[Federal Register Volume 61, Number 208 (Friday, October 25, 1996)]
[Rules and Regulations]
[Pages 55208-55213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27432]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 284
[Docket No. RM96-1-001; Order No. 587-A]
Standards for Business Practices of Interstate Natural Gas
Pipelines
AGENCY: Federal Energy Regulatory Commission, Energy.
ACTION: Final rule; Order denying rehearing.
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SUMMARY: The Federal Energy Regulatory Commission is denying a request
for rehearing of its final rule revising the Commission's regulations
to require interstate natural gas pipelines to follow standardized
procedures for critical business practices--nominations; allocations,
balancing, and measurement; invoicing; and capacity release--and
standardized mechanisms for electronic communication between the
pipelines and those with whom they do business. (61 FR 39053 (July 26,
1996)). The order reaffirms the Commission's determination to
incorporate by reference into its regulations standards promulgated by
the Gas Industry Standards Board.
DATES: The regulations were effective August 26, 1996, and are to be
implemented based on a staggered scheduling with pro forma tariff
filings in October through December, 1996 and corresponding
implementation in April through June, 1997.
ADDRESSES: Federal Energy Regulatory Commission, 888 First Street,
N.E., Washington DC 20426.
FOR FURTHER INFORMATION CONTACT:
Michael Goldenberg, Office of the General Counsel, Federal Energy
Regulatory Commission, 888 First Street, NE, Washington, DC 20426,
(202) 208-2294
Marvin Rosenberg, Office of Economic Policy, Federal Energy Regulatory
Commission, 888 First Street, N.E., Washington, DC 20426, (202) 208-
1283
Kay Morice, Office of Pipeline Regulation, Federal Energy Regulatory
Commission, 888 First Street, N.E., Washington, DC 20426, (202) 208-
0507
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in Room 2A, 888 First
Street, N.E., Washington D.C. 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 if dialing locally or 1-800-856-3920 if dialing
long distance. To access CIPS, set your communications software to
19200, 14400, 12000, 9600, 7200, 4800, 2400 or 1200bps, full duplex, no
parity, 8 data bits, and 1 stop bit. The full text of this document
will be available on CIPS in ASCII and WordPerfect 5.1 format. 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 2A, 888 First Street, N.E., Washington D.C. 20426.
The Commission's bulletin board system also can be accessed through
the FedWorld system directly by modem or through the Internet. To
access the FedWorld system by modem:
Dial (703) 321-3339 and logon to the FedWorld system.
After logging on, type: /go FERC
To access the FedWorld system, through the Internet:
Telnet to: fedworld.gov
Select the option: [1] FedWorld
Logon to the FedWorld system
Type: /go FERC
or:
Point your Web Browser to: http://www.fedworld.gov
Scroll down the page to select FedWorld Telnet Site
Select the option: [1] FedWorld
[[Page 55209]]
Logon to the FedWorld system
Type: /go FERC
Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A. Bailey,
James J. Hoecker, William L. Massey, and Donald F. Santa, Jr.
Issued October 21, 1996.
On July 17, 1996, the Federal Energy Regulatory Commission
(Commission) issued a final rule revising the Commission's regulations
to require interstate natural gas pipelines to follow standardized
procedures for critical business transactions between the pipelines and
their customers.1 The final rule incorporated by reference
standards promulgated by the Gas Industry Standards Board (GISB), a
consensus standards organization comprised of members from all segments
of the natural gas industry. On August 16, 1996, Natural Gas
Clearinghouse and Vastar Gas Marketing, Inc. (NGC/Vastar), filing
jointly, and Louisiana-Nevada Transit Company (LNT) filed for
rehearing. For the reasons discussed below, the rehearing requests are
denied.
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\1\ Standards for Business Practices Of Interstate Natural Gas
Pipelines, Order No. 587, 61 FR 39053 (Jul. 26, 1996), III FERC
Stats. & Regs. Regulations Preambles para. 31,039 (Jul. 17, 1996).
