[Federal Register: September 26, 2008 (Volume 73, Number 188)]
[Rules and Regulations]
[Page 55726-55749]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26se08-9]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Parts 260, 284 and 385
[Docket No. RM07-10-001; Order No. 704-A]
Transparency Provisions of Section 23 of the Natural Gas Act
Issued September 18, 2008.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Order on Rehearing and Clarification.
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SUMMARY: The Federal Energy Regulatory Commission affirms its basic
[[Page 55727]]
determinations in Order No. 704, while granting rehearing in part and
clarification regarding requirements that certain natural gas market
participants report information regarding their reporting of
transactions to price index publishers and their blanket sales
certificate status. These natural gas market participants must report
annually certain information regarding their physical natural gas
transactions for the previous calendar year. As clarified in the Order
on Rehearing and Clarification, certain market participants engaged in
a de minimis volume of transactions will not be required to report
information regarding their transactions for the calendar year. The
reported information will make it possible to assess the formation of
index prices and the use of index pricing in natural gas markets. These
regulations facilitate price transparency in markets for the wholesale
sale of physical natural gas in interstate commerce as contemplated by
section 23 of the Natural Gas Act, 15 U.S.C. 717t-2.
DATES: Effective Date: This rule will become effective October 27,
2008. The revisions to FERC Form No. 552 are applicable for the
reporting of transactions occurring in calendar year 2008.
FOR FURTHER INFORMATION CONTACT:
Matthew L. Hunter (Technical), Office of Enforcement, Federal Energy
Regulatory Commission, 888 First Street NE., Washington, DC 20426,
(202) 502-6409. Matthew.Hunter@ferc.gov.
Christopher J. Peterson (Technical), Office of Enforcement, Federal
Energy Regulatory Commission, 888 First Street NE., Washington, DC
20426, (202) 502-8933, Christopher.Peterson@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:
Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G.
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.
I. Introduction
1. On December 26, 2007, the Commission issued Order No. 704, which
imposed an annual reporting requirement on certain natural gas market
participants.\1\ The order requires certain natural gas buyers and
sellers to file annually FERC Form No. 552 and report summary
information about physical natural gas transactions for each calendar
year.
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\1\ Transparency Provisions of Section 23 of the Natural Gas
Act, Order No. 704, 74 FR 1014 (Jan. 4, 2008), FERC Stats. & Regs. ]
31,260.
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2. Order No. 704 has its genesis in the Energy Policy Act of 2005
(EPAct 2005).\2\ EPAct 2005 added section 23 of the Natural Gas Act
(NGA), 15 U.S.C. Sec. 717t-2 (2000 & Supp. V 2005) to authorize 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.'' 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.''
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\2\ Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594
(2005).
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3. Section 23 of the NGA enhances the Commission's authority to
ensure confidence in the nation's natural gas markets. The Commission's
market-oriented policies for the wholesale natural gas industry require
that interested persons have broad confidence that reported market
prices accurately reflect the interplay of legitimate market forces.
Without confidence in the fairness of price formation, the true value
of transactions is very difficult to determine. Further, price
transparency makes it easier for us to ensure that jurisdictional
prices are ``just and reasonable.'' \3\
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\3\ See sections 4 and 5 of the Natural Gas Act, 15 U.S.C.
sections 717c and 717d.
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4. The performance of Western electric and natural gas markets
early in the decade shook confidence in posted market prices for
energy. In examining these markets, the Commission's staff found that
some companies submitted false information to the publishers of natural
gas price indices, so that the resulting reported prices were
inaccurate and untrustworthy.\4\ As a result, questions arose about the
legitimacy of published price indices, remaining even after the
immediate crisis passed. Moreover, market participants feared that the
indices might have become even more unreliable, since reporting (which
has always been voluntary) declined to historically low levels in late
2002.
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\4\ See Initial Report on Company-Specific Separate Proceedings
and Generic Reevaluations; Published Natural Gas Price Data; and
Enron Trading Strategies--Fact Finding Investigation of Potential
Manipulation of Electric and Natural Gas Prices, Docket No. PA02-2-
000 (August 2003).
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5. One of the Commission's responses to these developments was the
issuance, on July 24, 2003, of a Policy Statement on Electric and
Natural Gas Price Indices (Policy Statement) that explained our
expectations of natural gas and electricity price index developers and
the companies that report transaction data to them.\5\ The Policy
Statement, among other things, directed the Commission's staff to
continue to monitor price formation in wholesale markets, including the
level of reporting to index developers and the amount of adherence to
the Policy Statement standards by price index developers and by those
who provide data to them.\6\ In adhering to this directive, Commission
staff documented improvements in the number of companies reporting
prices from back offices, adopting codes of conduct, and auditing their
price reporting practices.\7\ These efforts resulted in significant
progress in the amount and quality of both price reporting and the
information provided to market participants by price indices.\8\ It is
against this backdrop that Congress passed EPAct 2005 and provided us
with expanded authority to mandate additional reporting and improve
market confidence through greater price transparency.
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\5\ Price Discovery in Natural Gas and Electric Markets, 104
FERC ] 61,121 (2003).
\6\ Id. P 43.
\7\ Federal Energy Regulatory Commission, Report on Natural Gas
and Electricity Price Indices, at 2, Docket Nos. PL03-3-004 et al.
(2004).
\8\ See, e.g., GENERAL ACCOUNTING OFFICE, NATURAL GAS AND
ELECTRICITY MARKETS: FEDERAL GOVERNMENT ACTIONS TO IMPROVE PRIVATE
PRICE INDICES AND STAKEHOLDER REACTION (December 2005).
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6. In an April 19, 2007 Notice of Proposed Rulemaking, the
Commission proposed regulations consistent with these new
responsibilities.\9\ The April 2007 NOPR contained both an annual
transaction reporting requirement for market participants as well as a
daily posting requirement for pipelines. On December 26, 2007, the
Commission issued Order No. 704 regarding the annual reporting
requirement. The daily pipeline posting requirement proposal was
separated from the annual filing requirement and a new Notice of
Proposed Rulemaking regarding the pipeline posting requirement was
issued concurrently in Docket No. RM08-2-000.\10\
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\9\ Transparency Provisions of Section 23 of the Natural Gas
Act, 72 FR 20791 (Apr. 26, 2007), FERC Stats. and Regs. ] 32,614
(2007) (April 2007 NOPR).
\10\ Pipeline Posting Requirements under Section 23 of the
Natural Gas Act, 73 FR 1116 (Jan. 7, 2008), FERC Stats. and Regs. ]
32,626 (2007). A technical conference has been held in Docket No.
RM08-2-000 and the pipeline posting requirement is pending further
action by the Commission.
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[[Page 55728]]
7. Order No. 704 required natural gas wholesale market
participants, including a number of entities that may not otherwise be
subject to the Commission's traditional NGA jurisdiction, to identify
themselves and report summary information about their physical natural
gas transactions on an annual, calendar year basis. To facilitate such
reporting, Order No. 704 created FERC Transaction Report FERC Form No.
552: Annual Report of Natural Gas Transactions (Form No. 552) and
various implementing regulations. Form No. 552 is to be filed by May 1,
2009, for transactions occurring in calendar year 2008 and by May 1 of
each year thereafter for each previous calendar year.
8. Thirteen requests for rehearing or clarification of Order No.
704 were timely filed. No request for rehearing or clarification argues
that the rule is unnecessary or should not have been issued. Rather,
the requests seek modification or clarification of specific aspects of
Order No. 704. Commission staff held two technical conferences during
which potential filers of Form No. 552 and other industry stakeholders
discussed the form. Stakeholders at these two technical conferences
represented a broad spectrum of market participants and observers,
including producers, interstate pipelines, intrastate pipelines,
natural gas marketers, commodities traders, local distribution
companies (LDCs), electric generation end-users, industrial end-users,
and natural gas price index developers. Many conference participants
filed comments following one or both of these conferences.
9. As discussed below, we largely affirm Order No. 704, granting a
limited number of rehearing requests and clarifying the order.
II. Discussion
A. The Value of Aggregated Annual Data Regarding Volumes That Utilize,
Contribute to, or Could Contribute to the Development of Price Indices
10. Order No. 704 focused primarily on ``price formation in spot
markets'' and accordingly sought information about the ``amount of
daily or monthly fixed-price trading that [is] eligible to be reported
to price index publishers as compared to the amount of trading that
uses or refers to price indices.'' \11\ As we stated in the order, the
``information collected under this requirement is focused specifically
on daily and monthly physical spot or `cash' market activity and the
contracting based on the prices developed in those markets.'' \12\ The
rationale for this focus is that a ``[b]etter understanding of the role
and functioning of wholesale natural gas spot markets can increase
confidence that posted market prices of natural gas accurately reflect
the interplay of legitimate market forces.'' \13\ Additionally,
information on price index utilization and formation would greatly
enhance the Commission's efforts to monitor price formation in the
wholesale markets in support of the Commission's market-oriented
policies.\14\ As we explained, ``without confidence in the basic
processes of price formation, market participants cannot have faith in
the value of their transactions, the public cannot believe that the
prices they see are fair, and it is more difficult for the Commission
to ensure that jurisdictional prices are `just and reasonable.' '' \15\
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\11\ Order No. 704 at P 3. See also id. P 13.
\12\ Id. P 67.
\13\ Id.
\14\ Id. P 7 and 62.
\15\ Id. P 66 (citing sections 4 and 5 of the NGA, 15 U.S.C.
sections 717c and 717d).
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11. Our recognition of the importance of price formation on market
confidence is, of course, not new. The Commission has often remarked on
the need to ensure price transparency and accurate price reporting,
including, for example, our 2003 Policy Statement on price reporting to
index developers. As we there recognized:
Price indices are widely used in bilateral natural gas and
electric commodity markets to track spot and forward prices. They
are often referenced in contracts as a price term; they are related
to futures markets and used when futures contracts go to delivery;
basis differentials in indices are used to hedge natural gas
transportation costs; indices are used in many gas pipeline tariffs
to settle imbalances or determine penalties; and state commissions
use indices as benchmarks in reviewing the prudence of gas or
electricity purchases. Since index dependencies permeate the energy
industry, the indices must be robust and accurate and have the
confidence of market participants for such markets to function
properly and efficiently.\16\
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\16\ Policy Statement at P 6.
