The Energy Information Administration (EIA) has changed the revision policy for its weekly natural gas storage report (WNGSR), the most widely watched indicator of supply and demand in the natural gas marketplace. The agency has decided to allow unscheduled revisions on any federal workday between 2 p.m. and 2:10 p.m. ET only if the impact of the reported change is greater than 10 Bcf in any region or nationally.
According to the new policy, the revision can be made only after sending out prior notice at 1-1:10 p.m. on that day. Under the current revision policy, EIA can only send out revised data on Thursday at the regularly scheduled time of its weekly report and only if the impact is greater than 7 Bcf.
"The new policy for unscheduled releases of revisions to the WNGSR being issued today reflects EIA's careful consideration of input from users and providers of weekly natural gas storage data," EIA Administrator Guy Caruso said. "The new policy will enable us to provide revisions much more quickly, but in a manner that is fair to all market participants and workable for EIA."
Caruso noted that "the timetable established in the new policy would allow for a same-day correction to a morning WNGSR release in the event that a significant error in the data submitted by one or more respondents is discovered shortly after it is issued."
Such an incident occurred last November and is the main reason the agency undertook a review of its revision policy. A clerk at Dominion, one of the largest storage operators in the country, inadvertently sent EIA the wrong weekly storage file, and the agency did not find out about it until a few hours after it had released its weekly storage report. Because of its storage revision policy at the time, EIA had to wait an entire week before notifying the public that the large storage withdrawal it had reported on Nov. 24, 2004 was incorrect.
However, the market damage had already been done. When the EIA released its storage report Nov. 24 showing such a large storage withdrawal, natural gas prices soared more than $1/MMBtu. The worst part was that prices soared so high on a futures contract expiration day, setting the December 2004 futures contract and many December baseload cash market contracts with it. The Federal Energy Regulatory Commission later estimated that the error may have triggered up to a $1 billion increase in the value of natural gas in the marketplace.
A week later on Dec. 1, EIA informed the public that based on the procedures in its revision policy, the prior week's storage withdrawal had to be reduced by 32 Bcf. Gas prices subsequently returned to the levels at which they had been trading prior to the storage error.
Market participants were angered that the agency's revision procedure contributed so substantially to the market impact of the human error. After extensive investigation, FERC staff later found that the Dominion clerk had no prior knowledge of the error. It was simply a mistake.
EIA said there have been revisions in 10 of the 136 reports released during the time it has been doing the survey, starting May 9, 2002 through Dec. 9, 2004. Revisions may occur because survey respondents realize after submitting data that they had made an error or they have received new information that should have been included, or because a respondent did not get its survey form into EIA on time. There also could be a reclassification of working and base gas or a change in field operating status. Only two of the revisions that have been made were more than 15 Bcf: a revision of 26 Bcf of the total announced on July 3, 2002 and the 32 Bcf revision of the total announced on Nov. 24, 2004.
The new storage revision policy becomes effective with the WNGSR released on May 19, containing data for May 13. The date was chosen to ensure adequate time for developing and testing the procedures and report formats for unscheduled releases. The new policy, published in the April 26 Federal Register, is available on the EIA website, http://www.eia.doe.gov/.
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