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Rehearing Requests
NGC/Vastar principally contend the Commission acted arbitrarily and
capriciously in giving deference to the GISB standards without offering
a reasoned analysis of the GISB standards as compared with the
alternative proposals put forward by NGC/Vastar/Conoco.2 NGC/
Vastar contend that the Commission's failure to address each of NGC/
Vastar/Conoco's proposed standards ran afoul of the Administrative
Procedure Act, because the Commission ``failed to consider an important
aspect of the problem'' 3 and ignored ``important arguments or
evidence.'' 4
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\2\ Conoco did not join in the request for rehearing.
\3\ Citing American Horse Protection Assoc. v. Yeutter, 917 F.2d
594, 598 (D.C. Cir. 1992).
\4\ Citing Natural Resources Defense Council, Inc. v. U.S.
Environmental Protection Agency, 822 F.2d 104, 111 (D.C. Cir. 1987).
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NGC/Vastar further maintain that Sec. 12 of the National Technology
Transfer and Advancement Act of 1995 (NTT&AA) 5 and OMB Circular
A-119,6 which require government agencies to use private consensus
standards, do not justify the Commission's reliance on the GISB
standards or the Commission's failure to analyze NGC/Vastar/Conoco's
alternative standards. NGC/Vastar reiterate their position that the
NTT&AA applies only to government agencies' use of private consensus
standards for procurement, not for regulation of monopoly service
providers, like pipelines.
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\5\ Pub L. No. 104-113, Sec. 12(d), 110 Stat. 775 (1996).
\6\ ''Federal Participation in the Development and Use of
Voluntary Standards'' (Oct. 20, 1993). The Circular can be obtained
from the Internet at http://www.whitehouse.gov/WH/EOP/OMB/html/
circular.html. An earlier version is available at 47 FR 49496 (Nov.
1, 1992).
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Finally, NGC/Vastar maintain the Commission exceeded its authority
in finding that pipeline tariff provisions inconsistent with the GISB
standards are unjust and unreasonable under section 5 of the Natural
Gas Act (NGA). They maintain the Commission should not find unjust and
unreasonable tariff provisions the Commission specifically approved as
part of settlement negotiations.
LNT challenges the Commission's incorporation by reference of the
GISB standards. It avers incorporation by reference unreasonably
requires LNT either to view the standards in Washington, D.C., or to
purchase the standards from GISB for a charge of $2,000 for the four
volumes, which it claims is excessive.
Discussion
The principal issues raised in the rehearing requests are whether
the Commission adequately considered the comments of NGC/Vastar and
others on the notice of proposed rulemaking (NOPR),7 and whether
the Commission is justified in giving deference to the GISB standards
and incorporating them by reference into the regulations. As to the
first issue, the Commission reviewed all the comments submitted and
determined that the GISB standards are just and reasonable. Indeed,
examination of NGC/Vastar/Conoco's comments reveals that they
fundamentally disagree with only one GISB standard. Their principal
position is that to attain maximum efficiency, some of the standards
need supplementation and additional standards are required. Rather than
rejecting NGC/Vastar/Conoco's proposed enhancements or additions, the
Commission found that many of their suggestions may indeed have merit
and deferred consideration of these issues until GISB and the industry
had a further opportunity to consider them. Since the proposed GISB
standards can be implemented without resolving the deferred issues,
providing additional opportunity for industry review causes little or
no harm and will have the benefit of helping to produce more considered
and balanced standards.
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\7\ Standards For Business Practices Of Interstate Natural Gas
Pipelines, Notice of Proposed Rulemaking, 61 FR 19211 (May 1, 1996),
IV FERC Stats. & Regs. Proposed Regulations para. 32,517 (Apr. 24,
1996).
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In reviewing the comments, the Commission was warranted in giving
greater deference to the consensus viewpoint than to the views of one
or even several parties. Giving deference to the consensus decision is
consistent with the NTT&AA. It also is warranted by the Commission's
consistent policy goal of developing standards that satisfy the needs
of the broadest possible base of industry participants.8 Deference
is due to consensus standards, first because the gas industry possesses
specialized knowledge and expertise in the areas of business practices
and computer protocols. Second, when all is said and done, it is the
industry that has to operate businesses using these standards. The
standards, therefore, should be acceptable to as many industry
participants as possible. In short, adopting business practice
standards that command a consensus of the industry is the most likely
method of providing the greatest overall benefit to the industry as a
whole. Moreover, as discussed in the final rule and below, the
Commission considered the substantive changes put forward by NGC/Conoco
and others and found that modifying the standards to try and
accommodate the concerns of the minority would be inconsistent with the
goals to be achieved through standardization.
