133 FERC ¶ 61,065 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 284 

Docket No. RM11-1-000 

Capacity Transfers on Intrastate Natural Gas Pipelines 

(October 21, 2010) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Notice of Inquiry. 

SUMMARY: The Federal Energy Regulatory Commission is seeking comments on 

whether and how holders of firm capacity on intrastate natural gas pipelines providing 

interstate transportation and storage services under section 311 of the Natural Gas Policy 

Act of 1978 and Hinshaw pipelines providing such services pursuant to blanket 

certificates issued under section 284.224 of the Commission’s regulations should be 

permitted to allow others to make use of their firm interstate capacity. 

EFFECTIVE DATE: Comments are due 60 days after publication in the Federal 

Register. 

FOR FURTHER INFORMATION CONTACT: 

James Sarikas (Technical Information) 

Office of Energy Market Regulation 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-6831 

James.Sarikas@ferc.gov 
Docket No. RM11-1-000 - 2 - 

Anna Fernandez (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-6682 

Anna.Fernandez@ferc.gov 

SUPPLEMENTARY INFORMATION:
133 FERC ¶ 61,065 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Capacity Transfers on Intrastate Natural Gas Pipelines Docket No. RM11-1-000 

NOTICE OF INQUIRY 

(October 21, 2010) 

1. Recently, the Commission issued an order finding that the Commission’s policy 

prohibiting buy/sell transactions applies to interstate open-access transportation services 

provided by (1) intrastate natural gas pipelines pursuant to section 311 of the Natural Gas 

Policy Act of 1978 (NGPA)1

 and (2) Hinshaw pipelines2 pursuant to blanket certificates 

issued under section 284.224 of the Commission’s regulations.3

 In this Notice of Inquiry 

(NOI), the Commission is seeking comments on whether and how holders of firm 

interstate capacity on section 311 and Hinshaw pipelines should be permitted to allow 

 1

 15 U.S.C. § 3371(a)(2). 

2

 Section 1(c) of the Natural Gas Act (NGA) exempts from the Commission’s 

NGA jurisdiction those 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) (ANR) (briefly summarizing the history of 

the Hinshaw exemption). 

3 Arizona Public Service Co. and Sequent Energy Management, L.P., 132 FERC 

¶ 61,064 (2010) (APS/Sequent). 
Docket No. RM11-1-000 - 2 - 

others to make use of their firm interstate capacity, including to what extent buy/sell 

transactions should be permitted.4

 

I. Current Commission Policy

2. NGPA section 311 authorizes the Commission to allow intrastate natural gas 

pipelines to transport natural gas “on behalf of” interstate pipelines or local distribution 

companies served by interstate pipelines “under such terms and conditions as the 

Commission may prescribe.”5

 NGPA section 601(a)(2) exempts transportation service 

authorized under NGPA section 311 from the Commission’s 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.6

 Subpart C of the Commission’s Part 284 open access 

regulations (18 CFR § 2841.121-126) implements the provisions of NGPA section 311 

concerning transportation by intrastate pipelines.7

 

 4

 This NOI relates to firm capacity on section 311 and Hinshaw pipelines used for 

interstate service subject to our jurisdiction under the NGPA or NGA and does not extend 

to non-jurisdictional capacity used for purely intrastate service. 

5

 15 U.S.C. § 3371(c). 

6 EPGT Texas Pipeline, 99 FERC ¶ 61,295, at 62,252 (2002) (EPGT). 

7

 18 CFR § 284.121-126 (2010). 
Docket No. RM11-1-000 - 3 - 

3. Shortly after the adoption of the NGPA, the Commission authorized Hinshaw 

pipelines to apply for NGA section 7 certificates, authorizing them to transport natural 

gas in interstate commerce in the same manner as intrastate pipelines may do under 

NGPA section 311.8

 Specifically, section 284.224 of the Commission’s 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.9

 

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.10 The Commission found that requiring intrastate pipelines to offer firm 

service to out-of-state shippers could discourage them from providing any interstate 

 8 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). 

