BP faces penalties as judge sees manipulation of Texas gas markets

By HARRY R. WEBER
Bloomberg

BP faces millions of dollars in penalties and surrendered profits after a Federal Energy Regulatory Commission judge concluded Thursday that the natural gas producer manipulated markets in Texas in 2008.

BP artificially lowered the price of gas at a Houston hub in 2008 for financial gain, FERC administrative law judge Carmen Cintron in Washington said in a non-binding ruling. The judge’s decision will be voted on by FERC’s five-member commission, which will issue a final ruling on the case.

“The evidence in this case shows that the Texas team had hundreds of affirmative acts in furtherance of the manipulative scheme during the investigative period,” the judge said.

FERC brought charges against London-based BP in August 2013. Traders at BP’s Southeast natural gas desk were accused of a scheme to lower next-day, fixed-price natural gas prices at the Houston Ship Channel hub from Sept. 18 through Nov. 30, 2008, to boost physical and financial bets.

At the time, federal energy regulators proposed a $28 million penalty against BP, along with disgorgement of $800,000 plus interest.

The manipulation resulted in financial losses during 49 trading days, Cintron said.

BP spokesman Geoff Morrell said the company disagrees with the ruling and will appeal the decision to the full commission.

“The evidence overwhelmingly demonstrated that BP’s natural gas traders did not engage in any market manipulation,” Morrell said in an e-mail. “As the leading marketer of natural gas in North America, BP is committed to adhering to the highest ethical standards, conducting all trading in compliance with all laws and regulations, and maintaining a strong control and compliance environment.”

BP previously said the case should be dismissed because the trades at issue are outside the agency’s jurisdiction. BP can appeal a final order to a federal court.

Deepwater Horizon

The Thursday ruling comes after BP reached a record $18.7 billion agreement in July to settle claims from the 2010 Deepwater Horizon oil spill.

FERC began an inquiry of BP’s trading activity in November 2008, when one of the accused traders discussed the alleged ploy on a recorded phone call. BP was being monitored under a 2007 settlement agreement with the Justice Department and the US Commodity Futures Trading Commission following charges that it manipulated the market for TET propane in 2003 and 2004.

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