In a move that will have a significant impact on the natural gas market, the American Gas Association has decided to discontinue its weekly storage survey at the end of the year, citing the “labor intensive” nature of the project as a key factor in its decision.

The survey, which is released every Wednesday at 2 p.m. EDT, is the most widely used tool for assessing market fundamentals. AGA said it intends to publish its last survey on Wednesday, Jan. 2, 2002. It said it was taking “increasingly more staff time and effort to calculate and post the survey estimates; this drained resources committed to other programs more beneficial to its members.”

The news came one day after FERC Chairman Pat Wood referred to the natural gas industry’s reliance on the AGA’s storage data. ‘The fact that we’re hanging our hat on this one data set that comes out at 1 p.m. on Wednesday…is phenomenal,” he said during Thursday’s Commission meeting. The chairman’s remarks actually were complimentary to the AGA for its seven-year record in providing information for the industry. The comments came as he and Commissioner Nora Brownell suggested that FERC collaborate with the Energy Information Administration (EIA) in gathering additional data to support the market.

“We were aware that the chairman brought up the topic,” said AGA spokeswoman Daphne Magnuson, but she stressed that it was not a factor in the trade association’s decision.

However, some sources believe the association had been receiving legal threats after a recent decision to revise a weekly storage number by a substantial amount, 47 Bcf. Drawing the ire of many marketers and traders, the AGA stunned the market in mid August by announcing a revision to an extremely low 3 Bcf storage injection it reported for storage activity during the week ending Aug. 10. AGA said the number should have been 50 Bcf. Many traders and marketers at the time were suspicious of the revision.

Consultant Ron Denhardt of Wefa Inc said AGA officials told him at the time that they were already considering discontinuing the survey. “I think that was the motivation. They had people threatening to sue them. Some small traders claimed market manipulation and threatened to sue. My reaction was that it was pretty obvious the numbers were incorrect at the time. If they were trying to manipulate the market they could have done it in more subtle ways than that.”

One marketer said he believes pressure from the FERC Chairman was the last straw. “FERC is the agency that has forced AGA to do this because they don’t want the market to pin decisions on one set of data, but we don’t trade around one set of data; that’s just a set of data that we do use,” he said. “We trade around weather, producer numbers that different groups do.

“The storage data may not be the most important set of data but it is a very big factor. What are we going to do? We aren’t going to follow EIA data that comes out three months after the fact. Do they want the industry to hinge on that? No one is going to know where storage is entering the winter. Do they want to take a chance on doing that? Are we going to take a chance on letting the industry enter the winter with 2.6 Tcf and let prices go to $10/MMBtu like they did last year? That doesn’t make sense to me.”

AGA said it is planning to ask the EIA to consider publishing the storage estimates EIA currently collects on a more timely basis and to simplify its data collection process. It noted that its weekly storage estimates have closely tracked EIA’s numbers over the past seven years. However, EIA’s data is released a month or two after the fact. AGA also suggested subscribers to the storage survey might try getting similar storage data from commercial providers that either currently provide these services or that might offer storage-related services in the future.

“I’m extremely disappointed,” said Denhardt. “I think that it will provide an advantage to people who have access to [other commercial surveys] over other people who trade in the market.” Denhardt said the commercial storage information providers, such as privately owned GasFax, won’t sell their data to customers unless the customers have a physical presence in the market.

“I think the problem now is everyone is going to have to look at EIA data a month or two after the fact. It could mean some real radical changes in prices every month because people are all of a sudden surprised to see what has been going on with storage over the past month. All the big players are going to know a lot more about what is going on,” said Denhardt. “If you are Columbia or [Dominion] and you control all the Northeast gas storage and you know what that data is, you are going to have an advantage over other people.”

AGA has been publishing the report for seven years. It initially was put out so LDCs could plan better for the winter heating season, AGA’s Magnuson noted. “It’s been a good run for the report,” but AGA has to “prioritize” to carry out some “ambitious projects” for its members.

For more information, contact Paul Wilkinson at pwilkinson@aga.org or Roger Cooper at rcooper@aga.org. Both men also can be faxed at (202) 824-7089.

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