Pipeline Posting Requirements Under Section 23 of the Natural Gas Act, 73494-73518 [E8-28097]

Download as PDF 73494 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Part 284 [Docket No. RM08–2–000; Order No. 720] Pipeline Posting Requirements Under Section 23 of the Natural Gas Act November 20, 2008. Federal Energy Regulatory Commission. ACTION: Final rule. AGENCY: rwilkins on PROD1PC63 with RULES3 SUMMARY: In this Final Rule, the Commission adds regulations to require certain major non-interstate natural gas pipelines to post daily scheduled volume information and design capacity for certain points. The Commission also revises its regulations to require interstate natural gas pipelines to post information regarding the provision of no-notice service. The posting requirements will facilitate price transparency in markets for the sale or transportation of physical natural gas in interstate commerce to implement section 23 of the Natural Gas Act, 15 U.S.C. 717t–2 (2000 & Supp. V 2005). DATES: Effective Date: This rule will become effective January 2, 2009. FOR FURTHER INFORMATION CONTACT: Christopher Ellsworth (Technical), Office of Enforcement, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502–8228, Gabriel Sterling (Legal), Office of Enforcement, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502–8891. SUPPLEMENTARY INFORMATION: Table of Contents I. Introduction and Summary II. Procedural Background III. Authority for the Rule A. Posting NOPR B. Comments C. Commission Determination IV. Need for the Rule A. Posting NOPR B. Comments C. Commission Determination V. Pipeline Posting Requirements A. Overview B. Definition of Major Non-Interstate Pipeline 1. Posting NOPR 2. Comments 3. Commission Determination C. Scheduled Flow Information on Major Non-Interstate Pipelines 1. Posting NOPR 2. Comments 3. Commission Determination D. Receipt and Delivery Point Posting for Major Non-Interstate Pipelines VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 1. Posting NOPR 2. Comments 3. Commission Determination E. Exemptions to the Major Non-Interstate Pipeline Posting Requirements 1. Non-Interstate Pipelines That Are Upstream of a Processing, Treatment, or Dehydration Plant 2. Non-Interstate Pipelines that Deliver More Than Ninety-Five Percent of Volumes to Retail Customers 3. Non-Interstate Storage Providers 4. Other Exemptions and Safe Harbor F. Posting of No-Notice Service Information by Interstate Pipelines 1. Posting NOPR 2. Comments 3. Commission Determination VI. Effective Date of the Final Rule and Compliance Deadlines VII. Information Collection Statement VIII. Environmental Analysis IX. Regulatory Flexibility Act X. Document Availability XI. Effective Date and Congressional Notification I. Introduction and Summary 1. This Final Rule implements the Commission’s authority under section 23 of the Natural Gas Act (NGA),1 as added by the Energy Policy Act of 2005 (EPAct 2005),2 to facilitate transparency in markets for the sale or transportation of natural gas in interstate commerce by requiring major non-interstate pipelines and interstate pipelines to post certain data on their Internet Web sites. Specifically, the Final Rule requires major non-interstate pipelines, defined as those natural gas pipelines that deliver more than 50 million MMBtu per year, to post scheduled flow information and to post information for each receipt and delivery point with a design capacity greater than 15,000 MMBtu per day. The Final Rule also requires that interstate pipelines post information regarding no-notice service. 2. The postings required here will increase price transparency in the interstate natural gas markets by providing information about the supply and demand fundamentals that underlie those markets. In this way, the Commission will meet the goal set forth by Congress in section 23 of the NGA ‘‘to facilitate price transparency in markets for the sale or transportation of physical natural gas in interstate commerce,’’ 3 and, at the same time, will respond to commenters’ concerns about the potential cost and burden of posting flow information. 1 Section 23 of the Natural Gas Act; 15 U.S.C. 717t–2 (2000 & Supp. V 2005). 2 Energy Policy Act of 2005, Public Law No. 109– 58, sections 1261 et seq., 119 Stat. 594 (2005). 3 Section 23(a)(1) of the NGA; 15 U.S.C. 717t– 2(a)(1) (2000 & Supp. V 2005). PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 II. Procedural Background 3. The posting requirements adopted here are grounded in the Commission’s authority under section 23 of the NGA (as added by EPAct 2005), which directs the Commission, in relevant part, to obtain and disseminate ‘‘information about the availability and prices of natural gas at wholesale and in interstate commerce.’’ 4 This provision enhances the Commission’s authority to ensure confidence in the nation’s natural gas markets. The Commission’s market-oriented policies for the wholesale natural gas industry require that interested persons have broad confidence that reported market prices accurately reflect the interplay of legitimate market forces. Without confidence in the efficiency of price formation, the true value of transactions is very difficult to determine. 4. On April 19, 2007, the Commission issued a Notice of Proposed Rulemaking (Initial NOPR) to explore methods to implement our authority under NGA section 23. In the Initial NOPR, the Commission set forth two separate proposals. The first proposal addressed an annual reporting requirement for certain natural gas market participants and the second proposal addressed a daily requirement for intrastate pipelines to post flow information.5 On December 21, 2007, the Commission bifurcated the proceeding into two dockets: The Commission addressed the annual reporting requirement in a Final Rule issued in Docket No. RM07–10– 000,6 and addressed the daily posting requirement for natural gas pipelines in a new Notice of Proposed Rulemaking, in Docket No. RM08–2–000 (Posting NOPR). 5. In the Posting NOPR, we proposed to require both interstate and certain major non-interstate pipelines to post on public Internet Web sites capacity, daily scheduled flow and daily actual flow information. The proposal required posting of capacity and daily actual flow information by some intrastate pipelines, with some changes relative to 4 Section 23(a)(2) of the NGA, 15 U.S.C. 717t– 2(a)(2) (2000 & Supp. V 2005). 5 Initial NOPR at P 1–2. In this preamble, we use the term ‘‘flow information’’ generically to include both scheduled volume information and actual flow information. We use the term ‘‘scheduled volumes’’ herein because it is more precise: The terms ‘‘scheduled flows’’ or ‘‘scheduled flow volumes’’ could be confused with the term ‘‘actual flows.’’ In the Posting NOPR, we used the terms ‘‘scheduled flows’’ and ‘‘scheduled flow volumes.’’ 6 Transparency Provisions of Section 23 of the Natural Gas Act, Order No. 704, 73 FR 1014 (Jan. 4, 2008), FERC Stats. and Regs. ¶ 31,260 (2007), order on reh’g, Order No. 704–A, 73 FR 55726 (Sept. 26, 2008), FERC Stats. & Regs. ¶ 31,275 (2008) reh’g pending. E:\FR\FM\02DER3.SGM 02DER3 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations the Initial NOPR. Under the proposal contained in the Posting NOPR, interstate pipelines would be required to post daily actual flow information in addition to the currently required posting of capacity and daily scheduling information. Major non-interstate pipelines would be required to post daily scheduled flow information in addition to capacity and daily actual flow information. As explained in the Posting NOPR, the Commission believed that the proposal would facilitate price transparency in markets for the sale or transportation of physical natural gas in interstate commerce. 6. The Commission issued the Posting NOPR to develop the record more fully, particularly as to the proposals regarding interstate natural gas pipelines. The Posting NOPR was intended to give interstate natural gas pipelines sufficient notice of the changes that seemed necessary to implement adequately section 23 of the NGA.7 Also, in the Posting NOPR, we directed staff to hold a technical conference to address implementation issues associated with the proposal, such as obtaining and posting actual flow information and obtaining and posting information from storage facilities.8 7. As directed by the Commission, staff held a technical conference on April 3, 2008. Comments on the Posting NOPR were due on March 13, 2008; reply comments on April 14, 2008. The Commission received fifty-five comments and nineteen reply comments.9 III. Authority for the Rule rwilkins on PROD1PC63 with RULES3 A. Posting NOPR 8. In the Posting NOPR, we provided our interpretation of section 23 of the NGA and the Commission’s authority to enhance transparency in the interstate natural gas markets. We concluded that Congress granted us broad authority in EPAct 2005, placing non-interstate pipelines within the Commission’s transparency authority under section 23 of the GA in order to ensure—for the entirety of the wholesale, physical natural gas market—transparency of price and availability, including transparency of market price formation. As we stated in both the Initial NOPR and Posting NOPR, ‘‘[w]hile distinctions between intrastate and interstate natural gas markets may be meaningful from a legal perspective, they are not 7 Posting NOPR at P 2. at P 8. 9 A list of commenters and abbreviations for the commenters is contained in Appendix A. 8 Id. VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 meaningful from the perspective of market price formation.’’ 10 B. Comments 9. Several commenters agree that the Commission has broad transparency authority under section 23 of the NGA, including authority over non-interstate pipelines.11 APGA supports the Commission’s contention that the statute authorizes obtaining information from ‘‘any market participant’’ and not just ‘‘natural gas companies’’ as ‘‘tacit recognition that in order to collect the necessary information about the wholesale and interstate market, the Commission might well need to collect information from entities not historically subject to FERC jurisdiction.’’ 12 10. A significant number of commenters hold a different view, and contend that the term ‘‘any market participant,’’ contained in section 23(a)(3)(A) of the NGA, does not include non-interstate pipelines. TPA asserts that the term ‘‘any market participant’’ is limited to the participants in wholesale interstate natural gas markets.13 Thus, according to TPA, the Commission exceeds its authority under the transparency provisions by subjecting ‘‘‘non-interstate’ entities that do not participate in interstate sales markets’’ to its transparency authority.14 Further, TPA contends that had ‘‘Congress sought to expand the Commission’s jurisdiction to entities that do not participate in the interstate commerce market, it could have used the language ‘affecting interstate commerce,’ which has historically been read as a more expansive grant of authority.’’ 15 Similarly, Chevron Pipelines contends that because Congress did not expressly include intrastate pipelines in section 23, ‘‘one must conclude that the Commission’s jurisdiction was intended by Congress to be no greater following the enactment of section 23 than that which existed prior to the passage of that section.’’ 16 11. Certain commenters assert that, contrary to the Commission’s conclusions, the de minimis exemption does not aid in the interpretation of the term ‘‘any market participant.’’ TPA interprets the de minimis exemption to 10 Initial NOPR at P 20; Posting NOPR at P 25. Comments at 3–4; TIPRO Comments at 1–2; Yates Comments at 4. 12 APGA Comments at 4. 13 TPA Comments at 35. 14 Id. at 36. 15 Id. at 39 (citing City of Centralia v. FERC, 661 F.2d 787 (9th Cir. 1981) and Columbia Gas Transmission Corp., 3 FERC ¶ 61,115, at 61,239 n.1 (1978)). 16 Chevron Pipelines Comments at 9–10. 11 APGA PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 73495 mean that ‘‘the Commission should not require those with a de minimis presence in the interstate market to be subject to an added reported burden.’’ 17 12. Several commenters argue that section 1 of the NGA bars the Commission from obtaining and disseminating information from a noninterstate pipeline. TPA claims that sections 1(b) and 1(c) of the NGA limit the Commission’s transparency authority under section 23 of the NGA.18 TPA also contends that ‘‘extensive case law show[s] that Congress has consistently respected the distinction between interstate and intrastate sale and transportation of natural gas.’’ 19 Similarly, Copano Energy believes that section 1(b) of the NGA precludes the Commission from exercising its transparency authority over transportation of natural gas wholly in intrastate commerce.20 In support, Copano Energy points to Union Oil Company of America v. FPC,21 in which the court stated that the ‘‘Natural Gas Act limits the gathering of intrastate data to gathering it from companies falling under the Commission’s jurisdiction.’’ 22 Commenters argue that because Congress did not revise section 1 of the NGA, that section precludes the Commission from exercising transparency authority over noninterstate pipelines.23 13. Several commenters state that a posting rule on non-interstate pipelines would constitute improper regulation of a non-interstate pipeline’s operations and rates. TPA contends that the pipeline posting requirement would ‘‘directly regulate the operations of noninterstate pipelines’’ because the posting of data regarding mainline segments would require many non-interstate pipelines ‘‘to define segments on their systems and to install metering equipment to measure gas at those segments.’’ 24 Such meters, in turn, would affect the operations of pipelines, hinder efficiency and raise prices.25 Similarly, DCP Midstream holds that a pipeline posting requirement would impermissibly interfere with states’ regulation of intrastate gas pipelines. DCP Midstream reasons that the costs to meet the requirement would be borne by intrastate customers and rate payers 17 TPA Comments at 44. at 42. 19 Id. at 43. 20 Copano Energy Comments at 6. 21 542 F.2d 1036 (9th Cir. 1976). 22 Id. at 1039. 23 See, e.g., Copano Energy Comments at 6. 24 TPA Comments at 40. 25 Id. 18 Id. E:\FR\FM\02DER3.SGM 02DER3 73496 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations which would encroach upon state ratemaking authority.26 14. Other commenters assert that two clauses in section 23 preclude the Commission’s authority to obtain information about gas that flows on a non-interstate pipeline because such gas is sold only in intrastate commerce, not in interstate commerce. First, commenters contend that the statutory language in subsection (a)(1) ‘‘for the sale or transportation of physical natural gas in interstate commerce’’ limits the type of price transparency that the Commission may facilitate.27 Second, commenters contend that the statutory language in subsection (a)(2), which permits the Commission to issue rules that provide for the ‘‘disseminat[ion] * * * [of] information about the availability and prices of natural gas sold at wholesale and in interstate commerce,’’ does not include information about gas that flows on a non-interstate pipeline, because it is not ‘‘sold at wholesale and in interstate commerce.’’ 28 For instance, TPA argues that this language does not authorize the Commission to mandate the posting of ‘‘data about transportation of gas that may never be ‘sold at wholesale and in interstate commerce,’ ’’ as it is ‘‘directed at increased transparency in sales and transportation in interstate commerce.’’ 29 C. Commission Determination rwilkins on PROD1PC63 with RULES3 15. Section 23 of the NGA gives the Commission broad authority to facilitate price transparency in the interstate natural gas market. For that purpose, section 23 further authorizes the Commission to obtain and disseminate information. As now explained, the regulations promulgated in this Final Rule do not exceed that broad authority. 16. Section 23(a)(1) of the NGA directs the Commission 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.’’ 30 Congress left to the Commission’s discretion whether to enact rules to carry out this direction and provided that any rules implementing this section provide for public dissemination of the information gathered: 26 DCP Midstream Comments at 7–8; see also Railroad Commission of Texas Comments at 7. 27 See, e.g., Atmos Comments at 11–12. 28 See, e.g., DCP Midstream Comments at 8–9. See also Atmos Comments at 11–12. 29 TPA Comments at 35 (emphasis original). 30 15 U.S.C. 717t–2(a)(1) (2000 & Supp. V 2005). VerDate Aug<31>2005 21:29 Dec 01, 2008 Jkt 217001 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.31 17. Further, section 23(a)(3)(A) of the NGA allows the Commission ‘‘to obtain the information * * * from any market participant.’’ 32 By using the term ‘‘market participant,’’ Congress deliberately expanded the universe of entities subject to the Commission’s transparency authority beyond the entities subject to the Commission’s traditional rates, terms, and conditions jurisdiction under other sections of the NGA. The term ‘‘market participant’’ is not defined in the NGA and is not on its face limited to otherwise jurisdictional entities. As we explained in the Posting NOPR, this authorization is expansive. Congress was aware that other sections of the NGA limited the scope of entities subject to the Commission’s traditional regulatory authority to natural gas companies as that term is defined in the statute, but chose not to apply this same limitation in section 23. Congress clearly recognized that the Commission might not obtain sufficient price transparency from those ‘‘natural gas companies’’ subject to our traditional regulatory authority. This is consistent with the Commission’s findings here that a complete picture of the interstate natural gas market and the supply and demand fundamentals underlying that market require information from noninterstate natural gas pipelines.33 18. Moreover, the statutory language emphasizes the broad meaning of the phrase ‘‘market participant’’ by adding ‘‘any’’ as a descriptor. Our authority attaches not to a subset of market participants (for example, only those market participants traditionally subject to our regulation), but to any such participant.34 Court precedent confirms that the word ‘‘any’’ gives the term it modifies (in this case, ‘‘market 31 15 U.S.C. 717t–2(a)(2) (2000 & Supp. V 2005). 23(a)(3)(A) of the NGA; 15 U.S.C. 717t– 2(a)(3)(A) (2000 & Supp. V 2005). 33 We have recently stated in Order No. 704–A that the term ‘‘market participant’’ in section 23 of the NGA is not limited only to natural gas pipelines, but to all relevant segments of the natural gas supply and distribution chain. Order No. 704– A at P 37. As we discussed in this previous exercise of our authority under section 23 of the NGA, the statute grants broad latitude to the Commission to effectuate Congressional transparency goals. 34 See Posting NOPR at P 28. 32 Section PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 participant’’) an expansive meaning.35 We believe that Congress used the expansive term ‘‘any market participant’’ because it intended to provide broad transparency authority to the Commission. By this choice, Congress recognized that the Commission may need to obtain information from a wide variety of entities in order to facilitate transparency. 19. The Commission disagrees with commenters who argue that section 1(b) of the NGA precludes the Commission from imposing the daily posting requirement on non-interstate pipelines. Section 1(b) of the NGA provides that the ‘‘provisions of this chapter * * * shall apply to the transportation of natural gas in interstate commerce, to the sale in interstate commerce of natural gas for resale * * *’’ and that such provisions ‘‘shall not apply to any other transportation or sale of natural gas.’’ 36 Likewise, we disagree that section 23 has limited application only to ‘‘natural gas companies.’’ Section 1 is not referenced in section 23 and the term ‘‘natural gas company’’ is nowhere found in the section. Including such a reference would have been the simplest way for Congress to demonstrate an intent to limit the Commission’s transparency authority only to entities which we already regulate. 20. We likewise disagree with certain commenters’ arguments regarding application of pre-EPAct 2005 caselaw in this circumstance. The cases cited by commenters apply the jurisdictional limits set forth in section 1 of the NGA prior to the enactment of EPAct 2005.37 These arguments run afoul of the principle of statutory construction that ‘‘Congress is presumed to be aware of an administrative or judicial interpretation of a statute.’’ 38 Thus, Congress was 35 Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 31– 32 (2004) (the word ‘‘any’’ gives the word it modifies an expansive reading); Dep’t. of Housing and Urban Dev. v. Rucker, 535 U.S. 125, 130–31 (2002); TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (one must give effect to each word in a statute so that none is rendered superfluous); United States v. Gonzales, 520 U.S. 1, 5 (1997) (‘‘any’’ is an expansive term, meaning ‘‘one or some indiscriminately of whatever kind,’’); New York v. EPA, 443 F.3d 880, 885–87 (DC Cir. 2006) (the word ‘‘any’’ is broadly construed to reflect Congress’ intent that all types of physical changes are subject to the Clean Air Act’s New Source Review program). 36 Section 1(b) of the NGA, 15 U.S.C. 717(b). 37 See, e.g., Union Oil Co., 542 F.2d at 1039. In a post-EPAct 2005 case as noted by commenters, Transmission Agency of N. Cal. v. FERC, the U.S. Court of Appeals for the DC Circuit discussed the limits of the Commission’s jurisdiction, but that court was not reviewing the NGA, let alone section 23. 495 F.3d 663 (DC Cir. 2007). 38 Lorillard v. Pons, 434 U.S. 575, 580 (1978) (internal citations omitted); accord 2A Norman J. E:\FR\FM\02DER3.SGM 02DER3 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations rwilkins on PROD1PC63 with RULES3 presumably aware that prior to the enactment of section 23, the NGA could be construed as limiting the Commission’s authority to obtain data on intrastate natural gas flows to obtaining it from companies falling under the Commission’s jurisdiction.39 In using the term ‘‘any market participant’’ instead of ‘‘natural gas company,’’ Congress signaled its intent to expand the Commission’s transparency authority beyond the universe of natural gas companies to which it would otherwise be limited. TPA observes that courts have held that the Commission cannot exceed its statutory authority.40 This is an unremarkable and unassailable conclusion, but one that provides no guidance where the issue is not whether the Commission may exceed its statutory authority but what is the extent of the Commission’s transparency authority. 21. For similar reasons, we do not find persuasive the argument that Congress could have expressed its intent to subject non-interstate pipelines to the Commission’s transparency authority only by revising or amending section 1 of the NGA. First, section 1 of the NGA delineates the set of entities subject to the Commission’s traditional ratemaking and certificate authority. If Congress amended section 1 of the NGA to apply to a new set of entities, it would have been providing the Commission not only a limited grant of transparency authority, but the broader grant of authority that section 1 entails. Second, altering the exceptions in section 1, as commenters suggested, is not the only way to alter the statute to give the Commission transparency authority. Section 23 could, and in fact did, confer such authority separately from our authority under section 1. Third, if Congress intended to exclude noninterstate pipelines from the Commission’s authority under section 23 of the NGA, it would have used the term ‘‘natural gas company’’ in section 23, instead of the term ‘‘any market participant.’’ 22. Nevertheless, while the authority granted to us in section 23 is broad, we do not mean to imply that the Commission’s authority to obtain Singer, Sutherland Statutory Construction sec. 45.12 (5th ed. 1992) (‘‘legislative language will be interpreted on the assumption that the legislature was aware of * * * judicial decisions’’). 39 Union Oil Co., 542 F.2d at 1039 (Observing that the NGA limits the Commission’s ‘‘gathering of intrastate data to gathering it from companies falling under the Commission’s jurisdiction’’). 40 Reply Comments of TPA at 16–17 (citing Transmission Agency of N. Cal., 495 F.3d 663 and United Distrib. Cos. v. FERC, 88 F.3d 1105 (DC Cir. 1996)). VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 information from ‘‘any market participant’’ is plenary. In section 23, Congress limited our transparency authority in three respects. First, Congress directed the Commission to ‘‘facilitate price transparency in markets for the sale or transportation of physical natural gas in interstate commerce. * * *’’ 41 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, however, provided that the information obtained and disseminated pertains to price transparency in those markets. Second, Congress required that the Commission’s 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. * * *’’ 42 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.’’ Where transportation or sales of natural gas are not in interstate commerce, they nonetheless fall under the Commission’s transparency mandate if they affect the availability and prices of natural gas at wholesale and in interstate commerce. 23. Perhaps the most important limitation on our transparency authority is contained in section 23(d)(2) which mandates an exemption from any reporting for ‘‘natural gas producers, processors, or users who have a de minimis market presence. * * *’’ 43 It is noteworthy that this limitation 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. Section 1(b) of the NGA explicitly excludes these entities from the Commission’s traditional regulation. If, as some commenters assert, Congress did not intend to give the Commission authority over any entity excluded by section 1(b) of the NGA, a de minimis exemption would have been unnecessary; in other words, section 23(d)(2) would have been surplusage. 41 Section 23(a)(1) of the NGA; 15 U.S.C. 717t– 2(a)(1) (2000 & Supp. V 2005). 42 Section 23(a)(2) of the NGA; 15 U.S.C. 717t– 2(a)(2) (2000 & Supp. V 2005). 43 Section 23(d)(2) of the NGA; 15 U.S.C. 717t– 2(d)(2) (2000 & Supp. V 2005). PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 73497 Congress is not presumed to enact surplus language.44 To avoid this improper result, we interpret section 23 of the NGA to give effect to the de minimis language by interpreting the term ‘‘any market participant’’ to include those entities otherwise excluded from the Commission’s NGA jurisdiction by section 1(b) of the act. 24. The regulations promulgated by this Final Rule reflect Congress’ limitations on the Commission’s authority. The Commission’s traditional regulatory authority remains limited to ‘‘natural gas companies’’ under section 1 of the act. Section 23 of the NGA authorizes the Commission only to obtain and disseminate information. The Commission is not regulating the intrastate operations of non-interstate pipelines; nor is the Commission regulating the rates or terms and conditions of service for non-interstate pipelines. Consistent with its limited transparency authority set forth in section 23 of the NGA, the Commission will require major non-interstate pipelines only to post information. 25. Based upon the text of section 23 of the NGA and the clear intent of Congress, we determine that we have ample authority to issue this Final Rule, including the promulgation of regulations requiring additional posting obligations on both interstate and major non-interstate pipelines. IV. Need for the Rule A. Posting NOPR 26. As discussed in the Posting NOPR, section 23 of the NGA is a clear expression of Congress’ belief that the Commission may rightly perceive a need ‘‘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, and the protection of consumers.’’ Section 23 further provides that the Commission may issue such rules as it deems necessary and appropriate to ‘‘provide for the dissemination, on a timely basis, of information about the availability and prices of natural gas sold at wholesale and interstate commerce to the Commission, State commissions, buyers and sellers of wholesale natural gas, and the public.’’ The Posting NOPR stated that natural gas markets function more efficiently, and market problems are more readily identifiable, if participants and observers have timely access to 44 City of Roseville v. Norton, 348 F.3d 1020, 1028 (DC Cir. 2003) (citing Babbitt v. Sweet Home Chapter of Cmty. for a Greater Oregon, 515 U.S. 687, 698 (1995)). E:\FR\FM\02DER3.SGM 02DER3 73498 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations natural gas transportation data. As we stated in Order No. 636: The Commission believes that * * * it is vital to give all gas purchasers ([local distribution companies (LDCs)] and end users, such as industrials and gas-fired electric generators) the ability to make market-driven choices about the price of gas as a commodity and about the cost of delivering the gas. Simply put, efficiency in the national gas market can be realized only when the purchasers of a commodity know, in a timely manner, the prices of the distinct elements associated with the full range of services needed to purchase and then deliver gas from the wellhead to the burnertip. Only then will gas purchasers be able to purchase, based upon their needs, the exact services they want with full recognition of the prices that they would have to pay. And only then will the Commission be assured that all gas is transported to the market place on fair terms. What best serves the interests of gas purchasers—the ability to make informed choices—is also important for gas sellers.45 rwilkins on PROD1PC63 with RULES3 27. In the Posting NOPR, the Commission proposed that major noninterstate 46 natural gas pipelines post information on actual flows and scheduled volumes. The Commission defined a ‘‘major non-interstate pipeline’’ as one that is not a ‘‘natural gas company’’ under section 1 of the NGA47 and that flows greater than 10 million (10,000,000) MMBtus of natural gas per year. Such a major non-interstate pipeline would post daily ‘‘capacity, scheduled flow volumes, and actual flow volumes at major points and mainline segments.’’ 