[Federal Register Volume 73, Number 230 (Friday, November 28, 2008)]
[Proposed Rules]
[Pages 72395-72398]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-28218]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 284

[Docket No. RM09-2-000]


Contract Reporting Requirements of Intrastate Natural Gas 
Companies

Issued November 20, 2008.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Proposed rule; Notice of Inquiry.

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SUMMARY: The Federal Energy Regulatory Commission is considering 
whether to revise its contract reporting requirements for those natural 
gas pipelines that fall under the Commission's jurisdiction pursuant to 
section 311 of the Natural Gas Policy Act of 1978 or section 1(c) of 
the Natural Gas Act. This Notice of Inquiry will assist the Commission 
in determining what changes, if any, should be made to its regulations.

DATES: Comments are due January 27, 2009.

ADDRESSES: You may submit comments on the Notice of Inquiry, identified 
by Docket No. RM09-2-000, by one of the following methods:
     Agency Web site: http://www.ferc.gov. Follow instructions 
for submitting comments via the eFiling link found in the Comment 
Procedures Section of the preamble.
     Mail: Commenters unable to file comments electronically 
must mail or

[[Page 72396]]

hand deliver an original and 14 copies of their comments to the Federal 
Energy Regulatory Commission, Secretary of the Commission, 888 First 
Street, NE., Washington, DC 20426. Please refer to the Comment 
Procedures Section of the preamble for additional information on how to 
file paper comments.

FOR FURTHER INFORMATION CONTACT: 
Vince Mareino (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6167, [email protected].
Brian White (Technical Information), Office of Energy Markets 
Regulation, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-8332, [email protected].

SUPPLEMENTARY INFORMATION:

Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. 
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.

    1. In this Notice of Inquiry, the Federal Energy Regulatory 
Commission (Commission) seeks comments on whether the Commission should 
impose additional reporting requirements on (1) intrastate pipelines 
providing interstate services pursuant to section 311 of the Natural 
Gas Policy Act of 1978 (NGPA) \1\ and (2) Hinshaw pipelines providing 
interstate services subject to the Commission's Natural Gas Act (NGA) 
jurisdiction pursuant to blanket certificates issued under Sec.  
284.224 of the Commission's regulations.\2\ In particular, the 
Commission is interested in exploring whether it should require section 
311 and Hinshaw pipelines to post the details of their transactions 
with individual shippers in a manner more comparable to the reporting 
requirements applicable to interstate pipelines under Sec.  284.13(b) 
of the Commission's Regulations.\3\
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    \1\ 15 U.S.C. 3372.
    \2\ Section 1(c) of the NGA exempts from the Commission's NGA 
jurisdiction pipelines which transport gas in interstate commerce if 
(1) They receive natural gas at or within the boundary of a state, 
(2) all the gas is consumed within that state and (3) the pipeline 
is regulated by a state Commission. This exemption is referred to as 
the Hinshaw exemption after the Congressman who introduced the bill 
amending the NGA to include section 1(c). See ANR Pipeline Co. v. 
Federal Energy Regulatory Comm'n, 71 F.3d 897, 898 (1995) (briefly 
summarizing the history of the Hinshaw exemption).
    \3\ 18 CFR 284.13(b).
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I. Background

