trending Market Intelligence /marketintelligence/en/news-insights/trending/er0bFFJqOm2X3-kGlpnUvw2 content esgSubNav
In This List

FERC affirms decision on BP gas price manipulation with $20.2M in fines

Blog

Insight Weekly Labor market recovery hurdles power market integration nonbank MA hunt

Blog

Q&A: Q2'21 Power Forecast: Overheated Power Markets are Here – Who Wins, Who Loses, and Why?

Blog

ESG & Technology: Impacts and Implications

Blog

Essential Energy Insights - October 2021


FERC affirms decision on BP gas price manipulation with $20.2M in fines

FERCupheld a decision that BPplc companies manipulated natural gas prices in Texas in 2008, andthe commission directed the oil and gas supermajor to pay civil penalties ofnearly $20.2 million and disgorge unjust profits of $207,169.

"Therecord shows that BP's trading practices during the investigative period werefraudulent or deceptive, undertaken with the requisite scienter, and carriedout in connection with commission-jurisdictional transactions," FERC ruledin a July 11 order affirming the initial decision of Administrative Law Judge CarmenCintron.

FERCalso denied a BP request for rehearing.

FERCChairman Norman Bay, who previously served as head of the commission's Officeof Enforcement, which investigated BP and brought charges, did not participatein the decision.

TheOffice of Enforcement had charged that BP America Inc., BP Corp. North America Inc., BP America Production Co.and BP Energy Co."executed a scheme to profit from the market conditions in the aftermathof Hurricane Ike by manipulating the price of natural gas in the Houstonregion," FERC said. The scheme violated an anti-manipulation rule in thecommission's regulations and Section 4A of the Natural Gas Act. A FERC noticeof proposed penalty in 2013 had suggested the payment of $28 million in civil penaltiesand the surrender of $800,000 in unjust profits.

Inthe initial decision, the ALJ found BP had violated the law. The judge said theTexas trading team of BP's Southeast Gulf Texas desk traded next-day,fixed-price gas at the Houston Ship Channel and related transportation of gasfrom Katy, Texas, to the Houston Ship Channel with the aim of pushing downPlatts Gas Daily index prices tobenefit large financial spread positions during the period from Sept. 18, 2008,through Nov. 30, 2008.

Inthe order, FERC went through the judge's reasoning and comments by thecommission's enforcement staff and by BP, and the commission found no problemswith the initial decision. On the issue of "scienter," or intent,FERC agreed with the ALJ that BP intended to manipulate the market. The intentof BP's Texas trading desk was shown in a recorded phone call between the teamand a senior BP official on Nov. 5, 2008, and other actions by the team.

"Weaffirm that the evidence incontrovertibly indicates that during theinvestigative period the Texas team consciously deviated from a profitablephysical trading strategy to embark on a demonstrably unprofitable one, whichwas intended to, and did, manipulate the Houston Ship Channel Gas Daily index to the benefit of theirfinancial position," FERC said.

FERCdirected BP to pay the civil penalties by wire transfer to the U.S. Treasurywithin 60 days. The unjust profits must be turned over to the Low Income HomeEnergy Assistance Program in Texas. (IN13-15)

S&P Global Plattsand S&P Global Market Intelligence are owned by S&P Global Inc.