48 The Commission did not define ‘‘major points and mainline segments.’’ The Commission proposed two exemptions to the definition of ‘‘major non-interstate pipeline.’’ First, the Commission proposed to exempt non-interstate natural gas pipelines that ‘‘fall entirely upstream of a processing plant.’’ 49 Second, the Commission proposed to exempt non-interstate natural gas 45 Pipeline Service Obligations and Revisions to Regulations Governing Self-Implementing Transportation; and Regulation of Natural Gas Pipelines After Partial Wellhead Decontrol, Order No. 636, FERC Stats. & Regs. ¶ 30,939, at p. 30,393, order on reh’g, Order No. 636–A, FERC Stats. & Regs. ¶ 30,950, 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 1105 (DC Cir. 1996), order on remand, Order No. 636–C, 78 FERC ¶ 61,186 (1997). 46 In the Initial NOPR, the Commission used the term ‘‘intrastate pipeline.’’ In the Posting NOPR, the Commission used the term ‘‘non-interstate pipeline.’’ The latter term more accurately describes the scope of the rule, which is issued pursuant to section 23 of the NGA. This section applies to both interstate and non-interstate pipelines and does not use the term ‘‘intrastate pipeline.’’ 47 15 U.S.C. 717 (2007). 48 Posting NOPR at P 3. 49 Id. at P 4. VerDate Aug<31>2005 21:29 Dec 01, 2008 Jkt 217001 pipelines ‘‘that deliver more than 95 percent of the natural gas volumes they flow directly to end-users.’’ 50 The Commission also proposed that interstate natural gas pipelines post information on actual flows,51 in addition to the existing requirement to post capacity and scheduled flows.52 28. In the Posting NOPR, the Commission articulated three goals to be served by posting of flow information by non-interstate pipelines. 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 United States 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.53 B. Comments 29. A broad cross-section of the industry, representing producers, endusers, LDCs, and information providers, supports the goals of the pipeline posting requirement.54 In the Posting NOPR, the Commission asked for comment on whether the pipeline posting proposal would ‘‘provide a more complete picture of supply and demand fundamentals and improve market participants’ ability to assess supply and demand and to price physical natural gas transactions.’’ 55 Several commenters support posting requirements, particularly for noninterstate pipelines, as a means to meet this goal. NGSA states that ‘‘the [ ] proposed flow data posting requirement has the potential to provide market participants and regulators with additional information regarding underlying natural gas supply and demand fundamentals.’’ 56 Similarly, APGA supports the Commission’s rationale for obtaining daily flow information from major non-interstate pipelines.57 IPAA also supports the 50 Id. 51 Id. 52 Id. at P 60. e.g., NGSA Reply Comments at 5; TIPRO Comments at 3; APGA Comments at 4; Calpine Comments at 2–3; Bentek Comments at 3. 55 Posting NOPR at P 71. 56 NGSA Comments at 14. 57 APGA Comments at 4. posting of flow data from non-interstate pipelines, ‘‘but with a close watch on the costs of compliance, as the producer is likely to end up bearing much of those costs.’’ 58 30. TIPRO contends that the pipeline posting proposal meets the goal of increasing transparency of supplies that affect prices.59 Bentek, which collects and publishes information based on interstate flows, contends that requiring non-interstate pipelines to report daily flows and capacity ‘‘will significantly improve industry’s ability to understand natural gas supply and demand issues throughout the country’’ making ‘‘the market more transparent, less volatile, more reliable, and more efficient.’’ 60 31. Some commenters argue that the posting proposal, particularly regarding non-interstate pipelines, is not justified. Atmos believes that the need for the information has not been demonstrated and that there is already sufficient price transparency in interstate markets.61 Chevron Pipelines acknowledge that flow information from non-interstate pipelines may provide a more complete picture of supply and demand fundamentals, but state that such flow information would have a de minimis effect on market participants’ assessments of supply and demand and pricing of physical natural gas transactions.62 32. Kinder Morgan Intrastate maintains that due to the bundled sales function and the highly variable types of services provided by intrastate pipelines, a snapshot of available capacity on a given pipeline at a given time would not necessarily reflect pricing fundamentals. Because Kinder Morgan Intrastate provides no-notice service to many industrial users and must reserve physical capacity to serve this no-notice service, it asserts that capacity is not available for other customers. Thus, it alleges, posted capacity information would send the wrong signals to the market because it would reflect the complexity of pipeline operations rather than the overall supply situation in the market.63 33. In the Posting NOPR, the Commission also asked for comment on whether the proposal would provide a clearer view of the effects on infrastructure, the industry, and the economy during periods when the United States natural gas delivery system is disturbed, for instance, due to 53 Id. 54 See, PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 58 IPAA Comments at 1. Comments at 3. 60 Bentek Comments at 12. 61 Atmos Comments at 10–11. 62 Chevron Pipelines Comments at 25. 63 Kinder Morgan Intrastate Comments at 16–17. 59 TIPRO E:\FR\FM\02DER3.SGM 02DER3 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations rwilkins on PROD1PC63 with RULES3 hurricane damage to facilities in the Gulf of Mexico. Several commenters contend that the posting of flow information by non-interstate pipelines would support this goal.64 Chevron Pipelines assert that the requirements on non-interstate natural gas pipelines already are sufficient to gain a sense of how a significant disruption may affect natural gas pipeline facilities.65 TPA believes that significant disruptions such as hurricanes would preclude postings by non-interstate pipelines and evaluation of the impact of such disruptions on pipeline facilities could be obtained through less obtrusive means, such as contacting the pipeline.66 34. Finally, in the Posting NOPR, the Commission asked for comment on another goal of the pipeline posting proposal—whether the proposal would allow market observers to identify potentially manipulative activity. In response, several commenters assert that the posting of flow information by noninterstate pipelines would support this goal.67 35. By contrast, Chevron Pipelines declare that the information to be posted has no relation to pricing decisions, and therefore, the potential for misconduct by not making public such information is unfounded.68 Kinder Morgan Intrastate expresses concern that postings by non-interstates pipelines would lead market participants to suspect price manipulation where none was occurring. In support, Kinder Morgan Intrastate provides the example of a net segment flow of zero due to forward-hauls and backhauls canceling each other out.69 TPA adds that the Commission has not demonstrated how the proposed pipeline posting rule could be used to track manipulative behavior.70 36. Several commenters contend that there are alternatives available to daily posting of flow information by noninterstate pipelines. Commenters point to the following information as alternatives: Postings of capacity and scheduling data for ‘‘points at which intrastate pipelines connect to the interstate grid;’’ 71 postings by interstate 64 Yates Comments at 7; TIPRO Comments at 2; APGA Comments at 4; Royalty Owners Comments at 2–3. 65 Chevron Pipelines Comments at 25. 66 TPA Comments at 20. 67 See, e.g., TIPRO Comments at 2; APGA Comments at 4; Royalty Owners Comments at 2–3; Yates Comments at 8. 68 Chevron Pipelines Comments at 25. 69 Kinder Morgan Intrastate Comments at 17. 70 TPA Comments at 48. 71 Id. at 21–22. VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 natural gas pipelines; 72 Bentek’s ‘‘Texas Intrastate Report;’’ 73 data ‘‘filed annually by intrastate pipelines pursuant to section 311 of the Natural Gas Policy Act;’’ 74 price information provided by ‘‘NYMEX, CME, Globex, ICE and voice brokers, as well as price index publishers;’’ 75 state commission production data; 76 and information available from the United States Department of Energy’s Energy Information Administration (EIA).77 Genscape describes its natural gas pipeline flow monitoring product, which can measure flows on pipelines, and which Genscape uses presently to ‘‘monitor [ ] injections and withdrawals of gas at multiple storage facilities in Texas and Louisiana that are connected in whole or in part to intrastate pipeline systems.’’ 78 37. Commenters argue that a posting requirement on non-interstate pipelines would pose a competitive risk for noninterstate pipelines and for their customers. Atmos states: ‘‘the public dissemination of capacity information could provide competitors with insight into the pipeline’s ability to continue to provide services to existing and prospective customers, which could influence the location of new facility construction or how offers are made to prospective customers.’’ 79 Atmos describes a possible scenario in which two competing pipelines could serve one customer. When publicly disseminated information shows that one of those pipelines is at capacity, the other would have the opportunity to raise its price.80 38. Calpine, however, supports a posting obligation for non-interstate pipelines, stating that requiring the same posting requirements on both noninterstate and interstate pipelines would eliminate an existing competitive advantage for non-interstate pipelines.81 C. Commission Determination 39. Based upon the comments received and the input from stakeholders at the technical conference, we continue to believe that this Final Rule is needed because the information currently provided by interstate pipelines presents an incomplete picture of the supply and demand 72 Id. at 21. at 23. 74 Id. at 22. 75 Id. 76 Id. at 22 n 59. 77 Id. at 22. 78 Reply Comments of Genscape, Inc., at 3, Docket No. AD06–11–000 (filed Aug. 23, 2007). 79 Atmos Comments at 9. 80 Id. 81 Calpine Comments at 5. 73 Id. PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 73499 fundamentals that underlie the interstate natural gas market. While, as discussed above, Congress has given authority to the Commission to obtain additional information from market participants to increase transparency, we acknowledge that section 23 of the NGA grants us discretion as to whether and how to utilize this authority. The current picture of the interstate natural gas market derives from information on scheduled natural gas volumes and available capacity posted by interstate pipelines. In compliance with the regulations adopted in Order No. 637,82 interstate pipelines currently post daily information on the Internet about scheduled natural gas volumes for most of the continental United States. Shippers and other market participants rely on information posted by interstate pipelines to price both transportation and commodity transactions.83 As we described in the Posting NOPR, market participants retrieve the posted information on scheduled volumes from the Web sites of interstate natural gas pipelines, which they use to estimate in near real-time a variety of supply and demand conditions including geographic and industrial sector consumption, storage injections and withdrawals, and regional production.84 This posted scheduled flow information contributes to market transparency by providing information about the supply and demand fundamentals that drive price movements.85 Further, our staff 82 Regulation of Short-Term Natural Gas Transportation Services and Regulation of Interstate Natural Gas Transportation Services, Order No. 637, 65 FR 10,156 (Feb. 25, 2000), FERC Stats. & Regs. ¶ 31,091, at 31,332, clarified, Order No. 637–A, FERC Stats. & Regs. ¶ 31,099, reh’g denied, Order No. 637–B, 92 FERC ¶ 61,062 (2000), aff’d in part and remanded in part sub nom. Interstate Natural Gas Ass’n of America v. FERC, 285 F.3d 18 (DC Cir. 2002), order on remand, 101 FERC ¶ 61,127 (2002), order on reh’g, 106 FERC ¶ 61,088 (2004), aff’d sub nom. American Gas Ass’n v. FERC, 428 F.3d 255 (DC Cir. 2005). 83 In this regard, we disagree with commenters, such as Atmos, that increased transparency would harm competition. Such has not been our experience with interstate natural gas pipeline posting requirements. To the contrary, increased transparency has allowed for more informed decision making by market participants. In the scenario posited by Atmos (i.e., two pipelines, one of which is at capacity, that could serve a single customer), the posting of scheduled flow information at a particular point would typically not be sufficient to affect competition. Even if disclosure did have an effect, the effect would be to allow all market participants to make efficient determinations based upon equal access to relevant information. 84 Posting NOPR at P 55. See also Comments of Bentek, Docket No. AD06–11–000 (filed Oct. 11, 2006). 85 See, e.g., Comments of Platt’s at 11–13, Docket No. AD06–11–000 (filed Nov. 1, 2006) (information regarding the supply and demand of natural gas E:\FR\FM\02DER3.SGM Continued 02DER3 73500 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations relies on this posted information to perform oversight and enforcement functions. In sum, the existing posting requirements for interstate pipelines provide the Commission, market participants, and other market observers with a picture of the availability of natural gas (both the commodity and transportation needed to move the commodity to market centers).86 40. Nevertheless, this picture is incomplete. Because the Commission’s existing pipeline posting regulations do not apply to non-interstate pipelines, market observers cannot determine the availability of natural gas and transportation on a non-interstate pipeline to the same extent as they could for an interstate pipeline. These gaps in information are significant because, as detailed further below, major gas flows between producing basins and interstate markets occur on non-interstate pipelines and are thus invisible to the market. Often, the availability and price of natural gas on large non-interstate pipelines affects the availability and price of natural gas nation-wide because these pipelines serve as important pricing points and gateways for flows to much of the United States. Interstate and noninterstate pipeline infrastructure is functionally inter-connected in the United States. The gaps in information about non-interstate flows result from the limitations on the Commission’s authority over non-interstate pipelines prior to the enactment of EPAct 2005. 41. For instance, there is a significant lack of information about supply and demand fundamentals in the south- central region of the country: Texas, Louisiana, and Oklahoma, and in southern California. As we discussed in the Initial and Posting NOPRs, several major United States natural gas pricing points sit at the confluence of multiple interstate and non-interstate pipelines. A study by EIA identified twenty-eight national market centers, of which thirteen are served by a combination of interstate and non-interstate pipelines.87 The table below shows the capacity of interstate and non-interstate pipelines connected to each of these thirteen locations. Significantly, as relevant here, at nine of these thirteen locations, noninterstate capacity is greater than interstate capacity. TABLE 1—INTER- AND INTRASTATE PIPELINE DELIVERY CAPACITY AT SELECTED UNITED STATES NATURAL GAS PRICING POINTS 88 Receipt and delivery capacity Hub name State Carthage ...................................................................................................................................... Henry Hub .................................................................................................................................... Katy—Enstor ................................................................................................................................ Katy—DEFS ................................................................................................................................. Mid Continent ............................................................................................................................... Moss Bluff .................................................................................................................................... Nautilus ........................................................................................................................................ Perryville ...................................................................................................................................... Aqua Dulce .................................................................................................................................. Waha—Lone Star ........................................................................................................................ Waha—Encina ............................................................................................................................. Waha—El Paso ........................................................................................................................... Waha—DEFS .............................................................................................................................. Interstate pipelines (MMcf/d) TX LA TX TX KS TX LA LA TX TX TX TX TX 1,120 2,770 1,370 260 1,112 1,050 1,200 3,652 855 810 525 1,165 300 Non-interstate pipelines (MMcf/d) 1,355 1,215 3,815 2,360 627 1,800 1,350 350 835 1,140 800 1,660 1,850 rwilkins on PROD1PC63 with RULES3 42. No place is more indicative of the integration of interstate and noninterstate pipelines than Henry Hub in Louisiana. Henry Hub acts as an interchange for natural gas, where numerous interstate and non-interstate pipelines meet. It serves as 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 futures contract has become important in determining a variety of monthly index prices used to set natural gas prices in a large number of transactions 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.89 Because Henry Hub is connected to both interstate and noninterstate pipelines, the picture of flows and availability on the pipelines that feed into the Henry Hub is incomplete. 43. Figure 1 below demonstrates the integration of interstate and noninterstate flows in many of these markets. One cannot understand flow patterns on interstate natural gas pipelines nationwide without understanding flows on non-interstate pipelines in those areas. Non-interstate pipelines provide crucial physical links between interstate natural gas pipelines (particularly in Texas, Oklahoma, Louisiana, and California) as well as links between market hubs. Figure 1 shows major East-West flows of natural gas between the major production basins, such as Waha production area and major market locations, such as the Carthage Hub, but because such flows generally take place on non-interstate natural gas pipelines, they are invisible to market participants and other market observers. explains prices and such information is available from interstate pipelines, but not intrastate pipelines). 86 See, e.g., id. at 11 (explaining that, to understand prices, ‘‘the marketplace must look to * * * information on [the] availability of and demand for natural gas. * * *’’). 87 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. 88 The information on this chart is derived from Table 2 of 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). updated utilizing data available from EIA for 2005. 89 Federal Energy Regulatory Commission, 2006 State of the Markets Report at 48–50 (Jan. 2007), www.ferc.gov/market-oversight/marketoversight.asp (follow link to the State of the Markets Full Report). VerDate Aug<31>2005 21:29 Dec 01, 2008 Jkt 217001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 E:\FR\FM\02DER3.SGM 02DER3 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations 90 While this EIA data is two years old, based upon our experience, we believe that similar circumstances exist in the market today. 91 ‘‘EIA Natural Gas Consumption by End Use,’’ https://www.tonto.eia.doe.gov/dnav/ng/ ng_cons_sum_a_EPG0_VC0_mmcf_a.htm. (providing consumption figures by state). VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 purchasers of intrastate natural gas. Intrastate markets often compete from basin to basin with interstate markets. Southern California, for example, competes with several large Texas markets for Waha supplies. Interstate/ intrastate competition is expected to increase. Much of the recent Barnett Shale development in the Fort Worth basin in west Texas flows into intrastate systems before moving into interstate markets and, recently, two pipeline companies announced a major intrastate pipeline project that would transport 1 Bcf/day from the Barnett Shale development.92 In total, slightly more than 40 percent of total on-shore production in Texas is connected to interstate natural gas pipelines, close to 60 percent in Louisiana and almost 80 percent in Oklahoma.93 Although daily 92 ‘‘Enbridge, Atmos Energy propose new line to move 1 Bcf/d of northern Texas output,’’ Inside FERC, Sept. 1, 2008 (‘‘The Barnett Intrastate Gas Pipeline would connect Atmos Energy’s Line X in Johnson Country, Texas, to Enbridge’s Double D and Clarity Pipelines at Bethel in Anderson County, Texas.’’). 93 To derive these figures, Commission staff compared information from Bentek on supply scheduled on interstate pipelines with EIA information on withdrawals and production. EIA Natural Gas Gross Withdrawals and Production for PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 volume scheduled to flow from noninterstate into those interstate natural gas pipelines can be observed, the supply dynamics that determine the availability of such volumes cannot be observed because they occur on noninterstate pipelines. A market participant that understands the flows on non-interstate pipelines will better understand the availability of supply for the interstate natural gas market, thereby, enhancing transparency. 46. Taken together, this information shows that market prices of physical natural gas in interstate commerce result from the aggregate of interstate and noninterstate pipeline flows. Because of this relationship, information about the flows on non-interstate pipelines would promote price transparency by providing market participants with highly relevant information as they make day-to-day economic choices. 47. Additionally, the proposed pipeline capacity and volume postings would provide market participants— and entities charged with oversight of the markets—a clearer view of the effects on infrastructure, the industry, Texas and Oklahoma, https:// www.tonto.eia.doe.gov/dnav/ng/ ng_prod_sum_dcu_NUS_m.htm. E:\FR\FM\02DER3.SGM 02DER3 ER02DE08.072</GPH> rwilkins on PROD1PC63 with RULES3 44. The magnitude of missing market information is indicated in a comparison of the types of information available for interstate and noninterstate pipelines. Gas delivery data in Texas from interstate natural gas pipeline postings show approximately 1 bcf of deliveries to Texas end users on any given day in 2006.90 EIA shows that total average daily consumption of gas in Texas was approximately 9.4 Bcf/day in 2006.91 This means that delivery information for 90 percent of the gas consumed in the state is only provided in the aggregate for all of Texas and published monthly with a lag of several months while 10 percent of the gas delivered is reported daily by receipt and delivery point. Therefore, nearly 90 percent of consumption was invisible to market participants and other market observers on a daily basis. 45. Purchasers of natural gas in interstate commerce draw on the same sources of supply as users and 73501 73502 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations rwilkins on PROD1PC63 with RULES3 and the economy as a whole during periods when the United States natural gas delivery system is disturbed. For example, after the 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 output by potentiallydamaged production facilities.94 By monitoring receipt and delivery points for production facilities on interstate natural gas pipelines, market observers were able to obtain only a limited sense of production facility output.95 Similarly, market participants, state commissions and other market observers were unable to assess effects on natural gas availability in the Gulf Coast, including, for instance, availability to the petrochemical industry. The significance and duration of these effects on this industry— vulnerable to energy price and availability disruptions—remain unclear. Regulations promulgated by this Final Rule will allow market participants and other market observers to gain a much better picture of disruptions in natural gas flows in the case of future hurricanes in the Gulf region.96 48. Scheduled volume information would be useful whether a disruption were major or minor. TPA asserts that because pipeline facilities would be inaccessible during a major disruption, a non-interstate pipeline could not post 94 See, e.g., Comments on Initial NOPR of New York PSC at 2; Comments on Initial NOPR of Bentek at 15–16 & 21–22; Comments on Initial NOPR of APGA at 3–4; Transcript of the Oct. 13, 2006 Technical Conference (Tech. 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 PSC). 95 Tech. Conference Tr. at 25 (Comments of Sheila Rappazzo) (describing how after the 2005 hurricanes data availability differed widely). 96 Along these lines, this Final Rule is consistent with Order No. 682 and with a recently developed survey by EIA. In Order No. 682, 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 No. 682–B order denying reh’g, 118 FERC ¶ 61,188 (2007). Recently, EIA developed Form EIA–757, ‘‘Survey of Natural Gas Processing Plants’’ which is used to ‘‘collect information on the capacity, status, and operations of natural gas processing plants and to monitor constraints of natural gas processing plants during periods of supply disruption in areas affected by an emergency, such as a hurricane.’’ Department of Energy, Energy Information Administration, Form EIA–757, ‘‘Survey of Natural Gas Processing Plants’’, https://www.eia.doe.gov/oil_gas/ natural_gas/survey_forms/drafteia757/ ng757_instructions.pdf. VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 flow information and, thus, a posting requirement would fail to meet this goal.97 But, during a disruption, the fact that scheduled volumes were not posted, itself, would send a signal about the extent and duration of a disruption. It would be useful information during and following a disruption to know whether some points on a non-interstate were affected but not others. For example, following the landfall of hurricanes Gustav and Ike this past hurricane season, some pipelines in the affected areas were able to post information about flows before actual flows could resume. 49. We also believe that the regulations promulgated in this Final Rule will more readily allow the Commission and other market observers to identify and remedy potentially manipulative activity. The goal of identifying and remedying potential market manipulation conforms to the transparency directive in section 23 for the Commission to ‘‘hav[e] due regard for the public interest [and] the integrity of those markets. * * *’’ 98 By this language, Congress intended that the improvement of the Commission’s market oversight is a legitimate justification for prescribing a transparency rule. Monitoring and preventing manipulative or unduly discriminatory activity meets the Commission’s responsibility for ensuring the integrity of the physical interstate natural gas markets.99 50. Information regarding availability on non-interstate pipelines could be used to discover potentially manipulative or unduly discriminatory behavior in physical natural gas sales or transportation. In the Commission’s experience, the fact that a price for natural gas is not supported by supply and demand fundamentals may be an indication that a market participant has violated the NGA’s prohibitions regarding undue discrimination or market manipulation. On a daily basis, as part of its oversight responsibilities, the Commission tracks natural gas prices to determine whether they are justified by supply and demand fundamentals. To do this, we rely on, among other things, the scheduled volume postings by interstate natural gas pipelines. This information also serves as an important tool to analyze natural gas markets. Similar postings by non-interstate pipelines would make this analysis more accurate because it Comments at 20. 23(a)(1) of the NGA; 15 U.S.C. 717t– 2(a)(1) (2000 & Supp. V 2005). 99 See Prohibition of Energy Market Manipulation, Order No. 670, FERC Stats. & Regs. ¶ 31,202, (2006). would provide additional information currently lacking about supply and demand fundamentals, a point discussed above. With information from non-interstate pipelines, we can better account for how supply and demand fundamentals affect daily changes to physical prices for much of the gas transported to key interstate markets. For example, in overseeing markets, the Commission routinely checks for unused interstate natural gas pipeline capacity between geographically distinct markets with substantially different prices as a sign that flows may be managed to manipulate prices. 