131 FERC ¶ 61,246 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 260 

[Docket No. RM07-10-002; Order No. 704-C] 

Transparency Provisions of Section 23 of the Natural Gas Act 

(Issued June 17, 2010) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Order Granting Clarification 

SUMMARY: In this Order Granting Clarification, the Commission addresses pending 

requests to clarify Form No. 552, under which natural gas market participants must 

annually report information regarding physical natural gas transactions that use an index 

or that contribute to or may contribute to the formation of a gas index. Order No. 704 

required market participants to file these reports in order to provide greater transparency 

concerning the use of indices to price natural gas and how well index prices reflect 

market forces. 

Order No. 704-C revises Form No. 552 so as to (1) exempt from reporting any 

unexercised options to take gas under a take-or-release contract; (2) clarify the definition 

of exempt unprocessed natural gas transactions as those involving gas that is both not yet 

processed (to separate and recover natural gas liquids), and still upstream of a processing 

facility; (3) exempt from reporting cash-out and imbalance transactions, since they were 

burdensome to report and provided little market information; (4) strike the form’s 

references to the blanket sales certificates issued under § 284.402 or § 284.284, since 
Docket No. RM07-10-002 - 2 - 

they were burdensome to report and provided little market information, so as to also 

exempt small entities who were obligated to report solely by virtue of possessing a 

blanket sales certificate; and (5) make several non-substantive modifications to Form 

No. 552 in an effort to make it more user-friendly. 

EFFECTIVE DATE: This rule will become effective September 30, 2010.

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 

Vince.Mareino@ferc.gov 

Thomas Russo (Technical Information) 

Office of Enforcement 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-8792 

Thomas.Russo@ferc.gov 

SUPPLEMENTARY INFORMATION
131 FERC ¶ 61,246 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Jon Wellinghoff, Chairman; 

 Marc Spitzer, Philip D. Moeller, 

 and John R. Norris. 

Transparency Provisions of Section 23 of the Natural 

Gas Act 

Docket No. RM07-10-002 

ORDER NO. 704-C 

ORDER GRANTING CLARIFICATION 

(Issued June 17, 2010) 

 Paragraph Numbers

I. Background ............................................................................................................................2.

II. Clarifications.........................................................................................................................9.

A. Use of Indices...................................................................................................................9.

B. “Take or release” Transactions.........................................................................................21.

C. Natural Gas Imported to the Lower 48 States ..................................................................25.

D. Unprocessed and/or upstream natural gas........................................................................27.

E. Cash-out, Imbalance, and Operation-Related Transactions .............................................40.

F. Unit of Measurement ........................................................................................................46.

G. Blanket Certificates..........................................................................................................51.

H. Other Substantive Requested Clarifications ....................................................................59.

III. Other Non-Substantive Modifications.................................................................................66.

IV. Information Collection Statement .......................................................................................69.

V. Document Availability .........................................................................................................75.

VI. Extension of Time ...............................................................................................................78.
Docket No. RM07-10-002 - 2 - 

1. The Federal Energy Regulatory Commission’s (Commission) FERC Form 

No. 552 requires certain natural gas market participants to identify themselves and 

provide summary information about physical natural gas transactions on an annual, 

calendar year basis.1

 In this order, the Commission addresses pending requests to clarify 

Form No. 552, resolve issues discussed in comments in this docket and at the March 25, 

2010 Technical Conference (Technical Conference), and provide additional guidance for 

Respondents. Further, the Commission, in light of its experience administering the first 

year of Form No. 552, clarifies the exclusion of transactions involving volumes of 

unprocessed natural gas. The Commission adopts a revised Form No. 552 incorporating 

these modifications, which is included in the Appendix to this order. 

I. Background

2. On December 26, 2007, the Commission issued a Final Rule in Order No. 704,2

which amended Part 260 of its regulations to require the annual submission of a new 

form, Form No. 552. Order No. 704 has its genesis in the Energy Policy Act of 2005,3

which added section 23 of the Natural Gas Act (NGA). Section 23 of the NGA, among 

 1

 FERC Form No. 552 (Form No. 552): Annual Report of Natural Gas 

Transactions. A copy of Form No. 552, as revised by this order, is attached hereto in the 

Appendix. The revised form will be available on the Commission’s website at 

www.ferc.gov/docs-filing/forms.asp in the near future. Where appropriate, terms defined 

in Form No. 552 are capitalized herein. 

2 Transparency Provisions of Section 23 of the Natural Gas Act, Order No. 704, 

FERC Stats. & Regs. ¶ 31,260, 73 Fed. Reg. 1,014 (2007) (Final Rule) (Order No. 704). 

3

 Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (2005). 
Docket No. RM07-10-002 - 3 - 

other things, directs the Commission “to facilitate price transparency in markets for the 

sale or transportation of physical natural gas in interstate commerce, having due regard 

for the public interest, the integrity of those markets, and the protection of consumers.”4

 

Accordingly, Order No. 704 required natural gas wholesale market participants, including 

a number of entities that may not otherwise be subject to the Commission’s traditional 

NGA jurisdiction, to report certain information concerning their natural gas sales and 

purchases annually. 

3. The basic purpose of these reports is to provide greater transparency concerning 

the use of indices to price natural gas and how well index prices reflect market forces. 

Many market participants rely on indices as a way to reference market prices without 

taking on the risks of active trading. However, the Commission found that there was 

insufficient information available to the Commission and market participants to assess 

whether the gas indices are derived from a robust market of fixed-price transactions and 

thus accurately reflect market forces. For example, there was no way to determine the 

volumetric relationships between (a) the fixed-price, next day and next month delivery 

transactions that form gas price indices; and (b) transactions that use indices. 

4. Accordingly, Order No. 704, as clarified and modified by Order Nos. 704-A5

 and 

704-B,6

 requires market participants with reportable physical natural gas purchases or 

 4

 15 U.S.C. § 717t-2(a)(1) (2006). 

5 Transparency Provisions of Section 23 of the Natural Gas Act, Order No. 704-A, 

73 Fed. Reg. 55,726 (Sept. 26, 2008), FERC Stats. & Regs. ¶ 31,275 (2008) (Order 

No. 704-A). 
Docket No. RM07-10-002 - 4 - 

sales equal to or greater than 2.2 trillion British Thermal Units7

 to report the following 

information on Form No. 552: 

(1) total volume of the respondent’s reportable physical sales and 

purchases during the year; 

(2) quantities contracted at fixed prices for next day delivery; 

(3) quantities contracted at prices that refer to published daily gas 

price indices; 

(4) quantities contracted at fixed prices for next month delivery; 

(5) quantities contracted at prices that refer to published monthly gas 

price indices; 

(6) quantities contracted under trigger agreements, such as NYMEX 

Plus contracts; and 

(7) quantities contracted as physical basis transactions.8

 

5. The Commission has engaged in substantial outreach efforts related to Form 

No. 552. These efforts are intended to inform market participants of the obligation to file 

Form No. 552, to answer questions regarding the form, and to identify ways to improve 

 6 Transparency Provisions of Section 23 of the Natural Gas Act, Order No. 704-B, 

125 FERC ¶ 61,302 (2008) (Order No. 704-B). 

7

 2.2 TBtus, or roughly 2.2 million dekatherms. 

8

 Respondents must also explain any difference between the total volumes of their 

reportable purchases and sales reported in response to item (1) above and the sum of the 

corresponding quantities reported in response to items (2) through (7). 
Docket No. RM07-10-002 - 5 - 

it. Commission Staff has provided informal guidance to dozens of individual 

Respondents as well as to various natural gas industry associations representing 

Respondents. This outreach includes one-on-one telephone conferences with potential 

Respondents, conference calls with a number of industry participants, presentations to 

groups of market participants, and the creation and updating of a Frequently Asked 

Questions (FAQ) list available on the Commission’s website.9

 Commission Staff has 

also discussed Form No. 552 compliance with major trade organizations through 

conference calls and direct presentations. In addition, the Commission has addressed 

specific questions regarding Form No. 552 compliance through our Enforcement Hotline, 

Compliance Help Desk, direct calls to Staff members, and e-mails addressed to our 

dedicated Form No. 552 mailbox (form552@ferc.gov). 

