indirectly, to use or employ, in connection with the purchase or sale of natural
gas or the purchase or sale of transportation services subject to the jurisdiction of the
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§ 717c-1. We are not satisfied, however, that the single statutory phrase “in
connection with” can bear the weight FERC would place upon it;
considering the explicit division drawn by the statute between interstate and
intrastate transactions, it is plain to us that “in connection with” does not
mean any connection whatsoever, regardless of how indirect or tenuous. To
hold otherwise would be to hold that Congress intended for a subtle gloss of
these three words to entirely upend its carefully defined limitations on
FERC’s jurisdiction. In short, such a reading is not plausible. See Whitman v.
Am. Trucking Ass’ns, 531 U.S. 457, 468 (2001) (citing MCI Telecomms. Corp.
v. Am. Tele. & Tel. Co., 512 U.S. 218, 231 (1994); Brown & Williamson, 529
U.S. at 159–60 (“Congress[] . . . does not, one might say, hide elephants in
mouseholes.”)).
iii
Precedent confirms our understanding of the text. In Texas Pipeline
Ass’n v. FERC, 661 F.3d 258 (5th Cir. 2011), we considered a similar
jurisdictional issue. In that case, FERC asserted that an amendment to the
NGA had given it a new and separate “transparency authority” not
constrained by the jurisdictional limitations of section 1(b). Id. at 261–62. The
Commission pointed to new statutory language empowering it to gather
pricing information from “any market participant,” arguing that it could
therefore demand price data not only from interstate pipelines, but also from
wholly intrastate pipelines. Id. at 261 (quoting 15 U.S.C. § 717t-2(a)(3)(A)).
Our court rejected this position, reasoning that the statute could only be
interpreted as such “if [the statutory language relied on by FERC] floated
solitary and free in the U.S. Code.” Id. But we could not read the relevant
Commission, any manipulative or deceptive device or contrivance . . . in contravention of”
FERC’s regulations. 15 U.S.C. § 717c-1.
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provision in isolation, thereby ignoring the crucial context provided by
section 1(b) and its jurisdictional distinction between interstate and intrastate
activity. Id. at 261–62. Thus, our review of the NGA’s text and history
“confirm[ed] our conclusion that Congress did not intend to regulate ‘the
entire natural-gas field to the limit of constitutional power’ but chose instead
to leave regulation of certain entities, including intrastate transactions and
pipelines, to the states.” Id. at 263 (footnote omitted) (quoting Nw. Cent.
Pipeline, 489 U.S. at 510). The same reasoning directs us to the same
conclusion in this case.
Furthermore, we have previously noted that “where Congress has
decided to expand FERC’s jurisdiction, it has done so explicitly and
unambiguously.” Id. at 263–64. In both Texas Pipeline and this case, the new
rule that purportedly expanded FERC’s jurisdiction was added to the NGA
by the Energy Policy Act of 2005. Id.; § 4A, 119 Stat. at 691. In that same act,
however, Congress explicitly expanded FERC’s jurisdiction by modifying
section 1(b) to include importation and exportation. Tex. Pipeline, 661 F.3d at
263–64. In sum, we join the Texas Pipeline court’s conclusion that where
Congress seeks to modify the Commission’s jurisdiction, it does so directly
by amending the portion of the statute explicitly addressing jurisdiction
rather than by relying on a subtle reading of an otherwise non-jurisdictional
provision.
Finally, the Supreme Court has indicated that language similar to that
found in the anti-manipulation provision incorporates the NGA’s
jurisdictional provisions. In Oneok, Inc. v. Learjet, Inc., the Court examined a
provision authorizing FERC to adjust “any rate, charge, or classification . . .
collected by any natural-gas company in connection with any transportation
or sale of natural gas, subject to the jurisdiction of” the Commission. Oneok,
575 U.S. at 378 (emphasis removed) (quoting 15 U.S.C. § 717d(a)). The
Court determined that the phrase “subject to the jurisdiction of the
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Commission” referred to the jurisdictional distinction between interstate
and intrastate transactions. Id. at 378–79. The anti-manipulation statute
contains the same “subject to the jurisdiction of the Commission” phrase. 15
U.S.C. § 717c-1. Because similar statutory language is ordinarily interpreted
to have a similar meaning, Nijhawan v. Holder, 557 U.S. 29, 39 (2009) (citing
IBP, Inc. v. Alvarez, 546 U.S. 21, 34 (2005)), the Court’s decision in Oneok
supports the conclusion that the anti-manipulation rule does not depart from
the NGA’s general jurisdictional principles.
