[Federal Register: December 2, 2008 (Volume 73, Number 232)]
[Rules and Regulations]
[Page 73493-73518]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02de08-15]
[[Page 73493]]
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Part III
Department of Energy
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Federal Energy Regulatory Commission
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18 CFR Part 284
Pipeline Posting Requirements Under Section 23 of the Natural Gas Act;
Final Rule
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 284
[Docket No. RM08-2-000; Order No. 720]
Pipeline Posting Requirements Under Section 23 of the Natural Gas
Act
November 20, 2008.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
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SUMMARY: In this Final Rule, the Commission adds regulations to require
certain major non-interstate natural gas pipelines to post daily
scheduled volume information and design capacity for certain points.
The Commission also revises its regulations to require interstate
natural gas pipelines to post information regarding the provision of
no-notice service. The posting requirements will facilitate price
transparency in markets for the sale or transportation of physical
natural gas in interstate commerce to implement section 23 of the
Natural Gas Act, 15 U.S.C. 717t-2 (2000 & Supp. V 2005).
DATES: Effective Date: This rule will become effective January 2, 2009.
FOR FURTHER INFORMATION CONTACT: Christopher Ellsworth (Technical),
Office of Enforcement, Federal Energy Regulatory Commission, 888 First
Street, NE., Washington, DC 20426, (202) 502-8228, Gabriel Sterling
(Legal), Office of Enforcement, Federal Energy Regulatory Commission,
888 First Street, NE., Washington, DC 20426, (202) 502-8891.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction and Summary
II. Procedural Background
III. Authority for the Rule
A. Posting NOPR
B. Comments
C. Commission Determination
IV. Need for the Rule
A. Posting NOPR
B. Comments
C. Commission Determination
V. Pipeline Posting Requirements
A. Overview
B. Definition of Major Non-Interstate Pipeline
1. Posting NOPR
2. Comments
3. Commission Determination
C. Scheduled Flow Information on Major Non-Interstate Pipelines
1. Posting NOPR
2. Comments
3. Commission Determination
D. Receipt and Delivery Point Posting for Major Non-Interstate
Pipelines
1. Posting NOPR
2. Comments
3. Commission Determination
E. Exemptions to the Major Non-Interstate Pipeline Posting
Requirements
1. Non-Interstate Pipelines That Are Upstream of a Processing,
Treatment, or Dehydration Plant
2. Non-Interstate Pipelines that Deliver More Than Ninety-Five
Percent of Volumes to Retail Customers
3. Non-Interstate Storage Providers
4. Other Exemptions and Safe Harbor
F. Posting of No-Notice Service Information by Interstate
Pipelines
1. Posting NOPR
2. Comments
3. Commission Determination
VI. Effective Date of the Final Rule and Compliance Deadlines
VII. Information Collection Statement
VIII. Environmental Analysis
IX. Regulatory Flexibility Act
X. Document Availability
XI. Effective Date and Congressional Notification
I. Introduction and Summary
1. This Final Rule implements the Commission's authority under
section 23 of the Natural Gas Act (NGA),\1\ as added by the Energy
Policy Act of 2005 (EPAct 2005),\2\ to facilitate transparency in
markets for the sale or transportation of natural gas in interstate
commerce by requiring major non-interstate pipelines and interstate
pipelines to post certain data on their Internet Web sites.
Specifically, the Final Rule requires major non-interstate pipelines,
defined as those natural gas pipelines that deliver more than 50
million MMBtu per year, to post scheduled flow information and to post
information for each receipt and delivery point with a design capacity
greater than 15,000 MMBtu per day. The Final Rule also requires that
interstate pipelines post information regarding no-notice service.
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\1\ Section 23 of the Natural Gas Act; 15 U.S.C. 717t-2 (2000 &
Supp. V 2005).
\2\ Energy Policy Act of 2005, Public Law No. 109-58, sections
1261 et seq., 119 Stat. 594 (2005).
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2. The postings required here will increase price transparency in
the interstate natural gas markets by providing information about the
supply and demand fundamentals that underlie those markets. In this
way, the Commission will meet the goal set forth by Congress in section
23 of the NGA ``to facilitate price transparency in markets for the
sale or transportation of physical natural gas in interstate
commerce,'' \3\ and, at the same time, will respond to commenters'
concerns about the potential cost and burden of posting flow
information.
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\3\ Section 23(a)(1) of the NGA; 15 U.S.C. 717t-2(a)(1) (2000 &
Supp. V 2005).
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II. Procedural Background
3. The posting requirements adopted here are grounded in the
Commission's authority under section 23 of the NGA (as added by EPAct
2005), which directs the Commission, in relevant part, to obtain and
disseminate ``information about the availability and prices of natural
gas at wholesale and in interstate commerce.'' \4\ This provision
enhances the Commission's authority to ensure confidence in the
nation's natural gas markets. The Commission's market-oriented policies
for the wholesale natural gas industry require that interested persons
have broad confidence that reported market prices accurately reflect
the interplay of legitimate market forces. Without confidence in the
efficiency of price formation, the true value of transactions is very
difficult to determine.
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\4\ Section 23(a)(2) of the NGA, 15 U.S.C. 717t-2(a)(2) (2000 &
Supp. V 2005).
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4. On April 19, 2007, the Commission issued a Notice of Proposed
Rulemaking (Initial NOPR) to explore methods to implement our authority
under NGA section 23. In the Initial NOPR, the Commission set forth two
separate proposals. The first proposal addressed an annual reporting
requirement for certain natural gas market participants and the second
proposal addressed a daily requirement for intrastate pipelines to post
flow information.\5\ On December 21, 2007, the Commission bifurcated
the proceeding into two dockets: The Commission addressed the annual
reporting requirement in a Final Rule issued in Docket No. RM07-10-
000,\6\ and addressed the daily posting requirement for natural gas
pipelines in a new Notice of Proposed Rulemaking, in Docket No. RM08-2-
000 (Posting NOPR).
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\5\ Initial NOPR at P 1-2. In this preamble, we use the term
``flow information'' generically to include both scheduled volume
information and actual flow information. We use the term ``scheduled
volumes'' herein because it is more precise: The terms ``scheduled
flows'' or ``scheduled flow volumes'' could be confused with the
term ``actual flows.'' In the Posting NOPR, we used the terms
``scheduled flows'' and ``scheduled flow volumes.''
\6\ Transparency Provisions of Section 23 of the Natural Gas
Act, Order No. 704, 73 FR 1014 (Jan. 4, 2008), FERC Stats. and Regs.
] 31,260 (2007), order on reh'g, Order No. 704-A, 73 FR 55726 (Sept.
26, 2008), FERC Stats. & Regs. ] 31,275 (2008) reh'g pending.
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5. In the Posting NOPR, we proposed to require both interstate and
certain major non-interstate pipelines to post on public Internet Web
sites capacity, daily scheduled flow and daily actual flow information.
The proposal required posting of capacity and daily actual flow
information by some intrastate pipelines, with some changes relative to
[[Page 73495]]
the Initial NOPR. Under the proposal contained in the Posting NOPR,
interstate pipelines would be required to post daily actual flow
information in addition to the currently required posting of capacity
and daily scheduling information. Major non-interstate pipelines would
be required to post daily scheduled flow information in addition to
capacity and daily actual flow information. As explained in the Posting
NOPR, the Commission believed that the proposal would facilitate price
transparency in markets for the sale or transportation of physical
natural gas in interstate commerce.
6. The Commission issued the Posting NOPR to develop the record
more fully, particularly as to the proposals regarding interstate
natural gas pipelines. The Posting NOPR was intended to give interstate
natural gas pipelines sufficient notice of the changes that seemed
necessary to implement adequately section 23 of the NGA.\7\ Also, in
the Posting NOPR, we directed staff to hold a technical conference to
address implementation issues associated with the proposal, such as
obtaining and posting actual flow information and obtaining and posting
information from storage facilities.\8\
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\7\ Posting NOPR at P 2.
\8\ Id. at P 8.
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7. As directed by the Commission, staff held a technical conference
on April 3, 2008. Comments on the Posting NOPR were due on March 13,
2008; reply comments on April 14, 2008. The Commission received fifty-
five comments and nineteen reply comments.\9\
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\9\ A list of commenters and abbreviations for the commenters is
contained in Appendix A.
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III. Authority for the Rule
A. Posting NOPR
8. In the Posting NOPR, we provided our interpretation of section
23 of the NGA and the Commission's authority to enhance transparency in
the interstate natural gas markets. We concluded that Congress granted
us broad authority in EPAct 2005, placing non-interstate pipelines
within the Commission's transparency authority under section 23 of the
GA in order to ensure--for the entirety of the wholesale, physical
natural gas market--transparency of price and availability, including
transparency of market price formation. As we stated in both the
Initial NOPR and Posting NOPR, ``[w]hile distinctions between
intrastate and interstate natural gas markets may be meaningful from a
legal perspective, they are not meaningful from the perspective of
market price formation.'' \10\
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\10\ Initial NOPR at P 20; Posting NOPR at P 25.
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B. Comments
9. Several commenters agree that the Commission has broad
transparency authority under section 23 of the NGA, including authority
over non-interstate pipelines.\11\ APGA supports the Commission's
contention that the statute authorizes obtaining information from ``any
market participant'' and not just ``natural gas companies'' as ``tacit
recognition that in order to collect the necessary information about
the wholesale and interstate market, the Commission might well need to
collect information from entities not historically subject to FERC
jurisdiction.'' \12\
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\11\ APGA Comments at 3-4; TIPRO Comments at 1-2; Yates Comments
at 4.
\12\ APGA Comments at 4.
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10. A significant number of commenters hold a different view, and
contend that the term ``any market participant,'' contained in section
23(a)(3)(A) of the NGA, does not include non-interstate pipelines. TPA
asserts that the term ``any market participant'' is limited to the
participants in wholesale interstate natural gas markets.\13\ Thus,
according to TPA, the Commission exceeds its authority under the
transparency provisions by subjecting ```non-interstate' entities that
do not participate in interstate sales markets'' to its transparency
authority.\14\ Further, TPA contends that had ``Congress sought to
expand the Commission's jurisdiction to entities that do not
participate in the interstate commerce market, it could have used the
language `affecting interstate commerce,' which has historically been
read as a more expansive grant of authority.'' \15\ Similarly, Chevron
Pipelines contends that because Congress did not expressly include
intrastate pipelines in section 23, ``one must conclude that the
Commission's jurisdiction was intended by Congress to be no greater
following the enactment of section 23 than that which existed prior to
the passage of that section.'' \16\
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\13\ TPA Comments at 35.
\14\ Id. at 36.
\15\ Id. at 39 (citing City of Centralia v. FERC, 661 F.2d 787
(9th Cir. 1981) and Columbia Gas Transmission Corp., 3 FERC ]
61,115, at 61,239 n.1 (1978)).
\16\ Chevron Pipelines Comments at 9-10.
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11. Certain commenters assert that, contrary to the Commission's
conclusions, the de minimis exemption does not aid in the
interpretation of the term ``any market participant.'' TPA interprets
the de minimis exemption to mean that ``the Commission should not
require those with a de minimis presence in the interstate market to be
subject to an added reported burden.'' \17\
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\17\ TPA Comments at 44.
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12. Several commenters argue that section 1 of the NGA bars the
Commission from obtaining and disseminating information from a non-
interstate pipeline. TPA claims that sections 1(b) and 1(c) of the NGA
limit the Commission's transparency authority under section 23 of the
NGA.\18\ TPA also contends that ``extensive case law show[s] that
Congress has consistently respected the distinction between interstate
and intrastate sale and transportation of natural gas.'' \19\
Similarly, Copano Energy believes that section 1(b) of the NGA
precludes the Commission from exercising its transparency authority
over transportation of natural gas wholly in intrastate commerce.\20\
In support, Copano Energy points to Union Oil Company of America v.
FPC,\21\ in which the court stated that the ``Natural Gas Act limits
the gathering of intrastate data to gathering it from companies falling
under the Commission's jurisdiction.'' \22\ Commenters argue that
because Congress did not revise section 1 of the NGA, that section
precludes the Commission from exercising transparency authority over
non-interstate pipelines.\23\
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\18\ Id. at 42.
\19\ Id. at 43.
\20\ Copano Energy Comments at 6.
\21\ 542 F.2d 1036 (9th Cir. 1976).
\22\ Id. at 1039.
\23\ See, e.g., Copano Energy Comments at 6.
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13. Several commenters state that a posting rule on non-interstate
pipelines would constitute improper regulation of a non-interstate
pipeline's operations and rates. TPA contends that the pipeline posting
requirement would ``directly regulate the operations of non-interstate
pipelines'' because the posting of data regarding mainline segments
would require many non-interstate pipelines ``to define segments on
their systems and to install metering equipment to measure gas at those
segments.'' \24\ Such meters, in turn, would affect the operations of
pipelines, hinder efficiency and raise prices.\25\ Similarly, DCP
Midstream holds that a pipeline posting requirement would impermissibly
interfere with states' regulation of intrastate gas pipelines. DCP
Midstream reasons that the costs to meet the requirement would be borne
by intrastate customers and rate payers
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which would encroach upon state ratemaking authority.\26\
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\24\ TPA Comments at 40.
\25\ Id.
\26\ DCP Midstream Comments at 7-8; see also Railroad Commission
of Texas Comments at 7.
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14. Other commenters assert that two clauses in section 23 preclude
the Commission's authority to obtain information about gas that flows
on a non-interstate pipeline because such gas is sold only in
intrastate commerce, not in interstate commerce. First, commenters
contend that the statutory language in subsection (a)(1) ``for the sale
or transportation of physical natural gas in interstate commerce''
limits the type of price transparency that the Commission may
facilitate.\27\ Second, commenters contend that the statutory language
in subsection (a)(2), which permits the Commission to issue rules that
provide for the ``disseminat[ion] * * * [of] information about the
availability and prices of natural gas sold at wholesale and in
interstate commerce,'' does not include information about gas that
flows on a non-interstate pipeline, because it is not ``sold at
wholesale and in interstate commerce.'' \28\ For instance, TPA argues
that this language does not authorize the Commission to mandate the
posting of ``data about transportation of gas that may never be `sold
at wholesale and in interstate commerce,' '' as it is ``directed at
increased transparency in sales and transportation in interstate
commerce.'' \29\
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\27\ See, e.g., Atmos Comments at 11-12.
\28\ See, e.g., DCP Midstream Comments at 8-9. See also Atmos
Comments at 11-12.
\29\ TPA Comments at 35 (emphasis original).
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C. Commission Determination
15. Section 23 of the NGA gives the Commission broad authority to
facilitate price transparency in the interstate natural gas market. For
that purpose, section 23 further authorizes the Commission to obtain
and disseminate information. As now explained, the regulations
promulgated in this Final Rule do not exceed that broad authority.
16. Section 23(a)(1) of the NGA directs the Commission to:
``facilitate price transparency in markets for the sale or
transportation of physical natural gas in interstate commerce, having
due regard for the public interest, the integrity of those markets,
fair competition, and the protection of consumers.'' \30\ Congress left
to the Commission's discretion whether to enact rules to carry out this
direction and provided that any rules implementing this section provide
for public dissemination of the information gathered:
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\30\ 15 U.S.C. 717t-2(a)(1) (2000 & Supp. V 2005).
The Commission may prescribe such rules as the Commission
determines necessary and appropriate to carry out the purposes of
this section. The rules shall provide for the dissemination, on a
timely basis, of information about the availability and prices of
natural gas sold at wholesale and in interstate commerce to the
Commission, State commissions, buyers and sellers of wholesale
natural gas, and the public.\31\
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\31\ 15 U.S.C. 717t-2(a)(2) (2000 & Supp. V 2005).
17. Further, section 23(a)(3)(A) of the NGA allows the Commission
``to obtain the information * * * from any market participant.'' \32\
By using the term ``market participant,'' Congress deliberately
expanded the universe of entities subject to the Commission's
transparency authority beyond the entities subject to the Commission's
traditional rates, terms, and conditions jurisdiction under other
sections of the NGA. The term ``market participant'' is not defined in
the NGA and is not on its face limited to otherwise jurisdictional
entities. As we explained in the Posting NOPR, this authorization is
expansive. Congress was aware that other sections of the NGA limited
the scope of entities subject to the Commission's traditional
regulatory authority to natural gas companies as that term is defined
in the statute, but chose not to apply this same limitation in section
23. Congress clearly recognized that the Commission might not obtain
sufficient price transparency from those ``natural gas companies''
subject to our traditional regulatory authority. This is consistent
with the Commission's findings here that a complete picture of the
interstate natural gas market and the supply and demand fundamentals
underlying that market require information from non-interstate natural
gas pipelines.\33\
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\32\ Section 23(a)(3)(A) of the NGA; 15 U.S.C. 717t-2(a)(3)(A)
(2000 & Supp. V 2005).
\33\ We have recently stated in Order No. 704-A that the term
``market participant'' in section 23 of the NGA is not limited only
to natural gas pipelines, but to all relevant segments of the
natural gas supply and distribution chain. Order No. 704-A at P 37.
As we discussed in this previous exercise of our authority under
section 23 of the NGA, the statute grants broad latitude to the
Commission to effectuate Congressional transparency goals.
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18. Moreover, the statutory language emphasizes the broad meaning
of the phrase ``market participant'' by adding ``any'' as a descriptor.
Our authority attaches not to a subset of market participants (for
example, only those market participants traditionally subject to our
regulation), but to any such participant.\34\ Court precedent confirms
that the word ``any'' gives the term it modifies (in this case,
``market participant'') an expansive meaning.\35\ We believe that
Congress used the expansive term ``any market participant'' because it
intended to provide broad transparency authority to the Commission. By
this choice, Congress recognized that the Commission may need to obtain
information from a wide variety of entities in order to facilitate
transparency.
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\34\ See Posting NOPR at P 28.
\35\ Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 31-32 (2004) (the
word ``any'' gives the word it modifies an expansive reading);
Dep't. of Housing and Urban Dev. v. Rucker, 535 U.S. 125, 130-31
(2002); TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (one must give
effect to each word in a statute so that none is rendered
superfluous); United States v. Gonzales, 520 U.S. 1, 5 (1997)
(``any'' is an expansive term, meaning ``one or some
indiscriminately of whatever kind,''); New York v. EPA, 443 F.3d
880, 885-87 (DC Cir. 2006) (the word ``any'' is broadly construed to
reflect Congress' intent that all types of physical changes are
subject to the Clean Air Act's New Source Review program).
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19. The Commission disagrees with commenters who argue that section
1(b) of the NGA precludes the Commission from imposing the daily
posting requirement on non-interstate pipelines. Section 1(b) of the
NGA provides that the ``provisions of this chapter * * * shall apply to
the transportation of natural gas in interstate commerce, to the sale
in interstate commerce of natural gas for resale * * *'' and that such
provisions ``shall not apply to any other transportation or sale of
natural gas.'' \36\ Likewise, we disagree that section 23 has limited
application only to ``natural gas companies.'' Section 1 is not
referenced in section 23 and the term ``natural gas company'' is
nowhere found in the section. Including such a reference would have
been the simplest way for Congress to demonstrate an intent to limit
the Commission's transparency authority only to entities which we
already regulate.
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\36\ Section 1(b) of the NGA, 15 U.S.C. 717(b).
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20. We likewise disagree with certain commenters' arguments
regarding application of pre-EPAct 2005 caselaw in this circumstance.
