[Federal Register Volume 67, Number 147 (Wednesday, July 31, 2002)]
[Rules and Regulations]
[Pages 49564-49567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-19277]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 284

[Docket No. RM96-1-022; Order No. 587-Q]


Standards for Business Practices of Interstate Natural Gas 
Pipelines

Issued July 23, 2002.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule; order on rehearing.

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SUMMARY: This order rules on requests for rehearing and clarification 
of the final rule issued on May 1, 2002 (67 FR 30788) that incorporated 
by reference Version 1.5 of the consensus natural gas industry 
standards adopted by the Wholesale Gas Quadrant of the North American 
Energy Standards Board (NAESB). In particular, the order addresses 
requests for clarification and rehearing related to the standards 
governing title transfer tracking.

EFFECTIVE DATE: The regulations became effective June 7, 2002.

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 Markets, Tariffs, and Rates, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 
(202) 208-1283.
Kay Morice, Office of Markets, Tariffs, and Rates, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 
(202) 208-0507.

SUPPLEMENTARY INFORMATION:

    Federal Energy Regulatory Commission Before Commissioners: Pat 
Wood, III, Chairman; William L. Massey, Linda Breathitt, and Nora 
Mead Brownell.
    Standards for Business Practices of Interstate Natural Gas 
Pipelines, Order No. 587-Q; Docket No. RM96-1-022; Order on 
Rehearing and Clarification.
    Issued July 23, 2002.

    1. In Order No. 587-O,\1\ the Federal Energy Regulatory Commission 
(Commission) amended Sec. 284.12 of its open access regulations to 
incorporate by reference Version 1.5 of the consensus industry 
standards for the natural gas industry promulgated by the Wholesale Gas 
Quadrant of the North American Energy Standards Board (NAESB). These 
standards include requirements related to title transfer tracking (TTT) 
under which pipelines generally are responsible for accommodating title 
transfer tracking services at all pooling points.
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    \1\ Standards For Business Practices Of Interstate Natural Gas 
Pipelines, Order No. 587-O, 67 FR 30788 (May 8, 2002), III FERC 
Stats. & Regs. Regulations Preambles, ] 31,129 (May 1, 2002).
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    2. On May 31, 2002, National Fuel Gas Supply Corporation (National 
Fuel) filed a request for clarification and rehearing relating to the 
adoption of the TTT standards. In particular, National Fuel contends 
that pipelines need only support TTT where the pipeline has a 
contractual relationship with a Title Transfer Tracking Service 
Provider or Third Party Account Administrator and that the only parties 
for whom pipelines need to accommodate TTT services are Title Transfer 
Tracking Service Providers or Third Party Account Administrators. As 
discussed below, the Commission provides clarification that a party 
requesting the processing of title transfers must have a contract with 
the pipeline, but denies National Fuel's request that pipelines be 
required to process title transfer nominations only from Title Transfer 
Tracking Service

[[Page 49565]]

Providers and Third Party Account Administrators. This decision is in 
the public interest because it will ensure that pipelines will not 
limit the processing of title transfers to select parties, but will 
provide the same service, without undue discrimination, to all 
shippers.

Background

    3. Title transfer is defined as ``the change of title to gas 
between parties at a location.'' \2\ Title Transfer Tracking (TTT) is 
defined as ``the process of accounting for the progression of title 
changes from party to party that does not effect a physical transfer of 
the gas.'' \3\ The two NAESB standards generally defining the 
pipelines' responsibility for processing title transfers are Standards 
1.3.64 and 1.3.65.\4\ Standard 1.3.64 provides:
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    \2\ 18 CFR 284.12(a)(1)(i), Standard 1.2.14 (Version 1.5).
    \3\ 18 CFR 284.12(a)(1)(i), Standard 1.2.15 (Version 1.5).
    \4\ 18 CFR 284.12(a)(1)(i), Standards 1.3.64 and 1.3.65 (Version 
1.5).

    At a minimum, the Transportation Service Providers (TSP) should 
be responsible for accommodating Title Transfer Tracking (TTT) 
services at all points identified by the TSP as pooling points, 
where TTT services are requested. In absence of existing pooling 
points or in addition to existing pooling points where access to TTT 
activity is not reasonably accessible for supply receipt locations 
covered by an OBA, TSPs should be responsible for accommodating TTT 
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at no less than one location.