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\8\ The Commission sought industry consensus when it began the
standardization process by setting up a technical conference to
develop standards for capacity release transactions. Standards For
Electronic Bulletin Boards Required Under Part 284 of the
Commission's Regulations, Notice of Informal Conferences, Docket No.
RM93-4-000 (March 10, 1993).
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LNT's concern is not over the substance of the standards, but goes
to the manner by which the Commission adopted the standards, and is
addressed below.
A. Deference to the GISB Standards Is Warranted and Consistent With the
NTT&AA and OMB Circular A-119
In examining the standards proposed by GISB and the comments and
alternative standards of NGC/Vastar/Conoco and others, the Commission
was warranted in giving greater weight to the consensus agreement.
Section 12 of the NTT&AA establishes governmental policy that federal
agencies shall use technical standards that are developed or adopted by
voluntary consensus standards bodies unless such use is ``inconsistent
with applicable law or otherwise impractical.'' Although, as NGC/Vastar
point out, Senator Rockefeller, a sponsor of the bill,
[[Page 55210]]
referred to government use of standards for procurement purposes,9
nothing in the final language of the Act limits its applicability to
procurement. Congressman Brown, a cosponsor of the Act, in fact,
specifically refers to the use of standards for ``procurement and
regulatory purposes.'' 10 In addition, Sec. 12 of the NTT&AA was
intended to codify OMB Circular A-119, which did not limit the policy
of using private sector standards to procurement.
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\9\ 142 Cong. Rec. S1080 (daily ed. Feb. 7, 1996).
\10\ 142 Cong. Rec. H1266 (daily ed. Feb. 27, 1996) (emphasis
added).
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Even if Sec. 12 of the NTT&AA does not strictly apply here, the
Commission is warranted in giving significant weight to the consensus
standards. Not only does the industry possess specialized knowledge of
business and electronic communication practices, but, since the
industry itself has to operate under these standards, the standards
should implement practices that are favored by the broadest cross-
section of industry members.
Indeed, well before the passage of Sec. 12 of the NTT&AA,
government agencies relied on private sector standards for regulatory
purposes, including protection of public health and safety.11
Agencies rely on industry standards for much the same reasons the
Commission has chosen to give GISB's standards great weight. Industry
possesses specialized knowledge and expertise in the relevant technical
areas, and the procedural process of consensus standards development
helps ensure that the process is open to all affected interests and
that the standards reflect a consensus of these interests.12 There
is no reason to make a distinction between the frequent use of
standards by agencies to protect the public health and safety and the
Commission's use of industry standards as part of its efforts to
regulate the terms and conditions under which a monopoly service is
provided.
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\11\ For just a few examples of the use of standards for non-
procurement purposes, see 42 CFR 405.2150, 60 FR 48039 (Sept. 18,
1995) (Health Care Financing Administration incorporation of
Association for the Advancement of Medical Instrumentation standards
for reuse of hemodialyzers); 49 CFR Part 659, 60 FR 67034 (Dec. 27,
1995) (Federal Transit Administration incorporation by reference of
APTA rail transit system safety plans); 49 CFR 192.11, 193.2005
(Department of Transportation incorporation by reference of practice
standards relating to transportation of petroleum gas and LNG); 24
CFR 200.926b, part 200, App. A, 3280.801 (Housing and Urban
Development minimum property standards and manufactured housing
standards); 16 CFR Material Approved for Incorporation by Reference,
at 483 (1996) (listing standards incorporated by Consumer Product
Safety Commission); 21 CFR 801.410 (FDA standards for impact-
resistant eye glasses).
\12\ See 142 Cong. Rec. S1081 (daily ed. Feb. 7, 1996) (remarks
of Senator Rockefeller); 142 Cong. Rec. H1266 (daily ed. Feb. 27,
1996)(remarks of Congressman Brown).
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NGC/Vastar point to language in OMB Circular A-119 cautioning
federal agencies that private standards-setting is vulnerable to abuse.
They contend the evidence NGC/Vastar/Conoco put forward in their
comments shows that the pipeline interests unfairly dominated the task
force meetings (the committees that developed and submitted draft
standards to the GISB Executive Committee for final voting).
