WASHINGTON, July 31 /Xinhua-PRNewswire/ -- US Senator Carl Levin, a Michigan Democrat, said at a Platts Energy Podium in Washington Monday that he is working with three other senators on a bill designed to shut down certain types of damaging energy market manipulation. The measure they hope to introduce in the fall would close the so-called "Enron loophole" that exempts electronic trading platforms, such as the IntercontinentalExchange (ICE), from federal regulatory oversight.
Levin, who is chairman of the Senate Permanent Subcommittee on Investigations, said the bill would put electronic platforms under the same trading regulations as the New York Mercantile Exchange (NYMEX). He said crafting the measure has been a "legislative challenge," adding that thus far the bill would cover bilateral trades cleared on electronic platforms such as ICE. Bilateral trades not conducted on such exchanges would be excluded, he said. "That seems to be a logical place to draw the line."
Levin in late June began a quest to close the Enron loophole after his subcommittee released a report detailing "excessive speculation" in the natural gas markets last year by collapsed hedge fund Amaranth Advisors. The report concluded that Amaranth was able to mask some of its trading strategies from regulators by conducting deals on ICE. In a Platts exclusive, Levin's staff in early July revealed the senator would prepare and push comprehensive oversight legislation on the topic.
"Amaranth went to the casino and gambled their fortune," Levin said on Monday. "The problem is, there are people who depend on the future deliveries of natural gas for their schools, businesses and utilities."
"One thing that is undebatable is that NYMEX, which is the regulator, ordered Amaranth to reduce [its] holdings," he said. "We think we've demonstrated very clearly that we had one hedge fund that dominated the market. When you have a trader that dominates the market, you have a trader that affects price."
Addressing greenhouse gas emissions, the senator reiterated his opposition to mandatory fuel efficiency requirements for cars and trucks, but expressed qualified support for an industry-backed measure that would establish a 32 to 35 miles per gallon Corporate Average Fuel Efficiency Standard (CAFE) for cars and trucks by 2022, prohibiting further increases to the standard. According to Levin, the "compromise" measure would establish a standard that car manufactures could achieve.
In common with other Michigan lawmakers, Levin maintains that CAFE is not the best way to significantly increase the efficiency of cars and trucks. He said he circulated a proposal to his colleagues recently that would have instead made a "global deal" with domestic and foreign automobile manufacturers that would promote investment in alternative "leap-ahead" technologies, such as hydrogen vehicles.
Sponsored by Platts, a division of The McGraw-Hill Companies, Platts Energy Podium provides an ongoing forum for prominent newsmakers and the press to address important energy and environmental issues. Credentialed members of the media may receive complementary registration for Energy Podium events by contacting Nancy Covey at 202-942-8719, Nancy_Covey@platts.com. A recording of the Carl Levin session is available via podcast at www.energypodium.platts.com.
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