Deadly Texas blackouts during 2021 freeze were caused by greed, not the cold, lawsuits allege
Did pipeline companies mistakenly trigger blackouts that killed hundreds in pursuit of profit?
Most Texans believe cold weather in February 2021 shut down natural gas power plants and froze wind turbines, triggering one of the deadliest blackouts in the state’s history. But the true cause was corporate greed, according to a growing number of lawsuits filed across the country.
Texas relies on natural gas for more than 40 percent of its electricity supply, even more on cold nights. Federal investigators attributed the 2021 blackouts to failed natural gas delivery.
These suits allege that dozens of businesses acting independently withheld natural gas to raise prices and created an artificial fuel shortage, resulting in massive profits for companies that operate Texas-only pipelines and unimaginable gas bills for electric utilities and their customers across the Midwest. In the process, the pipeline companies took things too far, sparking the Texas electricity crisis, the suits say.
“Defendants’ intentional and manipulative withholding of supply caused prices to increase more than 500-fold,” CirclesX, a pipeline data firm, alleged in a lawsuit against 92 pipeline companies and energy traders filed in Houston this February. “Millions of Texans will be paying for the costs imposed by defendants’ misconduct for years to come.”
Kansas’ attorney general made similar allegations against pipeline owner and energy trader Macquarie Energy earlier this year. Several of the pipeline companies have sued each other, making similar claims.
An Oklahoma commissioner who oversees the energy industry has called for an investigation, and the state’s attorney general is looking for outside attorneys to recover what he says are ill-gotten gains from the 2021 storm.
“The magnitude of this scheme is staggering and unconscionable. The conduct in question is well outside the parameters and boundaries of ordinary capitalism,” Oklahoma Attorney General Gentner Drummond said in July.
Several lawsuits filed by San Antonio’s municipally owned utility, CPS Energy, alleged pipeline operators overcharged it, and CPS has recovered millions in secret settlements.
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All the companies named as defendants deny the accusations and insist they operated lawfully during the state of emergency, according to court documents. Several declined to comment further due to pending litigation.
If these lawsuits spread across three states are successful, natural gas pipeline operators and traders would have to refund billions of dollars in ill-gotten profits, much of which will repay government bonds customers would otherwise repay over the next 30 years through their electricity and gas bills.
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February freeze
From the moment the first lights went out, elected officials tried to blame renewable energy resources and protect the natural gas industry, which is responsible for millions of dollars in contributions to Republican political campaigns. But the pipeline and financial data presented in CirclesX’s court papers support arguments that during the 2021 storm, Winter Storm Uri, routine price manipulation caused the human tragedy.
The Texas Legislature spent the 2021 and 2023 sessions arguing over how to punish the clean energy industry without investigating pipeline companies. The Texas Railroad Commission, whose elected members rely on oil and gas companies for campaign donations, did not investigate the pipelines, spent most of their time defending them and denied they had jurisdiction to investigate price fixing.
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In the intervening years, though, a former Enron natural gas trader, who witnessed that firm’s manipulation of California’s gas market, has been collecting evidence.
Erik K. Simpson understands the value of knowing where companies send and store natural gas. After Enron’s bankruptcy, he founded Houston data firm CirclesX and built a proprietary database to analyze gas movements based on thousands of gas meters dotted across the state.
In its lawsuit, CirclesX says it can prove that operators of pipelines that operate within the state, which are very lightly regulated compared to interstate pipelines, inadvertently caused the blackouts in their search for outsized profits during a weather crisis.
Loose regulations
The manipulation is possible because the Federal Energy Regulatory Commission only regulates natural gas pipelines that cross state lines. Those that don’t are regulated by state officials. The federal government and every other state closely regulate pipelines to stop market manipulation.
Texas uniquely allows firms to own the gas in their pipes, which creates anti-competitive monopolies. Well owners rarely have a choice in the pipelines taking away their gas. Power plants typically only have one pipeline leading to them.
Under Texas law, pipeline operators can and do demand that well owners sell them gas at a secret contractual price and insist the customer buy it at a confidential price. Both well owners and gas customers have complained for decades about pipeline operators strong-arming them and booking hundreds of billions in unearned profits.
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The CirclesX suit alleges pipeline companies routinely move and withhold gas to drive up public prices under the cloak of these secret contracts. When a weather event strikes, pipeline operators frequently declare an emergency that suspends their contractual obligations, which allows them to sell gas at even higher prices, the suit alleges.
None of this is new.
Regulators and private companies have successfully sued pipeline companies in the past, forcing them to pay fines and damages. FERC assessed fines against BP for market manipulation during Hurricane Ike in 2008, and Energy Transfer Partners settled accusations of market manipulation in 2004 and 2005 by paying a $10 million civil penalty.
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Expert reports from academics and federal investigators examining Winter Storm Uri don’t dispute the new allegations.
This is the first of four columns on intrastate pipeline operators, their role in the deaths of hundreds of Texans in 2021, and how these companies maintain their excessive market power. In my next column, I’ll examine the detailed allegations in CirclesX’s lawsuit.