The Federal Energy Regulatory Commission (FERC) yesterday issued two orders to show cause and approved four stipulation and consent agreements resolving investigations into alleged fraudulent conduct in open season bidding for natural gas transportation capacity. The matters involve an 18-month investigation by FERC into allegations of market manipulation surrounding an open season for transportation capacity on the Cheyenne Plains Natural Gas Company pipeline. The stipulation and consent agreements included civil penalties ranging from $300,000 to $4.5 million and a total of almost $3.9 million in disgorgements.
The alleged violations occurred during Cheyenne’s March 2007 open season. The parties' alleged misconduct involved a planned scheme to submit bids from multiple affiliates to "game" the pro rata allocation method relied upon by the pipeline. According to FERC, the parties violated FERC’s prohibition on market manipulation (18 C.F.R. § 1c.1) by submitting their bids “with the intent to defeat the pro rata allocation method relied upon by Cheyenne to ensure fair allocation of scarce and valuable capacity.”
FERC issued two show cause orders against Seminole Energy Services, LLC, and its affiliates, and National Fuel Marketing Company and its affiliates, requiring them to show why they should not be found to have violated FERC’s prohibition on market manipulation and its capacity release rules. Seminole and its affiliates face the threat of more than $4 million in penalties plus disgorgement of unjust profits. National and its affiliates face more than $4 million in penalties as well. The parties must respond within 30 days.
FERC has announced that four parties settled the claims: (1) Tenaska Marketing Ventures LLC and its affiliates; (2) ONEOK Energy Services Company and its affiliates; (3) Klabzuba Oil & Gas, FLP; and (4) Jefferson Energy Trading, Company LLC, Wizco, Inc., and Golden Stone Resources, LLC.