Thus, our textual analysis and relevant precedent compel the
conclusion that the Commission cannot exercise its jurisdiction merely
because a manipulative scheme may affect the prices of interstate natural gas
trades. 6
3
Although we reject its broader jurisdictional claim, FERC asserts as
an alternative basis for its jurisdiction that several of BP’s natural gas sales
made as part of its manipulative scheme were, in fact, transactions in
interstate gas directly regulated under the NGA. Although FERC does not
assert that any of BP’s transactions directly involved the purchase or
transportation of natural gas across state lines, the Commission convincingly
6
An agency’s interpretation of its governing statute, when ambiguous, implicates
the two-step Chevron framework. Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467
U.S. 837, 842 (1984) (describing the steps when reviewing an agency’s construction of a
statute it administers as (1) determining if Congress has spoken directly on the issue and
(2) if Congress has not spoken directly on the issue, determining the permissibility of the
agency’s construction). But there is no need to go through such steps when a statute
unambiguously forecloses an agency’s position. See Esquivel-Quintana v. Sessions, 137 S. Ct.
1562, 1572 (2017) (finding “no need” to determine whether an agency was entitled to
deference under Chevron when “the statute, read in context, unambiguously foreclose[d]
the [agency’s] interpretation”); see also Am. Hosp. Ass’n v. Becerra, 142 S. Ct. 1896 (2022).
That is to say, in such a case, we simply follow the statutory command.
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points to its long-held position—which BP does not challenge here—that
once gas is sold or transported in interstate commerce, it remains interstate
gas thereafter. See Westar Transmission Co., 43 FERC 61,050, 61,141 n.12
(1988). Stated differently, once gas is sold or transported in a transaction
subject to NGA regulations, all subsequent transactions, whether interstate
or intrastate, are controlled by the NGA. Id. FERC claims that eighteen of
BP’s allegedly manipulative sales used natural gas that had been transported
in interstate commerce under the NGA. 7 Specifically, the Commission
points out that, in these eighteen transactions, the gas sold by BP had
previously been transported under a contract which stated in its title that it
was made “UNDER SUBPART G OF PART 284 OF THE FERC’S
REGULATIONS.” 8 Subpart G of Part 284 implements section 7 of the
NGA, meaning that a contract under the referenced regulations is subject to
the NGA. See 18 C.F.R. § 284.221(a).
BP does not dispute that the natural gas it sold had been transported
under a contract with the above-quoted language. Instead, BP argues that,
despite the language on its face, the contract was actually under section 311
of the NGPA. As earlier discussed, the NGPA exempts from FERC’s NGA
jurisdiction interstate transportation performed “on behalf of” an intrastate
pipeline. 15 U.S.C. §§ 3431(a), 3371(a). Thus, if the contract was governed
by the NGPA, FERC does not have jurisdiction. If, on the other hand, the
7
The parties discuss only one particular transaction and treat it as representative
of the eighteen. We will therefore do the same.
8
We reject BP’s argument that it was an abuse of discretion for the administrative
law judge to allow evidence of most of these transactions to be introduced for the first time
on rebuttal. As FERC points out, the Commission’s witness gave evidence of some of the
transactions on direct examination and specifically stated that the ongoing discovery
process might reveal further transactions. Moreover, because testimony was given in
written form, BP had ample time and opportunity to cross-examine FERC’s witness even
after the rebuttal testimony.
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contract was made pursuant to the NGA, FERC does have jurisdiction. In
support of its claim that the NGPA controls, BP points to a spreadsheet
produced in discovery by one of the parties to the upstream contract; this
spreadsheet indicates that the pertinent contract is a section 311 contract
under the NGPA. BP also claims that the disputed contracts reference NGA
regulations simply because the pipeline which provided the contractual form
did not have a different template for NGPA transactions.
We review for substantial evidence FERC’s finding that the contracts
in the eighteen disputed transactions were governed by the NGA. 9 On this
record, we can but conclude that the Commission’s finding that the NGA
controlled was supported by substantial evidence. One after-the-fact,
undetailed spreadsheet containing little more than an unexplained assertion
that the contract was under the NGPA does not overcome the unambiguous
language on the face of the contract to the contrary. And while BP asserts that
the drafter of the contract simply did not have a template for NGPA
transactions, BP points to no evidence of this in the record before us other
than the company’s own assertions of the same before the Commission. Even
assuming the accuracy of BP’s representation, FERC reasonably concluded
that, had the parties intended an NGPA contract, they could have created a
new template or otherwise modified the contractual language. Substantial
9
Both BP and FERC evidently accept, without discussion, that the contractual
parties’ identification of the governing regulations—whether in the contract’s text or in a
spreadsheet—is relevant to whether the contract is governed by the NGA or NGPA.
