Ms. Gattinger.
Evidence of meeting #101 for Natural Resources in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was agency.
A recording is available from Parliament.
Evidence of meeting #101 for Natural Resources in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was agency.
A recording is available from Parliament.
9:35 a.m.
Prof. Monica Gattinger
I would just add, to come back to the idea or thinking about this as an investment as opposed to an expenditure, that I would encourage the committee to look at the potential economic contribution.
9:35 a.m.
Liberal
Nick Whalen Liberal St. John's East, NL
Let's go straight to there.
We've heard testimony that five-sixths of every dollar spent by organizations such as yours is spent on finding the data rather than analyzing it within your own organizations. If we had this type of energy resource, you'd probably analyze American data and compare it to Canadian, so you might have a sense of how much extra work it is.
How much would this drive your productivity within your organizations, to have a comparable tool in Canada to what the Americans get to have?
9:35 a.m.
Prof. Monica Gattinger
The work that we do at Positive Energy is much more about looking at the decision-making arrangements and how to strengthen public confidence in decision-making arrangements. We would look at it through the lens of “what about the existing and the new users of energy information, notably municipalities, individual Canadians, whether as consumers or as citizens, indigenous communities, and the like?”
We're certainly seeing, with the research and engagement that we've undertaken over the last number of years, that the lack of credible shared views around information is really hamstringing the country. It's one of the reasons—not the only reason but one of the reasons—that's hamstringing the country when it comes to exactly the point you were mentioning: getting to “how” on the development of natural resources.
9:40 a.m.
Liberal
9:40 a.m.
Director, RS Energy Group
Absolutely.
When we look internally, we've spent probably half of our time trying to collect, correct, curate, glue together different datasets from hundreds or even thousands of data sources. There's massive drag there, and that has two effects: first, it's a loss in productivity; and second, it is a lost opportunity to look at what you find when you put it all together.
In many cases, we don't attack or other firms don't attack the Canadian data with the same vigour and the same opportunity, because it's so much more difficult to....
9:40 a.m.
Liberal
Nick Whalen Liberal St. John's East, NL
This probably goes to something you said earlier.
I'm not sure if I'm getting the quote right, but it was basic infrastructure that will smooth the flow of everything, from commerce to discourse.
9:40 a.m.
Liberal
Nick Whalen Liberal St. John's East, NL
Do you think we would have better capital flows for financing our energy-related projects if we have this data, or do the people who are actually making these large investment decisions have access to the data because they can buy it and they'll hire the engineers to do the work for them anyway?
9:40 a.m.
Director, RS Energy Group
We are that entity, and we don't consume Canadian data as fulsomely as we probably could, given its current structure and state.
9:40 a.m.
Chief Economist, RS Energy Group
To add to that, the other side of it is that more accessible, transparent data might help expedite certain activities going forward, because there's a greater acceptance of those data across the different opinions on different issues in the energy sector.
9:40 a.m.
Liberal
9:40 a.m.
Liberal
Nick Whalen Liberal St. John's East, NL
—users, and I think maybe investors would be in that category as well.
9:40 a.m.
Liberal
The Chair Liberal James Maloney
Not as long as you.
Thank you. We're going to have to stop there.
Thank you all for joining us today, especially for getting up so early in Calgary. We appreciate your time.
We'll suspend for two minutes, and then we'll start with the next witness.
9:45 a.m.
Liberal
The Chair Liberal James Maloney
I apologize for interrupting. We do have some business to deal with.
We have a PowerPoint presentation from the next witness, but it has just been received, so it hasn't been translated.
Is there any objection to circulating it, knowing it will be translated later?
Okay, we can distribute it.
Good morning. Thanks for joining us from Calgary. We know it's a bit early there, so we're very grateful for your taking the time in the early part of your day to join us.
The process for the morning is that you collectively will have up to 10 minutes to make a presentation, and then we'll open the floor to questions from around the table. You can deliver your remarks in French or English, knowing you'll be asked questions in both languages. You should have translation devices available to you should you need them.
The floor is yours.
9:45 a.m.
Steve Lappin President and Chief Operations Officer, Intercontinental Exchange - ICE NGX
Okay, very good. My name is Steve Lappin, president of ICE NGX.
I'll give you a very brief and quick background on our role in the energy markets. Then Greg Abbott, head of operations, will talk a bit more specifically to the data: indices and some of our settlements information.