Without repeating all the discussion in the final rule, the
Commission reviewed GISB's standards-development process and found that
GISB reasonably assured broad based approval of the standards by all
segments of the gas industry. At the Executive Committee level, the
record shows that the voting generally exceeded GISB's rigorous
consensus requirement; 13 most of the standards received virtually
unanimous support. 14 The record also shows that the Standards
Committee did not merely rubber stamp the recommendations from the
drafting committee, as suggested by NGC/Vastar. The Executive Committee
conducted preliminary sessions prior to its public meeting to debate
and refine the standards. Its public meeting lasted for two full days,
going late into the night, with the Committee making significant and
fundamental changes to the task force recommendations.
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\13\ Under GISB rules, 17 out of 25 Executive Committee members
must approve a standard with at least two affirmative votes from
each of the five industry segments. The five segments are pipelines,
local distribution companies (LDCs), producers, end-users, and
services (including marketers and third-party computer service
providers).
\14\ See Volume III of GISB's March 15, 1996 filing, Voting Work
papers.
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The Commission, however, is not ignoring potential problems with
consensus standard development, as NGC/Vastar argue. For instance,
under GISB's procedures, a concerted effort by a single interest can
prevent the adoption of a standard supported by the rest of the
industry. That is why the Commission has been particularly vigilant
about examining those areas in which GISB has failed to reach consensus
on standards. The Commission, in fact, agreed with NGC/Vastar that, in
many of these areas, standards appear necessary and instituted
procedures to have GISB and the industry develop the needed standards.
The Commission established a September 30, 1996 date for submission
of detailed reports on the additional standards, and, on that date,
GISB submitted a report containing additional approved standards and a
voting record for the standards that did not receive the necessary
votes.
B. Response to NGC/Vastar/Conoco's Comments
While GISB's standards are legitimately entitled to great weight,
the Commission did not, as NGC/Vastar/Conoco maintain, delegate to GISB
the sole responsibility to develop these standards. The Commission has
and is still taking an active role in the process. It has identified
the areas requiring standardization. And, as discussed below, the
Commission reviewed the GISB standards in light of NGC/Vastar/Conoco's
comments and those of other participants and determined that the
standards provide a just and reasonable solution to the lack of
standardization in the industry.
With the exception of the requirement for a nationwide nomination
schedule, NGC/Vastar/Conoco did not fundamentally disagree with the
GISB standards passed. Rather, their principal concerns were that a few
of the GISB standards, in their view, do not go far enough and need to
be improved and enhanced and that standards in additional areas need to
be adopted.
1. NGC/Vastar/Conoco's Objections to the GISB Standards
NGC/Vastar/Conoco raised six specific concerns with the GISB
standards in their comments on the NOPR: uniform nomination deadline;
pooling; tracking of title transfers; intra-day nominations; prior
period adjustments; and unit of measure. 15
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\15\ NGC/Vastar/Conoco also raised concerns about GISB's
adoption of internet protocols as the electronic method for
communication of the high priority data elements. They argued that,
while the use of internet protocols is a step forward, GISB did not
go far enough in using internet technology. This issue is not yet
ripe for consideration. The Commission has not yet adopted the
electronic delivery mechanism standards, because GISB had not
completed the standards in time for the final rule. The Commission,
however, did agree with some aspects of NGC/Vastar/Conoco's comments
regarding the need to eventually replace pipeline electronic
bulletin boards with a more uniform method of communication. 61 FR
39057, 39065, III FERC Stats. & Regs. Preambles at 30,063, 30,076.
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a. Uniform Nomination Deadline. GISB established a uniform
nomination deadline for the entire country, starting at 11:30 a.m. CCT
(central clock time). (Nomination Standard 1.3.2). NGC/Vastar/Conoco,
as well as others, argued a staggered nomination timeline would be more
efficient. NGC/Vastar/Conoco suggested that upstream pipelines should
go first while others suggested a regional nomination system.
