[Federal Register Volume 60, Number 12 (Thursday, January 19, 1995)]
[Proposed Rules]
[Pages 3783-3785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1295]



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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 284

[Docket No. RM95-5-000]


Release of Firm Capacity on Interstate Natural Gas Pipelines

January 12, 1995.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Energy Regulatory Commission is proposing to amend 
its capacity release regulations to permit firm shippers of natural gas 
to negotiate prearranged releases of capacity for a full calendar month 
without compliance with the Commission's advance posting and bidding 
requirements. The amendment would make it easier to negotiate short-
term capacity release transactions and would ease the reporting burden 
on industry.

DATES: Comments are due February 21, 1995.

ADDRESSES: An original and 14 copies of comments must be filed and 
refer to Docket No. RM95-5-000. Comments should be addressed to: Office 
of the Secretary, Federal Energy Regulatory Commission, 825 North 
Capitol Street NE., Washington, DC 20426.

FOR FURTHER INFORMATION CONTACT:
Michael Goldenberg, Federal Energy Regulatory Commission, 825 North 
Capitol Street NE., Washington, DC 20426, (202) 208-2294
Joseph Vasapoli, Federal Energy Regulatory Commission, 825 North 
Capitol Street NE., Washington, DC 20426, (202) 208-0620.

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of 
this document in the Federal Register, the Commission also provides all 
interested persons an opportunity to inspect or copy the contents of 
this document during normal business hours in Room 3104, 941 North 
Capitol Street NE., Washington DC 20426.
    The Commission Issuance Posting System (CIPS), an electronic 
bulletin board service, provides access to the texts of formal 
documents issued by the Commission. CIPS is available at no charge to 
the user and may be accessed using a personal computer with a modem by 
dialing (202) 208-1397. To access CIPS, set your communications 
software to 19200, 14400, 12000, 9600, 7200, 4800, 2400, 1200 or 
300bps, full duplex, no parity, 8 data bits, and 1 stop bit. The full 
text of this document will be available on CIPS for 60 days from the 
date of issuance in ASCII and WordPerfect 5.1 format. After 60 days the 
document will be archived, but still accessible. The complete text on 
diskette in WordPerfect format may also be purchased from the 
Commission's copy contractor, La Dorn Systems Corporation, also located 
in Room 3104, 941 North Capitol Street NE., Washington DC 20426.

Notice of Proposed Rulemaking

January 12, 1995.
    In Order No. 636,\1\ the Federal Energy Regulatory Commission 
(Commission) established a mechanism under which firm holders of 
capacity could release unneeded capacity they held on interstate 
pipelines to other shippers needing that capacity. The Commission is 
proposing to amend one provision of its capacity release regulations, 
Sec. 284.243(h), to extend to one month the time period for which 
shippers can release firm capacity without having to comply with the 
Commission's advance posting and bidding requirements. The current 
regulations restrict this ability to less than one calendar month.

    \1\Pipeline Service Obligations and Revisions to Regulations 
Governing Self-Implementing Transportation; and Regulation of 
Natural Gas Pipelines After Partial Wellhead Decontrol, 57 FR 13267 
(Apr. 16, 1992), III FERC Stats. & Regs. Preambles para. 30,939 
(Apr. 8, 1992), order on reh'g, Order No. 636-A, 57 FR 36128 (Aug. 
12, 1992), III FERC Stats. & Regs. Preambles para. 30,950 (Aug. 3, 
1992), order on reh'g, Order No. 636-B, 57 FR 57911 (Dec. 8, 1992), 
61 FERC para. 61,272 (1992), appeal re-docketed sub nom., Atlanta 
Gas Light Company and Chattanooga Gas Company, et al. v. FERC, No. 
94-1171 (D.C. Cir. May 27, 1994).
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I. Reporting Requirements

