Sen. Michael Enzi (R-WY) said he is “disappointed” by the Federal Energy Regulatory Commission’s decision not to investigate what he believes is an ever-widening discrepancy between the prices for natural gas that are paid to Wyoming producers and the higher costs for that same gas in out-of-state energy markets.

“While I acknowledge your agency does not regulate wellhead prices, your agency does have jurisdiction over pipelines and gas transportation tariffs. As such, I feel it would be imperative for you to review the situation in Wyoming to see if any regulated activity is affecting market prices or production,” Enzi wrote in a Dec. 3 letter to FERC Chairman Pat Wood, which was just made public.

“If prices are incorrectly reported — and there have been several indications of fraudulent underreporting since I [first] wrote you — then it is possible you will need to investigate this situation to ensure you are watching out for the federal interest in this matter,” the senator said. He asked FERC to reconsider his initial plea for review of the situation, with a focus on “whether or not any current pipeline management or other regulated activity is contributing to the price differential of gas in Wyoming.”

Enzi first called for the Commission to investigate the price disparity in mid-October. Wood replied in late November that FERC no longer had jurisdiction over producer prices, but he said the agency was aware that gas prices in the Rocky Mountain region were low compared to those in other areas of the country. “For example, over the past five years, Henry Hub prices have averaged $0.61 per MMBtu above prices in the Rockies.” The prices during the past few months have reflected an even greater differential, Wood noted, and only recently have returned to historic levels.

Wood attributed the lower Rockies prices to abundant gas supplies stemming from increased coal-bed methane production, and a lower demand for gas as a fuel for power generation facilities. “The high supply and the difficulty in serving distant market areas cause producers to accept low prices in order to move their gas and avoid having to shut in gas wells.”

He noted several interstate pipeline expansions are under way in the Rocky Mountain region to eliminate capacity bottlenecks that “may be a contributing factor” to the lower producer prices. Kern River Gas Transmission currently is expanding its Wyoming-to-California pipeline system by approximately 886 MMcf/d, and FERC has approved eight other projects that would increase pipeline deliveries out of Wyoming by 1.9 Bcf/d, according to Wood.

Three additional pipeline projects, which would boost capacity by 100 MMcf/d, are pending at the Commission, and “may be approved and placed into service within the next three years,” he said. “Finally, there are five projects that may be filed within the next one or two years that would add another 2 Bcf/d of pipeline capacity that would move gas out of Wyoming.”

This expanded pipeline capacity “should equalize natural gas prices among regions,” Wood said. “Be assured that the Commission will review the certification of expansion projects in the Rocky Mountain region as expeditiously as possible.”

©Copyright 2003 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.