FERC proposes fine for BP over 2008 natural gas trading

The US Federal Energy Regulatory Commission ordered four BP North American subsidiaries to show cause why they should not pay a $28 million fine for allegedly trying to manipulate the Houston Ship Channel-Katy Hub natural gas price spread in 2008. BP immediately disputed the Aug. 5 order, and said it would fight the allegations.

The US Federal Energy Regulatory Commission ordered four BP North American subsidiaries to show cause why they should not pay a $28 million fine for allegedly trying to manipulate the Houston Ship Channel-Katy Hub natural gas price spread in 2008. BP immediately disputed the Aug. 5 order, and said it would fight the allegations.

The order also would require BP to disgorge $800,000 plus interest, or a modification of those amounts if warranted. FERC gave the company 30 days to formally respond.

An attached Enforcement Office staff report alleged that three traders on the “Texas team” of BP’s Southeast gas trading desk tried to perpetuate a wide spread between HSC and Katy Hub prices which had developed in the wake of Hurricane Ike in late summer 2008. The alleged scheme, which began Sept. 18, was extended through October and into November, the report said.

BP stands by its February 2011 statement that its gas traders did not try to manipulate markets in late 2008, Geoff Morrell, vice-president and head of US communications, said in an Aug. 5 statement. FERC based its allegations on a 2-min telephone call between a BP trainee and gas trader that FERC has taken out of context, he noted.

“The recording does not support any allegation of wrongdoing,” Morrell said. “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, Morrell added.

Contact Nick Snow at nicks@pennwell.com.

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