The cases cited by commenters apply the jurisdictional limits set forth
in section 1 of the NGA prior to the enactment of EPAct 2005.\37\ These
arguments run afoul of the principle of statutory construction that
``Congress is presumed to be aware of an administrative or judicial
interpretation of a statute.'' \38\ Thus, Congress was
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presumably aware that prior to the enactment of section 23, the NGA
could be construed as limiting the Commission's authority to obtain
data on intrastate natural gas flows to obtaining it from companies
falling under the Commission's jurisdiction.\39\ In using the term
``any market participant'' instead of ``natural gas company,'' Congress
signaled its intent to expand the Commission's transparency authority
beyond the universe of natural gas companies to which it would
otherwise be limited. TPA observes that courts have held that the
Commission cannot exceed its statutory authority.\40\ This is an
unremarkable and unassailable conclusion, but one that provides no
guidance where the issue is not whether the Commission may exceed its
statutory authority but what is the extent of the Commission's
transparency authority.
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\37\ See, e.g., Union Oil Co., 542 F.2d at 1039. In a post-EPAct
2005 case as noted by commenters, Transmission Agency of N. Cal. v.
FERC, the U.S. Court of Appeals for the DC Circuit discussed the
limits of the Commission's jurisdiction, but that court was not
reviewing the NGA, let alone section 23. 495 F.3d 663 (DC Cir.
2007).
\38\ Lorillard v. Pons, 434 U.S. 575, 580 (1978) (internal
citations omitted); accord 2A Norman J. Singer, Sutherland Statutory
Construction sec. 45.12 (5th ed. 1992) (``legislative language will
be interpreted on the assumption that the legislature was aware of *
* * judicial decisions'').
\39\ Union Oil Co., 542 F.2d at 1039 (Observing that the NGA
limits the Commission's ``gathering of intrastate data to gathering
it from companies falling under the Commission's jurisdiction'').
\40\ Reply Comments of TPA at 16-17 (citing Transmission Agency
of N. Cal., 495 F.3d 663 and United Distrib. Cos. v. FERC, 88 F.3d
1105 (DC Cir. 1996)).
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21. For similar reasons, we do not find persuasive the argument
that Congress could have expressed its intent to subject non-interstate
pipelines to the Commission's transparency authority only by revising
or amending section 1 of the NGA. First, section 1 of the NGA
delineates the set of entities subject to the Commission's traditional
ratemaking and certificate authority. If Congress amended section 1 of
the NGA to apply to a new set of entities, it would have been providing
the Commission not only a limited grant of transparency authority, but
the broader grant of authority that section 1 entails. Second, altering
the exceptions in section 1, as commenters suggested, is not the only
way to alter the statute to give the Commission transparency authority.
Section 23 could, and in fact did, confer such authority separately
from our authority under section 1. Third, if Congress intended to
exclude non-interstate pipelines from the Commission's authority under
section 23 of the NGA, it would have used the term ``natural gas
company'' in section 23, instead of the term ``any market
participant.''
22. Nevertheless, while the authority granted to us in section 23
is broad, we do not mean to imply that the Commission's authority to
obtain information from ``any market participant'' is plenary. In
section 23, Congress limited our transparency authority in three
respects. First, Congress directed the Commission to ``facilitate price
transparency in markets for the sale or transportation of physical
natural gas in interstate commerce. * * *'' \41\ Thus, any information
collected and disseminated must be for the purpose of price
transparency in those markets. We do not interpret this language to
limit the Commission to obtaining information only about physical
natural gas sales or transportation in those markets, however, provided
that the information obtained and disseminated pertains to price
transparency in those markets. Second, Congress required that the
Commission's rules ``provide for the dissemination, on a timely basis,
of information about the availability and prices of natural gas sold at
wholesale and in interstate commerce. * * *'' \42\ Again, this language
does not limit the type of information the Commission could collect to
implement its mandate, provided that such information is ``about''
(i.e., pertains to) the ``availability and prices of natural gas sold
at wholesale and in interstate commerce.'' Where transportation or
sales of natural gas are not in interstate commerce, they nonetheless
fall under the Commission's transparency mandate if they affect the
availability and prices of natural gas at wholesale and in interstate
commerce.
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\41\ Section 23(a)(1) of the NGA; 15 U.S.C. 717t-2(a)(1) (2000 &
Supp. V 2005).
\42\ Section 23(a)(2) of the NGA; 15 U.S.C. 717t-2(a)(2) (2000 &
Supp. V 2005).
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23. Perhaps the most important limitation on our transparency
authority is contained in section 23(d)(2) which mandates an exemption
from any reporting for ``natural gas producers, processors, or users
who have a de minimis market presence. * * *'' \43\ It is noteworthy
that this limitation does not exempt all producers and all processors
from reporting, but exempts only producers that have a de minimis
market presence and only processors that have a de minimis market
presence. Section 1(b) of the NGA explicitly excludes these entities
from the Commission's traditional regulation. If, as some commenters
assert, Congress did not intend to give the Commission authority over
any entity excluded by section 1(b) of the NGA, a de minimis exemption
would have been unnecessary; in other words, section 23(d)(2) would
have been surplusage. Congress is not presumed to enact surplus
language.\44\ To avoid this improper result, we interpret section 23 of
the NGA to give effect to the de minimis language by interpreting the
term ``any market participant'' to include those entities otherwise
excluded from the Commission's NGA jurisdiction by section 1(b) of the
act.
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\43\ Section 23(d)(2) of the NGA; 15 U.S.C. 717t-2(d)(2) (2000 &
Supp. V 2005).
\44\ City of Roseville v. Norton, 348 F.3d 1020, 1028 (DC Cir.
2003) (citing Babbitt v. Sweet Home Chapter of Cmty. for a Greater
Oregon, 515 U.S. 687, 698 (1995)).
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24. The regulations promulgated by this Final Rule reflect
Congress' limitations on the Commission's authority. The Commission's
traditional regulatory authority remains limited to ``natural gas
companies'' under section 1 of the act. Section 23 of the NGA
authorizes the Commission only to obtain and disseminate information.
The Commission is not regulating the intrastate operations of non-
interstate pipelines; nor is the Commission regulating the rates or
terms and conditions of service for non-interstate pipelines.
Consistent with its limited transparency authority set forth in section
23 of the NGA, the Commission will require major non-interstate
pipelines only to post information.
25. Based upon the text of section 23 of the NGA and the clear
intent of Congress, we determine that we have ample authority to issue
this Final Rule, including the promulgation of regulations requiring
additional posting obligations on both interstate and major non-
interstate pipelines.
IV. Need for the Rule
A. Posting NOPR
26. As discussed in the Posting NOPR, section 23 of the NGA is a
clear expression of Congress' belief that the Commission may rightly
perceive a need ``to facilitate price transparency in markets for the
sale or transportation of physical natural gas in interstate commerce,
having due regard for the public interest, the integrity of those
markets, and the protection of consumers.'' Section 23 further provides
that the Commission may issue such rules as it deems necessary and
appropriate to ``provide for the dissemination, on a timely basis, of
information about the availability and prices of natural gas sold at
wholesale and interstate commerce to the Commission, State commissions,
buyers and sellers of wholesale natural gas, and the public.'' The
Posting NOPR stated that natural gas markets function more efficiently,
and market problems are more readily identifiable, if participants and
observers have timely access to
[[Page 73498]]
natural gas transportation data. As we stated in Order No. 636:
The Commission believes that * * * it is vital to give all gas
purchasers ([local distribution companies (LDCs)] and end users,
such as industrials and gas-fired electric generators) the ability
to make market-driven choices about the price of gas as a commodity
and about the cost of delivering the gas. Simply put, efficiency in
the national gas market can be realized only when the purchasers of
a commodity know, in a timely manner, the prices of the distinct
elements associated with the full range of services needed to
purchase and then deliver gas from the wellhead to the burnertip.
Only then will gas purchasers be able to purchase, based upon their
needs, the exact services they want with full recognition of the
prices that they would have to pay. And only then will the
Commission be assured that all gas is transported to the market
place on fair terms. What best serves the interests of gas
purchasers--the ability to make informed choices--is also important
for gas sellers.\45\
---------------------------------------------------------------------------
\45\ Pipeline Service Obligations and Revisions to Regulations
Governing Self-Implementing Transportation; and Regulation of
Natural Gas Pipelines After Partial Wellhead Decontrol, Order No.
636, FERC Stats. & Regs. ] 30,939, at p. 30,393, order on reh'g,
Order No. 636-A, FERC Stats. & Regs. ] 30,950, order on reh'g, Order
No. 636-B, 61 FERC ] 61,272 (1992), order on reh'g, 62 FERC ] 61,007
(1993), aff'd in part and remanded in part sub nom. United
Distribution Cos. v. FERC, 88 F.3d 1105 (DC Cir. 1996), order on
remand, Order No. 636-C, 78 FERC ] 61,186 (1997).
27. In the Posting NOPR, the Commission proposed that major non-
interstate \46\ natural gas pipelines post information on actual flows
and scheduled volumes. The Commission defined a ``major non-interstate
pipeline'' as one that is not a ``natural gas company'' under section 1
of the NGA\47\ and that flows greater than 10 million (10,000,000)
MMBtus of natural gas per year. Such a major non-interstate pipeline
would post daily ``capacity, scheduled flow volumes, and actual flow
volumes at major points and mainline segments.'' \48\ The Commission
did not define ``major points and mainline segments.'' The Commission
proposed two exemptions to the definition of ``major non-interstate
pipeline.'' First, the Commission proposed to exempt non-interstate
natural gas pipelines that ``fall entirely upstream of a processing
plant.'' \49\ Second, the Commission proposed to exempt non-interstate
natural gas pipelines ``that deliver more than 95 percent of the
natural gas volumes they flow directly to end-users.'' \50\ The
Commission also proposed that interstate natural gas pipelines post
information on actual flows,\51\ in addition to the existing
requirement to post capacity and scheduled flows.\52\
---------------------------------------------------------------------------
\46\ In the Initial NOPR, the Commission used the term
``intrastate pipeline.'' In the Posting NOPR, the Commission used
the term ``non-interstate pipeline.'' The latter term more
accurately describes the scope of the rule, which is issued pursuant
to section 23 of the NGA. This section applies to both interstate
and non-interstate pipelines and does not use the term ``intrastate
pipeline.''
\47\ 15 U.S.C. 717 (2007).
\48\ Posting NOPR at P 3.
\49\ Id. at P 4.
\50\ Id.
\51\ Id.
\52\ Id.
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28. In the Posting NOPR, the Commission articulated three goals to
be served by posting of flow information by non-interstate pipelines.
First, by providing a more complete picture of supply and demand
fundamentals, these postings would improve market participants' ability
to assess supply and demand and to price physical natural gas
transactions. Second, during periods when the United States natural gas
delivery system is disturbed, for instance due to hurricane damage to
facilities in the Gulf of Mexico, these postings would provide market
participants a clearer view of the effects on infrastructure, the
industry, and the economy as a whole. Finally, these postings would
allow the Commission and other market observers to identify and remedy
potentially manipulative activity.\53\
---------------------------------------------------------------------------
\53\ Id. at P 60.
---------------------------------------------------------------------------
B. Comments
29. A broad cross-section of the industry, representing producers,
end-users, LDCs, and information providers, supports the goals of the
pipeline posting requirement.\54\ In the Posting NOPR, the Commission
asked for comment on whether the pipeline posting proposal would
``provide a more complete picture of supply and demand fundamentals and
improve market participants' ability to assess supply and demand and to
price physical natural gas transactions.'' \55\ Several commenters
support posting requirements, particularly for non-interstate
pipelines, as a means to meet this goal. NGSA states that ``the [ ]
proposed flow data posting requirement has the potential to provide
market participants and regulators with additional information
regarding underlying natural gas supply and demand fundamentals.'' \56\
Similarly, APGA supports the Commission's rationale for obtaining daily
flow information from major non-interstate pipelines.\57\ IPAA also
supports the posting of flow data from non-interstate pipelines, ``but
with a close watch on the costs of compliance, as the producer is
likely to end up bearing much of those costs.'' \58\
---------------------------------------------------------------------------
\54\ See, e.g., NGSA Reply Comments at 5; TIPRO Comments at 3;
APGA Comments at 4; Calpine Comments at 2-3; Bentek Comments at 3.
\55\ Posting NOPR at P 71.
\56\ NGSA Comments at 14.
\57\ APGA Comments at 4.
\58\ IPAA Comments at 1.
---------------------------------------------------------------------------
30. TIPRO contends that the pipeline posting proposal meets the
goal of increasing transparency of supplies that affect prices.\59\
Bentek, which collects and publishes information based on interstate
flows, contends that requiring non-interstate pipelines to report daily
flows and capacity ``will significantly improve industry's ability to
understand natural gas supply and demand issues throughout the
country'' making ``the market more transparent, less volatile, more
reliable, and more efficient.'' \60\
---------------------------------------------------------------------------
\59\ TIPRO Comments at 3.
\60\ Bentek Comments at 12.
---------------------------------------------------------------------------
31. Some commenters argue that the posting proposal, particularly
regarding non-interstate pipelines, is not justified. Atmos believes
that the need for the information has not been demonstrated and that
there is already sufficient price transparency in interstate
markets.\61\ Chevron Pipelines acknowledge that flow information from
non-interstate pipelines may provide a more complete picture of supply
and demand fundamentals, but state that such flow information would
have a de minimis effect on market participants' assessments of supply
and demand and pricing of physical natural gas transactions.\62\
---------------------------------------------------------------------------
\61\ Atmos Comments at 10-11.
\62\ Chevron Pipelines Comments at 25.
---------------------------------------------------------------------------
32. Kinder Morgan Intrastate maintains that due to the bundled
sales function and the highly variable types of services provided by
intrastate pipelines, a snapshot of available capacity on a given
pipeline at a given time would not necessarily reflect pricing
fundamentals. Because Kinder Morgan Intrastate provides no-notice
service to many industrial users and must reserve physical capacity to
serve this no-notice service, it asserts that capacity is not available
for other customers. Thus, it alleges, posted capacity information
would send the wrong signals to the market because it would reflect the
complexity of pipeline operations rather than the overall supply
situation in the market.\63\
---------------------------------------------------------------------------
\63\ Kinder Morgan Intrastate Comments at 16-17.
---------------------------------------------------------------------------
33. In the Posting NOPR, the Commission also asked for comment on
whether the proposal would provide a clearer view of the effects on
infrastructure, the industry, and the economy during periods when the
United States natural gas delivery system is disturbed, for instance,
due to
[[Page 73499]]
hurricane damage to facilities in the Gulf of Mexico. Several
commenters contend that the posting of flow information by non-
interstate pipelines would support this goal.\64\ Chevron Pipelines
assert that the requirements on non-interstate natural gas pipelines
already are sufficient to gain a sense of how a significant disruption
may affect natural gas pipeline facilities.\65\ TPA believes that
significant disruptions such as hurricanes would preclude postings by
non-interstate pipelines and evaluation of the impact of such
disruptions on pipeline facilities could be obtained through less
obtrusive means, such as contacting the pipeline.\66\
---------------------------------------------------------------------------
\64\ Yates Comments at 7; TIPRO Comments at 2; APGA Comments at
4; Royalty Owners Comments at 2-3.
\65\ Chevron Pipelines Comments at 25.
\66\ TPA Comments at 20.
---------------------------------------------------------------------------
34. Finally, in the Posting NOPR, the Commission asked for comment
on another goal of the pipeline posting proposal--whether the proposal
would allow market observers to identify potentially manipulative
activity. In response, several commenters assert that the posting of
flow information by non-interstate pipelines would support this
goal.\67\
---------------------------------------------------------------------------
\67\ See, e.g., TIPRO Comments at 2; APGA Comments at 4; Royalty
Owners Comments at 2-3; Yates Comments at 8.
---------------------------------------------------------------------------
35. By contrast, Chevron Pipelines declare that the information to
be posted has no relation to pricing decisions, and therefore, the
potential for misconduct by not making public such information is
unfounded.\68\ Kinder Morgan Intrastate expresses concern that postings
by non-interstates pipelines would lead market participants to suspect
price manipulation where none was occurring. In support, Kinder Morgan
Intrastate provides the example of a net segment flow of zero due to
forward-hauls and backhauls canceling each other out.\69\ TPA adds that
the Commission has not demonstrated how the proposed pipeline posting
rule could be used to track manipulative behavior.\70\
---------------------------------------------------------------------------
\68\ Chevron Pipelines Comments at 25.
\69\ Kinder Morgan Intrastate Comments at 17.
\70\ TPA Comments at 48.
---------------------------------------------------------------------------
36. Several commenters contend that there are alternatives
available to daily posting of flow information by non-interstate
pipelines. Commenters point to the following information as
alternatives: Postings of capacity and scheduling data for ``points at
which intrastate pipelines connect to the interstate grid;'' \71\
postings by interstate natural gas pipelines; \72\ Bentek's ``Texas
Intrastate Report;'' \73\ data ``filed annually by intrastate pipelines
pursuant to section 311 of the Natural Gas Policy Act;'' \74\ price
information provided by ``NYMEX, CME, Globex, ICE and voice brokers, as
well as price index publishers;'' \75\ state commission production
data; \76\ and information available from the United States Department
of Energy's Energy Information Administration (EIA).\77\ Genscape
describes its natural gas pipeline flow monitoring product, which can
measure flows on pipelines, and which Genscape uses presently to
``monitor [ ] injections and withdrawals of gas at multiple storage
facilities in Texas and Louisiana that are connected in whole or in
part to intrastate pipeline systems.'' \78\
---------------------------------------------------------------------------
\71\ Id. at 21-22.
\72\ Id. at 21.
\73\ Id. at 23.
\74\ Id. at 22.
\75\ Id.
\76\ Id. at 22 n 59.
\77\ Id. at 22.
\78\ Reply Comments of Genscape, Inc., at 3, Docket No. AD06-11-
000 (filed Aug. 23, 2007).
---------------------------------------------------------------------------
37. Commenters argue that a posting requirement on non-interstate
pipelines would pose a competitive risk for non-interstate pipelines
and for their customers. Atmos states: ``the public dissemination of
capacity information could provide competitors with insight into the
pipeline's ability to continue to provide services to existing and
prospective customers, which could influence the location of new
facility construction or how offers are made to prospective
customers.'' \79\ Atmos describes a possible scenario in which two
competing pipelines could serve one customer. When publicly
disseminated information shows that one of those pipelines is at
capacity, the other would have the opportunity to raise its price.\80\
---------------------------------------------------------------------------
\79\ Atmos Comments at 9.
\80\ Id.
---------------------------------------------------------------------------
38. Calpine, however, supports a posting obligation for non-
interstate pipelines, stating that requiring the same posting
requirements on both non-interstate and interstate pipelines would
eliminate an existing competitive advantage for non-interstate
pipelines.\81\
---------------------------------------------------------------------------
\81\ Calpine Comments at 5.
---------------------------------------------------------------------------
C. Commission Determination
39. Based upon the comments received and the input from
stakeholders at the technical conference, we continue to believe that
this Final Rule is needed because the information currently provided by
interstate pipelines presents an incomplete picture of the supply and
demand fundamentals that underlie the interstate natural gas market.
While, as discussed above, Congress has given authority to the
Commission to obtain additional information from market participants to
increase transparency, we acknowledge that section 23 of the NGA grants
us discretion as to whether and how to utilize this authority. The
current picture of the interstate natural gas market derives from
information on scheduled natural gas volumes and available capacity
posted by interstate pipelines. In compliance with the regulations
adopted in Order No. 637,\82\ interstate pipelines currently post daily
information on the Internet about scheduled natural gas volumes for
most of the continental United States. Shippers and other market
participants rely on information posted by interstate pipelines to
price both transportation and commodity transactions.\83\ As we
described in the Posting NOPR, market participants retrieve the posted
information on scheduled volumes from the Web sites of interstate
natural gas pipelines, which they use to estimate in near real-time a
variety of supply and demand conditions including geographic and
industrial sector consumption, storage injections and withdrawals, and
regional production.\84\ This posted scheduled flow information
contributes to market transparency by providing information about the
supply and demand fundamentals that drive price movements.\85\ Further,
our staff
[[Page 73500]]
relies on this posted information to perform oversight and enforcement
functions. In sum, the existing posting requirements for interstate
pipelines provide the Commission, market participants, and other market
observers with a picture of the availability of natural gas (both the
commodity and transportation needed to move the commodity to market
centers).\86\
---------------------------------------------------------------------------
\82\ Regulation of Short-Term Natural Gas Transportation
Services and Regulation of Interstate Natural Gas Transportation
Services, Order No. 637, 65 FR 10,156 (Feb. 25, 2000), FERC Stats. &
Regs. ] 31,091, at 31,332, clarified, Order No. 637-A, FERC Stats. &
Regs. ] 31,099, reh'g denied, Order No. 637-B, 92 FERC ] 61,062
(2000), aff'd in part and remanded in part sub nom. Interstate
Natural Gas Ass'n of America v. FERC, 285 F.3d 18 (DC Cir. 2002),
order on remand, 101 FERC ] 61,127 (2002), order on reh'g, 106 FERC
] 61,088 (2004), aff'd sub nom. American Gas Ass'n v. FERC, 428 F.3d
255 (DC Cir. 2005).
