Transparency Provisions of Section 23 of the Natural Gas Act; Transparency Provisions of the Energy Policy Act, 20791-20806 [E7-7822]
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Federal Register / Vol. 72, No. 80 / Thursday April 26, 2007 / Proposed Rules
of the Proposed Amendment with their
comment letters.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(‘‘PRA’’) imposes certain obligations on
federal agencies, including the
Commission, in connection with their
conducting or sponsoring any collection
of information as defined by the PRA.26
The Proposed Amendment would
require intermediaries to conduct an
annual review of their registration
information maintained with NFA. The
information that would be reviewed in
accordance with the Proposed
Amendment is part of an approved
collection of information. Moreover, the
Proposed Amendment would not result
in any material modifications to this
approved collection. Accordingly, for
purposes of the PRA, the Commission
certifies that the requirements of the
PRA are inapplicable to the Proposed
Amendment.
List of Subjects in 17 CFR Part 3
PART 3—REGISTRATION
Authority: 5 U.S.C. 522, 522b; 7 U.S.C. 1a,
2, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h, 6i, 6k, 6m,
6n, 6o, 6p, 8, 9, 9a, 12, 12a, 13b, 13c, 16a,
18, 19, 21, 23.
2. Section 3.10 is amended by adding
paragraph (d) to read as follows:
§ 3.10 Registration of futures commission
merchants, introducing brokers, commodity
trading advisors, commodity pool operators
and leverage transaction merchants.
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*
*
*
(d) On a date to be established by the
National Futures Association, and in
accordance with procedures established
by the National Futures Association,
each registrant as a futures commission
merchant, introducing broker,
commodity trading advisor, commodity
pool operator or leverage transaction
merchant shall, on an annual basis,
review and update registration
information maintained with the
National Futures Association. The
failure to complete the review and
update within thirty days following the
date established by the National Futures
Association shall be deemed to be a
44 U.S.C. 3501 et seq.
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Withdrawal from registration.
*
*
*
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(f) A request for withdrawal from
registration will become effective on the
thirtieth day after receipt of such
request by the National Futures
Association, or earlier upon written
notice from the National Futures
Association (with the written
concurrence of the Commission) of the
granting of such request, unless prior to
the effective date:
*
*
*
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*
Issued in Washington, DC, on April 23,
2007, by the Commission.
Eileen Donovan,
Acting Secretary of the Commission.
[FR Doc. E7–8025 Filed 4–25–07; 8:45 am]
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
18 CFR Parts 260 and 284
[Docket Nos. RM07–10–000 and AD06–11–
000]
1. The authority citation for part 3
continues to read as follows:
26 26
§ 3.33
BILLING CODE 6351–01–P
Administrative practice and
procedure, Brokers, Commodity
Futures, Reporting and recordkeeping
requirements.
For the reasons discussed in the
preamble, the Commission proposes to
amend 17 CFR part 3 as follows:
*
request for withdrawal from registration,
which shall be processed in accordance
with the provisions of § 3.33(f).
3. Section 3.33 is amended by revising
paragraph (f) introductory text to read as
follows:
Transparency Provisions of Section 23
of the Natural Gas Act; Transparency
Provisions of the Energy Policy Act
April 19, 2007.
Federal Energy Regulatory
Commission, DOE.
ACTION: Notice of proposed rulemaking.
AGENCY:
SUMMARY: In order to implement its
authority under section 23 of the
Natural Gas Act, which was added by
section 316 of the Energy Policy Act of
2005 (EPAct 2005), the Commission
proposes to revise its regulations to:
require that intrastate pipelines post
daily the capacities of, and volumes
flowing through, their major receipt and
delivery points and mainline segments
in order to make available the
information needed to track daily flows
of natural gas throughout the United
States; and require that buyers and
sellers of more than a de minimis
volume of natural gas report annual
numbers and volumes of relevant
transactions to the Commission in order
to make possible an estimate of the size
of the physical U.S. natural gas market,
assess the importance of the use of
index pricing in that market, and
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determine the size of the fixed-price
trading market that produces the
information. These revisions would
facilitate price transparency in markets
for the sale or transportation of physical
natural gas in interstate commerce.
DATES: Comments are due June 11, 2007.
Reply comments are due July 10, 2007.
ADDRESSES: You may submit comments
identified by Docket No. RM07–10–000,
by one of the following methods:
• Agency Web Site: https://ferc.gov.
Follow the instructions for submitting
comments via the eFiling link found in
the Comment Procedures Section of the
preamble.
• Mail: Commenters unable to file
comments electronically must mail or
hand deliver an original and 14 copies
of their comments to the Federal Energy
Regulatory Commission, Secretary of the
Commission, 888 First Street, NE.,
Washington, DC 20426. Please refer to
the Comment Procedures Section of the
preamble for additional information on
how to file paper comments.
FOR FURTHER INFORMATION CONTACT:
Stephen J. Harvey (Technical), 888 First
Street, NE., Washington, DC 20426,
(202) 502–6372,
Stephen.Harvey@ferc.gov.
Eric Ciccoretti (Legal), 888 First Street,
NE., Washington, DC 20426, (202)
502–8493, Eric.Ciccoretti@ferc.gov.
SUPPLEMENTARY INFORMATION:
I. Introduction
1. The Federal Energy Regulatory
Commission (Commission), in order to
facilitate market transparency in natural
gas markets, proposes to revise its
regulations to: (a) Require daily posting
of some natural gas flow information by
intrastate pipelines; and (b) require
annual filings by buyers and sellers of
natural gas in U.S. wholesale markets
(that transact more than de minimis
volumes) of aggregate annual purchase
and sales information. These proposals
exercise expanded Commission
authority under section 23 of the
Natural Gas Act,1 which was added by
the Energy Policy Act of 2005 (EPAct
2005) to require reporting from entities
not under the Commission’s traditional
jurisdiction.2 At this time, as discussed
infra, due to other market-related
Commission initiatives, we do not
propose additional regulations for
transparency in electricity markets.
2. The first proposal, designed to
make available the information needed
to track daily flows of natural gas
throughout the United States, would
1 To
be codified at 15 U.S.C. 717t–2.
Policy Act of 2005, Pub. L. No. 109–58,
119 Stat. 594 (2005).
2 Energy
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create a requirement that intrastate
pipelines post daily to the Internet the
capacities of, and volumes flowing
through, their major receipt and
delivery points and mainline segments.
Postings would be required within 24
hours from the close of the gas day on
which gas flows, i.e., on or before 9 a.m.
central clock time for flows occurring on
the gas day that ended 24 hours before.
3. The second proposal, designed to
permit the annual estimate of (a) The
size of the physical domestic natural gas
market, (b) the use of index pricing in
that market, (c) the size of the fixedprice trading market that produces price
indices from the subset reported to
index publishers, and (d) the relative
size of major traders, would create an
annual requirement that buyers and
sellers of more than a de minimis
volume of natural gas report numbers
and volumes of relevant transactions to
the Commission. As part of this
proposal, the Commission would
require each holder of blanket marketing
certificate authority or blanket
unbundled sales services certificate
authority to notify the Commission as to
whether it reports its transactions to
publishers of electricity or natural gas
price indices and whether any such
reporting complies with certain
standards. Currently, a holder of a
blanket marketing certificate or a
blanket unbundled sales service
certificate is required to notify the
Commission only when it changes its
practice regarding such reporting. This
part of the proposal would make
notifications of reporting status more
reliable.
II. Background
4. The Commission’s market-oriented
policies for the wholesale electric and
natural gas industries require that
interested persons have broad
confidence that reported market prices
accurately reflect the interplay of
legitimate market forces. Without
confidence in the basic processes of
price formation, market participants
cannot have faith in the value of their
transactions, the public cannot believe
that the prices they see are fair, and it
is more difficult for the Commission to
ensure that jurisdictional prices are
‘‘just and reasonable.’’ 3
5. The performance of Western
electric and natural gas markets early in
the decade shook confidence in posted
market prices for energy. In examining
these markets, the Commission’s staff
found, inter alia, that some companies
3 See sections 4 and 5 of the Natural Gas Act, 15
U.S.C. 717c, 717d (2000); sections 205 and 206 of
the Federal Power Act, 16 U.S.C. 824d, 824e (2000).
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submitted false information to the
publishers of natural gas price indices,
so that the resulting reported prices
were inaccurate and untrustworthy.4 As
a result, questions arose about the
legitimacy of published price indices,
remaining even after the immediate
crisis passed. Moreover, market
participants feared that the indices
might have become even more
unreliable, since reporting (which has
always been voluntary) declined to
historically low levels in late 2002.
6. The Commission recognized staff
concerns about price discovery in
electric and natural gas markets as early
as January 2003, when, prior to passage
of EPAct 2005, the Commission made
use of its existing authority under the
Natural Gas Act and the Federal Power
Act to restore confidence in natural gas
and electricity price indices. The
Commission expected that, over time,
improved price discovery processes
would naturally increase confidence in
market performance. On July 24, 2003,
the Commission issued a Policy
Statement on Electric and Natural Gas
Price Indices (Policy Statement) that
explained its expectations of natural gas
and electricity price index developers
and the companies that report
transaction data to them.5 On November
17, 2003, the Commission adopted
behavior rules for certain electric market
participants in its Order Amending
Market-Based Rate Tariffs and
Authorizations relying on section 206 of
the Federal Power Act to condition
market-based rate authorizations,6 and
for certain natural gas market
participants in Amendments to Blanket
Sales Certificates, relying on section 7 of
the Natural Gas Act to condition blanket
marketing certificates.7 The behavior
4 See Initial Report on Company-Specific
Separate Proceedings and Generic Reevaluations;
Published Natural Gas Price Data; and Enron
Trading Strategies—Fact Finding Investigation of
Potential Manipulation of Electric and Natural Gas
Prices, Docket No. PA02–2–000 (August 2003).
5 Price Discovery in Natural Gas and Electric
Markets, Policy Statement on Natural Gas and
Electric Price Indices, 104 FERC ¶ 61,121 (Policy
Statement). Subsequently, in the same proceeding,
the Commission issued an Order on Clarification of
Policy Statement on Natural Gas and Electric Price
Indices, 105 FERC ¶ 61,282 (Dec. 12, 2003) (Order
on Clarification of Policy Statement) and an Order
on Further Clarification of Policy Statement on
Natural Gas and Electric Price Indices, 112 FERC
¶ 61,040 (July 6, 2005) (Order on Further
Clarification of Policy Statement).
6 Investigation of Terms and Conditions of Public
Utility Market-Based Rate Authorizations, 105
FERC ¶ 61,218, at P 1, superseded in part by
Compliance for Public Utility Market-Based Rate
Authorization Holders, Order No. 674, 71 FR 9695
(Feb. 27, 2006), FERC Stats. and Regs. ¶ 31,208
(2006).
7 Amendments to Blanket Sales Certificates,
Order No. 644, 68 FR 66,323 (Nov. 26, 2003), FERC
Stats. and Regs. ¶ 31,153, at P 1 (2003) (citing 15
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rules bar false statements and require
certain market participants, if they
report transaction data, to report such
data in accordance with the Policy
Statement. These participants must also
notify the Commission whether or not
they report prices to price index
developers in accordance with the
Policy Statement.8 On November 19,
2004, the Commission issued an order
that addressed issues concerning prices
indices in natural gas and electricity
markets and adopted specific standards
for the use of price indices in
jurisdictional tariffs.9
7. In the Policy Statement, among
other things, the Commission directed
staff to continue to monitor price
formation in wholesale markets,
including the level of reporting to index
developers and the amount of adherence
to the Policy Statement standards by
price index developers and by those
who provide data to them.10 In adhering
to this directive, Commission staff
documented improvements in the
number of companies reporting prices
from back offices, adopting codes of
conduct, and auditing their price
reporting practices.11 These efforts
resulted in significant progress in the
amount and quality of both price
reporting and the information provided
to market participants by price
indices.12 Further, in conformance with
this directive, Commission staff recently
concluded audits of three natural gas
market participants with blanket
certificate authority that were data
providers subject to § 284.403 of the
Commission’s regulations.13
U.S.C. 717f (2000)), reh’g denied, 107 FERC ¶
61,174 (2003) (Order No. 644–A).
8 Certain portions of the behavior rules were
rescinded in Amendments to Codes of Conduct for
Unbundled Sales Service and for Persons Holding
Blanket Marketing Certificates, Order No. 673, 71
FR 9709 (Feb. 27, 2006), FERC Stats. and Regs. ¶
31,207 (2006). The requirement to report
transaction data in accordance with the Policy
Statement and to notify the Commission of
reporting status were retained in renumbered
sections. 18 CFR 284.288(a), 284.403(a).
9 Price Discovery in Natural Gas and Electric
Markets, 109 FERC ¶ 61,184, at P 73 (2004).
10 Policy Statement at P 43.
11 Federal Energy Regulatory Commission, Report
on Natural Gas and Electricity Price Indices, at 2,
Docket Nos. PL03–3–004 et al. (2004).
12 See, e.g., General Accounting Office, Natural
Gas and Electricity Markets: Federal Government
Actions to Improve Private Price Indices and
Stakeholder Reaction (December 2005).
13 See April 5, 2007 letter issued to Anadarko
Energy Services Co. in Docket No. PA06–11–000 by
Susan J. Court, Director, Office of Enforcement, and
attached Audit of Price Index Reporting
Compliance; April 5, 2007 letter issued to BG
Energy Merchants, LLC. in Docket No. PA06–12–
000 by Susan J. Court and attached Audit of Price
Index Reporting Compliance; April 5, 2007 letter
issued to Marathon Oil Co. in Docket No. PA06–13–
000 by Susan J. Court, and attached Audit of Price
Index Reporting Compliance.
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8. Congress recognized that the
Commission might need expanded
authority to mandate additional
reporting to improve market confidence
through greater price transparency and
included in the Energy Policy Act of
2005 (EPAct 2005) 14 authority for the
Commission to obtain information on
wholesale electric and natural gas prices
and availability. Under the Federal
Power Act 15 and the Natural Gas Act,16
the Commission has long borne a
responsibility to protect wholesale
electric and natural gas consumers.
EPAct 2005 emphasized the
Commission’s responsibility for
protecting the integrity of the markets
themselves as a way of protecting
consumers in an active market
environment. In particular, Congress
directed the Commission to facilitate
price transparency ‘‘having due regard
for the public interest, the integrity of
[interstate energy] markets, [and] fair
competition.’’ 17 In the new
transparency provisions of section 23 of
the Natural Gas Act and section 220 of
the Federal Power Act, Congress
provided that the Commission may, but
is not obligated to, prescribe rules for
the collection and dissemination of
information regarding the wholesale,
interstate markets for natural gas and
electricity, and authorized the
Commission to adopt rules to assure the
timely dissemination of information
about the availability and prices of
natural gas and natural gas
transportation and electric energy and
transmission service in such markets.
9. Consistent with the directive to
facilitate price transparency in natural
gas and electric markets as well as to
explore options for action under EPAct
2005’s expansion of the Commission’s
authority, Commission staff met with
interested entities in the summer of
2006. On September 26, 2006, staff
conducted a workshop to review
sources of energy market information
with interested persons and to lay the
groundwork for a technical conference
held on October 13, 2006. In that
conference, ideas for potential policy
14 Energy Policy Act of 2005, Pub. L. No. 109–58,
119 Stat. 594 (2005).
15 16 U.S.C. 824 et seq.
16 15 U.S.C. 717 et seq.
17 Section 23(a)(1) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t-2(a)(1); see also section
220 of the Federal Power Act, to be codified at 16
U.S.C. 824t (identical language). Section 316 of
EPAct 2005 added section 23 to the Natural Gas Act
(natural gas transparency provisions); section 1281
of EPAct 2005 added section 220 to the Federal
Power Act (electric transparency provisions)
(together, the transparency provisions).
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actions by the Commission were
identified.18
10. Based on those efforts, in this
Notice of Proposed Rulemaking (NOPR),
the Commission sets out two proposals
regarding collection and dissemination
of information about natural gas
wholesale markets. The Commission
does not propose action with respect to
electric markets at this time. The
Commission has recently addressed and
is currently addressing electric market
transparency in other proceedings. For
example, in its final rule reforming the
Open Access Transmission Tariff, the
Commission referred to its authority
under the electric transparency
provisions to ‘‘promote greater
transparency in the provision of
transmission service * * *’’ 19 In that
order, the Commission increased the
transparency of a transmission
provider’s transmission planning,20 the
transparency of its calculations of
Available Transfer Capability,21 and the
transparency of its business rules and
practices.22 These reforms are consistent
with the electric transparency
provisions because they will ‘‘provide
information about the availability and
prices of wholesale * * * transmission
service’’ to ‘‘users of transmission
services’’ among others, as
contemplated in the electric
transparency provisions.23 Furthermore,
in the recently-initiated wholesale
competition review, the Commission is
reviewing a variety of market-related
electricity issues in a series of public
conferences evaluating the state of
competition in wholesale power
markets.24 In the first conference, held
February 27, 2007, among other issues,
the Commission and panelists
considered price transparency in the
context of competition in the wholesale
18 At the conference, the Commission convened
two panels: (a) A panel of seven market participants
to discuss price transparency in markets for the sale
or transportation of physical natural gas in
interstate commerce; and, (b) a panel of four market
participants regarding price transparency in
markets for the sale and transmission of electric
energy in interstate commerce. See Transparency
Provisions of the Energy Policy Act of 2005,
Program for the Technical Conference, Docket No.
AD06–11–000 (Oct. 6, 2006). In addition, for each
panel, about ten representatives of information
providers, such as price index publishers, attended
to provide comment and answer questions.
19 Preventing Undue Discrimination and
Preference in Transmission Service, Order No. 890,
72 FR 12266 (March 15, 2007), FERC Stats. and
Regs. ¶ 31,241 (2007), at P 80.
20 Id. at P 69, 83.
21 Id. at P 84.
22 Id. at P 88.
23 Section 220(a)(2) of the Federal Power Act, to
be codified at 16 U.S.C. 824t(a)(2).
24 See, e.g., Conference on Competition In
Wholesale Power Markets, Docket No. AD07–7–000.