    2. NGPA section 311 authorizes the Commission to allow intrastate 
pipelines to transport gas ``on behalf of'' interstate pipelines or 
local distribution companies served by interstate pipelines ``under 
such terms and conditions as the Commission may prescribe.'' \4\ NGPA 
section 601(a)(2) exempts transportation service authorized under NGPA 
section 311 from the Commission's Natural Gas Act (NGA) jurisdiction. 
Congress adopted these provisions in order to eliminate the regulatory 
barriers between the intrastate and interstate markets and to promote 
the entry of intrastate pipelines into the interstate market. Such 
entry eliminates the need for duplication of facilities between 
interstate and intrastate pipelines. Shortly after the adoption of the 
NGPA, the Commission authorized Hinshaw pipelines to apply for NGA 
section 7 certificates authorizing them to transport gas in interstate 
commerce in the same manner as intrastate pipelines may do under NGPA 
section 311.\5\
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    \4\ 15 U.S.C. 3371(c).
    \5\ Certain Transportation, Sales, and Assignments by Pipeline 
Companies not Subject to Commission Jurisdiction Under Section 1(c) 
of the Natural Gas Act, Order No. 63, FERC Stats. & Regs. ] 30,118, 
at 30,824-25 (1980).
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    3. Subpart C of the Commission's Part 284 open access regulations 
(18 CFR 284.121-126) implements the provisions of NGPA section 311 
concerning transportation by intrastate pipelines. Section 284.224 of 
the regulations provides for the issuance of blanket certificates to 
Hinshaw pipelines to provide open access transportation service ``to 
the same extent that, and in the same manner'' as intrastate pipelines 
are authorized to perform such service by Subpart C.
    4. The Part 284, Subpart C, regulations require that intrastate 
pipelines performing interstate service under NGPA section 311 must do 
so on an open access basis.\6\ However, consistent with the NGPA's goal 
of encouraging intrastate pipelines to provide interstate service, the 
Commission has not imposed on intrastate pipelines all of the Part 284 
requirements imposed on interstate pipelines. For example, when the 
Commission first adopted the Part 284 open access regulations in Order 
No. 436, the Commission exempted intrastate pipelines from the 
requirement that they offer open access service on a firm basis.\7\ The 
Commission found that requiring intrastate pipelines to offer firm 
service to out-of-state shippers could discourage them from providing 
any interstate service, because such a requirement could progressively 
turn the intrastate pipeline into an interstate pipeline against its 
will and against the will of the responsible state authorities. 
Similarly, Order No. 636-B exempted intrastate pipelines from the 
requirements of Order No. 636.\8\ Those requirements included capacity 
release, electronic bulletin boards (now internet Web sites), and 
flexible receipt and delivery points.
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    \6\ See 18 CFR 284.7(b), 284.9(b) and 284.122.
    \7\ Regulation of Natural Gas Pipelines After Partial Wellhead 
Decontrol, Order No. 436, FERC Stats. & Regs. ] 30,665, at 31,502 
(1985).
    \8\ Pipeline Service Obligations, and Revisions to Regulations 
Governing Self-Implementing Transportation Under Part 284 of the 
Commission's Regulations; Regulation of Natural Gas Pipelines After 
Partial Wellhead Decontrol, Order No. 636-B, 61 FERC ] 61,272, at 
61,992 n.26 (1992), order on reh'g, 62 FERC ] 61,007 (1993), aff'd 
in part and remanded in part sub nom. United Distribution Cos. v. 
FERC, 88 F.3d 1105 (D.C. Cir. 1996), order on remand, Order No. 636-
C, 78 FERC ] 61,186 (1997).
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    5. In Order No. 637,\9\ the Commission modified the Part 284 
regulations applicable to interstate pipelines in a number of ways. 
Among other things, the Commission revised the reporting requirements 
for interstate pipelines in order to provide more transparent pricing 
information and to permit more effective monitoring for the exercise of 
market power and undue discrimination. Section 284.13(b), as adopted by 
Order No. 637, requires interstate pipelines to post on their internet 
Web sites basic information on each transaction with individual 
shippers. Interstate pipelines must post on their Web site the 
following details about new transactions, including revisions to a 
contract, no later than the first nomination under a transaction:
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    \9\ Regulation of Short-Term Natural Gas Transportation Services 
and Regulation of Interstate Natural Gas Transportation Services, 
Order No. 637, FERC Stats. & Regs. ]31,091, clarified, Order No. 
637-A, FERC Stats. & Regs. ] 31,099, reh'g denied, Order No. 637-B, 
92 FERC ] 61,062 (2000), aff'd in part and remanded in part sub nom. 
Interstate Natural Gas Ass'n of America v. FERC, 285 F.3d 18 (D.C. 
Cir. 2002), order on remand, 101 FERC ] 61,127 (2002), order on 
reh'g, 106 FERC ] 61,088 (2004), aff'd sub nom. American Gas Ass'n 
v. FERC, 428 F.3d 255 (D.C. Cir. 2005).
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     The name of the shipper.
     The contract number (for firm service).
     The rate charged.
     The maximum rate.
     The duration (for firm service).
     The receipt and delivery points and zones covered.
     The quantity of gas covered.
     Any special terms or details, such as any deviations from 
the tariff.
     Whether any affiliate relationship exists.
    6. Section 284.13(c) of the Commission's regulations also requires 
interstate pipelines to file with the Commission on the first business 
day of each calendar quarter an index of its firm transportation and 
storage customers and to publish the same

