US nears action on new natgas trading rules

27 November 2007 21:46  [Source: ICIS news]

WASHINGTON (ICIS news)--US energy regulators said on Tuesday they are actively working on new rules to increase transparency in the country’s natural gas trading but that timing for final action on the new regulations cannot now be specified.

 

Cynthia Marlette, general counsel at the Federal Energy Regulatory Commission (FERC), told a natural gas industry group that the commission is “actively working on the rule” but that she could not by law indicate when the regulation will be completed.

 

The commission issued a proposed rule in April this year that would require natural gas pipeline operators serving markets within a state to provide FERC with daily reports on the capacities and volumes of natural gas flowing their systems.

 

The proposed rule also would require high-volume buyers and sellers of physical natural gas to report annually on the number and volume of threshold transactions for the prior year.

 

The commission was granted expanded regulatory authority for natgas trading in the 2005 Energy Policy Act. 

 

FERC said the new regulations will “significantly increase the transparency of wholesale natural gas markets, protect the integrity of wholesale gas markets and improve our ability to assess market forces and detect market manipulation”.

 

Some US chemicals manufacturers have called for increased FERC monitoring and more public disclosure of gas trading, arguing that market speculators are driving up the price of natgas beyond normal supply and demand pricing pressures.

 

US chemical manufacturing is heavily dependent on natural gas as both a principal feedstock and energy source. Gas prices have risen four fold since 2000.

 

Marlette indicated that when the commission does issue its final rule, that action is likely to trigger legal challenges by some in the gas trading industry.

 

She said that several of the industry comments on the proposed rule have challenged the commission’s statutory authority to require the daily and annual reporting. The legal arguments, she said, chiefly turn on FERC’s authority to demand reporting by any “market participant”.

 

Marlette said the FERC rule is necessary to prevent gas market manipulation. That goal, she said, is all the more important because natural gas will play an increasingly critical role in the stability of the US energy supply over the next two decades.

 

Legislation pending in Congress to control and limit US emissions of greenhouse gases is expected to increase demand for natural gas as an electric utility fuel in coming years.

By: Joe Kamalick
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