Daily Rules, Proposed Rules, and Notices of the Federal Government
The Federal Energy Administration Act of 1974 (Pub. L. 93-275, 15 U.S.C. 761
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
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
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
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.
In September 2012, EIA began publishing the Henry Hub natural gas spot price and a Mont Belvieu NGL composite spot price in the
Section 13(b) of the Federal Energy Administration Act of 1974, Pub. L. 93-275, codified at 15 U.S.C. 772(b).