The Federal Energy Regulatory Commission (FERC) plans to take a second look next Thursday at its Form 552 rule requiring both buyers and sellers of natural gas to report their annual spot market purchases and sales to the agency. The Commission said it may elect to modify the Form 552 requirements depending on the outcome of the technical conference.
At the conference, which will be held March 25, FERC said it will address “inconsistencies in reporting upstream transactions in the natural gas supply chain on Form 552, and whether these transactions contribute to wholesale price formation.”
It also will review “whether transactions involving balancing, cash-out, operational and in-kind transactions should be reported on Form 552; and whether the units of measurement (TBtu) currently used for reporting volumes in the form are appropriate,” the agency said in the “notice of the agenda” for the technical conference [RM07-10].
Because of the technical conference, all natural gas participants have been given an extension of time until July 1 to file Form 552 data at FERC for calendar year 2009.
Panelists discussing the initial issue — upstream transactions in the natural gas supply chain — will be John Poe, manager of regulatory affairs for ExxonMobil Gas & Power Marketing Co. (he will represent the Natural Gas Supply Association); William E. Shanahan, marketing manager of Chaparral LLC (he will represent the Natural Gas & Energy Association of Oklahoma); Mary Nelson, manager of regulatory affairs for Devon Energy Corp; Katie Rice, director of regulatory affairs for DCP Midstream LLC; and a representative of the Independent Petroleum Association of America.
Speaking to the issues involving cash-outs, imbalances and operational volumes will be Scott Brewer, director of North American Energy for Terra Industries Inc. (he will represent the Process Gas Consumers Group); DCP Midstream’s Rice; Matt Keree, assistant commodity manager for Alcoa Inc.; Michael E. Novak, assistant general manager of federal regulatory affairs for National Fuel Gas Distribution Corp. (he will represent the American Gas Association); ExxonMobil’s Poe; and Dena Wiggins, a partner with the Washington, DC law firm of Ballard Spahr LLP (she also will represent the Process Gas Consumers Group).
The rule, which FERC approved in December 2007, requires market participants to file the new Form 552 detailing the aggregate volumes of annual natural gas purchases and sales to help the Commission and others in the market understand how price indexes are formed and used, as well as give the agency an idea of the volume of gas sales transacted in the physical market. Reporting is required of sellers that either hold blanket sales certificates or buy or sell more than 2.2 million MMBtu annually, according to FERC (see Daily GPI, Dec. 21, 2007).
Parties must report information about their physical gas transactions for the previous year, including total volume of sales and purchases; the volume of transactions that were priced at fixed prices; and the volume of transactions that were reported to price index publishers [RM07-10].
This rule was FERC’s first exercise of its transparency authority under the Energy Policy Act of 2005.
Natural gas participants reported Form 552 data for the first time in mid-2009, providing the agency with data on their sales and purchases for calendar year 2008 (see Daily GPI, June 29, 2009). A quick look at the initial data by NGI at the time showed that there was a heavy concentration of volume traded by the top producers/marketers in the U.S. and that index deals accounted for a majority of these volumes. Specifically, the top four marketers to report, BP, ConocoPhillips, Shell and Chevron, tallied an impressive cumulative volume of 12.1 Tcf in purchases and 13.6 Tcf in sales for 2008.
The hefty volumes for the top four accounted for roughly one-quarter of the overall volume reported by the 526 companies that had filed with the Commission as of late June 2009. The overall sales were 53.4 Tcf, while purchases were 51.4 Tcf. As for the percentage indexed, which has been the $64,000 question for FERC ever since the trading scandals of the early 2000s, the early numbers for the top four are not terribly surprising either.
Cumulatively, the top four traders indicated that they indexed roughly 65% of their next-day trading volumes and 87% of their next-month or bidweek volumes. One revelation from the early data was the very low volume of basis deal trading, or transactions pegged to the New York Mercantile Exchange futures, reported by these traders. Specifically, the top four reported slightly more than 1 Tcf in annual basis trading volume, just a small fraction of the nearly 26 Tcf they bought and sold in total.
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