    Standard 1.3.65 states:

    The Title Transfer Tracking services should be supported by 
means of the nominations, quick responses and scheduled quantities 
processes. At the Transportation Service Provider's election, the 
confirmation process may also be utilized with Title Transfer 
Tracking Service Providers within the TSP's system.

    4. In Order No. 587-O, the Commission interpreted these standards 
as requiring pipelines to permit and process, on a non-discriminatory 
basis, transportation nominations (along with required responsive 
scheduling information) effecting transfers of title at pooling points 
by any party including shippers, poolers, or third party account 
administrators.\5\ The Commission provided the following example of the 
pipeline's obligations under the standards. In the example, Producer A 
aggregates 1000 Dth of gas from three receipt points at its pool at 
Pool 1, sells 1000 Dth to Marketer B at Marketer B's pool at Pool 1, 
and Marketer B sells 1000 Dth to Shipper C at the pooling point for 
transportation to Shipper C's delivery point under Shipper C's firm 
transportation contract. The Commission explained that, under the NAESB 
standards, the pipeline would have to process a transportation 
nomination from Producer A and the required scheduling responses to 
reflect the transfer of gas from Producer A's pool to Marketer B's 
pool. Other than processing the transportation nomination to reflect 
the in-place transfer of gas, the pipeline would be required to provide 
no other ``accounting services'' \6\ respecting the transfer of title.
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    \5\ A Third Party Account Administrator is defined as a Title 
Transfer Tracking Service Provider other than the Transportation 
Service Provider. Standard 1.2.17 (Version 1.5).
    \6\ Standard 1.2.15 defines title transfer tracking as ``the 
process of accounting for the progression of title changes from 
party to party that does not effect a physical transfer of the 
gas.''
[GRAPHIC] [TIFF OMITTED] TR31JY02.000

    5. In its rehearing request, National Fuel maintains the Commission 
should clarify that pipelines need only support TTT where the pipeline 
has a contractual relationship with a Title Transfer Tracking Service 
Provider or

[[Page 49566]]

Third Party Account Administrator. National Fuel further contends that 
the only parties for whom pipelines need to accommodate TTT services 
are Title Transfer Tracking Service Providers or Third Party Account 
Administrators.
    6. On June 7, 2002, Dominion Resources, Inc. also filed a request 
for rehearing or reconsideration and clarification of Order No. 587-O. 
This rehearing request was filed late, and, accordingly, will not be 
addressed.\7\
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    \7\ Order No. 587-O was issued on May 1, 2002, and Dominion 
Resources rehearing request was not filed until June 7, 2002, more 
than 30 days from the date of issuance. Under the Natural Gas Act 
and the Commission regulations, rehearing requests must be filed 
``within thirty days after the issuance of such order.'' Natural Gas 
Act, Sec. 19, 15 U.S.C. 7174 (a); 18 CFR 385.713 (rehearing requests 
must be filed no later than 30 days after issuance of final decision 
or final order); 18 CFR 385.2007 (issuance is defined as the 
earliest of posting or public notice).
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Discussion