We continue to believe that ensuring price transparency is a vital
policy goal, especially as it relates to transactions that utilize,
contribute, or could contribute to a price index.
12. Section 23(a)(4) of the NGA requires us to ``consider the
degree of transparency provided by existing price publishers and
providers of trade processing services, and [] rely on such publishers
and services to the maximum extent possible.'' We have reviewed
existing price index publications and, while the Commission recognizes
the substantial value that these publications have enhancing market
transparency, we determine that the additional data required on Form
No. 552 is necessary. Section 23 is consistent with our belief that
transparency is furthered by shedding light on price indices and their
formation.
13. The Commission reiterates that the focus of Form No. 552's data
collection is transactions that utilize an index price, contribute to
index price formation, or could contribute to index price formation.
Specifically, the Commission finds that volumes reportable on Form No.
552 should include volumes that utilize next-day or next-month price
indices, volumes that are reported to any price index publisher, and
any volumes that could be reported to an index publisher even if the
respondent has chosen not to report to a publisher. By ``could be
reported to an index publisher,'' we mean bilateral, arms-length, fixed
price, physical natural gas transactions between non-affiliated
companies at all trading locations.\17\ Transactions that do not occur
at a specific location currently designated by an index developer as a
reporting location are nonetheless reportable on Form No. 552.
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\17\ We note that this understanding tracks closely with our
discussion of transactions that are reportable to index developers
in the Policy Statement. See Policy Statement at P 34.
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14. This focus on index price-related transactions will increase
market participant confidence by providing greater transparency in the
use of index prices and how well index prices reflect market forces.
This data will also allow the Commission's staff, state commissions,
and all other industry observers to evaluate the level of index price
usage at both a company level and nationally.\18\ Data on index
development and use would be of substantial value in the Commission's
transparency and market monitoring missions.
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\18\ Further, as discussed in greater detail below, observers
will be able to parse data to compare activities of purchasers and
sellers in the market.
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15. We also clarify that Form No. 552 does not seek the broader
range of transaction data necessary to evaluate the size of the
national physical natural gas market. While Order No. 704 mentioned
such a calculation as one result of the data to be collected,\19\ we
elect not to craft Form No. 552 to
[[Page 55729]]
capture the data necessary to calculate a national market. At this
time, we do not believe that such data would further the transparency
of the natural gas markets other than determining an aggregate
approximation of the entirety of physical gas transactions. Further,
unless volumes that utilize price indices or that could contribute to
such indices were separately reported on Form No. 552 (with an
additional, substantial reporting burden), the analytical benefits
noted above would be lost. Lastly, any attempt to rationally estimate
the size of the physical gas market on a national level would require
reporting from a substantially larger group of respondents than the
narrower focus adopted in Order No. 704. Respondents would necessarily
include smaller market participants for whom the reporting burden would
be undue. For these reasons, we reiterate and emphasize our
determination that data provided on Form No. 552 should be limited to
transactions that utilize, contribute to, or could contribute to index
price formation. However, the Commission understands that the natural
gas market is ever evolving and dynamic. At a future date we may elect
to amend Form No. 552 to obtain additional information necessary to
facilitate transparency of the market.
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\19\ Order No. 704 at PP 18 and 69. Similarly, P 5 of the order
indicates that an understanding ``in broad terms'' of the extent of
the natural gas market is a goal of the rule.
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B. Both Sales and Purchase Data Are To Be Included on Form No. 552
16. Order No. 704 required the annual reporting both of relevant
natural gas sales and purchases. We explained that purchase information
was the opposing side of a sale transaction and, thus, was as relevant
to the Commission's transparency mission as the reporting of sales.\20\
Further, we noted that we have often found the reporting of purchase
information beneficial both independent of sales figures and as a
cross-check on such volumes.\21\
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\20\ Id. P 86.
\21\ Id. PP 85-86.
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17. Although we understand that some participants in the technical
conferences objected to the collection of purchase data in various
contexts, we continue to believe that purchase data is a vital
component to Form No. 552 and the Commission's transparency goals. Not
only is purchase information important as a cross-check on reported
sales volumes, but it has independent value. If only sales were
reported on Form No. 552, Commission staff, state commissions, and
other market observers would be unable to discern, for example, whether
significant numbers of gas purchasers were transacting under contracts
referencing an index price. Analysis of Form No. 552 purchase
information will also provide trend data regarding purchase activity,
which would be very useful for those charged with monitoring the
natural gas markets. With purchase data, the public will be able to
discern which purchasers are utilizing index-based contracts, whether
there is geographic disparity regarding use of price indices among
purchasers, the overall reliance upon gas price indices by purchasers,
and other information relevant to market analysis and market
confidence. While we acknowledge that removing purchases from volumes
that must be reported on Form No. 552 would somewhat reduce the
reporting burden on certain market participants, we continue to believe
that the substantial benefits of having such data publicly available
outweigh this burden.
C. The De Minimis Reporting Threshold
18. Section 23(d)(2) of the NGA requires the Commission to exempt
from new transparency reporting requirements ``natural gas producers,
processors or users who have a de minimis market presence.'' \22\
Consistent with this directive, Order No. 704 provided that most buyers
or sellers of less than a de minimis volume of natural gas are not
required to submit Form No. 552.\23\ The order set the de minimis
threshold at 2.2 million MMBtus; that is, annual sales plus annual
purchases of more than 2.2 million MMBtus required a market participant
to report transaction information. In setting this threshold, the
Commission ``sought to require reporting from a sufficient number of
significant market participants to ensure, in the aggregate, an
accurate picture of the physical natural gas market as a whole.'' \24\
The Commission explained that:
\22\ 15 U.S.C. section 717t-2(d)(2).
\23\ Form No. 552 must be submitted by any section 204.402 or
section 284.284 blanket certificate holder even if the entity has
aggregate purchases and sales less than the de minimis threshold.
Such an entity must provide identification information on Form No.
552 and must answer questions regarding price reporting to price
index publishers, but need not submit Form No. 552's aggregate
volume data. Order No. 704 at P 60.
\24\ Id. P 78.
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[T]he [2.2 million MMBtu] figure was based on the simple
calculation of one-ten thousandth (1/10,000th) of the annual
physical volumes consumed in the United States, which is
approximately 22 trillion cubic feet (Tcf) (or roughly 22 billion
MMBtus). Looked at another way, a de minimis market participant
would trade the equivalent of less than one standard NYMEX futures
contract per day. Although a market participant that contracts for
1/10,000th of the nation's annual physical volume may appear to have
little effect on natural gas prices, that participant may be
transacting only at one location and, thus, have a much greater
pricing effect there.
Requests for Clarification or Rehearing
19. Copano Energy L.L.C. (Copano) requests rehearing of the de
minimis threshold and argues that 2.2 million MMBtu is such a low
threshold so as to render meaningless the NGA's directive that the
Commission exempt from annual reporting requirements market
participants that have a de minimis market presence.\25\ Copano argues
that the Congressional purpose behind the de minimis threshold was to
exclude entities that are too small to have an impact on market prices
in the interstate, wholesale gas market. Copano states that a threshold
one-hundred times as large (i.e., 220 million MMBtu/year) would
represent less than 1 percent of annual physical volumes of gas
consumed in the country and ``would therefore have no ability to impact
prices in the wholesale, interstate natural gas market.'' \26\ Copano
notes that Order No. 704 justifies the selected threshold by noting
that even small amounts of gas purchases can have a price effect at
certain locations.\27\ Copano believes that this reinforces its
conclusion that a threshold should be established that measures market
presence at market hubs.\28\ Instead of a single-number de minimis
threshold, Copano suggests a two-pronged approach that considers both
the impact of a market participant's transactions on the overall
wholesale gas market (a twenty-two million MMBtu threshold) and the
impact of a market participant's transactions at market hubs (5 percent
of the total jurisdictional sales at the hub).\29\
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\25\ Copano comments at 8.
\26\ Id. 5.
\27\ Id. at 6.
\28\ Id. at 7.
\29\ Id. at 7-8.
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20. American Public Gas Association (APGA) requests clarification
of section 260.401(b) of the Commission's regulations. As currently
written, the regulation exempts an entity that does not hold a blanket
sales or marketing certificate from the reporting requirement if the
entity either made fewer than 2.2 million Dth of wholesale sales or 2.2
million Dth of wholesale purchases. APGA proposes that the Commission
clarify this language so as to ensure that an entity with fewer than
2.2 million MMBtu of purchases is exempted from reporting purchases and
an entity with fewer than 2.2 million
[[Page 55730]]
MMBtu of sales is exempted from reporting sales.\30\
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\30\ APGA comments at 2.
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21. Shell requests that the Commission clarify whether purchases
and sales should be aggregated for purposes of calculating an entity's
total reportable volumes.\31\ Additionally, Shell seeks guidance
regarding how market participants are to determine whether they fall
into the de minimis exception when part of the relevant total sales or
purchases are to an affiliate or under other circumstances.\32\ Shell
also requests clarification as to whether volumes that total exactly
2.2 TBtu fall into or out of the de minimis exception as the rule
references amounts above and below the threshold, but not precisely at
the threshold.\33\
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\31\ Shell is, collectively, Shell Gulf of Mexico, Shell
Offshore, Inc., Shell Rocky Mountain Production LLC, and SWEPI LP.
Shell comments at 28.
\32\ Id. at 28-29.
\33\ Id. at 29.
