BP could face millions of dollars in fines and surrendered profits after a US judge said it had manipulated the Texas natural gas market in 2008.
The administrative law judge’s decision upheld the Federal Energy Regulatory Commission’s 2013 charges that BP’s trading activities in Texas violated the Natural Gas Act.
At the time, federal energy regulators proposed a $28 million penalty against BP, along with disgorgement of $800,000 plus interest.
BP has disputed the commission’s allegations.
The action against BP related to natural gas trading in the Houston area in the aftermath of Hurricane Ike.
It is one of several high-profile investigations the regulator has pursued against energy traders and major banks, including Barclays, in recent years.
A spokesman for the commission said it would decide at a later time whether civil penalties should be imposed for any BP violations and whether it should payback any unjust profits.
BP said it will appeal the decision to the full commission.
In a non-binding ruling by Carmen Cintron, administrative law judge for the FERC, found BP flooded a Texas delivery point with natural gas to drive down prices, at the same time as placing trades in related financial markets that would benefit from the reduced price.
The judge’s decision will be voted on by FERC’s five-member commission, which will issue a final ruling on the case.
“The evidence in this case shows that the Texas team had hundreds of affirmative acts in furtherance of the manipulative scheme during the investigative period,” the judge said.
FERC brought charges against BP in August 2013. Traders at BP’s Southeast natural gas desk were accused of a scheme to lower next-day, fixed-price natural gas prices at the Houston Ship Channel hub to boost physical and financial bets.
BP previously said the case should be dismissed because the trades at issue are outside the agency’s jurisdiction. BP can appeal a final order to a federal court.
The Thursday ruling comes after BP reached a record $18.7 billion agreement in July to settle claims from the 2010 Deepwater Horizon oil spill.
FERC began an inquiry of BP’s trading activity in November 2008, when one of the accused traders discussed the alleged ploy on a recorded phone call.
BP was being monitored under a 2007 settlement agreement with the Justice Department and the US Commodity Futures Trading Commission following charges that it manipulated the market for TET propane in 2003 and 2004.
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