Connecticut Governor Rell Asks Congressional Energy Committees to Probe Possible Natural Gas Price Manipulation

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September 13, 2007 -- Connecticut Governor M. Jodi Rell today announced she has asked the chairmen and ranking members of the U.S. Senate and House committees with oversight of the energy industry to begin an immediate investigation into possible manipulation of the price of natural gas.

Governor Rell cited a September 6 market watch report that noted the volume of natural gas moving into pre-winter storage nationwide is 23 billion cubic feet lower than the five-year average and a September 4 news release from an Oklahoma City natural gas company, Chesapeake Energy Corp., that said it was “electing” to cut production by 200 million cubic feet per day and reducing the number of drilling rigs by 10 percent because of “lower natural gas prices.”

“This practice, if true, is an unconscionable fleecing of U.S. citizens by natural gas suppliers who ‘elect’ to reduce production in order to drive up prices paid by their captive customers,” Governor Rell said. “We have been told over and over again that the shocking price increases are the result of forces beyond anyone’s control: hurricanes, unexpected demand spikes, refinery problems – almost anything, in fact, except a deliberate attempt to manipulate the market. Yet the evidence suggests otherwise.

“Just this week, OPEC oil ministers said they would increase oil production slightly to avoid making the global economic slowdown any worse,” the Governor said. “These countries – not all of whom are diplomatic allies of the United States – recognize the need to avoid exacerbating economic problems. Why don’t our own country’s natural gas producers get it?”

The Governor’s letter was directed to Senate Energy and Natural Resource Committee Chairman Jeff Bingaman (D-N.M.) and Ranking Member Pete Domenici (R-N.M.) and House Energy and Commerce Committee Chairman John Dingell (D-Mich.) and Ranking Member Joe Barton (R-Tex.). All seven members of the Connecticut Congressional delegation also received the letter.

In her letter, Governor Rell noted that Americans “have been more than patient over the past few years with the spiraling costs of their oil, natural gas and electricity.”

“They have been assured by the energy companies – and by the federal government – that the escalations are the result of forces outside of any government control,” Governor Rell wrote. “That assurance rests in large measure on their faith that the government will ensure their costs are not artificially inflated for the sake of naked profit.

“To allow companies to remove natural gas supply from the market – to take deliberate, considered actions to promote higher prices – is an outrage,” the Governor wrote. “I recognize that natural gas companies are private industries seeking to maximize shareholder value and are a part of our great tradition of free enterprise. However, they are also regulated by government and provide a critical utility to the citizens and the economy of the United States.”

Governor Rell pointed out that federal energy statistics show the residential price per thousand cubic feet of natural gas “has increased a staggering 169 percent in the last five years.” The June 2002 price was $9.58; the June 2007 price was $16.22.

She also noted that wellhead prices reflected similar trends: The June 2002 wellhead price per thousand cubic feet was $2.96; the June 2006 price was $5.80; the June 2007 price was $6.86. These prices raise questions about the rationale cited by Chesapeake Energy for lowering its production, the Governor added.

“It is imperative that you take immediate action to investigate manipulation of supply in the natural gas markets,” Governor Rell wrote the congressional leaders. “The American people have sacrificed enough in the name of natural disaster, market forces and the vagaries of supply and demand. To ask them to continue to sacrifice in the name of corporate profit is reprehensible.”

Source: Connecticut Governor