[[Page 72397]]

information on their Web site. The information required to be included 
in the Index of Customers does not include the rates paid by the 
customers. Section 284.13(d) requires interstate pipelines to provide 
on their Web sites ``equal and timely access to information relevant to 
the availability of all transportation services whenever capacity is 
scheduled.'' Section 284.13(e) requires interstate pipelines to file 
semi-annual reports of their storage injection and withdrawal 
activities, including the identities of the customers, the volumes into 
and withdrawn from storage for each customer and the unit charge and 
total revenues received.
    7. Order No. 637 did not modify the reporting requirements for NGPA 
section 311 intrastate pipelines and Hinshaw pipelines provided in 
Sec.  284.126(c) of the Commission's regulations. That section only 
requires section 311 and Hinshaw pipelines to file semi-annual reports 
of their storage injection and withdrawal activity. The reports must be 
filed within 30 days of the end of each complete injection and 
withdrawal period and must include: The identity of each customer 
injecting or withdrawing gas from storage; the docket where the storage 
injection or withdrawal rates were approved; the maximum storage 
quantity and daily withdrawal quantity applicable to each customer; the 
volumes each customer injected or withdrew from storage; and the unit 
charge and total revenues received from each customer during the 
injection/withdrawal period. Section 284.126(b) of the Commission's 
regulations requires section 311 pipelines to make similar reports 
concerning their transportation services on an annual basis.\10\
    8. Recently, an interstate storage provider with market-based 
rates, SG Resources Mississippi, L.L.C. (SGRM) filed a request for 
waiver of the Sec. Sec.  284.13(b)(1)(iii) and (b)(2)(ii) requirements 
that interstate pipelines post the rates charged in firm and 
interruptible transactions no later than first nomination for 
service.\11\ SGRM requested the waiver for both itself and all 
interstate storage providers with market-based rates. It contended that 
the mandatory disclosure of commercially sensitive pricing information 
provides prospective customers and competitors, such as NGPA section 
311 intrastate storage providers that are not subject to this 
disclosure, with an unfair competitive advantage. In the alternative, 
SGRM requested that the Commission initiate a rulemaking proceeding to 
determine whether the Commission's regulations should be modified to 
exempt storage providers authorized to charge market-based rates from 
the relevant portions of the Internet posting regulations. A number of 
other interstate storage providers with market-based rates filed 
comments in support of SGRM's requests. A number of natural gas 
industry trade associations and a natural gas commodities trading firm 
filed in opposition of SGRM's request.
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    \10\ Some section 311 intrastate storage and transportation 
operators submit these reports subject to a request for privileged 
treatment under Sec. Sec.  388.112 or 385.1112 of the Commission's 
regulations. In such instances, the reports are treated as 
privileged at least until another party asks that they be made 
public.
    \11\ See Docket No. RP08-606-000, SGRM September 3, 2008 
Petition.
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    9. In a contemporaneous order, the Commission is denying the 
request for waiver and the alternative petition for a rulemaking 
proceeding.\12\ In that order, the Commission finds that the fact some 
interstate storage companies have been authorized to charge market-
based rates does not justify exempting them from the requirements in 
Sec.  284.13(b) that they post the rates charged in each storage 
transaction. The Commission explains that Order No. 637 adopted the 
posting requirements for the purpose of enabling the Commission and 
shippers to monitor market-based rate transactions, as well as cost-
based transactions, for undue discrimination and preference and to 
promote competition through price transparency. As the Commission 
stated in Order No. 637:
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    \12\ SGRM, 125 FERC ] 61,191 (2008).