6. The Commission extended the deadline for filing the first Form No. 552, for 

calendar 2008, from May 1, 2009 to July 1, 2009.10 The Commission received Form 

No. 552 for calendar year 2008 from 1,109 Respondents. The vast majority of these 

participants timely submitted Form No. 552, though the Commission granted seven 

requests for limited extensions of time to submit the form. Filed copies of each 

 9

 The FAQ is available at http://www.ferc.gov/docs-filing/forms/form-552/form552-faq.pdf. Along with the FAQ, copies of relevant Commission orders and general 

filing guidance are provided. The Commission will update the FAQ as necessary and 

encourages potential Respondents to review the FAQ prior to filing Form No. 552. 

10 Transparency Provisions of Section 23 of the Natural Gas Act, Notice of 

Extension of Time (issued Apr. 9, 2009). The order provided for an extension of the 

filing deadline for calendar year 2008 data. Calendar year 2009 data must be submitted 

by May 1, 2010. 
Docket No. RM07-10-002 - 6 - 

Respondent’s Form No. 552 are publicly available in the Commission’s website in 

eLibrary. The entire Form No. 552 database for calendar year 2008 is also available for 

download at http://www.ferc.gov/docs-filing/forms/form-552/data.asp. While most 

Respondents correctly completed Form No. 552, the Commission believes that additional 

clarifications to Form No. 552 would enhance regulatory certainty and improve the 

quality of data elicited in the form. 

7. The American Gas Association (AGA) and Pacific Gas and Electric Company 

(PG&E) submitted requests for clarification of Order No. 704 on October 9, 2009 and 

November 3, 2009, respectively. These requests are discussed below. In addition, 

Commission Staff held a Technical Conference to discuss: 

(1) inconsistencies in reporting upstream transactions in the 

natural gas supply chain on Form No. 552, and whether these 

transactions contribute to wholesale price formation; 

(2) whether transactions involving balancing, cash-out, 

operational, and in-kind transactions should be reported on 

Form No. 552; and 

(3) whether the units of measurement (TBtu) currently used 

for reporting volumes in the form are appropriate.11

Lastly, in addition to the discussion at the Technical Conference, the Commission 

received numerous written comments in this docket, which we also discuss below. 

8. Although the Commission and its Staff have provided considerable guidance with 

regard to these reporting requirements, because of the importance the Commission puts 

 11 Notice of Form No. 552 Technical Conference (Feb. 22, 2010). 
Docket No. RM07-10-002 - 7 - 

on compliance and its efforts to provide clear and understandable rules, the Commission 

finds that Form No. 552 should be revised to further clarify Respondents’ obligations. 

II. Clarifications

A. Use of Indices

1. Request for Clarification

9. Form No. 552, at page 4 line 3, requires respondents to report “what quantities 

were contracted at prices that refer to published Next-Day Delivery gas price indices.” 

Similarly, respondents are required to report, at line 5, “what quantities were contracted 

at prices that refer to published Next-Month Delivery gas price indices.” AGA requests 

that the Commission modify Form No. 552 to state clearly that the transactions reportable 

on these lines “are transactions that are contracted at prices that refer to daily or monthly 

gas price indices regardless of whether such transactions are themselves for next-day 

delivery or for next-month delivery.”12 AGA claims that this clarification is necessary to 

resolve ambiguity in the form that has led some Respondents to submit inaccurate 

calendar year 2009 information. 

10. In particular, AGA argues that Order No. 704 was unclear as to whether the indexpriced transactions required to be reported in line 3 or 5 must themselves be next-day or 

next-month transactions or whether all transactions that refer to daily or monthly gas 

price indices should be reported even if they do not require gas to be delivered the next 

day or month. 

 12 AGA Request for Clarification at p. 1. 
Docket No. RM07-10-002 - 8 - 

11. AGA states that Order No. 704-A appeared to clarify that only index-priced 

transactions that were for next-day or next-month delivery were required to be reported in 

lines 3 and 5, respectively. Among other things, AGA points out that Order No. 704-A 

revised the instructions to Form No. 552 by specifically excluding from the reporting 

requirements “Fixed Price transaction volumes that are not Next-Day Delivery or NextMonth Delivery.”13 Thus, AGA argues, the fact only next-day and next-month fixed 

price transactions were required to be reported suggested that, similarly, only index 

priced transactions that were themselves next-day or next-month transactions were 

required to be reported on line 3 or 5. AGA also points out that that Order No. 704-A 

revised lines 3 and 5 of the Form No. 552 to specify that the transactions reportable on 

line 3 were volumes “contracted at prices that refer to published Next-Day Delivery gas 

price indices,” and that the transactions reportable on line 5 were volumes “contracted at 

prices that refer to published Next-Month Delivery gas price indices.” AGA states that 

the addition of the phrases “Next-Day Delivery” and “Next-Month Delivery” created 

uncertainty as to whether those phrases applied to the transactions to be reported or only 

modified the referenced gas price indices. 

12. Against this background, AGA argues that as market participants began to prepare 

to file Form No. 552 to report their 2008 calendar year transactions there was continued 

uncertainty as to the reporting of index-priced transactions. In some cases, AGA states, 

filers included in line 3 or line 5 only those index-based transactions where the day of gas 

 13 Instruction VII(h). 
Docket No. RM07-10-002 - 9 - 

flow matched up with the index being used, and did not include, for example, 

transactions that were priced based on an average of gas price indices or transactions for 

future gas delivery based on historic gas price indices. 

13. Thus, AGA recommends that the Commission modify lines 3 and 5 of the Form 

No. 552 to ask for “quantities that were contracted at prices that refer to daily price 

indices and “quantities that were contracted at prices that refer to monthly price indices,” 

and remove the references to Next-Day and Next-Month delivery. 

14. NiSource,14 in its comments in response to the Technical Conference, also draws 

the Commission’s attention to lines 3 and 5 on page 5 of Form No. 552.15 NiSource 

recommends revising them both so that each line begins “Of the amounts reported on 

line 1, regardless of the date the transaction was executed, ...”16 NiSource argues that 

this revision is in keeping with Order No. 704-B, which stated, “[i]ndex-based 

 14 In this docket, NiSource refers to the following affiliated distribution 

companies: Bay State Gas Company; Columbia Gas of Kentucky, Inc.; Columbia Gas of 

Maryland, Inc.; Columbia Gas of Ohio, Inc.; Columbia Gas of Pennsylvania, Inc.; 

Columbia Gas of Virginia, Inc.; Kokomo Gas and Fuel Company; Northern Indiana 

Public Service Company; and Northern Indiana Fuel and Light Company, Inc. 

15 These lines ask Respondents, respectively, “Of the amounts reported on line 1, 

what quantities were contracted at prices that refer to published Next-Day Delivery gas 

price indices?” and “Of the amounts reported on line 1, what quantities were contracted 

at prices that refer to published Next-Month Delivery gas price indices?” 

16 NiSource Comments at 6. 
Docket No. RM07-10-002 - 10 - 

transactions are reportable even if they are not for Next-Day Delivery or Next-Month 

Delivery.”17

2. Discussion

15. The Commission grants AGA’s request. In granting AGA’s request, we provide 

clarification that also addresses the root of NiSource’s comments. The Commission’s 

guiding principle is that all transactions that utilize a daily or monthly gas price index, 

contribute to index price formation, or could contribute to index price formation must be 

reported on Form No. 552. As Order No. 704-A stated: 

[T]he focus of Form No. 552’s data collection is transactions 

that utilize an index price, contribute to index price formation, 

or could contribute to index price formation. Specifically, the 

Commission finds that volumes reportable on Form No. 552 

should include volumes that utilize next-day or next-month 

price indices, volumes that are reported to any price index 

publisher, and any volumes that could be reported to an index 

publisher even if the respondent has chosen not to report to a 

publisher. By ‘could be reported to an index publisher,’ we 

mean bilateral, arms-length, fixed price, physical natural gas 

transactions between non-affiliated companies at all trading 

locations.18 

In Order No. 704-B, in response to a request for clarification regarding retail end-use 

transactions, the Commission reiterated that “Form No. 552 requires reporting of 

 17 Order No. 704-B at P 15. 

18 Order No. 704-A at P 13. 
Docket No. RM07-10-002 - 11 - 

volumes associated with transactions that utilize, contribute to, or could contribute to a 

price index.”19

16. Transactions that utilize daily or monthly indices are reported on lines 3 and 5, 

respectively, of Form No. 552. Transactions that contribute to, or could contribute to a 

gas index are reported on lines 2, 4, 6 and 7 of Form No. 552. Consistent with the 

purpose of Order No. 704 of providing greater transparency concerning the use of indices 

to determine natural gas prices and how well index prices reflect market forces, the 

Commission seeks information concerning all transactions that use indices, regardless of 

any other aspect of the transaction. Thus, the Commission intended that all transactions 

using indices be reported on lines 3 and 5 no matter when they were transacted.20 Such 

information is necessary to determine, for example, the volumetric relationship between 

(a) transactions that use indices to determine natural gas prices; and (b) the fixed-price 

next day or next month delivery transactions, NYMEX trigger agreements, including 

NYMEX plus contracts, and physical basis transactions that form gas indices. 