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markets.25 As a separate matter, we note
that wholesale electric transactions
under market-based rates are submitted
to the Commission and made publicly
available through the Electric Quarterly
Reports.26 Further, in organized
electricity markets, Regional
Transmission Organizations (RTOs) and
Independent System Operators (ISOs)
provide transparency by publishing the
results of auction markets and by
posting spot market and day-ahead
prices at pre-established intervals. The
RTOs also provide additional
information concerning the electric
system capacity markets and financial
transmission rights that provide further
transparency concerning the RTO/ISOadministered markets.27 For these
reasons, we do not believe that
additional action is needed at this time
to implement the new electric
transparency provisions of section 220
of the Federal Power Act.
III. Legal Context
11. With the passage of EPAct 2005,
Congress affirmed a commitment to
competition in wholesale natural gas
and electricity markets as national
policy, the fifth major Federal law in the
last 30 years to do so.28 As part of this
commitment to competition, in the
transparency provisions, Congress
charged the Commission with assuring
the integrity of the wholesale markets
and assuring fair competition by
facilitating price transparency in those
markets. It also significantly
strengthened the Commission’s
regulatory tools in the transparency
provisions, specifically, in new section
220 of the Federal Power Act and new
section 23 of the Natural Gas Act.
12. In new section 23(a)(1) of the
Natural Gas Act, Congress provided the
Commission’s mandate:
25 See, e.g., Transcript of Feb. 27, 2007
Conference, Conference on Competition in
Wholesale Power Markets, Docket No. AD07–7–000,
at 123, 153–154, 244–249.
26 Revised Public Utility Filing Requirements,
Order No. 2001, 67 FR 31043 (May 8, 2002), FERC
Stats. & Regs. ¶ 31,127 (2002), reh’g denied, Order
No. 2001–A, 100 FERC ¶ 61,074, reh’g denied,
Order No. 2001–B, 100 FERC ¶ 61,342, order
directing filing, Order No. 2001–C, 101 FERC ¶
61,314 (2002), order directing filing, Order No.
2001–D, 102 FERC ¶ 61,334 (2003).
27 Comments of ISO/RTO Council, Docket No.
AD06–11–000 (filed Oct. 5, 2006) (describing
information provided by ISOs and RTOs).
28 See Energy Policy Act of 1992, Pub. L. No. 102–
486, 106 Stat. 2776 (1992), codified as amended in
scattered sections of 16 U.S.C.; Natural Gas
Wellhead Decontrol Act of 1989, Pub. L. No. 101–
60, 103 Stat. 157 (1989), codified in scattered
section of 15 U.S.C.; Public Utility Regulatory
Policies Act of 1978, 16 U.S.C. 2601–2645 (2000);
Natural Gas Policy Act of 1978, 15 U.S.C. 3301–
3442 (2000).
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The Commission is directed to facilitate
price transparency in markets for the sale or
transportation of physical natural gas in
interstate commerce, having due regard for
the public interest, the integrity of those
markets, fair competition, and the protection
of consumers.29
In new section 23(a)(2) of the Natural
Gas Act, Congress left to the
Commission’s discretion whether to
enact rules to carry out this mandate
and provided that any rules
implementing the transparency
provisions provide for public
dissemination of the information
gathered:
The Commission may prescribe such rules
as the Commission determines necessary and
appropriate to carry out the purposes of this
section. The rules shall provide for the
dissemination, on a timely basis, of
information about the availability and prices
of natural gas sold at wholesale and in
interstate commerce to the Commission, State
commissions, buyers and sellers of wholesale
natural gas, and the public.30
13. In new section 23(a)(3) of the
Natural Gas Act, Congress contemplated
that the transparency provisions would
differ from other provisions in the
Natural Gas Act, both as to the entities
covered by the Commission’s
jurisdiction and the possible
involvement of third parties in
implementing the rules. That section
reads, with emphasis added:
The Commission may—
(A) Obtain the information described in
paragraph (2) [i.e., information about the
availability and prices of natural gas sold at
wholesale and interstate commerce] from any
market participant; and
(B) Rely on entities other than the
Commission to receive and make public the
information, subject to the disclosure rules in
subsection (b).31
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By using the term ‘‘any market
participant,’’ Congress deliberately
expanded the universe subject to the
Commission’s transparency authority
beyond the entities subject to the
Commission’s rate and certificate
jurisdiction under other parts of the
Natural Gas Act. The term ‘‘market
participant’’ is not defined in the
Natural Gas Act and is not on its face
limited to otherwise jurisdictional
entities.
29 To be codified at 15 U.S.C. 717(v)(a)(1). The
electric transparency provisions of the Federal
Power Act are nearly identical as to the electric
wholesale markets. Section 220 of the Federal
Power Act, to be codified at 16 U.S.C. 824t. Because
our proposals herein address natural gas
transparency, we do not analyze the electric
transparency provisions, although we expect that
analysis of electric transparency provisions would
be substantially similar.
30 To
be codified at 15 U.S.C. 717t–2(a).
31 To
be codified at 15 U.S.C. 717t–2(a)(3).
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14. Congress could have limited the
scope of entities subject to the
Commission’s transparency authority by
referring to ‘‘natural gas company’’ as
defined in the Natural Gas Act 32 or by
referring to section 1, 3, or 7 of the
Natural Gas Act.33 The former approach
would have excluded intrastate
pipelines from the Commission’s
transparency authority. The latter
approach would have entailed the
jurisdictional limitations of those
sections, which exclude from the
Commission’s jurisdiction first sales,
sales of imported natural gas, sales of
imported liquefied natural gas, and sales
and transportation by entities engaged
in production and gathering, local
distribution, ‘‘Hinshaw’’ pipelines, or
vehicular natural gas.34 These
limitations do not apply to the
Commission’s transparency authority.
Given Congress’s use of the term
‘‘market participant,’’ the Commission’s
transparency authority includes any
person or form of organization,
including, for instance, natural gas
producers, processors and users.
15. The Commission’s authority to
obtain information from ‘‘any market
participant’’ is not plenary. In the
natural gas transparency provisions,
Congress limited that authority in two
respects: the scope of the markets at
issue and the type of information to
obtain and disseminate. First, Congress
directed the Commission to ‘‘facilitate
price transparency in markets for the
32 Section 2(6) of the Natural Gas Act, 15 U.S.C.
717a(6).
33 15 U.S.C. 717, 717b, 717f.
34 Section 1(b)-(d) of the Natural Gas Act, 15
U.S.C. 717(b)-(d); section 3 of the Natural Gas Act,
15 U.S.C. 717b; section 7(f) of the Natural Gas Act,
15 U.S.C. 717f(f); see, also, section 601(a) of the
Natural Gas Policy Act, 15 U.S.C. 3431(a). The
Commission has previously explained that the
Natural Gas Policy Act of 1978 (NGPA or Natural
Gas Policy Act) and the Natural Gas Wellhead
Decontrol Act of 1989 narrowed its jurisdiction
under the Natural Gas Act:
Under the NGPA, first sales of natural gas are
defined as any sale to an interstate or intrastate
pipeline, LDC [Local Distribution Company] or
retail customer, or any sale in the chain of
transactions prior to a sale to an interstate or
intrastate pipeline or LDC or retail customer. NGPA
Section 2(21)(A) sets forth a general rule stating that
all sales in the chain from the producer to the
ultimate consumer are first sales until the gas is
purchased by an interstate pipeline, intrastate
pipeline, or LDC. Once such a sale is executed and
the gas is in the possession of a pipeline, LDC, or
retail customer, the chain is broken, and no
subsequent sale, whether the sale is by the pipeline,
or LDC, or by a subsequent purchaser of gas that
has passed through the hands of a pipeline or LDC,
can qualify under the general rule as a first sale on
natural gas. In addition to the general rule, NGPA
Section 2(21)(B) expressly excludes from first sale
status any sale of natural gas by a pipeline, LDC,
or their affiliates, except when the pipeline, LDC,
or affiliate is selling its own production.
Order No. 644 at P 14.
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sale or transportation of physical natural
gas in interstate commerce * * *.’’ 35
Thus, any information collected and
disseminated must be for the purpose of
price transparency in those markets. We
do not interpret this language to limit
the Commission to obtaining
information only about physical natural
gas sales or transportation in those
markets, provided that the information
obtained and disseminated pertains to
price transparency in those markets.
Second, Congress provided that any
rules ‘‘provide for the dissemination, on
a timely basis, of information about the
availability and prices of natural gas
sold at wholesale and in interstate
commerce * * *.’’ 36 Thus, the
Commission’s authority is limited to
‘‘information about the availability and
prices of natural gas sold at wholesale
and in interstate commerce.’’ 37 Again,
this language does not limit the type of
information the Commission could
collect to implement its mandate,
provided that such information is
‘‘about’’ (i.e., pertains to) the
‘‘availability and prices of natural gas
sold at wholesale and in interstate
commerce.’’ For instance, some
transportation or sales of natural gas is
not in interstate commerce, but,
nonetheless, would affect the
availability and prices of natural gas at
wholesale and in interstate commerce.
16. The natural gas transparency
provisions further provide that the
Commission shall ‘‘rely on existing
price publishers and providers of trade
processing services to the maximum
extent possible.’’ 38 Thus, Congress
authorized the Commission to rely on
third parties to collect and disseminate
transparency information. The
Commission does not herein authorize
or empower third parties to collect or
disseminate information. Nonetheless,
we expect that third parties may use the
information collected pursuant to the
proposals in this NOPR and repackage
it, if sufficient demand for such services
arises in the information marketplace.39
17. Also, in the transparency
provisions, Congress cautioned the
Commission in providing for any
35 Section 23(a)(1) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t-2(a)(1).
36 Section 23(a)(2) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t-2(a)(2).
37 Id.
38 Section 23(a)(4) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t-2(a)(4).
39 We reiterate here our comments made
previously regarding price index publishers, data
hubs, and other trade processing services: we do not
‘‘endors[e] any particular entity or approach, but
continue to encourage industry participants to find
optimal solutions to better wholesale price
formation.’’ Order on Further Clarification of the
Policy Statement at P 11.
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dissemination of information pursuant
to the transparency provisions to ensure
that ‘‘consumers and competitive
markets are protected from the adverse
effects of potential collusion or other
anticompetitive behaviors by untimely
disclosure of transaction-specific
information.’’ 40
18. Finally, new section 23(d)(2) of
the natural gas transparency provisions
mandates an exemption from any
reporting for ‘‘natural gas producers,
processors, or users who have a de
minimis market presence * * *.’’ 41
This paragraph does not exempt all
producers and all processors from
reporting, but exempts only producers
that have a de minimis market presence
and only processors that have a de
minimis market presence.
jlentini on PROD1PC65 with PROPOSALS
IV. Reporting of Flow Volume and
Capacity by Intrastate Pipelines
A. Proposal
19. The Commission proposes that in
order to make available the information
needed to track daily flows of natural
gas throughout the United States, each
intrastate pipeline would be required to
post daily to the Internet the capacities
of, and volumes flowing through, their
major receipt and delivery points and
mainline segments. Postings would be
required within 24 hours from the close
of the gas day on which gas flowed, i.e.,
at or before 9 a.m. central clock time for
flow that occurred on the gas day that
ended 24 hours before. To illustrate, the
volume of gas that flowed through a
receipt point from 9 a.m. central clock
time on Monday through 9:00 a.m.
central clock time on Tuesday would be
reported as a daily flow volume for that
gas day and must be reported by 9 a.m.
Wednesday central clock time. The
Commission would implement this
proposal by adding a new § 284.14 to its
regulations.
20. As explained in greater detail
below, by adding information on
intrastate pipeline flows to the
information already available from
interstate pipelines, the Commission,
market participants, and the public
could develop a better understanding of
daily supply and demand conditions
that directly affect U.S. wholesale
natural gas markets. While distinctions
between intrastate and interstate natural
gas markets may be meaningful from a
legal perspective, they are not
meaningful from the perspective of
market price formation. The U.S. natural
gas market produces geographically
40 Section 23(b)(2) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(b)(2).
41 Section 23(d)(2) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(d)(2).
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diverse prices through the direct
influence of supply, demand and
transportation availability, but without
ever differentiating interstate from
intrastate commerce. Consequently, this
proposal to increase information from
intrastate pipelines would directly
‘‘facilitate price transparency for the
sale * * * of physical natural gas in
interstate commerce’’ as authorized in
the natural gas transparency
provisions.42
B. Legal Considerations
21. As discussed above, the natural
gas transparency provisions provide the
authority for the Commission to obtain
information from otherwise nonjurisdictional entities, including
intrastate pipelines. The proposal to
require intrastate pipelines to post flow
information raises the additional issue
whether such information qualifies as
‘‘information about the availability and
prices of natural gas sold at wholesale
in interstate commerce.’’ 43 If not, the
Commission would be foreclosed from
requiring the posting.
22. The Commission believes that the
information covered by the instant
proposal qualifies as ‘‘information about
the availability and prices of natural gas
sold at wholesale and in interstate
commerce.’’ Notwithstanding their
intrastate status, most major intrastate
pipelines today transport or buy and sell
wholesale natural gas that eventually
enters or at least impacts the interstate
natural gas market. Further, supply and
demand in intrastate markets have a
direct effect on prices of gas destined for
interstate markets because both
intrastate and interstate consumers draw
on the same sources of supply. This is
the case because of the statutory,
regulatory and market changes that have
taken place in the last three decades.
23. In 1978, in the Natural Gas Policy
Act, Congress allowed an intrastate
pipeline to transport natural gas in
interstate commerce on behalf of any
interstate pipeline or local distribution
company served by an interstate
pipeline, without losing its intrastate
status.44 Congress likewise permitted an
intrastate pipeline to sell natural gas to
any interstate pipeline or any local
distribution company served by any
interstate pipeline, without losing its
42 Section 23(a)(1) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(a)(1).
43 Section 23(a)(2) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(a)(2).
44 See section 311(a)(2) of the Natural Gas Policy
Act, 15 U.S.C. 3371(a)(2); see also 18 CFR part 284,
subpart C (Certain Transportation by Intrastate
Pipelines).
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20795
intrastate status.45 In addition, at the
same time that the Commission issued
Order No. 636 in 1992, it promulgated
a new subpart of Part 284 (revised
several times in the past 15 years) that
provides blanket authority to any person
who is not an interstate pipeline
(including intrastate pipelines) to make
sales for resale of natural gas in
interstate commerce.46 This
authorization is a limited jurisdiction
certificate, which means that the holder
does not become subject to the panoply
of Natural Gas Act regulation by
exercising its rights under the
certificate.47
24. The market understandably
reacted to these statutory and regulatory
changes since 1978. As relevant here,
and explained in greater detail below,
natural gas sold at or destined to be sold
at wholesale in the interstate market is
frequently exchanged or the transactions
consummated at market hubs where
interstate and intrastate pipelines are
interconnected (e.g., Waha, Katy,
Houston Ship Channel, and Carthage in
Texas and at Henry Hub in Louisiana).
Prices formed at these hubs are, in
effect, prices for wholesale transactions
in interstate commerce, even if a portion
of the gas priced at each market hub is
consumed intrastate. In addition,
transfer of natural gas can take place
directly between parties who ship gas
on both intrastate and interstate
pipelines at any pipeline
interconnection.
C. Discussion
25. Currently, through the availability
of information regarding daily
scheduled flows of natural gas through
interstate pipelines, market participants
have an increased, daily understanding
of natural gas markets, including
regional conditions and the pipeline
capacity available to resolve different
geographic supply/demand balances.
This is due in part to Order No. 637,
where the Commission required posting
of capacity and scheduled volume
information on interstate pipelines with
45 See section 311(b) of the Natural Gas Policy
Act, 15 U.S.C. 3371(b); see also 18 CFR part 284,
subpart D (Certain Sales by Intrastate Pipelines).
46 Pipeline Service Obligations and Revisions to
Regulations Governing Self-Implementing
Transportation and Regulation of Natural Gas
Pipelines After Partial Wellhead Decontrol, Order
No. 636, 57 FR 13267 (Apr. 16, 1992), FERC Stats.
& Regs. ¶ 30,939 (1992), order on reh’g, Order No.
636–A, 57 FR 36128 (Aug. 12, 1992), FERC Stats &
Regs. ¶ 30,950 (1992), order on reh’g, Order No.
636–B, 61 FERC ¶ 61,272 (1992), order on reh’g, 62
FERC ¶ 61,007 (1993), aff’d in part and remanded
in part sub nom United Distribution Cos. v. FERC,
88 F.3d 1104 (D.C. Cir. 1996), order on remand,
Order No. 636–C, 78 FERC ¶ 61,186 (1997).
47 See 18 CFR part 284, subpart L (Certain Sales
for Resale by Non-interstate Pipelines).
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the direct intention of allowing shippers
to monitor capacity availability.48
Accordingly, interstate pipelines must
post available capacity information,
specifically:
The availability of capacity at receipt points,
on the mainline, at delivery points, and in
storage fields, whether the capacity is
available directly from the pipeline or
through capacity release, the total design
capacity of each point or segment on the
system; the amount scheduled at each point
or segment whenever capacity is scheduled,
and all planned and actual service outages or
reductions in service capacity.49
In Order No. 637, the Commission
anticipated that such postings would
provide useful information regarding
supply and demand fundamentals:
The changes to the Commission’s reporting
requirements will enhance the reliability of
information about capacity availability and
price that shippers need to make informed
decisions in a competitive market as well as
improve shippers’ and the Commission’s
ability to monitor marketplace behavior to
detect, and remedy anticompetitive
behavior.50
26. Today, interested market
participants as well as commercial
vendors retrieve this information from
the Web sites of interstate pipelines to
obtain schedule information that is then
used to estimate a variety of supply and
demand conditions including
geographic and industrial sector
consumption, storage injections and
withdrawals and regional production in
almost real-time.51 Market participants
have come to rely on this information to
help price transactions. Commission
staff has also come to rely on this
information to perform its oversight and
enforcement functions. In fact, observers
believe that this information posting has
contributed to market transparency by
revealing the underlying volumetric (or
availability) drivers behind price
movements.52
27. Notwithstanding the contribution
of posted interstate schedule
information to the transparency of price
and availability of natural gas, this
information cannot provide a complete
picture of natural gas flows in the
United States—or even those flows
directly relevant to the pricing of
natural gas flowing in interstate
commerce. Several major U.S. natural
gas pricing points sit at the confluence
of multiple interstate and intrastate
pipelines. A recent study by the
Department of Energy’s Energy
Information Administration (EIA)
identified 28 national market centers or
pricing hubs, of which 13 are served by
a combination of interstate and
intrastate pipelines.53 The table below
shows the capacity of interstate and
intrastate pipelines connected to each of
these 13 hubs.
