On December 11, 2017, BP America Inc., BP Corporation North America Inc., BP America Production Company, and BP Energy Company (collectively, “BP”) requested FERC to dismiss its July 11, 2016 order (“July 11 Order”) assessing civil penalties against BP and requiring BP to disgorge profits for violating FERC’s anti-market manipulation rule. In doing so, BP argued that, due to recent federal court cases, the law had changed regarding the statute of limitations for actions imposing civil penalties and disgorgement. Therefore, according to BP, FERC’s August 5, 2013 order to show cause issued to BP failed to commence a “proceeding” within the meaning of the statute of limitations for enforcing civil fines and penalties, and thus FERC’s assessment of civil penalties and disgorgement was time-barred. Rather, BP argued that the statute of limitations began to run on November 25, 2008 at the latest, and thus FERC was required to commence a “proceeding” by November 25, 2013, but FERC did not commence a “proceeding” until May 15, 2014 at the earliest when it set the matter for hearing.
On August 5, 2013, FERC issued an order to show cause proposing to penalize BP for allegedly trading physical natural gas at the Houston Ship Channel uneconomically to benefit BP’s related financial positions from September 18, 2008 through November 25, 2008 (see July 18, 2016 edition of the WER). Ultimately, in the July 11 Order, FERC determined that BP’s trading activity violated FERC’s anti-market manipulation rule, and thus assessed BP a civil penalty of $20,160,000 and required BP to disgorge $207,169 of profits. BP subsequently petitioned the U.S. Court of Appeals for the Fifth Circuit for review of FERC’s decision.
In its December 11 request, BP asked FERC to either dismiss or grant reconsideration of its July 11 Order due to recent federal court cases. Specifically, BP argued that two federal court opinions issued in 2017—FERC v. Barclays Bank (“Barclays”) and Kokesh v. SEC (“Kokesh”)—resulted in a change in law. BP argued that, in Barclays, the U.S. District Court for the Eastern District of California held that FERC’s order to show cause and order assessing civil penalty in that case did not constitute a “proceeding” within the meaning of the statute of limitations, because a “proceeding” requires an adversarial adjudication whereas the administrative enforcement process at FERC was more of a “decision to prosecute” (see November 14, 2017 edition of the WER). Moreover, BP argued that, in Kokesh, the U.S. Supreme Court held that disgorgement imposed as a sanction for violating securities laws is a “penalty” because disgorgement is imposed as a consequence of violating a law and is intended to deter, rather than compensate. Thus, BP stated that the U.S. Supreme Court in Kokesh held that the five-year statute of limitations applies to disgorgement.
As a result of these recent court decisions, BP argued that FERC should dismiss or grant reconsideration of its July 11 Order. In particular, BP argued that FERC’s order to show cause issued to BP did not include the hallmarks of an adversarial adjudication. For example, BP argued that BP could not conduct depositions or other discovery in response to an order to show cause. BP further argued that, assuming arguendo that the statute of limitations began to run on November 25, 2008, FERC was required to commence a “proceeding” no later than November 25, 2013. BP contended, however, that FERC’s order to show cause issued on August 5, 2013 did not commence a “proceeding” for purposes of the statute of limitations. BP continued that, even if FERC’s order setting the matter for hearing commenced a “proceeding,” that order was not issued until May 15, 2014, outside of the five-year statute of limitations. BP thus concluded that FERC’s assessment of civil penalties and disgorgement against BP was time-barred.
A copy of BP’s request can be found in Docket No. IN13-15, and is available here.