[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