    7. National Fuel maintains that the Commission's statement in Order 
No. 587-O (that pipelines must ``effect[] transfers of title at pooling 
points by any party including shippers, poolers, or third party account 
administrators'') can be read to require pipelines to process title 
transfers regardless of whether there is a contractual relationship 
between the party transferring title and the pipeline. National Fuel 
further argues that the Commission has incorrectly provided that 
pipelines must accommodate TTT services from other than Title Transfer 
Tracking Service Providers (and Third Party Account Administrators),\8\ 
and it urges the Commission to clarify that the obligation of a 
pipeline to accommodate TTT services arises in the context of services 
requested to be performed by Title Transfer Tracking Service Providers 
and Third Party Account Administrators.
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    \8\ Under the standards, a ``Title Transfer Tracking Service 
Provider is a party conducting the title transfer tracking 
activity,'' and a ``Third Party Account Administrator is a Title 
Transfer Tracking Service Provider other than the Transportation 
Service Provider.'' Standards 1.2.16 and 1.2.17.
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    8. The Commission agrees with National Fuel that pipelines need 
only process title transfers from parties with contractual 
relationships with the pipeline. Pipelines need to be able to verify 
the parties with whom they deal. The obligation to process title 
transfer nominations, however, extends to any party with a contractual 
relationship with the pipeline, including, but not limited to, parties 
with transportation or storage contracts, pooling contracts or 
operational balancing agreements, Third Party Account Administrators, 
and agents of any of the foregoing.
    9. The Commission does not agree with National Fuel's 
interpretation of the standards as providing that pipelines are 
required to accommodate title transfers only with Third Party Account 
Administrators, and denies the rehearing request. The Commission finds 
that, as discussed below, National Fuel's interpretation is not 
supported by the text of the standards. Moreover, adopting National 
Fuel's interpretation, which would limit the obligation of a pipeline 
to provide nomination services only for certain third parties, would 
lead to practical difficulties, and would be inconsistent with a 
pipeline's obligation to provide services in a not unduly 
discriminatory manner under the Natural Gas Act, and the Commission's 
regulations.
    10. The two principal standards defining the pipelines' obligations 
to support title transfers are Standards 1.3.64 and 1.3.65. In relevant 
part, these standards provide that ``at a minimum, the Transportation 
Service Providers (TSP) should be responsible for accommodating Title 
Transfer Tracking (TTT) services at all points identified by the TSP as 
pooling points, where TTT services are requested,'' and that ``the 
Title Transfer Tracking services should be supported by means of the 
nominations, quick responses and scheduled quantities processes.'' 
These standards do not state that pipelines are to support title 
transfer tracking only with Title Transfer Tracking Service Providers 
or Third Party Account Administrators.\9\ These standards impose a 
general obligation on pipelines to accommodate title transfer tracking 
at pooling points through the nominations, quick responses and 
scheduled quantities processes.\10\ While other standards do require 
pipelines to accommodate title transfer tracking from Third Party 
Account Administrators, these standards do not provide that Third Party 
Account Administrators and Title Transfer Tracking Service Providers 
are the sole parties from whom pipelines are required to accommodate 
title transfer nominations. The ability to use Third Party Account 
Administrators is an additional option under the standards for 
obtaining title transfer tracking services; the standards do not make 
it the exclusive method of obtaining title transfer tracking services, 
nor do the standards specifically preclude shippers or others from 
undertaking the process of accounting for title transfers 
themselves.\11\
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    \9\ The only relevant issue in National Fuel's rehearing request 
relates to Third Party Account Administrators, since the underlying 
assumption of National Fuel's rehearing is that the pipeline will 
not be establishing a Title Transfer Tracking Service Provider.
    \10\ In effect, the standards require pipelines to process a 
nomination that reflects the movement of gas from the pool of the 
party selling gas to the pool of the purchaser. In the prior 
example, at P 4, Producer A would be transporting gas from its Pool 
to Marketer B's pool.
    \11\ No pipeline or party other than National Fuel has contested 
the Commission's interpretation of the standards.
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    11. Moreover, the standards define a Third Party Account 
Administrator only as ``a Title Transfer Tracking Service Provider 
other than the Transportation Service Provider.''\12\ This definition 
does not specifically define or limit who can be a Third Party Account 
Administrator, nor does it preclude a shipper, pooler, point operator, 
or other firm with a contract with the pipeline from acting as a Third 
Party Account Administrator only with respect to its own sales. 
National Fuel fails to provide citation to a specific definition of the 
characteristics necessary qualify as a Third Party Account 
Administrator, nor does it explain why under the standards any party, 
including a shipper, pooler, point operator, cannot qualify as a Third 
Party Account Administrator with respect only to its own transactions. 
The definition of Third Party Account Administrator, therefore, is 
sufficiently broad to include any party wanting to account for its own 
title transfers and supports the conclusion that pipelines are required 
to process nominations reflecting title transfers from any party with a 
contractual relationship with the pipeline.
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    \12\ Standard 1.2.17.
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    12. National Fuel asserts that standard 1.2.19 (which provides that 
``[a] title transfer Nomination is a nomination line item requesting 
the service of Title Transfer Tracking and is sent by an Account Holder 
to a Title Transfer Tracking Service Provider'') and standard 1.2.16 
(which defines a Title Transfer Tracking Service Provider as a ``party 
conducting the title transfer tracking activity'') support its view 
that title transfer tracking nominations will be made only to the Title 
Transfer Tracking Service Provider, not the pipeline. But these 
standards only define the method by which shippers choosing to use a 
Third Party Account Administrator will communicate with the Third Party 
Account Administrator; the standards do not specifically state that 
pipelines are required to process title transfers only from Third Party 
Account Administrators or that pipelines can refuse to process title 
transfers from shippers or other parties.\13\
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    \13\ Indeed, as pointed out above, the standards would not 
specifically preclude shippers, poolers, or point operators from 
qualifying as Third Party Account Administrators in order to process 
their own title transfers.

