The Commodity Futures Trading Commission (CFTC) is carrying out an industry-wide review of major natural gas storage owners and operators to determine if they may have over- or under-reported their storage withdrawal estimates to the federal government in late 2003 and early this year to such an extent that it influenced gas futures prices.

Federal investigators have subpoenaed a number of storage owners to turn over information “related to activities affecting the price of natural gas during Oct. 31, 2003 to Jan. 2, 2004,” said Tulsa, OK-based ONEOK Inc., which received a subpoena in mid-April. Specifically, the companies said they were asked to provide information on how their gas storage numbers were compiled and reported to the Energy Information Administration (EIA), the statistical arm of the Department of Energy (DOE), during this period.

Aside from ONEOK, some of the other companies that have been subpoenaed are El Paso Corp., CenterPoint Energy, MDU Resources Group subsidiary Williston Basin Interstate, Duke Energy, Kinder Morgan Inc., NiSource Inc. and Dallas-based TXU Energy. Dominion Resources of Richmond, VA, said while it did not get a subpoena, it voluntarily submitted storage data for the period to the CFTC. EnCana Corp. noted it received a letter from the CFTC in mid-April requesting information on its reported storage data and responded to it.

“We will have to see where [the CFTC probe] goes, but clearly it sounds like they are looking at some of the major players,” remarked a Washington, DC-based gas futures broker.

El Paso is the largest gas storage owner in the nation, and is closely followed by Dominion Resources, according to a ranking of storage companies based on current operating working gas capacity totals collected by NGI. Kinder Morgan is ranked third, NiSource fourth, Duke Energy fifth, MDU Resources sixth, EnCana 10th and TXU Energy 11th. All of the storage owners said they already had responded to the CFTC subpoenas. Most received their subpoenas in April, but a few said they got them as early as January.

“We don’t believe there are any problematic issues related to the storage information that we have provided to EIA,” said Duke Energy spokesman Peter Sheffield. “We have no reason to believe we are the target of any investigation,” noted Kinder Morgan spokesman Rick Rainey, who based this conclusion on the fact that the CFTC did not conduct a follow-up to the company’s responses.

NiSource spokeswoman Kris Falzone said the company had replied to the CFTC’s questions in writing, and had personally met with the agency’s staff.

The Washington futures broker said that the industry’s trust in the storage numbers was at risk. “It’s not good to have doubts on storage. Confidence in the number is important to every single person in the industry.” He said that while he did not know who was being singled out, it “is clearly in the best interest of everyone to make sure that we have confidence in the data.”

The CFTC is focusing on the time frame (Oct. 2003 to Jan. 2004) during which natural gas was withdrawn from storage facilities to meet the traditional heavier winter demand. That could mean that federal investigators may be looking at whether the withdrawal estimates reported to the EIA were artificially high during the period in question.

It is considered a “criminal offense” for any individual or company to “knowingly and willingly” report “false, fictitious or fraudulent” information to the federal government, according to the EIA gas storage survey form.

The EIA surveys 45 respondents each week to create an estimate of the total amount of gas that has been withdrawn and/or injected into storage in the United States. The results of the surveys, which are widely anticipated by industry, are released every Thursday and can cause significant swings in futures prices. A high withdrawal estimate during the October 2003-January 2004 period would have boosted prices, while a lower withdrawal number would have depressed prices.

The latest round of subpoenas for reported storage data apparently is part of the CFTC’s ongoing investigation into whether the run-up in gas futures prices in late 2003 was due to manipulation in the market. Gas futures began to climb shortly after Thanksgiving last year, hitting a peak of $7.55 on Dec. 10. Prices tapered off a bit during late January and February, but began to slowly rise again in March. The June natural gas futures contract closed at $6.48 last Thursday.

The CFTC has acknowledged that it is probing gas prices, but the agency declined to confirm that it is looking at what role, if any, storage estimates may have played.

Earlier this year, the CFTC had subpoenaed the phone records of Nymex gas futures traders to look for signs of collusion or market manipulation during the same time period. Sources close to the CFTC review indicated at the time that the agency had not found any evidence that suggested the price run-up was the product of manipulation (see NGI, Jan. 19).

In related action, the CFTC is said to be wrapping up its two-year investigation of major energy companies for reporting false information about energy trades to published prices indexes, wash trades, attempted manipulation and manipulation of prices.

The agency so far has brought approximately 15 enforcement actions against 20 energy companies, collecting $180 million in penalties for illegal behavior involving natural gas. It also has filed separate lawsuits against Enron and American Electric Power Co.

As part of the CFTC’s probe of industry price-reporting practices, a TXU Energy spokeswoman said last week the company recently turned over “extensive information” to the agency, including audiotapes of traders’ conversations during bid-weeks between November 2000 and May 2001.

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