FERC issued an order Jan. 31 approving the return of $13.6 million in penalties it had collected from BP over a case of alleged manipulation of Houston Ship Channel natural gas prices after Hurricane Ike in 2008.
The commission collected $24.36 million in fines, plus interest, from BP for allegedly keeping natural gas prices at the Houston Ship Channel lower than those at the Henry Hub in Louisiana and losing money in physical trades, which benefited its financial positions and led to overall profits. FERC first issued a show cause order in the case in 2013, and years of litigation followed until a decision from the Fifth Circuit Court of Appeals came down in October 2022.
The commission had argued it should have jurisdiction over any transaction that impacts the interstate natural gas markets it polices, but the court disagreed.
BP only shipped gas over intrastate pipelines regulated by the Texas Railroad Commission in the alleged scheme, but some of that natural gas previously had crossed state lines, meaning it fell under FERC’s jurisdiction. The court said only that interstate gas could be part of the federal regulator’s enforcement action.
BP and FERC’s Office of Enforcement entered into a settlement that trimmed the penalty to $10.75 million, following the court’s findings, which meant the firm had paid an extra $13.6 million.
The oil major agreed it would not seek recovery of $250,295 of disgorgement of unjust profits, which ultimately was paid to three Texas Low Income Home Energy Assistance Program (LIHEAP) programs.
BP made a filing in November arguing FERC itself should issue an order requiring it be repaid for the $13.6 million. The order Jan. 31 directed the director of the Financial Management Division in the Office of Executive Director to wire BP the money.
