Federal Register / Vol. 73, No. 161 / Tuesday, August 19, 2008 / Proposed Rules 48317 

1 Section 811 is part of Subtitle B of Title VIII 

of EISA, which has been codified at 42 U.S.C. 

17301-17305. Hereinafter, citations to EISA sections 

shall be made to the United States Code. 

2 The comment must be accompanied by an 

explicit request for confidential treatment, 

including the factual and legal basis for the request, 

and must identify the specific portions of the 

comment to be withheld from the public record. 

The request will be granted or denied by the 

Commission’s General Counsel, consistent with 

applicable law and the public interest. See 

Commission Rule 4.9(c), 16 CFR 4.9(c). 

3 Pub. L. No. 110-140, codified at 42 U.S.C. 

17001-17386. 

4 42 U.S.C. 17301. 

5 42 U.S.C. 17302. 

6 Section 813 provides that Subtitle B ‘‘shall be 

enforced by the [FTC] in the same manner, by the 

same means, and with the same jurisdiction as 

Continued 

Issued in Kansas City, Missouri, on August 

12, 2008. 

G. Wes Ryan, 

Acting Manager, Small Airplane Directorate, 

Aircraft Certification Service. 

[FR Doc. E8–19168 Filed 8–18–08; 8:45 am] 

BILLING CODE 4910–13–P 

FEDERAL TRADE COMMISSION 

16 CFR Part 317 

[Project No. P082900] 

RIN 3084-AB12 

Prohibitions On Market Manipulation 

and False Information in Subtitle B of 

Title VIII of The Energy Independence 

and Security Act of 2007 

AGENCY: Federal Trade Commission. 

ACTION: Notice of proposed rulemaking; 

request for public comment. 

SUMMARY: Pursuant to Title VIII, Subtitle 

B of the Energy Independence and 

Security Act of 2007 (‘‘EISA’’), the 

Federal Trade Commission 

(‘‘Commission’’ or ‘‘FTC’’) is proposing 

a rule to implement Section 811 of 

Subtitle B prohibiting the use or 

employment of manipulative or 

deceptive devices or contrivances in 

wholesale petroleum markets.1 The 

Commission invites written comments 

on issues raised by the proposed Rule 

and seeks answers to the specific 

questions set forth in Section II.L of this 

Notice of Proposed Rulemaking 

(‘‘NPRM’’). 

DATES: Written comments must be 

received by September 18, 2008. 

ADDRESSES: Interested parties are 

invited to submit written comments 

electronically or in paper form. 

Comments should refer to ‘‘Market 

Manipulation Rulemaking, P082900’’ to 

facilitate the organization of comments. 

Comments containing material for 

which confidential treatment is 

requested must be filed in paper form, 

must be clearly labeled ‘‘Confidential,’’

and must comply with Commission 

Rule 4.9(c).2 Comments should not 

include any sensitive personal 

information, such as an individual’s 

Social Security Number; date of birth; 

driver’s license number or other state 

identification number or foreign country 

equivalent; passport number; financial 

account number; or credit or debit card 

number. Comments also should not 

include any sensitive health 

information, such as medical records 

and other individually identifiable 

health information. 

Because paper mail in the Washington 

area, and specifically to the FTC, is 

subject to delay due to heightened 

security screening, please consider 

submitting your comments in electronic 

form. Comments filed in electronic form 

should be submitted by using the 

following weblink: (http:// 

secure.commentworks.com/ftcmarketmanipulationNPRM/)(and 

following the instructions on the webbased form). To ensure that the 

Commission considers an electronic 

comment, you must file it on the webbased form at the weblink(http:// 

secure.commentworks.com/ftcmarketmanipulationNPRM/). If this 

NPRM appears at (http:// 

www.regulations.gov/search/index.jsp), 

you may also file an electronic comment 

through that website. The Commission 

will consider all comments that 

regulations.gov forwards to it. You may 

also visit the FTC website at (http:// 

www.ftc.gov/os/2008/08/ 

P082900nprm.pdf) to read the NPRM 

and the news release describing it. 

A comment filed in paper form 

should include the ‘‘Market 

Manipulation Rulemaking, P082900’’

reference both in the text and on the 

envelope, and should be mailed to the 

following address: Federal Trade 

Commission, Market Manipulation 

Rulemaking, P.O. Box 2846, Fairfax, VA 

22031-0846. This address does not 

accept courier or overnight deliveries. 

Courier or overnight deliveries should 

be delivered to: Federal Trade 

Commission/Office of the Secretary, 

Room H-135 (Annex G), 600 

Pennsylvania Avenue, NW, Washington, 

DC 20580. 

The Federal Trade Commission Act 

(‘‘FTC Act’’) and other laws the 

Commission administers permit the 

collection of public comments to 

consider and use in this proceeding as 

appropriate. The Commission will 

consider all timely and responsive 

public comments that it receives, 

whether filed in paper or electronic 

form. Comments received will be 

available to the public on the FTC 

website, to the extent practicable, at 

(http://www.ftc.gov/os/ 

publiccomments.shtm). As a matter of 

discretion, the Commission makes every 

effort to remove home contact 

information for individuals from the 

public comments it receives before 

placing those comments on the FTC 

website. More information, including 

routine uses permitted by the Privacy 

Act, may be found in the FTC’s privacy 

policy, at (http://www.ftc.gov/ftc/ 

privacy.shtm). 

FOR FURTHER INFORMATION CONTACT: 

James Mongoven, Deputy Assistant 

Director of Policy and Coordination, 

Bureau of Competition, Federal Trade 

Commission, Market Manipulation 

Rulemaking, P.O. Box 2846, Fairfax, VA 

22031-0846, (202) 326-3772. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. The Energy Independence and 

Security Act of 2007 

EISA became law on December 19, 

2007.3 Subtitle B of Title VIII of the Act 

prohibits market manipulation in 

connection with the purchase or sale of 

crude oil, gasoline, or petroleum 

distillates at wholesale, and reporting 

false or misleading information related 

to the wholesale price of those products. 

Specifically, Section 811 prohibits ‘‘any 

person’’ from directly or indirectly: (1) 

using or employing ‘‘any manipulative 

or deceptive device or contrivance;’’ (2) 

‘‘in connection with the purchase or 

sale of crude oil gasoline or petroleum 

distillates at wholesale;’’ (3) that 

violates a rule or regulation that the FTC 

‘‘may prescribe as necessary or 

appropriate in the public interest or for 

the protection of United States 

citizens.’’4

Section 812 prohibits ‘‘any person’’

from reporting information that is 

‘‘required by law to be reported’’ — and 

that is ‘‘related to the wholesale price of 

crude oil gasoline or petroleum 

distillates’’ — to a Federal department 

or agency if the person: (1) ‘‘knew, or 

reasonably should have known, [that] 

the information [was] false or 

misleading;’’ and (2) intended such false 

or misleading information ‘‘to affect 

data compiled by the department or 

agency for statistical or analytical 

purposes with respect to the market for 

crude oil, gasoline, or petroleum 

distillates.’’5

Subtitle B also contains three 

additional sections, which address, 

respectively, enforcement of the Subtitle 

(Section 813),6 penalties for violations 


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48318 Federal Register / Vol. 73, No. 161 / Tuesday, August 19, 2008 / Proposed Rules 

though all applicable terms’’ of the FTC Act were 

incorporated into and made a part of Subtitle B. 

42 U.S.C. 17303. 

7 Section 814(a) of Subtitle B provides that —

‘‘[i]n addition to any penalty applicable’’ under the 

FTC Act — ‘‘any supplier that violates [S]ection 811 

or 812 shall be punishable by a civil penalty of not 

more than $1,000,000.’’ Further, Section 814(c) 

provides that each day of a continuing violation 

shall be considered a separate violation. 

42 U.S.C. 17304. 

8 Section 815(a) provides that nothing in Subtitle 

B ‘‘limits or affects’’ Commission authority ‘‘to 

bring an enforcement action or take any other 

measure’’ under the FTC Act or ‘‘any other 

provision of law.’’ Section 815(b) provides that 

‘‘[n]othing in [Subtitle B] shall be construed to 

modify, impair, or supersede the operation’’ of: (1) 

any of the antitrust laws (as defined in Section 1(a) 

of the Clayton Act, 15 U.S.C. 12(a)), or (2) Section 

5 of the FTC Act ‘‘to the extent that . . . [S]ection 

5 applies to unfair methods of competition.’’

Section 815(c) provides that nothing in Subtitle B 

‘‘preempts any State law.’’ 42 U.S.C. 17305. 

9 FTC, Prohibitions On Market Manipulation and 

False Information in Subtitle B of the Energy 

Independence and Security Act of 2007, 73 FR 

25614 (May 7, 2008). The ANPR was announced in 

a press release and made available to the public on 

May 1, 2008, available at (http://www.ftc.gov/opa/ 

2008/05/anpr.shtm). 

10 Id. at 25620-25624. 

11 Id. at 25614. 

12 Letter from the American Petroleum Institute 

to FTC Secretary Donald S. Clark, (May 19, 2008), 

available at (http://www.ftc.gov/os/comments/ 

marketmanipulation/index.shtm). 

13 FTC, Extension of Period to Submit Comments 

in Response to the ANPR, 73 FR 32259 (June 6, 

2008). The extension was announced in a press 

release and made available to the public on May 30, 

2008, available at (http://www.ftc.gov/opa/2008/05/ 

anprfyi.shtm). 

14 Attachment A contains a list of commenters 

who responded to the ANPR, together with the 

acronyms used to identify each commenter in this 

NPRM. The full rulemaking record can be found at 

(http://www.ftc.gov/ftc/oilgas/index.html), and 

electronic versions of the comments can be 

accessed at (http://www.ftc.gov/os/comments/ 

marketmanipulation/index.shtm). 

15 See, e.g., Bergkamp (‘‘The biggest problem is 

that the major OPEC countries are not only 

determining the price by controlling out put, they 

have also figured out that they can inject millions 

of dollars into the futures market and manipulate 

the price of oil in that capacity.’’); Noga (‘‘Since we 

are an exporter of food products, the price of our 

exported food to OPEC members should be tied to 

their oil production and prices.’’); Pereira (‘‘I feel 

that prices are being manipulated by OPEC.’’); A. 

Stark (‘‘Why are we allowing OPEC to get away 

with $125.00 per barrel of oil?’’). 

16 See, e.g., Bremer (‘‘The big oil companies need 

to be investigated for price gouging and 

manipulation.’’); McGill (‘‘Oil companies should 

not be allowed to ship oil overseas, store it until 

the price rises, and then return it to the United 

States. That is manipulation.’’); Phillips (‘‘[S]ince 

all of the major oil companies have made, and 

continue to make record profits (definition: the 

monetary surplus left to a producer or employer 

after deducting wages, rent, cost of raw materials, 

etc.) It is highly likely that they are, together, 

manipulating the cost of a gallon of gasoline.’’); 

Love (‘‘BIG OIL controls gasoline prices thru the 

refineries which stand BETWEEN primary fuel 

supplies [including biofuel] and consumers.’’); 

Reinecke (‘‘Here in Wichita Ks when gas prices go 

up over night all stations go up in price over night, 

and they say they don’t talk to each other,’’); 

Theisen (‘‘I believe the oil companies should be 

severely punished for manipulating the sale and 

purchase of oil to boost the price of oil.’’). 

17 See, e.g., Barton (‘‘There is no reason gas 

should be his high, get rid of the traders and it will 

drop $ 3.00/ Dth.’’); Gould (‘‘It seems like the real 

manipulation in fuel cost is happening in the 

futures markets and not at the oil companies.’’); 

Nichols (‘‘[T]he price is now purely speculative and 

[completely] out of line with supply and demand. 

The problem will be if the price does collapse will 

the government bail out the speculators and what 

will it cost.’’); Noga (‘‘This like the tech stocks, 

housing market bubble, is a market driven by the 

greed of speculators and hedge markets.’’); Parker 

(‘‘OIL/GAS SPECULATION ON WALL STREET IS 

OUT OF CONTROL, BECAUSE THE HIGHER THE 

PRICE THE MORE COMMISSION THEY GET.’’); 

Patel (‘‘What has change in the last year to make 

the price almost double? SPECULATION BY 

ANALYSTS.’’); D. Smith (‘‘As much as 60% of 

today’s crude oil price is pure speculation driven 

by large trader banks and hedge funds.’’); Van 

Hecke (‘‘I also feel there needs to be regulations put 

in place to have some sort of control on the way 

the stock traders are able to continually drive up 

the costs through speculation.’’). See also 

Greenberger (arguing that excessive speculation, 

fraud, and illegal manipulation are causing higher 

gasoline prices). 

18 See, e.g., Brownstein (‘‘The oil companies have 

used their profits to line their pockets instead of 

putting it back into increasing refinery & 

exploration.’’); Nenortas (‘‘While I am for 

companies making a profit I am NOT for gluttony 

which the oil companies seem to be guilty. Their 

costs do not justify the outrageous prices they are 

demanding.’’). 

19 See, e.g., Rubinstein (‘‘Gas/fuel prices are high 

because the value of the dollar has fallen. . . .’’). 

20 See, e.g., Tanner (‘‘Oil price rises caused from 

importing from China and India. Most oil demand 

caused by these two countries having 40 percent of 

the world’s population.’’). 

21 See, e.g., Bergkamp (‘‘[I]f any other business 

[construction companies, farmers, etc.] were 

working in collusion in a form of bid rigging [and 

fundamentally that is what is happening with the 

price of oil] the Justice Department would have 

them in a court so fast it would boggle the mind. 

But we allow the market to be exploited with no 

legal recourse what so ever.’’); Berman (‘‘[President 

Bush] must call in the executives of the large oil 

companies who are making billions and billions in 

profits in the current crisis and make them lower 

their prices.’’); Love (‘‘Our government seems to be 

able to create a BUBBLE for just about every 

economic good . . . except fuel. It can be done for 

fuel as well and this will bring BIG OIL back to a 

levelled playing field.’’); Loucks (‘‘Set some laws 

and make the oil companies abide by them. This 

hike of gasoline costs is outrageous! Someone needs 

to be held accountable. Please hurry!’’); Noga 

(‘‘Something needs to be done, the profits are 

obscene, the terrorists are the oil companies.’’); A. 

Stark (‘‘We need regulation and protection from the 

Oil Industry . . . .’’). 

22 See, e.g., Bradley (‘‘Put in place a new ban on 

market manipulation and giving false information 

to the FTC or the Department of Justice. Give the 

FTC the authority to levy fines up to $1 million for 

each violation of market manipulation.’’); Nenortas 

(‘‘IF making federal regulations that will do this on 

a permanent basis and NOT be a band-aid or quick 

fix to this problem, then I am all for it.’’). 

23 See, e.g., Bremer (‘‘The big oil companies need 

to be investigated for price gouging and 

manipulation.’’); Hudecek (‘‘[T]he FTC should be 

able to regulate the price of crude oil prices to stop 

all price gauging that is going on in America and 

in Europe at this time. The FTC should bring the 

of Section 812 or any FTC rule 

promulgated pursuant to Section 811 

(Section 814),7 and the interplay 

between Subtitle B and existing laws 

(Section 815).8

B. Advance Notice of Proposed 

Rulemaking 

On May 1, 2008, the Commission 

issued an Advance Notice of Proposed 

Rulemaking (‘‘ANPR’’) that solicited 

comments on whether it should 

promulgate a rule under Section 811, 

and, if so, the appropriate scope and 

content of such a rule.9 In particular, the 

ANPR requested comment on the 

interplay between any proposed FTC 

rule and other existing federal rules 

prohibiting market manipulation; the 

scope of certain definitions; the level of 

scienter necessary to establish a 

violation of any proposed rule; the 

efficacy of the civil penalty authority 

provided to the Commission in EISA; 

the inclusion or exclusion of certain 

conduct from the scope of any proposed 

rule; and the potential costs and benefits 

of any proposed rule.10 The ANPR set a 

deadline of June 6, 2008, by which to 

submit comments.11 In response to a 

petition from a major trade 

association,12 the Commission extended 

the comment period until June 23, 

2008.13

In response to the ANPR, the 

Commission received 155 comments 

from interested parties, including other 

federal agencies, state government 

agencies, industry members, trade and 

bar associations, academics, and 

individual members of the public.14 The 

comments respond to questions posed 

in the ANPR and highlight several 

issues of particular concern to 

commenters. An overview of the major 

themes reflected in the comments 

follows. 

The overwhelming majority of the 

comments submitted in response to the 

ANPR were from consumers. These 

consumers voice concern about the 

rising cost of gasoline, attributing the 

increase to many variables, including: 

(1) OPEC control over prices;15 (2) price 

manipulation by oil companies;16 (3) 

speculation by investors;17 (4) corporate 

greed;18 (5) the decreasing value of the 

U.S. dollar;19 and (6) increased demand 

from China and India.20 Although many 

of these consumers urge the United 

States government, as a whole, to take 

action to address gasoline prices,21 few 

expressly support a FTC market 

manipulation rule.22 Some of the 

consumer commenters, although not 

addressing the need for a specific 

market manipulation rule, nonetheless 

urge the FTC to investigate the 

petroleum industry for various types of 

alleged misconduct or to take other 

action to control increasing prices.23


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price of crude oil back down to a reasonable price 

per barrel, that is under $60 a barrel, and set a 

reasonable gas price for all gas stations in every 

State in America . . . .’’); Kas (‘‘I want to see real 

action taken against those who are stealing from the 

rest of us.’’); Morris-Ramos (‘‘This is clearly price 

gouging by private companies and our government 

needs to protect us. This is the clear mission of the 

FTC and Congress.’’); A. Stark (‘‘Why hasn’t the 

FTC investigated this in earnest?’’); Strickland (‘‘I 

believe the FTC should investigate market 

manipulation.’’); Warner (‘‘ENOUGH of would of, 

should of, could of. Our Government NEEDS to do 

something NOW about these gas prices. Don’t say 

it can’t be done because it CAN! The government 

can do anything it wants to do.’’). 

24 Three commenters specifically argue that the 

FTC should not promulgate a rule. See API at 12- 

16 (arguing that the Commission should refrain 

from promulgating a rule); Flint Hills at 1-2, 8-11 

(asserting that a rule is unnecessary in the absence 

of any evidence of inefficiencies or anticompetitive 

behavior in the U.S. oil refining industry); IER at 

1 (arguing that existing statutes provide FTC and 

other agencies ‘‘with adequate powers to deal with 

legitimately anti-competitive and/or fraudulent 

practices in the petroleum and financial markets’’). 

Many commenters, without expressly stating 

whether they support a rule, urge the Commission 

to consider a variety of concerns in drafting a 

Section 811 rule. See, e.g., ICE at 1-2 

(recommending that the Commission draft a rule 

with a ‘‘well defined jurisdictional boundary’’ to 

avoid duplicative enforcement); Plains at 1, 3 

(recommending that the Commission craft a rule 

that will ‘‘avoid any overlap with other regulatory 

regimes’’); Sutherland at 8 (urging the Commission 

to adopt a rule that avoids any overlap with futures 

trading which is the exclusive jurisdiction of the 

Commodity Futures Trading Commission 

(‘‘CFTC’’)); AOPL at 1 (seeking clarification from 

the Commission that a Section 811 rule will not 

apply to crude oil and petroleum products 

pipelines); CFDR at 2 (encouraging the FTC to draft 

a rule that is clear and easily understood, ‘‘advances 

the development of one universal definition of price 

manipulation’’ in the markets for petroleum 

products, and does not create or alter existing 

obligations among market participants); Hess at 12 

(urging the Commission to ‘‘consider the entire 

spectrum of possible consequences stemming from 

the contemplated rulemaking’’); Sutherland at 2, 4 

(urging the Commission to avoid adopting 

regulations that will have a chilling effect on 

legitimate market activities). Cf. Platts at 2 

(supporting a FTC rule that encourages the 

voluntary reporting of data, such as price, inventory 

volumes, and import/export volumes); CAPP at 2- 

3 (raising a concern about the FTC’s ability to 

construct a market manipulation rule appropriately 

in the face of little empirical evidence of market 

manipulation). 