\83\ In this regard, we disagree with commenters, such as Atmos,
that increased transparency would harm competition. Such has not
been our experience with interstate natural gas pipeline posting
requirements. To the contrary, increased transparency has allowed
for more informed decision making by market participants. In the
scenario posited by Atmos (i.e., two pipelines, one of which is at
capacity, that could serve a single customer), the posting of
scheduled flow information at a particular point would typically not
be sufficient to affect competition. Even if disclosure did have an
effect, the effect would be to allow all market participants to make
efficient determinations based upon equal access to relevant
information.
\84\ Posting NOPR at P 55. See also Comments of Bentek, Docket
No. AD06-11-000 (filed Oct. 11, 2006).
\85\ See, e.g., Comments of Platt's at 11-13, Docket No. AD06-
11-000 (filed Nov. 1, 2006) (information regarding the supply and
demand of natural gas explains prices and such information is
available from interstate pipelines, but not intrastate pipelines).
\86\ See, e.g., id. at 11 (explaining that, to understand
prices, ``the marketplace must look to * * * information on [the]
availability of and demand for natural gas. * * *'').
---------------------------------------------------------------------------
40. Nevertheless, this picture is incomplete. Because the
Commission's existing pipeline posting regulations do not apply to non-
interstate pipelines, market observers cannot determine the
availability of natural gas and transportation on a non-interstate
pipeline to the same extent as they could for an interstate pipeline.
These gaps in information are significant because, as detailed further
below, major gas flows between producing basins and interstate markets
occur on non-interstate pipelines and are thus invisible to the market.
Often, the availability and price of natural gas on large non-
interstate pipelines affects the availability and price of natural gas
nation-wide because these pipelines serve as important pricing points
and gateways for flows to much of the United States. Interstate and
non-interstate pipeline infrastructure is functionally inter-connected
in the United States. The gaps in information about non-interstate
flows result from the limitations on the Commission's authority over
non-interstate pipelines prior to the enactment of EPAct 2005.
41. For instance, there is a significant lack of information about
supply and demand fundamentals in the south-central region of the
country: Texas, Louisiana, and Oklahoma, and in southern California. As
we discussed in the Initial and Posting NOPRs, several major United
States natural gas pricing points sit at the confluence of multiple
interstate and non-interstate pipelines. A study by EIA identified
twenty-eight national market centers, of which thirteen are served by a
combination of interstate and non-interstate pipelines.\87\ The table
below shows the capacity of interstate and non-interstate pipelines
connected to each of these thirteen locations. Significantly, as
relevant here, at nine of these thirteen locations, non-interstate
capacity is greater than interstate capacity.
---------------------------------------------------------------------------
\87\ Department of Energy, Energy Information Administration,
Natural Gas Market Centers and Hubs: A 2003 Update, (Oct. 2003),
http://www.eia.doe.gov/pub/oil_gas/natural_gas/feature_articles/
2003/market_hubs/mkthubs03.pdf.
Table 1--Inter- and Intrastate Pipeline Delivery Capacity at Selected United States Natural Gas Pricing Points
\88\
----------------------------------------------------------------------------------------------------------------
Receipt and delivery capacity
-------------------------------
Hub name State Interstate Non-interstate
pipelines pipelines
(MMcf/d) (MMcf/d)
----------------------------------------------------------------------------------------------------------------
Carthage........................................................ TX 1,120 1,355
Henry Hub....................................................... LA 2,770 1,215
Katy--Enstor.................................................... TX 1,370 3,815
Katy--DEFS...................................................... TX 260 2,360
Mid Continent................................................... KS 1,112 627
Moss Bluff...................................................... TX 1,050 1,800
Nautilus........................................................ LA 1,200 1,350
Perryville...................................................... LA 3,652 350
Aqua Dulce...................................................... TX 855 835
Waha--Lone Star................................................. TX 810 1,140
Waha--Encina.................................................... TX 525 800
Waha--El Paso................................................... TX 1,165 1,660
Waha--DEFS...................................................... TX 300 1,850
----------------------------------------------------------------------------------------------------------------
42. No place is more indicative of the integration of interstate
and non-interstate pipelines than Henry Hub in Louisiana. Henry Hub
acts as an interchange for natural gas, where numerous interstate and
non-interstate pipelines meet. It serves as the location for delivery
of natural gas under the New York Mercantile Exchange's (NYMEX) futures
contract. Monthly settlement of NYMEX's Henry Hub natural gas futures
contract has become important in determining a variety of monthly index
prices used to set natural gas prices in a large number of transactions
in interstate commerce, particularly along the East Coast and Gulf
Coast of the United States. The nature of this influence is detailed in
Commission staff's 2006 State of the Markets Report.\89\ Because Henry
Hub is connected to both interstate and non-interstate pipelines, the
picture of flows and availability on the pipelines that feed into the
Henry Hub is incomplete.
---------------------------------------------------------------------------
\88\ The information on this chart is derived from Table 2 of
Department of Energy, Energy Information Administration, Natural Gas
Market Centers and Hubs: A 2003 Update, (Oct. 2003), http://
www.eia.doe.gov/pub/oil_gas/natural_gas/feature_articles/2003/
market_hubs/mkthubs03.pdf). updated utilizing data available from
EIA for 2005.
\89\ Federal Energy Regulatory Commission, 2006 State of the
Markets Report at 48-50 (Jan. 2007), www.ferc.gov/market-oversight/
market-oversight.asp (follow link to the State of the Markets Full
Report).
---------------------------------------------------------------------------
43. Figure 1 below demonstrates the integration of interstate and
non-interstate flows in many of these markets. One cannot understand
flow patterns on interstate natural gas pipelines nationwide without
understanding flows on non-interstate pipelines in those areas. Non-
interstate pipelines provide crucial physical links between interstate
natural gas pipelines (particularly in Texas, Oklahoma, Louisiana, and
California) as well as links between market hubs. Figure 1 shows major
East-West flows of natural gas between the major production basins,
such as Waha production area and major market locations, such as the
Carthage Hub, but because such flows generally take place on non-
interstate natural gas pipelines, they are invisible to market
participants and other market observers.
[[Page 73501]]
[GRAPHIC] [TIFF OMITTED] TR02DE08.072
44. The magnitude of missing market information is indicated in a
comparison of the types of information available for interstate and
non-interstate pipelines. Gas delivery data in Texas from interstate
natural gas pipeline postings show approximately 1 bcf of deliveries to
Texas end users on any given day in 2006.\90\ EIA shows that total
average daily consumption of gas in Texas was approximately 9.4 Bcf/day
in 2006.\91\ This means that delivery information for 90 percent of the
gas consumed in the state is only provided in the aggregate for all of
Texas and published monthly with a lag of several months while 10
percent of the gas delivered is reported daily by receipt and delivery
point. Therefore, nearly 90 percent of consumption was invisible to
market participants and other market observers on a daily basis.
---------------------------------------------------------------------------
\90\ While this EIA data is two years old, based upon our
experience, we believe that similar circumstances exist in the
market today.
\91\ ``EIA Natural Gas Consumption by End Use,'' http://
www.tonto.eia.doe.gov/dnav/ng/ng_cons_sum_a_EPG0_VC0_mmcf_
a.htm. (providing consumption figures by state).
---------------------------------------------------------------------------
45. Purchasers of natural gas in interstate commerce draw on the
same sources of supply as users and purchasers of intrastate natural
gas. Intrastate markets often compete from basin to basin with
interstate markets. Southern California, for example, competes with
several large Texas markets for Waha supplies. Interstate/intrastate
competition is expected to increase. Much of the recent Barnett Shale
development in the Fort Worth basin in west Texas flows into intrastate
systems before moving into interstate markets and, recently, two
pipeline companies announced a major intrastate pipeline project that
would transport 1 Bcf/day from the Barnett Shale development.\92\ In
total, slightly more than 40 percent of total on-shore production in
Texas is connected to interstate natural gas pipelines, close to 60
percent in Louisiana and almost 80 percent in Oklahoma.\93\ Although
daily volume scheduled to flow from non-interstate into those
interstate natural gas pipelines can be observed, the supply dynamics
that determine the availability of such volumes cannot be observed
because they occur on non-interstate pipelines. A market participant
that understands the flows on non-interstate pipelines will better
understand the availability of supply for the interstate natural gas
market, thereby, enhancing transparency.
---------------------------------------------------------------------------
\92\ ``Enbridge, Atmos Energy propose new line to move 1 Bcf/d
of northern Texas output,'' Inside FERC, Sept. 1, 2008 (``The
Barnett Intrastate Gas Pipeline would connect Atmos Energy's Line X
in Johnson Country, Texas, to Enbridge's Double D and Clarity
Pipelines at Bethel in Anderson County, Texas.'').
\93\ To derive these figures, Commission staff compared
information from Bentek on supply scheduled on interstate pipelines
with EIA information on withdrawals and production. EIA Natural Gas
Gross Withdrawals and Production for Texas and Oklahoma, http://
www.tonto.eia.doe.gov/dnav/ng/ng_prod_sum_dcu_NUS_m.htm.
---------------------------------------------------------------------------
46. Taken together, this information shows that market prices of
physical natural gas in interstate commerce result from the aggregate
of interstate and non-interstate pipeline flows. Because of this
relationship, information about the flows on non-interstate pipelines
would promote price transparency by providing market participants with
highly relevant information as they make day-to-day economic choices.
47. Additionally, the proposed pipeline capacity and volume
postings would provide market participants--and entities charged with
oversight of the markets--a clearer view of the effects on
infrastructure, the industry,
[[Page 73502]]
and the economy as a whole during periods when the United States
natural gas delivery system is disturbed. For example, after the
landfall of hurricanes Katrina and Rita in late 2005, even the most
interested of governmental and commercial market observers were not
able to obtain complete information regarding the output by
potentially-damaged production facilities.\94\ By monitoring receipt
and delivery points for production facilities on interstate natural gas
pipelines, market observers were able to obtain only a limited sense of
production facility output.\95\ Similarly, market participants, state
commissions and other market observers were unable to assess effects on
natural gas availability in the Gulf Coast, including, for instance,
availability to the petrochemical industry. The significance and
duration of these effects on this industry--vulnerable to energy price
and availability disruptions--remain unclear. Regulations promulgated
by this Final Rule will allow market participants and other market
observers to gain a much better picture of disruptions in natural gas
flows in the case of future hurricanes in the Gulf region.\96\
---------------------------------------------------------------------------
\94\ See, e.g., Comments on Initial NOPR of New York PSC at 2;
Comments on Initial NOPR of Bentek at 15-16 & 21-22; Comments on
Initial NOPR of APGA at 3-4; Transcript of the Oct. 13, 2006
Technical Conference (Tech. Conference Tr.), at 25, Transparency
Provisions of the Energy Policy Act of 2005, Docket No. AD06-11-000
(Comments of Sheila Rappazzo, Chief of Policy Section of the Office
of Gas and Water of the New York PSC).
\95\ Tech. Conference Tr. at 25 (Comments of Sheila Rappazzo)
(describing how after the 2005 hurricanes data availability differed
widely).
\96\ Along these lines, this Final Rule is consistent with Order
No. 682 and with a recently developed survey by EIA. In Order No.
682, the Commission revised its reporting regulations to require
jurisdictional natural gas companies to report damage to facilities
due to a natural disaster or terrorist activity that results in a
reduction in pipeline throughput or storage deliverability. Revision
of Regulations to Require Reporting of Damage to Natural Gas
Pipeline Facilities, Order No. 682, 71 FR 51098 (Aug. 29, 2006),
FERC Stats. and Regs. ] 31,227 (2006), Order No. 682-B order denying
reh'g, 118 FERC ] 61,188 (2007). Recently, EIA developed Form EIA-
757, ``Survey of Natural Gas Processing Plants'' which is used to
``collect information on the capacity, status, and operations of
natural gas processing plants and to monitor constraints of natural
gas processing plants during periods of supply disruption in areas
affected by an emergency, such as a hurricane.'' Department of
Energy, Energy Information Administration, Form EIA-757, ``Survey of
Natural Gas Processing Plants'', http://www.eia.doe.gov/oil_gas/
natural_gas/survey_forms/drafteia757/ng757_instructions.pdf.
---------------------------------------------------------------------------
48. Scheduled volume information would be useful whether a
disruption were major or minor. TPA asserts that because pipeline
facilities would be inaccessible during a major disruption, a non-
interstate pipeline could not post flow information and, thus, a
posting requirement would fail to meet this goal.\97\ But, during a
disruption, the fact that scheduled volumes were not posted, itself,
would send a signal about the extent and duration of a disruption. It
would be useful information during and following a disruption to know
whether some points on a non-interstate were affected but not others.
For example, following the landfall of hurricanes Gustav and Ike this
past hurricane season, some pipelines in the affected areas were able
to post information about flows before actual flows could resume.
---------------------------------------------------------------------------
\97\ TPA Comments at 20.
---------------------------------------------------------------------------
49. We also believe that the regulations promulgated in this Final
Rule will more readily allow the Commission and other market observers
to identify and remedy potentially manipulative activity. The goal of
identifying and remedying potential market manipulation conforms to the
transparency directive in section 23 for the Commission to ``hav[e] due
regard for the public interest [and] the integrity of those markets. *
* *'' \98\ By this language, Congress intended that the improvement of
the Commission's market oversight is a legitimate justification for
prescribing a transparency rule. Monitoring and preventing manipulative
or unduly discriminatory activity meets the Commission's responsibility
for ensuring the integrity of the physical interstate natural gas
markets.\99\
---------------------------------------------------------------------------
\98\ Section 23(a)(1) of the NGA; 15 U.S.C. 717t-2(a)(1) (2000 &
Supp. V 2005).
\99\ See Prohibition of Energy Market Manipulation, Order No.
670, FERC Stats. & Regs. ] 31,202, (2006).
---------------------------------------------------------------------------
50. Information regarding availability on non-interstate pipelines
could be used to discover potentially manipulative or unduly
discriminatory behavior in physical natural gas sales or
transportation. In the Commission's experience, the fact that a price
for natural gas is not supported by supply and demand fundamentals may
be an indication that a market participant has violated the NGA's
prohibitions regarding undue discrimination or market manipulation. On
a daily basis, as part of its oversight responsibilities, the
Commission tracks natural gas prices to determine whether they are
justified by supply and demand fundamentals. To do this, we rely on,
among other things, the scheduled volume postings by interstate natural
gas pipelines. This information also serves as an important tool to
analyze natural gas markets. Similar postings by non-interstate
pipelines would make this analysis more accurate because it would
provide additional information currently lacking about supply and
demand fundamentals, a point discussed above. With information from
non-interstate pipelines, we can better account for how supply and
demand fundamentals affect daily changes to physical prices for much of
the gas transported to key interstate markets. For example, in
overseeing markets, the Commission routinely checks for unused
interstate natural gas pipeline capacity between geographically
distinct markets with substantially different prices as a sign that
flows may be managed to manipulate prices.
51. In summary, the posting of scheduled flow information by major
non-interstate pipelines will increase transparency by meeting the
three goals set forth in the Posting NOPR. Such postings will: (1)
Improve market participants' ability to assess supply and demand and to
price physical natural gas transactions and transportation; (2) provide
market participants a clearer view of the effects on infrastructure,
the industry and the economy from disruptions to the United States
natural gas delivery system, for instance due to hurricane damage to
facilities in the Gulf of Mexico; and (3) allow the Commission, market
participants and other market observers to identify potentially
manipulative activity.\100\ We believe that these are worthy goals.
---------------------------------------------------------------------------
\100\ Posting NOPR at 60.
---------------------------------------------------------------------------
52. Further, we do not believe that these transparency goals can be
met by less intrusive means or through reliance upon existing market
data. For example, TPA refers to the ``data filed annually by
intrastate pipelines pursuant to Section 311 of the [Natural Gas Policy
Act of 1978 (NGPA)]'' as a possible substitute for this Final
Rule.\101\ Section 284.126(b) of the Commission's regulations requires
intrastate pipelines providing section 311 transportation to file an
annual report of volumes of section 311 transportation service, to be
used to determine the rates applicable to section 311 service.\102\
This existing data is inadequate to meet our transparency goals,
however, because section 311 volumes are only a subset of all volumes
transported by intrastate pipelines, the information is aggregated and
is reported annually and, therefore, delayed by at least three months.
---------------------------------------------------------------------------
\101\ TPA Comments at 22 (citing 15 U.S.C. 717-717z).
\102\ 18 CFR 284.126(b).
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53. TPA also refers to ``additional sources of natural gas price
information,'' including, for example, ``NYMEX, CME, Globex, ICE and
voice brokers, as well as price index
[[Page 73503]]
publishers.'' \103\ These sources are not a useful substitute for the
pipeline posting requirements. They do not provide any scheduled flow
information and, thus, cannot explain the supply and demand
fundamentals that underlie the prices in the same way as postings by
non-interstate pipelines. Additionally, TPA generally refers to state
commission production data available from Texas, Louisiana, and New
Mexico.\104\ However, this data includes only production data (and not
other transportation volumes) and is only available on a monthly basis.
Similarly, the data from production information Web sites does not
include transportation volumes.\105\
---------------------------------------------------------------------------
\103\ TPA Comments at 22.
\104\ Id. at 22 n. 59.
\105\ Id. at 22.
---------------------------------------------------------------------------
54. TPA references various EIA reports as possible replacement
sources for data regarding pipeline flows,\106\ but none of these
reports is an adequate substitute for the posting of scheduled volume
information by major non-interstate pipelines; none of these sources
provides scheduled pipeline-by-pipeline flow data on a daily basis. EIA
Monthly Storage Reports provide only information about aggregated
storage flows on a monthly or weekly basis. EIA Weekly Storage Reports
provide only storage information, are issued only once each week, and
provide aggregated data for three regions. Form EIA-895 provides only
production data aggregated by state. Form EIA-176 does not provide
daily transportation information, and is significantly lagged and
aggregated annually and by company. Form EIA-857 provides only ``volume
and cost data on natural gas delivered to residential, commercial, and
industrial consumers'' \107\ estimated by reviewing a monthly sample of
natural gas companies that deliver to consumers in the United States.
The survey does not report disaggregated daily transactional data at
receipt and delivery points, but instead only provides partial retail
sales. While we appreciate the value of EIA's data collection and
publications, we are not persuaded that these activities are adequate
substitutes for the daily, point-specific postings required by this
Final Rule.
---------------------------------------------------------------------------
\106\ Id. at 22 n. 59.
\107\ http://www.tonto.eia.doe.gov/dnav/ng/TblDefs/ng_
statdetails.html.
---------------------------------------------------------------------------
55. As for Genscape's work monitoring flows on pipelines, its
project does not provide sufficient coverage of non-interstate
pipelines as it appears limited to storage facilities in Texas and
Louisiana and some major interstate pipelines. Most importantly,
Genscape's services are available only for a fee and only to
subscribers. The Commission's intent in this Final Rule is to increase
transparency for the public's benefit.