51. In summary, the posting of scheduled flow information by major non-interstate pipelines will increase transparency by meeting the three goals set forth in the Posting NOPR. Such postings will: (1) Improve market participants’ ability to assess supply and demand and to price physical natural gas transactions and transportation; (2) provide market participants a clearer view of the effects on infrastructure, the industry and the economy from disruptions to the United States natural gas delivery system, for instance due to hurricane damage to facilities in the Gulf of Mexico; and (3) allow the Commission, market participants and other market observers to identify potentially manipulative activity.100 We believe that these are worthy goals. 52. Further, we do not believe that these transparency goals can be met by less intrusive means or through reliance upon existing market data. For example, TPA refers to the ‘‘data filed annually by intrastate pipelines pursuant to Section 311 of the [Natural Gas Policy Act of 1978 (NGPA)]’’ as a possible substitute for this Final Rule.101 Section 284.126(b) of the Commission’s regulations requires intrastate pipelines providing section 311 transportation to file an annual report of volumes of section 311 transportation service, to be used to determine the rates applicable to section 311 service.102 This existing data is inadequate to meet our transparency goals, however, because section 311 volumes are only a subset of all volumes transported by intrastate pipelines, the information is aggregated and is reported annually and, therefore, delayed by at least three months. 53. TPA also refers to ‘‘additional sources of natural gas price information,’’ including, for example, ‘‘NYMEX, CME, Globex, ICE and voice brokers, as well as price index 97 TPA 98 Section PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 100 Posting 101 TPA NOPR at 60. Comments at 22 (citing 15 U.S.C. 717– 717z). 102 18 CFR 284.126(b). E:\FR\FM\02DER3.SGM 02DER3 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations rwilkins on PROD1PC63 with RULES3 publishers.’’ 103 These sources are not a useful substitute for the pipeline posting requirements. They do not provide any scheduled flow information and, thus, cannot explain the supply and demand fundamentals that underlie the prices in the same way as postings by noninterstate pipelines. Additionally, TPA generally refers to state commission production data available from Texas, Louisiana, and New Mexico.104 However, this data includes only production data (and not other transportation volumes) and is only available on a monthly basis. Similarly, the data from production information Web sites does not include transportation volumes.105 54. TPA references various EIA reports as possible replacement sources for data regarding pipeline flows,106 but none of these reports is an adequate substitute for the posting of scheduled volume information by major noninterstate pipelines; none of these sources provides scheduled pipeline-bypipeline flow data on a daily basis. EIA Monthly Storage Reports provide only information about aggregated storage flows on a monthly or weekly basis. EIA Weekly Storage Reports provide only storage information, are issued only once each week, and provide aggregated data for three regions. Form EIA–895 provides only production data aggregated by state. Form EIA–176 does not provide daily transportation information, and is significantly lagged and aggregated annually and by company. Form EIA–857 provides only ‘‘volume and cost data on natural gas delivered to residential, commercial, and industrial consumers’’ 107 estimated by reviewing a monthly sample of natural gas companies that deliver to consumers in the United States. The survey does not report disaggregated daily transactional data at receipt and delivery points, but instead only provides partial retail sales. While we appreciate the value of EIA’s data collection and publications, we are not persuaded that these activities are adequate substitutes for the daily, pointspecific postings required by this Final Rule. 55. As for Genscape’s work monitoring flows on pipelines, its project does not provide sufficient coverage of non-interstate pipelines as it appears limited to storage facilities in Texas and Louisiana and some major 103 TPA Comments at 22. at 22 n. 59. 105 Id. at 22. 106 Id. at 22 n. 59. 107 https://www.tonto.eia.doe.gov/dnav/ng/ TblDefs/ng_statdetails.html. 104 Id. VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 interstate pipelines. Most importantly, Genscape’s services are available only for a fee and only to subscribers. The Commission’s intent in this Final Rule is to increase transparency for the public’s benefit. 56. We also believe that the goals of this Final Rule outweigh the burdens to be placed upon non-interstate and interstate pipelines. Based upon our experience, as a matter of business acumen and good operational practice, most if not all of the gas control divisions of the affected companies currently have ready access to the information captured by this Final Rule. Pipelines already track flows on points with a design capacity equal to or greater than 15,000 MMBtu/day to ensure the operational integrity of their systems; to plan and schedule operations; to monitor and control the pipelines; and to respond to and correct abnormal operations. Natural gas pipeline schedulers need this information on a daily basis so that they can match supply to nominated demand and maintain system balance. Furthermore, some companies that own several major non-interstate pipelines also own interstate natural gas pipelines, which already post scheduled volume information. For such companies, the requirement is a familiar one and they should have the infrastructure in place, or easily put in place, to meet the requirement on their major non-interstate pipelines. V. Pipeline Posting Requirements A. Overview 57. Based on the comments received and the discussion at the technical conference held on April 3, 2008, the Commission will modify the proposal in the Posting NOPR in a number of significant ways. We have increased the minimum delivery threshold defining major non-interstate pipelines from 10 to 50 million MMBtu per year. Also, we have determined that neither major noninterstate pipelines nor interstate pipelines will be required to post actual flow information at this time. Instead, the regulations promulgated in this Final Rule require major non-interstate pipelines to post scheduled flow information at each receipt and delivery point with a design capacity greater than 15,000 MMBtu per day, and interstate pipelines to post certain information on no-notice service.108 108 Under 18 CFR 284.7(a)(4), an interstate natural gas pipeline must provide no-notice service, which is defined as ‘‘a firm transportation service under which firm shippers may receive delivery up to their firm entitlements on a daily basis without penalty.’’ PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 73503 Further, we provide for a number of exemptions and clarifications of the new posting requirements that we believe will further limit the burden on entities subject to the Final Rule. We address the salient aspects of the regulations in turn, below. B. Definition of Major Non-Interstate Pipeline 1. Posting NOPR 58. In the Posting NOPR, the Commission proposed that only major non-interstate pipelines would be required to post flow information. The Posting NOPR provisionally defined a ‘‘major non-interstate pipeline’’ as ‘‘a pipeline that fits the following criteria: (1) It is not a ‘natural gas company’ under section 1 of the NGA; and (2) it flows annually more than 10 million (10,000,000) MMBtu of natural gas measured in average receipts or in deliveries for the past 3 years.’’ 109 The Commission asked for comment on the proposed 10 million MMBtu delivery threshold and whether it should be increased or decreased.110 2. Comments 59. Several commenters support both a delivery threshold approach and the 10 million MMBtu delivery threshold proposed in the Posting NOPR.111 Copano Energy supports a 10 million MMBtu threshold but adds that only jurisdictional flows should be counted for that delivery threshold.112 60. Several commenters seek an increase in the proposed delivery threshold. Contending that a 10 million MMBtu delivery threshold is unnecessarily low, NGSA suggests that the delivery threshold should be 50 million MMBtu.113 Relying upon EIA data regarding intrastate pipelines, NGSA contends that a 50 million MMBtu delivery threshold would capture approximately 90 percent of the intrastate pipeline volumes and apply to only 57 intrastate pipelines. By contrast, according to NGSA, a 10 million MMBtu threshold would capture 99 percent of such volumes and apply to approximately 100 intrastate pipelines. NGSA contends that the benefit from this increase in reported volumes that would result from establishing a lower threshold is not sufficient to justify greater costs related to implementation of a 10 million MMBtu delivery 109 Posting NOPR at P 67. 110 Id. 111 Bentek Comments at 6; see also TIPRO Comments at 2. 112 Copano Energy Comments at 10. 113 NGSA Comments at 5–6. E:\FR\FM\02DER3.SGM 02DER3 73504 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations threshold.114 Similarly, Chevron Pipelines proposes raising the delivery threshold; it proposes a delivery threshold for reporting based on daily flows of 100,000 mcf/day (which equates to 36.5 MMBtu/year).115 61. Calpine supports a greater delivery threshold and proposes setting out two minimum thresholds based on gross and net throughput levels. It would set a de minimis daily volume threshold of 100,000 Dth (100,000 MMBtu) of net throughput, net of gas consumed by directly connected endusers, or 300,000 Dth (300,000 MMBtu) of gross peak day throughput.116 62. TPA suggests that the Commission adopt the delivery threshold used in FERC Form No. 2, 50 million Dth (50 million MMBtu), so that only noninterstate pipelines that transported over 50 million Dth (50 million MMBtu) in each of the three prior years would be required to post.117 63. Shell seeks clarification regarding the calculation of the proposed delivery threshold. It contends that the use of thermal units, i.e., MMBtu, is more appropriate than volumetric units, i.e., Bcf. Shell suggests that the word ‘‘average’’ should be added in front of the word ‘‘deliveries’’ so the calculation would apply both to average receipts and/or deliveries. Shell seeks clarification if the three-year average is a rolling average and whether it should be calculated annually. It also seeks clarification on whether the delivery threshold should be applied on a facility-by-facility basis or corporate wide.118 3. Commission Determination 64. In consideration of the comments filed in this proceeding, the Commission will define a major noninterstate pipeline as a pipeline that ‘‘(1) is not a ‘natural gas company’ under section 1 of the NGA; and (2) delivers annually more than 50 million MMBtu of natural gas measured in average receipts or in average deliveries for the past three years.’’ 119 The definition adopted in this Final Rule differs substantially from that proposed in the Posting NOPR and adopts a five-fold increase in the delivery threshold. Further, the definition bases the threshold on deliveries instead of flows. In addition, the definition clarifies that the delivery threshold should be rwilkins on PROD1PC63 with RULES3 114 Id. at 5–6. Pipelines Comments at 23–24. 116 Calpine Comments at 6–7. 117 TPA Comments at 45; see also Kinder Morgan Intrastate Comments at 21; NGSA Comments at 5. 118 Shell Comments at 27–29. 119 See new section 284.14(a). 115 Chevron VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 determined on a facility-by-facility basis. 65. As an initial matter, we believe that a delivery threshold of 50 million MMBtu provides sufficient information to meet the Commission’s goal of tracking daily flows of natural gas adequately throughout the United States by providing flow information in areas for which interstate natural gas pipeline posting is not adequate. EIA Form 176 data demonstrates the reach of the 50 million MMBtu threshold. Excluding deliveries by interstate natural gas pipelines, pipelines that deliver greater than 50 million MMBtu annually account for 75 percent of total noninterstate volumes delivered in the United States.120 While the EIA Form 176 categories are not a precise match to the data required to be posted by this Final Rule, the categories are sufficiently similar to show that the 50 million MMBtu delivery threshold will provide a significant amount of flow information to the Commission, market participants, and observers and improve the understanding of the supply and demand fundamentals affecting interstate markets. Assuming this data is representative, capturing roughly threefourths of non-interstate pipelines would be a significant stride in filling in the gaps regarding flows in the United States.121 66. The 50 million MMBtu delivery threshold is likewise consistent with the threshold used in the Commission’s FERC Form No. 2 requirements. FERC Form No. 2 is a compilation of financial and operational information filed by interstate natural gas pipelines. An interstate natural gas pipeline must file a FERC Form No. 2 if it transports or stores for a fee volumes of natural gas greater than 50 million Dth.122 If an interstate natural gas pipeline transports or stores for a fee volumes of natural gas less than 50 million Dth, it is not considered a major pipeline and files 120 Derived from EIA Form 176 data for 2006 based on the ratio of non-interstate pipelines reporting deliveries greater than 50 million MMBtu per year to total deliveries on all non-interstate pipelines. NGSA estimates that a 50 million MMBtu threshold would capture 90 percent of the relevant intrastate pipeline volumes. NGSA comments at 5– 6. We have been unable to duplicate NGSA’s methodology used to derive this figure, although we note that NGSA has included certain interstate volumes and excluded some non-interstate volumes in its calculations. 121 We believe that a 50 million MMBtu annual threshold for ‘‘major non-interstate pipelines’’ is appropriate since this threshold includes almost all non-interstate pipelines that interconnect with major hubs. However, experience with pipeline postings following implementation of this Final Rule could lead us to revisit this determination in the future. 122 18 CFR 260.1(b). PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 FERC Form No. 2A, which entails a lesser accounting burden. 67. By adopting the significantly higher 50 million MMBtu delivery threshold, the Commission also will eliminate compliance burdens on many smaller pipelines which may have fewer resources to meet the posting requirement. We agree with various commenters that the 10 million MMBtu delivery threshold in the Posting NOPR would have burdened smaller pipelines without providing a proportionate amount of useful information. A review of EIA Form 176 data for those pipelines that describe themselves to EIA as intrastate pipelines is illustrative. Under a 10 million MMBtu delivery threshold, thirty-seven of such pipelines would be required to post. In contrast, under a 50 million MMBtu delivery threshold, only sixteen of such pipelines will be required to post.123 68. Additionally, the Commission clarifies the definition of major noninterstate pipeline in a few other respects. The Commission uses the term ‘‘deliveries’’ instead of ‘‘flows’’ for determining the threshold. We believe that the term ‘‘deliveries’’ is a more precise term and is more easily understood by both pipelines and their customers. Further, the delivery threshold for defining a ‘‘major noninterstate pipeline’’ must be measured by a non-interstate pipeline’s average deliveries for the previous three calendar years. If in the previous three calendar years, a non-interstate pipeline’s deliveries averaged greater than 50 million MMBtu then it would be required to post the information required under this Final Rule. This approach, too, is consistent with the Commission’s FERC Form No. 2 requirements.124 C. Scheduled Flow Information on Major Non-Interstate Pipelines 1. Posting NOPR 69. In the Posting NOPR, the Commission proposed to require major non-interstate pipelines to post information regarding capacity, 123 Looking at the EIA data another way also supports the 50 million MMBtu delivery threshold. The 50 million MMBtu threshold would capture 85 major non-interstate pipelines that do not qualify under the exemptions. These 85 pipelines flow greater than 75 percent of total non-interstate volumes, according to the EIA Form 176 data. The Commission’s definition of ‘‘major non-interstate’’ does not match exactly the categories used by EIA. Thus, these numbers may differ. 124 See FERC Form No. 2, Instructions, p. i, https://www.ferc.gov/docs-filing/eforms/form-2/ form-2.pdf (‘‘Each natural gas company whose combined gas transported or stored for a fee exceed 50 million dekatherms in each of the previous three years must submit FERC Form Nos. 2 and 3–Q’’). E:\FR\FM\02DER3.SGM 02DER3 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations scheduled flow volumes, and actual flow volumes.125 2. Comments 70. Several commenters assert that scheduled volume information would provide sufficient insight on supply and demand fundamentals to meet the Commission’s transparency goals. TPA, for example, claims that ‘‘[t]he use of scheduled volumes is widespread within the natural gas industry and is the current standard used by interstate natural gas pipelines’’ and would provide the transparency that the Commission wants at minimal costs.126 Similarly, Kinder Morgan Intrastate maintains that actual flows do not reflect the actual supply and demand picture due to, for instance, back-hauls, operational balancing agreements, equipment outages, and other operating conditions.127 Commenters object to the requirement that non-interstate pipelines post actual flows as overly burdensome. For example, Kinder Morgan Intrastate objects to the cost of posting scheduled volumes; it estimates that the proposal would cost $250,000 for information technology modifications to obtain and post scheduled volumes and another $250,000 for information technology modifications to obtain and post actual flow volumes.128 TPA recommends posting of only scheduled volumes rather than actual volumes as a way to significantly reduce the costs of compliance with the Final Rule.129 71. TIPRO supports the posting of actual flows as a way to verify scheduled activity as compared to actual activity, but acknowledges that posting of actual flows may not be feasible on a daily basis and that should be taken into account in the final rulemaking.130 3. Commission Determination 72. We will not require major noninterstate pipelines to post actual flow information. As noted by Kinder Morgan Intrastate, the information gained from requiring non-interstate pipelines to post actual flows would not be that much greater than that gained from the posting of scheduled volumes, particularly given that non-interstate pipelines are not required to provide nonotice service (although some do). rwilkins on PROD1PC63 with RULES3 125 Posting NOPR at P 22 and 49. 126 TPA Comments at 8. 127 Kinder Morgan Intrastate at 13–14. 128 Kinder Morgan Intrastate at 12. Kinder Morgan estimates additional costs for obtaining flow information at segments, which is not required in the Final Rule. 129 TPA Comments at 6–7. 130 TIPRO Comments at 4. VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 73. We recognize that some noninterstate pipelines will incur costs to comply with this rule, including the posting of scheduled volumes. However, we believe that the benefits of posting and the need for this rule outweigh those costs. In any event, we do not believe that the costs are as great as those estimated by commenters. Commenters’ estimated costs included the cost of metering at segments, but posting at segments is not a requirement of this Final Rule.131 Similarly, commenters’ estimated costs include the cost of new metering and the posting of actual flow information, but posting actual flow is, likewise, not a requirement of this Final Rule. We also disagree with Kinder Morgan Intrastate’s estimated $250,000 in costs to obtain and post volumetric information.132 The Commission believes that this figure is too great because, as discussed by TPA, ‘‘most of the information already collected by intrastate pipelines relates to scheduled volumes at receipt and delivery points. * * *’’ 133 D. Receipt and Delivery Point Posting for Major Non-Interstate Pipelines 1. Posting NOPR 74. The Posting NOPR sought comments regarding whether the Commission’s transparency goals could be sufficiently advanced through the posting of flows in and out of major market hubs and, if so, which hubrelated data should be reported.134 The Commission suggested two possible approaches to postings by non-interstate pipelines. First, under a delivery threshold approach, whether a noninterstate pipeline posts flow information depends on the amount of flows or deliveries the non-interstate pipeline flows or delivers annually at the hub. Second, under a market hub approach, or market hub alternative, whether a non-interstate pipeline posts flow information depends on whether it interconnects to a major market hub. The Commission sought comment on 131 Our decision not to require posting by segment is discussed infra. 132 Kinder Morgan Intrastate at 12. 133 Our staff’s research indicates that such costs could be less than $30,000 for major non-interstate pipelines. The estimate includes both the software and labor costs associated with implementing the rule. Software costs include a one-time capital cost (amortized over ten years) to create a standard informational posting Web site for reporting scheduled volumes and the monthly fees associated with maintaining this site. In addition, the cost factors daily labor costs to upload this information on the Internet and to have an attorney or compliance office review these postings on a routine basis. 134 Posting NOPR at P 75. PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 73505 adopting a market hub approach, but did not propose a market hub approach. 75. The Posting NOPR also proposed that non-interstate pipelines post flow information for ‘‘major points or segments.’’ We did not delineate for which ‘‘major points or segments’’ a major, non-interstate pipeline should post but requested comment on the subject. The Posting NOPR proposed that non-interstate pipelines post ‘‘on a daily basis on an Internet Web site and in downloadable file formats, in conformity with section 284.12 of this chapter, equal and timely access to’’ flow information.135 2. Comments 76. Several commenters support a market hub approach (as opposed to a points or segment-based approach) for determining which non-interstate pipelines should post flow information.136 Chevron Pipelines argue that a market hub approach would ‘‘ensure and facilitate more accurate pricing with little loss of meaningful information.’’ 137 EOG Resources supports posting at the thirteen market hubs referred to in the Initial and Posting NOPRs because it would more likely provide meaningful information on flows affecting wholesale natural gas markets and would cost less than the proposed posting requirement.138 Atmos also advocates posting at the thirteen hubs because the hubs represent market points where index prices are regularly published and the market hubs ‘‘come closer than any other points to satisfying the statutory requirement that the information be about physical pricing at wholesale and interstate commerce.’’ 139 77. Yates asserts that a market hub approach would address the lack of supply and demand information in production areas because the thirteen major market hubs are located in the major production areas in Louisiana and Texas.140 Supply and demand information, according to this commenter, is available for other production areas through interstate postings.141 Similarly, because the market hub approach focuses on the Gulf Coast, Yates claims, it would address the goal of understanding the 135 See new section 284.14(a). e.g., National Fuel Distribution Comments 136 See, at 2. 137 Chevron Pipelines Comments at 27. Resources Comments at 11; see also Oklahoma Corporation Commission Comments at 4; Shell Comments at 11–17. 139 Atmos Comments at 7. 140 Yates Comments at 6–8. 141 Yates Comments at 7. 138 EOG E:\FR\FM\02DER3.SGM 02DER3 73506 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations effects of a major disruption in that area.142 78. Other commenters oppose adoption of a market hub approach. Royalty Owners contend that limiting the postings to hubs would exclude vast, relevant segments of the intrastate system. For instance, Royalty Owners declare that, since Oklahoma does not have one of the thirteen market hubs listed in the Posting NOPR, every pipeline in the state could be exempt, yet Oklahoma is the third largest producing state with approximately 8.8 percent of the nation’s total production.143 TIPRO similarly opposes limiting the proposal to only pipelines that flow in and out of major hubs because significant information would be lost and the transparency goals would not be met.144 79. Commenters also addressed possible postings by receipt and delivery points. Several commenters object to the fact that the Posting NOPR did not define the ‘‘major points of receipt and delivery’’ at which noninterstate pipelines would be required to post flow information. Atmos believes that the lack of a definition of major points hindered the ability to comment on the burden and costs of the proposal.145 NGSA suggests requiring the posting of flow information at receipt and delivery points that flow on average more than 15 mmcf/day and at all metered points.146 PGC requests that the Final Rule exclude posting at points serving private pipelines or LDC bypasses, noting the Commission’s comments that it was not interested in posting for ‘‘extremely small points connected to one or a few customers.’’ 147 80. Several commenters express concern that the public posting of flow information at receipt and delivery points could result in a competitive disadvantage for individual customers.148 TPA objects to the posting of design capacity for a point as it would allow a determination of a noninterstate pipeline’s available capacity.149 Kinder Morgan Intrastate contends that the posting proposal would harm its end-use customers by causing the release of confidential information.150 To avoid this result, Kinder Morgan Intrastate suggests that 142 Id. at 7–8. Owners Comments at 2. 144 TIPRO Comments at 2. 145 Atmos Comments at 5; see also TPA Comments at 32; Calpine Comments at 9–11. 146 NGSA Comments at 7–10. 147 PGC Comments at 2. 148 See, e.g., Atmos Comments at 8. 149 TPA Comments at 16. 150 Kinder Morgan Intrastate Comments at 19. rwilkins on PROD1PC63 with RULES3 143 Royalty VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 the Commission exempt the reporting of information regarding deliveries made to power generators, LDCs and industrial customers.151 Calpine seeks to keep confidential an individual customer’s transportation volumes and consumption patterns by excluding individual customer laterals and focusing the posting requirement on high-volume segments with multiple shippers.152 But, as to confidentiality, Bentek observes that data for power plants and nearly 800 industrial facilities that are directly connected to interstate natural gas pipelines is posted daily with ‘‘no apparent adverse impact.’’ 153 Bentek concludes that the Commission should not ‘‘protect something in the non-interstate context that is not protected in the interstate context.’’ 154 81. Several commenters object to posting information on segments. Atmos opposes posting information at segments because it does not measure flows at segments.155 Atmos also states that it has 1,200 receipt and delivery points on its system and thousands of minor ones resulting in a multitude of possible postings for segments.156 PG&E urges the Commission to focus on receipt and delivery points on noninterstate pipelines, rather than on mainline segments because posting at segments would not provide any information that is not already apparent from posting capacity, scheduled volume and actual flows at receipt and delivery points.157 In this regard, other commenters maintain that the requirement to post flows at segments would create a significant burden.158 TPA explains that the estimates of costs from the proposed requirement to post flow information arises from the assumption that the proposal entails reporting at segments: The burdens and costs associated with the proposed rule would be substantially greater than the Commission estimated. A large reason for this is that intrastate pipelines do not typically collect information related to segment flow—most of the information already collected by intrastate pipelines relates to scheduled volumes at receipt and delivery points, rather than segments.159 For instance, Atmos estimates that determining actual gas flows at major pipeline segments would require a 151 Id. at 22. Comments at 5. 153 Bentek Comments at 9. 154 Id. 155 Atmos Comments at 5. 156 Id. at 6. 157 PG&E Comments at 5. 158 See, e.g., TPA Comments at 25–26; Atmos Comments at 5. 159 TPA Comments at 25. 