    The proposed rule affects the information required to be maintained 
on pipeline electronic bulletin boards (EBBs). The public reporting 
burden for EBBs is contained in the information requirement FERC-
549(B), ``Gas Pipeline Rates: Capacity Release Information.'' If 
adopted, the proposed rule would eliminate the need for the industry to 
continue the current practice of using two capacity release postings (a 
less-than-one month release coupled with a one-day release) to complete 
a full month release transaction. Under the proposed rule, full month 
releases could be accomplished with only one such posting. The 
Commission estimates that approximately 1,500 paired release 
transactions occur per year. At an average burden of one hour per 
posting, the annual reduction in burden as a result of this rule is 
approximately 1,500 hours.
    A copy of this proposed rule is being provided to the Office of 
Management and Budget (OMB). Interested persons may send comments 
regarding the burden estimates or any other aspect of this collection 
of information, including suggestions for further reductions of this 
burden, to the Federal Energy Regulatory Commission, 941 North Capitol 
Street, N.E., Washington, D.C. 20426 [Attention: Michael Miller, 
Information Services Division, (202) 208-1415, FAX (202) 208-2425]. 
Comments on the requirements of this proposed rule may also be sent to 
the Office of Information and Regulatory Affairs of OMB, Washington, 
D.C. 20503 [Attention: Desk Officer for Federal Energy Regulatory 
Commission (202) 395-6880, FAX (202) 395-5167].

II. Background

    Under the regulations promulgated in Order No. 636, holders of firm 
capacity on pipelines could reassign that capacity in two ways. The 
releasing shipper could choose to have the pipeline post the notice of 
release on the pipeline's Electronic Bulletin Board (EBB) so other 
shippers could submit bids for that capacity, with the capacity awarded 
to the highest bidder. Or, the releasing shipper could enter into a 
pre-arranged deal with another shipper (replacement shipper) for the 
release of capacity. For a pre-arranged release at less than the 
maximum rate, the pipeline had to post the release on its EBB to permit 
other shippers to bid for that capacity. If a shipper bid more than the 
pre-arranged release rate, the designated replacement shipper was given 
the opportunity to match that bid to retain the capacity.
    In Order No. 636-A, several petitioners requested an exemption from 
the bidding process for short-term pre-arranged release transactions, 
contending that the requirements for advance posting and bidding are 
too administratively difficult for such transactions and could inhibit 
the efficient allocation of capacity.\2\ In response, the Commission 
promulgated Sec. 224.243(h), permitting firm shippers to 

[[Page 3784]]
release capacity to a designated replacement shipper for a period of 
less than one calendar month without having to comply with the advance 
posting and bidding requirements. Releases under this provision would 
have to be posted no later than 48 hours after the release transaction 
begins. In addition, the Commission prohibited parties in transactions 
covered by this exception from rolling-over or granting extensions 
without complying with the requirements for prior notice and bidding.

    \2\Order No. 636-A, III FERC Stats. & Regs. Preambles at 30,553.
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    The Commission adopted the less-than-one calendar month exception 
to balance two objectives of the capacity release mechanism.\3\ The 
exception served to promote a robust secondary market by ensuring that 
parties could quickly and efficiently consummate short-term deals in 
emergency situations, such as a power plant outage resulting in excess 
capacity, without the administrative complications resulting from the 
advance posting and bidding requirements. On the other hand, the 
restriction to less-than-one calendar month was intended to ensure that 
normal monthly transactions would have to comply with the advance 
posting and bidding requirements to ensure open and non-discriminatory 
access to the capacity release market. The Commission expressed 
confidence that the pipelines could design capacity release procedures 
to efficiently handle full calendar month transactions.

    \3\See Order No. 636-A, III FERC Stats. & Regs. Preambles at 
30,554; Order No. 636-B, 61 FERC at 61,994-95.
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    The capacity release system has now been in effect for a full year 
and the Commission has begun the process of evaluating the system's 
operation. In the course of this review, the staff of the Commission 
has conducted informal discussions about the operation of the capacity 
release system and possible changes or modifications to improve the 
system with all major segments of the gas industry, including 
pipelines, local distribution companies, marketers, producers, end-
users, and others interested in the capacity release market, such as 
companies developing third-party bulletin boards.

