153 FERC ¶ 61,049

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Norman C. Bay, Chairman;

 Philip D. Moeller, Cheryl A. LaFleur,

Tony Clark, and Colette D. Honorable.

Coordination of the Scheduling Processes of Interstate 

Natural Gas Pipelines and Public Utilities

Docket No. RM14-2-002

ORDER ESTABLISHING DEFAULT INTERPRETATIONS FOR CAPACITY 

RELEASE CONTRACTS

(Issued October 15, 2015)

1. Order No. 809 revised the Commission’s regulations relating to the scheduling of 

transportation service on interstate natural gas pipelines to better coordinate the 

scheduling practices of the wholesale natural gas and electric industries, as well as to 

provide additional scheduling flexibility to all shippers on interstate natural gas 

pipelines.

1

 Among other things, Order No. 809 incorporated by reference into the 

Commission’s regulations certain modified standards developed by the North American 

Energy Standards Board (NAESB) that revised the standard nomination timeline for 

interstate natural gas pipelines, including expanding the number of intraday nomination 

cycles from the current two to three. Order No. 809 established an implementation date 

of April 1, 2016.

2. On May 28, 2015, the American Gas Association, the American Public Gas 

Association, and the Interstate Natural Gas Association of America (collectively, 

Associations) filed a request for clarification relating to the timing of implementation as

well as interpretations of recall rights under certain existing capacity release contracts in 

light of the transition from two to three intraday nomination cycles. In particular, the 

Associations proposed default interpretations of recall rights to be applied to capacity 

release contracts that span the transition period between the existing and revised 

standards.

 1 Coordination of the Scheduling Processes of Interstate Natural Gas Pipelines 

and Public Utilities, Order No. 809, 80 Fed. Reg. 23197 (Apr. 24, 2015), FERC Stats. & 

Regs. ¶ 31,368 (cross-referenced at 151 FERC ¶ 61,049 (2015)).
Docket No. RM14-2-002 - 2 -

3. On July 31, 2015, the Commission issued an order granting clarification with 

respect to the timing of implementation and requesting comments on the Associations’

proposal regarding transitioning capacity release contracts.2

 The Natural Gas Supply 

Association (NGSA) and the Associations filed comments.

4. As discussed below, the Commission provides default interpretations to apply to 

capacity release transactions that span the transition.

I. Background

5. On April 16, 2015, the Commission issued Order No. 809, which revised the 

Commission’s regulations relating to the scheduling of transportation service on interstate 

natural gas pipelines to better coordinate the scheduling practices of the wholesale natural 

gas and electric industries, as well as to provide additional scheduling flexibility to all 

shippers on interstate natural gas pipelines. Among other things, the Commission revised 

its regulations to incorporate by reference the modified NAESB Wholesale Gas Quadrant 

(WGQ) Business Practice Standards, which revised the standard nomination timeline for 

interstate natural gas pipelines.

6. Under the prior set of standards, shippers had two opportunities to submit intraday 

nominations (nominations during the current natural gas day). The revised standards 

adopted in Order No. 809 provided an additional intraday nomination opportunity. The 

current and revised nomination timelines are as follows: 

All times Central Clock Time (CCT) Current NAESB 

Standards

Revised 

NAESB

Standards

Timely Nomination Deadline 11:30 AM 1:00 PM

Start of Gas Flow 9:00 AM 9:00 AM

Evening Nomination Deadline 6:00 PM 6:00 PM

Start of Gas Flow 9:00 AM 9:00 AM

Intraday 1

Nomination Deadline 10:00 AM 10:00 AM

Start of Gas Flow 5:00 PM 2:00 PM

IT Bump Rights Bumpable Bumpable

Intraday 2

Nomination Deadline 5:00 PM 2:30 PM

Start of Gas Flow 9:00 PM 6:00 PM

IT Bump Rights no bump Bumpable

Intraday 3 Nomination Deadline 7:00 PM

 2 Coordination of the Scheduling Processes of Interstate Natural Gas Pipelines 

and Public Utilities, 152 FERC ¶ 61,095 (2015) (Order on Clarification).
Docket No. RM14-2-002 - 3 -

All times Central Clock Time (CCT) Current NAESB 

Standards

Revised 

NAESB

Standards

Start of Gas Flow 10:00 PM

IT Bump Rights no bump

The Commission required interstate natural gas pipelines to implement the revised 

NAESB standards beginning on April 1, 2016.

