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[Federal Register Volume 77, Number 233 (Tuesday, December 4, 2012)]
[Notices]
[Pages 71788-71789]
From the Federal Register Online via the Government Printing 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 (jose.villar@eia.gov) 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
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