* Natural gas liquids trader sues for breach of contract
* Alleges BP attempting to manipulate U.S. gas liquids market
* Company paid $303 mln fine in 2007 over propane manipulation
* BP says that allegations are "untrue and without merit"
* BP says it is not engaging in any price or market manipulation
By David Sheppard and Joshua Schneyer
NEW YORK, Jan 31 (Reuters) - A former trader at BP has filed a lawsuit for breach of contract in which he alleges the British company's Houston-based unit, BP Energy Co, is attempting to manipulate the U.S. natural gas liquids market.
Drew Sickinger, who joined BP in Houston in 2009, said the company "created a pretext" for disciplining him late last year and then firing him earlier this month. He said he made $100 million for the company over the previous three years.
The complaint, filed Jan. 30 in Harris County, Texas, includes allegations by Sickinger that BP is trying to manipulate the natural gas liquids markets "by establishing a dominant and controlling position."
The lawsuit does not include facts describing the basis for those claims. Sickinger's lawyer, Raul Loya, said the allegations against BP could spur a government investigation, but he declined to offer further detail.
A BP spokesman denied the accusations in Sickinger's lawsuit.
"Allegations of market misbehavior arising from this legal proceeding are untrue and without merit," BP spokesman Scott Dean said in an email. "BP is not engaging, and will not engage, in any price or market manipulation. Our ongoing trading strategies are lawful and compliant."
BP declined to comment on the circumstances of Sickinger's departure.
The regulator of the markets concerned, the U.S. Commodity Futures Trading Commission (CFTC), declined to comment.
BP is one of the major North American traders of natural gas liquids, which mainly have industrial and heating uses. But prices of these commodities, which include propane and ethane, have fallen sharply against benchmark crude oil over the last year on brimming supplies from the boom in drilling of shale formations. That has depressed earnings for some natural gas liquids processors and traders.
In 2007, BP paid $303 million in fines to the CFTC to settle criminal and civil cases related to propane market manipulation earlier that decade.
Loya said BP's head of gas trading in Houston, Orlando Alvarez, was involved in firing his client without just cause. Alvarez is not named as a defendant in Sickinger's 10-page complaint.
BP declined to say if Alvarez was involved in Sickinger's departure from the company. Alvarez could not be immediately reached for comment.
"BP used all means available to it to rid itself of Sickinger and his knowledge of the positions that BP has taken in the market," the lawsuit stated.