FERC last Thursday set for hearing the charges against Energy Transfer Partners LP (ETP) and several affiliates -- Energy Transfer Co., ETC Marketing Ltd. and Houston Pipeline Co. -- for manipulation of the physical natural gas prices at the Houston Ship Channel (HSC) and Waha trading hub on various dates from December 2003 through December 2005.
In July 2007, the Federal Energy Regulatory Commission (FERC) issued a show-cause order alleging manipulation of wholesale gas prices at the HSC to benefit Dallas-based ETP's financial positions and other physical positions on certain days during the two-year period (see NGI, July 30, 2007). ETP last October responded that the agency's "theory of the case" was completely wrong, and it called for an immediate dismissal of the charges (see NGI, Oct.15, 2007).
FERC also set for hearing the issues of whether affiliates Oasis Pipeline LP, Oasis Pipeline Co. Texas LP and ETP Texas Pipeline Ltd. violated certain regulations under Section 311 of the Natural Gas Policy Act of 1978 (NGPA), including unduly discriminating against nonaffiliated shippers and unduly preferring affiliated shippers; charging rates in excess of the Commission-approved fair and equitable rates, and, if so, the amount of unjust profits due shippers; and failing to file an amended operating statement in violation of agency regulations [IN06-3].
The Commission said it ordered a hearing because there were material facts in dispute that could not be resolved on the basis of the written filings that it has received from its enforcement staff and ETP so far. The hearings will be conducted by FERC administrative law judges (ALJ). A presiding judge will make a recommendation to FERC in an initial decision, and the agency will make a final ruling on key issues, including:
The order calls for Chief ALJ Curtis Wagner Jr. to determine whether the charges against ETP and Oasis Pipeline should be addressed in a single hearing or in separate hearings. Once a presiding ALJ is chosen, he or she will have 10 days to convene a prehearing conference to determine a procedural schedule and to set hearing dates.
Wagner responded that "because there appear to be significant differences in the allegations against ETP and the allegations against Oasis Pipeline, separate hearings would be more appropriate and best serve the interest of the parties and the public." Moreover, "there are major issues of material fact that are unique to ETP and to Oasis Pipeline," Wagner said, adding that he believes separate hearings "would result in a quicker resolution of the two proceedings."
However before making a final decision, he said he wants to hear arguments from the parties and participants concerning the issues and the desirability of separate hearings. Wagner has scheduled a prehearing conference for Monday (May 19).
ETP faces 82 million in civil penalties for market manipulation -- the maximum $79 million for the manipulations at the HSC, and $3 million for the manipulations at Waha and Permian trading hubs. 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 ETP 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 ETP's blanket certificate to sell natural gas for one year. This means that ETP would have to get Commission approval for all jurisdictional sales of natural gas.
For the Oasis Pipeline NGPA violations, the Commission proposed $15.5 million in civil penalties for undue discrimination and undue preference, and $500,000 for failure to file an amended operating statement. The Commission also is proposing the company disgorge $267,122, plus interest, in unjust profits.
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