25 See, e.g., API at 12-13 (stating that a Section 

811 rule is unnecessary because there is no 

evidence that market manipulation is occurring or 

has occurred); CAPP at 2-3 (arguing that little 

empirical evidence exists of market manipulation or 

any adverse effects on crude oil markets); 

Sutherland at 3 (asserting that the FTC has found 

U.S. oil markets to be generally free of manipulation 

in its past investigations). See also Flint Hills at 1- 

2, 8-11. 

26 See, e.g., Flint Hills at 3-4 (arguing that Section 

811 ‘‘overlaps and arguably duplicates authority 

conferred by [Section 5 of the FTC Act]’’); AOPL at 

1-2 (stating that a FTC rule will overlap with and 

be duplicative of other agencies’ regulations). See 

also ISDA at 2-3; API at 14-16. 

27 See, e.g., IER at 1-2 (arguing that a rule could 

interfere with healthy market operations, leading to 

higher volatility in oil and gas prices and less 

efficiency in distribution); Flint Hills at 2-3 (stating 

that a rule would likely be harmful to the industry 

and consumers); API at 16 (stating that a Section 

811 rule could deter beneficial market activity); 

Sutherland at 3-4 (stating that the FTC needs to take 

great care not to chill legitimate market activities by 

adopting rules that substitute governmentally 

created norms for the rules of the marketplace); 

CAPP at 5 (stating that it could be damaging to the 

petroleum industry to enact rules to prohibit 

conduct described in the ANPR). 

28 See, e.g., API at 2, 16-17 (recommending that 

any FTC rule be drafted narrowly to avoid 

duplication with other laws and to avoid deterring 

pro-competitive conduct); Flint Hills at 5, 8-9, 15 

(stating that a rule should cover ‘‘only conduct that 

contains an element of fraud or dishonesty’’); ISDA 

at 2-3 (urging the Commission to adopt a rule under 

Section 811 that is tailored to target manipulative 

schemes involving wholesale, physical petroleum 

products); Muris at 13 (advocating that any rule be 

limited to fraudulent and deceptive conduct). 

ContraNPGA at 5 (urging the FTC to ‘‘view its 

mandate broadly’’ and focus ‘‘on practices that are 

not a reaction to market forces’’). 

29 See, e.g., Greenberger at 21-25 (urging the 

Commission to move quickly to adopt a rule); 

Gregoire at 1 (recommending that the FTC 

promulgate an interim rule so it can commence an 

investigation into the oil and gas markets). See also 

NPGA at 2 (‘‘[R]apid increase in price levels and 

volatility recently . . . raise concerns regarding 

potential manipulation and the need for stronger 

regulatory oversight.’’). See also MFA at 4-5. 

30 See, e.g., IPMA at 3-4; TOMA at 2-3 

(recommending that the FTC treat an oil company’s 

decision to sell only gasoline blended with ethanol 

instead of unblended gasoline at the terminal rack 

as a potentially manipulative practice); Navajo 

Nation at 3-5 (asking the FTC to treat the denial of 

access by terminals and common carrier pipelines 

to other suppliers as a manipulative practice); ILMA 

at 1 (requesting that the FTC consider as potentially 

manipulative a refiner’s decision to increase the 

price of base oils sold to others (non-refiner 

blenders/marketers) at wholesale faster than the 

refiner increases the retail price for its own branded 

finished oils). 

31 See, e.g., CFDR (advising that the FTC model 

its rule after SEC, FERC, and CFTC market 

manipulation standards to varying degrees); 

Gregoire (recommending that the FTC model a rule 

after FERC and SEC market manipulation rules); 

Greenberger at 23 (urging the FTC to use FERC’s 

market manipulation rule as a template for drafting 

a Section 811 rule); ISDA at 7 (encouraging the FTC 

to ‘‘propose a rule that draws on the most analogous 

aspects of those anti-manipulation standards 

already applicable to the commodities markets, in 

particular those existing under the [CEA]’’); MFA at 

5-6, 21-23 (arguing for the adoption of a CFTC-style 

anti-manipulation regulation in the wholesale 

energy market because of its relevance to the FTC’s 

mission); CAPP at 3-4 (urging the Commission to 

adopt CEA’s specific intent standard); Sutherland at 

7 (urging the Commission to draw on precedent 

developed under the CEA). But see ISDA at 12-14 

(urging the FTC not to use FERC and SEC market 

manipulation standards as models in determining 

what constitutes manipulative behavior); MFA at 5- 

6, 19-21 (stating that ‘‘the absence of a securities 

law disclosure foundation . . . argues against the 

adopting of an SEC-style anti-manipulation 

formulation . . . .’’). See also Flint Hills at 10 n.25, 

13-14, 22-23. 

32 See, e.g., Muris at 2 (‘‘[T]he Commission 

should follow its own clear precedents regarding 

when a failure to disclose is deceptive, and avoid 

importing broad disclosure requirements from 

highly regulated markets that simply have no place 

in wholesale petroleum markets.’’); PMAA at 3 

(‘‘Given the very wide gap between regulated and 

unregulated behavior, existing precedents should be 

looked to as informational only and not as having 

any binding effect upon interpretation of rules 

promulgated under Section 811.’’); Flint Hills at 10 

n.25, 13-14, 22-23 (stating that FERC and SEC 

market manipulation statutes were promulgated in 

a different regulatory context than EISA). Cf. API at 

18-19, 30 (recognizing the value of FERC and SEC 

approaches to an extent). 

33 Many commenters urge the Commission to 

require specific intent as a prerequisite for finding 

liability under Section 811. See, e.g., ISDA at 7 

(urging the FTC to require a specific intent to 

manipulate prices); Muris at 11 (‘‘In any 

manipulation rule, the Commission should require 

specific intent, rather than relying solely on the 

knowledge standard in the FTC Act.’’); CFDR at 4, 

Continued 

Twenty-nine industry members, 

associations, and other organizations 

responded to the ANPR. Most 

organizational commenters express 

concern about the prospect of a FTC 

rule.24 In support of their position, these 

commenters advance a variety of 

arguments, including: (1) a rule is 

unnecessary because there is no 

empirical evidence that market 

manipulation is occurring;25 (2) a rule 

would be duplicative of existing laws, 

including the Commodity Exchange Act 

(‘‘CEA’’), existing antitrust laws, and the 

FTC Act;26 and (3) a rule could harm the 

efficient functioning of petroleum 

markets to the detriment of 

consumers.27 Many of the 

organizational commenters who express 

concern about FTC rulemaking in this 

area advance the view that if the 

Commission promulgates a rule, it 

should be narrowly tailored to reach 

only fraudulent conduct in the 

marketplace.28 Only a few 

organizational commenters affirmatively 

favor a FTC market manipulation rule.29

A few commenters recommend specific 

conduct that a FTC rule should 

prohibit.30

Organizational commenters express 

differing views regarding the 

appropriate legal basis for, and form of, 

any such rule. For example, some 

commenters argue that the Commission 

should model its rule after market 

manipulation authority under which 

other federal agencies, such as the 

Securities and Exchange Commission 

(‘‘SEC’’), the CFTC, and the Federal 

Energy Regulatory Commission 

(‘‘FERC’’), currently police market 

manipulation.31 Other commenters 

disagree, questioning whether it is 

appropriate to apply approaches 

designed for regulated industries to the 

comparatively unregulated petroleum 

industry.32

Organizational commenters also 

advance several significant suggestions 

regarding the elements of a cause of 

action that they believe the Commission 

should employ in enforcing the 

proposed Rule. In particular, 

commenters express strong views about 

the appropriate level of scienter33 and 


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48320 Federal Register / Vol. 73, No. 161 / Tuesday, August 19, 2008 / Proposed Rules 

13 (asserting that the FTC should require a specific 

intent to affect market prices); MFA at 6, 23-25 

(arguing that the Commission should include a 

‘‘specific intent to create an artificial price’’

standard to ensure protection of legitimate 

commercial conduct); CAPP at 3 (recommending 

that the FTC adopt the intent standard set out in 

the CEA); API at 28-29 (arguing that the legislative 

history of EISA supports inclusion of a scienter 

standard); Sutherland at 7 (encouraging the 

Commission to follow CEA by requiring proof of 

specific intent). Cf. PMAA at 4-5 (‘‘‘[T]he focus is 

on practices that intentionally, willfully or 

recklessly cause distortion in the market.’’’). But 

see, e.g., Flint Hills at 16 (asserting that the 

Commission should apply the same standard of 

intent under the FTC’s existing authority to address 

fraud and deception). One commenter counsels the 

Commission against adopting an intent 

requirement. NPGA at 5 (arguing that proof of intent 

creates an ‘‘impossible burden of proof,’’ which will 

‘‘ultimately waste the Commission’s resources and 

contribute little to the efficiency of the markets or 

the wellbeing of consumers’’). 

34 Several commenters support, as an element of 

a Section 811 rule violation, a showing of a price 

effect. See, e.g., API at 23, 31-32 (stating that, as a 

prerequisite to finding liability, the FTC should 

require a showing that manipulative conduct 

caused the market price to deviate materially from 

the price that would have existed but for the 

deception or fraud). See also ISDA at 15; Muris at 

9; CFDR at 4; Sutherland at 7. But see USDOJ 

(‘‘Certainly, there should be no requirement that 

one succeed in moving prices . . . the only 

requirement should be an attempt to do so . . . 

whether successful or not.’’); NPGA at 5 (arguing 

that the FTC should focus ‘‘on practices that are not 

a reaction to market forces’’). 

35 See generally ABA at 6-9 (stating that the 

antitrust laws should be the guide for determining 

when unilateral supply decisions should be lawful 

or when firms may be required to provide 

competitors with access to facilities); API at 46-47 

(arguing that the Commission should not draft a 

rule that imposes an affirmative obligation to 

release inventory during a price spike); Plains at 2- 

5 (arguing that the decision to release inventory is 

complicated, and the FTC should not substitute its 

judgment for others); Hess at 8-10 (arguing against 

imposing an affirmative obligation to release 

inventory during price spikes because such an 

obligation would have a negative impact on long 

term supply); PMAA at 6-10 (arguing against 

restricting common carrier pipelines’

announcements concerning future capacity 

constraints); Sutherland at 6 (‘‘To mandate 

inventory releases would distort the U.S. oil 

markets and is contrary to the healthy structure of 

the markets.’’). See also AOPL at 20-33; CAPP at 4- 

6; IER at 4-8; ISDA at 17-18; CFDR at 15-16. 

36 See generally ISDA at 19 (seeking clarification 

of the FTC’s proposed definition of wholesale 

distillates products under Section 811); CAPP at 3 

(stating that the definition of market manipulation 

is appropriate because it reflects the language 

contained in EISA); Flint Hills at 15 (stating that the 

FTC’s proposed definition of market manipulation 

‘‘makes no sense’’); PMAA at 2; Sutherland at 7. 

37 See generally API at 16 (‘‘Without evidence of 

significant ‘manipulative’ conduct in the petroleum 

industry, the costs of additional enforcement and 

their impact on competitive market activity 

outweigh any benefit to be gained from the FTC 

applying Section 811 to conduct that is already 

addressed by other rules.’’); Muris at 7 (‘‘In 

addressing market manipulation, the potential costs 

of mistakenly regulating are likely to be high 

because these are well-functioning, highly 

competitive markets crucial to the operation of our 

economy.’’). 

38 See generally API at 38 (urging the FTC to 

adopt Section 5(m)(1)(C) of the FTC Act as the 

standard for determining the amount of civil 

penalties under Section 811); PMAA at 6 (‘‘The very 

large penalty should only be applied, if at all, to the 

very largest entities (refiners, trading companies) 

who participate in the upstream portion of crude 

and finished product, manufacture and sales.’’). 

39 In the ANPR, the Commission stated that this 

rulemaking proceeding is governed by the 

Administrative Procedure Act (‘‘APA’’), 5 U.S.C. 

553, and Part 1, Subpart C, of the Commission Rules 

of Practice concerning the adoption of non-Section 

18 rules, 16 CFR 1.21-1.26. 73 FR 25614, 25615 n.4. 

One commenter, however, asserts that this 

proceeding should be commenced as a rulemaking 

under Section 18 of the FTC Act, 15 U.S.C. 57a, 

requiring, among other things, more lengthy and 

detailed notice and comment procedures. See API 

at 58-59. The Commission disagrees. Nothing in the 

plain language of EISA requires Section 18 

rulemaking, and the use of APA rulemaking 

procedures is consistent with Congressional 

expectations that this proceeding be conducted 

expeditiously. 

40 As the Commission stated in the ANPR, the 

phrase ‘‘crude oil gasoline or petroleum distillates,’’

without commas, is used in Section 811 (as well as 

in the first clause of Section 812), while the phrase 

‘‘crude oil, gasoline, or petroleum distillates’’ (with 

commas) is used in Section 812(3). This drafting is 

presumably a non-substantive typographical error; 

therefore, all parts of both sections should be read 

to cover all three types of products (that is, crude 

oil, gasoline, and petroleum distillates). See 73 FR 

at 25621 n.59. 

41 42 U.S.C. 17301. 

42 Some commenters address the phrase 

‘‘necessary or appropriate’’ in their comments; 

however, none attempt to define the phrase. See, 

e.g., API at 36 (‘‘[T]here are solid grounds to 

conclude that adoption of a market manipulation 

rule for petroleum wholesale markets is neither 

necessary nor appropriate.’’); CAPP at 4 (‘‘In order 

to ensure that rules are . . . necessary or appropriate 

in the public interest . . . the Commission must set 

objective standards as to what these concepts are 

and how they will manifest themselves in reality.’’). 

See alsoAOPL at 11-12 (‘‘Regulation of oil 

[pipelines] . . . would not be ‘necessary or 

appropriate in the public interest or for the 

protection of the United States citizens.’’’). 

whether a price effect should be a 

prerequisite to a finding of liability.34

Several commenters also respond to 

questions and hypotheticals presented 

in the ANPR about the types of conduct 

that might violate EISA and any 

proposed market manipulation rule.35

Other topics that the comments address 

include: possible definitions,36 costs 

and benefits of a market manipulation 

rule,37 and appropriate penalties for 

violations of EISA or any FTC rule.38

C. Notice of Proposed Rulemaking 

Pursuant to EISA 

Based on the ANPR comments and 

the Commission’s extensive experience 

studying, analyzing, and investigating 

the petroleum industry, the Commission 

has determined to propose a rule to 

prevent manipulative and deceptive 

conduct in the petroleum markets.39

The Commission invites written 

comments on the proposed Rule and 

answers to the questions in Section II.L, 

to assist it in determining whether the 

proposed Rule provisions strike an 

appropriate balance to maximize 

protections for consumers from market 

manipulation while avoiding the 

imposition of unnecessary compliance 

burdens on law-abiding industry 

members. 

II. Discussion of the Proposed Rule 

A. Determination to Promulgate a Rule 

to Proscribe Market Manipulation 

In considering whether to exercise its 

discretionary rulemaking authority 

pursuant to Section 811, the 

Commission relies upon several sources 

of information in addition to the statute, 

including its extensive background 

knowledge of the petroleum industry, 

the ANPR comments, independent 

research, and consultation with sister 

agencies charged with administering 

similar market manipulation rules. 

Based on its findings, the Commission 

tentatively concludes that promulgating 

a rule to address market manipulation 

in connection with the wholesale 

purchase or sale of crude oil, gasoline, 

or petroleum distillates is appropriate 

and in the public interest.40 This 

Section of the NPRM sets forth the 

Commission’s reasoning for the 

proposed Rule. The Commission invites 

comment on the issues raised in this 

Section. 

1. The proposed Rule must meet Section 

811’s ‘‘necessary or appropriate’’

standard 

Section 811 states that the 

Commission ‘‘may prescribe’’ a rule ‘‘as 

necessary or appropriate in the public 

interest or for the protection of United 

States citizens.’’41 Thus, the 

Commission may only promulgate a rule 

to prohibit manipulation in the 

petroleum industry if, in its discretion, 

it finds that a rule under EISA is 

‘‘necessary or appropriate’’ and ‘‘in the 

public interest or for the protection of 

United States citizens.’’ The 

Commission has tentatively determined 

that promulgating a market 

manipulation rule narrowly tailored to 

address fraudulent practices would be 

appropriate to ensure that the objective 

of EISA is carried out, and therefore 

would be in the public interest. 

The Commission believes that the 

initial inquiry in determining whether it 

should promulgate a rule requires 

understanding the phrase ‘‘necessary or 

appropriate in the public interest or for 

the protection of United States 

citizens.’’42 The use of the disjunctive 

‘‘or’’ in the first clause of this phrase 

indicates that the Commission would be 

within its mandate to promulgate a rule 


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43 42 U.S.C. 17301 (emphasis added). The use of 

a disjunctive indicates alternatives and requires that 

each be treated separately unless there is clear 

legislative intent that indicates otherwise. Reiter v. 

Sonotone Corp., 442 U.S. 330, 339 (1979) (‘‘Canons 

of construction ordinarily suggest that terms 

connected by a disjunctive be given separate 

meanings, unless the context dictates otherwise . . 

. .’’). See also FCC v. Pacifica Foundation, 438 U.S. 

726, 739-740 (1978); Azure v. Morton, 514 F.2d 897, 

900 (9th Cir. 1975) (‘‘As a general rule, the use of 

a disjunctive in a statute indicates alternatives and 

requires that they be treated separately.’’); Norman 

J. Singer, Statutes and Statutory Construction 21.14, 

at 180-182 (6th ed. rev. vol. 2002) (‘‘Generally, 

courts presume that ‘or’ is used in a statute 

disjunctively . . . .’’). 

44 See, e.g., AOPL at 18 (noting that the 

Commission has found little evidence of price 

manipulation in previous investigations); API at 12- 

14, 36; Flint Hills at 10 (‘‘[T]he Commission lacks 

evidence of ‘manipulation’ in wholesale petroleum 

markets that warrants the kind of extensive 

regulatory intervention that a proposed rule could 

engender.’’); Hess at 10-11; Muris at 2 (asserting that 

the petroleum industry is highly competitive). See 

also Sutherland at 3 (stating that the Commission 

should not ‘‘adopt rules that substitute 

governmentally created norms for the rules of the 

marketplace.’’). 

45 Commenters express the view that a FTC rule 

is unnecessary because it would duplicate existing 

laws and regulations. See, e.g., API at 40-41 

(arguing against a FTC rule that would duplicate the 

existing CEA enforcement scheme and antitrust 

laws); Flint Hills at 8-9 (asserting that existing 

Commission authority under Section 5 of the FTC 

Act is sufficient to protect against ‘‘[d]isingenuous 

business practices’’); MFA at 17 (‘‘FTC Rules that 

purport to overlap with CFTC exclusive jurisdiction 

would not serve the public interest.’’). Although it 

is true that other agencies have market 

manipulation regulations in place already, this fact 

was well-known to Congress when it enacted EISA. 

Therefore, the Commission disagrees with 

commenters that argue that a Commission rule is 

unnecessary because it may be redundant with 

other regulatory authority. 

46 For a general discussion of organizational 

commenters’ concerns about a FTC rule, see Section 

I.B above. 

47 Commenters recognize the negative effects of 

fraud and deceit. See, e.g., Greenberger at 1 (arguing 

that excessive speculation, fraud, and illegal 

manipulation are causing higher gasoline prices); 

MFA at 1 (‘‘Price manipulation has a corrosive 

effect on the proper functioning of any market.’’); 

API at 50 (‘‘We agree that the provision of false or 

misleading pricing information to private reporting 

entities could be problematic.’’); ISDA at 19 (‘‘ISDA 

. . . both supports and encourages the development 

of dynamic markets undistorted by manipulative 

trading activity.’’); Sutherland at 3 (‘‘[O]il marketers 

and traders often are the first victims of unfair 

business practices. They, therefore, support efforts 

by Congress to deter manipulation and the use of 

deceptive devices.’’); Flint Hills at 18 

(‘‘[R]estrictions on disclosures that ‘leave customers 

in the dark’ may be inimical to the smooth 

operations of the relevant markets. Of course, false 

or deceptive reports can also raise familiar [sic] 

problems.’’); CAPP at 1 (‘‘CAPP recognizes that 

fraud and manipulation pose a potential threat to 

the successful and efficient functioning of 

petroleum markets in North America.’’). 