9

 18 CFR §§ 284.7(b), 284.9(b) and 284.122 (2010). 

10 Regulation of Natural Gas Pipelines After Partial Wellhead Decontrol, Order 

No. 436, FERC Stats. & Regs. ¶ 30,665, at 31,502 (1985). 
Docket No. RM11-1-000 - 4 - 

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. For the same reasons, when the Commission adopted Order No. 63611

restructuring the services provided by interstate pipelines, the Commission exempted 

intrastate pipelines from the requirements of Order No. 636, including capacity release, 

electronic bulletin boards (now internet websites) and flexible receipt and delivery 

points.12 

5. Order No. 636 adopted the capacity release program in order to permit holders of 

firm capacity on interstate pipelines to “reallocate unneeded firm capacity” to the person 

who values it the most.13 The Commission reasoned that the capacity release program 

would promote efficient load management by the pipeline and its customers and would, 

therefore, result in the efficient use of firm interstate pipeline capacity throughout the 

year. It further concluded that, “because more buyers will be able to reach more sellers 

through firm transportation capacity, capacity reallocation comports with the goal of 

 11 See Pipeline Service Obligations and Revisions to Regulations Governing SelfImplementing Transportation and Regulation of Natural Gas Pipeline After Partial 

Wellhead Decontrol, Order No. 636, FERC Stats. & Regs. ¶ 30,939, order on reh'g, 

Order No. 636-A, FERC Stats. & Regs. ¶ 30,950, order on reh 'g, Order No. 636-B, 61 

FERC ¶ 61,272 (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), order on reh'g, 

Order No. 636-D, 83 FERC ¶ 61,210 (1998). 

12 Order No. 636-B, 61 FERC at 61,992 n.26. 

13 Order No. 636, FERC Stats. & Regs. ¶ 30,939 at 30,418. 
Docket No. RM11-1-000 - 5 - 

improving nondiscriminatory, open access transportation to maximize the benefits of the 

decontrol of natural gas at the wellhead and in the field.”14

6. Prior to Order No. 636, the Commission had permitted interstate pipelines to 

obtain certificates for capacity brokering programs that would allow customers to assign 

their capacity directly to other customers on a first-come, first-served basis, without any 

requirement that the brokering shipper post the availability of its capacity or allocate it to 

the highest bidder.15 In Order No. 636, however, the Commission decided that it could 

not monitor those certificated capacity brokering programs adequately to ensure against 

undue discrimination in the allocation of capacity.16 When transactions occurred directly 

and privately between shippers, there was no way to verify that certain purchasers were 

not being favored unreasonably over others.17 The Commission explained that “there are 

simply too many potential assignors of capacity and too many different programs for the 

Commission to oversee.”18 

7. The capacity release program addressed those concerns by, among other things, 

requiring that all reassignments be transparent. Order No. 636 prohibited private 

 14 Id. 

15 See Algonquin Gas Transmission Corp., 59 FERC ¶ 61,032 (1992) (Algonquin). 

16 Order No. 636, FERC Stats. & Regs. ¶ 30,939 at 30,416.

17 United Distributions Co. v. FERC, 88 F.3d at 1149-50 (quoting Order No. 636 

at 30,416). 

18 Id. 
Docket No. RM11-1-000 - 6 - 

transfers of capacity between shippers and, instead, required that all release transactions 

be conducted through the pipeline. Therefore, when a releasing shipper releases its 

capacity, the replacement shipper must enter into a contract directly with the pipeline, 

and section 284.13(b) of the Commission’s regulations requires the pipeline to post 

information about the replacement shipper’s contract including any special terms and 

conditions.19 In addition, the capacity release program requires certain categories of 

releases to be posted for bidding.20 

8. In orders issued concurrently with Order No. 636, the Commission terminated the 

capacity brokering program.21 The Commission also stated it would not authorize any 

more buy/sell transactions.22 Traditionally, a buy/sell transaction is a commercial 

arrangement whereby a shipper holding interstate pipeline capacity buys gas at the 

direction of, on behalf of, or directly from another entity (e.g., an end-user), ships that gas 

 19 As Order No. 636 emphasized: 

The main difference between capacity brokering as it now 

exists and the new capacity release program is that under 

capacity brokering, the brokering customer could enter into 

and execute its own deals without involving the pipeline. 

Under capacity releasing, all offers must be put on the 

pipeline’s electronic bulletin board and contracting is done 

directly with the pipeline. 