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Commission Determination
22. Regarding the appropriate de minimis threshold, we affirm our
findings in Order No. 704 and retain the 2.2 million MMBtu level. As
the Commission stated in Order No. 704, even market participants with
total reportable volumes slightly above the threshold may have a
significant effect on local wholesale markets.\34\ While it is possible
that a respondent that exceeds the de minimis threshold exemption does
not actually contribute to price formation, it is certain that some do
and, in any event, market observers cannot yet know with any degree of
assuredness which market participants have or do not have local price
relevance. Likewise, these entities may rely upon price indices for a
sizeable portion of their natural gas transactions. Form No. 552 seeks
data only for volumes that either reference price indices or could
contribute to the formation of price indices. A number of transactions
are not reportable (as identified on Form No. 552, as discussed in
Order No. 407, and as clarified in this order). Market participants
should bear in mind that the Commission is not seeking data on all gas
sales and purchases made by an entity, but rather a subset of these
transactions.\35\
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\34\ Order No. 704 at P 81.
\35\ For example, we clarify below that a bundled retail
transaction made at a state-approved tariff rate is not reportable.
We anticipate that this clarification will significantly limit the
reporting obligation on smaller market participants.
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23. Nothing in Copano's request for rehearing provides new
information regarding the establishment of a proper de minimis
threshold. While we acknowledge that there are a number of rational
ways to establish a de minimis threshold consistent with our
Congressional mandate, we continue to believe that 2.2 million MMBtu is
an appropriate threshold for the reasons expressed herein and in Order
No. 704.
24. Regarding APGA and Shell's requests involving how volumes are
to be calculated to determine whether an entity meets or exceeds the de
minimis threshold, the Commission clarifies that an entity that has 2.2
million MMBtu of reportable sales or purchases must file Form No. 552.
That is, a potential respondent with either reportable purchases equal
to or greater than 2.2 million MMBtu or reportable sales \36\ equal to
or greater than 2.2 million MMBtu must submit the form. The following
table, regarding reportable purchase and sale volumes, explains how the
de minimis threshold will apply:
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\36\ Reportable sales include off-system, balancing, and other
assorted reportable sales as discussed elsewhere in this order.
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Reportable Does the entity
Reportable sales volumes purchase volumes report?
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>= 2.2 million MMBtu.......... >= 2.2 million Yes, both sales and
MMBtu. purchases.
>= 2.2 million MMBtu.......... < 2.2 million Yes, both sales and
MMBtu. purchases.
< 2.2 million MMBtu........... >= 2.2 million Yes, both sales and
MMBtu. purchases.
< 2.2 million MMBtu........... < 2.2 million No (unless the entity
MMBtu. has a blanket
certificate, in
which case it will
provide non-volume
information only).
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25. We also clarify that sales and purchase volumes do not ``net
each other out'' for purposes of determining whether an entity meets or
exceeds the de minimis threshold. Additionally, an entity that must
file Form No. 552 must report both reportable sales and reportable
purchases regardless of the total volumes associated with each
component volume. For example, if a potential respondent has annual
reportable sales of 2.0 million MMBtu and reportable purchases of 3.0
million MMBtu, then it must file Form No. 552 as its purchases exceed
the de minimis threshold of 2.2 million MMBtu. Further, it would report
both its sales and purchases on the form.\37\
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\37\ APGA's request for clarification on this point is therefore
denied.
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26. We further clarify that, if a transaction is reportable on Form
No. 552, then volumes associated with the transaction should be counted
towards the threshold. The converse is also true: if a transaction
volume would not be included on the form, then volumes associated with
it should not be counted towards the threshold. We emphasize that not
all physical natural gas purchases and sales count towards the
threshold.\38\
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\38\ As detailed herein, physical transactions of companies that
fall below the de minimis threshold are excluded from the data
collected by Form No. 552. Physical transactions need not be
reported if they are not Next-Day or Next-Month transactions as
those terms are defined in Form No. 552. In this same vein,
financial transactions, transactions between affiliates, and
traditional retail transactions (as discussed below), are not
reportable on Form No. 552.
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27. If a company chooses to aggregate volumes from affiliates, then
such volumes are aggregated for purposes of determining whether the
corporation meets or exceeds the de minimis threshold. In response to
Shell's requested clarification, Order No. 704 already makes clear that
``a company with multiple affiliates may choose to report separately or
in aggregate, as best meets its needs.'' \39\ A company with multiple
affiliates that chooses to aggregate must, however, aggregate all of
its affiliates' data (i.e., it may not choose to aggregate some
affiliates but not others). Consistent with Shell's other requests, we
have modified Form No. 552 to make clear that entities that meet or
exceed the de minimis volume must submit the form.
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\39\ Order No. 704 at PP 60 and 97.
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28. Regarding the format of amounts reported on Form No. 552, the
Commission will require that volumetric entries on Form No. 552 be
rounded to the nearest tenth of a TBtu. We understand that there was
some confusion among participants at the technical conferences
regarding the rounding of volume figures on Form No. 552. Form No. 552
currently requests reporting of volumes to the nearest TBtu (i.e. , a
reportable volume of 2.499 TBtu would be reported as 2.0 TBtu). We
[[Page 55731]]
direct respondents to round volumes up or down, as appropriate, to the
nearest tenth of a TBtu. Rounding to the nearest tenth of a TBtu will
make the reporting obligation consistent with the proposed de minimis
threshold volume calculation, which is measured to the nearest tenth of
a TBtu. Further, more precise reporting of data would allow for a more
accurate review of market activity and we believe that aggregating
volumes to the nearest tenth of a TBtu would be no more burdensome for
respondents than the rounding currently required in the form.
D. Certain End-Use Transactions Should Be Reported on Form No. 552
29. Several commenters to the April 2007 NOPR objected to the
inclusion of end-use transactions in the annual report.\40\ Order No.
704 addressed these concerns by exempting certain types of transactions
from the reporting requirement. The order states that the rule
``focuses the reporting requirement solely on wholesale buyers and
sellers by excluding retail transactions.'' \41\ The order did not
require ``end-use customers or retail buyers'' to report transaction
information unless those entities also made wholesale sales or
purchases that were greater than the de minimis threshold.\42\
Likewise, the order stated that ``a transaction made to an end-user is
not to be included in the volumes reported on the form.'' \43\
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\40\ These commenters included American Forest & Paper
Association (AF&PA), Industrial Energy Consumers of America (IECA),
and Natural Gas Supply Association (NGSA).
\41\ Order No. 704 at P 3.
\42\ Id. P 90.
\43\ Id.
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30. However, the order did not adequately distinguish between two
distinct types of end-use transactions (i.e. transactions that utilize
or could contribute to a price index and transactions to customers as
part of a bundled retail sale). The American Gas Association (AGA) and
the National Energy Marketers Association (NEM), for example,
specifically argued in comments on the April 2007 NOPR that end-use
sales at retail should be excluded from the reporting requirement.\44\
These types of end-use transactions involved retail service provided by
a LDC to consumers subject to the LDC's state commission-approved
tariff. Other commenters argued for a broader exemption, including all
end-use transactions.\45\ These types of transactions would include not
only bundled retail service subject to traditional state jurisdiction,
but also direct end-use deliveries by interstate pipelines (an activity
traditionally subject to the Commission's jurisdiction).
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\44\ AGA NOPR comments at 3; NEM NOPR comments at 5. See also
NGSA NOPR comments at 12.
\45\ AF&PA NOPR comments at 5.
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31. Order No. 704 correctly, though summarily, describes these
participants' comments,\46\ but then proceeded to utilize the term
``retail'' interchangeably with ``end-use'' when describing
transactions that would be exempt from the reporting requirement.\47\
For example, under a section entitled, ``Exclusion of Retail
Transactions,'' the order states that ``[a]lthough some transactions
reported to indices may include purchases by large end-users, the
Commission is generally interested in wholesale prices.'' \48\ Our
exclusion in Order No. 704 is aimed at traditional retail transactions
(i.e., those that are in markets functionally separate from the
wholesale markets) rather than other end-use transactions involving
volumes in the wholesale market--although the language of the rule's
exclusion could easily be read so as to reach to all end-use
transactions.
---------------------------------------------------------------------------
\46\ Order No. 704 at PP 39-40.
\47\ See, e.g., Order No. 704 at PP 60, 89, and 90.
\48\ Id. P 90.
---------------------------------------------------------------------------
Requests for Clarification or Rehearing
32. NGSA requests clarification or rehearing regarding a seller's
obligation to exclude end-use volumes from volumes reported on Form No.
552. NGSA quotes paragraph 90 of Order No. 704 indicating that ``a
transaction made to an end-user is not to be included in the volumes
reported on the form.'' \49\ NGSA argues that requiring the seller to
delineate between end-use and non-end-use customers is unduly
burdensome and that requiring such disclosure to sellers from
purchasers would limit market liquidity.\50\ NGSA requests that the
Commission clarify that, when in doubt, it is acceptable for a seller
to include end-use volumes in Form No. 552.\51\ Any exclusion of end-
use transactions should be applied from the buyers' perspective, argues
NGSA.\52\
---------------------------------------------------------------------------
\49\ NGSA comments at 3.
\50\ Id. 4.
\51\ Id.
\52\ Id. 5.
---------------------------------------------------------------------------
33. We understand that a number of participants at the technical
conference (including AGA, Encana,\53\ and others) had both substantive
and technical questions regarding Order No. 704's references to ``end-
use'' transactions and ``retail'' transactions. There was significant
confusion regarding whether certain types of transactions to consumers
of natural gas were reportable. AGA filed supplemental comments in the
docket requesting various clarifications regarding an LDC's
responsibility to report sales to end-users, among other
transactions.\54\
---------------------------------------------------------------------------
\53\ Encana Marketing (USA) Inc. (distinct from its joint
rehearing request as part of the Canadian Suppliers).
\54\ AGA supplemental comments at 3-5.
---------------------------------------------------------------------------
Commission Determination
34. The Commission clarifies here that there will be no categorical
exclusion of end-use transactions from Form No. 552. Nevertheless, Form
No. 552 will collect only information regarding that subset of end-use
transactions that relies upon price indices or that could be utilized
to form a price index. Accordingly, as we explain below, reporting of
traditional, bundled retail transactions made by an LDC at a state-
approved tariff rate (i.e., the majority of transactions to retail
customers) would not contribute to the Commission's transparency
mission and are not subject to reporting. We believe that this is a
``bright-line'' rule easily understood by potential respondents.\55\
---------------------------------------------------------------------------
\55\ NGSA's request for rehearing or clarification of this issue
is, therefore, denied.