TABLE 1.—INTER- AND INTRASTATE PIPELINE DELIVERY CAPACITY AT SELECTED U.S. NATURAL GAS PRICING POINTS
Receipt and delivery capacity
Hub name
State
Carthage ....................................................................................................
Henry Hub ..................................................................................................
Katy—Enstore ............................................................................................
Katy—DEFS ...............................................................................................
Mid Continent .............................................................................................
Moss Bluff ..................................................................................................
Nautilus ......................................................................................................
Perryville ....................................................................................................
Aqua Dulce ................................................................................................
Waha—Lone Star ......................................................................................
Waha—Encina ...........................................................................................
Waha—El Paso .........................................................................................
Waha—DEFS ............................................................................................
TX
LA
TX
TX
KS
TX
LA
LA
TX
TX
TX
TX
TX
Interstate
pipelines
(MMcfd)
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
1,120
2,770
1,370
260
1,112
1,050
1,200
3,652
855
810
525
1,165
300
Intrastate
pipelines
(MMcfd)
1,355
1,215
3,815
2,360
627
1,800
1,350
350
835
1,140
800
1,660
1,850
Source: Unpublished Energy Information Administration update to March 2005 of information presented in Natural Gas Market Centers and
Hubs: A 2003 Update, October 2003.
jlentini on PROD1PC65 with PROPOSALS
28. Many of these pricing points are
closely connected to other regions of the
United States, influencing prices across
the country. The figure below shows the
location and flow patterns of natural gas
moving between intrastate and interstate
48 Regulation of Short-Term Natural Gas
Transportation Services and Regulation of
Interstate Natural Gas Transportation Services,
Order No. 637, 65 FR 10156, at 10204–10205, (Feb.
25, 2000), FERC Stats. & Regs.
¶ 31,091, at 31,320–31,321 (2000); order on reh’g,
Order No. 637–A, 65 FR 35706 (June 5, 2000), FERC
Stats. & Regs.
¶ 31,099 (2000); order on reh’g, Order No. 637–B,
65 FR 47284 (Aug. 2, 2000), affirmed in relevant
part, Interstate Natural Gas Ass’n of America v.
FERC, 285 F.3d 18 (D.C. Cir. 2002), order on
remand, 101 FERC ¶ 61,127, order on reh’g, 106
FERC ¶ 61,088, aff’d sub nom. American Gas Ass’n
v. FERC, 428 F.3d 255 (D.C. Cir. 2005) (Order No.
637).
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21:14 Apr 25, 2007
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49 18
CFR 284.13(d).
50 Order
No. 637, 65 FR at 10169.
e.g., Comments of Bentek Energy, LLC.,
Docket No. AD06–11–000 (filed Oct. 10, 2006).
51 See,
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markets through several of these pricing
points.
BILLING CODE 6717–01–P
52 See, e.g., Comments of Platt’s, at p. 11–13,
Docket No. AD06–11–000 (information regarding
the supply and demand of natural gas explains
prices and such information is available from
interstate pipelines, but not intrastate pipelines).
53 Department of Energy, Energy Information
Administration, Natural Gas Market Centers and
Hubs: A 2003 Update, Oct. 2003, https://
www.eia.doe.gov/pub/oil_gas/natural_gas/
feature_articles/2003/market_hubs/mkthubs03.pdf.
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26APP1
29. One pricing point directly
connected to both interstate and
intrastate pipelines is Henry Hub,
Louisiana, the location for delivery of
natural gas under the New York
Mercantile Exchange’s (NYMEX) futures
contract. Monthly settlement of
NYMEX’s Henry Hub natural gas future
contract has become important in
determining a variety of monthly index
prices used to set natural gas prices in
a variety of transactions, some in
interstate commerce, particularly along
the East Coast and Gulf Coast of the
United States. The nature of this
influence is detailed in Commission
staff’s 2006 State of the Markets
Report.54
30. Purchasers of natural gas in
interstate commerce draw on the same
sources of supply as users and buyers of
54 Federal
Energy Regulatory Commission, 2006
State of the Markets Report, at 48–50 (Jan. 2007),
https://www.ferc.gov/market-oversight/marketoversight.asp, (follow link to the State of the
Markets Full Report).
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natural gas in intrastate commerce. For
example, much of the recent Barnett
Shale development in the Fort Worth
basin flows into intrastate systems
before moving into interstate markets. In
total, slightly more than 40 percent of
total on-shore production in Texas is
connected to interstate pipelines, less
than 60 percent in Louisiana and less
than 80 percent in Oklahoma.55 Though
daily volume flowing from intrastate
into interstate pipelines can be
estimated, the supply dynamics that
make these volumes available cannot.
31. Send-out from current liquefied
natural gas (LNG) terminals—Cove
Point, Elba Island, Everett and Lake
Charles—is observable through
interstate receipt point flow postings. Of
seven approved, but not yet operational,
55 BENTEK Energy, LLC analysis of supply
scheduled into interstate pipelines compared with
EIA data from its table Natural Gas Gross
Withdrawals and Production for Texas and
Oklahoma available at https://tonto.eia.doe.gov/
dnav/ng/ng_prod_sum_dcu_NUS_m.htm.
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20797
terminals in Texas and Louisiana, all
would discharge in whole or in part to
intrastate pipelines.56
32. The Commission proposes to
require posting of actual flow
information from intrastate pipelines
rather than scheduled volumes, as it
does for interstate pipelines. Intrastate
pipelines operate in different regulatory
and business contexts from interstate
pipelines, making scheduled volumes
less helpful in estimating movement of
natural gas. For example, interstate
pipelines primarily operate as open
access transporters, not as sellers of
natural gas. Scheduled volumes
represent the communication that must
occur between the shipper and the
pipeline to conduct most of their
business. As a consequence, interstate
receipt, transportation and delivery
schedules, as updated before and
56 Texas Railroad Commission, Onshore LNG
Supply Terminal Projects Proposed for Texas (June
28, 2006), https://www.rrc.state.tx.us/
commissioners/carrillo/press/LNGprojects.html.
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through the delivery day, reflect actual
flows on their systems as well.57 In
contrast, intrastate pipelines often sell
gas directly to customers under a variety
of regulatory regimes. Much of such gas
can flow without being scheduled,
especially for customers’ variable
requirements. Similarly, many direct
pipeline purchases from the wellhead
and from smaller gathering systems
need not be scheduled. Given the
different business models, and the
likelihood that scheduling information
on intrastate pipelines would be
unhelpful, we conclude that actual flow
information, posted after-the-fact, would
be needed to develop an understanding
of these flows.
33. The daily posting of flow
information by intrastate pipelines
would provide several benefits to the
functioning of natural gas markets in
ways that would protect the integrity of
physical, interstate natural gas markets,
protect fair competition in those
markets and consequently serve the
public interest by better protecting
consumers. First, by providing a more
complete picture of supply and demand
fundamentals, these postings would
improve market participants’ ability to
assess supply and demand and to price
physical natural gas transactions.
Second, during periods when the U.S.
natural gas delivery system is disturbed,
for instance due to hurricane damage to
facilities in the Gulf of Mexico, these
postings would provide market
participants a clearer view of the effects
on infrastructure, the industry, and the
economy as a whole. Finally, these
postings would allow the Commission
and other market observers to identify
and remedy potentially manipulative
activity. We discuss each of these points
in turn.
34. First, the proposed daily intrastate
pipeline capacity and volume postings
would improve market participants’
ability to assess supply and demand and
price physical natural gas transactions
by providing a more complete picture of
supply and demand fundamentals.58 As
discussed above and noted in comments
filed in these proceedings, interstate
pipeline information does not provide a
complete picture of the supply and
demand fundamentals that apply to
interstate commerce because much of
57 In the case of ‘‘no-notice’’ service, see 18 CFR
284.7(a)(4), interstate pipeline schedules do not
reflect flows. Consequently, information about
interstate flows in areas using no-notice service is
less useful.
58 See, e.g., Comments of Platt’s, at p. 11, Docket
No. AD06–11–000 (filed Nov. 1, 2006) (explaining
that, to understand prices, ‘‘the marketplace must
look to * * * information on [the] availability of
and demand for natural gas * * *.’’).
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the natural gas in the U.S. is moved
through the intrastate pipeline system.59
35. Second, the proposed daily
intrastate pipeline capacity and volume
postings would provide market
participants—and the Commission in its
market oversight efforts—a clearer view
of the effects on infrastructure, the
industry, and the economy as a whole
during periods when the U.S. natural
gas delivery system is disturbed. For
example, after landfall of hurricanes
Katrina and Rita in late 2005, even the
most interested of governmental and
commercial market observers were not
able to obtain complete information
regarding the extent of the damage at
production facilities.60 By monitoring
receipt and delivery points for
production facilities on interstate
pipelines, market participants were able
to obtain only a limited sense of
production facility output.61 Similarly,
market participants, State commissions
and others were unable to assess effects
on natural gas consumption in the Gulf
Coast, including consumption by the
petrochemical industry, for some
period. The significance and duration of
these effects on this industry—
vulnerable to energy price and
availability disruptions—remain
unclear. This proposal would allow
interested governmental and private
parties to gain a much better picture of
disruptions in natural gas flows in the
case of future hurricanes in the Gulf
region.62
59 See Comments of Platt’s, at p. 13, Docket No.
AD06–11–000 (filed Nov. 1, 2006) (stating that
much of the fundamental supply and demand data
is missing from natural gas markets and advocating
for reporting by intrastate pipelines).
60 See, e.g., Transcript of the Oct. 13, 2006
Technical Conference (Tr.), at 25, Transparency
Provisions of the Energy Policy Act of 2005, Docket
No. AD06–11–000 (Comments of Sheila Rappazzo,
Chief of Policy Section of the Office of Gas and
Water of the New York State Department of Public
Service).
61 Tr. at 25 (Comments of Sheila Rappazzo)
(describing how after the 2005 hurricanes data
availability differed widely).
62 Along these lines, this proposal is consistent
with a recent Commission final rule and a proposed
survey by EIA. On August 23, 2006, the
Commission revised its reporting regulations to
require jurisdictional natural gas companies to
report damage to facilities due to a natural disaster
or terrorist activity that results in a reduction in
pipeline throughput or storage deliverability.
Revision of Regulations to Require Reporting of
Damage to Natural Gas Pipeline Facilities, Order
No. 682, 71 FR 51098 (Aug. 29, 2006), FERC Stats.
and Regs. ¶ 31,227 (2006), order on reh’g, 118 FERC
¶ 61, (2007). On January 30, 2007, EIA proposed to
survey natural gas processing plants ‘‘to monitor
their operational status and assess operations of
processing plants during a period when natural gas
supplies are disrupted.’’ Agency Information
Collection Activities, 72 FR 4248 (Jan. 30, 2007).
The purpose of the survey would be to ‘‘inform the
public, industry, and the government about the
status of supply and delivery activities in the area
affected by the disruption.’’ Id.
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36. Third, the proposed daily
intrastate pipeline capacity and volume
postings would allow the Commission
and other market observers to identify
and remedy potentially manipulative
activity more actively by tracking price
movement in the context of natural gas
flows.63 In particular, information
regarding availability on intrastate
pipelines could be used to track
manipulative or unduly discriminatory
behavior intended to cause harm to
consumers by distorting market prices
in interstate commerce. For example,
Commission staff overseeing markets
routinely check for unused interstate
pipeline capacity between
geographically distinct markets with
substantially different prices as a sign
that flows may be managed to
manipulate prices. Given the
importance of intrastate pipeline
connections to 13 major pricing hubs,
including Henry Hub, as discussed
above, the lack of flow information on
intrastate pipelines hinders the
Commission’s market oversight and
enforcement efforts.
37. This benefit comports with EPAct
2005, in which Congress directed the
Commission to facilitate price
transparency in physical, interstate
natural gas markets ‘‘with due regard for
the public interest, the integrity of those
markets, fair competition, and the
protection of consumers.’’ 64 By this
language, Congress intended that the
improvement of Commission market
oversight activities is a legitimate
justification for proposing rules under
the natural gas transparency provisions.
Monitoring and preventing
manipulative or unduly discriminatory
activity would meet the Commission’s
responsibility for ensuring the integrity
of the physical interstate natural gas
markets. The proposal to make intrastate
pipeline information available to the
public would assist the Commission in
fulfilling that responsibility.
D. Solicitation of Comments
38. The Commission seeks comments
on its proposal to be codified in subpart
A of part 284 of the Commission’s
regulations that intrastate pipelines be
required to post daily to the Internet the
capacities of, and volumes flowing
through their major receipt and delivery
63 See Prohibition of Energy Market
Manipulation, Order No. 670, 71 FR 4244 (Jan. 26,
2006), FERC Stats. & Regs. ¶ 31,202 (2006)
(implementing section 4A of the Natural Gas Act,
to be codified at 15 U.S.C. 717c–1, which prohibits
natural gas market manipulation), reh’g denied, 114
FERC ¶ 61,300 (2006).
64 Section 23(a)(1) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(a)(1).
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points and mainline segments.65 In
particular, the Commission seeks
comment on whether market
participants believe that the posting of
flow information on intrastate pipelines
would provide valuable additional
information on supply and demand
fundamentals for interstate markets and
whether such information would be
sufficient. The Commission also seeks
comment on the burden this proposal
would impose on intrastate pipelines.
Those providing burden estimates
should provide support for their
estimate and compare that estimate to
the burden currently borne by interstate
pipelines that report capacity
availability pursuant to § 284.13(d) of
the Commission’s regulations.
39. The Commission seeks comment
on how to define ‘‘major’’ receipt and
delivery points and mainline segments
on intrastate systems. The Commission
does not wish to include extremely
small points connected to one or a few
customers, which it would consider
burdensome and possibly even anticompetitive in certain cases.
40. The proposal does not make an
exception for intrastate pipelines
transporting de minimis volumes.
Although the natural gas transparency
provisions mandate that the
Commission create an exception from
reporting requirements for ‘‘natural gas
producers, processors, or users who
have a de minimis market presence,’’
they do not mandate a de minimis
exception for natural gas pipelines.66
The Commission seeks comment on
whether the Commission should create
a de minimis threshold under which
certain intrastate pipelines should not
be required to report or should create a
method for certain intrastate pipelines
to seek waiver of these requirements.
How would such a de minimis
threshold be measured, for instance, by
throughput volume? The Commission
also seeks comment on whether the
proposed flow posting requirements
should apply to all intrastate pipelines,
or whether it should be limited to
intrastate pipelines in states where a
significant percentage of supply and
demand information is not observable
through current interstate pipeline
posting requirements.
41. The Commission seeks comment
on the difference in approach applied to
jlentini on PROD1PC65 with PROPOSALS
65 The
Commission is not proposing to amend
subparts C and D of part 284, because those
subparts govern interstate transactions by intrastate
pipelines under the authority of the Natural Gas
Policy Act. The instant proposal is based on the
Commission’s Natural Gas Act jurisdiction as
amended by EPAct 2005.
66 Section 23(d)(2) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(d)(2).
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intrastate and interstate pipelines by
requiring intrastate pipelines to post
actual natural gas flows instead of
scheduled flows. Should the
Commission require intrastate pipelines
to post information about capacity
availability at major points on a daily
basis, similar, or identical, to the
information that interstate pipelines are
required to post under § 284.13(c)? Is it
possible to determine major intrastate
pipeline flows using schedule
information?
42. Regarding the method of posting,
the Commission seeks comment on the
format for posting flow information by
intrastate pipelines, including whether
intrastate pipelines should follow the
standards of the North American Energy
Standards Board. If not, what additional
accommodations would need to be
made for their different operations?
Further, how would § 284.12, which
outlines formatting requirements for
interstate pipeline postings be modified
to accommodate intrastate pipelines and
to accommodate posting of flow
information as opposed to scheduling
information? Also, the timing in the
proposal requires the posting of flow
information within 24 hours from the
close of the gas day on which gas flows
(i.e., on or before 9 a.m. central clock
time for flows occurring on the gas day
that ended 24 hours before). Does this
timing create an undue burden? Is it
sufficiently timely?
43. Finally, the Commission seeks
comment on whether it should revise
the posting requirements applicable to
interstate pipelines provided in
§ 284.13(d)(1) of the Commission’s
regulations.67 Since those posting
requirements were mandated, have
there been changes in technology or the
marketplace that justify changing the
posting requirements for interstate
pipelines? In addition to current posting
requirements, should interstate
pipelines be required to post actual flow
information as we propose to require
intrastate pipelines to do? Would
posting of actual flow information
provide useful information regarding
actual capacity use, for instance, by
providing information regarding nonotice service?
V. Annual Reporting of Natural Gas
Transactions
A. Proposal
44. The Commission proposes that
buyers and sellers of more than a de
minimis volume of natural gas be
required to report aggregate numbers
and volumes of relevant transactions in
67 18
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an annual filing using an electronic
form to be provided by the Commission
on its Internet Web page. This proposal
would be codified at § 260.401 of the
Commission’s regulations. This
information would provide regularly an
estimate of (a) the size of the physical
domestic natural gas market, (b) the use
of index pricing in that market, (c) the
size of the fixed-price trading market
that produces price indices, and (d) the
relative size of major traders. Although
the natural gas transparency provisions
authorize the Commission to require
reporting of detailed transaction-bytransaction information, the
Commission proposes obtaining this
more limited set of information
designed to assess the market. The
requirement would be applied to
companies both traditionally
jurisdictional to the Commission and
others. This form would also serve to
identify users of blanket certificates and
document their reporting status as
required under § 284.403(c) and
§ 284.288(a), discussed further below. A
proposed form for the report is set forth
in Appendix A.68
45. Under the proposed reporting
requirement, certain natural gas buyers
and sellers would identify themselves to
the Commission and report summary
information about physical natural gas
transactions for the previous calendar
year including: (a) Their total amount of
physical 69 natural gas transactions by
number and volume; (b) the breakdown
of their transactions by purchases and
sales; (c) the number and volume
breakdown of their purchases and sales
by whether they were conducted in
monthly or daily spot markets; and (d)
the number and volume breakdown of
their purchases and sales by type of
pricing, in particular whether that
pricing was fixed or indexed.
