EDITORIAL The gas co-op bill

A bill that would allow natural gas producers to form marketing cooperatives stalled on arrival in Congress. The Natural Gas Competitiveness Act of 1995, introduced last October by Rep. John Bryant (D-Tex.), loiters in the House judiciary committee and hasn't been introduced in the Senate. Little time remains in the current session.

But the pause allows for a fresh look at an important question: Do antitrust rules keep independent producers from fairly participating in the newly deregulated gas market? If the answer is yes, the rules need to be changed.

Unnecessary polemics

Bryant's bill may or may not be the way to effect the change. A grassroots group called Independents for Co-ops, led by Apache Corp., says it is. Opponents, including interstate pipelines and local distribution companies, say it isn't.

The concern here is not which side is right about the current bill. It is that unnecessary polemics will distract lawmakers from the central question and discourage them from addressing it at all.

In a creative turn instructive to all industry issue managers, Independents for Co-ops opened a Worldwide Web home page on the Internet to describe its position. But the position gets-well, overstated.

The group alleges that entities called "mega-marketers" and other "middlemen" have come to dominate trade in natural gas since deregulation. These entities make most of their money buying and selling "virtual gas" on the futures market, profiting from price swings, and encouraging volatility. For real gas, the mega-marketers pay producers too little and charge consumers too much.

"What's more," Independents for Co-ops says, "they have their eye on bigger fields to plunder. Electricity is their next target, and they're going global in their quest to dominate energy supplies."

See why this issue needs a breather?

The emergence of gas marketers, mega or otherwise, just does not threaten the global order of things, as the group implies. And trading gas futures and options is no sin. It is a way to manage risk, to secure future supplies and sales, and to make and lose money.

In fact, marketing companies and futures trading are signs of a blossoming market. The aim of deregulation was to make the gas market work. That it is working became further evident this winter, when sustained cold raised demand and the market distributed gas supplies much more efficiently than the government ever did. Independents for Co-ops would have people believe that gyrations of the futures market during that period portend some sort of breakdown.

It is always reasonable, even healthy, to wonder whether someone possesses undue market power. Independents for Co-ops raises the question and cites skewed distribution of this winter's gas price gains to support its charge.

Certainly, the possibility for excessive wholesale claims on gas values deserves attention. But to lawmakers deciding whether to relax antitrust limits on gas producers, price complaints wrapped in anti-middleman tirades are bound to look self-serving.

That's too bad. Producers deserve a fair hearing about limits on their abilities to aggregate supply. The newly free market demands gas in portions larger than many of them individually can deliver.

Fair look needed

If the law prevents producers from pooling supply and forces them instead to sell to entities that face no such prohibition, it is unfair, anticompetitive, and in need of change. Access to the modern market in part means the ability to sell certain minimum volumes of gas. Producers should have the same access to the market as everyone else. Any limit on their ability to deliver gas in volumes that the market wants amounts to a limit on market access. An antitrust measure that imposed such a limit in the modern gas market would contradict itself.

That's the issue. The rest is gratuitous antagonism likely to ensure that lawmakers never take a fair look at the problem.

Copyright 1996 Oil & Gas Journal. All Rights Reserved.