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Traders returned to a fairly quiet market Monday in which prices increased by about a dime or less at most eastern points but by considerably larger amounts in the West. California was heating up rapidly and registered triple-digit recoveries from weekend softness.

After encountering heavy overhead selling above last Thursday’s $4.13 high, natural gas futures sunk lower Monday as traders took back early-session advances and demoted the market to its lowest level in more than a week. The July contract closed 4 cents weaker at $3.939, but comparatively, that was the good news for bulls. The rest of the summer strip slipped 4.1 cents and the winter strip sunk 5.4 cents. Keeping with the trend, the 12-month strip tumbling 5.4 cents as well.

The Federal Energy Regulatory Commission by a 5-0 vote Monday extended its power market mitigation program across the western states 24 hours a day, seven days a week through September, 2002, with a two part cost-based formula addressing prices during emergency and non-emergency periods. The new mitigation program begins the day after the issuance of the order.

Conceding that federal regulators belatedly have taken steps to offer wholesale power price relief, California Gov. Gray Davis Monday announced an agreement with Sempra Energy’s San Diego Gas and Electric Co. that wipes out a $740 million debt the utility was facing for uncovered wholesale electricity costs. The state will buy SDG&E’s transmission lines for just under $1 billion, or 2.3 times book value, and commit to provide all of its native generation to the state on a cost-based, below-market basis.

Williams apparently still has the western pipeline expansion fever. The company announced the fourth expansion project in the Pacific Northwest for Northwest Pipeline and all four are expected to be in service in the next two years. This latest project, Evergreen, is a mainline expansion that will add 276 MMcf/d to serve new power generation in Washington. The $200 million looping and compression project will include the addition of 26 miles of pipeline in Skagit, King and Pierce counties and 90,000 hp of compression at eight existing stations.

As the five-week-old hearing into whether El Paso Natural Gas manipulated gas prices in California last year winds down at FERC, a war of words has erupted over just how much transportation on the pipeline was unavailable to customers during 2000 for reasons other than operational factors.

Liquefied natural gas for the U.S. market is becoming more viable with each passing week, and yesterday, a Houston-based company firmed up its plans to build the first of three Gulf Coast receiving terminals, while an international company announced it is negotiating with several U.S. buyers for its future Egyptian LNG supplies.

As natural gas prices in the Rocky Mountain region over the last few months have fallen much further than other areas of the country due primarily to transportation constraints, the question becomes, why is the region currently experiencing a frenzy of exploration and production activity, when pricing signals point toward restraint? The answer, according to Raymond James & Associates analyst Wayne Andrews, is that new pipeline infrastructure is on its way to the region, and in a big hurry.

Jumping into the rush to expand the Rocky Mountain region’s natural gas infrastructure, Duke Energy Field Services (DEFS) and BP America Inc. have signed a 12-year agreement to expand gathering and processing infrastructure and services to accommodate BP’s Greater Green River Basin drilling program in Wamsutter, WY.