Order No. 636, FERC Stats. & Regs. ¶ 30,939 at 30,420 (emphasis in original). 

20 18 CFR §§ 284.8(c)-(e), (h) (2010). 

21 Algonquin, 59 FERC ¶ 61,032. 

22 El Paso Natural Gas Co., et al., 59 FERC ¶ 61,031 (1992) (El Paso). 
Docket No. RM11-1-000 - 7 - 

through its interstate pipeline capacity, and then resells an equivalent quantity of gas to 

the downstream entity at the delivery point. The Commission believed that to permit 

buy/sell transactions to utilize interstate pipeline capacity after the capacity release 

mechanism went into effect would frustrate the new, nationally uniform capacity release 

program.23 

9. On June 25, 2010, Arizona Public Service Company (APS) and Sequent Energy 

Management, L.P. (Sequent) (collectively, Petitioners) sought clarification that a certain 

proposed transaction involving a Hinshaw storage facility was not a prohibited buy/sell 

transaction as contemplated by Commission policy.24 They contended that the 

Commission’s buy/sell prohibition was inapplicable to service on Hinshaw pipelines, 

because the buy/sell prohibition was intended to prevent the circumvention of the 

Commission’s capacity release program instituted in Order No. 636 and Hinshaw 

pipelines do not offer capacity release. Alternatively, Petitioners requested a limited 

waiver should the Commission determine that the transaction was a prohibited buy/sell 

transaction. Under the proposed agreement, APS would have the right to deliver gas to 

Sequent and Sequent would take title to the gas and inject it into storage at Chevron 

Keystone Gas Storage, LLC (Keystone Storage), a Hinshaw pipeline with a limited 

 23 Id. at 61,080. 

24 According to their petition, APS is Arizona’s largest electric utility company 

and Sequent purchases and sells natural gas and provides other energy-related services to 

customers throughout the United States. 
Docket No. RM11-1-000 - 8 - 

blanket certificate to provide certain storage and hub services in interstate commerce. 

APS would have the right to require Sequent to redeliver gas to APS and title would pass 

back to APS at the Keystone Storage delivery point. Like other section 311 and Hinshaw 

pipelines, Keystone Storage’s tariff requires that the storage or transportation capacity 

holder possesses title to the gas being stored or transported. 

10. The Petitioners raised an issue which the Commission had not previously 

addressed – whether the prohibition on buy/sell transactions applies to interstate openaccess transportation services provided by section 311 and Hinshaw pipelines, and the 

APS/Sequent order found that the prohibition did apply. The Commission explained that, 

while Order No. 636 adopted the prohibition on buy/sell transactions in conjunction with 

the creation of the capacity release program for interstate pipelines, the prohibition on 

buy/sell transactions, together with the shipper-must-have-title rule, play a more 

fundamental role than just preventing the circumvention of the capacity release 

program.25 These rules help enforce the central requirement of the Commission’s Part 

284 regulations that all open-access pipelines, including section 311 and Hinshaw 

pipelines, “must provide such service without undue discrimination, or preference.”26 

They do this by ensuring that capacity is allocated among shippers in a transparent 

 25 APS/Sequent, 132 FERC ¶ 61,064 at P 16. 

26 Id. (citing sections 284.7(b)(1) and 284.9(b) of the Commission’s regulations, 

which are applicable to intrastate pipelines providing service under Subpart C of the Part 

284 regulations). 
Docket No. RM11-1-000 - 9 - 

manner based on the procedures and not unduly discriminatory priorities in the pipeline’s 

Commission-approved tariff, either for the direct sale of capacity by the pipeline or for 

capacity release by firm shippers.27

11. The Commission acknowledged that it does not require section 311 and Hinshaw 

pipelines to include capacity release provisions in their tariffs, nor have any such 

pipelines done so. However, it did not follow from this fact that the prohibition on 

buy/sell transactions was unnecessary. Rather, the Commission stated that the absence of 

a capacity release program for section 311 and Hinshaw pipelines means that their tariffs 

contain no provisions to ensure that capacity reassignments by shippers are transparent 

and non-discriminatory. In these circumstances, a blanket authorization of buy/sell 

transactions would allow holders of capacity on such pipelines to privately contract to 

allow another party to make use of their capacity without informing the pipeline or 

publicly disclosing the transaction. This, the Commission stated, would create the same 

potential for discrimination and inability of the Commission to monitor capacity 

reassignment which led to the adoption of the capacity release program as the sole 

method for capacity reassignment on interstate pipelines.28 

12. Recognizing, however, that capacity reassignments could promote more efficient 

use of firm pipeline capacity, and given the absence of any generic capacity reassignment 

