Pipeline Posting Requirements under Section 23 of the Natural Gas Act, 5178-5202 [2010-1546]
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Federal Register / Vol. 75, No. 20 / Monday, February 1, 2010 / Rules and Regulations
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
18 CFR Part 284
[Docket No. RM08–2–001; Order No. 720–
A]
Pipeline Posting Requirements under
Section 23 of the Natural Gas Act
January 21, 2010.
AGENCY: Federal Energy Regulatory
Commission, DOE.
ACTION: Order on Rehearing and
Clarification.
SUMMARY: The Federal Energy
Regulatory Commission modifies its
regulations requiring major noninterstate pipelines to post daily
scheduled volume information and
other data for certain points. These
modifications include a requirement
that major non-interstate pipelines post
information for receipt and delivery
points at which design capacity is
unknown. The Commission denies
requests to revise its regulations
requiring 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).
Effective Date: This rule will become
effective March 3, 2010.
FOR FURTHER INFORMATION CONTACT:
Steven Reich (Technical), Office of
Enforcement, Federal Energy
Regulatory Commission, 888 First
Street, NE., Washington, DC 20426,
(202) 502–6446,
Steven.Reich@ferc.gov.
Gabe S. Sterling (Legal), Office of
Enforcement, Federal Energy
Regulatory Commission, 888 First
Street, NE., Washington, DC 20426,
(202) 502–8891,
Gabriel.Sterling@ferc.gov.
SUPPLEMENTARY INFORMATION:
TABLE OF CONTENTS
[Issued January 21, 2010]
Paragraph
Nos.
I. Introduction .........................................................................................................................................................................................
II. Discussion ..........................................................................................................................................................................................
A. Authority for the Rule ........................................................................................................................................................
1. Requests for Rehearing and Clarification .............................................................................................................
2. Commission Determination ...................................................................................................................................
B. Need for the Rule ................................................................................................................................................................
1. Requests for Rehearing and Clarification .............................................................................................................
2. Supplemental Comments ......................................................................................................................................
3. Commission Determination ...................................................................................................................................
C. Definition of Major Non-Interstate Pipeline ......................................................................................................................
1. Delivery Threshold ................................................................................................................................................
2. Treatment of Non-Contiguous Pipeline Systems .................................................................................................
D. Posting Requirements for Major Non-Interstate Pipelines ................................................................................................
1. Posting Requirements at Points Where Design Capacity Is Unknown or Does Not Exist ................................
2. Posting Requirements at Points Where Design Capacity Is Known ...................................................................
3. Timing of Posting of Eligible Points .....................................................................................................................
4. Clarifications Regarding the Major Non-Interstate Posting Requirements .........................................................
E. Exemptions ...........................................................................................................................................................................
1. Pipelines Upstream of Processing Plants .............................................................................................................
2. Pipelines That Deliver Primarily to End Users ...................................................................................................
3. Storage Facilities ...................................................................................................................................................
F. Safe Harbor ...........................................................................................................................................................................
G. Interstate Pipeline Posting of No-Notice Service ..............................................................................................................
H. Additional Exemptions .......................................................................................................................................................
1. Natural Gas Companies With Service Area Determinations Under NGA Section 7(f) .....................................
2. Pipelines Owned or Operated by End Users .......................................................................................................
III. Cost of Compliance ...........................................................................................................................................................................
A. Requests for Rehearing and Clarification ..........................................................................................................................
B. Commission Determination ................................................................................................................................................
IV. Information Collection Statement ...................................................................................................................................................
V. Regulatory Flexibility Act .................................................................................................................................................................
VI. Document Availability .....................................................................................................................................................................
VII. Effective Date and Compliance Deadlines .....................................................................................................................................
1. Requests for Rehearing and Clarification ...........................................................................................................................
2. Commission Determination .................................................................................................................................................
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Before Commissioners: Jon Wellinghoff,
Chairman; Marc Spitzer, Philip D. Moeller,
and John R. Norris.
Order on Rehearing and Clarification
Issued January 21, 2010
I. Introduction
1. On November 20, 2008, the Federal
Energy Regulatory Commission
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(Commission) issued Order No. 720,1
requiring interstate and certain major
non-interstate natural gas pipelines to
post limited information on publicly
accessible Internet Web sites regarding
their operations. In this order, the
Commission grants and denies requests
1 Pipeline Posting Requirements under section 23
of the Natural Gas Act, 73 FR 73494 (Dec. 2, 2008),
FERC Stats. & Regs. 31,283 (2008) (Order No. 720).
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for rehearing and clarification of Order
No. 720.
2. The Commission issued Order No.
720 and promulgated related regulations
consistent with the Energy Policy Act of
2005 (EPAct 2005).2 In EPAct 2005,
Congress added section 23 to the
Natural Gas Act (NGA), 15 U.S.C. 717t–
2 Energy Policy Act of 2005, Public Law 109–58,
119 Stat. 594 (2005).
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2 (2000 & Supp. V 2005) authorizing 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 * * * and the protection
of consumers.’’ 3 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.’’ 4
3. On December 21, 2007, the
Commission issued a Notice of
Proposed Rulemaking (NOPR),
proposing to require both interstate and
certain major non-interstate natural gas
pipelines to post daily information
regarding their capacity, scheduled flow
volumes, and actual flow volumes at
major points and mainline segments.5
The Commission proposed regulations
that would make available the
information needed to track daily flows
of natural gas adequately throughout the
United States.6 The posting proposal
would 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.7
4. Order No. 720 required major noninterstate pipelines, defined as those
natural gas pipelines that are not natural
gas companies under the NGA and
deliver more than 50 million MMBtu
per year, to post scheduled flow and
other information for each receipt or
delivery point with a design capacity
greater than 15,000 MMBtu per day.8
While Order No. 720 required major
non-interstate pipelines to comply with
the new rules within 150 days of the
Final Rule’s publication,9 a subsequent
order in this docket extended the
compliance deadline for major noninterstate pipelines until 150 days
following the issuance of an order on
rehearing.10
3 NGA § 23, 15 U.S.C. 717t–2(a)(1) (2000 & Supp.
V 2005).
4 15 U.S.C. 717t–2(a)(2).
5 Pipeline Posting Requirements under section 23
of the Natural Gas Act, 73 FR 1116 (Jan. 7, 2008),
FERC Stats. & Regs., Proposed Regulations 2004–
2007 ¶ 32,626, at P 3 (2007).
6 Id.
7 Id. P 5.
8 Order No. 720 at P 1.
9 Id. P 168.
10 Pipeline Posting Requirements under section 23
of the Natural Gas Act, 126 FERC ¶ 61,047, at P
4 (2009).
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5. Regarding interstate natural gas
pipelines, Order No. 720 expanded the
Commission’s existing posting
requirements under 18 CFR 284 to
include no-notice service. Interstate
natural gas pipelines were required to
comply with this posting requirement
no later than 60 days following Order
No. 720’s publication,11 and should
therefore be currently complying with
the regulations.
6. Twenty-six requests for rehearing
or clarification of Order No. 720 were
submitted.12 On January 16, 2009, the
Commission issued an order granting
rehearing for the purpose of providing
additional time to respond to the
requests for rehearing.13
7. A staff technical conference was
held on March 18, 2009, to gather
additional information on three issues
raised in the requests for rehearing.14
The technical conference addressed: (1)
The definition of major non-interstate
pipelines; (2) what constitutes
‘‘scheduling’’ for a receipt or delivery
point; and (3) how a 15,000 MMBtu per
day design capacity threshold would be
applied.15 Panelists making
presentations at the conference and
commenters from the audience
represented a broad cross-section of the
U.S. natural gas industry 16 and the
conference was widely attended.17
8. On July 16, 2009, the Commission
issued an order requesting supplemental
comments in response to limited issues
raised in requests for rehearing of Order
No. 720 and at the technical conference,
with comments due within 30 days.18
Eight supplemental comments were
filed.19
11 Order
No. 720 at P 167.
list of petitioners requesting rehearing and/
or clarification is provided at Appendix A. All
requests for rehearing, clarification, or both are
referred to herein as ‘‘Requests for Rehearing and
Clarification.’’
13 Pipeline Posting Requirements under section 23
of the Natural Gas Act, Docket No. RM08–2–001,
at 1 (Jan. 16, 2009).
14 Pipeline Posting Requirements under section 23
of the Natural Gas Act , Notice of Technical
Conference, Docket No. RM08–2–001 (issued Feb.
24, 2009); Pipeline Posting Requirements under
section 23 of the Natural Gas Act, Notice of Agenda
for Technical Conference, Docket No. RM08–2–001
(issued March 11, 2009).
15 Notice of Agenda for Technical Conference, at
P 1.
16 In the Matter of Pipeline Posting Requirements
under section 23 of the Natural Gas Act Docket No.
RM08–2–001, at 2–3 (Mar. 18, 2009) (Transcript of
Technical Conference).
17 A transcript of this conference is available on
the Commission’s e-Library system.
18 Pipeline Posting Requirements under section 23
of the Natural Gas Act, 128 FERC ¶ 61,030, at P
1 (2009) (Order Requesting Supplemental
Comments).
19 A list of persons submitting supplemental
comments is provided at Appendix B. These
12 A
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9. As discussed below, the
Commission affirms Order No. 720,
granting a number of requests for
rehearing and clarification and adopting
regulations consistent with our findings.
As a whole, the modifications that are
adopted substantially reduce the
number of major non-interstate
pipelines that must comply with the
proposed transparency regulations.
10. Major non-interstate pipelines
must comply with the revised
regulations within 150 days following
publication in the Federal Register.
Interstate pipelines must continue their
current compliance with our
transparency regulations.
II. Discussion
A. Authority for the Rule
11. Order No. 720 implemented the
Commission’s authority under section
23 of the NGA,20 as added by EPAct
2005,21 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 publicly-accessible Internet Web
sites. Congress granted the Commission
this statutory authority to ensure
transparency of natural gas prices,
natural gas availability, and the price
formation in the interstate natural gas
market.22
12. The Commission held in Order
No. 720 that NGA section 23 authorizes
the Commission to obtain and
disseminate information, including
information regarding non-interstate
natural gas markets that affect the
interstate natural gas market. The
Commission’s decision substantially
relied on the language of NGA section
23(a)(3)(A), which allows the
Commission to ‘‘obtain the information
* * * from any market participant.’’ 23
The Commission identified Congress’
use of the term ‘‘any market participant’’
as an intentional expansion of ‘‘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.’’ 24 Order No. 720
took particular note of Congress’ use of
‘‘any’’ in section 23 as a descriptor,
attaching jurisdiction to market
participants independently of the
comments are referred herein as ‘‘Supplemental
Comments.’’
20 15 U.S.C. 717t–2.
21 Energy Policy Act of 2005, Public Law 109–58,
sections 1261 et seq., 119 Stat. 594 (2005).
22 Id. P 8.
23 15 U.S.C. 717t–2(a)(3)(A) (emphasis added).
24 Order No. 720 at P 17.
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limitations prescribed elsewhere in the
NGA.25
13. The NGA limits the scope of the
Commission’s traditional regulatory
authority to ‘‘natural gas companies’’ as
the term is utilized in the NGA.26 The
Commission held in Order No. 720 that
Congress contemplated different
jurisdictional parameters for its
transparency authority.27 Additionally,
the Commission found that the scope of
section 23 is not limited by section 1(b)
of the NGA.
14. The Commission emphasized that
the regulations promulgated by Order
No. 720 reflect the limitations that
Congress placed on the Commission’s
authority in section 23. Order No. 720
explained that section 23 extends the
Commission’s authority only to the
collection and dissemination of
information for the purposes of
promoting price transparency in the
natural gas market.28 The Commission’s
traditional regulatory authority remains
limited to ‘‘natural gas companies’’
under section 1(b) of the Act.29
1. Requests for Rehearing and
Clarification
15. Some petitioners support the
Commission’s assertion of jurisdiction,
with at least one petitioner supporting
Order No. 720’s requirement that certain
major non-interstate pipelines post daily
scheduled volume information and
design capacity for certain receipt and
delivery points ‘‘pursuant to [the
Commission’s] authority under section
32 [sic] of the NGA.’’ 30 Yates and Agave
particularly commend the Commission’s
new regulations and assertion of
jurisdiction, stating that ‘‘the major noninterstate pipeline posting requirements
adopted in Order No. 720 are a good
first step towards the Commission’s
stated goal of facilitating transparency
in markets for the sale or transportation
of physical natural gas in interstate
commerce.’’ 31
16. Several petitioners requesting
rehearing argue that the Commission
unlawfully expanded its statutory
25 Id.
26 Id.
P 18.
P 19 citing 15 U.S.C. 717.
27 Id.
28 Id.
P 22.
gas producers, processors, or users who
have a de minimis market presence are explicitly
exempted from the reporting requirements. Id. at P
23.
30 Yates and Agave Request for Rehearing and
Clarification at 1; Williston Basin Request for
Rehearing and Clarification at 1 (acknowledging
that the Commission has the authority to
promulgate Order No. 720’s new regulations
pursuant to its authority under section 23 of the
NGA).
31 Yates and Agave Request for Rehearing and
Clarification at 3–4.
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authority by imposing posting
requirements on major non-interstate
pipelines, including natural gas
gathering lines.32 They claim that the
Commission does not have jurisdiction
to impose posting requirements on
intrastate pipelines, and that its
transparency jurisdiction does not
extend to intrastate activities at receipt
and delivery points that are not
involved in the Commission’s
jurisdictional activities.33
17. Many petitioners reiterated
arguments, made in comments to the
NOPR, that the reference in NGA
section 23 to ‘‘any market participant’’ is
restricted to participants in the
interstate market.34 Gas Processors
suggests that the Commission has
derived its expanded jurisdictional
powers from an ambiguous term
without sufficient support, and that
Congressional intent over that term
‘‘must not be read in a vacuum.’’ 35 It
also argues that the term ‘‘market
participant’’ was not intended to extend
the Commission’s jurisdiction to
intrastate pipelines because: (1) Section
23 was not intended to cover intrastate
pipelines; (2) the Commission has never
had jurisdiction over intrastate
pipelines; and (3) Congress did not
‘‘expressly or implicitly’’ provide such
jurisdiction in section 23.36 Quoting
section 23, Gas Processors points out the
repeated use of the term ‘‘interstate’’
throughout the section, emphasizing
that if Congress intended an expansion
into the intrastate pipelines, they would
have selected different language.37 RRC
agrees, stating that ‘‘[n]othing in the
plain language of Section 23 of the NGA
or the legislative history of [EPAct 2005]
evinces Congressional intent to expand
32 Enogex Request for Rehearing and Clarification
at 5–10; Gas Processors Request for Rehearing and
Clarification at 3–7; LOC Request for Rehearing and
Clarification at 3–10; California LDCs Request for
Rehearing and Clarification at 13–15; Railroad
Commission of Texas Request for Rehearing and
Clarification at 5–10; Southwest Gas Request for
Rehearing and Clarification at 3–5, 13–14; Targa
Request for Rehearing and Clarification at 8–9; TPA
Request for Rehearing and Clarification at 8–24.
33 See, e.g., TPA Request for Rehearing and
Clarification at 31–32.
34 California LDCs Request for Rehearing and/or
Clarification at 14–15; Gas Processors Request for
Rehearing at 3–4; LOC Request for Rehearing at 8–
9; Railroad Commission of Texas Request for
Rehearing at 5–8; Southwest Gas Request for
Clarification and Rehearing at 13–14; Targa Request
for Rehearing at 8–9; TPA Request for Rehearing
and Clarification at 9–11.
35 Gas Processors Request for Rehearing and
Clarification at 3–4.
36 Id. at 4.
37 Id.; see also RRC Request for Rehearing and
Clarification at 6–8; TPA Request for Rehearing and
Clarification at 8–12; LOC Request for Rehearing
and Clarification at 10.
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the FERC’s authority over intrastate
pipelines.’’ 38
18. TPA opines that the plain
language of section 23 provides that
‘‘market participant’’ be limited to the
interstate natural gas market.39 It further
argues that Congress had no need to
exclude intrastate pipelines from the
Commission’s transparency jurisdiction
because those entities are not subject to
the Commission’s jurisdiction ‘‘in the
first place.’’ 40
19. TPA repeats arguments made in
its NOPR comments, and seeks
rehearing of the Commission’s
determination that it has authority to
issue the posting regulations. TPA
argues that expansion of the jurisdiction
of the Commission usually occurs
through amendment of NGA section 1(b)
by Congress.41 TPA asserts that Order
No. 720 expands the Commission’s
jurisdiction using a process that is not
supported by the Commission’s own
precedent.42 TPA cites Order No. 670,43
discussing the procedures used to
process market manipulation
allegations, in support of its claim that
the Commission should wait until
Congress explicitly expands its
jurisdiction to assert such authority over
traditionally non-jurisdictional
entities.44 TPA further argues that the
Natural Gas Policy Act of 1978 (NGPA)
section 311 shows a clear distinction
between intrastate and interstate
jurisdiction, and concludes that, if
Congress had intended to expand the
Commission’s jurisdiction, it would
have amended NGA section 1(b) in a
similar fashion.45
20. Several petitioners, echoing
comments that the Commission
addressed in Order No. 720, argue that
the regulations exceed the
Commission’s jurisdiction under section
1(b) of the NGA.46 Petitioners argue that
NGA section 23 is not ‘‘a stand alone
38 RRC Request for Rehearing and Clarification at
6; see also LOC Request for Rehearing and
Clarification at 9.
39 TPA Request for Rehearing and Clarification at
9–11.
40 Id. at 11.
41 TPA Request for Rehearing and Clarification at
12; Gas Processors Request for Rehearing and
Clarification at 4–5; LOC Request for Rehearing and
Clarification at 6; RRC Request for Rehearing and
Clarification at 7–8.
42 TPA Request for Rehearing and Clarification at
12.
43 Prohibition of Energy Market Manipulation,
Order No. 670, 71 FR 4244 (Jan. 26, 2006), FERC
Stats. & Regs. ¶ 31,202 (2006).
44 TPA Request for Rehearing and Clarification at
12.
45 Id. at 21 (citing 15 U.S.C. 3371(a)(2)).
46 Enogex Request for Rehearing and Clarification
at 6–7; LOC Request for Rehearing and Clarification
at 3–4; Railroad Commission of Texas Request for
Rehearing and Clarification at 8–9; TPA Request for
Rehearing and Clarification at 8, 16–19.
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provision,’’ but is subject to the
jurisdictional limits established in
section 1(b).47 Thus, they contend that
the fact that Congress did not amend the
language in section 1(b) demonstrates
that Congress did not intend to modify
the Commission’s jurisdiction with
section 23.48 Petitioners state that
section 1(b) is ‘‘unequivocally clear’’
regarding the entities to which section
23 applies.49 The petitioners argue that
because section 1(b) expressly bars the
Commission from jurisdiction over
intrastate pipelines, section 23 does as
well.50
21. Several petitioners also state that
section 311 of the NGPA 51 limits the
Commission’s transparency jurisdiction
to only interstate activities.52 These
petitioners claim that, although section
311 ‘‘vests the Commission with the
power to authorize an intrastate
pipeline to transport natural gas on
behalf of interstate pipelines,’’ section
311 did not expand the Commission’s
jurisdiction under the NGA.53 In fact,
the NGPA explicitly defines ‘‘intrastate
pipeline’’ as one ‘‘not subject to the
jurisdiction of the Commission under
the NGA.’’ 54 LOC states, for example,
that the Commission cannot ‘‘destroy’’
this jurisdictional distinction placing
intrastate pipelines beyond its NGA
authority without express amendment
from Congress.55 Moreover, TPA cites to
Associated Gas Distributors v. FERC,56
where the court held that it was
unreasonable for the Commission to
presume that ‘‘obscure’’ language in
section 311 authorized an expansion of
its jurisdiction without legislative
47 LOC Request for Rehearing and Clarification at
3; Enogex Request for Rehearing and Clarification
at 7; Railroad Commission of Texas Request for
Rehearing and Clarification at 8–9; TPA Request for
Rehearing and Clarification at 22–23.
48 LOC Request for Rehearing and Clarification at
9; RRC Request for Rehearing and Clarification at
8.
49 RRC Request for Rehearing and Clarification at
8.
50 RRC Request for Rehearing and Clarification at
8, LOC Request for Rehearing and Clarification at
8–9; Enogex Request for Rehearing and Clarification
at 6–7; TPA Request for Rehearing and Clarification
at 28–29.
51 15 U.S.C. 3371(a)(2).
52 Enogex Request for Rehearing and Clarification
at 9; LOC Request for Rehearing and Clarification
at 5–8; Railroad Commission of Texas Request for
Rehearing at 9; TPA Request for Rehearing and
Clarification at 18–22.
53 LOC Request for Rehearing and Clarification at
5–6; RRC Request for Rehearing and Clarification at
9; TPA Request for Rehearing and Clarification at
18–22.
54 LOC Request for Rehearing and Clarification at
5–6; RRC Supplemental Comments at 9; TPA
Request for Rehearing and Clarification at 18–22.
55 LOC Request for Rehearing and Clarification at
6.
56 Assoc. Gas Distrib. v. FERC, 899 F.2d 1250
(D.C. Cir. 1990).
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history to support an expansion.57 TPA,
LOC, and RRC also focus on previous
case-law limiting the Commission’s
traditional rates, terms, and conditions
jurisdiction under section 311.58
22. Other petitioners focus on NGA
section 23(d)(2) which provides that the
Commission shall not require natural
gas producers, processors, or users who
have a de minimis market presence to
comply with the reporting requirements
of section 23.59 On rehearing, RRC
renews arguments made in response to
the NOPR regarding the de minimis
exception. Contrary to the Commission’s
interpretation, RRC believes that, had
Congress intended to give the
Commission even limited jurisdiction
over intrastate pipelines, it would have
listed them in section 23(d)(2).60
Because section 23(d)(2) makes no such
reference, RRC contends that the
Commission’s findings are contrary to
the plain language of section 23.61
23. Some petitioners assert that the
Commission is seeking information on
gas flows that are outside of the
Commission’s jurisdiction, regardless of
the facilities at issue.62 TPA argues that
the collection of design capacity and gas
flow data does not relate to the
availability and prices of natural gas,
thereby exceeding the Commission’s
transparency jurisdiction.63 Enogex
argues that the new regulations make it
impossible to discern the Commission’s
jurisdiction from State jurisdiction
because the intrastate and interstate
volumes of gas that move on the Enogex
system are so commingled that they
cannot be distinguished for capacity
posting purposes.64
24. Targa, California LDCs, RRC, and
TPA all contend that Order No. 720 is
an improper regulation of intrastate
operations and rates.65 These petitioners
57 TPA Request for Rehearing and Clarification at
19–20.
58 TPA Request for Rehearing and Clarification at
21–22; LOC Request for Rehearing and Clarification
at 6–10; RRC Request for Rehearing and
Clarification at 16. TPA and LOC also raise
arguments linking section 311 to section 601 of the
NGPA. LOC Request for Rehearing and Clarification
at 5–8; TPA Request for Rehearing and Clarification
at 18–21.
59 15 U.S.C. 717t–2(d)(2).
60 RRC Request for Rehearing and Clarification at
7; see also TPA Request for Rehearing and
Clarification at 23–24.
61 RRC Request for Rehearing and Clarification at
7–8.
62 Enogex Request for Rehearing at 9–10; TPA
Request for Rehearing and Clarification at 13–15.
63 TPA Request for Rehearing and Clarification at
13–15.
64 Enogex Request for Rehearing and Clarification
at 9–10.
65 Targa Request for Rehearing and Clarification at
9; California LDCs Request for Rehearing and
Clarification at 14–15; RRC Request for Rehearing
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argue that the Final Rule may adversely
interfere with State regulation of noninterstate pipelines.66 California LDCs
challenge the Commission’s claim that it
is not regulating intrastate operations of
non-interstate pipelines. The petitioner
alleges that compliance with Order No.
720 entails daily postings of customerspecific and facility-specific
information, effectively regulating
intrastate operations.67
2. Commission Determination
25. After consideration, the
Commission rejects the requests for
rehearing and reaffirms its holding that
it has jurisdiction over the matters
addressed in Order No. 720. NGA
section 23 provides the Commission
limited jurisdiction over major noninterstate pipelines for the purpose of
requiring public disclosure of
information to enhance market
transparency.
26. Most petitions for rehearing
reiterate arguments the Commission
considered and addressed at length in
Order No. 720. For example, petitioners
take issue with the Commission’s
interpretation of the expansive language
used in NGA section 23. In Order No.