As was the case with many of the standards, the Commission found
that the determination of an appropriate nomination schedule was a
matter of judgment, not fact, and accepted the
[[Page 55211]]
consensus rationale for adopting a nationwide schedule. The industry
consensus was that a nationwide timeline provides shippers with more
assurance of their transportation arrangements. A nationwide nomination
schedule enables a shipper using multiple pipelines to nominate and
schedule each link in its transaction chain at one time. It also
enables the shipper to learn quickly whether its nomination will go
through as scheduled.
A staggered schedule could leave a shipper with one (or more)
scheduled pipeline and one (or more) unscheduled. 16 For example,
under a system where nominations on upstream pipelines are processed
first, a shipper may receive confirmation of transportation on the
upstream pipeline, without knowing whether it will be able to acquire
transportation to deliver that gas to its needed destination.
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\16\ 61 FR 39061, III FERC Stats. & Regs. Preambles at 30,067-
68.
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b. Pooling. GISB's standard requires pipelines to offer one pool if
requested by a shipper or supplier. (Nomination Standard 1.3.17). NGC/
Vastar/Conoco agree with the standard, but object to the requirement
that pooling must be requested by a shipper or supplier. They suggest
pipelines may take a long time to establish pooling mechanisms and,
therefore, argue the ``shipper request'' requirement could drag out
implementation for years.
Although pooling is either already provided, or is likely to be
requested, on larger pipelines, pooling may not be needed or demanded
on smaller pipelines. The ``shipper request'' requirement helps to
ensure that pipelines do not unnecessarily establish pools that are not
needed. The ``shipper request'' requirement also should not cause any
delay in implementing pooling. The standard requires nothing more than
a request by a shipper or a supplier to trigger the obligation for the
pipeline to establish a pool. Since the tariff changes to comply with
the standards are not due to start being filed until October of 1996,
and implementation does not begin until April of 1997, there is ample
time for shippers needing pooling to make their requests, and for
implementation to be timely.
c. Title Transfer Tracking. GISB adopted two principles dealing
with title transfers 17--title transfer tracking improves
certainty and users of title transfers should bear the cost of the
service (Nomination Principles 1.1.10 and 1.1.11). But GISB failed,
after much discussion, to reach agreement on a title tracking
standard.18 NGC/Vastar/Conoco request the Commission to eliminate
the two principles because the entire issue of title transfers has been
deferred for further consideration.
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\17\ Title transfer tracking refers to keeping computerized
record of nominations showing the transfer between parties of title
to gas whether or not the gas is being physically transported on the
pipeline.
\18\ See Transcript of March 7, 1996 GISB Executive Committee
Meeting, Docket No. RM96-1-000, at 316-370 (filed March 27, 1996).
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Although the Commission adopted the principles, pipelines need not
comply with them unless, and until they are adopted as standards. NGC/
Vastar/Conoco, in fact, agree with the general principle that title
transfer tracking is important, and improves certainty,19 and the
Commission concurred, including title transfer tracking as an issue for
further consideration by GISB and the industry.20 NGC/Vastar/
Conoco have suffered no harm from adoption of the two principles, since
pipelines are not required to revise their tariffs to comply with them,
and, in any event, they are subject to revision based on the future
deliberations.
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\19\ See Comments and Proposed Alternative Standards of NGC/
Vastar/Conoco, Docket No. RM96-1-000, at 67 (May 28, 1996) (``title
transfers create liquidity in the market, which in turn enhances
reliability and competitiveness of natural gas as a fuel'').
\20\ 61 FR 19216; IV FERC Stats. & Regs. Proposed Regulations at
33,213.
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d. Intra-day Nominations. GISB's standards for intra-day
nominations (a nomination made after the nomination deadline for a gas
day) provide that pipelines must allow shippers to submit at least one
intra-day nomination four hours prior to gas flow and that intra-day
nominations can be used to request increases or decreases in total flow
and changes to receipt or delivery points for scheduled gas.
(Nomination Standards 1.3.8, 1.3.10, and 1.3.11). NGC/Vastar/Conoco
maintain that these standards, while a ``step in the right direction,''
do not go far enough to ensure equitable treatment of shippers. They
propose six revised standards covering additional areas such as bumping
rights, for example, between shippers submitting intra-day nominations
to primary points and shippers using those points as secondary points.