 27 APS/Sequent, 132 FERC ¶ 61,064 at P 16. 

28 Id. P 17. 
Docket No. RM11-1-000 - 10 - 

programs on section 311 and Hinshaw pipelines, the Commission agreed to consider, on 

a case-by-case basis, requests for waiver of the buy/sell prohibition, where it can be 

shown that a particular buy/sell transaction provides significant benefits to the market.29 

Along those same lines, the Commission found that, in this case, good cause existed to 

grant Petitioners a limited waiver of the Commission’s buy/sell prohibition in order to 

allow the proposed agreement to proceed.30

13. Neither of the Petitioners sought rehearing of the APS/Sequent order. However, 

following that order, fifteen motions to intervene out-of-time were filed. Also filed were 

five requests for rehearing of the APS/Sequent order and each of those requests were filed 

by entities seeking late intervention. The entities seeking rehearing are: (1) Texas 

Pipeline Association (TPA); (2) BG Energy Merchants, LLC (BG Energy); (3) Morgan 

Stanley Capital Group Inc. (Morgan Stanley); (4) the Associations;31 and (5) the 

Marketer Group.32 Of the five rehearing requests, four asked that the Commission 

reverse its ruling expanding the buy/sell prohibition to section 311 and Hinshaw pipelines 

 29 Id. P 19. 

30 Id. P 21. 

31 The Associations include Natural Gas Supply Association, Electric Power 

Supply Association, and Independent Petroleum Association of America. 

32 The Marketer Group includes Barclays Capital Energy Inc., Chevron U.S.A. 

Inc., Citigroup Energy Inc., ConocoPhillips Company, Encana Marketing (USA) Inc., 

Iberdrola Renewables, Inc., J.P. Morgan Ventures Energy Corporation, Tenaska 

Marketing Ventures, Sempra Energy Trading LLC and Shell Energy North America 

(U.S.) L.P. 
Docket No. RM11-1-000 - 11 - 

and one asked the Commission to consider requiring section 311 and Hinshaw pipelines 

to offer capacity release. Two of the four requests seeking reversal stated that issues 

regarding the secondary market on section 311 and Hinshaw pipelines, including the 

buy/sell prohibition, should have been addressed in a NOI proceeding to examine the 

available options and their implications. 

14. The Marketer Group, Morgan Stanley, TPA and the Associations requested that 

the Commission reverse its ruling expanding the buy/sell prohibition to section 311 and 

Hinshaw pipelines.33 They contended, among other things, that the Commission erred by 

expanding the buy/sell prohibition to section 311 and Hinshaw pipelines on the basis of 

discrimination concerns without a record establishing the existence of discrimination. If 

the Commission seeks transparency, Morgan Stanley argued that a necessary precursor is 

a capacity release mechanism. In fact, Morgan Stanley argued that the efficiency gains 

cited by the APS/Sequent order cannot be fully realized absent a capacity release 

mechanism on section 311 and Hinshaw facilities. The Associations suggested that if the 

Commission wishes to address any issues with regard to the secondary market of capacity 

on section 311 and Hinshaw pipelines, it should initiate a notice of inquiry proceeding to 

examine any available options and their implications. 

 33 TPA, in addition to the foregoing, requests that the Commission clarify that the 

shipper-must-have-title rule also does not apply to section 311 and Hinshaw pipelines. 

