ERAC Regulatory Compliance & Legal Framework 3 — Questions and Answers
Question 1: Under Dodd-Frank Title VII, which category of energy derivatives is generally subject to mandatory central clearing requirements?
- Physical commodity forwards with actual delivery
- Standardized swaps designated by the CFTC as subject to clearing (Correct answer)
- Exchange-traded futures contracts on recognized exchanges
- Over-the-counter options on physical natural gas
Correct answer: Standardized swaps designated by the CFTC as subject to clearing
Dodd-Frank requires mandatory central clearing for standardized swaps that the CFTC has designated as clearing-eligible, reducing counterparty risk.
Question 2: The Outer Continental Shelf Lands Act (OCSLA) grants primary federal jurisdiction over offshore energy development to which agency?
- FERC
- Bureau of Ocean Energy Management (BOEM) (Correct answer)
- Army Corps of Engineers
- Environmental Protection Agency
Correct answer: Bureau of Ocean Energy Management (BOEM)
BOEM (formerly MMS) administers OCSLA, overseeing leasing, exploration, and development of OCS mineral and energy resources.
Question 3: A natural gas pipeline company seeks to abandon service to a customer. Under the Natural Gas Act, what must it obtain first?
- State public utility commission approval only
- FERC authorization or certificate approval for abandonment (Correct answer)
- Customer consent in writing
- Department of Energy waiver
Correct answer: FERC authorization or certificate approval for abandonment
The Natural Gas Act requires interstate pipelines to obtain FERC authorization before abandoning any certificated service or facilities.
Question 4: Which aspect of the Public Utility Regulatory Policies Act (PURPA) of 1978 most directly expanded renewable energy development opportunities?
- It mandated utilities to purchase power from qualified facilities (QFs) at avoided cost (Correct answer)
- It established federal renewable portfolio standards for all states
- It created FERC's backstop siting authority for wind farms
- It required vertically integrated utilities to divest generation assets
Correct answer: It mandated utilities to purchase power from qualified facilities (QFs) at avoided cost
PURPA required electric utilities to purchase electricity from qualifying small power producers and cogenerators at the utility's avoided cost, creating a market for independent power.
Question 5: Under EPA's Renewable Fuel Standard (RFS) program, obligated parties must demonstrate compliance primarily through which mechanism?
- Filing annual emission reduction reports with state agencies
- Retiring Renewable Identification Numbers (RINs) to meet volume obligations (Correct answer)
- Purchasing renewable energy certificates (RECs) on open markets
- Submitting fuel efficiency data under CAFE standards
Correct answer: Retiring Renewable Identification Numbers (RINs) to meet volume obligations
The RFS program uses RINs as the compliance currency; obligated parties (refiners and importers) must retire sufficient RINs to meet their renewable volume obligations.
Question 6: When an energy company discovers a potential FCPA (Foreign Corrupt Practices Act) violation related to overseas project development, which two US agencies share enforcement authority?
- FERC and EPA
- DOJ and SEC (Correct answer)
- State Department and DOE
- CFTC and NRC
Correct answer: DOJ and SEC
The Department of Justice and the Securities and Exchange Commission jointly enforce the FCPA, with DOJ handling criminal prosecutions and SEC handling civil cases for issuers.
Question 7: Which legal standard governs FERC's review of proposed electric utility mergers under Section 203 of the Federal Power Act?
- Strict antitrust per se rule
- Public interest standard (Correct answer)
- Net benefits test
- Rate of return reasonableness test
Correct answer: Public interest standard
Under FPA Section 203, FERC approves mergers and dispositions of jurisdictional assets only if they are consistent with the public interest.
ERAC Regulatory Compliance & Legal Framework 3
Under Dodd-Frank Title VII, which category of energy derivatives is generally subject to mandatory central clearing requirements?