NGSA, NCGA cite concern at start of House-Senate finance conference

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, May 24 -- The Natural Gas Supply Association and the National Corn Growers Association asked a congressional conference to make clear that commercial end-users of derivatives should not be treated as swap dealers under financial reform legislation.

“The important thing to bear in mind as the conference begins is that a means of preventing unintended consequences to the economy and commercial end-users exists and is achievable,” the groups said in a May 24 letter to US House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.). “Broadening the clearing exclusion to exempt commercial end-users is absolutely essential to avoiding harm to the economy and allowing capital to stay at work in US industries.”

Gas producers use over-the-counter derivatives to provide more predictable prices and cash flow, said Jenny Fordham, NGSA’s government affairs and energy markets director, in a separate statement. “Our companies should not be regulated like swap dealers,” she said, adding, “They have significant assets and do not pose the ‘systemic risk’ that financial reform measures are aimed at preventing.”

Fordham said, “In fact, forcing natural gas companies to clear derivatives transactions only serves to centralize risk that would otherwise be diversified among numerous counterparties.”

Mandatory clearing requirements would drain hundreds of millions of dollars from energy industries, and an estimated $700 billion economy-wide, which would otherwise be productive capital and invested in infrastructure and job-generating activities, Fordham said. “We share Congress’s commitment to securing the integrity of the financial system, and we call on conferees to follow through on this commitment by excluding commercial end-users from mandatory clearing,” she added.

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