UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of
Report (date of earliest event reported): July 26, 2007
ENERGY TRANSFER EQUITY, L.P.
(Exact name of registrant as specified in its charter)
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| Delaware
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001–32740
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30–0108820 |
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(Commission File Number)
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(IRS. Employer |
| of incorporation)
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Identification No.) |
3738 Oak Lawn Avenue
Dallas, Texas 75219
(Address of principal executive offices, including zip code)
(214) 981–0700
(Registrant’s telephone number, including area code)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a–12 under the Exchange Act (17 CFR 240.14a–12) |
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Pre-commencement communications pursuant to Rule 14d–2(b)
under the Exchange Act (17 CFR 240.14d–2(b)) |
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Pre-commencement communications pursuant to Rule 13e–4(c)
under the Exchange Act (17 CFR 240.13e–4(c)) |
Item 8.01 Other Events.
Energy
Transfer Equity, L.P. (“ETE”) is amending in its entirety
its prior disclosure included in a Current Report on Form 8-K,
dated as of July 26, 2007, to reflect developments related to
the subject matter of such prior disclosure as set forth below:
On July 26, 2007, the Federal Energy Regulatory Commission
(the “FERC”) issued to Energy Transfer Partners,
L.P. (“ETP”) an Order to Show Cause and
Notice of Proposed Penalties (the “Order and Notice”)
that contains allegations that ETP violated FERC rules and
regulations. The FERC has alleged that ETP engaged in
manipulative or improper trading activities in the Houston Ship
Channel, primarily on two dates during the fall of 2005
following the occurrence of Hurricanes Katrina and Rita, as well
as on eight dates from December 2003 through August 2005, in
order to benefit financially from ETP’s commodities
derivatives positions and from certain of its index-priced
physical gas purchases in the Houston Ship Channel. The FERC has
alleged that during these periods ETP violated the FERC’s
then-effective Market Behavior Rule 2, an anti-market
manipulation rule promulgated by FERC under authority of the
Natural Gas Act (“NGA”). ETP allegedly violated this
rule by artificially suppressing prices that were included in
the Platts Inside FERC Houston Ship Channel index,
published by the McGraw - Hill Companies, on which the
pricing of many physical natural gas contracts and financial
derivatives are based. Additionally, the FERC has alleged that
ETP manipulated daily prices at the Waha Hub in west Texas on
certain dates in December 2005. The FERC’s action against
ETP also includes allegations related to ETP’s Oasis
Pipeline, an intrastate pipeline that transports natural gas
between the Waha Hub and the Katy Hub near Houston, Texas. The
Oasis Pipeline also transports interstate natural gas pursuant
to Natural Gas Policy Act (“NGPA”) Section 311
authority, and subject to FERC-approved rates, terms and
conditions of service. The allegations related to the Oasis
Pipeline include claims that the Oasis Pipeline violated NGPA
regulations from January 26, 2004 through June 30,
2006 by granting undue preference to its affiliates for
interstate NGPA Section 311 pipeline service to the
detriment of similarly situated non-affiliated shippers and by
charging in excess of the FERC-approved maximum lawful rate for
interstate NGPA Section 311 transportation. The FERC also
seeks to revoke, for a period of 12 months, ETP’s
blanket marketing authority for sales of natural gas in
interstate commerce at negotiated rates, which activity is
expected to account for approximately 1.0% of ETP’s EBITDA
for its 2007 fiscal year. If the FERC is successful in revoking
ETP’s blanket marketing authority, ETP’s sales of
natural gas at market-based rates would be limited to sales of
natural gas to retail customers, (such as utilities and other
end-user) and sales from its own production, and any other sales
of natural gas by ETP would be required to be made at prices
that would be subject to FERC approval. Also on July 26,
2007, the United States Commodity Futures Trading Commission
(the “CFTC”) filed suit in United States District
Court for the Northern District of Texas alleging that ETP
violated provisions of the Commodity Exchange Act by attempting
to manipulate natural gas prices in the Houston Ship Channel. It
is alleged that such manipulation was attempted during the
period from late September through early December 2005 to allow
ETP to benefit financially from ETP’s commodities
derivatives positions.
