Macquarie to fight illegal profiteering allegations in four US class actions

Macquarie Group’s energy trading arm is vigorously defending four separate class actions in the US that allege it and other major energy traders illegally profiteered from a disaster caused by a deadly winter ice storm in 2021.

The claims have been lodged on behalf of energy consumers in the state of Kansas and are seeking a combined total of $US429 million ($636 million) in damages from the energy trading houses, which are major suppliers to retail distributors.

The attorney-general of Kansas alleges Macquarie deliberately pushed up gas prices and damaged the state’s economy.
The attorney-general of Kansas alleges Macquarie deliberately pushed up gas prices and damaged the state’s economy.Credit: Getty

Macquarie is the only group to be listed as a defendant in all four suits. Energy powerhouse BP is a defendant in three of the class actions and US giant Chevron in one, along with a host of other companies.

The damages relate to the special levies energy consumers will pay in the state to cover the financial devastation the storm caused to energy distributors which were forced to buy gas at sky-high prices.

The Australian investment behemoth is also being sued by the attorney-general of Kansas, Kris Kobach, who alleges Macquarie deliberately pushed up gas prices and damaged the state’s economy.

Winter storm Uri devastated the US in February 2021, hitting the states of Kansas, Texas and Oklahoma particularly hard and leading to an enormous blowout in natural gas prices. Macquarie updated its earnings following the storm, after earlier that month warning of a softer result.

Macquarie Group is one of Australia’s biggest companies with a huge investment arm, infrastructure assets, a bank and successful energy trading arm.
Macquarie Group is one of Australia’s biggest companies with a huge investment arm, infrastructure assets, a bank and successful energy trading arm. Credit: Jim Rice

In its upgrade later in February, Macquarie cited the positive impact of the storm on its coming end of year results for the year to March 31. Its energy trading arm has been one of the group’s best performing units and a key profit driver for the group.

The four class action claims are not competing, but represent the customers of four major energy distributors operating in Kansas that used Macquarie and other groups as suppliers.

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According to court documents filed in Kansas, Macquarie and the other suppliers to local distributors called a force majeure event during the storm, which allowed them to rip up their contracts with the distributors and put in place new contracts with vastly inflated prices.

“Those force-majeure declarations were false,” the class actions allege. “Though demand for natural gas during Winter Storm Uri did increase, distributors in Kansas did not run out of natural gas.

“Indeed, though numerous distributors and producers relied on stored natural gas, the Southern Star Central Gas Pipeline never lost pressure during Winter Storm Uri, nor did the incremental gas going into the Southern Star Central Gas Pipeline increase in any significant measure.”

According to the claims, gas prices on the pipeline rocketed to astronomical levels during the storm, rising from $US2.50 at the start of the usually cold February to $US9.62 on February 11 as weather forecasts indicated a major weather event, before soaring to $US329.595 on the first day of the storm on February 13. They again jumped to $US622 on February 17 as the storm continued to wreak havoc in the region.

“As a result of defendants’ illegal profiteering, plaintiffs have suffered damages,” the class actions allege.

The class actions are seeking to cover customers of four major retail energy distributors in Kansas who will over the next five years pay hundreds of millions of dollars in special levies on their energy bills.

Vehicles at a standstill on a highway in Texas when winter storm Uri delivered historic cold weather and power outages in February 2021.
Vehicles at a standstill on a highway in Texas when winter storm Uri delivered historic cold weather and power outages in February 2021.Credit: Getty Images

The charge was part of a separate court ruling in Kansas to allow local distributors to recoup funds after being forced to pay for skyrocketing gas prices. As a result of the ruling, the class action argues that the energy suppliers that allegedly drove the gas price higher – forcing retail energy distributors to pay huge prices – ought to compensate Kansas’ energy consumers.

Macquarie and the other energy suppliers have asked the court to throw out the cases. The companies argue that Kansas consumer law limits claims for damages to companies with a direct relationship with consumers, which would be the energy distributors rather than the suppliers to the distributors.

They also argue that the increase in prices at the time of the storm were driven by a range of factors and there was no price gouging. A spokesperson for Macquarie said: “Macquarie continues to defend vigorously both the Kansas class actions and the Kansas Attorney-General’s claims.

“Macquarie Energy LLC is just one of 100-plus US energy suppliers involved in ongoing litigation matters stemming from their role in maintaining critical energy supply during unprecedented freezing weather events across the United States in February 2021.”

Spokespeople for BP and Chevron declined to comment.

In regards to the Kansas attorney-general’s case, the state was given leave by the District Court of Kansas, a federal US court, to refile its case last year after it initially incorrectly filed the case in state court before having to move to a federal court.

Under US law, even if a federal court can hear a case after it has been moved from state court, the act of filing in a state court when it does not have jurisdiction removes the jurisdiction of the federal court. The case has since been refiled in the District Court of Kansas.

The Macquarie spokesperson said: “Macquarie was successful in its motion to dismiss the Kansas Attorney-General’s original lawsuit in the United States District Court of Kansas.

“The Kansas Attorney-General has recently filed a further case. Macquarie continues to be confident in its position regarding the Kansas attorney-general’s claims.”

The court will soon consider arguments on whether to consolidate the four cases and the Kansas attorney-general cases.

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