Although counsel for BP contended at oral argument that if certain statutory conditions are
satisfied, the NGPA automatically exempts a transaction from the NGA, BP did not make
any such argument in its initial or even in its reply brief. Issues raised only at oral argument
are waived. Zuccarello v. Exxon Corp., 756 F.2d 402, 407–08 (5th Cir. 1985). We therefore
assume, for purposes of this case, that the spreadsheet and contractual language are
pertinent to whether the NGA or NGPA controls. We express no opinion, however, as to
whether in general a contractual party’s identification of the contract’s governing
regulations can ever be effective.
16
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evidence does not require even a preponderance of the evidence, but instead
demands that the agency produce “such relevant evidence as a reasonable
mind might accept as adequate.” Consolo, 383 U.S. at 620 (quoting Consol.
Edison, 305 U.S. at 229) (quotation marks omitted). FERC has carried its
burden here. It was reasonable to take the language in the contract at face
value. The Commission thus had substantial evidence to conclude that the
disputed natural gas was transported under an NGA contract, meaning that
FERC had jurisdiction over the eighteen later transactions in which BP sold
the same gas. We therefore uphold FERC’s assertion of jurisdiction over
those eighteen of BP’s sales. 10
B
We move on to consider FERC’s finding that BP engaged in market
manipulation. Although BP gives various reasons for us to find that FERC
acted arbitrarily and capriciously or without the support of substantial
evidence, we find that BP’s contentions ultimately amount to disagreements
with FERC’s permissible interpretations of the evidence and reasonable
resolution of conflicting expert testimony. We address BP’s principal
arguments in turn. 11
10
We reject, however, FERC’s argument that it has jurisdiction over thirty-six
additional specific transactions for which it could not show an upstream NGA contract.
FERC asserts that the eighteen transactions over which it does have jurisdiction render BP
a regulated “natural-gas company” under the NGA, see 15 U.S.C. § 717a(6), thereby
subjecting the remaining thirty-six transactions to regulation even if they would otherwise
be shielded by the NGPA. This position is plainly foreclosed by the NGPA’s text, which
provides that “[f]or purposes of the [NGA], the term ‘natural-gas company’ . . . shall not
include any person by reason of, or with respect to, any transportation of natural gas if [the
NGA and FERC’s jurisdiction thereunder] do not apply to such transportation by reason
of [the NGPA].” 15 U.S.C. § 3431(a)(2)(B); see also id. § 3431(a)(1)(C) (nearly identical
provision for sales).
11
We reject at the outset BP’s argument that FERC failed to adequately define or
provide notice of what constitutes market manipulation. BP is correct that agencies must
17
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First, BP claims that FERC’s selection of the Pre-Investigative Period
failed to account for seasonal changes in the natural gas market. 12 Yet
FERC’s witnesses testified that some trading behaviors, such as
transportation between Katy and HSC, depended not on seasonal factors but
solely on price differences between the two hubs. Moreover, FERC tried
using alternative comparator periods and found essentially the same results:
during the Investigative Period, BP sold more, sold earlier, and transported
more gas to HSC. We therefore cannot accept BP’s seasonality arguments.
Next, BP challenges FERC’s findings concerning its increased sales
at HSC. Though BP does not deny that, by volume, it sold more natural gas
at HSC during the Investigative Period, it argues that this fact is the blameless
generally give regulated parties “fair notice of the wrong to be avoided.” Elgin Nursing &
Rehab. Ctr. v. U.S. Dep’t of Health & Hum. Servs., 718 F.3d 488, 493 (5th Cir. 2013). But a
statute forbidding “any manipulative . . . device or contrivance” “in connection with the
purchase or sale of natural gas” provides more than adequate notice that the conduct of
which BP is accused—that is, engaging in repeated natural gas sales with the objective of
manipulating prices—is prohibited. 15 U.S.C. § 717c-1. Moreover, the anti-manipulation
provision and implementing regulations are modeled after section 10(b) of the Securities
Exchange Act and SEC Rule 10b-5, respectively. Compare 15 U.S.C. § 717c-1, and 18 C.F.R.
§ 1c.1, with 15 U.S.C. § 78j(b), and 17 C.F.R. § 240.10b-5. Courts have interpreted these
securities provisions broadly, mindful that fraud—like market manipulation—can take
many different forms that cannot all be specifically articulated in advance. See SEC v.
Zandford, 535 U.S. 813, 821 (2002) (quoting Superintendent of Ins. Of State of N.Y. v.
Bankers Life & Cas. Co., 404 U.S. 6, 12 (1971)) (stating that § 10(b) “must be read flexibly,
not technically and restrictively”). We therefore find that the arguably imprecise language
of the anti-manipulation rule, and the many different factors FERC identified as indicative
of a violation thereof, are not symptoms of a lack of notice or an inadequate decisional
standard, but the natural consequence of the many ways in which market manipulation can
manifest.