720, the Commission held that Congress
deliberately chose the term ‘‘any market
participant’’ in section 23 to expand the
Commission’s jurisdiction beyond the
universe of natural gas companies to
which it would otherwise be limited,
recognizing that the public needs
information from a wide variety of
entities in order to facilitate
transparency.68 Section 1 is not
referenced in section 23 and the term
‘‘natural gas company’’ is not used in
section 23. Petitioners have not raised
any new arguments regarding the
meaning of ‘‘any market participant’’ in
section 23. The Commission continues
to believe that Congress did not intend
to limit the Commission’s transparency
jurisdiction to entities it traditionally
regulates.69
27. As stated in Order No. 720,
section 23(d)(2) would be unnecessary
surplusage if Congress did not intend to
give the Commission authority over
entities otherwise excluded by section
1(b) of the NGA.70 Petitioners raise no
new arguments regarding this issue.
and Clarification at 9–11; TPA Request for
Rehearing and Clarification at 25–28.
66 California LDCs Request for Rehearing and
Clarification at 14–15; RRC Request for Rehearing
and Clarification at 9–11; TPA Request for
Rehearing and Clarification at 3, 25–28.
67 California LDCs Request for Rehearing and
Clarification at 14–15.
68 Order No. 720 at P 18.
69 Id. P 19.
70 Id. P 23.
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Likewise, no new arguments were
presented regarding the Commission’s
authority to enact rules under sections
23(a)(1) and 23(a)(2). These subsections
grant discretion to the Commission to
achieve interstate price transparency
and to provide for public dissemination
of information.71
28. The Commission also finds no
merit in arguments raised by petitioners
related to section 311 of the NGPA.
While section 311 limits the
Commission’s jurisdiction regarding
some intrastate natural gas pipeline
activities, section 23 of the NGA
provides a different jurisdictional basis
promoting different Congressional goals.
Section 23 grants the Commission
authority to ensure that the information
necessary for interstate market
transparency is available to the public.
The term any market participant
includes non-interstate pipelines, thus
the Commission has the authority to
require those participants to post certain
information to facilitate market
transparency.
29. Petitioners also reiterated
arguments, addressed in Order No. 720,
that previous case law limits the
Commission’s transparency
jurisdiction.72 The Commission affirms
its conclusion that the cases cited by
commenters apply only to the
jurisdictional limits set forth in section
1 of the NGA prior to the enactment of
EPAct 2005.73 Such case law is not
applicable to regulations adopted by the
Commission pursuant to section 23 of
the NGA.
30. In response to Enogex, it is
immaterial for purposes of our
transparency jurisdiction whether noninterstate and interstate volumes of gas
are commingled. Under section 23, if
natural gas volumes have a greater than
de minimis effect on the interstate
natural gas market, and the other
requirements of section 23 are met, the
Commission has the authority to require
posting of such volumes regardless of
whether flowing natural gas is
characterized as ‘‘interstate’’ or ‘‘noninterstate.’’
31. The Commission emphasizes that
its transparency jurisdiction is limited
to the dissemination of information that
will aid in market transparency. Section
23 gives the Commission no jurisdiction
related to, and our regulations do not
govern the rates, terms, and conditions
of service of major non-interstate
pipeline operations. The Commission is
71 Id.
P 16.
72 Railroad
Commission of Texas Request for
Rehearing and Clarification at 15–16; LOC Request
for Rehearing and Clarification at 6–7; Enogex
Request for Rehearing and Clarification at 6–7.
73 Order No. 720 at P 20.
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requiring only the posting of essential
information to ensure market
transparency and is not engaging in
traditional regulation of rates, terms,
and conditions of service.
32. The Commission finds that Order
No. 720 accurately implemented its
authority under the limited jurisdiction
Congress conferred in NGA section 23.74
Therefore, we deny rehearing.
B. Need for the Rule
33. Order No. 720 found that a broad
cross-section of the natural gas industry
supports the transparency goals of the
pipeline posting requirements.75 In
Order No. 720, the Commission
exercised the authority conferred by
Congress following consideration of
comments on the NOPR, and based on
its experience regulating the interstate
natural gas market. Order No. 720
discussed interstate pipeline postings as
well as other sources of market
information, determining that additional
information by non-interstate pipelines
would enhance transparency further.76
34. Order No. 720 found that
information regarding wholesale natural
gas price fundamentals was incomplete
given the lack of access to scheduled
flow information from major noninterstate pipelines.77 This
informational gap exists because, while
interstate pipelines must post daily
scheduled flow information under our
current regulations, no similar
information is available regarding
scheduled flows prior to or following
transportation on interstate pipelines.
Order No. 720 attempted to fill this
informational gap with supply-related
information from large non-interstate
pipelines upstream of interstate
pipelines and demand-related
information from large non-interstate
pipelines downstream of interstate
pipelines. Supply and demand
fundamentals for the interstate natural
gas market can be more fully understood
utilizing information from noninterstate pipelines.
74 The Commission’s conclusion here is
consistent with its findings in Order No. 704
regarding the annual reporting requirement for
market participants adopted pursuant to our NGA
section 23 authority. See 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), order on reh’g, Order No. 704–B,
125 FERC ¶ 61,302 (2008).
75 Order No. 720 at P 29.
76 Id. P 39–50. Additionally, the Commission
determined that increased transparency regarding
no-notice natural gas flows was needed on
interstate pipelines. Id. P 161.
77 Id. P 40.
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1. Requests for Rehearing and
Clarification
35. On rehearing, a limited number of
petitioners object to Order No. 720’s
findings that transparency needs to be
increased in the interstate natural gas
market, and question whether the
regulations adopted in Order No. 720
actually increase transparency.
36. For example, LOC states that
Order No. 720 ‘‘failed to support its
finding that there exists any necessity
for the enactment of the proposed
rules.’’ 78 RRC argues that our pipeline
posting regulation is ‘‘a solution in
search of a problem,’’ adding that recent
Commission initiatives have improved
market transparency and that there has
been no showing that additional
transparency is required.79
37. TPA requests rehearing on the
grounds that the Commission has not
demonstrated that interstate market
transparency is enhanced by major noninterstate pipeline information. It
alleges that the Commission has
‘‘consistently disregarded the consensus
among market participants’’ on this
point.80
38. TPA takes Order No. 720 to task
for focusing on comments ‘‘of a handful
of intervenors expressing general
support for the [NOPR]’’ rather than
acknowledging the substantial number
of intrastate pipelines and other
participants that see no need for
increased transparency.81 TPA argues,
citing National Fuel Gas Supply
Corporation v. FERC, 82 that the
Commission must cite evidence of an
industry problem prior to rulemaking
action.83 TPA particularly objects to
Order No. 720’s finding that the
transparency rule assists market
participants to understand the impact of
hurricanes and other natural disasters
on natural gas supply. Further, TPA
argues that ‘‘nowhere in this proceeding
has the Commission or any market
participant provided an adequate
explanation of how the proposed rule
would detect market manipulation.’’ 84
39. Southwest Gas argues that the
transparency rule did not specifically
demonstrate a need for information from
LDCs related to daily capacity and
78 LOC Request for Rehearing and Clarification at
11. See also TRC Request for Rehearing and
Clarification at 14–15.
79 RRC Request for Rehearing and Clarification at
11–15.
80 TPA Request for Rehearing and Clarification at
33.
81 Id. at 35–37.
82 468 F.3d 831, 843 (D.C. Cir. 2006).
83 TPA Request for Rehearing and Clarification at
37.
84 Id. at 39.
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scheduled retail transportation.85
Southwest Gas complains that Order
No. 720 did not adequately explain the
nexus between data provided by Stateregulated LDCs and price formation for
natural gas sold at wholesale and in
interstate commerce.86
40. Additionally, some petitioners
request rehearing on the grounds that
Order No. 720 failed to fully consider
the existing sources of data regarding
non-interstate natural gas flows as
required by section 23.87
2. Supplemental Comments
41. In its supplemental comments,
AGA makes arguments similar to
Southwest Gas.88 AGA states that LDCs
are fundamentally distributors of
natural gas and that LDC scheduled flow
postings would not further the
Commission’s transparency goals.89
AGA notes that no wholesale natural gas
price formation occurs on an LDC’s
system 90 and argues that available
capacity calculations for LDCs may be
misleading.91
3. Commission Determination
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42. The Commission continues to
believe that the major non-interstate
pipeline posting requirements are
needed and denies the requests for
rehearing.
43. The Commission notes, as an
initial matter, that some of the requests
for rehearing appear to argue that the
Commission has substantially increased
transparency in interstate markets in
recent years, but that such transparency
is sufficient and more need not be done.
However, these petitioners misconstrue
section 23 of the NGA and Congress’
transparency objectives. As discussed in
Order No. 720, the Commission has
been directed by Congress to facilitate
price transparency in markets for the
sale or transportation of physical natural
85 Southwest Gas Request for Rehearing and
Clarification at 12.
86 Id. at 13–14.
87 LOC Request for Rehearing and Clarification at
11; RRC Request for Rehearing and Clarification at
11–15; TPA Request for Rehearing and Clarification
at 30–31.
88 The Order Requesting Supplemental Comments
requested additional comments on discrete issues
raised by commenters in requests for rehearing and
clarification. Order Requesting Supplemental
Comments at P 7–10. Some commenters submitted
supplemental comments on subjects outside the
requested scope. While the Commission did not
request such extraneous supplemental comments,
such as AGA’s supplemental comments regarding
need for the rule, we nevertheless address such
comments in this order to ensure that the record is
complete.
89 AGA Supplemental Comments at 10.
90 Id. at 13.
91 Id. at 16–17. See also California LDCs
Supplemental Comments at 8.
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gas in interstate commerce 92 and given
the authority to prescribe such rules as
may be necessary to effectuate the
Congressional goal.93 As the
Congressional mandate implicitly
acknowledges, lack of transparency is
not a ‘‘problem’’ readily susceptible to a
single regulatory solution. Transparency
enhances the ability of market
participants to make informed, efficient
decisions based upon public
information. In other words, enhanced
transparency is typically beneficial to
markets, even markets, such as the U.S.
wholesale natural gas market, that are
already competitive. It is not a necessary
prerequisite to adoption of our
regulations to find, as some petitioners
appear to demand, that the interstate
natural gas market cannot function
without the rule. As petitioners
acknowledge, the Commission has
improved market transparency in
several different ways in recent years
and the interstate natural gas market is
competitive and robust. These
successes, however, do not preclude
other means of further enhancing
transparency. This is particularly true
where the Commission has identified a
‘‘gap’’ in relevant market information
available to market participants.
44. Many of the petitions for rehearing
repeat arguments made in response to
the NOPR and addressed in Order No.
720. As the Commission found in Order
No. 720, there presently exists a gap in
information available to interstate
market participants necessary to more
fully understand supply and demand
fundamentals and therefore price
formation.94 A significant amount of
natural gas flows from producing basins
to interstate markets on non-interstate
pipelines. These scheduled flows
impact supply considerations in
interstate markets. Similarly, flows on
non-interstate pipelines at the end of the
delivery chain impact demand
considerations in the interstate
market.95 These considerations are
fundamental to Order No. 720’s
determination that information about
scheduled non-interstate pipeline
natural gas flows would enhance
transparency in the interstate natural
gas market. Without access to
information about supply and demand,
interstate natural gas market
participants are left with incomplete
information to understand interstate
U.S.C. 717f–2(a)(1).
U.S.C. 717f–2(a)(2).
94 Order No. 720 at P 39.
95 Of course, non-interstate pipelines that deliver
natural gas to end-users may also deliver gas to
other pipelines for subsequent transportation
similar to transportation provided by interstate
pipelines.
5183
wholesale prices. Incomplete
information leads to market
inefficiencies because wholesale buyers
and sellers of natural gas have
inconsistent levels of market knowledge
and are less able to understand price
outcomes.96
45. Existing interstate pipeline
posting data is used extensively by the
public to understand daily market
conditions and price formation. The
public can access an interstate
pipeline’s Internet Web site to ascertain
capacity availability and operational
conditions. Also, data aggregators scour
these Web sites and sell analysis and
services based on this data, with many
market participants, including
producers, pipelines, end users,
marketers, traders, and financial firms
paying subscription fees to these data
aggregators to evaluate the interstate
natural gas market. The demand for
such data by market participants is a
persuasive factor regarding its
transparency value. Based upon the
comments in this rulemaking and our
natural gas market experience, the
Commission believes that there is robust
interest by the public regarding similar
scheduled flow data from non-interstate
pipelines to form a more complete
picture of the U.S. wholesale natural gas
market. We therefore disagree with
commenters arguing that such data is
not valued by the public.
46. As discussed below, data provided
by major non-interstate pipelines will
help interstate natural gas market
participants understand both supply
and demand and, thus, price formation.
Understanding of Supply Fundamentals
Will Be Enhanced
47. Some petitioners, including TPA,
argue that information from noninterstate pipelines that provide natural
gas supplies would not enhance
interstate market transparency. Order
No. 720 notes the substantial impact
that non-interstate pipelines have on the
establishment of national wholesale
natural gas prices. Non-interstate
pipelines, particularly those in the
south-central United States, connect
large production areas with interstate
pipelines.97
48. Despite TPA’s protestations,
obtaining data from TPA’s members is
particularly important for interstate
market transparency. Onshore Texas
locations account for thirty percent
92 15
93 15
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96 Transparency plays a fundamental role in the
fairness, efficiency, and functioning of orderly
markets. Greater transparency results in greater
market efficiency because price signals to market
participants more accurately reflect underlying
supply and demand fundamentals.
97 Order No. 720 at P 45.
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(approximately 5.7 Tcf in 2007) of U.S.
natural gas production.98 Texas has
more non-interstate pipelines than any
other State—45,000 of the 58,600 miles
of natural gas pipelines in the State are
intrastate pipelines and account for
almost 16 Bcf/d of pipeline capacity.99
The pipeline network in Texas has
experienced significant growth over the
past several years as a result of
increased demand for pipeline capacity
caused by the rapid development and
expansion of natural gas production in
the Barnett Shale Formation.100 New
pipelines have been built, and
expansions to existing ones undertaken,
to meet increased demand. The
importance of Texas non-interstate
transportation to understanding
interstate price fundamentals is growing
as production shifts from old depleting
gas basins to new gas basins.
49. The value of non-interstate
pipeline supply flows is not confined to
Texas. In Colorado, Wyoming, and Utah,
development of new, large-diameter
intrastate pipelines is proceeding at a
fast pace, as proved reserves of coalbed
methane, tight sands, and conventional
natural gas supplies are identified.101
During the past several years, at least
eight large-capacity pipeline header
systems have been built in Wyoming to
transport natural gas from local
gathering systems.102 In the Piceance
Basin in western Colorado and the Uinta
Basin in eastern Utah, several new large
gathering systems have been developed
to feed expanding natural gas
production into the interstate pipeline
network.103 These supply sources have
a significant effect on interstate price
formation because new supply can
98 U.S. Energy Information Administration,
Natural Gas Annual 2007, Gross Withdrawals and
Marketed Production of Natural Gas by State and
the Gulf of Mexico 2003–2007 (2007), p. 8
(available at https://www.eia.doe.gov/pub/oil_gas/
natural_gas/data_publications/natural_gas_annual/
current/pdf/table_003.pdf).
99 Energy Information Administration, Intrastate
Natural Gas Segment (available at https://
www.eia.doe.gov/pub/oil_gas/natural_gas/
analysis_publications/ngpipeline/intrastate.html).
The size and importance of non-interstate
transportation in Texas is manifest. Sixteen Bcf/d
is enough gas to serve all the industrial or power
load in the U.S.
100 U.S. Energy Information Administration,
Expansion of the U.S. Natural Gas Pipeline
Network: Additions in 2008 and Projects through
2011, (Sept. 2009) (available at https://
www.eia.doe.gov/pub/oil_gas/natural_gas/
feature_articles/2009/pipelinenetwork/
pipelinenetwork.pdf) (‘‘About 10 percent of all
newly added natural gas pipeline capacity for 2008,
or 4.6 Bcf per day, was attributable to new intrastate
pipelines built to transport expanding Barnett shale
production specifically’’).
101 U.S. Energy Information Administration,
supra note 97.
102 Id.
103 Id.
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reduce regional and national gas prices.
The faster the implications of new
supply are assessed, the better the
market can integrate those implications
into pricing decisions.
50. In these states and elsewhere,
capacity could be limited at key points,
impacting regional, interstate wholesale
prices. Supply or demand driven events
on non-interstate pipelines that impact
regional wholesale prices cannot be
fully understood by market participants
without access to receipt and delivery
point information.
51. Existing data sources on gas
supply flows are insufficient for
participants to adequately evaluate
physical daily market activity. As the
Commission discussed in Order No.
720, the Energy Information
Administration (EIA) publishes data on
monthly production by State based on a
survey and with a three month lag.104
Similarly, monthly consumption data is
published by State with a four month
lag.105
Understanding of Demand
Fundamentals Will Be Enhanced
52. Petitioners not only question the
value of increased transparency of the
operations of non-interstate pipelines at
the beginning of the delivery chain, but
also at the end of the delivery chain. For
example, Southwest Gas and AGA argue
that the Commission has not articulated
an adequate nexus between data
provided by LDCs (oftentimes
companies that primarily deliver natural
gas to end-users) and interstate natural
gas price formation. The Commission
disagrees and continues to believe that
the pipeline posting regulations will
enhance understanding of demand
fundamentals.
53. Order No. 720 not only identified
the information gap now present, but
also provided data explaining the
possible scope of the transparency
problem regarding demand for natural
gas. For example, we noted that up to
90 percent of daily consumption of
natural gas in Texas is not captured
through the Commission’s current
interstate pipeline posting
requirements.106 Instead, such
consumption data is available only from
104 Energy Information Administration, Natural
Gas Deliveries to All Consumers by State 2007–2009
(Nov. 2009) (available at https://www.eia.doe.gov/
oil_gas/natural_gas/data_publications/
natural_gas_monthly/ngm/current/pdf/
table_16.pdf).
105 Energy Information Administration, Marketed
Production of Natural Gas in Selected States and
the Federal Gulf of Mexico (Nov. 2009) (available
at https://www.eia.doe.gov/oil_gas/natural_gas/
data_publications/natural_gas_monthly/current/
pdf/table_05.pdf).
106 Order No. 720 at P 44.
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EIA in aggregated format several months
following actual delivery.107 Such stale
data is unhelpful for interstate market
participants seeking to understand price
formation in today’s rapidly-changing
energy markets.
54. Demand clarity is a persistent
problem in U.S. interstate natural gas
markets. For example, California
accounts for 10 percent of U.S. natural
gas consumption, of which one-third is
utilized for electric power generation.108
About 13 percent of California’s
consumption is met by in-State
production with the rest met by imports
from surrounding states.109 Interstate
pipelines serving California, with four
exceptions, terminate at the State
border.110 Market participants can
currently ‘‘see’’ imports into California,
flows between PG&E and Southern
California Gas Company (SoCal Gas),
and flows into SoCal Gas producing
zones by virtue of the Commission’s
existing interstate pipeline posting
regulations and using PG&E’s and SoCal
Gas’ Pipe Ranger and Envoy systems.111
However, market participants have
limited information regarding gas
receipts and deliveries once gas is
delivered to PG&E’s and SoCal Gas’
systems. Non-interstate transportation
and distribution are dominated by:
PG&E, with 6,136 miles of
transportation pipelines); SoCal Gas,
with 2,890 miles of transmission and
storage pipelines; and SDG&E, with 168
miles of transmission pipelines.112
107 Id.
108 U.S. Energy Information Administration,
Natural Gas Annual 2007: Consumption of Natural
Gas 2003–2007 by State, 2007 (2007) at 41
(available at https://www.eia.doe.gov/pub/oil_gas/
natural_gas/data_publications/natural_gas_annual/
current/pdf/table_015.pdf).
109 Id.
110 Interstate pipelines currently serving
California include El Paso Natural Gas Company (El
Paso), Kern River Transmission Company, Mojave
Pipeline Company, Gas Transmission-Northwest,
Transwestern Pipeline Company (Transwestern),
Questar Southern Trails Pipeline, Tuscarora
Pipeline and the Bajanorte/North Baja Pipeline.
Kern River, Mojave, Tuscarora, and North Baja
pipeline have significant capacity in California,
while all other pipelines terminate at the California
border. See California Public Utilities Commission,
Natural Gas Market Study (Feb. 2006) at 28
(available at https://www.docs.cpuc.ca.gov/
WORD_PDF/REPORT/54256.pdf).
111 Sempra’s Envoy system posts daily
information at SoCal Gas’ interconnection with
interstate pipelines, PG&E, and five ‘‘producer
zones.’’ PG&E’s Pipe Ranger system posts daily
information only at interconnects with interstate
pipelines and SoCal Gas’ system. Most of the gas
flow information posted on Envoy and Pipe Ranger
is readily available from interstate pipeline postings
and provides little additional market information
useful for understanding the intrastate flow of gas.
Envoy Interactive Map (available at https://
www.envoyproj.sempra.com/help/
help_pipeline_map.html).
112 Pacific Gas and Electric Co., Fast Facts
(available at https://www.pge.com/about/company/
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55. SoCal Gas and PG&E are two of
the largest distribution companies in the
U.S. When major natural gas
transportation interruptions occur on
these systems inside California, market
participants are unable to accurately
assess interstate market implications.113
For example, the western energy crisis
of 2000–2001 resulted in high power
and natural gas prices in California
which were compounded by restricted
flows of gas into California due to an
explosion on the El Paso pipeline that
connects west Texas production to
California earlier in 2000. The ability to
observe flows on the PG&E and SoCal
systems would have enabled market
participants, the California Public
Utility Commission, and the public to
better understand the severity of local
gas shortages and their impact on prices
and gas supply.
56. The frequent price differences
observed between PG&E and SoCal Gas
city gate prices provide a further
example of the need for greater
transparency in the California intrastate
market. Intrastate pipeline constraints
within California likely cause these
price divergences, but the nature and
extent of these constraints is
unobservable to the public. The public
has access to flow data at the
interconnects of PG&E with two
interstate pipelines in southern
California (with El Paso at the Topock
receipt point and Transwestern at the
Needles receipt point). Capacity at the
Topock receipt point is not fully
utilized and cheaper gas should
theoretically flow north on PG&E’s
system to equalize prices between PG&E
and SoCal Gas. In order to effectively
understand constraints on intrastate
pipelines (and the effects on interstate
market prices), it is imperative that the
public have access to better, more
timely information on intrastate
scheduled gas flows in California.
57. Lack of demand transparency in
California markets is detrimental to well
functioning and competitive interstate
markets in a number of ways. For
example, a holder of pipeline capacity
on PG&E’s non-interstate pipeline
system could potentially hoard capacity
at key points, driving up gas prices in
California, while depressing interstate
prices at the California border. Such
non-interstate activity not only would
profile/); Securities and Exchange Commission,
Sempra Energy Form 10–K Annual Report at 25
(Feb. 24, 2009) (available at https://
www.investor.shareholder.com/sre/
secfiling.cfm?filingID=86521-09-10&CIK=1032208).
113 Since most information is only posted at major
interconnections with interstate pipelines and
between PG&E and SoCal Gas, conditions in-state
are not readily discernible.
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have an immediate impact on interstate
wholesale prices at the border, but
would have a ripple effect outward,
perhaps affecting prices throughout the
southwest. In another example, the
regional impact of a surge in California
gas demand by power generators,
perhaps due to hot weather or a nuclear
outage, could be more easily understood
and assessed if the location of such
surges could be identified at individual
delivery points. Again, obtaining
information only at the California
border would be insufficient to
understand interstate market prices
since the price-affecting constraints may
be occurring within the State.
58. Based upon the foregoing
examples and the Commission’s
discussion in Order No. 720, the
Commission believes that there is
sufficient nexus between demand-side
non-interstate flow information and
interstate price formation to sustain the
Commission’s regulations, contrary to
the position of AGA and Southwest Gas.
Non-Interstate Pipeline Scheduled Flow
Postings During Times of Natural
Disaster Would Benefit Interstate Market
Participants
59. TPA objects to Order No. 720’s
conclusion that information regarding
supply flowing through non-interstate
pipelines is particularly important
during times of natural disaster or when
pipelines are unexpectedly shut down.
TPA contends that most non-interstate
pipelines will not be able to post
scheduled flow data during an
emergency.114 The Commission
disagrees and continues to believe that
non-interstate pipeline postings are
crucial to ameliorate market
misunderstandings during hurricanes
and other situations that occasion
pipeline outages.
60. Even if, as TPA suggests without
support, major non-interstate pipelines
would be unable to meet their posting
obligations during hurricanes, the fact
that an emergency is so severe as to
preclude postings would provide an
important signal to the market regarding
the emergency’s impact on natural gas
supply. Further, posting information up
to and following an emergency would
give crucial insight regarding staged
shutdown of supply before an
emergency event and renewed operation
of supply infrastructure following an
emergency event.
