[Federal Register Volume 67, Number 233 (Wednesday, December 4, 2002)]
[Rules and Regulations]
[Pages 72098-72099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30706]



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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 284

[Docket No. RM01-6-000; Order No. 892]


Before Commissioners: Pat Wood, III, Chairman; William L. Massey, 
Linda Breathitt, and Nora Brownell; Assignment of Firm Capacity on 
Upstream Interstate Pipelines

November 21, 2002.
AGENCY: Federal Energy Regulatory Commission, Department of Energy.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission is amending its 
regulations to remove Subpart H of Part 284 which requires interstate 
natural gas pipelines to assign to their firm shippers capacity the 
pipelines hold on other interstate pipelines. This requirement was a 
necessary part of the unbundling of interstate pipelines' gas sales 
from their gas transportation service required in Order No. 636. On 
December 14, 2000, the Commission announced a new policy under which it 
would no longer require pipelines to give up their capacity on other 
pipelines but would allow them to acquire and hold capacity on other 
pipelines without prior Commission approval. Since Subpart H no longer 
reflects the Commission policy with respect to pipelines' holding 
capacity on other pipelines, the Commission is removing the regulation.

EFFECTIVE DATE: Removal of these regulations becomes effective January 
3, 2003.

FOR FURTHER INFORMATION CONTACT: Cecilia Desmond, Office of the General 
Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8695.

SUPPLEMENTARY INFORMATION:

I. Introduction

    1. The Federal Energy Regulatory Commission (Commission) is 
amending its regulations by removing subpart H of part 284 (18 CFR 
284.241 and 284.242) which requires interstate natural gas pipelines to 
assign to their firm shippers capacity the pipelines hold on other 
interstate pipelines. The policies embedded in these regulations have 
been overtaken by subsequent policy developments, most particularly the 
Commission's December 14, 2000 announcement of a new policy allowing 
unbundled open access pipelines to acquire and hold capacity on other 
pipelines without prior Commission approval.\1\ Subpart H was 
promulgated in Order No. 636 \2\ and was a necessary part of the 
unbundling of interstate gas sales from transportation. However, all 
natural gas companies have implemented Order No. 636 and the Commission 
now allows unbundled open access pipelines to acquire capacity on other 
pipelines as can any other shipper without seeking prior Commission 
approval. Since Subpart H is inconsistent with current Commission 
policy, the Commission is removing Subpart H from its regulations.
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    \1\ Texas Eastern Transmission Corp., 93 FERC ] 61,273 (2000); 
reh'g denied, 94 FERC ] 61,139; reh'g denied, 95 FERC ] 61,056 
(2001).
    \2\ Pipeline Service Obligations and Revisions to Regulations 
Governing Self-Implementing Transportation Under Part 284 of the 
Commission's Regulations, Order No. 636, 57 FR 13267 (Apr. 16, 
1992), FERC Stats & Regs., Regulations Preambles, January 1991-June 
1996 ] 30,939 (Apr. 8, 1992).
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II. Discussion

    2. In Order No. 636, the Commission required interstate gas 
pipelines to unbundle the sale of gas from the sale of transportation 
and to assign their upstream capacity to their firm shippers.\3\ The 
Commission found that pipelines' access to upstream capacity needed to 
provide bundled gas sales gave them an undue competitive advantage over 
other gas merchants since the upstream capacity gave pipelines access 
to more gas suppliers. The Commission also found that a pipeline's 
holding upstream capacity inhibited the goal of a competitive national 
market because the downstream gas purchasers would not be able to 
access the production areas and gas merchants reached by the downstream 
pipeline through its upstream capacity.
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    \3\ The Commission allowed pipelines to retain upstream capacity 
for operational management and balancing purposes and no-notice 
transportation service.
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    3. The Commission adhered to that policy for several years during 
the individual pipelines' Order No. 636 restructuring proceedings. 
Then, in Texas Eastern Transmission Corporation (Texas Eastern), the 
Commission determined that Order No. 636 did not create a per se rule 
precluding restructured pipelines from entering into contracts for 
transportation or storage capacity on other pipelines (offsystem 
capacity).\4\ The Commission reasoned that pipelines had completed the 
unbundling of gas sales and transportation service required by Order 
No. 636 and that the market had become sufficiently competitive to 
allow pipelines to hold capacity on other pipelines. Therefore, the 
Commission said it would decide whether to allow pipelines to acquire 
offsystem capacity on a case-by-case basis.
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    \4\ 74 FERC ] 61,074 (1996); 78 FERC ] 61,277 (1997); order on 
remand, 93 FERC ] 61,273 (2000); reh'g denied, 94 FERC ] 61,139; 
reh'g denied, 95 FERC ] 61,056 (2001).
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    4. Two pipelines appealed the Texas Eastern requirement for case-
specific approval, claiming that it discriminated against pipelines 
because non-pipeline shippers could acquire capacity without prior 
approval.\5\ They also argued that the Commission's blanket certificate 
and capacity release regulations, which require pipelines to make 
transportation services available on a nondiscriminatory basis under 
Commission-approved open access tariffs, were sufficient to control 
unduly sdiscriminatory or anticompetitive actions that might arise when 
a pipeline acquires offsystem capacity. The court agreed and remanded 
the case.
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    \5\ See Colorado Interstate Gas Co. v. FERC, 146 F.3d 889 (D.C. 
Cir. 1998).
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    5. On December 14, 2000, the Commission issued its Order on Remand 
in the Texas Eastern proceeding. In that order, the Commission 
announced a new policy that unbundled open access pipelines will no 
longer be required to seek Commission approval before acquiring 
offsystem capacity, that existing safeguards provide the necessary 
protection against discriminatory and anticompetitive actions with 
respect to acquired offsystem capacity, and that pipelines will be at-
risk for the costs of any such capacity. Before transporting gas for 
others on any acquired offsystem capacity, the Commission required a 
pipeline to seek a blanket waiver of the shipper-must-hold-title policy 
by amending its tariff to include a general statement that it will only 
transport for others on offsystem capacity pursuant to its existing 
open access tariff and rates.\6\
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    \6\ See Texas Eastern, 95 FERC ] 61,056 (2001).
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    6. On April 10, 2002, the Commission issued a Notice of Proposed 
Rulemaking (NOPR)\7\ proposing in this docket to amend the Commission's 
regulations by removing Subpart H of Part 284.\8\ In the NOPR, the 
Commission noted that the natural gas marketplace has fundamentally 
changed since the issuance of Order No. 636. The Commission stated 
that, in the Texas Eastern series of orders, the Commission developed 
and modified its policy with respect to pipelines' acquiring capacity 
on other pipelines in light of these

