US Natural-Gas Markets

Vincent Kaminski

“The natural-gas industry, like ancient Gaul, is divided into three parts. These parts are production and gathering, interstate transmission by pipeline, and distribution to consumers by local distribution companies.”¹¹The US Supreme Court Justice Tom C. Clark, the dissenting opinion in the case Phillips Petroleum Co. v. Wisconsin, 347 US 672. Today, we would add another province: the system of physical and financial transactions supporting such critical functions as price discovery, hedging, funding for drilling operations and necessary infrastructure expansion, and management of volumetric flows from producers to the end-users. The US natural-gas empire has recently gone through several exceptionally turbulent years under the impact of a number of interconnected and mutually reinforcing forces, including:

• • a revolution in production of hydrocarbons from tight rock and shale formations;
• • regulatory reforms of the natural-gas industry and of the financial markets;
• • expansion of web-based trading platforms and web-based information tools; and
• • growing concerns regarding anthropomorphic climate change.

This chapter covers the