12
To reiterate, the Investigative Period represents the period during which BP
allegedly manipulated the market and spans from September 18 to November 30, 2008.
The Pre-Investigative Period, which stretches from January 2 to September 10, 2008,
serves as a comparator in FERC’s efforts to identify changes in BP’s trading activity
following Hurricane Ike.
18
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result of having more gas to sell under its monthly contracts. 13 As FERC
found, however, BP changed its behavior during the Investigative Period by
buying more gas at Katy under monthly contracts and reducing its obligations
to deliver at HSC under such contracts. This behavior left BP with more gas
on hand to sell at HSC under the daily contracts on which BP’s financial
position depended. BP is, we think, inculpated, rather than exonerated, by its
attempted explanation. We thus detect nothing arbitrary or capricious in
FERC’s treatment of BP’s increased sales.
BP further challenges FERC’s conclusion that BP traded earlier in the
day as part of its manipulative scheme. BP first states that there is no evidence
early trades have any manipulative effect and goes on to argue that, in any
event, its Investigative Period trades were no earlier than normal. The first
contention is directly contradicted by the record; FERC’s expert testified
that early trades send pricing signals to other market participants and may
affect other transactions throughout the day. As to the second contention,
while BP’s expert indicated that the company’s transactions were not
particularly early during the Investigative Period, FERC correctly points out
that this result was reached only by combining sales and purchases.
Disaggregating sales from purchases shows that BP was an early seller at HSC
and early buyer at Katy. Given that FERC’s core allegation of wrongdoing
was that BP bought gas at Katy to sell and deflate prices at HSC, we find it
reasonable for the Commission to have accepted its own expert’s testimony.
See La. Crawfish Producers Ass’n-W. v. Rowan, 463 F.3d 352, 356 (5th Cir.
13
The value of BP’s financial positions depended solely on the price of gas under
next-day, fixed price contracts—that is, one-time contracts for the delivery of natural gas
the next day. BP was thus free to buy or sell gas under monthly contracts without affecting
its paper position.
19
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2006) (“[A]n agency may rely on its own experts, so long as they are qualified
and express a reasonable opinion.”).
BP also objects to FERC’s transport analysis, which found that the
company transported gas from Katy to HSC even when it was uneconomic
to do so. More specifically, the analysis showed that there was a statistically
significant relationship between BP’s transport decisions and the price
differential at Katy and HSC during the Pre-Investigative Period; BP became
indifferent to this price spread, however, during the Investigative Period. BP
says that FERC improperly used the end-of-day average prices at HSC and
Katy, rather than intraday prices, pointing out that its traders could not make
transport decisions during the trading day based on the end-of-day average
price. But we think that FERC’s choice of metric was reasonable, both
because end-of-day prices tend to track intraday prices and because the
Commission was comparing prices to the total flow of natural gas—a figure
which itself represents the sum of transportation decisions throughout the
trading day.
Finally, we cannot accept BP’s argument that the Commission failed
to establish intent to manipulate the market. FERC showed that BP changed
its behavior by transporting more natural gas to HSC, selling more, and
selling at a time calculated to maximally influence market prices. There is
nothing arbitrary and capricious in FERC’s technical analysis or reasoning.
Furthermore, the suspicious nature of BP’s trading patterns is accentuated
by the interactions between Gradyn Comfort and Clayton Luskie. During a
recorded phone conversation, Comfort repeatedly interrupted Luskie’s line
of inquiry, which cast doubt on the team’s trading strategy, and took several
extended pauses as he ineffectively cast about for a convincing answer.
Luskie then terminated the call by saying that he “need[ed] to run” but called
Comfort back on an unrecorded line almost immediately thereafter, and
neither party could remember what was discussed in the subsequent phone
20
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conversations with specificity. It is certainly reasonable to conclude that
Comfort had an awareness that his scheme was illicit and sought to prevent
incriminating information from being revealed on a recorded call, and Luskie
eventually realized this and endeavored to circumvent the recording. Given
the incriminating call and the suspect details of BP’s actual trading, FERC’s
finding of market manipulation is supported by substantial evidence. We
therefore affirm FERC’s finding that BP violated the anti-manipulation
rule. 14
C
We now turn to the Commission’s penalty assessment. The parties
dispute whether FERC’s penalty was arbitrary and capricious. But many of
the issues pertinent to determining an appropriate penalty, such as the proper
calculation of profits and market harm, are ill-suited to our resolution given
our holding that FERC has jurisdiction only over some of BP’s transactions.