68 Pursuant to § 375.314(f) and (g), the Director of
the Office of Enforcement or the Director’s designee,
could deny or grant waivers of the requirements of
this form and could act on requests for extensions
of time to file the form. 18 CFR 375.314(f) and (g).
The Commission anticipates directing staff to make
changes to the format of the form. Cf. Revised Public
Utility Filing Requirements, 106 FERC ¶ 61,281
(2004) (directing staff to make future changes to the
Electric Quarterly Reports).
69 Although the standard contract for the most
significant natural gas futures market traded on the
New York Mercantile Exchange (NYMEX) requires
physical delivery, the vast majority of those
transactions do not go to delivery. For the purposes
of this proposal, and despite the particulars of the
futures contract language, we intend to explicitly
exclude volumes of futures transactions from
consideration. Indeed, information about volumes
of futures transactions is already publicly available
through a variety of commercial means or directly
through NYMEX at https://www.nymex.com, so
collection of the information would be redundant
and unnecessary.
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46. In addition, a natural gas seller
would be required to state whether it
operates under blanket certificate
authority under § 284.402 of the
Commission’s regulations, and whether
it reports transactions to price index
publishers and whether any such
reporting complies with the standards
provided in § 284.403(a). Similarly, an
interstate pipeline would be required to
state whether it operates under blanket
certificate authority under § 284.284 of
the Commission’s regulations, and
whether it reports transactions to price
index publishers and whether any such
reporting complies with the standards
provided in § 284.288(a).70
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B. Legal Considerations
47. The Commission intends
‘‘physical natural gas transaction’’ to
mean a sale or purchase of natural gas
with an obligation to deliver or receive
physically, even if the natural gas is not
physically transferred due to some
offsetting or countervailing trade. Thus,
with one explicit exception, even if the
transaction does not go to physical
delivery, it would still be included as a
physical transaction. The exception is
physically settled futures contracts. The
Commission would require such a
contract to be reported only if it actually
goes to delivery. Although the language
of the natural gas transparency
provisions address sales of natural gas,
it does not limit the Commission from
seeking information about natural gas
purchases as well as sales. They are
simply different sides of the same
transaction. Congress directed the
Commission to ‘‘facilitate price
transparency in markets for the sale
* * * of physical natural gas in
interstate commerce,’’ but that language
does not limit the Commission to
seeking information regarding only
sales.71 Purchases of physical natural
gas are also a part of such markets; there
is no market for the sale of natural gas
that does not include purchases. Nor
does the natural gas transparency
provision language that provides for the
‘‘dissemination * * * of information
about the availability and prices of
natural gas sold at wholesale and
interstate commerce’’ restrict the
Commission.72 As a practical matter,
70 The Commission recognizes that few if any
interstate natural gas pipelines still make wholesale
sales. Nevertheless, if they were to sell gas at
wholesale in interstate commerce, they would be
subject to the proposed rule. More relevant, of
course, is the fact that all of their affiliates making
wholesale sales in interstate commerce would be
subject to the proposed rule.
71 Section 23(a)(1) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(a)(1).
72 Section 23(a)(2) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(a)(2) (emphasis added).
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information regarding purchases of
natural gas is necessary to evaluate the
reliability of information regarding sales
of natural gas. Both types of information
are necessary to obtain a useful gauge of
price transparency in natural gas
markets.
48. Further, in its Policy Statement,
the Commission states that data
providers should provide both sale and
purchase information to price index
developers.73 As the Policy Statement
and related Commission initiatives were
major Commission proceedings
regarding this topic, we can presume
that Congress was aware of this Policy
Statement when it wrote the
transparency provisions and, thus,
contemplated that the Commission
would continue its practice of seeking
both sale and purchase information in
facilitating price transparency.
49. The proposed public nature of the
filings would comport with the
transparency provisions which require
that any such rules ‘‘provide for the
dissemination, on a timely basis, of
information * * * to the public.’’ 74 The
transparency provisions further direct
the Commission to ‘‘rely on [existing
price publishers and providers of trade
processing services] to the maximum
extent possible.’’ 75 By requiring public
filings by market participants, the
Commission would provide an
opportunity for trade publications and
commercial vendors to aggregate the
information and provide any analysis
should a desire for such services arise
in the energy information marketplace.
C. Discussion
50. Because of the way transactions
currently take place in the natural gas
industry, there is no way to estimate in
even the broadest terms the overall size
of the natural gas market or its
breakdown by types of contract
provision, including pricing and term
(e.g., spot or longer term forwards).76
More particularly, there is no way to
determine important volumetric
relationships between the fixed-price
day-or month-ahead transactions that
form price indices or to determine the
use of price indices themselves. As
noted by the price index developer
Platt’s, the question of what is the total
size of the traded market has ‘‘hung over
73 Policy
Statement on Price Indices at P 34.
23(a)(2) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(a)(2).
75 Section 23(a)(4) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(a)(4).
76 In its supplemental comments, Platt’s provided
information regarding its use of physical basis
transactions in compiling monthly indices.
Supplemental Comments of Platt’s, Transparency
Provisions of the Energy Policy Act, Docket No.
AD06–11–000 (filed Feb. 23, 2007).
74 Section
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the gas market for years.’’ 77 Without the
most basic of volumetric information,
the Commission has been hampered in
its oversight and its ability to assess the
adequacy of price-forming transactions.
Market participants are likewise unable
to evaluate their use of indexed
transactions. Typically, market
participants rely on index-price
transactions as a way to reference
market prices without taking on the
risks of active trading. These market
participants rely on index prices, often
whether or not those prices are derived
from a robust market of fixed-price
transactions.
51. Price formation in natural gas
markets makes no distinction between
transactions that are jurisdictional to the
Commission under the Natural Gas Act
absent new section 23 of that statute and
those that are not. As discussed above,
generally, while the Commission’s
traditional jurisdiction arising from
sections 3 through 10 of the Natural Gas
Act is limited to ‘‘natural gas
compan[ies],’’ 78 this limitation is not
applicable to the Commission’s
jurisdiction under new section 23 of the
Natural Gas Act,79 the natural gas
transparency provisions. As a
consequence, in order to assess the size
and structure of U.S. natural gas
markets, information is required from
transacting companies whether or not
they fall under the Commission’s
traditional jurisdiction.
52. Notwithstanding Congress’s
broadening of the scope of the
Commission’s jurisdiction in new
section 23 of the Natural Gas Act with
respect to transparency, Congress also
mandated that the Commission exempt
‘‘natural gas producers, processors or
users who have a de minimis market
presence [from compliance] with the
reporting requirements of this
section.’’ 80 In establishing a de minimis
threshold for reporting, which would
apply to all market participants, the
Commission seeks to require reporting
from only those market participants
whose transactions could have an effect
on the price for the sale of physical
natural gas in interstate commerce and
to obtain reporting from a sufficient
number of market participants to
ensure, in the aggregate, an accurate
picture of the physical natural gas
market as a whole. To this end, we
propose to define such a de minimis
market participant as a market
77 Comments of Platt’s, at 6, Transparency
Provisions of the Energy Policy Act, Docket No.
AD06–11–000, (filed Nov. 1, 2006).
78 See, 15 U.S.C. 717b–717i (2000).
79 To be codified at 15 U.S.C. 717t–2.
80 Section 23(d)(2) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(d)(2).
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participant that engages in physical
natural gas transactions that amount by
volume to less than 2,200,000 MMBtus
annually.81 This figure is based on the
rather simple calculation of one-ten
thousandth (1⁄10,000th) of the annual
physical volumes consumed in the
United States, which is approximately
22 trillion cubic feet (Tcf) (or roughly
22,000,000,000 MMBtus).82
Consequently, a de minimis market
participant would trade the equivalent
of less than one standard NYMEX
futures contract per day. Although a
market participant that contracts for
1⁄10,000th of the nation’s annual physical
volume may appear to have little effect
on natural gas prices, that participant
may be transacting only at one location
and, thus, have a much greater pricing
effect there. Although we do not expect
annual physical volumes consumed in
the United States to remain constant,
the figure of 22 Tcf is a useful snapshot
of consumption and a useful startingpoint for setting the de minimis
exemption.
53. The proposed reporting
requirement would also shift the
notification regarding the index
reporting practices of companies selling
under blanket certificates to this annual
form and away from the prior practice
of a letter notification upon a change in
company policy. Consequently, if a
market participant makes use of its
blanket certificate authority, even if its
sales are de minimis, it would still be
required to report, but only its
identification information, whether it
reports transaction information to price
index publishers, and whether any such
reporting complies with the regulations
governing reporting to price index
publishers. This proposal would be
codified at § 284.403(a) for blanket
marketing certificate holders and at
§ 284.288(a) for interstate pipelines with
unbundled sales service certificates. The
Commission would impose these
requirements on all blanket certificate
holders regardless of size.83
54. In Order No. 644, the Commission
required each holder of blanket
81 Proposed 18 CFR 284.401 (defining de minimis
market participant). The Commission proposes to
define a market participant as ‘‘any buyer or seller
that engaged in physical natural gas transactions for
the previous calendar year.’’ Proposed 18 CFR
284.401.
82 Department of Energy, Energy Information
Administration, Natural Gas Summary, Data Series:
Total Consumption, 2006, https://tonto.eia.doe.gov/
dnav/ng/ng_sum_lsum_dcu_nus_a.htm.
83 The Commission makes this proposal under
section 4, 5 and 7 of the Natural Gas Act, 15 U.S.C.
717c, 717d, and 717f (2000), and, thus, is not
required to create a de minimis exception for
holders of blanket marketing certificates or for
interstate pipelines that have blanket unbundled
sales services certificates.
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marketing certificate authority to notify
the Commission whether it engages in
reporting of its transactions to
publishers of electricity or natural gas
price indices according to the standards
set out in the Commission’s Policy
Statement on Price Indices.84 Pursuant
to § 284.403(a) of the Commission’s
regulations, if a holder of a blanket
marketing certificate changes its
reporting standards, it is required to
report that change to the Commission.85
Pursuant to § 284.288(a) of the
Commission’s regulations, if an
interstate pipeline that holds blanket
unbundled sales service certificate, it is
similarly required to report that change
to the Commission.
55. Several data providers asked for
clarification as to whether they may
report certain classes of products traded,
but not others. In one instance, related
to electricity, the data provider was
reporting all transactions other than
next-hour electric transactions.86 We
clarify that a data provider remains
eligible for the safe harbor provisions if
it reports certain products but not
others, provided that it provides all of
the same type of transactions and that
it notifies the Commission which
products it will report in its annual
filing or other notification. A data
provider would be required to notify the
commission of any change in the types
of products it reports within 15 days of
any such change. We intend to reiterate
this clarification in the preamble of any
final rule issued in these proceedings.
56. At the October 13, 2006 technical
conference, several participants called
for mandatory reporting of all fixedprice transactions.87 Mandatory
reporting would appear to provide
additional benefits in that it could assist
in determining whether the price
indices are an accurate reflection of
underlying fixed-price trading. Market
participants, State commissions, and
this Commission could gain a clearer
sense of the volume and number of
natural gas transactions that form prices
by location and duration. For the
following reasons, however, we believe
84 Order
No. 644 at P 70–72.
CFR 284.403(a).
86 See, Pinnacle West Capital Corporation and
Pinnacle West Marketing and Trading Co., LLC,
Investigation of Terms and Conditions of MarketBased Rate Tariffs and Authorizations, Docket No.
EL01–118–000 (filed Feb. 12, 2007).
87 Tr. at 13–14 (Ms. Lewis-Raymond on behalf of
the American Gas Association) (calling for
mandatory reporting of fixed-price trades); Tr. at
18–19 (Mr. Les Fyock on behalf of the American
Public Gas Association (APGA)) (calling for
mandatory price reporting); Comments of the
APGA, Transparency Provisions of the Energy
Policy Act, Docket No. AD06–11–000 (filed Nov. 1,
2006) (same).
85 18
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that mandatory reporting is not
appropriate at this time.
57. First, mandatory reporting of
certain transactions would create an
incentive for wholesale buyers and
sellers to consider structuring
transactions based on avoiding reporting
requirements rather than simply on the
economics of the transaction. Even very
subtle shifts in the form of transactions
could easily make them non-reportable
in any pre-defined system. For instance,
if the Commission required reporting of
fixed-price, day-ahead transactions,
market participants could create twoday transactions, achieve substantially
the same economic result and avoid
reporting.
58. Second, buyers and sellers might
shift away from fixed-price transactions
to indexed-price transactions. Fixedprice transactions could easily decrease
to the point that indices that rely on
them would no longer represent reliable
indicators of the market. Such indices
would likely become more volatile as
they moved more in response to fewer
transactions. At the October 13, 2006
technical conference, several panelists
raised similar concerns and advocated
against mandatory price reporting.88
59. Third, broad availability of
detailed transaction data might prove to
be anticompetitive. By contrast, our
proposal herein is intended to adhere to
the requirement provided in section 23
of the Natural Gas Act that the
Commission ‘‘shall seek to ensure that
consumers and competitive markets are
protected from the adverse effects of
potential collusion or other
anticompetitive behaviors that can be
facilitated by untimely public disclosure
of transaction-specific information.’’ 89
In its comments in these proceedings,
the Department of Justice echoed this
caution, stating that the Commission
‘‘may be able to achieve the benefits of
88 See, e.g., Tr. at 12–13 (Mr. Christopher Conway
on behalf of Conoco-Phillips Gas and Power, the
Natural Gas Supply Association, and the
Independent Producers Association of America)
(asserting that mandatory price reporting could
drive market participants away from reportable
transactions, thereby, possibly reducing liquidity);
Tr. at 35–36, 38–39 (Mr. Alex Strawn on behalf of
the Process Gas Consumers Group) (asserting that
mandatory reporting of fixed price transactions
would drive market participants to use index-price
transactions, thereby, reducing liquidity);
Comments of Independent Petroleum Association of
America, at p. 3, Transparency Provisions of the
Energy Policy Act, Docket No. AD06–11–000 (filed
Nov. 1, 2006) (mandatory reporting would push
market participants away from reportable
transactions and cause them to do more index-price
transactions); Comments of Natural Gas Supply
Association, Transparency Provisions of the Energy
Policy Act, Docket No. AD06–11–000 (filed Nov. 1,
2006) (similar).
89 Section 23(b)(2) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(b)(2).
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transparency while limiting its potential
harm by aggregating, masking, and
lagging the release of such
information.’’ 90 The Commission’s
proposal would not provide for the
collection and disclosure of
‘‘transaction-specific information.’’ The
proposal is intended to avoid facilitating
anti-competitive behavior in several
ways: (i) Reported information would
not include specific price information;
(ii) reported information would be
aggregated information over a period of
one year and not transaction-specific
information; and (iii) reported
information would be made on an
aggregated, national level, and not by
point or even region.
60. The Commission also does not
propose that market participants report
information regarding their financiallysettled transactions nor regarding their
physically-settled futures contracts that
do not go to delivery.91 The
Commission has noted significant
interactions among financial, futures
and physical natural gas markets.92 The
most direct and important influence of
this type on physical markets is from
the futures market, which is regulated
by the Commodities Futures Trading
Commission (CFTC). The CFTC actively
monitors that market, and
communicates regularly with the
Commission regarding market matters.93
90 Comments of the Department of Justice,
Antitrust Division, Transparency Provisions of the
Energy Policy Act, Docket No. AD06–11–000 (filed
Jan. 25, 2007). The Department of Justice’s
comments focused on the electricity markets,
although it did note that the same general
considerations that applied to electricity markets
also applied to natural gas markets.
91 See, e.g., Tr. at 22–24, Comments of Industrial
Energy Consumers of America, (arguing that
because the physical and financial natural gas
markets are linked, the Commission and the
Commodity Futures Trading Commission should
make Over-the-Counter markets more transparent.)
92 Federal Energy Regulatory Commission, 2006
State of the Markets Report, at 48–50 (Jan. 2007),
https://www.ferc.gov/market-oversight/marketoversight.asp, (follow link to the State of the
Markets Full Report).
93 In the transparency provisions, Congress
mandated that this Commission and the CFTC
conclude a memorandum of understanding relating
to information sharing to include ‘‘provisions
ensuring that information requests to markets
within the respective jurisdiction of each agency are
properly coordinated to minimize duplicative
information requests, and provisions regarding the
treatment of proprietary trading information.’’
Section 23(c)(1) of the Natural Gas Act, 15 U.S.C.
717t–2(c)(1); see also section 220(c)(1) of the
Federal Power Act, 16 U.S.C. 824t(c)(1) (identical
language). The Commission and the CFTC entered
into the memorandum of understanding on October
12, 2005. Memorandum of Understanding Between
FERC and the CFTC Regarding Information Sharing
And Treatment Of Proprietary Trading And Other
Information, available at https://www.ferc.gov/legal/
maj-ord-reg/fed-sta/ene-pol-act.asp (follow
‘‘Interagency/Tribal,’’ then, ‘‘MOU’’).
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61. By obtaining the number and
volume of transactions conducted for
each market participant, the
Commission, market participants and
others would be able to determine the
overall level of activity of market
participants in the physical natural gas
market. In particular, the information
would provide regularly an estimate of
(a) The size of the physical U.S.
domestic natural gas market, (b) the use
of index pricing in that market, (c) the
size of the fixed-price trading market
that produces price indices, and (d) the
relative sizes of major traders.
62. The information provided through
the Commission’s proposal would
improve the understanding of index
pricing by interested entities, including
the market participants and State energy
regulators who use them. The number
and volume break-down of transactions
by price type, fixed-price or index-price,
should permit an overall assessment of
the ratio of index-using transactions to
price-forming transactions, i.e., fixedprice transactions. At present, we do not
know how much fixed-price
transactions are a part of the universe of
natural gas transactions, although they
may be the minority of natural gas
transactions.94
63. As noted in the introduction, the
Commission has taken several steps to
restore confidence in natural gas index
prices and their formation.95 By
obtaining information regarding the
extent that market participants make
fixed-price transactions, market
participants would be able to evaluate
their confidence in the index prices that
are formed by those fixed-price
transactions. By collecting sales and
purchases information, results could
also be cross-checked to ensure that
information was accurate. In effect, total
sales should roughly equal total
purchases, with some allowance for de
minimis buyers and sellers.