The Commission accepted the GISB standards as a reasonable point of
departure. NGC/Vastar/Conoco do not maintain that the GISB standards
should not be implemented as written, only that their suggested
additions may improve the efficiency of the market. The Commission
agrees that improvements probably can be made in this area as the
standards are refined. While permitting the industry to review such
revisions through the consensus process may be somewhat slower than
NGC/Vastar/Conoco would prefer, such review will lead to a better and
more considered decision.
e. Prior Period Adjustments. GISB adopted three standards dealing
with prior period adjustments (allocations, measurement, and invoices)
that impose a six-month period for the adjustment and a three-month
rebuttal period. (Flowing Gas Standards 2.3.26 and 2.3.14 and Invoicing
Standard 3.3.15.) NGC/Vastar/Conoco contend the six-month
reconciliation period does not reflect commercial realities, because
most pipelines are unable to provide adjustments that quickly, the
adjustments therefore may be inaccurate, and the six-month period is
inconsistent with companies' internal and external auditing procedures.
They recommend a two-year period for adjustments.
The consensus view of all segments of the industry, including the
pipeline segment, is that expedition of these adjustments is important
and can be made accurately within the six-month time period specified.
There is no factual basis, at this point, to determine whether these
adjustments can be made accurately. The question of how fast
reconciliation is needed and what reasonably can be accomplished is a
matter of judgment, and the Commission, therefore, chose to adopt the
position supported by the majority of the industry.21 Given the
importance of obtaining financial data promptly, the Commission is
unwilling to accept NGC/Vastar/Conoco's assumption that pipelines will
fail to perform in the manner to which they have agreed. Pipelines are
subject to the risks of alienating their own customer base as well as
possible Commission action if they fail to follow the standards.
Indeed, NGC/Vastar/Conoco's reluctance to hold the pipelines to the
speed-up in reconciliation, to which the pipelines agreed, is at odds
with the general thrust of NGC/Vastar/Conoco's arguments, on other
standards, that pipelines should be forced to do more, and do it
faster, than the consensus agreement.
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\21\ 61 FR 39062, III. FERC Stats. & Regs. Preambles at 30,068-
69.
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f. Unit of Measure. GISB adopted dekatherms as the standard unit
for nominations. (Nomination Standard 1.3.14.) It further adopted a
standard providing that, subject to regulatory and/or contractual
considerations for standardizing billing units on invoices, dekatherms
should be used for invoices
[[Page 55212]]
to be consistent with nomination standard. (Invoicing Standard 3.3.3.)
NGC/Vastar/Conoco accepted the use of dekatherms for nominations,
but contended dekatherms should not be required for billing. They
contended that this standard ignores the commercial reality that
thousands of contracts are based on Mcf and that parties such as LDCs,
intrastate pipelines, and gatherers may have state rates based on Mcf
and may not measure dekatherms. They recommended that Mcf should be
included as an optional field.
The GISB standard, on its face, is conditioned on the relevant
contractual relations between the parties, so that it will not result
in trumping those agreements in the absence of negotiations between the
parties. Thus, customers can still continue to receive invoices in Mcf
if provided by their contract. The consensus standard, however,
establishes parameters for future and renegotiated contracts to provide
consistency in the measurement and billing process, which is a
reasonable objective.
2. Deferred Issues
NGC/Vastar/Conoco's primary concern was with the standards that
fall under the heading of deferred issues: the issues the Commission
determined required further consideration by GISB and the industry.
NGC/Vastar/Conoco contended the Commission should not have deferred
resolution of these issues, but should have resolved them immediately
based on NGC/Vastar/Conoco's proposed standards. NGC/Vastar/Conoco
further contended the ``reserved'' issues are among the most complex
facing the industry and, since GISB failed to resolve them the first
time, its chances of resolving them on a second try are a ``false
hope.''
The Commission heeded the comments of NGC/Vastar/Conoco, finding
that ``many of NGC/Vastar/Conoco's points may have merit.'' 22
Where the Commission differed with NGC/Vastar/Conoco was in the process
for resolving these issues. While recognizing that the additional
standards need prompt consideration, the Commission concluded the GISB
standards could be implemented while standards in the additional areas
are being considered.23 Indeed, although NGC/Vastar/Conoco
contended that implementation of their proposed additional standards
immediately may reduce the costs of ironing out the details in later
filings, they did not suggest that implementation of the additional
standards is a prerequisite to implementation of the GISB standards.