---------------------------------------------------------------------------
35. While Order No. 704 utilized the phrase ``retail'' transactions
interchangeably with ``end-use'' transactions,\56\ the overall thrust
of our order was that transactions that are typically perceived to be
at retail are not reportable while transactions that utilize,
contribute to, or may contribute to price indices should be reportable.
Depending upon the type of transactions involved, end-use transactions
can have a substantial impact on price formation and the functioning of
the wholesale markets, particularly in localized areas.
---------------------------------------------------------------------------
\56\ See, e.g., Order No. 704 at PP 60, 89, and 90.
---------------------------------------------------------------------------
36. While precise data is not readily available (indeed, obtaining
that data is one of the goals of Form No. 552), it is our experience
and industry common knowledge that many end-use transactions utilize
price indices and/or could be relied upon to form price indices. End-
use transactions, specifically transactions involving large consumers
of natural gas that compete directly with wholesale market
participants, are very relevant to the Commission's transparency
mission. For example, use of natural gas for power generation has
increased markedly since 2000. According to annual figures from the
Energy Information Administration (EIA), natural gas used to produce
electric power is up from 14.2 Bcf/d in 2000 to 18.8 Bcf/d in 2007, an
increase of 32 percent. As a result, natural gas generation's share of
overall gas use is up, too. In 2000, EIA figures indicate
[[Page 55732]]
that natural gas used for power generation accounted for 18 percent of
total U.S. natural gas consumption; by the end of 2007 it represented
30 percent.\57\ On a peak day in the summer, natural gas generation's
share of gas use can be much higher. According to EIA, the U.S.
delivered a total of 21.3 Tcf of natural gas to consumers in 2007 or on
average about 58.3 Bcf per day.\58\ On August 8, 2007, estimates of gas
use for power generation reached 38 Bcf/d or 65 percent of 2007 average
daily gas use.\59\ Moreover, in many regional power markets, natural
gas is the marginal fuel during the majority of hours power plants are
being dispatched, therefore a better understanding of how natural gas
indices are formed will aid the Commission and the public in
understanding power market dynamics. For these reasons, we conclude
that where a transaction could contribute to the formation of price
indices and/or relies upon a price index, the transaction should be
reportable even if the reporting entity is a natural gas end-user.
---------------------------------------------------------------------------
\57\ Derived from information provided by EIA on their Natural
Gas Navigator Web site, http://tonto.eia.doe.gov/dnav/ng/hist/
n3045us2a.htm.
\58\ Derived from information provided by EIA on their Natural
Gas Navigator Web site, http://tonto.eia.doe.gov/dnav/ng/ng_sum_
lsum_dcu_nus_a.htm.
\59\ Derived from the ``U.S. Power Burn Report'', Bentek Energy,
LLC.
---------------------------------------------------------------------------
37. Requiring end-users to supply transaction data if the
transaction utilizes, contributes to, or could contribute to price
index formation is well within EPAct 2005's Congressional mandate. The
Commission accurately stated in Order No. 704 that price formation in
natural gas markets makes no distinction between transactions that are
traditionally jurisdictional to the Commission and those that are
not.\60\ Congress, recognizing this fact, gave the Commission expansive
jurisdiction under the transparency provisions of EPAct 2005. The
Commission's traditional jurisdiction under sections 4, 5, and 7 of the
NGA is limited to ``natural gas companies.'' \61\ In contrast, section
23(a) of the NGA directs the Commission ``to facilitate price
transparency in markets for the sale or transportation of physical
natural gas in interstate commerce'' \62\ including obtaining
information from ``any market participant.'' \63\ There is no
applicable statutory limitation on the collection of information that
may involve transportation through distribution-level facilities, as
applies to the Commission's traditional jurisdiction.\64\
---------------------------------------------------------------------------
\60\ Order No. 704 at P 6.
\61\ 15 U.S.C. section 717b-717i.
\62\ 15 U.S.C. section 717t-2(a)(1).
\63\ 15 U.S.C. section 717t-2(a)(3)(A).
\64\ Section 1(b) of the NGA, 15 U.S.C. section 717(b), provides
in part that the Commission's jurisdiction generally does not apply
to ``the local distribution of natural gas.''
---------------------------------------------------------------------------
38. In addition, the first sentence of section 23(a)(2) gives the
Commission broad authority to ``prescribe such rules as the Commission
determines necessary and appropriate to carry out the purposes of this
section,'' i.e. facilitating price transparency. This broad grant of
authority is followed, in the second sentence of the section, with the
requirement that the ``rules shall provide for the dissemination on a
timely basis of information about the availability and prices of
natural gas sold at wholesale and in interstate commerce.'' The
requirement in the second sentence, including the reference to ``gas
sold at wholesale,'' does not limit the broad authority granted by the
first sentence. Rather, the rules required by the second sentence
should be viewed as a subset of the rules the first sentence of section
23(a)(2) authorizes the Commission to adopt. Put another way, section
23(a)(2) should be interpreted as providing that the Commission may
adopt rules collecting information about any transactions, including
non-wholesale end-use transactions, if necessary to facilitate price
transparency, but such rules must include the collection of information
about wholesale transactions in interstate commerce.
39. This interpretation is buttressed by the fact that section
23(a)(3)(A) expressly permits the Commission to obtain ``the
information described in paragraph (2) from any market participant,'' a
term which includes end-users. EPAct 2005's de minimis threshold
requirement in section 23(d)(2) provides further support for this
position. That provision states:
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 this section.\65\
---------------------------------------------------------------------------
\65\ 15 U.S.C. section 717t-2(d)(2) (emphasis added).
The logical corollary to this Congressional directive is that a
user that has greater than de minimis market presence could be made
subject to the reporting requirement. By establishing a de minimis
threshold volume of 2.2 million MMBtu (and, as further explained
herein, exempting traditional retail transactions from reporting), the
Commission appropriately limits reporting by end-users only to those
users with a more than a de minimis market presence and only to those
end-use transactions that utilize, contribute to, or could contribute
to price index formation.
40. While a large industrial end-user may not be a customer ``at
wholesale,'' it is doubtless a ``market participant'' in the interstate
wholesale energy market and its actions may have a direct impact on the
wholesale market or market indices, especially in a localized area. We
also note that the collection of information on an annual basis is
qualitatively different than our customary regulation of rates, terms,
and conditions applicable to natural gas companies. Requiring reporting
from large end-users that engage in 2.2 million MMBtu of annual sales
or purchase transactions (other than transactions associated with
bundled retail tariff service) is a conservative outcome compared to
the broad authority granted to us by Congress in section 23 of the NGA.
Our approach strikes a balance between the data that the Commission
requires to meet its transparency-related obligations and the burden
placed upon market participants to provide this data.
41. However, not all end-use transactions have the potential to
contribute to the formation of price indices or rely upon price
indices. For example, traditional retail transactions, even those
involving annual volumes greater than the de minimis threshold, neither
utilize an index for a price nor contribute to index price formation.
These retail transactions are not relevant to the Commission's
transparency goals. A bundled retail transaction through an LDC at a
state-approved tariff rate is properly excluded from purchase and sales
volumes to be reported on Form No. 552.\66\ The reporting burden on
retail consumers would greatly outweigh any minimal transparency
benefit. To the extent that a potential respondent purchases or sells
gas at a bundled retail tariff rate, it should not
[[Page 55733]]
count those volumes towards the de minimis threshold and, if required
to submit Form No. 552, it would not include those volumes in its
report.\67\ We note that this ``bright-line'' clarification would also
resolve NGSA's concerns regarding a selling entity's ability to
identify what purchasers are consuming gas--if gas is sold by an LDC
under a bundled retail tariff rate, then it need not be reported.
---------------------------------------------------------------------------
\66\ We have drawn a parallel distinction in the electric
context. In Order No. 888, the Commission exercised its jurisdiction
over unbundled transmission to end-users in interstate commerce, yet
declined to exert jurisdiction over bundled retail transmission. See
Promoting Wholesale Competition Through Open Access Non-
discriminatory Transmission Services by Public Utilities; Recovery
of Stranded Costs by Public Utilities and Transmitting Utilities,
Order No. 888, 61 FR 21540 (May 10, 1996), FERC Stats. & Regs. ]
31,036, at p. 31,781 (1996). The U.S. Supreme Court approved of this
distinction in New York v. FERC, 535 U.S. 1, 28 (2002). While not a
jurisdictional question, in this rulemaking, we incorporate a
similar distinction between unbundled natural gas transactions to
consumers (which are reportable in Form No. 552 if they utilize or
contribute to the formation of a price index) and bundled
transactions through an LDC subject to state-approved tariff rates
(which are not reportable).
\67\ One caveat is that, if the end-user or other market
participant holds a blanket certificate from the Commission, it
must, at a minimum, submit the identification and price reporting
data required on Form No. 552.
---------------------------------------------------------------------------
42. This proposed approach is similar, though not identical, to the
Commission's jurisdictional reach over natural gas transportation
service to end-users. FERC exerts its customary jurisdiction over
direct transportation of natural gas from an interstate pipeline to an
end-user.\68\ However, the Commission has traditionally declined to
exercise jurisdiction over transportation to ``retail customers in a
localized geographical area behind either a town border station or
behind facilities * * * that connect to rural delivery points outside
the boundaries of towns.'' \69\ Where transportation to an end-user
occurs in interstate commerce and not as part of local distribution,
the Commission has jurisdiction.
---------------------------------------------------------------------------
\68\ See, e.g., Public Utilities Commission of the State of
California v. FERC, 900 F.2d 269 (D.C. Cir. 1990).
\69\ Kinder Morgan Interstate Gas Transmission LLC, 99 FERC ]
61,186, at n.30 (2002).
