Litigation and arbitration

Overview
Insight

Bates White has extensive experience in numerous facets of energy litigation and arbitration, including contract disputes; damages estimation; disputes involving energy assets; market manipulation and trading and risk management practices; regulatory proceedings in state, federal, and international venues; market power issues; bankruptcy filings; and international arbitration cases. Using our industry expertise, state-of-the-art analytical tools, rigorous economic and financial analysis, and ability to present complex quantitative analysis in easy-to-understand and compelling terms, we provide the economic support and defensible expert testimony necessary for high-stakes litigation.

Contract disputes

Contracts are the backbone of well-functioning markets. The complexity of transaction structures and extreme volatility of energy markets has increased the number of contractual disputes in recent years, making it crucial to critically evaluate the contract terms, conditions, and damages arising from nonperformance. Using our deep understanding of industry practices as well as state-of-the-art empirical tools and sophisticated economic analysis, our economists work closely with attorneys to provide critical supporting analysis and expert testimony.

  • Served as an expert witness on behalf of an LNG supplier seeking a price adjustment under an LNG supply agreement. Analyses and testimony covered netback calculations, loss estimates, and the calculation of the embedded option value of the buyer’s right to divert cargoes.
  • Provided expert testimony on the reasons for oil price increases in connection with a contract pricing dispute.
  • On behalf of JPMorgan Chase, provided expert testimony in a civil litigation regarding the enforcement of guarantees of Enron’s performance under a number of forward natural gas sales contracts. JPMorgan Chase v. Liberty Mutual Insurance Co., No. 01 Civ. 11523 (S.D.N.Y.)

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Damages estimation

Accurate and defensible estimates of monetary damages arising from contract disputes, bankruptcy filings, allegations of anticompetitive behavior, and other legal and regulatory actions are key components of successful litigation. Such damages estimates require not only empirical analysis but also a thorough understanding of the underlying economic structures and incentives. We use our knowledge of industry contracting practices and established economic theory to produce testimony and damages estimates that withstand intense scrutiny in litigation.

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Energy infrastructure disputes

Bates White experts are adept at addressing issues raised in disputes involving oil and gas fields, storage facilities, natural gas, oil and product pipelines, refineries, power plants, thermal hosts, treatment plants, and utilities. Such disputes require the ability to integrate economic and engineering expertise as well as a detailed understanding of power and fuels markets, the operation of energy assets, fuel supply and delivery contracts, power and thermal offtake agreements, local and federal regulatory requirements, and applicable environmental regulations. Our expertise is enhanced by our ability to project the operation of generation facilities, electricity and fuels markets, and the transmission or pipeline system but-for the alleged breach.

In addition to all aspects of assessing gas-fired and cogeneration facilities, we are experienced in the siting and modeling of renewable resources as well as the often unrecognized demands that their integration places on transmission and generation systems. We have deep insight and experience in disputes involving nuclear facilities, which include power plants, uranium handling and fuel-cycle facilities, and waste facilities. Our experts have provided testimony and support in a number of cases involving contract disputes, alleged violation of New Source Review regulations under the Clean Air Act, mergers and acquisitions, nuclear power, power plant construction, fuel purchase obligations, and valuations of energy asset-related contracts rejected in bankruptcy. In addition, we have testified in regulatory proceedings regarding transmission facilities as well as before FERC on regulatory issues and market power cases.

  • Analyzed government claims of emissions increases under the New Source Review provisions of the Clean Air Act.
  • Evaluated allegations of gasoline price manipulation by oil refiners and marketers in eastern Canada.
  • In a dispute between a major EPC contractor and the plant owner over alleged schedule delays, performance guarantees, and contract termination related to the construction of a co-generation plant, analyzed the evolution of the other side’s pro formas over time to assess motive for contract termination, and modeled the physical operation and financial performance of the co-generation plant for the assessment of damages.

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Market manipulation and trading and risk management practices

Today’s energy environment is fraught with challenges. Wide swings in prices and economic conditions have dramatically changed the economics of energy companies and their contracts and have triggered investigations, enforcement actions, and private disputes. Bates White’s experts are well-versed in the complexities of physical and financial energy markets, energy industry disputes, and state and federal regulatory issues and enforcement actions. We have analyzed the trading and risk management practices of a number of energy companies; assessed trading strategies and hedging practices, transaction pricing, the impact of trades on prices, the business practices of trading organizations, and the riskiness of transactions or positions; and assessed extensive trade and position data from a large number of disparate trading systems, as well as company financial records. We have performed analyses and provided testimony and advice in cases of alleged market manipulation, fraudulent price reporting, price-fixing and market power abuses, “gaming” behavior, improper bidding behavior and capacity withholding, allegations of fraud, class action litigations on behalf of oil companies, and contract disputes and transaction pricing issues.