III. Discussion

    The Commission is now proposing to amend Sec. 284.243(h) to extend 
the short-term release exception from less than one calendar month to a 
full calendar month. The revision would permit firm shippers to 
negotiate pre-arranged releases for a full calendar month without 
having to comply with the advance posting and bidding requirements.
    During the course of staff's review of the capacity release system, 
industry participants overwhelmingly recommended that the less-than-one 
calendar month exception be modified to a full calendar month. They 
argued that the industry generally conducts its gas purchases on a 
monthly basis, so that customers requiring capacity need to acquire a 
full month's capacity. They further pointed out that most monthly 
transactions occur during a very compressed time period known as bid 
week and that this time pressure requires that shippers be able to 
obtain released capacity quickly with the certainty that the deal will 
go through as negotiated.
    As a result, the industry has developed a practice of designing so-
called ``29/1 day'' deals to arrive at full month releases. Under this 
practice, shippers release capacity under the Sec. 284.243(h) exception 
for 29 days (or less than one calendar month) and then post a release 
offer for bidding for the remaining day of the month. This practice 
ensures that the designated replacement shipper can obtain a full 
month's capacity, since rarely do other shippers want to purchase 
capacity for one day or the one-day prearranged deal is posted at the 
maximum rate. While this procedure does permit full month releases, the 
industry participants claimed that posting for one day is 
administratively cumbersome. They pointed out that the 29/1 day deals 
require two EBB postings, the consummation of a second contract with 
the pipelines, and the need for two bills. Pipelines similarly have 
sought waivers of the Commission's regulations to change the definition 
of short-term prearranged releases to one full calendar month to 
eliminate the administrative burdens associated with double release 
requests.4

    \4\Natural Gas Pipeline Company of America, 67 FERC para. 61,385 
at 62,316-17 (1994) (Commission denied the requests because it 
wanted to ensure that changes to the capacity release system were 
uniform for all pipelines).
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    Based on the seeming unanimity of support for extending the short 
term exception to one full calendar month, the Commission is proposing 
to make this change. This revision should promote a more effective 
capacity release market because it will better comport with the 
industry's purchasing practices and will provide the speed and 
certainty needed for one month transactions, without entailing the 
administrative burdens inherent in the 29/1 day deals.
    The Commission's original reason for restricting the short-term 
exception to less-than-one calendar month deals was to limit the 
exception to emergency situations, so as to maximize the open bidding 
for capacity. The Commission believed at the time that the pipelines' 
posting and bidding procedures could be designed to permit normal one-
month transactions. However, the widespread use of 29/1 day deals 
demonstrates that bidding for one month deals is not taking place, and 
any attempt to limit or restrict the 29/1 practice in order to further 
promote bidding would seem only to create further inefficiencies. On 
balance, therefore, the greater speed and efficiency made possible by 
the elimination of the less-than-one calendar month restriction appears 
to outweigh any potential loss from the elimination of the advance 
posting and bidding requirements. The Commission and the industry will 
still be able to monitor one month deals for adherence to the 
Commission's policies against undue discrimination because all deals 
will be posted on the pipelines' EBBs within 48 hours.
    Given the apparent broad support for changing the short term 
exception, the Commission is proposing to make this one change at this 
time so it can be implemented as quickly as possible. This, however, is 
not the end of the Commission's inquiry. The Commission still is 
considering further adjustments to the capacity release mechanism.

IV. Environmental Analysis

    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.5 The 
Commission has categorically excluded certain actions from these 
requirements as not having a significant effect on the human 
environment.6 The action taken here falls within categorical 
exclusions provided in the Commission's regulations.7 Therefore, 
an environmental assessment is unnecessary and has not been prepared in 
this rulemaking.