48 Some commenters opine on the meaning of the 

language: ‘‘in the public interest or for the 

protection of United States citizens.’’ See, e.g., 

CFDR at 4-5 (‘‘The public interest and the 

protection of U.S. citizens . . . are best served by 

the adoption of a clear legal standard for market 

manipulation.’’ CFDR goes on to say that a clear 

legal standard ‘‘will allow market participants to 

conduct their business with a clear understanding 

of the relevant legal boundaries.’’); MFA at 17 

(‘‘FTC rules that purport to overlap with CFTC 

exclusive jurisdiction would not serve the public 

interest.’’). Noting the absence of the phrase ‘‘public 

interest’’ from other laws the Commission enforces, 

Flint Hills states that Congress must have intended 

that the Commission rely upon its experience in 

promoting the public interest through enforcement 

of the consumer protection and antitrust principles 

governed by Section 5 of the FTC Act. See Flint 

Hills at 17-18. 

49 42 U.S.C. 17301. 

50 42 U.S.C. 17301. The statute itself does not 

describe the manipulative or deceptive devices or 

contrivances that are illegal. Rather, it vests in the 

FTC discretionary rulemaking authority to identify 

such conduct. 

51 ABA at 3. 

52 As the ANPR discusses in detail, the 

Commission studied SEC, FERC, and CFTC 

enabling statutes, and their respective 

implementing regulations, and asked questions in 

the ANPR about whether these existing regulatory 

schemes should serve as a model for a FTC Rule. 

73 FR at 25616-25618. 

53 15 U.S.C. 78j(b). 

54 See, e.g., ABA at 2 (asserting that ‘‘Section 811 

is modeled on FERC and SEC authority to challenge 

deceptive conduct’’); Greenberger at 27 (‘‘Congress 

modeled the FTC’s new 2007 anti-manipulation 

provision on 10(b) of the [SEA] and Rule 10b-5 to 

once again make it clear . . . that the FTC must use 

the extensive securities precedent to guide its 

manipulation investigations in the petroleum 

markets.’’); CFDR at 3 (recognizing that the language 

of Section 811 is ‘‘effectively identical to the antimanipulation proscriptions found in Section 10(b) 

. . . of the [SEA], as amended’’); Sutherland at 4 

(‘‘Congress, in fashioning Section 811, used 

language similar to that used in the Energy Policy 

Act of 2005 . . . which in turn drew upon the 

securities laws . . . .’’); Gregoire at 1 (arguing that 

the Commission’s ‘‘authority is very similar to the 

Continued 

that is either: (1) ‘‘necessary . . . in the 

public interest or for the protection of 

United States citizens,’’ or (2) 

‘‘appropriate in the public interest or for 

the protection of United States 

citizens.’’43 Similarly, the Commission 

need only show that a rule would be 

either ‘‘in the public interest’’ or ‘‘for 

the protection of United States 

citizens.’’ Thus, the Commission could 

proceed in its rulemaking if, at a 

minimum, the endeavor is ‘‘appropriate 

. . . in the public interest.’’ The 

Commission has determined that a rule 

that achieves EISA’s plainly stated 

purpose — that is, the prohibition of 

market manipulation in the petroleum 

industry — would be appropriate. 

The Commission carefully considered 

concerns raised by organizational 

commenters about the necessity or 

appropriateness of a rule in determining 

whether to move forward in the 

rulemaking process. Some of these 

commenters argue, for example, that 

petroleum markets are competitive, and, 

in the absence of specific evidence of 

market manipulation, the Commission 

should refrain from promulgating a 

rule.44 Some point to FTC and CFTC 

authority to argue that any rule would 

be duplicative of existing laws and lead 

to uncertainty and confusion among 

market participants about compliance.45

Many commenters also express 

concerns about the scope and contours 

of a rule and whether any rule that the 

Commission promulgates would be 

appropriate for petroleum markets.46

EISA targets manipulative and 

deceptive conduct in the petroleum 

markets, thereby seeking to eliminate 

conduct which serves no legitimate 

purpose and may in fact harm the 

market to the detriment of market 

participants and consumers.47 In the 

view of the Commission, a rule that 

allows the Commission to guard against 

conduct that undermines the integrity of 

the petroleum market would be in the 

public interest.48 The Commission notes 

that fraud and deception may occur in 

competitive marketplaces. Further, the 

Commission notes that Congress 

specifically authorized it to determine 

whether a rule would be appropriate 

and in the public interest despite the 

existence of other laws that potentially 

cover fraud or deceit.49 Therefore, as the 

agency charged with protecting 

consumers and preserving the 

competitiveness of markets (such as 

petroleum markets), the Commission 

believes that it would be appropriate for 

it to propose a rule targeting fraudulent 

or deceptive conduct in wholesale 

petroleum markets under this new 

authority. 

2. SEC Rule 10b-5 provides an 

appropriate regulatory model on which 

to base the FTC’s proposed Rule 

By its plain language, Section 811 

declares unlawful the use of 

manipulative or deceptive devices or 

contrivances — in connection with the 

purchase or sale of crude oil, gasoline, 

or petroleum distillates at wholesale —

that violates any FTC rule prohibiting 

their use.50 As one commenter observes, 

‘‘Section 811 is not discussed in any 

Senate, House, or Conference Report, 

nor is there any reported Congressional 

debate on this provision.’’51

Nevertheless, the statutory language —

especially the use of the phrase 

‘‘manipulative or deceptive device or 

contrivance’’ — reveals its legislative 

antecedents.52

In particular, it is instructive that the 

language that Congress chose to frame 

the conduct prohibition in Section 811 

is identical to language found in Section 

10(b) of the Securities Exchange Act of 

1934 (‘‘SEA’’),53 which prohibits the use 

of any ‘‘manipulative or deceptive 

device or contrivance’’ in contravention 

of such rules as the SEC may 

prescribe.54 Congress used identical 


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authority Congress previously gave the [FERC] . . . 

which in turn was based on the statutory authority 

of the [SEC]’’). See also Muris at 2 (arguing that ‘‘the 

statutory language and the legislative history point 

to the SEC, FERC, and CFTC as relevant regulatory 

models’’); MFA at 19-20 (acknowledging that the 

provisions of Section 811 were modeled after 

Section 10(b) of the SEA, but also taking the 

position that the Commission should not follow its 

statutory precedent). Cf. API at 18 (arguing that 

EISA does not require the Commission to follow the 

SEC model in every respect, despite an 

acknowledgment that Section 811 was modeled 

after the SEA). 

55 See 15 U.S.C. 717c-1; 16 U.S.C. 824v; FERC, 

Prohibition of Energy Market Manipulation, 71 FR 

4244, 4246 (Jan. 19, 2006). 

56 17 CFR 240.10b-5. 

57 Energy Emergency Consumer Protection Act of 

2005, S.1735, 109th Cong. (2005). In these remarks, 

Senator Maria Cantwell stated that the market 

manipulation provisions in that bill would ensure 

‘‘the same kind of anti-manipulation and 

transparency rules as those with which electricity 

and natural gas industries must comply [under the 

EPAct 2005].’’ The FERC rules, to which the 

Senator refers, similarly derive from the SEA, and 

target fraudulent marketplace conduct. 151 Cong. 

Rec. S10238 (daily ed. Sept. 20, 2005). 

58 An April 2008 letter to the Commission from 

Senators Maria Cantwell, Olympia Snowe, Byron 

Dorgan, Daniel Inouye, and Gordon Smith also 

supports the interpretation that EISA is designed to 

provide the FTC with anti-fraud market 

manipulation authority similar to that already 

vested in the SEC and recently given to FERC in the 

EPAct 2005. Letter from Senators Cantwell, Snowe, 

Dorgan, Inouye, and Smith to FTC Chairman 

Kovacic and Commissioners Harbour, Leibowitz, 

and Rosch (Apr. 8, 2008), available at (http:// 

www.ftc.gov/os/comments/marketmanipulation/ 

congress/080414cantwell.pdf). 

See EPAct 2005, 42 U.S.C. 15801-16503. 

59 See, e.g., Greenberger at 23, 25, 27; Gregoire at 

1; CFDR at 11, 13; SIGMA at 6. 

60 See, e.g., Gregoire at 1; Greenberger at 23-25, 

27; CFDR at 11, 13. But see CAPP at 2 (arguing that 

EISA was enacted in anticipation of market abuses, 

not in response to them, and thus is not analogous 

to SEC rules); Sutherland at 4 (arguing that SEC 

rules operate in a highly regulated environment and 

that modeling a rule that is aimed at the 

comparatively unregulated petroleum industry after 

SEC rules would be inappropriate). 

61 As the Commission noted in the ANPR, 

‘‘nothing in connection with this Section 811 

Rulemaking, any subsequently enacted rules, or 

related efforts should be construed to alter the 

standards associated with establishing a deceptive 

practice or an unfair practice in a case brought by 

the Commission.’’ 73 FR at 25619 n.55. 

62 The Commission believes this careful tailoring 

addresses concerns that a new rule prohibiting 

market manipulation in the petroleum industry 

might interfere with legitimate, pro-consumer 

business behavior. See generally API at 16 (‘‘New 

rules have the potential to over-deter, discouraging 

beneficial market activity.’’); Sutherland at 2 

(stating that the FTC must not ‘‘deter important and 

economically efficient business activities that are 

fundamental to the energy markets’’). 

63 Several commenters, while not necessarily 

advocating a FTC rule, appear to support a rule 

based on SEC Rule 10b-5. See, e.g., Gregoire at 1 

(‘‘The FTC should be similarly informed by the 

FERC and SEC rules and model its rules on 

theirs.’’); Greenberger at 22 (urging the FTC to 

model its rule after FERC’s rule because FERC 

resolved its ‘‘major interpretative issues’’ by 

‘‘adopting the anti-manipulation definitions within 

Section 10(b) of the [SEA]’’); API at 17 (recognizing 

the value of FERC and SEC approaches to an 

extent). See also CFDR at 3. The determination to 

prohibit manipulative and deceptive conduct under 

the proposed Rule does not preclude the 

Commission from finding that other conduct 

violates EISA and any other applicable laws or rules 

that the Commission enforces. 

64 Proposed Rule 317.3(a)-(c). 

65 Any ‘‘laundry list’’ of specifically proscribed 

conduct could quickly become out of date, 

requiring that the Commission frequently revisit the 

rulemaking process. See also Muris at 11 (‘‘Because 

defining the specific deceptions that might 

manipulate wholesale markets is virtually 

impossible, any manipulation rule will of necessity 

be more general.’’). 

66 See Chiarella v. United States, 445 U.S. 222, 

235 (1980) (stating that SEC Rule 10b-5 did not 

create a duty of disclosure; rather, the duty to 

disclose was created by a fiduciary relationship 

between traders). 

67 See, e.g., PMAA at 3 (arguing that given the 

differences between regulated and unregulated 

markets, ‘‘existing precedents should be looked to 

as informational only’’); Sutherland at 4 (stating 

that ‘‘as a rule’’ SEC market manipulation standards 

language — ‘‘manipulative or deceptive 

device or contrivance’’ — when it gave 

FERC anti-manipulation authority over 

electricity and natural gas under the 

Energy Policy Act of 2005 (‘‘EPAct 

2005’’). In doing so, Congress 

specifically instructed FERC to define 

the terms ‘‘any manipulative or 

deceptive device or contrivance’’ ‘‘as 

those terms are used in [SEA Section 

10(b)].’’55 The use of this language 

suggests that any proposed FTC Rule 

should follow the contours of SEC Rule 

10b-5, promulgated by the SEC pursuant 

to that agency’s market manipulation 

authority.56

Floor statements made in connection 

with a predecessor bill to Subtitle B of 

EISA57 and correspondence from 

Congress regarding EISA58 support the 

Commission’s decision to model its 

proposed Rule on SEC Rule 10b-5. Thus, 

the language of the statute, taken 

together with other indicators of 

Congressional expectations, suggests 

that any proposed FTC market 

manipulation rule should be modeled 

on SEC Rule 10b-5. 

The Commission believes that, in 

addition to adhering to the mandate 

implied by the statutory language, there 

are several advantages to modeling its 

proposed Rule on SEC Rule 10b-5. The 

Commission believes that using an 

existing anti-fraud market manipulation 

regulatory scheme as a model for the 

proposed Rule is beneficial for market 

participants because it leverages the 

significant body of legal precedent 

interpreting that scheme.59 This 

determination is consistent with the 

views of some commenters who assert 

that SEC Rule 10b-5 provides a welldeveloped framework for the FTC to 

follow.60 Moreover, using an established 

regulatory scheme as the basis for the 

proposed Rule should reduce regulatory 

uncertainty and thereby assure greater 

compliance. 

The structure and scope of SEC Rule 

10b-5 also provide a useful model for 

the substantive prohibitions of the 

proposed Rule. EISA contemplates the 

FTC using a new authority — separate 

and apart from antitrust law and FTC 

Act Section 5 authority — to target 

manipulation and deception based on 

the SEC anti-fraud model.61 By 

mirroring the established SEC Rule 10b5, the Commission believes it strikes at 

the core of what EISA explicitly 

proscribes — market manipulation.62

3. The provisions of the proposed Rule 

appropriately prohibit fraudulent 

conduct in wholesale petroleum 

markets 

The Commission believes that an 

appropriate means to achieve this 

objective would be to adopt largely the 

language and structure of SEC Rule 10b5 in promulgating the proposed Rule.63

Accordingly, the proposed Rule 

contains the following conduct 

prohibitions. First, Section 317.3(a) 

prohibits the use or employment of any 

‘‘device, scheme, or artifice to defraud.’’

Second, proposed Rule Section 317.3(b) 

states that it is a violation of the rule for 

any person to: ‘‘make any untrue 

statement of a material fact or to omit 

to state a material fact necessary in 

order to make the statements made, in 

the light of the circumstances under 

which they were made, not misleading.’’

Finally, proposed Rule Section 317.3(c) 

makes it illegal for any person ‘‘[t]o 

engage in any act, practice, or course of 

business that operates or would operate 

as a fraud or deceit upon any person.’’64

The Commission believes that adopting 

the general conduct prohibitions 

embodied in SEC Rule 10b-5 provides 

the necessary flexibility for the 

Commission to adapt to changing 

market conditions in enforcing its 

proposed Rule.65

Moreover, the Commission is not 

invoking the entire body of SEC law in 

this rulemaking, but rather the antifraud provisions of SEC Rule 10b-5. 

Thus, the proposed Rule does not 

impose affirmative disclosure or recordkeeping obligations, and does not 

regulate supply decisions or require that 

market participants provide access to 

terminals or pipelines.66 In making this 

determination, the Commission 

considered arguments raised by 

commenters who oppose the 

promulgation of an SEC-style rule on 

the grounds that securities markets are 

qualitatively different from petroleum 

product markets because securities 

markets are subject to a significant 

degree of regulation.67 The Commission 


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are not useful precedents for a Section 811 rule); 

ISDA at 12 (‘‘Securities precedent is not 

illuminating with respect to how to develop a rule 

to prosecute manipulation in wholesale, physical 

Petroleum Products markets because there are 

substantial differences between the market 

frameworks.’’). See also API at 19-20, 30; CAPP at 

2-3. 

68 Many commenters raise concerns about a FTC 

rule that would impose affirmative duties or 

obligations on persons covered by the rule. For a 

discussion of any potential duties or obligations 

imposed by the proposed Rule, see Section II.B.4 

below. 

69 Several commenters discuss the consequences 

of manipulative or deceptive conduct on the overall 

health of the marketplace and note the importance 

of ensuring a legitimate price discovery process. 

See, e.g., Muris at 6 (‘‘Fraudulent and deceptive 

conduct undermine the market’s competitive 

process because they impair efficient price 

discovery, which is the process of incorporating 

information in the market price.’’); Platts at 2 

(‘‘Confidence in price discovery processes is vital 

for market participants, regulators and the public 

alike . . . .’’); MFA at 1 (‘‘Price manipulation has 

a corrosive effect on the proper functioning of any 

market.’’). 

70 In a market economy, resources are allocated 

to productive activities on the basis of impersonal 

price signals that reflect both consumer preferences 

and profit opportunities. When resources flow to 

their highest valued use, social wealth is 

maximized. Intentional manipulative or deceptive 

conduct impedes this process. See also Milton 

Friedman & Rose Friedman, Free to Choose, 14-18 

(Harcourt 1980); Friedrich Hayek, The Use of 

Knowledge in Society, 35(4) Am. Econ. Rev. 519 

(1945). For example, disseminating misinformation 

that is relied on by market participants may prevent 

wealth-generating exchanges from taking place. If 

so, an opportunity cost is imposed on society at 

large. 

71 Such investments, although perceived as 

necessary by the investor, are socially wasteful 

because they utilize resources that otherwise might 

have been allocated to wealth-generating activities. 

72 Section II.E of this NPRM also addresses 

whether actual price effects should be a required 

element of proof. 

73 ‘‘This subtitle shall be enforced by the Federal 

Trade Commission in the same manner, by the same 

means, and with the same jurisdiction as though all 

applicable terms of the [FTC] Act (15 U.S.C. 41 et 

seq.) were incorporated into and made a part of this 

subtitle.’’ 42 U.S.C. 17303 (emphasis added). 

74 Moreover, any person subject to Commission 

jurisdiction must comply with Section 812 and 

with any rule promulgated under Section 811. 

Several commenters asked the FTC to clarify its 

proposed definition of ‘‘person.’’ See e.g., ISDA at 

4 n.5; AOPL at 1. 

75 AOPL at 1 (‘‘Common carrier oil pipelines 

subject to the Interstate Commerce Act (‘‘ICA’’) are 

exempt from the Commission’s jurisdiction under 

the [FTC Act] and thus are also exempt from the 

Commission’s jurisdiction under the EISA.’’). 

Conversely, Navajo Nation asserts that FERC’s 

regulations are not directly applicable to the crude 

oil market. Therefore the Commission should tailor 

a rule to ‘‘eliminate anticompetitive practices that 

[FERC] may have determined are beyond its 

jurisdiction . . . .’’ Navajo Nation at 4. 

76 DRG at 3-4. Cf. Greenberger at 28-29 (arguing 

that the Commission has authority to investigate 

banks for manipulation in the crude oil markets). 

77 See, e.g., CFTC at 2 (‘‘[W]e urge the FTC to 

avoid proposing regulatory measures that could 

lead to futures-market manipulation charges based 

solely on the downstream effects of futures 

exchange prices on off-exchange prices in physical 

or cash-market transactions, and that may be 

inconsistent or duplicative of CEA provisions.’’); 

MFA at 13-14 (‘‘But futures market manipulation 

claims do involve both actual futures transactions 

and the core price discovery operations of the 

futures markets and should be outside the limits of 

Section 811 due to the CEA’s exclusive jurisdiction 

provision.’’). See also Flint Hills at 12; Sutherland 

at 8; Hess at 12 n.10; CFDR at 6 n.4. 

78 49 U.S.C. 10101-16106. Section 4 of the FTC 

Act defines the ‘‘‘Acts to regulate commerce’’’ to 

mean, inter alia, ‘‘subtitle IV of title 49 . . . and all 

Acts amendatory thereof and supplementary 

thereto.’’ 15 U.S.C. 44. 

79 49 U.S.C. 4(c) (emphasis added). 

80 15 U.S.C. 45(a)(2). 

believes that excluding these affirmative 

duties should alleviate commenter 

concerns and make clear that the 

Commission is using only the relevant 

portions of the SEC regulatory model in 

crafting the proposed Rule.68

In crafting the proposed Rule, the 

Commission intends to prohibit 

manipulative and deceptive conduct 

without discouraging pro-competitive or 

otherwise desirable market practices. 

