U.S. Commodity Futures Trading Commission 

 Public Hearing 

September 18, 2007 

Opening Statement of 

R. Skip Horvath, President & CEO 

Natural Gas Supply Association 

The Natural Gas Supply Association (NGSA) represents integrated and independent 

companies that produce and market natural gas in the United States. NGSA supports 

regulatory and legislative actions that foster competitive markets and downstream 

efficiencies while fostering increased natural gas supply. 

As large producers and marketers of natural gas, NGSA members have a shared belief 

in, and actively support, a number of bedrock principles with regard to enhancing the 

ongoing competition in North American natural gas markets. Key among them are: 1) 

integrity, 2) transparency and 3) efficiency. By adhering to these principles, we believe 

we ensure the delivery of natural gas supplies to our customers and end-users at prices 

that reflect both recovery costs and market values for increasingly constrained domestic 

resources. We believe it is important for the commission and other federal 

policymakers to continue to recognize that these constraints, coupled with normal 

weather swings, represent the biggest driver for market volatility levels. While 

Congress appropriately debates the need for any additional government oversight of 

the various energy-related markets, we think it is important to recognize that the 

outcome of that debate will have only limited benefit without also addressing the need 

for additional access to the most economic supplies. 

 

Specifically with regard to the issue of integrity, we believe a number of relatively 

recent regulatory and legislative changes are providing additional confidence and trust 

in the overall benefit of our natural gas markets. The first step was the enhanced 

integrity of the various market indices via the 2003 Federal Energy Regulatory 

Commission (FERC) Policy Statement on good faith price reporting and publishing, 

followed by last year’s rule prohibiting market manipulation (Order No. 670). Further 

bolstering integrity and oversight, FERC has recently implemented a memorandum of 

understanding with the Commodity Futures Trading Commission (CFTC) to share 

market oversight information, and made public its Market Oversight webpage for 

timely, free and unbiased energy market data. Finally, Section 316 of the Energy Policy 

Act of 2005 (EPACT) directed FERC to facilitate price transparency, spurring FERC’s 

Market Transparency NOPR as the culmination of a series of efforts designed to 

provide confidence in the price-reporting process. 
While the outcome has yet to be determined with regard to a number of pending 

enforcement actions, most notably the Amaranth investigation, we do believe that these 

cases reflect that federal oversight agencies such as the CFTC are doing the job assigned 

to them by Congress, which should serve to provide additional assurances to the 

market that it is functioning as intended for the benefit of customers and suppliers 

alike. We do not, however, intend today to address any of the specific allegations with 

regard to Amaranth or others in cases that continue to be litigated. 

 

Overall, though, we believe it is important for the commission and our fellow market 

participants to stay focused on the fact that the U.S. natural gas market is more 

transparent than any other natural gas market in the world. Domestic natural gas 

prices are set by supply and demand fundamentals in a highly competitive market. 

More than 7,000 producers of natural gas have multiple ways of connecting to millions 

of natural gas customers. 

 

Even though we have many buyers and many sellers in our competitive market, there 

are often more buyers than sellers, or vice versa, at any given location or moment in 

time. In general, participation by speculative traders serves to further balance the 

supply-demand equation via higher-risk market positions, which those interested in 

producing or consuming natural gas often do not wish to take. If it were not for such 

speculators, who actually smooth out delivered commodity prices over time and 

geography, price volatility could, most likely, be even greater. Future regulations that 

do not strike the balance needed to ensure the participation of this important segment 

of the market could actually increase price volatility and, arguably, increase the 

frequency of price spikes as well as the overall price of natural gas to American 

consumers. It could also have the unintended consequence of pushing such speculation 

into even more opaque and less regulated markets. 

Thank you for the opportunity to appear today and we look forward to your questions.