56. We also believe that the goals of this Final Rule outweigh the
burdens to be placed upon non-interstate and interstate pipelines.
Based upon our experience, as a matter of business acumen and good
operational practice, most if not all of the gas control divisions of
the affected companies currently have ready access to the information
captured by this Final Rule. Pipelines already track flows on points
with a design capacity equal to or greater than 15,000 MMBtu/day to
ensure the operational integrity of their systems; to plan and schedule
operations; to monitor and control the pipelines; and to respond to and
correct abnormal operations. Natural gas pipeline schedulers need this
information on a daily basis so that they can match supply to nominated
demand and maintain system balance. Furthermore, some companies that
own several major non-interstate pipelines also own interstate natural
gas pipelines, which already post scheduled volume information. For
such companies, the requirement is a familiar one and they should have
the infrastructure in place, or easily put in place, to meet the
requirement on their major non-interstate pipelines.
V. Pipeline Posting Requirements
A. Overview
57. Based on the comments received and the discussion at the
technical conference held on April 3, 2008, the Commission will modify
the proposal in the Posting NOPR in a number of significant ways. We
have increased the minimum delivery threshold defining major non-
interstate pipelines from 10 to 50 million MMBtu per year. Also, we
have determined that neither major non-interstate pipelines nor
interstate pipelines will be required to post actual flow information
at this time. Instead, the regulations promulgated in this Final Rule
require major non-interstate pipelines to post scheduled flow
information at each receipt and delivery point with a design capacity
greater than 15,000 MMBtu per day, and interstate pipelines to post
certain information on no-notice service.\108\ Further, we provide for
a number of exemptions and clarifications of the new posting
requirements that we believe will further limit the burden on entities
subject to the Final Rule. We address the salient aspects of the
regulations in turn, below.
---------------------------------------------------------------------------
\108\ Under 18 CFR 284.7(a)(4), an interstate natural gas
pipeline must provide no-notice service, which is defined as ``a
firm transportation service under which firm shippers may receive
delivery up to their firm entitlements on a daily basis without
penalty.''
---------------------------------------------------------------------------
B. Definition of Major Non-Interstate Pipeline
1. Posting NOPR
58. In the Posting NOPR, the Commission proposed that only major
non-interstate pipelines would be required to post flow information.
The Posting NOPR provisionally defined a ``major non-interstate
pipeline'' as ``a pipeline that fits the following criteria: (1) It is
not a `natural gas company' under section 1 of the NGA; and (2) it
flows annually more than 10 million (10,000,000) MMBtu of natural gas
measured in average receipts or in deliveries for the past 3 years.''
\109\ The Commission asked for comment on the proposed 10 million MMBtu
delivery threshold and whether it should be increased or
decreased.\110\
---------------------------------------------------------------------------
\109\ Posting NOPR at P 67.
\110\ Id.
---------------------------------------------------------------------------
2. Comments
59. Several commenters support both a delivery threshold approach
and the 10 million MMBtu delivery threshold proposed in the Posting
NOPR.\111\ Copano Energy supports a 10 million MMBtu threshold but adds
that only jurisdictional flows should be counted for that delivery
threshold.\112\
---------------------------------------------------------------------------
\111\ Bentek Comments at 6; see also TIPRO Comments at 2.
\112\ Copano Energy Comments at 10.
---------------------------------------------------------------------------
60. Several commenters seek an increase in the proposed delivery
threshold. Contending that a 10 million MMBtu delivery threshold is
unnecessarily low, NGSA suggests that the delivery threshold should be
50 million MMBtu.\113\ Relying upon EIA data regarding intrastate
pipelines, NGSA contends that a 50 million MMBtu delivery threshold
would capture approximately 90 percent of the intrastate pipeline
volumes and apply to only 57 intrastate pipelines. By contrast,
according to NGSA, a 10 million MMBtu threshold would capture 99
percent of such volumes and apply to approximately 100 intrastate
pipelines. NGSA contends that the benefit from this increase in
reported volumes that would result from establishing a lower threshold
is not sufficient to justify greater costs related to implementation of
a 10 million MMBtu delivery
[[Page 73504]]
threshold.\114\ Similarly, Chevron Pipelines proposes raising the
delivery threshold; it proposes a delivery threshold for reporting
based on daily flows of 100,000 mcf/day (which equates to 36.5 MMBtu/
year).\115\
---------------------------------------------------------------------------
\113\ NGSA Comments at 5-6.
\114\ Id. at 5-6.
\115\ Chevron Pipelines Comments at 23-24.
---------------------------------------------------------------------------
61. Calpine supports a greater delivery threshold and proposes
setting out two minimum thresholds based on gross and net throughput
levels. It would set a de minimis daily volume threshold of 100,000 Dth
(100,000 MMBtu) of net throughput, net of gas consumed by directly
connected end-users, or 300,000 Dth (300,000 MMBtu) of gross peak day
throughput.\116\
---------------------------------------------------------------------------
\116\ Calpine Comments at 6-7.
---------------------------------------------------------------------------
62. TPA suggests that the Commission adopt the delivery threshold
used in FERC Form No. 2, 50 million Dth (50 million MMBtu), so that
only non-interstate pipelines that transported over 50 million Dth (50
million MMBtu) in each of the three prior years would be required to
post.\117\
---------------------------------------------------------------------------
\117\ TPA Comments at 45; see also Kinder Morgan Intrastate
Comments at 21; NGSA Comments at 5.
---------------------------------------------------------------------------
63. Shell seeks clarification regarding the calculation of the
proposed delivery threshold. It contends that the use of thermal units,
i.e., MMBtu, is more appropriate than volumetric units, i.e., Bcf.
Shell suggests that the word ``average'' should be added in front of
the word ``deliveries'' so the calculation would apply both to average
receipts and/or deliveries. Shell seeks clarification if the three-year
average is a rolling average and whether it should be calculated
annually. It also seeks clarification on whether the delivery threshold
should be applied on a facility-by-facility basis or corporate
wide.\118\
---------------------------------------------------------------------------
\118\ Shell Comments at 27-29.
---------------------------------------------------------------------------
3. Commission Determination
64. In consideration of the comments filed in this proceeding, the
Commission will define a major non-interstate pipeline as a pipeline
that ``(1) is not a `natural gas company' under section 1 of the NGA;
and (2) delivers annually more than 50 million MMBtu of natural gas
measured in average receipts or in average deliveries for the past
three years.'' \119\ The definition adopted in this Final Rule differs
substantially from that proposed in the Posting NOPR and adopts a five-
fold increase in the delivery threshold. Further, the definition bases
the threshold on deliveries instead of flows. In addition, the
definition clarifies that the delivery threshold should be determined
on a facility-by-facility basis.
---------------------------------------------------------------------------
\119\ See new section 284.14(a).
---------------------------------------------------------------------------
65. As an initial matter, we believe that a delivery threshold of
50 million MMBtu provides sufficient information to meet the
Commission's goal of tracking daily flows of natural gas adequately
throughout the United States by providing flow information in areas for
which interstate natural gas pipeline posting is not adequate. EIA Form
176 data demonstrates the reach of the 50 million MMBtu threshold.
Excluding deliveries by interstate natural gas pipelines, pipelines
that deliver greater than 50 million MMBtu annually account for 75
percent of total non-interstate volumes delivered in the United
States.\120\ While the EIA Form 176 categories are not a precise match
to the data required to be posted by this Final Rule, the categories
are sufficiently similar to show that the 50 million MMBtu delivery
threshold will provide a significant amount of flow information to the
Commission, market participants, and observers and improve the
understanding of the supply and demand fundamentals affecting
interstate markets. Assuming this data is representative, capturing
roughly three-fourths of non-interstate pipelines would be a
significant stride in filling in the gaps regarding flows in the United
States.\121\
---------------------------------------------------------------------------
\120\ Derived from EIA Form 176 data for 2006 based on the ratio
of non-interstate pipelines reporting deliveries greater than 50
million MMBtu per year to total deliveries on all non-interstate
pipelines. NGSA estimates that a 50 million MMBtu threshold would
capture 90 percent of the relevant intrastate pipeline volumes. NGSA
comments at 5-6. We have been unable to duplicate NGSA's methodology
used to derive this figure, although we note that NGSA has included
certain interstate volumes and excluded some non-interstate volumes
in its calculations.
\121\ We believe that a 50 million MMBtu annual threshold for
``major non-interstate pipelines'' is appropriate since this
threshold includes almost all non-interstate pipelines that
interconnect with major hubs. However, experience with pipeline
postings following implementation of this Final Rule could lead us
to revisit this determination in the future.
---------------------------------------------------------------------------
66. The 50 million MMBtu delivery threshold is likewise consistent
with the threshold used in the Commission's FERC Form No. 2
requirements. FERC Form No. 2 is a compilation of financial and
operational information filed by interstate natural gas pipelines. An
interstate natural gas pipeline must file a FERC Form No. 2 if it
transports or stores for a fee volumes of natural gas greater than 50
million Dth.\122\ If an interstate natural gas pipeline transports or
stores for a fee volumes of natural gas less than 50 million Dth, it is
not considered a major pipeline and files FERC Form No. 2A, which
entails a lesser accounting burden.
---------------------------------------------------------------------------
\122\ 18 CFR 260.1(b).
---------------------------------------------------------------------------
67. By adopting the significantly higher 50 million MMBtu delivery
threshold, the Commission also will eliminate compliance burdens on
many smaller pipelines which may have fewer resources to meet the
posting requirement. We agree with various commenters that the 10
million MMBtu delivery threshold in the Posting NOPR would have
burdened smaller pipelines without providing a proportionate amount of
useful information. A review of EIA Form 176 data for those pipelines
that describe themselves to EIA as intrastate pipelines is
illustrative. Under a 10 million MMBtu delivery threshold, thirty-seven
of such pipelines would be required to post. In contrast, under a 50
million MMBtu delivery threshold, only sixteen of such pipelines will
be required to post.\123\
---------------------------------------------------------------------------
\123\ Looking at the EIA data another way also supports the 50
million MMBtu delivery threshold. The 50 million MMBtu threshold
would capture 85 major non-interstate pipelines that do not qualify
under the exemptions. These 85 pipelines flow greater than 75
percent of total non-interstate volumes, according to the EIA Form
176 data. The Commission's definition of ``major non-interstate''
does not match exactly the categories used by EIA. Thus, these
numbers may differ.
---------------------------------------------------------------------------
68. Additionally, the Commission clarifies the definition of major
non-interstate pipeline in a few other respects. The Commission uses
the term ``deliveries'' instead of ``flows'' for determining the
threshold. We believe that the term ``deliveries'' is a more precise
term and is more easily understood by both pipelines and their
customers. Further, the delivery threshold for defining a ``major non-
interstate pipeline'' must be measured by a non-interstate pipeline's
average deliveries for the previous three calendar years. If in the
previous three calendar years, a non-interstate pipeline's deliveries
averaged greater than 50 million MMBtu then it would be required to
post the information required under this Final Rule. This approach,
too, is consistent with the Commission's FERC Form No. 2
requirements.\124\
---------------------------------------------------------------------------
\124\ See FERC Form No. 2, Instructions, p. i, http://
www.ferc.gov/docs-filing/eforms/form-2/form-2.pdf (``Each natural
gas company whose combined gas transported or stored for a fee
exceed 50 million dekatherms in each of the previous three years
must submit FERC Form Nos. 2 and 3-Q'').
---------------------------------------------------------------------------
C. Scheduled Flow Information on Major Non-Interstate Pipelines
1. Posting NOPR
69. In the Posting NOPR, the Commission proposed to require major
non-interstate pipelines to post information regarding capacity,
[[Page 73505]]
scheduled flow volumes, and actual flow volumes.\125\
---------------------------------------------------------------------------
\125\ Posting NOPR at P 22 and 49.
---------------------------------------------------------------------------
2. Comments
70. Several commenters assert that scheduled volume information
would provide sufficient insight on supply and demand fundamentals to
meet the Commission's transparency goals. TPA, for example, claims that
``[t]he use of scheduled volumes is widespread within the natural gas
industry and is the current standard used by interstate natural gas
pipelines'' and would provide the transparency that the Commission
wants at minimal costs.\126\ Similarly, Kinder Morgan Intrastate
maintains that actual flows do not reflect the actual supply and demand
picture due to, for instance, back-hauls, operational balancing
agreements, equipment outages, and other operating conditions.\127\
Commenters object to the requirement that non-interstate pipelines post
actual flows as overly burdensome. For example, Kinder Morgan
Intrastate objects to the cost of posting scheduled volumes; it
estimates that the proposal would cost $250,000 for information
technology modifications to obtain and post scheduled volumes and
another $250,000 for information technology modifications to obtain and
post actual flow volumes.\128\ TPA recommends posting of only scheduled
volumes rather than actual volumes as a way to significantly reduce the
costs of compliance with the Final Rule.\129\
---------------------------------------------------------------------------
\126\ TPA Comments at 8.
\127\ Kinder Morgan Intrastate at 13-14.
\128\ Kinder Morgan Intrastate at 12. Kinder Morgan estimates
additional costs for obtaining flow information at segments, which
is not required in the Final Rule.
\129\ TPA Comments at 6-7.
---------------------------------------------------------------------------
71. TIPRO supports the posting of actual flows as a way to verify
scheduled activity as compared to actual activity, but acknowledges
that posting of actual flows may not be feasible on a daily basis and
that should be taken into account in the final rulemaking.\130\
---------------------------------------------------------------------------
\130\ TIPRO Comments at 4.
---------------------------------------------------------------------------
3. Commission Determination
72. We will not require major non-interstate pipelines to post
actual flow information. As noted by Kinder Morgan Intrastate, the
information gained from requiring non-interstate pipelines to post
actual flows would not be that much greater than that gained from the
posting of scheduled volumes, particularly given that non-interstate
pipelines are not required to provide no-notice service (although some
do).
73. We recognize that some non-interstate pipelines will incur
costs to comply with this rule, including the posting of scheduled
volumes. However, we believe that the benefits of posting and the need
for this rule outweigh those costs. In any event, we do not believe
that the costs are as great as those estimated by commenters.
Commenters' estimated costs included the cost of metering at segments,
but posting at segments is not a requirement of this Final Rule.\131\
Similarly, commenters' estimated costs include the cost of new metering
and the posting of actual flow information, but posting actual flow is,
likewise, not a requirement of this Final Rule. We also disagree with
Kinder Morgan Intrastate's estimated $250,000 in costs to obtain and
post volumetric information.\132\ The Commission believes that this
figure is too great because, as discussed by TPA, ``most of the
information already collected by intrastate pipelines relates to
scheduled volumes at receipt and delivery points. * * *'' \133\
---------------------------------------------------------------------------
\131\ Our decision not to require posting by segment is
discussed infra.
\132\ Kinder Morgan Intrastate at 12.
\133\ Our staff's research indicates that such costs could be
less than $30,000 for major non-interstate pipelines. The estimate
includes both the software and labor costs associated with
implementing the rule. Software costs include a one-time capital
cost (amortized over ten years) to create a standard informational
posting Web site for reporting scheduled volumes and the monthly
fees associated with maintaining this site. In addition, the cost
factors daily labor costs to upload this information on the Internet
and to have an attorney or compliance office review these postings
on a routine basis.
---------------------------------------------------------------------------
D. Receipt and Delivery Point Posting for Major Non-Interstate
Pipelines
1. Posting NOPR
74. The Posting NOPR sought comments regarding whether the
Commission's transparency goals could be sufficiently advanced through
the posting of flows in and out of major market hubs and, if so, which
hub-related data should be reported.\134\ The Commission suggested two
possible approaches to postings by non-interstate pipelines. First,
under a delivery threshold approach, whether a non-interstate pipeline
posts flow information depends on the amount of flows or deliveries the
non-interstate pipeline flows or delivers annually at the hub. Second,
under a market hub approach, or market hub alternative, whether a non-
interstate pipeline posts flow information depends on whether it
interconnects to a major market hub. The Commission sought comment on
adopting a market hub approach, but did not propose a market hub
approach.
---------------------------------------------------------------------------
\134\ Posting NOPR at P 75.
---------------------------------------------------------------------------
75. The Posting NOPR also proposed that non-interstate pipelines
post flow information for ``major points or segments.'' We did not
delineate for which ``major points or segments'' a major, non-
interstate pipeline should post but requested comment on the subject.
The Posting NOPR proposed that non-interstate pipelines post ``on a
daily basis on an Internet Web site and in downloadable file formats,
in conformity with section 284.12 of this chapter, equal and timely
access to'' flow information.\135\
---------------------------------------------------------------------------
\135\ See new section 284.14(a).
---------------------------------------------------------------------------
2. Comments
76. Several commenters support a market hub approach (as opposed to
a points or segment-based approach) for determining which non-
interstate pipelines should post flow information.\136\ Chevron
Pipelines argue that a market hub approach would ``ensure and
facilitate more accurate pricing with little loss of meaningful
information.'' \137\ EOG Resources supports posting at the thirteen
market hubs referred to in the Initial and Posting NOPRs because it
would more likely provide meaningful information on flows affecting
wholesale natural gas markets and would cost less than the proposed
posting requirement.\138\ Atmos also advocates posting at the thirteen
hubs because the hubs represent market points where index prices are
regularly published and the market hubs ``come closer than any other
points to satisfying the statutory requirement that the information be
about physical pricing at wholesale and interstate commerce.'' \139\
---------------------------------------------------------------------------
\136\ See, e.g., National Fuel Distribution Comments at 2.
\137\ Chevron Pipelines Comments at 27.
\138\ EOG Resources Comments at 11; see also Oklahoma
Corporation Commission Comments at 4; Shell Comments at 11-17.
\139\ Atmos Comments at 7.
---------------------------------------------------------------------------
77. Yates asserts that a market hub approach would address the lack
of supply and demand information in production areas because the
thirteen major market hubs are located in the major production areas in
Louisiana and Texas.\140\ Supply and demand information, according to
this commenter, is available for other production areas through
interstate postings.\141\ Similarly, because the market hub approach
focuses on the Gulf Coast, Yates claims, it would address the goal of
understanding the
[[Page 73506]]
effects of a major disruption in that area.\142\
---------------------------------------------------------------------------
\140\ Yates Comments at 6-8.
\141\ Yates Comments at 7.
\142\ Id. at 7-8.
---------------------------------------------------------------------------
78. Other commenters oppose adoption of a market hub approach.
Royalty Owners contend that limiting the postings to hubs would exclude
vast, relevant segments of the intrastate system. For instance, Royalty
Owners declare that, since Oklahoma does not have one of the thirteen
market hubs listed in the Posting NOPR, every pipeline in the state
could be exempt, yet Oklahoma is the third largest producing state with
approximately 8.8 percent of the nation's total production.\143\ TIPRO
similarly opposes limiting the proposal to only pipelines that flow in
and out of major hubs because significant information would be lost and
the transparency goals would not be met.\144\
---------------------------------------------------------------------------
\143\ Royalty Owners Comments at 2.
\144\ TIPRO Comments at 2.
---------------------------------------------------------------------------
79. Commenters also addressed possible postings by receipt and
delivery points. Several commenters object to the fact that the Posting
NOPR did not define the ``major points of receipt and delivery'' at
which non-interstate pipelines would be required to post flow
information. Atmos believes that the lack of a definition of major
points hindered the ability to comment on the burden and costs of the
proposal.\145\ NGSA suggests requiring the posting of flow information
at receipt and delivery points that flow on average more than 15 mmcf/
day and at all metered points.\146\ PGC requests that the Final Rule
exclude posting at points serving private pipelines or LDC bypasses,
noting the Commission's comments that it was not interested in posting
for ``extremely small points connected to one or a few customers.''
\147\
---------------------------------------------------------------------------
\145\ Atmos Comments at 5; see also TPA Comments at 32; Calpine
Comments at 9-11.
