On February 27, 2009, FERC approved a settlement agreement with Energy Transfer Partners LP (“ETP”) under which it will pay no civil penalty and neither admit nor deny any wrongdoing to any third party by Oasis Pipeline, LP (“Oasis”), an affiliate. The decision follows a ruling by FERC Administrative Law Judge Bruce Birchman that FERC was unable to prove Oasis had unduly discriminated against non-affiliated shippers (see November 21, 2008 edition of the WER).
FERC’s settlement with ETP ends an important aspect of the investigations that began in a show cause order issued in July 2007. The show cause order not only claimed ETP was unduly discriminating against non-affiliated shippers, but that it charged more than the maximum rate for service allowed in the Natural Gas Policy Act of 1978 and failed to file an amended operating statement. FERC initially proposed over $167 million in fines and disgorgement of profits against ETP for manipulating the gas markets and $15.5 million for undue discrimination by Oasis. The February 27 settlement puts the Oasis claims to rest.
FERC set a trial-type hearing for last November. At the hearing Judge Birchman determined that FERC staff’s expert witness testimony indicated that two classes of Oasis’ interstate shippers were not similarly situated. Judge Birchman concluded that because FERC was unable to show there were at least two classes of shippers who were similarly situated, Oasis could not have been unduly discriminatory.
While the settlement essentially dismisses the Oasis part of the case, it will have no effect on the market manipulation claims against ETP. That case, which alleges market manipulation at the Houston Ship Channel and Waha Texas between December 2003 and December 2005, is ongoing under Docket No. IN06-3-003.
The settlement also contains several stipulations that Oasis will be required to follow when administering its dual contract arrangements going forward. These provisions will govern how Oasis will allocate capacity on a first-come, first-serve basis and certain amendments and filings Oasis will make in the future.
A copy of the order is available on FERC’s website under Docket No. IN06-3-004.