61. For example, in September 2005,
hurricanes Katrina and Rita forced the
114 TPA
Request for Rehearing and Clarification at
38.
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5185
shut down of Henry Hub for 11 days.115
Henry Hub is the location for
interconnection of four non-interstate
and nine interstate pipelines. Because of
these interconnections, the location is of
vital importance for transportation of
natural gas from the producing region in
the Gulf to the consuming markets in
the Northeast and the Midwest.116 It is
also a crucial pricing point for interstate
natural gas. Although no interstate
pipeline flows were scheduled or prices
reported for this fourteen day period,
the lack of postings reflected the outage
status of Henry Hub. Resumption of
scheduled flow postings by interstate
pipelines sent an important signal to
market participants that markets were
beginning to normalize.
Scheduled Flow Information Posted by
Major Non-Interstate Pipelines Could Be
Utilized To Detect Manipulation and
Discriminatory Behavior
62. We also reject TPA’s assertion that
non-interstate scheduled flow
information could not be utilized to
detect market manipulation and
discriminatory behavior. As we
discussed in Order No. 720, the
Commission and other market
participants regularly review supply
and demand fundamentals to determine
if prices are the result of such market
forces.117 Understanding supply in large
non-interstate pipelines leading into the
interstate market and demand in large
non-interstate pipelines downstream of
the interstate market will enable market
observers to better understand prices
and, therefore, identify potential cases
of market manipulation.
63. The Commission has utilized
interstate scheduled flow postings in its
investigations of market manipulation
and unduly discriminatory behavior.
The Commission will now include
relevant non-interstate posting data in
its evaluations of such allegations.
C. Definition of Major Non-Interstate
Pipeline
1. Delivery Threshold
64. Consistent with the need for
greater transparency in the interstate
natural gas market and Congress’
directive in section 23 of the NGA,
Order No. 720 required major noninterstate pipelines to post daily
information regarding scheduled
volumes at specified points of receipt
115 2008 State of Markets Report, Federal Energy
Regulatory Commission, Division of Energy Market
Oversight at 6 (available at https://www.ferc.gov/
market-oversight/st-mkt-ovr/2008-som-final.pdf).
116 Henry Hub is the interconnecting location of
twelve pipelines and transportation capacity at the
Hub is more than 1.8 Bcf per day.
117 Order No. 720 at P 50.
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and delivery. The Commission adopted
a definition of ‘‘major non-interstate
pipeline’’ as a pipeline that: (1) Is not a
‘‘natural gas pipeline’’ under section 1 of
the NGA; and (2) delivers annually more
than 50 million MMBtu of natural gas
measured in average deliveries over the
past three years.118 The Commission
found that a delivery threshold of 50
million MMBtu would capture large
non-interstate pipelines with operations
that have a substantial impact on
interstate natural gas prices. Further, the
50 million MMBtu threshold is
consistent with the threshold that the
Commission has adopted for interstate
pipelines to file FERC Form No. 2.119
The Commission also held that such a
threshold would eliminate compliance
burdens for smaller non-interstate
pipelines.120
a. Requests for Rehearing and
Clarification
65. Encana requests that the
Commission clarify that new pipelines
will not be required to post information
until at least three years following
initial operation as they will not have
average deliveries for the three previous
calendar years upon which to determine
if they exceed the threshold.121 TPA
supports Encana’s requested
clarification.122 Shell requests
clarification that a major non-interstate
pipeline is one that delivered annually
more than 50 million MMBtus for each
of the preceding three years.123
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b. Commission Determination
66. Section 284.1(d)(2) of the
Commission’s regulations provides that
major non-interstate pipelines are
pipelines that deliver ‘‘annually more
than fifty (50) million MMBtus (million
British thermal units) of natural gas
measured in average deliveries for the
previous three calendar years.’’ 124 We
believe this language to be
unambiguous, requiring the aggregation
of pipeline deliveries over the previous
three calendar years and division by
three. Shell’s request for clarification is
therefore denied.
67. As Encana argues,125 the
Commission did not explicitly state how
118 See 18 CFR 284.1(d). Fifty million MMBtu of
natural gas deliveries per year is roughly equivalent
to 136 MMcf of deliveries per day.
119 Order No. 720 at P 66.
120 Id. P 67.
121 Encana Request for Clarification and
Clarification at 3.
122 TPA Request for Rehearing and Clarification at
51–52.
123 Shell Request for Rehearing and Clarification
at 6–8.
124 18 CFR 284.1(d)(2).
125 Encana Request for Rehearing and
Clarification at 3.
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the threshold calculation would apply
to pipelines with less than three years
of operational data. The Commission
finds that the appropriate threshold to
determine if a new pipeline qualifies as
major non-interstate pipeline is whether
the pipeline has the capability to deliver
more than 50 million MMBtu of natural
gas annually. That is, until a noninterstate pipeline has experienced
three years of operational flow, it must
utilize its maximum delivery capacity to
determine whether it is a major noninterstate pipeline subject to this
transparency rule. Section 284.1(d),
defining ‘‘major non-interstate pipeline,’’
is amended accordingly.
68. The Commission disagrees with
Encana and TPA that new pipelines,
including large non-interstate pipelines
with possible natural gas flows that
could have significant effects on the
interstate markets, should be wholly
exempt from the posting requirements
of this rule for the first three years of
their existence. New major noninterstate pipelines have more than a de
minimis impact on interstate markets
and, as such, the Commission’s posting
requirements shall apply.
69. Further, the Commission will not
adopt a threshold for new pipelines that
utilizes projected three-year natural gas
deliveries as a proxy for actual
deliveries. The Commission agrees with
Encana that a non-interstate pipeline
that gathers production may ‘‘have
difficulty in projecting the volume of
natural gas that it will deliver.’’ 126 Thus,
the Commission will not require new
non-interstate pipelines to develop
natural gas delivery projections simply
to determine whether they are a major
non-interstate pipeline subject to our
transparency rules.
70. Instead, the Commission
determines that, until a new pipeline
develops three years of operational flow
data, it must utilize design capacity to
determine whether the pipeline is a
major non-interstate pipeline subject to
the rule. As discussed in Order No. 720,
the Commission believes that design
capacity data typically will be readily
accessible to pipelines, especially newly
constructed pipelines. As such, the
Commission expects that a design
capacity threshold will be the least
burdensome method for most new
pipelines to determine if they are
subject to our transparency regulations.
Further, in the absence of scheduled
flow data, capacity is the best measure
of the potential impact of a new
pipeline on the interstate natural gas
markets.
126 Encana Request for Rehearing and
Clarification at 4.
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71. Accordingly, the Commission
denies Encana’s and TPA’s requested
clarification. However, the Commission
requires pipelines without three years’
operational data to utilize design
capacity to determine whether they are
major non-interstate pipelines. Section
284.1(d) of our regulations is modified
to include this requirement.
2. Treatment of Non-Contiguous
Pipeline Systems
72. In Order No. 720, the Commission
defined major non-interstate pipelines
utilizing a 50 million MMBtu annual
delivery threshold.127 The order
clarified that the threshold would be
applied on a ‘‘facility-by-facility’’
basis.128
a. Requests for Rehearing and
Clarification
73. AGA, Southwest Gas, and Bear
Paw/ONEOK Gathering Companies
request either clarification, rehearing, or
both regarding the meaning of ‘‘facilityby-facility.’’ Particularly, petitioners
request clarification as to how the
delivery threshold for major noninterstate pipelines applies to pipeline
systems that are non-contiguous (i.e.,
pipelines that are not directly
interconnected with each other).129
AGA argues that non-contiguous
pipeline systems should be viewed
separately to determine whether each
pipeline system is a major non-interstate
pipeline or is eligible for the exceptions
for posting in section 284.14(b)(2).130
74. Southwest Gas requests that the
Commission clarify that separate
facilities should be based, at least for an
LDC, upon the LDC’s own ‘‘operational
grouping of lines and facilities within
an operational area.’’ 131 Southwest Gas
also requests clarification that its
separate operating systems need not
comply with the posting regulations
based upon factual representations
made in its comments.132
75. Bear Paw/ONEOK supports the
Commission’s determination that major
non-interstate pipelines be determined
on a facility-by-facility basis. However,
they request clarification that ‘‘facilityby-facility’’ analysis is appropriate
where ‘‘physically separate facilities are
127 This threshold is included in the definition of
‘‘major non-interstate pipeline’’ in 18 CFR 284.1(d).
128 Order No. 720 at P 64.
129 AGA Request for Rehearing and Clarification
at 27–28; SWG Request for Rehearing and
Clarification at 7; Bear Paw/ONEOK Request for
Rehearing and Clarification at 10–11.
130 AGA Request for Rehearing and Clarification
at 27–28.
131 Southwest Gas Request for Rehearing and
Clarification at 7.
132 Id. at 7–9.
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not operated on an integrated basis.’’ 133
Bear Paw/ONEOK claims that such a
clarification would eliminate incentives
for non-interstate pipelines to splinter
their facilities into individual
companies to avoid posting
obligations.134
jlentini on DSKJ8SOYB1PROD with RULES2
b. Commission Determination
76. The Commission clarifies that the
phrase ‘‘facility-by-facility’’ as used in
Order No. 720 applies both to determine
whether a pipeline is a major noninterstate pipeline under 18 CFR
284.1(d) and also whether a major noninterstate pipeline is nevertheless
exempted from the posting requirements
as provided in 18 CFR 284.14(b). The
phrase ‘‘facility-by-facility’’ was
intended by the Commission to indicate
that major non-interstate pipelines
would be defined by a common sense
grouping of related facilities.
77. Identifying all of the facilities
within a major non-interstate pipeline
requires consideration of both physical
interconnection and operational
integration. Put differently, a major noninterstate pipeline is composed of a set
of facilities that is both physically
interconnected and operationally
integrated. We believe that this
clarification captures the impact that
major non-interstate pipelines have on
price formation. If a set of facilities is
physically interconnected and
operationally integrated, then the
facilities, as a whole, impact the natural
gas market as one entity rather than as
multiple entities.
78. By ‘‘operationally integrated,’’ the
Commission means transportation of
natural gas through a centralized
scheduling process. It is at this level of
integration that the facilities can be
coordinated to such an extent that they
may have the effect of a single entity in
the natural gas market. Whether
pipelines are organized into separate
corporate divisions or formal operating
systems is not relevant to this analysis.
For example, if two interconnected sets
of facilities are operated jointly from a
central dispatch center, then the
facilities together constitute a single
pipeline for purposes of evaluation
under the rule, even if the facilities are
separately owned. On the other hand,
even if two interconnected sets of
facilities are owned by a single entity,
they are nevertheless separate pipelines
for purposes of the rule if they do not
schedule natural gas through a joint
scheduling process.
79. Finally, the Commission will not
address Southwest Gas’s requested
clarification regarding whether 18 CFR
284.14 applies to Southwest Gas’s
operating systems in Arizona, Nevada,
and California. Southwest Gas did not
provide sufficient information for the
Commission to make such a
determination. Southwest Gas should
review its pipeline system based upon
the clarifications granted herein.
D. Posting Requirements for Major NonInterstate Pipelines
1. Posting Requirements at Points Where
Design Capacity Is Unknown or Does
Not Exist
80. In Order No. 720, the Commission
required all major non-interstate
pipelines subject to our posting
regulations to post scheduled natural
gas flow and design capacity
information for each receipt and
delivery point with a design capacity
equal to or greater than 15,000 MMBtu/
day.
81. In the Commission’s request for
supplemental comments, it sought
additional input on proposals submitted
at the March 18, 2009 technical
conference and subsequent postconference comments regarding
application of our posting regulations to
receipt and delivery points at virtual or
pooling points.135 Specifically, the
Commission requested comment on
requirements to post at such points with
a maximum flow equal to or greater than
15,000 MMBtu per day.136 The request
for supplemental comments included
possible revisions to our regulations,
including revisions that would require
posting by major non-interstate
pipelines at eligible virtual and pooling
points.137 Further, the order requesting
supplemental comments proposed
exempting from posting receipt points
where actual flows were less than 5,000
MMBtu each day for the prior three
years.138
a. Requests for Rehearing and
Clarification
82. Many petitioners requested
rehearing or clarification regarding how
Order No. 720’s major non-interstate
pipeline posting regulations apply to
points where design capacity is
unknown or does not exist. Such points
may include, but are not limited to,
virtual points, pooling points, points
that are not operated by the pipeline,
and other physical points for which the
135 Order
Requesting Supplemental Comments at
P 7.
133 Bear Paw/ONEOK Request for Rehearing and
Clarification at10–11.
134 Id.
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136 Id.
137 Id.
P 10.
P 7.
138 Id.
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5187
pipeline cannot reasonably determine
the design capacity.
83. AGA states that many LDCs
schedule volumes to paper pooling
points without reference to individual
physical points.139 AGA suggests that
the Commission consider requiring
posting scheduled volumes at paper
pooling points where the scheduled
volumes exceed 15,000 MMBtu per
day.140
84. Both ONEOK Gathering and Nicor
request that the Commission clarify
whether scheduled volumes to virtual
points should be posted.141 TPA also
requests clarification that historical data
utilized for planning purposes is not
required to be posted.142
b. Supplemental Comments
85. Atmos generally supports the
regulatory language proposed in the
Commission’s order requesting
supplemental comments stating that the
proposal ‘‘represents a good compromise
between the expensive and extensive
reporting required under [the NOPR]
and the very limited reporting
requirements proposed by others.’’ 143
Atmos suggests, however, that the
Commission allow major non-interstate
pipelines to utilize historical data rather
than actual flow data to determine
posting eligibility for each point.144
86. ONEOK Gathering likewise
supports the regulations proposed in the
order requesting supplemental
comments with ‘‘minor
clarifications.’’ 145 It requests
clarification that the three-year review
of receipt point flows to determine
whether the point is exempted from
posting is three calendar years rather
than a rolling three year period.146
87. Occidental supports the Order
Requesting Supplemental Comments’
proposal to limit posting only to
scheduled points, and requests
modification of the regulatory language
to further clarify this subject, including
a definition of virtual and pooling
points.147 Occidental suggests utilizing
an average of multiple days’ actual flow
rather than peak day actual flow to
determine posting eligibility for each
139 AGA Request for Rehearing and Clarification
at 25.
140 Id. at 26.
141 Nicor Request for Rehearing and Clarification
at 5–7; ONEOK Gathering Request for Rehearing
and Clarification at 10–11.
142 TPA Request for Rehearing and Clarification at
48–49.
143 Atmos Supplemental Comments at 2.
144 Id. at 3.
145 ONEOK Gathering Supplemental Comments at
4.
146 Id. at 5.
147 Occidental Supplemental Comments at 3.
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point.148 Occidental states that it is
inappropriate to require posting based
upon a single-day anomaly in gas
flow.149
88. TPA requests that the Commission
extend the proposed exemption for
receipt points with less than 5,000
MMBtu of flow each day both to
delivery points and to points for which
a design capacity is known.150 TPA
argues that points ‘‘flowing less than
15,000 MMBtu every day for three years
have no significant impact on
pricing.’’ 151 TPA also suggests utilizing
an average throughput as a threshold to
determine whether a point with no
known design capacity must be
posted.152 KM Intrastate Pipelines
support TPA’s supplemental
comments.153 Atmos likewise suggests
that the proposed exemption be
extended to delivery points.154
89. AGA’s supplemental comments
request clarification as to how posted
capacity is determined for non-physical
points where volumes are scheduled.155
AGA also suggests that the Commission
clarify the manner in which volumes are
calculated for non-physical receipt and
delivery points.156 AGA suggests that
the Commission adopt a threshold based
upon scheduled volumes for posting of
points with no known design capacity.
c. Commission Determination
90. The Commission grants the
requests for rehearing and clarification.
As petitioners note, Order No. 720 did
not address the posting of virtual,
pooling, or other points to which
natural gas volumes are scheduled and
yet where design capacity is unknown
or does not exist. Based on the
additional information received, the
Commission finds that major noninterstate pipelines must post scheduled
flow data for points where design
capacity is unknown or does not exist
with scheduled maximum natural gas
volumes equal to or greater than 15,000
MMBtu on any day within the prior
three calendar years. The Commission
amends 18 CFR 284.14(a)(1) to
implement this requirement.
91. As petitioners and commenters
have stated, some major non-interstate
pipelines schedule natural gas flows to
virtual or pooling points where there is
no physically-measurable design
jlentini on DSKJ8SOYB1PROD with RULES2
148 Id.
at 4–5.
at p. 5.
150 TPA Supplemental Comments at 5.
151 Id.
152 Id. at 4.
153 KM Supplemental Comments at 1.
154 Atmos Supplemental Comments at 5.
155 AGA Supplemental Comments at 25.
156 Id. at 26.
149 Id.
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capacity.157 Further, there exist a small
number of physical receipt and delivery
points where major non-interstate
pipelines cannot reasonably determine a
physical design capacity. Nevertheless,
transportation to these points may be
substantial and have a significant effect
on interstate natural gas price formation.
Petitioners have presented no arguments
that scheduled volumes to such points
have only de minimis effects on
interstate price formation.
92. For purposes of determining
whether a point with no known design
capacity must be posted, major noninterstate pipelines shall use the largest
scheduled natural gas flow over the past
three calendar years.158 If the largest
daily scheduled flow is equal to or
greater than 15,000 MMBtu, then the
point is subject to posting. The potential
impact on the natural gas market of a
physically metered point is best
understood through reference to its
design capacity. The greater the capacity
of the point, the greater the natural gas
flows that could occur at the point and
the greater the market impact. For this
reason, the Commission adopted in
Order No. 720 a design capacity
threshold for posting at points where
design capacity is known. For a point
with no known design capacity, the
closest approximation for design
capacity is the maximum flow
scheduled to the point. Additionally,
maximum scheduled daily flow will not
be burdensome for major non-interstate
pipelines to calculate for points with no
known design capacity.
93. The Commission clarifies that, as
with posting related to points with a
known design capacity, postings at
points with no known design capacity
are required only for scheduled
volumes. The Commission is not
requiring the posting of unscheduled
natural gas volumes or actual flow. Nor
is it requiring posting regarding points
to which no volumes are scheduled. As
discussed in Order No. 720, the posting
of unscheduled volumes would be
unduly burdensome.159
94. The Commission’s regulations
further reduce the burden on posting
pipelines with virtual points by
requiring posting based upon calendar
year data. Thus, major non-interstate
157 The Commission will not amend its
regulations to define ‘‘virtual points’’ or ‘‘pooling
points’’ as suggested by some petitioners. These
terms are not utilized in the regulations. Instead,
the posting regulations distinguish between points
at which design capacity is known, on the one
hand, or is unknown or does not exist.
158 We discuss, infra, the timing of postings for
all newly-eligible receipt and delivery points,
including both points for which design capacity is
known and unknown.
159 Order No. 720 at P 57.
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pipelines need only review scheduled
volume data annually to determine
whether points where no design
capacity is known must be posted.
Points with scheduled natural gas flows
equal to or greater than 15,000 MMBtu
per day become eligible for posting on
January 1 of the following year.
95. The Commission will not adopt
alternative proposals regarding the
appropriate posting threshold for points
with no known design capacity. Atmos
suggests that the Commission adopt a
threshold utilizing historical metered
flows. TPA suggests utilizing an average
of maximum scheduled flows at each
point. Neither of these suggestions more
closely approximates design capacity
than a single-day maximum scheduled
flow. Further, identifying multiple
maximum scheduled flow days or
appropriate historical actual metered
flow would be more burdensome than
identifying a single-day maximum
scheduled flow.160
96. The Commission also finds that
the appropriate timeframe for the
scheduled flow threshold that we adopt
is three years. A three calendar year
review is sufficient to identify
reportable points on major noninterstate pipelines while allowing
pipelines to remove points that are no
longer significant.161 We also clarify, as
TPA requests, that historical data need
not be posted for points at which no
design capacity is known.
2. Posting Requirements at Points Where
Design Capacity Is Known
97. In Order No. 720, the Commission
required major non-interstate pipelines
to post information for receipt and
delivery points with design capacity
equal to or greater than 15,000 MMBtu
per day.162 The Commission found that
market participants could utilize design
capacity and scheduled volume
information to help determine available
capacity at a particular point and,
therefore, required posting of both
design capacity and scheduled
volumes.163 Order No. 720 clarified that,
where the design capacity of a receipt or
delivery point could vary according to
operational or usage conditions, major
160 Consistent with TPA’s suggestion, we have
clarified section 284.14(a)(4) of our regulations to
reflect that the ‘‘Method of Determining Posted
Capacity’’ includes ‘‘Maximum Volume’’ rather than
‘‘Maximum Average Volume.’’
161 We note, as we did in Order No. 720, that our
regulations do not require that pipelines remove
any points from points that are posted. Indeed, we
welcome the greater transparency afforded by
postings at receipt and delivery points even where
the Commission’s regulations permit posting to
terminate.
162 Order No. 720 at P 82; see 18 CFR 284.14(a).
163 Order No. 720 at P 82, 84.
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non-interstate pipelines must post the
design capacity for the most common
usage conditions of its system during
peak periods.164
98. In the Order Requesting
Supplemental Comments, the
Commission sought comment on a
proposal to exempt from posting all
receipt points at which design capacity
was known that experienced actual flow
of less than 5,000 MMBtu per day on
every day within the prior three
years.165 The Commission explained
that this proposal was based upon its
understanding, from the record in this
proceeding, that many major noninterstate pipelines have receipt points
with design capacities greater than
15,000 MMBtu per day and yet
consistently flow far less natural gas
than this design capacity.166 The
proposal balanced the transparency goal
of the rule with the costs associated
with posting at such receipt points.
a. Requests for Rehearing and
Clarification
99. ONEOK Gathering, Nicor, Atmos,
Shell, and TPA request clarification
regarding whether posting is required
for a physical point if natural gas flows
are not scheduled to the point.167
100. Enogex argues that the
Commission erred in concluding that
the posting of scheduled volumes and
design capacity at a given point will
allow shippers to determine how much
capacity is available at the point.168
Enogex states, without further
explanation, that ‘‘capacity constraints
and other conditions on a pipeline’s
system affect the amount of capacity
that can be made available on a daily
basis.’’ 169
101. ONEOK Gathering requests
clarification regarding the calculation of
design capacity for points with meters
for which the major non-interstate
pipeline does not have control.170 In
such circumstances, ONEOK Gathering
suggests that the Commission permit
major non-interstate pipelines to rely
upon representations made by the entity
controlling the point or to make
reasonable estimates of design capacity.
164 Id.
at P 92.
Requesting Supplemental Comments at
165 Order
P 10.
jlentini on DSKJ8SOYB1PROD with RULES2
166 Id.
167 Nicor Request for Rehearing and Clarification
at 7–8; ONEOK Gathering Request for Rehearing
and Clarification at 11; Atmos Request for
Rehearing and Clarification at 2–3; Shell Request
for Rehearing and Clarification at 8–9; TPA Request
for Rehearing and Clarification at 48–50.
168 Enogex Request for Rehearing and
Clarification at 11.
169 Id. at 11.
170 ONEOK Gathering Request for Rehearing and
Clarification at 9–10.
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ONEOK Gathering also requests
clarification regarding design capacity
postings for receipt and delivery points
on major non-interstate pipelines with
greater capacity than interconnected
interstate pipelines.171 Further, ONEOK
Gathering requests clarification
regarding how pipeline design capacity
should be calculated as a general matter
or, in the alternative, establishment of a
safe harbor for calculations regarding
design capacity.172
b. Supplemental Comments
102. In its supplemental comments,
Atmos requests that the Commission
extend the proposed exemption for
receipt points with less than 5,000
MMBtu of flow each day both to points
for which design capacity is
unknown.173 Atmos argues that
extension of the exemption to points for
which design capacity is unknown
would provide regulatory consistency in
that points with a known design
capacity would be treated similarly to
points with an unknown design
capacity.174 TPA echoes these
comments, urging also that the
exemption threshold be raised to 15,000
MMBtu per day for all points, including
points where design capacity is known
or not known.175 TPA argues that points
flowing less than 15,000 MMBtu per day
every day for three years have no
significant impact on pricing in the
U.S.176
103. NGSA also urges that the
proposed exemption should be adopted
and extended to points at which design
capacity is known. NGSA claims that
the proposed exemption ‘‘exposes a
problem inherent in using design
capacity as a threshold—it may capture
points that are not truly significant.’’ 177
NGSA requests that the Commission
modify its regulations to provide that
points with physically metered design
capacity are eligible for the exemption
and also that the exemption threshold
be increased to 12,000 MMBtu per
day.178
c. Commission Determination
104. The Commission denies the
requests for rehearing and clarification.
Regarding Enogex’s comments, the
Commission continues to believe, as
stated in Order No. 720, that, as a
general matter, ‘‘[m]arket observers may
estimate availability by subtracting
180 Id.
172 Id.
173 Atmos
Supplemental Comments at 5.
at 6.