17. Accordingly, we are modifying Form No. 552 to provide greater clarity. In 

particular, as requested by AGA, the Commission eliminates the references to “Next-Day 

Delivery” and “Next-Month Delivery” in page 4, lines 3 and 5 of Form No. 552 and 

revises the question on page 4, line 3 to ask for “quantities that were contracted at Prices 

 19 Order No. 704-B at P 13. 

20 Multi-year physical natural gas transactions that refer to an index would report 

only those volumes that flowed during a given reporting year in the Form No. 552. 
Docket No. RM07-10-002 - 12 - 

that Refer to published Daily Indices*.” The question on page 4, line 5 is similarly 

revised to ask for “quantities that were contracted at Prices that Refer to published 

Monthly Indices*.”21

18. In addition, we are modifying the definitions in the Form No. 552 to provide 

additional guidance to respondents concerning what transactions should be treated as 

reportable transactions that refer to daily or monthly indices. In the revised definitions, 

the Commission clarifies that transactions that refer to “weekly,” “yearly,” or other gas 

price indices may, in fact, be based on daily gas price indices and are reportable on page 

4, line 3 of Form No. 552. For example, a transaction that references a “weekly” index 

that is formed by averaging multiple daily indices is reportable as referencing a daily 

index. Similarly, a transaction that refers to a yearly index that is formed by averaging 

twelve monthly indices would be reported as referencing a monthly index. 

19. The Commission also clarifies that the referenced index need not be solely a gas 

index. Thus, a transaction that relies on a basket of indices which includes a gas index 

and other daily or monthly indices such as coal, petroleum, LNG, inflation, etc. would 

also be reportable on lines 3 and 5 of the Form No. 552. The Commission will ask 

Respondents that use a basket of daily or monthly indices that includes gas and other 

indices to identify the names of the indices used on page 4 in line 8 or 9. The 

 21 In particular, the revised Form No. 552, on page 4, line 3, asks for “quantities 

that were contracted at prices that refer to published daily gas price indices” and on page 

4, line 5 asks for “quantities that were contracted at prices that refer to published monthly 

gas price indices.” 
Docket No. RM07-10-002 - 13 - 

Commission reminds Respondents that the NYMEX Natural Gas Futures price outside of 

bidweek is not considered an index for purposes of Form No. 552 and is not to be 

reported.22 

20. Finally, while all transactions referring to daily or monthly indices must be 

reported without regard to whether they are for next day or next month delivery, the fixed 

price transactions to be reported on lines 2, 4, 6 and 7 of the Form No. 552 are limited to 

transactions which are for next-day or next-month delivery. The transactions to be 

reported on those lines are transactions that contribute to gas index price formation, or 

could contribute to gas index price formation. The only fixed price transactions that can 

contribute to a daily price index are fixed price contracts for next day delivery. Similarly, 

the only fixed price contracts that can contribute to a monthly gas price index are 

contracts for next month delivery reported on lines 4, 6 and 7. The Commission is 

modifying and adding definitions in the Form No. 552 to make clear that the terms 

“Next-Day Delivery or Next-Month Delivery” only pertain to Fixed Price transactions 

 22 See Order No. 704 at P 113 (“Unlike in the NOPR, Form No. 552 no longer 

requests information on NYMEX contracts that go to physical delivery because the 

purpose of the form is to focus on fixed-priced spot transactions and how they are used. 

Further, information attributable to such contracts is available from NYMEX. 

Consequently, to reduce the burden on market participants, this instruction has been 

removed and a market participant may not include volume information related to 

physically-settled future contracts.”) 
Docket No. RM07-10-002 - 14 - 

which are reportable on lines 2 and 4, respectively23 and to clarify what transactions on 

the form do or may contribute to daily and monthly gas price indices. 

B. “Take or release” Transactions

1. Request for Clarification

21. AGA states that gas is sometimes purchased under long-term contracts that offer 

the purchaser an option to either take (i.e.) purchase gas up to a contract maximum 

quantity on a monthly or daily basis or release the gas back to the seller for it to market to 

other purchasers. AGA refers to these contracts as “take or release contracts.” AGA 

states that the orders in this proceeding do not specifically address how take or release 

transactions are to be reported. AGA notes that, under the definition of “Physical Natural 

Gas Transaction,” Form No. 552 provides that “[i]t is not necessary that natural gas 

actually be delivered under the transactions, only that the delivery obligation existed in 

the agreement when executed.” AGA believes that this raises the question whether the 

option to take or release a volume of natural gas under a take or release contract 

constitutes a “delivery obligation” within the meaning of “Physical Natural Gas 

Transaction” such that the optional amount the purchaser could take must be reported, or 

whether only the volumes that actually flowed under the contract should be reported. 

22. AGA recommends that the Commission clarify that respondents must report only 

those volumes that actually flowed under a take or release contract. AGA believes that 

 23 Lines 3 and 5 of the schedule appearing on page 4 of Form No. 552 have also 

been slightly modified to remove references to “Next-Day Delivery” and “Next-Month 

Delivery.” 
Docket No. RM07-10-002 - 15 - 

the option to take or release a portion of the volumes of natural gas under such a contract 

does not give rise to a delivery obligation that would make such volumes reportable. The 

nature of the contract is such that some portion of the contract volumes may or may not 

be delivered, and the exact amount of the volumes that must be delivered remains 

unknown until the purchaser actually exercises the option. In other words, the delivery 

obligation only arises when the option to take is actually exercised. Indeed, argues AGA, 

the parties to a take or release contract contemplate that some volumes will not be 

delivered at all. As a result, it is the quantity of gas that is actually delivered that has an 

impact on pricing, according to AGA. AGA recommends that the Commission clarify 

that the option to take or release a volume of natural gas under a take or release contract 

does not constitute a “delivery obligation” within the meaning of a “Physical Natural Gas 

Transaction” such that only the volumes that actually flowed under the contract are 

reportable on FERC Form No. 552. 

2. Discussion

23. The Commission grants AGA’s requested clarification. The Commission adopted 

the reporting requirements in the Form No. 552 in order to monitor the use of price 

indices in the natural gas market, including determining the volumetric relationships 

between (a) the fixed-price for next day or next month delivery and other transactions 

that form gas indices; and (b) transactions that use indices to price natural gas 

transactions. For this purpose, the Commission seeks information concerning what 

volumes of natural gas are purchased and sold in physical natural gas transactions based 

on price indices and what volumes are purchased under fixed price contracts which could 
Docket No. RM07-10-002 - 16 - 

contribute to a gas index. Where gas is sold under long-term contracts which give the 

purchaser an option to either take gas or release the gas back to the seller, the relevant 

volumes to be reported are those that actually flowed under the contract during the course 

of the year for which the report is being filed. An unexercised option to take gas under a 

contract does not constitute a reportable physical natural gas transaction. 

24. The take or release contracts described by AGA differ from the contracts 

addressed by the statement in the Form No. 552 definition of “Physical Natural Gas 

Transaction” that “[i]t is not necessary that natural gas actually be delivered under the 

transactions, only that the delivery obligation existed in the agreement when executed.” 

That statement contemplated a contract which required the seller to deliver a specified 

amount, without either party having any option to modify the amount to be delivered. By 

contrast, the take or release contracts give the purchaser an option whether to purchase. 

In the latter situation, only volumes actually delivered pursuant to the option should be 

reported on the form if they use an index, contribute to or may contribute to gas price 

formation. 