  • Testified on behalf of FERC Enforcement Staff in the Amaranth market manipulation case. Analysis found statistically significant price reversals, consistent with alleged manipulation, that Amaranth’s at-issue trading differed from its historical trading pattern, and that there was no evidence market fundamentals caused the at-issue price movements.
  • Submitted expert testimony on merits and damages on behalf of the defendant in a dispute over alleged natural gas price manipulation in Gallo v. EnCana.
  • Submitted an expert report in support of the defendants’ opposition to the plaintiffs’ motions for class certification in the matter In re Western States Wholesale Natural Gas Antitrust Litigation, MDL1566.
  • On behalf of a natural gas marketer accused of attempting to manipulate natural gas prices, provided expert consulting services, analyses of plaintiff’s expert’s reports, and estimates of alleged damages.
  • Estimated damages related to allegations of physical natural gas price manipulation, and provided advice to defendants as a consulting expert in support of successful settlement negotiations in a number of indirect purchaser cases.
  • Evaluated allegations of gasoline price manipulation by oil refiners and marketers in eastern Canada.
  • Provided expert testimony related to the California power markets during 2000–2001 and allegations of improper bidding behavior. Analyzed detailed data on individual bids and plant-level generation, performed statistical analysis of “physical” and “economic” capacity withholding, analyzed financial market data, examined alleged evidence of manipulative trading strategies, and assessed evidence of coordinated behavior.
  • Provided expert consulting support to a major energy company in a dispute over trading practices, including assessment of trading books, transaction pricing, and trading and hedging strategies and practices, and the effect on trading book value associated with changes in allowable VaR.
  • Provided expert consulting support on issues related to an energy merchant’s business model, its trading and risk management practices, and the accuracy of public disclosures.

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Regulatory support, supply procurement, and market design

Bates White’s experts leverage extensive energy market, financial, and litigation experience to address complex regulatory issues, which include the design and evaluation of electric utility and gas procurement methods, the assessment of market structure and presence of market power, and the design of centralized market mechanisms. We have provided testimony in market-based rate proceedings, rate cases, and transmission siting and permitting proceedings.

For more information on our experience and services in this area, click here.

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Market power

Bates White’s professionals combine antitrust expertise, a deep understanding of energy markets, and rigorous quantitative analysis. We provide expert consulting and testimony to address a wide range of anticompetitive practices, which include the impact of transactions between regulated and unregulated affiliates, mergers and acquisitions, and access to transmission systems and other constrained facilities. We advise clients on the economic, financial, and regulatory implications of mergers and acquisitions in energy markets, and we use state-of-the-art, proprietary transmission models to provide rigorous and defensible quantitative analysis of transmission-related market power. We have extensive experience providing consulting services and expert testimony in merger litigation and in proceedings before the DOJ, FTC, FERC, and state public utility commissions.

  • Assessed potential market power issues associated with the proposed merger of Exelon and Constellation. On behalf of Maryland PSC staff, testified on issues related to the FERC’s Delivered Price Test, changes in market concentration as result of the merger, transmission constraints affecting the definition of relevant markets, and the adequacy of the Applicants’ proposed mitigation plan. Analyzed the economic viability of several of the coal-fired plants selected for divestiture by the Applicants. The Applicants have since committed to build additional generation in Maryland if the merger is approved.
  • Submitted expert testimony on behalf of InterGen in FERC proceedings (Docket No. EC03-131-000) related to Oklahoma Gas & Electric’s proposed acquisition of NRG McClain; analyzed issues of horizontal and vertical market power within the context of a hearing to identify appropriate mitigation measures.
  • Submitted expert testimony on behalf of the Independent Energy Producers Association on vertical market power in FERC proceedings (Docket No. ER04-316-000) related to Southern California Edison’s proposed acquisition of a Mountainview, Calif., electricity-generating facility and a subsequent interaffiliate Power Purchase Agreement.

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Bankruptcy

Economic, financial, and regulatory issues can be crucial for energy companies that are affected by insolvent entities or are suffering financial distress. Our experts have played critical roles in a significant number of complex, large-scale, precedent-setting transactions and disputes. We have provided analysis and testimony on numerous issues, which include cost of capital, asset, contract, securities, and derivatives valuation as well as contract disputes, damages, solvency and fairness opinions, and goodwill impairment.

  • Submitted expert reports on the fair market value of natural gas transactions in response to fraudulent conveyance claims in the bankruptcy of a natural gas company, and on contracting practices for natural gas and whether the contracts at issue were commodity forward agreements and thus protected from avoidance under the bankruptcy code.
  • Performed valuation of natural gas transportation contracts in the bankruptcy of U.S. energy companies.
  • Developed econometric models to quantify the impact of alleged accounting fraud on damages arising from an energy company’s bankruptcy. The work included forensic accounting analyses of sophisticated structured transactions, valuation of the trade book of energy and other commodities, and analysis of loan agreements, on- and off-balance sheet debt obligations and contractual covenants, and other financial documents.

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International arbitration

Bates White’s professionals have provided support to numerous law firms and clients in alternative dispute resolution. Our experts have worked in more than 25 countries and can support contract renegotiations prior to arbitration, assess damages prior to filing for arbitration, formulate concession termination strategies, provide expert and consulting support in investment disputes between governments and companies under bilateral investment treaties, and provide expert and consulting support in arbitrations between private parties, including insurance and reinsurance disputes, construction and engineering disputes, and oil and gas disputes.

For more information on our international arbitration experience and services, click here.

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