---------------------------------------------------------------------------
43. We conclude that exempting from reporting those volumes
associated with bundled retail transactions made at state-approved
tariff rates, while including volumes associated with direct pipeline-
to-end-user and other end-user transactions, is appropriate. This
modification regarding the reportability of certain end-use
transactions necessitates changes to the language of Form No. 552.\70\
---------------------------------------------------------------------------
\70\ One such modification is the definition of ``Physical
Natural Gas Transactions'' in the Definitions portion of current
Form No. 552. The definition clearly indicates that reportable
volumes are only those that utilize, contribute to, or may
contribute to the formation of price indices. The definition also
explicitly excludes volumes associated with bundled retail sales and
purchases at state-approved tariff rates.
---------------------------------------------------------------------------
E. Respondents Need Not Distinguish Between Transactions Based Upon
Location
44. Order No. 704 provided that a market participant must
categorize transaction volumes by whether each transaction was made at
a ``reportable location.'' Reportable locations are locations where
index developers currently collect fixed-price information for
transactions with Next-Day or Next-Month Delivery obligations, and
produce index prices. Thus, Order No. 704 tied the meaning of ``fixed-
price'' reported volumes to volumes that may be reported to index
developers at specific points. To this end, we directed our staff to
list on the Commission's Web site all reportable locations at which
fixed-price volumes were to be reported on Form No. 552.\71\
---------------------------------------------------------------------------
\71\ Order No. 704 at PP 60 and 101-102.
---------------------------------------------------------------------------
Requests for Rehearing and Clarification
45. NGSA requests rehearing of Order No. 704 so as to require
submission of data at all trading locations rather than limited to
specific reportable locations.\72\ NGSA argues that this approach would
be consistent with the Policy Statement on price reporting.\73\
Further, NGSA states that designated ``reportable locations'' will
change over time, hampering the Commission's long-term analysis of the
market.\74\ NGSA argues that limiting reported data only to specific
reportable locations would be more burdensome to most respondents than
reporting all aggregate, relevant data.\75\ Lastly, NGSA asserts that
different index developers utilize different means to collect data at
the same index point and, thus, data collected from market participants
for particular reportable points will not offer a reasonable comparison
to reported indices.\76\
---------------------------------------------------------------------------
\72\ NGSA comments at 5.
\73\ Id. at 6 (citing the Policy Statement).
\74\ Id. at 6-7.
\75\ Id. at 7.
\76\ Id.
---------------------------------------------------------------------------
46. Participants at the technical conferences echoed some of these
themes. The NiSource Companies (NiSource) and Encana, for example,
questioned how reporting was to be accomplished for certain reportable
locations given that different reporting services defined the locations
in multiple ways.
Commission Determination
47. We grant rehearing of Order No. 704 on this issue and provide
that respondents need not categorize volumes based upon whether such
volumes relate to transactions at specific price index locations. We
agree with NGSA that: (1) It would be substantially less burdensome for
market participants to provide aggregate data regarding their
transactions than to differentiate between volumes that occur within or
outside reportable locations; (2) defining workable ``reportable
locations'' would be difficult, would require substantial detail
regarding geographic scope and types of transactions at specific
locations, and would unduly complicate respondents' Form No. 552
responses; and (3) specific reportable locations would change on a
yearly basis, limiting the value of data collected by location. We also
understand that participants at the technical conferences indicated a
substantial preference for this modification.
48. The Policy Statement provides that the minimum standards for
data providers include a commitment to report ``each bilateral, arm's-
length transaction between non-affiliated companies in the physical
(cash) markets at all trading locations.'' \77\ Modification of Form
No. 552 to eliminate data collected at specific reporting locations
would make the annual reporting obligation consistent with the Policy
Statement. Consequently, for respondents that already comply with the
Policy Statement standards, data collection and reporting on Form No.
552 would be significantly less burdensome. In fact, we believe that it
would be easier for most entities that do not comply with the Policy
Statement standards to provide aggregate data for all reportable
transactions rather than to segregate data regarding transactions at
specific locations.
---------------------------------------------------------------------------
\77\ Policy Statement at P 34 (emphasis added).
---------------------------------------------------------------------------
49. Further, comments by conference participants and NGSA's request
for rehearing make clear that it would be administratively difficult to
geographically define each reportable location in a way that would
capture all transactions that were eligible for reporting to the
various price indices. This is due to the fact that different data
collection methodologies are used by index developers at the same point
as well as the fact that different index developers accept different
transactions from these points to form indices.
50. For these reasons, we grant rehearing of Order No. 704 and
determine that respondents need only provide aggregated data for
reportable transactions at all transaction locations. Respondents need
not provide data segregated by reportable location.\78\
---------------------------------------------------------------------------
\78\ Consistent with the determination, we will no longer direct
the Commission's staff to retain a list of reportable locations on
the Commission's Web site.
---------------------------------------------------------------------------
F. Balancing, Cash-out, Operational, and In-Kind Transactions Are
Reportable
51. In Order No. 704, we required market participants to report
sale and purchase volumes related to cash-outs,
[[Page 55734]]
imbalance make-ups, and operations.\79\ We noted that, while some
volumes related to such transactions are not utilized to create price
indices, many volumes do refer to or utilize such indices.\80\ The
Commission concluded that the data collected from such transactions is
useful in assessing how spot prices are being used commercially.
Specifically, the order required market participants to include on Form
No. 552 volumes related to royalty-in-kind transactions and purchases
and sales related to production and gathering functions.\81\
---------------------------------------------------------------------------
\79\ Order No. 704 at P 107.
\80\ Id. P 108.
\81\ Id.
---------------------------------------------------------------------------
Requests for Rehearing or Clarification
52. Regarding transactions on interstate pipelines, Shell and NGSA
seek rehearing of Order No. 704 so as to exclude cash-out, imbalance
makeup, and operational volumes from the realm of reportable
transactions. Both Shell and NGSA argue that such transactions do not
affect the interstate natural gas market, though they may often rely
upon natural gas indices for their price.\82\ Shell states that data
regarding such transactions may not reflect actual market activity as
prices may vary according to whether the pipeline or shipper owes gas
and there is a one-month lag on the timing of many makeup
transactions.\83\ For this reason, the use of index prices in makeup
transactions, Shell argues, does not reflect the value of natural gas
for purposes of assessing wholesale natural gas spot markets and will
actually distort relevant data received by the Commission.\84\ In the
alternative, if rehearing on this point is denied, Shell seeks
clarification that, if a pipeline provides imbalance cash-out data,
then shippers need not provide the identical data on Form No. 552.\85\
NGSA reiterates many of these arguments, adds that pipeline balancing
transactions are governed by the pipeline's tariff, and argues that
balancing should not be considered a purchase or sale in the wholesale
market.\86\
---------------------------------------------------------------------------
\82\ Shell comments at 14-15; NGSA comments at 11.
\83\ Shell comments at 14-15.
\84\ Id. at 15.
\85\ Id. at 16.
\86\ NGSA comments at 9-10. NGSA repeats many of these same
arguments in its subsequent supplemental comments at 4-6. See also
Shell comments at 15-16 (stating in passing that imbalance trading
transactions should not be considered a purchase or sale).
---------------------------------------------------------------------------
53. Regarding intrastate pipelines, Copano seeks clarification or
rehearing regarding whether ``non-interstate pipeline'' market
participants must report, and include for purposes of meeting the de
minimis threshold, volumes related to cash-outs and other operational
activities.\87\ Copano argues, much as does Shell and NGSA regarding
interstate pipelines, that these sorts of transactions are operational
in nature, are not based on market conditions, and provide no benefit
to the Commission's transparency goals.\88\
---------------------------------------------------------------------------
\87\ Copano comments at 8-9.
\88\ Id. at 9-10.
---------------------------------------------------------------------------
54. Regarding transactions involving end-users, AF&PA and IECA, in
a joint submittal, seek clarification or rehearing to exempt balancing-
type transactions from reporting. Additionally, these entities request
that blanket certificate holders under section 284.402, that hold such
a certificate solely by virtue of their status as a pipeline customer
engaged in balancing or cash out transactions pursuant to a consumer
level gas service contract, be allowed to forego filing of Form No.
552.\89\ AF&PA and IECA argue that the benefit of obtaining this
information is minimal compared to the burden of reporting the data.
They contend that: (1) Such transactions are often ``involuntary'' and
that it may be very difficult for end-users to determine whether their
balancing activity exceeds the de minimis threshold; (2) the applicable
volumes already likely are reported at the pipeline level; and (3)
balancing transactions that occur pursuant to individual end-use
contracts will not factor appreciatively into wholesale price
formation.\90\ They also state that it is likely that many end-user
blanket certificate holders under section 284.402 do not know that they
hold such certificate authority or that balancing provisions in
existing contracts with pipelines could trigger the rule's annual
reporting requirement.\91\
---------------------------------------------------------------------------
\89\ AF&PA/IECA comments at 6.
\90\ Id. at 4-6.
\91\ Id. at 6-7.
---------------------------------------------------------------------------
55. Shell seeks clarification that ``in-kind'' balancing
transactions of all stripes are not reportable transactions under the
rule as such transactions do not involve a ``sale'' or a ``purchase.''
\92\ Relatedly, NGSA requests clarification or rehearing, as necessary,
that the entity that purchases or sells royalty-in-kind interests is
responsible for reporting royalty-in-kind transactions--not well
operators.\93\ NGSA argues that well operators do not necessarily have
knowledge of the contractual relations of royalty interest holders.\94\
---------------------------------------------------------------------------
\92\ Shell comments at 15-16.
\93\ NGSA comments at 12-13.
\94\ Id. at 12.
---------------------------------------------------------------------------
56. Shell also seeks clarification regarding the location that
cash-out, in-kind, or other imbalance transactions occur for purposes
of determining whether the transaction occurs at a ``reportable
location.'' \95\ Shell requests further clarification as to whether
such transactions are considered ``next-day,'' ``next-month,'' or
``other'' for purposes of completing Form No. 552.\96\ Finally, Shell
seeks clarification that all production-related balancing activities,
such as those between producers and working interest owners, are not to
be reported.\97\ We understand that producers at the technical
conferences requested similar clarification from staff.