175 TPA Supplemental Comments at 4–5.
176 Id. at 5.
177 NGSA Supplemental Comments at 5.
178 Id.
174 Id.
Frm 00013
scheduled volumes from design
capacity.’’ 179 The Commission
understands that day-to-day operational
factors can sometimes affect available
capacity in ways that are not readily
apparent. However, just as we have
observed regarding similar postings
made by interstate pipelines, market
participants will very often be able to
ascertain available capacity from the
data to be posted by major noninterstate pipelines.
105. Additionally, the Commission’s
regulations do not prohibit major noninterstate pipelines from posting
additional information, including, for
example, operational considerations
that could affect available capacity.
106. Regarding the calculation of
design capacity, the Commission
confirms the statement in Order No.
720: ‘‘[i]n 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.’’ 180 This guidance
is consistent with the guidance that we
have provided to interstate pipelines
subject to our long standing posting
requirements.181 Regarding ONEOK
Gathering’s specific request for guidance
regarding major non-interstate points
with greater capacity than an
interconnected interstate pipeline, the
Commission clarifies that the obligation
to post design capacity relates to the
major non-interstate pipeline’s facilities.
As such, major non-interstate pipelines
must post design capacity of their
facilities even if an interconnecting
facility’s capacity is less than the major
non-interstate pipeline’s.
107. Major non-interstate pipelines
must use reasonable efforts to determine
design capacity at physical receipt and
delivery points. To the extent that a
major non-interstate pipeline is
uncertain as to how to calculate design
capacity at a point, they are free to
contact the Commission’s compliance
help desk for informal guidance.182
Therefore, the Commission will not
adopt a safe harbor for the posting of
design capacity.
108. No commenter objected to the
proposal, contained in the
Commission’s order requesting
179 Order
171 Id.
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No. 720 at P 84.
P 92.
181 Id.
182 As we reminded major non-interstate
pipelines in Order No. 720, the Commission’s help
desk can facilitate responses to questions regarding
compliance with our regulations. See Obtaining
Guidance on Regulatory Requirements, 123 FERC
¶ 61,157 (2008).
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jlentini on DSKJ8SOYB1PROD with RULES2
supplemental comments, to adopt an
exemption from posting for receipt
points with actual flow of less than
5,000 MMBtu per day on each day
within the prior three years. With two
minor modifications, the Commission
adopts this exemption. Namely, the
exemption shall apply to receipt points
with scheduled natural gas volumes of
less than 5,000 MMBtu per day on each
day within the prior three calendar
years. These modifications are
consistent with the Commission’s
determination to post scheduled
volumes rather than actual flow and
should be less burdensome for major
non-interstate pipelines to implement
than a rolling exemption based upon
actual flow.183
109. The Commission will not further
extend this exemption as requested by
some commenters. The Commission
clarifies that the exemption applies to
only receipt points, not delivery points
or points that operate both as receipt
and delivery points. The exemption is
intended primarily to apply to pipelines
that receive gas from declining
production areas.184 These pipelines
may have receipt points that were
designed to accommodate natural gas
flows of 15,000 MMBtu per day, but,
because of declining production over
time, flows into these points have
dwindled to consistently de minimis
levels. In such circumstances, it is
unlikely that excess capacity at the
point could become utilized in the
future and the burden of posting at the
point may exceed the transparency
value.
110. As Order No. 720 explained, one
of the chief goals of our posting
regulations for major non-interstate
pipelines is to assist the public’s
estimates of available capacity on large
non-interstate pipelines, and the
potential impacts on interstate price
formation. Delivery points with excess
capacity may often be utilized to
provide additional service. As just one
example, a delivery point that supplies
several industrial consumers of natural
gas may encounter reduced scheduled
flows during economic downturns
caused by reduction of output from the
industrial consumers. Capacity is
available, however, and use of the point
may increase as economic conditions
improve. This data would be useful for
183 TPA Supplemental Comments at 5; NGSA
Supplemental Comments at 4–6; Atmos
Supplemental Comments at 5.
184 While the exemption could be utilized to
exempt receipt points under other circumstances,
we decline to further restrict the exemption. Such
restrictions would complicate application of the
exemption, increasing the burden on major noninterstate pipelines.
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market participants to review as they
consider the effect of increased demand
on interstate natural gas prices.185
111. Additionally, the Commission
clarifies that the exemption applies only
to points with a stated design capacity—
we decline to extend the exemption to
points for which no design capacity is
known.186 As discussed above, the
exemption is intended to apply to
receipt points that were designed to
accommodate natural gas flows of
15,000 MMBtu per day, but, because of
declining production over time, flows
into these points have dwindled to de
minimis levels. Extending this
exemption to points for which design
capacity is unknown would be
inconsistent with our determination that
such points should be subject to posting
if scheduled flows exceed 15,000
MMBtu per day on any day within the
prior three years.
112. Lastly, the Commission clarifies
that the posting exemption for receipt
points with scheduled natural gas
volumes of less than 5,000 MMBtu per
day on each day within the prior three
calendar years does not require that
pipelines remove points that have been
subject to posting. We emphasize, as we
did in Order No. 720, that our posting
regulations are minimum posting
requirements. Major non-interstate
pipelines may elect to post additional
data regarding their operations.
3. Timing of Posting of Eligible Points
113. In the Order Requesting
Supplemental Comments, the
Commission sought additional comment
on the appropriate time for posting to
begin for newly eligible points. The
order sought comments on one proposal
that would require posting for each
receipt and delivery point to begin
within 45 days of the point’s eligibility
for posting.187
a. Supplemental Comments
114. TPA’s supplemental comments
claim that 45 days is insufficient time
185 Further, given the determination to require
updating of posted points only on a bi-annual basis,
a delivery point that was ‘‘dropped’’ from posting
could experience resurgent flow for over seven
months before posting resumed. Such a result is
contrary to the transparency goals expressed in
NGA section 23.
186 18 CFR 284.14(a)(2) of the regulations adopted
herein by its terms applies to the entirety of section
284.14(a)(1), including both points for which a
design capacity is posted and those that are not.
Section 284.14(a)(2) applies only to receipt points
with scheduled volumes of less than 5,000 MMBtu
per day for each day within the prior three years.
Points where no design capacity is posted, by
definition, have experienced scheduled flows equal
to or greater than 15,000 MMBtu per day and are
thus not eligible for the exemption.
187 Order Requesting Supplemental Comments at
P 9.
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for review of flow data to determine if
posting is required, even if such
determinations utilize monthly billing
data.188 AGA urges the Commission to
require new receipt and delivery points
to be added annually rather than on a
rolling 45-day basis. AGA claims that
such a modification would reduce
compliance burdens for major noninterstate pipelines.189 TPA requests
that the Commission require major noninterstate pipelines to determine, on a
semi-annual basis, whether points with
no known design capacity must be
posted. ONEOK Gathering supports
TPA’s request that eligible points be
determined on a bi-annual basis.190
b. Commission Determination
115. The Commission grants rehearing
and revises section 284.14(a)(3) of its
regulations to require major noninterstate pipelines to begin Internet
postings for newly eligible receipt and
delivery points within 45 days of the
point’s eligibility for posting.
116. The Commission understands
commenters’ arguments that posting
new points on a rolling basis would be
burdensome for major non-interstate
pipelines, but believes that these
burdens are overstated and substantially
outweighed by the transparency benefit
of timely posting of newly eligible
points.191 Major non-interstate pipelines
have access to, and utilize on a daily
basis, all of the information necessary to
determine whether a receipt or delivery
point must be posted under our
regulations. The posting of newly
eligible points is of substantial value to
market participants as new receipt and
delivery points or increased scheduled
flow to points could have immediate,
substantial effect on market prices.
Balancing the transparency benefits of
timely posting for newly eligible points
with this burden, we believe that a 45day requirement for the posting of
newly eligible points is appropriate.
Such a requirement would allow major
non-interstate pipelines to utilize
monthly billing and report data to
determine the eligibility of new
points.192
188 TPA
Supplemental Comments at 3.
Supplemental Comments at 27.
190 ONEOK Gathering Supplemental Comments
at 4.
191 The Commission notes that newly eligible
points may be newly constructed receipt and
delivery points or existing points that have become
eligible for posting due to an increase in scheduled
natural gas volumes.
192 To the extent that a major non-interstate
pipeline does not believe that it can, using
reasonable efforts, determine the eligibility of new
points and begin posting within 45 days of their
eligibility, it may request waiver from the
Commission of this requirement.
189 AGA
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117. We decline to require only an
annual or semi-annual review of new
points as AGA and others suggest.
Volumes at points that are large enough
to require posting may have a significant
impact on wholesale natural gas price
formation. Delaying posting for a full
year at such points would be contrary to
the Commission’s transparency goals.
4. Clarifications Regarding the Major
Non-Interstate Posting Requirements
a. Confidentiality of Data To Be Posted
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118. In Order No. 720, the
Commission rejected requests to
abandon this rule on the grounds that
posted information would competitively
disadvantage non-interstate pipelines or
non-interstate pipeline transportation
customers.193 This determination was
based upon the Commission’s
substantial experience with interstate
posting requirements and the general,
aggregated nature of the information to
be posted by non-interstate pipelines.
119. AGA argues on rehearing that
posting at delivery points with one or
few transportation customers could
have anti-competitive effects in certain
situations.194 Additionally, AGA
believes that, in certain circumstances,
the Commission’s posting requirements
could require LDCs to violate other
regulatory requirements regarding the
posting of customer-specific data.195
120. California LDCs make similar
arguments in their request for rehearing
of Order No. 720, echoing arguments
previously made in response to the
NOPR. They request that the
Commission clarify that major noninterstate pipelines are not required to
post confidential customer
information.196 Enogex argues that the
posting of certain information could
disclose the identity of end-users on an
LDCs system.197
121. California LDCs’ supplemental
comments provide additional detail
regarding their position. California
LDCs’ supplemental comments argue
that posting scheduled flow information
may violate the California Public Utility
Commission’s (CPUC’s) confidentiality
regulations. Specifically, according to
these commenters, posting information
required by Order No. 720 may cause
the California LDCs to violate the
CPUC’s directives to preserve customer
193 Order
194 AGA
No. 720 at P 88–89.
Request for Rehearing and Clarification
at 24.
195 Id.
196 California LDCs Request for Clarification and
Rehearing at 17–18.
197 Enogex Request for Rehearing and
Clarification at 10.
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privacy.198 Further, the comments
repeat arguments made in their request
for rehearing and comments in response
to the NOPR that disclosure of
scheduled flows could competitively
disadvantage generators that receive
natural gas at a delivery point.199
Additionally, the California LDCs
expand on prior comments that
disclosure of location names or location
information could disclose critical
energy infrastructure information or
information about military installations
with national security implications.200
122. In supplemental comments,
NGSA requests clarification that posting
is required only for aggregated
scheduled volumes, not specific
delivery accounts.201 NGSA also
requests that the Commission permit
market participants to seek exemptions
for posting at certain points to protect
commercially sensitive information.202
123. Most of the arguments raised by
petitioners and commenters were
discussed and rejected in Order No.
720.203 The regulations therein adopted
required only posting of aggregated, not
account-specific, scheduled flow
data.204 The Commission noted that its
interstate pipeline posting regulations
require posting at receipt and delivery
points even if the points are customerspecific and the industry has benefitted
from the transparency afforded by such
postings.205 Congress clearly expressed
an intent in NGA section 23 to ensure
that relevant market data is made
available to the public.206 For these
reasons, we reject petitioners’ requests
to limit the posting of information.
124. Additionally, the Commission
does not believe its regulations require
the disclosure of potentially sensitive
information regarding the physical
location of receipt and delivery points
or actual natural gas flows that would
implicate national security. Our major
non-interstate posting requirements do
not mandate disclosure of the physical
location or composition of receipt and
delivery point facilities.
125. Lastly, the Commission does not
believe that its regulations are in
conflict with State public utility
commissions’ general prohibitions
198 PG&E
and SoCal Gas Supplemental Comments
at 6.
199 Id.
at 5–6.
at 5.
201 NGSA Supplemental Comments at 6.
202 Id.
203 Order No. 720 at P 88–89.
204 While our major non-interstate pipeline
posting regulations do not require the posting of
account-specific data, they do not prohibit such
postings.
205 Order No. 720 at P 88–89.
206 Id.
200 Id.
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5191
regarding disclosure of private customer
data. We note that the CPUC itself has
not raised this issue in this
proceeding—nor have any other noninterstate pipelines within California
other than the California LDCs. The
California LDCs’ claim that our posting
regulations ‘‘likely’’ would identify
particular customers on their systems
and customer’s usage.207 Such concerns
are speculative and commenters fail to
identify any specific points where
application of our posting requirements
would be inconsistent with the CPUC’s
privacy guidelines. The Commission
therefore denies rehearing and declines
to modify its regulations as requested by
the petitioners.
b. Duplicate Postings
126. AGA and National Grid request
clarification regarding posting of
information by major non-interstate
pipelines at points of interconnection
with interstate pipelines.208 They argue
that such postings are duplicative of
postings made by interstate pipelines.
Additionally, Bear Paw/ONEOK argues
that postings should not be required by
major non-interstate pipelines at
locations downstream of processing
facilities if such postings would be
duplicative of postings made by
interstate pipelines.209
127. In response to AGA’s, National
Grid’s, and Bear Paw/ONEOK’s
requests, the Commission clarifies that
major non-interstate pipelines must post
at eligible points at interconnections
with interstate pipelines and denies the
requests for rehearing. Postings at
interconnections with interstate
pipelines are not necessarily duplicative
as the Commission’s posting
requirements for interstate pipelines
differ from the requirements for major
non-interstate pipelines. Further,
available capacity at points of
interconnection may differ between
interstate and major non-interstate
pipelines and this information would be
unavailable if only interstate pipelines
posted data. Even if posted information
is, on occasion, duplicative, market
participants can utilize posted
information from one pipeline to better
evaluate the accuracy of information
posted by the interconnected pipeline. It
has been the Commission’s experience
administering our interstate posting
requirements that ‘‘duplicative’’ postings
at interconnections between interstate
207 PG&E and SoCal Gas Supplemental Comments
at p. 6.
208 AGA Request for Rehearing and Clarification
at 22–24; National Grid Request for Rehearing and
Clarification at 9–10.
209 Bear Paw/ONEOK Supplemental Comments at
9–10.
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pipelines are very helpful to market
participants.
jlentini on DSKJ8SOYB1PROD with RULES2
c. Monthly and Weekly Scheduling
128. In Order No. 720, the
Commission concluded that major noninterstate natural gas pipelines should
post data on a daily basis.210 Less
frequent postings would not provide
sufficient transparency for market
observers to understand price
fluctuations in a timely manner.
129. On rehearing, Targa claims that
the requirement to post scheduled data
on a daily basis ‘‘likely would require
[Targa] to redefine the nature of its
relationships with current and future
customers.’’ 211 Targa explains that it
does not utilize daily scheduling or
nominations, but that it reads its system
meters on a monthly basis.212 Targa
reads Order No. 720 as requiring it ‘‘to
establish an internal gas control
function’’ to comply with the
Commission’s posting regulations.213
130. As the Commission stated in
Order No. 720, the Commission’s major
non-interstate pipeline posting
regulations do not regulate the rates,
terms, or conditions of service for major
non-interstate pipelines.214 To the
extent that Targa complains of the need
to designate personnel to ensure
compliance with the data posting
requirements, we deny the company’s
rehearing request. Compliance with the
Commission’s regulations is mandatory
for all non-exempt major non-interstate
pipelines. However, to the extent that
Targa’s comments assume that Order
No. 720 requires major non-interstate
pipelines to schedule natural gas
transportation on a daily basis, we
clarify that Order No. 720 imposes no
such requirement. Natural gas
transportation that is not scheduled
need not be posted. If natural gas
transportation is scheduled on a daily
basis, then such scheduled volumes
should be posted along with other
required data.
131. Further, the Commission clarifies
that, if a major non-interstate pipeline
schedules natural gas transportation
using a timeframe different from daily
scheduling (e.g., weekly or monthly
scheduling), postings must nevertheless
occur on a daily basis utilizing the most
recent scheduling data. Major noninterstate pipelines that engage in such
scheduling practices must use
reasonable efforts to estimate daily
210 This
requirement is contained in section
284.14(a)(4) of the Commission’s regulations.
211 Targa Request for Rehearing and Clarification
at 9.
212 Id.
213 Id.
214 Order No. 720 at P 24.
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natural gas scheduled flows. Further,
major non-interstate pipelines must
explain the basis for such estimates on
their Internet Web sites. For example, if
a major non-interstate pipeline
schedules natural gas transportation for
the upcoming week, it could post daily
scheduled flows in equal amounts each
day (i.e., 1⁄7 of the weekly scheduled
amount) if it believes that deliveries will
be uniform each day.
d. Postings for Bi-Directional Scheduled
Volumes
132. In Order No. 720, the
Commission required major noninterstate pipelines to post, for each
eligible point and on a daily basis,
‘‘Scheduled Volume’’ 215 and
incorporated this requirement in 18 CFR
284.14(a)(4).
133. Atmos requests clarification
regarding posting of Scheduled Volume
at points with bi-directional scheduled
natural gas flows (i.e., points of both
receipt and delivery).216 Atmos urges
the Commission to determine that net
volumes be posted at such points.
Similarly, Atmos requests clarification
regarding posting at points where bidirectional scheduled transportation
results in displacement.217
134. In response to Atmos’ request,
the Commission clarifies that bidirectional scheduled volumes should
not be netted against each other prior to
posting. The Commission modifies 18
CFR 284.14(a)(4) consistent with this
determination and requires Scheduled
Volume to be posted for each direction
of scheduled natural gas flow. While the
Commission agrees, as Atmos argues,
that market observers should be aware
that Atmos’ and other major noninterstate pipelines’ bi-directional
scheduling affects available capacity,
the Commission believes that, for
transparency purposes, posting more
information about such scheduling is
preferable than less information.
Postings for points that operate as both
receipt and delivery points should
include Scheduled Volume in each
direction separately.218 To the extent
that a major non-interstate pipeline
believes that such posting would
provide misleading data regarding
215 Order
No. 720 at P 94.
Request for Rehearing and Clarification
216 Atmos
at 5–6.
217 Id. at 6–7.
218 The Commission will leave the manner of
posting such bi-directional flows to the major noninterstate pipeline’s discretion. For example, a
major non-interstate pipeline may choose to reflect
bi-directional scheduled volumes at a single point
as two separate points, one for each direction of
scheduled flow. Alternatively, it could list two
separate volumes for a single point, identifying the
direction of each scheduled volume.
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available capacity at the point, it may
post a narrative explaining how such
scheduled volumes affect available
capacity.
e. Timing of Postings
135. In Order No. 720, the
Commission determined postings by
major non-interstate pipelines should be
made no later than 10:00 p.m. central
clock time on the day prior to scheduled
gas flow.219 AGA and National Grid
request that the Commission include
this requirement in the regulations
adopted.220 The Commission agrees and
section 284.14(a)(4) of our regulations
has been modified to require postings by
10 p.m. central clock time the day prior
to scheduled flow.
f. Reporting by Customer Class
136. In Order No. 720, the
Commission required major noninterstate pipelines to post information
regarding scheduled flows on an
aggregated basis.221 Yates requests that
the Commission expand this
requirement to include postings at each
point by customer class and to identify
affiliate relationships.222 Yates argues
that such postings could enable market
participants to detect unduly
discriminatory activities by major noninterstate pipelines.223
137. The Commission will not require
the posting of additional data by
customer class. As explained in Order
No. 720, the Commission’s primary goal
is to enhance the transparency of the
interstate natural gas market by
requiring major non-interstate pipelines
to post information regarding scheduled
natural gas volumes that may impact
interstate natural gas price formation.
Requiring customer class-specific data
would not further this goal.
g. Conversion From Standard Cubic Feet
(scf)
138. The pipeline posting regulations
adopted in Order No. 720 provided for
measurements in Btu to determine
whether major non-interstate pipelines
were subject to the rule and the receipt
and delivery points to be posted. In
supplemental comments, NGSA
suggests that the Commission clarify
that it is acceptable for major noninterstate pipelines to utilize a standard
conversion of 1,000 Btu per scf to
219 Order
No. 720 at P 97.
Request for Rehearing and Clarification
at 28; National Grid Request for Rehearing and
Clarification at 10.
221 Order No. 720 at P 137.
222 Yates Request for Rehearing and Clarification
at 5–7.
223 Id. at 7.
220 AGA
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determine whether a point is required to
be posted.224
139. We grant the requested
clarification. To the extent that a
pipeline cannot reasonably determine
scheduled volumes utilizing Btu, it may
choose to utilize 1,000 Btu per scf as a
conversion factor. This conversion
factor may be used to establish whether
a pipeline is a major non-interstate
pipeline subject to the Commission’s
regulations and also whether specific
receipt and delivery points must be
posted.
h. Clarification of Information To Be
Posted
140. California LDCs request
clarification that available capacity
should be calculated, for purposes of
postings by major non-interstate
pipelines, by subtracting Design
Capacity from Scheduled Volume.225
The Commission agrees and clarifies
that Available Capacity for physical
points is calculated by subtracting
Design Capacity from Scheduled
Volume. To the extent that Available
Capacity is not an appropriate estimate
of the additional volumes of natural gas
that could be scheduled at a point,
pipelines may provide an explanation
accompanying their postings.
E. Exemptions
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1. Pipelines Upstream of Processing
Plants
141. In Order No. 720, the
Commission adopted an exemption to
the posting requirements contained in
§ 284.14(a) for major non-interstate
pipelines that lie entirely upstream of a
processing, treatment, or dehydration
plant.226 The Commission declared that
a pipeline may be upstream of a
processing plant if it flows into another
line that flows into a processing
plant.227 The Commission did not
provide a general exemption for
gathering pipelines.228 The Commission
also declined to adopt an exemption for
pipelines that lie partially upstream and
partially downstream of a processing,
treatment, or dehydration plant, instead
holding that the increased threshold
mitigated compliance difficulties posed
for such pipelines.229 The Commission
held that, in contrast to the ‘‘primary
function test,’’ the new regulation
exemptions served as an easily-applied
bright-line test for determining whether
224 NGSA
Supplemental Comments at 3–4.
LDCs Request for Rehearing and
Clarification at 19.
226 Order No. 720 at P 113.
227 Id.
228 Id. at P 114.
229 Id. at P 115.
225 California
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a major non-interstate pipeline should
post information in compliance with
this rule.230
a. Requests for Rehearing and
Clarification
142. Anadarko and Encana request
rehearing, and Shell requests
clarification, regarding whether the
Commission should extend the
exemption to major non-interstate
pipelines that are entirely upstream of
processing, treatment or dehydration
plants but for the presence of stub lines
incidental to the operation of those
plants.231 Anadarko comments that if
the only portion of a major noninterstate pipeline system that is
downstream of a processing, treatment,
or dehydration plant is a stub line
incidental to that plant, solely used to
connect that plant to an interstate
pipeline, then that major non-interstate
pipeline should not be required to
comply with the reporting requirements
of section 284.14(a).232
143. Anadarko cites Commission
precedent, claiming that stub lines are
generally held to be incidental to the
provision of gathering services and, as
such, are not subject to Commission
jurisdiction under section 1 of the
NGA.233 Anadarko and Encana both
state that the relevant information for
the gas flowing through the stub lines
would be captured at the receipt point
on whatever pipeline that sub line flows
into; thus requiring posting under Order
No. 720 would be duplicative.234
Encana further urged the Commission to
adopt such an exemption to avoid
unnecessary burdens on gathering and
processing companies in exercising its
transparency authority.235
144. Copano seeks clarification that
the exemption for pipelines lying
entirely upstream of processing applies
to a pipeline where, under normal
operating conditions, the entire gas
stream flowing on the pipeline is
delivered into a downstream pipeline
and is contractually committed to be
processed at a processing plant located
on the downstream pipeline.236
145. Enogex comments the
Commission should exempt non230 Id.
231 Anadarko Request for Rehearing and
Clarification at 6–7; Encana Request for Rehearing
and Clarification at 5–7; Shell Request for
Rehearing and Clarification at 4–6.
232 Anadarko Request for Rehearing and
Clarification at 6.
233 Id.
234 Id. at 7; Encana Request for Rehearing and
Clarification at 6–7.
235 Encana Request for Rehearing and
Clarification at 6.
236 Copano Request for Rehearing and
Clarification at 5.
