Against a backdrop of falling crude oil and natural gas prices, the House Thursday passed by an overwhelming margin legislation that seeks to curb “excessive” speculation in the energy markets.

By 283 to 133, lawmakers approved HR 6604, which would set position limits for speculators in energy and agricultural commodities and directs the Commodity Futures Trading Commission (CFTC) to establish position limits for any trader with respect to designated contract markets, derivative transaction execution facilities and electronic trading facilities.

The bill initially was brought to the House floor in late July. However, it failed to garner the two-thirds majority vote required under the suspension of House rules (see Daily GPI, July 31). This time it was considered under closed rule, requiring only a simple majority to pass.

“We anticipate the measure will…be referred to the Senate. The Senate, however, did not seem to have anti-speculation on its long list of actions planned before hoped-for adjournment on Sept. 26,” said energy analysts Christine Tezak and K. Whitney Stanco of Stanford Group Co.

“That being said, a lame duck session is looking increasingly likely, particularly in the context of the nation’s current upheaval in the financial markets. If Congress returns for a lame duck in November, we think that the Senate may find time to return to the speculation theme and this bill may have a decent chance of finding its way into law, but the discussion could easily slide until the next Congress,” they said.

While there has been considerable debate over the role speculation plays in the energy markets, the Industrial Energy Consumers Association (IECA) Thursday reported that “excessive” speculation cost natural gas consumers more than $40.4 billion from January to August when compared to the same period last year.

“During this same time period, the Energy Information Administration reports that domestic production increased by 8.6%; demand was essentially unchanged from the previous year; and…national inventories were in the normal range for this time of the year. These facts prove that the price spike was not driven by supply versus demand fundamentals,” said IECA President Paul N. Cicio.

In addition to setting position limits, the House bill directs the CFTC to require regular reporting of fungible over-the-counter (OTC) agricultural and energy transactions; determine if such transactions have the potential to disrupt market liquidity or cause market or price disturbances; and if so to use its discretion to impose position limits.

The measure also would bar foreign boards of trade from providing U.S.-located members with access to the CFTC electronic trading system and order-matching system for energy or agricultural commodities unless the board member meets requirements similar to those imposed upon U.S. trading exchanges. And it calls for the hiring of at least 100 new full-time employees at the CFTC.

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