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More FERC Investigation Risks

New transparency practice turns confidentiality on its head.

Fortnightly Magazine - March 2011

Before either of those kinds of orders that ended confidentiality, FERC had reviewed staff’s earlier prosecutorial findings and opinions and independently decided to proceed. That confidentiality, with accompanying protection for the subject, no longer exists. Public disclosure of staff’s beliefs about a subject’s alleged wrongful conduct, accelerated to the stage of staff’s preliminary findings letter and subject’s response, now increases risks for the subject perhaps well before FERC’s own, independent review of staff recommendations and any FERC finding of wrongdoing.

Preliminary Notice

In a non-public, Part 1b investigation, after concluding that a violation of a FERC requirement has occurred in its view, OE staff can ask FERC for authority to discuss settlement and attempt to obtain remedies, sanctions, or penalties for the alleged violation. The OE director then also can direct the FERC secretary to issue a Staff’s Preliminary Notice of Violations (Notice) to the public in the matter. Sufficient to inform the public of the basic facts surrounding the investigation, the Notice identifies the subject under investigation, the time and place of the alleged conduct, and the rules, regulations, statutes, or orders allegedly violated, concisely describing the alleged wrongful conduct. While FERC anticipates that a Notice will issue in every such investigation, the agency retains discretion to review, stay, bar, or countermand any Notice. It bears emphasis that the Notice consists only of staff’s, not FERC’s, belief that a subject might have violated the NGA, NGPA, FPA, or other FERC-jurisdictional requirements.

A Notice can issue after staff, continuing to act in confidence, has completed fact analysis and informed the subject of preliminary findings and conclusions, including that one or more violations might have occurred. The subject has the chance to respond in writing to staff’s preliminary findings letter. Staff will review the response. The OE director notifies FERC, and OE staff notifies the subject, in advance of a Notice to be issued. The Notice provides enough information to enable third parties to inform staff of any additional, relevant information. No right is conferred on third parties to intervene in the investigation. No other right is given for the investigation, except rights coincidental to using the Notice mechanism as a vehicle for any third party communications to staff. Should staff terminate an investigation after the Notice has issued, FERC authorizes public notice of the termination.

Transparency Justifications

FERC considers insufficiently transparent the traditional lack of public notification of its staff’s preliminary investigation findings, analyses, opinions, and beliefs until either a settlement order or an order to show cause. FERC wants the public to learn staff’s views earlier. FERC would disavow the Queen of Hearts’ “[s]entence first—verdict afterwards” instinct (Lewis Carroll, Alice’s Adventures in Wonderland , ch. 12) by stating that a Notice has no substantive legal effect, and doesn’t conclusively or otherwise affect a subject’s rights. 6 FERC also insists a Notice is entirely separate from and unrelated to any findings it may later make. That very separateness, however, increases risks of reputational and other harms to investigated subjects when Notices are based only on staff’s, not FERC’s, say so.

Turning traditional