64. The Commission also proposes to
require a holder of blanket market
certificates or an interstate pipeline with
an unbundled sales service certificate to
notify the Commission annually about
its reporting of transaction information
to price index publishers and whether
any such reporting conforms to the
Policy Statement. After the Policy
Statement’s notification requirement
took effect, we observed that blanket
marketing certificate holders may have
overlooked this requirement and we
provided the opportunity for blanket
94 Tr. at 32 (Comments of Ms. Jane LewisRaymond, American Gas Association) (surmising
that we currently cannot know the amount of fixedprice transactions and the amount of fixed-price
trades that make up an index).
95 See supra, notes 5–11.
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marketing certificate holders to notify
the Commission by August 1, 2005 of
their reporting status.96 Based on
Commission staff’s experience
monitoring price indices and adherence
to the Policy Statement, as discussed in
the introduction, the Commission
believes that notification on an annual
basis would make the information more
reliable. As a further benefit, notifying
companies would have the opportunity
to review their practices in coordination
with their response to the data
collection proposal described above.
D. Solicitation of Comments
65. The Commission seeks comment
on this proposal, including whether
market participant responses to the
questions would provide useful
information to market participants, State
commissions, this Commission and the
public in understanding the natural gas
market, the price formation process, and
the use of price indices.
66. In particular, the Commission
encourages market participants to
review the questions (in draft form at
Appendix A) and determine whether
they would result in useful information
for understanding the prices and
availability of physical natural gas in
interstate commerce. What adjustments
might improve these questions? What
alternative or additional questions
might add sufficient information to
justify additional burden on filers? Does
the format for responses ensure
consistency for aggregation and
analysis? The Commission anticipates
holding meetings, if needed, to consider
the details of this annual filing
requirement.
67. The Commission seeks comment
on its proposed definition of a de
minimis market participant. Is this
threshold sufficiently low to permit a
comprehensive picture of the U.S.
wholesale natural gas market? Is it
sufficiently high so that persons or
municipalities not able to prices of
natural gas in interstate commerce are
not required to report? Is there another,
more effective bright-line measure that
allows market participants to determine
easily whether they are exempt?
Further, the Commission seeks
comment on the burden this proposal
would impose on market participants.
For instance, is it unduly burdensome
for market participants to file the
information by February 15 of each
year?
68. The Commission seeks comments
on its proposal that buyers and sellers
of more than a de minimis volume of
96 Order on Further Clarification of Policy
Statement at P 21.
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natural gas be required to report
aggregate numbers and volumes of
relevant transactions in an annual filing
with the Commission. Does information
regarding purchases of natural gas at
wholesale ‘‘facilitate price transparency
in markets for the sale and
transportation of physical natural gas in
interstate commerce,’’ as provided in
the natural gas transparency
provisions? 97
69. The Commission seeks comment
on whether reporting information
aggregated by calendar year is adequate.
Would a monthly breakdown create an
undue burden compared to providing
the information by calendar year?
Would it provide a better understanding
of the physical natural gas market given
the seasonal nature of the market?
70. The Commission seeks comment
on the proposed modifications to the
notification requirements regarding
reporting of transactions to publishers of
price indices imposed on those entities
who hold blanket marketing certificates
in proposed § 284.403(a) and imposed
on intrastate pipelines with blanket
unbundled sales service certificates in
proposed § 284.288(a). Also, as
currently codified, those sections refer
to the procedural requirements for
reporting to publishers of price indices
‘‘set forth in the Policy Statement on
Electric and Natural Gas Price Indices,
issued by the Commission in PL03–3–
000 and any clarifications thereto.’’ 98
Instead of referring to policy statements
in that proceeding for the procedural
requirements, should the Commission
codify in the regulations the procedural
requirements that such reporting
entities must follow in reporting
transactions to publishers of electric and
natural gas price indices?
71. The Commission seeks comment
on making public participant responses
to these questions through public filing
requirements. Commenters who suggest
an alternate method, such as aggregating
data received before disseminating it to
the public, should address whether such
an approach meets the objectives of the
statute sufficiently.
72. The Commission seeks comment
on whether, in lieu of this proposal, to
require mandatory, detailed transaction
reporting by market participants.
Commenters should address the
burdens and benefits of such an
approach. Commenters supporting
mandatory reporting of transactions
should address the cautions set forth in
the natural gas transparency provisions
and echoed by the Department of Justice
in the discussion above. If detailed
transaction reporting were mandatory,
could these concerns be addressed by
making the reporting non-public,
aggregating the reported information,
and disseminating publicly only the
aggregated information (either by the
Commission or, as contemplated in the
natural gas transparency provisions, by
other entities) subject to sufficient
disclosure rules? 99
VI. Information Collection Statement
73. The Office of Management and
Budget (OMB) regulations require it to
approve certain reporting and
recordkeeping (information collection)
Number of
respondents
Data collection
requirements imposed by an agency.100
In this NOPR, the Commission makes
two proposals that would require the
posting or collection of information.101
The Commission is submitting
notification of these proposed
information collection requirements to
OMB for its review and approval under
section 3507(d) of the Paperwork
Reduction Act of 1995.102
74. The proposal to require intrastate
pipelines to post flow information
would impose an information collection
burden on intrastate pipelines. We
presume that intrastate pipelines
already collect flow information for
receipt and delivery points and, thus,
the burden that would be imposed by
this proposed requirement is only for
the posting of this information in the
required format.103 The proposal to
require market participants to file
annually a form regarding their physical
natural gas transactions would impose
an information collection burden on
market participants. Again, we presume
that market participants already collect
transaction information and, thus, the
burden imposed by this proposed
requirement is only for completing and
submitting the form.
75. OMB regulations require OMB to
approve certain information collection
requirements imposed by agency rule.
The Commission is submitting
notification of this proposed rule to
OMB.
Public Reporting Burden: The start-up
and annual burden estimates for
complying with this proposed rule are
as follows:
Estimated
annual
burden hours
per
respondent
(hours)
Number of
responses
per
respondent
(per year)
20803
Total annual
hours for
all
respondents
Estimated
start-up
burden per
respondent
(hours)
Part 284 FERC–xxx:
Intrastate Pipeline Postings ..........................................
Annual Reporting Requirement ....................................
179
1,500
365
1
183
4
32,757
6,000
160
40
Total .......................................................................
........................
........................
........................
38,757
........................
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The total annual hours for collection
(including recordkeeping) for all
respondents is estimated to be 38,757.
97 Section 23(a)(1) of the Natural Gas Act, to be
codified at 15 U.S.C. 717t–2(a)(1).
98 18 CFR 284.403(a); see, also, 18 CFR 284.288(a)
(identical language).
99 Section 23(a)(3)(B) and (b) of the Natural Gas
Act, to be codified at 15 U.S.C. 717t–2(a)(3)(B) and
(b).
100 5 CFR 1320.11.
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Information Collection Costs: The
average annualized cost for each
respondent is projected to be the
following (savings in parenthesis):
101 The OMB regulations cover both the collection
of information and the posting of information. 5
CFR 1320.3(c). Thus, the proposal to post
information would create an information collection
burden.
102 44 U.S.C. 3507(d).
103 See 5 CFR 1320.3(b)(2) (‘‘The time, effort, and
financial resources necessary to comply with a
collection of information that would be incurred by
persons in the normal course of their activities (e.g.,
in compiling and maintaining business records)
will be excluded from the ‘‘burden’’ if the agency
demonstrates that the reporting, recordkeeping, or
disclosure activities needed to comply are usual
and customary.’’)
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Annualized capital/
startup costs (10
year amortization)
jlentini on PROD1PC65 with PROPOSALS
FERC–xxx:
Intrastate Pipeline Postings ..........................................................................
Transaction Reporting Requirement ............................................................
Title: FERC–xxx.
Action: Proposed Information Posting
and Information Filing.
OMB Control No:
Respondents: Business or other for
profit.
Frequency of Responses: Daily posting
requirements and annual filing
requirements.
Necessity of the Information: The
daily posting of flow information by
intrastate pipelines is necessary to
provide information regarding the price
and availability of natural gas to market
participants, State commissions, the
FERC and the public. The annual filing
of transaction information by market
participants is necessary to provide
information regarding the size of the
physical natural gas market, the use of
the natural gas spot markets and the use
of fixed and index price transactions.
Internal Review: The Commission has
reviewed the requirements pertaining to
natural gas pipelines and natural gas
market participants and determined
they are necessary to provide price and
availability information regarding the
sale of natural gas in interstate markets.
76. These requirements conform to
the Commission’s plan for efficient
information collection, communication,
and management within the natural gas
industry. The Commission has assured
itself, by means of internal review, that
there is specific, objective support for
the burden estimates associated with the
information posting requirements. The
Commission seeks comment on these
estimates.
77. Interested persons may obtain
information on the reporting
requirements by contacting: Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC 20426,
[Attention: Michael Miller, Office of the
Chief Information Officer], phone: (202)
502–8415, fax: (202) 208–2425, e-mail:
Michael.Miller@ferc.gov. Comments on
the requirements of the proposed rule
also may be sent to the Office of
Information and Regulatory Affairs,
Office of Management and Budget,
Washington, DC 20503 [Attention: Desk
Officer for the Federal Energy
Regulatory Commission].
78. Comments on the requirements of
the proposed rule may also be sent to
the Office of Information and Regulatory
Affairs, Office of Management and
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$1,600
400
Budget, Washington, DC 20503
[Attention: Desk Officer for the Federal
Energy Regulatory Commission] (202)
395–4650 or
oira_submission@omb.eop.gov.
VII. Environmental Analysis
79. The Commission is required to
prepare an Environmental Assessment
or an Environmental Impact Statement
for any action that may have a
significant adverse effect on the human
environment.104 The actions taken here
fall within categorical exclusions in the
Commission’s regulations for
information gathering, analysis, and
dissemination, and for sales, exchange,
and transportation of natural gas that
requires no construction of facilities.105
Therefore, an environmental assessment
is unnecessary and has not been
prepared in this rulemaking.
VIII. Regulatory Flexibility Act
Analysis
80. The Regulatory Flexibility Act of
1980 (RFA) generally requires a
description and analysis of final rules
that will have significant economic
impact on a substantial number of small
entities.106 The two proposals in this
NOPR will not have a significant
economic impact on a substantial
number of small entities.
81. The proposal to require daily
postings by intrastate pipelines will not
impact small entities. Natural gas
pipelines are classified under NAICS
code, 486210, Pipeline Transportation
of Natural Gas.107 A natural gas pipeline
is considered a small entity for the
purposes of the Regulatory Flexibility
Act if its average annual receipts are less
than $6.5 million.108 The Commission
does not believe that any intrastate
104 Order No. 486, Regulations Implementing the
National Environmental Policy Act, 52 FR 47897
(Dec. 17, 1987), FERC Stats. & Regs. Preambles
1986–1990 ¶ 30,783 (1987).
105 18 CFR 380.4(a)(5) and (a)(27).
106 5 U.S.C. 601–612.
107 This industry comprises establishments
primarily engaged in the pipeline transportation of
natural gas from processing plants to local
distribution systems. 2002 North American Industry
Classification System (NAICS) Definitions, https://
www.census.gov/epcd/naics02/def/ND486210.HTM.
108 See Table of Small Business Size Standards,
U.S. Small Business Administration (effective July
31, 2006), available at https://www.sba.gov/idc/
groups/public/documents/sba_homepage/
serv_sstd_tablepdf.pdf.
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Annual costs
$18,300
400
Annualized costs
total
$19,900
800
pipeline has receipts less than $6.5
million. Thus, the daily posting
proposal will not impact small entities.
82. The proposal to require annual
reporting of physical natural gas
transactions will have minimal impact
on small entities.109 By incorporating a
de minimis exemption into the
regulations, the Commission has
reduced the number of small entities
subject to the requirements; de minimis
entities without blanket certificates will
not be required to report. This reporting
proposal will affect small entities but
the burden on them will be minimal.
For each entity, small or otherwise, that
is required to comply with the annual
reporting requirement, the Commission
estimates that the compliance would
require a one-time cost of approximately
$4,000 and an annual cost thereafter of
$400. Although some costs would
increase for market participants with a
greater number of transactions, we
expect that that increase would be likely
offset because such entities would have
already compiled information regarding
their transactions in the aggregate. The
Commission bases its one-time cost
estimate on an assumption that it would
take approximately one person one
week to set up the reporting and file the
report initially and that their time costs
$100 per hour. The Commission bases
its annual estimate on an assumption
that it would take one person four hours
to compile the information and that his
or her time costs $100 per hour. On an
annualized basis, costs would amount to
approximately $1,200 per entity. This
amount is not a significant burden on
small entities. The Commission seeks
comment on its Regulatory Flexibility
Act analysis and the assumptions on
which it is based.
IX. Comment Procedures
83. The Commission invites interested
persons to submit comments on the
109 For the purposes of analyzing the impact of
the proposed filing requirement on small entities,
the Commission classifies market participants
under the NAICS category of ‘‘Natural Gas
Distribution,’’ Code 221210, which includes gas
marketers, and establishments engaged in gas
distribution. Under that classification, a small
entity is any entity with less than 500 employees.
See Table of Small Business Size Standards, U.S.
Small Business Administration (effective July 31,
2006), available at https://www.sba.gov/idc/groups/
public/documents/sba_homepage/
serv_sstd_tablepdf.pdf.
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jlentini on PROD1PC65 with PROPOSALS
matters and issues proposed in this
notice to be adopted, including any
related matters or alternative proposals
that commenters may wish to discuss.
Comments are due June 11, 2007. Reply
comments are due July 10, 2007.
Comments must refer to Docket No.
RM07–10–000, and must include the
commenter’s name, the organization
they represent, if applicable, and their
address in their comments. Comments
may be filed either in electronic or
paper format.
84. Comments may be filed
electronically via the eFiling link on the
Commission’s Web site at https://
www.ferc.gov. The Commission accepts
most standard word processing formats
and requests commenters to submit
comments in a text-searchable format
rather than a scanned image format.
Commenters filing electronically do not
need to make a paper filing.
Commenters that are not able to file
comments electronically must send an
original and 14 copies of their
comments to: Federal Energy Regulatory
Commission, Secretary of the
Commission, 888 First Street, NE.,
Washington, DC 20426.
85. All comments will be placed in
the Commission’s public files and may
be viewed, printed, or downloaded
remotely as described in the Document
Availability section below. Commenters
on this proposal are not required to
serve copies of their comments on other
commenters.
Public Reference Room at
public.referenceroom@ferc.gov.
§ 284.14 Intrastate pipeline flow
information.
List of Subjects
An intrastate pipeline must provide
on a daily basis on an Internet Web site
and in downloadable file formats, in
conformity with § 284.12 of this chapter,
access to information on flowing
volumes and capacities at each major
receipt point, mainline segment, and
delivery point on its pipeline. This
information must be posted within 24
hours from the close of the gas day on
which gas flows, i.e., on or before 9:00
a.m. central clock time for flows
occurring on the gas day that ended 24
hours before.
5. In § 284.288, paragraph (a) is
revised to read as follows:
18 CFR Part 260
Natural gas; Reporting and
recordkeeping requirements.
18 CFR Part 284
Continental Shelf; Incorporation by
reference; Natural gas; Reporting and
recordkeeping requirements.
By direction of the Commission.
Philis J. Posey,
Deputy Secretary.
In consideration of the foregoing, the
Commission proposes to amend parts
260 and 284 Chapter I, Title 18, Code of
Federal Regulations, to read as follows.
PART 260—STATEMENTS AND
REPORTS (SCHEDULES)
1. The authority citation for part 260
continues to read as follows:
Authority: 15 U.S.C. 717–717w, 3301–
3432; 42 U.S.C. 7101–7352.
2. Section 260.401 is added to read as
follows:
§ 260.401 FERC Form No. [X], Annual
Reporting of Natural Gas Transactions and
Blanket Certificate Authorities.
Unless otherwise exempted or granted
a waiver by Commission rule or order,
each natural gas market participant that
is not a de minimis market participant
as defined in § 284.401 of this chapter
X. Document Availability
and each de minimis market participant
86. In addition to publishing the full
that holds a blanket marketing
text of this document in the Federal
certificate under § 284.402 of this
Register, the Commission provides all
chapter or a blanket unbundled sales
interested persons an opportunity to
service certificate under § 284.284 of
view and/or print the contents of this
this chapter must file with the
document via the Internet through
Commission by February 15, 2008, and
FERC’s Home Page (https://www.ferc.gov) by February 15 of each year thereafter,
and in FERC’s Public Reference Room
a report, FERC Form No. [X], for the
during normal business hours (8:30 a.m. prior calendar year. Every such report
to 5 p.m. Eastern time) at 888 First
must be prepared in conformance with
Street, NE., Room 2A, Washington DC
the Commission’s software and
20426.
guidance posted and available for
87. From FERC’s Home Page on the
downloading from the FERC Web site
Internet, this information is available on (https://www.ferc.gov).
eLibrary. The full text of this document
PART 284—CERTAIN SALES AND
is available on eLibrary in PDF and
TRANSPORATION OF NATURAL GAS
Microsoft Word format for viewing,
printing, and/or downloading. To access UNDER THE NATURAL GAS POLICY
ACT OF 1978 AND RELATED
this document in eLibrary, type the
AUTHORITIES
docket number excluding the last three
digits of this document in the docket
3. The authority citation for part 284
number field.
continues to read as follows:
88. User assistance is available for
Authority: 15 U.S.C. 717–717w, 3301–
eLibrary and the FERC’s Web site during
3432; 42 U.S.C. 7101–7352; 43 U.S.C. 1331–
normal business hours from our Help
1356.
line at (202) 502–8222 or the Public
Reference Room at (202) 502–8371,
4. Section 284.14 is added to read as
Press 0, TTY (202) 502–8659. E-Mail the follows:
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§ 284.288 Code of conduct for unbundled
sales service.
(a) To the extent Seller engages in
reporting of transactions to publishers of
electricity or natural gas indices, Seller
shall provide accurate and factual
information, and not knowingly submit
false or misleading information or omit
material information to any such
publisher, by reporting its transactions
in a manner consistent with the
procedures set forth in the Policy
Statement on Natural Gas and Electric
Price Indices, issued by the Commission
in Docket No. PL03–3–000 and any
clarifications thereto. Seller shall notify
the Commission as part of its annual
reporting requirement in § 260.401 of
this chapter whether it reports its
transactions to publishers of electricity
and natural gas indices. Seller shall
notify the Commission within 15 days
of any subsequent change to its
transaction reporting status. In addition,
Seller shall adhere to such other
standards and requirements for price
reporting as the Commission may order.