The appropriate course is therefore to remand to the Commission for
reassessment of the penalty in the light of our jurisdictional holding. We will,
however, address the penalty issues that are unaffected by our decision as to
jurisdiction. 15
14
BP makes various other arguments which support or complement the specific
contentions laid out above. After thoroughly reviewing the briefs and the record, however,
we determine that BP’s remaining arguments as to whether it manipulated the market are
meritless.
15
At the outset, BP asserts that it was arbitrary and capricious for FERC to find any
anti-manipulation rule violations at all, arguing that the Commission improperly relied on
net selling to establish violations and ignored BP’s defense that its trading was often
profitable. We reject BP’s arguments because FERC relied on more than BP’s status as a
net seller and because profitable trading may nevertheless be manipulative.
21
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1
We cannot agree with BP that FERC improperly treated as binding, or
retroactively applied, its advisory sentencing guidelines. 16 FERC explicitly
acknowledged, when applying the guidelines, that they were advisory only;
contrary to BP’s assertions, that the agency acted consistent with its non-
binding guidance does not prove that it misconstrued that guidance as
carrying the force of law. Nor was it arbitrary or capricious for FERC, in its
guideline calculations, to account for several settlements BP entered into
before the guidelines were promulgated. By statute, FERC is required when
imposing a penalty to “take into consideration the nature and seriousness of
the violation and the efforts to remedy the violation.” 15 U.S.C. § 717t-1(c).
Thus, whether it punished BP under the guidelines or otherwise, the
Commission was entitled to account for BP’s past settlements because a
history of wrongdoing worsens the “nature” and increases the
“seriousness” of an offense. Id.
2
Nor did the Commission err by taking into account BP’s violation of a
settlement agreement with the Commodity Futures Trading Commission.
BP argues, and FERC concedes, that only the CFTC can find a violation of
the Commodity Exchange Act (CEA). But the settlement BP entered into
with the CFTC prohibited BP from “directly or indirectly engaging in any
conduct that violates [the CEA] including [m]anipulating or attempting to
manipulate the price of any commodity in interstate commerce.” It is thus
BP’s settlement agreement itself, and not FERC, that characterizes market
16
The sentencing guidelines are a set of rules, issued by FERC in a non-binding
policy statement, guiding the Commission’s discretion in imposing a civil penalty. See
Revised Policy Statement on Penalty Guidelines, 132 FERC 61,216 (2010).
22
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manipulation as a violation of the CEA; FERC did not act unreasonably in
considering the fact that BP had transgressed the settlement’s
straightforward proscription of manipulating prices.
3
Finally, FERC did not err in denying BP credit for its compliance
program under the sentencing guidelines. Although BP did have a well-
funded compliance program, which FERC initially found to be diligent and
helpful, the Commission changed its view on learning of what it saw as
several deficiencies in BP’s program. Most notably, FERC found that BP’s
compliance systems failed to track traders’ profit and loss or trading by
location; that a manager in compliance told a senior BP official, before
investigating, that he did not think the Texas team had done anything wrong;
and that BP prematurely ended its internal investigation. Although, given
BP’s non-negligible compliance efforts, the agency could have come to
another conclusion, we cannot say that it was arbitrary or capricious for
FERC to deny BP credit for its compliance program under these
circumstances.
D
BP’s next major argument asserts that the Commission violated the
APA’s separation of functions rule by intermixing its investigatory and
adjudicatory roles. 17 Specifically, BP contends that certain orders issued by
17
FERC argues that the separation of functions issue is waived because it was not
included in BP’s brief on exceptions. But the regulatory provision on which FERC relies
states that if a participant “does not object to a part of an initial decision in a brief on
exceptions, any objections . . . to that part of the initial decision are waived.” 18 C.F.R.
§ 385.711(d)(2) (emphasis added). The administrative law judge’s initial decision did not
address separation of functions arguments, so the cited regulation is inapplicable under its
plain terms. To be sure, BP repeatedly raised and diligently pursued the issue as early as
23
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FERC support a finding that the agency violated the separation of functions
rule. In considering this claim, we first examine what is required by the
statute’s text. The APA promotes neutrality in agency adjudication by
commanding that:
An employee or agent engaged in the performance of
investigative or prosecuting functions for an agency in a case
may not, in that or a factually related case, participate or advise
in the decision, recommended decision, or agency review
pursuant to section 557 of this title, except as witness or
counsel in public proceedings.
5 U.S.C. § 554(d). We note that the statute, by its terms, prohibits only
individuals who actually “engaged in the performance” of investigative
functions “in a case” from participating in the adjudication “in that or a
factually related case.” Id. (emphasis added). In other words, the APA forbids
individuals from taking part in both investigation and adjudication on the
same case, but it does not require agency staff who investigated one case to
abstain from adjudication in other, factually unrelated cases.