---------------------------------------------------------------------------
\95\ Shell comments at 17.
\96\ Id.
\97\ Id.
---------------------------------------------------------------------------
57. In supplemental comments, NGSA suggests that, if the Commission
continues to require the submission of cash-out transaction data
(including thermal reduction volumes), such data should be reported on
a separate line on Form No. 552.\98\
---------------------------------------------------------------------------
\98\ NGSA supplemental comments at 4.
---------------------------------------------------------------------------
58. A significant number of commenters at the technical conferences
raised questions regarding balancing transactions of various types.
Commenters wished to know whether balancing transactions were to be
reported on a ``net'' basis for each year or whether activity in each
direction (cash-ins and cash-outs) should be separately accounted.
Commission Determination
59. We deny the requests for rehearing. Balancing, cash-out,
operational, in-kind, and similar transactions must be reported on Form
No. 552 if they rely upon, contribute to, or could contribute to a
price index.
60. Section 23 of the NGA requires that our data collection have
``due regard'' for ``the integrity of [the physical natural gas]
markets, [and] fair competition.'' \99\ Public confidence in the
reporting of natural gas prices to gas price index developers and the
reasonable use and reliance on such indices in the market is squarely
within the Commission's purview. This includes not just transactions
that directly impact wholesale price formation, but also transactions
that reference indices. As we stated in Order No. 704, one of the goals
of Form No. 552 is to allow the Commission to ``not only understand the
transactions used to formulate price indices; it is to understand how
influential price indices are in the overall transacting of
[[Page 55735]]
natural gas in U.S. wholesale markets.'' \100\ It has been our
experience that a significant number of balancing, cash-out, and
similar transactions include references to price indices. Understanding
the magnitude of this reliance on price indices is therefore a
legitimate policy goal. Form No. 552 will provide this information and
we can conceive of no less intrusive way to obtain this relevant data.
---------------------------------------------------------------------------
\99\ 15 U.S.C. section 717t-2(a)(1).
\100\ Order No. 704 at P 73.
---------------------------------------------------------------------------
61. In any event, we do not agree with the proposition that
balancing transactions, as described by commenters, could not
themselves contribute to the formation of price indices. The fact that
a purchase or sale is made for operational or balancing, rather than
market, reasons is irrelevant. This includes, for example, base or
cushion gas purchases for storage facilities, balancing between
pipelines or between a supplier and a customer, and purchases of gas
for compression. Some portion of these transactions could be utilized
to establish index prices. Balancing, cash-out, operational, and in-
kind transactions should therefore be reportable on Form No. 552 to the
same extent as other types of transactions.\101\
---------------------------------------------------------------------------
\101\ As with the reporting of purchase and sale transactions,
we clarify that balancing transactions should be reported for both
cash-ins and cash-outs and not on a net basis.
---------------------------------------------------------------------------
62. Further, reporting of balancing transactions by all entities
subject to the annual reporting requirement is entirely appropriate.
Specifically, balancing transactions involving end-users are likely a
significant total of natural gas contracts that reference price
indices. Understanding the prevalence of such contracts may allow the
Commission and other market observers to assess weaknesses in price
index development.\102\
---------------------------------------------------------------------------
\102\ Technical requests regarding how these types of
transactions should be reported on Form No. 552 are addressed
through clarifications discussed elsewhere in this order. Regarding
the request for clarification by AF&PA and IECA on this point, the
Commission declines to clarify the Final Rule in the manner
suggested by the commenters. While AF&PA and IECA did not supply
sufficient detail in their request regarding the transactions of
concern to their members for us to offer more specific guidance, we
expect that the clarifications provided in this order will allow
these organizations' members to determine both whether they must
submit Form No. 552 and the transaction volumes that must be
reported therein.
---------------------------------------------------------------------------
63. For all these reasons, we continue to require that reportable
sales and purchases on Form No. 552 include balancing, cash-out,
operational, and in-kind transactions that utilize, contribute to, or
could contribute to the formation of a price index.
G. Safe Harbor
64. In Order No. 704, we noted our intent not to prosecute or
penalize companies for inadvertent reporting errors on Form No.
552.\103\ However, we drew a clear distinction between the safe harbor
provided to voluntary reporting to price index publishers in the Policy
Statement and the mandatory annual report required by Order No.
704.\104\ The Commission rejected calls to include a similar safe
harbor for the submission of Form No. 552.
---------------------------------------------------------------------------
\103\ Order No. 704 at P 114.
\104\ Id.
---------------------------------------------------------------------------
Requests for Rehearing or Clarification
65. Shell notes that the Commission stated that it ``does not
intend to prosecute or penalize parties for inadvertent errors in
reporting,'' but did not include a safe harbor provision for market
participants that attempt to comply in good faith with Order No. 704.
Shell urges the Commission to adopt an explicit, rebuttable presumption
of good faith as it did in the Policy Statement on price
reporting.\105\
---------------------------------------------------------------------------
\105\ Shell comments at 29-31.
---------------------------------------------------------------------------
66. Powerex Corporation (Powerex) notes that, in the April 2007
NOPR, the Commission responded to queries from ``several data providers
* * * as to whether they may report certain classes of products traded,
but not others.'' \106\ The April 2007 NOPR stated that ``a data
provider remains eligible for the safe harbor provisions if it reports
certain products, but not others, provided that it provides all of the
same type of transactions and that it notifies the Commission which
products it will report in its annual filing or other notification.''
\107\ The Commission stated that it would repeat this safe harbor
clarification in the final rule. However, no such clarification was
included in Order No. 704.
---------------------------------------------------------------------------
\106\ Powerex comments at 5.
\107\ Id.
---------------------------------------------------------------------------
67. In supplemental comments to the technical conferences, AGA
requests that the Commission institute a ``pilot program'' for
compliance with Order No. 704 for calendar year 2008 data.\108\ AGA
suggests that the Commission not penalize market participants that make
good faith efforts to complete Form No. 552 but ``make errors'' or
``include data that is inconsistent with the way other market
participants have completed the form.'' \109\ NGSA, in supplemental
comments, requests that the Commission adopt a safe harbor for 2008
calendar-year data, including allowing respondents ``to base
information * * * on transaction data collected using existing
processes and systems.'' \110\
---------------------------------------------------------------------------
\108\ AGA supplemental comments at 2-3.
\109\ Id.
\110\ NGSA supplemental comments at 3.
---------------------------------------------------------------------------
Commission Determination
68. The Commission herein adopts a one-year safe harbor, covering
transactions occurring in calendar year 2008 and reported on Form No.
552 on May 1, 2009. However, we decline to extend this safe harbor for
additional calendar year reporting.
69. The Policy Statement includes a safe harbor provision that
grants a data provider that adopts the Policy Statement standards a
rebuttable presumption that data submitted to index developers is
accurate, timely, and submitted in good faith.\111\ However, a similar
perpetual safe harbor is not warranted regarding the reporting of data
on Form No. 552. The Policy Statement set forth standards that data
providers could choose to adopt should they voluntarily elect to
provide data to price index developers. One goal of the Policy
Statement was to ``encourage [industry participants] voluntarily to
report energy transactions to the providers of price indices.'' \112\
The safe harbor that we adopted in the Policy Statement was a direct
extension of this policy goal.
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\111\ See Policy Statement at P 37.
\112\ Id. P 3.
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70. Form No. 552 is a mandatory annual filing adopted consistent
with EPAct 2005, not the voluntary reporting of price data to an index
developer. There is no policy need to provide an incentive for the
filing of Form No. 552 similar to the encouragement to reporting price
data to index developers. Other mandatory forms, such as FERC Form No.
2, do not include such a safe harbor. For this reason, we are not
persuaded that a perpetual safe harbor is warranted.
71. However, a one-year safe harbor (including data collected for
calendar year 2008 and reported by May 1, 2009) is appropriate. Market
participants have begun data collection for the current calendar year
without the benefit of an order on rehearing of Order No. 704. We
acknowledge that this Order on Rehearing and Clarification is issued
well after respondents' data collection has been underway for 2008.
Further, we herein offer a number of clarifications of Order No. 704
that may impact such data collection activities. A one-time safe harbor
for the 2009 Form No. 552 is, under these unique circumstances,
reasonable. Consistent with the Policy Statement, the
[[Page 55736]]
Commission finds that respondents submitting Form No. 552 in 2009 will
benefit from a rebuttable presumption that the data provided is
accurate and submitted in good faith. Further, we do not intend to
penalize respondents for errors in reporting on Form No. 552 provided
that respondents use reasonable efforts to comply with the regulations
regarding and instructions for Form No. 552. We emphasize that the
Commission expects respondents submitting Form No. 552 in 2009 to do so
in good faith and on a timely basis.
H. Additional Clarifications
72. In addition to resolution of the rehearing and clarification
issues discussed above, we clarify a number of minor or technical
aspects of Form No. 552.
Some Volumes Associated With Transactions Outside the Lower 48 States
Should Be Reported
73. The Canadian Association of Petroleum Producers (CAPP),
Canadian Suppliers,\113\ and Powerex request clarification, or in the
alternative, rehearing, that reported data should include only sales or
purchases made inside the geographic boundaries of the United
States.\114\ Marathon Oil Company (Marathon) and NGSA request
clarification or rehearing regarding the scope of the rule vis-
[agrave]-vis natural gas production in Alaska.\115\ AGA, in
supplemental comments, also requests that the Commission address this
issue.\116\
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\113\ Collectively, Encana Marketing (USA) Inc., Nexen Marketing
(USA) Inc., Petro-Canada Hydrocarbons Inc., and Talisman Energy Inc.
\114\ CAPP comments at 1; Canadian Suppliers comments at 3;
Powerex comments at 6-7.
\115\ Marathon comments at 4-5; NGSA comments at 13-14.
\116\ AGA supplemental comments at 6-9.