152 Calpine PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 capital investment of at least $13 million.160 Kinder Morgan Intrastate estimates that installing meters to measure flow at segments would cost approximately $62.7 million.161 The ONEOK Gathering Companies observe that narrowly defining the term ‘‘major point or mainline segment’’ in proposed section 284.14(a) would reduce the number of new meters that would need to be installed, operated and maintained and would thus keep the burden to a minimum.162 TPA contends that adding segment meters to a pipeline would cause a drop in pressure.163 3. Commission Determination 82. The Commission determines that a major non-interstate pipeline must post scheduling information for each receipt and delivery point with a design capacity of equal to or greater than 15,000 MMBtu/day (a point-based delivery threshold). In addition, a noninterstate pipeline must post the design capacity for each such point. Specific information that is to be posted is discussed below.164 Postings at market hubs or for segments will not be required. a. Posting at Receipt and Delivery Points 83. The delivery threshold approach adopted herein will provide broader, more useful information about the supply and demand fundamentals that underlie the interstate natural gas market than a hub-based approach and at a cost less than a segment-based approach. The delivery threshold approach is not limited to a few market hubs or published pricing points. It will provide information about flows that either eventually feed into market hubs or that affect pricing at those market hubs. Such market hubs or published pricing points are generally already relatively liquid—the delivery threshold approach will promote transparency at less liquid and currently less transparent points. 84. Posting points’ design capacity will allow the Commission and market participants to better determine availability, a key component of supply and demand fundamentals. Market observers may estimate availability by subtracting scheduled volumes from design capacity. Requiring the posting 160 Atmos Comments at 5. Morgan Intrastate at 11. 162 ONEOK Gathering Companies Comments at 12–13. 163 TPA Comments at 41. 164 We remind pipelines that must comply with this Final Rule that the Commission has established a help desk to facilitate responses to questions regarding compliance with our regulations. See Obtaining Guidance on Regulatory Requirements, 123 FERC ¶ 61,157 (2008). 161 Kinder E:\FR\FM\02DER3.SGM 02DER3 rwilkins on PROD1PC63 with RULES3 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations of design capacity will allow shippers and other market observers to understand the availability of transportation that affects interstate wholesale markets. Further, this approach is consistent with the Commission’s policies for interstate natural gas pipelines. In Order No. 637, the Commission stated that interstate natural gas pipelines had the option of posting at either (i) receipt and delivery points or (ii) segments. It has been our experience that most, but by no means all, interstate pipelines elect to post by receipt and delivery point and not by segment. 85. Some commenters object to the threshold approach as not advancing transparency in the interstate market because, for example, as they claim ‘‘[v]ery few intrastate delivery or receipt points and no intrastate segments exist at the same location as published pricing indices. If these points do not represent established pricing points for the interstate market, there is no advancement of the increased price transparency goal from the proposed reporting.’’ 165 This criticism assumes that only flow information for a published pricing point can promote transparency. First, this assumption is incorrect because prices are affected by flows that feed a pricing point or that affect the supply available to a pricing point. Second, this assumption incorrectly assumes that price transparency is solely about the price of natural gas at published price indices. Price transparency also includes the price of transportation of natural gas. Congress contemplated that this price transparency would be derived from not only information about prices but also information about availability. Section 23 of the NGA authorizes the Commission to obtain ‘‘information about the availability’’ of natural gas, in addition to information about the ‘‘prices’’ of natural gas. Unlike the market hub approaches, the delivery threshold approach would obtain information regarding availability of transportation broadly which would facilitate price transparency of both ‘‘sales and transportation of physical natural gas in interstate commerce.* * *’’ 166 86. We believe that a delivery threshold will be less burdensome for major non-interstate pipelines than either a hub-based or segment-based approach as many such pipelines already collect such information. These pipelines may incur some additional costs to comply with the Final Rule’s posting requirements, however, we believe the substantial transparency benefits, discussed above, outweigh those costs. In any event, the Commission expects that compliance costs will not be nearly as great as those estimated by some commenters. As discussed above, most commenters’ cost estimates include the cost of metering at segments, but posting at segments is not a requirement. Other cost estimates include the cost of metering and posting actual flow information, but posting actual flow information is, likewise, not a requirement. 87. Only a few commenters provided cost estimates that did not assume obtaining and posting flow information for pipeline segments and that did not assume obtaining and posting actual flow information. Kinder Morgan Intrastate, for example, estimated a cost of $250,000 for obtaining and posting scheduled volume information.167 The Commission believes that this figure is likely exaggerated because, as noted by TPA, ‘‘most of the information already collected by intrastate pipelines relates to scheduled volumes at receipt and delivery points.’’ 168 We believe that the costs of collecting existing scheduled volume information and posting it on a Web site is likely to be far less.169 88. Lastly, we have carefully considered the arguments by some commenters that additional pipeline postings could affect the competitive position of customers who have a dedicated delivery point with a design capacity equal to or greater than 15,000 MMBtu/day on a major, non-interstate pipeline. In this respect, the regulations that we adopt here may affect ‘‘fair competition, and the protection of consumers’’—considerations that the Commission must take into account pursuant to section 23(a)(1) of the NGA. Nonetheless, information about the scheduled volumes to a customer with a delivery point with a capacity greater than 15,000 MMBtu/day will provide useful information to the Commission, market participants, and other market observers and will greatly increase market transparency. We believe that this benefit outweighs the concerns about publicly posting information about scheduled volumes to such a customer. Further, we understand that such customers would be placed in the same situation as customers on interstate natural gas pipelines with 167 Kinder Morgan Intrastate at 12. Comments at 25. 169 As noted above, supra note 130, our staff’s research indicates that such costs could be less than $30,000 per year. 168 TPA 165 Atmos Comments at 7. 23(a)(1) of the NGA; 15 U.S.C. 717t2(a)(1) (2000 & Supp. V 2005). 166 Section VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 73507 whom they often compete.170 Currently, interstate natural gas pipelines post daily scheduled volumes for delivery points dedicated to a single customer regardless of the size of the meter. There have been no indications that competitive balance has been harmed since the interstate requirement to post was instituted. 89. The Commission will require all postings to be public; we will not provide for posting information to be kept confidential as requested by some commenters. In section 23(a)(2) of the NGA, Congress called for any transparency rule to provide for the ‘‘dissemination, on a timely basis, of information about the availability and prices of natural gas sold at wholesale and interstate commerce to the Commission, State commissions, buyers and sellers of wholesale natural gas, and the public.’’ 171 90. In this Final Rule we determine that each major non-interstate pipeline must post information for each receipt or delivery point with a design capacity equal to or greater than 15,000 MMBtu/ day. We believe that this threshold represents significant load at delivery points (major pipeline interconnections, substantial industrial use, etc.) and major receipt points. However, the 15,000 MMBtu/day threshold should be sufficiently large so as to exclude insignificant or minor points on a pipeline system. To put this threshold in context, 15,000 MMBtu/day corresponds roughly to the gas used by an 85 MW baseload gas fired power plant at a relatively efficient heat rate of 7,500 Btu/kWh—a facility that could serve over 40,000 households each with a 2 kW load. 91. The Commission will require posting based on each receipt and delivery point’s design capacity rather than average flows at a point because posting at points based on design capacity should be less burdensome for pipelines. The average flows over a receipt or delivery point may change from year-to-year and designation of posting points based upon fluctuating averages would require pipelines to add and subtract points from posting on a rolling basis. By comparison, points’ design capacities are relatively fixed and lend themselves to stable posting requirements. 170 Those customers whose delivery point has a design capacity of less than 15,000 MMBtu/day would not be affected. Those customers of noninterstate pipelines that did not flow greater than 50 million MMBtu per year also would not be affected. 171 Section 23(a)(2) of the NGA; 15 U.S.C. 717t– 2(a)(2) (2000 & Supp. V 2005) (emphasis added). E:\FR\FM\02DER3.SGM 02DER3 rwilkins on PROD1PC63 with RULES3 73508 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations 92. In the circumstance where the design capacity of a receipt or delivery point could vary according to operational or usage conditions, a major non-interstate pipeline must post the design capacity for the most common operating conditions of its system during peak periods. This guidance is identical to that provided to interstate natural gas pipelines in Order No. 637 regarding postings. Also consistent with our directives in Order No. 637, a pipeline’s posting of the total design capacity of a point is not a daily posting requirement, but pipelines must update this information from time-to-time as changes in design capacity occur. 93. The Commission will not require major non-interstate pipelines to post information for each point that has a meter as suggested by NGSA. Such a requirement would not be uniform for each pipeline as some systems have significantly more physical meter points than others. Further, such a requirement could create a disincentive for a major non-interstate pipeline to install new meters. 94. The Commission will require that a major, non-interstate pipeline post the following scheduled volume information for each receipt and delivery point that has a design capacity equal to or greater than 15,000 MMBtu/ day: Transportation Service Provider Name, Posting Date, Posting Time, Nomination Cycle, Location Name, Additional Location Information if Needed to Distinguish Between Points, Location Purpose Description (Receipt, Delivery, or Bilateral), Design Capacity, Scheduled Volume, Available Capacity, Measurement Unit (Dth, MMBtu, or MCf). 95. Regarding the timing of postings, the Commission considers that scheduled flow information that is not provided on a daily basis is simply untimely and of vastly diminished use to market participants. We believe that, in this regard, our interstate natural gas pipeline postings set an appropriate standard: Postings should occur at least on a daily basis. Further, this standard conforms to Congress’ direction in section 23 of the NGA, which requires that our transparency rules ‘‘provide for the dissemination, on a timely basis, of information about the availability and prices of natural gas. * * *’’ 172 96. These postings will provide information comparable to the daily postings made by interstate natural gas pipelines. Major non-interstate pipelines must post scheduled volumes according to a daily posting deadline. 172 Section 23(a)(2) of the NGA (emphasis added); 15 U.S.C. 717t–2(a)(2) (2000 & Supp. V 2005). VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 Currently, interstate natural gas pipelines must provide at least four nomination cycles to their shippers with the following nomination: Timely, evening, intra-day 1, and intra-day 2.173 Once these volumes are scheduled, they must be posted on the public Internet under Operationally Available Capacity section of an interstate natural gas pipeline’s Informational Postings according to the following cycle deadlines: Timely (no later than 4:30 p.m. central clock time for the day prior to gas flow); evening (no later than 9 p.m. central clock for the day prior to gas flow); intra-day 1 (no later than 5 p.m. on flow day); and intra-day 2 (no later than 9 p.m. on flow day). Currently, major non-interstate pipelines employ a variety of nomination deadlines on their systems. Some use the standard North American Energy Standards Board (NAESB) guidelines followed by interstate natural gas pipelines; others do not have specific nomination deadlines. 97. The Commission will require that major non-interstate pipelines post scheduled volumes no later than 10 p.m. central clock time the day prior to gas flow. This deadline occurs after interstate natural gas pipelines are required to post their evening cycle schedule confirmations by receipt and delivery point. The deadline enables non-interstate pipelines ample time to review their gas control set-up for the next day and limits the burden of posting to a single, daily reporting cycle. 98. Regarding comments made by TPA, the Commission clarifies that the pipeline posting regulations do not impose NAESB requirements on noninterstate pipelines. Rather, the proposed regulations required a major non-interstate pipeline to post daily its scheduled volumes, ‘‘in conformity with § 284.12 of this chapter. * * *’’ The commenter erroneously assumes that this would require a non-interstate pipeline to conform to all of section 284.12 instead of to conform with the manner of posting set forth in that section. The Commission clarifies that posting pipelines need only comply with the manner of posting outlined in section 284.12 and need not comply with all other requirements of that section. b. Posting at Market Hubs or by Segment 99. The Commission identified, in the Initial and Posting NOPRs, thirteen market hubs served by both interstate and non-interstate pipelines as a way to 173 Standard 1.3.2, Nominations Related Standards, North American Energy Standards Board, Wholesale Gas Quadrant, July 31, 2002. PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 illustrate and provide examples of the wider range of deficient information about the physical natural gas market. We asked for comment on whether these thirteen hubs should help determine which non-interstate pipelines should post flow information.174 Some commenters seized on these thirteen market hubs as a way to define the particular points at which pipelines that should post flow information. While the Commission adopts a posting method based upon points of receipt and delivery, the Commission appreciates the effort that commenters expended in evaluating the Posting NOPR and proposing other alternatives (including posting at market hubs) as well as comments on posting by segment. We now explain why we are not adopting any of these alternatives. 100. The market hub alternatives proposed by NGSA and TPA focus on locations which have obvious import to understanding pricing in the interstate markets. However, we believe that a hub-based approach would be unwieldly at best and would not provide the data needed to meet the Commission’s transparency goals. The market hub alternatives would require posting only by those non-interstate pipelines that connect to major market hubs. These alternatives would be quite difficult to implement and would provide insufficient information to market participants. 101. The market hub alternatives also present too great a challenge in trying to keep up with the constantly changing nature and location of market hubs. Even the initial identification of relevant market hubs would present a challenge. Market hubs are uniform only in that they serve as pricing points; they are not uniform physically. There is a wide variety of hub types: pooling points, salt-cavern based storage hubs, and pipeline hubs (including one, two, or even three different pipelines). In spite of this lack of uniformity, a pipeline posting would require physical posting as if every market hub were physically the same. In such circumstances, posting information would not be comparable among different hubs and the resulting data would be of marginal value. 102. After market hubs were initially determined, ongoing challenges would remain. A regulatory listing of market hubs would need to be established and maintained, yet trading in the market determines which market hubs are, in fact, relevant to the market as a whole. This list of relevant market hubs would need to be constantly modified as 174 Posting E:\FR\FM\02DER3.SGM NOPR at P 71. 02DER3 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations rwilkins on PROD1PC63 with RULES3 trading trends evolved. For instance, on July 2, 2008, Gas Daily reported on numerous changes involving price reporting and the establishment of new trading hubs, including El Paso South Mainline. El Paso South Mainline is a market hub that, under a market hub approach, could be considered as a market hub at which interconnected pipelines should post flow information. New pipelines would also change which market hubs were important to the overall transparency of the market.175 The listing of specific hubs could not keep up with this constantly changing market, would require the commitment of significant Commission resources, and would result in perpetual regulatory uncertainty regarding posting obligations. Each time a market hub were added to the list of relevant hubs, a new set of pipelines would be required to begin posting information. 103. An additional drawback, particular to NGSA’s proposed market hub approach, would be determining how far upstream of the market hub a non-interstate pipeline should post data. NGSA proposes only postings of flow information at the pipeline immediately connected to the market hub.176 This limitation would result in too little information: It would provide flow information only at the immediate interconnecting pipeline. The Commission, market participants, and observers would lose significant information from a supply-chain standpoint. 104. The TPA market hub alternative would provide even less information and less benefit to market participants and observers. Because the TPA market hub alternative would not include points upstream of the market hub interconnection, this alternative would provide no information about the availability of transportation to the market hub. The Commission’s experience with postings by interstate natural gas pipelines suggests that the value of such posting is to understand the availability of supply at different points on a pipeline, not just the one point at the interconnection. Further, if the market hub interconnection is with an interstate natural gas pipeline, the interstate natural gas pipeline already posts scheduled volume information for that receipt point, thus rendering the TPA proposal redundant for many points.177 175 IPAA Comments at 3. Reply Comments at 2. 177 The AGA states, in objecting to posting such points for local distribution companies, that requiring the posting of ‘‘daily information for receipt and delivery points that are interconnections with interstate pipelines would be 176 NGSA VerDate Aug<31>2005 21:29 Dec 01, 2008 Jkt 217001 105. Similarly, based upon comments we received in response to the Posting NOPR, we will not require posting of data by segment. As noted by TPA, ‘‘most of the information already collected by intrastate pipelines relates to scheduled volumes at receipt and delivery points, rather than segments.’’ 178 Thus, the requirement in the Final Rule focuses on obtaining and posting information already collected by intrastate pipelines: we will require posting of scheduled volumes and posting by receipt and delivery points, rather than segments.179 106. We also appreciate the burden that would be placed upon major noninterstate pipelines if we were to adopt a segment-based posting approach. Nearly every commenter that discussed segment-based posting acknowledged that the costs of such a methodology would be substantial.180 We adopt a receipt and delivery point-based approach that will capture much of the same data as a segment-based approach, but that is less burdensome to implement. E. Exemptions to the Major NonInterstate Pipeline Posting Requirements 107. In consideration of the comments received in response to the Posting NOPR, the Commission adopts three exemptions: for non-interstate pipelines upstream of a processing plant; for noninterstate pipelines that deliver almost exclusively to retail end-users; and for storage providers. First, a major noninterstate pipeline will be exempt from the posting requirement if it ‘‘fall[s] entirely upstream of a processing, treatment or dehydration plant.’’ 181 This language excludes from the definition not only non-interstate pipelines located upstream of a processing plant but also those located upstream of a treatment or dehydration plant. Second, the Commission modifies the end-use exemption, excluding a non-interstate pipeline if it delivers more than 95 percent of its natural gas unnecessarily redundant and would add no valuable information to the Commission’s or others’ understanding of the supply and demand conditions that directly affect the U.S. wholesale gas markets.’’ AGA Comments at 15. 178 TPA Comments at 25. 179 We note that some non-interstate pipelines currently post data regarding pipeline use and availability by segment. We wish to make clear that the Final Rule does not preclude pipelines from posting such data. The Final Rule requires the posting of specific data by major non-interstate pipelines at certain points of receipt and delivery. A pipeline is free to post any additional data (e.g., additional points, postings by segment, etc.) that it believes would be useful to its customers or as required by other regulatory bodies. 180 See, e.g., TPA Comments at 25–26. 181 See new section 284.14(b)(1). PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 73509 volumes directly to retail end-users.182 To determine eligibility for the retail exception, a major non-interstate pipeline must measure volumes by ‘‘average deliveries over the preceding three calendar years.’’ 183 Third, the Commission provides a general exemption for storage providers.184 1. Non-Interstate Pipelines That Are Upstream of a Processing, Treatment, or Dehydration Plant a. Posting NOPR 108. In the Posting NOPR, the Commission proposed that noninterstate pipelines located upstream of a processing plant would be exempt from the proposed regulations185 and requested comment on this proposal.186 b. Comments 109. Commenters generally support the exemption for pipelines upstream of the processing plant as price formation relies more on flows downstream of the processing plant.187 However, several commenters seek to clarify and, in some ways, expand the definition of processing plant. These commenters request that the exemption be expanded to exclude pipelines upstream of a treatment plant.188 Dow Pipeline seeks to include nitrogen processing in the definition of processing.189 Regency seeks to expand the exemption to exclude any pipeline upstream of a processing, treatment or dehydration plant used to remove liquid hydrocarbons or other substances from natural gas to meet transmission pipeline quality specifications.190 NGSA contends that a major non-interstate pipeline that lies upstream from another major non-interstate pipeline and delivers solely into a single noninterstate pipeline should be exempted from the posting requirement because its volume will be reported by the downstream pipeline.191 110. Several commenters seek an exemption specifically for gathering pipelines.192 These commenters argue that the exemption for pipelines upstream of a processing plant would 182 See new section 284.14(b)(2). new section 284.14(b)(4). 184 See new section 284.14(b)(3). 185 Posting NOPR at P 69. 186 Id. at P 68. 187 See, e.g., Chevron Pipelines Comments at 22– 23; TIPRO Comments at 5. 188 Copano Energy Comments at 8–9; ONEOK Gathering Companies Comments at 5; TPA Comments at 32. 189 Dow Pipeline Comments at 2–3. 190 Regency Comments at 11–13. 191 NGSA Comments at 6. 192 Enbridge Comments at 2–4; EOG Resources Comments at 8–10; Gas Processors Comments at 3– 5; TPA Comments at 30–31. 183 See E:\FR\FM\02DER3.SGM 02DER3 73510 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations not exclude all gathering pipelines.193 They note that the exemption for pipelines upstream of a processing plant was justified in part as a way to exempt gathering pipelines, but that it does not exempt all gathering pipelines.194 Shell asserts that a production and/or gathering line should not be considered a ‘‘pipeline’’ and request that the Commission define pipeline.195 111. Some commenters assert that if gathering systems were required to post at all of their receipt and delivery points, the burden would be too great. For instance, Regency, which operates gathering systems, estimates that requiring posting of its gathering system would cost $6–10 million.196 These commenters request that the Commission exempt gathering pipelines by using the ‘‘primary function test.’’ 197 Dow Pipeline argues that, if any portion of a major non-interstate pipeline located upstream of a processing plant, the pipeline should be excluded from the posting requirement.198 112. Several commenters note that many gathering facilities are downstream of a processing plant.199 For instance, ONEOK Gathering Companies maintain that the proposed exemption for a pipeline that lies upstream of a processing facility is insufficient to exempt gathering facilities because gathering facilities have facilities downstream of a processing facility. This fact, ONEOK Gathering Companies describe, is recognized in the Commission’s primary function test for determining a gathering facility in which one factor is the location of the processing plant.200 The fact that the Commission did not delineate for which points a pipeline would post makes such an exemption even more necessary, according to ONEOK Gathering Companies, as the burden would be too great.201 c. Commission Determination rwilkins on PROD1PC63 with RULES3 113. The Commission adopts an exemption for major non-interstate pipelines that lie entirely upstream of a processing, treatment, or dehydration plant. The focus of this Final Rule is to make available information on flows of 193 ONEOK Gathering Companies Comments at 5– 11; Crosstex Comments at 5; Enbridge Comments at 4–6 194 Gas Processors Comments at 3–5. 195 Shell Comments at 18–20. 196 Regency Comments at 8–9. 197 Copano Energy Comments at 8–9; Encana Comments at 5–8; EOG Resources Comments at 10– 11; Kinder Morgan Intrastate Comments at 21. 198 Dow Pipeline Comments at 2–3. 199 DCP Midstream Comments at 5. 200 ONEOK Gathering Companies Comments at 7. 201 Id. at 7–9. VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 gas that may be sold in interstate natural gas markets. Prior to processing, treatment, or dehydration, natural gas is generally not of sufficient quality to serve as a fungible product to use in evaluating supply and demand fundamentals underlying the interstate natural gas market. We clarify that nitrogen processing, as suggested by Dow Pipeline, would be considered processing at a processing plant for purposes of this exemption. Additionally, as requested by TPA, the Commission clarifies that a pipeline may be upstream of a processing plant if it flows into another line that flows into a processing plant. 114. The Commission will not provide a general exemption for gathering pipelines. The increased delivery threshold of 50 million MMBtu and the exemption for pipelines that lie entirely upstream of a processing, treatment, or dehydration plant should be sufficient to exclude most gathering pipelines. Further, these exemptions as written will serve as a bright-line test for determining whether a major noninterstate pipeline should post. This contrasts with the ‘‘primary function test’’ advocated by some commenters. Adopting an exemption based on the ‘‘primary function test’’ would require a Commission determination of each gathering pipeline’s eligibility and would be burdensome for pipelines seeking to determine whether they must post information. Moreover, the ‘‘primary function test’’ is a test adopted by the Commission to determine whether a facility would fall outside of the scope of our traditional NGA jurisdiction under section 1 of the act. Use of this test could further confuse the distinction that the Commission makes here between its traditional section 1 and its new section 23 jurisdiction. 115. We also decline to adopt an exemption for pipelines that lie partially upstream and partially downstream of a processing, treatment, or dehydration plant. Such an accommodation would confuse the exemption and create compliance difficulties. In any event, again, we believe that the increased threshold mitigates any compliance difficulties posed for such pipelines. 