Energy and Commodities Outlook 2023

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Read time: 8 minutes

The energy industry experienced tremendous growth last year, but present and future challenges abound, including energy transition, reliability concerns, inflation and a potential recession. U.S. regulators have been actively overseeing these issues and have taken significant steps in the past year. Executive orders, legislative action and rulemaking from the Biden administration along with a greater emphasis on the effects of climate change, reporting obligations and enforcement actions have been key factors steering the activities of U.S. energy and commodity regulatory bodies.

This article analyzes the recent trends, updates and changes from the Commodity Futures Trading Commission (CFTC) and the Federal Energy Regulatory Commission (FERC). It also examines Securities and Exchange Commission (SEC) developments in relation to the ESG objectives and disclosure obligations of various companies.

CFTC leadership update

In the last year, the CFTC has had almost total leadership turnover at the commissioner level. Four of its five current commissioners were sworn in in 2022. Chairman Rostin Behnam was sworn in as chairman in January 2022 after serving at the agency since 2017. Other CFTC commissioners include Kristin Johnson, Christy Goldsmith Romero, Summer Mersinger and Caroline Pham. Also of note, Ian McGinley, a former federal prosecutor from the Southern District of New York, became director of the CFTC’s Enforcement Division.

Notable enforcement actions

In 2022, the CFTC imposed a total of more than $2.5 billion in civil monetary penalties, disgorgement and restitution. Almost half of this sum came from CFTC v. Glencore International AG et al, No. 22-16, in which the CFTC found violations of the Foreign Corrupt Practices Act in connection with widespread manipulation of certain benchmarks in the oil industry.

The CFTC is also bringing more enforcement actions in terms of violations of traditional and technical regulatory requirements under the Dodd-Frank Act. This has largely focused on reporting violations concerning swap dealer reporting. In CFTC v. JPMorgan Chase Bank, N.A., No. 22-20, JPMorgan was required to pay $850,000 for failing to report 2.1 million short-dated FX swap transactions. Most of these actions are related to technical violations. Thus, it does behoove market participants responsible for reporting swap data to review and audit their swap data against the CFTC’s reporting standards. Of note, compliance with the specifications set forth by a swap data repository is not enough to ensure compliance, as the CFTC has made clear in certain enforcement actions.

In September 2022, the CFTC and the SEC brought a series of enforcement actions against a number of financial institutions concerning the use of unapproved messaging services such as WhatsApp and Signal. These violations led to a total payout of (a) $710 million in CFTC fines for violating recordkeeping requirements and failure to supervise; and (b) SEC fines in excess of $1.1 billion for generally the same conduct. Thereafter, also in September 2022, the U.S. Justice Department issued guidelines asking prosecutors to consider whether corporations have implemented effective policies to ensure the preservation of business-related electronic data and communications.

Key takeaways
  • In 2022, the CFTC imposed over $2.5 billion in restitution, disgorgement and civil money penalties
  • The CFTC brought more actions for Dodd-Frank Act violations, primarily for reporting and recordkeeping issues
  • SEC proposes rules to eliminate greenwashing and deceptive ESG advertising
  • There are signs of life for natural gas projects, with FERC certifying more production facilities and pipelines
  • FERC continues its push for environmental justice and equity