ICE NGX is a leading physical energy exchange based out of Calgary. We've been around for about 25 years. Unlike most quantity exchanges, we actually get involved in the physical products, so when you trade commodities with us, physical energy, natural gas, and electricity actually move and whatnot. I've been at that for a while.
We were recently purchased by ICE. They purchased us last year. It started with backing by the pipelines in 1993 with Westcoast Energy, which is now Spectra. In 2001, it was OMX, which is part of the Nasdaq group. In 2004, the Toronto Stock Exchange Group owned us. In 2012, of course, they became the Maple Group. Then, as I said, in December of 2017, we became part of the ICE group.
We have dominant market share in Canadian physical spot gas. Greg will talk about our physical natural gas markets. That and our power indices are the Canadian benchmarks in terms of pricing. We handle Canadian crude oil as well, and we have some pricing and data on that front.
We also have U.S. operations set throughout the majority of our business. The dominant portion is on the Canadian side, but we do have markets throughout North America.
All of our markets are traded on the ICE front-end trading platform, and everything is electronically traded. We do get some, what we call, over-the-counter clients as well, which is where bilateral counterparties have entered into an agreement and then bring it to us for clearing.
We have both the exchange and the clearing house side of the business. The clearing side is your typical clearing house. It takes in all of the transactions. We provide both a physical and financial assurance and guarantee to assure performance.
We typically hold about $2 billion or $3 billion in collateral to secure those positions, those transactions, that take place. It's a non-mutualized model, which means that the counterparties trade directly with us. They don't go through a broker-dealer or any sort of intermediary.
With regard to some key assorted facts, we have about 275 counterparties annually clearing about $35 billion in terms of transactions that are done. We settle up about $500 million to $1 billion monthly. The total daily volume is about 45 billion cubic feet. The total Canadian production is around 16 billion cubic feet. Obviously what we transact is a multiple of the entire underlying Canadian natural gas volume as well. We have over 90 different clearing hubs and locations, as I said, throughout North America.
From a regulatory perspective, a highly regulated entity, the Alberta Securities Commission is our primary regulator here. It oversees us both in terms of an exchange and a clearing house. In the U.S., we're overseen by the Commodity Futures Trading Commission, as a derivatives clearing organization, as well as a foreign board of trade as an exchange. We also have EU recognition as a third country central counterparty.
In terms of a brief background regarding our markets, the majority of what we do is out of what we call “AECO AB-NIT”, which is here in Alberta. As I'm sure you understand, that is the predominant production of natural gas supply in Canada, so that is where our single largest market is. The next largest would be out of Dawn, Ontario, where a lot of the gas moves for consumption both within Ontario and then further on into the U.S. Those are our two major markets.
On the electricity side, we have both Alberta power and Ontario power. Crude oil is mostly done through our brokerage affiliate entity. We provide the indices and numbers for that. That is on the Canadian crude oil products throughout Canada, but again, predominantly in western Canada for all the major grades of crude oil.
In the U.S., as I said, our natural gas markets are throughout the U.S. We also run the Texas physical electricity markets there as well.
I think that's really it. We have a wide variety of contracting parties we deal with. We do have our bank hedge funds, marketers. We have a number of producers, midstream physical pipeline, utility, storage companies, and what not. In addition, and this is a sort of segue into the data part, we have over 70 view-only customers. As you can imagine, we collect a lot of data and information from all these transactions. Certainly our trading entities use it, but as well we have additional business with those who don't transact but simply subscribe to and use our data for other purposes.
With that, I'll turn it over to Greg Abbott. I'll let Greg walk you through a bit more on what we do on the data side.
9:50 a.m.
Greg Abbott Vice-President, Market Operations, Intercontinental Exchange - ICE NGX
Good morning, everybody.
I just wanted to speak really briefly about the data products offered by NGX. All of our data products really are derived from transactional data. I think it's important to understand that we really are an exchange and clearing house, so our data products are all transactional based. For these discussions and the exploration to national data products, there are a couple of different types. There's the people looking to aggregate physical data, receive delivery data, storage information, and that type of thing. What NGX has really is the transactional piece.
As Steve mentioned, we have a very dominant market share. NGX calculates a couple of different key datasets or data products. We classify those as trading price indices or price indices, and then settlement curves. A price index is effectively just the weighted average of all the transactions in the applicable product. We calculate traded price, real-time price indices for natural gas, crude oil, and electricity, all just in Canada. While Steve did mention we clear about 60 or 70 locations in the United States as well, NGX has not published data products for those. We only publish Canadian data.
