[Federal Register Volume 67, Number 218 (Tuesday, November 12, 2002)]
[Notices]
[Pages 68581-68583]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-28652]


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DEPARTMENT OF ENERGY

Energy Information Administration


Policy Statement; Energy Information Administration Policy for 
Revisions to the Weekly Natural Gas Storage Report

AGENCY: Energy Information Administration (EIA), Department of Energy 
(DOE).

ACTION: Policy statement. Energy Information Administration policy for 
revisions to the Weekly Natural Gas Storage Report.

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SUMMARY: The EIA has established a policy for revisions to weekly 
estimates of working gas volumes held in underground storage facilities 
at the national and regional levels disseminated in EIA's Weekly 
Natural Gas Storage Report (WNGSR). Under this policy, revisions shall 
be disseminated in the WNGSR according to the established schedule and 
shall occur when the effect of reported changes is at least 7 billion 
cubic feet (Bcf) at either a regional or national level. Revisions 
shall not be disseminated outside the established schedule. EIA is 
deferring temporarily further updates in estimation parameters, and is 
exploring ways to minimize revisions, including analysis of the 
sensitivity of the estimates to parameter changes. EIA will continue 
with the current estimation parameters and will report revisions as a 
result of respondent changes only, until further change is announced in 
the Weekly Natural Gas Storage Report.

DATES: This policy becomes effective on November 12, 2002.

ADDRESSES: Requests for additional information or questions about this 
policy should be directed to William Trapmann. Mr. Trapmann may be 
contacted by telephone ((202) 586-6408), fax ((202) 586-4220), or e-
mail ([email protected]). These methods are recommended to 
expedite contact. His mailing address is Energy Information 
Administration, EI-44, Forrestal Building, U.S. Department of Energy, 
Washington, DC 20585.

FOR FURTHER INFORMATION CONTACT: The WNGSR is available on EIA's 
Internet site at http://tonto.eia.doe.gov/oog/info/ngs/ngs.html. The 
survey Form EIA-912 and instructions used to collect information for 
the WNGSR are available at http://www.eia.doe.gov/oil_gas/natural_gas/survey_forms/nat_survey_forms.html.

SUPPLEMENTARY INFORMATION:
I. Background
II. Discussion of Comments
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. No. 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 and statistical information. This information is used 
to assess the adequacy of energy resources to meet near and longer term 
domestic demands.
    EIA's Weekly Natural Gas Storage Report (WNGSR) provides weekly 
estimates of working gas volumes held in underground storage facilities 
at the national and regional levels. The WNGSR became a new EIA 
information product in 2002 replacing an American Gas Association (AGA) 
report begun in 1994 and discontinued in 2002. WNGSR users include 
policymakers, commodity and financial market analysts, and industry 
experts. EIA uses the data to prepare analytical products assessing 
storage operations and the impact on supplies available, and to analyze 
relationships between demand, heating-degree-days, and inventory 
levels.
    The WNGSR is based on information collected on Form EIA-912, 
``Weekly Underground Gas Storage Report.'' Form EIA-912 respondents 
provide estimates for working gas in storage as of 9 a.m. Friday each 
week. The deadline for submitting reports to the EIA is 5 p.m. Eastern 
Time the following Monday, except when Monday is a Federal holiday. In 
that case, forms should be submitted by 5 p.m. on Tuesday. The WNGSR is 
released on Thursday between 10:30 and 10:40 a.m. Eastern Time on EIA's 
Web site (http://tonto.eia.doe.gov/oog/info/ngs/ngs.html), except when 
Thursday is a Federal holiday. Notification of changes in this general 
schedule is maintained on the EIA Web site at http://tonto.eia.doe.gov/oog/info/ngs/schedule.html.
    The EIA provides the public and other Federal agencies with 
opportunities to comment on collections of energy information conducted 
by EIA. As appropriate, EIA also requests comments on important issues 
relevant to EIA dissemination of energy information. Comments received 
help the EIA when preparing information collections and information 
products necessary to EIA's mission.
    On July 11, 2002, EIA issued a Federal Register notice (67 FR 
45963) requesting public comments on a proposed policy for revisions to 
information disseminated in the WNGSR. In that notice, EIA discussed 
the reasons for WNGSR revisions as well as a proposed policy for both 
scheduled (i.e., the revised information is disseminated in the next 
scheduled WNGSR) and unscheduled revisions (i.e., the revisions are of 
such magnitude and interest that revised WNGSR information would be 
disseminated prior to the next scheduled WNGSR).

