[Federal Register Volume 77, Number 233 (Tuesday, December 4, 2012)]
[Notices]
[Pages 71788-71789]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-29232]
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DEPARTMENT OF ENERGY
Energy Information Administration
Notice of Change to the Publication of Natural Gas Wellhead
Prices
AGENCY: U.S. Energy Information Administration (EIA), Department of
Energy (DOE).
ACTION: Notice of a discontinuation of series in the publication of
natural gas wellhead prices and request for comments.
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SUMMARY: EIA is announcing the discontinuation of the natural gas
wellhead price series. Beginning in January 2013, EIA will discontinue
publishing wellhead prices, and will begin publishing a natural gas
spot price at the Henry Hub and an NGL composite spot price at Mont
Belvieu. Comments are invited on the proposed change. Please provide a
description of your current use of the wellhead price data if
applicable.
DATES: Comments must be filed by February 4, 2013. If you anticipate
difficulty in submitting comments within that period, contact the
person listed below as soon as possible.
ADDRESSES: Comments should be mailed to Jose Villar, EI-24, Forrestal
Building, U.S. Department of Energy, 1000 Independence Ave. SW.,
Washington, DC 20585.
FOR FURTHER INFORMATION CONTACT: Requests for additional information
should be directed to Jose Villar at ([email protected]) or telephone
at 202-586-9613.
SUPPLEMENTARY INFORMATION:
I. Background
II. Discussion
III. Current Actions
I. Background
The Federal Energy Administration Act of 1974 (Pub. L. 93-275, 15
U.S.C. 761 et seq.) and the DOE Organization Act (Pub. L. 95-91, 42
U.S.C. 7101 et seq.) require the EIA to carry out a centralized,
comprehensive, and unified energy information program. This program
collects, evaluates, assembles, analyzes, and disseminates information
on energy resource reserves, production, demand, technology, and
related economic statistics. This information is used to assess the
adequacy of energy resources to meet both near- and longer-term
domestic demands.
EIA requests public comment on the discontinuation of the natural
gas wellhead price data in an effort to reduce data and conceptual
issues associated with the series.
Historically, the EIA published natural gas wellhead prices on an
annual basis by state and on a monthly basis nationally. EIA has
defined the wellhead price as the per-unit value at the mouth of the
well (i.e., the wellhead price is considered to be the sales price
obtainable from a third party in an arm's length transaction). These
data appeared in the Natural Gas Monthly, http://www.eia.gov/naturalgas/monthly/, the Natural Gas Annual, http://www.eia.gov/naturalgas/annual/, and others.
II. Discussion
EIA will terminate its natural gas wellhead price series in
December 2012 in an effort to reduce data quality and conceptual issues
associated with the series. The data quality issues associated with the
wellhead price series are closely related to the data
[[Page 71789]]
quality problems that resulted in the termination of the survey Form
EIA-895 Annual Quantity and Value of Natural Gas Production Report in
2012. The Form EIA-895 was designed to obtain monthly information on an
annual and voluntary basis from the appropriate state agencies that
collect data related to natural gas production. EIA discontinued the
Form EIA-895 as a result of disparities in the quality of the data
submissions and problems with enforcement and compliance with survey
requirements. Some examples of these quality and compliance issues
included delayed survey responses and incomplete submissions of key
requested data elements that directly affected the EIA wellhead price
estimation, such as associated volumes and revenues of marketed natural
gas production. Since the termination of the Form EIA-895, EIA has
explored possibilities for continuing the wellhead price series while
also avoiding the shortcomings of the discontinued survey.
Conceptual issues associated with the wellhead price also
contribute to the data quality problems. The wellhead price is defined
as the per-unit value of natural gas at the mouth of the well. However,
in practice, the concept of the wellhead price is problematic as a
result of the complexities of the long-term and short-term transactions
that occur between natural gas producers, processors, marketers, and
consumers along the natural gas value chain, as well as to the
heterogeneity of natural gas production at the wellhead. The differing
quality and thermal content of natural gas at the wellhead makes
comparison of prices resulting from transactions across differing
regions difficult because it is often unclear whether the gas in a
given transaction contains marketable hydrocarbon liquids or
unmarketable nonhydrocarbon gases. Natural gas production and revenue
data supplied by the states is not sufficiently detailed for making
these kinds of distinctions.
As an alternative upstream price, EIA has explored using spot or
bidweek prices from established hubs, such as prices for natural gas at
the Henry Hub in Louisiana and the prices of selected NGLs at the Mont
Belvieu location in Texas. Natural gas spot price information could
resolve some of the issues associated with obtaining upstream wellhead
prices for natural gas because these prices result from transactions
for pipeline quality gas, which is a well-defined, uniform commodity.
In theory, a wellhead price could be derived from nearby spot prices,
assuming that transportation, processing, and related costs are known
or knowable. However, obtaining this kind of information about the
natural gas value chain leading to the market hub would likely be
burdensome, and EIA currently has no plans to undertake such an
analysis. As a result, EIA has begun to publish natural gas spot prices
at the Henry Hub and a composite NGL price, excluding liquids produced
at crude oil refineries, at the Mont Belvieu market location.
Historically, EIA has estimated preliminary values for the monthly
U.S. natural gas wellhead price using a time-series econometric model,
which incorporates data from historical wellhead prices, the New York
Mercantile Exchange (Nymex) futures final settlement price for near-
month delivery at the Henry Hub, and reported spot market prices at
four major trading hubs: Carthage, Texas; Katy, Texas; Waha, Texas; and
El Paso non-Bondad, New Mexico (see Natural Gas Monthly, Appendix A,
June 2012, for details). These model-based estimates were replaced with
the data submissions reported on the Form EIA-895, when the data became
available. Wellhead prices have been estimated using this model through
2012. However, the growth in natural gas production in other parts of
the contiguous U.S. outside of Texas has reduced the reliability of the
model estimates. Moreover, with the discontinuation of the Form EIA-
895, updating these estimates with reported values is no longer
feasible.
EIA proposes discontinuation of the wellhead price series because
wellhead price data is not readily available and spot price information
can provide a reasonable substitute. Further, obtaining wellhead price
information would require a comprehensive study that could prove costly
and burdensome to the public and seems impractical given current
resource constraints. Absent a source of wellhead price information,
EIA cannot objectively verify its model-based wellhead price estimates
of the national average wellhead price. Finally, natural gas spot and
bidweek prices, in conjunction with NGL spot prices, provide a
reasonable proxy for upstream natural gas prices.
III. Current Actions
In September 2012, EIA began publishing the Henry Hub natural gas
spot price and a Mont Belvieu NGL composite spot price in the Natural
Gas Monthly. Beginning in January 2013, EIA will discontinue publishing
wellhead prices.
Statutory Authority: Section 13(b) of the Federal Energy
Administration Act of 1974, Pub. L. 93-275, codified at 15 U.S.C.
772(b).
Issued in Washington, DC, on November 28, 2012.
Stephanie Brown,
Director, Office of Survey Development and Statistical Integration,
U.S. Energy Information Administration.
[FR Doc. 2012-29232 Filed 12-3-12; 8:45 am]
BILLING CODE 6450-01-P