\146\ NGSA Comments at 7-10.
\147\ PGC Comments at 2.
---------------------------------------------------------------------------
80. Several commenters express concern that the public posting of
flow information at receipt and delivery points could result in a
competitive disadvantage for individual customers.\148\ TPA objects to
the posting of design capacity for a point as it would allow a
determination of a non-interstate pipeline's available capacity.\149\
Kinder Morgan Intrastate contends that the posting proposal would harm
its end-use customers by causing the release of confidential
information.\150\ To avoid this result, Kinder Morgan Intrastate
suggests that the Commission exempt the reporting of information
regarding deliveries made to power generators, LDCs and industrial
customers.\151\ Calpine seeks to keep confidential an individual
customer's transportation volumes and consumption patterns by excluding
individual customer laterals and focusing the posting requirement on
high-volume segments with multiple shippers.\152\ But, as to
confidentiality, Bentek observes that data for power plants and nearly
800 industrial facilities that are directly connected to interstate
natural gas pipelines is posted daily with ``no apparent adverse
impact.'' \153\ Bentek concludes that the Commission should not
``protect something in the non-interstate context that is not protected
in the interstate context.'' \154\
---------------------------------------------------------------------------
\148\ See, e.g., Atmos Comments at 8.
\149\ TPA Comments at 16.
\150\ Kinder Morgan Intrastate Comments at 19.
\151\ Id. at 22.
\152\ Calpine Comments at 5.
\153\ Bentek Comments at 9.
\154\ Id.
---------------------------------------------------------------------------
81. Several commenters object to posting information on segments.
Atmos opposes posting information at segments because it does not
measure flows at segments.\155\ Atmos also states that it has 1,200
receipt and delivery points on its system and thousands of minor ones
resulting in a multitude of possible postings for segments.\156\ PG&E
urges the Commission to focus on receipt and delivery points on non-
interstate pipelines, rather than on mainline segments because posting
at segments would not provide any information that is not already
apparent from posting capacity, scheduled volume and actual flows at
receipt and delivery points.\157\ In this regard, other commenters
maintain that the requirement to post flows at segments would create a
significant burden.\158\ TPA explains that the estimates of costs from
the proposed requirement to post flow information arises from the
assumption that the proposal entails reporting at segments:
---------------------------------------------------------------------------
\155\ Atmos Comments at 5.
\156\ Id. at 6.
\157\ PG&E Comments at 5.
\158\ See, e.g., TPA Comments at 25-26; Atmos Comments at 5.
---------------------------------------------------------------------------
The burdens and costs associated with the proposed rule would be
substantially greater than the Commission estimated. A large reason
for this is that intrastate pipelines do not typically collect
information related to segment flow--most of the information already
collected by intrastate pipelines relates to scheduled volumes at
receipt and delivery points, rather than segments.\159\
---------------------------------------------------------------------------
\159\ TPA Comments at 25.
For instance, Atmos estimates that determining actual gas flows at
major pipeline segments would require a capital investment of at least
$13 million.\160\ Kinder Morgan Intrastate estimates that installing
meters to measure flow at segments would cost approximately $62.7
million.\161\ The ONEOK Gathering Companies observe that narrowly
defining the term ``major point or mainline segment'' in proposed
section 284.14(a) would reduce the number of new meters that would need
to be installed, operated and maintained and would thus keep the burden
to a minimum.\162\ TPA contends that adding segment meters to a
pipeline would cause a drop in pressure.\163\
---------------------------------------------------------------------------
\160\ Atmos Comments at 5.
\161\ Kinder Morgan Intrastate at 11.
\162\ ONEOK Gathering Companies Comments at 12-13.
\163\ TPA Comments at 41.
---------------------------------------------------------------------------
3. Commission Determination
82. The Commission determines that a major non-interstate pipeline
must post scheduling information for each receipt and delivery point
with a design capacity of equal to or greater than 15,000 MMBtu/day (a
point-based delivery threshold). In addition, a non-interstate pipeline
must post the design capacity for each such point. Specific information
that is to be posted is discussed below.\164\ Postings at market hubs
or for segments will not be required.
---------------------------------------------------------------------------
\164\ We remind pipelines that must comply with this Final Rule
that the Commission has established a help desk to facilitate
responses to questions regarding compliance with our regulations.
See Obtaining Guidance on Regulatory Requirements, 123 FERC ] 61,157
(2008).
---------------------------------------------------------------------------
a. Posting at Receipt and Delivery Points
83. The delivery threshold approach adopted herein will provide
broader, more useful information about the supply and demand
fundamentals that underlie the interstate natural gas market than a
hub-based approach and at a cost less than a segment-based approach.
The delivery threshold approach is not limited to a few market hubs or
published pricing points. It will provide information about flows that
either eventually feed into market hubs or that affect pricing at those
market hubs. Such market hubs or published pricing points are generally
already relatively liquid--the delivery threshold approach will promote
transparency at less liquid and currently less transparent points.
84. Posting points' design capacity will allow the Commission and
market participants to better determine availability, a key component
of supply and demand fundamentals. Market observers may estimate
availability by subtracting scheduled volumes from design capacity.
Requiring the posting
[[Page 73507]]
of design capacity will allow shippers and other market observers to
understand the availability of transportation that affects interstate
wholesale markets. Further, this approach is consistent with the
Commission's policies for interstate natural gas pipelines. In Order
No. 637, the Commission stated that interstate natural gas pipelines
had the option of posting at either (i) receipt and delivery points or
(ii) segments. It has been our experience that most, but by no means
all, interstate pipelines elect to post by receipt and delivery point
and not by segment.
85. Some commenters object to the threshold approach as not
advancing transparency in the interstate market because, for example,
as they claim ``[v]ery few intrastate delivery or receipt points and no
intrastate segments exist at the same location as published pricing
indices. If these points do not represent established pricing points
for the interstate market, there is no advancement of the increased
price transparency goal from the proposed reporting.'' \165\ This
criticism assumes that only flow information for a published pricing
point can promote transparency. First, this assumption is incorrect
because prices are affected by flows that feed a pricing point or that
affect the supply available to a pricing point. Second, this assumption
incorrectly assumes that price transparency is solely about the price
of natural gas at published price indices. Price transparency also
includes the price of transportation of natural gas. Congress
contemplated that this price transparency would be derived from not
only information about prices but also information about availability.
Section 23 of the NGA authorizes the Commission to obtain ``information
about the availability'' of natural gas, in addition to information
about the ``prices'' of natural gas. Unlike the market hub approaches,
the delivery threshold approach would obtain information regarding
availability of transportation broadly which would facilitate price
transparency of both ``sales and transportation of physical natural gas
in interstate commerce.* * *'' \166\
---------------------------------------------------------------------------
\165\ Atmos Comments at 7.
\166\ Section 23(a)(1) of the NGA; 15 U.S.C. 717t-2(a)(1) (2000
& Supp. V 2005).
---------------------------------------------------------------------------
86. We believe that a delivery threshold will be less burdensome
for major non-interstate pipelines than either a hub-based or segment-
based approach as many such pipelines already collect such information.
These pipelines may incur some additional costs to comply with the
Final Rule's posting requirements, however, we believe the substantial
transparency benefits, discussed above, outweigh those costs. In any
event, the Commission expects that compliance costs will not be nearly
as great as those estimated by some commenters. As discussed above,
most commenters' cost estimates include the cost of metering at
segments, but posting at segments is not a requirement. Other cost
estimates include the cost of metering and posting actual flow
information, but posting actual flow information is, likewise, not a
requirement.
87. Only a few commenters provided cost estimates that did not
assume obtaining and posting flow information for pipeline segments and
that did not assume obtaining and posting actual flow information.
Kinder Morgan Intrastate, for example, estimated a cost of $250,000 for
obtaining and posting scheduled volume information.\167\ The Commission
believes that this figure is likely exaggerated because, as noted by
TPA, ``most of the information already collected by intrastate
pipelines relates to scheduled volumes at receipt and delivery
points.'' \168\ We believe that the costs of collecting existing
scheduled volume information and posting it on a Web site is likely to
be far less.\169\
---------------------------------------------------------------------------
\167\ Kinder Morgan Intrastate at 12.
\168\ TPA Comments at 25.
\169\ As noted above, supra note 130, our staff's research
indicates that such costs could be less than $30,000 per year.
---------------------------------------------------------------------------
88. Lastly, we have carefully considered the arguments by some
commenters that additional pipeline postings could affect the
competitive position of customers who have a dedicated delivery point
with a design capacity equal to or greater than 15,000 MMBtu/day on a
major, non-interstate pipeline. In this respect, the regulations that
we adopt here may affect ``fair competition, and the protection of
consumers''--considerations that the Commission must take into account
pursuant to section 23(a)(1) of the NGA. Nonetheless, information about
the scheduled volumes to a customer with a delivery point with a
capacity greater than 15,000 MMBtu/day will provide useful information
to the Commission, market participants, and other market observers and
will greatly increase market transparency. We believe that this benefit
outweighs the concerns about publicly posting information about
scheduled volumes to such a customer. Further, we understand that such
customers would be placed in the same situation as customers on
interstate natural gas pipelines with whom they often compete.\170\
Currently, interstate natural gas pipelines post daily scheduled
volumes for delivery points dedicated to a single customer regardless
of the size of the meter. There have been no indications that
competitive balance has been harmed since the interstate requirement to
post was instituted.
---------------------------------------------------------------------------
\170\ Those customers whose delivery point has a design capacity
of less than 15,000 MMBtu/day would not be affected. Those customers
of non-interstate pipelines that did not flow greater than 50
million MMBtu per year also would not be affected.
---------------------------------------------------------------------------
89. The Commission will require all postings to be public; we will
not provide for posting information to be kept confidential as
requested by some commenters. In section 23(a)(2) of the NGA, Congress
called for any transparency rule to provide for the ``dissemination, on
a timely basis, of information about the availability and prices of
natural gas sold at wholesale and interstate commerce to the
Commission, State commissions, buyers and sellers of wholesale natural
gas, and the public.'' \171\
---------------------------------------------------------------------------
\171\ Section 23(a)(2) of the NGA; 15 U.S.C. 717t-2(a)(2) (2000
& Supp. V 2005) (emphasis added).
---------------------------------------------------------------------------
90. In this Final Rule we determine that each major non-interstate
pipeline must post information for each receipt or delivery point with
a design capacity equal to or greater than 15,000 MMBtu/day. We believe
that this threshold represents significant load at delivery points
(major pipeline interconnections, substantial industrial use, etc.) and
major receipt points. However, the 15,000 MMBtu/day threshold should be
sufficiently large so as to exclude insignificant or minor points on a
pipeline system. To put this threshold in context, 15,000 MMBtu/day
corresponds roughly to the gas used by an 85 MW baseload gas fired
power plant at a relatively efficient heat rate of 7,500 Btu/kWh--a
facility that could serve over 40,000 households each with a 2 kW load.
91. The Commission will require posting based on each receipt and
delivery point's design capacity rather than average flows at a point
because posting at points based on design capacity should be less
burdensome for pipelines. The average flows over a receipt or delivery
point may change from year-to-year and designation of posting points
based upon fluctuating averages would require pipelines to add and
subtract points from posting on a rolling basis. By comparison, points'
design capacities are relatively fixed and lend themselves to stable
posting requirements.
[[Page 73508]]
92. In the circumstance where the design capacity of a receipt or
delivery point could vary according to operational or usage conditions,
a major non-interstate pipeline must post the design capacity for the
most common operating conditions of its system during peak periods.
This guidance is identical to that provided to interstate natural gas
pipelines in Order No. 637 regarding postings. Also consistent with our
directives in Order No. 637, a pipeline's posting of the total design
capacity of a point is not a daily posting requirement, but pipelines
must update this information from time-to-time as changes in design
capacity occur.
93. The Commission will not require major non-interstate pipelines
to post information for each point that has a meter as suggested by
NGSA. Such a requirement would not be uniform for each pipeline as some
systems have significantly more physical meter points than others.
Further, such a requirement could create a disincentive for a major
non-interstate pipeline to install new meters.
94. The Commission will require that a major, non-interstate
pipeline post the following scheduled volume information for each
receipt and delivery point that has a design capacity equal to or
greater than 15,000 MMBtu/day: Transportation Service Provider Name,
Posting Date, Posting Time, Nomination Cycle, Location Name, Additional
Location Information if Needed to Distinguish Between Points, Location
Purpose Description (Receipt, Delivery, or Bilateral), Design Capacity,
Scheduled Volume, Available Capacity, Measurement Unit (Dth, MMBtu, or
MCf).
95. Regarding the timing of postings, the Commission considers that
scheduled flow information that is not provided on a daily basis is
simply untimely and of vastly diminished use to market participants. We
believe that, in this regard, our interstate natural gas pipeline
postings set an appropriate standard: Postings should occur at least on
a daily basis. Further, this standard conforms to Congress' direction
in section 23 of the NGA, which requires that our transparency rules
``provide for the dissemination, on a timely basis, of information
about the availability and prices of natural gas. * * *'' \172\
---------------------------------------------------------------------------
\172\ Section 23(a)(2) of the NGA (emphasis added); 15 U.S.C.
717t-2(a)(2) (2000 & Supp. V 2005).
---------------------------------------------------------------------------
96. These postings will provide information comparable to the daily
postings made by interstate natural gas pipelines. Major non-interstate
pipelines must post scheduled volumes according to a daily posting
deadline. Currently, interstate natural gas pipelines must provide at
least four nomination cycles to their shippers with the following
nomination: Timely, evening, intra-day 1, and intra-day 2.\173\ Once
these volumes are scheduled, they must be posted on the public Internet
under Operationally Available Capacity section of an interstate natural
gas pipeline's Informational Postings according to the following cycle
deadlines: Timely (no later than 4:30 p.m. central clock time for the
day prior to gas flow); evening (no later than 9 p.m. central clock for
the day prior to gas flow); intra-day 1 (no later than 5 p.m. on flow
day); and intra-day 2 (no later than 9 p.m. on flow day). Currently,
major non-interstate pipelines employ a variety of nomination deadlines
on their systems. Some use the standard North American Energy Standards
Board (NAESB) guidelines followed by interstate natural gas pipelines;
others do not have specific nomination deadlines.
---------------------------------------------------------------------------
\173\ Standard 1.3.2, Nominations Related Standards, North
American Energy Standards Board, Wholesale Gas Quadrant, July 31,
2002.
---------------------------------------------------------------------------
97. The Commission will require that major non-interstate pipelines
post scheduled volumes no later than 10 p.m. central clock time the day
prior to gas flow. This deadline occurs after interstate natural gas
pipelines are required to post their evening cycle schedule
confirmations by receipt and delivery point. The deadline enables non-
interstate pipelines ample time to review their gas control set-up for
the next day and limits the burden of posting to a single, daily
reporting cycle.
98. Regarding comments made by TPA, the Commission clarifies that
the pipeline posting regulations do not impose NAESB requirements on
non-interstate pipelines. Rather, the proposed regulations required a
major non-interstate pipeline to post daily its scheduled volumes, ``in
conformity with Sec. 284.12 of this chapter. * * *'' The commenter
erroneously assumes that this would require a non-interstate pipeline
to conform to all of section 284.12 instead of to conform with the
manner of posting set forth in that section. The Commission clarifies
that posting pipelines need only comply with the manner of posting
outlined in section 284.12 and need not comply with all other
requirements of that section.
b. Posting at Market Hubs or by Segment
99. The Commission identified, in the Initial and Posting NOPRs,
thirteen market hubs served by both interstate and non-interstate
pipelines as a way to illustrate and provide examples of the wider
range of deficient information about the physical natural gas market.
We asked for comment on whether these thirteen hubs should help
determine which non-interstate pipelines should post flow
information.\174\ Some commenters seized on these thirteen market hubs
as a way to define the particular points at which pipelines that should
post flow information. While the Commission adopts a posting method
based upon points of receipt and delivery, the Commission appreciates
the effort that commenters expended in evaluating the Posting NOPR and
proposing other alternatives (including posting at market hubs) as well
as comments on posting by segment. We now explain why we are not
adopting any of these alternatives.
---------------------------------------------------------------------------
\174\ Posting NOPR at P 71.
---------------------------------------------------------------------------
100. The market hub alternatives proposed by NGSA and TPA focus on
locations which have obvious import to understanding pricing in the
interstate markets. However, we believe that a hub-based approach would
be unwieldly at best and would not provide the data needed to meet the
Commission's transparency goals. The market hub alternatives would
require posting only by those non-interstate pipelines that connect to
major market hubs. These alternatives would be quite difficult to
implement and would provide insufficient information to market
participants.
101. The market hub alternatives also present too great a challenge
in trying to keep up with the constantly changing nature and location
of market hubs. Even the initial identification of relevant market hubs
would present a challenge. Market hubs are uniform only in that they
serve as pricing points; they are not uniform physically. There is a
wide variety of hub types: pooling points, salt-cavern based storage
hubs, and pipeline hubs (including one, two, or even three different
pipelines). In spite of this lack of uniformity, a pipeline posting
would require physical posting as if every market hub were physically
the same. In such circumstances, posting information would not be
comparable among different hubs and the resulting data would be of
marginal value.
102. After market hubs were initially determined, ongoing
challenges would remain. A regulatory listing of market hubs would need
to be established and maintained, yet trading in the market determines
which market hubs are, in fact, relevant to the market as a whole. This
list of relevant market hubs would need to be constantly modified as
[[Page 73509]]
trading trends evolved. For instance, on July 2, 2008, Gas Daily
reported on numerous changes involving price reporting and the
establishment of new trading hubs, including El Paso South Mainline. El
Paso South Mainline is a market hub that, under a market hub approach,
could be considered as a market hub at which interconnected pipelines
should post flow information. New pipelines would also change which
market hubs were important to the overall transparency of the
market.\175\ The listing of specific hubs could not keep up with this
constantly changing market, would require the commitment of significant
Commission resources, and would result in perpetual regulatory
uncertainty regarding posting obligations. Each time a market hub were
added to the list of relevant hubs, a new set of pipelines would be
required to begin posting information.
---------------------------------------------------------------------------
\175\ IPAA Comments at 3.
---------------------------------------------------------------------------
103. An additional drawback, particular to NGSA's proposed market
hub approach, would be determining how far upstream of the market hub a
non-interstate pipeline should post data. NGSA proposes only postings
of flow information at the pipeline immediately connected to the market
hub.\176\ This limitation would result in too little information: It
would provide flow information only at the immediate interconnecting
pipeline. The Commission, market participants, and observers would lose
significant information from a supply-chain standpoint.
---------------------------------------------------------------------------
\176\ NGSA Reply Comments at 2.
---------------------------------------------------------------------------
104. The TPA market hub alternative would provide even less
information and less benefit to market participants and observers.
Because the TPA market hub alternative would not include points
upstream of the market hub interconnection, this alternative would
provide no information about the availability of transportation to the
market hub. The Commission's experience with postings by interstate
natural gas pipelines suggests that the value of such posting is to
understand the availability of supply at different points on a
pipeline, not just the one point at the interconnection. Further, if
the market hub interconnection is with an interstate natural gas
pipeline, the interstate natural gas pipeline already posts scheduled
volume information for that receipt point, thus rendering the TPA
proposal redundant for many points.\177\
---------------------------------------------------------------------------
\177\ The AGA states, in objecting to posting such points for
local distribution companies, that requiring the posting of ``daily
information for receipt and delivery points that are
interconnections with interstate pipelines would be unnecessarily
redundant and would add no valuable information to the Commission's
or others' understanding of the supply and demand conditions that
directly affect the U.S. wholesale gas markets.'' AGA Comments at
15.