Section 311 and Hinshaw pipelines generally include in their statements of operating 

conditions a requirement that shippers possess title to the gas being stored or transported. 
Docket No. RM11-1-000 - 12 - 

15. The Marketer Group, Morgan Stanley, TPA and the Associations also argued that 

the APS/Sequent order failed to establish a record addressing the potential effect, results, 

and impacts on shippers. Among the issues they argued the APS/Sequent order did not 

consider are: (1) the potential market uncertainty that may result from the expansion of 

the buy/sell prohibition to section 311 and Hinshaw pipelines; (2) the impact on the 

efficient use of section 311 and Hinshaw pipeline capacity; (3) the burden and 

impracticability of entities having to seek a waiver for buy/sell transactions on 

section 311 and Hinshaw pipelines; and (4) the extent of the Commission’s jurisdiction to 

impose the buy/sell prohibition on section 311 and Hinshaw pipelines given Congress’ 

decision to provide the Commission with only limited jurisdiction over section 311 and 

Hinshaw pipelines. The Marketer Group states that, if the Commission believes that it 

may be in the public interest to apply the buy/sell prohibition to section 311 and Hinshaw 

pipelines, the Commission should issue a NOI in which a record can be compiled to 

examine the necessity for and the implications associated with the issue. 

16. In its rehearing request, BG Energy requested that the Commission institute a 

notice and comment proceeding to consider requiring a uniform capacity release program 

for section 311 and Hinshaw pipelines that requires capacity to be posted and subject to 

bidding on a non-discriminatory basis. It contended that a firm shipper on a section 311 

or Hinshaw pipeline that wants to release or acquire interstate capacity encounters 

cumbersome, lengthy, and non-transparent procedures. 
Docket No. RM11-1-000 - 13 - 

17. In a contemporaneous order in the APS/Sequent proceeding, the Commission is 

denying the late interventions and dismissing the requests for rehearing.34 In that order, 

the Commission finds that the entities requesting late intervention seek only to raise 

general policy issues concerning capacity reassignment on section 311 and Hinshaw 

pipelines which are more appropriately addressed in a rulemaking proceeding. 

II. Discussion

18. As stated above, the Commission is issuing this NOI to consider whether and how 

holders of firm interstate capacity on section 311 and Hinshaw natural gas pipelines 

should be permitted to allow others to make use of their firm interstate capacity, 

including to what extent buy/sell transactions should be permitted. Specifically, the 

Commission requests comments on the following questions: 

A. Questions Related to Application of Buy/Sell Prohibition to Section 311 

and Hinshaw Pipelines 

1. The requests for rehearing in APS/Sequent suggest that marketers 

and others holding firm interstate capacity on section 311 and 

Hinshaw pipelines are using buy/sell transactions to allow others to 

make use of their capacity. Are buy/sell transactions commonly 

used in connection with service on section 311 and Hinshaw 

 34 Arizona Public Service Company and Sequent Energy Management, L.P., 133 

FERC ¶ 61,049 (2010). 
Docket No. RM11-1-000 - 14 - 

pipelines or are such transactions relatively rare? Are such 

transactions more commonly used with respect to storage capacity as 

in APS/Sequent or are they used with respect to all types of services? 

Have such transactions provided for more efficient use of firm 

capacity on section 311 and Hinshaw pipelines? 

2. Are there any experiences or concerns of undue discrimination or 

preference or loss of market transparency related to the buy/sell 

transactions which have occurred on section 311 and Hinshaw 

pipelines? 

3. Could buy/sell transactions be allowed without risk of undue 

discrimination or preference or loss of market transparency? 

Section 311 and Hinshaw pipelines generally include in their 

statements of operating conditions a requirement that shippers 

possess title to the gas being stored or transported. Is application of 

the shipper-must-have-title rule sufficient to minimize concerns 

about undue discrimination and transparency, since it ensures that 

the capacity holder has an interest in the gas being transported?35

 35 See El Paso, 59 FERC ¶ 61,031 at 61,079. 
Docket No. RM11-1-000 - 15 - 

4. When the Commission grandfathered existing buy/sell transactions 

at the time of Order No. 636, the Commission required participants 

in those transactions to notify the interstate pipeline of them, and the 

Commission required the pipeline, for informational purposes, to 

post notice of the transactions on its electronic bulletin board.36 

Would a similar reporting requirement for participants in buy/sell 

transactions to notify the relevant section 311 and Hinshaw pipelines 

and for those pipelines to post notice of them reasonably mitigate 

concerns related to undue discrimination or preference or loss of 

market transparency? 

