FERC Issues Show Cause Order Seeking $28 Million Penalty for Alleged Market Manipulation

FERC issued an order to BP Energy Company and affiliates directing the companies to show cause why they should not be found to have violated section 1c.1 of the Commission’s regulations and section 4A of the Natural Gas Act.

Specifically, FERC said in an order that, "BP America Inc., BP Corporation North America Inc., BP America Production Company, and BP Energy Company (collectively 'BP' or 'Respondent') are alleged to have violated section 1c.1 and section 4A of the NGA by manipulating the next-day, fixed-price gas market at Houston Ship Channel from mid-September 2008 through November 30, 2008."

The Commission directed BP to show cause why it should not be assessed a civil penalty in the amount of $28 million, and disgorge $800,000 plus interest.

A FERC Staff report alleges that, "traders on the 'Texas team' of BP’s Southeast Gas Trading (SEGT) desk traded physical natural gas at Houston Ship Channel (HSC) to increase the value of BP’s financial position at HSC."

"Specifically, staff alleges that the Texas team 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. In doing so, staff alleges, the 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," FERC said in its show cause order.

Docket IN13-15