U.S. GAS PRODUCERS PROPOSE SALES CO-OP

An informal group led by Apache Corp., Houston, says order could be restored to North American gas markets if producers had more say. Citing gas price volatility as the main problem, Raymond Plank, Apache chairman and chief executive officer, last week said producers would have more influence in North American markets if U.S. antitrust laws were changed to allow formation of producer cooperatives.

Feb. 27, 1995

2 min read

An informal group led by Apache Corp., Houston, says order could be restored to North American gas markets if producers had more say.

Citing gas price volatility as the main problem, Raymond Plank, Apache chairman and chief executive officer, last week said producers would have more influence in North American markets if U.S. antitrust laws were changed to allow formation of producer cooperatives.

Plank told a Houston group a producer cooperative could gather members' supplies into pools, then sell only enough gas to meet rather than exceed market demand. He suggested that coop gas withheld from market could be stored underground in a "strategic gas reserve" at no expense to taxpayers.

"In order to have a real effect on the market, we believe a cooperative would have to aggregate about 10 bcfd of supply," Plank said.

Apache and several other U.S. independent producers maintain that North American gas markets are being influenced excessively by a handful of large gas marketing companies.

An Apache advisory alerting media to Plank's appearance last week at a Houston Producers Forum luncheon asserted that three large gas marketing companies, which account for more than 60% of New York Mercantile Exchange gas futures trading, earn more than half their income not by marketing gas but by speculating on wide and frequent gas price swings.

Such arbitrage activity encourages gas price volatility, while failing to assure that producers have a wellhead price high enough to replace produced reserves. Plank described the situation as a classic conflict between short term and long term interests.

Details still are sketchy, but Plank and others at a press briefing following his speech said they would base proposed antitrust law changes on a resolution introduced in the U.S. House of Representatives but defeated in 1991. Changes could be proposed as early as the current session of Congress, backers said.

Speaking in support of Apache's idea at the meeting were representatives of the Texas Independent Producers & Royalty Owners Association and Dwight's Energydata Inc. Pres. and CEO R. Charles Ivey. Plank read a letter of support from the Independent Petroleum Association of America.