In arguing that FERC violated the principles set out above, BP points
to several Commission orders. These orders implemented the separation of
functions rule by forbidding members of FERC’s Office of Enforcement from
adjudicating BP’s case. As BP notes, however, the orders exempted a handful
of named individuals, thus allowing certain members of the Commission’s
investigatory staff to take part in adjudication.
As we have discussed, the APA does not prohibit all overlap between
investigatory and adjudicatory roles in general; it only prohibits individuals
from performing both functions in the same case. Although the individuals
2014—before the initial decision was even issued. Under these circumstances, the issue is
therefore not waived.
24
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named in FERC’s orders were members of the Commission’s investigatory
office, BP offers no reason to believe that they did, in fact, work as
investigators on BP’s case. Instead, BP can offer only speculation to this
effect. But courts considering separation of function challenges have
generally required particularized allegations as to who committed a violation
or how it occurred. Air Prods. & Chems., Inc. v. FERC, 650 F.2d 687, 710 (5th
Cir. 1981) (discussing allegation adjudicator improperly considered ex parte
information offered by agency investigators in a particular memorandum and
at a particular meeting); Gibson v. FTC, 682 F.2d 554, 560 (5th Cir. 1982)
(considering claim that administrative law judge was tainted by previous
work as a staff attorney to an agency head); Grolier, Inc. v. FTC, 615 F.2d
1215, 1221 (9th Cir. 1980) (same as Gibson and collecting cases). The
conjecture offered by BP here does not suffice. 18
But BP complains that it was prevented from obtaining evidence
pertinent to its separation of functions argument by FERC’s denial of its
request for privilege logs, which it contends would have allowed it to evaluate
FERC’s compliance with the separation of functions rule. BP, however, has
failed to show that it was entitled to such privilege logs. There is no indication
that BP took any of the more modest investigatory steps that would have been
appropriate before seeking voluminous discovery from FERC. See, e.g.,
Grolier, 615 F.2d at 1222 (indicating that sworn statements from relevant
agency figures may resolve a separation of functions issue and that such
18
BP’s assertion that members of the Commission’s investigatory staff are tainted
simply by being employees of FERC’s Office of Enforcement and subject to its leaders’
supervision is likewise unavailing. Absent evidence of improper influence, BP’s claim is
speculative. BP’s argument is also in tension with the APA because it would effectively
expand the prohibition on adjudication to FERC’s entire investigatory staff. The statute’s
text, however, applies this prohibition only to individuals who investigated the particular
case at issue or a factually related case. See 5 U.S.C. § 554(d).
25
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statements, if uncontradicted, may be a basis to deny further discovery). This
court has previously denied expansive requests to sift through an agency’s
records in search of an APA violation, particularly where there was “nothing
in the material brought to this court’s attention to suggest” impropriety on
the part of the agency. Air Prods., 650 F.2d at 710 n.37. BP’s concerns, based
on speculation and devoid of any concrete facts plausibly suggesting that
FERC intermixed its investigatory and adjudicatory functions, do not suffice
“to overcome the ‘presumption of honesty and integrity in those serving as
adjudicators.’” Id. (quoting Withrow v. Larkin, 421 U.S. 35, 47 (1975)). Thus,
we reject BP’s argument that FERC violated the separation of functions
rule. 19
E
BP’s final argument is that FERC’s entire enforcement action must
be dismissed because it is barred by the statute of limitations. FERC counters
that this court does not have jurisdiction to consider the issue because BP
failed timely to raise it before the agency. Although we must, of course,
decide the jurisdictional question first, we briefly lay out the parties’
19
BP also contends that FERC’s regulation purportedly implementing the APA’s
separation of functions rule actually impermissibly allows agency investigators to
adjudicate in the same case they investigated. See 18 C.F.R. § 385.2202 (implementing
regulation). BP argues that the regulation allows FERC staff to fully participate in the
investigation of a case, stop just before an order to show cause is issued, and then participate
in the case’s adjudication. Although we agree that the contested regulation is not the
standard for pellucidity, we think that the better understanding of the regulation is that all
staff who have participated or who are participating in the Commission’s investigation are
prohibited from taking part in a subsequent adjudication. Such a reading accords with how
the regulation has been interpreted both by the Commission, BP Am., Inc., 173 FERC
61,239, 62,540, and, more importantly, by this court, Total Gas & Power N. Am., Inc. v.
FERC, 859 F.3d 325, 329 (5th Cir. 2017) (describing § 385.2202 as forbidding staff who
“were involved” in the investigation from participating in adjudication).