---------------------------------------------------------------------------
105. Similarly, based upon comments we received in response to the
Posting NOPR, we will not require posting of data by segment. As noted
by TPA, ``most of the information already collected by intrastate
pipelines relates to scheduled volumes at receipt and delivery points,
rather than segments.'' \178\ Thus, the requirement in the Final Rule
focuses on obtaining and posting information already collected by
intrastate pipelines: we will require posting of scheduled volumes and
posting by receipt and delivery points, rather than segments.\179\
---------------------------------------------------------------------------
\178\ TPA Comments at 25.
\179\ We note that some non-interstate pipelines currently post
data regarding pipeline use and availability by segment. We wish to
make clear that the Final Rule does not preclude pipelines from
posting such data. The Final Rule requires the posting of specific
data by major non-interstate pipelines at certain points of receipt
and delivery. A pipeline is free to post any additional data (e.g.,
additional points, postings by segment, etc.) that it believes would
be useful to its customers or as required by other regulatory
bodies.
---------------------------------------------------------------------------
106. We also appreciate the burden that would be placed upon major
non-interstate pipelines if we were to adopt a segment-based posting
approach. Nearly every commenter that discussed segment-based posting
acknowledged that the costs of such a methodology would be
substantial.\180\ We adopt a receipt and delivery point-based approach
that will capture much of the same data as a segment-based approach,
but that is less burdensome to implement.
---------------------------------------------------------------------------
\180\ See, e.g., TPA Comments at 25-26.
---------------------------------------------------------------------------
E. Exemptions to the Major Non-Interstate Pipeline Posting Requirements
107. In consideration of the comments received in response to the
Posting NOPR, the Commission adopts three exemptions: for non-
interstate pipelines upstream of a processing plant; for non-interstate
pipelines that deliver almost exclusively to retail end-users; and for
storage providers. First, a major non-interstate pipeline will be
exempt from the posting requirement if it ``fall[s] entirely upstream
of a processing, treatment or dehydration plant.'' \181\ This language
excludes from the definition not only non-interstate pipelines located
upstream of a processing plant but also those located upstream of a
treatment or dehydration plant. Second, the Commission modifies the
end-use exemption, excluding a non-interstate pipeline if it delivers
more than 95 percent of its natural gas volumes directly to retail end-
users.\182\ To determine eligibility for the retail exception, a major
non-interstate pipeline must measure volumes by ``average deliveries
over the preceding three calendar years.'' \183\ Third, the Commission
provides a general exemption for storage providers.\184\
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\181\ See new section 284.14(b)(1).
\182\ See new section 284.14(b)(2).
\183\ See new section 284.14(b)(4).
\184\ See new section 284.14(b)(3).
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1. Non-Interstate Pipelines That Are Upstream of a Processing,
Treatment, or Dehydration Plant
a. Posting NOPR
108. In the Posting NOPR, the Commission proposed that non-
interstate pipelines located upstream of a processing plant would be
exempt from the proposed regulations\185\ and requested comment on this
proposal.\186\
---------------------------------------------------------------------------
\185\ Posting NOPR at P 69.
\186\ Id. at P 68.
---------------------------------------------------------------------------
b. Comments
109. Commenters generally support the exemption for pipelines
upstream of the processing plant as price formation relies more on
flows downstream of the processing plant.\187\ However, several
commenters seek to clarify and, in some ways, expand the definition of
processing plant. These commenters request that the exemption be
expanded to exclude pipelines upstream of a treatment plant.\188\ Dow
Pipeline seeks to include nitrogen processing in the definition of
processing.\189\ Regency seeks to expand the exemption to exclude any
pipeline upstream of a processing, treatment or dehydration plant used
to remove liquid hydrocarbons or other substances from natural gas to
meet transmission pipeline quality specifications.\190\ NGSA contends
that a major non-interstate pipeline that lies upstream from another
major non-interstate pipeline and delivers solely into a single non-
interstate pipeline should be exempted from the posting requirement
because its volume will be reported by the downstream pipeline.\191\
---------------------------------------------------------------------------
\187\ See, e.g., Chevron Pipelines Comments at 22-23; TIPRO
Comments at 5.
\188\ Copano Energy Comments at 8-9; ONEOK Gathering Companies
Comments at 5; TPA Comments at 32.
\189\ Dow Pipeline Comments at 2-3.
\190\ Regency Comments at 11-13.
\191\ NGSA Comments at 6.
---------------------------------------------------------------------------
110. Several commenters seek an exemption specifically for
gathering pipelines.\192\ These commenters argue that the exemption for
pipelines upstream of a processing plant would
[[Page 73510]]
not exclude all gathering pipelines.\193\ They note that the exemption
for pipelines upstream of a processing plant was justified in part as a
way to exempt gathering pipelines, but that it does not exempt all
gathering pipelines.\194\ Shell asserts that a production and/or
gathering line should not be considered a ``pipeline'' and request that
the Commission define pipeline.\195\
---------------------------------------------------------------------------
\192\ Enbridge Comments at 2-4; EOG Resources Comments at 8-10;
Gas Processors Comments at 3-5; TPA Comments at 30-31.
\193\ ONEOK Gathering Companies Comments at 5-11; Crosstex
Comments at 5; Enbridge Comments at 4-6
\194\ Gas Processors Comments at 3-5.
\195\ Shell Comments at 18-20.
---------------------------------------------------------------------------
111. Some commenters assert that if gathering systems were required
to post at all of their receipt and delivery points, the burden would
be too great. For instance, Regency, which operates gathering systems,
estimates that requiring posting of its gathering system would cost $6-
10 million.\196\ These commenters request that the Commission exempt
gathering pipelines by using the ``primary function test.'' \197\ Dow
Pipeline argues that, if any portion of a major non-interstate pipeline
located upstream of a processing plant, the pipeline should be excluded
from the posting requirement.\198\
---------------------------------------------------------------------------
\196\ Regency Comments at 8-9.
\197\ Copano Energy Comments at 8-9; Encana Comments at 5-8; EOG
Resources Comments at 10-11; Kinder Morgan Intrastate Comments at
21.
\198\ Dow Pipeline Comments at 2-3.
---------------------------------------------------------------------------
112. Several commenters note that many gathering facilities are
downstream of a processing plant.\199\ For instance, ONEOK Gathering
Companies maintain that the proposed exemption for a pipeline that lies
upstream of a processing facility is insufficient to exempt gathering
facilities because gathering facilities have facilities downstream of a
processing facility. This fact, ONEOK Gathering Companies describe, is
recognized in the Commission's primary function test for determining a
gathering facility in which one factor is the location of the
processing plant.\200\ The fact that the Commission did not delineate
for which points a pipeline would post makes such an exemption even
more necessary, according to ONEOK Gathering Companies, as the burden
would be too great.\201\
---------------------------------------------------------------------------
\199\ DCP Midstream Comments at 5.
\200\ ONEOK Gathering Companies Comments at 7.
\201\ Id. at 7-9.
---------------------------------------------------------------------------
c. Commission Determination
113. The Commission adopts an exemption for major non-interstate
pipelines that lie entirely upstream of a processing, treatment, or
dehydration plant. The focus of this Final Rule is to make available
information on flows of gas that may be sold in interstate natural gas
markets. Prior to processing, treatment, or dehydration, natural gas is
generally not of sufficient quality to serve as a fungible product to
use in evaluating supply and demand fundamentals underlying the
interstate natural gas market. We clarify that nitrogen processing, as
suggested by Dow Pipeline, would be considered processing at a
processing plant for purposes of this exemption. Additionally, as
requested by TPA, the Commission clarifies that a pipeline may be
upstream of a processing plant if it flows into another line that flows
into a processing plant.
114. The Commission will not provide a general exemption for
gathering pipelines. The increased delivery threshold of 50 million
MMBtu and the exemption for pipelines that lie entirely upstream of a
processing, treatment, or dehydration plant should be sufficient to
exclude most gathering pipelines. Further, these exemptions as written
will serve as a bright-line test for determining whether a major non-
interstate pipeline should post. This contrasts with the ``primary
function test'' advocated by some commenters. Adopting an exemption
based on the ``primary function test'' would require a Commission
determination of each gathering pipeline's eligibility and would be
burdensome for pipelines seeking to determine whether they must post
information. Moreover, the ``primary function test'' is a test adopted
by the Commission to determine whether a facility would fall outside of
the scope of our traditional NGA jurisdiction under section 1 of the
act. Use of this test could further confuse the distinction that the
Commission makes here between its traditional section 1 and its new
section 23 jurisdiction.
115. We also decline to adopt an exemption for pipelines that lie
partially upstream and partially downstream of a processing, treatment,
or dehydration plant. Such an accommodation would confuse the exemption
and create compliance difficulties. In any event, again, we believe
that the increased threshold mitigates any compliance difficulties
posed for such pipelines.
2. Non-Interstate Pipelines That Deliver More Than Ninety-Five Percent
of Volumes to Retail Customers
a. Posting NOPR
116. In the Posting NOPR, the Commission proposed that major non-
interstate pipelines that deliver 95 percent of their volumes to end-
users would be exempt from the posting requirements and requested
comment on this proposal.\202\
---------------------------------------------------------------------------
\202\ Posting NOPR at P 69.
---------------------------------------------------------------------------
b. Comments
117. Several commenters support an exemption for pipelines
delivering almost exclusively to end-users contending that it would not
result in a loss of significant market information.\203\ Indeed, some
commenters request that a proposed exemption be expanded to include
non-interstate pipelines that transport 80 percent of flows to end-
users.\204\ Calpine seeks to lower the end-use threshold from 95
percent to 90 percent and asserts that such pipelines do not have a
major impact on gas flow. Calpine contends that unforeseen outages of a
large gas-consuming facility could cause a non-interstate pipeline to
no longer be eligible for the exemption. Calpine acknowledges that this
possibility is lessened by averaging deliveries over a three-year
period as was proposed.\205\
---------------------------------------------------------------------------
\203\ Dow Chemical Comments at 2; Dow Pipeline Comments at 2-3;
Chevron Pipelines Comments at 23.
\204\ ONEOK Gathering Companies Comments at 14-15; TPA Comments
at 46-47; Kinder Morgan Intrastate Comments at 22-23.
\205\ Calpine Comments at 7-8.
---------------------------------------------------------------------------
118. AGA proposes to exempt any pipeline in which flows to non-end-
users amounted to less than 10 million MMBtu. AGA is concerned that
without its additional exemption, a pipeline that flowed more than the
delivery threshold of 10 million MMBtu but whose flows to non-end-users
were more than 500,000 MMBtu would be captured.\206\ Dow Chemical
requests a categorical exemption for non-interstate pipelines that are
owned or operated by end-users and that are used to transport natural
gas for use by such end-users.\207\
---------------------------------------------------------------------------
\206\ AGA Comments at 2.
\207\ Dow Chemical Comments at 2.
---------------------------------------------------------------------------
119. Duke maintains that gas consumed by an LDC in the normal
course of operations, such as fuel and lost-and-unaccounted for gas,
should be included in the gas deemed delivered directly to end-users
for purposes of this exemption.\208\ Duke contends that such gas
facilitates performance by an LDC of its core function and is not
pertinent to the United States wholesale market.\209\ Duke also argues
that deliveries by one LDC to another LDC should be considered
deliveries to another end-user for the purposes of the exemption.\210\
Duke reasons that such gas has left the interstate system.\211\
---------------------------------------------------------------------------
\208\ Duke Comments at 7; see also AGA Comments at 11.
\209\ Duke Comments at 7.
\210\ Id. at 7-8; see also AGA Comments at 13.
\211\ Duke Comments at 8.
---------------------------------------------------------------------------
[[Page 73511]]
c. Commission Determination
120. With one substantial modification, the Commission adopts the
exemption proposed in the Posting NOPR. Major non-interstate pipelines
that flow greater than 95 percent of their volumes directly to retail
customers (rather than all end-users) are exempted from the posting
requirements.\212\
---------------------------------------------------------------------------
\212\ Dow Intrastate requests clarification for its non-
interstate pipeline that can deliver both to a processing plant and
an end-user. It seeks to fit the non-interstate pipeline into one of
the exemptions. The non-interstate pipeline delivers directly into a
processing plant but can also deliver directly to an end-user.
According to Dow Intrastate, in those circumstances, a pipeline
could not qualify for the end-use exemption because 95 percent of
the gas does not go to an end-user, it is delivered to the
processing plant. It appears that the pipeline that Dow Intrastate
describes does not lie entirely upstream of a processing plant. If
the modified delivery point threshold adopted in this Final Rule
does not address Dow Intrastate's concern, it may file for a waiver
of the regulations and the Commission will consider the matter in
light of the facts presented.
---------------------------------------------------------------------------
121. Recently, in Order No. 704-A, the Commission held that data
regarding transactions with consumers at retail would not significantly
assist us to fulfill our transparency responsibilities under section 23
of the NGA.\213\ There, we drew a distinction between a broad category
of end-use transactions and transactions that occur at retail. As we
discussed in that order, many end-use transactions have substantial
impact on wholesale energy markets.\214\ For these reasons, we will
define the exemption in the same terms described in Order No. 704-A and
exempt pipelines delivering 95 percent of their flow volumes under
retail transactions (i.e., bundled transactions through an LDC at a
state-approved tariff rate) to consumers.
---------------------------------------------------------------------------
\213\ Order No. 704-A at P 40-43.
\214\ Id. at P 40.
---------------------------------------------------------------------------
122. In light of the increase in the delivery threshold from 10 to
50 million MMBtu, we do not adopt the proposal of AGA to further expand
this exemption. AGA proposes to exempt any pipeline in which flows to
non-end-users amounted to less than 10 million MMBtu. AGA is concerned
that without its additional exemption, a pipeline that flowed just more
than the delivery threshold of 10 million MMBtu but whose flows to non-
end-users were more than 500,000 MMBtu would be required to post.\215\
Because the Commission herein increases the delivery threshold proposed
in the Posting NOPR, AGA's concern is alleviated because such a non-
interstate pipeline would not be required to post.
---------------------------------------------------------------------------
\215\ AGA Comments at 2.
---------------------------------------------------------------------------
123. Also, because of the increase in the delivery threshold, we
will not lower the threshold for this exemption to 80 percent as
requested by several commenters \216\ or to 90 percent as proposed by
Calpine. Lowering the retail delivery exemption to 80 or 90 percent
would allow some major non-interstate pipelines to avoid posting a
significant amount of receipts and deliveries that are not made to
consumers, which could result in the loss of a large amount of
information about the interstate natural gas market. Further, we
believe that commenters' concerns largely are addressed by the
increased delivery threshold of 50 million MMBtu and by the requirement
that the end-use percentages be determined on a three-year average.
---------------------------------------------------------------------------
\216\ ONEOK Gathering Companies Comments at 14-15; TPA Comments
at 46-47; Kinder Morgan Intrastate Comments at 22-23.
---------------------------------------------------------------------------
124. We find Calpine's ``concern[] that the ninety-five (95%)
volume level is set too high to allow for unforeseen outages that
affect large gas-consuming facilities'' to be misplaced. Such outages
could result in gas being redirected away from an end-user to a
wholesale purchaser. This also could result in the pipeline delivering
more than 5 percent of its flows to non-end-users therefore triggering
the posting requirement. In such a circumstance, posting would be
properly required.
125. In response to other comments, we clarify that volumes
transported from one LDC to another should not be deemed deliveries to
retail consumers for purposes of the end-user exemption.\217\ The
Commission will not exempt a non-interstate pipeline that delivers
solely into a single non-interstate pipeline as suggested by NGSA.\218\
NGSA reasons that the downstream, non-interstate pipeline would post
the flows at its receipt point. That may not be the case where the
downstream, non-interstate pipeline does not meet the delivery
threshold and is not required to post.
---------------------------------------------------------------------------
\217\ Duke Comments at 7.
\218\ NGSA Comments at 6.
---------------------------------------------------------------------------
126. Natural gas consumed or utilized for operational reasons by
the posting pipeline (such as for fuel or lost-and-unaccounted for gas)
is deemed to be gas consumed ``at retail'' for purposes of determining
whether a pipeline fits within this exemption.
3. Non-Interstate Storage Providers
a. Posting NOPR
127. In the Posting NOPR, the Commission sought further comment
from storage providers regarding the effect of the proposed rule on
their businesses. Specifically, the Commission asked for comment on
whether storage providers should provide data in aggregate form and
whether an individual storage facility loses negotiating strength when
its customers know the supply of available storage capacity.\219\
---------------------------------------------------------------------------
\219\ Posting NOPR at P 76-77.
---------------------------------------------------------------------------
b. Comments
128. Some commenters support the proposal.\220\ For example,
Calpine supports a daily posting requirement for storage providers,
otherwise ``[t]he supply chain would be incomplete.'' \221\ Calpine
contends that the information currently available about interstate
storage facilities is ``often too delayed or too aggregated to provide
effective daily flow information'' and information about non-interstate
storage providers is even less useful.\222\
---------------------------------------------------------------------------
\220\ Calpine Comments at 12.
\221\ Id. at 13.
\222\ Id.
---------------------------------------------------------------------------
129. Storage providers generally object to the proposal, claiming,
for example, that the proposal is anti-competitive in nature,\223\ the
information is already available through other means,\224\ or that the
daily posting requirements would produce distorted aggregate data and
may yield inaccuracies.\225\ They oppose both (i) the posting of flow
information by storage providers who qualify as major non-interstate
pipelines, and; (ii) the posting by a non-interstate pipeline of flow
information at a receipt or delivery point that serves a storage
provider.
---------------------------------------------------------------------------
\223\ Enstor Comments at 3-5; Dow Chemical Comments at 2.
\224\ See Jefferson Island Comments at 4-6; NISKA Comments at 4-
5; Nisource Comments at 4-5; Williston Basin Comments at 16;
EnergySouth Comments at 2, 5.
\225\ Nisource Comments at 5; Total Peaking Comments at 11.
---------------------------------------------------------------------------
130. In response to the Commission's inquiry regarding the effect
of the proposal on a storage provider's negotiating position,
commenters warn that revealing their actual storage position would
cause them to lose negotiating strength,\226\ which could make the
storage business less profitable, discourage continued and new storage
services, lower storage supply and increase prices.\227\ As explained
by Enstor:
---------------------------------------------------------------------------
\226\ Williston Basin Comments at 17.
\227\ EnergySouth Comments at 13.
A rule that requires [a storage provider] to reveal all daily
injections and withdrawals into and out of each of its storage
facilities would, in effect, reveal to the world what [its] storage
position is on each day in each such storage facility.\228\
---------------------------------------------------------------------------
\228\ Enstor Comments at 6 n. 22; see also EnergySouth Comments
at 2 and 11; Jefferson Island Comments at 7-8; NISKA Comments at 6-
8; Nisource Comments at 5 and 7-8; Williston Basin Comments at 17;
Chevron Pipelines Comments at 32; Enstor Reply Comments at 10.
[[Page 73512]]
---------------------------------------------------------------------------
131. Similarly, EnergySouth comments that revealing such
competitively-sensitive information about individual facilities would
degrade storage providers' competitive abilities and provide ``one-
sided information advantage'' to storage purchasers.\229\ This result,
storage providers allege, would run contrary to section 23(a)(1) of the
NGA, which requires the Commission to facilitate price transparency
``having due regard for * * * fair competition'' among other
goals.\230\
---------------------------------------------------------------------------
\229\ EnergySouth Comments at 2, 11-12; see also EnergySouth
Reply Comments at 1-2.
\230\ Section 23(a)(1) of the NGA; 15 U.S.C. 717t-2(a)(1) (2000
& Supp. V 2005).
---------------------------------------------------------------------------
132. Commenters also claim that the release of flow data from
individual storage facilities could lead to increased prices.\231\ For
instance, NiSource asserts that the posting of regionally specific
storage volumes could result in artificially high prices, particularly
where storage assets are operated on an integrated basis.\232\ Further,
commenters suggest that flow information from storage providers would
not be useful to market participants or the Commission.\233\ National
Fuel Supply comments that ``information about daily flows at each
individual field has only operational, not commercial, significance,
and its disclosure would place a burden on National Fuel Supply and
other storage providers without facilitating price transparency.''