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\22\ 61 FR 39060, III FERC Stats. & Regs. Preambles at 30,068.
\23\ 61 FR 19216, IV FERC Stats. & Regs. Proposed Regulations at
33,213.
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The Commission has determined to try to obtain resolution of
standards issues through the consensus process and is not prepared to
discard that process at this stage of the proceedings. Particularly for
complex issues, achievement of a consensus that fairly balances the
concerns of all industry segments is desirable. On its first try at
standardization, GISB and the industry had to face and resolve a wide
range of issues in a short timeframe. GISB conducted 45 meetings within
a 53 day period and reached consensus on a significant number of
critical issues. The Commission is not willing to short-circuit that
process without giving the industry a chance to consider the deferred
issues.
Moreover, the Commission could not have resolved these issues
immediately based on the existing record. Since no party had an
opportunity to respond to NGC/Vastar/Conoco's comments, the Commission
would have had to establish additional procedures to resolve the issues
in any event. The better path, therefore, is to proceed as the
Commission has done and provide the industry with additional time to
consider the issues. Even if the industry does not succeed at reaching
consensus, the review by GISB and the industry will cast additional
light on the issues involved in these complex areas, enabling the
Commission to reach a more reasoned resolution if it is required to
intervene in the process.
The Commission, however, recognized the need to monitor industry
progress on these standards to ensure that a stalemate does not impede
development of the standards. Thus, the Commission rejected calls to
extend the September 30, 1996 deadline to report to the Commission on
the industry's progress on these issues.\24\ Analysis of the reports
filed on September 30 by GISB and others should reveal whether the
industry is en route to resolving these issues or whether the
Commission should institute additional procedures.
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\24\ 61 FR 39066, III FERC Stats. & Regs. Preambles at 30,076-
79.
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C. The Commission's Sec. 5 Action Is Warranted
NGC/Vastar take issue with the Commission's finding that pipeline
tariff provisions inconsistent with the GISB standards are unjust and
unreasonable under Sec. 5 of the NGA. They maintain that a Sec. 5
finding is inappropriate since the Commission has specifically ordered
or approved many of these provisions, which were crafted as part of
extensive settlement processes.
As the Commission pointed out in the final rule, pipeline tariff
provisions governing business practices initially were crafted in
individual restructuring proceedings pursuant to Order No. 636. But
experience under these tariffs clearly showed the policy of relying on
individual, non-standardized tariff filings was not sufficient to
create the uniform pipeline grid the Commission envisioned in Order No.
636. \25\ Indeed, before initiating this rulemaking, the Commission
held a technical conference on September 21, 1995, to assess the
industry's standardization progress.\26\ At that conference, all
segments of the industry agreed that relying on individual pipeline
procedures inhibited efficiency. One participant aptly summarized the
problem:
\25\ 61 FR 39056, III. FERC Stats. & Regs. Preambles at 30,059.
\26\ Technical Conference, Standards For Electronic Bulletin
Boards Required Under Part 284 of the Commission's Regulations,
Docket No. RM93-4-000 (Sept. 21, 1995).
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Moving gas across multiple pipelines today is a logistical
nightmare. Each pipeline wants data specified in a different way.
Delays are standard operating procedure, errors are routine, and the
cost of this process is too great for all of us. * * * Let me give
you an example of the problem. Today, the 18 largest pipelines use
14 different nomenclatures to describe a pipeline receipt point.
About 80 unique data elements are required to execute a nomination
on these pipelines.\27\
\27\ Transcript of September 21, 1995 Technical Conference,
supra, note, at 44-45.
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NGC/Vastar, themselves, recognize that individual pipeline tariff
procedures are not sufficient and that ``standardization of pipeline
business practices will go a long way to making the trading of natural
gas in an integrated market more efficient, and should make gas service
more reliable.'' \28\
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\28\ Request for Rehearing, August 16, 1996, at 1.
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Through this rulemaking proceeding, the Commission sought to
correct this obstacle to efficiency by requiring standardization of
pipeline business practices. Accordingly, tariff provisions that
conflict with the Commission's standardization policy are, of
necessity, unjust and unreasonable.