II. Discussion of Comments

    In response to the Federal Register notice requesting comments on 
the proposed WNGSR revision policy, EIA received 28 sets of comments. 
Most of the comments were from energy firms and trade groups.
    The comments tended to focus on the following general issues for 
which EIA specifically requested a response:
    [sbull] Whether EIA should release revised estimates in the Weekly 
Natural Gas

[[Page 68582]]

Storage Report outside the established schedule.
    [sbull] The timing and prenotification of unscheduled revisions.
    [sbull] The appropriateness of the suggested thresholds for 
revisions--a lower threshold to trigger any revision and a larger one 
to trigger an unscheduled release of revised estimates.
    As to whether EIA should release revisions to the Weekly Natural 
Gas Storage Report outside the established schedule, 13 respondents 
indicated that EIA should issue revisions only on the official 
schedule, while 7 indicated that unscheduled releases were appropriate 
and the remaining respondents (8) did not express a preference. Most of 
the respondents who preferred no unscheduled releases expressed 
concerns that unscheduled releases of revisions would increase market 
volatility, increase resource costs in managing their analytical 
efforts, and that not having unscheduled releases would promote 
fairness and consistency in the marketplace. Most of the respondents 
who were in favor of unscheduled releases argued that providing the 
market with the better data more promptly would ensure the accuracy of 
the storage data and enhance the efficacy of the pricing mechanism by 
reducing uncertainty in gas markets.
    On the timing and prenotification of unscheduled releases, 4 
respondents indicated that EIA should not provide early notification, 2 
indicated that prenotification was appropriate, and the remaining 22 
respondents did not state a preference. As with the question of whether 
to have unscheduled releases, respondents opposed to pre-notification 
24 hours ahead of the release of a revision cited increased price 
volatility as their major concern. Respondents in favor of 
prenotification asserted that the early notice would give market 
participants time to prepare for the new information and help ensure 
that they would receive the information simultaneously.
    With regard to the appropriateness of the suggested thresholds for 
revisions, most respondents did not explicitly state a preference. The 
lower threshold of 7 billion cubic feet (Bcf) for revisions that are 
released according to the established schedule was considered 
appropriate by seven respondents, and one respondent recommended a 
threshold of 1 Bcf. No other opinions regarding the lower threshold 
were expressed.
    For revisions released outside the regular schedule, the large 
threshold of 35 Bcf was considered appropriate by three respondents, 
and three respondents recommended thresholds in the 20-to-25 Bcf range. 
Those who recommended larger thresholds for unscheduled revisions 
sought to minimize the number of revisions that EIA would have to make, 
while those who suggested smaller thresholds generally sought to 
enhance the accuracy of the data.