C. Natural Gas Imported to the Lower 48 States 

25. PG&E requests that the Commission clarify the reporting status of purchases of 

natural gas outside of the United States for use in the United States.24 In particular, 

PG&E requests that the Commission clarify the reporting status of purchases by a Local 

Distribution Company (LDC) of gas outside the United States for use in the 

 24 PG&E Request for Clarification at p. 1. 
Docket No. RM07-10-002 - 17 - 

United States. PG&E argues that it is not clear from Order No. 704 and the orders on 

rehearing of Order No. 704 the extent to which gas purchase transactions by an LDC that 

occur outside of the United States are reportable on Form No. 552.25

26. In Order No. 704-A, the Commission addressed whether transactions outside the 

lower forty-eight states are reportable on Form No. 552. In relevant part, Order 

No. 704-A provides that: 

Regarding transactions involving possible international 

transportation, we clarify that: (1) volumes originating 

outside the lower 48 states and delivered at locations outside 

the lower 48 states are not reportable; (2) volumes originating 

from inside the lower 48 states and delivered outside the 

lower 48 states are reportable; and (3) volumes delivered 

inside the lower 48 states are reportable. Thus, any volumes 

that originate or are delivered into the lower 48 states 

should be reported on Form No. 552 to the same extent as 

purely domestic volumes.

26

 

The Commission reaffirms the above statement from Order No. 704-A and clarifies that it 

applies to all Respondents, including any LDC. 

D. Unprocessed and/or Upstream Natural Gas

27. Order No. 704-A held that transactions involving unprocessed natural gas were not 

reportable on Form No. 552.27 The Commission made this holding in response to two 

requests on rehearing of Order No. 704. Hess Corporation (Hess) requested that the order 

 25 Id. at p. 2. Furthermore, PG&E claims LDCs have been given conflicting 

unofficial guidance by Commission Staff on this issue. 

26 Order No. 704-A at P 74 (emphasis added). 

27 Order No. 704-A at P 78. 
Docket No. RM07-10-002 - 18 - 

exclude entities engaged in transactions behind a processing plant priced pursuant to a 

percentage-of-proceeds contract under which the producer is entitled to receive a 

percentage of the proceeds realized by the buyer upon resale of the natural gas. 

Similarly, the Oklahoma Independent Petroleum Association (OIPA) sought rehearing of 

Order No. 704 so as to exempt producers of natural gas that sell wellhead gas at the initial 

first sales point under a percentage of proceeds contract. 

28. On rehearing the Commission held, “transactions involving unprocessed gas 

should not be reported on Form No. 552 and should not be counted when determining 

whether an entity falls below the de minimis threshold. Transactions involving 

unprocessed natural gas are not relevant to wholesale price formation.”28 The 

Commission did not, however, define the term “unprocessed natural gas.” Commission 

Staff sought further input at the Technical Conference on industry practice in order to 

determine whether upstream natural gas contributes to wholesale price formation.29

29. Through Staff’s outreach efforts and the below comments, the Commission finds 

that there remains some confusion regarding the filing requirement and that Respondents 

have interpreted the requirement in various ways. Commission Staff administering Form 

No. 552 responded to a number of informal requests for clarification involving pipelinequality natural gas. For instance, some Respondents questioned whether pipeline-quality 

natural gas that is sold directly into an interstate or intrastate natural gas pipeline without 

 28 Id. 

29 Notice of Form No. 552 Technical Conference. 
Docket No. RM07-10-002 - 19 - 

processing involved “unprocessed natural gas” and, thus, need not be reported. Other 

Respondents reported transactions of pipeline-quality gas under the assumption that 

“unprocessed natural gas” was natural gas that required processing. 

1. Comments

30. In general, commenters supported the unprocessed natural gas exemption, but 

were disparate in their understanding of what the precise metes and bounds of the 

exemption should be. Three commenters30 simply request that the Commission 

promulgate a clear and consistent definition. Others propose specific definitions of the 

exemption, as laid out below. While some commenters seek a broadly-worded 

exemption, others recommend that some volumes be understood not to fall under the 

exemption. 

31. Hess limits its concern to that in its original filing: that the Commission exclude 

transactions behind a processing plant priced pursuant to a percentage-of-proceeds 

contract. 

32. DCP Midstream, LLC (DCP) recommends that Form No. 552 should be revised so 

as to only apply to Dry Natural Gas, using the definition developed by the Energy 

Information Administration (EIA): 

Natural gas which remains after: (1) the liquefiable 

hydrocarbon portion has been removed from the gas stream 

(i.e., gas after lease, field, and/or plant separation); and 

(2) any volumes of nonhydrocarbon gases have been removed 

 30 Occidental Energy Marketing, Statoil Natural Gas, and Summit Energy 

Services. 
Docket No. RM07-10-002 - 20 - 

where they occur in sufficient quantity to render the gas 

unmarketable. Note: Dry natural gas is also known as 

consumer-grade natural gas. The parameters for 

measurement are cubic feet at 60 degrees Fahrenheit and 

14.73 pounds per square inch absolute.31

Similarly, Independent Petroleum Association of America (IPAA) urges the Commission 

to use EIA definitions, and calls for a blanket exclusion of transactions involving 

unprocessed gas. IPAA argues that the Commission would still capture these volumes in 

transactions downstream of the processing facility. 

33. Devon Energy Corporation (Devon) argues that the Commission has a choice 

between a definition based on gas quality, and a definition based on the type of 

transaction. Focusing on gas quality, it argues, runs the risk of requiring Respondents to 

conduct a complex, burdensome well-by-well examination of their supplies. Instead, it 

urges the Commission to clarify that the exclusion applies to Unprocessed Natural Gas 

Transactions, a phrase that it defines as “transactions in which title transfers prior to the 

physical act of process and [prior to when] the gas is physically delivered to a processing 

[facility].” Devon states that its definition would exclude some upstream transactions 

regardless of whether they reference an index or could be reported to an index. 

Nevertheless, it argues, any such volumes would be reported at the first non-affiliate sale 

downstream of the processing plant, so the Commission could adopt Devon’s proposal 

without endangering its goal of facilitating price transparency in the wholesale market. 

 31 EIA, Energy Glossary, “D”, available at 

http://www.eia.doe.gov/glossary/glossary_d.htm (May 19, 2010). 
Docket No. RM07-10-002 - 21 - 

34. By contrast, Shell Producers32 offer a three-part definition, which they argue is 

consistent with the guidance that Commission Staff has provided: 

(i) Title to the gas involved in the transaction passes to the 

buyer at, or upstream of, a processing plant; 

(ii) The gas is physically unprocessed at the time of the title 

transfer. (Wellhead separation and treating is not defined as 

processing for purposes of this exemption); and 

(iii) Other transactions (not covered in (i) and (ii)) involving 

unprocessed gas are also exempt from reporting if they do not 

use, contribute to, or could contribute to a price index; 

however, if an unprocessed gas transaction is downstream of 

a plant (or no plant is in the vicinity) and does use, contribute 

to, or could contribute to a price index, the transaction is 

reportable. 

Shell Producers also urge the Commission to clarify the difference between processing, 

treating, and separating natural gas. 

35. Natural Gas Supply Association (NGSA), similarly, argues that there are situations 

in which it might be appropriate to report unprocessed gas transactions. NGSA gives the 

example of a firm-to-wellhead pipeline with long-haul shippers: producers often transfer 

title to long-haul shippers upstream of the processing plant, but only sell the net quantity 

of post-processing gas. NGSA argues that the parties to these transactions “should be 

allowed to report these volumes.” This scenario aside, NGSA proposes to exempt 

transactions that meet both of two criteria: 

 32 In this docket, Shell Producers refers to Shell Gulf of Mexico Inc., Shell 

Offshore Inc., and SWEPI LP. 
Docket No. RM07-10-002 - 22 - 

1. Title to the gas involved in the transaction passes to the 

buyer at, or upstream of, a processing plant; and 

2. The gas is physically unprocessed at the time of the title 

transfer. 

2. Discussion

36. The Commission understands there is no uniform industry processing practice. As 

such, it is not practical for the Commission to attempt to provide guidance designed to 

address every situation involving natural gas that may be subject to processing. 

However, the Commission provides the following clarification to assist Respondents in 

meeting their Form No. 552 filing obligations. 