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5193
contiguous systems located entirely
upstream of processing plants.237
Enogex states that Enogex Gas Gathering
LLC operates several separate, noncontiguous systems. Enogex also
requests that the Commission apply the
modified primary function test to
determine whether facilities are exempt
under the Final Rule rather than the
bright-line test promulgated therein.238
Enogex cites Commission precedent
applying the primary function test,
claiming that the modified primary
function test is the standard the
Commission has consistently applied to
determine whether a given facility
performs a gathering or transmission
function.239
b. Commission Determination
146. The Commission is persuaded
that a major non-interstate pipeline with
a stub line incidental to a processing
plant and that delivers all of its
transported gas directly into a single
pipeline should not be required to
comply with the posting requirements.
The Commission, therefore, grants
rehearing on this issue. However, if a
major non-interstate pipeline’s stub line
delivers gas to multiple pipelines or to
end-users, then the major non-interstate
pipeline will not be exempt.
147. The Commission agrees with
Anadarko and Encana that major noninterstate pipelines with stub lines that
deliver gas entirely into a single
pipeline are in a substantially similar
position regarding impact on interstate
natural gas price formation as pipelines
that lie entirely upstream of processing
plants. As the Commission stated in
Order No. 720, natural gas that requires
processing is not fungible with
interstate pipeline quality natural gas
and, therefore, data regarding the
transportation of such natural gas has
substantially less transparency value.240
While natural gas that enters a stub line
following processing is of ‘‘pipeline
quality,’’ transportation of that gas
directly to a single pipeline has no
different price effect than if natural gas
flowed directly from a processing plant
into an adjacent, interconnected
interstate pipeline.
148. If a pipeline downstream of a
processing plant makes deliveries of
natural gas to more than one pipeline or
to end-users, then such deliveries could
have an effect on the supply of natural
gas to different portions of the interstate
market and, therefore, on price
237 Enogex Request for Rehearing and
Clarification at 9.
238 Id. at 7–9.
239 Id. at 7.
240 Order No. 720 at P 113.
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formation. To the extent that Anadarko
and Encana request rehearing to expand
the exemption beyond stub line delivery
directly to a single pipeline, the
Commission rejects the requests.
149. Further, the Commission rejects
Copano’s request for rehearing. Order
No. 720 stated that, for purposes of this
exemption, ‘‘a pipeline may be upstream
of a processing plant if it flows into
another line that flows into a processing
plant.’’ 241 Copano requests that we
extend this analysis to contractual
agreements to process gas downstream
from a major non-interstate pipeline. We
understand Copano’s request to include
situations where, although a contractual
commitment exists to deliver natural gas
to a processing plant, some or all of the
delivered natural gas molecules may be
delivered into interstate or noninterstate pipelines without
processing.242 In this circumstance, at
least some of the delivered natural gas
is fungible with pipeline quality natural
gas and, for the reasons we expressed in
Order No. 720, the Commission will not
extend the exemption to major noninterstate pipelines that deliver pipeline
quality natural gas.243
150. Regarding Enogex’s request for
clarification of the exemption regarding
non-contiguous pipelines, the
Commission directs Enogex and other
non-contiguous gathering pipelines to
our clarifications regarding companies
operating non-contiguous pipelines,
supra at P 71 et seq. To the extent that
Enogex operates separate pipelines, it
must determine whether each pipeline
is a major non-interstate pipeline
subject to the posting requirements.
151. For the reasons expressed in
Order No. 720, the Commission denies
Enogex’s request for rehearing regarding
use of the modified primary function
test to define the exemption for
unprocessed gas transportation. As
Enogex correctly observes, the test is the
method utilized by the Commission ‘‘to
determine whether a given facility
performs a gathering or transmission
function.’’ 244 The test was created to
assist the Commission to determine
whether facilities are transmission
facilities subject to our traditional rates,
terms, and conditions regulation. NGA
section 23 embodies a different purpose
(i.e., transparency of interstate natural
jlentini on DSKJ8SOYB1PROD with RULES2
241 Id.
P 113.
the extent that Copano, or another major
non-interstate pipeline, delivers natural gas to
another pipeline that must then physically flow
through a processing plant, then the exemption
would apply as the Commission stated in Order No.
720. Id.
243 Id.
244 Enogex Request for Rehearing and
Clarification at p. 7.
242 To
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gas price formation) with a different
jurisdictional reach (i.e., any market
participant) and the modified primary
function test is therefore inapposite.
Further, application of the test would
require case-by-case evaluation by each
potential major non-interstate pipeline
to determine its status under the rule.
As Order No. 720 held, application of
the test would be unnecessarily
burdensome for pipelines and the
Commission.245
2. Pipelines That Deliver Primarily to
End Users
152. Order No. 720 adopted an
exemption to the posting requirements
in section 284.14 of the Commission’s
regulations for major non-interstate
pipelines that deliver more than 95
percent of their volumes to retail
customers as measured by average
deliveries over the preceding three
calendar years.246 This exemption is
codified at 18 CFR 284.14(b)(2).
153. The Commission explained that
many sales to end-users have substantial
impacts on wholesale energy
markets.247 In part, the Commission
relied upon its findings in Order No.
704–A to define ‘‘retail’’ sales of natural
gas as bundled transactions through an
LDC at State-approved tariff rates.248
Order No. 720 concluded that, where
such transactions dominate a major noninterstate pipeline’s deliveries, the
transparency importance of a pipeline’s
postings is diminished. Balancing this
lessened transparency benefit with the
burdens on LDCs to post data, the
Commission decided to exempt LDCs
from posting if a pipeline’s retail
deliveries exceed 95 percent of the total
deliveries averaged over three calendar
years. The Commission also noted that,
by increasing the threshold to become a
major non-interstate pipeline from 10
million MMBtu (as proposed in the
NOPR) to 50 million MMBtu, it had
already exempted a large number of
small LDCs from the posting
regulations.249
a. Requests for Rehearing and
Clarification
154. AGA, MidAmerican, National
Grid, NICOR, Dow Pipeline, ONEOK
Gathering, and California LDCs argue on
rehearing that the Commission should
extend the retail delivery exemption to
major non-interstate pipelines with the
245 Order
No. 720 at P 114.
P 120.
247 Id. P 121 (citing Order No. 704–A at P 40–43).
248 Id.
249 Id. P 122.
246 Id.
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requisite deliveries to all end-users, not
just retail transactions.250
155. AGA, MidAmerican, and
National Grid complain that Order No.
720 substantially departed from the
NOPR in that the NOPR proposed to
exempt pipelines based upon deliveries
to end-users rather than retail
deliveries.251 These companies argue
that, as a result, affected companies had
no opportunity to comment on the
scope of this exemption.
156. MidAmerican states that the only
rationale provided by the Commission
explaining the exclusion of unbundled
transactions was a reference to Order
No. 704.252 MidAmerican understands
Order No. 704–A as confirming the
Commission’s concern regarding
interstate transportation to end-users
and not transportation from LDCs to
end-users.253 MidAmerican argues that
data regarding deliveries to any
customers under State-approved
transmission tariffs is not useful to
understand wholesale natural gas
prices.
157. Nicor argues that the
Commission’s analogy to Order No.
704–A is misplaced. Nicor states that
Order No. 704–A imposed an annual
reporting requirement for wholesale
purchases and sales by market
participants while Order No. 720
imposes posting requirements for major
non-interstate pipelines.254 Nicor argues
that all sales of natural gas on its system
are either being sold at retail or ‘‘just
delivered.’’ 255 Nicor’s argument stems
from its conclusion that ‘‘flows on a
LDC’s system would not meaningfully
add to * * * understanding of the
supply and demand fundamentals that
affect wholesale natural gas prices.’’ 256
Even if the Commission does not modify
the exemption, Nicor argues that the
regulatory text should be clarified that
retail transactions are only those
bundled transactions at a tariff rate.257
250 AGA Request for Rehearing and Clarification
at 10–16; MidAmerican Request for Rehearing and
Clarification at 3–5; National Grid Request for
Rehearing and Clarification at 4–8; NICOR Request
for Rehearing and Clarification at 2–5; Dow Pipeline
Request for Rehearing and Clarification at 3–5;
ONEOK Gathering Request for Rehearing and
Clarification at 6–8; California LDCs Request for
Rehearing and Clarification at 18–19.
251 AGA Request for Rehearing and Clarification
at 5–6; MidAmerican Request for Rehearing and
Clarification at 6–9; National Grid Request for
Rehearing and Clarification at 4–8.
252 MidAmerican Request for Rehearing and
Clarification at 7.
253 Id. at 7–10. MidAmerican suggests that the
paragraphs cited in Order No. 704–A relate to
interstate transportation only.
254 Nicor Request for Rehearing and Clarification
at 3–4.
255 Id.
256 Id. at 4.
257 Id. at 2–5.
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158. Targa claims that the
Commission’s determination in Order
No. 720 to exempt only major noninterstate pipelines with greater than 95
percent of deliveries to retail customers
is unsupported by the record in this
proceeding.258 Targa points to the fact
that the only comments received on this
point were submitted by pipelines and
pipeline representatives counseling
against this type of limitation to the
exclusion.259 Targa also claims that the
Commission has not drawn a legally
cognizable distinction between
pipelines that deliver more than 95
percent of annual flows to end-users
and pipelines that deliver 95 percent of
flows to retails customers.260
159. Other petitioners seek to expand
the exemption not only to cover
deliveries to all end-users, but to other
transactions as well. For example, Targa
argues for further expansion of the
exemption to cover Hinshaw pipelines
that supply natural gas to end-users and
other pipelines within a State. Targa
states that there is no justification for
disparate treatment of such supply
pipelines and LDCs for purposes of the
exemption.261 AGA agrees with Targa
on this point.
160. National Grid and AGA argue
that two other transactions should also
be part of the 95 percent of deliveries
included in the exclusion: volumes
delivered to and from a liquefied natural
gas storage facility behind an LDC’s citygate and volumes that flow through
delivery points shared with other
LDCs.262 National Grid states that these
transactions, like all deliveries to endusers, cannot contribute to an
understanding of wholesale price
formation.
161. AGA additionally argues that
deliveries from one LDC to another
should be deemed a delivery to end use
customers.263 California LDCs request
that the Commission require LDCs to
post information only at citygates and
not within the LDC systems
themselves.264
b. Commission Determination
162. The Commission grants rehearing
to provide an exemption from the
jlentini on DSKJ8SOYB1PROD with RULES2
258 Targa
Request for Rehearing and Clarification
at 10–14.
259 Id. at 12.
260 Id. at 14.
261 Targa Request for Rehearing and Clarification
at 10–14.
262 National Grid Request for Rehearing and
Clarification at 9–10; AGA Request for Rehearing
and Clarification at 11–17.
263 AGA Request for Rehearing and Clarification
at 20–21.
264 California LDCs Request for Rehearing and
Clarification at 15–17; California LDCs
Supplemental Comments at 6–9.
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posting requirements for all major noninterstate pipelines that deliver more
than 95 percent of their annual flows to
end-users as measured by average
deliveries over the preceding three
calendar years. We agree with AGA,
MidAmerican, National Grid, NICOR,
Dow Pipeline, ONEOK Gathering, and
California LDCs that deliveries to endusers generally have the same effect on
deliveries to retail customers (a subset
of all end-users). As the Commission
explained elsewhere in Order No. 720
and above, transparency is enhanced
through an understanding of natural gas
scheduled flows on non-interstate
systems. The structure of natural gas
price sales and transportation
transactions by an LDC to end-users is
irrelevant for purposes of interstate
price formation.265
163. The Commission also clarifies, as
National Grid and AGA suggest, that
deliveries to on-system storage facilities
(including deliveries to on-system
liquefied natural gas (LNG) storage) are
included within the exemption. Such
deliveries have no effect on interstate
natural gas price formation. The
Commission modifies section
284.14(b)(2) to include deliveries to onsystem storage.
164. We deny AGA’s request to
include deliveries from one LDC to
another in the end-use exemption and
California LCDs’ request to limit posting
by LDCs only to citygates. In such
circumstances, LDCs are not providing
service to end-users, but are operating in
essentially the same fashion as
traditional intrastate pipelines. To the
extent that National Grid’s and AGA’s
requests regarding shared points relate
to deliveries and receipts from one LDC
to another, those requests are also
denied.
165. The Commission will also clarify
that major non-interstate pipelines other
than LDCs can qualify for this
exemption if they meet the delivery
threshold. However, we deny rehearing
as requested by Targa and AGA to
broadly exempt Hinshaw pipelines that
supply natural gas to end-users and
other pipelines within a State. Pipelines
that deliver substantial quantities of
natural gas to other pipelines for
subsequent re-delivery to end-users are
not similarly situated with pipelines
that deliver 95 percent of their volumes
to end-users. Receipts and deliveries at
interconnections between pipelines
265 Because
we grant the rehearing request and
revise our regulations consistent with the proposal
contained in the NOPR, we need not address
AGA’s, MidAmerican’s, and National Grid’s
arguments regarding the notice provided regarding
the Final Rule or Dow Pipeline’s alternative request
for waiver.
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5195
provide useful market information to
understand changes in daily flows in
response to such things as regional
prices; pipeline maintenance; and
pipeline disruptions, for example
caused by a compressor outage.
166. Lastly, the Commission notes
that reference to NGA section 23(d)(2) is
unavailing to most non-interstate
pipelines seeking to avoid posting of
data.266 That section prohibits the
Commission from requiring compliance
from ‘‘natural gas producers, processors,
or users who have a de minimis market
presence.’’ Most non-interstate pipelines
are not producers, processors, or users
of natural gas.
3. Storage Facilities
167. In Order No. 720, the
Commission adopted an exemption for
major non-interstate pipelines that
function as stand-alone storage
providers.267 This exemption is codified
in 18 CFR 284.14(b)(3). The Commission
reasoned that much of the flow data that
could be obtained from storage
providers would be provided by
interconnected interstate or major noninterstate pipeline postings.268 Further,
the Commission clarified that flow data
affecting interstate price formation, not
natural gas storage inventory, would
enhance transparency and, thus, posting
of storage-specific data was
unnecessary.269 Given these facts, the
Commission exempted major noninterstate pipeline storage providers
from the posting requirements of the
rule as such postings would be unduly
burdensome.270
a. Requests for Rehearing and
Clarification
168. Enogex argues on rehearing that
the exemption should be extended to all
major non-interstate pipelines that
provide storage service in addition to
transportation service.271 Enogex states
that the Commission provided no
explanation for excluding from the
exemption major non-interstate
pipelines with storage and
transportation service.272
b. Commission Determination
169. The Commission denies Enogex’s
request for rehearing. As explained in
Order No. 720 and supra at P 33 et
266 15
U.S.C. 717t–2(d)(2).
No. 720 at P 136.
268 Id. P 136–37.
269 Id. P 136.
270 Id. P 137.
271 Enogex Request for Rehearing and
Clarification at 10.
272 Id.
267 Order
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seq.,273 the posting of scheduled flow
information on major non-interstate
pipelines will enhance interstate
transparency and market efficiency. In
Order No. 720, the Commission
exempted non-interstate storage
providers from the posting regulations
because it determined that scheduled
flow, not natural gas storage inventory
information, furthered the rule’s
transparency goal. The Commission also
noted that, because major non-interstate
pipelines that provide transportation
service would provide scheduled flow
information to receipt and delivery
points connected to non-interstate
storage providers, at least some flow
data into and out of storage providers
would be publicly available. Given
these facts, the Commission determined
that the exemption was warranted.
normal course of business.278
Occidental comments that the potential
for inadvertent posting errors is
particularly significant based on the fact
that the posting requirements apply to
parties who historically have not been
subject to posting requirements and
because many have not tracked the data
that the Commission is requiring them
to report.279
173. California LDCs do not take issue
with the Commission’s determination to
not adopt a safe harbor provision in
perpetuity. Instead, it recommends that
the Commission adopt a limited safe
harbor for the first six months after the
new regulations are implemented so
that non-interstate pipelines which
make a good faith effort to comply will
not be penalized if they make
inadvertent errors in reporting.280
F. Safe Harbor
b. Commission Determination
174. Nothing in the supplemental
comments persuades the Commission to
depart from the reasoning in Order No.
720 and the petitioners’ requests are
denied. While the Commission has, on
rare occasions, adopted a safe harbor in
other contexts, it does not believe one
is warranted here. The safe harbor
adopted in the Policy Statement on
Price Indices was a direct extension of
our policy goal to ‘‘encourage [industry
participants] voluntarily to report
energy transactions to providers or price
indices.’’ 281 The posting requirements
set forth in Order No. 720 and this order
are mandatory posting requirements
adopted consistent with the directives
of EPAct 2005, and are not the voluntary
reporting of price data to an index
developer; therefore, there is no policy
need to provide an incentive for posting
the information required.282 As
discussed in Order No. 720, other
mandatory requirements, such as the
filing of FERC Form No. 2, generally do
not include a safe harbor.283
175. The Commission further
distinguishes the decision here not to
adopt a safe harbor from the temporary
safe harbor adopted in Order No. 704–
A. There, the Commission determined
that, as FERC Form No. 552 would be
completed by a large number of
relatively unsophisticated companies
with little experience filing materials
170. In response to the NOPR, certain
commenters requested a safe harbor for
postings made by major non-interstate
pipelines under the promulgated
regulations to excuse inadvertent
posting errors by non-interstate
pipelines that make a good-faith effort to
comply with the posting requirements.
The Commission declined to adopt a
safe harbor, differentiating between the
posting requirements set forth in the
order and the very limited
circumstances where the Commission
has, in the past, provided a safe
harbor.274
a. Requests for Rehearing and
Clarification
171. Certain petitioners and
commenters request rehearing of the
Commission’s determination to not
adopt a safe harbor provision based on
claimed uncertainties and ambiguities
in the posting requirements.275
172. TPA and Occidental seek
clarification that the Commission will
not penalize unintentional mistakes by
parties acting in good faith.276 TPA
comments that enforcement of our
regulations regarding major noninterstate pipelines within six months is
a narrow timeframe and that such
pipelines will be hard pressed to design
and implement systems to post the
required data.277 TPA also notes that
errors are likely to occur during the
jlentini on DSKJ8SOYB1PROD with RULES2
273 Order
No. 720 at P 39–56.
274 Id. P 151–52.
275 California LDCs Request for Rehearing and
Clarification at 17; Occidental Request for
Rehearing and Clarification at 6–7; TPA
Supplemental Comments at 46.
276 TPA Supplemental Comments at 46;
Occidental Supplemental Comments at 6–7.
277 TPA Supplemental Comments at 46.
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278 Id.
279 Occidental Request for Rehearing and
Clarification at 7.
280 California LDCs Request for Rehearing and
Clarification at 17.
281 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).
282 Order No. 720 at P 152.
283 Id.
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with the Commission, a one-time safe
harbor for initial filings of the form was
appropriate.284 Major non-interstate
pipelines tend to be large, sophisticated
natural gas transportation businesses,
often with substantial experience
complying with State public service
commission reporting requirements, and
with dedicated regulatory staff available
to ensure compliance with our
regulations.
176. Further, the Commission does
not believe that the posting
requirements set forth in Order No. 720
were unclear or ambiguous; however, to
the extent that commenters believed
they were unclear or ambiguous, they
have been provided an opportunity to
request clarification or rehearing, which
many did. Additionally, major noninterstate pipelines will have 150 days
following publication of this Order No.
720–A in the Federal Register before
they must comply with the posting
regulations. The Commission expects
that all major non-interstate pipelines
will have sufficient opportunity to
create internal operating procedures to
ensure compliance.285
177. The Commission will exercise
discretion evaluating non-compliance
by major non-interstate pipelines with
our posting requirements. As the
Commission has explained,286 Office of
Enforcement staff considers a number of
factors to determine whether
investigations involving noncompliance
are warranted and whether a violation
of the Commission’s regulations
warrants sanctions or other remedies. In
fact, Office of Enforcement staff
‘‘frequently exercises prosecutorial
discretion to resolve minor infractions
with voluntary compliance measures
rather than with penalties.’’ 287 The most
recent Office of Enforcement Annual
Report is replete with examples of selfreports of minor errors which were not
pursued by the Office of
Enforcement.288
G. Interstate Pipeline Posting of NoNotice Service
178. Order No. 720 required interstate
natural gas pipelines to post volumes of
284 Order
No. 720 at P 71.
remind major non-interstate pipelines that
they may contact our Compliance Help Desk for
assistance regarding compliance with our
regulations, including questions regarding posting
scheduled flow data at receipt and delivery points.
286 Enforcement of Statutes, Regulations and
Orders, Revised Policy Statement on Enforcement,
123 FERC ¶ 61,156, at P 23–26 and P 31–32 (2008).
287 Id. P 9.
288 2009 Report on Enforcement, Docket No.
AD07–13–002 at 10–14 (2009) (inadvertent errors in
Electric Quarterly Report submissions not
sanctioned; inadvertent violation of price reporting
guidelines not sanctioned).
285 We
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no-notice service flows 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.289 In the NOPR, the Commission
considered requiring interstate natural
gas pipelines to post actual flow
information within twenty-four hours,
but upon further consideration in Order
No. 720, the Commission required the
posting of only no-notice volumes
within three days after the day of gas
flow. Order No. 720 found that this
would achieve the goals of the
Commission with less of a burden than
full posting of actual flows with a
twenty-four hour deadline.290 Because
the Commission gave interstate
pipelines more time to post and because
an interstate pipeline should already
have the no-notice information that we
are requiring them to post, the
Commission found that this requirement
was not unduly burdensome.291
179. The Commission explained that
making information on no-notice
volumes available is important because
it allows interstate natural gas market
participants and other market observers
to better understand price formation and
historical patterns of flow.292 Without
no-notice information, the market
cannot see large and unexpected
increases in gas demand and, therefore,
cannot understand price formation both
during and after no-notice service is
utilized.
180. The Commission noted that nonotice service information would be of
particular importance in understanding
price behavior in the northern tier of the
country during extreme weather
conditions.293 The Commission also
noted that no-notice information could
also prevent manipulation and unduly
discriminatory behavior because it
would increase transparency and
therefore discourage such activities.294
In addition, the Commission noted that
no-notice postings would help shippers
understand why capacity that appears to
be available is actually not available
during situations when no-notice
service is being used.295
a. Requests for Rehearing and
Clarification
jlentini on DSKJ8SOYB1PROD with RULES2
181. Williston Basin seeks rehearing
and INGAA requests clarification and
rehearing of the Commission’s decision
289 Order
No. 720 at P 160.
P 162, 166.
291 Id. P 166.
292 Id. P 165.
293 Id. P 163.
294 Id. P 165.
295 Id. P 164.
290 Id.
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to require interstate natural gas
pipelines to post volumes of no-notice
service flows, both claiming that the
requirement is arbitrary and
capricious.296
182. Williston Basin comments that
the requirement to post information on
no-notice service would not provide any
useful market information and would
therefore have no impact on market
decisions.297 Williston Basin claims that
the majority of no-notice service relates
to storage activity which is based on
weather-driven demand, and because
most no-notice shippers inject in the
summer months at prevailing market
rates and withdraw at a different time
when prices are different, the true
market price of the gas on that particular
day is not reflected.298 Williston Basin
states that the posting of scheduled
pipeline capacity and volume data
provides the timeliest and accurate
information for assessing market
fundamentals, and reporting no-notice
service is not necessary and would not
provide any relevant market
information.299
183. Williston Basin and INGAA both
request that the Commission adopt the
same de minimis standard for no-notice
interstate pipeline postings as applied to
major non-interstate pipeline
postings.300 Williston Basin claims that
it is discriminatory for the Commission
to not apply the same standard for
interstate pipelines.301 INGAA states
that there are certain delivery points
that are so small that they have no
measureable impact on market
fundamentals and are not worth the cost
and administrative burden necessary to
comply with the rule; therefore, INGAA
suggests that the Commission establish
a de minimis rule that would exempt
delivery points with an average annual
delivery rate of less than 2,500 Mcf per
day.302
184. On rehearing, INGAA argues that
the no-notice reporting requirement is
not supported by a substantial record of
evidence because the Commission did
not develop a record on the various
ways pipelines provide and measure nonotice service.303 INGAA asks the
Commission to consider that interstate
296 Williston Basin Request for Rehearing and
Clarification at 1; INGAA Request for Rehearing and
Clarification at 1–2.
297 Williston Basin Request for Rehearing and
Clarification at 1–2.
298 Id. at 2.
299 Id.
300 Id. at 3; INGAA Request for Rehearing and
Clarification at 6–7.
301 Williston Basin Request for Rehearing and
Clarification at 3.
302 INGAA Request for Rehearing and
Clarification at 7.