2. Non-Interstate Pipelines That Deliver More Than Ninety-Five Percent of Volumes to Retail Customers a. Posting NOPR 116. In the Posting NOPR, the Commission proposed that major noninterstate pipelines that deliver 95 percent of their volumes to end-users would be exempt from the posting PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 requirements and requested comment on this proposal.202 b. Comments 117. Several commenters support an exemption for pipelines delivering almost exclusively to end-users contending that it would not result in a loss of significant market information.203 Indeed, some commenters request that a proposed exemption be expanded to include noninterstate pipelines that transport 80 percent of flows to end-users.204 Calpine seeks to lower the end-use threshold from 95 percent to 90 percent and asserts that such pipelines do not have a major impact on gas flow. Calpine contends that unforeseen outages of a large gas-consuming facility could cause a non-interstate pipeline to no longer be eligible for the exemption. Calpine acknowledges that this possibility is lessened by averaging deliveries over a three-year period as was proposed.205 118. AGA proposes to exempt any pipeline in which flows to non-endusers amounted to less than 10 million MMBtu. AGA is concerned that without its additional exemption, a pipeline that flowed more than the delivery threshold of 10 million MMBtu but whose flows to non-end-users were more than 500,000 MMBtu would be captured.206 Dow Chemical requests a categorical exemption for non-interstate pipelines that are owned or operated by end-users and that are used to transport natural gas for use by such end-users.207 119. Duke maintains that gas consumed by an LDC in the normal course of operations, such as fuel and lost-and-unaccounted for gas, should be included in the gas deemed delivered directly to end-users for purposes of this exemption.208 Duke contends that such gas facilitates performance by an LDC of its core function and is not pertinent to the United States wholesale market.209 Duke also argues that deliveries by one LDC to another LDC should be considered deliveries to another enduser for the purposes of the exemption.210 Duke reasons that such gas has left the interstate system.211 202 Posting NOPR at P 69. Chemical Comments at 2; Dow Pipeline Comments at 2–3; Chevron Pipelines Comments at 23. 204 ONEOK Gathering Companies Comments at 14–15; TPA Comments at 46–47; Kinder Morgan Intrastate Comments at 22–23. 205 Calpine Comments at 7–8. 206 AGA Comments at 2. 207 Dow Chemical Comments at 2. 208 Duke Comments at 7; see also AGA Comments at 11. 209 Duke Comments at 7. 210 Id. at 7–8; see also AGA Comments at 13. 211 Duke Comments at 8. 203 Dow E:\FR\FM\02DER3.SGM 02DER3 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations rwilkins on PROD1PC63 with RULES3 c. Commission Determination 120. With one substantial modification, the Commission adopts the exemption proposed in the Posting NOPR. Major non-interstate pipelines that flow greater than 95 percent of their volumes directly to retail customers (rather than all end-users) are exempted from the posting requirements.212 121. Recently, in Order No. 704–A, the Commission held that data regarding transactions with consumers at retail would not significantly assist us to fulfill our transparency responsibilities under section 23 of the NGA.213 There, we drew a distinction between a broad category of end-use transactions and transactions that occur at retail. As we discussed in that order, many end-use transactions have substantial impact on wholesale energy markets.214 For these reasons, we will define the exemption in the same terms described in Order No. 704–A and exempt pipelines delivering 95 percent of their flow volumes under retail transactions (i.e., bundled transactions through an LDC at a state-approved tariff rate) to consumers. 122. In light of the increase in the delivery threshold from 10 to 50 million MMBtu, we do not adopt the proposal of AGA to further expand this exemption. AGA proposes to exempt any pipeline in which flows to non-endusers amounted to less than 10 million MMBtu. AGA is concerned that without its additional exemption, a pipeline that flowed just more than the delivery threshold of 10 million MMBtu but whose flows to non-end-users were more than 500,000 MMBtu would be required to post.215 Because the Commission herein increases the delivery threshold proposed in the Posting NOPR, AGA’s concern is alleviated because such a non-interstate pipeline would not be required to post. 123. Also, because of the increase in the delivery threshold, we will not 212 Dow Intrastate requests clarification for its non-interstate pipeline that can deliver both to a processing plant and an end-user. It seeks to fit the non-interstate pipeline into one of the exemptions. The non-interstate pipeline delivers directly into a processing plant but can also deliver directly to an end-user. According to Dow Intrastate, in those circumstances, a pipeline could not qualify for the end-use exemption because 95 percent of the gas does not go to an end-user, it is delivered to the processing plant. It appears that the pipeline that Dow Intrastate describes does not lie entirely upstream of a processing plant. If the modified delivery point threshold adopted in this Final Rule does not address Dow Intrastate’s concern, it may file for a waiver of the regulations and the Commission will consider the matter in light of the facts presented. 213 Order No. 704–A at P 40–43. 214 Id. at P 40. 215 AGA Comments at 2. VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 lower the threshold for this exemption to 80 percent as requested by several commenters 216 or to 90 percent as proposed by Calpine. Lowering the retail delivery exemption to 80 or 90 percent would allow some major noninterstate pipelines to avoid posting a significant amount of receipts and deliveries that are not made to consumers, which could result in the loss of a large amount of information about the interstate natural gas market. Further, we believe that commenters’ concerns largely are addressed by the increased delivery threshold of 50 million MMBtu and by the requirement that the end-use percentages be determined on a three-year average. 124. We find Calpine’s ‘‘concern[] that the ninety-five (95%) volume level is set too high to allow for unforeseen outages that affect large gas-consuming facilities’’ to be misplaced. Such outages could result in gas being redirected away from an end-user to a wholesale purchaser. This also could result in the pipeline delivering more than 5 percent of its flows to non-end-users therefore triggering the posting requirement. In such a circumstance, posting would be properly required. 125. In response to other comments, we clarify that volumes transported from one LDC to another should not be deemed deliveries to retail consumers for purposes of the end-user exemption.217 The Commission will not exempt a non-interstate pipeline that delivers solely into a single noninterstate pipeline as suggested by NGSA.218 NGSA reasons that the downstream, non-interstate pipeline would post the flows at its receipt point. That may not be the case where the downstream, non-interstate pipeline does not meet the delivery threshold and is not required to post. 126. Natural gas consumed or utilized for operational reasons by the posting pipeline (such as for fuel or lost-andunaccounted for gas) is deemed to be gas consumed ‘‘at retail’’ for purposes of determining whether a pipeline fits within this exemption. 3. Non-Interstate Storage Providers a. Posting NOPR 127. In the Posting NOPR, the Commission sought further comment from storage providers regarding the effect of the proposed rule on their businesses. Specifically, the Commission asked for comment on 216 ONEOK Gathering Companies Comments at 14–15; TPA Comments at 46–47; Kinder Morgan Intrastate Comments at 22–23. 217 Duke Comments at 7. 218 NGSA Comments at 6. PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 73511 whether storage providers should provide data in aggregate form and whether an individual storage facility loses negotiating strength when its customers know the supply of available storage capacity.219 b. Comments 128. Some commenters support the proposal.220 For example, Calpine supports a daily posting requirement for storage providers, otherwise ‘‘[t]he supply chain would be incomplete.’’ 221 Calpine contends that the information currently available about interstate storage facilities is ‘‘often too delayed or too aggregated to provide effective daily flow information’’ and information about non-interstate storage providers is even less useful.222 129. Storage providers generally object to the proposal, claiming, for example, that the proposal is anticompetitive in nature,223 the information is already available through other means,224 or that the daily posting requirements would produce distorted aggregate data and may yield inaccuracies.225 They oppose both (i) the posting of flow information by storage providers who qualify as major non-interstate pipelines, and; (ii) the posting by a non-interstate pipeline of flow information at a receipt or delivery point that serves a storage provider. 130. In response to the Commission’s inquiry regarding the effect of the proposal on a storage provider’s negotiating position, commenters warn that revealing their actual storage position would cause them to lose negotiating strength,226 which could make the storage business less profitable, discourage continued and new storage services, lower storage supply and increase prices.227 As explained by Enstor: A rule that requires [a storage provider] to reveal all daily injections and withdrawals into and out of each of its storage facilities would, in effect, reveal to the world what [its] storage position is on each day in each such storage facility.228 219 Posting NOPR at P 76–77. Comments at 12. 221 Id. at 13. 222 Id. 223 Enstor Comments at 3–5; Dow Chemical Comments at 2. 224 See Jefferson Island Comments at 4–6; NISKA Comments at 4–5; Nisource Comments at 4–5; Williston Basin Comments at 16; EnergySouth Comments at 2, 5. 225 Nisource Comments at 5; Total Peaking Comments at 11. 226 Williston Basin Comments at 17. 227 EnergySouth Comments at 13. 228 Enstor Comments at 6 n. 22; see also EnergySouth Comments at 2 and 11; Jefferson 220 Calpine E:\FR\FM\02DER3.SGM Continued 02DER3 73512 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations rwilkins on PROD1PC63 with RULES3 131. Similarly, EnergySouth comments that revealing such competitively-sensitive information about individual facilities would degrade storage providers’ competitive abilities and provide ‘‘one-sided information advantage’’ to storage purchasers.229 This result, storage providers allege, would run contrary to section 23(a)(1) of the NGA, which requires the Commission to facilitate price transparency ‘‘having due regard for * * * fair competition’’ among other goals.230 132. Commenters also claim that the release of flow data from individual storage facilities could lead to increased prices.231 For instance, NiSource asserts that the posting of regionally specific storage volumes could result in artificially high prices, particularly where storage assets are operated on an integrated basis.232 Further, commenters suggest that flow information from storage providers would not be useful to market participants or the Commission.233 National Fuel Supply comments that ‘‘information about daily flows at each individual field has only operational, not commercial, significance, and its disclosure would place a burden on National Fuel Supply and other storage providers without facilitating price transparency.’’ 234 133. Several commenters state that the posting for storage providers should be done on an aggregated basis rather than on a facility-by-facility basis.235 Otherwise, NiSource reasons, market participants may use daily storage data to artificially increase natural gas prices when they believe demand is rising.236 Others contend that an aggregated posting by storage providers should parallel the postings of interstate storage providers. According to Enstor, many interstate natural gas pipelines post one aggregated, system-wide storage capacity number for all of their storage Island Comments at 7–8; NISKA Comments at 6–8; Nisource Comments at 5 and 7–8; Williston Basin Comments at 17; Chevron Pipelines Comments at 32; Enstor Reply Comments at 10. 229 EnergySouth Comments at 2, 11–12; see also EnergySouth Reply Comments at 1–2. 230 Section 23(a)(1) of the NGA; 15 U.S.C. 717t–2(a)(1) (2000 & Supp. V 2005). 231 See Chevron Pipelines Comments at 32; EnergySouth Comments at 2, 13; Nisource Comments at 9. 232 Nisource Comments at 9. 233 Total Peaking Comments at 11; National Fuel Supply Comments at 6; Williston Basin Reply Comments at 7. 234 National Fuel Supply Comments at 6; National Fuel Supply Reply Comments at 5–6. 235 See Enstor Comments at 5; Nisource Comments at 5; EnergySouth Comments at 10–11; Bentek Comments at 10; Comments of National Fuel Supply at 6. 236 NiSource Comments at 5. VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 fields, regardless of the number of storage facilities.237 Enstor explains that if the Commission deems it necessary to require non-interstate storage providers to post daily storage capacity and withdrawal and injection capacities, the Commission should require all storage providers to report this information by specific location rather than by the entirety of their systems.238 134. Some commenters request clarification regarding possible storage provider postings. PG&E requests that the Commission clarify that by requiring storage providers to post ‘‘capacity’’ information, it would not be requiring storage providers to post inventory data.239 PG&E does not object to posting information concerning injections into and withdrawals from its storage facilities on an aggregated basis.240 135. Commenters propose different ways to limit storage provider posting obligations to address the above concerns. They suggest that the Commission exempt storage providers providing storage service under section 311 of the NGPA under market-basedrates 241 or allow storage providers to post such information on a confidential, non-public basis.242 EnergySouth comments that ‘‘[m]arket-based rate storage providers lacking market power should be regulated under less intrusive gas market transparency rules, if under any such rules, than pipelines providing transportation services.’’ 243 c. Commission Determination 136. In response to the comments received, the Commission will exempt non-interstate storage providers from the requirement to post information on the Internet.244 As discussed above, the Commission and other market observers would benefit substantially by increased transparency regarding the flow of natural gas on major non-interstate pipelines. We agree, however, with certain commenters that the Commission’s transparency goals may not be substantially enhanced by a requirement that non-interstate storage providers separately post flow 237 Enstor Comments at 8. at 9. 239 PG&E Comments at 7; NISKA Comments at 7. 240 PG&E Comments at 7. 241 See Chevron Pipelines Comments at 29; Jefferson Island Comments at 10; NISKA Comments at 4; see also Enstor Comments at 7 (stating that the Commission should put all storage providers on the same playing field and not exempt some operators from posting information because it is inherently not fair to entities taking on the ‘‘additional burden’’). 242 See PG&E Comments at 7; NISKA Comments at 5; Chevron Pipelines Comments at 30–31. 243 EnergySouth Reply Comments at 3. 244 See new section 284.14(a)(3). 238 Id. PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 information. The Commission here does not require the posting of information regarding natural gas storage inventories for the same reason that it does not seek production information. The focus of the Final Rule is on the flow, not strictly the supply, of natural gas within the United States. 137. Regarding flows into and out of non-interstate storage providers, we determine that relevant information is already captured by the requirements imposed on non-interstate pipelines in the promulgated regulations. That is, a major non-interstate pipeline with a receipt or delivery point at a connection with a storage provider is required to post scheduled flow data if the point has a design capacity greater than 15,000 MMBtu per day. We believe that this posting will be sufficient to capture relevant flow information into and out of storage facilities. Further, as major non-interstate pipelines are already required by this Final Rule to post data for such points, requiring similar postings by storage providers would be duplicative and unduly burdensome. 138. We disagree with the concerns raised by certain non-interstate storage provider commenters regarding competitive issues related to the posting of flow data. First, the Final Rule does not require storage providers to post any information. Rather, the information relating to flows into and out of storage facilities that the Commission requires to be posted is in the control of interconnected non-interstate pipelines. Second, the Commission is not requiring the posting of inventory or storage capacity data. Under these circumstances, we do not believe that the postings required in this Final Rule would have any deleterious effect on competition. 4. Other Exemptions and Safe Harbor a. Posting NOPR 139. While the Posting NOPR did not specifically suggest additional exemptions from the proposed posting requirements, it solicited comments from interested entities regarding all aspects of the rule. b. Comments 140. Cranberry Pipeline requests an exemption for intrastate pipelines, such as itself, with a relatively small Weblike configuration rather than a long-line system. Furthermore, Cranberry Pipeline requests an exemption for intrastate pipelines that operate in concentrated and transparent markets (such as Appalachia) in which supply E:\FR\FM\02DER3.SGM 02DER3 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations and demand information is readily available.245 141. Freeport requests that the Commission clarify that the definition of ‘‘major non-interstate pipeline’’ does not include facilities authorized pursuant to section 3 of the NGA that do not render stand-alone transportation service.246 Freeport asserts that because its sendout pipeline is more akin to a production facility than to a ‘‘major non-interstate pipeline,’’ it should not be subject to a posting requirement.247 142. SEMCO urges the Commission to exempt major non-interstate pipelines that sell and transport natural gas in the Alaska natural gas market because there are no market hubs in Alaska.248 For its part, Marathon contends that the Commission does not have jurisdiction over Alaskan pipelines and explains that natural gas pipeline activities in Alaska do not impact interstate commerce.249 143. Several commenters advocate for a safe harbor provision for good faith compliance.250 TPA argues in favor of a safe harbor provision.251 ONEOK Gathering advocates for ‘‘safe harbor’’ provisions to ensure upstream pipelines are not unfairly punished if posted capacities are based on reasonable assumptions about downstream pressures that differ from actual pressures.252 OGT explains that capacity on upstream pipelines varies due to the pressures of downstream pipelines.253 144. In contrast, Royalty Owners state that any Final Rule should not contain a safe harbor contending that the Commission should be able to accommodate the few instances of honest mistakes—‘‘Penalties are in place for a reason.’’ 254 145. AGA requests that distribution companies with Commission-approved service area determinations under section 7(f) of the NGA be excluded from the Final Rule, as such companies are considered ‘‘natural gas companies’’ under section (2)(6) of the NGA.255 146. Several commenters contend that the Commission should clarify that Hinshaw pipelines are not subject to the posting requirements for major, non245 Cranberry 246 Freeport 247 Id. Pipeline Comments at 5–7. Comments at 1. at 4. 248 SEMCO Comments at 4–5. Comments at 2–8. 250 AGA Comments at 18; Atmos Comments at 13; Copano Energy Comments at 12. 251 TPA Comments at 33; Crosstex Comments at 33. 252 ONEOK Gathering Comments at 18. 253 Id. 254 Royalty Owners Comments at 2. 255 AGA Comments at 6; Louisville Gas and Electric Co. Comments at 3–4. rwilkins on PROD1PC63 with RULES3 249 Marathon VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 interstate pipelines. As explained by PSCo, a Hinshaw pipeline should not fall within the definition of ‘‘major, noninterstate pipeline’’ under the proposed regulation.256 PSCo also contends that flow information from a Hinshaw pipeline would not be useful in meeting the Commission’s goals for the pipeline posting requirements. c. Commission Determination 147. The Commission will not provide a separate exemption for pipelines in ‘‘concentrated and transparent markets’’ as requested by Cranberry Pipeline.257 The increase in the threshold for the definition of major non-interstate pipelines should accommodate Cranberry Pipeline’s request for an exemption for ‘‘smaller’’ pipelines. It would be extremely difficult to create a test for what is a ‘‘concentrated and transparent’’ market. Such a test would create an undue burden on a pipeline and an unnecessary administrative burden on the Commission. 148. Likewise, we decline to provide a separate exemption for sendout pipelines covered under section 3 of the NGA as requested by Freeport LNG. The flow information from such pipelines, if they were to meet the 50 million MMBtu delivery threshold, would provide valuable information to market participants, market observers and the Commission. Peak sendout at liquefied natural gas facilities may represent material volumes of natural gas within a region or trading location and, therefore, may significantly explain changes in prices. 149. Similar reasoning applies to our decision not to categorically exclude Hinshaw pipelines or LDCs operating under a section 7(f) service area determination from the posting requirements in this Final Rule. Hinshaw pipelines and entities that serve an interstate service area under NGA section 7(f) that meet or exceed the 50 million MMBtu delivery threshold are sizeable entities and flows on these pipelines may have substantial effect on the natural gas market, especially regionally. 150. However, we will not impose the requirements of the Final Rule on noninterstate pipelines in Alaska. At this time, such pipelines do not have a sufficiently significant impact on the 256 PSCo Comments at 3–4; see also AGA Comments at 6–7. 257 Cranberry Pipeline describes these types of entities as intrastate pipelines that operate in concentrated and transparent markets (such as Appalachia) in which supply and demand information is readily available. Cranberry Pipeline Comments at 5–7. PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 73513 interstate natural gas market so as to warrant their inclusion in the Final Rule. 151. The Commission will not adopt a ‘‘safe harbor’’ for posting. The Commission articulated a safe harbor in the Policy Statement on Price Indices,258 which grants a data provider that adopts certain reporting standards a rebuttable presumption that data submitted to index developers is accurate, timely, and submitted in good faith. However, a similar perpetual safe harbor is not warranted regarding the posting requirements set forth in this Final Rule. The Policy Statement on Price Indices sets forth standards that data providers could choose to adopt should they voluntarily elect to provide data to price index developers. One goal of the Policy Statement on Price Indices was to ‘‘encourage [industry participants] voluntarily to report energy transactions to providers or price indices.’’ The safe harbor that we adopted in the Policy Statement on Price Indices was a direct extension of this policy goal. 152. The posting requirements set forth in this Final Rule are mandatory posting requirements adopted consistent with the directives of EPAct 2005, not the voluntary reporting of price data to an index developer. There is no policy need to provide an incentive for posting the information required in this Final Rule similar to the encouragement to reporting price data to index developers. Other mandatory requirements, such as the filing of FERC Form No. 2, do not include such a safe harbor. For this reason, we are not persuaded that a perpetual safe harbor is warranted.259 F. Posting of No-Notice Service Information by Interstate Pipelines 1. Posting NOPR 153. The Posting NOPR proposed to require interstate natural gas pipelines to post actual flow information within 24 hours of the close of the gas day on 258 Price Discovery in Natural Gas and Electric Markets; Policy Statement on Natural Gas and Electric Price Indices, 104 FERC ¶ 61,121 (2003), clarified, 109 FERC ¶ 61,184 (2004). 259 Recently, in Order No. 704–A, the Commission declined to adopt a perpetual safe harbor for the annual reporting requirement for Form No. 552. FERC Stats. & Regs. ¶ 31,275 at P 69. While we did adopt a one-year safe harbor for 2009 filings of Form No. 552, we decline to do so here. As discussed below, interstate pipelines will be required to comply with the promulgated posting requirements within 60 days of the publication of this Final Rule in the Federal Register. Major noninterstate pipelines must comply within 150 days of publication. We are confident that pipelines subject to this Final Rule will be able to comply with the new regulations in a timely manner. E:\FR\FM\02DER3.SGM 02DER3 73514 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations which it flowed.260 This proposed requirement, the Commission stated, would disseminate information about no-notice service for interstate pipelines.261 The Commission observed that posting of actual flow information could fill the gap between scheduled and actual flows and allow market observers to ascribe price behavior with physical changes in flows, particularly in the northern tier of the country where no-notice service is more prevalent.262 The Posting NOPR also observed that posting of actual flow information could reduce the opportunities for market participants to exploit non-public flow information.263 We sought comments about implementation of the requirement to post actual flows on interstate natural gas pipelines in order to better understand the costs and benefits of such posting.264 2. Comments 154. Several commenters oppose the requirement that interstate pipelines post actual flow information as too burdensome in relation to the minimal information that would be gleaned. For example, INGAA contends that information regarding actual flows does not further market transparency because they do not reflect ongoing market dynamics; rather they trace to transactions that have already been completed.265 Further, according to INGAA, actual flows are independent of the contract paths that INGAA asserts define market transactions.266 Several commenters contend, without specificity, that the posting of actual flows will be costly.267 155. Several commenters argue that the current posting of scheduled volume information provides sufficient transparency and there is no evidence that the posting of actual flows would increase transparency.268 Spectra states that scheduled volumes postings contain better and more timely data for the market than actual flow postings would contain.269 Spectra also points out that the market currently uses scheduled volume data to make decisions, and there is no evidence that the market is currently functioning in 260 Posting 261 Id. NOPR at P 4. at P 41. 262 Id. at P 42. at P 2, 46. 265 INGAA Comments at 12; see also Chevron Pipelines Comments at 12–13. 266 INGAA Comments at 13. 267 See, e.g., id. at 17–18. 268 Id. at 7; National Fuel Supply Comments at 4; Spectra Comments at 8; Williston Basin Comments at 3–5. 269 Spectra Comments at 7; see also NiSource Comments at 5. any way other than efficiently.270 National Fuel Supply states that nonotice volumes are not important to understanding the market and ‘‘the Commission should not be concerned that information about no-notice volumes could be exploited in a manipulative or discriminatory manner.’’ 271 Similarly, Kinder Morgan Interstate maintains that the Commission offers no support that the posting of no-notice activity would prevent misconduct.272 156. Several commenters argue that the posting of actual flow information could confuse market participants due, for instance, to timing differences between when the original imbalances occur and when they are cleared.273 Commenters object to including actual flow information because it would include operational flows, such as flows reflecting maintenance activities, line pack management, blending and balancing, which are not relevant to the price formation process.274 Kinder Morgan Interstate contends that nonotice activity is not useful in establishing future prices and does not reflect current market conditions; thus, it would not enhance price transparency.275 157. On the other hand, some commenters support the posting of actual flow information by interstate pipelines. Calpine asserts that actual daily flow information would allow an assessment of how accurately scheduled volumes reflect the actual volumes associated with activities in the realtime market, which ‘‘is especially critical in times of constraints caused by unplanned events or outages.’’ 276 APGA supports posting of actual flow volume as it would provide market observers an important ‘‘missing piece of the puzzle’’ to understand what is transpiring in the market, both operationally and as to supply and demand fundamentals.277 The New York PSC supports obtaining actual flows from not just interstate pipelines, but also intrastate pipelines, as the data would provide market participants with increased understanding of daily trends in natural gas markets, including regional conditions and pipeline capacity available to resolve regional supply/ demand imbalances, especially during 263 Id. rwilkins on PROD1PC63 with RULES3 264 Id. VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 270 Spectra Comments at 8. Fuel Supply Comments at 4–5. 271 National 272 Id. 273 Williston Basin Comments at 3–5. at 5–7; Chevron Pipelines Comments at 16; Total Peaking Comments at 12. 275 Kinder Morgan Interstate Comments at 10. 276 Calpine Comments at 4. 277 APGA Comments at 3–4. 