Federal Register, Volume 74, Number 76, April 22, 2009, Pages 18285-18448 Page: 18,312
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Federal Register/Vol. 74, No. 76/Wednesday, April 22, 2009/Proposed Rules
Finally, some commenters voiced the
concern that if the Commission relies
upon the text and judicial construction
of SEC Rule 10b-5 language and
securities law precedent, courts would
be more inclined to find an implied
private right of action under any final
rule.83 Commenters urged the
Commission to clarify that any final rule
would not create or imply a private right
of action.84 In response, the Commission
notes that EISA does not expressly
create a private right of action.85
Whether a private right of action might
be implied, however, is a question of
legislative intent for Congress or the
courts, not the Commission, to resolve.
C. Section 317.2: Definitions
The revised proposed Rule provides
definitions for six terms: "crude oil,"
"gasoline," "knowingly," "person,"
"petroleum distillates," and
"wholesale." Five of these terms were
defined in the initial NPRM, and the
definitions of those five terms herein
remain largely the same as those in the
initially proposed Rule.86 In addition,
the revised proposed Rule now includes
a definition of the term "knowingly."
These definitions establish the scope of
the revised proposed Rule's coverage
and provide guidance as to the
Commission's intended enforcement of
Several commenters addressed the
definitions proposed in the initial
NPRM, and some of them also suggested
additional definitions. These comments,
together with the Commission analysis
of the definitions that are included in
the revised proposed Rule, are
1. Section 317.2(a): "Crude oil"
Section 317.2(a) of the initially
proposed Rule defined "crude oil" to
mean: "the mixture of hydrocarbons
that exist: (1) in liquid phase in natural
83 See, e.g., NPRA at 15 ("The greater the
emphasis on SEC authorities as a source of the
Commission's Rule, the greater the likelihood that
courts would follow the SEC model to imply a
private right of action under EISA as well."); Flint
Hills at 4 (noting that the closer the Commission
adheres to a SEC Rule 10b-5 model, the more
difficult it will be to design a compliance program
to preclude third-party litigation).
84 See, e.g., Sutherland at 7 ("[The Commission]
should make clear that neither EISA nor the
proposed Rule creates any private right of action.");
Plains at 1 ("We urge the Commission to make it
clear that its proposed rule does not create any
private right of action and that the rule may be
enforced only by the Commission itself."); API at
10 ("The Commission should make clear in any
final Rule that it does not create a private right of
85 See API at 10 (agreeing that "Congress did not
expressly provide for a private right of action in
86 73 FR at 48325-26.
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."''87 As explained in
the NPRM, the Commission intended
the definition to include "liquid crude
oil and any hydrocarbon form that can
be processed into a refinery feedstock,"
but to exclude "natural gas, natural gas
liquids, or non-crude refinery
Two commenters, PMAA and Navajo
Nation, supported the proposed
definition of "crude oil,""89 and no
commenter provided a basis for
changing it. Section 317.2(a) of the
revised proposed Rule thus retains the
substantive definition of "crude oil" in
the initially proposed Rule. However,
the definition in the revised proposed
Rule has three non-substantive
modifications.90 Section 317.2(a) of the
revised proposed Rule therefore defines
"crude oil" as "any mixture of
hydrocarbons that exists: (1) in liquid
phase in natural underground reservoirs
and that remains 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."
2. Section 317.2(b): "Gasoline"
Section 317.2(b) of the initially
proposed Rule defined "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.""91 Three commenters
generally supported the proposed
Several commenters offered views on
whether ethanol or renewable fuels
should be included as covered products
under any final rule. Some of them
expressed general support for including
ethanol or renewable fuels.93 One
87 73 FR at 48325.
88 73 FR at 48325.
89 PMAA at 3 ("The definition of 'crude oil' ...
seem[s] appropriate."); Navajo Nation at 7 (adopting
the FTC's proposed definition of "crude oil" in its
recommended rule text).
90 The word "exist" in the definition has been
replaced with the word "exists"; the phrase "the
mixture" has been changed to "any mixture"; and
in the first part of the definition, the phrase "which
remain" has been changed to "that remains."
91 73 FR at 48325.
92 PMAA at 3 ("The definition of... 'gasoline'
... seem[s] appropriate."); IPMA at 4 (agreeing with
the Commission's proposed definition of
"gasoline"); Navajo Nation at 7 (adopting the FTC's
proposed definition of "gasoline" in its
recommended rule text).
93 See, e.g., ATA at 1 (encouraging the
Commission to include renewable fuels markets in
commenter specifically opposed
including ethanol in the definition of
Section 317.2(b) of the revised
proposed Rule retains, without
modification, the definition of
"gasoline" in the initially proposed
Rule. Consistent with its position in the
NPRM, the Commission intends to
capture those commodities regularly
traded as finished gasoline products or
as gasoline products requiring only
oxygenate blending to be finished,
under this definition.95
The Commission tentatively has
determined not to treat products not
listed in Section 811-such as
renewable fuels (e.g., ethanol) and
blending components (e.g., alkylate and
reformate)-as separate covered
products under its definition of
"gasoline." The Commission may
nonetheless apply the revised proposed
Rule to conduct implicating non-
covered commodities if appropriate
under the "in connection with"
language in the revised proposed Rule,
as discussed below in Section
IV.D.2.a.2. This approach would
provide the Commission with sufficient
flexibility to achieve the statutory goal
of protecting wholesale petroleum
markets from manipulation without
expanding the reach of a Section 811
rule to cover products not identified in
3. Section 317.2(c): "Knowingly"
Section 317.2(c) of the revised
proposed Rule defines "knowingly" to
mean "with actual or constructive
knowledge such that the person knew or
must have known that his or her
conduct was fraudulent or deceptive."
This definition has been added to
provide guidance as to the level of
scienter required to establish a violation
of the general anti-fraud provision
contained in revised proposed Rule
Section 317.3(a). Consistent with the
position the Commission adopted in the
NPRM, the definition of "knowingly"
derives from the extreme recklessness
standard articulated by the Seventh
Circuit and the District of Columbia
Circuit Courts of Appeals in decisions
delineating the appropriate scienter
the proposed Rule's reach); PMAA at 3 (stating that
the Commission should reach the manipulation of
ethanol under the rule); see also IPMA at 4
("[A]gree[ing] with the language that manipulation
of non-petroleum based commodities such as
ethanol and other oxygenates that directly or
indirectly affect the price of gasoline should be
subject to Commission enforcement under the
94 MFA at 12 (requesting that the Commission
"delete its reference to 'ethanol' as a subset of
95 See 73 FR at 48325.
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United States. Office of the Federal Register. Federal Register, Volume 74, Number 76, April 22, 2009, Pages 18285-18448, periodical, April 22, 2009; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc132938/m1/34/: accessed October 21, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.