As previously disclosed in our public filings, the FERC and CFTC
had been conducting investigations into these matters. ETP
engaged in settlement negotiations to resolve these matters;
however, these negotiations were not successful. In its Order
and Notice, the FERC is seeking $70.1 million in
disgorgement of profits, plus interest, and $97.5 million
in civil penalties relating to these matters. FERC has ordered
ETP to show cause why the allegations against ETP made in the
Order and Notice are not true by October 15, 2007. The FERC
has taken the position that, once it receives ETP’s
response, it has several options as to how to proceed, including
issuing an order on the merits, requesting briefs, or setting
specified issues for a trial-type hearing before an
administrative law judge. In its lawsuit, the CFTC is seeking
civil penalties of $130,000 per violation, or three times the
profit gained from each violation, and other ancillary relief.
The CFTC has not specified the number of alleged violations or
the amount of alleged profit related to the matters specified in its complaint. ETP is required to answer or
otherwise respond to the CFTC’s complaint on or before
October 15, 2007. It is ETP’s position that its
trading and transportation activities during the periods at
issue complied in all material respects with applicable laws and
regulations, and ETP intends to contest these cases vigorously.
However, the laws and regulations related to alleged market
manipulation are vague, subject to broad interpretation, and
offer little guiding precedent, while at the same time the FERC
and CFTC hold substantial enforcement authority. At this time,
neither we nor ETP is able to predict the final outcome of these
matters.
In addition to the FERC and CFTC legal actions, it is also
possible that third parties will assert claims against ETP and
ETE for damages related to these matters, which parties could
include natural gas producers, royalty owners, taxing
authorities, and parties to physical natural gas contracts and
financial derivatives based on the Platts Inside FERC
Houston Ship Channel index during the periods in question.
In this regard, two natural gas producers have initiated legal
proceedings against ETP for claims related to the FERC and CFTC
claims. One of the producers has brought suit in Texas state
court against
ETP and ETE based on contractual and tort claims relating to direct,
indirect, consequential and punitive damages for alleged
manipulation of natural gas prices at the Waha Hub in West Texas
and the Houston Ship Channel and is seeking an unspecified
amount of direct, indirect, consequential and punitive damages.
The second producer has brought suit in Texas state court against
ETP and ETE based
on contract and tort claims relating to a natural gas purchase
contract to which ETP and this producer are parties. This
producer seeks unspecified damages and requests pre-arbitration
discovery of information related to ETP’s activities prior
to further pursuing a claim for manipulation of natural gas
prices in the Houston Ship Channel. The producer also seeks to
intervene in the FERC proceeding, alleging that it is entitled
to a FERC-ordered refund of $5.9 million, plus interest and
costs. In addition, a plaintiff has filed a putative class
action in federal court in New York against ETP. This suit
alleges that ETP unlawfully manipulated the price of natural gas
futures and options contracts on the New York Mercantile
Exchange, or NYMEX, in violation of the Commodity Exchange Act,
that ETP has the market power to manipulate index prices, and
that ETP used this market power to artificially depress the
index prices at major natural gas trading hubs, including the
Houston Ship Channel, Waha, and Permian hubs, in order to
benefit ETP’s natural gas physical and financial trading
positions. The suit alleges that this unlawful depression of
index prices by ETP manipulated the NYMEX prices for natural gas
futures and options contracts to artificial levels between
December 29, 2003 and December 31, 2005, causing
unspecified damages to plaintiff and all others who purchased
and/or sold
natural gas futures and options contracts on NYMEX during that
period.
We are expensing the legal fees, consultants’ and related
expenses relating to these matters in the periods in which such
expenses are incurred. In addition, our existing accruals for
litigation and contingencies include an accrual related to these
matters. At this time, we are unable to predict the outcome of
these matters; however, it is possible that the amount we become
obligated to pay as a result of the final resolution of these
matters, whether on a negotiated settlement basis or otherwise,
will exceed the amount of our existing accrual related to these
matters. In accordance with applicable accounting standards, we
will review the amount of our accrual related to these matters
as developments related to these matters occur and we will
adjust our accrual if we determine that it is probable that the
amount we may ultimately become obligated to pay as a result of
the final resolution of these matters is greater than the amount
of our existing accrual for these matters. As our accrual
amounts are non-cash, any cash payment of an amount in
resolution of these matters would likely be made from cash from
operations or borrowings, which payments would reduce our cash
available for distributions either directly or as a result of
increased principal and interest payments necessary to service
any borrowings incurred to finance such payments. If these
payments are substantial, we may experience a material adverse
impact on our results of operations, cash available for
distribution and our liquidity.