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FERC Enforcement, Oasis Pipeline Reach Settlement in Principle

December 15, 2008
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FERC enforcement litigation staff and Energy Transfer Partners' Oasis Pipeline LP have reached an agreement in principle to settle violations of regulations under Section 311 of the Natural Gas Policy Act (NGPA) of 1978.

Chief Administrative Law Judge (ALJ) Curtis Wagner Jr. last Thursday granted both parties' request to suspend the trial schedule so that they can work on the settlement and file it at the Federal Energy Regulatory Commission (FERC). He ordered parties to advise the presiding judge of a target deadline for circulation of a draft settlement among the participants, a target date for the filing of a settlement and related documents with the Commission, and to file a status report within 30 days of the date of the order if the settlement cannot be filed by then [IN06-3-004].

The news of the settlement in principle comes less than a month after presiding ALJ Bruce L. Birchman in a partial decision dismissed the meat of the FERC enforcement case against Oasis Pipeline -- that it discriminated against nonaffiliated shippers in favor of affiliated shippers (see NGI, Nov. 24). The Commission, which can either approve or reject Birchman's decision in full or part, has yet to rule on it.

This left only two charges to be resolved when the hearing resumed on Dec. 15: 1) whether Oasis overcharged shippers with respect to Section 184 interruptible transportation transactions; and 2) whether Oasis improperly failed to file with FERC or cite in its statement of operating conditions a pipeline capacity lease and commercial operations agreement.

A July 2007 show-cause order charged that affiliates Oasis Pipeline LP, Oasis Pipeline Co. Texas LP and ETP Texas Pipeline Ltd. violated certain regulations under Section 311 of the 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 failing to file an amended operating statement in violation of agency regulations (see NGI, July 30, 2007).

For the Oasis Pipeline NGPA violations, the Commission proposed that Energy Transfer pay $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 proposed that the company disgorge $267,122, plus interest, in unjust profits.

The settlement in principle between FERC enforcement and Oasis does not resolve the charges against Energy Transfer Partners, parent of Oasis. Energy Transfer Partners and several affiliates -- Energy Transfer Co., ETC Marketing Ltd. and Houston Pipeline Co. -- are accused of manipulating physical natural gas prices at the Houston Ship Channel (HSC) and Waha trading hub on various dates from December 2003 through December 2005.

Energy Transfer and affiliates face potential civil penalties of $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.

In a parallel enforcement case earlier this month, FERC ALJ Carmen Cintron certified as uncontested a joint offer of settlement that resolves charges that collapsed hedge fund Amaranth Advisors LLC, affiliates and two former gas traders manipulated gas trading activity in the futures market (see NGI, Dec. 8). Details of the settlement, which awaits action by the full Commission, were not disclosed.

FERC's Office of Enforcement, Amaranth Advisors, affiliates and former traders Brian Hunter and Matthew Donohoe filed the settlement at the agency in late November.

In the same July 2007 show-cause order, FERC accused Amaranth and others of manipulating the New York Mercantile Exchange (Nymex) natural gas futures contract, which settles at the Henry Hub and ultimately determines physical gas prices over which FERC has jurisdiction. The agency sought civil penalties and disgorged profits totaling $291 million for Amaranth's activities in the Nymex gas futures market in February, March and April 2006.

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