37. The goal of Order No. 704-A is to facilitate transparency of the price formation 

process by collecting information concerning the use of indices to determine the price of 

natural gas and certain fixed prices in natural gas markets. As stated in Order No. 704-A: 

“the focus of Form No. 552’s data collection is transactions that utilize an index price, 

contribute to index price formation, or could contribute to index price formation.”33 In 

response to Hess and OIPA’s request to exempt transactions behind a processing plant 

priced pursuant to a percentage-of-proceeds contract under which the producer is entitled 

to receive a percentage of the proceeds realized by the buyer upon resale of the natural 

gas, the Commission in Order No. 704-A exempted unprocessed natural gas from the 

Form No. 552 data collection because “[t]ransactions involving unprocessed natural gas 

 33 Order No. 704-A at P 13. 
Docket No. RM07-10-002 - 23 - 

are not relevant to wholesale price formation.”34 Nothing has changed regarding our 

exemption of percentage-of-proceeds contracts associated with unprocessed gas. While 

this holding clearly exempts the particular transactions referred to by Hess and OIPA, it 

has not been clear to some Respondents whether the Commission does, indeed, intend to 

grant a broader exemption for unprocessed natural gas, and if so, how the Commission 

defines unprocessed natural gas. 

38. The Commission clarifies that, within the context of Form No. 552, “unprocessed 

natural gas” refers to natural gas that is not yet processed, but will be processed prior to 

delivery to an end-user, and is sold on an unprocessed basis. The EIA defines 

unprocessed gas as “natural gas that has not gone through a processing plant.”35 EIA 

further defines a processing plant as “a surface installation designed to separate and 

recover natural gas liquids from a stream of produced natural gas ... and to control the 

quality of natural gas ....”36 We apply the quoted definitions, with one exception. In 

some instances, lean natural gas may emerge from the wellhead without the need for any 

further processing to remove natural gas liquids before consumption. If this natural gas is 

produced and eventually transported to end users without any processing then 

transactions involving such natural gas are reportable at all stages, if the transactions use 

 34 Order No. 704-A at P 78. 

35 EIA, Energy Glossary, “U”, available at 

http://www.eia.doe.gov/glossary/glossary_u.htm (June 1, 2010). 

36 EIA, Energy Glossary, “P”, available at 

http://www.eia.doe.gov/glossary/glossary_p.htm (June 1, 2010). 
Docket No. RM07-10-002 - 24 - 

an index, or contribute to, or may contribute to gas index formation. Accordingly, 

transactions involving natural gas that is both (1) not processed; and (2) upstream of a 

processing facility (that is, volumes reasonably expected to travel through a processing 

facility before consumption) are not reportable.37 

39. Whether certain natural gas is lean, separated, or treated does not necessarily 

resolve whether a transaction is reportable. Separation (the removing of water and 

petroleum liquids) and treatment (the removing of other impurities) are distinct from 

processing (the removal and recovery of natural gas liquids). Thus, wellhead separation 

and treatment do not necessarily render natural gas reportable under Form No. 552. In all 

instances, the question is whether the gas is of sufficient quality that it could contribute to 

gas index formation. To the extent a Respondent is unsure as to whether a particular 

transaction is reportable, it may request informal guidance from Staff or request waiver 

from the Commission. 

E. Cash-out, Imbalance, and Operation-Related Transactions

40. In Order No. 704, we required market participants to report sale and purchase 

volumes related to cash-outs, imbalance make-ups, and operations.38 These transactions 

include transactions to resolve shippers’ transportation imbalances on pipelines and 

 37 The Commission understands that, in limited circumstances, a seller of natural 

gas may not know whether the purchaser intends to process natural gas prior to 

transportation to an end-user. In such case, the seller should report the relevant volumes 

on Form No. 552. 

38 Order No. 704 at P 107. 
Docket No. RM07-10-002 - 25 - 

LDCs. Such imbalances are often cashed out pursuant to provisions in the pipeline or 

LDC tariffs based on specified price indices. The cash-out prices may be set at a 

premium to the relevant price index in order to penalize shippers which incur significant 

imbalances. These transactions also include operational purchases and sales by pipelines 

and LDCs and production-related balancing activities, such as those between producers 

and working interest owners. 

41. In Order No. 704, we stated that, while some volumes related to such transactions 

are not utilized to create price indices, many volumes do refer to or utilize such indices, 

and therefore these transactions should be included in the Form No. 552 reports.39 In 

Order No. 704-A, we reiterated, “It has been our experience that a significant number of 

balancing, cash-out, and similar transactions include references to price indices. 

Understanding the magnitude of this reliance on price indices is therefore a legitimate 

policy goal.”40

42. After respondents filed their Form No. 552s for 2008, Staff reviewed the filings 

and made preliminary findings that the volumes of natural gas identified as cash-outs are 

relatively low in relation to the total reportable physical natural gas reported on Form 

No. 552. Therefore, Staff sought through the Technical Conference and comment 

process to better understand the burden and benefits of reporting these volumes.41

 39 Order No. 704 at P 108. 

40 Order No. 704-A at P 61. 

41 Notice of Form No. 552 Technical Conference. 
Docket No. RM07-10-002 - 26 - 

1. Comments

43. Almost every party that filed comments in response to the Technical Conference 

commented on cash-out and related transactions, including seven trade associations and 

six companies.42 All of these Commenters urge the Commission to exclude cash-out and 

imbalance transactions in Form No. 552, and generally provide the same arguments for 

exclusion. Commenters claim that reviewing and reporting these transactions takes 

roughly between one-third and one-half of the person-hours that the typical Respondent 

devotes to Form No. 552.43 Moreover, since cash-out and imbalance transactions are 

fairly unpredictable and spread out over a wide range of contracts, the process of 

reviewing them will not become significantly more efficient over time. In terms of 

volume, however, cash-out and imbalance transactions are relatively minor: between 0 

and 3 percent of most Respondents’ reportable volumes.44 Volumes are low because 

cash-out and imbalance transactions are netting transactions. Finally, commenters argue 

 42 The trade associations are AGA, Electric Power Supply Association (EPSA), 

Interstate Natural Gas Association of America (INGAA), IPAA, NGSA, Northwest 

Industrial Gas Users (NWIGU), and Process Gas Consumers Group (PGC). The 

companies are Carolina Gas Transmission Corporation (CGT), DCP, Devon, NiSource, 

Shell Producers, and Summit Energy Services (Summit). 

43 Commenters state that they or their members devoted the following personhours, or proportion of person-hours, to cash-out and imbalance volumes. DCP: 90 

person-hours or half their time; IPAA: 100 person-hours (data for one representative 

member); NGSA: 50 person-hours; PGC: 32 percent; Shell Producers 30 person-hours. 

44 As a percentage of total reportable volumes, Commenters state that they or their 

members reported the following cash-out and imbalance volumes. AGA: under 3 

percent; DCP: 1 percent; Devon: under 1 percent; IPAA: under 1 percent (data for one 

representative member); NGSA: 0.5 percent; PGC: 1 percent; Shell Producers: zero. 
Docket No. RM07-10-002 - 27 - 

that cash-out transactions take place after the fact as a method of settling imbalances, and 

thus cannot contribute to market price index formation. 

44. AGA agrees with the other commenters that cash-out and imbalance transactions 

should be excluded from reporting on Form No. 552. AGA argues, however, that it may 

be appropriate to continue reporting operational volumes unrelated to the resolution of 

imbalances. For example, LDCs may purchase or sell wholesale volumes in advance to 

address balancing concerns on their distribution systems. Such advance purchases should 

continue to be reported, AGA argues, because the volumes are acquired through the 

typical procurement channels as their end-use volumes, and would require 

disproportionate effort to exclude from reports. 

2. Discussion

45. Upon review of the comments in this docket, as well as Staff’s review of initial 

year Form No. 552 submissions for 2008, we have reconsidered our position with regard 

to cash-out and imbalance transactions. As several Commenters note, cash-out and 

imbalance transactions represent an insignificant portion of the total reportable volumes 

because the transactions, while frequent, do not accumulate to significant volumes for 

any one Respondent. The Commission’s interest is in aggregated totals, so eliminating 

cash-out and imbalance transactions has little effect on our mission to monitor aggregate 

reliance on indices. Further, given the after-the-fact nature of accounting for these sorts 

of operational transactions, we find that it may be unduly burdensome for some 

Respondents to report these volumes as compared to any benefit achieved by such 

reports. Accordingly, Respondents are no longer required to report cash-out, and 
Docket No. RM07-10-002 - 28 - 

imbalance transactions that refer to or use indices or that may contribute to gas indices. 