    \5\Order No. 486, Regulations Implementing the National 
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & 
Regs. Preambles 1986-1990 para. 30,783 (1987).
    \6\18 CFR 380.4.
    \7\See 18 CFR 380.4(a)(2)(ii), 380.4(a)(5).
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V. Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act of 1980 (RFA)8 generally 
requires a description 

[[Page 3785]]
and analysis of final rules that will have significant economic impact 
on a substantial number of small entities. Since the proposed 
regulations do not increase the burdens on any companies or entities, 
they will not have a significant impact on small entities. Pursuant to 
section 605(b) of the RFA, the Commission hereby certifies that the 
regulations proposed herein will not have a significant impact on a 
substantial number of small entities.

    \8\5 U.S.C. 601-612.
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VI. Information Collection Requirement

    OMB regulations require approval of certain information collection 
requirements imposed by agency rules.9 The information 
requirements affected by this proposed rule are in FERC-549B, ``Gas 
Pipeline Rates: Capacity Release Information'' (1902-0169). The 
Commission is issuing the proposed rulemaking including the information 
requirements to carry out its regulatory responsibilities under the 
Natural Gas Act (NGA) and Natural Gas Policy Act (NGPA) to promote a 
more effective capacity release market as instituted by the 
Commission's Order No. 636. The Commission's Office of Pipeline 
Regulation uses the data to review/monitor capacity release 
transactions as well as firm and interruptible capacity made available 
by pipelines and to take appropriate action, where and when necessary. 
The collection of information is intended to be the minimum needed for 
posting on EBBs to provide information about the availability of 
service on interstate pipelines.

    \9\5 CFR 1320.13.
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    The Commission is submitting to the Office of Management and the 
Budget a notification of the proposed revision to the collection of 
information. Interested persons may obtain information on these 
reporting requirements by contacting the Federal Energy Regulatory 
Commission, 941 North Capitol Street NE., Washington, DC 20426 
[Attention: Michael Miller, Information Services Division, (202) 208-
1415], FAX (202) 208-2425. Comments on the requirements of this rule 
can be sent to OMB's Office of Information and Regulatory Affairs, 
Washington, DC 20503 [Attention: Desk Officer for Federal Energy 
Regulatory Commission (202) 395-6880, FAX (202) 395-5167].

VII. Comment Procedures

    The Commission invites interested persons to submit written 
comments on the matters proposed in this notice, including any related 
matters or alternative proposals that commenters may wish to discuss. 
An original and 14 copies of comments to this notice must be filed with 
the Commission no later than February 21, 1995. Comments should be 
submitted to the Office of the Secretary, Federal Energy Regulatory 
Commission, 825 North Capitol Street NE., Washington, DC 20426, and 
should refer to Docket No. RM95-5-000.
    All written comments will be placed in the Commission's public 
files and will be available for inspection in the Commission's Public 
Reference Room at 941 North Capitol Street NE., Washington, DC 20426, 
during regular business hours.

List of Subjects in 18 CFR Part 284

    Continental shelf, Natural gas, Reporting and recordkeeping 
requirements.

    By direction of the Commission.
Lois D. Cashell,
Secretary.

    In consideration of the foregoing, the Commission proposes to amend 
Part 284, Chapter I, Title 18, Code of Federal Regulations, as set 
forth below.

PART 284--CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS UNDER THE 
NATURAL GAS POLICY ACT OF 1978 AND RELATED AUTHORITIES

    1. The authority citation for Part 284 continues to read as 
follows:

    Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C 7101-7532; 43 
U.S.C 1331-1356.

    2. In Sec. 284.243, the first sentence of paragraph (h)(1) is 
revised to read as follows:


Sec. 284.243  Release of firm capacity on interstate pipelines.

* * * * *
    (h)(1) A release of capacity by a firm shipper to a replacement 
shipper for a period of one calendar month or less need not comply with 
the notification and bidding requirements of paragraphs (c) through (e) 
of this section. * * *
* * * * *
[FR Doc. 95-1295 Filed 1-18-95; 8:45 am]
BILLING CODE 6717-01-P