26
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positions on the merits of the statute of limitations question because doing so
is helpful to our discussion of jurisdiction.
1
On the merits, both parties agree that the limitations period applicable
in this case is provided by 28 U.S.C. § 2462. That statute states that:
an action, suit or proceeding for the enforcement of any civil
fine, penalty, or forfeiture . . . shall not be entertained unless
commenced within five years from the date when the claim first
accrued.
Id. The parties further agree that this five-year limitations clock began ticking
in September of 2008, when BP’s alleged manipulative conduct began.
The parties disagree, however, as to whether, in the race to the
deadline, FERC broke the ribbon in time. FERC contends that its
enforcement proceeding began in August of 2013—just within the five-year
limitations period—when it issued its order to show cause. BP, on the other
hand, argues that FERC’s action was untimely because the Commission’s
order to show cause cannot initiate a “proceeding” within the meaning of the
statute of limitations. Id. BP argues that a proceeding requires an adversarial
adjudication, meaning that there must be motions, hearings, depositions, the
taking of evidence, and the like. See FERC v. Barclays Bank PLC, No. 2:13-
cv-2093, 2017 U.S. Dist. LEXIS 161414, at *28 (E.D. Cal. Sept. 29, 2017)
(quoting 3M Co. (Minn Mining & Mfg.) v. Browner, 17 F.3d 1453, 1456 (D.C.
Cir. 1994)). According to BP, because an order to show cause, in and of itself,
is not accompanied by such hearings or motions, said order does not begin a
proceeding. Thus, says BP, it was instead some unidentified, later point in
FERC’s administrative process that officially initiated the “proceeding”
27
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within the meaning of 28 U.S.C. § 2462. 20 Because FERC’s order to show
cause was the only part of its administrative process that came within five
years of the action accruing in September of 2008, BP concludes that FERC’s
action was untimely and must be dismissed under the statute of limitations.
2
Having set the scene by laying out the parties’ substantive positions,
we now proceed to decide whether we have jurisdiction to consider the
statute of limitations. Our jurisdiction is controlled by 15 U.S.C. § 717r(b),
which provides that “[n]o objection to the order of the Commission shall be
considered by the court unless such objection shall have been urged before
the Commission in the application for rehearing unless there is reasonable
ground for failure so to do.” See also NICOR Expl. Co. v. FERC, 50 F.3d 1341,
1346–47 (5th Cir. 1995) (stating that requirement to include issue in
application for rehearing is jurisdictional). Under the plain terms of this
statute, then, we have jurisdiction to consider the statute of limitations only
if BP raised it in its application for rehearing or if BP had reasonable ground
for its failure thusly to raise the matter.
It is undisputed that BP did not address the statute of limitations in its
application for rehearing in 2016. Instead, BP first raised the issue more than
a year later in a 2017 motion to reopen. Thus, BP must show that it had
“reasonable ground” for its failure timely to assert the matter at rehearing.
15 U.S.C. § 717r(b).
BP argues that it did have reasonable ground for its delay, pointing to
two cases, Kokesh v. SEC, 137 S. Ct. 1635 (2017), and FERC v. Barclays Bank
PLC, 2017 U.S. Dist. LEXIS 161414. According to BP, these cases, which
20
BP does not specifically state what order or hearing within FERC’s enforcement
process it believes does start a proceeding for the purposes of the statute of limitations.
28
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were issued after the application for rehearing had been filed, changed the
law to support BP’s substantive position—which we have already laid out
above—on the statute of limitations. Because these allegedly crucial cases
issued only after the application for rehearing had been filed, BP contends
that it had reasonable ground for failing to raise the issue at rehearing.
But even assuming, for the sake of argument, that subsequently issued
decisions can provide reasonable ground for failing to raise an issue at
rehearing, BP’s cases simply did not change the law in the manner suggested
by BP. To reiterate, the core dispute between the parties on the merits—and
the issue that BP claims these two cases decided in its favor—is whether the
order to show cause constitutes the beginning of a “proceeding” within the
meaning of the statute of limitations. See 28 U.S.C. § 2462. We emphasize
that we are not actually considering or deciding this merits question, but are
instead asking only whether BP’s cited cases support its position. If BP’s
cases do not support its position that the statute of limitations blocks FERC’s
enforcement action, then they certainly cannot provide reasonable ground for
making that argument in an untimely fashion.
