BP PLC expects the US Commodity Futures Trading Commission staff to recommend that a civil enforcement action be brought against the company over alleged violations of federal commodity exchange regulations.
The allegations are in connection with BP North America’s trading of unleaded gasoline futures on Oct. 31, 2002. CFTC’s staff notified the company of its plans on Nov. 21, BP said in a Dec. 13 filing with the US Securities and Exchange Commission.
CFTC has been investigating various aspects of BP’s crude oil trading and storage activities in the US since 2003, the company said. It added that it has provided, and continues to provide responsive data and other information to the federal regulatory agency.
In a civil action that it filed June 28 in the federal district court for northern Illinois, CFTC charged that BP Products North America cornered the market for February 2004 TET physical propane and manipulated the price.
It also charged the BP products unit with trying to corner the April 2003 TET physical propane market and manipulate the price. BP Products North America denied both charges.
BP said it also is cooperating with CFTC in the gasoline futures trading inquiry. The US attorney for the Northern District of Illinois also is investigating the company’s US gasoline trading, it noted.
“Additionally, an independent review of the group’s US trading compliance culture and its related systems has been undertaken by KPMG. The review’s findings and recommendations, and management’s response to them will be made available to the appropriate regulators,” BP said in an amendment to its 2006 third-quarter and 9-month financial results report to the SEC.
Supreme Court decision
The disclosure came 2 days after the US Supreme Court ruled against BP in its appeal of the US Minerals Management Service’s 1997 demand for coalbed methane royalties that the Department of Interior agency said BP’s US exploration and production subsidiary did not pay.
BP America Production Co. contested the order because it came more than 6 years after the alleged underpayment of royalties from gas leases originally held by Amoco Production Co. in New Mexico’s San Juan basin. BP assumed the leases when it acquired Amoco Corp. in 1998.
The company argued that the statute of limitations had run out by the time MMS demanded the additional payment. It appealed first to DOI’s assistant secretary, who ruled that the statute of limitations did not apply to an MMS administrative order, and then to various federal courts, which upheld the DOI ruling.
The Supreme Court agreed with the lower courts that the 6-year limit applied only to court actions. “In the final analysis, while we appreciate [the] petitioners’ arguments, they are insufficient to overcome the plain meaning of the statutory text,” it said in the opinion written by Justice Samuel A. Alito Jr.
On Dec. 7, MMS announced that it is billing BP America Inc.’s E&P subsidiary $18.9 million for additional royalties and $13.3 million in interest payments from the leases. Payment for production from June 1991 through May 2006 was due by yearend 2006, MMS Director Johnnie Burton said.
