On September 21, 2009, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) approved an uncontested settlement with its Enforcement Litigation Staff and Energy Transfer Partners L.P., Energy Transfer Company, ETC Marketing Ltd., and Houston Pipe Line Company LP (collectively “ETP”) for $30 million in a market manipulation case. This is the highest amount of any settlement since FERC was granted heightened enforcement authority under the Energy Policy Act of 2005.
The Enforcement Litigation Staff initiated a non-public investigation of ETP in September 2005. On July 26, 2007, FERC issued its Show Cause Order that directed ETP to respond to the allegation that ETP manipulated some Texas natural gas markets in violation of the anti-manipulation rules in place at the time. The matter was set for hearing with an administrative law judge, and on August 26, 2009 both ETP and the Enforcement Litigation Staff filed a joint motion to certify their joint offer of settlement and to waive the comment period. On August 31, 2009 Judge McCartney certified the settlement to the Commission as uncontested.
The settlement calls for ETP to pay a $5 million civil penalty. Also ETP will establish a $25 million fund to disgorge unjust profits due to ETP’s conduct. Third parties that accept money from the fund will forever waive/release ETP from all legal claims, even if that party has already commenced a lawsuit. The allocation of profits will become final when the Commission approves the allocation report or takes no action within the time set out in the settlement agreement. Any leftover money in the fund will be paid to the United States Treasury.
The settlement also requires ETP to confirm its compliance standards with FERC’s anti-manipulation policy and the settlement. This includes (i) written compliance standards that include gas trading protocols and prohibited trade practices, (ii) mandatory compliance training for anyone involved in commodity trading, (iii) annual review of the compliance program, (iv) ongoing monitoring of ETP’s compliance program by its chief compliance officer, (v) confidential reporting systems, (vi) disciplinary mechanisms to ensure enforcement of these standards, and (vii) procedures for conducting internal investigations of trading. Finally, ETP must conduct two annual independent audits following this settlement.
The full opinion is available at: http://www.ferc.gov/EventCalendar/Files/20090921114345-IN06-3-003.pdf