We thus turn to address the two cited cases. Kokesh, for its part, did
not even consider the issues involved in this case, such as the meaning of
“proceeding” or the effect of an order to show cause. Instead, the Supreme
Court in Kokesh held only that the limitations period in 28 U.S.C. § 2462applies to disgorgement actions. 137 S. Ct. at 1639; see id. at 1642 n.3 (“The
sole question presented in this case is whether disgorgement . . . is subject to
§ 2462’s limitations period.”). To be sure, the phrase “order to show cause”
does not even appear in the decision. 137 S. Ct. 1635. Stated differently,
Kokesh had nothing to do with the actual statute of limitations questions
disputed by FERC and BP. BP’s invocation of Kokesh appears, quite frankly,
to be an effort to cloak BP’s more relevant case—a lone unpublished decision
from an out-of-circuit district court—with the suggestion of Supreme Court
29
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authority. But whether acting in concert with another case or standing alone,
Kokesh does not support BP’s position on the merits. It thus does not supply
reasonable ground for BP’s failure to raise the statute of limitations earlier. 21
We now turn to the unpublished California district court case that
supposedly turned the law in new and unexpected directions. In Barclays, the
district court found that a “proceeding” involves certain hallmarks of judicial
procedure—in a proceeding, “motions and affidavits are filed, depositions
are taken, other discovery pursued, a hearing is held,” and so forth. Barclays,
2017 U.S. Dist. LEXIS 161414, at *28, *33 (quoting 3M, F.3d at 1456).
Barclays is at least within the right zip code, in that it considers the meaning
of a “proceeding” under 28 U.S.C. § 2462. But, one unpublished decision
from an out-of-circuit district court cannot change the law in a manner
sufficient to excuse BP’s untimeliness.
Moreover, though Kokesh and Barclays may well have provided BP
with untimely inspiration—or perhaps a reminder of a missed opportunity—
neither decision was necessary for BP to make its case. BP’s core argument
is one of statutory interpretation concerning the meaning of a “proceeding”
for the purposes of 28 U.S.C. § 2462. But no favorable judicial decision is a
sine qua non to advocate a possible interpretation of a helpful statute. And the
significant passage of time throughout the life of the case—about five years
of investigation and another three of administrative procedure before the
application for rehearing—should have alerted BP to the need to look into
21
We also note that, whatever the case may be as to disgorgement, it has long been
established that civil fines are subject to section 2462’s limitations period. Kokesh, 137
S. Ct. at 1640–41 (citing Gabelli v. SEC, 568 U.S. 442, 454 (2013)). Thus, Kokesh is also of
no help to BP because, assuming arguendo that BP did not know it needed to raise the statute
of limitations as to disgorgement, BP still had cause to know that it should raise the matter
in response to the more than $20 million in civil fines imposed by FERC.
30
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whether it might have a statute of limitations claim. Given these
circumstances, BP’s delay in raising the issue was not reasonable.
In sum, an examination of BP’s proffered cases reveals that neither
constitutes an intervening change in law which could excuse BP’s
untimeliness. And, in any event, BP could have reasonably made the same
arguments even in the absence of the cited cases. We thus conclude that BP
did not have “reasonable ground” for its delay in raising the statute of
limitations. 15 U.S.C. § 717r(b). Accordingly, we have no jurisdiction over
the issue, and we will not consider it. 22
IV
In this appeal, we have rejected FERC’s expansive assertion that it
has jurisdiction over any manipulative trade affecting the price of an NGA
transaction. We have, however, reaffirmed the Commission’s authority over
transactions directly involving natural gas in interstate commerce under the
NGA. We have further determined that there was substantial evidence to
support FERC’s finding that BP manipulated the market for natural gas. We
have found that FERC’s reasoning in imposing a penalty was not arbitrary
and capricious, though we have concluded that FERC’s reliance on an
erroneous understanding of its own jurisdiction necessitates a remand for
recalculation of the penalty. 23 Finally, we have held that neither separation of
22
BP also contends that we can consider the statute of limitations issue because it
would be a manifest injustice to do otherwise. See Tenneco Expl., Ltd. v. FERC, 649 F.2d
376, 378 n.1 (5th Cir. 1981) (stating that court would consider issue because failing to do so
would be manifestly unjust). We do not see manifest injustice, however, in declining to
consider an issue that BP neglected for more than four years—from the inception of the
case in 2013 until BP’s motion to reopen in 2017.
23
We express no opinion as to the proper disposition on remand of any issues not
addressed by this decision.
31
Case: 16-60604 Document: 00516516011 Page: 32 Date Filed: 10/20/2022
No. 16-60604
c/w No. 21-60083
functions nor statute of limitations issues justify overturning the
Commission’s order.
Accordingly, BP’s petition for review is GRANTED in part and
DENIED in part, and the matter is REMANDED to the Federal Energy
Regulatory Commission for reassessment of its penalty in the light of our
jurisdictional holding.
Petition GRANTED in part; DENIED in part; REMANDED.
32