\234\
---------------------------------------------------------------------------
\231\ See Chevron Pipelines Comments at 32; EnergySouth Comments
at 2, 13; Nisource Comments at 9.
\232\ Nisource Comments at 9.
\233\ Total Peaking Comments at 11; National Fuel Supply
Comments at 6; Williston Basin Reply Comments at 7.
\234\ National Fuel Supply Comments at 6; National Fuel Supply
Reply Comments at 5-6.
---------------------------------------------------------------------------
133. Several commenters state that the posting for storage
providers should be done on an aggregated basis rather than on a
facility-by-facility basis.\235\ Otherwise, NiSource reasons, market
participants may use daily storage data to artificially increase
natural gas prices when they believe demand is rising.\236\ Others
contend that an aggregated posting by storage providers should parallel
the postings of interstate storage providers. According to Enstor, many
interstate natural gas pipelines post one aggregated, system-wide
storage capacity number for all of their storage fields, regardless of
the number of storage facilities.\237\ Enstor explains that if the
Commission deems it necessary to require non-interstate storage
providers to post daily storage capacity and withdrawal and injection
capacities, the Commission should require all storage providers to
report this information by specific location rather than by the
entirety of their systems.\238\
---------------------------------------------------------------------------
\235\ See Enstor Comments at 5; Nisource Comments at 5;
EnergySouth Comments at 10-11; Bentek Comments at 10; Comments of
National Fuel Supply at 6.
\236\ NiSource Comments at 5.
\237\ Enstor Comments at 8.
\238\ Id. at 9.
---------------------------------------------------------------------------
134. Some commenters request clarification regarding possible
storage provider postings. PG&E requests that the Commission clarify
that by requiring storage providers to post ``capacity'' information,
it would not be requiring storage providers to post inventory
data.\239\ PG&E does not object to posting information concerning
injections into and withdrawals from its storage facilities on an
aggregated basis.\240\
---------------------------------------------------------------------------
\239\ PG&E Comments at 7; NISKA Comments at 7.
\240\ PG&E Comments at 7.
---------------------------------------------------------------------------
135. Commenters propose different ways to limit storage provider
posting obligations to address the above concerns. They suggest that
the Commission exempt storage providers providing storage service under
section 311 of the NGPA under market-based-rates \241\ or allow storage
providers to post such information on a confidential, non-public
basis.\242\ EnergySouth comments that ``[m]arket-based rate storage
providers lacking market power should be regulated under less intrusive
gas market transparency rules, if under any such rules, than pipelines
providing transportation services.'' \243\
---------------------------------------------------------------------------
\241\ See Chevron Pipelines Comments at 29; Jefferson Island
Comments at 10; NISKA Comments at 4; see also Enstor Comments at 7
(stating that the Commission should put all storage providers on the
same playing field and not exempt some operators from posting
information because it is inherently not fair to entities taking on
the ``additional burden'').
\242\ See PG&E Comments at 7; NISKA Comments at 5; Chevron
Pipelines Comments at 30-31.
\243\ EnergySouth Reply Comments at 3.
---------------------------------------------------------------------------
c. Commission Determination
136. In response to the comments received, the Commission will
exempt non-interstate storage providers from the requirement to post
information on the Internet.\244\ As discussed above, the Commission
and other market observers would benefit substantially by increased
transparency regarding the flow of natural gas on major non-interstate
pipelines. We agree, however, with certain commenters that the
Commission's transparency goals may not be substantially enhanced by a
requirement that non-interstate storage providers separately post flow
information. The Commission here does not require the posting of
information regarding natural gas storage inventories for the same
reason that it does not seek production information. The focus of the
Final Rule is on the flow, not strictly the supply, of natural gas
within the United States.
---------------------------------------------------------------------------
\244\ See new section 284.14(a)(3).
---------------------------------------------------------------------------
137. Regarding flows into and out of non-interstate storage
providers, we determine that relevant information is already captured
by the requirements imposed on non-interstate pipelines in the
promulgated regulations. That is, a major non-interstate pipeline with
a receipt or delivery point at a connection with a storage provider is
required to post scheduled flow data if the point has a design capacity
greater than 15,000 MMBtu per day. We believe that this posting will be
sufficient to capture relevant flow information into and out of storage
facilities. Further, as major non-interstate pipelines are already
required by this Final Rule to post data for such points, requiring
similar postings by storage providers would be duplicative and unduly
burdensome.
138. We disagree with the concerns raised by certain non-interstate
storage provider commenters regarding competitive issues related to the
posting of flow data. First, the Final Rule does not require storage
providers to post any information. Rather, the information relating to
flows into and out of storage facilities that the Commission requires
to be posted is in the control of interconnected non-interstate
pipelines. Second, the Commission is not requiring the posting of
inventory or storage capacity data. Under these circumstances, we do
not believe that the postings required in this Final Rule would have
any deleterious effect on competition.
4. Other Exemptions and Safe Harbor
a. Posting NOPR
139. While the Posting NOPR did not specifically suggest additional
exemptions from the proposed posting requirements, it solicited
comments from interested entities regarding all aspects of the rule.
b. Comments
140. Cranberry Pipeline requests an exemption for intrastate
pipelines, such as itself, with a relatively small Web-like
configuration rather than a long-line system. Furthermore, Cranberry
Pipeline requests an exemption for intrastate pipelines that operate in
concentrated and transparent markets (such as Appalachia) in which
supply
[[Page 73513]]
and demand information is readily available.\245\
---------------------------------------------------------------------------
\245\ Cranberry Pipeline Comments at 5-7.
---------------------------------------------------------------------------
141. Freeport requests that the Commission clarify that the
definition of ``major non-interstate pipeline'' does not include
facilities authorized pursuant to section 3 of the NGA that do not
render stand-alone transportation service.\246\ Freeport asserts that
because its sendout pipeline is more akin to a production facility than
to a ``major non-interstate pipeline,'' it should not be subject to a
posting requirement.\247\
---------------------------------------------------------------------------
\246\ Freeport Comments at 1.
\247\ Id. at 4.
---------------------------------------------------------------------------
142. SEMCO urges the Commission to exempt major non-interstate
pipelines that sell and transport natural gas in the Alaska natural gas
market because there are no market hubs in Alaska.\248\ For its part,
Marathon contends that the Commission does not have jurisdiction over
Alaskan pipelines and explains that natural gas pipeline activities in
Alaska do not impact interstate commerce.\249\
---------------------------------------------------------------------------
\248\ SEMCO Comments at 4-5.
\249\ Marathon Comments at 2-8.
---------------------------------------------------------------------------
143. Several commenters advocate for a safe harbor provision for
good faith compliance.\250\ TPA argues in favor of a safe harbor
provision.\251\ ONEOK Gathering advocates for ``safe harbor''
provisions to ensure upstream pipelines are not unfairly punished if
posted capacities are based on reasonable assumptions about downstream
pressures that differ from actual pressures.\252\ OGT explains that
capacity on upstream pipelines varies due to the pressures of
downstream pipelines.\253\
---------------------------------------------------------------------------
\250\ AGA Comments at 18; Atmos Comments at 13; Copano Energy
Comments at 12.
\251\ TPA Comments at 33; Crosstex Comments at 33.
\252\ ONEOK Gathering Comments at 18.
\253\ Id.
---------------------------------------------------------------------------
144. In contrast, Royalty Owners state that any Final Rule should
not contain a safe harbor contending that the Commission should be able
to accommodate the few instances of honest mistakes--``Penalties are in
place for a reason.'' \254\
---------------------------------------------------------------------------
\254\ Royalty Owners Comments at 2.
---------------------------------------------------------------------------
145. AGA requests that distribution companies with Commission-
approved service area determinations under section 7(f) of the NGA be
excluded from the Final Rule, as such companies are considered
``natural gas companies'' under section (2)(6) of the NGA.\255\
---------------------------------------------------------------------------
\255\ AGA Comments at 6; Louisville Gas and Electric Co.
Comments at 3-4.
---------------------------------------------------------------------------
146. Several commenters contend that the Commission should clarify
that Hinshaw pipelines are not subject to the posting requirements for
major, non-interstate pipelines. As explained by PSCo, a Hinshaw
pipeline should not fall within the definition of ``major, non-
interstate pipeline'' under the proposed regulation.\256\ PSCo also
contends that flow information from a Hinshaw pipeline would not be
useful in meeting the Commission's goals for the pipeline posting
requirements.
---------------------------------------------------------------------------
\256\ PSCo Comments at 3-4; see also AGA Comments at 6-7.
---------------------------------------------------------------------------
c. Commission Determination
147. The Commission will not provide a separate exemption for
pipelines in ``concentrated and transparent markets'' as requested by
Cranberry Pipeline.\257\ The increase in the threshold for the
definition of major non-interstate pipelines should accommodate
Cranberry Pipeline's request for an exemption for ``smaller''
pipelines. It would be extremely difficult to create a test for what is
a ``concentrated and transparent'' market. Such a test would create an
undue burden on a pipeline and an unnecessary administrative burden on
the Commission.
---------------------------------------------------------------------------
\257\ Cranberry Pipeline describes these types of entities as
intrastate pipelines that operate in concentrated and transparent
markets (such as Appalachia) in which supply and demand information
is readily available. Cranberry Pipeline Comments at 5-7.
---------------------------------------------------------------------------
148. Likewise, we decline to provide a separate exemption for
sendout pipelines covered under section 3 of the NGA as requested by
Freeport LNG. The flow information from such pipelines, if they were to
meet the 50 million MMBtu delivery threshold, would provide valuable
information to market participants, market observers and the
Commission. Peak sendout at liquefied natural gas facilities may
represent material volumes of natural gas within a region or trading
location and, therefore, may significantly explain changes in prices.
149. Similar reasoning applies to our decision not to categorically
exclude Hinshaw pipelines or LDCs operating under a section 7(f)
service area determination from the posting requirements in this Final
Rule. Hinshaw pipelines and entities that serve an interstate service
area under NGA section 7(f) that meet or exceed the 50 million MMBtu
delivery threshold are sizeable entities and flows on these pipelines
may have substantial effect on the natural gas market, especially
regionally.
150. However, we will not impose the requirements of the Final Rule
on non-interstate pipelines in Alaska. At this time, such pipelines do
not have a sufficiently significant impact on the interstate natural
gas market so as to warrant their inclusion in the Final Rule.
151. The Commission will not adopt a ``safe harbor'' for posting.
The Commission articulated a safe harbor in the Policy Statement on
Price Indices,\258\ which grants a data provider that adopts certain
reporting standards a rebuttable presumption that data submitted to
index developers is accurate, timely, and submitted in good faith.
However, a similar perpetual safe harbor is not warranted regarding the
posting requirements set forth in this Final Rule. The Policy Statement
on Price Indices sets forth standards that data providers could choose
to adopt should they voluntarily elect to provide data to price index
developers. One goal of the Policy Statement on Price Indices was to
``encourage [industry participants] voluntarily to report energy
transactions to providers or price indices.'' The safe harbor that we
adopted in the Policy Statement on Price Indices was a direct extension
of this policy goal.
---------------------------------------------------------------------------
\258\ Price Discovery in Natural Gas and Electric Markets;
Policy Statement on Natural Gas and Electric Price Indices, 104 FERC
] 61,121 (2003), clarified, 109 FERC ] 61,184 (2004).
---------------------------------------------------------------------------
152. The posting requirements set forth in this Final Rule are
mandatory posting requirements adopted consistent with the directives
of EPAct 2005, not the voluntary reporting of price data to an index
developer. There is no policy need to provide an incentive for posting
the information required in this Final Rule similar to the
encouragement to reporting price data to index developers. Other
mandatory requirements, such as the filing of FERC Form No. 2, do not
include such a safe harbor. For this reason, we are not persuaded that
a perpetual safe harbor is warranted.\259\
---------------------------------------------------------------------------
\259\ Recently, in Order No. 704-A, the Commission declined to
adopt a perpetual safe harbor for the annual reporting requirement
for Form No. 552. FERC Stats. & Regs. ] 31,275 at P 69. While we did
adopt a one-year safe harbor for 2009 filings of Form No. 552, we
decline to do so here. As discussed below, interstate pipelines will
be required to comply with the promulgated posting requirements
within 60 days of the publication of this Final Rule in the Federal
Register. Major non-interstate pipelines must comply within 150 days
of publication. We are confident that pipelines subject to this
Final Rule will be able to comply with the new regulations in a
timely manner.
---------------------------------------------------------------------------
F. Posting of No-Notice Service Information by Interstate Pipelines
1. Posting NOPR
153. The Posting NOPR proposed to require interstate natural gas
pipelines to post actual flow information within 24 hours of the close
of the gas day on
[[Page 73514]]
which it flowed.\260\ This proposed requirement, the Commission stated,
would disseminate information about no-notice service for interstate
pipelines.\261\ The Commission observed that posting of actual flow
information could fill the gap between scheduled and actual flows and
allow market observers to ascribe price behavior with physical changes
in flows, particularly in the northern tier of the country where no-
notice service is more prevalent.\262\ The Posting NOPR also observed
that posting of actual flow information could reduce the opportunities
for market participants to exploit non-public flow information.\263\ We
sought comments about implementation of the requirement to post actual
flows on interstate natural gas pipelines in order to better understand
the costs and benefits of such posting.\264\
---------------------------------------------------------------------------
\260\ Posting NOPR at P 4.
\261\ Id. at P 41.
\262\ Id.
\263\ Id. at P 42.
\264\ Id. at P 2, 46.
---------------------------------------------------------------------------
2. Comments
154. Several commenters oppose the requirement that interstate
pipelines post actual flow information as too burdensome in relation to
the minimal information that would be gleaned. For example, INGAA
contends that information regarding actual flows does not further
market transparency because they do not reflect ongoing market
dynamics; rather they trace to transactions that have already been
completed.\265\ Further, according to INGAA, actual flows are
independent of the contract paths that INGAA asserts define market
transactions.\266\ Several commenters contend, without specificity,
that the posting of actual flows will be costly.\267\
---------------------------------------------------------------------------
\265\ INGAA Comments at 12; see also Chevron Pipelines Comments
at 12-13.
\266\ INGAA Comments at 13.
\267\ See, e.g., id. at 17-18.
---------------------------------------------------------------------------
155. Several commenters argue that the current posting of scheduled
volume information provides sufficient transparency and there is no
evidence that the posting of actual flows would increase
transparency.\268\ Spectra states that scheduled volumes postings
contain better and more timely data for the market than actual flow
postings would contain.\269\ Spectra also points out that the market
currently uses scheduled volume data to make decisions, and there is no
evidence that the market is currently functioning in any way other than
efficiently.\270\ National Fuel Supply states that no-notice volumes
are not important to understanding the market and ``the Commission
should not be concerned that information about no-notice volumes could
be exploited in a manipulative or discriminatory manner.'' \271\
Similarly, Kinder Morgan Interstate maintains that the Commission
offers no support that the posting of no-notice activity would prevent
misconduct.\272\
---------------------------------------------------------------------------
\268\ Id. at 7; National Fuel Supply Comments at 4; Spectra
Comments at 8; Williston Basin Comments at 3-5.
\269\ Spectra Comments at 7; see also NiSource Comments at 5.
\270\ Spectra Comments at 8.
\271\ National Fuel Supply Comments at 4-5.
\272\ Id.
---------------------------------------------------------------------------
156. Several commenters argue that the posting of actual flow
information could confuse market participants due, for instance, to
timing differences between when the original imbalances occur and when
they are cleared.\273\ Commenters object to including actual flow
information because it would include operational flows, such as flows
reflecting maintenance activities, line pack management, blending and
balancing, which are not relevant to the price formation process.\274\
Kinder Morgan Interstate contends that no-notice activity is not useful
in establishing future prices and does not reflect current market
conditions; thus, it would not enhance price transparency.\275\
---------------------------------------------------------------------------
\273\ Williston Basin Comments at 3-5.
\274\ Id. at 5-7; Chevron Pipelines Comments at 16; Total
Peaking Comments at 12.
\275\ Kinder Morgan Interstate Comments at 10.
---------------------------------------------------------------------------
157. On the other hand, some commenters support the posting of
actual flow information by interstate pipelines. Calpine asserts that
actual daily flow information would allow an assessment of how
accurately scheduled volumes reflect the actual volumes associated with
activities in the real-time market, which ``is especially critical in
times of constraints caused by unplanned events or outages.'' \276\
APGA supports posting of actual flow volume as it would provide market
observers an important ``missing piece of the puzzle'' to understand
what is transpiring in the market, both operationally and as to supply
and demand fundamentals.\277\ The New York PSC supports obtaining
actual flows from not just interstate pipelines, but also intrastate
pipelines, as the data would provide market participants with increased
understanding of daily trends in natural gas markets, including
regional conditions and pipeline capacity available to resolve regional
supply/demand imbalances, especially during peak demand or emergency
conditions.\278\
---------------------------------------------------------------------------
\276\ Calpine Comments at 4.
\277\ APGA Comments at 3-4.
\278\ New York PSC Comments at 1.
---------------------------------------------------------------------------
158. Bentek's comments suggest that the posting of actual volumes
is one option to obtain data to ensure that no-notice service is
transparent on interstate pipelines, but, alternatively, proposed that
market observers rely on publication of no-notice volumes.\279\
---------------------------------------------------------------------------
\279\ Bentek Comments at 3-5.
---------------------------------------------------------------------------
159. Several commenters respond specifically to the Posting NOPR's
inquiry as to whether no-notice activity is reflected in trading
activity or storage activity. Chevron Pipelines responds that the only
no-notice activity that would equate to trading activity is storage
injections.\280\ Kinder Morgan Interstate contends that no-notice
activity on their pipelines generally reflect storage withdrawals
because the trading activity associated with storage withdrawals would
have already occurred when the gas was purchased and injected into
storage.\281\ Williston Basin states that on its system no-notice
volumes are exclusively associated with storage activity.\282\ Chevron
Pipelines describe no-notice service as commonly associated with two
types of transactions: Storage injections/withdrawals and imbalance
management, including balancing under Operating Balancing
Agreements.\283\
---------------------------------------------------------------------------
\280\ Chevron Pipelines Comments at 17.
\281\ Kinder Morgan Interstate Comments at 9.
\282\ Id.
\283\ Chevron Pipelines Comments at 13-14.
---------------------------------------------------------------------------
3. Commission Determination
160. While the Commission will not require interstate natural gas
pipelines to post information regarding all actual flows, this Final
Rule requires interstate natural gas pipelines to post the volumes of
no-notice service flows \284\ at each receipt and delivery point before
11:30 a.m. central clock time (the timely cycle under NAESB Nomination
Standard 1.32) three days after the day of gas flow.\285\
---------------------------------------------------------------------------
\284\ See 18 CFR 284.7(a)(4) (requiring pipelines to provide no-
notice service).
\285\ Total Peaking, Venice Gathering, and DCP Midstream sought
in this proceeding to exempt specific interstate natural gas
pipelines from the existing posting requirement. We believe the
current posting requirements on interstate pipelines should not be
reduced at this time and do not adopt any exemptions to that
requirement. As always, interstate pipelines may request a waiver
from the requirements.
---------------------------------------------------------------------------
161. The Commission requires an interstate pipeline to provide no-
notice service if such service was provided as of the effective date of
Order No. 636.\286\ Accordingly, firm shippers that receive no-notice
service can receive delivery of
[[Page 73515]]
gas on demand up to their firm entitlements on a daily basis without
incurring daily balancing and scheduling penalties. No-notice service
is usually used by shippers when gas load is much higher than has been
nominated and scheduled the previous day (due, perhaps, to
unanticipated cold or hot temperatures). However, while Order No. 636
and its progeny mandated the adoption of no-notice service, the
Commission has previously not required Internet posting of no-notice
volumes.
