Natural gas is in the limelight today, but for reasons not so
Prices are depressed to a point not seen in decades.
Overproduction is blamed in part for the price collapse, which
went as low as 95 cents per thousand cubic feet for July.
In the discussion about improving natural gas prices arises the
argument for increasing demand. Then comes discus- sion of pipeline
capacity, which has been argued to be restrained in Oklahoma for
Some producers assert, however, that while demand is low there
should be limited consideration of new pipelines.
Currently, there are $3 billion worth of new pipeline
construction planned or under way in Oklahoma.
And, while the economic cycle of the gas industry hits the
downside curve, evolution of the regulated workings of the industry
continues. The Federal Energy Regulatory Commission is presently
undertaking a rule making action aimed at further pipeline reform.
Whether this will prove to be a positive step or not is yet to be
Certainly, pipeline policy affects the business of producers.
But, producers have not always felt that federal regulators lend an
ear to their specific concerns in the industry.
In the FERC's proposed rule making on interstate pipeline
comparability of service, there would be revisions to regulations
governing self-implementing transportation and the purchased gas
adjustment regulations. It is a continuation of the transformation
of pipelines from gas merchants to nondiscriminative carriers.
"The IPAA (Independent Petroleum Association of America) is
interested in the FERC's proposed rule making. . .which raises
most of the fundamental policy questions currently before the
natural gas industry," said Eugene L. Ames Jr., president of Venus
Oil Co. of San Antonio, Texas, before the U.S. House Republican
Research Committee Energy Task Force.
Ames is chairman-elect of the national organization of
He noted that natural gas represents more than 70 percent of
production by independents and 75 percent of their reserve base,
according to a recent survey by Arthur Andersen & Co. Furthermore,
independents account for about 60 percent of domestic gas
production, he said.
"One of IPAA's top natural gas policy objectives," Ames said,
"is to ensure a level playing field between domestic and foreign
natural gas producers through consistent attention to the impact of
pipeline rate design on pipeline construction and gas purchasing
decisions." Those issues seemed to come to a head last year during
hearings at FERC on the proposed Iroquois pipeline from Canada to
Essentially, federal regulators are contemplating abandoning
its previous policy of applying a modified fixed variable rate
design, which shifts fixed costs to the commodity charge and thus
increases the marginal cost of domestic gas to a pure fixed
variable rate design that does not recover fixed costs in commodity