303 Id. at 1–2.
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5197
pipelines have varying tariffs and
contracts for how they provide nonotice transportation services for
customers. INGAA requests that the
Commission clarify that a pipeline can
satisfy the no-notice posting
requirement by providing data
corresponding to how it provides nonotice transportation service.304 For
example, INGAA claims that in the
majority of cases, there is no way for a
pipeline to determine a receipt point for
its no-notice service, therefore, it
recommends that the Commission
clarify that interstate pipelines are not
required to post no-notice volumes at
receipt points.305 In addition, INGAA
asks the Commission to recognize the
role of aggregation in the administration
of no-notice service and asks the
Commission to clarify that interstate
pipelines who report aggregate volume
to customers and who use aggregate
volume to administer no-notice service
contracts satisfy the no-notice posting
requirement by posting aggregate
volumes.306
185. INGAA also asks that the
Commission take into consideration that
interstate pipelines have varying
metering and measurement equipment,
and INGAA requests that the
Commission clarify that a pipeline can
satisfy the no-notice posting
requirement by posting estimated
volumes when a pipeline estimates its
no-notice volumes for operational
purposes (e.g., volumes are posted on a
monthly or weekly basis; meters are
controlled by third parties).307 INGAA
states that it would not be economic for
pipelines to install real-time
measurements equipment at each
delivery point; therefore, INGAA asks
the Commission to clarify that it is
appropriate for a pipeline to report
whatever information is available to the
pipeline within the three days allowed
for posting.
b. Commission Determination
186. The Commission denies
Williston Basin’s and INGAA’s requests
for rehearing. The Commission believes
that the posting of information about nonotice service will enhance
transparency and that this requirement
is not unduly burdensome. The
Commission continues to believe that
no-notice service has an impact on
market decisions and price formation as
described in Order No. 720. The
Commission recognizes that a large
percentage of no-notice service relates to
304 Id.
at 2.
at 2–3.
306 Id. at 3–5.
307 Id. at 5–6.
305 Id.
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jlentini on DSKJ8SOYB1PROD with RULES2
weather-driven storage activity, and
many no-notice shippers inject in the
summer months at prevailing market
rates and withdraw at a different time
when prices are different; however,
during such occasions, when no-notice
shippers withdraw gas, the absence of
posting of no-notice service means that
the market cannot see these large
responses to gas demand at a time when
the market is particularly sensitive to
variations in natural gas availability.
Market participants do not have access
to information necessary to understand
price formation during such occasions,
and for this very reason, the
Commission believes that the posting of
no-notice service volumes is necessary
to achieve transparency.
187. The Commission denies
petitioners’ requests for rehearing and
clarification that would establish a de
minimis standard for posting of
information about no-notice service.
The Commission is not persuaded to
adopt a de minimis standard for nonotice posting because it believes that
all interstate no-notice volumes are
relevant to interstate wholesale price
formation.308 Even very small or
transitory no-notice volumes can have a
substantial impact on natural gas prices
during times of system stress. Indeed, it
is precisely at these times when nonotice service is most utilized.
188. The Commission’s conclusion is
reinforced by our authority, exercised in
Order No. 637 and elsewhere, to require
interstate pipelines to post substantial
data regarding their operations.309
However, if a pipeline believes that its
no-notice service is so insubstantial so
as to not influence price formation, the
pipeline may submit a detailed
description of its no-notice operations
and request a waiver from our
regulations. The Commission will
consider such requests on a case-by-case
basis.
189. The Commission takes into
consideration the fact that interstate
pipelines have varying tariffs and
contracts for providing no-notice
service. The Commission recognizes
308 Unlike non-interstate transportation that has
an indirect effect on interstate natural gas price
formation, interstate transportation has a direct
effect on prices.
309 Regulation of Short-Term Natural Gas
Transportation Services and Regulation of
Interstate Natural Gas Transportation Services,
Order No. 637, 65 FR 10156 (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 (D.C. 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 (D.C. Cir. 2005).
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that sometimes there is no way for a
pipeline to determine a receipt point for
its no-notice service; however, the
Commission denies the request that
interstate pipelines not be required to
post no-notice volumes at receipt
points. To the extent that the receipt
point data is available for no-notice
service, pipelines must post that
information. In the event that a pipeline
does not have receipt point data, then
the pipeline may indicate that the
required data field is left intentionally
blank. The Commission also recognizes
that some pipelines traditionally report
aggregate no-notice volumes to their
customers. However, posting aggregate
volumes does not satisfy the no-notice
posting requirement if a pipeline has
access to the records of the daily
volumes. If the data is available or could
be made available, then the pipeline
must post the non-aggregated volume
data, even if it prefers a different format
when dealing with customers. If a
pipeline does not have access to nonaggregated data, then it should post
aggregated data.
190. Finally, the Commission assures
petitioners that it has taken into
consideration the fact that interstate
pipelines have varying metering and
measurement equipment and clarifies
that pipelines must only post
information that is available to them.
Our transparency regulations do not
require the construction of new
metering equipment. Instead, an
interstate pipeline should post whatever
data it has available within three days
of the flow, noting any deficiencies in
the posting on its Web site. A pipeline
should not post estimated volumes, but
rather actual flow. If, subsequent to an
initial posting, more complete no-notice
service data becomes available,
interstate pipelines must update
previously posted information.
H. Additional Exemptions
1. Natural Gas Companies With Service
Area Determinations Under NGA
Section 7(f)
191. In Order No. 720, the
Commission stated that local
distribution companies with service
area determinations under section 7(f) of
the NGA were not categorically
excluded from the posting requirements
as such companies that exceed the 50
million MMBtu annual threshold may
have a substantial impact on regional
interstate natural gas markets.310
192. WGL requests clarification and,
in the alternative, rehearing regarding
the definition of ‘‘major non-interstate
310 Order
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pipeline’’ as applied to natural gas
companies that have obtained service
area determinations under section 7(f) of
the NGA.311 Our pipeline posting
requirements apply to ‘‘major noninterstate pipelines.’’ As provided in 18
CFR 284.1(d), major non-interstate
pipelines are comprised only of those
pipelines not subject to our NGA
jurisdiction as ‘‘natural gas
companies.’’ 312 WGL contends that a
strict reading of the regulation would
exclude local distribution companies
with service area determinations under
section 7(f) as such companies are
‘‘natural gas companies’’ under the NGA.
193. AGA requests clarification that
LDCs that have service area
determinations under section 7(f) can
qualify for the posting exemptions
contained in 18 CFR 284.14(b).
194. The Commission grants WGL’s
request for rehearing and modifies 18
CFR 284.1(d) to provide that pipelines
with a Commission-approved service
area determination may be major noninterstate pipelines if they exceed the
delivery threshold and otherwise do not
qualify for an exemption. The
Commission agrees with WGL that there
is no practical difference between an
LDC operating entirely within a single
State and LDCs operating in multiple
states under a section 7(f) service area
determination. Consistent with WGL’s
and AGA’s requests, the Commission
also clarifies that LDCs with service area
determinations may be major noninterstate pipelines for purposes of this
rule.
2. Pipelines Owned or Operated by End
Users
195. Dow Chemical requests
clarification, or in the alternative
rehearing, regarding application of the
Commission’s pipeline posting
regulations to pipelines that are owned
and/or operated by an end-user to
transport natural gas to that end-user.313
Dow Chemical argues that price
transparency in the interstate market
would not be enhanced by requiring
such pipelines to post scheduled flow
information.314
196. The Commission grants the
requested clarification. Where a
pipeline delivers all of its transported
natural gas directly to an end-user that
owns or operates the pipeline, the
pipeline is an extension of the enduser’s plant or other natural gas
consumption facilities. To require
311 WGL
Request for Rehearing and Clarification
at 3.
312 18
CFR 284.1(d).
Chemical Request for Rehearing and
Clarification at 3.
314 Id. at 4.
313 Dow
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posting in such circumstances would be
the functional equivalent of requiring
each large consumer of natural gas to
post consumption information on a
daily basis. However, if a pipeline
delivers natural gas to entities other
than the owner or operator of the
pipeline, then it is not exempted from
the regulation. The Commission
modifies section 284.14(b) of our
regulations to incorporate this
exemption.
III. Cost of Compliance
197. In Order No. 720, the
Commission estimated the compliance
costs of the pipeline posting regulations
for both interstate and major noninterstate pipelines.315 The order found
that the average annual cost of
compliance for interstate pipelines and
major non-interstate pipelines was
approximately $5,000 and $30,000,
respectively.316
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A. Requests for Rehearing and
Clarification
198. No petitioner objects to the
Commission’s estimate of compliance
costs for interstate pipelines. However,
two petitioners question the compliance
costs for major non-interstate
companies. California LDCs claim that
initial compliance costs for each LDC
may exceed $500,000 to calculate and
record the design capacity of delivery
points as well as establishing
procedures to capture new delivery
points for which posting is required.
Based upon these costs, the California
LDCs conclude that the cost of
compliance far outweighs the benefits of
the rule.317
199. TPA argues that some TPA
members will encounter increased
compliance costs to design and
implement scheduling processes at
points where they currently do not
schedule natural gas.318 Further, TPA
notes that non-interstate pipelines may
schedule delivery of natural gas to LDCs
at sets of delivery points rather than
individual delivery points. TPA claims
that the rule would require such
pipelines to establish mechanisms to
account for scheduled flows to each
point.319 Further, TPA claims that
‘‘[s]ome TPA members * * * estimate
implementation and start-up costs in the
hundreds of thousands of dollars.’’ 320
While TPA acknowledges that Order
315 Order
No. 720 at P 86.
P 171.
317 California LDCs Request for Rehearing and
Clarification at 12–13.
318 TPA Request for Rehearing and Clarification at
41.
319 Id.
320 Id. at 42.
No. 720 did not adopt posting
requirements for segments or actual
flow, and thus, reduced the potential
cost of compliance, it argues that Order
No. 720 ignores other costs estimated by
TPA members.321
B. Commission Determination
200. The Commission disagrees with
the California LDCs and TPA and finds,
as it did in Order No. 720, that the
benefits of our transparency regulations
substantially outweigh the cost of
compliance. Enhanced transparency
will result in a more efficient wholesale
natural gas market, more informed and
better market choices made by market
participants, and, ultimately, lower
natural gas prices for consumers.
201. The Commission notes that
Order No. 720’s cost of compliance
estimates were based upon comments
received in response to the NOPR and
the substantial reduction in compliance
costs attendant in the Commission’s
decision not to require posting of actual
natural gas flows or on pipeline
segments. Further, Order No. 720
acknowledged that both start-up and
annual compliance costs would vary
among pipelines.322
202. The Commission emphasizes that
only scheduled natural gas volumes are
to be posted. The comments by TPA do
not dissuade the Commission from the
determination that ‘‘most if not all of the
gas control divisions of the affected
companies currently have ready access
to the information captured’’ by the
rule.323 In large part, it appears that
TPA’s concerns stem from fundamental
misunderstandings of the Final Rule.
For example, TPA notes that some of its
member pipelines do not schedule flows
at certain points, but that the rule
requires such pipelines to restructure
their operations to adopt a scheduling
process.324 The regulations do not
require pipelines to modify their
operations so as to schedule natural gas
flows at point where such flows have
not heretofore been scheduled. Section
284.14(a) of the Commission’s
regulations makes clear that major noninterstate pipelines must post the
amount of natural gas scheduled at each
relevant point ‘‘whenever capacity is
scheduled.’’ 325 Likewise, TPA assumes
that volumes scheduled to an aggregated
receipt point for an LDC customer must
be broken out by physical receipt point.
As clarified in this order, the
316 Id.
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321 Id.
at 43.
322 Order No. 720 at P 171.
323 Id. P 56.
324 TPA Request for Rehearing and Clarification at
p. 41.
325 18 CFR 284.14(a).
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5199
Commission’s regulations will allow for
posting of aggregated scheduled flows to
virtual or pooling points. The
Commission does not believe that major
non-interstate pipelines will incur
significant expenses adopting new
scheduling procedures as our
regulations do not require such changes.
203. TPA and the California LDCs
claim that the major non-interstate
pipelines that they represent may incur
start-up costs of hundreds of thousands
of dollars to comply with Order No. 720.
Such costs seem disproportionately high
given that other major non-interstate
pipelines have not expressed similar
concerns on rehearing. The Commission
also finds such claims doubtful given
the sophistication of these pipelines,
their experience with electronic data
capture, their familiarity with the
receipt and delivery points on their
systems, and, for at least some of these
pipelines, their substantial experience
with posting flow data on electronic
databases. For these reasons and given
the generality of the compliance cost
claims by TPA and the California LDCs,
the Commission will not modify the
conclusion that compliance costs for the
rule exceed the substantial value of
enhanced market transparency.
IV. Information Collection Statement
204. The Office of Management and
Budget (OMB) regulations require it to
approve certain reporting and
recordkeeping (information collection)
requirements imposed by an agency.326
In the Final Rule and in this Order on
Rehearing and Clarification, the
Commission addresses two
requirements for the posting or
collection of information, one for
interstate and one for major noninterstate pipelines.327 The Commission
adopts no changes to its regulations
regarding posting requirements for
interstate pipelines. However, the
Commission has submitted notification
of the modified information collection
requirements for major non-interstate
pipelines to OMB for its review and
approval under section 3507(d) of the
Paperwork Reduction Act of 1995.328
205. The requirement for major noninterstate pipelines to post scheduled
volume information would impose an
information collection burden on major
non-interstate pipelines. Certain noninterstate pipelines have asserted on
rehearing that costs would be high if
326 5
CFR 1320.11.
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.
328 44 U.S.C. 3507(d).
327 The
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additional equipment were needed to
meet quick posting deadlines. However,
the Commission does not believe that
installation of additional equipment
will be necessary to meet major noninterstate pipelines’ obligations. The
burden that is imposed by these
regulations is largely for the collection
and posting of this information in the
required format.329 Elsewhere in this
preamble, the Commission has further
addressed requests for rehearing and
clarification regarding the burden of the
requirements.
206. 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 rule
are as follows:
Data collection
Number of
respondents
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 ....
70
2
365
25,550
40
The total annual hours for collection
(including recordkeeping) for all
respondent is projected to be the
following (savings in parenthesis):
respondents is estimated to be 25,550
hours.
Information Posting Costs: The
average annualized cost for each
Annualized
capital/startup
costs
(10 year
amortization)
Annual costs
Annualized costs
total
$142
$30,000
$30,142
FERC–551:
Major Non-Interstate Pipeline Postings ....................................................................
V. Regulatory Flexibility Act
207. The Regulatory Flexibility Act of
1980 (RFA) 330 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
of regulatory alternatives that
accomplish the stated objectives of a
proposed rule and that minimize any
significant economic impact on such
entities. 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 $7.0 million.331 In Order No. 720,
the Commission stated its belief that
none of the pipelines required to
comply with requirements in the rule
had receipts of less than $7.0 million
annually and therefore, the daily
posting proposal will not impact small
entities.
208. In keeping with the provisions of
the RFA, the Commission established a
delivery threshold of 50 million MMBtu
which would eliminate compliance
burdens for smaller non-interstate
pipelines by taking into account the
resources that are available to small
entities in order to comply with the
posting requirements. In response to the
comments on rehearing and
supplemental comments, the
Commission is also exercising an
additional regulatory alternative by
exempting some major non-interstate
pipelines with certain operational
characteristics from the posting
requirements and otherwise modifying
the requirements to lessen the burden
on posting pipelines. For example, the
Commission is directing major noninterstate pipelines to review points
with no known design capacity
annually, rather on a rolling basis, to
determine whether information for the
point must be posted. Further, major
non-interstate pipelines are exempt
from posting scheduled natural gas
volumes at points that have scheduled
flows less than 5,000 MMBtu per day on
each day within the prior three calendar
years.
209. Additional exemptions include:
Major non-interstate pipeline that have
stub lines incidental to a processing
plant and that delivers all of its
transported gas directly into a single
pipeline; major non-interstate pipelines
that deliver more than 95 percent of
their annual flows to end-users as
measured by average deliveries over the
preceding three calendar years; major
non-interstate pipelines that deliver to
on-system storage facilities (including
deliveries to on-system LNG storage);
329 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.’’).
330 5 U.S.C. 601–612.
331 See U.S. Small Business Administration,
Table of Small Business Size Standards, https://
www.sba.gov/idc/groups/public/documents/
sba_homepage/serv_sstd_tablepdf.pdf (effective
July 31, 2006).
jlentini on DSKJ8SOYB1PROD with RULES2
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.
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pipelines that transport all of their
natural gas directly to an end-user that
owns or operates the pipeline.
VI. Document Availability
210. 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.
211. 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,
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.
212. 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.
jlentini on DSKJ8SOYB1PROD with RULES2
VII. Effective Date and Compliance
Deadlines
213. Order No. 720 set compliance
deadlines for interstate and major noninterstate pipelines to comply with the
transparency posting requirements.332
The Commission ordered interstate
pipelines subject to the new posting
requirements to comply with the
promulgated regulations no later than
60 days following publication in the
Federal Register; major non-interstate
pipelines were given 150 days after such
publication to comply.333 On January
15, 2009, in response to motions from
major non-interstate pipelines for an
extension of time to comply with Order
No. 720, the Commission extended
compliance for major non-interstate
pipelines until 150 days following the
publication of an order addressing the
pending requests for rehearing.334 The
Commission did not modify the
deadline by which interstate pipelines
must comply with the requirements of
332 Order
Order No. 720.335 The compliance
deadlines were chosen to allow the
applicable entities sufficient time to
update their information technology
systems and establish an Internet Web
site for the postings.
A. Requests for Rehearing and
Clarification
214. No parties submitted requests for
rehearing or comments regarding the
deadline for compliance with the Final
Rule.
215. The Commission’s regulations
regarding the posting of data related to
no-notice service by interstate pipelines
are not modified in this order. Interstate
pipelines should continue compliance
with our regulations.
216. The Commission’s revised
regulations regarding postings by major
non-interstate pipelines will become
effective 30 days following publication
in the Federal Register. The
Commission continues to believe, that,
for major non-interstate pipelines, a
compliance deadline of 150 days
following the issuance of this order on
rehearing allows sufficient time for
pipelines to update their information
technology systems and establish an
Internet Web site for the required
postings. This time frame for
compliance will allow major noninterstate pipelines 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. Therefore, major non-interstate
pipelines must comply within 150 days
of the issuance of this order on
rehearing.
List of Subjects in 18 CFR Part 284
Continental shelf; Incorporation by
reference; Natural gas; Reporting and
recordkeeping requirements.
By the Commission. Commissioner Norris
voting present.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
For the reasons stated in the preamble,
the Federal Energy Regulatory
Commission amends 18 CFR Chapter I
as follows.
■
No. 720 at P 167–68.
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335 Id. at P 4. Thus, interstate pipelines were
required to begin posting no-notice flow no later
than January 30, 2009.
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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, revise paragraph (d) to
read as follows:
■
Definitions.
*
333 Id.
334 Pipeline Posting Requirements Under section
23 of the Natural Gas Act, 126 FERC ¶ 61,047, at
P 2, 4 (2009).
PART 284—CERTAIN SALES AND
TRANSPORTATION OF NATURAL GAS
UNDER THE NATURAL GAS POLICY
ACT OF 1978 AND RELATED
AUTHORITIES
§ 284.1
B. Commission Determination
5201
*
*
*
*
(d) Major non-interstate pipeline
means a pipeline that fits the following
criteria:
(1) It is not a ‘‘natural gas company’’
under section 1 of the Natural Gas Act,
or is a ‘‘natural gas company’’ and has
obtained a service area determination
under section 7(f) of the Natural Gas Act
from the Commission;
(2) It delivers annually more than fifty
(50) million MMBtu (million British
thermal units) of natural gas measured
in average deliveries for the previous
three calendar years; or, if the pipeline
has been operational for less than three
years, its design capacity permits
deliveries of more than fifty (50) million
MMBtu of natural gas annually.
■ 3. Section 284.14 is revised to read as
follows:
§ 284.14 Posting requirements of major
non-interstate pipelines.
(a) Daily posting requirement. A major
non-interstate pipeline must post on a
daily basis on a publicly-accessible
Internet Web site and in downloadable
file format equal and timely access to
information regarding receipt or
delivery points, including non-physical
scheduling points.
(1) A major non-interstate pipeline
must post data for each receipt or
delivery point, or for any point that
operates as both a delivery and receipt
point for the major non-interstate
pipeline, to which natural gas
transportation is scheduled:
(i) With a physically metered design
capacity equal to or greater than 15,000
MMBtu (million British thermal units)/
day; or
(ii) If a physically metered design
capacity is not known or does not exist
for such a point, with a maximum
volume scheduled to such a point equal
to or greater than 15,000 MMBtu on any
day within the prior three calendar
years.
(2) Notwithstanding the requirements
of subsection 284.14(a)(1), a receipt
point is not subject to the posting
requirements of this section if the
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maximum scheduled volume at the
receipt point was less than 5,000
MMBtu on every day within the prior
three calendar years. If a point has
operated as both a receipt and delivery
point any time within the prior three
calendar years, subsection 284.14(a)(2)
shall not apply to that point.
(3) A major non-interstate pipeline
that must post data for a receipt or
delivery point shall do so within 45
days of the date that the point becomes
eligible for posting.
(4) For each delivery or receipt point
that must be posted, a major noninterstate pipeline must provide the
following information by 10:00 p.m.
central clock time the day prior to
scheduled natural gas flow:
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,
Bilateral, or Non-physical Scheduling
Point), Posted Capacity (physically
metered design capacity or maximum
flow within the last three years),
Method of Determining Posted Capacity
(Capacity or Maximum Volume),
Scheduled Volume, Available Capacity
(Calculated as Posted Capacity minus
Scheduled Capacity), and Measurement
Unit (Dth, MMBtu, or MCf). For receipt
or delivery points with bi-directional
scheduled flows, the Scheduled Volume
for scheduled flow in each direction
must be posted. The information in this
subsection must remain posted for at
least 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 are located upstream of
a processing, treatment or dehydration
plant;
(2) Those that deliver more than
ninety-five percent (95%) of the natural
gas volumes they flow directly to endusers or on-system storage as measured
in average deliveries for the previous
three calendar years;
(3) Storage providers;
(4) Those that deliver the entirety of
their transported natural gas directly to
an end-user that owns or operates the
major non-interstate pipeline.
Note: The following Appendix will not
appear in the Code of Federal Regulations.
APPENDIX A: LIST OF PETITIONERS AND ABBREVIATIONS
Petitioners
Abbreviations
1. American Gas Association .........................................................................................................................................
2. Anadarko Petroleum Corporation ...............................................................................................................................
3. Atmos Pipeline-Texas .................................................................................................................................................
4. Bear Paw Energy LLC and ONEOK Field Services Company, LLC .........................................................................
5. Copano Energy LLC ...................................................................................................................................................
6. Dow Chemical Company ............................................................................................................................................
7. Dow Pipeline Company and Dow Intrastate Gas Company ......................................................................................
8. Ecana Oil & Gas (USA) Inc. .......................................................................................................................................
9. Enogex LLC and Enogex Gas Gathering LLC ...........................................................................................................
10. Gas Processors Association ....................................................................................................................................
11. Interstate Natural Gas Association of America ........................................................................................................
12. Louisiana Office of Conservation .............................................................................................................................
13. MidAmerican Energy Company ................................................................................................................................
14. National Grid Gas Delivery Companies ...................................................................................................................
15. Nicor Gas Company .................................................................................................................................................
16. ONEOK Gas Transportation, LLC and ONEOK Gas Transmission, LLC ...............................................................
17. Pacific Gas & Electric Company ..............................................................................................................................
18. Pacific Gas & Electric Company, Southern California Gas Company, and San Diego Gas & Electric Company
19. Railroad Commission of Texas ................................................................................................................................
20.
21.
22.
23.
24.
25.
26.
Shell Offshore, Inc ....................................................................................................................................................
Southwest Gas Corporation .....................................................................................................................................
Targa Louisiana Intrastate LLC ................................................................................................................................
Texas Pipeline Association ......................................................................................................................................
Washington Gas Light Company .............................................................................................................................
Williston Basin Interstate Pipeline Company ...........................................................................................................
Yates Petroleum Corporation and Agave Energy Corporation ................................................................................
AGA.
Anadarko.
Atmos.
Bear Paw/ONEOK.
Copano Energy.
Dow Chemical.
Dow Pipeline.
Encana.
Enogex.
Gas Processors.
INGAA.
LOC.
MidAmerican.
National Grid.
Nicor.
ONEOK Gathering.
PG&E.
California LDCs.
Railroad Commission of
Texas.
Shell.
Southwest Gas.
Targa.
TPA.
WGL.
Williston Basin.
Yates.
APPENDIX B: LIST OF SUPPLEMENTAL COMMENTERS AND ABBREVIATIONS
jlentini on DSKJ8SOYB1PROD with RULES2
Supplemental Commenters
1.
2.
3.
4.
5.
6.
7.
8.
Abbreviations
American Gas Association .........................................................................................................................................
Atmos Pipeline—Texas ..............................................................................................................................................
