EnergyChoiceMatters.com

Initial Decision Would Find BP Engaged in Market Manipulation

August 13, 2015

Email This Story
Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

An initial decision from a FERC ALJ would conclude that BP America Inc. and affiliates, "engaged in market manipulation," as a result of trading practices related to the Houston Ship Channel (HSC).

FERC Enforcement Staff had alleged that BP traders, "uneconomically used BP’s transportation capacity between Katy and HSC, made repeated early uneconomic sales at HSC, and took steps to increase BP’s market concentration at HSC as part of a manipulative scheme."

Enforcement Staff had alleged, "the [BP] Texas team traders suppressed the HSC Gas Daily index with the goal of increasing the value of BP’s financial position at HSC from mid-September 2008 through November 2008."

The ALJ's initial decision makes conclusions regarding whether the behavior constituted manipulation, but does not address fines or disgorgement sought by Enforcement Staff. A prior FERC show cause order had directed BP to show why it should not be subject to a civil penalty in the amount of $28 million

The initial decision is not final, and parties may file exceptions to the initial decision, to be heard by the full FERC commission.

The initial decision concludes as follows:

"It is concluded that BP engaged in market manipulation. This is a classic case of physical for financial benefits. During the Investigative Period (two and a half months in 2008) BP intentionally sold large volumes of next-day physical gas at HSC in a way designed to benefit their corresponding short financial positions. Starting on September 18, 2008 through the end of that month Comfort began to manipulate the HSC Gas Daily index to slow the shrinkage of the very valuable spread position in the Texas team’s book. After a successful September the Texas team extended the manipulation through October and November 2008. The Texas team trading during the Investigative Period was markedly different than their trading before the Investigative Period. There is no economic or other justification for their changed and unprofitable trading patterns," the initial decision states

"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 (49 trading days covering a period of 73 flow days). They made 680 fixed-price sales at HSC, 101 bid-initiated sales at HSC when they could have hit a more economic bid at Katy, and 129 offer-initiated sales when they could have sold more economically by adjusting their offer price at Katy. If each individual trade is treated as a separate violation the facts support a high number of violations. However, Staff recommends a minimum number of 48. Accordingly, it is concluded that there were at least 48 violations during a period of 49 days. BP’s manipulation resulted in financial losses of $1,375,482 to $1,927,728 on the next-day natural gas markets at HSC and Katy during the Investigative Period. The amount of natural gas involved in BP’s sales of next-day, fixed-price physical gas at HSC in the Investigative Period was 10,632,400 MMBtus. The amount of natural gas involved in the financial natural gas positions at HSC in the Investigative Period was 25,310,000 MMBtus. The losses were during 49 trading days of the Investigative Period," the initial decision states

Docket No. IN13-15

Email This Story

HOME

Copyright 2010-15 Energy Choice Matters. If you wish to share this story, please email or post the website link; unauthorized copying, retransmission, or republication prohibited.

Archive

Daily Email

Events

About/Contact

Search