Following the example of SEC Rule 10b5, the Commission believes that its 

proposed Rule would contribute to wellfunctioning marketplaces. Markets 

function best when market participants 

can presume that the best available 

information relevant to their decisionmaking is not distorted.69 Manipulative 

or deceptive conduct distorts the 

marketplace signals that guide resource 

allocation.70 When market participants 

react to distorted market price signals, 

short-term purchase and sale decisions 

may be altered and long-term capital 

investments may be adversely 

influenced. Finally, if manipulative or 

deceptive conduct recurs, it may 

increase the cost of doing business if 

market participants are required to 

invest in defensive measures.71 The 

Commission believes eliminating or 

reducing these effects is in the public 

interest. 

The Commission addresses the 

elements of a cause of action under the 

proposed Rule in Section II.E. This 

discussion should provide guidance to 

the industry on how the Commission 

would enforce the proposed Rule. The 

Commission would not likely act except 

in cases where an entity: (1) uses a 

fraudulent device, scheme or artifice, or 

makes a material misrepresentation or a 

material omission, or engages in any act, 

practice, or course of business that 

operates or would operate as a fraud or 

deceit upon any entity; (2) with scienter; 

(3) in connection with the purchase or 

sale of crude oil, gasoline, or petroleum 

distillates at wholesale.72 For example, 

false reporting to private data reporting 

services or misleading announcements 

by refineries, pipelines, or investment 

banks done with the requisite scienter, 

in connection with the purchase or sale 

of a covered product at wholesale, 

would be covered by the proposed Rule. 

Similarly, trading practices in physical 

or futures markets would also be 

covered if the conduct met all the 

elements of a cause of action. 

In sum, the Commission has paid 

careful attention to maximizing the 

proposed Rule’s benefits while 

minimizing its costs from both a legal 

and an economic perspective. The 

Commission believes that the proposed 

Rule, by specifically targeting 

manipulative or deceptive conduct, not 

only achieves the goals of Section 811, 

but also complements the Commission’s 

antitrust and consumer protection 

missions. The Commission seeks 

comments on the specific formulation of 

the proposed Rule, and in particular on 

whether using SEC Rule 10b-5 as a 

model is appropriate. 

B. Section 317.1 - Scope 

Section 813 makes clear that the 

Commission possesses the same 

jurisdiction and power under Subtitle B 

as it possesses under the FTC Act.73

Because EISA does not expand or 

contract Commission jurisdiction or the 

scope of any rule’s coverage, any person 

to which Commission jurisdiction under 

the FTC Act does not extend would also 

lie outside Commission jurisdiction 

under the proposed Rule. Conversely, 

any person currently subject to 

Commission jurisdiction under the FTC 

Act would be covered by the proposed 

Rule.74

In response to the ANPR, the 

Commission received some comments 

requesting that the Commission clarify 

the scope of the application of any 

proposed rule. One commenter, AOPL, 

expresses the belief that Commission 

jurisdiction does not extend to 

pipelines.75 Another opines that any 

rule could not and should not reach any 

non-profits or banks.76 Several suggest 

that any proposed rule should not, by its 

terms or construction, reach futures 

trading activities regulated by the CFTC, 

including any futures market 

manipulation.77

As to pipelines in particular, 

Commission jurisdiction under Section 

5 of the FTC Act does not extend to 

common carriers that are subject to the 

ICA and its amendments,78 including 

the ICC Termination Act of 1994. Those 

acts apply to interstate rail, trucking and 

busing; domestic offshore water 

carriage; and pipelines carrying 

commodities other than water, gas, or 

oil.79 Accordingly, oil and gas pipelines 

enjoy no exemption from the FTC Act 

and would be subject to the proposed 

Rule.80


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81 Id. 

82 See Minnesota v. Fleet Mortg. Corp., 181 F. 

Supp. 2d 995, 1000 (D. Minn. 2001). 

83 Investment banks (e.g., Goldman Sachs and 

Morgan Stanley), many of which are voluntarily 

regulated by the SEC, are not necessarily ‘‘banks’’

as that term is typically defined under traditional 

banking law. See 12 U.S.C. 1813(a)(1). Therefore, 

whether an investment bank would be covered by 

the proposed FTC Rule must be determined on a 

case-by-case basis. 

84 15 U.S.C. 44 (defining ‘‘corporation’’). 

85 526 U.S. 756 (1999). 

86 See In the Matter of The City of New Orleans, 

105 F.T.C. 1, 1-2 (1985); In the Matter of The City 

of Minneapolis, 105 F.T.C 304, 305 (1985). In each 

complaint, the Commission alleged that the 

respondent was a ‘‘municipal corporation’’ and ‘‘a 

person or corporation within the meaning of the 

[FTC Act], as amended (15 U.S.C. 45).’’ (emphasis 

added). See 105 F.T.C. at 5-6; 105 F.T.C. at 308-309. 

The Commission subsequently issued orders 

dismissing the complaints on other grounds. 

87 Section 2 of the CEA states that ‘‘[t]he 

Commission shall have exclusive jurisdiction . . . 

with respect to accounts, agreements . . . and 

transactions involving contracts of sale of a 

commodity for future delivery, traded or executed 

on a contract market designated . . . pursuant to 

section 7 or 7a of this title’’ of the CEA. See CEA 

2(a)(1)(A); 7 U.S.C. 2(a)(1)(A). See e.g., MFA at 5 

(‘‘[Requesting] that the Commission propose and 

adopt a safe harbor provision or other appropriate 

exception from its rules confirming that nothing in 

its Section 811 rules would govern or apply . . . 

‘with respect to accounts, agreements . . . and 

transactions involving’ futures and options markets 

and other trading instruments which are subject to 

CFTC exclusive jurisdiction.’’); CFTC at 2 (‘‘[T]he 

FTC might also consider specifically excluding 

from a new rule the trading of futures on registered 

entities under the CEA, which are within the 

CFTC’s exclusive purview under that statute.’’). 

88 See, e.g., MFA at 3-4 (arguing that Congress 

enacted the CEA’s ‘‘exclusive jurisdiction’’

provision to ensure that CFTC regulations and the 

CEA would be the sole legal standards applied to 

U.S. futures trading); CFTC at 1 (‘‘The CFTC’s 

exclusive jurisdiction over trading in futures is 

based upon the concern that futures markets remain 

subject to a single, federal regulatory standard.’’). 

See also Flint Hills at 12 (arguing that a rule 

overlapping with the CFTC’s broad oversight over 

futures trading markets could subject market 

participants to ‘‘differing standards of conduct and 

multiple levels of liability’’); API at 14 (‘‘It is 

unnecessary and undesirable to overlay a parallel 

system of FTC regulation to address the same 

conduct and markets already subject to oversight by 

the CFTC.’’). 

89 See, e.g., Sutherland at 8 (arguing that private 

parties would be unfairly burdened by ‘‘multiple 

enforcement actions by federal agencies examining 

identical facts or suffer double jeopardy in terms of 

fines and disgorgement orders’’); ICE at 2 

(‘‘Duplicative enforcement and regulation is unduly 

burdensome and could possibly deprive market 

participants of due process.’’); NPGA at 2 (‘‘A 

flawed regulatory scheme may result in . . . 

penalties being cumulative and ultimately 

excessive.’’). 

90 See CEA 2(a)(1)(A) (CFTC exclusive 

jurisdiction is not intended to remove jurisdiction 

conferred to other agencies under other laws); FTC 

v. Ken Roberts Co., 276 F.3d 583, 593 (D.C. Cir. 

2001) (holding that the Commission’s authority 

under the FTC Act to investigate deceptive 

marketing of commodities trading courses did not 

conflict with the CFTC’s exclusive authority under 

CEA 2(a)(1)(A)); SEC v. Hopper, No. 04-1054, 2006 

U.S. Dist. LEXIS 17772, at *35 (S.D. Tex. Mar. 24, 

2006) (allowing the SEC to challenge fraudulent and 

deceptive energy trading transactions under Rule 

10b-5, despite assertions that the CFTC and FERC 

had exclusive jurisdiction to regulate commodities 

transactions and interstate wholesale electricity 

rates, respectively). Cf. CEA 9(a)(2), 7 U.S.C. 

13(a)(2) (making it unlawful for ‘‘[a]ny person to 

manipulate or attempt to manipulate the price of 

any commodity in interstate commerce’’); 7 U.S.C. 

13b (authorizing the CFTC to issue cease and desist 

orders against commodities price manipulation); 

United States v. Reliant Energy Serv., 420 F. Supp. 

2d 1043, 1062 (N.D. Cal. 2006) (holding that FERC’s 

exclusive jurisdiction to regulate wholesale 

electricity markets did not bar CFTC enforcement 

action against commodities price manipulation); 

Amaranth Advisors LLC, 120 F.E.R.C. ¶ 61,085; 

2007 FERC LEXIS 1463, at *52 (July 26, 2007) 

(show cause order) (observing that the ‘‘CFTC has 

jurisdiction over trading on its regulated exchanges 

[under the CEA], we have jurisdiction [under the 

EPAct 2005] over certain types of natural gas and 

electric markets, and where these markets are 

interconnected, both agencies have jurisdiction to 

prohibit market manipulation.’’). 

91 See Ken Roberts, 276 F.3d at 593 (‘‘[In] ‘an age 

of overlapping and concurring regulatory 

jurisdiction,’’’ declining to conclude ‘‘that one 

agency may not regulate merely because another 

may.’’) (citations omitted). 

92 Likewise, certain commenters urge the 

Commission to avoid any overlap with FERC 

authority to regulate certain energy markets. See, 

e.g., API at 15 n.26 (noting that a rule reaching oil 

pipelines would address conduct and markets 

already subject to FERC regulation); Plains at 1 

(‘‘FERC has extensive authority over oil pipelines 

and the adoption of an anti-manipulation provision 

applicable to these same entities by another 

regulatory authority creates a risk of conflicting and 

inconsistent standards, with resulting 

uncertainty.’’); AOPL at 12, 20 (arguing that the 

Commission should avoid conflicts of jurisdiction 

with FERC because the cost of inconsistent and 

overlapping enforcement standards would be 

substantial). FERC’s authority with respect to price 

manipulation in such markets is not exclusive, 

however, and would not preclude the Commission 

from promulgating an anti-manipulation rule that 

may reach conduct also subject to FERC’s authority. 

See United States v. Reliant Energy Serv., 420 F. 

Supp. 2d 1043 (N.D. Cal. 2006). 

With respect to banks, Commission 

jurisdiction under Section 5 of the FTC 

Act does not extend to ‘‘banks, savings 

and loan institutions described in 

section 57a(f)(3) of this title, [and] 

Federal credit unions described in 

section 57a(f)(4) of this title.’’81

Nevertheless, the Commission does 

have jurisdiction over entities affiliated 

with or contracting with banks that are 

not themselves banks.82 Whether any 

particular person would be exempt from 

the FTC Act or the proposed Rule as a 

‘‘bank’’ must be assessed on a case-bycase basis.83

As to non-profit organizations, 

although Commission jurisdiction under 

Section 5 of the FTC Act extends to 

‘‘corporations,’’ that term does not cover 

any organization that does not carry on 

business for its own profit or that of its 

members.84 The form of a corporation as 

a ‘‘non-profit’’ is not necessarily 

determinative, however. Organizations 

with both non-profit and for-profit 

activities may be subject to the FTC Act. 

For example, in California Dental Ass’n 

v. FTC,85 the Supreme Court held that 

the FTC Act applies to anti-competitive 

practices used by non-profit 

associations whose activities provide 

substantial economic benefits to the 

businesses of their for-profit members. 

Moreover, the Commission has asserted 

that its jurisdiction over ‘‘persons’’

under Section 5 of the FTC Act extends 

to nonprofit municipal corporations 

such as the City of New Orleans and the 

City of Minneapolis.86 Whether any 

particular person would be exempt from 

the FTC Act or the proposed Rule as a 

non-profit must be assessed on a caseby-case basis. 

Commenters argue that a safe harbor 

provision or other explicit exemption 

for the futures markets is necessary to 

avoid an overlap with the CFTC’s 

exclusive jurisdiction under Section 2 of 

the CEA.87 According to commenters, 

including the CFTC, such an overlap 

potentially would create duplicative or 

inconsistent regulatory requirements 

and thus undermine a uniform 

regulatory scheme that Congress sought 

to establish for the futures markets 

under the CEA.88 Several other 

commenters express concern that even 

if the Commission could avoid 

inconsistent regulatory requirements, 

market participants would still be 

unfairly burdened by duplicative 

enforcement.89

The Commission does not believe a 

safe harbor provision or exemption from 

the proposed Rule is warranted. CFTC 

authority over manipulation relating to 

commodities futures markets is not 

exclusive and, moreover, is separate 

from CFTC’s exclusive authority under 

CEA Section 2(a)(1)(A).90 The 

Commission believes the proper 

approach, and the one courts favor, is to 

give full effect to all statutory schemes 

that may address the conduct at issue 

here.91 Nothing in EISA itself indicates 

that Congress intended to exempt 

conduct in the futures markets from the 

reach of any rule that the Commission 

might promulgate under Section 811. 

Accordingly, the Commission believes 

that its proposed Rule proscribes 

manipulative or deceptive conduct in 

wholesale futures markets and it would 

not improperly intrude upon the 

jurisdiction of the CFTC or any other 

agency whose authority may overlap in 

whole or in part with respect to such 

activities.92

The proposed Rule is not intended to 

impose contradictory requirements on 

regulated entities in the futures markets 

or otherwise. To the extent, if any, that 

the proposed Rule’s requirements could 

duplicate requirements already 


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93 One commenter warns that poor coordination 

between the Commission and other agencies could 

lead to a situation wherein ‘‘multiple agencies may 

pursue certain potential violations, while other 

violations are left unchecked because each 

oversight agency expects or desires another to take 

the appropriate action.’’ NPGA at 2. To prevent 

such pitfalls of regulatory overlap, NPGA 

encourages the issuance of an Executive Order that 

clearly draws lines of jurisdiction among agencies. 

NPGA at 3. 

94 See, e.g., PMAA at 6 (urging the formation of 

a standing inter-agency task force on market 

manipulation charged with coordination and 

information sharing tasks); ISDA at 4 (encouraging 

the Commission to work with the CFTC to ensure 

that both agencies implement their antimanipulation enforcement programs in a 

coordinated and efficient manner); CFDR at 6 

(encouraging the Commission to work with the 

CFTC and FERC to adopt a clear anti-manipulation 

standard for the wholesale crude oil, gasoline and 

petroleum distillates markets); ICE at 2 (‘‘The 

Commission should coordinate with FERC and the 

CFTC to define their respective roles in the energy 

markets.’’); SIGMA at 10 (urging the Commission to 

coordinate its present rulemaking with the CFTC to 

‘‘ensure that regulated parties are governed 

appropriately’’); MFA at 22 (stating the Commission 

could avoid duplicative efforts if it developed a 

formal or informal arrangement to coordinate 

investigatory activities and even enforcement 

actions with the CFTC); Sutherland at 8 (urging the 

Commission and the CFTC to ‘‘develop clear rules 

as to which agency will assume jurisdiction when 

the futures and financial market conditions are not 

in issue’’). 

95 The Commission does not believe, as some 

commenters argue, that the terms in Section 811 

preclude the Commission from reaching supply 

decisions or services. See, e.g., API at 25-26 (urging 

the Commission to avoid construing the language of 

Section 811 to apply to supply decisions 

unconnected with a wholesale transaction); AOPL 

at 10 (arguing that EISA does not expressly cover 

‘‘transportation and related services provided by oil 

pipelines’’). 

96 Two commenters express concern about 

practices involving ethanol. TOMA at 2-3; IPMA at 

2-3. But see ISDA at 19 (encouraging the 

Commission to ‘‘exclude non-petroleum based 

ethanol products from the definition of petroleum 

distillates’’). 

97 See, e.g., Telemarketing Sales Rule, 16 CFR 

Part 310; Disclosure Requirements and Prohibitions 

Concerning Franchising, 16 CFR Part 436. 

98 73 FR at 25616 n.14. For a discussion of 

comments submitted on the scope of the 

application of the proposed rule, see Section II.B. 

established by other agencies for such 

markets, it would not impose additional 

compliance costs. Although the 

Commission acknowledges that 

different agencies could simultaneously 

initiate enforcement action with respect 

to the same activities, the Commission 

has had a longstanding practice of 

coordinating its enforcement efforts 

with agencies with which it shares 

overlapping jurisdiction.93 The 

Commission expects that it would 

continue that practice here, as feasible 

and appropriate, to ensure fairness to 

regulated entities and to conserve 

enforcement resources and maximize 

agency efficiency.94 The Commission 

seeks additional comments on the scope 

of persons covered by the proposed 

Rule. 

C. Section 317.2: Definitions 

The proposed Rule sets forth five 

definitions, adding precision to the 

following terms used in EISA: ‘‘crude 

oil;’’ ‘‘gasoline;’’ ‘‘person;’’ ‘‘petroleum 

distillates;’’ and ‘‘wholesale.’’ The 

proposed definitions establish the scope 

of the proposed Rule’s coverage and 

provide guidance as to the 

Commission’s intended enforcement of 

the proposed Rule. It is important to 

note, however, that Section 811 

prohibits manipulative or deceptive 

devices or contrivances ‘‘in connection 

with’’ the purchase or sale of the 

defined commodities at wholesale. As 

discussed in Section II.E.3 below, the 

proposed Rule would also reach 

manipulative conduct that extends 

beyond the defined terms if that 

conduct directly or indirectly impacts 

wholesale prices for the covered 

products.95 The Commission solicits 

comments on these proposed 

definitions, as well as any alternative or 

additional definitions, or other 

comments on this Section of the 

proposed Rule. 

1. Section 317.2(a): Crude oil 

The proposed Rule is intended to 

capture the direct or indirect use or 

employment of any manipulative or 

deceptive device or contrivance in 

connection with the wholesale purchase 

or sale of enumerated petroleum 

products, including crude oil. Section 

317.2(a) of the proposed Rule defines 

‘‘crude oil’’ to mean: ‘‘the mixture of 

hydrocarbons that exist: (1) in liquid 

phase in natural underground reservoirs 

and which remain liquid at atmospheric 

pressure after passing through 

separating facilities, or (2) as shale oil or 

tar sands requiring further processing 

for sale as a refinery feedstock.’’ As 

defined, ‘‘crude oil,’’ includes liquid 

crude oil and any hydrocarbon form that 

can be processed into a refinery 

feedstock. ‘‘Crude oil’’ does not include 

natural gas, natural gas liquids, or noncrude refinery feedstocks. 

2. Section 317.2(b): ‘‘Gasoline’’

The proposed Rule also covers the use 

or employment of any manipulative or 

deceptive device or contrivance in 

connection with the wholesale purchase 

or sale of ‘‘gasoline.’’ Section 317.2(b) of 

the proposed Rule defines ‘‘gasoline’’ to 

mean: ‘‘(1) finished gasoline, including, 

but not limited to, conventional, 

reformulated, and oxygenated blends, 

and (2) conventional and reformulated 

gasoline blendstock for oxygenate 

blending.’’ The proposed definition of 

‘‘gasoline’’ is intended to capture those 

commodities regularly traded as 

finished products or as products 

requiring only oxygenate blending to be 

finished. 

Manipulative or deceptive conduct 

involving non-petroleum based 

commodities that directly or indirectly 

affect the price of gasoline (e.g., ethanol, 

reformate, or alkylate that may be 

blended into the finished product) may 

be the subject of Commission 

enforcement under the proposed Rule.96

For example, although ethanol is 

excluded from the definition of 

‘‘gasoline,’’ the Commission believes 

that manipulation of ethanol may be 

covered under the proposed Rule where 

changes in ethanol prices directly or 

indirectly affect wholesale gasoline 

prices. 