    The reporting of detailed transactional information is necessary 
because the Commission is modifying its method of regulating the 
natural gas industry by replacing traditional regulatory controls, 
such as the price cap on short-term capacity releases, with 
competition. Thus, greater transactional information is necessary to 
ensure that competition flourishes, and that market power and undue 
discrimination remain in check in the new competitive environment. * 
* * The Commission finds it axiomatic that greater, more complete 
and detailed information about transactions will greatly improve 
shippers' ability to make informed decisions, and both shippers' and 
the Commission's ability to monitor the market.\13\
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    \13\ Order No. 637-A, FERC Stats. & Regs. ] 31,099 at 31,612-3.

    10. In addition, the Commission rejects SGRM's contention that it 
should not require the transactional data to be made public, because 
such disclosure could cause competitive harm. The Commission finds 
that, while disclosure of the transactional information may cause some 
commercial disadvantage to individual entities, it benefits the market 
as a whole, by improving efficiency and competition.\14\ The Commission 
also finds that SGRM's request that the Commission permit storage 
providers to report their prices only to the Commission, and not 
publicly disclose them, is contrary to NGA section 4(c)'s requirement 
that ``every natural gas company * * * keep open * * * for public 
inspection * * * all rates.'' \15\
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    \14\ SGRM, 125 FERC ] 61,191 at P 32-33.
    \15\ 15 U.S.C. 717c(c).
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II. Discussion

    11. While the Commission is rejecting SGRM's waiver request and 
reaffirming that all interstate pipelines must post the information 
required by Sec.  284.13(b) of the Commission's regulations, the 
Commission is issuing this Notice of Inquiry to consider (1) whether 
the disparate reporting requirements for interstate and NGPA section 
311 and Hinshaw pipelines have an adverse competitive effect on the 
interstate pipelines and (2) if so, whether the Commission should 
modify the posting requirements for section 311 intrastate pipelines 
and Hinshaw pipelines in order to make them more comparable to the 
Sec.  284.13(b) posting requirements for interstate pipelines.
    12. SGRM and other interstate storage providers with market-based 
rates have raised a concern that our disparate reporting requirements 
for interstate pipelines and section 311 intrastate pipelines may 
provide the intrastate pipelines with a competitive advantage. Although 
the interstate storage providers have sought to remedy any competitive 
disadvantage by seeking an exemption from the Sec.  284.13(b) price 
disclosure requirements, an alternative remedy would be to extend the 
interstate reporting requirements to NGPA section 311 and Hinshaw 
pipelines.
    13. The Commission recognizes that ``Congress intended that 
intrastate pipelines should be able to compete in the transportation 
market without bearing the burden of full regulation by FERC under the 
Natural Gas Act.'' \16\ Consistent with that fact, the Commission has 
not extended all of the Part 284 open access requirements to NGPA 
section 311 intrastate pipelines or to Hinshaw pipelines. However, the 
U.S. Court of Appeals for the District of Columbia Circuit has also 
held that the Commission ``must provide a reasonable justification for 
excluding'' an intrastate

[[Page 72398]]