*
*
*
*
*
6. In § 284.401, definitions of ‘‘de
minimis market participant’’ and
‘‘market participant’’ are added in
alphabetical order to read as follows:
§ 284.401
Definitions.
*
*
*
*
*
De minimis market participant. For
purposes of this subpart, a de minimis
market participant is a market
participant that engaged in physical
natural gas transactions that by volume
amounted to less than 2,200,000
MMBtus for the previous calendar year.
Market participant. For purposes of
this subpart, a market participant is any
buyer or seller that engaged in physical
natural gas transactions the previous
calendar year.
7. In § 284.403, paragraph (a) is
revised to read as follows:
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§ 284.403 Code of conduct for persons
holding blanket marketing certificates.
(a) To the extent Seller engages in
reporting of transactions to publishers of
electricity or natural gas indices, Seller
shall provide accurate and factual
information, and not knowingly submit
false or misleading information or omit
material information to any such
publisher, by reporting its transactions
in a manner consistent with the
procedures set forth in the Policy
Statement on Natural Gas and Electric
Price Indices, issued by the Commission
in Docket No. PL03–3–000 and any
clarifications thereto. Seller shall notify
the Commission as part of its annual
reporting requirement in § 260.401 of
this chapter whether it reports its
transactions to publishers of electricity
and natural gas indices. Seller shall
notify the Commission within 15 days
of any subsequent change to its
transaction reporting status. In addition,
Seller shall adhere to such other
standards and requirements for price
reporting as the Commission may order.
*
*
*
*
*
Purchases by
number
Note: The following Appendix will not be
published in the Code of Federal
Regulations.
Appendix A to Notice of Proposed
Rulemaking—Transparency Provisions
of Section 23 of the Natural Gas Act;
Transparency Provisions of the Energy
Policy Act of 2005, Docket Nos. RM07–
10–000 and AD06–11–000: Proposed
FERC Form No. [X]
Provide accurate and complete responses
to the following questions.
Purchases by
volume
(TBtu/Bcf)
Sales by
number
Sales by
volume
(TBtu/Bcf)
A. How much physical gas,* did you transact in the prior calendar year?
B. Of the amount reported in Row A, what number and volume are transacted for next-day delivery?
C. Of these next-day transactions, what number and volume are priced at a
fixed price?
D. Of these next-day transactions, what number and volume are priced at
an index price?
E. Of the amount reported in Row A, what number and volume are transacted for delivery in the next month?
F. Of your transactions for delivery in the next month, what number and volume are priced at a fixed price during bid week? **
G. Of your transactions for delivery in the next month, what number and
volume are priced at an index price?
H. Of your transactions for delivery beyond next-day or month, what number and volume are priced using next-day or next-month index prices?
* Notwithstanding its physical delivery provisions, for the purposes of this form, exclude NYMEX futures contracts or any other physically-settled futures contract unless the contract actually goes to delivery.
** Bid week is defined as the last 5 working days prior to the delivery month. Please include those transactions in this row.
[FR Doc. E7–7822 Filed 4–25–07; 8:45 am]
BILLING CODE 6717–01–P
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 1051
[EPA–HQ–OAR–2006–0858; FRL–8305–7]
RIN 2060–A035
Exhaust Emission Test Procedures for
All-Terrain Vehicles
Environmental Protection
Agency (EPA).
ACTION: Notice of proposed rulemaking.
jlentini on PROD1PC65 with PROPOSALS
AGENCY:
SUMMARY: In a rule published November
8, 2002, EPA promulgated new emission
standards for recreational vehicles
beginning in model year 2006. This
included a newly regulated class of
nonroad vehicles/engines commonly
referred to as all-terrain vehicles. In that
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21:14 Apr 25, 2007
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rulemaking, a temporary provision was
included allowing manufacturers to
certify all-terrain vehicles over a steadystate, engine-based, duty cycle for
exhaust emissions prior to the 2009
model year in lieu of the transient,
chassis-based, Federal Test Procedure
which was effective for 2006 and later
model years. In this rulemaking we are
proposing to extend the availability of
this temporary provision for in some
cases up to an additional six model
years, after which the chassis-based
Federal Test Procedure would become
the only available test cycle. More
specifically, manufacturers would have
to certify exhaust emission engine
families representing not less than 50
percent of their U.S.-directed
production on the Federal Test
Procedure in model year 2014 and 100
percent in 2015. Manufacturers with
only one all-terrain vehicle exhaust
emission engine engine family would
not be required to use the Federal Test
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Fmt 4702
Sfmt 4702
Procedure until the 2015 model year.
For those manufacturers who have not
yet done so, this will allow additional
time to certify to the previously
promulgated Federal Test Procedurebased emission standards using either
contract facilities or by obtaining inhouse capability.
DATES: Written comments must be
received by May 29, 2007. Request for
a public hearing must be received by
May 11, 2007. If we receive a request for
a public hearing, we will publish
information related to the timing and
location of the hearing and the timing of
a new deadline for public comments.
ADDRESSES: Submit your comments,
identified by Docket ID No. EPA–HQ–
OAR–2006–0858, by one of the
following methods:
• www.regulations.gov: Follow the
on-line instructions for submitting
comments.
• E-mail: a-and-r-docket@epa.gov.
• Fax: (202) 566–1741.
E:\FR\FM\26APP1.SGM
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]]>Agencies
[Federal Register Volume 72, Number 80 (Thursday, April 26, 2007)]
[Proposed Rules]
[Pages 20791-20806]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-7822]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Parts 260 and 284
[Docket Nos. RM07-10-000 and AD06-11-000]
Transparency Provisions of Section 23 of the Natural Gas Act;
Transparency Provisions of the Energy Policy Act
April 19, 2007.
AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: In order to implement its authority under section 23 of the
Natural Gas Act, which was added by section 316 of the Energy Policy
Act of 2005 (EPAct 2005), the Commission proposes to revise its
regulations to: require that intrastate pipelines post daily the
capacities of, and volumes flowing through, their major receipt and
delivery points and mainline segments in order to make available the
information needed to track daily flows of natural gas throughout the
United States; and require that buyers and sellers of more than a de
minimis volume of natural gas report annual numbers and volumes of
relevant transactions to the Commission in order to make possible an
estimate of the size of the physical U.S. natural gas market, assess
the importance of the use of index pricing in that market, and
determine the size of the fixed-price trading market that produces the
information. These revisions would facilitate price transparency in
markets for the sale or transportation of physical natural gas in
interstate commerce.
DATES: Comments are due June 11, 2007. Reply comments are due July 10,
2007.
ADDRESSES: You may submit comments identified by Docket No. RM07-10-
000, by one of the following methods:
Agency Web Site: https://ferc.gov. Follow the instructions
for submitting comments via the eFiling link found in the Comment
Procedures Section of the preamble.
Mail: Commenters unable to file comments electronically
must mail or hand deliver an original and 14 copies of their comments
to the Federal Energy Regulatory Commission, Secretary of the
Commission, 888 First Street, NE., Washington, DC 20426. Please refer
to the Comment Procedures Section of the preamble for additional
information on how to file paper comments.
FOR FURTHER INFORMATION CONTACT: Stephen J. Harvey (Technical), 888
First Street, NE., Washington, DC 20426, (202) 502-6372,
Stephen.Harvey@ferc.gov.
Eric Ciccoretti (Legal), 888 First Street, NE., Washington, DC 20426,
(202) 502-8493, Eric.Ciccoretti@ferc.gov.
SUPPLEMENTARY INFORMATION:
I. Introduction
1. The Federal Energy Regulatory Commission (Commission), in order
to facilitate market transparency in natural gas markets, proposes to
revise its regulations to: (a) Require daily posting of some natural
gas flow information by intrastate pipelines; and (b) require annual
filings by buyers and sellers of natural gas in U.S. wholesale markets
(that transact more than de minimis volumes) of aggregate annual
purchase and sales information. These proposals exercise expanded
Commission authority under section 23 of the Natural Gas Act,\1\ which
was added by the Energy Policy Act of 2005 (EPAct 2005) to require
reporting from entities not under the Commission's traditional
jurisdiction.\2\ At this time, as discussed infra, due to other market-
related Commission initiatives, we do not propose additional
regulations for transparency in electricity markets.
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\1\ To be codified at 15 U.S.C. 717t-2.
\2\ Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594
(2005).
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2. The first proposal, designed to make available the information
needed to track daily flows of natural gas throughout the United
States, would
[[Page 20792]]
create a requirement that intrastate pipelines post daily to the
Internet the capacities of, and volumes flowing through, their major
receipt and delivery points and mainline segments. Postings would be
required within 24 hours from the close of the gas day on which gas
flows, i.e., on or before 9 a.m. central clock time for flows occurring
on the gas day that ended 24 hours before.
3. The second proposal, designed to permit the annual estimate of
(a) The size of the physical domestic natural gas market, (b) the use
of index pricing in that market, (c) the size of the fixed-price
trading market that produces price indices from the subset reported to
index publishers, and (d) the relative size of major traders, would
create an annual requirement that buyers and sellers of more than a de
minimis volume of natural gas report numbers and volumes of relevant
transactions to the Commission. As part of this proposal, the
Commission would require each holder of blanket marketing certificate
authority or blanket unbundled sales services certificate authority to
notify the Commission as to whether it reports its transactions to
publishers of electricity or natural gas price indices and whether any
such reporting complies with certain standards. Currently, a holder of
a blanket marketing certificate or a blanket unbundled sales service
certificate is required to notify the Commission only when it changes
its practice regarding such reporting. This part of the proposal would
make notifications of reporting status more reliable.
II. Background
4. The Commission's market-oriented policies for the wholesale
electric and natural gas industries require that interested persons
have broad confidence that reported market prices accurately reflect
the interplay of legitimate market forces. Without confidence in the
basic processes of price formation, market participants cannot have
faith in the value of their transactions, the public cannot believe
that the prices they see are fair, and it is more difficult for the
Commission to ensure that jurisdictional prices are ``just and
reasonable.'' \3\
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\3\ See sections 4 and 5 of the Natural Gas Act, 15 U.S.C. 717c,
717d (2000); sections 205 and 206 of the Federal Power Act, 16
U.S.C. 824d, 824e (2000).
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5. The performance of Western electric and natural gas markets
early in the decade shook confidence in posted market prices for
energy. In examining these markets, the Commission's staff found, inter
alia, that some companies submitted false information to the publishers
of natural gas price indices, so that the resulting reported prices
were inaccurate and untrustworthy.\4\ As a result, questions arose
about the legitimacy of published price indices, remaining even after
the immediate crisis passed. Moreover, market participants feared that
the indices might have become even more unreliable, since reporting
(which has always been voluntary) declined to historically low levels
in late 2002.
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\4\ See Initial Report on Company-Specific Separate Proceedings
and Generic Reevaluations; Published Natural Gas Price Data; and
Enron Trading Strategies--Fact Finding Investigation of Potential
Manipulation of Electric and Natural Gas Prices, Docket No. PA02-2-
000 (August 2003).
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6. The Commission recognized staff concerns about price discovery
in electric and natural gas markets as early as January 2003, when,
prior to passage of EPAct 2005, the Commission made use of its existing
authority under the Natural Gas Act and the Federal Power Act to
restore confidence in natural gas and electricity price indices. The
Commission expected that, over time, improved price discovery processes
would naturally increase confidence in market performance. On July 24,
2003, the Commission issued a Policy Statement on Electric and Natural
Gas Price Indices (Policy Statement) that explained its expectations of
natural gas and electricity price index developers and the companies
that report transaction data to them.\5\ On November 17, 2003, the
Commission adopted behavior rules for certain electric market
participants in its Order Amending Market-Based Rate Tariffs and
Authorizations relying on section 206 of the Federal Power Act to
condition market-based rate authorizations,\6\ and for certain natural
gas market participants in Amendments to Blanket Sales Certificates,
relying on section 7 of the Natural Gas Act to condition blanket
marketing certificates.\7\ The behavior rules bar false statements and
require certain market participants, if they report transaction data,
to report such data in accordance with the Policy Statement. These
participants must also notify the Commission whether or not they report
prices to price index developers in accordance with the Policy
Statement.\8\ On November 19, 2004, the Commission issued an order that
addressed issues concerning prices indices in natural gas and
electricity markets and adopted specific standards for the use of price
indices in jurisdictional tariffs.\9\
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\5\ Price Discovery in Natural Gas and Electric Markets, Policy
Statement on Natural Gas and Electric Price Indices, 104 FERC ]
61,121 (Policy Statement). Subsequently, in the same proceeding, the
Commission issued an Order on Clarification of Policy Statement on
Natural Gas and Electric Price Indices, 105 FERC ] 61,282 (Dec. 12,
2003) (Order on Clarification of Policy Statement) and an Order on
Further Clarification of Policy Statement on Natural Gas and
Electric Price Indices, 112 FERC ] 61,040 (July 6, 2005) (Order on
Further Clarification of Policy Statement).
\6\ Investigation of Terms and Conditions of Public Utility
Market-Based Rate Authorizations, 105 FERC ] 61,218, at P 1,
superseded in part by Compliance for Public Utility Market-Based
Rate Authorization Holders, Order No. 674, 71 FR 9695 (Feb. 27,
2006), FERC Stats. and Regs. ] 31,208 (2006).
\7\ Amendments to Blanket Sales Certificates, Order No. 644, 68
FR 66,323 (Nov. 26, 2003), FERC Stats. and Regs. ] 31,153, at P 1
(2003) (citing 15 U.S.C. 717f (2000)), reh'g denied, 107 FERC ]
61,174 (2003) (Order No. 644-A).
\8\ Certain portions of the behavior rules were rescinded in
Amendments to Codes of Conduct for Unbundled Sales Service and for
Persons Holding Blanket Marketing Certificates, Order No. 673, 71 FR
9709 (Feb. 27, 2006), FERC Stats. and Regs. ] 31,207 (2006). The
requirement to report transaction data in accordance with the Policy
Statement and to notify the Commission of reporting status were
retained in renumbered sections. 18 CFR 284.288(a), 284.403(a).
\9\ Price Discovery in Natural Gas and Electric Markets, 109
FERC ] 61,184, at P 73 (2004).
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7. In the Policy Statement, among other things, the Commission
directed staff to continue to monitor price formation in wholesale
markets, including the level of reporting to index developers and the
amount of adherence to the Policy Statement standards by price index
developers and by those who provide data to them.\10\ In adhering to
this directive, Commission staff documented improvements in the number
of companies reporting prices from back offices, adopting codes of
conduct, and auditing their price reporting practices.\11\ These
efforts resulted in significant progress in the amount and quality of
both price reporting and the information provided to market
participants by price indices.\12\ Further, in conformance with this
directive, Commission staff recently concluded audits of three natural
gas market participants with blanket certificate authority that were
data providers subject to Sec. 284.403 of the Commission's
regulations.\13\
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\10\ Policy Statement at P 43.
\11\ Federal Energy Regulatory Commission, Report on Natural Gas
and Electricity Price Indices, at 2, Docket Nos. PL03-3-004 et al.
(2004).
\12\ See, e.g., General Accounting Office, Natural Gas and
Electricity Markets: Federal Government Actions to Improve Private
Price Indices and Stakeholder Reaction (December 2005).
\13\ See April 5, 2007 letter issued to Anadarko Energy Services
Co. in Docket No. PA06-11-000 by Susan J. Court, Director, Office of
Enforcement, and attached Audit of Price Index Reporting Compliance;
April 5, 2007 letter issued to BG Energy Merchants, LLC. in Docket
No. PA06-12-000 by Susan J. Court and attached Audit of Price Index
Reporting Compliance; April 5, 2007 letter issued to Marathon Oil
Co. in Docket No. PA06-13-000 by Susan J. Court, and attached Audit
of Price Index Reporting Compliance.
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[[Page 20793]]
8. Congress recognized that the Commission might need expanded
authority to mandate additional reporting to improve market confidence
through greater price transparency and included in the Energy Policy
Act of 2005 (EPAct 2005) \14\ authority for the Commission to obtain
information on wholesale electric and natural gas prices and
availability. Under the Federal Power Act \15\ and the Natural Gas
Act,\16\ the Commission has long borne a responsibility to protect
wholesale electric and natural gas consumers. EPAct 2005 emphasized the
Commission's responsibility for protecting the integrity of the markets
themselves as a way of protecting consumers in an active market
environment. In particular, Congress directed the Commission to
facilitate price transparency ``having due regard for the public
interest, the integrity of [interstate energy] markets, [and] fair
competition.'' \17\ In the new transparency provisions of section 23 of
the Natural Gas Act and section 220 of the Federal Power Act, Congress
provided that the Commission may, but is not obligated to, prescribe
rules for the collection and dissemination of information regarding the
wholesale, interstate markets for natural gas and electricity, and
authorized the Commission to adopt rules to assure the timely
dissemination of information about the availability and prices of
natural gas and natural gas transportation and electric energy and
transmission service in such markets.
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\14\ Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat.
594 (2005).
\15\ 16 U.S.C. 824 et seq.
\16\ 15 U.S.C. 717 et seq.
\17\ Section 23(a)(1) of the Natural Gas Act, to be codified at
15 U.S.C. 717t-2(a)(1); see also section 220 of the Federal Power
Act, to be codified at 16 U.S.C. 824t (identical language). Section
316 of EPAct 2005 added section 23 to the Natural Gas Act (natural
gas transparency provisions); section 1281 of EPAct 2005 added
section 220 to the Federal Power Act (electric transparency
provisions) (together, the transparency provisions).
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9. Consistent with the directive to facilitate price transparency
in natural gas and electric markets as well as to explore options for
action under EPAct 2005's expansion of the Commission's authority,
Commission staff met with interested entities in the summer of 2006. On
September 26, 2006, staff conducted a workshop to review sources of
energy market information with interested persons and to lay the
groundwork for a technical conference held on October 13, 2006. In that
conference, ideas for potential policy actions by the Commission were
identified.\18\
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\18\ At the conference, the Commission convened two panels: (a)
A panel of seven market participants to discuss price transparency
in markets for the sale or transportation of physical natural gas in
interstate commerce; and, (b) a panel of four market participants
regarding price transparency in markets for the sale and
transmission of electric energy in interstate commerce. See
Transparency Provisions of the Energy Policy Act of 2005, Program
for the Technical Conference, Docket No. AD06-11-000 (Oct. 6, 2006).
