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FERC Continues Crackdown on Violators of SMHT Requirement

FERC is continuing its crackdown on violators of its shipper-must-have-title (SMHT) requirement, approving two separate stipulation and consent agreements in late December that require Sempra Energy Trading LLC and DCP Midstream LLC to pay a combined penalty of nearly $800,000.

The Federal Energy Regulatory Commission (FERC) ordered Stamford, CT-based Sempra Energy Trading to pay a civil penalty of $400,000 and to disgorge $7,959 in unjust profits as a result of the violations. DCP Midstream, a gas gathering and processing firm, agreed to pay a civil penalty of $360,000 for multiple SMHT violations. Both Sempra and Denver-based DCP Midstream self-reported the violations to FERC earlier this year.

A FERC investigation determined that Sempra Energy Trading violated the SMHT requirement between September 2004 and October 2007 by improperly transporting approximately 50.6 Bcf of gas that it owned on pipeline capacity held by customers, including 26.7 Bcf of gas owned by Sempra that was delivered to third parties using capacity held by Sempra customers [IN09-14].

DCP Midstream violated the SMHT requirement between January 2005 and December 2007 by improperly transporting 61.5 Bcf of gas, the FERC order said [IN09-13]. An estimated 49.8 Bcf of third-party gas was transported on DCP Midstream capacity. The remaining 11.7 Bcf of gas was owned by an affiliate of DCP Midstream, but it was illegally transported on capacity either held by DCP Midstream or a different affiliate of DCP Midstream, the order noted.

FERC has had little tolerance for violators of its SMHT requirement. In late November it ordered Nebraska-based Cornerstone Energy to pay a civil penalty of $325,000 for SMHT violations and to disgorge $121,825, plus interest, in unjust profits (see NGI, Dec. 1, 2008). It also fined NorthWestern Corp. and its subsidiary NorthWestern Services LLC $450,000 for self-reported SMHT violations and required it to submit semiannual compliance monitoring reports for one year (see NGI, Dec. 8, 2008).

In late October, the Commission ordered Wisconsin-based marketer Integrys Energy Services Inc. to pay a civil penalty of $800,000 and to disgorge unjust profits of $194,505 for SMHT violations and other infractions, and fined Enbridge Marketing (U.S.) LP $500,000 for violating the SMHT requirement (see NGI, Oct. 27, 2008).

Under its capacity-release program, the Commission requires that all shippers must have title to the gas at the time the gas is tendered to pipelines or storage transporter and while it is being transported or held in storage by the transporter. FERC said SMHT violations interfere with its oversight of natural gas markets and with the agency's goal of market transparency.

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