5. In ANR,

37 the U.S. Court of Appeals for the District of Columbia 

Circuit held that the Commission must provide a reasonable 

justification for excluding section 311 pipelines from requirements 

imposed on interstate pipelines, where such regulatory differences 

may place the interstate pipelines at a competitive disadvantage. 

Would allowing buy/sell transactions on section 311 and Hinshaw 

pipelines, but not on interstate natural gas pipelines, cause any 

competitive disadvantage to interstate pipelines? 

 36 Id. at 61,080. 

37 See ANR, 71 F.3d 897. 
Docket No. RM11-1-000 - 16 - 

6. 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. Would extending the buy/sell prohibition to 

service on section 311 and Hinshaw pipelines deter intrastate 

pipelines from participating in the interstate market? If so, explain 

what burdens such a prohibition places on section 311 and Hinshaw 

pipelines that would make them less likely to offer interstate service. 

B. Questions Related to Requiring Section 311 and Hinshaw Pipelines 

Providing Firm Service to Also Allow Capacity Release 

1. The Commission has consistently held that capacity reassignments 

promote more efficient use of firm pipeline capacity by enabling a 

holder of such capacity to permit its capacity to be used by another 

party for a higher valued use. However, Order No. 636 did not 

require section 311 and Hinshaw pipelines providing firm interstate 

services to offer capacity release because of a concern that imposing 

all the requirements of Order No. 636 on such pipelines could 

discourage them from offering interstate services. Should the 

Commission reexamine its decision not to require section 311 and 

Hinshaw pipelines to offer capacity release in light of market 
Docket No. RM11-1-000 - 17 - 

changes since the issuance of Order No. 636 in 1992 and the success 

of the interstate capacity release program?

2. As discussed above, the U.S. Court of Appeals for the District of 

Columbia Circuit has held that the Commission “must provide a 

reasonable justification for excluding” an intrastate pipeline from a 

requirement that binds interstate pipelines.38 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.”39 Does the absence of a transparent method for 

shippers on section 311 and Hinshaw pipelines to reassign their 

capacity interfere with the Commission’s goal of fostering an 

efficient national pipeline grid in which buyers and sellers of natural 

gas have the maximum ability to reach one another? Would 

requiring some or all section 311 and Hinshaw pipelines to offer 

capacity release provide sufficient benefits to the market as a whole 

to outweigh any costs incurred as a result of such a requirement? 

Does exempting section 311 and Hinshaw pipelines from offering 

 38 See ANR, 71 F.3d 897. 

39 See EPGT, 99 FERC ¶ 61,295 at 62,252-3. 
Docket No. RM11-1-000 - 18 - 

capacity release give them a competitive advantage over interstate 

pipelines? 

3. Should any requirement for section 311 and Hinshaw pipelines to 

offer capacity release be limited to some category of such pipelines 

whose services significantly affect interstate markets? If so, how 

should that category be defined (e.g., based on size as shown by 

annual throughput above a certain level, percentage of business that 

is interstate, or storage providers with market-based rates)? 

4. In Order No. 720,40 the Commission required major non-interstate 

pipelines, defined as those pipelines that are not natural gas 

companies under the NGA and deliver annually more than 

50 million MMBtu measured in average deliveries over the past 

three years, to post daily scheduled volume information. Should the 

Commission adopt the threshold utilized in Order No. 720 to 

determine which section 311 and Hinshaw pipelines would be 

required to offer capacity release? 

 40 Pipeline Posting Requirements under Section 23 of the Natural Gas Act, Order 

No. 720, FERC Stats. & Regs. ¶ 31,283 (2008), Order No. 720-A, 75 FR 5178 (Jan. 21, 

2010), FERC Stats. & Regs. ¶ 31,302 (2010), Order No. 720-B, 75 FR 44,893 (July 30, 

2010), FERC Stats. & Regs. ¶ 31,314 (2010). 
Docket No. RM11-1-000 - 19 - 

5. In this regard, based upon our review of existing section 311 and 

Hinshaw pipelines, there are some intrastate pipelines whose current 

service consists virtually entirely of interstate service provided under 

NGPA section 311.41 This is particularly true of some of the newer 

section 311 and Hinshaw storage providers. Should any requirement 

to offer capacity release be limited to section 311 and Hinshaw 

pipelines whose business is predominantly interstate? If so, what 

standard should be used to determine if such a pipeline’s business is 

predominantly interstate? 