In addition, for each panel, about ten representatives of
information providers, such as price index publishers, attended to
provide comment and answer questions.
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10. Based on those efforts, in this Notice of Proposed Rulemaking
(NOPR), the Commission sets out two proposals regarding collection and
dissemination of information about natural gas wholesale markets. The
Commission does not propose action with respect to electric markets at
this time. The Commission has recently addressed and is currently
addressing electric market transparency in other proceedings. For
example, in its final rule reforming the Open Access Transmission
Tariff, the Commission referred to its authority under the electric
transparency provisions to ``promote greater transparency in the
provision of transmission service * * *'' \19\ In that order, the
Commission increased the transparency of a transmission provider's
transmission planning,\20\ the transparency of its calculations of
Available Transfer Capability,\21\ and the transparency of its business
rules and practices.\22\ These reforms are consistent with the electric
transparency provisions because they will ``provide information about
the availability and prices of wholesale * * * transmission service''
to ``users of transmission services'' among others, as contemplated in
the electric transparency provisions.\23\ Furthermore, in the recently-
initiated wholesale competition review, the Commission is reviewing a
variety of market-related electricity issues in a series of public
conferences evaluating the state of competition in wholesale power
markets.\24\ In the first conference, held February 27, 2007, among
other issues, the Commission and panelists considered price
transparency in the context of competition in the wholesale
markets.\25\ As a separate matter, we note that wholesale electric
transactions under market-based rates are submitted to the Commission
and made publicly available through the Electric Quarterly Reports.\26\
Further, in organized electricity markets, Regional Transmission
Organizations (RTOs) and Independent System Operators (ISOs) provide
transparency by publishing the results of auction markets and by
posting spot market and day-ahead prices at pre-established intervals.
The RTOs also provide additional information concerning the electric
system capacity markets and financial transmission rights that provide
further transparency concerning the RTO/ISO-administered markets.\27\
For these reasons, we do not believe that additional action is needed
at this time to implement the new electric transparency provisions of
section 220 of the Federal Power Act.
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\19\ Preventing Undue Discrimination and Preference in
Transmission Service, Order No. 890, 72 FR 12266 (March 15, 2007),
FERC Stats. and Regs. ] 31,241 (2007), at P 80.
\20\ Id. at P 69, 83.
\21\ Id. at P 84.
\22\ Id. at P 88.
\23\ Section 220(a)(2) of the Federal Power Act, to be codified
at 16 U.S.C. 824t(a)(2).
\24\ See, e.g., Conference on Competition In Wholesale Power
Markets, Docket No. AD07-7-000.
\25\ See, e.g., Transcript of Feb. 27, 2007 Conference,
Conference on Competition in Wholesale Power Markets, Docket No.
AD07-7-000, at 123, 153-154, 244-249.
\26\ Revised Public Utility Filing Requirements, Order No. 2001,
67 FR 31043 (May 8, 2002), FERC Stats. & Regs. ] 31,127 (2002),
reh'g denied, Order No. 2001-A, 100 FERC ] 61,074, reh'g denied,
Order No. 2001-B, 100 FERC ] 61,342, order directing filing, Order
No. 2001-C, 101 FERC ] 61,314 (2002), order directing filing, Order
No. 2001-D, 102 FERC ] 61,334 (2003).
\27\ Comments of ISO/RTO Council, Docket No. AD06-11-000 (filed
Oct. 5, 2006) (describing information provided by ISOs and RTOs).
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III. Legal Context
11. With the passage of EPAct 2005, Congress affirmed a commitment
to competition in wholesale natural gas and electricity markets as
national policy, the fifth major Federal law in the last 30 years to do
so.\28\ As part of this commitment to competition, in the transparency
provisions, Congress charged the Commission with assuring the integrity
of the wholesale markets and assuring fair competition by facilitating
price transparency in those markets. It also significantly strengthened
the Commission's regulatory tools in the transparency provisions,
specifically, in new section 220 of the Federal Power Act and new
section 23 of the Natural Gas Act.
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\28\ See Energy Policy Act of 1992, Pub. L. No. 102-486, 106
Stat. 2776 (1992), codified as amended in scattered sections of 16
U.S.C.; Natural Gas Wellhead Decontrol Act of 1989, Pub. L. No. 101-
60, 103 Stat. 157 (1989), codified in scattered section of 15
U.S.C.; Public Utility Regulatory Policies Act of 1978, 16 U.S.C.
2601-2645 (2000); Natural Gas Policy Act of 1978, 15 U.S.C. 3301-
3442 (2000).
---------------------------------------------------------------------------
12. In new section 23(a)(1) of the Natural Gas Act, Congress
provided the Commission's mandate:
[[Page 20794]]
The Commission is directed to facilitate price transparency in
markets for the sale or transportation of physical natural gas in
interstate commerce, having due regard for the public interest, the
integrity of those markets, fair competition, and the protection of
consumers.\29\
\29\ To be codified at 15 U.S.C. 717(v)(a)(1). The electric
transparency provisions of the Federal Power Act are nearly
identical as to the electric wholesale markets. Section 220 of the
Federal Power Act, to be codified at 16 U.S.C. 824t. Because our
proposals herein address natural gas transparency, we do not analyze
the electric transparency provisions, although we expect that
analysis of electric transparency provisions would be substantially
similar.
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In new section 23(a)(2) of the Natural Gas Act, Congress left to
the Commission's discretion whether to enact rules to carry out this
mandate and provided that any rules implementing the transparency
provisions provide for public dissemination of the information
gathered:
The Commission may prescribe such rules as the Commission
determines necessary and appropriate to carry out the purposes of
this section. The rules shall provide for the dissemination, on a
timely basis, of information about the availability and prices of
natural gas sold at wholesale and in interstate commerce to the
Commission, State commissions, buyers and sellers of wholesale
natural gas, and the public.\30\
\30\ To be codified at 15 U.S.C. 717t-2(a).
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13. In new section 23(a)(3) of the Natural Gas Act, Congress
contemplated that the transparency provisions would differ from other
provisions in the Natural Gas Act, both as to the entities covered by
the Commission's jurisdiction and the possible involvement of third
parties in implementing the rules. That section reads, with emphasis
added:
The Commission may--
(A) Obtain the information described in paragraph (2) [i.e.,
information about the availability and prices of natural gas sold at
wholesale and interstate commerce] from any market participant; and
(B) Rely on entities other than the Commission to receive and
make public the information, subject to the disclosure rules in
subsection (b).\31\
\31\ To be codified at 15 U.S.C. 717t-2(a)(3).
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By using the term ``any market participant,'' Congress deliberately
expanded the universe subject to the Commission's transparency
authority beyond the entities subject to the Commission's rate and
certificate jurisdiction under other parts of the Natural Gas Act. The
term ``market participant'' is not defined in the Natural Gas Act and
is not on its face limited to otherwise jurisdictional entities.
14. Congress could have limited the scope of entities subject to
the Commission's transparency authority by referring to ``natural gas
company'' as defined in the Natural Gas Act \32\ or by referring to
section 1, 3, or 7 of the Natural Gas Act.\33\ The former approach
would have excluded intrastate pipelines from the Commission's
transparency authority. The latter approach would have entailed the
jurisdictional limitations of those sections, which exclude from the
Commission's jurisdiction first sales, sales of imported natural gas,
sales of imported liquefied natural gas, and sales and transportation
by entities engaged in production and gathering, local distribution,
``Hinshaw'' pipelines, or vehicular natural gas.\34\ These limitations
do not apply to the Commission's transparency authority. Given
Congress's use of the term ``market participant,'' the Commission's
transparency authority includes any person or form of organization,
including, for instance, natural gas producers, processors and users.
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\32\ Section 2(6) of the Natural Gas Act, 15 U.S.C. 717a(6).
\33\ 15 U.S.C. 717, 717b, 717f.
\34\ Section 1(b)-(d) of the Natural Gas Act, 15 U.S.C. 717(b)-
(d); section 3 of the Natural Gas Act, 15 U.S.C. 717b; section 7(f)
of the Natural Gas Act, 15 U.S.C. 717f(f); see, also, section 601(a)
of the Natural Gas Policy Act, 15 U.S.C. 3431(a). The Commission has
previously explained that the Natural Gas Policy Act of 1978 (NGPA
or Natural Gas Policy Act) and the Natural Gas Wellhead Decontrol
Act of 1989 narrowed its jurisdiction under the Natural Gas Act:
Under the NGPA, first sales of natural gas are defined as any
sale to an interstate or intrastate pipeline, LDC [Local
Distribution Company] or retail customer, or any sale in the chain
of transactions prior to a sale to an interstate or intrastate
pipeline or LDC or retail customer. NGPA Section 2(21)(A) sets forth
a general rule stating that all sales in the chain from the producer
to the ultimate consumer are first sales until the gas is purchased
by an interstate pipeline, intrastate pipeline, or LDC. Once such a
sale is executed and the gas is in the possession of a pipeline,
LDC, or retail customer, the chain is broken, and no subsequent
sale, whether the sale is by the pipeline, or LDC, or by a
subsequent purchaser of gas that has passed through the hands of a
pipeline or LDC, can qualify under the general rule as a first sale
on natural gas. In addition to the general rule, NGPA Section
2(21)(B) expressly excludes from first sale status any sale of
natural gas by a pipeline, LDC, or their affiliates, except when the
pipeline, LDC, or affiliate is selling its own production.
Order No. 644 at P 14.
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15. The Commission's authority to obtain information from ``any
market participant'' is not plenary. In the natural gas transparency
provisions, Congress limited that authority in two respects: the scope
of the markets at issue and the type of information to obtain and
disseminate. First, Congress directed the Commission to ``facilitate
price transparency in markets for the sale or transportation of
physical natural gas in interstate commerce * * *.'' \35\ Thus, any
information collected and disseminated must be for the purpose of price
transparency in those markets. We do not interpret this language to
limit the Commission to obtaining information only about physical
natural gas sales or transportation in those markets, provided that the
information obtained and disseminated pertains to price transparency in
those markets. Second, Congress provided that any rules ``provide for
the dissemination, on a timely basis, of information about the
availability and prices of natural gas sold at wholesale and in
interstate commerce * * *.'' \36\ Thus, the Commission's authority is
limited to ``information about the availability and prices of natural
gas sold at wholesale and in interstate commerce.'' \37\ Again, this
language does not limit the type of information the Commission could
collect to implement its mandate, provided that such information is
``about'' (i.e., pertains to) the ``availability and prices of natural
gas sold at wholesale and in interstate commerce.'' For instance, some
transportation or sales of natural gas is not in interstate commerce,
but, nonetheless, would affect the availability and prices of natural
gas at wholesale and in interstate commerce.
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\35\ Section 23(a)(1) of the Natural Gas Act, to be codified at
15 U.S.C. 717t-2(a)(1).
\36\ Section 23(a)(2) of the Natural Gas Act, to be codified at
15 U.S.C. 717t-2(a)(2).
\37\ Id.
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16. The natural gas transparency provisions further provide that
the Commission shall ``rely on existing price publishers and providers
of trade processing services to the maximum extent possible.'' \38\
Thus, Congress authorized the Commission to rely on third parties to
collect and disseminate transparency information. The Commission does
not herein authorize or empower third parties to collect or disseminate
information. Nonetheless, we expect that third parties may use the
information collected pursuant to the proposals in this NOPR and
repackage it, if sufficient demand for such services arises in the
information marketplace.\39\
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\38\ Section 23(a)(4) of the Natural Gas Act, to be codified at
15 U.S.C. 717t-2(a)(4).
\39\ We reiterate here our comments made previously regarding
price index publishers, data hubs, and other trade processing
services: we do not ``endors[e] any particular entity or approach,
but continue to encourage industry participants to find optimal
solutions to better wholesale price formation.'' Order on Further
Clarification of the Policy Statement at P 11.
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17. Also, in the transparency provisions, Congress cautioned the
Commission in providing for any
[[Page 20795]]
dissemination of information pursuant to the transparency provisions to
ensure that ``consumers and competitive markets are protected from the
adverse effects of potential collusion or other anticompetitive
behaviors by untimely disclosure of transaction-specific information.''
\40\
---------------------------------------------------------------------------
\40\ Section 23(b)(2) of the Natural Gas Act, to be codified at
15 U.S.C. 717t-2(b)(2).
---------------------------------------------------------------------------
18. Finally, new section 23(d)(2) of the natural gas transparency
provisions mandates an exemption from any reporting for ``natural gas
producers, processors, or users who have a de minimis market presence *
* *.'' \41\ This paragraph does not exempt all producers and all
processors from reporting, but exempts only producers that have a de
minimis market presence and only processors that have a de minimis
market presence.
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\41\ Section 23(d)(2) of the Natural Gas Act, to be codified at
15 U.S.C. 717t-2(d)(2).
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IV. Reporting of Flow Volume and Capacity by Intrastate Pipelines
A. Proposal
19. The Commission proposes that in order to make available the
information needed to track daily flows of natural gas throughout the
United States, each intrastate pipeline would be required to post daily
to the Internet the capacities of, and volumes flowing through, their
major receipt and delivery points and mainline segments. Postings would
be required within 24 hours from the close of the gas day on which gas
flowed, i.e., at or before 9 a.m. central clock time for flow that
occurred on the gas day that ended 24 hours before. To illustrate, the
volume of gas that flowed through a receipt point from 9 a.m. central
clock time on Monday through 9:00 a.m. central clock time on Tuesday
would be reported as a daily flow volume for that gas day and must be
reported by 9 a.m. Wednesday central clock time. The Commission would
implement this proposal by adding a new Sec. 284.14 to its
regulations.
20. As explained in greater detail below, by adding information on
intrastate pipeline flows to the information already available from
interstate pipelines, the Commission, market participants, and the
public could develop a better understanding of daily supply and demand
conditions that directly affect U.S. wholesale natural gas markets.
While distinctions between intrastate and interstate natural gas
markets may be meaningful from a legal perspective, they are not
meaningful from the perspective of market price formation. The U.S.
natural gas market produces geographically diverse prices through the
direct influence of supply, demand and transportation availability, but
without ever differentiating interstate from intrastate commerce.
Consequently, this proposal to increase information from intrastate
pipelines would directly ``facilitate price transparency for the sale *
* * of physical natural gas in interstate commerce'' as authorized in
the natural gas transparency provisions.\42\
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\42\ Section 23(a)(1) of the Natural Gas Act, to be codified at
15 U.S.C. 717t-2(a)(1).
---------------------------------------------------------------------------
B. Legal Considerations
21. As discussed above, the natural gas transparency provisions
provide the authority for the Commission to obtain information from
otherwise non-jurisdictional entities, including intrastate pipelines.
The proposal to require intrastate pipelines to post flow information
raises the additional issue whether such information qualifies as
``information about the availability and prices of natural gas sold at
wholesale in interstate commerce.'' \43\ If not, the Commission would
be foreclosed from requiring the posting.
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\43\ Section 23(a)(2) of the Natural Gas Act, to be codified at
15 U.S.C. 717t-2(a)(2).
---------------------------------------------------------------------------
22. The Commission believes that the information covered by the
instant proposal qualifies as ``information about the availability and
prices of natural gas sold at wholesale and in interstate commerce.''
Notwithstanding their intrastate status, most major intrastate
pipelines today transport or buy and sell wholesale natural gas that
eventually enters or at least impacts the interstate natural gas
market. Further, supply and demand in intrastate markets have a direct
effect on prices of gas destined for interstate markets because both
intrastate and interstate consumers draw on the same sources of supply.
This is the case because of the statutory, regulatory and market
changes that have taken place in the last three decades.
23. In 1978, in the Natural Gas Policy Act, Congress allowed an
intrastate pipeline to transport natural gas in interstate commerce on
behalf of any interstate pipeline or local distribution company served
by an interstate pipeline, without losing its intrastate status.\44\
Congress likewise permitted an intrastate pipeline to sell natural gas
to any interstate pipeline or any local distribution company served by
any interstate pipeline, without losing its intrastate status.\45\ In
addition, at the same time that the Commission issued Order No. 636 in
1992, it promulgated a new subpart of Part 284 (revised several times
in the past 15 years) that provides blanket authority to any person who
is not an interstate pipeline (including intrastate pipelines) to make
sales for resale of natural gas in interstate commerce.\46\ This
authorization is a limited jurisdiction certificate, which means that
the holder does not become subject to the panoply of Natural Gas Act
regulation by exercising its rights under the certificate.\47\
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\44\ See section 311(a)(2) of the Natural Gas Policy Act, 15
U.S.C. 3371(a)(2); see also 18 CFR part 284, subpart C (Certain
Transportation by Intrastate Pipelines).
\45\ See section 311(b) of the Natural Gas Policy Act, 15 U.S.C.
3371(b); see also 18 CFR part 284, subpart D (Certain Sales by
Intrastate Pipelines).
\46\ Pipeline Service Obligations and Revisions to Regulations
Governing Self-Implementing Transportation and Regulation of Natural
Gas Pipelines After Partial Wellhead Decontrol, Order No. 636, 57 FR
13267 (Apr. 16, 1992), FERC Stats. & Regs. ] 30,939 (1992), order on
reh'g, Order No. 636-A, 57 FR 36128 (Aug. 12, 1992), FERC Stats &
Regs. ] 30,950 (1992), order on reh'g, Order No. 636-B, 61 FERC ]
61,272 (1992), order on reh'g, 62 FERC ] 61,007 (1993), aff'd in
part and remanded in part sub nom United Distribution Cos. v. FERC,
88 F.3d 1104 (D.C. Cir. 1996), order on remand, Order No. 636-C, 78
FERC ] 61,186 (1997).
\47\ See 18 CFR part 284, subpart L (Certain Sales for Resale by
Non-interstate Pipelines).
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24. The market understandably reacted to these statutory and
regulatory changes since 1978. As relevant here, and explained in
greater detail below, natural gas sold at or destined to be sold at
wholesale in the interstate market is frequently exchanged or the
transactions consummated at market hubs where interstate and intrastate
pipelines are interconnected (e.g., Waha, Katy, Houston Ship Channel,
and Carthage in Texas and at Henry Hub in Louisiana). Prices formed at
these hubs are, in effect, prices for wholesale transactions in
interstate commerce, even if a portion of the gas priced at each market
hub is consumed intrastate. In addition, transfer of natural gas can
take place directly between parties who ship gas on both intrastate and
interstate pipelines at any pipeline interconnection.