274 Id. PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 peak demand or emergency conditions.278 158. Bentek’s comments suggest that the posting of actual volumes is one option to obtain data to ensure that nonotice service is transparent on interstate pipelines, but, alternatively, proposed that market observers rely on publication of no-notice volumes.279 159. Several commenters respond specifically to the Posting NOPR’s inquiry as to whether no-notice activity is reflected in trading activity or storage activity. Chevron Pipelines responds that the only no-notice activity that would equate to trading activity is storage injections.280 Kinder Morgan Interstate contends that no-notice activity on their pipelines generally reflect storage withdrawals because the trading activity associated with storage withdrawals would have already occurred when the gas was purchased and injected into storage.281 Williston Basin states that on its system no-notice volumes are exclusively associated with storage activity.282 Chevron Pipelines describe no-notice service as commonly associated with two types of transactions: Storage injections/ withdrawals and imbalance management, including balancing under Operating Balancing Agreements.283 3. Commission Determination 160. While the Commission will not require interstate natural gas pipelines to post information regarding all actual flows, this Final Rule requires interstate natural gas pipelines to post the volumes of no-notice service flows 284 at each receipt and delivery point before 11:30 a.m. central clock time (the timely cycle under NAESB Nomination Standard 1.32) three days after the day of gas flow.285 161. The Commission requires an interstate pipeline to provide no-notice service if such service was provided as of the effective date of Order No. 636.286 Accordingly, firm shippers that receive no-notice service can receive delivery of 278 New York PSC Comments at 1. Comments at 3–5. 280 Chevron Pipelines Comments at 17. 281 Kinder Morgan Interstate Comments at 9. 282 Id. 283 Chevron Pipelines Comments at 13–14. 284 See 18 CFR 284.7(a)(4) (requiring pipelines to provide no-notice service). 285 Total Peaking, Venice Gathering, and DCP Midstream sought in this proceeding to exempt specific interstate natural gas pipelines from the existing posting requirement. We believe the current posting requirements on interstate pipelines should not be reduced at this time and do not adopt any exemptions to that requirement. As always, interstate pipelines may request a waiver from the requirements. 286 See Order No. 636–A at p. 30,574. 279 Bentek E:\FR\FM\02DER3.SGM 02DER3 rwilkins on PROD1PC63 with RULES3 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations gas on demand up to their firm entitlements on a daily basis without incurring daily balancing and scheduling penalties. No-notice service is usually used by shippers when gas load is much higher than has been nominated and scheduled the previous day (due, perhaps, to unanticipated cold or hot temperatures). However, while Order No. 636 and its progeny mandated the adoption of no-notice service, the Commission has previously not required Internet posting of nonotice volumes. 162. The absence of reporting of nonotice service means that the market cannot see large and unexpected increases in gas demand and therefore cannot understand price formation during such occasions. Information on no-notice volumes is valuable even posted after the no-notice gas flows because it allows market participants and other market observers to understand the historical patterns of flows and will enable them to better predict future no-notice flows. Requiring interstate pipelines to post no-notice volumes will meet the goals of the Commission with less of a burden on interstate natural gas pipelines than full posting of actual flows. 163. The posting of no-notice service will be of particular importance in the northern tier of the country during extreme weather conditions. As we pointed out in the Posting NOPR, the gap between scheduled and actual flows occurs most commonly in this region of the country where a pipeline serves a local distribution company with significant space heating demand. In such circumstances, market observers find it more difficult to ascribe price behavior to physical changes in flows. Further, as observed by NGSA, ‘‘[o]n heating season peak days or days with wide intra-day weather swings, nonotice volumes can be significant; therefore, scheduled volumes are not a proxy for physical flow and, thus, do not necessarily provide an accurate picture of underlying market fundamentals.’’ 287 164. The Commission has received many hotline and other informal calls from shippers with complaints about available service on interstate pipelines. Often, callers indicate confusion regarding discrepancies in pipeline postings of scheduled volumes that indicate that capacity should be available and a pipeline’s refusal to provide same-day service on the grounds that there is no capacity available. This lack of available capacity is very often due to the use of no-notice 287 NGSA Comments on the Initial NOPR at 10. VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 service. Posting information about nonotice service, even after the fact, will make availability on interstate natural gas pipelines more transparent, consistent with section 23 of the NGA.288 165. Public posting of no-notice service information could also prevent other forms of misconduct with direct effects on natural gas in interstate commerce. The lack of public flow information could provide the opportunity for parties to engage in manipulative or unduly discriminatory behavior. By making major noninterstate pipeline flow information public, such transparency could discourage market participants from engaging in such activities. Therefore, we disagree with commenters that suggest that transparency will not be enhanced via the posting of no-notice flows. 166. We believe this requirement to post no-notice service information would not be unduly burdensome for interstate pipelines. An interstate natural gas pipeline should already have information on the no-notice service it provides. Additionally, pipelines already have the existing information technology (i.e., Internet Web sites) for posting such information. We further reduce the posting burden for posting no-notice service by requiring such posts to occur within seventy-two hours after the applicable gas day. This compares to a twenty-four hour deadline as originally suggested in the Posting NOPR. VI. Effective Date of the Final Rule and Compliance Deadlines 167. The Final Rule will become effective 30 days following publication in the Federal Register. Interstate pipelines subject to these new posting requirements must comply with the regulations promulgated herein no later than 60 days following such publication. Interstate pipelines already have Internet Web sites in place and likely have ready means in-place to capture data necessary to post information regarding no-notice service. Under these circumstances, we believe that a 60-day deadline is sufficient time for all interstate pipelines to comply with the regulations. 168. While some major non-interstate pipelines have Web sites and data collection abilities similar to interstate pipelines, others may need additional time to put procedures in place to comply with the instant posting requirements. Therefore, we will give 288 Section 23(a)(2) of the NGA; 15 U.S.C. 717t– 2(a)(2) (2000 & Supp. V 2005). PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 73515 major non-interstate pipelines 150 days following publication of this Final Rule to come into compliance with the new regulations. This time will allow them sufficient time to update their information technology systems and establish an Internet Web site for the postings. This time frame for compliance will allow them to complete the current heating season without the need to implement new posting procedures while ensuring that new postings are available prior to the next heating season. While one commenter, Kinder Morgan Intrastate, estimated it would take one year ‘‘to complete the necessary IT upgrades and data reorganization,’’ 289 that estimate assumed a requirement for obtaining and posting both actual flows and scheduled volumes on both mainline segments and on receipt and delivery points. As the regulations promulgated here do not require obtaining and posting actual flows or obtaining scheduled volumes from segments, Kinder Morgan Intrastate’s estimate is excessive. VII. Information Collection Statement 169. The Office of Management and Budget (OMB) regulations require it to approve certain reporting and recordkeeping (information collection) requirements imposed by an agency.290 In this Final Rule, the Commission will set forth two requirements for the posting or collection of information, one for interstate and one for major noninterstate pipelines.291 The Commission has submitted notification of these proposed information collection requirements to OMB for its review and approval under section 3507(d) of the Paperwork Reduction Act of 1995.292 170. The requirement for interstate natural gas pipelines to post information about no-notice service, would impose an additional information collection burden on interstate natural gas pipelines. The other requirement for major non-interstate pipelines to post scheduled volume information would impose an additional information collection burden on major noninterstate pipelines. Interstate and major non-interstate pipelines already collect this information, but do not necessarily post it. Certain non-interstate pipelines have asserted in comments on the Posting NOPR that costs would be quite 289 Kinder Morgan Intrastate at 8. CFR 1320.11. 291 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. 292 44 U.S.C. 3507(d). 290 5 E:\FR\FM\02DER3.SGM 02DER3 73516 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations high if additional equipment were needed to meet quick posting deadlines. However, given that this information is used in their business, the Commission still believes that the burden that would be imposed by this proposed requirement is largely for the collection and posting of this information in the required format.293 Further, certain noninterstate pipelines provide burden estimates based on posting for all receipt and delivery points and by mainline segment and based on measuring and posting actual flow information. These estimates are too high because, as explained in this preamble, the Commission will not require posting at mainline segments and does not require posting at all receipt and delivery points, rather it will require posting at each receipt and delivery point that has a design capacity greater than 15,000 MMBtu/day. Finally, the Commission has reduced the number of non-interstate pipelines that will be required to post by raising the delivery threshold used to define a major non-interstate pipeline from 10 million MMBtu per year to 50 million MMBtu per year in deliveries. For interstate natural gas pipelines, the Commission reduced the burden by not requiring the posting of actual flow information; instead, the Commission Number of respondents Data collection will require that interstate natural gas pipelines post information on no-notice transportation. Elsewhere in this preamble, the Commission has further addressed comments regarding the burden of the requirements. 171. OMB regulations require OMB to approve certain information collection requirements imposed by agency rule. The Commission submitted notification of this rule to OMB. Public Reporting Burden The start-up and annual burden estimates for complying with this Final Rule are as follows: Number of daily postings per respondent Estimated annual burden hours per respondent Total annual hours for all respondents Estimated start-up burden per respondent Part 284 FERC–551. Major Non-Interstate Pipeline Postings ............................... Additional Interstate Natural Gas Pipeline Postings ............ 80 101 2 1 365 183 29,200 18,433 40 8 Total .............................................................................. 181 ........................ ........................ 47,633 ........................ The total annual hours for collection (including recordkeeping) for all respondents is estimated to be 47,633 hours. Information Posting Costs: The average annualized cost for each respondent is projected to be the following (savings in parenthesis): Annualized capital/startup costs (10 year amortization) FERC–551. Major Non-Interstate Pipeline Postings ....................................................................................... Additional Interstate Natural Gas Pipeline Postings ................................................................... rwilkins on PROD1PC63 with RULES3 Title: FERC–551. Action: Proposed Information Posting and Information Filing. OMB Control No.: 1902–0243. Respondents: Business or other for profit. Frequency of Responses: Daily posting requirements. Necessity of the Information: The daily posting of additional information by interstate and major non-interstate pipelines is necessary to provide information regarding the price and availability of natural gas to market participants, state commissions, the Commission and the public. The posting would contribute to market transparency by aiding the understanding of the volumetric/ availability drivers behind price movements; it would provide a better picture of disruptions in natural gas flows in the case of disturbances to the pipeline system; and it would allow the monitoring of potentially manipulative or unduly discriminatory activity. Internal Review: The Commission has reviewed the requirements pertaining to natural gas pipelines and determined they are necessary to provide price and availability information regarding the sale of natural gas in interstate markets. 293 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.’’). 294 Regulations Implementing the National Environmental Policy Act of 1969, Order No. 486, VerDate Aug<31>2005 21:29 Dec 01, 2008 Jkt 217001 VIII. Environmental Analysis 172. The Commission is required to prepare an Environmental Assessment or an Environmental Impact Statement for any action that may have a PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 $142 0 Annual costs $30,000 5,000 Annualized costs total $30,142 5,000 significant adverse effect on the human environment.294 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 require no construction of facilities.295 Therefore, an environmental assessment is unnecessary and has not been prepared in this rulemaking. IX. Regulatory Flexibility Act 173. The Regulatory Flexibility Act of 1980 (RFA) 296 generally requires a description and analysis of final rules that will have significant economic impact on a substantial number of small entities. The RFA requires consideration 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs., Regulations Preambles 1986–1990 ¶ 30,783 (1987). 295 18 CFR 380.4(a)(5) and (a)(27). 296 5 U.S.C. 601–612. E:\FR\FM\02DER3.SGM 02DER3 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations printing, and/or downloading. To access this document in eLibrary, type the docket number excluding the last three digits of this document in the docket number field. 176. User assistance is available for eLibrary and the FERC’s Web site during normal business hours from FERC Online Support at 202–502–6652 (toll free at 1–866–208–3676) or e-mail at ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502– 8371, TTY (202) 502–8659. E-mail the Public Reference Room at public.referenceroom@ferc.gov. X. Document Availability rwilkins on PROD1PC63 with RULES3 of regulatory alternatives that accomplish the stated objectives of a proposed rule and that minimize any significant economic impact on such entities. The RFA does not, however, mandate any particular outcome in a rulemaking. At a minimum, agencies are to consider the following alternatives: Establishment of different compliance or reporting requirements for small entities or timetables that take into account the resources available to small entities; clarification, consolidation, or simplification of compliance and reporting requirements for small entities; use of performance rather than design standards; and exemption for certain or all small entities from coverage of the rule, in whole or in part. The proposal to require daily postings by interstate and non-interstate pipelines will not impact small entities. Natural gas pipelines are classified under NAICS code, 486210, Pipeline Transportation of Natural Gas.297 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.298 The Commission does not believe that any pipeline that would be required to post under the proposal in this NOPR has receipts less than $6.5 million. Thus, the daily posting proposal will not impact small entities. In this Final Rule, the Commission will reduce the number of major noninterstate pipelines that will be subject to the posting requirements by reducing the delivery threshold from 10 million MMBtu/year to 50 million MMBtu/year. Further, the Commission as explained above considered alternatives for obtaining and disseminating daily the information on scheduled volumes. ■ 174. In addition to publishing the full text of this document in the Federal Register, the Commission will provide all interested persons an opportunity to view and/or print the contents of this document via the Internet through FERC’s Home Page (https://www.ferc.gov) and in FERC’s Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A, Washington DC 20426. 175. From FERC’s Home Page on the Internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, 297 This industry comprises establishments primarily engaged in the pipeline transportation of natural gas from processing plants to local distribution systems. 2002 North American Industry VerDate Aug<31>2005 20:57 Dec 01, 2008 Jkt 217001 XI. Effective Date and Congressional Notification 177. These regulations are effective January 2, 2009. The Commission will determine, with the concurrence of the Administrator of the Office of Information and Regulatory Affairs of OMB, that this rule [is or is not] a ‘‘major rule’’ as defined in section 351 of the Small Business Regulatory Enforcement Fairness Act of 1996. List of Subjects in 18 CFR Part 284 Continental shelf; Incorporation by reference; Natural gas; Reporting and recordkeeping requirements. By the Commission. Kimberly D. Bose, Secretary. In consideration of the foregoing, the Commission amends Part 284, Chapter I, Title 18, Code of Federal Regulations, as follows. ■ PART 284—CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS UNDER THE NATURAL GAS POLICY OF 1978 AND RELATED AUTHORITIES 1. The authority citation for part 284 continues to read as follows: Authority: 15 U.S.C. 717–717w, 3301– 3432; 42 U.S.C. 7101–7352; 43 U.S.C. 1331– 1356. 2. In § 284.1, paragraph (d) is added to read as follows: ■ § 284.1 Definitions. * * * * * (d) Major non-interstate pipeline means a pipeline that: (1) Is not a ‘‘natural gas company’’ under section 1 of the Natural Gas Act; and (2) Delivers annually more than fifty (50) million MMBtu (million British thermal units) of natural gas measured Classification System (NAICS) Definitions, https:// www.census.gov/epcd/naics02/def/ND486210.HTM. 298 See U.S. Small Business Administration, Table of Small Business Size Standards, https:// PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 73517 in average deliveries for the previous three calendar years. ■ 3. In § 284.13(d), revise the heading and add two sentences to the end of paragraph (d)(1) to read as follows: § 284.13 Reporting requirements for interstate pipelines. * * * * * (d) Capacity and flow information. (1) An interstate pipeline must also provide information about the volumes of nonotice transportation provided pursuant to § 284.7(a)(4). This information must be posted at each receipt and delivery point before 11:30 a.m. central clock time three days after the day of gas flow. * * * * * ■ 4. Section 284.14 is added to read as follows: § 284.14. Posting requirements of major non-interstate pipelines. (a) Daily posting requirement. A major non-interstate pipeline must provide on a daily basis on an Internet Web site and in downloadable file formats equal and timely access to information relevant to the design capacity of each receipt or delivery point that has a design capacity equal to or greater than 15,000 MMBtu/ day and the amount scheduled at each such point whenever capacity is scheduled. For each such point on its system, a major non-interstate pipeline must provide the following information: Transportation Service Provider Name, Posting Date, Posting Time, Nomination Cycle, Location Name, Additional Location Information if Needed to Distinguish Between Points, Location Purpose Description (Receipt, Delivery, or Bilateral), Design Capacity, Scheduled Volume, Available Capacity, and Measurement Unit (Dth, MMBtu, or MCf). The information in this subsection must remain posted for a period of one year. (b) Exemptions to daily posting requirement. The following categories of major non-interstate pipelines are exempt from the posting requirement of § 284.14(a): (1) Those that fall entirely upstream of a processing, treatment, or dehydration plant; (2) Those that deliver more than 95 percent of the natural gas volumes they flow directly to retail end-users as measured by average deliveries over the preceding three calendar years; and, (3) Storage providers. Note: This Appendix will not appear in the Code of Federal Regulations. www.sba.gov/idc/groups/public/documents/ sba_homepage/serv_sstd_tablepdf.pdf (effective July 31, 2006). E:\FR\FM\02DER3.SGM 02DER3 73518 Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 / Rules and Regulations Appendix A: List of Commenters and Abbreviations Commenter Abbreviation 1. 2. 3. 4. 5. 6. 7. Alliance Pipeline L.P .......................................................................................................................... American Gas Association ................................................................................................................ American Public Gas Association ..................................................................................................... Atmos Pipeline—Texas ..................................................................................................................... Bear Paw Energy LLC and Oneok Field Services Company LLC ................................................... BENTEK Energy, LLC ....................................................................................................................... Bridgeline Holdings, L.P., Chevron Midstream Pipeline LLC, Chevron Keystone Gas Storage, LLC, Sabine Pipe Line LLC, and Chandeleur Pipe Line Company. 8. Calpine Corporation ........................................................................................................................... 9. Copano Energy, LLC ......................................................................................................................... 10. Cranberry Pipeline Corporation ....................................................................................................... 11. Crosstex Energy Services, LP ......................................................................................................... 12. DCP Midstream, LLC ....................................................................................................................... 13. Dow Chemical Company ................................................................................................................. 14. Dow Interstate Gas Company ......................................................................................................... 15. Dow Pipeline Company ................................................................................................................... 16. EnergySouth, Inc ............................................................................................................................. 17. Duke Energy Corporation ................................................................................................................ 18. Enbridge Energy Company, Inc ...................................................................................................... 19. Encana Oil & Gas (USA) Inc ........................................................................................................... 20. Enstor Operating Company, LLC .................................................................................................... 21. EOG Resources, Inc., Pecan Pipeline Company, and Pecan Pipeline (North Dakota), Inc .......... 22. Gas Processors Association ............................................................................................................ 23. Freeport LNG Development, L.P ..................................................................................................... 24. Independent Petroleum Association of America ............................................................................. 25. Interstate Natural Gas Association of America ............................................................................... 26. Jefferson Island Storage & Hub, LLC ............................................................................................. 27. Kinder Morgan Interstate Pipelines ................................................................................................. 28. Kinder Morgan Texas Intrastate Pipeline Group ............................................................................. 29. LaGrange Acquisition L.P ................................................................................................................ 30. Liberty Gas Storage, LLC ................................................................................................................ 31. Louisville Gas and Electric Company .............................................................................................. 32. Marathon Oil Company .................................................................................................................... 33. National Association of Royalty Owners ......................................................................................... 34. National Fuel Gas Distribution Corporation ..................................................................................... 35. National Fuel Gas Supply Corporation ............................................................................................ 36. Natural Gas Supply Association ...................................................................................................... 37. New York Public Service Commission ............................................................................................ 38. NISKA Gas Storage LLC ................................................................................................................. 39. NiSource Gas Transmission & Storage Companies ....................................................................... 40. NorthWestern Energy Corporation .................................................................................................. 41. Oklahoma Corporation Commission ................................................................................................ 42. Oneok Gas Transportation, LLC, and Oneck Westex Transmission, LLC ..................................... 43. Pacific Gas & Electric Company ..................................................................................................... 44. Process Gas Consumers Group ..................................................................................................... 45. Public Service Company of Colorado ............................................................................................. 46. Railroad Commission of Texas ....................................................................................................... 47. Regency Energy Partnership ........................................................................................................... 48. Ryan Cole ........................................................................................................................................ 49. SEMCO Energy Gas Company, Enstar Natural Gas Company, and Alaska Pipeline Company .. 50. Shell Offshore Inc ............................................................................................................................ 51. SPECTRA Energy Transmission, LLC and Spectra Energy Partners, LP ..................................... 52. Texas Independent Producers and Royalty Owners ...................................................................... 53. Texas Pipeline Association .............................................................................................................. 54. Total Peaking Services, LLC ........................................................................................................... 55. Venice Gathering System, LLC ....................................................................................................... 56. Williston Basin Interstate Pipeline Company ................................................................................... 57. Yates Petroleum Corporation and Agave Energy Corporation ....................................................... Alliance AGA APGA Atmos ONEOK Gathering Companies Bentek Chevron Pipelines or CVX Pipelines Calpine Copano Energy Cranberry Pipeline Crosstex DCP Midstream Dow Chemical Dow Interstate Dow Pipeline EnergySouth Duke Enbridge Encana Enstor EOG Resources Gas Processors Freeport IPAA INGAA Jefferson Kinder Morgan Interstate Kinder Morgan Intrastate LaGrange Liberty Gas Storage Louisville Gas and Electric Marathon Royalty Owners National Fuel Distribution National Fuel Supply NGSA New York PSC NISKA NiSource NorthWestern Oklahoma Corporation Commission ONEOK Gathering PG&E PGC PSCo Railroad Commission of Texas Regency Ryan Cole SEMCO Shell Spectra TIPRO TPA Total Peaking Venice Gathering Williston Basin Yates [FR Doc. E8–28097 Filed 12–1–08; 8:45 am] rwilkins on PROD1PC63 with RULES3 BILLING CODE 6717–01–P VerDate Aug<31>2005 21:29 Dec 01, 2008 Jkt 217001 PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 E:\FR\FM\02DER3.SGM 02DER3