We also publish a lot of crude oil indices—again, Canadian only. These are transactions that are done on our brokerage arm, our sister company. Those transactions are then routed electronically to NGX, and we have an engine that we've developed internally to calculate the price indices as well. We do the same thing for electricity. We have electricity products here in Alberta and electricity products in Ontario as well that we clear.
Whenever we refer to a price index, it really is the weighted average of all the transactions done in the applicable instruments for that index.
A price settlement curve, which is also a very valuable piece of data to our client base, is really the projected pricing for any type of product or location of a product for that day. At the end of every day, NGX publishes approximately the forward 60 days and the 60 months. That's about two months of daily products and about five years of monthly products of pricing curves for every product that we clear. For every gas, electricity, and crude oil product across North America that we clear, we'll publish those price settlement curves once a day at the end of each day.
There are a couple of other ancillary products that we have. We do publish something called the Alberta market price as well, or the AMP. The Alberta market price is a product that we publish in tandem with the Department of Energy here in Alberta, so it really is a weighted average price of all gas that actually delivers. Regardless of trading time, it's all the gas that's delivered in a calendar month. That average is then used as part of the calculation for royalty payments by the Government of Alberta here too.
Each of those services that we mentioned has a different type of commercial structure. Many of them are proprietary and subscription-based so people have to subscribe in order to access those, but we do have some free data as well available on the NGX.com website. For example, for those settlement curves we talked about, we keep a rolling five-day list of them available for free on the NGX.com website. If a client wants to access our full history, and we have history going back in both price indices and settlement curves for about 20-some years. If you want to access that, that's a subscription cost. You have to pay for that, but if you're looking just to keep up to date on what the settlement prices are and what the curves are each day from a gas price perspective, you can access that for free on our website.
The AMP price we talked about that gets used in the calculation of the royalty price can also be accessed for free on the website. You can go there and check that out as well.
I think that's the crux of it. We just wanted to highlight the fact that we do offer data. It's transactional based. It's really across Canada. It's Canadian focused, and it is multi-commodity: electricity, crude oil, and natural gas.
9:55 a.m.
Liberal
9:55 a.m.
Liberal
Nick Whalen Liberal St. John's East, NL
Thank you very much.
I'm interested in how your organization interfaces with the EIA. I'm trying to figure it out online. I'm not sure if you provide the natural gas trading resource margins online, or other real-time data that's provided by your organization, to the EIA. Can you juxtapose that with how your organization provides the natural gas and crude oil data and energy data you collect to StatsCan or the Alberta government?
Greg is the data guy. He probably has the quickest answer.
10 a.m.
Vice-President, Market Operations, Intercontinental Exchange - ICE NGX
Sure. We don't directly provide data to the EIA and we don't have a direct relationship with them. I think they do access our website, as I mentioned, so they will get our settlement curves and that type of stuff from the website. We don't have a direct connection with them. We use some of their data, so we take a look at the storage information they publish and use that data sometimes as well. There's no direct connectivity such that we're sending stuff to them on a regular basis, but they do access our website regularly.
The only one of that group you mentioned that really has a direct relationship with us is the Alberta government. The Department of Energy does have access to NGX. They subscribe to NGX so that they can get access to all of our proprietary settlement price data and index price data.
The other group that does, the National Energy Board, is also a subscriber of NGX data. They do access us that way and get access to all of those curves and prices as well.
For everyone else, really we just make sure we're publishing our information on the website. I do think those entities are accessing it, but since it's on the website, it's not direct and we're not talking with them. If there is an issue with it, they can call us and we'll make sure the numbers are right, but other than that, there's no direct connectivity except for those entities I mentioned.
10 a.m.
Liberal
Nick Whalen Liberal St. John's East, NL
When the EIA gets the natural gas data, are they juxtaposing your posted figures with energy data provided directly by buyers and sellers? Do you have an understanding of how that works? They do have their own natural gas data, and lots of it daily. I'm trying to figure out whether they're relying on you for this data or they're using you as a basis of comparison against the actual data from the producers.
10 a.m.
Vice-President, Market Operations, Intercontinental Exchange - ICE NGX
I would guess it's the latter, that are using us as a basis for comparison. As I said, they can access it and take a look at it, but from a republishing perspective, we have some pretty strict language around our contract because it's proprietary. They aren't allowed to take exactly what they see in the subscription's pay area and republish it to their clients, but they can use it to compare and do whatever they need to. That's the way we've operated with any of the government entities we've dealt with, and it's the same with the government. We understand they're using it for purposes important for their business, so they're allowed to do that. We just ask that they don't republish it directly.