3. Section 317.2(c): ‘‘Person’’

The proposed Rule makes it unlawful 

for any ‘‘person’’ to engage in 

manipulative or deceptive conduct in 

connection with the wholesale purchase 

or sale of the enumerated petroleum 

products. Section 317.2(c) defines the 

term ‘‘person’’ to mean: ‘‘any 

individual, group, unincorporated 

association, limited or general 

partnership, corporation, or other 

business entity.’’ This definition is 

identical to that used in other 

Commission rules,97 and is consistent 

with the jurisdictional reach of the FTC 

Act.98

4. Section 317.2(d): ‘‘Petroleum 

distillates’’

The proposed Rule also covers the use 

or employment of a manipulative or 

deceptive device or contrivance in 

connection with the wholesale purchase 

or sale of ‘‘petroleum distillates.’’

Section 317.2(d) of the proposed Rule 

defines ‘‘petroleum distillates’’ to mean: 

‘‘(1) jet fuels, including, but not limited 

to, all commercial and military 

specification jet fuels, and (2) diesel 

fuels and fuel oils, including, but not 

limited to, No. 1, No. 2, and No. 4 diesel 

fuel, and No. 1, No. 2, and No. 4 fuel 

oil.’’

‘‘Petroleum distillates’’ include the 

middle distillate refinery streams from 

heavy fuel oils to lighter products such 

as on-road diesel, heating oil, and 

kerosene-based jet fuels. Similar to the 

Commission’s proposed definition of 

‘‘gasoline,’’ the definition of ‘‘petroleum 

distillates’’ is limited to finished fuel 

products, other than ‘‘gasoline’’

produced at a refinery or blended in 

tank at a terminal. The proposed 

definition of ‘‘petroleum distillates’’

also responds to the request of ANPR 

commenters that the Commission 


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99 See, e.g., MFA at 2 n.2 (encouraging the 

Commission to define the term ‘‘petroleum 

distillate’’); API at 23 n.42 (proposing that the 

definition of ‘‘petroleum distillates’’ include diesel, 

kerosene, jet fuel, and home heating oil); ISDA at 

19 (proposing that the definition of ‘‘petroleum 

distillates’’ include diesel, home heating oil, and jet 

fuel). 

100 See, e.g., CFDR at 3 n.1; PMAA at 4-5. 

101 API at 24-25. See also PMAA at 4-5 (urging 

the Commission to exclude activities that occur at 

the terminal rack level). 

102 (http://www.eia.doe.gov/glossary/ 

glossary_w.htm). 

103 (http://dictionary.reference.com/browse/ 

wholesale). 

104 See, e.g., Dennis v. United States, 384 U.S. 

855, 861 (1966) (noting that fraud within the 

meaning of a statute need not be confined to the 

common law definition of fraud: any false 

statement, misrepresentation or deceit may suffice). 

105 TSC Indus., Inc. v. Northway, Inc., 426 U.S. 

438 (1976) sets forth the ‘‘total mix’’ or ‘‘substantial 

likelihood’’ test of materiality: a substantial 

likelihood that the disclosure of the omitted fact 

would have been viewed by a reasonable investor 

as having significantly altered the total mix of 

information made available. Accord Basic, Inc. v. 

Levinson, 485 U.S. 224, 231-2 (1988) (adopting TSC 

Indus. test for materiality in Section 10(b) and Rule 

10b-5 context). 

106 Basic, Inc. 485 U.S. at 234. 

107 Id. at 238. 

108 See Folger Adam Co. v. PMI Indus., Inc., 938 

F.2d 1529, 1534 (2d Cir. 1991), cert. denied, 502 

U.S. 983 (1991). 

109 API at 50; Plains at 4; PMAA at 7 (urging the 

Commission to prohibit the dissemination of false 

or misleading information made with the intent to 

defraud). 

110 Congress recognized the importance of 

truthful reporting by adopting Section 812 of EISA, 

which prohibits false reporting to the government. 

42 U.S.C. 17302. See Platts at 2 (‘‘Confidence in 

price discovery processes is vital for market 

participants, regulators and the public alike . . . .’’). 

specifically define the term ‘‘petroleum 

distillates’’ more precisely.99

5. Section 317.2(e): ‘‘Wholesale’’

As previously noted, the proposed 

Rule prohibits the use or employment of 

a manipulative or deceptive device or 

contrivance in connection with the 

wholesale purchase or sale of 

enumerated petroleum products —

crude oil, gasoline, and petroleum 

distillates. The proposed Rule defines 

the term ‘‘wholesale’’ to mean: 

‘‘purchases or sales at the terminal rack 

level or upstream of the terminal rack 

level. Transactions conducted at 

wholesale do not include retail gasoline 

sales to consumers.’’

This definition is intended to make it 

clear that the proposed Rule would 

apply to any conduct that directly or 

indirectly affects market prices of an 

enumerated petroleum product at the 

terminal rack level or upstream of the 

terminal rack level.100 The proposed 

definition of ‘‘wholesale’’ also makes 

explicit that the proposed Rule does not 

apply to ordinary sales of gasoline or 

other covered products to consumers at 

gasoline stations or other retail 

establishments. 

The Commission disagrees with 

commenters that define wholesale to 

exclude transactions at the terminal rack 

level. API, for example, asserts that 

wholesale transactions should not 

include terminal rack transactions, 

Dealer Tankwagon sales to dealers, and 

other terminal-level sales.101 The 

Department of Energy’s Energy 

Information Administration (‘‘EIA’’), 

however, defines a ‘‘wholesale price’’ to 

include rack prices.102 Moreover, a 

common definition of ‘‘wholesale’’ is 

‘‘the sale of goods in quantity, as to 

retailers or jobbers, for resale.’’103

Accordingly, the Commission believes it 

is appropriate for the proposed Rule to 

cover transactions at the terminal level. 

D. Section 317.3: Prohibited Practices 

The Commission intends its proposed 

Rule to prohibit manipulative or 

deceptive conduct in connection with 

the purchase or sale of crude oil, 

gasoline, or petroleum distillates at 

wholesale. Specifically, Section 317.3 

states: 

It shall be unlawful for any 

person, directly or indirectly, in 

connection with the purchase or 

sale of crude oil, gasoline, or 

petroleum distillates at wholesale, 

(a) To use or employ any device, 

scheme, or artifice to defraud, 

(b) To make any untrue statement 

of a material fact or to omit to state 

a material fact necessary in order to 

make the statements made, in the 

light of the circumstances under 

which they were made, not 

misleading, or 

(c) To engage in any act, practice, 

or course of business that operates 

or would operate as a fraud or 

deceit upon any person. 

1. Section 317.3(a): Device, scheme, or 

artifice to defraud 

Section 317.3(a) prohibits the use or 

employment of any ‘‘device, scheme, or 

artifice to defraud.’’ As noted before, 

this language is derived from SEA 

Section 10(b) and SEC Rule 10b-5. It is 

intended to be a broad anti-fraud 

provision that will enable the 

Commission to police all forms of fraud 

and manipulation that affect wholesale 

petroleum markets. At the same time, 

the term ‘‘fraud’’ is not intended to 

cover every act that happens to affect a 

wholesale market for petroleum. Rather, 

as discussed in greater detail in the 

required elements section of this NPRM, 

it covers intentional acts that obstruct or 

impair wholesale petroleum markets.104

Determining whether specific conduct 

constitutes fraud is a question of fact 

that requires a case-by-case 

determination in light of all the 

circumstances. 

2. Section 317.3(b): False material facts 

and omissions of material fact 

Section 317.3(b) of the proposed Rule 

prohibits covered entities from 

misrepresenting, and in some instances 

omitting, material information in a 

wholesale petroleum market. Consistent 

with securities law, a fact is material if 

there is a substantial likelihood that a 

reasonable market participant would 

consider it in making its decision to 

transact because the material fact 

significantly alters the total mix of 

information available.105 As the 

Supreme Court has stated, ‘‘[t]he role of 

the materiality requirement is . . . to 

filter out essentially useless information 

that a reasonable investor would not 

consider significant, even as part of a 

larger ‘mix’ of factors to consider in 

making his investment decision.’’106

Thus, it is often not enough simply to 

show that a particular statement is false 

or incomplete if the misrepresented fact 

is otherwise insignificant.107 However, 

under securities law precedent, it is not 

necessary to prove that an investor 

would have acted differently if he or she 

had known the actual truth of the 

matter.108

a. Misrepresentations of material fact 

One type of misrepresentation of 

material fact captured by the proposed 

Rule is the reporting of false or 

misleading information to government 

agencies, to third-party reporting 

services, and to the public through 

corporate announcements. Many 

commenters agree that this type of 

behavior is problematic because 

industry participants rely on such 

market information to conduct business 

transactions.109 For example, false or 

deceptive announcements by refiners or 

pipelines, in particular, are likely to 

have an adverse impact on the market 

and the pricing of petroleum products, 

thereby harming market participants 

and ultimately consumers, because of 

the close attention paid to even slight 

changes in supply or inventory. 

Similarly, the reporting of false or 

misleading information to private data 

reporting services may have an impact 

on market prices and supply 

decisions.110

b. Omissions of material information 

Section 317.3(b) imposes no general 

duty upon covered entities to disclose 

information such as cost and volume 

data. Nonetheless, Section 317.3(b) 

prohibits omissions of material fact that 


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111 Based on securities law precedent, the 

relevant time period for determining materiality is 

at the time of the statement or omission, and not 

in hindsight. See Ganino v. Citizens Utils. Co., 228 

F.3d 154, 165 (2d Cir. 2000). 

112 71 FR at 4252. 

113 See id. 

114 Id. 

115 Id. 

116 Several commenters state that a firm’s supply 

decisions could be considered manipulative or 

deceptive, but only under limited circumstances. 

For example, IER recommends that the Commission 

reach supply decisions only if they are fraudulent, 

but it does not recommend new rules. IER at 4. 

Sutherland asserts that the only circumstance in 

which a firm’s market supply decisions could be 

considered manipulative is if there is evidence of 

both ‘‘a specific intent to manipulate a properly 

defined market [which the Commission can 

properly define, ‘‘given its long experience under 

the antitrust laws.’’] and the power to do so.’’

Sutherland at 5 & n.9. Likewise, ISDA states that a 

rule should reach only supply decisions involving 

intentional deceptive or anticompetitive conduct 

resulting in manipulated prices. ISDA at 17. 

By contrast, many commenters oppose any 

attempt to regulate supply decisions. ABA, Flint 

Hills, and API contend that regulation of supply 

decisions should be beyond the authority of Section 

811. ABA at 6-7; API at 47. See also Flint Hills at 

19 (‘‘The idea that the Commission can regulate 

business decisions about how much petroleum to 

sell, to whom to sell it, and at what price is 

misguided and potentially dangerous.’’); Plains at 2- 

3 (FTC should not impose a duty to supply). ABA 

asserts that the antitrust laws are the best vehicle 

for determining the circumstances in which 

unilateral supply decisions should be lawful or 

unlawful. ABA at 6-7. Moreover, ABA, API, and 

Flint Hills suggest that it would be difficult for the 

Commission to regulate such complex supply 

decisions. ABA at 6-7; API at 43-44; Flint Hills at 

20. 

Similarly, several commenters assert that the 

Commission should not regulate supply decisions 

after natural disasters or require firms to release 

inventory during price spikes. IER, Flint Hills, 

ABA, and API describe the need for markets to 

respond freely to natural disasters. IER at 8; Flint 

Hills at 21; ABA at 7; API at 42-43. ABA and API 

note the aftermath of Hurricanes Katrina and Rita 

as an example of the petroleum industry’s quick 

response to a product shortage after a natural 

disaster. They assert that high prices were shortlived due to the industry’s quick response. ABA at 

7 n.20; API at 42-43. 

117 Several commenters, API, AOPL, and Plains, 

oppose any rule imposing a duty to provide access 

to terminals or pipelines, because a terminal or 

common carrier pipeline operator may have 

legitimate business reasons for denying access to 

third parties, or because FERC already regulates 

such access and terms of access. API at 15 n.26, 51- 

52; AOPL at 25-27; Plains at 3. By contrast, Navajo 

Nation contends that a denial of pipeline access or 

to ‘‘exchange transportation’’ can result in an 

artificial limitation on a crude producer’s ability to 

reach refineries, which may depress prices, thereby 

reducing output and discouraging investment to 

expand crude production. Navajo Nation proposes 

that the Commission adopt a rule ‘‘prohibiting an 

owner-operator of an interstate pipeline from 

denying a request for either actual physical 

transportation or exchange transportation on the 

pipeline when the owner-operator or its affiliate is 

an actual or potential purchaser or consumer of the 

crude oil supplied by the requesting party,’’ unless 

the owner-operator can provide an enumerated 

defense. Navajo Nation at 5-7. 

118 Some commenters observe that the SEC has 

broad authority to regulate the sale of and trade in 

securities, including imposing disclosure 

requirements. They voice concern that, by basing 

the proposed Rule on Section 10(b) and Rule 10b5, the Commission is adopting the SEC’s disclosure 

requirements as well. Although the proposed Rule 

is based on SEC law, the Commission is invoking 

only the SEC’s anti-fraud provisions, not the entire 

body of SEC law in the proposed Rule. In a similar 

vein, the Commission chooses not to include any 

record-keeping requirement in the proposed Rule. 

See, e.g., API at 20 (arguing that the Commission 

‘‘should not create new disclosure obligations 

similar to those imposed on securities market 

participants by SEC regulations’’). 

are necessary to ensure that a previously 

made statement is not misleading.111

Accordingly, there may be a violation of 

Section 317.3(b) if a covered entity 

voluntarily provides information — or is 

compelled to provide information by 

statute, order, or regulation — but then 

fails to disclose a material fact, thereby 

making the information provided 

misleading. 

3. Section 317.3(c): Conduct operating 

as a fraud or deceit 

Section 317.3(c) of the proposed Rule 

prohibits any act, practice, or course of 

business that ‘‘operates or would 

operate as a fraud or deceit.’’ This 

provision, also modeled after SEC Rule 

10b-5, is intended to be a catch-all 

provision that prohibits any other 

conduct that constitutes a fraud on 

wholesale petroleum markets. 

In proposing this language —

‘‘operates as a fraud’’ — the Commission 

is mindful of objections raised to the 

identical language used in the FERC 

market manipulation rulemaking 

proceeding. A few commenters to 

FERC’s proposed rule questioned 

whether the phrase ‘‘would operate as a 

fraud’’ implied that no scienter is 

required, and some urged FERC 

specifically to add a scienter 

requirement to this language in the 

FERC rule.112 Following FERC’s 

analysis, the Commission stresses that 

the phrase ‘‘would operate as a fraud’’

is to be read consistently with securities 

law precedent, meaning that there can 

be no law violation without a showing 

of scienter.113 Commenters to the FERC 

proceeding also questioned whether this 

language in the FERC rule is necessary 

in light of the anti-fraud language in the 

first section of the FERC rule, which is 

the same language used in proposed 

Rule Section 317.3(a).114 FERC noted in 

its final rule that the SEC brings 

numerous cases under this language in 

SEC Rule 10b-5, and removing this 

language from the FERC rule would 

‘‘create uncertainty by distinguishing 

the final rule from SEC Rule 10b-5 as to 

render analogous securities law 

precedent inapplicable.’’115 That same 

reasoning applies here as well. 

Consequently, the Commission has 

tentatively decided to include 

subsection (c) (prohibiting conduct 

operating as a fraud or deceit) in the 

proposed Rule. 

4. Section 317.3 imposes no affirmative 

duties or obligations upon covered 

entities 

Based upon the comments and its 

own experience, the Commission 

chooses at this time not to propose any 

specific conduct obligations, such as a 

duty to supply, provide access, or 

disclose. The Commission in the ANPR 

requested comment on whether specific 

types of conduct should be prohibited 

by an anti-manipulation rule. In 

response, commenters generally oppose 

requiring specific conduct standards 

and focus their comments instead upon 

whether there should be a duty to: (1) 

supply product;116 (2) provide access to 

terminals or pipelines;117 or (3) disclose 

information.118 The Commission agrees 

with commenters that the market is 

generally the best determiner of supply 

and demand decisions. The Commission 

does not, however, foreclose the 

possibility that facts and circumstances 

may lead it to find that a decision to 

withhold supply or access that 

otherwise meets the requirements of the 

proposed Rule violates the proposed 

Rule. 

The Commission seeks comments on 

the foregoing, and specifically on the 

use of the SEC 10b-5 Rule as a model 

for the conduct prohibitions in the 

proposed Rule. 

E. Elements of Proof Under a Rule 

Promulgated Pursuant to EISA 

The Commission believes that 

clarifying the elements of a violation 

under the proposed Rule will reduce 

regulatory uncertainty and assure 

greater compliance. In doing so, the 

Commission has looked to SEC 

precedent for guidance in the 

application of the proposed Rule. The 

Commission has determined that it 

would not likely act except in cases 

where an entity: (1) uses a fraudulent 

device, scheme or artifice, or makes a 

material misrepresentation or a material 

omission, or engages in any act, 

practice, or course of business that 

operates or would operate as a fraud or 

deceit upon any entity; (2) with scienter; 

and (3) in connection with the purchase 

or sale of crude oil, gasoline, or 

petroleum distillates at wholesale. 

These elements track the elements 

that courts have prescribed under SEC 


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119 The elements are also similar to those that 

FERC adopted for its final market manipulation 

rule. See 71 FR at 4253. 

120 Geman v. SEC, 334 F.3d 1183, 1192 (10th Cir. 

2003); SEC v. C. Jones & Co., 312 F. Supp. 2d 1375, 

1379 (D. Colo. 2004); SEC v. Autocorp Equities, Inc., 

292 F. Supp. 2d 1310, 1318 (D. Utah 2003); SEA, 

10(b), 15 U.S.C. 78j(b); 17 CFR 240.10b-5. 

121 SEC v. Credit Bancorp, Ltd., 195 F. Supp. 2d 

475, 490-91 (S.D.N.Y. 2002) (citing SEC v. North 

Am. Research & Dev. Corp., 424 F.2d 63, 84 (2d Cir. 

1970)). See also SEC v. Todt, 2000 U.S. Dist. LEXIS 

2087, at *27 (S.D.N.Y. Feb. 25, 2000), aff’d, 2001 

U.S. App. LEXIS 6042 (2d Cir. 2001); SEC v. Norton, 

1997 U.S. Dist. LEXIS 15167, at * 9 n.2 (S.D.N.Y. 

Oct. 3, 1997); 71 FR 4244, 4253; 3 Thomas Lee 

Hazen, Treatise on the Law of Securities Regulation 

12.1 (5th ed. 2005) (‘‘[A] successful government 

prosecution does not depend on a showing the 

price was actually driven above or below the 

security’s fair value. It is sufficient to establish that 

the manipulator engaged in conduct calculated to 

artificially affect the security’s price. However, in 

the context of private suit, an actual effect on price 

must be shown.’’ (emphasis added)). 

122 SEC v. Credit Bancorp, Ltd., 195 F. Supp. 2d 

at 491 (quoting Berko v. SEC, 316 F.2d 137, 143 (2d 

Cir. 1963), and citing SEC v. North American 

Research & Dev. Corp., 424 F.2d 63, 84 (2d Cir. 

1970) (reliance not an element of a Rule 10b-5 claim 

in the context of an SEC proceeding)). Similarly, the 

government need not demonstrate specific reliance 

by the investor in a criminal prosecution for 

securities fraud, although it must show that the 

scheme at issue had some impact on the investor. 

See United States v. Ashdown, 509 F.2d 793, 799 

(5th Cir. 1975); United States v. Schaefer, 299 F.2d 

625, 629 (7th Cir. 1962). Although reliance, loss 

causation, and damages are not necessary for a 

violation of the proposed Rule, the Commission, 

like FERC, has determined that these elements will 

inform the assessment of any remedies, such as 

disgorgement or civil penalties, that may be 

appropriate under the circumstances. See 71 FR at 

4253 n.102. 

123 Although not explicitly in its rule, FERC 

included an intent requirement in its interpretation 

of its rule, noting that ‘‘[t]he final rule is not 

intended to regulate negligent practices or corporate 

mismanagement, but rather to deter or punish fraud 

in wholesale energy markets.’’ 71 FR at 4245-4246. 