6. The capacity release program is only applicable to firm services, and 

the Commission does not require section 311 and Hinshaw pipelines 

to offer firm services. Would a requirement that section 311 and 

Hinshaw pipelines offering firm service also offer capacity release 

discourage such pipelines from offering any firm interstate service? 

Would this concern be minimized if the requirement to offer 

capacity release is limited to larger section 311 and Hinshaw 

pipelines whose services are predominantly interstate? 

 41 For example, Regency Intrastate Gas, LLC and Bay Gas Storage, Ltd. transport 

over 95 percent of their throughput as interstate gas. Crosstex LIG, LLC and Enterprise 

Texas, LLC along with Regency Intrastate Gas, LLC predominately serve the interstate 

market and have recently undertaken major expansions that are primarily dedicated to 

moving shale gas into the interstate marketplace. 
Docket No. RM11-1-000 - 20 - 

7. If section 311 and Hinshaw pipelines are required to offer capacity 

release, should the regulations be the same as the capacity release 

regulations for interstate pipelines set forth in section 284.8 of the 

Commission’s regulations? Would a subset of those regulations be 

sufficient for purposes of preventing undue discrimination and 

promoting transparency, while minimizing any burden on the 

pipelines offering capacity release? 

19. Finally, as we recognized in the APS/Sequent order, the Commission has not 

previously addressed the issue of whether the buy/sell prohibition applies to interstate 

service provided by section 311 and Hinshaw pipelines. Thus, until the Commission 

issued that order, there was no clear policy prohibiting such transactions. Therefore, the 

Commission will not institute any enforcement actions with respect to prior buy/sell 

transactions involving section 311 and Hinshaw pipelines. In addition, the Commission 

grants a blanket waiver of the prohibition on buy/sell transactions to allow existing and 

new buy/sell transactions involving section 311 and Hinshaw pipelines to continue to 

take place until the Commission issues a further order in this proceeding. This will avoid 

disrupting any ongoing relationships established through currently existing buy/sell 

transactions and also avoid discouraging beneficial new arrangements, while the 

Commission considers the policy issues raised in this proceeding. As we recognized in 

the APS/Sequent order, capacity reassignments can promote more efficient use of firm 
Docket No. RM11-1-000 - 21 - 

pipeline capacity by enabling a holder of such capacity to permit its capacity to be used 

by another party for a higher valued use. 

III. Procedure for Comments

20. 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 60 days from the date of publication in the Federal Register. 

Comments must refer to Docket No. RM11-1-000, and must include the commenter's 

name, the organization they represent, if applicable, and their address. 

21. The Commission encourages comments to be filed electronically via the eFiling 

link on the Commission's web site at http://www.ferc.gov. The Commission accepts 

most standard word processing formats. Documents created electronically using word 

processing software should be filed in native applications or print-to-PDF format and not 

in a scanned format. Commenters filing electronically do not need to make a paper 

filing. 

22. Commenters unable to file comments electronically must mail or hand deliver an 

original copy of their comments to: Federal Energy Regulatory Commission, Secretary 

of the Commission, 888 First Street, NE, Washington, DC 20426. The current 

requirements are specified on the Commission’s website, see, e.g., the “Quick Reference 

Guide for Paper Submissions,” available at http://www.ferc.gov/docs-filing/efiling.asp, 

or via phone from FERC Online Support at 202-502-6652 or toll-free at 1-866-208-3676. 
Docket No. RM11-1-000 - 22 - 

23. 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 

24. 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 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 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A, 

Washington, DC 20426. 

25. 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 downloading. To access this document in eLibrary, type the docket number 

(excluding the last three digits) in the docket number field. 

26. User assistance is available for eLibrary and the Commission's website 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 FERCOnlineSupport@ferc.gov) 
Docket No. RM11-1-000 - 23 - 

or the Public Reference Room at 202-502-8371, TTY 202-502-8659 (e-mail at 

public.referenceroom@ferc.gov). 

By direction of the Commission. 

( S E A L ) 

Nathaniel J. Davis, Sr., 

Deputy Secretary.