---------------------------------------------------------------------------
\286\ See Order No. 636-A at p. 30,574.
---------------------------------------------------------------------------
162. The absence of reporting of no-notice service means that the
market cannot see large and unexpected increases in gas demand and
therefore cannot understand price formation during such occasions.
Information on no-notice volumes is valuable even posted after the no-
notice gas flows because it allows market participants and other market
observers to understand the historical patterns of flows and will
enable them to better predict future no-notice flows. Requiring
interstate pipelines to post no-notice volumes will meet the goals of
the Commission with less of a burden on interstate natural gas
pipelines than full posting of actual flows.
163. The posting of no-notice service will be of particular
importance in the northern tier of the country during extreme weather
conditions. As we pointed out in the Posting NOPR, the gap between
scheduled and actual flows occurs most commonly in this region of the
country where a pipeline serves a local distribution company with
significant space heating demand. In such circumstances, market
observers find it more difficult to ascribe price behavior to physical
changes in flows. Further, as observed by NGSA, ``[o]n heating season
peak days or days with wide intra-day weather swings, no-notice volumes
can be significant; therefore, scheduled volumes are not a proxy for
physical flow and, thus, do not necessarily provide an accurate picture
of underlying market fundamentals.'' \287\
---------------------------------------------------------------------------
\287\ NGSA Comments on the Initial NOPR at 10.
---------------------------------------------------------------------------
164. The Commission has received many hotline and other informal
calls from shippers with complaints about available service on
interstate pipelines. Often, callers indicate confusion regarding
discrepancies in pipeline postings of scheduled volumes that indicate
that capacity should be available and a pipeline's refusal to provide
same-day service on the grounds that there is no capacity available.
This lack of available capacity is very often due to the use of no-
notice service. Posting information about no-notice service, even after
the fact, will make availability on interstate natural gas pipelines
more transparent, consistent with section 23 of the NGA.\288\
---------------------------------------------------------------------------
\288\ Section 23(a)(2) of the NGA; 15 U.S.C. 717t-2(a)(2) (2000
& Supp. V 2005).
---------------------------------------------------------------------------
165. Public posting of no-notice service information could also
prevent other forms of misconduct with direct effects on natural gas in
interstate commerce. The lack of public flow information could provide
the opportunity for parties to engage in manipulative or unduly
discriminatory behavior. By making major non-interstate pipeline flow
information public, such transparency could discourage market
participants from engaging in such activities. Therefore, we disagree
with commenters that suggest that transparency will not be enhanced via
the posting of no-notice flows.
166. We believe this requirement to post no-notice service
information would not be unduly burdensome for interstate pipelines. An
interstate natural gas pipeline should already have information on the
no-notice service it provides. Additionally, pipelines already have the
existing information technology (i.e., Internet Web sites) for posting
such information. We further reduce the posting burden for posting no-
notice service by requiring such posts to occur within seventy-two
hours after the applicable gas day. This compares to a twenty-four hour
deadline as originally suggested in the Posting NOPR.
VI. Effective Date of the Final Rule and Compliance Deadlines
167. The Final Rule will become effective 30 days following
publication in the Federal Register. Interstate pipelines subject to
these new posting requirements must comply with the regulations
promulgated herein no later than 60 days following such publication.
Interstate pipelines already have Internet Web sites in place and
likely have ready means in-place to capture data necessary to post
information regarding no-notice service. Under these circumstances, we
believe that a 60-day deadline is sufficient time for all interstate
pipelines to comply with the regulations.
168. While some major non-interstate pipelines have Web sites and
data collection abilities similar to interstate pipelines, others may
need additional time to put procedures in place to comply with the
instant posting requirements. Therefore, we will give major non-
interstate pipelines 150 days following publication of this Final Rule
to come into compliance with the new regulations. This time will allow
them sufficient time to update their information technology systems and
establish an Internet Web site for the postings. This time frame for
compliance will allow them to complete the current heating season
without the need to implement new posting procedures while ensuring
that new postings are available prior to the next heating season. While
one commenter, Kinder Morgan Intrastate, estimated it would take one
year ``to complete the necessary IT upgrades and data reorganization,''
\289\ that estimate assumed a requirement for obtaining and posting
both actual flows and scheduled volumes on both mainline segments and
on receipt and delivery points. As the regulations promulgated here do
not require obtaining and posting actual flows or obtaining scheduled
volumes from segments, Kinder Morgan Intrastate's estimate is
excessive.
---------------------------------------------------------------------------
\289\ Kinder Morgan Intrastate at 8.
---------------------------------------------------------------------------
VII. Information Collection Statement
169. The Office of Management and Budget (OMB) regulations require
it to approve certain reporting and recordkeeping (information
collection) requirements imposed by an agency.\290\ In this Final Rule,
the Commission will set forth two requirements for the posting or
collection of information, one for interstate and one for major non-
interstate pipelines.\291\ The Commission has submitted notification of
these proposed information collection requirements to OMB for its
review and approval under section 3507(d) of the Paperwork Reduction
Act of 1995.\292\
---------------------------------------------------------------------------
\290\ 5 CFR 1320.11.
\291\ The OMB regulations cover both the collection of
information and the posting of information. 5 CFR 1320.3(c). Thus,
the proposal to post information would create an information
collection burden.
\292\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------
170. The requirement for interstate natural gas pipelines to post
information about no-notice service, would impose an additional
information collection burden on interstate natural gas pipelines. The
other requirement for major non-interstate pipelines to post scheduled
volume information would impose an additional information collection
burden on major non-interstate pipelines. Interstate and major non-
interstate pipelines already collect this information, but do not
necessarily post it. Certain non-interstate pipelines have asserted in
comments on the Posting NOPR that costs would be quite
[[Page 73516]]
high if additional equipment were needed to meet quick posting
deadlines. However, given that this information is used in their
business, the Commission still believes that the burden that would be
imposed by this proposed requirement is largely for the collection and
posting of this information in the required format.\293\ Further,
certain non-interstate pipelines provide burden estimates based on
posting for all receipt and delivery points and by mainline segment and
based on measuring and posting actual flow information. These estimates
are too high because, as explained in this preamble, the Commission
will not require posting at mainline segments and does not require
posting at all receipt and delivery points, rather it will require
posting at each receipt and delivery point that has a design capacity
greater than 15,000 MMBtu/day. Finally, the Commission has reduced the
number of non-interstate pipelines that will be required to post by
raising the delivery threshold used to define a major non-interstate
pipeline from 10 million MMBtu per year to 50 million MMBtu per year in
deliveries. For interstate natural gas pipelines, the Commission
reduced the burden by not requiring the posting of actual flow
information; instead, the Commission will require that interstate
natural gas pipelines post information on no-notice transportation.
Elsewhere in this preamble, the Commission has further addressed
comments regarding the burden of the requirements.
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\293\ See 5 CFR 1320.3(b)(2) (``The time, effort, and financial
resources necessary to comply with a collection of information that
would be incurred by persons in the normal course of their
activities (e.g., in compiling and maintaining business records)
will be excluded from the ``burden'' if the agency demonstrates that
the reporting, recordkeeping, or disclosure activities needed to
comply are usual and customary.'').
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171. OMB regulations require OMB to approve certain information
collection requirements imposed by agency rule. The Commission
submitted notification of this rule to OMB.
Public Reporting Burden
The start-up and annual burden estimates for complying with this
Final Rule are as follows:
----------------------------------------------------------------------------------------------------------------
Number of Estimated Estimated
Number of daily postings annual burden Total annual start-up
Data collection respondents per hours per hours for all burden per
respondent respondent respondents respondent
----------------------------------------------------------------------------------------------------------------
Part 284 FERC-551...............
Major Non-Interstate Pipeline 80 2 365 29,200 40
Postings.......................
Additional Interstate Natural 101 1 183 18,433 8
Gas Pipeline Postings..........
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Total....................... 181 .............. .............. 47,633 ..............
----------------------------------------------------------------------------------------------------------------
The total annual hours for collection (including recordkeeping) for
all respondents is estimated to be 47,633 hours.
Information Posting Costs: The average annualized cost for each
respondent is projected to be the following (savings in parenthesis):
----------------------------------------------------------------------------------------------------------------
Annualized
capital/
startup costs Annual costs Annualized
(10 year costs total
amortization)
----------------------------------------------------------------------------------------------------------------
FERC-551........................................................
Major Non-Interstate Pipeline Postings.......................... $142 $30,000 $30,142
Additional Interstate Natural Gas Pipeline Postings............. 0 5,000 5,000
----------------------------------------------------------------------------------------------------------------
Title: FERC-551.
Action: Proposed Information Posting and Information Filing.
OMB Control No.: 1902-0243.
Respondents: Business or other for profit.
Frequency of Responses: Daily posting requirements.
Necessity of the Information: The daily posting of additional
information by interstate and major non-interstate pipelines is
necessary to provide information regarding the price and availability
of natural gas to market participants, state commissions, the
Commission and the public. The posting would contribute to market
transparency by aiding the understanding of the volumetric/availability
drivers behind price movements; it would provide a better picture of
disruptions in natural gas flows in the case of disturbances to the
pipeline system; and it would allow the monitoring of potentially
manipulative or unduly discriminatory activity.
Internal Review: The Commission has reviewed the requirements
pertaining to natural gas pipelines and determined they are necessary
to provide price and availability information regarding the sale of
natural gas in interstate markets.
VIII. Environmental Analysis
172. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\294\ The
actions taken here fall within categorical exclusions in the
Commission's regulations for information gathering, analysis, and
dissemination, and for sales, exchange, and transportation of natural
gas that require no construction of facilities.\295\ Therefore, an
environmental assessment is unnecessary and has not been prepared in
this rulemaking.
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\294\ Regulations Implementing the National Environmental Policy
Act of 1969, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats.
& Regs., Regulations Preambles 1986-1990 ] 30,783 (1987).
\295\ 18 CFR 380.4(a)(5) and (a)(27).
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IX. Regulatory Flexibility Act
173. The Regulatory Flexibility Act of 1980 (RFA) \296\ generally
requires a description and analysis of final rules that will have
significant economic impact on a substantial number of small entities.
The RFA requires consideration
[[Page 73517]]
of regulatory alternatives that accomplish the stated objectives of a
proposed rule and that minimize any significant economic impact on such
entities. The RFA does not, however, mandate any particular outcome in
a rulemaking. At a minimum, agencies are to consider the following
alternatives: Establishment of different compliance or reporting
requirements for small entities or timetables that take into account
the resources available to small entities; clarification,
consolidation, or simplification of compliance and reporting
requirements for small entities; use of performance rather than design
standards; and exemption for certain or all small entities from
coverage of the rule, in whole or in part. The proposal to require
daily postings by interstate and non-interstate pipelines will not
impact small entities. Natural gas pipelines are classified under NAICS
code, 486210, Pipeline Transportation of Natural Gas.\297\ A natural
gas pipeline is considered a small entity for the purposes of the
Regulatory Flexibility Act if its average annual receipts are less than
$6.5 million.\298\ The Commission does not believe that any pipeline
that would be required to post under the proposal in this NOPR has
receipts less than $6.5 million. Thus, the daily posting proposal will
not impact small entities. In this Final Rule, the Commission will
reduce the number of major non-interstate pipelines that will be
subject to the posting requirements by reducing the delivery threshold
from 10 million MMBtu/year to 50 million MMBtu/year. Further, the
Commission as explained above considered alternatives for obtaining and
disseminating daily the information on scheduled volumes.
---------------------------------------------------------------------------
\296\ 5 U.S.C. 601-612.
\297\ This industry comprises establishments primarily engaged
in the pipeline transportation of natural gas from processing plants
to local distribution systems. 2002 North American Industry
Classification System (NAICS) Definitions, http://www.census.gov/
epcd/naics02/def/ND486210.HTM.
\298\ See U.S. Small Business Administration, Table of Small
Business Size Standards, http://www.sba.gov/idc/groups/public/
documents/sba_homepage/serv_sstd_tablepdf.pdf (effective July 31,
2006).
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X. Document Availability
174. In addition to publishing the full text of this document in
the Federal Register, the Commission will provide all interested
persons an opportunity to view and/or print the contents of this
document via the Internet through FERC's Home Page (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.
175. From FERC's Home Page on the Internet, this information is
available on eLibrary. The full text of this document is available on
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or
downloading. To access this document in eLibrary, type the docket
number excluding the last three digits of this document in the docket
number field.
176. User assistance is available for eLibrary and the FERC's Web
site during normal business hours from FERC Online Support at 202-502-
6652 (toll free at 1-866-208-3676) or e-mail at
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. E-mail the Public Reference Room at
public.referenceroom@ferc.gov.
XI. Effective Date and Congressional Notification
177. These regulations are effective January 2, 2009. The
Commission will determine, with the concurrence of the Administrator of
the Office of Information and Regulatory Affairs of OMB, that this rule
[is or is not] a ``major rule'' as defined in section 351 of the Small
Business Regulatory Enforcement Fairness Act of 1996.
List of Subjects in 18 CFR Part 284
Continental shelf; Incorporation by reference; Natural gas;
Reporting and recordkeeping requirements.
By the Commission.
Kimberly D. Bose,
Secretary.
0
In consideration of the foregoing, the Commission amends Part 284,
Chapter I, Title 18, Code of Federal Regulations, as follows.
PART 284--CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS UNDER THE
NATURAL GAS POLICY OF 1978 AND RELATED AUTHORITIES
0
1. The authority citation for part 284 continues to read as follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352;
43 U.S.C. 1331-1356.
0
2. In Sec. 284.1, paragraph (d) is added to read as follows:
Sec. 284.1 Definitions.
* * * * *
(d) Major non-interstate pipeline means a pipeline that:
(1) Is not a ``natural gas company'' under section 1 of the Natural
Gas Act; and
(2) Delivers annually more than fifty (50) million MMBtu (million
British thermal units) of natural gas measured in average deliveries
for the previous three calendar years.
0
3. In Sec. 284.13(d), revise the heading and add two sentences to the
end of paragraph (d)(1) to read as follows:
Sec. 284.13 Reporting requirements for interstate pipelines.
* * * * *
(d) Capacity and flow information. (1) An interstate pipeline must
also provide information about the volumes of no-notice transportation
provided pursuant to Sec. 284.7(a)(4). This information must be posted
at each receipt and delivery point before 11:30 a.m. central clock time
three days after the day of gas flow.
* * * * *
0
4. Section 284.14 is added to read as follows:
Sec. 284.14. Posting requirements of major non-interstate pipelines.
(a) Daily posting requirement. A major non-interstate pipeline must
provide on a daily basis on an Internet Web site and in downloadable
file formats equal and timely access to information relevant to the
design capacity of each receipt or delivery point that has a design
capacity equal to or greater than 15,000 MMBtu/day and the amount
scheduled at each such point whenever capacity is scheduled. For each
such point on its system, a major non-interstate pipeline must provide
the following information: Transportation Service Provider Name,
Posting Date, Posting Time, Nomination Cycle, Location Name, Additional
Location Information if Needed to Distinguish Between Points, Location
Purpose Description (Receipt, Delivery, or Bilateral), Design Capacity,
Scheduled Volume, Available Capacity, and Measurement Unit (Dth, MMBtu,
or MCf). The information in this subsection must remain posted for a
period of one year.
(b) Exemptions to daily posting requirement. The following
categories of major non-interstate pipelines are exempt from the
posting requirement of Sec. 284.14(a):
(1) Those that fall entirely upstream of a processing, treatment,
or dehydration plant;
(2) Those that deliver more than 95 percent of the natural gas
volumes they flow directly to retail end-users as measured by average
deliveries over the preceding three calendar years; and,
(3) Storage providers.
Note: This Appendix will not appear in the Code of Federal
Regulations.
[[Page 73518]]
Appendix A: List of Commenters and Abbreviations
----------------------------------------------------------------------------------------------------------------
Commenter Abbreviation
----------------------------------------------------------------------------------------------------------------
1. Alliance Pipeline L.P.................... Alliance
2. American Gas Association................. AGA
3. American Public Gas Association.......... APGA
4. Atmos Pipeline--Texas.................... Atmos
5. Bear Paw Energy LLC and Oneok Field ONEOK Gathering Companies
Services Company LLC.
6. BENTEK Energy, LLC....................... Bentek
7. Bridgeline Holdings, L.P., Chevron Chevron Pipelines or CVX Pipelines
Midstream Pipeline LLC, Chevron Keystone
Gas Storage, LLC, Sabine Pipe Line LLC, and
Chandeleur Pipe Line Company.
8. Calpine Corporation...................... Calpine
9. Copano Energy, LLC....................... Copano Energy
10. Cranberry Pipeline Corporation.......... Cranberry Pipeline
11. Crosstex Energy Services, LP............ Crosstex
12. DCP Midstream, LLC...................... DCP Midstream
13. Dow Chemical Company.................... Dow Chemical
14. Dow Interstate Gas Company.............. Dow Interstate
15. Dow Pipeline Company.................... Dow Pipeline
16. EnergySouth, Inc........................ EnergySouth
17. Duke Energy Corporation................. Duke
18. Enbridge Energy Company, Inc............ Enbridge
19. Encana Oil & Gas (USA) Inc.............. Encana
20. Enstor Operating Company, LLC........... Enstor
21. EOG Resources, Inc., Pecan Pipeline EOG Resources
Company, and Pecan Pipeline (North Dakota),
Inc.
22. Gas Processors Association.............. Gas Processors
23. Freeport LNG Development, L.P........... Freeport
24. Independent Petroleum Association of IPAA
America.
25. Interstate Natural Gas Association of INGAA
America.
26. Jefferson Island Storage & Hub, LLC..... Jefferson
27. Kinder Morgan Interstate Pipelines...... Kinder Morgan Interstate
28. Kinder Morgan Texas Intrastate Pipeline Kinder Morgan Intrastate
Group.
29. LaGrange Acquisition L.P................ LaGrange
30. Liberty Gas Storage, LLC................ Liberty Gas Storage
31. Louisville Gas and Electric Company..... Louisville Gas and Electric
32. Marathon Oil Company.................... Marathon
33. National Association of Royalty Owners.. Royalty Owners
34. National Fuel Gas Distribution National Fuel Distribution
Corporation.
35. National Fuel Gas Supply Corporation.... National Fuel Supply
36. Natural Gas Supply Association.......... NGSA
37. New York Public Service Commission...... New York PSC
38. NISKA Gas Storage LLC................... NISKA
39. NiSource Gas Transmission & Storage NiSource
Companies.
40. NorthWestern Energy Corporation......... NorthWestern
41. Oklahoma Corporation Commission......... Oklahoma Corporation Commission
42. Oneok Gas Transportation, LLC, and Oneck ONEOK Gathering
Westex Transmission, LLC.
43. Pacific Gas & Electric Company.......... PG&E
44. Process Gas Consumers Group............. PGC
45. Public Service Company of Colorado...... PSCo
46. Railroad Commission of Texas............ Railroad Commission of Texas
47. Regency Energy Partnership.............. Regency
48. Ryan Cole............................... Ryan Cole
49. SEMCO Energy Gas Company, Enstar Natural SEMCO
Gas Company, and Alaska Pipeline Company.
50. Shell Offshore Inc...................... Shell
51. SPECTRA Energy Transmission, LLC and Spectra
Spectra Energy Partners, LP.
52. Texas Independent Producers and Royalty TIPRO
Owners.
53. Texas Pipeline Association.............. TPA
54. Total Peaking Services, LLC............. Total Peaking
55. Venice Gathering System, LLC............ Venice Gathering
56. Williston Basin Interstate Pipeline Williston Basin
Company.
57. Yates Petroleum Corporation and Agave Yates
Energy Corporation.
----------------------------------------------------------------------------------------------------------------
[FR Doc. E8-28097 Filed 12-1-08; 8:45 am]
BILLING CODE 6717-01-P