See also, e.g., SIGMA at 6 (asserting that any rule 

proposed under Section 811, like the FERC rule, 

‘‘cannot ‘regulate negligent practices or . . . 

mismanagement but rather [are meant] . . . to deter 

or punish fraud.’’’). 

124 Tellabs, Inc. v. Makor Issues & Rights, Ltd., 

127 S.Ct. 2499, 2507 (June 21, 2007) (quoting Ernst 

& Ernst v. Hochfelder, 425 U.S. 185, 193-194 & n.12 

(1976)); Ernst & Ernst, 425 U.S. at 197. In Ernst & 

Ernst, the Court continued that the terms 

‘‘‘manipulative,’ ‘device,’ and ‘contrivance’ . . . 

make unmistakable a congressional intent to 

proscribe a type of conduct quite different from 

negligence.’’ Ernst & Ernst, 425 U.S. at 199. See also 

Schreiber v. Burlington Northern, Inc., 472 U.S. 1, 

6-7 (1985); Santa Fe Indus., Inc. v. Green, 430 U.S. 

462, 476 (1977). See, e.g., API at 28 (stating that 

‘manipulative’ and ‘deceptive,’ as found in SEA 

Section 10(b), are generally understood to denote 

conduct that is deliberately intended to deceive); 

ISDA at 7-8 (arguing that through Section 10(b), 

‘‘Congress intended to prohibit only knowing or 

intentional misconduct’’); CFDR at 13 (arguing that 

Section 10(b) does not embrace a lesser standard 

than specific intent). 

125 See, e.g., API at 27 (urging the Commission 

to adopt a specific intent standard); CAPP at 3 

(stating ‘‘that intent or state of mind should be 

made an essential element of prohibited conduct’’); 

ISDA at 7 (urging the Commission to require 

specific intent); CFDR at 7 (‘‘Manipulation should 

require proof of intentionally or recklessly 

deceptive conduct.’’); SIGMA at 3 (stating that any 

Section 811 rule ‘‘must have a strict scienter 

requirement’’); Muris at 11 (‘‘In any manipulation 

rule, the Commission should require specific intent 

. . . .’’); PMAA at 4 (encouraging the Commission 

to include a scienter requirement). But see, e.g., 

NPGA at 4-5 (arguing that the rule should not 

include a scienter requirement). 

126 See, e.g., SIGMA at 6 (‘‘[T]he Commission’s 

authority rests on identical language to that of 

[Section] 10(b) . . . .’’); API at 17 (arguing that 

Section 811’s prohibitive language is derived from 

Section 10(b)); CFDR at 3 (‘‘[T]he language of 

Section 811 is effectively identical to the antimanipulation proscriptions found in Section 10(b) 

. . . .’’). 

127 Tellabs, Inc., 127 S.Ct. at 2507 (quoting Ernst 

& Ernst, 425 U.S. at 193-194 & n.12); accord e.g., 

API at 2, 28-29. 

128 Moreover, the legislative materials cited above 

support the view that when Congress enacted 

Section 811, it chose this language in order to 

encourage the Commission to incorporate the 

scienter requirement into any rule promulgated 

under Section 811. See, e.g., SIGMA at 4 (‘‘As it 

regards [Section] 811 of EISA, Congress plainly 

chose language that it has previously used in the 

context of the securities laws, knowing that the 

Court implies such usage to connote a strict scienter 

requirement.’’); ISDA at 7 (‘‘In enacting Section 811 

. . . Congress used the same language . . . that it 

has used in other contexts and that courts 

consistently have interpreted to require scienter . . 

. .’’); API at 17-18 (arguing that Congress made a 

‘‘conscious decision to model Section 811’’ on the 

precedents of Section 10(b) and the EPAct 2005). 

129 Some commenters note that, although a 

recklessness standard makes sense in the highly 

regulated securities markets characterized by 

fiduciary duties imposed on brokers and issuers 

and by a variety of disclosure obligations, it should 

not suffice to satisfy the scienter requirement with 

respect to transactions in physical commodities 

markets such as petroleum wholesale markets that 

lack similar disclosure obligations and fiduciary 

duties. See, e.g. API at 30 (‘‘Importing a 

‘recklessness’ standard from the highly regulated 

securities markets into unregulated petroleum 

wholesale markets would create new market 

uncertainty.’’); ISDA at 9 (stating that a recklessness 

standard ‘‘is not appropriate in the wholesale, 

physical Petroleum Products markets . . . .’’). See 

also, e.g., SIGMA at 5 (arguing that allowing 

recklessness to satisfy the scienter requirement of 

Section 811 would ‘‘[make] the rule an open ended 

invitation to litigate any grievance’’). 

130 Tellabs, Inc., 127 S. Ct. at 2507 n.3 (citing 

Ernst & Ernst, 425 U.S. at 194 n.12); Ottman v. 

Hunger Orthopedic Group, Inc., 353 F.3d 338, 343 

Rule 10b-5.119 Specifically, in 

enforcement actions under Rule 10b-5, 

the SEC must show: (1) a material 

misrepresentation; (2) in connection 

with the purchase or sale of a security; 

(3) scienter; and (4) use of the 

jurisdictional means.120 The SEC does 

not need to prove investor reliance, loss 

causation, or damages (or harm)121

because ‘‘the [SEC’s] duty is to enforce 

the remedial and preventive terms of the 

statute in the public interest, and not 

merely to police those whose plain 

violations have already caused 

demonstrable loss or injury.’’122

1. The first element is a showing of 

manipulative conduct 

Under the first element, the 

Commission would need to show a 

completed manipulative or deceptive 

act. A manipulative or deceptive act is 

one that injects information that is 

materially false, misleading, or 

deceptive into the marketplace. For 

example, providing information that is 

false or misleading to companies that 

report details of transactions to the 

industry, such as price reporting 

services, would satisfy this element. 

Uncompleted acts would not be 

sufficient, however. For example, 

preparing false or misleading data for a 

reporting service but not actually 

transmitting it would not likely satisfy 

this element. Preparing a public 

announcement containing false or 

misleading information about sales or 

available supplies — but not actually 

making the announcement — also 

would not likely satisfy this element. 

2. The second element is a showing of 

scienter 

Under the second element, the 

Commission would need to show 

scienter.123 As discussed below, a 

scienter requirement parallels securities 

law precedent124 and would help to 

ensure that the proposed Rule does not 

chill competitive behavior. Several 

commenters support such a 

requirement.125

As an initial matter, the conduct 

addressed by Section 811 — use or 

employment of a manipulative or 

deceptive device or contrivance — is 

substantially similar to the conduct 

prohibited by Section 10(b) of the 

SEA.126 The Supreme Court has 

determined that this Section 10(b) 

language connotes ‘‘intentional or 

willful conduct that is designed to 

deceive or defraud,’’ and has concluded, 

therefore, that a violation of SEA 

Section 10(b) and Rule 10b-5 requires 

scienter; that is, ‘‘a mental state 

embracing intent to deceive, 

manipulate, or defraud.’’127 As several 

commenters argue, SEA Section 10(b) 

provides the most directly relevant 

precedents for analyzing the market 

manipulation standard of Section 

811.128

Moreover, the Commission believes a 

showing of recklessness would satisfy 

the scienter element.129 This proposal is 

consistent with the legal and regulatory 

precedent governing SEC Rule 10b-5. As 

the Supreme Court has noted, ‘‘[e]very 

Court of Appeals that has considered 

the issue [of civil liability under SEA 

Section 10(b) and Rule 10b-5] has held 

that a plaintiff may meet the scienter 

requirement by showing that the 

defendant acted intentionally or 

recklessly, though the Circuits differ on 

the degree of recklessness.’’130


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(4th Cir. 2003) (collecting Court of Appeals cases). 

Note, however, the Supreme Court has reserved the 

question whether reckless behavior is, in fact, 

sufficient for civil liability under SEA Section 10(b) 

and Rule 10b-5. See Tellabs. Inc., 127 S. Ct. at 2507 

n.3. 

131 Sundstrand Corp. v. Sun Chemical Corp., 553 

F. 2d 1033, 1045 (7th Cir. 1977), cert. denied, 434 

U.S. 875 (1977) (quoting Franke v. Midwestern 

Oklahoma Development Authority, CCH Fed. Sec. 

L. Rep. [*] 95,786 at 90,850 (W.D. Okl. 1976)). 

132 SEC v. Steadman, 967 F.2d 636, 641-42 (D.C. 

Cir. 1992) (citingSundstrand Corp., 553 F.2d at 

1045). 

133 42 U.S.C. 17301. See SEC v. Zanford, 535 U.S. 

813, 820 (2002); Superintendent of Ins. of State of 

N.Y. v. Bankers Life & Cas. Co., 404 U.S. 6, 12-13 

(1971) (holding that the ‘‘in connection with’’

requirement was met because the plaintiff had 

‘‘suffered an injury as a result of deceptive practices 

touching its sale of securities.’’). See also Merrill 

Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 

U.S. 71, 85 (2006) (‘‘Moreover, when this court has 

sought to give meaning to the phrase [‘in 

connection with’] in the context of [Section] 10(b) 

and Rule 10b-5, it has espoused a broad 

interpretation.’’). 134 See Zanford, 535 U.S. at 820. 135 CAPP at 4. Other commenters raise questions 

that relate more to wholesale purchase and sale 

transactions. See, e.g. API at 26-27 (asserting that 

Section 811 should not apply to over-the-counter 

derivatives contracts); Hess at 10-11 (arguing that 

futures and over-the-counter markets should not be 

regulated by the Commission); ISDA at 5 (stating 

that a Commission market manipulation rule 

should not apply to futures transactions); PMAA at 

4-5 (arguing that regulations should not apply to 

‘‘participants or activities’’ that occur below the 

rack). 

136 API at 25 (asserting that ‘‘Section 811 . . . 

should not apply to supply decisions that are 

unconnected to [wholesale petroleum 

transactions]’’). API lists various supply decisions 

it does not believe should be covered under the ‘‘in 

connection with’’ requirement, including: ‘‘refining 

decisions, facility maintenance and upgrades, [and] 

the management of inventory levels.’’ API at 25-26. 

137 MFA at 6-12; CFDR at 6 n.4; Hess at 12 n.10; 

CFTC at 1-2; API at 3, 26-27; ISDA at 5 n.9. These 

comments are addressed above in Section II.B. 

138 The enabling statute is clear: ‘‘It is unlawful 

. . . to use or employ . . . any manipulative or 

deceptive device or contrivance.’’ 42 U.S.C. 17301. 139 Not requiring proof of effects as an element 

is consistent with precedent established under SEC 

Rule 10b-5. See generally United States v. Smith, 

155 F.3d 1051, 1063 (9th Cir. 1988); see also SEC 

v. Fehn, 97 F.3d 1276, 1289 (9th Cir. 1996). 140 See United States v. Hall, 48 F. Supp. 2d 386, 

387 (S.D.N.Y. 1999) (‘‘Whether the price of a stock 

is ‘artificial’ does not turn on whether the stock is 

trading above or below its ‘true worth.’ Rather, the 

trading price of a stock is determined by available 

information and market forces, and a stock is 

trading at an ‘artificial level’ when it is trading at 

a level above what market forces would otherwise 

dictate.’’). See also CAPP at 1 (‘‘CAPP recognizes 

that fraud and manipulation pose a potential threat 

to the successful and efficient functioning of 

petroleum markets in North America.’’); MFA at 1 

(‘‘Price manipulation has a corrosive effect on the 

proper functioning of any market.’’). 

141 While the Commission does not intend to 

require discernible price effects as an element of a 

rule violation, it will, nevertheless, consider the 

extent of any price effects or other harm resulting 

from the market manipulation in assessing a civil 

penalty. 

142 See, e.g., API at 53 (stating that the artificial 

price concept is difficult to apply to petroleum 

Continued 

Indeed, the Courts of Appeals have 

adopted a number of different 

formulations as to precisely what 

constitutes recklessness. Thus, for 

example, the Court of Appeals for the 

Seventh Circuit has defined reckless 

conduct as a 

highly unreasonable [act or] 

omission, involving not merely 

simple, or even inexcusable 

negligence, but an extreme 

departure from the standards of 

ordinary care, and which presents a 

danger of misleading buyers or 

sellers that is either known to the 

defendant or is so obvious that the 

actor must have been aware of it.131

More recently, the Court of Appeals 

for the District of Columbia Circuit has 

relied upon Sundstrand Corp. to 

conclude that establishing recklessness 

requires evidence from which it can be 

reasonably inferred that the violator 

both acted with an extreme departure 

from standards of ordinary care and 

either knew or must have known that its 

conduct created a danger of misleading 

buyers or sellers.132 The Commission 

believes that a recklessness standard as 

articulated by the Seventh and District 

of Columbia Circuits would be adequate 

to establish scienter for any future 

violation. 

3. The third element is that a person 

engage in conduct ‘‘in connection with’’

the purchase or sale of a covered 

commodity at wholesale 

Finally, under the third element, the 

Commission would need to show a 

nexus between the manipulative 

conduct and the purchase or sale of 

crude oil, gasoline, or petroleum 

distillates at wholesale. Guided by 

Supreme Court precedent in the 

securities area, the Commission 

interprets the phrase ‘‘in connection 

with’’ as requiring fraudulent conduct to 

coincide with a purchase or sale of 

crude oil, gasoline, or petroleum 

distillates at wholesale.133 At the same 

time, the Commission does not interpret 

the ‘‘in connection with’’ requirement 

so broadly as to turn every common law 

fraud that happens to touch a purchase 

or sale of a covered or uncovered 

petroleum product into a rule 

violation.134 Specifically, the proposed 

Rule would reach manipulative conduct 

that extends beyond the defined terms 

if that conduct directly or indirectly 

impacts wholesale prices for the 

covered products. 

In response to the ANPR, some 

commenters urge the Commission not to 

apply the ‘‘in connection with’’

requirement to specific types of 

conduct. For example, CAPP suggests 

that the Commission not construe ‘‘in 

connection with’’ to cover importing 

crude oil,135 while API argues that the 

Commission not construe ‘‘in 

connection with’’ to refer to supply 

decisions.136 Other commenters take the 

position that the Commission should 

interpret ‘‘in connection with’’ to 

exempt transactions not within the 

Commission’s jurisdiction, specifically 

commodity trading, because those 

transactions, they assert, are within the 

exclusive jurisdiction of the CFTC.137

The Commission disagrees. The 

Commission may enforce the proposed 

Rule if the conduct directly or indirectly 

affects a covered wholesale petroleum 

transaction within the Commissions’s 

jurisdiction — in this matter, a purchase 

or sale of crude oil, gasoline, or 

petroleum distillates. Therefore, any 

conduct that is done in connection with 

the wholesale purchase or sale of a 

covered or uncovered product —

including importing covered or 

uncovered products and making supply 

decisions related to covered or 

uncovered products — could be subject 

to the proposed Rule. 

4. A showing of price effects is not an 

element of a cause of action 

The Commission does not intend to 

require proof of effects as an element of 

a cause of action. First, a plain reading 

of EISA does not require such proof. 

Section 811 prohibits the ‘‘use or 

employment’’ of any manipulative or 

deceptive device or contrivance.138 The 

proposed Rule would be violated at the 

stage when the actor uses or employs a 

manipulative or deceptive device or 

contrivance — whether or not those 

actions can be shown to result in 

discernible price effects. Nothing in the 

statute or proposed Rule suggests that 

manipulative or deceptive conduct must 

result in identifiable price effects before 

such conduct is culpable.139

Second, there is no economic 

justification for fraud or deception in an 

exchange economy. Thus, harm to the 

market can be inferred. Fraudulent 

behavior interferes with market signals, 

reduces transparency in the market, and 

casts into doubt the very information 

that allows markets to function 

properly.140 There is no need to 

determine separately whether there is 

evidence of harm; therefore, requiring 

proof of price effects is unnecessary.141

Third, the Commission believes that 

requiring a showing of price effects 

raises an unnecessary risk of regulatory 

error. Prices of commodity products 

such as petroleum are inherently 

volatile and are a function of many 

factors.142 The Commission’s 


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markets because petroleum markets, in contrast to 

futures markets, use many non-standardized 

contracts); ISDA at 15-16 (stating that the artificial 

price standard ‘‘has proven to be very difficult to 

understand and apply in practice’’). 

143 The practical difficulty in discerning 

accurately what constitutes an artificial price is 

discussed by the ABA. ABA at 7 (‘‘[D]etermining 

what supply allocations and price levels would 

most benefit consumers over the long run would be 

impossible for the FTC or any regulator in this 

complex industry.’’); see also IER at 4 (arguing that 

regulators should not second-guess the decisions of 

market participants in the petroleum industry 

because it could lead to ‘‘an inefficient amount of 

risk-taking among producers.’’); Muris at 8 

(‘‘Judgments about the ‘right’ mix of sales and 

distribution are beyond the capacity of any 

individual or organization to make accurately. That, 

of course, is why our economy relies on markets to 

make such decisions, and on the profit motive to 

guide the behavior of individual firms.’’). 

144 Proof of an overt manipulative or deceptive 

act together with proof of requisite intent provide 

sufficient safeguards against both regulatory 

overreach and judicial error. 

145 See Flint Hills at 19 (stating that a market 

economy relies on prices and profit motive to 

allocate resources efficiently; thus, regulators must 

allow market participants to respond to market 

signals when making production and product 

allocation decisions without ‘‘fear of being second 

guessed’’); Muris at 9 (‘‘One way to reduce the risk 

of errors is to require a showing of (1) an effect on 

price . . . .’’); API at 31 (‘‘Applying Section 811 to 

conduct that does not cause a material deviation in 

market prices would unduly expand the FTC’s 

regulatory oversight and would likely harm 

consumer welfare in the long run by chilling 

competitive market behavior, thereby potentially 

increasing prices.’’). 

146 42 U.S.C. 17305. 

147 See, e.g., Disclosure Requirements and 

Prohibitions Concerning Franchising, 16 CFR 

436.10(b); Disclosure Requirements and 

Prohibitions Concerning Business Opportunities, 16 

CFR 437 n.2. 

148 See, e.g., Telemarketing Sales Rule, 16 CFR 

310.9; Used Motor Vehicle Trade Regulation Rule, 

16 CFR 455.7. 

149 See 16 CFR 1.26(b)(5). 

150 5 U.S.C. 601-612. 

151 5 U.S.C. 603. 

152 5 U.S.C. 604. 

153 5 U.S.C. 605. 

154 The RFA definition of ‘‘small entity’’ refers to 

the definition provided in the Small Business Act, 

which defines a ‘‘small business concern’’ as a 

business that is independently owned and operated 

and that is not dominant in its field of operation. 

15 U.S.C. 632. 

155 73 FR at 25624. 

156 42 U.S.C. 17301. 

experience in investigating petroleum 

pricing anomalies demonstrates the 

difficulty of identifying price changes 

that result directly from any specific act 

or conduct.143

Finally, the Commission believes that 

the scienter requirement, in addition to 

proof of an overt act, should provide 

sufficient safeguards against 

overbreadth.144 Consequently, the 

Commission believes the proposed Rule 

addresses commenters’ concerns that, 

absent an effects requirement, any rule 

would be overbroad and interfere with 

pricing signals.145 The Commission 

seeks comment on the foregoing, 

including in particular whether its 

articulation of the appropriate elements 

of a cause of action under the Rule 

furthers the goals of EISA and the 

proposed Rule. 