Agencies

[Federal Register Volume 73, Number 232 (Tuesday, December 2, 2008)]
[Rules and Regulations]
[Pages 73494-73518]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-28097]

[[Page 73493]]

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Part III

Department of Energy

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Federal Energy Regulatory Commission

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18 CFR Part 284

Pipeline Posting Requirements Under Section 23 of the Natural Gas Act;
Final Rule

Federal Register / Vol. 73, No. 232 / Tuesday, December 2, 2008 /
Rules and Regulations

[[Page 73494]]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 284

[Docket No. RM08-2-000; Order No. 720]

Pipeline Posting Requirements Under Section 23 of the Natural Gas
Act

November 20, 2008.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: In this Final Rule, the Commission adds regulations to require
certain major non-interstate natural gas pipelines to post daily
scheduled volume information and design capacity for certain points.
The Commission also revises its regulations to require interstate
natural gas pipelines to post information regarding the provision of
no-notice service. The posting requirements will facilitate price
transparency in markets for the sale or transportation of physical
natural gas in interstate commerce to implement section 23 of the
Natural Gas Act, 15 U.S.C. 717t-2 (2000 & Supp. V 2005).

DATES: Effective Date: This rule will become effective January 2, 2009.

FOR FURTHER INFORMATION CONTACT: Christopher Ellsworth (Technical),
Office of Enforcement, Federal Energy Regulatory Commission, 888 First
Street, NE., Washington, DC 20426, (202) 502-8228, Gabriel Sterling
(Legal), Office of Enforcement, Federal Energy Regulatory Commission,
888 First Street, NE., Washington, DC 20426, (202) 502-8891.

SUPPLEMENTARY INFORMATION:

Table of Contents
I. Introduction and Summary
II. Procedural Background
III. Authority for the Rule
A. Posting NOPR
B. Comments
C. Commission Determination
IV. Need for the Rule
A. Posting NOPR
B. Comments
C. Commission Determination
V. Pipeline Posting Requirements
A. Overview
B. Definition of Major Non-Interstate Pipeline
1. Posting NOPR
2. Comments
3. Commission Determination
C. Scheduled Flow Information on Major Non-Interstate Pipelines
1. Posting NOPR
2. Comments
3. Commission Determination
D. Receipt and Delivery Point Posting for Major Non-Interstate
Pipelines
1. Posting NOPR
2. Comments
3. Commission Determination
E. Exemptions to the Major Non-Interstate Pipeline Posting
Requirements
1. Non-Interstate Pipelines That Are Upstream of a Processing,
Treatment, or Dehydration Plant
2. Non-Interstate Pipelines that Deliver More Than Ninety-Five
Percent of Volumes to Retail Customers
3. Non-Interstate Storage Providers
4. Other Exemptions and Safe Harbor
F. Posting of No-Notice Service Information by Interstate
Pipelines
1. Posting NOPR
2. Comments
3. Commission Determination
VI. Effective Date of the Final Rule and Compliance Deadlines
VII. Information Collection Statement
VIII. Environmental Analysis
IX. Regulatory Flexibility Act
X. Document Availability
XI. Effective Date and Congressional Notification

I. Introduction and Summary

1. This Final Rule implements the Commission's authority under
section 23 of the Natural Gas Act (NGA),\1\ as added by the Energy
Policy Act of 2005 (EPAct 2005),\2\ to facilitate transparency in
markets for the sale or transportation of natural gas in interstate
commerce by requiring major non-interstate pipelines and interstate
pipelines to post certain data on their Internet Web sites.
Specifically, the Final Rule requires major non-interstate pipelines,
defined as those natural gas pipelines that deliver more than 50
million MMBtu per year, to post scheduled flow information and to post
information for each receipt and delivery point with a design capacity
greater than 15,000 MMBtu per day. The Final Rule also requires that
interstate pipelines post information regarding no-notice service.
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\1\ Section 23 of the Natural Gas Act; 15 U.S.C. 717t-2 (2000 &
Supp. V 2005).
\2\ Energy Policy Act of 2005, Public Law No. 109-58, sections
1261 et seq., 119 Stat. 594 (2005).
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2. The postings required here will increase price transparency in
the interstate natural gas markets by providing information about the
supply and demand fundamentals that underlie those markets. In this
way, the Commission will meet the goal set forth by Congress in section
23 of the NGA ``to facilitate price transparency in markets for the
sale or transportation of physical natural gas in interstate
commerce,'' \3\ and, at the same time, will respond to commenters'
concerns about the potential cost and burden of posting flow
information.
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\3\ Section 23(a)(1) of the NGA; 15 U.S.C. 717t-2(a)(1) (2000 &
Supp. V 2005).
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II. Procedural Background

3. The posting requirements adopted here are grounded in the
Commission's authority under section 23 of the NGA (as added by EPAct
2005), which directs the Commission, in relevant part, to obtain and
disseminate ``information about the availability and prices of natural
gas at wholesale and in interstate commerce.'' \4\ This provision
enhances the Commission's authority to ensure confidence in the
nation's natural gas markets. The Commission's market-oriented policies
for the wholesale natural gas industry require that interested persons
have broad confidence that reported market prices accurately reflect
the interplay of legitimate market forces. Without confidence in the
efficiency of price formation, the true value of transactions is very
difficult to determine.
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\4\ Section 23(a)(2) of the NGA, 15 U.S.C. 717t-2(a)(2) (2000 &
Supp. V 2005).
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4. On April 19, 2007, the Commission issued a Notice of Proposed
Rulemaking (Initial NOPR) to explore methods to implement our authority
under NGA section 23. In the Initial NOPR, the Commission set forth two
separate proposals. The first proposal addressed an annual reporting
requirement for certain natural gas market participants and the second
proposal addressed a daily requirement for intrastate pipelines to post
flow information.\5\ On December 21, 2007, the Commission bifurcated
the proceeding into two dockets: The Commission addressed the annual
reporting requirement in a Final Rule issued in Docket No. RM07-10-
000,\6\ and addressed the daily posting requirement for natural gas
pipelines in a new Notice of Proposed Rulemaking, in Docket No. RM08-2-
000 (Posting NOPR).
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\5\ Initial NOPR at P 1-2. In this preamble, we use the term
``flow information'' generically to include both scheduled volume
information and actual flow information. We use the term ``scheduled
volumes'' herein because it is more precise: The terms ``scheduled
flows'' or ``scheduled flow volumes'' could be confused with the
term ``actual flows.'' In the Posting NOPR, we used the terms
``scheduled flows'' and ``scheduled flow volumes.''
\6\ Transparency Provisions of Section 23 of the Natural Gas
Act, Order No. 704, 73 FR 1014 (Jan. 4, 2008), FERC Stats. and Regs.
] 31,260 (2007), order on reh'g, Order No. 704-A, 73 FR 55726 (Sept.
26, 2008), FERC Stats. & Regs. ] 31,275 (2008) reh'g pending.
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5. In the Posting NOPR, we proposed to require both interstate and
certain major non-interstate pipelines to post on public Internet Web
sites capacity, daily scheduled flow and daily actual flow information.
The proposal required posting of capacity and daily actual flow
information by some intrastate pipelines, with some changes relative to

[[Page 73495]]

the Initial NOPR. Under the proposal contained in the Posting NOPR,
interstate pipelines would be required to post daily actual flow
information in addition to the currently required posting of capacity
and daily scheduling information. Major non-interstate pipelines would
be required to post daily scheduled flow information in addition to
capacity and daily actual flow information. As explained in the Posting
NOPR, the Commission believed that the proposal would facilitate price
transparency in markets for the sale or transportation of physical
natural gas in interstate commerce.
6. The Commission issued the Posting NOPR to develop the record
more fully, particularly as to the proposals regarding interstate
natural gas pipelines. The Posting NOPR was intended to give interstate
natural gas pipelines sufficient notice of the changes that seemed
necessary to implement adequately section 23 of the NGA.\7\ Also, in
the Posting NOPR, we directed staff to hold a technical conference to
address implementation issues associated with the proposal, such as
obtaining and posting actual flow information and obtaining and posting
information from storage facilities.\8\
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\7\ Posting NOPR at P 2.
\8\ Id. at P 8.
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7. As directed by the Commission, staff held a technical conference
on April 3, 2008. Comments on the Posting NOPR were due on March 13,
2008; reply comments on April 14, 2008. The Commission received fifty-
five comments and nineteen reply comments.\9\
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\9\ A list of commenters and abbreviations for the commenters is
contained in Appendix A.
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III. Authority for the Rule

A. Posting NOPR

8. In the Posting NOPR, we provided our interpretation of section
23 of the NGA and the Commission's authority to enhance transparency in
the interstate natural gas markets. We concluded that Congress granted
us broad authority in EPAct 2005, placing non-interstate pipelines
within the Commission's transparency authority under section 23 of the
GA in order to ensure--for the entirety of the wholesale, physical
natural gas market--transparency of price and availability, including
transparency of market price formation. As we stated in both the
Initial NOPR and Posting NOPR, ``[w]hile 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.'' \10\
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\10\ Initial NOPR at P 20; Posting NOPR at P 25.
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B. Comments

9. Several commenters agree that the Commission has broad
transparency authority under section 23 of the NGA, including authority
over non-interstate pipelines.\11\ APGA supports the Commission's
contention that the statute authorizes obtaining information from ``any
market participant'' and not just ``natural gas companies'' as ``tacit
recognition that in order to collect the necessary information about
the wholesale and interstate market, the Commission might well need to
collect information from entities not historically subject to FERC
jurisdiction.'' \12\
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\11\ APGA Comments at 3-4; TIPRO Comments at 1-2; Yates Comments
at 4.
\12\ APGA Comments at 4.
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10. A significant number of commenters hold a different view, and
contend that the term ``any market participant,'' contained in section
23(a)(3)(A) of the NGA, does not include non-interstate pipelines. TPA
asserts that the term ``any market participant'' is limited to the
participants in wholesale interstate natural gas markets.\13\ Thus,
according to TPA, the Commission exceeds its authority under the
transparency provisions by subjecting ```non-interstate' entities that
do not participate in interstate sales markets'' to its transparency
authority.\14\ Further, TPA contends that had ``Congress sought to
expand the Commission's jurisdiction to entities that do not
participate in the interstate commerce market, it could have used the
language `affecting interstate commerce,' which has historically been
read as a more expansive grant of authority.'' \15\ Similarly, Chevron
Pipelines contends that because Congress did not expressly include
intrastate pipelines in section 23, ``one must conclude that the
Commission's jurisdiction was intended by Congress to be no greater
following the enactment of section 23 than that which existed prior to
the passage of that section.'' \16\
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\13\ TPA Comments at 35.
\14\ Id. at 36.
\15\ Id. at 39 (citing City of Centralia v. FERC, 661 F.2d 787
(9th Cir. 1981) and Columbia Gas Transmission Corp., 3 FERC ]
61,115, at 61,239 n.1 (1978)).
\16\ Chevron Pipelines Comments at 9-10.
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11. Certain commenters assert that, contrary to the Commission's
conclusions, the de minimis exemption does not aid in the
interpretation of the term ``any market participant.'' TPA interprets
the de minimis exemption to mean that ``the Commission should not
require those with a de minimis presence in the interstate market to be
subject to an added reported burden.'' \17\
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\17\ TPA Comments at 44.
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12. Several commenters argue that section 1 of the NGA bars the
Commission from obtaining and disseminating information from a non-
interstate pipeline. TPA claims that sections 1(b) and 1(c) of the NGA
limit the Commission's transparency authority under section 23 of the
NGA.\18\ TPA also contends that ``extensive case law show[s] that
Congress has consistently respected the distinction between interstate
and intrastate sale and transportation of natural gas.'' \19\
Similarly, Copano Energy believes that section 1(b) of the NGA
precludes the Commission from exercising its transparency authority
over transportation of natural gas wholly in intrastate commerce.\20\
In support, Copano Energy points to Union Oil Company of America v.
FPC,\21\ in which the court stated that the ``Natural Gas Act limits
the gathering of intrastate data to gathering it from companies falling
under the Commission's jurisdiction.'' \22\ Commenters argue that
because Congress did not revise section 1 of the NGA, that section
precludes the Commission from exercising transparency authority over
non-interstate pipelines.\23\
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\18\ Id. at 42.
\19\ Id. at 43.
\20\ Copano Energy Comments at 6.
\21\ 542 F.2d 1036 (9th Cir. 1976).
\22\ Id. at 1039.
\23\ See, e.g., Copano Energy Comments at 6.
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13. Several commenters state that a posting rule on non-interstate
pipelines would constitute improper regulation of a non-interstate
pipeline's operations and rates. TPA contends that the pipeline posting
requirement would ``directly regulate the operations of non-interstate
pipelines'' because the posting of data regarding mainline segments
would require many non-interstate pipelines ``to define segments on
their systems and to install metering equipment to measure gas at those
segments.'' \24\ Such meters, in turn, would affect the operations of
pipelines, hinder efficiency and raise prices.\25\ Similarly, DCP
Midstream holds that a pipeline posting requirement would impermissibly
interfere with states' regulation of intrastate gas pipelines. DCP
Midstream reasons that the costs to meet the requirement would be borne
by intrastate customers and rate payers

[[Page 73496]]

which would encroach upon state ratemaking authority.\26\
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\24\ TPA Comments at 40.
\25\ Id.
\26\ DCP Midstream Comments at 7-8; see also Railroad Commission
of Texas Comments at 7.
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14. Other commenters assert that two clauses in section 23 preclude
the Commission's authority to obtain information about gas that flows
on a non-interstate pipeline because such gas is sold only in
intrastate commerce, not in interstate commerce. First, commenters
contend that the statutory language in subsection (a)(1) ``for the sale
or transportation of physical natural gas in interstate commerce''
limits the type of price transparency that the Commission may
facilitate.\27\ Second, commenters contend that the statutory language
in subsection (a)(2), which permits the Commission to issue rules that
provide for the ``disseminat[ion] * * * [of] information about the
availability and prices of natural gas sold at wholesale and in
interstate commerce,'' does not include information about gas that
flows on a non-interstate pipeline, because it is not ``sold at
wholesale and in interstate commerce.'' \28\ For instance, TPA argues
that this language does not authorize the Commission to mandate the
posting of ``data about transportation of gas that may never be `sold
at wholesale and in interstate commerce,' '' as it is ``directed at
increased transparency in sales and transportation in interstate
commerce.'' \29\
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\27\ See, e.g., Atmos Comments at 11-12.
\28\ See, e.g., DCP Midstream Comments at 8-9. See also Atmos
Comments at 11-12.
\29\ TPA Comments at 35 (emphasis original).
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C. Commission Determination

15. Section 23 of the NGA gives the Commission broad authority to
facilitate price transparency in the interstate natural gas market. For
that purpose, section 23 further authorizes the Commission to obtain
and disseminate information. As now explained, the regulations
promulgated in this Final Rule do not exceed that broad authority.
16. Section 23(a)(1) of the NGA directs the Commission 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.'' \30\ Congress left
to the Commission's discretion whether to enact rules to carry out this
direction and provided that any rules implementing this section provide
for public dissemination of the information gathered:
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\30\ 15 U.S.C. 717t-2(a)(1) (2000 & Supp. V 2005).

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.\31\
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\31\ 15 U.S.C. 717t-2(a)(2) (2000 & Supp. V 2005).

17. Further, section 23(a)(3)(A) of the NGA allows the Commission
``to obtain the information * * * from any market participant.'' \32\
By using the term ``market participant,'' Congress deliberately
expanded the universe of entities subject to the Commission's
transparency authority beyond the entities subject to the Commission's
traditional rates, terms, and conditions jurisdiction under other
sections of the NGA. The term ``market participant'' is not defined in
the NGA and is not on its face limited to otherwise jurisdictional
entities. As we explained in the Posting NOPR, this authorization is
expansive. Congress was aware that other sections of the NGA limited
the scope of entities subject to the Commission's traditional
regulatory authority to natural gas companies as that term is defined
in the statute, but chose not to apply this same limitation in section
23. Congress clearly recognized that the Commission might not obtain
sufficient price transparency from those ``natural gas companies''
subject to our traditional regulatory authority. This is consistent
with the Commission's findings here that a complete picture of the
interstate natural gas market and the supply and demand fundamentals
underlying that market require information from non-interstate natural
gas pipelines.\33\
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\32\ Section 23(a)(3)(A) of the NGA; 15 U.S.C. 717t-2(a)(3)(A)
(2000 & Supp. V 2005).
\33\ We have recently stated in Order No. 704-A that the term
``market participant'' in section 23 of the NGA is not limited only
to natural gas pipelines, but to all relevant segments of the
natural gas supply and distribution chain. Order No. 704-A at P 37.
As we discussed in this previous exercise of our authority under
section 23 of the NGA, the statute grants broad latitude to the
Commission to effectuate Congressional transparency goals.
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18. Moreover, the statutory language emphasizes the broad meaning
of the phrase ``market participant'' by adding ``any'' as a descriptor.
Our authority attaches not to a subset of market participants (for
example, only those market participants traditionally subject to our
regulation), but to any such participant.\34\ Court precedent confirms
that the word ``any'' gives the term it modifies (in this case,
``market participant'') an expansive meaning.\35\ We believe that
Congress used the expansive term ``any market participant'' because it
intended to provide broad transparency authority to the Commission. By
this choice, Congress recognized that the Commission may need to obtain
information from a wide variety of entities in order to facilitate
transparency.
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\34\ See Posting NOPR at P 28.
\35\ Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 31-32 (2004) (the
word ``any'' gives the word it modifies an expansive reading);
Dep't. of Housing and Urban Dev. v. Rucker, 535 U.S. 125, 130-31
(2002); TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (one must give
effect to each word in a statute so that none is rendered
superfluous); United States v. Gonzales, 520 U.S. 1, 5 (1997)
(``any'' is an expansive term, meaning ``one or some
indiscriminately of whatever kind,''); New York v. EPA, 443 F.3d
880, 885-87 (DC Cir. 2006) (the word ``any'' is broadly construed to
reflect Congress' intent that all types of physical changes are
subject to the Clean Air Act's New Source Review program).
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19. The Commission disagrees with commenters who argue that section
1(b) of the NGA precludes the Commission from imposing the daily
posting requirement on non-interstate pipelines. Section 1(b) of the
NGA provides that the ``provisions of this chapter * * * shall apply to
the transportation of natural gas in interstate commerce, to the sale
in interstate commerce of natural gas for resale * * *'' and that such
provisions ``shall not apply to any other transportation or sale of
natural gas.'' \36\ Likewise, we disagree that section 23 has limited
application only to ``natural gas companies.'' Section 1 is not
referenced in section 23 and the term ``natural gas company'' is
nowhere found in the section. Including such a reference would have
been the simplest way for Congress to demonstrate an intent to limit
the Commission's transparency authority only to entities which we
already regulate.
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\36\ Section 1(b) of the NGA, 15 U.S.C. 717(b).
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20. We likewise disagree with certain commenters' arguments
regarding application of pre-EPAct 2005 caselaw in this circumstance.
The cases cited by commenters apply the jurisdictional limits set forth
in section 1 of the NGA prior to the enactment of EPAct 2005.\37\ These
arguments run afoul of the principle of statutory construction that
``Congress is presumed to be aware of an administrative or judicial
interpretation of a statute.'' \38\ Thus, Congress was

[[Page 73497]]

presumably aware that prior to the enactment of section 23, the NGA
could be construed as limiting the Commission's authority to obtain
data on intrastate natural gas flows to obtaining it from companies
falling under the Commission's jurisdiction.\39\ In using the term
``any market participant'' instead of ``natural gas company,'' Congress
signaled its intent to expand the Commission's transparency authority
beyond the universe of natural gas companies to which it would
otherwise be limited. TPA observes that courts have held that the
Commission cannot exceed its statutory authority.\40\ This is an
unremarkable and unassailable conclusion, but one that provides no
guidance where the issue is not whether the Commission may exceed its
statutory authority but what is the extent of the Commission's
transparency authority.
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\37\ See, e.g., Union Oil Co., 542 F.2d at 1039. In a post-EPAct
2005 case as noted by commenters, Transmission Agency of N. Cal. v.
FERC, the U.S. Court of Appeals for the DC Circuit discussed the
limits of the Commission's jurisdiction, but that court was not
reviewing the NGA, let alone section 23. 495 F.3d 663 (DC Cir.
2007).
\38\ Lorillard v. Pons, 434 U.S. 575, 580 (1978) (internal
citations omitted); accord 2A Norman J. Singer, Sutherland Statutory
Construction sec. 45.12 (5th ed. 1992) (``legislative language will
be interpreted on the assumption that the legislature was aware of *
* * judicial decisions'').
\39\ Union Oil Co., 542 F.2d at 1039 (Observing that the NGA
limits the Commission's ``gathering of intrastate data to gathering
it from companies falling under the Commission's jurisdiction'').
\40\ Reply Comments of TPA at 16-17 (citing Transmission Agency
of N. Cal., 495 F.3d 663 and United Distrib. Cos. v. FERC, 88 F.3d
1105 (DC Cir. 1996)).
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21. For similar reasons, we do not find persuasive the argument
that Congress could have expressed its intent to subject non-interstate
pipelines to the Commission's transparency authority only by revising
or amending section 1 of the NGA. First, section 1 of the NGA
delineates the set of entities subject to the Commission's traditional
ratemaking and certificate authority. If Congress amended section 1 of
the NGA to apply to a new set of entities, it would have been providing
the Commission not only a limited grant of transparency authority, but
the broader grant of authority that section 1 entails. Second, altering
the exceptions in section 1, as commenters suggested, is not the only
way to alter the statute to give the Commission transparency authority.
Section 23 could, and in fact did, confer such authority separately
from our authority under section 1. Third, if Congress intended to
exclude non-interstate pipelines from the Commission's authority under
section 23 of the NGA, it would have used the term ``natural gas
company'' in section 23, instead of the term ``any market
participant.''
22. Nevertheless, while the authority granted to us in section 23
is broad, we do not mean to imply that the Commission's authority to
obtain information from ``any market participant'' is plenary. In
section 23, Congress limited our transparency authority in three
respects. First, Congress directed the Commission to ``facilitate price
transparency in markets for the sale or transportation of physical
natural gas in interstate commerce. * * *'' \41\ 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, however, provided
that the information obtained and disseminated pertains to price
transparency in those markets. Second, Congress required that the
Commission's 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. * * *'' \42\ 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.'' Where transportation or
sales of natural gas are not in interstate commerce, they nonetheless
fall under the Commission's transparency mandate if they affect the
availability and prices of natural gas at wholesale and in interstate
commerce.
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\41\ Section 23(a)(1) of the NGA; 15 U.S.C. 717t-2(a)(1) (2000 &
Supp. V 2005).
\42\ Section 23(a)(2) of the NGA; 15 U.S.C. 717t-2(a)(2) (2000 &
Supp. V 2005).
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23. Perhaps the most important limitation on our transparency
authority is contained in section 23(d)(2) which mandates an exemption
from any reporting for ``natural gas producers, processors, or users
who have a de minimis market presence. * * *'' \43\ It is noteworthy
that this limitation 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. Section 1(b) of the NGA explicitly excludes these entities
from the Commission's traditional regulation. If, as some commenters
assert, Congress did not intend to give the Commission authority over
any entity excluded by section 1(b) of the NGA, a de minimis exemption
would have been unnecessary; in other words, section 23(d)(2) would
have been surplusage. Congress is not presumed to enact surplus
language.\44\ To avoid this improper result, we interpret section 23 of
the NGA to give effect to the de minimis language by interpreting the
term ``any market participant'' to include those entities otherwise
excluded from the Commission's NGA jurisdiction by section 1(b) of the
act.
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\43\ Section 23(d)(2) of the NGA; 15 U.S.C. 717t-2(d)(2) (2000 &
Supp. V 2005).
\44\ City of Roseville v. Norton, 348 F.3d 1020, 1028 (DC Cir.
2003) (citing Babbitt v. Sweet Home Chapter of Cmty. for a Greater
Oregon, 515 U.S. 687, 698 (1995)).
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24. The regulations promulgated by this Final Rule reflect
Congress' limitations on the Commission's authority. The Commission's
traditional regulatory authority remains limited to ``natural gas
companies'' under section 1 of the act. Section 23 of the NGA
authorizes the Commission only to obtain and disseminate information.
The Commission is not regulating the intrastate operations of non-
interstate pipelines; nor is the Commission regulating the rates or
terms and conditions of service for non-interstate pipelines.
Consistent with its limited transparency authority set forth in section
23 of the NGA, the Commission will require major non-interstate
pipelines only to post information.
25. Based upon the text of section 23 of the NGA and the clear
intent of Congress, we determine that we have ample authority to issue
this Final Rule, including the promulgation of regulations requiring
additional posting obligations on both interstate and major non-
interstate pipelines.