Kinder Morgan Texas Intrastate Pipeline Group ........................................................................................................
Occidental Permian Ltd ..............................................................................................................................................
ONEKOK Gas Transmission, LLC and ONEOK Westex Transmission, LLC ...........................................................
Natural Gas Supply Association .................................................................................................................................
Pacific Gas & Electric Company, Southern California Gas, and San Diego Gas & Electric Company ....................
Texas Pipeline Association ........................................................................................................................................
[FR Doc. 2010–1546 Filed 1–29–10; 8:45 am]
BILLING CODE 6717–01–P
VerDate Nov<24>2008
18:48 Jan 29, 2010
Jkt 220001
PO 00000
Frm 00026
Fmt 4701
Sfmt 9990
E:\FR\FM\01FER2.SGM
01FER2
AGA.
APT.
KM.
Occidental.
ONEOK Gathering.
NGSA.
California LDCs.
TPA.
]]>Agencies
[Federal Register Volume 75, Number 20 (Monday, February 1, 2010)]
[Rules and Regulations]
[Pages 5178-5202]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-1546]
[[Page 5177]]
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Part II
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. 75 , No. 20 / Monday, February 1, 2010 /
Rules and Regulations
[[Page 5178]]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 284
[Docket No. RM08-2-001; Order No. 720-A]
Pipeline Posting Requirements under Section 23 of the Natural Gas
Act
January 21, 2010.
AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Order on Rehearing and Clarification.
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SUMMARY: The Federal Energy Regulatory Commission modifies its
regulations requiring major non-interstate pipelines to post daily
scheduled volume information and other data for certain points. These
modifications include a requirement that major non-interstate pipelines
post information for receipt and delivery points at which design
capacity is unknown. The Commission denies requests to revise its
regulations requiring 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).
Effective Date:
This rule will become effective March 3, 2010.
FOR FURTHER INFORMATION CONTACT:
Steven Reich (Technical), Office of Enforcement, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426,
(202) 502-6446, Steven.Reich@ferc.gov.
Gabe S. Sterling (Legal), Office of Enforcement, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426,
(202) 502-8891, Gabriel.Sterling@ferc.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
[Issued January 21, 2010]
Paragraph
Nos.
I. Introduction............................................ 1
II. Discussion............................................. 6
A. Authority for the Rule.............................. 6
1. Requests for Rehearing and Clarification........ 8
2. Commission Determination........................ 16
B. Need for the Rule................................... 20
1. Requests for Rehearing and Clarification........ 21
2. Supplemental Comments........................... 23
3. Commission Determination........................ 24
C. Definition of Major Non-Interstate Pipeline......... 37
1. Delivery Threshold.............................. 37
2. Treatment of Non-Contiguous Pipeline Systems.... 41
D. Posting Requirements for Major Non-Interstate 44
Pipelines.............................................
1. Posting Requirements at Points Where Design 44
Capacity Is Unknown or Does Not Exist.............
2. Posting Requirements at Points Where Design 52
Capacity Is Known.................................
3. Timing of Posting of Eligible Points............ 61
4. Clarifications Regarding the Major Non- 64
Interstate Posting Requirements...................
E. Exemptions.......................................... 75
1. Pipelines Upstream of Processing Plants......... 75
2. Pipelines That Deliver Primarily to End Users... 81
3. Storage Facilities.............................. 88
F. Safe Harbor......................................... 90
G. Interstate Pipeline Posting of No-Notice Service.... 94
H. Additional Exemptions............................... 102
1. Natural Gas Companies With Service Area 102
Determinations Under NGA Section 7(f).............
2. Pipelines Owned or Operated by End Users........ 104
III. Cost of Compliance.................................... 105
A. Requests for Rehearing and Clarification............ 105
B. Commission Determination............................ 106
IV. Information Collection Statement....................... 109
V. Regulatory Flexibility Act.............................. 112
VI. Document Availability.................................. 114
VII. Effective Date and Compliance Deadlines............... 115
1. Requests for Rehearing and Clarification............ 116
2. Commission Determination............................ 116
Before Commissioners: Jon Wellinghoff, Chairman; Marc Spitzer,
Philip D. Moeller, and John R. Norris.
Order on Rehearing and Clarification
Issued January 21, 2010
I. Introduction
1. On November 20, 2008, the Federal Energy Regulatory Commission
(Commission) issued Order No. 720,\1\ requiring interstate and certain
major non-interstate natural gas pipelines to post limited information
on publicly accessible Internet Web sites regarding their operations.
In this order, the Commission grants and denies requests for rehearing
and clarification of Order No. 720.
---------------------------------------------------------------------------
\1\ Pipeline Posting Requirements under section 23 of the
Natural Gas Act, 73 FR 73494 (Dec. 2, 2008), FERC Stats. & Regs.
31,283 (2008) (Order No. 720).
---------------------------------------------------------------------------
2. The Commission issued Order No. 720 and promulgated related
regulations consistent with the Energy Policy Act of 2005 (EPAct
2005).\2\ In EPAct 2005, Congress added section 23 to the Natural Gas
Act (NGA), 15 U.S.C. 717t-
[[Page 5179]]
2 (2000 & Supp. V 2005) authorizing 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 * * * and the
protection of consumers.'' \3\ 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.'' \4\
---------------------------------------------------------------------------
\2\ Energy Policy Act of 2005, Public Law 109-58, 119 Stat. 594
(2005).
\3\ NGA Sec. 23, 15 U.S.C. 717t-2(a)(1) (2000 & Supp. V 2005).
\4\ 15 U.S.C. 717t-2(a)(2).
---------------------------------------------------------------------------
3. On December 21, 2007, the Commission issued a Notice of Proposed
Rulemaking (NOPR), proposing to require both interstate and certain
major non-interstate natural gas pipelines to post daily information
regarding their capacity, scheduled flow volumes, and actual flow
volumes at major points and mainline segments.\5\ The Commission
proposed regulations that would make available the information needed
to track daily flows of natural gas adequately throughout the United
States.\6\ The posting proposal would 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.\7\
---------------------------------------------------------------------------
\5\ Pipeline Posting Requirements under section 23 of the
Natural Gas Act, 73 FR 1116 (Jan. 7, 2008), FERC Stats. & Regs.,
Proposed Regulations 2004-2007 ] 32,626, at P 3 (2007).
\6\ Id.
\7\ Id. P 5.
---------------------------------------------------------------------------
4. Order No. 720 required major non-interstate pipelines, defined
as those natural gas pipelines that are not natural gas companies under
the NGA and deliver more than 50 million MMBtu per year, to post
scheduled flow and other information for each receipt or delivery point
with a design capacity greater than 15,000 MMBtu per day.\8\ While
Order No. 720 required major non-interstate pipelines to comply with
the new rules within 150 days of the Final Rule's publication,\9\ a
subsequent order in this docket extended the compliance deadline for
major non-interstate pipelines until 150 days following the issuance of
an order on rehearing.\10\
---------------------------------------------------------------------------
\8\ Order No. 720 at P 1.
\9\ Id. P 168.
\10\ Pipeline Posting Requirements under section 23 of the
Natural Gas Act, 126 FERC ] 61,047, at P 4 (2009).
---------------------------------------------------------------------------
5. Regarding interstate natural gas pipelines, Order No. 720
expanded the Commission's existing posting requirements under 18 CFR
284 to include no-notice service. Interstate natural gas pipelines were
required to comply with this posting requirement no later than 60 days
following Order No. 720's publication,\11\ and should therefore be
currently complying with the regulations.
---------------------------------------------------------------------------
\11\ Order No. 720 at P 167.
---------------------------------------------------------------------------
6. Twenty-six requests for rehearing or clarification of Order No.
720 were submitted.\12\ On January 16, 2009, the Commission issued an
order granting rehearing for the purpose of providing additional time
to respond to the requests for rehearing.\13\
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\12\ A list of petitioners requesting rehearing and/or
clarification is provided at Appendix A. All requests for rehearing,
clarification, or both are referred to herein as ``Requests for
Rehearing and Clarification.''
\13\ Pipeline Posting Requirements under section 23 of the
Natural Gas Act, Docket No. RM08-2-001, at 1 (Jan. 16, 2009).
---------------------------------------------------------------------------
7. A staff technical conference was held on March 18, 2009, to
gather additional information on three issues raised in the requests
for rehearing.\14\ The technical conference addressed: (1) The
definition of major non-interstate pipelines; (2) what constitutes
``scheduling'' for a receipt or delivery point; and (3) how a 15,000
MMBtu per day design capacity threshold would be applied.\15\ Panelists
making presentations at the conference and commenters from the audience
represented a broad cross-section of the U.S. natural gas industry \16\
and the conference was widely attended.\17\
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\14\ Pipeline Posting Requirements under section 23 of the
Natural Gas Act , Notice of Technical Conference, Docket No. RM08-2-
001 (issued Feb. 24, 2009); Pipeline Posting Requirements under
section 23 of the Natural Gas Act, Notice of Agenda for Technical
Conference, Docket No. RM08-2-001 (issued March 11, 2009).
\15\ Notice of Agenda for Technical Conference, at P 1.
\16\ In the Matter of Pipeline Posting Requirements under
section 23 of the Natural Gas Act Docket No. RM08-2-001, at 2-3
(Mar. 18, 2009) (Transcript of Technical Conference).
\17\ A transcript of this conference is available on the
Commission's e-Library system.
---------------------------------------------------------------------------
8. On July 16, 2009, the Commission issued an order requesting
supplemental comments in response to limited issues raised in requests
for rehearing of Order No. 720 and at the technical conference, with
comments due within 30 days.\18\ Eight supplemental comments were
filed.\19\
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\18\ Pipeline Posting Requirements under section 23 of the
Natural Gas Act, 128 FERC ] 61,030, at P 1 (2009) (Order Requesting
Supplemental Comments).
\19\ A list of persons submitting supplemental comments is
provided at Appendix B. These comments are referred herein as
``Supplemental Comments.''
---------------------------------------------------------------------------
9. As discussed below, the Commission affirms Order No. 720,
granting a number of requests for rehearing and clarification and
adopting regulations consistent with our findings. As a whole, the
modifications that are adopted substantially reduce the number of major
non-interstate pipelines that must comply with the proposed
transparency regulations.
10. Major non-interstate pipelines must comply with the revised
regulations within 150 days following publication in the Federal
Register. Interstate pipelines must continue their current compliance
with our transparency regulations.
II. Discussion
A. Authority for the Rule
11. Order No. 720 implemented the Commission's authority under
section 23 of the NGA,\20\ as added by EPAct 2005,\21\ 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 publicly-accessible
Internet Web sites. Congress granted the Commission this statutory
authority to ensure transparency of natural gas prices, natural gas
availability, and the price formation in the interstate natural gas
market.\22\
---------------------------------------------------------------------------
\20\ 15 U.S.C. 717t-2.
\21\ Energy Policy Act of 2005, Public Law 109-58, sections 1261
et seq., 119 Stat. 594 (2005).
\22\ Id. P 8.
---------------------------------------------------------------------------
12. The Commission held in Order No. 720 that NGA section 23
authorizes the Commission to obtain and disseminate information,
including information regarding non-interstate natural gas markets that
affect the interstate natural gas market. The Commission's decision
substantially relied on the language of NGA section 23(a)(3)(A), which
allows the Commission to ``obtain the information * * * from any market
participant.'' \23\ The Commission identified Congress' use of the term
``any market participant'' as an intentional expansion of ``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.''
\24\ Order No. 720 took particular note of Congress' use of ``any'' in
section 23 as a descriptor, attaching jurisdiction to market
participants independently of the
[[Page 5180]]
limitations prescribed elsewhere in the NGA.\25\
---------------------------------------------------------------------------
\23\ 15 U.S.C. 717t-2(a)(3)(A) (emphasis added).
\24\ Order No. 720 at P 17.
\25\ Id. P 18.
---------------------------------------------------------------------------
13. The NGA limits the scope of the Commission's traditional
regulatory authority to ``natural gas companies'' as the term is
utilized in the NGA.\26\ The Commission held in Order No. 720 that
Congress contemplated different jurisdictional parameters for its
transparency authority.\27\ Additionally, the Commission found that the
scope of section 23 is not limited by section 1(b) of the NGA.
---------------------------------------------------------------------------
\26\ Id. P 19 citing 15 U.S.C. 717.
\27\ Id.
---------------------------------------------------------------------------
14. The Commission emphasized that the regulations promulgated by
Order No. 720 reflect the limitations that Congress placed on the
Commission's authority in section 23. Order No. 720 explained that
section 23 extends the Commission's authority only to the collection
and dissemination of information for the purposes of promoting price
transparency in the natural gas market.\28\ The Commission's
traditional regulatory authority remains limited to ``natural gas
companies'' under section 1(b) of the Act.\29\
---------------------------------------------------------------------------
\28\ Id. P 22.
\29\ Natural gas producers, processors, or users who have a de
minimis market presence are explicitly exempted from the reporting
requirements. Id. at P 23.
---------------------------------------------------------------------------
1. Requests for Rehearing and Clarification
15. Some petitioners support the Commission's assertion of
jurisdiction, with at least one petitioner supporting Order No. 720's
requirement that certain major non-interstate pipelines post daily
scheduled volume information and design capacity for certain receipt
and delivery points ``pursuant to [the Commission's] authority under
section 32 [sic] of the NGA.'' \30\ Yates and Agave particularly
commend the Commission's new regulations and assertion of jurisdiction,
stating that ``the major non-interstate pipeline posting requirements
adopted in Order No. 720 are a good first step towards the Commission's
stated goal of facilitating transparency in markets for the sale or
transportation of physical natural gas in interstate commerce.'' \31\
---------------------------------------------------------------------------
\30\ Yates and Agave Request for Rehearing and Clarification at
1; Williston Basin Request for Rehearing and Clarification at 1
(acknowledging that the Commission has the authority to promulgate
Order No. 720's new regulations pursuant to its authority under
section 23 of the NGA).
\31\ Yates and Agave Request for Rehearing and Clarification at
3-4.
---------------------------------------------------------------------------
16. Several petitioners requesting rehearing argue that the
Commission unlawfully expanded its statutory authority by imposing
posting requirements on major non-interstate pipelines, including
natural gas gathering lines.\32\ They claim that the Commission does
not have jurisdiction to impose posting requirements on intrastate
pipelines, and that its transparency jurisdiction does not extend to
intrastate activities at receipt and delivery points that are not
involved in the Commission's jurisdictional activities.\33\
---------------------------------------------------------------------------
\32\ Enogex Request for Rehearing and Clarification at 5-10; Gas
Processors Request for Rehearing and Clarification at 3-7; LOC
Request for Rehearing and Clarification at 3-10; California LDCs
Request for Rehearing and Clarification at 13-15; Railroad
Commission of Texas Request for Rehearing and Clarification at 5-10;
Southwest Gas Request for Rehearing and Clarification at 3-5, 13-14;
Targa Request for Rehearing and Clarification at 8-9; TPA Request
for Rehearing and Clarification at 8-24.
\33\ See, e.g., TPA Request for Rehearing and Clarification at
31-32.
---------------------------------------------------------------------------
17. Many petitioners reiterated arguments, made in comments to the
NOPR, that the reference in NGA section 23 to ``any market
participant'' is restricted to participants in the interstate
market.\34\ Gas Processors suggests that the Commission has derived its
expanded jurisdictional powers from an ambiguous term without
sufficient support, and that Congressional intent over that term ``must
not be read in a vacuum.'' \35\ It also argues that the term ``market
participant'' was not intended to extend the Commission's jurisdiction
to intrastate pipelines because: (1) Section 23 was not intended to
cover intrastate pipelines; (2) the Commission has never had
jurisdiction over intrastate pipelines; and (3) Congress did not
``expressly or implicitly'' provide such jurisdiction in section
23.\36\ Quoting section 23, Gas Processors points out the repeated use
of the term ``interstate'' throughout the section, emphasizing that if
Congress intended an expansion into the intrastate pipelines, they
would have selected different language.\37\ RRC agrees, stating that
``[n]othing in the plain language of Section 23 of the NGA or the
legislative history of [EPAct 2005] evinces Congressional intent to
expand the FERC's authority over intrastate pipelines.'' \38\
---------------------------------------------------------------------------
\34\ California LDCs Request for Rehearing and/or Clarification
at 14-15; Gas Processors Request for Rehearing at 3-4; LOC Request
for Rehearing at 8-9; Railroad Commission of Texas Request for
Rehearing at 5-8; Southwest Gas Request for Clarification and
Rehearing at 13-14; Targa Request for Rehearing at 8-9; TPA Request
for Rehearing and Clarification at 9-11.
\35\ Gas Processors Request for Rehearing and Clarification at
3-4.
\36\ Id. at 4.
\37\ Id.; see also RRC Request for Rehearing and Clarification
at 6-8; TPA Request for Rehearing and Clarification at 8-12; LOC
Request for Rehearing and Clarification at 10.
\38\ RRC Request for Rehearing and Clarification at 6; see also
LOC Request for Rehearing and Clarification at 9.
---------------------------------------------------------------------------
18. TPA opines that the plain language of section 23 provides that
``market participant'' be limited to the interstate natural gas
market.\39\ It further argues that Congress had no need to exclude
intrastate pipelines from the Commission's transparency jurisdiction
because those entities are not subject to the Commission's jurisdiction
``in the first place.'' \40\
---------------------------------------------------------------------------
\39\ TPA Request for Rehearing and Clarification at 9-11.
\40\ Id. at 11.
---------------------------------------------------------------------------
19. TPA repeats arguments made in its NOPR comments, and seeks
rehearing of the Commission's determination that it has authority to
issue the posting regulations. TPA argues that expansion of the
jurisdiction of the Commission usually occurs through amendment of NGA
section 1(b) by Congress.\41\ TPA asserts that Order No. 720 expands
the Commission's jurisdiction using a process that is not supported by
the Commission's own precedent.\42\ TPA cites Order No. 670,\43\
discussing the procedures used to process market manipulation
allegations, in support of its claim that the Commission should wait
until Congress explicitly expands its jurisdiction to assert such
authority over traditionally non-jurisdictional entities.\44\ TPA
further argues that the Natural Gas Policy Act of 1978 (NGPA) section
311 shows a clear distinction between intrastate and interstate
jurisdiction, and concludes that, if Congress had intended to expand
the Commission's jurisdiction, it would have amended NGA section 1(b)
in a similar fashion.\45\
---------------------------------------------------------------------------
\41\ TPA Request for Rehearing and Clarification at 12; Gas
Processors Request for Rehearing and Clarification at 4-5; LOC
Request for Rehearing and Clarification at 6; RRC Request for
Rehearing and Clarification at 7-8.
\42\ TPA Request for Rehearing and Clarification at 12.
\43\ Prohibition of Energy Market Manipulation, Order No. 670,
71 FR 4244 (Jan. 26, 2006), FERC Stats. & Regs. ] 31,202 (2006).
\44\ TPA Request for Rehearing and Clarification at 12.
\45\ Id. at 21 (citing 15 U.S.C. 3371(a)(2)).
---------------------------------------------------------------------------
20. Several petitioners, echoing comments that the Commission
addressed in Order No. 720, argue that the regulations exceed the
Commission's jurisdiction under section 1(b) of the NGA.\46\
Petitioners argue that NGA section 23 is not ``a stand alone
[[Page 5181]]
provision,'' but is subject to the jurisdictional limits established in
section 1(b).\47\ Thus, they contend that the fact that Congress did
not amend the language in section 1(b) demonstrates that Congress did
not intend to modify the Commission's jurisdiction with section 23.\48\
Petitioners state that section 1(b) is ``unequivocally clear''
regarding the entities to which section 23 applies.\49\ The petitioners
argue that because section 1(b) expressly bars the Commission from
jurisdiction over intrastate pipelines, section 23 does as well.\50\
---------------------------------------------------------------------------
\46\ Enogex Request for Rehearing and Clarification at 6-7; LOC
Request for Rehearing and Clarification at 3-4; Railroad Commission
of Texas Request for Rehearing and Clarification at 8-9; TPA Request
for Rehearing and Clarification at 8, 16-19.
\47\ LOC Request for Rehearing and Clarification at 3; Enogex
Request for Rehearing and Clarification at 7; Railroad Commission of
Texas Request for Rehearing and Clarification at 8-9; TPA Request
for Rehearing and Clarification at 22-23.
\48\ LOC Request for Rehearing and Clarification at 9; RRC
Request for Rehearing and Clarification at 8.
\49\ RRC Request for Rehearing and Clarification at 8.
\50\ RRC Request for Rehearing and Clarification at 8, LOC
Request for Rehearing and Clarification at 8-9; Enogex Request for
Rehearing and Clarification at 6-7; TPA Request for Rehearing and
Clarification at 28-29.
---------------------------------------------------------------------------
21. Several petitioners also state that section 311 of the NGPA
\51\ limits the Commission's transparency jurisdiction to only
interstate activities.\52\ These petitioners claim that, although
section 311 ``vests the Commission with the power to authorize an
intrastate pipeline to transport natural gas on behalf of interstate
pipelines,'' section 311 did not expand the Commission's jurisdiction
under the NGA.\53\ In fact, the NGPA explicitly defines ``intrastate
pipeline'' as one ``not subject to the jurisdiction of the Commission
under the NGA.'' \54\ LOC states, for example, that the Commission
cannot ``destroy'' this jurisdictional distinction placing intrastate
pipelines beyond its NGA authority without express amendment from
Congress.\55\ Moreover, TPA cites to Associated Gas Distributors v.
FERC,\56\ where the court held that it was unreasonable for the
Commission to presume that ``obscure'' language in section 311
authorized an expansion of its jurisdiction without legislative history
to support an expansion.\57\ TPA, LOC, and RRC also focus on previous
case-law limiting the Commission's traditional rates, terms, and
conditions jurisdiction under section 311.\58\
---------------------------------------------------------------------------
\51\ 15 U.S.C. 3371(a)(2).
\52\ Enogex Request for Rehearing and Clarification at 9; LOC
Request for Rehearing and Clarification at 5-8; Railroad Commission
of Texas Request for Rehearing at 9; TPA Request for Rehearing and
Clarification at 18-22.
\53\ LOC Request for Rehearing and Clarification at 5-6; RRC
Request for Rehearing and Clarification at 9; TPA Request for
Rehearing and Clarification at 18-22.
\54\ LOC Request for Rehearing and Clarification at 5-6; RRC
Supplemental Comments at 9; TPA Request for Rehearing and
Clarification at 18-22.
\55\ LOC Request for Rehearing and Clarification at 6.
\56\ Assoc. Gas Distrib. v. FERC, 899 F.2d 1250 (D.C. Cir.
1990).
\57\ TPA Request for Rehearing and Clarification at 19-20.
\58\ TPA Request for Rehearing and Clarification at 21-22; LOC
Request for Rehearing and Clarification at 6-10; RRC Request for
Rehearing and Clarification at 16. TPA and LOC also raise arguments
linking section 311 to section 601 of the NGPA. LOC Request for
Rehearing and Clarification at 5-8; TPA Request for Rehearing and
Clarification at 18-21.
---------------------------------------------------------------------------
22. Other petitioners focus on NGA section 23(d)(2) which provides
that the Commission shall not require natural gas producers,
processors, or users who have a de minimis market presence to comply
with the reporting requirements of section 23.\59\ On rehearing, RRC
renews arguments made in response to the NOPR regarding the de minimis
exception. Contrary to the Commission's interpretation, RRC believes
that, had Congress intended to give the Commission even limited
jurisdiction over intrastate pipelines, it would have listed them in
section 23(d)(2).\60\ Because section 23(d)(2) makes no such reference,
RRC contends that the Commission's findings are contrary to the plain
language of section 23.\61\
---------------------------------------------------------------------------
\59\ 15 U.S.C. 717t-2(d)(2).
\60\ RRC Request for Rehearing and Clarification at 7; see also
TPA Request for Rehearing and Clarification at 23-24.
\61\ RRC Request for Rehearing and Clarification at 7-8.
---------------------------------------------------------------------------
23. Some petitioners assert that the Commission is seeking
information on gas flows that are outside of the Commission's
jurisdiction, regardless of the facilities at issue.\62\ TPA argues
that the collection of design capacity and gas flow data does not
relate to the availability and prices of natural gas, thereby exceeding
the Commission's transparency jurisdiction.\63\ Enogex argues that the
new regulations make it impossible to discern the Commission's
jurisdiction from State jurisdiction because the intrastate and
interstate volumes of gas that move on the Enogex system are so
commingled that they cannot be distinguished for capacity posting
purposes.\64\
---------------------------------------------------------------------------
\62\ Enogex Request for Rehearing at 9-10; TPA Request for
Rehearing and Clarification at 13-15.
\63\ TPA Request for Rehearing and Clarification at 13-15.