7. Under Commission regulations,3 shippers (releasing shipper) can release their 

capacity to other shippers (replacement shippers) needing that capacity. The releasing 

shippers may include special terms and conditions as part of their release.4 A very 

common release condition is for the releasing shipper to reserve the right to recall its 

capacity at one or more of the nomination cycles.

8. As relevant here, on May 28, 2015, as supplemented on June 26, 2015, the 

Associations filed a request to clarify the recall rights under existing capacity release 

contracts in light of the transition from two to three intraday nomination cycles. The 

Associations’ concern was that recall conditions might be unclear for capacity release 

transactions with the right to recall capacity that spans a period before and after April 1, 

2016. The Associations proposed that the Commission establish default interpretations

covering such transactions unless the parties to a transaction agreed to alternative recall 

rights. In the absence of mutual agreement to the contrary, the Associations proposed the 

following default rights:

 If the transaction specifies that recalls are permitted at the Intraday 1 

Nomination Cycle and the Intraday 2 Nomination Cycle, then for periods 

that include April 1, 2016, and thereafter, recalls will be permitted at the 

Intraday 1 Nomination Cycle, Intraday 2 Nomination Cycle and Intraday 3 

Nomination Cycle.

 If the transaction specifies that recalls are permitted only at the Intraday 1 

Nomination Cycle, then for periods that include April 1, 2016, and 

thereafter, recalls only will be permitted at the Intraday 1 Nomination 

Cycle. 

 3 18 C.F.R. § 284.8 (2015).

4 Under the Commission’s regulations, the pipeline contracts with, and receives 

payment from, the replacement shipper and then issues a credit to the releasing shipper. 

The results of all releases are posted by the pipeline on its Internet web site and made 

available through standardized, downloadable files.
Docket No. RM14-2-002 - 4 -

 If the transaction specifies that recalls are permitted only at the Intraday 2 

Nomination Cycle, then for periods that include April 1, 2016, and 

thereafter, recalls will be permitted at the Intraday 2 Nomination Cycle and 

Intraday 3 Nomination Cycle. 

9. The Associations proposed that shippers releasing capacity for periods that 

straddle April 1, 2016 notify the pipeline by way of a letter in advance of that date if they 

do not want the proposed default rights to apply to the transaction and indicate the mutual 

agreement of the releasing and replacement shippers. In the absence of such a letter, they 

proposed that recall rights should transition according to the default rights. The 

Associations also proposed that the releasing shipper should have the ability to recall 

capacity under a transaction’s existing provisions if it wished to terminate the transaction, 

even if the releasing shipper and the replacement shipper were unable to reach agreement 

on a non-default recall transition.

10. In the Order on Clarification, the Commission stated that it saw value in 

establishing a default interpretation of capacity release contractual recall provisions to 

assist parties in effectuating the transition between the two intraday and three intraday 

nomination schedules.5

 The Commission, however, found that the request went beyond 

merely clarifying the implementation date adopted in Order No. 809 and should be 

subject to notice and comment. The Commission stated that commenters should address 

the following issues:

1. The merits of establishing a default approach or propose an alternative 

approach; 

2. Whether the default should apply to all agreements into which the parties 

have entered before April 1, 2016 (as proposed by the Associations), or 

should only apply to releases entered into by an earlier date, such as the 

date of issuance of Order No. 809; 

3. Whether the default that should apply when the transaction specifies that 

recalls are permitted only at the Intraday 2 Nomination Cycle should be that 

recalls are permitted at both Intraday 2 and 3 (as proposed by the 

Associations) or only at Intraday 3; and 

4. The proposal that “the releasing shipper should have the ability to recall 

capacity under a transaction’s existing provisions if it wishes to terminate 

the transaction, even if the releasing shipper and the replacement shipper 

 5 Order on Clarification, 152 FERC ¶ 61,095 at PP 13-14.
Docket No. RM14-2-002 - 5 -

are unable to reach agreement on a non-default recall transition,”6 including 

how this provision would operate and why the general default 

interpretations should not apply to a contract in dispute if the parties are 

unable to reach agreement (and have not sought Commission resolution of 

the dispute). 