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changes. Since the requirement to assign upstream capacity contained in 
Sec.  284.242 was specific to the implementation of Order No. 636, all 
interstate pipelines had implemented Order No. 636, and the Commission 
now allows pipelines to acquire capacity on other pipelines as can any 
other shipper without seeking prior Commission approval, the Commission 
stated, Subpart H is no longer necessary.
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    \7\ Assignment of Firm Capacity on Upstream Interstate 
Pipelines, 67 FR 19136 (Apr. 18, 2002), FERC Stats. & Regs. ] 
32,549.
    \8\ The Commission received one comment in response to the NOPR 
from Williston Basin Interstate Pipeline Co. which supports the 
proposal to remove Subpart H of Part 284.
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    7. However, as the Commission stated in the NOPR, the removal of 
the regulation will not modify the Commission's Texas Eastern policy 
under which the appropriateness of a pipeline's acquisitions of 
capacity on other pipelines is subject to review in a subsequent 
general section 4 rate proceeding or the Commission's requirement that 
the shipper must hold title to any gas being shipped through the 
acquired capacity.

III. Environmental Analysis

    8. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human environment.\9\ The 
Commission has categorically excluded certain actions from this 
requirement as not having a significant effect on the human 
environment.\10\ No environmental consideration is necessary in this 
instance since the final rule is clarifying, corrective, or procedural 
and affects transportation of natural gas that requires no construction 
of facilities.\11\
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    \9\ Order No. 486, Regulations Implementing the National 
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & 
Regs. Preambles 1986-1990 ] 30,783 (1987).
    \10\ 18 CFR 380.4.
    \11\ See 18 CFR 380.4(a)(2)(ii), 380.4(a)(27).
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IV. Regulatory Flexibility Impact Statement

    9. The Regulatory Flexibility Act of 1980 (RFA)\12\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small entities. 
The Commission is not required to make such analysis if a rule would 
not have such an effect.\13\
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    \12\ 5 U.S.C. 601-612.
    \13\ 5 U.S.C. 605(b).
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    10. The Commission does not believe that this rule removal would 
have such an impact on small entities. The removal of these regulations 
would have an impact only on interstate pipelines, which generally do 
not fall within the RFA's definition of small entity.\14\ Accordingly, 
pursuant to section 605(b) of the RFA, the Commission certifies that 
the removal of the regulations will not have a significant economic 
impact on a substantial number of small entities.
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    \14\ 5 U.S.C. 601(3), citing to section 3 of the Small Business 
Act, 15 U.S.C. 632. Section 3 of the Small Business Act defines a 
``small business concern'' as a business which is independently 
owned and operated and which is not dominant in its field of 
operations.
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V. Information Collection Statement

    11. The Office of Management and Budget's (OMB) regulations require 
that OMB approve certain information collection requirements imposed by 
agency rules.\15\ However, this final rule contains no information 
reporting requirements, and therefore is not subject to OMB approval.
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    \15\ 5 CFR Part 1320.
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VI. Document Availability

    12. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's 
Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. 
Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426.
    13. From FERC's Home Page on the Internet, this information is 
available in the Federal Energy Regulatory Records Information System 
(FERRIS). The full text of this document is available on FERRIS in PDF 
and WordPerfect format for viewing, printing, and/or downloading. To 
access this document in FERRIS, type the docket number excluding the 
last three digits of this document in the docket number field.
    14. User assistance is available for FERRIS and the FERC's website 
during normal business hours. Please contact FERC Online Support at 
[email protected] or toll-free at (866) 208-3676, or for TTY, 
contact (202) 502-8659.

VII. Effective Date

    15. This Final Rule will take effect January 3, 2003.
    16. The Commission has determined, with the concurrence of the 
Administrator of the Office of Information and Regulatory Affairs of 
OMB, that this rule is not a ``major rule'' as defined in Section 351 
of the Small Business Regulatory Enforcement Fairness Act of 1996.

List of Subjects in 18 CFR Part 284

    Continental Shelf, Natural gas, Reporting and recordkeeping 
requirements, Incorporation by reference.

    By the Commission.
Magalie R. Salas,
Secretary.

    In consideration of the foregoing, the Commission amends Part 284, 
Chapter I, Title 18, Code of Federal Regulations, as follows.

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

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

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

Subpart H--[Removed and Reserved].

    2. In part 284, remove and reserve subpart H, consisting of 
Sec. Sec.  284.241 and 284.242.

[FR Doc. 02-30706 Filed 12-3-02; 8:45 am]
BILLING CODE 6717-01-P