Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Natural gas companies seek Supreme Court rejection of state antitrust law claims on preemption grounds, (Sep 5, 2013)

Natural gas companies have asked the U.S. Supreme Court to review a decision of the U.S. Court of Appeals in San Francisco reviving state antitrust law claims brought by commercial and industrial end users of natural gas. The natural gas companies’ petition for certiorari was filed on August 26, 2013 (In Re: Western States Wholesale Natural Gas Antitrust Litigation: Oneok, Inc. v. Learjet, Inc., Dkt. 13-271).

In April, the Ninth Circuit ruled that Section 5(a) of the Natural Gas Act did not preempt the natural gas buyers’ claims under state antitrust laws for price manipulation associated with transactions falling outside of the jurisdiction of the Federal Energy Regulatory Commission (FERC) (715 F3d 716,2013-1 Trade Cases ¶78,338). Because the buyers alleged harm in retail transactions, and the NGA did not regulate retail sales, there could be no preemption, in the appellate court’s view. Summary judgment in favor of defendants on the buyers’ state antitrust claims was reversed.

The buyers had alleged that the natural gas companies had engaged in practices that inflated “index” rates for natural gas. They claimed that the natural gas companies manipulated the price of natural gas by reporting false information to price indices published by trade publications and by engaging in wash sales—prearranged sales in which traders agreed to execute a buy or a sell on an electronic trading platform and then to immediately reverse or offset the first trade by bilaterally executing over the telephone an equal and opposite buy or sell.

According to the petitioning natural gas companies, the Natural Gas Act gives the federal government exclusive power to regulate wholesale natural gas and the practices of natural gas companies affecting wholesale gas rates. “The Ninth Circuit in the decision below broke with this Court’s teachings—and created a recipe for regulatory chaos—by authorizing every state to impose its own unique regulatory regime on the wholesale gas market,” the petitioners contended.

The petitioners argued that the Ninth Circuit’s decision conflicted with decisions of the supreme courts of Nevada (Nevada v. Reliant Energy, Inc., 289 P.3d 1186, 2013-1 Trade Cases ¶78,206) and Tennessee (Leggett v. Duke Energy Corp., 308 S.W.3d 843, 2010-1 Trade Cases ¶77,000). In addition, it was suggested that the Ninth Circuit decision conflicted with U.S. Supreme Court precedent and that it would fragment regulation of the interstate natural gas market.

The petition asks specifically whether the NGA preempts state regulation directed at practices that affect the wholesale natural gas market.

Attorneys: Neal Kumar Katyal (Hogan Lovells US LLP for Oneok, Inc.

Companies: Learjet, Inc.; Oneok, Inc.

News: Antitrust