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Six-Year Old Case Alleging BP Price Manipulation Going Another Round

The six-year old FERC case over allegations that BP America Inc. manipulated Houston Ship Channel (HSC) prices continued Monday in a hearing before an administrative law judge on whether to limit the Office of Enforcement’s (OE) request for five years of price data from the IntercontinentalExchange Inc. (ICE) and McGraw-Hill’s Platts gas publications.

At the same time, BP America and its affiliates filed an appeal Friday to the Federal Energy Regulatory Commission (FERC) itself for rehearing of the May 15, 2014 order setting the case for hearing, claiming the Commission had acted outside its jurisdiction, and attacking “enforcement’s staff’s flawed theory of manipulation.” BP also attacked FERC for “failing to provide meaningful notice of allegedly impermissible behavior.”

In seeking to limit discovery BP noted the Commission in setting out its accusations said the “manipulative conduct” occurred over a period of 73 days, from Sept. 18, 2008 to Nov. 30, 2008. The discovery request for price data from Jan. 1, 2005 through Dec. 31, 2012 was nothing more than a “fishing expedition,” BP said.

FERC’s June 4 request for data said ICE and Platts would be given 10 business days from issuance of the subpoena to produce the data.

The hearing stems from a show cause order issued by FERC last August based on an OE investigation alleging that traders on the "Texas team" of BP's Southeast Gas Trading desk traded physical natural gas at HSC in a manner designed to increase the value of the company's futures market position.

"Specifically, staff alleges that the Texas team traders uneconomically used BP's transportation capacity between Katy and HSC, made repeated early uneconomic sales at HSC, and took steps to increase BP's market concentration at HSC as part of a manipulative scheme. In doing so, staff alleges, the Texas team traders suppressed the HSC Gas Daily Index with the goal of increasing the value of BP's financial position..." (see Daily GPI, Aug. 6, 2013).

In refuting the charges, BP said "the FERC bases its allegations on a recorded two-minute phone conversation between a BP trainee and BP natural gas trader that the regulator has taken completely out of context. The recording does not support any allegation of wrongdoing. In fact, the trainee involved in the conversation states that his characterization was incorrect and the trader never agrees with nor condones the trainee's statements. The trader also reacts strongly to the trainee's comments and interrupts him because the trainee's comments -- as the trainee admits on the call -- are incorrect and inappropriate.

"The trader also promptly reported the conversation and BP's compliance personnel acted appropriately in examining the trading at issue."

BP said in the five years since the charges first surfaced it had sent “a mountain of data” to the Commission. The company further said staff’s proposed application of the penalty guidelines was “conclusory, seriously flawed, and indefensible and that its calculation of pecuniary losses and disgorgement were simply wrong.” BP and its affiliates have been ordered to show cause why the companies should not be assessed a civil penalty in the amount of $28 million and required to disgorge $800,000 plus interest.

The Commission staff also has issued a subpoena for transportation records from Energy Transfer Partners L.P. for the September to October 2008 time period in question. 

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