Initial Decision Overview
On May 15, 2014, FERC set a hearing to address whether BP violated FERC’s anti-manipulation rules and Section 4A of the NGA and to make certain factual findings regarding the application of the FERC’s Penalties Guidelines.[1] After hearing (and nearly seven years since the alleged violations), and consistent with the OE’s allegations, on Aug. 13, 2015, Presiding Administrative Law Judge (ALJ) Carmen Cintron issued an Initial Decision in BP America, Inc., et al, 152 FERC ¶ 63,016 (2015), concluding that BP America Inc., BP Corporation North America Inc., BP America Production Company, and BP Energy Company (collectively, BP) violated Section 1c.1 of the Commission’s anti-manipulation regulations 18 C.F.R. § 1c.1 (2014), and section 4A of the NGA with respect to its trading of next-day, fixed-price natural gas at Houston Ship Channel (HSC) from Sept. 18, 2008, through Nov. 30, 2008 (Investigative Period).
Alleged Violations: Changing Trading Patterns
Despite BP’s arguments to the contrary, the Presiding ALJ found that OE Staff had met its burden of proof and concluded that “BP, through the Texas team, manipulated the market by selling next-day, fixed, price natural gas at HSC during the Investigative Period, in such a way that they managed to suppress the Gas Daily index and benefit their financial positions.” Judge Cintron noted, “[t]heir financial positions benefited from the Gas Daily index for HSC being lower than the index at Henry Hub.”[2] In concluding that BP engaged in market manipulation, the Presiding ALJ stated “[t]his is a classic case of physical for financial benefits.”[3] She agreed with FERC Enforcement Staff’s assertion that BP’s Texas team of traders “directly used a scheme to defraud, engaging in uneconomic trading in the physical markets at the HSC” during the two and a half month Investigative Period in 2008.[4]