EIA's Response to Comments Received

    Comments regarding the revision policy. EIA finds that the comments 
on the issue of unscheduled releases of revisions are thoughtful and 
reflect the nature of the tradeoff in developing a revision policy: the 
benefit of having the most accurate data immediately available versus 
the costs of this immediacy. While the costs to market participants to 
monitor for and react to unscheduled releases of revisions on an 
ongoing basis seem clear and may be substantial, the benefits of 
providing out-of-cycle revisions are not as clear or measurable. Market 
participants would have to undertake the costs of monitoring for the 
possibility of an unscheduled release each week, regardless of whether 
there actually is a revision. However, benefits of an out-of-cycle 
release would accrue only when there is an out-of-cycle release. 
Furthermore, while the likelihood of a revision of 35 Bcf or more 
cannot be known, it may be highly unlikely given that such a large 
revision only occurred once in the more than 8-year history of the AGA 
weekly storage survey. Thus, the benefits of unscheduled releases are 
likely outweighed by the ongoing costs and other costs associated with 
an unexpected release.
    Other costs of instituting an unscheduled release policy likely 
include ensuring that all market participants receive the information 
simultaneously and increased market volatility. By its very nature, 
unscheduled releases make ensuring fairness to all market participants 
problematic, because market participants will likely not learn of a 
revision at the same time. It was suggested to institute a set day and 
time for out-of-cycle revisions, however this does not eliminate the 
burden for the market participants who will have to monitor EIA for a 
possible revision. Additionally, a prenotification to inform market 
participants of an upcoming revision would give an advantage to the 
individuals who hear about the upcoming revision first, as they may be 
able to infer the direction of the revision and anticipate its effect 
on prices. Markets react to news, and volatility appears to be a 
function of the news. Price volatility is the dynamic process of price 
adjustment as markets react to news and digest the ramifications of the 
news on prices. Each new announcement that EIA makes about the market-
moving storage number will likely be accompanied by attendant price 
volatility. As an independent, policy neutral, statistical agency, it 
seems prudent for EIA to adopt an unobtrusive stance, and to minimize 
the number of announcements that it makes regarding new weekly storage 
data.
    Additional comments on other issues. Some respondents submitted 
comments on issues related to the Weekly Natural Gas Storage Report for 
which EIA did not specifically request a response. In general, these 
comments fell into two broad categories: concerns about enforcement and 
penalties for bad data, and suggested methodological changes to the 
survey and estimation.
    With regard to enforcement and penalties for bad data, EIA would 
like to reassure those respondents that the EIA-912, ``Weekly 
Underground Natural Gas Storage Report,'' is mandatory under Pub. L. 
93-275. Failure to comply may result in criminal fines, civil 
penalties, and other sanctions as provided by law. Title 18 U.S.C 1001 
makes it a criminal offense for any person knowingly and willingly to 
make to any Agency or Department of the United States any false, 
fictitious, or fraudulent statements as to any matter within its 
jurisdiction.
    EIA conducts due diligence in confirming that the data submitted 
are accurate and of high quality. In fact, these data quality efforts 
resulted in a number of revisions in the early weeks of the survey. The 
resolution of difficulties typical of any new survey often required 
resubmission of an entire series of data reports from respondents, 
which resulted in revised estimates. It is important to note that these 
resubmissions of respondent information occurred at the request of EIA 
to improve data quality. Except for the requested resubmissions, 
respondents have rarely submitted adjustments to previous data.
    EIA believes that the initial start-up problems have been resolved. 
In the first 10 weeks that EIA issued weekly storage reports, five 
revisions were issued, but only one revision was necessary in the 
following 15 weeks through October 24, 2002. Reasons for revisions in 
monthly and weekly data include resolution of:
    [sbull] Companies' reporting responsibilities for their field 
operations; e.g., fields included in company submissions did not 
coincide with EIA's specifications.

[[Page 68583]]