11. Initial and Reply Comments were due 20 and 30 days, respectively, from the date 

of the Order on Clarification.

II. Comments

12. NGSA argues that when the new gas nomination timeline is implemented, a 

default interpretation will not be necessary to effectuate the transition, as the parties are 

much better served by resolving contract issues that may arise between themselves 

without involving the Commission. NGSA does not believe there are any special 

circumstances here that warrant Commission involvement in the renegotiation of recall 

provisions between two commercial parties, given that renegotiation of contract terms is 

not an uncommon occurrence in the industry. 

13. NGSA states that, because the circumstances surrounding each capacity release 

transaction with recall rights vary, it would be inappropriate for the Commission to 

arbitrarily establish a default determination. NGSA states that the Commission recently 

supported this position in Cost Recovery Mechanisms for Modernization of Natural Gas 

Facilities, 152 FERC ¶ 61,046, at P 20 (2015) when it stated “the issue of cost 

responsibility for modernization costs during the term of a capacity release is a 

contractual issue between the relevant parties, and that issue cannot be resolved on a

generic basis.” Consistent with that determination, NGSA states that the Commission 

should leave the transition of the few impacted contracts as a business decision between 

the parties.

14. The Associations maintain that their proposal is reasonable. They continue to 

believe that specifying default outcomes in the absence of the parties’ agreement would 

assist the parties to these transactions in defining the capacity release recall rights that 

will be available on April 1, 2016, and thereafter, and smooth the transition to the new 

scheduling timeline. They believe that their proposal appropriately balances the intent of 

parties that agree with the default recall rights with parties that disagree with the default 

recall rights.

 6 Associations’ Supplemental Filing at 3. 
Docket No. RM14-2-002 - 6 -

15. The Associations state that the Commission should establish a default 

interpretation that applies to all capacity releases that span April 1, 2016, as opposed to 

only releases entered into prior to the issuance of Order No. 809. The Associations state 

that while it is known that the Intraday 3 Nomination Cycle will be added as of April 1, 

2016, the pipelines will not provide until April 1, 2016 an electronic mechanism 

permitting shippers to specifically designate the recall rights applicable to releases under 

the three intraday nominations. They state that pipelines likely will not have their 

computer systems set up to implement Order No. 809 until the April 1, 2016

implementation date. 

16. The Associations state that for all capacity releases that span April 1, 2016, it is 

reasonable to expect shippers to advise their pipeline(s) by letter, indicating mutual 

agreement, if they do not want the default to apply. They state that this is reasonable 

since a releasing shipper with recall rights that has not reached an agreement with its 

replacement shipper could resolve the matter itself by recalling the capacity prior to 

April 1, 2016. 

17. The Associations state that, if the Commission decides not to establish default 

capacity release recall rights, it will create unnecessary administrative burdens and 

inefficiencies. They state that, without the default, many releasing shippers likely will 

decide to recall and re-release potentially thousands of capacity releases on the April 1, 

2016 implementation date in order to establish Intraday 3 recall rights in a new release. 

They state that these additional capacity releases would result in an enormous burden for 

the pipeline administrator and shippers at this busy time, a burden that largely would be 

eliminated by the proposed default interpretation. 

III. Commission Determination

18. The Commission permits releasing shippers to specify whether releases are 

recallable and select which nomination cycles are subject to recall rights. Prior to 

Order No. 809, a releasing shipper could agree to recall capacity at the Intraday 1

Nomination Cycle at 10:00 a.m. CCT or the Intraday 2 Nomination Cycle at 5:00 p.m. 

CCT, or both. Following Order No. 809, and beginning April 1, 2016, a releasing 

shipper will have three intraday opportunities to recall capacity instead of two: (1) the 

Intraday 1 Nomination Cycle at 10:00 a.m. CCT; (2) the Intraday 2 Nomination Cycle at

2:30 p.m. CCT; and (3) the Intraday 3 Nomination Cycle at 7:00 p.m. CCT. Given the 

changes in the intraday cycles, and in the absence of the parties’ agreement otherwise, it 

will be unclear what intraday recall rights a releasing shipper has on April 1, 2016 if the 

capacity release transaction spans a period before and after April 1, 2016. 

