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Strike Two for Energy Transfer at FERC

FERC last Thursday rejected Energy Transfer Partners LP's (ETP) request for rehearing and stay of an order setting for hearing charges that it manipulated the natural gas markets at the Houston Ship Channel (HSC) and Waha, TX, trading hubs.

This was the second time that the Dallas-based company sought rehearing and/or stays of Federal Energy Regulatory Commission (FERC) decisions. Last December the Commission rejected Energy Transfer's argument that it was entitled to a de novo trial in district court for any civil penalties assessed under the Natural Gas Act (NGA), and held that the company instead could seek U.S. court of appeals review of any civil penalty after FERC makes a final ruling in the show-cause proceeding (see NGI, Dec. 24, 2007).

Energy Transfer sought judicial review in the U.S. Court of Appeals for the Fifth Circuit, which in March declined to rule on the agency's enforcement action against ETP on the grounds that it lacked jurisdiction to intervene in an ongoing agency matter. The court granted FERC's motion to dismiss the company's petition for review of the Commission's action (see Daily GPI, March 24).

In its latest plea, which was filed in late May, Energy Transfer requested that the agency reconsider and stay a May 15 order, which set for hearing the allegations that Energy Transfer and several affiliates -- Energy Transfer Co., ETC Marketing Ltd. and Houston Pipeline Co. -- manipulated physical natural gas prices at the HSC and Waha trading hub on various dates from December 2003 through December 2005 (see NGI, May 19). FERC responded in the negative to both requests.

In July 2007 FERC issued a show cause order accusing Energy Transfer and affiliates of market manipulation, with potential civil penalties totaling $82 million -- $79 million for the manipulations at the HSC and $3 million for the manipulations at Waha and Permian trading hubs (see NGI, July 30, 2007). The Commission also proposed disgorgement of $69.9 million, plus interest, in unjust profits. This includes $67.6 million for manipulation in the HSC and $2.2 million for manipulation at Waha and Permian.

In February FERC enforcement proposed that the agency increase the civil penalty against Energy Transfer by $25 million to $107 million and raise the unjust profits that the company would be required to disgorge to $74.9 million in the event it is found guilty of manipulation of gas prices. The proposed penalty increase was based on FERC staff's claim that it uncovered additional manipulation by ETP that it was not aware of last July (see NGI, Feb. 18).

The Commission also is seeking to revoke Energy Transfer's blanket certificate to sell natural gas for one year. This would require the company to get Commission approval for all jurisdictional sales of natural gas.

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