    [sbull] Questions about how joint operations of a field should be 
reported; e.g., companies did not always report on all gas contained in 
a field, instead only on the volumes they owned.
    [sbull] Questions about whether gas should be identified as base or 
working; e.g., some respondents inadvertently reported total gas 
volumes rather than working gas volumes.
    Methodological comments included a recommendation that the EIA-912 
should be a census rather than a sample survey, suggestions on 
smoothing the estimation parameters when shifting reference months, and 
increasing the level of significant digits that respondents should 
include when reporting their data. A sample survey was chosen instead 
of a census, because a census would have increased respondent burden 
substantially without providing significantly more accuracy than a 
sample survey. EIA's objective in selection of the sample was to attain 
a coefficient of variation less than or equal to 5 percent in the 
estimates for each region. This was attained without imposing the 
additional cost and burden of a census on respondents. EIA currently is 
reviewing its methodology and investigating the possibility of using 
different smoothing and estimation methods. EIA is deferring 
temporarily further updates in estimation parameters, and is exploring 
ways to minimize revisions, including analysis of the sensitivity of 
the estimates to parameter changes. EIA will continue with the current 
estimation parameters and will report revisions as a result of 
respondent changes only, until further notice. The methodology may 
change when the analysis effort has been completed. Any changes to the 
current methodology will be announced in the WNGSR and suitable 
documentation will be posted on the EIA Internet Web-site.

III. Current Actions

    EIA is establishing a policy for revisions to information 
disseminated in the WNGSR. With respect to the treatment of revisions 
to WNGSR data, EIA had proposed a policy that covered the release of 
information under two different scenarios : (1) Releasing any revisions 
only with the release of the regularly scheduled WNGSR, and (2) 
including relatively small volume revisions (i.e., between 7 Bcf and 35 
Bcf) with the regularly scheduled release and conducting unscheduled 
releases of major revisions of 35 Bcf or greater.
    The comments received in response to the Federal Register notice 
did not produce a clear consensus on issues raised. However EIA used 
the comments to reach certain conclusions regarding a proper revision 
policy. A plurality of respondents indicated that 7 Bcf is an 
appropriate threshold to trigger revisions to previously published 
estimates. EIA has begun statistical analyses to explore further the 
issue of the size for the threshold that would trigger a revision, and 
to evaluate the current estimation methodology. However, in the 
interim, 7 Bcf will be retained as the active threshold.
    EIA proposed a 35 Bcf threshold to trigger unscheduled releases of 
revisions because it is roughly equivalent to one standard deviation of 
the working gas in storage estimate that prevailed in the early weeks 
of the WNGSR when stock estimates and the associated standard 
deviations are expected to be around their lowest level. The 
suggestions from respondents on specific thresholds seemed to be drawn 
from judgment based on industry experience and did not seem to have an 
empirical basis.
    Nonetheless, a plurality of respondents opposed the notion of 
unscheduled releases of revised estimates. In light of these comments 
and without an empirical basis on which to institute an unscheduled 
release policy, EIA decided that it would not be prudent to do so at 
this time. EIA also considered the possibility of maintaining the 
discretion to disseminate an unscheduled revision if the organization 
decides that events may warrant it. However, as a policy neutral 
organization, EIA recognizes that a plan to exercise this discretion 
with the market-moving storage series could be more disruptive than 
beneficial.
    EIA WNGSR revisions policy. Scheduled revisions shall be 
disseminated in the WNGSR according to the established schedule and 
shall occur when the effect of reported changes is at least 7 billion 
cubic feet (Bcf) at either a regional or national level. If a revision 
is made, changes to all regions shall be recorded. Consequently, 
although all respondents' changes shall be entered into EIA's database 
for editing, imputation, and other analytic purposes, the changes shall 
only lead to a published revision when it exceeds the 7 Bcf threshold. 
Revisions shall not be disseminated on an unscheduled basis.
    EIA reserves the right to revisit or amend this policy. However, 
EIA shall not issue unscheduled revisions or establish a new revision 
policy without prior notification in the Weekly Natural Gas Storage 
Report or the Federal Register.

    Statutory Authority: Section 52 of the Federal Energy 
Administration Act (Pub. L. No. 93-275, 15 U.S.C. 790a).

    Issued in Washington, DC, November 4, 2002.
Nancy J. Kirkendall,
Director, Statistics and Methods Group, Energy Information 
Administration.
[FR Doc. 02-28652 Filed 11-8-02; 8:45 am]
BILLING CODE 6450-01-P