C. Discussion
25. Currently, through the availability of information regarding
daily scheduled flows of natural gas through interstate pipelines,
market participants have an increased, daily understanding of natural
gas markets, including regional conditions and the pipeline capacity
available to resolve different geographic supply/demand balances. This
is due in part to Order No. 637, where the Commission required posting
of capacity and scheduled volume information on interstate pipelines
with
[[Page 20796]]
the direct intention of allowing shippers to monitor capacity
availability.\48\ Accordingly, interstate pipelines must post available
capacity information, specifically:
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\48\ Regulation of Short-Term Natural Gas Transportation
Services and Regulation of Interstate Natural Gas Transportation
Services, Order No. 637, 65 FR 10156, at 10204-10205, (Feb. 25,
2000), FERC Stats. & Regs. ] 31,091, at 31,320-31,321 (2000); order
on reh'g, Order No. 637-A, 65 FR 35706 (June 5, 2000), FERC Stats. &
Regs. ] 31,099 (2000); order on reh'g, Order No. 637-B, 65 FR 47284
(Aug. 2, 2000), affirmed in relevant part, Interstate Natural Gas
Ass'n of America v. FERC, 285 F.3d 18 (D.C. Cir. 2002), order on
remand, 101 FERC ] 61,127, order on reh'g, 106 FERC ] 61,088, aff'd
sub nom. American Gas Ass'n v. FERC, 428 F.3d 255 (D.C. Cir. 2005)
(Order No. 637).
The availability of capacity at receipt points, on the mainline, at
delivery points, and in storage fields, whether the capacity is
available directly from the pipeline or through capacity release,
the total design capacity of each point or segment on the system;
the amount scheduled at each point or segment whenever capacity is
scheduled, and all planned and actual service outages or reductions
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in service capacity.\49\
\49\ 18 CFR 284.13(d).
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In Order No. 637, the Commission anticipated that such postings
would provide useful information regarding supply and demand
fundamentals:
The changes to the Commission's reporting requirements will
enhance the reliability of information about capacity availability
and price that shippers need to make informed decisions in a
competitive market as well as improve shippers' and the Commission's
ability to monitor marketplace behavior to detect, and remedy
anticompetitive behavior.\50\
\50\ Order No. 637, 65 FR at 10169.
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26. Today, interested market participants as well as commercial
vendors retrieve this information from the Web sites of interstate
pipelines to obtain schedule information that is then used to estimate
a variety of supply and demand conditions including geographic and
industrial sector consumption, storage injections and withdrawals and
regional production in almost real-time.\51\ Market participants have
come to rely on this information to help price transactions. Commission
staff has also come to rely on this information to perform its
oversight and enforcement functions. In fact, observers believe that
this information posting has contributed to market transparency by
revealing the underlying volumetric (or availability) drivers behind
price movements.\52\
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\51\ See, e.g., Comments of Bentek Energy, LLC., Docket No.
AD06-11-000 (filed Oct. 10, 2006).
\52\ See, e.g., Comments of Platt's, at p. 11-13, Docket No.
AD06-11-000 (information regarding the supply and demand of natural
gas explains prices and such information is available from
interstate pipelines, but not intrastate pipelines).
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27. Notwithstanding the contribution of posted interstate schedule
information to the transparency of price and availability of natural
gas, this information cannot provide a complete picture of natural gas
flows in the United States--or even those flows directly relevant to
the pricing of natural gas flowing in interstate commerce. Several
major U.S. natural gas pricing points sit at the confluence of multiple
interstate and intrastate pipelines. A recent study by the Department
of Energy's Energy Information Administration (EIA) identified 28
national market centers or pricing hubs, of which 13 are served by a
combination of interstate and intrastate pipelines.\53\ The table below
shows the capacity of interstate and intrastate pipelines connected to
each of these 13 hubs.
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\53\ Department of Energy, Energy Information Administration,
Natural Gas Market Centers and Hubs: A 2003 Update, Oct. 2003,
https://www.eia.doe.gov/pub/oil_gas/natural_gas/feature_articles/
2003/market_hubs/mkthubs03.pdf.
Table 1.--Inter- and Intrastate Pipeline Delivery Capacity at Selected U.S. Natural Gas Pricing Points
----------------------------------------------------------------------------------------------------------------
Receipt and delivery capacity
-------------------------------
Hub name State Interstate Intrastate
pipelines pipelines
(MMcfd) (MMcfd)
----------------------------------------------------------------------------------------------------------------
Carthage...................................... TX.............................. 1,120 1,355
Henry Hub..................................... LA.............................. 2,770 1,215
Katy--Enstore................................. TX.............................. 1,370 3,815
Katy--DEFS.................................... TX.............................. 260 2,360
Mid Continent................................. KS.............................. 1,112 627
Moss Bluff.................................... TX.............................. 1,050 1,800
Nautilus...................................... LA.............................. 1,200 1,350
Perryville.................................... LA.............................. 3,652 350
Aqua Dulce.................................... TX.............................. 855 835
Waha--Lone Star............................... TX.............................. 810 1,140
Waha--Encina.................................. TX.............................. 525 800
Waha--El Paso................................. TX.............................. 1,165 1,660
Waha--DEFS.................................... TX.............................. 300 1,850
----------------------------------------------------------------------------------------------------------------
Source: Unpublished Energy Information Administration update to March 2005 of information presented in Natural
Gas Market Centers and Hubs: A 2003 Update, October 2003.
28. Many of these pricing points are closely connected to other
regions of the United States, influencing prices across the country.
The figure below shows the location and flow patterns of natural gas
moving between intrastate and interstate markets through several of
these pricing points.
BILLING CODE 6717-01-P
[[Page 20797]]
[GRAPHIC] [TIFF OMITTED] TP26AP07.000
29. One pricing point directly connected to both interstate and
intrastate pipelines is Henry Hub, Louisiana, the location for delivery
of natural gas under the New York Mercantile Exchange's (NYMEX) futures
contract. Monthly settlement of NYMEX's Henry Hub natural gas future
contract has become important in determining a variety of monthly index
prices used to set natural gas prices in a variety of transactions,
some in interstate commerce, particularly along the East Coast and Gulf
Coast of the United States. The nature of this influence is detailed in
Commission staff's 2006 State of the Markets Report.\54\
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\54\ Federal Energy Regulatory Commission, 2006 State of the
Markets Report, at 48-50 (Jan. 2007), https://www.ferc.gov/market-
oversight/market-oversight.asp, (follow link to the State of the
Markets Full Report).
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30. Purchasers of natural gas in interstate commerce draw on the
same sources of supply as users and buyers of natural gas in intrastate
commerce. For example, much of the recent Barnett Shale development in
the Fort Worth basin flows into intrastate systems before moving into
interstate markets. In total, slightly more than 40 percent of total
on-shore production in Texas is connected to interstate pipelines, less
than 60 percent in Louisiana and less than 80 percent in Oklahoma.\55\
Though daily volume flowing from intrastate into interstate pipelines
can be estimated, the supply dynamics that make these volumes available
cannot.
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\55\ BENTEK Energy, LLC analysis of supply scheduled into
interstate pipelines compared with EIA data from its table Natural
Gas Gross Withdrawals and Production for Texas and Oklahoma
available at https://tonto.eia.doe.gov/dnav/ng/ng_prod_sum_dcu_
NUS_m.htm.
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31. Send-out from current liquefied natural gas (LNG) terminals--
Cove Point, Elba Island, Everett and Lake Charles--is observable
through interstate receipt point flow postings. Of seven approved, but
not yet operational, terminals in Texas and Louisiana, all would
discharge in whole or in part to intrastate pipelines.\56\
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\56\ Texas Railroad Commission, Onshore LNG Supply Terminal
Projects Proposed for Texas (June 28, 2006), https://
www.rrc.state.tx.us/commissioners/carrillo/press/LNGprojects.html.
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32. The Commission proposes to require posting of actual flow
information from intrastate pipelines rather than scheduled volumes, as
it does for interstate pipelines. Intrastate pipelines operate in
different regulatory and business contexts from interstate pipelines,
making scheduled volumes less helpful in estimating movement of natural
gas. For example, interstate pipelines primarily operate as open access
transporters, not as sellers of natural gas. Scheduled volumes
represent the communication that must occur between the shipper and the
pipeline to conduct most of their business. As a consequence,
interstate receipt, transportation and delivery schedules, as updated
before and
[[Page 20798]]
through the delivery day, reflect actual flows on their systems as
well.\57\ In contrast, intrastate pipelines often sell gas directly to
customers under a variety of regulatory regimes. Much of such gas can
flow without being scheduled, especially for customers' variable
requirements. Similarly, many direct pipeline purchases from the
wellhead and from smaller gathering systems need not be scheduled.
Given the different business models, and the likelihood that scheduling
information on intrastate pipelines would be unhelpful, we conclude
that actual flow information, posted after-the-fact, would be needed to
develop an understanding of these flows.
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\57\ In the case of ``no-notice'' service, see 18 CFR
284.7(a)(4), interstate pipeline schedules do not reflect flows.
Consequently, information about interstate flows in areas using no-
notice service is less useful.
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33. The daily posting of flow information by intrastate pipelines
would provide several benefits to the functioning of natural gas
markets in ways that would protect the integrity of physical,
interstate natural gas markets, protect fair competition in those
markets and consequently serve the public interest by better protecting
consumers. First, by providing a more complete picture of supply and
demand fundamentals, these postings would improve market participants'
ability to assess supply and demand and to price physical natural gas
transactions. Second, during periods when the U.S. natural gas delivery
system is disturbed, for instance due to hurricane damage to facilities
in the Gulf of Mexico, these postings would provide market participants
a clearer view of the effects on infrastructure, the industry, and the
economy as a whole. Finally, these postings would allow the Commission
and other market observers to identify and remedy potentially
manipulative activity. We discuss each of these points in turn.
34. First, the proposed daily intrastate pipeline capacity and
volume postings would improve market participants' ability to assess
supply and demand and price physical natural gas transactions by
providing a more complete picture of supply and demand
fundamentals.\58\ As discussed above and noted in comments filed in
these proceedings, interstate pipeline information does not provide a
complete picture of the supply and demand fundamentals that apply to
interstate commerce because much of the natural gas in the U.S. is
moved through the intrastate pipeline system.\59\
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\58\ See, e.g., Comments of Platt's, at p. 11, Docket No. AD06-
11-000 (filed Nov. 1, 2006) (explaining that, to understand prices,
``the marketplace must look to * * * information on [the]
availability of and demand for natural gas * * *.'').
\59\ See Comments of Platt's, at p. 13, Docket No. AD06-11-000
(filed Nov. 1, 2006) (stating that much of the fundamental supply
and demand data is missing from natural gas markets and advocating
for reporting by intrastate pipelines).\
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35. Second, the proposed daily intrastate pipeline capacity and
volume postings would provide market participants--and the Commission
in its market oversight efforts--a clearer view of the effects on
infrastructure, the industry, and the economy as a whole during periods
when the U.S. natural gas delivery system is disturbed. For example,
after landfall of hurricanes Katrina and Rita in late 2005, even the
most interested of governmental and commercial market observers were
not able to obtain complete information regarding the extent of the
damage at production facilities.\60\ By monitoring receipt and delivery
points for production facilities on interstate pipelines, market
participants were able to obtain only a limited sense of production
facility output.\61\ Similarly, market participants, State commissions
and others were unable to assess effects on natural gas consumption in
the Gulf Coast, including consumption by the petrochemical industry,
for some period. The significance and duration of these effects on this
industry--vulnerable to energy price and availability disruptions--
remain unclear. This proposal would allow interested governmental and
private parties to gain a much better picture of disruptions in natural
gas flows in the case of future hurricanes in the Gulf region.\62\
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\60\ See, e.g., Transcript of the Oct. 13, 2006 Technical
Conference (Tr.), at 25, Transparency Provisions of the Energy
Policy Act of 2005, Docket No. AD06-11-000 (Comments of Sheila
Rappazzo, Chief of Policy Section of the Office of Gas and Water of
the New York State Department of Public Service).
\61\ Tr. at 25 (Comments of Sheila Rappazzo) (describing how
after the 2005 hurricanes data availability differed widely).
\62\ Along these lines, this proposal is consistent with a
recent Commission final rule and a proposed survey by EIA. On August
23, 2006, the Commission revised its reporting regulations to
require jurisdictional natural gas companies to report damage to
facilities due to a natural disaster or terrorist activity that
results in a reduction in pipeline throughput or storage
deliverability. Revision of Regulations to Require Reporting of
Damage to Natural Gas Pipeline Facilities, Order No. 682, 71 FR
51098 (Aug. 29, 2006), FERC Stats. and Regs. ] 31,227 (2006), order
on reh'g, 118 FERC ] 61, (2007). On January 30, 2007, EIA proposed
to survey natural gas processing plants ``to monitor their
operational status and assess operations of processing plants during
a period when natural gas supplies are disrupted.'' Agency
Information Collection Activities, 72 FR 4248 (Jan. 30, 2007). The
purpose of the survey would be to ``inform the public, industry, and
the government about the status of supply and delivery activities in
the area affected by the disruption.'' Id.
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36. Third, the proposed daily intrastate pipeline capacity and
volume postings would allow the Commission and other market observers
to identify and remedy potentially manipulative activity more actively
by tracking price movement in the context of natural gas flows.\63\ In
particular, information regarding availability on intrastate pipelines
could be used to track manipulative or unduly discriminatory behavior
intended to cause harm to consumers by distorting market prices in
interstate commerce. For example, Commission staff overseeing markets
routinely check for unused interstate pipeline capacity between
geographically distinct markets with substantially different prices as
a sign that flows may be managed to manipulate prices. Given the
importance of intrastate pipeline connections to 13 major pricing hubs,
including Henry Hub, as discussed above, the lack of flow information
on intrastate pipelines hinders the Commission's market oversight and
enforcement efforts.
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\63\ See Prohibition of Energy Market Manipulation, Order No.
670, 71 FR 4244 (Jan. 26, 2006), FERC Stats. & Regs. ] 31,202 (2006)
(implementing section 4A of the Natural Gas Act, to be codified at
15 U.S.C. 717c-1, which prohibits natural gas market manipulation),
reh'g denied, 114 FERC ] 61,300 (2006).
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37. This benefit comports with EPAct 2005, in which Congress
directed the Commission to facilitate price transparency in physical,
interstate natural gas markets ``with due regard for the public
interest, the integrity of those markets, fair competition, and the
protection of consumers.'' \64\ By this language, Congress intended
that the improvement of Commission market oversight activities is a
legitimate justification for proposing rules under the natural gas
transparency provisions. Monitoring and preventing manipulative or
unduly discriminatory activity would meet the Commission's
responsibility for ensuring the integrity of the physical interstate
natural gas markets. The proposal to make intrastate pipeline
information available to the public would assist the Commission in
fulfilling that responsibility.
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\64\ Section 23(a)(1) of the Natural Gas Act, to be codified at
15 U.S.C. 717t-2(a)(1).
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D. Solicitation of Comments
38. The Commission seeks comments on its proposal to be codified in
subpart A of part 284 of the Commission's regulations that intrastate
pipelines be required to post daily to the Internet the capacities of,
and volumes flowing through their major receipt and delivery
[[Page 20799]]
points and mainline segments.\65\ In particular, the Commission seeks
comment on whether market participants believe that the posting of flow
information on intrastate pipelines would provide valuable additional
information on supply and demand fundamentals for interstate markets
and whether such information would be sufficient. The Commission also
seeks comment on the burden this proposal would impose on intrastate
pipelines. Those providing burden estimates should provide support for
their estimate and compare that estimate to the burden currently borne
by interstate pipelines that report capacity availability pursuant to
Sec. 284.13(d) of the Commission's regulations.
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\65\ The Commission is not proposing to amend subparts C and D
of part 284, because those subparts govern interstate transactions
by intrastate pipelines under the authority of the Natural Gas
Policy Act. The instant proposal is based on the Commission's
Natural Gas Act jurisdiction as amended by EPAct 2005.
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39. The Commission seeks comment on how to define ``major'' receipt
and delivery points and mainline segments on intrastate systems. The
Commission does not wish to include extremely small points connected to
one or a few customers, which it would consider burdensome and possibly
even anti-competitive in certain cases.
40. The proposal does not make an exception for intrastate
pipelines transporting de minimis volumes. Although the natural gas
transparency provisions mandate that the Commission create an exception
from reporting requirements for ``natural gas producers, processors, or
users who have a de minimis market presence,'' they do not mandate a de
minimis exception for natural gas pipelines.\66\ The Commission seeks
comment on whether the Commission should create a de minimis threshold
under which certain intrastate pipelines should not be required to
report or should create a method for certain intrastate pipelines to
seek waiver of these requirements. How would such a de minimis
threshold be measured, for instance, by throughput volume? The
Commission also seeks comment on whether the proposed flow posting
requirements should apply to all intrastate pipelines, or whether it
should be limited to intrastate pipelines in states where a significant
percentage of supply and demand information is not observable through
current interstate pipeline posting requirements.
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\66\ Section 23(d)(2) of the Natural Gas Act, to be codified at
15 U.S.C. 717t-2(d)(2).
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41. The Commission seeks comment on the difference in approach
applied to intrastate and interstate pipelines by requiring intrastate
pipelines to post actual natural gas flows instead of scheduled flows.
Should the Commission require intrastate pipelines to post information
about capacity availability at major points on a daily basis, similar,
or identical, to the information that interstate pipelines are required
to post under Sec. 284.13(c)? Is it possible to determine major
intrastate pipeline flows using schedule information?
42. Regarding the method of posting, the Commission seeks comment
on the format for posting flow information by intrastate pipelines,
including whether intrastate pipelines should follow the standards of
the North American Energy Standards Board. If not, what additional
accommodations would need to be made for their different operations?
Further, how would Sec. 284.12, which outlines formatting requirements
for interstate pipeline postings be modified to accommodate intrastate
pipelines and to accommodate posting of flow information as opposed to
scheduling information? Also, the timing in the proposal requires the
posting of flow information within 24 hours from the close of the gas
day on which gas flows (i.e., on or before 9 a.m. central clock time
for flows occurring on the gas day that ended 24 hours before). Does
this timing create an undue burden? Is it sufficiently timely?
43. Finally, the Commission seeks c