However, as AGA requests, respondents should continue to report transactions related to 

operational volumes unrelated to the resolution of imbalances. These operational volumes 

are commonly used to maintain system pressure and provide line pack for pipelines and 

other gas distributions systems. 

F. Unit of Measurement

46. Form No. 552 required respondents to report transactions in trillions of British 

Thermal Units (TBtu). However, this caused some confusion among filers whose 

transactions were expressed in other measurement units, such as MMBtus (millions of 

British Thermal Units) as to how to convert those transactions to TBtus. As a result, 

converting data to TBtus led to a number of filing errors, and subsequent resubmissions 

to correct the data were required. Accordingly, Staff sought feedback on whether to 

change the reporting units to a more common magnitude or unit.45 

1. Comments

47. While several parties filed comments on the appropriate unit of measurement, the 

commenters generally stated that the issue is minor relative to their other concerns. 

IPAA, for instance, favors retaining TBtus in order to “minimize disruption,” but states 

that “this recommendation is less urgent than” its other requests.46 DCP and NGSA 

briefly ask the Commission to continue with TBtus which, NGSA states, is reflective of 

 45 Notice of Form No. 552 Technical Conference. 

46 IPAA Comments at 4. 
Docket No. RM07-10-002 - 29 - 

the way gas is purchased and sold in the wholesale market. NWIGU, however, asks the 

Commission to switch to MMBtus or another more common unit. Summit, rather than 

recommending a unit, instead recommends that in the event that the Commission 

continues with TBtus, the instructions to Form No. 552 should provide more detail on 

how to convert other units to TBtus. 

48. AGA does not reach a firm conclusion, but offers the most detailed analysis. In 

favor of a new unit, it notes that the NAESB Base Contract Transaction Confirmation 

Form uses millions of British Thermal Units (MMBtus) as its base unit, and defines an 

MMBtu as equal to a dekatherm. It also suggests that “[r]eporting at the thousanddekatherm (or BBtu) level would provide ... 100 times more detail than currently 

reported.”47 AGA warns, however, that either switch could prove to be too fine a level of 

detail, leading to unnecessary revisions, or could lead to another round of conversion 

errors as Respondents adjust to the new reporting magnitude. If no change is made, AGA 

recommends that Form No. 552 include a definition advising Respondents that 1 TBtu is 

equal to 1,000,000 MMBtu. 

2. Discussion

49. Given the lack of interest in changing units, the Commission will retain the TBtu 

as its unit of reporting. While Staff’s review of the initial Form No. 552 submissions 

found numerous unit-conversion errors, it also appears that correcting those errors has 

been relatively simple for Respondents, and that Respondents anticipate far fewer errors 

 47 AGA Comments at 6. 
Docket No. RM07-10-002 - 30 - 

going forward. We acknowledge, however, the confusion caused by using a unit that is 

orders of magnitude greater than the units commonly used in most natural gas contracts. 

50. Accordingly, the revised Form No. 552 will include a brief description of the 

proper conversion ratios. A TBtu is one trillion British Thermal Units; a BBtu is one 

billion British Thermal Units; and an MMBtu is one million British Thermal Units. A 

dekatherm (Dth) is, by definition, one MMBtu. One thousand Cubic Feet (Mcf) of 

natural gas at standard pressure and heat content produces almost exactly one MMBtu of 

heat, so these terms may be treated as equal for purposes of Form No. 552 unless doing 

so would produce a significantly misleading result; similarly, one billion Cubic Feet 

(Bcf) may be treated as equal to one TBtu. Thus, when filing Form No. 552, respondents 

should convert as follows: 1 TBtu = 1,000 BBtu = 1,000,000 MMBtu = 1,000,000 Dth = 

1,000,000 Mcf = 1 Bcf. 

G. Blanket Certificates

51. In Order No. 704, the Commission required that each market participant, including 

a de minimis market participant, state in the Form No. 552 whether it operates under a 

blanket sales certificate issued under § 284.402 or § 284.284 of the Commission’s 

regulations.48 Section 284.402 grants to any entity which is not an interstate pipeline a 

blanket marketing certificate, authorizing it to make sales for resale at negotiated rates in 

interstate commerce of any category of gas that is subject to the Commission’s NGA 

 48 The current Form No. 552 implements this requirement by asking, “At any time 

during the report year, did the Reporting Company operate under a Blanket certificate?” 
Docket No. RM07-10-002 - 31 - 

jurisdiction. Section 284.284 grants open access interstate pipelines a blanket certificate 

to make unbundled sales. 

52. Order No. 704 stated that the requirement for market participants to state whether 

they operate under a blanket sales certificate would give the Commission a measure of 

the number of holders of such certificates. The Commission also stated that it would 

permit some breakdown of market information between jurisdictional and nonjurisdictional components, which is useful for effective oversight and monitoring for 

market manipulation.49

1. Comments

53. In its comments after the technical conference, NGSA seeks clarification of when 

a market participant should be considered to be operating under a blanket marketing 

certificate. It points out that § 284.402(a) automatically grants the blanket marketing 

certificate to all market participants who are not interstate pipelines, without the need to 

file an application for the certificate or for any Commission action. It also notes that 

§ 284.402(d) authorizes abandonment under NGA section 7(b) of any sales service 

performed under the certificate upon the expiration of the contractual term of that service 

or upon termination of each individual sales arrangement. NGSA asserts that these 

provisions create confusion as to whether a respondent has operated under the blanket 

certificate in certain scenarios. NGSA explains: 

 49 Order No. 704 at P 91. 
Docket No. RM07-10-002 - 32 - 

It is not clear if a company that used a blanket marketing 

certificate in year one for certain transactions, but didn't use 

the certificate in subsequent years, continues to hold the 

certificate in perpetuity (unless the certificate is rescinded by 

the Commission); or whether a new certificate is allowed in a 

subsequent year if the company needs to enter into a 

transaction that requires a blanket certificate. If the future 

transaction is several years later, should the company be 

required to report in interim year Form 552’s that it holds a 

blanket marketing certificate or is it acceptable for the 

company to assume the original certificate was abandoned 

when the original transactions ended; and a new certificate 

commences with the subsequent transaction?50

54. NGSA recommends that the Commission clarify that the reporting requirement 

only applies if the respondent actually used the blanket marketing certificate during the 

reporting year. It requests clarification that this reporting requirement be limited to 

market participants using a blanket marketing certificate above the de minimis volume. 

2. Discussion

55. The Commission has determined to remove from Form No. 552 the requirement 

that market participants state whether they operate under a blanket sales certificate issued 

under either § 284.402 or § 284.284 of the Commission’s regulations.51 Our experience 

reviewing completed reports for the year 2008 indicates that this requirement does not 

provide sufficiently useful and reliable information to justify its continuation. 

 50 NGSA Comments at 8. 

51 The current Form No. 552 implements this requirement by asking, “At any time 

during the report year, did the Reporting Company operate under a Blanket certificate?” 
Docket No. RM07-10-002 - 33 - 

56. As illustrated by NGSA’s request for clarification, it can be difficult for market 

participants to know whether they have operated under a blanket marketing certificate 

during a reporting year. A market participant only operates under a blanket marketing 

certificate when it makes a sale subject to our NGA jurisdiction. In order for a sale to be 

within our NGA jurisdiction it must be a sale for resale in interstate commerce, which 

does not qualify a “first sale” of natural gas, as defined in section 2(21) of the Natural 

Gas Policy Act.52 The first sale definition is very complicated. As the Commission 

explained in Order No. 644: 

Under the NGPA, first sales of natural gas are defined as any 

sale to an interstate or intrastate pipeline, LDC, or retail 

customer or any sale in the chain of transactions prior to a 

sale to an interstate or intrastate pipeline or LDC or retail 

customer. NGPA section 2(21)(A) sets forth a general rule 

stating that all sales in the chain from the producer to the 

ultimate consumer are first sales until the gas is purchased by 

an interstate pipeline, intrastate pipeline, or LDC. Once such 

a sale is executed and the gas is in the possession of a 

pipeline, LDC, or retail customer, the chain is broken, and no 

subsequent sale, whether the sale is by the pipeline, or LDC, 

or by a subsequent purchaser of gas that has passed through 

the hands of a pipeline or LDC, can qualify under the general 

rule as a first sale of natural gas. In addition to the general 

rule, NGPA section 2(21)(B) expressly excludes from first 

sale status any sale of natural gas by a pipeline, LDC, or their 

affiliates, except when the pipeline, LDC, or affiliate is 

selling its own production.53

 52 The Natural Gas Wellhead Decontrol Act of 1989 removed all “first sales” from 

our NGA jurisdiction. 

