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Natural Gas Market Centers: A 2008 Update

April 24, 2009

This special report looks at the current status of market centers in today=s natural gas marketplace, examining their role and their importance to natural gas shippers, pipelines, and others involved in the transportation of natural gas over the North American pipeline network. Questions or comments on the contents of this article should be directed to James Tobin at james.tobin@eia.doe.gov or (202) 586-4835.

Natural gas market centers first began to develop in the late 1980s following the implementation of the initial openaccess transportation initiative under the Federal Energy Regulatory Commission’s (FERC) Order 436 (1985). Market centers since have become a key component of the North American natural gas transportation network (see box, “Market Center Development”). Located at strategic points on the pipeline grid, these centers offer essential transportation service for shippers between pipeline interconnections, as well as provide these shippers with many of the physical and administrative support services formerly handled by the natural gas pipeline company as “bundled” sales services.

The day-to-day operations of a market center are usually managed by two separate parties: the center’s administrator, who provides customer contact and handles administrative tasks, and a pipeline operator who carries out the physical operations at the direction of the administrator. Both the operational infrastructure among market centers and the services offered vary considerably (see box, “Market Center Configurations”).

The key services offered by most market centers include the physical coverage of short-term receipt/delivery balancing needs such as parking and loaning services, compression services, and pooling (see box, “Market Center Services”). Many of these market centers also provide new and innovative services that expedite and improve the natural gas transportation process. For instance, many market centers include access to internet-based natural gas trading platforms and capacity release programs, in addition to interactions that support title transfer services between parties who buy, sell, or move their natural gas through the center.

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