Potentially big regulatory changes lie ahead for the natural gas industry as Congress gets down to business in the next few months on legislation to limit speculation in the commodity markets. "The real question is whether the changes will make the existing regulatory system stronger or create an entirely new system that will fix the perceived problems without creating new problems for the future," Gregory Mocek, former director of enforcement for the Commodity Futures Trading Commission (CFTC), told NGI.
"I expect either the Peterson bill (HR 977, the Derivatives Markets Transparency and Accountability Act of 2009) or some form of legislation will get through Congress this year," Mocek, now a partner specializing in energy, derivatives and government affairs at McDermott Will & Emery, said. The bill, introduced by Agriculture Committee Chairman Rep. Collin Peterson (D-MN), which could open over-the-counter markets to government scrutiny and set position limits for those markets, which include swaps, derivatives and bilateral trades, "could be modified quite a bit" as it make its way through Congress, he added. It has been approved by the House Agriculture Committee (see Daily GPI, Feb. 13), but Rep. Barney Frank's (D-MA) House Financial Services Committee also has jurisdiction. Other bills are surfacing in the Senate.
Legislation introduced Monday by Sens. Carl Levin (D-MI) and Susan Collins (R-ME) would effectively take an ax to the swaps market by simply repealing the current prohibition on regulating that market (see related story). This could create a lot of uncertainty, Mocek said. Currently the CFTC does not regulate bilateral swaps on a daily basis. "If they repeal those anti-regulation provisions, it will dramatically change the way people do business."
Mocek will be a keynote speaker at GasMart 2009, the 23rd annual meeting of the natural gas market coming up May 19-21 in Chicago. Speaking on "Loophole Carpet Bombing, Market Mutations and Trader Liability," he will discuss how the new and proposed legislative and regulatory changes could affect the business of buyers, sellers and traders of natural gas.
The "overarching issue," Mocek said, will be whether Congress carefully coordinates its actions with futures market regulation in other countries. If it doesn't, it could create a situation fostering "jurisdictional arbitrage and resulting in the loss of a significant derivatives market" to offshore trading. The business is "quite portable," and the U.S. would be at a disadvantage if it has more stringent laws, he said.
Mocek also will discuss the changed makeup and direction at the CFTC and some proposed rules it has issued in an attempt to get out in front of Congress. In the ways of Washington, agencies tend to go with the flow and suddenly find that they have the authority to do much of what Congress is discussing before any new laws actually are passed. The Levin-Collins bill would augment the CFTC's discretionary power by removing the prohibition against regulating swaps transactions and leaving any further action up to the agency.
Other GasMart speakers, including executives from ConocoPhillips, Nexen and Gazprom USA, will address the physical supply end of the natural gas market, while the head of Integrys Energy utilities group, along with purchasing and risk managers from Procter & Gamble, Alcoa and MillerCoors, will assess the demand side. The Process Gas Consumers Group, a GasMart sponsor, will hold a gas buyers luncheon and meeting in conjunction with GasMart.
Attendees will hear from these industry leaders and others during the conference and can discuss the issues with their colleagues in the GasMart Market Network Center. Those wanting basic trading and risk management information can attend separate workshops sponsored by BP and NiSource's EnergyUSA.
Go to gasmart.com to see the full program and who has signed up to attend. Register online and book your room at the headquarters hotel, the downtown Sheraton Chicago Hotel & Towers, to get a $50 discount of the price registration.
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