pipeline from a requirement that binds interstate pipelines.\17\ 
Similarly, the Commission has held that it may grant intrastate 
facilities ``additional flexibility,'' but not if lighter regulation 
would ``harm any party [or] impede the Commission's goal of fostering a 
national pipeline grid.'' \18\
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    \16\ Mustang Energy Corp. v. Federal Energy Regulatory Comm'n, 
859 F.2d 1447, 1457 (10th Cir. 1988), cert. denied, 490 U.S. 1019 
(1988); see also EPGT Texas Pipeline, 99 FERC ]61,295 (2002).
    \17\ ANR v. FERC, 71 F.3d at 902.
    \18\ EPGT Texas Pipeline, 99 FERC ] 61,295, at 62,252-3 (2002).
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    14. Accordingly, comments are requested to assist in evaluating 
whether changes in the Commission's posting requirements should be 
considered in order to remove any competitive disadvantage between 
interstate pipelines, on the one hand, and intrastate pipelines 
providing interstate transportation and storage services under section 
311 of the NGPA and Hinshaw pipelines providing such service pursuant 
to a Sec.  284.224 blanket certificate. Specifically, the Commission 
requests comments on the following questions:
    1. What are the competitive impacts of the current differences in 
reporting requirements applicable to interstate pipelines subject to 
the Sec.  284.13 reporting requirements and section 311 and Hinshaw 
pipelines subject to the Sec.  284.126 reporting requirements? Are the 
competitive effects greater where the competing pipelines have market-
based rates, than where the competing pipelines have cost-based rates? 
Does competition between interstate pipelines, on the one hand, and 
section 311 and Hinshaw pipelines, on the other, occur primarily in the 
context of storage services or is there also significant competition in 
the context of transportation services?
    2. Should the reporting requirements for interstate pipelines in 
Sec.  284.13 be extended to all section 311 and Hinshaw pipelines 
providing interstate transportation and storage services? Should the 
reporting requirements in Sec.  284.13 only be required for section 311 
and Hinshaw pipelines with authority to provide interstate services at 
market-based rates?
    3. To what extent would market transparency be enhanced by 
requiring section 311 and Hinshaw pipelines providing interstate 
services to comply with the requirements of Sec.  284.13?
    4. Should the reporting requirements for interstate pipelines in 
Sec.  284.13 only be extended to larger section 311 and Hinshaw 
pipelines and, if so, what measurement should be used to separate 
larger section 311 and Hinshaw pipelines from smaller storage 
providers?
    5. Should all of the Sec.  284.13 reporting requirements be imposed 
on section 311 and Hinshaw pipelines or only some of those 
requirements? If the latter, which of the Sec.  284.13 reporting 
requirements are necessary to avoid adverse competitive effects and 
promote transparency?
    6. Would extending the Sec.  284.13 reporting requirements to 
section 311 and Hinshaw pipelines have a material effect on the amount 
of intrastate transportation and storage capacity made available in the 
interstate market?
    7. Would a periodic report filed more frequently than semi-annually 
but short of a daily posting requirement provide the necessary level of 
price transparency to address the issues raised by SGRM and other 
storage developers in Docket No. RP08-606-000?
    8. Should section 311 and Hinshaw pipelines be prohibited from 
submitting their Sec.  284.126(b) and (c) annual transportation and 
semi-annual storage reports subject to a request for privileged 
treatment under Sec. Sec.  385.1112 and 388.112 of the Commission's 
regulations? If so, does that provide the necessary level of price 
transparency to address the issues raised by SGRM and other storage 
developers in Docket No. RP08-606-000?

III. Procedure for Comments

    15. The Commission invites interested persons to submit comments, 
and other information on the matters, issues, and specific questions 
identified in this notice. Comments are due January 27, 2009. Comments 
must refer to Docket No. RM09-2-000, and must include the commenter's 
name, the organization it represents, if applicable, and its address.
    16. To facilitate the Commission's review of the comments, 
commenters are requested to provide an executive summary of their 
position. Commenters are requested to identify each specific question 
posed by the Notice of Inquiry that their discussion addresses and to 
use appropriate headings. Additional issues the commenters wish to 
raise should be identified separately. The commenters should double-
space their comments.
    17. Comments may be filed on paper or electronically via the 
eFiling link on the Commission's Web site at http://www.ferc.gov. The 
Commission accepts most standard word processing formats and commenters 
may attach additional files with supporting information in certain 
other file formats. Commenters filing electronically do not need to 
make a paper filing. Commenters that are not able to file comments 
electronically must send an original and 14 copies of their comments 
to: Federal Energy Regulatory Commission, Secretary of the Commission, 
888 First Street, NE., Washington, DC 20426.
    18. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters are not required to 
serve copies of their comments on other commenters.

IV. Document Availability

    19. 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 the Commission's Home Page (http://www.ferc.gov) and 
in the Commission'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.
    20. From the Commission's Home Page on the Internet, this 
information is available in the Commission's document management 
system, eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or 
downloading. To access this document in eLibrary, type the docket 
number (excluding the last three digits) in the docket number field.
    21. User assistance is available for eLibrary and the Commission's 
Web site during normal business hours. For assistance, please contact 
the Commission's Online Support at 1-866-208-3676 (toll free) or 202-
502-6652 (e-mail at [email protected] or the Public Reference 
Room at 202-502-8371, TTY 202-502-8659 (e-mail at 
[email protected]).

    By direction of the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. E8-28218 Filed 11-26-08; 8:45 am]
BILLING CODE 6717-01-P