American Oil and Gas Reporter - January 2012 - 34

Energy Groups Support End-User Bill
WASHINGTON- Eight energy trade
associations, including the American Independent Petroleum Association of America, are urging Congress to ensure commercial end-users are not cast as swap
dealers under new federal regulations.
In a letter sent to Congress, the associations urge enactment of HR 3527, the
Protecting Main Street End-Users from
Excessive Regulation Act, which seeks
to change language contained in 2010's
HR 4173, the Wall Street Reform and
Consumer Protection Act commonly
known as Dodd-Frank, IPAA reports.
Representative Randy Hultgren, R-Il., is
the main sponsor of HR 3527. The bill
was moved to the House Committee on
Agriculture on Nov. 30.
The letter says the energy companies
are worried the swap-dealer definition
and de minimis exception under the Commodity Futures Trading Commission's
proposed "entity definition" rules are
overly restrictive. That would result in
commercial end-users, who use swaps
for hedging purposes, to be misclassified
as swap dealers, they assert, which would
impose unnecessary burdens and costs
on end-users.
Hultgren says his legislations narrows
the Dodd-Frank definition of a swap
dealer to ensure that congressional intent
is realized and that costly regulations intended for the largest financial institutions
are not imposed on hundreds of small
end-users.
"At a time when American families'
budgets already are stretched, new rules
from Washington regulators threaten to
increase the volatility of prices for essentials such as food and electricity," he
states. "Subjecting end-users such as agricultural cooperatives and rural electric
cooperatives to rules designed for Wall
Street is not just illogical, it defies congressional intent."
Representative Dan Boren, D-Ok., a
cosponsor of HR 3527, asserts Oklahomans are tired of one-size-fits-all regulations coming out of Washington. "The
last thing we need to do is unintentionally
hurt rural electric cooperatives and small
businesses," he holds.
Margin Exemption
The letter also recommends Congress
pass HR 2682, the Business Risk Mitigation and Price Stabilization Act of
2011, which would ensure that commercial
end-users are exempt from margin requirements applied to many derivative
34 THE AMERICAN OIL & GAS REPORTER

contracts by Dodd-Frank, IPAA reports.
Sponsored by Representative Michael
Grimm, R-N.Y., HR 2682 would allow
end-users to continue to use derivatives
to maintain stable prices for consumers
and to free capital that could be used to
create jobs, according to the congressman.
"At a time when unemployment is at
9 percent, we must do all we can to
remove the barriers to job creation, rather
than putting up more," Grimm holds.
Forcing true end-users to post margins
can have several negative consequences,
Grimm asserts, including:
* Making the costs so high that endusers stop hedging, thereby increasing
prices for consumers;
* Restricting capital that otherwise
would be used for job creation or reinvestment; and
* Driving businesses to foreign derivatives markets.
Grimm cites a study by Keybridge
Research that shows a 3 percent margin
requirement on over-the-counter derivatives could be expected to reduce capital
spending by as much as $6.7 billion a
year, leading to the loss of 100,000130,000 jobs.
Defying Congressional Intent
Rules on margin requirements proposed
by several financial regulators, including
CFTC and banking watchdogs, are inconsistent, work at cross-purposes with
congressional intent, and have caused
uncertainty for commercial end-users,
the energy associations assert in their
letter to Congress. One example they cite
is that although the CFTC has proposed
not to require posting margins for endusers' uncleared swaps, some regulators
want end-users dealing with banks to
provide one-way margining for any uncleared swap transaction that exceed set
thresholds.
The CFTC also proposes to unnecessarily impose capital requirements for
transactions with end-users where margins
are not posted, the letter warns.
It says these proposals clearly go beyond the congressional intent articulated
in the bipartisan letter from four House
and Senate chairmen of committees with
jurisdiction over commercial end-users.
That letter said regulators should exempt
end-users from margin requirements and
seek to limit other regulatory burdens
that could increase costs for end-users
and increase systematic risks for the na-

tion's economy.
"We consistently have supported the
bipartisan goals of the Dodd-Frank Act
to enhance regulatory oversight and transparency in the derivatives markets," the
energy group's letter says. "However, derivatives provide electric utilities, electricity
providers, natural gas producers and
energy companies an important tool to
insulate our energy customers from wholesale commodity price volatility, and offer
the stability and certainty that our members
need to make critical capital investments
that contribute to economic growth and
job creation."
HR 3527 and HR 2682 will help
ensure Dodd-Frank is implemented appropriately, will assure a robust commercial
end-user exemption as intended by Congress, and will not create loopholes in
the regulations, the letter holds.
Joining IPAA are the American Gas
Association, American Public Power Association, Edison Electric Institute, Electric
Power Supply Association, Large Public
Power Council, National Rural Electric
Cooperative Association and Natural Gas
Supply Association.
r

Whiting Petroleum Reports
North Dakota Discoveries
DENVER-An update from Whiting
Petroleum Corp. on 11 of the company's
newest North Dakota wells shows initial
production rates as high as 3,065 barrels
of oil equivalent a day.
According to the company, the flow
rate for that well, the Norgard 21-13H in
McKenzie County's Hidden Bench prospect,
was gauged on a 48⁄64-inch choke with a
flowing casing pressure of 800 psi. The
well was fractured with 30 stages, all using
sliding sleeves.
Whiting says it owns 59,170 gross
acres in the Hidden Bench prospect, where
it plans to drill 12 wells before year's
end.
The company indicates the initial 24hour test rates for five more of its North
Dakota wells exceed 2,000 boe/d:
* The Smith 34-12TFH at the Lewis
and Clark prospect in Stark County yielded
2,939 boe/d.
* The Hansen 14-20XH in Mountrail
County's Sanish Field produced 2,893 boe/d.
* The Johnson 31-4H at Hidden Bench
flowed at 2,520 boe/d.
* The Kummer 34-31 at Hidden Bench
yielded 2,216 boe/d.
* The Snyder 21-11H at Sanish produced 2,193 boe/d.
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American Oil and Gas Reporter - January 2012

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