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BP Appeals Market Manipulation Finding at FERC

BP plc is appealing a FERC administrative law judge's (ALJ) initial decision (ID) that says affiliates of the company gamed the market for natural gas at the Houston Ship Channel (HSC) during two and a half months in 2008 following Hurricane Ike.

The Federal Energy Regulatory Commission Office of Enforcement (OE) "...has since 2010 insisted that some finding of market manipulation is warranted because of a single audio taped conversation between two BP traders," the company said in its rebuttal to the ID of ALJ Carmen A. Cintron (see Daily GPIAug. 13) [IN13-15]. "OE mischaracterized the context and content of that call and disregarded the fact that the call refers to none of the alleged manipulative behavior postulated by OE's experts.

"BP has contested and continues to contest OE's claims because they are devoid of any support in fact or in law."

The ALJ's findings were in line with previous recommendations from the FERC OE, which BP disputes. Cintron found that BP violated Section 4 of the Natural Gas Act and FERC's Anti-Manipulation Rule and that the traders knew what they were doing was wrong. "BP participated in an unlawful scheme to manipulate the HSC Gas Daily index to benefit their financial positions. Further, it is concluded that they did so with the requisite scienter and in connection with jurisdictional transactions."

Last month BP said it would be appealing the ID. The company's 111-page "Brief of Exceptions" details what it says are numerous errors made by investigators in the case.

"The trading at issue took place in a very unusual environment: in the midst of the financial crisis of 2008 and in the aftermath of Hurricane Gustav and on the heels of Hurricane Ike," BP said.

"There is no direct evidence of manipulation. OE's case is flawed exegesis of trading data, which BP has rebutted in detail. The ID turns the procedural protection embedded in the Natural Gas Act on its head by requiring BP to affirmatively prove its innocence."

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