The FERC and Commodity Futures Trading Commission (CFTC) investigations into trading and intrastate gas transportation activities of Energy Transfer Partners (ETP) will likely result in fines in the case of a negotiated settlement, the company said last week in a regulatory filing.

"Management believes that these agencies will require a payment in order to conclude these investigations on a negotiated settlement basis," said the company's filing with the Securities and Exchange Commission (SEC).

The trading investigations center around Houston Ship Channel trading activity during summer and fall 2005, particularly around the time of the hurricanes in fall 2005 (see NGI, Nov. 6, 2006). Additionally, the Federal Energy Regulatory Commission (FERC) is investigating certain ETP intrastate transportation activities.

While ETP's SEC filing said the company believes it did nothing wrong, there is room for doubt where the law is concerned, it said.

"[T]he laws and regulations in this area, particularly as they relate to alleged market manipulation, are vague, subject to broad interpretation, and offer little guiding precedent, while at the same time the FERC and CFTC hold substantial enforcement authority, including the ability to assess fines of up to $1 million per day per violation, to order the disgorgement of profits, and to recommend criminal penalties."

The company said it is "unable to predict the outcome of these matters." ETP said in the filing that it has $30.3 million set aside for potential liabilities such as could result from the investigations.

"If cash payments to resolve a particular matter substantially exceed our accrual for such matter, we may experience a material adverse impact on our results of operations, cash available for distribution and our liquidity," the Dallas-based company warned.

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