On April 28, 2016, FERC issued an Order to Show Cause and Notice of Proposed Penalty ("Order to Show Cause") against Total Gas & Power North America, Inc. ("TGPNA"), Aaron Hall ("Hall"), and Therese Tran ("Tran") for alleged natural gas market manipulation at four locations in the southwest United States between June 2009 and June 2012. The Order to Show Cause also directs these parties to show cause why TGPNA should not be required to disgorge $9.18 million (plus interest) in unjust profits, and the parties be assessed civil penalties in the amounts of $213,600,000 for TGPNA, $1,000,000 for Hall, and $2,000,000 for Tran. In addition, the Commission directed TGPNA's ultimate parent company, Total, S.A. ("Total"), and TGPNA's affiliate, Total Gas & Power, Ltd. ("TGPL"), to show cause why they should not be held liable for TGPNA's, Hall's, and Tran's conduct and held jointly and severally liable for their disgorgement and civil penalties.
In the Order to Show Cause, FERC explains that the Office of Enforcement ("OE") Staff allege in their attached Staff Report that TGPNA violated section 4A of the Natural Gas Act and section 1c.1 of FERC's regulations, which prohibit natural gas market manipulation. Specifically, OE Staff claim that TGPNA, primarily through its employees Hall and Tran, "deliberately traded to affect monthly natural gas indexes by transacting at prices and in ways that were designed to move index prices in a direction that benefited its related derivative positions." This trading scheme was further described by OE Staff as TGPNA first taking large positions of both physical and financial natural gas products exposed to monthly index prices before and during "bidweek," which is the last five business days of the month when various publications will calculate monthly index prices for different natural gas trading hubs. OE Staff claims that TGPNA would then make "uneconomic trades of monthly physical fixed price natural gas during bidweek at the regional trading hubs of Southern California Gas Co., El Paso Natural Gas Co., Permian Basin, West Texas, Waha, and El Paso, San Juan Basin." According to OE Staff, TGPNA made these trades in an effort to affect published monthly index prices – either to raise or lower such prices – and benefit TGPNA's related positions that were tied to these indices.
Based on this alleged scheme, OE Staff claims that TGPNA gained more than $9 million in unjust profits, and caused more than $89 million in harm to consumers and producers of natural gas. Notably, in addition to stating that TGPNA should be jointly and severally liable for Hall's and Tran's proposed civil penalties of, respectively, $1 and $2 million, the Order to Show Cause also states that TGPNA's ultimate parent company, Total, and TGPNA's affiliate, TGPL, must show cause why they should not also be held jointly and severally liable for the disgorgement and civil penalty amounts based on Total's and TGPL's significant control and authority over TGPNA's daily operations. Finally, FERC ordered TGPNA, Hall, and Tran to answer the allegations within 30 days of the date of its order, or to pay the proposed assessment. If the parties contest the Order to Show Cause, OE Staff may file a reply within 30 days.
The Order to Show Cause follows FERC's prior Notice of Alleged Violations against TGPNA, Hall, and Tran (see September 28, 2015 edition of the WER).
A copy of the Order to Show Cause is available here.
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