F. Section 317.4: Preemption 

Section 815(c) of EISA states that 

‘‘[n]othing in this subtitle preempts any 

State law.’’146 To give effect to that 

provision, Section 317.4 of the proposed 

Rule contains a standard preemption 

provision, making clear that the 

Commission does not intend to preempt 

the laws of any state or local 

government, except to the extent of any 

conflict. Section 317.4 also explains that 

there is no conflict between federal and 

state and local law, and therefore no 

preemption, if such state or local law 

affords equal or greater protection from 

the manipulative conduct prohibited by 

the proposed Rule.147

G. Section 317.5: Severability 

Section 317.5 of the proposed Rule 

contains a standard severability 

provision. This provision makes clear 

that, if any part of the Rule is held 

invalid by a court, the remainder of the 

Rule will still be in effect.148

H. Invitation to Comment and Advance 

Notice of Workshop 

All persons are hereby given notice of 

the opportunity to submit written data, 

views, facts, and arguments addressing 

the issues raised in this NPRM. All 

comments should be filed as prescribed 

in the ADDRESSES Section above, and 

must be received by September 18, 

2008. In addition, the Commission 

anticipates that it may be advantageous 

to hold a public workshop to discuss in 

greater detail the written comments 

submitted by the public in response to 

the NPRM, and, in particular, any areas 

of significant controversy or divergent 

opinion that may arise from the 

comments. In order to be eligible to 

participate in a workshop, should one 

be held, a person must submit a 

comment in response to this NPRM. If 

it is determined that a workshop is 

necessary, details about the event will 

be announced in a press release and be 

available at (http://www.ftc.gov/ftc/ 

oilgas/index.html). 

I. Communications by Outside Parties to 

the Commissioners or Their Advisors 

Written communications and 

summaries or transcripts of oral 

communications respecting the merits 

of this proceeding from any outside 

party to any Commissioner or 

Commissioner’s advisor will be placed 

on the public record.149

J. Regulatory Flexibility Act 

The Regulatory Flexibility Act of 1980 

(‘‘RFA’’)150 generally requires a 

description and analysis of proposed 

and final rules that will have significant 

economic impact on a substantial 

number of small entities. The RFA 

requires an agency to provide an Initial 

Regulatory Flexibility Analysis 

(‘‘IRFA’’)151 with a proposed Rule and a 

Final Regulatory Flexibility Analysis 

(‘‘FRFA’’)152 with the final rule, if any. 

The Commission is not required to make 

such analyses if a rule would not have 

such an effect.153

Although the scope of the proposed 

Rule may reach a substantial number of 

small entities as defined in the RFA, the 

Commission does not believe that the 

proposed Rule will have a significant 

economic impact on those 

businesses.154 The Commission 

specifically requested comments on the 

economic impact of a proposed Rule 

and received none.155 Given that there 

are no reporting requirements, 

document or data retention provisions, 

or any other affirmative duties imposed, 

it is unlikely that the proposed Rule 

imposes costs to comply beyond 

standard costs associated with ensuring 

that behavior and statements are not 

manipulative or deceptive. Therefore, 

the Commission believes that the 

proposed Rule, if finalized, will not 

have a significant economic impact on 

a substantial number of small entities. 

Notwithstanding this belief, the 

Commission provides a full IRFA 

analysis to aid in its solicitation for 

comments on this topic. 

1. Description of the reasons that action 

by the agency is being considered 

Section 811 grants the Commission 

the authority to promulgate a rule that 

‘‘is necessary or appropriate in the 

public interest or for the protection of 

United States citizens.’’156 As discussed 

above, the Commission believes that 

promulgating the proposed Rule is 

appropriate to prevent manipulative 

practices affecting wholesale markets for 

petroleum products and the 

Commission has tailored its proposed 

Rule specifically to reach manipulative 

behavior that likely impacts those 

commodities described in Section 811. 

2. Succinct statement of the objectives 

of, and the legal basis for, the proposed 

Rule 

The legal basis of the proposed Rule 

is Section 811 of EISA, which makes 

illegal manipulative and deceptive 

conduct in the purchase or sale of 

petroleum products at wholesale in 


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157 Directly covered entities under this proposed 

Rule are classified as small businesses under the 

Small Business Size Standards component of the 

North American Industry Classification System 

(‘‘NAICS’’) if they are: petroleum refiners (NAICS 

code 324110) with no more than 1,500 employees 

nor greater than 125,000 barrels per calendar day 

Operable Atmospheric Crude Oil Distillation 

capacity; petroleum bulk stations and terminals 

(NAICS code 424710) with no more than 100 

employees; or petroleum and petroleum products 

merchant wholesalers (except bulk stations and 

terminals (NAICS code 424720) with no more than 

100 employees. See U.S. Small Business 

Administration, Table of Small Business Size 

Standards Matched to North American Industry 

Classification System Codes (Mar. 11, 2008), 

available at (http://www.sba.gov/idc/groups/public/ 

documents/sba_homepage/serv_sstd_tablepdf.pdf). 

158 The SBA publication that provides data on 

number of firms and number of employees by firm 

does not provide sufficient precision to gauge 

accurately the number of small business that may 

be impacted by the proposed Rule. The data are 

provided in increments of 1-4 employees, fewer 

than 20 employees and fewer than 500 employees. 

Small Business Administration, Employer Firms, & 

Employment by Employment Size of Firm by 

NAICS Codes, 2005, available at (http:// 

www.sba.gov/advo/research/us05_n6.pdf). Thus for 

the 177 petroleum refiners listed, 139 show that 

they have less than 500 employees. Although the 

Commission is unaware of more than 5 refiners 

with less than 125,000 barrels of crude distillation 

capacity, the data may be kept by refinery, rather 

than refiner. Similar problems exist for the bulk 

terminal and bulk wholesale categories listed above, 

in which the relevant small business cut off is 

greater than 100 employees. Thus, the range of 

‘‘small’’ entities appears unreliable and the 

Commission seeks comment or information 

providing better data. 

159 Commenters such as MFA specifically argue 

that the proposed Rule should have a safe harbor 

provision or other explicit exemption for the futures 

markets in order to avoid an overlap with the 

CFTC’s jurisdiction under Section 2 of the CEA. 

MFA at 5. According to commenters, including the 

CFTC, such an overlap would create potentially 

duplicative or inconsistent regulatory requirements, 

thus undermining uniform regulatory scheme that 

Congress sought to establish for the futures markets 

under the CEA. See, e.g., CFTC at 1-2; API at 14, 

16, 27; Flint Hills at 12; Hess at 12 n.10; NPGA at 

2 (‘‘A flawed regulatory scheme may result in 

reporting requirements being duplicative, standards 

and definitions of proscribed behavior being 

inconsistent . . . .’’); MFA at 13-14 (arguing that any 

proposed rule should not reach futures trading 

activities regulated by the CFTC). Several other 

commenters express concern that even if the 

Commission could avoid inconsistent regulatory 

requirements, market participants would still be 

unfairly burdened by duplicative enforcement. See 

Flint Hills at 14; Hess at 12; NPGA at 2. 

160 One commenter warned that poor 

coordination between the Commission and other 

agencies could lead to a situation wherein 

‘‘multiple agencies may pursue certain potential 

violations, while other violations are left unchecked 

because each oversight agency expects or desires 

another to take the appropriate action.’’ NPGA at 2. 

To prevent such pitfalls of regulatory overlap, 

NPGA encouraged the issuance of an Executive 

Order that clearly draws lines of jurisdiction among 

agencies. Id. at 3. 

161 See Section II.B (and footnotes therein) for a 

discussion of concerns raised by commenters about 

potentially duplicative or inconsistent regulatory 

requirements. 

contravention of rules, if any, that the 

Commission may promulgate. The 

proposed Rule is intended to define the 

conduct that the law proscribes. If 

adopted, such rule will supplement the 

Commission’s existing antitrust and 

consumer protection law enforcement 

tools. 

3. Description of, and where feasible, 

estimate of the number of small entities 

to which the proposed Rule will apply 

The proposed Rule applies to entities 

engaging in the purchase or sale of 

crude oil, gasoline, and petroleum 

distillates. These potentially include 

petroleum refiners, blenders, 

wholesalers and dealers (including 

terminal operators that sell covered 

commodities). Although many of these 

entities are large international and 

domestic corporations, the Commission 

believes that a number of these covered 

entities may fall into the category of 

small entities.157 According to the SBA 

size standards, and utilizing SBA source 

data, the Commission estimates that 

between approximately 1700 and 5200 

covered entities would be classified as 

‘‘small entities.’’158

The scope of the proposed Rule could 

be broader depending on whether illegal 

manipulative conduct impacts covered 

commodities directly or other 

commodities with the effect of 

impacting the covered commodities 

contemplated by the proposed Rule. The 

Commission seeks comments on 

whether the proposed Rule may reach 

other small entities and what economic 

impact, if any, the proposed Rule would 

have on those entities. 

4. Projected reporting, record-keeping, 

and other compliance requirements, 

including an estimate of the classes of 

small entities that will be subject to the 

requirement and the type of professional 

skills necessary for preparation of the 

report or record 

The Commission does not propose, 

and the proposed Rule does not contain, 

any requirement that covered entities 

create, retain, submit, or disclose any 

information. Accordingly, the proposed 

Rule will impose no new record-keeping 

or related data retention and 

maintenance or disclosure requirements 

on any covered entity, including small 

entities. The Commission has not 

identified additional costs necessary to 

comply with the proposed Rule beyond 

existing costs associated with behaving 

in a nondeceptive, truthful manner. The 

Commission seeks comments on 

whether the proposed Rule imposes 

costs on any covered entities including 

a description of specific costs and 

estimates of the magnitude of those 

costs. 

5. Other duplicative, overlapping, or 

conflicting federal rules 

As discussed previously, other federal 

agencies have regulatory authority to 

prohibit in whole or in part 

manipulative and deceptive practices 

involving petroleum products. The SEC 

has authority to stop manipulative and 

deceptive practices involving the 

securities and securities offerings of 

companies involved in the petroleum 

industry. The CFTC also has authority 

to bring an action against any person 

who is manipulating or attempting to 

manipulate the petroleum futures 

markets.159

As explained in Section II.B, above, 

the proposed Rule is not intended to 

impose contradictory requirements on 

regulated entities in the futures markets 

or otherwise. To the extent, if any, that 

the proposed Rule’s requirements could 

duplicate requirements already 

established by other agencies for such 

markets, the proposed Rule should not 

impose any additional compliance 

costs. Although the Commission 

acknowledges that different agencies 

could simultaneously initiate 

enforcement action with respect to the 

same activities, the Commission has had 

a longstanding practice of coordinating 

its enforcement efforts with agencies 

that have overlapping jurisdiction.160

The Commission expects to continue 

that practice here, as feasible and 

appropriate, to ensure fairness to 

regulated entities and to conserve 

enforcement resources and maximize 

agency efficiency.161 However, the 

Commission is requesting comment on 

the extent to which other federal 

standards on manipulation may 

duplicate, satisfy, or inform the 

proposed Rule’s requirements. In 

addition, the Commission seeks 

comment and information about any 

statutes or rules that may conflict with 

the proposed requirements, as well as 

any other state, local, or industry rules 

or policies that require covered entities 

to implement practices that comport 

with the requirements of the proposed 

Rule. 


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162 44 U.S.C. 3501-3521. Under the PRA, federal 

agencies must obtain approval from OMB for each 

collection of information they conduct or sponsor. 

‘‘Collection of information’’ means agency requests 

or requirements that members of the public submit 

reports, keep records, or provide information to a 

third party. 44 U.S.C. 3502(3). 

163 73 FR at 25622. 

164 ISDA at 16 (‘‘Neither Section 811 nor Section 

812 of the EISA authorizes the Commission to 

impose new reporting requirements.’’). See, e.g., 

CFDR at 16 (‘‘The Commission should not 

promulgate a rule that purports to impose 

disclosure obligations on market participants where 

no disclosure obligations otherwise exist under 

current law.’’); API at 52. But see, e.g., PMAA at 8- 

9 (stating that the Commission has authority under 

Section 811 to impose new reporting requirements); 

NPGA at 3 (‘‘The authority to mandate the 

maintenance and submission of [information 

regarding wholesale petroleum transactions] is 

inherent in the EISA prohibitions against 

manipulative activities in Section 811 and the 

reporting of false information to Federal authorities 

in Section 812.’’). 

165 Platts at 3 (taking no position on reporting to 

government agencies, but ‘‘strongly endors[ing] any 

efforts to make more data available on an equal 

basis to all market participants’’). 

6. Description of any significant 

alternatives to the proposed Rule that 

would accomplish the stated objectives 

of applicable statutes and that minimize 

any significant economic impact of the 

proposed Rule on small entities, 

including alternatives considered, such 

as: (1) establishment of differing 

compliance or reporting requirements or 

timetables that take into account the 

resources available to small entities; (2) 

clarification, consolidation, or 

simplification of compliance and 

reporting requirements under the rule 

for such small entities; and (3) any 

exemption from coverage of the rule, or 

any part thereof, for such small entities 

The proposed Rule is narrowly 

tailored to reduce compliance burdens 

on covered entities, regardless of size. In 

formulating the proposed Rule, the 

Commission has taken several 

significant steps to minimize potential 

burdens. Most significantly, the 

proposed Rule focuses on preventing 

manipulation and deception in 

wholesale petroleum markets. The 

Commission has declined to include 

specific conduct or duty requirements, 

such as a duty to supply product or a 

duty to provide access to pipelines and 

terminals. In addition, the proposed 

Rule makes clear that covered entities 

need not disclose price, volume, and 

other data to the market. Finally, the 

proposed Rule contains no recordkeeping requirement. 

While the Commission believes that 

the proposed Rule imposes no unique 

compliance costs, it nonetheless 

requests comment on this issue, in 

particular, whether the proposed Rule’s 

prohibited practices impose a 

significant impact upon a substantial 

number of small entities, and what 

modifications to the Rule the 

Commission should consider to 

minimize the burden on small entities. 

7. Questions for comment to assist 

regulatory flexibility analysis 

The Commission requests 

commenters to provide information as 

to the potential scope and economic 

impact of the proposed Rule so that the 

Commission may better assess the 

economic impact of the language of any 

final rule if it determines to promulgate 

such rule. Specifically, the Commission 

requests comment on: 

a. the number and type of small 

entities affected by the proposed Rule; 

b. any or all of the provisions in the 

proposed Rule with regard to: (i) the 

impact of the provision(s) (including 

benefits and costs to implement and 

comply with the Rule or Rule 

provision), if any; (ii) what alternatives, 

if any, the Commission should consider, 

as well as the costs and benefits of those 

alternatives, paying specific attention to 

the effect of the proposed Rule on small 

entities; 

c. ways in which the proposed Rule 

could be modified to reduce any costs 

or burdens on small entities, including 

whether and how technological 

developments could further reduce the 

costs of implementing and complying 

with the proposed Rule for small 

entities; 

d. any information quantifying the 

economic costs and benefits of the 

proposed Rule on the entities covered, 

including small entities; and 

e. the identity of any relevant federal, 

state, or local rules that may duplicate, 

overlap, or conflict with the proposed 

Rule. 

K. Paperwork Reduction Act 

The Commission does not 

contemplate requiring any entity 

covered by the Rule to create, retain, or 

submit any data. Accordingly, the 

proposed Rule does not include any 

new information collection 

requirements under the provisions of 

the Paperwork Reduction Act of 1995 

(‘‘PRA’’).162

In the ANPR, the Commission 

solicited comment on whether covered 

entities should report market data, such 

as cost and volume data for wholesale 

transactions.163 In response, one 

commenter notes that Section 812 

already addresses the making of false 

reports and should not be construed as 

giving the Commission authority to 

impose new reporting requirements.164

The Commission has determined that 

a record retention or submission 

requirement is not necessary or 

appropriate at this time. However, the 

Commission’s experience with any final 

rule that may be adopted under Section 

811 or pursuant to its investigative and 

enforcement role under Section 812 may 

suggest a particular need to require 

firms to create or maintain particular 

information.165 If such a need arises, the 

Commission may, in the future, adopt 

such rules as necessary or appropriate 

in the public interest or for the 

protection of United States citizens. 

L. Request for Comments 

The Commission seeks comment on 

various aspects of the proposed Rule. 

Without limiting the scope of issues on 

which it seeks comment, the 

Commission is particularly interested in 

receiving comments on the questions 

that follow. In responding to these 

questions, include detailed, factual 

supporting information whenever 

possible. 

1. General Questions for Comment 

Please provide comment on each 

proposed aspect of the proposed Rule. 

Regarding each proposed provision 

commented on, please include answers 

to the following questions. 

a. What is the effect (including any 

benefits and costs), if any, on 

consumers? 

b. What is the impact (including any 

benefits and costs), if any, on individual 

firms that must comply with the 

proposed Rule? 

c. What is the impact (including any 

benefits and costs), if any, on industry? 

d. What changes, if any, should be 

made to the proposed Rule to eliminate 

any unnecessary cost to industry or 

consumers? 

e. How would the proposed Rule 

affect small business entities with 

respect to costs, profitability, 

competitiveness, and employment? 

2. Questions on Proposed Specific 

Provisions 

Rulemaking Standard 

a. Is the Commission’s determination 

that the proposed Rule meets the 

rulemaking standard — that the rule is 

‘‘necessary or appropriate in the public 

interest or for the protection of United 

States citizens’’ — correct? In what way 

is the proposed Rule necessary or 

appropriate? In what way does the 

proposed Rule fail to be necessary or 

appropriate? 

Section 317.1 — Scope 

b. The Commission did not provide 

for safe harbors or exemptions from the 


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proposed Rule. Should there be safe 

harbors or exemptions? If so, what 

should they be? To what should they 

apply; that is, what types of acts or 

practices should constitute a safe 

harbor? Why should that be so? What 

types of acts or practices should be 

exempt? Why should that be so? 

Section 317.2 — Definitions 

c. Do the proposed definitions 

adequately describe the scope of the 

proposed Rule’s coverage? If not, how 

should they be modified? Are the 

proposed definitions accurate? Are there 

alternative definitions that the 

Commission should consider? Should 

additional terms be defined, and, if so, 

how? What would be the costs and 

benefits of each suggested definition? 

Section 317.3 — Prohibited Practices 

d. The proposed Rule uses SEC Rule 

10b-5 as a model. Will the Rule 10b-5 

model function properly with respect to 

wholesale petroleum markets? If not, 

why not? What alternative approach 

could be used? If an alternative 

approach or model could be used here, 

what would be the costs and benefits of 

using an alternative approach or model? 

e. The proposed Rule targets practices 

that act as a fraud or deceit. Has the 

Commission adequately delineated such 

practices? If not, why not? Is there a list 

of practices that should be covered by 

the proposed Rule? If so, what are they 

and why should they be included? Are 

there practices that should be excluded 

from the proposed Rule? If so, what are 

they and why should they be excluded? 

f. Has the proposed Rule sufficiently 

laid out any affirmative duties or other 

obligations upon entities covered under 

the proposed Rule? If not, why not? 

g. Section 317.3(a) of the proposed 

Rule prohibits the use or employment of 

any ‘‘device, scheme, or artifice to 

defraud.’’ Is this language sufficiently 

broad enough to enable the Commission 

to police all forms of fraud and 

manipulation that affect wholesale 

petroleum markets? If not, why not? 

How could the proposed Rule be 

modified to ensure that all forms of 

devices, schemes, or artifices to defraud 

are covered? 

h. Section 317.3(b) of the proposed 

Rule prohibits covered entities from 

misrepresenting, and in some instances 

from omitting, material information in 

wholesale petroleum markets. Is this 

prohibition adequate to enable the 

Commission to deter and punish 

persons who intentionally provide false 

or misleading information to 

government agencies, third-party 

reporting services, or the public through 

corporate announcements? Why or why 

not? Does the proposed Rule need to be 

modified in anyway to better address 

any misrepresentations or omissions, 

and if so, what should those 

modifications be? 

i. What factors should the 

Commission consider in weighing 

whether, once an announcement is 

made by a person subject to the 

proposed Rule, an affirmative obligation 

may then exist to provide full and 

complete disclosure? 

j. Section 317.3(b) prohibits omissions 

of material fact that are necessary to 

ensure that a previously made statement 

is not misleading. Will this provision 

address the harms that may occur in the 

reporting of information in the 

wholesale petroleum industry? If not, 

why not and how could the proposed 

Rule be modified to better address such 

harms? 

k. Section 317.3(c) of the proposed 

Rule prohibits any act, practice, or 

course of business that ‘‘operates or 

would operate as a fraud or deceit.’’