IV. Need for the Rule

A. Posting NOPR

26. As discussed in the Posting NOPR, section 23 of the NGA is a
clear expression of Congress' belief that the Commission may rightly
perceive a need ``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, and the protection of consumers.'' Section 23 further provides
that the Commission may issue such rules as it deems necessary and
appropriate to ``provide for the dissemination, on a timely basis, of
information about the availability and prices of natural gas sold at
wholesale and interstate commerce to the Commission, State commissions,
buyers and sellers of wholesale natural gas, and the public.'' The
Posting NOPR stated that natural gas markets function more efficiently,
and market problems are more readily identifiable, if participants and
observers have timely access to

[[Page 73498]]

natural gas transportation data. As we stated in Order No. 636:

The Commission believes that * * * it is vital to give all gas
purchasers ([local distribution companies (LDCs)] and end users,
such as industrials and gas-fired electric generators) the ability
to make market-driven choices about the price of gas as a commodity
and about the cost of delivering the gas. Simply put, efficiency in
the national gas market can be realized only when the purchasers of
a commodity know, in a timely manner, the prices of the distinct
elements associated with the full range of services needed to
purchase and then deliver gas from the wellhead to the burnertip.
Only then will gas purchasers be able to purchase, based upon their
needs, the exact services they want with full recognition of the
prices that they would have to pay. And only then will the
Commission be assured that all gas is transported to the market
place on fair terms. What best serves the interests of gas
purchasers--the ability to make informed choices--is also important
for gas sellers.\45\
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\45\ Pipeline Service Obligations and Revisions to Regulations
Governing Self-Implementing Transportation; and Regulation of
Natural Gas Pipelines After Partial Wellhead Decontrol, Order No.
636, FERC Stats. & Regs. ] 30,939, at p. 30,393, order on reh'g,
Order No. 636-A, FERC Stats. & Regs. ] 30,950, 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 1105 (DC Cir. 1996), order on
remand, Order No. 636-C, 78 FERC ] 61,186 (1997).

27. In the Posting NOPR, the Commission proposed that major non-
interstate \46\ natural gas pipelines post information on actual flows
and scheduled volumes. The Commission defined a ``major non-interstate
pipeline'' as one that is not a ``natural gas company'' under section 1
of the NGA\47\ and that flows greater than 10 million (10,000,000)
MMBtus of natural gas per year. Such a major non-interstate pipeline
would post daily ``capacity, scheduled flow volumes, and actual flow
volumes at major points and mainline segments.'' \48\ The Commission
did not define ``major points and mainline segments.'' The Commission
proposed two exemptions to the definition of ``major non-interstate
pipeline.'' First, the Commission proposed to exempt non-interstate
natural gas pipelines that ``fall entirely upstream of a processing
plant.'' \49\ Second, the Commission proposed to exempt non-interstate
natural gas pipelines ``that deliver more than 95 percent of the
natural gas volumes they flow directly to end-users.'' \50\ The
Commission also proposed that interstate natural gas pipelines post
information on actual flows,\51\ in addition to the existing
requirement to post capacity and scheduled flows.\52\
---------------------------------------------------------------------------

\46\ In the Initial NOPR, the Commission used the term
``intrastate pipeline.'' In the Posting NOPR, the Commission used
the term ``non-interstate pipeline.'' The latter term more
accurately describes the scope of the rule, which is issued pursuant
to section 23 of the NGA. This section applies to both interstate
and non-interstate pipelines and does not use the term ``intrastate
pipeline.''
\47\ 15 U.S.C. 717 (2007).
\48\ Posting NOPR at P 3.
\49\ Id. at P 4.
\50\ Id.
\51\ Id.
\52\ Id.
---------------------------------------------------------------------------

28. In the Posting NOPR, the Commission articulated three goals to
be served by posting of flow information by non-interstate pipelines.
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 United States 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.\53\
---------------------------------------------------------------------------

\53\ Id. at P 60.
---------------------------------------------------------------------------

B. Comments

29. A broad cross-section of the industry, representing producers,
end-users, LDCs, and information providers, supports the goals of the
pipeline posting requirement.\54\ In the Posting NOPR, the Commission
asked for comment on whether the pipeline posting proposal would
``provide a more complete picture of supply and demand fundamentals and
improve market participants' ability to assess supply and demand and to
price physical natural gas transactions.'' \55\ Several commenters
support posting requirements, particularly for non-interstate
pipelines, as a means to meet this goal. NGSA states that ``the [ ]
proposed flow data posting requirement has the potential to provide
market participants and regulators with additional information
regarding underlying natural gas supply and demand fundamentals.'' \56\
Similarly, APGA supports the Commission's rationale for obtaining daily
flow information from major non-interstate pipelines.\57\ IPAA also
supports the posting of flow data from non-interstate pipelines, ``but
with a close watch on the costs of compliance, as the producer is
likely to end up bearing much of those costs.'' \58\
---------------------------------------------------------------------------

\54\ See, e.g., NGSA Reply Comments at 5; TIPRO Comments at 3;
APGA Comments at 4; Calpine Comments at 2-3; Bentek Comments at 3.
\55\ Posting NOPR at P 71.
\56\ NGSA Comments at 14.
\57\ APGA Comments at 4.
\58\ IPAA Comments at 1.
---------------------------------------------------------------------------

30. TIPRO contends that the pipeline posting proposal meets the
goal of increasing transparency of supplies that affect prices.\59\
Bentek, which collects and publishes information based on interstate
flows, contends that requiring non-interstate pipelines to report daily
flows and capacity ``will significantly improve industry's ability to
understand natural gas supply and demand issues throughout the
country'' making ``the market more transparent, less volatile, more
reliable, and more efficient.'' \60\
---------------------------------------------------------------------------

\59\ TIPRO Comments at 3.
\60\ Bentek Comments at 12.
---------------------------------------------------------------------------

31. Some commenters argue that the posting proposal, particularly
regarding non-interstate pipelines, is not justified. Atmos believes
that the need for the information has not been demonstrated and that
there is already sufficient price transparency in interstate
markets.\61\ Chevron Pipelines acknowledge that flow information from
non-interstate pipelines may provide a more complete picture of supply
and demand fundamentals, but state that such flow information would
have a de minimis effect on market participants' assessments of supply
and demand and pricing of physical natural gas transactions.\62\
---------------------------------------------------------------------------

\61\ Atmos Comments at 10-11.
\62\ Chevron Pipelines Comments at 25.
---------------------------------------------------------------------------

32. Kinder Morgan Intrastate maintains that due to the bundled
sales function and the highly variable types of services provided by
intrastate pipelines, a snapshot of available capacity on a given
pipeline at a given time would not necessarily reflect pricing
fundamentals. Because Kinder Morgan Intrastate provides no-notice
service to many industrial users and must reserve physical capacity to
serve this no-notice service, it asserts that capacity is not available
for other customers. Thus, it alleges, posted capacity information
would send the wrong signals to the market because it would reflect the
complexity of pipeline operations rather than the overall supply
situation in the market.\63\
---------------------------------------------------------------------------

\63\ Kinder Morgan Intrastate Comments at 16-17.
---------------------------------------------------------------------------

33. In the Posting NOPR, the Commission also asked for comment on
whether the proposal would provide a clearer view of the effects on
infrastructure, the industry, and the economy during periods when the
United States natural gas delivery system is disturbed, for instance,
due to

[[Page 73499]]

hurricane damage to facilities in the Gulf of Mexico. Several
commenters contend that the posting of flow information by non-
interstate pipelines would support this goal.\64\ Chevron Pipelines
assert that the requirements on non-interstate natural gas pipelines
already are sufficient to gain a sense of how a significant disruption
may affect natural gas pipeline facilities.\65\ TPA believes that
significant disruptions such as hurricanes would preclude postings by
non-interstate pipelines and evaluation of the impact of such
disruptions on pipeline facilities could be obtained through less
obtrusive means, such as contacting the pipeline.\66\
---------------------------------------------------------------------------

\64\ Yates Comments at 7; TIPRO Comments at 2; APGA Comments at
4; Royalty Owners Comments at 2-3.
\65\ Chevron Pipelines Comments at 25.
\66\ TPA Comments at 20.
---------------------------------------------------------------------------

34. Finally, in the Posting NOPR, the Commission asked for comment
on another goal of the pipeline posting proposal--whether the proposal
would allow market observers to identify potentially manipulative
activity. In response, several commenters assert that the posting of
flow information by non-interstate pipelines would support this
goal.\67\
---------------------------------------------------------------------------

\67\ See, e.g., TIPRO Comments at 2; APGA Comments at 4; Royalty
Owners Comments at 2-3; Yates Comments at 8.
---------------------------------------------------------------------------

35. By contrast, Chevron Pipelines declare that the information to
be posted has no relation to pricing decisions, and therefore, the
potential for misconduct by not making public such information is
unfounded.\68\ Kinder Morgan Intrastate expresses concern that postings
by non-interstates pipelines would lead market participants to suspect
price manipulation where none was occurring. In support, Kinder Morgan
Intrastate provides the example of a net segment flow of zero due to
forward-hauls and backhauls canceling each other out.\69\ TPA adds that
the Commission has not demonstrated how the proposed pipeline posting
rule could be used to track manipulative behavior.\70\
---------------------------------------------------------------------------

\68\ Chevron Pipelines Comments at 25.
\69\ Kinder Morgan Intrastate Comments at 17.
\70\ TPA Comments at 48.
---------------------------------------------------------------------------

36. Several commenters contend that there are alternatives
available to daily posting of flow information by non-interstate
pipelines. Commenters point to the following information as
alternatives: Postings of capacity and scheduling data for ``points at
which intrastate pipelines connect to the interstate grid;'' \71\
postings by interstate natural gas pipelines; \72\ Bentek's ``Texas
Intrastate Report;'' \73\ data ``filed annually by intrastate pipelines
pursuant to section 311 of the Natural Gas Policy Act;'' \74\ price
information provided by ``NYMEX, CME, Globex, ICE and voice brokers, as
well as price index publishers;'' \75\ state commission production
data; \76\ and information available from the United States Department
of Energy's Energy Information Administration (EIA).\77\ Genscape
describes its natural gas pipeline flow monitoring product, which can
measure flows on pipelines, and which Genscape uses presently to
``monitor [ ] injections and withdrawals of gas at multiple storage
facilities in Texas and Louisiana that are connected in whole or in
part to intrastate pipeline systems.'' \78\
---------------------------------------------------------------------------

\71\ Id. at 21-22.
\72\ Id. at 21.
\73\ Id. at 23.
\74\ Id. at 22.
\75\ Id.
\76\ Id. at 22 n 59.
\77\ Id. at 22.
\78\ Reply Comments of Genscape, Inc., at 3, Docket No. AD06-11-
000 (filed Aug. 23, 2007).
---------------------------------------------------------------------------

37. Commenters argue that a posting requirement on non-interstate
pipelines would pose a competitive risk for non-interstate pipelines
and for their customers. Atmos states: ``the public dissemination of
capacity information could provide competitors with insight into the
pipeline's ability to continue to provide services to existing and
prospective customers, which could influence the location of new
facility construction or how offers are made to prospective
customers.'' \79\ Atmos describes a possible scenario in which two
competing pipelines could serve one customer. When publicly
disseminated information shows that one of those pipelines is at
capacity, the other would have the opportunity to raise its price.\80\
---------------------------------------------------------------------------

\79\ Atmos Comments at 9.
\80\ Id.
---------------------------------------------------------------------------

38. Calpine, however, supports a posting obligation for non-
interstate pipelines, stating that requiring the same posting
requirements on both non-interstate and interstate pipelines would
eliminate an existing competitive advantage for non-interstate
pipelines.\81\
---------------------------------------------------------------------------

\81\ Calpine Comments at 5.
---------------------------------------------------------------------------

C. Commission Determination

39. Based upon the comments received and the input from
stakeholders at the technical conference, we continue to believe that
this Final Rule is needed because the information currently provided by
interstate pipelines presents an incomplete picture of the supply and
demand fundamentals that underlie the interstate natural gas market.
While, as discussed above, Congress has given authority to the
Commission to obtain additional information from market participants to
increase transparency, we acknowledge that section 23 of the NGA grants
us discretion as to whether and how to utilize this authority. The
current picture of the interstate natural gas market derives from
information on scheduled natural gas volumes and available capacity
posted by interstate pipelines. In compliance with the regulations
adopted in Order No. 637,\82\ interstate pipelines currently post daily
information on the Internet about scheduled natural gas volumes for
most of the continental United States. Shippers and other market
participants rely on information posted by interstate pipelines to
price both transportation and commodity transactions.\83\ As we
described in the Posting NOPR, market participants retrieve the posted
information on scheduled volumes from the Web sites of interstate
natural gas pipelines, which they use to estimate in near real-time a
variety of supply and demand conditions including geographic and
industrial sector consumption, storage injections and withdrawals, and
regional production.\84\ This posted scheduled flow information
contributes to market transparency by providing information about the
supply and demand fundamentals that drive price movements.\85\ Further,
our staff

[[Page 73500]]

relies on this posted information to perform oversight and enforcement
functions. In sum, the existing posting requirements for interstate
pipelines provide the Commission, market participants, and other market
observers with a picture of the availability of natural gas (both the
commodity and transportation needed to move the commodity to market
centers).\86\
---------------------------------------------------------------------------

\82\ Regulation of Short-Term Natural Gas Transportation
Services and Regulation of Interstate Natural Gas Transportation
Services, Order No. 637, 65 FR 10,156 (Feb. 25, 2000), FERC Stats. &
Regs. ] 31,091, at 31,332, clarified, Order No. 637-A, FERC Stats. &
Regs. ] 31,099, reh'g denied, Order No. 637-B, 92 FERC ] 61,062
(2000), aff'd in part and remanded in part sub nom. Interstate
Natural Gas Ass'n of America v. FERC, 285 F.3d 18 (DC Cir. 2002),
order on remand, 101 FERC ] 61,127 (2002), order on reh'g, 106 FERC
] 61,088 (2004), aff'd sub nom. American Gas Ass'n v. FERC, 428 F.3d
255 (DC Cir. 2005).
\83\ In this regard, we disagree with commenters, such as Atmos,
that increased transparency would harm competition. Such has not
been our experience with interstate natural gas pipeline posting
requirements. To the contrary, increased transparency has allowed
for more informed decision making by market participants. In the
scenario posited by Atmos (i.e., two pipelines, one of which is at
capacity, that could serve a single customer), the posting of
scheduled flow information at a particular point would typically not
be sufficient to affect competition. Even if disclosure did have an
effect, the effect would be to allow all market participants to make
efficient determinations based upon equal access to relevant
information.
\84\ Posting NOPR at P 55. See also Comments of Bentek, Docket
No. AD06-11-000 (filed Oct. 11, 2006).
\85\ See, e.g., Comments of Platt's at 11-13, Docket No. AD06-
11-000 (filed Nov. 1, 2006) (information regarding the supply and
demand of natural gas explains prices and such information is
available from interstate pipelines, but not intrastate pipelines).
\86\ See, e.g., id. at 11 (explaining that, to understand
prices, ``the marketplace must look to * * * information on [the]
availability of and demand for natural gas. * * *'').
---------------------------------------------------------------------------

40. Nevertheless, this picture is incomplete. Because the
Commission's existing pipeline posting regulations do not apply to non-
interstate pipelines, market observers cannot determine the
availability of natural gas and transportation on a non-interstate
pipeline to the same extent as they could for an interstate pipeline.
These gaps in information are significant because, as detailed further
below, major gas flows between producing basins and interstate markets
occur on non-interstate pipelines and are thus invisible to the market.
Often, the availability and price of natural gas on large non-
interstate pipelines affects the availability and price of natural gas
nation-wide because these pipelines serve as important pricing points
and gateways for flows to much of the United States. Interstate and
non-interstate pipeline infrastructure is functionally inter-connected
in the United States. The gaps in information about non-interstate
flows result from the limitations on the Commission's authority over
non-interstate pipelines prior to the enactment of EPAct 2005.
41. For instance, there is a significant lack of information about
supply and demand fundamentals in the south-central region of the
country: Texas, Louisiana, and Oklahoma, and in southern California. As
we discussed in the Initial and Posting NOPRs, several major United
States natural gas pricing points sit at the confluence of multiple
interstate and non-interstate pipelines. A study by EIA identified
twenty-eight national market centers, of which thirteen are served by a
combination of interstate and non-interstate pipelines.\87\ The table
below shows the capacity of interstate and non-interstate pipelines
connected to each of these thirteen locations. Significantly, as
relevant here, at nine of these thirteen locations, non-interstate
capacity is greater than interstate capacity.
---------------------------------------------------------------------------

\87\ 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 United States Natural Gas Pricing Points
\88\
----------------------------------------------------------------------------------------------------------------
Receipt and delivery capacity
-------------------------------
Hub name State Interstate Non-interstate
pipelines pipelines
(MMcf/d) (MMcf/d)
----------------------------------------------------------------------------------------------------------------
Carthage........................................................ TX 1,120 1,355
Henry Hub....................................................... LA 2,770 1,215
Katy--Enstor.................................................... 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
----------------------------------------------------------------------------------------------------------------

42. No place is more indicative of the integration of interstate
and non-interstate pipelines than Henry Hub in Louisiana. Henry Hub
acts as an interchange for natural gas, where numerous interstate and
non-interstate pipelines meet. It serves as 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 futures
contract has become important in determining a variety of monthly index
prices used to set natural gas prices in a large number of transactions
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.\89\ Because Henry
Hub is connected to both interstate and non-interstate pipelines, the
picture of flows and availability on the pipelines that feed into the
Henry Hub is incomplete.
---------------------------------------------------------------------------

\88\ The information on this chart is derived from Table 2 of
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). updated utilizing data available from
EIA for 2005.
\89\ Federal Energy Regulatory Commission, 2006 State of the
Markets Report at 48-50 (Jan. 2007), www.ferc.gov/market-oversight/
market-oversight.asp (follow link to the State of the Markets Full
Report).
---------------------------------------------------------------------------

43. Figure 1 below demonstrates the integration of interstate and
non-interstate flows in many of these markets. One cannot understand
flow patterns on interstate natural gas pipelines nationwide without
understanding flows on non-interstate pipelines in those areas. Non-
interstate pipelines provide crucial physical links between interstate
natural gas pipelines (particularly in Texas, Oklahoma, Louisiana, and
California) as well as links between market hubs. Figure 1 shows major
East-West flows of natural gas between the major production basins,
such as Waha production area and major market locations, such as the
Carthage Hub, but because such flows generally take place on non-
interstate natural gas pipelines, they are invisible to market
participants and other market observers.

[[Page 73501]]

[GRAPHIC] [TIFF OMITTED] TR02DE08.072

44. The magnitude of missing market information is indicated in a
comparison of the types of information available for interstate and
non-interstate pipelines. Gas delivery data in Texas from interstate
natural gas pipeline postings show approximately 1 bcf of deliveries to
Texas end users on any given day in 2006.\90\ EIA shows that total
average daily consumption of gas in Texas was approximately 9.4 Bcf/day
in 2006.\91\ This means that delivery information for 90 percent of the
gas consumed in the state is only provided in the aggregate for all of
Texas and published monthly with a lag of several months while 10
percent of the gas delivered is reported daily by receipt and delivery
point. Therefore, nearly 90 percent of consumption was invisible to
market participants and other market observers on a daily basis.
---------------------------------------------------------------------------

\90\ While this EIA data is two years old, based upon our
experience, we believe that similar circumstances exist in the
market today.
\91\ ``EIA Natural Gas Consumption by End Use,'' https://
www.tonto.eia.doe.gov/dnav/ng/ng_cons_sum_a_EPG0_VC0_mmcf_
a.htm. (providing consumption figures by state).
---------------------------------------------------------------------------

45. Purchasers of natural gas in interstate commerce draw on the
same sources of supply as users and purchasers of intrastate natural
gas. Intrastate markets often compete from basin to basin with
interstate markets. Southern California, for example, competes with
several large Texas markets for Waha supplies. Interstate/intrastate
competition is expected to increase. Much of the recent Barnett Shale
development in the Fort Worth basin in west Texas flows into intrastate
systems before moving into interstate markets and, recently, two
pipeline companies announced a major intrastate pipeline project that
would transport 1 Bcf/day from the Barnett Shale development.\92\ In
total, slightly more than 40 percent of total on-shore production in
Texas is connected to interstate natural gas pipelines, close to 60
percent in Louisiana and almost 80 percent in Oklahoma.\93\ Although
daily volume scheduled to flow from non-interstate into those
interstate natural gas pipelines can be observed, the supply dynamics
that determine the availability of such volumes cannot be observed
because they occur on non-interstate pipelines. A market participant
that understands the flows on non-interstate pipelines will better
understand the availability of supply for the interstate natural gas
market, thereby, enhancing transparency.
---------------------------------------------------------------------------

\92\ ``Enbridge, Atmos Energy propose new line to move 1 Bcf/d
of northern Texas output,'' Inside FERC, Sept. 1, 2008 (``The
Barnett Intrastate Gas Pipeline would connect Atmos Energy's Line X
in Johnson Country, Texas, to Enbridge's Double D and Clarity
Pipelines at Bethel in Anderson County, Texas.'').
\93\ To derive these figures, Commission staff compared
information from Bentek on supply scheduled on interstate pipelines
with EIA information on withdrawals and production. EIA Natural Gas
Gross Withdrawals and Production for Texas and Oklahoma, https://
www.tonto.eia.doe.gov/dnav/ng/ng_prod_sum_dcu_NUS_m.htm.
---------------------------------------------------------------------------

46. Taken together, this information shows that market prices of
physical natural gas in interstate commerce result from the aggregate
of interstate and non-interstate pipeline flows. Because of this
relationship, information about the flows on non-interstate pipelines
would promote price transparency by providing market participants with
highly relevant information as they make day-to-day economic choices.
47. Additionally, the proposed pipeline capacity and volume
postings would provide market participants--and entities charged with
oversight of the markets--a clearer view of the effects on
infrastructure, the industry,

[[Page 73502]]

and the economy as a whole during periods when the United States
natur

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