53 Amendments to Blanket Sales Certificates, Order No. 644, FERC Stats. & Regs., 

Regulations Preambles 2001-2005 ¶ 31,153, at P 14 (2003) (Order No. 644). See also

Order No. 644 at P 22, clarifying the provision concerning an affiliate’s own production. 
Docket No. RM07-10-002 - 34 - 

57. Thus, whether a market participant makes a sale pursuant to the blanket marketing 

certificate depends on a number of factors, including whether: (1) the gas was previously 

purchased and sold by a pipeline or LDC; (2) whether the purchaser will resell the gas; 

(3) whether the seller is pipeline, LDC or an affiliate thereof; and (4) if so, whether the 

seller is selling gas produced by any member of the affiliated group. Because the first 

two of these factors involve events occurring before and after the relevant sale, it is 

possible that a market participant may not have all the information necessary to 

determine whether its sale is subject to NGA jurisdiction and thus made pursuant to the 

blanket marketing certificate. For example, it may be particularly difficult for the market 

participant to know whether the gas it is selling previously passed through the hands of a 

pipeline or LDC. Moreover, for many market participants the relevant factors causing a 

sale to be subject to our NGA jurisdiction will be present for some sales, but not others. 

Thus, such market participants will be operating pursuant to the blanket marketing 

certificate for only some portion of their sales, not all. 

58. As a result of these complications, the responses to the Form No. 552 blanket 

certificate question have not provided useful information to the Commission. The 

Commission had hoped that those responses would permit some breakdown of market 

information between jurisdictional and non-jurisdictional components. However, given 

the widespread confusion as to whether particular sales are jurisdictional, the market 

participants’ statements in the Form No. 552 as to whether they operated under the 

blanket marketing certificate do not appear reliable. Moreover, a simple statement of 

whether the market participant made sales pursuant to the blanket marketing certificate 
Docket No. RM07-10-002 - 35 - 

does not reveal whether those sales constituted most, or only a very few, of the market 

participant’s sales. Without that information, it is not possible to determine, with any 

degree of accuracy, what proportion of gas sales are subject to our NGA jurisdiction.54 

In any event, information about whether sales are jurisdictional is not relevant to th

fundamental purpose of the Form No. 552, which is to obtain information concerning the 

relative volumes of fixed price transactions that contribute or may contribute to a gas 

index versus the volume of transactions that refer to indices. For all these reasons, the 

Commission eliminates the requirement that market participants report whether they 

make sales under a blanket certificate. Accordingly, the Commission will modify section 

260.401 of its regulations to strike 18 C.F.R. § 260.401(b)(1)(i), which prevented blanket 

certificate holders from benefitting from the de minimis exemption to the annual filing 

requirement. The instructions on Form No. 552 shall be modified to reflect this holding. 

e 

H. Other Substantive Requested Clarifications

59. Several commenters, in responding to the issues raised at the Technical 

Conference, took the opportunity to raise other issues related to Form No. 552. Some of 

these comments concerned the timing and enforcement of the revised reporting 

requirements, mainly in the form of the requests for extension of time noted below. In 

addition, DCP states that it “does not support significant changes ... that would require 

 54 Interstate pipelines filing the Form No. 552 reported insignificant volumes of 

sales pursuant to the § 284.284 blanket certificate authorizing pipelines to make 

unbundled sales. Few, if any, pipelines use that certificate, because almost all pipeline 

exited the merchant business after Order No. 636. 
Docket No. RM07-10-002 - 36 - 

another burdensome process.” Similarly, IPAA requests an extension of the safe harbor 

for any inadvertent errors, while NWIGU and NGSA request an extension of the safe 

harbor period in the event that the Commission makes any substantive changes to Form 

No. 552 in this or future orders. 

60. In response to DCP’s comments, we clarify that the present order does not require 

Respondents who have under-reported or mis-reported their 2008 Form No. 552 to 

correct their filings based on our guidance herein. 

61. We will not institute any additional safe-harbor period. However, as previously 

stated, the Commission will focus any enforcement efforts on instances of intentional 

submission of false, incomplete, or misleading information to the Commission, of failure 

to report in the first instance, or of failure to exercise due diligence in compiling and 

reporting data.55

62. NGSA also raises the issue of whether a Sarbanes-Oxley56 signoff standard 

applies to Form No. 552’s signature requirement. NGSA argues that it does not, and 

urges the Commission to clarify that the entity signoff can be from any official that is 

able to bind the company. 

 

63. The Commission does require Annual Corporate Officer Certification and 

Sarbanes-Oxley signoff for some forms: e.g., Form Nos. 1, 2, 2-A, 6, 60, 3-Q, and 6-Q. 

55 Order No. 704 at P 114. 

56 Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745. In certain 

situations, the Sarbanes-Oxley Act requires chief corporate officers to personally vouch 

for the veracity, timeliness, and fairness of their companies’ public disclosures. 
Docket No. RM07-10-002 - 37 - 

These forms are financial reports that include balance sheets, income statements, and 

similar financial data. However, we do not interpret the Sarbanes-Oxley Act to compel 

the Commission to require such a standard for Form No. 552. At this time, we believe 

that it is sufficient that the person signing Form No. 552 be one whose signature legally 

binds the company with respect to the accuracy and completeness of the submission. The 

instructions on Form No. 552 as well as the form shall be modified slightly to clarify this 

holding. 

64. NiSource requests that the Commission exempt from reporting any “transactions 

that occur under a local distribution company’s state-approved retail tariff that refer to 

next-day or next-month price indices.”57 NiSource states that gathering such information 

is administratively burdensome for it because NiSource has several state-approved tariffs 

among several affiliates and currently lacks “one consistent IT system that can be used to 

pull this data.”58 NiSource also states that some of these tariffs only rely upon index 

prices when certain conditions are met, and that NiSource’s IT systems only record the 

actual price and fail to record the reason why the price was charged. NiSource states that, 

among its nine LDC affiliates, it has identified 26 state-approved tariff provisions that 

refer to gas price indices, providing for different variations of cash-outs and a number of 

imbalance situations. 

 57 NiSource Comments at 1. 

58 NiSource Comments at 4. 
Docket No. RM07-10-002 - 38 - 

65. We reject the requested exemption for state-approved retail tariffs. All of the 

examples of reportable transactions that NiSource gives in its comments involve cash-out 

or imbalance provisions. Accordingly, the exemption granted above in this order for 

cash-out and imbalance transactions that reference a price index appears to sufficiently 

address NiSource’s concerns. 

III. Other Non-Substantive Modifications

66. In response to informal questions by Respondents and in an effort to make the 

Form No. 552 more user friendly, we approve a number of other non-substantive 

modifications to Form No. 552. These modifications do not affect the data to be 

collected by Respondents and provided on the form. However, the modifications more 

clearly identify the data to be provided and more understandable direction to 

Respondents. A copy of revised Form No. 552 is attached to this order.59

67. For example, the instructions to Form No. 552 have been modified to allow 

potential Respondents to more easily determine whether they must submit the form, the 

types of transactions that are reportable, and the procedure to eFile the form. The 

instructions also explain that typing the name of the company officer constitutes an 

electronic signature of a company officer is acceptable under the Commission’s 

regulations.60 Additionally, the schedule on page three of Form No. 552 is modified to 

 59 The copy of the Form No. 552 in the Appendix should not be eFiled with the 

Commission at this time. Staff will make available a fillable PDF Form No. 552 at a later 

date. 

60 See 18 C.F.R. § 385.2005(c). 
Docket No. RM07-10-002 - 39 - 

explain that each Respondent Reporting Company and Affiliate should be listed and 

required to answer the questions on the schedule. 

68. The Commission believes that the modifications to Form No. 552 will provide 

regulatory certainty and reduce erroneous filings by Respondents. We encourage 

potential Respondents to utilize other Commission resources should they have questions 

regarding the filing of Form No. 552. In addition to consulting the Form No. 552 FAQ at 

http://www.ferc.gov/docs-filing/forms/form-552/form-552-faq.pdf and other filing 

guidance at http://www.ferc.gov/docs-filing/forms/form-552/fil-instr.asp, Respondents 

may request informal assistance through our Compliance Help Desk or by submitting 

questions via e-mail to form552@ferc.gov. 