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74. Regarding transactions involving possible international
transportation, we clarify that: (1) Volumes originating outside the
lower 48 states and delivered at locations outside the lower 48 states
are not reportable; (2) volumes originating from inside the lower 48
states and delivered outside the lower 48 states are reportable; and
(3) volumes delivered inside the lower 48 states are reportable. Thus,
any volumes that originate or are delivered into the lower 48 states
should be reported on Form No. 552 to the same extent as purely
domestic volumes. Form No. 552 is designed to capture all transactions
that reference price indices or that could contribute to price indices
and these types of international transactions are not categorically
excluded.
Transactions Related to Exploration Activities, Production Area
Operations, and Gathering Functions Are Not Exempted From Reporting
75. Shell and NGSA request clarification or rehearing of Order No.
704 so as to categorically exclude exploration activities, production
area operations, and gathering functions from reporting. They argue
that the entirety of the Commission's rationale for including these
transactions is that these transactions often make use of price
indices.\117\ They also argue that these transactions do not impact the
wholesale interstate gas market and are excluded from traditional NGA
regulation under section 1(b) of the Act.\118\
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\117\ Shell comments at 9; NGSA comments at 11-12.
\118\ Shell comments at 10; NGSA comments at 11.
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76. In Order No. 704, the Commission stated that, ``while these
transactions may not affect the formation of price indices in wholesale
markets, these transactions often make use of price indices * * * to
the extent that transfers of value take place based on price indices,
it is important that the Commission and other market observers be able
to understand the extent of that transfer and its dependency on price
indices as well.'' \119\ As explained in the order, determining the
scope of price index reliance in the market is a significant goal of
this rulemaking. The public availability of this data will increase
market transparency and confidence. Transactions involving exploration
activities, production area operations, and gathering functions that
rely upon or could contribute to the creation of price indices are to
be reported in the same manner as other types of transactions.
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\119\ Order No. 704 at P 108.
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Transactions Involving Unprocessed Gas Are Not Reportable
77. Hess Corporation (Hess) requests rehearing of Order No. 704 so
as to exclude entities engaged in transactions behind a processing
plant priced pursuant to a percentage-of-proceeds contract under which
the producer is entitled to receive a percentage of the proceeds
realized by the buyer upon resale of the natural gas.\120\ Similarly,
the Oklahoma Independent Petroleum Association (OIPA) seeks rehearing
of Order No. 704 so as to exempt producers of natural gas that sell
wellhead gas at the initial first sales point under a percentage of
proceeds contract.\121\
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\120\ Hess comments at 1.
\121\ OIPA comments at 2.
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78. We agree with Hess and OIPA that transactions regarding
unprocessed gas should not be reported on Form No. 552 and should not
be counted when determining whether an entity falls below the de
minimis threshold. Transactions involving unprocessed natural gas are
not relevant to wholesale price formation.
A Customer of an Asset Manager Is Responsible for Reporting Volumes
Managed by the Asset Manager
79. Order No. 704 states that asset managers may not aggregate
customer volumes and report the same on Form No. 552.\122\ NGSA
requests that the Commission clarify that individual customers of asset
managers are responsible for the submission of Form No. 552 and
reporting volumes managed by the asset manager as well as any other
reportable sales or purchases.\123\
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\122\ Order No. 704 at P 98.
\123\ NGSA comments at 15.
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80. We clarify the rule in the manner suggested by NGSA. In Order
No. 704, we stated that asset managers may not report aggregated
information for their customers.\124\ However, this statement should
not be read so as to relieve customers that hire asset managers from
their obligation to file Form No. 552 if they are required to do so.
Individual customers of asset managers (assuming that their activities
do not fall below the de minimis threshold) are responsible for
reporting volumes both as managed by an asset manager and independently
sold and purchased. The Commission also notes that an asset manager, to
the extent that its market activities are not undertaken on behalf of
an asset management client, may itself be required to submit Form No.
552.
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\124\ Order No. 704 at P 98.
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A Public Joint Action Agency May Report an Aggregate of Members'
Volumes
81. Order No. 704 does not directly address the filing of Form No.
552 by public joint action agencies. APGA requests clarification that a
public joint action agency may aggregate members' annual volume data
for purposes of the report.\125\ APGA notes that, in Order No. 704,
aggregation is permitted between privately-owned affiliates.\126\
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\125\ APGA comments at 2-3.
\126\ Id. at 2 (citing Order No. 704 at P 94).
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82. We clarify that public joint action agencies, such as certain
members of APGA, will be allowed to report members' data on an
aggregate basis in the same manner as corporate affiliates. We see no
reason to treat public joint action agencies differently from private
[[Page 55737]]
corporate families. Allowing a public joint action agency to report
members' volumes will significantly reduce the reporting burden on
those members. Of course, members of public joint action agencies and
affiliates within a corporate family remain free to report separately,
should they wish. Additionally, we clarify that arms-length
transactions between members of a public joint action agency may be
reportable transactions.
Physically-Settled Non-NYMEX Options Are Reportable
83. Order No. 704 excluded from reporting NYMEX options that
physically settle. The rationale for this exclusion was that data
regarding these transactions did not necessarily relate to fixed-price
spot price formation, the data was readily available to the public
through NYMEX, and reporting these volumes on Form No. 552 would be
duplicative and burdensome.\127\ However, Order No. 704 does not
explicitly address non-NYMEX transactions that result in physical flow.
When such options are exercised, they result in physical deliveries in
the wholesale market. NGSA requests clarification and, if needed,
rehearing to ensure that physically-settled, non-NYMEX options are
included in reported volumes.\128\
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\127\ Order No. 704 at P 113.
\128\ NGSA comments at 14.
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84. We agree with NGSA and grant the requested clarification. A
physically-settled non-NYMEX transaction must be reported on Form No.
552 if it utilizes or could contribute to the formation of a price
index.
Certain ``NYMEX Plus'' Contracts Are Reportable
85. Order No. 704 excluded from reporting any type of financially-
settled transaction.\129\ NEM requests clarification regarding
reporting of ``NYMEX Plus'' contract volumes. Specifically, NEM
requests clarification regarding the definition of Physical Natural Gas
on Form No. 552.\130\ The form excludes from reporting ``any type of
financially-settled transaction.'' NEM is uncertain whether NYMEX Plus
contracts fall into this exclusion. NEM explains that under a NYMEX
Plus contract an entity purchases or sells a volume of gas on a
wholesale basis at a reportable location for a month or series of
months with the price determined by reference to the monthly settlement
price of a NYMEX futures contract plus an adder.\131\ NEM is unsure
whether such volumes should be reported on Form No. 552 line 5 as
``prices that refer to published next-month gas price indices'' or line
6 (the ``other'' category).\132\ NEM is also uncertain as to: (1) The
calendar year and months in which contract volumes related to a multi-
month or multi-year NYMEX Plus contract should be reported; and (2) the
price that should be reported on Form No. 552 if a price is to be set
at a future date.\133\
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\129\ Order No. 704 at P 111 and Form No. 552, Definition VII,
Physical Natural Gas.
\130\ NEM comments at 4-6.
\131\ Id. at 3.
\132\ Id. at 3-4.
\133\ NEM comments at 4-5.
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86. Based upon the facts as detailed by NEM, the Commission
believes that only a subset of NYMEX Plus contracts should be reported.
Specifically, we clarify that NYMEX Plus transactions are reportable
only when: (1) Executed during bid week and that can contribute to a
next-month price index, or (2) they utilize a NYMEX settlement price
during bid week that can contribute to a next-month index. In that
regard, the Commission is adding a new line between current lines 6 and
7 to page 5 of Form No. 552 for the purpose of reporting data regarding
NYMEX Plus and other ``triggered'' physical gas transactions.
87. Further, we clarify that, for all contracts where deliveries
occur or may occur over multiple calendar years and such volumes are
reportable, only volumes attributable for delivery that use or may
contribute to the formation of price indices during the subject
calendar year should be reported on Form No. 552. In Order No. 704, the
Commission indicated that transactions are to be reported based upon
whether their expected delivery dates are within the reporting year--
contract formation dates are irrelevant.\134\ For example, for a
contract that could contribute to the formation of a price index and
requires deliveries at times between July of the first year through
February of the next, the respondent should report July-December
volumes for the Form No. 552 corresponding to the first year's volumes
and January-February volumes in the next year's Form No. 552. For a
multi-year contract that relies on a price index to establish a price,
the relevant volumes should be reported in the year in which the index
is referenced.
---------------------------------------------------------------------------
\134\ Order No. 704 at P 60.
---------------------------------------------------------------------------
Bid-Week, Fixed Price Differential Physical Basis Transactions Tied to
the Last Day of Settlement Are Reportable
88. NGSA requests rehearing such that the definition of ``Fixed
Price'' in Form No. 552 includes bid-week fixed price differential
physical basis transactions tied to the last day of settlement.\135\
NGSA notes that these agreements form a material portion of the
reported transactions at index points.\136\ AGA, in supplemental
comments in the docket, suggests that physical basis transactions be
reported on a separate line on Form No. 552.\137\ NGSA argues that
including these volumes would ease the administrative burden on
respondents as these volumes would not need to be monitored and removed
from aggregate volume numbers.\138\
---------------------------------------------------------------------------
\135\ These types of transactions involve transfers of physical
natural gas utilizing basis differentials. The transactions are
executed during the bid-week at a fixed differential to the last day
of settlement.
\136\ NGSA comments at 8.
\137\ AGA supplemental comments at 5-6.
\138\ NGSA comments at 8.
---------------------------------------------------------------------------
89. The Commission agrees that Form No. 552 should include bid-
week, fixed price differential physical basis transactions. These
transactions are a significant aspect of wholesale natural gas markets
and utilize or could contribute to the formation of price indices.
Consistent with AGA's recommendation, we will include a new line item
in Form No. 552, requiring the reporting of all physical basis
transactions, including fixed differential basis transactions that can
contribute to or rely upon a price index.