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[[Page 49567]]

    13. National Fuel also asserts that an interpretation requiring 
pipelines to accept ``nominations * * * effecting transfers of title'' 
from all comers would inappropriately require pipelines to assume the 
role of a Title Transfer Tracking Service Provider. However, as the 
Commission stated in Order No. 587-O, under the standards, pipelines 
are required only to process, on a non-discriminatory basis, 
nominations to reflect the in-place transfer of gas; they are not 
required to provide the other ``accounting'' services that constitute 
title transfer tracking.\14\ Under the standards, pipelines are 
required only to process in-place title transfers using the same 
nomination and confirmation procedures used to process other 
transportation nominations. National Fuel moreover has not shown that 
applying the same nomination processes to title transfers is unduly 
burdensome.
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    \14\ Standard 1.2.15 defines title transfer tracking as the 
``process of accounting for the progression of title changes from 
party to party.'' (emphasis added).
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    14. The Commission also rejects National Fuel's proposed 
interpretation of the standards because it would create practical 
difficulties for shippers. On some pipelines, the number of shippers 
that want to conduct title transfers or the overall number of such 
transactions may not be sufficient to economically support a third-
party firm that offers accounting services for title transfers. Under 
National Fuel's interpretation, however, these shippers could be 
precluded from transferring title at pooling points even though they 
are willing to account for those transfers themselves.
    15. In addition, National Fuel's interpretation of the standards 
ignores the requirement in the Natural Gas Act \15\ and the 
Commission's regulations \16\ that pipelines provide services connected 
with interstate transportation without undue discrimination. Under 
National Fuel's interpretation, pipelines would be discriminating in 
their handling of title transfer nominations by processing such 
nominations from Third Party Account Administrators or Title Transfer 
Tracking Service Providers, but refusing to provide the same service 
for other parties doing business on the pipelines. In implementing and 
interpreting NAESB's standards, the standards need to be interpreted in 
a way that is consistent with the Natural Gas Act and Commission 
regulations.\17\ The Commission finds that requiring pipelines to 
process title transfer nominations on a non-discriminatory basis is 
more consonant with its statutory and regulatory obligations than 
National Fuel's interpretation.
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    \15\ 15 U.S.C. 717c(b) (``no natural gas company shall * * * (1) 
make or grant any undue preference or advantage to any person or 
subject any person to any undue prejudice or disadvantage, or (2) 
maintain any unreasonable difference in rates, charges, service, 
facilities, or in any other respect, either as between localities or 
as between classes of service'').
    \16\ 18 CFR 284.7 & 284.9 (``An interstate pipeline or 
intrastate pipeline must provide such service without undue 
discrimination, or preference, including undue discrimination or 
preference in the quality of service provided, the duration of 
service, the categories, prices, or volumes of natural gas to be 
transported, customer classification, or undue discrimination or 
preference of any kind'').
    \17\ See United Distribution Cos. v. FERC, 88 F.3d 1105, 1166 
(D.C. Cir 1996), Independent Insurance Agents v. Hawke, 211 F.3d 
638, 643 (D.C. Cir. 2000) (under the Chevron test, an agency's 
interpretation of a statute must be reasonable and consistent with 
the statute's purpose). See also Concrete Pipe and Products v. 
Construction Laborers Pension Trust, 508 U.S. 602, 629 (statutes are 
to be construed to avoid serious doubt of their constitutionality).
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    16. National Fuel states that it anticipates that it will raise its 
requested clarifications with NAESB and suggests that the Commission 
defer addressing these issues until NAESB has an opportunity to 
interpret the standards. The Commission will not defer ruling on 
National Fuel's rehearing request. Since the NAESB standards do not 
compel or support National Fuel's reading, and National Fuel's 
interpretation raises issues regarding compliance with statutory and 
regulatory requirements, the Commission finds that the requirement in 
Order No. 587-O that pipelines process title transfer nominations with 
all parties is more consistent with those responsibilities.
    The Commission orders: The request for clarification is granted and 
the request for rehearing is denied as discussed in the body of the 
order.

    By the Commission.
Magalie R. Salas,
Secretary.
[FR Doc. 02-19277 Filed 7-30-02; 8:45 am]
BILLING CODE 6710-01-P