D. Incorporation by Reference Is Appropriate
LNT does not object to the substance of the GISB standards, but to
the Commission's incorporation of the standards by reference into its
regulations. LNT complains that by
[[Page 55213]]
incorporating the standards by reference, rather than reprinting the
standards in the Code of Federal Regulations, the Commission has forced
it to incur either the expense of traveling to Washington, DC. to view
the standards at the Commission or the Office of the Federal Register
or the $2,000 cost of purchasing the standards from GISB. LNT maintains
the $2,000 cost is exorbitant and, therefore, argues the standards are
not reasonably available to the class of persons affected by the
regulations, contrary to the regulations promulgated by the Office of
the Federal Register.\29\
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\29\ 1 CFR 51.7(4).
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As discussed earlier, section 12 of NTT&AA establishes a government
policy under which agencies are to rely upon, and adopt, private sector
standards whenever practicable and appropriate. The Freedom of
Information Act and implementing regulations establish that the proper
method of adopting such copyrighted material is to incorporate it by
reference into the agency's regulations. \30\ To be eligible for
incorporation by reference, the document must be reasonably available
to the class of persons affected by the publication. \31\ Once adopted,
a copy must be provided to the Office of the Federal Register for
viewing, and the material must be available and readily obtainable.
Neither the statute nor the regulations require that the standards be
available at no cost. Indeed, standards incorporated by reference are
exempt from the requirement that the agency provide copies of documents
according to the agency's fee schedule. \32\
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\30\ 5 U.S.C. Sec. 553(a)(1); 1 CFR 51.7(4). See 28 U.S.C.
Sec. 1498 (government liability for patent and copyright
infringement). Other government agencies similarly incorporate
private standards by reference. See, e.g., note 11, supra.
\31\ See 5 U.S.C. 553(a)(1); 1 CFR 51.7(4).
\32\ 5 U.S.C. 553(a)(3).
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GISB, in fact, is not insisting on payment for the reproduction for
regulatory purposes of the business practice standards and the
associated datasets (data dictionaries), so small companies or
municipalities will have easy access to the standards for purposes of
reviewing and responding to pipeline tariff filings. \33\ The only
material for which GISB has restricted reproduction is the complex and
detailed ASC X12 mappings and other computer protocols and examples.
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\33\ Letter of September 12, 1996 from counsel for GISB to the
Secretary of the Commission (Docket No. RM96-1-000).
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It is common practice for standards organizations to charge for
copies of their standards in order to defray the publishing costs as
well as some of the administrative, legal, and other costs of
developing the standards.\34\ The GISB price of $2,000 covers the
complete four volume set of documents, running over 2,000 pages,
including the provision without charge for one year, of the updates and
revisions that are certain to be forthcoming. Determining an
appropriate price for such standards is not simply a matter of
calculating the direct costs of publishing the standards, but involves
consideration of the administrative, legal, and other developmental
costs as well as the anticipated number of purchasers. In this case,
this determination was made, not by an independent publishing firm, but
by those who themselves have to purchase the documents--the GISB
membership composed of firms, of varying sizes, from all segments of
the industry.\35\ The Commission has no basis to disagree with their
determination of the price. Even for small pipelines, like LNT, a
regulatory cost of $2,000, whether for legal fees or for acquiring
standards, is within the normal course of doing business. Moreover, LNT
can seek to include the costs of compliance with the GISB standards in
future rate proceedings.
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\34\ See Why There Is a Charge for Standards and Standards
Information, American National Standards Institute (explaining why
charges need to be assessed for standards even if obtained
electronically, with no publishing costs). The document is
accessible at ANSI's Internet site, http://www.ansi.org/
why__chrg.html.
\35\ Although GISB members can receive the four volume set at
the member's fee of $1,000, their yearly membership dues of $2,000
help defray the administrative, legal, and other costs of developing
the standards. See Gas Industry Standards Board Standards Action
Bulletin, September 17, 1996, at 8. The Bulletin is accessible via
GISB's Internet site at http://www.NeoSoft.com/gisb/
gisb.htm.
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The Commission orders: The requests for rehearing are denied.
By the Commission.
Lois D. Cashell,
Secretary.
[FR Doc. 96-27432 Filed 10-24-96; 8:45 am]
BILLING CODE 6717-01-P