EnCana subsidiary settles energy trading charges
Division since wound up
Fine amounts to $20 million U.S.
Canadian Press - July 29, 2003
by James Stevenson
CALGARY - A division of oil and gas giant EnCana Corp. has agreed to pay a
fine of nearly $28 million to settle charges that a former subsidiary
tried to manipulate U.S. energy markets.
The U.S. Commodity Futures Trading Commission announced yesterday that
actions were filed and immediately settled against WD Energy Services, the
now-defunct U.S.-based energy trading unit of EnCana.
While WD Energy and EnCana neither admitted nor denied the findings of the
order, the settlement means the Calgary-based company will pay the $20
million (U.S.) "civil monetary penalty" and agree to comply with other
related investigations into gas trading.
An EnCana spokesperson said the company would not discuss the matter until
today, when it releases its second-quarter results.
The commission alleged that WD Energy reported false natural gas trading
information, including price and volume information during at least a
14-month period starting in June, 2000.
It also alleged that a WD Energy employee discussed false reporting with
traders at two other energy companies.
Price and volume information is used in calculating the published indexes
of natural gas prices throughout the United States, the commission said.
Because natural gas futures traders used those published indexes to assess
price risks, the commission said WD Energy "knowingly submitted false
information to the reporting firms in an attempt to skew those indexes for
its financial benefit."
Commission chairman James Newsome said the settlement was "further
indication of the commission's commitment to uncover and prosecute false
reporting and manipulation in the markets that we oversee in an
expeditious, yet thorough, manner so that wrongdoers are appropriately
The commission, created in 1974, is an independent agency mandated to
regulate U.S. commodity futures and option markets to protect participants
against manipulation, abusive trade practices and fraud.
With an enterprise value of about $30 billion (Canadian), EnCana is one of
the world's largest independent oil and gas companies with extensive
operations in Canada, the United States, the North Sea and Ecuador.
EnCana was created in April, 2002, when two senior oil and gas producers -
Alberta Energy and PanCanadian Energy - agreed to merge.
WD Energy was a PanCanadian subsidiary before the merger. In one of the
first orders of business after its creation, EnCana decided to exit the
merchant energy trading business and recorded a $49 million after-tax loss
to wind up those operations.
On the Toronto stock market yesterday, EnCana shares dropped 64 cents $48.65.