Will this sub-section be useful to the 

FTC as a ‘‘catch-all’’ provision that 

captures fraud on wholesale petroleum 

markets? If not, why not? Is this 

provision, in light of the inclusion of the 

more specific anti-fraud provision in 

proposed Rule Section 317.3(a)? If not, 

why not? 

l. Does the Rule’s prohibition on 

manipulative or deceptive conduct 

promote well-functioning market 

processes ‘‘in connection with the 

purchase or sale of crude oil, gasoline, 

or petroleum distillates at wholesale’’? If 

so, why not? 

m. Does the proposed Rule have 

sound bases in economic policy for 

prohibiting manipulative and deceptive 

conduct? Why or why not? 

n. Do additional factual predicates 

exist to support a basis for the proposed 

Rule to fill a gap in Commission 

jurisdiction under Section 5 of the FTC 

Act or to support extending Commission 

authority beyond the scope of Section 5 

of the FTC Act? If so, describe such 

factual predicates. 

o. Should the Commission consider 

any affirmative defenses to rule 

violations? If so, what affirmative 

defenses should the Commission 

consider and how can those defenses be 

justified? 

p. Is the proposed Rule’s basis for 

requiring a showing of scienter as an 

element of proof sound? Should a 

scienter requirement be part of the text 

of Section 317.3 of the proposed Rule? 

Is the Commission’s tentative 

determination that both intentional and 

reckless conduct may satisfy the 

scienter requirement appropriate? Why 

or why not? 

q. The Commission tentatively has 

concluded that the ‘‘in connection 

with’’ language in the proposed Rule 

would reach manipulative conduct that 

extends beyond the defined terms (e.g., 

crude oil, gasoline, petroleum 

distillates) if that conduct directly or 

indirectly impacts wholesale prices for 

the covered products. What would be 

the advantage (disadvantage) of this 

approach and why? 

r. Should the proposed Rule be 

available to challenge ‘‘attempted 

manipulation,’’ defined as uncompleted 

fraudulent or deceptive conduct? Are 

there advantages to this approach and 

why? Are there disadvantages to this 

approach and why? Are there examples 

of ‘‘attempted manipulation’’ that 

should be covered by the proposed 

Rule? If so, what are they and why 

should they be covered? 

s. The Commission tentatively has 

concluded that liability should not 

require proof of price effects. What 

would be the advantage (disadvantage) 

of requiring proof of price effects? 

t. The Commission tentatively has 

determined that a record retention or 

submission requirement is not necessary 

or appropriate at this time. Are there 

records that the Commission should, in 

fact, require companies to retain or 

submit? If so, what types of records 

should be retained or submitted and 

why? 

Section 317.4 — Preemption 

u. The Commission has determined 

that the proposed Rule should not 

preempt the laws of any state or local 

government, except to the extent that 

any such law conflicts with this 

proposed Rule. What impact is this 

approach likely to have upon the 

industry? Individual companies? 

Consumers? 

Regulatory Flexibility Act 

v. Is the Commission estimate that 

between approximately 1700 and 5200 

‘‘small entities’’ will be covered by the 

proposed Rule accurate? Why or why 

not? 

w. The proposed Rule does not 

contain any requirement that covered 

entities create, retain, submit, or 

disclose any information. Is the 

Commission correct in its determination 

that, accordingly, the proposed Rule 

will impose no record-keeping or 

related data retention and maintenance 

or disclosure requirements on any 

covered entity, including small entities? 

Why or why not? 

x. Identify any statutes or rules that 

may conflict with the proposed Rule 

requirements, as well as any other state, 


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48334 Federal Register / Vol. 73, No. 161 / Tuesday, August 19, 2008 / Proposed Rules 

local, or industry rules or policies that 

require covered entities to implement 

practices that comport with the 

requirements of the proposed Rule. 

y. Do the prohibited practices in the 

proposed Rule impose a significant 

impact upon a substantial number of 

small entities? If so, what modifications 

to the proposed Rule should the 

Commission consider to minimize the 

burden on small entities? 

List of Subjects in 16 CFR Part 317 

Trade practices. 

■ Accordingly, for the reasons set forth 

in the preamble, the Commission 

proposes to amend Title 16, Chapter 1, 

Subchapter C of the Code of Federal 

Regulations by adding Part 317 to read 

as follows: 

PART 317—PROHIBITION OF ENERGY 

MARKET MANIPULATION RULE 

Sec. 

317.1 Scope. 

317.2 Definitions. 

317.3 Prohibited practices. 

317.4 Preemption. 

317.5 Severability. 

Authority: 42 U.S.C. 17301-17305; 15 

U.S.C. 41-58. 

§ 317.1 Scope. 

This part implements Subtitle B of 

Title VIII of The Energy Independence 

and Security Act of 2007 (‘‘EISA’’), Pub. 

L. 110-140, 121 Stat. 1723 (December 

19, 2007), codified at 42 U.S.C. 17301- 

17305. This rule applies to any person 

over which the Federal Trade 

Commission has jurisdiction under the 

Federal Trade Commission Act, 15 

U.S.C. 41 et seq. 

§ 317.2 Definitions. 

The following definitions shall apply 

throughout this rule: 

(a) Crude oil means the mixture of 

hydrocarbons that exist: 

(1) in liquid phase in natural 

underground reservoirs and which 

remain liquid at atmospheric pressure 

after passing through separating 

facilities, or 

(2) as shale oil or tar sands requiring 

further processing for sale as a refinery 

feedstock. 

(b) Gasoline means 

(1) finished gasoline, including, but 

not limited to, conventional, 

reformulated, and oxygenated blends, 

and 

(2) conventional and reformulated 

gasoline blendstock for oxygenate 

blending. 

(c) Person means any individual, 

group, unincorporated association, 

limited or general partnership, 

corporation, or other business entity. 

(d) Petroleum distillates means 

(1) jet fuels, including, but not limited 

to, all commercial and military 

specification jet fuels, and 

(2) diesel fuels and fuel oils, 

including, but not limited to, No. 1, No. 

2, and No. 4 diesel fuel, and No. 1, No. 

2, and No. 4 fuel oil. 

(e) Wholesale means purchases or 

sales at the terminal rack level or 

upstream of the terminal rack level. 

Transactions conducted at wholesale do 

not include retail gasoline sales to 

consumers. 

§ 317.3 Prohibited practices. 

It shall be unlawful for any person, 

directly or indirectly, in connection 

with the purchase or sale of crude oil, 

gasoline, or petroleum distillates at 

wholesale, 

(a) To use or employ any device, 

scheme, or artifice to defraud, 

(b) To make any untrue statement of 

a material fact or to omit to state a 

material fact necessary in order to make 

the statements made, in the light of the 

circumstances under which they were 

made, not misleading, or 

(c) To engage in any act, practice, or 

course of business that operates or 

would operate as a fraud or deceit upon 

any person. 

§ 317.4 Preemption. 

The Federal Trade Commission does 

not intend, through the promulgation of 

this Rule, to preempt the laws of any 

state or local government, except to the 

extent that any such law conflicts with 

this Rule. A law is not in conflict with 

this Rule if it affords equal or greater 

protection from the use or employment, 

directly or indirectly, of any deceptive 

or manipulative device or contrivance, 

in connection with the purchase or sale 

of crude oil, gasoline, or petroleum 

distillates at wholesale. 

§ 317.5 Severability. 

The provisions of this Rule are 

separate and severable from one 

another. If any provision is stayed or 

determined to be invalid, it is the 

Commission’s intention that the 

remaining provisions shall continue in 

effect. 

By direction of the Commission. 

Donald S. Clark, 

Secretary. 

Note: The following attachment will 

not appear in the Code of Federal 

Regulations. 

Attachment A 

ANPR Commenters 

American Bar Association/Section of 

Antitrust Law (‘‘ABA’’) 

Association of Oil Pipe Lines (‘‘AOPL’’) 

American Petroleum Institute and the 

National Petrochemical and Refiners 

Association (‘‘API’’) 

Patrick Barrett (‘‘Barrett’’) 

Lawrence Barton (‘‘Barton’’) 

Dave Beedle (‘‘Beedle’’) 

Stanley Bergkamp (‘‘Bergkamp’’) 

Louis Berman (‘‘Berman’’) 

Bezdek Associates, Engineers PLLC 

(‘‘Bezdek’’) 

Katherine Bibish (‘‘Bibish’’) 

John Booke (‘‘Booke’’) 

Bradley (‘‘Bradley’’) 

Jeremy Bradley (‘‘J. Bradley’’) 

Charles Bradt (‘‘Bradt’’) 

Wendell Branham (‘‘Branham’’) 

Lorraine Bremer (‘‘Bremer’’) 

Gloria Briscolino (‘‘Briscolino’’) 

Rick Brownstein (‘‘Brownstein’’) 

Byrum (‘‘Byrum’’) 

Canadian Association of Petroleum 

Producers (‘‘CAPP’’) 

Jeff Carlson (‘‘Carlson’’) 

Jacquelynne Catania (‘‘Catania’’) 

Marie Cathey (‘‘Cathey’’) 

New York City Bar Committee on Futures & 

Derivatives Regulation (‘‘CFDR’’) 

U.S. Commodities Futures Trading 

Commission (‘‘CFTC’’) 

Manuel Chavez (‘‘Chavez’’) 

Michael Chudzik (‘‘Chudzik’’) 

D. Church (‘‘Church’’) 

Earl Clemons (‘‘Clemons’’) 

Dan Clifton (‘‘Clifton’’) 

Kim Cruz (‘‘Cruz’’) 

Jerry Davidson (‘‘Davidson’’) 

Don Deresz (‘‘Deresz’’) 

Charlene Dermond (‘‘Dermond’’) 

Kimberly DiPenta (‘‘DiPenta’’) 

Penny Donaly (‘‘Donaly1’’) 

Penny Donaly (‘‘Donaly2’’) 

Penny Donaly (‘‘Donaly3’’) 

Penny Donaly (‘‘Donaly4’’) 

Harold Ducote (‘‘Ducote’’) 

Deep River Group, Inc. (‘‘DRG’’) 

Mary Dunaway (‘‘Dunaway’’) 

Econ One Research, Inc. (‘‘Econ One’’) 

Kevin Egan (‘‘Egan’’) 

DJ Ericson (‘‘Ericson’’) 

Mark Fish (‘‘Fish’’) 

Flint Hills Resources (‘‘Flint Hills’’) 

Bob Frain (‘‘Frain’’) 

Joseph Fusco ( ‘‘Fusco’’ ) 

Tricia Glidewell (‘‘Glidewell’’) 

Robert Gould (‘‘Gould’’) 

James Green (‘‘Green’’) 

Michael Greenberger (‘‘Greenberger’’) 

Christine Gregoire, Governor, State of 

Washington (‘‘Gregoire’’) 

Hagan (‘‘Hagan’’) 

Charles Hamel (‘‘Hamel’’) 

Chris Harris (‘‘Harris’’) 

Thomas Herndon (‘‘Herndon’’) 

Johnny Herring (‘‘Herring’’) 

Hess Corporation (‘‘Hess’’) 

David Hill (‘‘Hill’’) 

Hopper (‘‘Hopper’’) 

Sharon Hudecek (‘‘Hudecek’’) 

Intercontinental Exchange, Inc. (‘‘ICE’’) 

Institute for Energy Research (‘‘IER’’) 

Independent Lubricant Manufacturers 

Association (‘‘ILMA’’) 

Illinois Petroleum Marketers Association 

(‘‘IPMA’’) 

International Swaps and Derivatives 

Association, Inc. (‘‘ISDA’’) 


ebenthall on PRODPC60 with PROPOSALS
Federal Register / Vol. 73, No. 161 / Tuesday, August 19, 2008 / Proposed Rules 48335 

Micki Jay (‘‘Jay’’) 

Kenneth Jensen (‘‘Jensen’’) 

Paul Johnson (‘‘Johnson’’) 

Tacie Jones (‘‘Jones’’) 

Joy (‘‘Joy’’) 

John Kaercher (‘‘Kaercher’’) 

Kas Kas (‘‘Kas’’) 

Kipp (‘‘Kipp’’) 

Paola Kipp (‘‘P. Kipp’’) 

Jerry LeCompte (‘‘LeCompte’’) 

Kurt Lennert (‘‘Lennert’’) 

Loucks (‘‘Loucks’’) 

Robert Love (‘‘Love’’) 

R. Matthews (‘‘Matthews’’) 

Catherine May (‘‘May’’) 

Mike Mazur (‘‘Mazur’’) 

Sean McGill (‘‘McGill’’) 

Kathy Meadows (‘‘Meadows’’) 

Managed Funds Association; Futures 

Industries Association; New York 

Mercantile Exchange; and CME Group Inc. 

(‘‘MFA’’) 

Bret Morris (‘‘Morris’’) 

Theresa Morris-Ramos (‘‘Morris-Ramos’’) 

Scott Morosini (‘‘Morosini’’) 

Timothy J. Muris and J. Howard Beales, III 

(‘‘Muris’’) 

Navajo Nation Resolute Natural Resources 

Company and Navajo Nation Oil and Gas 

Company (‘‘Navajo Nation’’) 

Laurie Nenortas (‘‘Nenortas’’) 

James Nichols (‘‘Nichols’’) 

Virgil Noffsinger (‘‘Noffsinger’’) 

Noga (‘‘Noga’’) 

Richard Nordland (‘‘Nordland’’) 

National Propane Gas Association (‘‘NPGA’’) 

Kerry O’Shea, (‘‘O’Shea’’) 

Jeffery Parker (‘‘Parker’’) 

Pamela Parzynski (‘‘Parzynski’’) 

Brook Paschkes (‘‘Paschkes’’) 

Brijesh Patel (‘‘Patel’’) 

Stefanie Patsiavos (‘‘Patsiavos’’) 

P D (‘‘PD’’) 

Guillermo Pereira (‘‘Pereira’’) 

James Persinger (‘‘Persinger’’) 

Mary Phillips (‘‘Phillips’’) 

Plains All American Pipeline, LLP (‘‘Plains’’) 

Platts (‘‘Platts’’) 

Betty Pike (‘‘Pike’’) 

Petroleum Marketers Association of America 

(‘‘PMAA’’) 

Joel Poston (‘‘Poston’’) 

Radzicki (‘‘Radzicki’’) 

Gary Reinecke (‘‘Reinecke’’) 

Steve Roberson (‘‘Roberson’’) 

Shawn Roberts (‘‘Roberts’’) 

Linda Rooney (‘‘Rooney’’) 

Mel Rubinstein (‘‘Rubinstein’’) 

secret (‘‘secret’’) 

Joel Sharkey (‘‘Sharkey’’) 

Society of Independent Gasoline Marketers of 

America (‘‘SIGMA’’) 

Daryl Simon (‘‘Simon’’) 

David Smith (‘‘D. Smith’’) 

Donald Smith (‘‘Do. Smith’’) 

Mary Smith (‘‘M. Smith’’) 

Donna Spader (‘‘Spader’’) 

Stabila (‘‘Stabila’’) 

Alan Stark (‘‘A. Stark’’) 

Gary Stark (‘‘G. Stark’’) 

Robert Stevenson (‘‘Stevenson’’) 

Ryan Stine (‘‘Stine’’) 

Maurice Strickland (‘‘Strickland’’) 

Sutherland, Asbill, and Brennan, LLP 

(‘‘Sutherland’’) 

L.D. Tanner (‘‘Tanner’’) 

Dennis Tapalaga (‘‘Tapalaga’’) 

Tennessee Oil Marketers Association 

(‘‘TOMA’’) 

Theisen (‘‘Theisen’’) 

Greg Turner (‘‘Turner’’) 

U.S. citizen (‘‘U.S. citizen’’) 

U.S. Department of Justice, Criminal Fraud 

Section (‘‘USDOJ’’) 

Jeff Van Hecke (‘‘Van Hecke’’) 

Louis Vera (‘‘Vera’’) 

Thomas Walker (‘‘Walker’’) 

Victoria Warner (‘‘Warner’’) 

Lisa Wathen (‘‘Wathen’’) 

Watson (‘‘Watson’’) 

Gary Watson (‘‘G. Watson’’) 

Joseph Weaver (‘‘Weaver’’) 

Webb (‘‘Webb’’) 

Douglas Willis (‘‘Willis’’) 

[FR Doc. E8–19154 Filed 8–18–08; 8:45 am] 

BILLING CODE 6750–01–S 

DEPARTMENT OF LABOR 

Occupational Safety and Health 

Administration 

29 CFR Parts 1910, 1915, 1917, 1918 

and 1926 

[Docket No. OSHA–2008–0031] 

RIN 1218–AC42 

Clarification of Remedy For Violation 

of Requirements To Provide Personal 

Protective Equipment and Train 

Employees 

AGENCY: Occupational Safety and Health 

Administration (OSHA), U.S. 

Department of Labor. 

ACTION: Proposed rule. 

SUMMARY: In this rulemaking, OSHA is 

proposing to amend its regulations to 

add language clarifying that 

noncompliance with the personal 

protective equipment (PPE) and training 

requirements in safety and health 

standards in these parts may expose the 

employer to liability on a per-employee 

basis. The amendments consist of new 

paragraphs added to the introductory 

sections of the listed parts and changes 

to the language of some existing 

respirator and training requirements. 

This action, which is in accord with 

OSHA’s longstanding position, is 

proposed in response to recent 

decisions of the Occupational Safety 

and Health Review Commission 

indicating that differences in wording 

among the various PPE and training 

provisions in OSHA safety and health 

standards affect the Agency’s ability to 

treat an employer’s failure to provide 

PPE or training to each covered 

employee as a separate violation. The 

amendments add no new compliance 

obligations. Employers are not required 

to provide any new type of PPE or 

training, to provide PPE or training to 

any employee not already covered by 

the existing requirements, or to provide 

PPE or training in a different manner 

than that already required. The 

amendments simply clarify the remedy 

for violations of these requirements. 

DATES: Written comments: Comments 

must be submitted (postmarked, sent or 

received) by September 18, 2008. 

Hearing Requests: Any request for a 

hearing must also be submitted by 

September 18, 2008. See ADDRESSES

section below for special procedures for 

submitting hearing requests. 

ADDRESSES: Written comments: You may 

submit comments, identified by docket 

number OSHA–2008–0031, or 

regulatory information number (RIN) 

1290–AA23, by any of the following 

methods: 

Electronically: You may submit 

comments and attachments 

electronically at http:// 

www.regulations.gov, which is the 

Federal eRulemaking Portal. Follow the 

instructions on-line for making 

electronic submissions. 

Fax: If your comments, including 

attachments, do not exceed 10 pages, 

you may fax them to the OSHA Docket 

Office at (202) 693–1648. 

Mail, hand delivery, express mail, 

messenger or courier service: You must 

submit three copies of your comments 

and attachments to the OSHA Docket 

Office, Docket Number OSHA–2008–

0031, U.S. Department of Labor, Room 

N–2625, 200 Constitution Avenue, NW., 

Washington, DC 20210; telephone (202) 

693–2350 (OSHA’s TTY number is (877) 

889–5627). Deliveries (hand, express 

mail, messenger and courier service) are 

accepted during the Department of 

Labor’s and Docket Office’s normal 

business hours, 8:15 a.m.–4:45 p.m., e.t. 

Hearing Requests: A hearing request 

may only be submitted by one of the 

following methods: Electronically, fax, 

express mail, hand delivery, messenger 

or courier service. OSHA will not 

consider hearing requests sent by 

regular mail. 

Instructions: All submissions must 

include the docket number [OSHA–

2008–0031] or the regulatory 

information number (RIN) 1290–AA23, 

for this rulemaking. All comments, 

including any personal information you 

provide, are placed in the public 

without change and may be made 

available online at http:// 

www.regulations.gov. Therefore, OSHA 

cautions you about submitting personal 

information such as Social Security 

numbers and birthdates. For further 

information on submitting comments, 

plus additional information on the 


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