IV. Information Collection Statement

69. The Office of Management and Budget (OMB) regulations require that OMB 

approve certain reporting, recordkeeping, and public disclosure (collections of 

information) imposed by an agency.61 The information collection requirements or Form 

No. 552 respondents were approved under OMB Control No. 1902-0242. This order 

further revises these requirements in order to more clearly state the obligations imposed 

in Order No. 704. While the net result of these revisions is to decrease the overall burden 

as well as the number of Respondents, because the Commission has made “substantive or 

 61 5 C.F.R. § 1320. 
Docket No. RM07-10-002 - 40 - 

material modifications” to the information collection requirement, we will submit them 

for OMB review under the Paperwork Reduction Act.62

70. The Commission identifies the information provided under Part 260 as contained 

in FERC Form No. 552. The Commission solicited comments on the need for this 

information, whether the information would provide useful transparency information, 

ways to enhance the quality, utility, and clarity of the information to be collected, and any 

suggested methods for minimizing respondents’ burden. Where commenters raised 

concerns that information collection requirements would be burdensome to implement, 

the Commission has addressed those concerns above in this order. 

71. In Order No. 704, the Commission estimated the burden for complying with the 

Final Rule as follows: 

Data 

Collection 

Part 260 

FERC Form 

No. 552 

No. of 

Respondents 

No. of 

Responses 

per 

Respondent 

Estimated 

Annual 

Burden 

Hours per 

Respondent 

Total 

Annual 

Hours For 

All 

Respondents 

Estimated 

Start-Up 

Burden Per 

Respondent 

Annual 

Reporting 

Requirement 

 1,500 1 per year 4 hours 6,000 40 hours 

The Commission further estimated average annualized cost for each respondent to be the 

following: 

 62 See 44 U.S.C. § 3507(h)(3). 
Docket No. RM07-10-002 - 41 - 

FERC Form No. 552 Annualized 

Capital/Startup Costs 

(10 year amortization)

Annual Costs Annualized Costs 

Total 

Annual 

 Reporting Requirement 

$400 $400 $800 

The Commission did not change its burden estimate upon release of Order Nos. 704-A or 

704-B. 

72. Several factors influence the Commission’s revised numbers. If the Commission 

were making no changes to Order No. 704-B, then it would be revising the estimates 

upward. Many Respondents reported unexpectedly high start-up burdens, primarily due 

to the difficulty of gathering information on cash-out and imbalance transactions. 

However, virtually every clarification or revision provided above in this order should act 

to reduce the burden on Respondents. In addition, the experience in filing the initial 

Form No. 552 reports should drastically reduce the start-up burden in responding to the 

revised Form No. 552. 

73. Based on data collected for calendar year 2008, the number of Respondents was 

1,109, not 1,500 as estimated. The elimination of the requirement for parties to file 

information about their use of certain blanket certificates should reduce the number of 

Respondents even further, as 369 Respondents filed solely to meet the blanket certificate 

reporting requirement. As a result, the Commission estimates the burden for complying 

with the Final Rule as follows: 
Docket No. RM07-10-002 - 42 - 

Data 

Collection 

Part 260 

FERC Form 

No. 552 

No. of 

Respondents 

No. of 

Responses 

per 

Respondent 

Estimated 

Annual 

Burden 

Hours per 

Respondent 

Total 

Annual 

Hours For 

All 

Respondents 

Estimated 

Start-Up 

Burden Per 

Respondent 

Annual 

Reporting 

Requirement 

740 1 per year 4 hours 2,9600 5 hours 

Information Collection Costs: The average annualized cost for each respondent is 

projected to be the following: 

FERC Form No. 552 Annualized 

Capital/Startup Costs 

(10 year amortization)

Annual Costs Annualized Costs 

Total 

Annual 

 Reporting Requirement 

$50 $400 $450 

Title: FERC Form No. 552. 

Action: Proposed Revised Information Filing. 

OMB Control No: 1902-0242 

Respondents: Business or other for profit. 

Frequency of Responses: Annually. 

Necessity of the Information: The annual filing of transaction information by market 

participants is necessary to provide information regarding the size of the physical natural 

gas market, the use of the natural gas spot markets and the use of fixed- and indexedprice transactions. The revisions to the filing reduce the burden to respondents. 
Docket No. RM07-10-002 - 43 - 

74. Interested persons may obtain information on the reporting requirements by 

contacting the following: 

Federal Energy Regulatory Commission, 

888 First Street, NE, 

Washington, DC 20426 

[Attention: Michael Miller, Office of the Executive Director] 

e-mail: DataClearance@ferc.gov 

Phone: (202) 502-8415, Fax: (202) 273-0873. 

For submitting comments concerning the collection of information and the associated 

burden estimate(s), please send your comments to the contact listed above and to: 

Office of Information and Regulatory Affairs, 

Office of Management and Budget, 

725 17th Street, NW, 

Washington, DC 20503 

[Attention: Desk Officer for the Federal Energy Regulatory Commission] 

Phone: (202) 395-4638, Fax: (202) 395-7285. 

Due to security concerns, comments should be sent electronically to the following e-mail 

address: oira_submission@omb.eop.gov. Please reference OMB Control No. 1902-0242 

and the docket number of this order in your submission. 

V. Document Availability

75. In addition to publishing the full text of this document, except for the Appendix, in 

the Federal Register, the Commission provides all interested persons an opportunity to 
Docket No. RM07-10-002 - 44 - 

view and/or print the contents of this document, including the Appendix, 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 5:00 p.m. Eastern time) at 888 First 

Street, NE, Room 2A, Washington, DC 20426. 

76. From FERC’s Home Page on the Internet, this information is available on 

eLibrary. The full text of this document, including the Appendix, 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 of this document in the docket number field. 

77. User assistance is available for eLibrary and the FERC’s web site during normal 

business hours from FERC Online Support at 202-502-6652 (toll free at 1-866-208-3676) 

or email at ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-

8371, TTY (202) 502-8659. E-mail the Public Reference Room at 

public.referenceroom@ferc.gov. 

VI. Extension of Time

78. On May 24, 2010, the Secretary of the Commission issued in this docket an 

extension of time until September 1, 2010 for Respondents to file Form No. 552 with 

calendar year 2009 data.63 The report for calendar year 2010 remains due on May 1, 

2011, as per § 260.401(b)(2) of the Commission’s regulations. 

 63 See 18 C.F.R. § 375.302(b). 
Docket No. RM07-10-002 - 45 - 

79. OMB regulations require a notice and comment period before changes to the Code 

of Federal Regulations may take effect. Accordingly, this order’s revision to section 

260.401 exempting blanket certificate holders with de minimis transaction volumes will 

be effective September 30, 2010. In order to allow these entities to be exempt from the 

2009 filing requirement, and also to allow other Respondents to review and revise their 

data in light of the clarifications provided in this order, Respondents are granted an 

extension of time until October 1, 2010 to file calendar year 2009 data. 

List of Subjects for Part 260

18 CFR Part 260 

Natural gas, Reporting and recordkeeping requirements. 

The Commission orders: 

(A) AGA’s and PG&E’s requests for clarification are granted as described 

herein. 

(B) FERC Form No. 552 is modified as discussed herein. 

(C) Form No. 552 Respondents are granted an extension of time until 

October 1, 2010 to file calendar year 2009 data. 

By the Commission. 

( S E A L ) 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 
Docket No. RM07-10-002 - 46 - 

In consideration of the foregoing, the Commission amends part 260, Chapter I, Title 18, 

Code of Federal Regulations to read as follows: 

PART 260 - STATEMENTS AND REPORTS (SCHEDULES) 

1. The authority citation for part 260 continues to read as follows: 

Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352. 

2. Sec. 260.401 is amended as follows: 

a. Paragraph (b)(1)(i) is removed. 

b. Paragraphs (b)(1)(ii) and (iii) are redesignated as paragraphs (b)(1)(i) and (ii) 

respectively. 

c. Paragraph (b)(1)(iii) is moved to (b)(1)(ii). 
Docket No. RM07-10-002 - 47 - 

 

Appendix