BP plc said it has reached an agreement with FERC to “fully resolve disputes, allegations and claims” over the energy major’s natural gas trading transactions in 2008 for alleged manipulation of U.S. natural gas prices. The settlement represents less than one-half of the original amount BP has already paid in the case.
Under the settlement, the company agreed to pay a $10.75 million fine to the Federal Energy Regulatory Commission to resolve the charges. The U.S. Court of Appeals for the Fifth Circuit last October had ordered FERC to recalculate a $20.16 million fine on BP traders who allegedly took advantage of the next-day natural gas market to suppress prices at the Houston Ship Channel (HSC) (No. IN13-15-000).
In late December 2020, BP paid “under protest” a civil penalty including interest of $24.36 million. In January 2021, BP also paid $250,295 “under protest disgorgement, including interest.” BP had appealed to the Fifth Circuit seeking a rehearing in the case.
As part of this settlement, BP said it would not seek to recover the $250,295 fine.
Hurricane Ike had stormed into Galveston and the Greater Houston area in September 2008.
“Enforcement investigated BP’s Southeast Gulf Texas Team’s physical, next-day fixed price natural gas trading…and related transport of natural gas” from the Katy hub near Houston to HSC from Sept. 18, 2008 to Nov. 30, 2008, FERC noted in the settlement.
The scheme caused financial losses of $1.38-1.93 million and affected more than 35 Bcf of physical and financial natural gas.
Specifically, FERC’s Office of Enforcement “sought to determine whether BP, in the aftermath of Hurricane Ike, traded physical, next-day fixed price natural gas with the intent to depress” HSC prices “to benefit larger financial spread positions held by BP that settled off the index prices, in violation of the Commission’s prohibition of market manipulation.”
BP has long fought a July 2016 decision by FERC after it affirmed the findings of Administrative Law Judge Carmen Cintron, who had concluded that the BP affiliates gamed the market for two-and-a-half months in “…a classic case of physical for financial benefits.” The “Texas team” of BP’s Southeast gas trading desk “intentionally sold large volumes of next-day physical gas at HSC in a way designed to benefit their corresponding short financial positions.”
Acting Chairman Willie L. Phillips and Commissioners James P. Danly, Allison Clements and Mark C. Christie signed off on the agreement between the FERC Office of Enforcement and BP America Inc., BP Corporation North America Inc. BP America Production Co. and BP Energy Co.
“To be specific, this order resolves the Fifth Circuit’s order that the Commission reassess the civil penalty that BP must pay for its violations of the Commission’s Anti-Manipulation Rule,” the Commission noted.
FERC said the Office of Enforcement also "will not object should BP choose to seek to reclaim the excess payment of $13.6 million” through a lawsuit in the U.S. Court of Federal Claims or another jurisdiction.