\64\ Enogex Request for Rehearing and Clarification at 9-10.
---------------------------------------------------------------------------
24. Targa, California LDCs, RRC, and TPA all contend that Order No.
720 is an improper regulation of intrastate operations and rates.\65\
These petitioners argue that the Final Rule may adversely interfere
with State regulation of non-interstate pipelines.\66\ California LDCs
challenge the Commission's claim that it is not regulating intrastate
operations of non-interstate pipelines. The petitioner alleges that
compliance with Order No. 720 entails daily postings of customer-
specific and facility-specific information, effectively regulating
intrastate operations.\67\
---------------------------------------------------------------------------
\65\ Targa Request for Rehearing and Clarification at 9;
California LDCs Request for Rehearing and Clarification at 14-15;
RRC Request for Rehearing and Clarification at 9-11; TPA Request for
Rehearing and Clarification at 25-28.
\66\ California LDCs Request for Rehearing and Clarification at
14-15; RRC Request for Rehearing and Clarification at 9-11; TPA
Request for Rehearing and Clarification at 3, 25-28.
\67\ California LDCs Request for Rehearing and Clarification at
14-15.
---------------------------------------------------------------------------
2. Commission Determination
25. After consideration, the Commission rejects the requests for
rehearing and reaffirms its holding that it has jurisdiction over the
matters addressed in Order No. 720. NGA section 23 provides the
Commission limited jurisdiction over major non-interstate pipelines for
the purpose of requiring public disclosure of information to enhance
market transparency.
26. Most petitions for rehearing reiterate arguments the Commission
considered and addressed at length in Order No. 720. For example,
petitioners take issue with the Commission's interpretation of the
expansive language used in NGA section 23. In Order No. 720, the
Commission held that Congress deliberately chose the term ``any market
participant'' in section 23 to expand the Commission's jurisdiction
beyond the universe of natural gas companies to which it would
otherwise be limited, recognizing that the public needs information
from a wide variety of entities in order to facilitate
transparency.\68\ Section 1 is not referenced in section 23 and the
term ``natural gas company'' is not used in section 23. Petitioners
have not raised any new arguments regarding the meaning of ``any market
participant'' in section 23. The Commission continues to believe that
Congress did not intend to limit the Commission's transparency
jurisdiction to entities it traditionally regulates.\69\
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\68\ Order No. 720 at P 18.
\69\ Id. P 19.
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27. As stated in Order No. 720, section 23(d)(2) would be
unnecessary surplusage if Congress did not intend to give the
Commission authority over entities otherwise excluded by section 1(b)
of the NGA.\70\ Petitioners raise no new arguments regarding this
issue.
[[Page 5182]]
Likewise, no new arguments were presented regarding the Commission's
authority to enact rules under sections 23(a)(1) and 23(a)(2). These
subsections grant discretion to the Commission to achieve interstate
price transparency and to provide for public dissemination of
information.\71\
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\70\ Id. P 23.
\71\ Id. P 16.
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28. The Commission also finds no merit in arguments raised by
petitioners related to section 311 of the NGPA. While section 311
limits the Commission's jurisdiction regarding some intrastate natural
gas pipeline activities, section 23 of the NGA provides a different
jurisdictional basis promoting different Congressional goals. Section
23 grants the Commission authority to ensure that the information
necessary for interstate market transparency is available to the
public. The term any market participant includes non-interstate
pipelines, thus the Commission has the authority to require those
participants to post certain information to facilitate market
transparency.
29. Petitioners also reiterated arguments, addressed in Order No.
720, that previous case law limits the Commission's transparency
jurisdiction.\72\ The Commission affirms its conclusion that the cases
cited by commenters apply only to the jurisdictional limits set forth
in section 1 of the NGA prior to the enactment of EPAct 2005.\73\ Such
case law is not applicable to regulations adopted by the Commission
pursuant to section 23 of the NGA.
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\72\ Railroad Commission of Texas Request for Rehearing and
Clarification at 15-16; LOC Request for Rehearing and Clarification
at 6-7; Enogex Request for Rehearing and Clarification at 6-7.
\73\ Order No. 720 at P 20.
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30. In response to Enogex, it is immaterial for purposes of our
transparency jurisdiction whether non-interstate and interstate volumes
of gas are commingled. Under section 23, if natural gas volumes have a
greater than de minimis effect on the interstate natural gas market,
and the other requirements of section 23 are met, the Commission has
the authority to require posting of such volumes regardless of whether
flowing natural gas is characterized as ``interstate'' or ``non-
interstate.''
31. The Commission emphasizes that its transparency jurisdiction is
limited to the dissemination of information that will aid in market
transparency. Section 23 gives the Commission no jurisdiction related
to, and our regulations do not govern the rates, terms, and conditions
of service of major non-interstate pipeline operations. The Commission
is requiring only the posting of essential information to ensure market
transparency and is not engaging in traditional regulation of rates,
terms, and conditions of service.
32. The Commission finds that Order No. 720 accurately implemented
its authority under the limited jurisdiction Congress conferred in NGA
section 23.\74\ Therefore, we deny rehearing.
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\74\ The Commission's conclusion here is consistent with its
findings in Order No. 704 regarding the annual reporting requirement
for market participants adopted pursuant to our NGA section 23
authority. See 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), order on
reh'g, Order No. 704-B, 125 FERC ] 61,302 (2008).
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B. Need for the Rule
33. Order No. 720 found that a broad cross-section of the natural
gas industry supports the transparency goals of the pipeline posting
requirements.\75\ In Order No. 720, the Commission exercised the
authority conferred by Congress following consideration of comments on
the NOPR, and based on its experience regulating the interstate natural
gas market. Order No. 720 discussed interstate pipeline postings as
well as other sources of market information, determining that
additional information by non-interstate pipelines would enhance
transparency further.\76\
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\75\ Order No. 720 at P 29.
\76\ Id. P 39-50. Additionally, the Commission determined that
increased transparency regarding no-notice natural gas flows was
needed on interstate pipelines. Id. P 161.
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34. Order No. 720 found that information regarding wholesale
natural gas price fundamentals was incomplete given the lack of access
to scheduled flow information from major non-interstate pipelines.\77\
This informational gap exists because, while interstate pipelines must
post daily scheduled flow information under our current regulations, no
similar information is available regarding scheduled flows prior to or
following transportation on interstate pipelines. Order No. 720
attempted to fill this informational gap with supply-related
information from large non-interstate pipelines upstream of interstate
pipelines and demand-related information from large non-interstate
pipelines downstream of interstate pipelines. Supply and demand
fundamentals for the interstate natural gas market can be more fully
understood utilizing information from non-interstate pipelines.
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\77\ Id. P 40.
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1. Requests for Rehearing and Clarification
35. On rehearing, a limited number of petitioners object to Order
No. 720's findings that transparency needs to be increased in the
interstate natural gas market, and question whether the regulations
adopted in Order No. 720 actually increase transparency.
36. For example, LOC states that Order No. 720 ``failed to support
its finding that there exists any necessity for the enactment of the
proposed rules.'' \78\ RRC argues that our pipeline posting regulation
is ``a solution in search of a problem,'' adding that recent Commission
initiatives have improved market transparency and that there has been
no showing that additional transparency is required.\79\
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\78\ LOC Request for Rehearing and Clarification at 11. See also
TRC Request for Rehearing and Clarification at 14-15.
\79\ RRC Request for Rehearing and Clarification at 11-15.
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37. TPA requests rehearing on the grounds that the Commission has
not demonstrated that interstate market transparency is enhanced by
major non-interstate pipeline information. It alleges that the
Commission has ``consistently disregarded the consensus among market
participants'' on this point.\80\
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\80\ TPA Request for Rehearing and Clarification at 33.
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38. TPA takes Order No. 720 to task for focusing on comments ``of a
handful of intervenors expressing general support for the [NOPR]''
rather than acknowledging the substantial number of intrastate
pipelines and other participants that see no need for increased
transparency.\81\ TPA argues, citing National Fuel Gas Supply
Corporation v. FERC, \82\ that the Commission must cite evidence of an
industry problem prior to rulemaking action.\83\ TPA particularly
objects to Order No. 720's finding that the transparency rule assists
market participants to understand the impact of hurricanes and other
natural disasters on natural gas supply. Further, TPA argues that
``nowhere in this proceeding has the Commission or any market
participant provided an adequate explanation of how the proposed rule
would detect market manipulation.'' \84\
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\81\ Id. at 35-37.
\82\ 468 F.3d 831, 843 (D.C. Cir. 2006).
\83\ TPA Request for Rehearing and Clarification at 37.
\84\ Id. at 39.
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39. Southwest Gas argues that the transparency rule did not
specifically demonstrate a need for information from LDCs related to
daily capacity and
[[Page 5183]]
scheduled retail transportation.\85\ Southwest Gas complains that Order
No. 720 did not adequately explain the nexus between data provided by
State-regulated LDCs and price formation for natural gas sold at
wholesale and in interstate commerce.\86\
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\85\ Southwest Gas Request for Rehearing and Clarification at
12.
\86\ Id. at 13-14.
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40. Additionally, some petitioners request rehearing on the grounds
that Order No. 720 failed to fully consider the existing sources of
data regarding non-interstate natural gas flows as required by section
23.\87\
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\87\ LOC Request for Rehearing and Clarification at 11; RRC
Request for Rehearing and Clarification at 11-15; TPA Request for
Rehearing and Clarification at 30-31.
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2. Supplemental Comments
41. In its supplemental comments, AGA makes arguments similar to
Southwest Gas.\88\ AGA states that LDCs are fundamentally distributors
of natural gas and that LDC scheduled flow postings would not further
the Commission's transparency goals.\89\ AGA notes that no wholesale
natural gas price formation occurs on an LDC's system \90\ and argues
that available capacity calculations for LDCs may be misleading.\91\
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\88\ The Order Requesting Supplemental Comments requested
additional comments on discrete issues raised by commenters in
requests for rehearing and clarification. Order Requesting
Supplemental Comments at P 7-10. Some commenters submitted
supplemental comments on subjects outside the requested scope. While
the Commission did not request such extraneous supplemental
comments, such as AGA's supplemental comments regarding need for the
rule, we nevertheless address such comments in this order to ensure
that the record is complete.
\89\ AGA Supplemental Comments at 10.
\90\ Id. at 13.
\91\ Id. at 16-17. See also California LDCs Supplemental
Comments at 8.
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3. Commission Determination
42. The Commission continues to believe that the major non-
interstate pipeline posting requirements are needed and denies the
requests for rehearing.
43. The Commission notes, as an initial matter, that some of the
requests for rehearing appear to argue that the Commission has
substantially increased transparency in interstate markets in recent
years, but that such transparency is sufficient and more need not be
done. However, these petitioners misconstrue section 23 of the NGA and
Congress' transparency objectives. As discussed in Order No. 720, the
Commission has been directed by Congress to facilitate price
transparency in markets for the sale or transportation of physical
natural gas in interstate commerce \92\ and given the authority to
prescribe such rules as may be necessary to effectuate the
Congressional goal.\93\ As the Congressional mandate implicitly
acknowledges, lack of transparency is not a ``problem'' readily
susceptible to a single regulatory solution. Transparency enhances the
ability of market participants to make informed, efficient decisions
based upon public information. In other words, enhanced transparency is
typically beneficial to markets, even markets, such as the U.S.
wholesale natural gas market, that are already competitive. It is not a
necessary prerequisite to adoption of our regulations to find, as some
petitioners appear to demand, that the interstate natural gas market
cannot function without the rule. As petitioners acknowledge, the
Commission has improved market transparency in several different ways
in recent years and the interstate natural gas market is competitive
and robust. These successes, however, do not preclude other means of
further enhancing transparency. This is particularly true where the
Commission has identified a ``gap'' in relevant market information
available to market participants.
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\92\ 15 U.S.C. 717f-2(a)(1).
\93\ 15 U.S.C. 717f-2(a)(2).
---------------------------------------------------------------------------
44. Many of the petitions for rehearing repeat arguments made in
response to the NOPR and addressed in Order No. 720. As the Commission
found in Order No. 720, there presently exists a gap in information
available to interstate market participants necessary to more fully
understand supply and demand fundamentals and therefore price
formation.\94\ A significant amount of natural gas flows from producing
basins to interstate markets on non-interstate pipelines. These
scheduled flows impact supply considerations in interstate markets.
Similarly, flows on non-interstate pipelines at the end of the delivery
chain impact demand considerations in the interstate market.\95\ These
considerations are fundamental to Order No. 720's determination that
information about scheduled non-interstate pipeline natural gas flows
would enhance transparency in the interstate natural gas market.
Without access to information about supply and demand, interstate
natural gas market participants are left with incomplete information to
understand interstate wholesale prices. Incomplete information leads to
market inefficiencies because wholesale buyers and sellers of natural
gas have inconsistent levels of market knowledge and are less able to
understand price outcomes.\96\
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\94\ Order No. 720 at P 39.
\95\ Of course, non-interstate pipelines that deliver natural
gas to end-users may also deliver gas to other pipelines for
subsequent transportation similar to transportation provided by
interstate pipelines.
\96\ Transparency plays a fundamental role in the fairness,
efficiency, and functioning of orderly markets. Greater transparency
results in greater market efficiency because price signals to market
participants more accurately reflect underlying supply and demand
fundamentals.
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45. Existing interstate pipeline posting data is used extensively
by the public to understand daily market conditions and price
formation. The public can access an interstate pipeline's Internet Web
site to ascertain capacity availability and operational conditions.
Also, data aggregators scour these Web sites and sell analysis and
services based on this data, with many market participants, including
producers, pipelines, end users, marketers, traders, and financial
firms paying subscription fees to these data aggregators to evaluate
the interstate natural gas market. The demand for such data by market
participants is a persuasive factor regarding its transparency value.
Based upon the comments in this rulemaking and our natural gas market
experience, the Commission believes that there is robust interest by
the public regarding similar scheduled flow data from non-interstate
pipelines to form a more complete picture of the U.S. wholesale natural
gas market. We therefore disagree with commenters arguing that such
data is not valued by the public.
46. As discussed below, data provided by major non-interstate
pipelines will help interstate natural gas market participants
understand both supply and demand and, thus, price formation.
Understanding of Supply Fundamentals Will Be Enhanced
47. Some petitioners, including TPA, argue that information from
non-interstate pipelines that provide natural gas supplies would not
enhance interstate market transparency. Order No. 720 notes the
substantial impact that non-interstate pipelines have on the
establishment of national wholesale natural gas prices. Non-interstate
pipelines, particularly those in the south-central United States,
connect large production areas with interstate pipelines.\97\
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\97\ Order No. 720 at P 45.
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48. Despite TPA's protestations, obtaining data from TPA's members
is particularly important for interstate market transparency. Onshore
Texas locations account for thirty percent
[[Page 5184]]
(approximately 5.7 Tcf in 2007) of U.S. natural gas production.\98\
Texas has more non-interstate pipelines than any other State--45,000 of
the 58,600 miles of natural gas pipelines in the State are intrastate
pipelines and account for almost 16 Bcf/d of pipeline capacity.\99\ The
pipeline network in Texas has experienced significant growth over the
past several years as a result of increased demand for pipeline
capacity caused by the rapid development and expansion of natural gas
production in the Barnett Shale Formation.\100\ New pipelines have been
built, and expansions to existing ones undertaken, to meet increased
demand. The importance of Texas non-interstate transportation to
understanding interstate price fundamentals is growing as production
shifts from old depleting gas basins to new gas basins.
---------------------------------------------------------------------------
\98\ U.S. Energy Information Administration, Natural Gas Annual
2007, Gross Withdrawals and Marketed Production of Natural Gas by
State and the Gulf of Mexico 2003-2007 (2007), p. 8 (available at
https://www.eia.doe.gov/pub/oil_gas/natural_gas/data_publications/natural_gas_annual/current/pdf/table_003.pdf).
\99\ Energy Information Administration, Intrastate Natural Gas
Segment (available at https://www.eia.doe.gov/pub/oil_gas/natural_gas/analysis_publications/ngpipeline/intrastate.html). The size and
importance of non-interstate transportation in Texas is manifest.
Sixteen Bcf/d is enough gas to serve all the industrial or power
load in the U.S.
\100\ U.S. Energy Information Administration, Expansion of the
U.S. Natural Gas Pipeline Network: Additions in 2008 and Projects
through 2011, (Sept. 2009) (available at https://www.eia.doe.gov/pub/oil_gas/natural_gas/feature_articles/2009/pipelinenetwork/pipelinenetwork.pdf) (``About 10 percent of all newly added natural
gas pipeline capacity for 2008, or 4.6 Bcf per day, was attributable
to new intrastate pipelines built to transport expanding Barnett
shale production specifically'').
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49. The value of non-interstate pipeline supply flows is not
confined to Texas. In Colorado, Wyoming, and Utah, development of new,
large-diameter intrastate pipelines is proceeding at a fast pace, as
proved reserves of coalbed methane, tight sands, and conventional
natural gas supplies are identified.\101\ During the past several
years, at least eight large-capacity pipeline header systems have been
built in Wyoming to transport natural gas from local gathering
systems.\102\ In the Piceance Basin in western Colorado and the Uinta
Basin in eastern Utah, several new large gathering systems have been
developed to feed expanding natural gas production into the interstate
pipeline network.\103\ These supply sources have a significant effect
on interstate price formation because new supply can reduce regional
and national gas prices. The faster the implications of new supply are
assessed, the better the market can integrate those implications into
pricing decisions.
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\101\ U.S. Energy Information Administration, supra note 97.
\102\ Id.
\103\ Id.
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50. In these states and elsewhere, capacity could be limited at key
points, impacting regional, interstate wholesale prices. Supply or
demand driven events on non-interstate pipelines that impact regional
wholesale prices cannot be fully understood by market participants
without access to receipt and delivery point information.
51. Existing data sources on gas supply flows are insufficient for
participants to adequately evaluate physical daily market activity. As
the Commission discussed in Order No. 720, the Energy Information
Administration (EIA) publishes data on monthly production by State
based on a survey and with a three month lag.\104\ Similarly, monthly
consumption data is published by State with a four month lag.\105\
---------------------------------------------------------------------------
\104\ Energy Information Administration, Natural Gas Deliveries
to All Consumers by State 2007-2009 (Nov. 2009) (available at https://www.eia.doe.gov/oil_gas/natural_gas/data_publications/natural_gas_monthly/ngm/current/pdf/table_16.pdf).
\105\ Energy Information Administration, Marketed Production of
Natural Gas in Selected States and the Federal Gulf of Mexico (Nov.
2009) (available at https://www.eia.doe.gov/oil_gas/natural_gas/data_publications/natural_gas_monthly/current/pdf/table_05.pdf).
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Understanding of Demand Fundamentals Will Be Enhanced
52. Petitioners not only question the value of increased
transparency of the operations of non-interstate pipelines at the
beginning of the delivery chain, but also at the end of the delivery
chain. For example, Southwest Gas and AGA argue that the Commission has
not articulated an adequate nexus between data provided by LDCs
(oftentimes companies that primarily deliver natural gas to end-users)
and interstate natural gas price formation. The Commission disagrees
and continues to believe that the pipeline posting regulations will
enhance understanding of demand fundamentals.
53. Order No. 720 not only identified the information gap now
present, but also provided data explaining the possible scope of the
transparency problem regarding demand for natural gas. For example, we
noted that up to 90 percent of daily consumption of natural gas in
Texas is not captured through the Commission's current interstate
pipeline posting requirements.\106\ Instead, such consumption data is
available only from EIA in aggregated format several months following
actual delivery.\107\ Such stale data is unhelpful for interstate
market participants seeking to understand price formation in today's
rapidly-changing energy markets.
---------------------------------------------------------------------------
\106\ Order No. 720 at P 44.
\107\ Id.
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54. Demand clarity is a persistent problem in U.S. interstate
natural gas markets. For example, California accounts for 10 percent of
U.S. natural gas consumption, of which one-third is utilized for
electric power generation.\108\ About 13 percent of California's
consumption is met by in-State production with the rest met by imports
from surrounding states.\109\ Interstate pipelines serving California,
with four exceptions, terminate at the State border.\110\ Market
participants can currently ``see'' imports into California, flows
between PG&E and Southern California Gas Company (SoCal Gas), and flows
into SoCal Gas producing zones by virtue of the Commission's existing
interstate pipeline posting regulations and using PG&E's and SoCal Gas'
Pipe Ranger and Envoy systems.\111\ However, market participants have
limited information regarding gas receipts and deliveries once gas is
delivered to PG&E's and SoCal Gas' systems. Non-interstate
transportation and distribution are dominated by: PG&E, with 6,136
miles of transportation pipelines); SoCal Gas, with 2,890 miles of
transmission and storage pipelines; and SDG&E, with 168 miles of
transmission pipelines.\112\
---------------------------------------------------------------------------
\108\ U.S. Energy Information Administration, Natural Gas Annual
2007: Consumption of Natural Gas 2003-2007 by State, 2007 (2007) at
41 (available at https://www.eia.doe.gov/pub/oil_gas/natural_gas/data_publications/natural_gas_annual/current/pdf/table_015.pdf).
\109\ Id.
\110\ Interstate pipelines currently serving California include
El Paso Natural Gas Company (El Paso), Kern River Transmission
Company, Mojave Pipeline Company, Gas Transmission-Northwest,
Transwestern Pipeline Company (Transwestern), Questar Southern
Trails Pipeline, Tuscarora Pipeline and the Bajanorte/North Baja
Pipeline. Kern River, Mojave, Tuscarora, and North Baja pipeline
have significant capacity in California, while all other pipelines
terminate at the California border. See California Public Utilities
Commission, Natural Gas Market Study (Feb. 2006) at 28 (available at
https://www.docs.cpuc.ca.gov/WORD_PDF/REPORT/54256.pdf).
\111\ Sempra's Envoy system posts daily information at SoCal
Gas' interconnection with interstate pipelines, PG&E, and five
``producer zones.'' PG&E's Pipe Ranger system posts daily
information only at interconnects with interstate pipelines and
SoCal Gas' system. Most of the gas flow information posted on Envoy
and Pipe Ranger is readily available from interstate pipeline
postings and provides little additional market information useful
for understanding the intrastate flow of gas. Envoy Interactive Map
(available at https://www.envoyproj.sempra.com/help/help_pipeline_map.html).
\112\ Pacific Gas and Electric Co., Fast Facts (available at
https://www.pge.com/about/company/profile/); Securities and Exchange
Commission, Sempra Energy Form 10-K Annual Report at 25 (Feb. 24,
2009) (available at https://www.investor.shareholder.com/sre/secfiling.cfm?filingID=86521-09-10&CIK=1032208).
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[[Page 5185]]
55. SoCal Gas and PG&E are two of the largest distribution
companies in the U.S. When major natural gas transportation
interruptions occur on these systems inside California, market
participants are unable to accurately assess interstate market
implications.\113\ For example, the western energy crisis of 2000-2001
resulted in high power and natural gas prices in California which were
compounded by restricted flows of gas into California due to an
explosion on the El Paso pipeline that connects west Texas production
to California earlier in 2000. The ability to observe flows on the PG&E
and SoCal systems would have enabled market participants, the
California Public Utility Commission, and the public to better
understand the severity of local gas shortages and their impact on
prices and gas supply.
---------------------------------------------------------------------------
\113\ Since most information is only posted at major
interconnections with interstate pipelines and between PG&E and
SoCal Gas, conditions in-state are not readily discernible.
---------------------------------------------------------------------------
56. The frequent price differences observed between PG&E and SoCal
Gas city gate prices provide a further example of the need for greater
transparency in the California intrastate market. Intrastate pipeline
constraints within California likely cause these price divergences, but
the nature and extent of these constraints is unobservable to the
public. The public has access to flow data at the interconnects of PG&E
with two interstate pipelines in southern California (with El Paso at
the Topock receipt point and Transwestern at the Needles receipt
point). Capacity at the Topock receipt point is not fully utilized and
cheaper gas should theoretically flow north on PG&E's system to
equalize prices between PG&E and SoCal Gas. In order to effectively
understand constraints on intrastate pipelines (and the effects on
interstate market prices), it is imperative that the public have access
to better, more timely information on intrastate scheduled gas flows in
California.
57. Lack of demand transparency in California markets is
detrimental to well functioning and competitive interstate markets in a
number of ways. For example, a holder of pipeline capacity on PG&E's
non-interstate pipeline system could potentially hoard capacity at key
points, driving up gas prices in California, while depressing
interstate prices at the California border. Such non-interstate
activity not only would have an immediate impact on interstate
wholesale prices at the border, but would have a ripple effect outward,
perhaps affecting prices throughout the southwest. In another example,
the regional impact of a surge in California gas demand by power
generators, perhaps due to hot weather or a nuclear outage, could be
more easily un