All Data Provided on Form No. 552 Will Be Publicly Available
90. At least one participant at the technical conference requested
that the Commission act to protect allegedly proprietary information
contained in completed Form No. 552. Specifically, the concern was
raised by Samson Resources Company (Samson) that, by requiring
submission of data based upon transactions at specific locations, the
form would provide sensitive commercial information to competitors who
may already know the point or points where the respondent transacts.
Samson also claimed that the names of affiliates should be confidential
as well.
91. We reiterate that Form No. 552 data will be publicly available.
In Order No. 704, the Commission addressed requests that data included
on Form No. 552 be treated as confidential or proprietary.\139\ We
found that Congress directed the Commission to provide aggregate
information to the public. We balanced this transparency goal with the
asserted need for confidentiality. Among the factors we considered
were: (1) Data would be reported in the aggregate; (2) no specific
pricing information would be reported; (3) data
[[Page 55738]]
would be reported on a national level, not locally or regionally; and
(4) data would not be reported until four months following the
reporting year.\140\ We see no reason to modify our determination in
this regard. We note, however, that our determination herein to
eliminate the reporting of data at specific reportable locations,
further reduces any concerns that reported data is commercially
sensitive.
---------------------------------------------------------------------------
\139\ Order No. 704 at PP 82-84.
\140\ Id. P 83.
---------------------------------------------------------------------------
We Decline To Modify the Effective Date of the Rule
92. Under Order No. 704, respondents must submit Form No. 552 no
later than May 1, 2009 for data collected in calendar year 2008.\141\
We understand that one participant at the technical conference
requested that the Commission delay reporting of data until 2010 (for
calendar year 2009 data). NiSource argued that it did not have the
ability to electronically record data required by Form No. 552 and,
given that the Commission had yet to issue an order on rehearing, it
may be very difficult or impossible for some companies to comply with a
2009 filing date.
---------------------------------------------------------------------------
\141\ Id. P 105.
---------------------------------------------------------------------------
93. The Commission declines to modify the effective date of the
rule or the date by which Form No. 552 is first to be filed. We note
that no entity raised this issue on rehearing or a formal request for
clarification. We have confidence in respondents' capabilities to
report the general volume data requested on Form No. 552 by the May 1,
2009 filing date. With the adoption of a one-year safe harbor,
discussed above, concerns regarding the difficulty of collecting 2008
data for reporting in 2009 should be mitigated.
We Do Not at This Time Establish Additional Formal Procedures To
Address Market Participant Questions Regarding Form No. 552
94. NEM requests that the Commission establish ongoing procedures
in which staff may offer informal advice to market participants
regarding reporting requirements in Form No. 552. NEM proposes a
``technical compliance forum'' to include a combination of measures
such as an additional hotline, a designated interactive Web page for
industry questions regarding Form No. 552 (including a Frequently Asked
Questions page), designation of specific staff members to field
questions, and periodic technical conferences leading up to the May
2009 filing deadline.\142\ Additionally, AGA and Merrill Lynch
Commodities (Merrill Lynch), during the technical conference process,
suggested that staff complete and distribute a sample Form No. 552
based upon various types of transactions. AGA also requested in
supplemental comments that the Commission commit to provide further
guidance on the reporting obligation following submission of annual
reports in 2009.\143\
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\142\ NEM comments at 2.
\143\ AGA supplemental comments at 3.
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95. We do not believe that additional informational or educational
outreach regarding Form No. 552 is necessary at this time. To the
extent that additional clarification is necessary following the
issuance of this Order on Rehearing and Clarification, requests for
further clarification and rehearing are permitted and additional
technical conferences may be held at our discretion. Further, we note
that, once entities begin to complete Form No. 552 with calendar year
2008 data, respondents may direct informal questions through
appropriate means, including the new compliance help desk.\144\
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\144\ See Obtaining Guidance on Regulatory Requirements, 123
FERC ] 61,157 (2008).
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The Reach of the Safe Harbor Provision in the Policy Statement On
Natural Gas and Electric Price Indices
96. Referring to the 2003 Policy Statement, Order No. 704 stated,
in passing, that ``[a] market participant that does not hold blanket
sales certificates is not required to comply with the Policy Statement
processes, nor does it receive the safe harbor available in the Policy
Statement.'' \145\ Southern Company Services, Inc. (SCS) requests
clarification of this statement. SCS argues that non-jurisdictional
entities have engaged in price reporting while relying on an
interpretation of the Policy Statement's safe harbor provision. SCS
argues that the Policy Statement safe harbor applies to any ``data
provider'' regardless of whether the provider is a certificate
holder.\146\
---------------------------------------------------------------------------
\145\ Order No. 704 at P 96.
\146\ SCS comments at 2-3.
---------------------------------------------------------------------------
97. SCS's request is effectively a request to clarify the Policy
Statement, not Order No. 704. The referenced comment was not a
prerequisite to our determinations in the order. SCS's request is
inappropriate as a request for clarification of Order No. 704.
III. Information Collection Statement
98. The Office of Management and Budget (OMB) regulations require
that OMB approve certain reporting, recordkeeping, and public
disclosure (collections of information) imposed by an agency.\147\ The
information collection requirements for Form No. 552 respondents were
approved under OMB Control Nos. 1902-0242. This order further revises
these requirements in order to more clearly state the obligations
imposed in Order No. 704, but does not substantively alter those
requirements. OMB approval of this order is therefore unnecessary.
However, the Commission will send a copy of this order to OMB for
informational purposes only.
---------------------------------------------------------------------------
\147\ 5 CFR 1320.
---------------------------------------------------------------------------
IV. Environmental Analysis
99. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\148\ The
actions taken here fall within categorical exclusions in the
Commission's regulations for information gathering, analysis, and
dissemination, and for sales, exchange, and transportation of natural
gas that requires no construction of facilities.\149\ Therefore, an
environmental assessment is unnecessary and has not been prepared in
this rulemaking.
---------------------------------------------------------------------------
\148\ Order No. 486, Regulations Implementing the National
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. &
Regs ] 30,783 (1987).
\149\ 18 CFR 380.4(a)(5) and (a)(27).
---------------------------------------------------------------------------
V. Regulatory Flexibility Act
100. The Regulatory Flexibility Act of 1980 (RFA) \150\ generally
requires a description and analysis of 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. The RFA does not, however, mandate
any particular outcome in a rulemaking. At a minimum, agencies are to
consider the following alternatives: Establishment of different
compliance or reporting requirements for small entities or timetables
that take into account the resources available to small entities;
clarification, consolidation, or simplification of compliance and
reporting requirements for small entities; use of performance rather
than design standards; and exemption for certain or all small entities
from coverage of the rule, in whole or in part.
---------------------------------------------------------------------------
\150\ 5 U.S.C. 601-612.
---------------------------------------------------------------------------
101. The annual reporting requirement set forth in the Order on
Rehearing and Clarification will not have a significant economic impact
on a substantial number of small entities. The requirement for annual
reporting of
[[Page 55739]]
physical natural gas transactions will have minimal impact on small
entities. By incorporating a de minimis exemption into the regulations,
the Commission has reduced the number of small entities subject to the
requirements; de minimis entities without blanket sales certificates
will not be required to report. This reporting requirement will affect
small entities but the burden on them will be minimal. For each entity,
small or otherwise, that is required to comply with the annual
reporting requirement, the Commission estimates that the compliance
would require a one-time cost of approximately $4,000 and an annual
cost thereafter of $400. Although some costs would increase for market
participants with a greater number of transactions, we expect that that
increase would be likely offset because such entities would have
already compiled information regarding their transactions in the
aggregate. This amount is not a significant burden on small entities.
The de minimis exemption provides a regulatory alternative that will
reduce the economic impact on certain small entities from coverage of
the rule. Accordingly, the Commission certifies that the order will not
have a significant economic impact on a substantial number of small
entities.
VI. Document Availability
102. In addition to publishing the full text of this document in
the Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through FERC's Home Page (http://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.
103. 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.
104. 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.
VII. Effective Date
105. Changes to Order No. 704 adopted in this Order on Rehearing
and Clarification will become effective October 26, 2008.
The Commission orders:
The requests for clarification and rehearing are granted in part
and denied in part as discussed in the body of this order.
List of Subjects
18 CFR Part 260
Natural gas, Reporting and recordkeeping requirements.
18 CFR Part 284
Continental shelf; Natural gas; Reporting and recordkeeping
requirements.
18 CFR Part 385
Administrative practice and procedure; Electric power; Penalties;
Pipelines; Reporting and recordkeeping requirements.
By the Commission.
Kimberly D. Bose,
Secretary.
0
In consideration of the foregoing, the Commission amends Chapter I,
Title 18, Code of Federal Regulations to read as follows:
PART 260--STATEMENTS AND REPORTS (SCHEDULES)
0
1. The authority citation for part 260 continues to read as follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.
0
2. Sec. 260.401 is revised as follows:
0
a. Paragraph (a) is amended by removing the word ``reporting'' between
the words ``annual'' and ``report.''
0
b. Paragraph (b)(1) introductory text is amended by removing the word
``wholesale,'' between the words ``in'' and ``physical'' and removing
the word ``As'' and inserting the words, ``However, as'' at the
beginning of the final sentence.
0
c. Paragraph (b)(1)(i) is amended by removing the word ``and'' at the
end of the paragraph.
0
d. Paragraph (b)(1)(ii) is revised and paragraph 260.401(b)(1)(iii) is
added to read as follows:
Sec. 260.401 FERC Form No. 552, Annual Report of Natural Gas
Transactions.
* * * * *
(b) * * *
(1) * * *
(ii) It engages in reportable physical natural gas sales that
amount to less than 2,200,000 MMBtus for the previous calendar year;
and
(iii) It engages in reportable physical natural gas purchases that
amount to less than 2,200,000 MMBtus for the previous calendar year.
* * * * *
PART 284--CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS UNDER THE
NATURAL GAS POLICY ACT OF 1978 AND RELATED AUTHORITIES
0
3. 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.
0
4. Section 284.403(a) is amended by removing the word ``must'' in the
final sentence, and inserting the word ``Seller'' in its place.
Note: The following appendix will not be published in the Code
of Federal Regulations.
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