19. Based upon our review of the record, we see value in interpreting in advance the 

contractual recall provisions in capacity release transactions that span a period before and 

after April 1, 2016. Interpreting in advance such provisions will assist parties in 

effectuating the transition from two to three intraday cycles and reduce the burden of 
Docket No. RM14-2-002 - 7 -

negotiation on those parties satisfied with those interpretations. We agree with NGSA 

that the parties to a capacity release transaction could agree to resolve any issues 

regarding ambiguous recall rights between themselves. However, the default 

interpretation provides all parties with a reasonable method of proceeding, without the 

need for further action on their part. If the parties disagree with the default interpretation, 

the Commission will interpret the intent of the parties pursuant to the procedures 

established below. However, providing a reasonable default interpretation should reduce 

the number of written requests to the pipelines as well as the number of potential 

complaints filed with the Commission pursuant to those procedures.

20. Accordingly, absent the parties’ agreement otherwise, we find that the most 

reasonable interpretation of the parties’ intent with respect to intraday recall rights on 

April 1, 2016 and thereafter is as follows:7

 If the transaction spans a period before and after April 1, 2016 and specifies that 

recalls are permitted at both the Intraday 1 and Intraday 2 Nomination Cycles, then 

for April 1, 2016 and thereafter recalls will be permitted at the Intraday 1, Intraday 

2, and Intraday 3 Nomination Cycles. If the parties agreed to allow recall rights at 

both of the then-existing intraday cycles, we think it is the most reasonable 

interpretation to allow recall at all of the intraday cycles available on April 1, 

2016. 

 If the transaction spans a period before and after April 1, 2016 and specifies that 

recalls are permitted only at the Intraday 1 Nomination Cycle, then for April 1,

2016 and thereafter recalls only will be permitted at the Intraday 1 Nomination 

Cycle. Because the deadline for making an Intraday 1 nomination did not change 

as a result of Order No. 809, we find this is the most reasonable interpretation of 

the parties’ intent. 

 If the transaction spans a period before and after April 1, 2016 and specifies that 

recalls are permitted only at the Intraday 2 Cycle, then for April 1, 2016 and 

thereafter recalls will be permitted only at the Intraday 3 Nomination Cycle. We 

find that the most reasonable interpretation of the parties’ intent in this situation is 

that the parties intended to permit recalls only at the last intraday nomination 

cycle, and the Intraday 3 Nomination Cycle is closest in time to the 9:00 p.m. CCT 

gas flow time under the existing Intraday 2 Nomination Cycle. While this 

interpretation is at variance with that proposed by the Associations, we find that, 

as a default, the most reasonable interpretation of an Intraday 2 only nomination is 

 7 See, e.g., Consol. Gas Transmission Corp. v. FERC, 771 F.2d 1536, 1544 (D.C. 

Cir. 1985) (stating that a contract “is ambiguous when it is ‘reasonably susceptible to 

different constructions or interpretations’”) (citations omitted).
Docket No. RM14-2-002 - 8 -

that the parties intended the replacement shipper to lock-in its pro rata quantity of 

gas flow before the last intraday nomination opportunity.8

21. In the Order on Clarification, we pointed out that as of the April 16, 2015 issuance 

of Order No. 809, parties should have been on notice that the nomination schedule would 

change as of April 1, 2016. The Associations replied stating that prior to April 1, 2016, 

pipelines will not have a simple electronic election mechanism to specify recall rights for 

the new intraday schedules. Nonetheless, even prior to April 1, 2016, shippers could 

have specified special recall provisions for the period on and after April 1, 2016 in the 

special terms and conditions section of the transaction agreement. To the extent that 

parties have made such provisions, we expect the pipelines to honor them. However, 

when the parties have been silent, we find that establishing a default interpretation is 

reasonable. Releasing and replacement shippers, of course, can always notify the 

pipelines if they do not want to avail themselves of the defaults. If the parties agree to 

alternative recall rights, those rights will apply in place of the default interpretation.

22. The Associations request that, if the parties cannot reach agreement, the releasing 

shipper should have the right to recall capacity under a transaction’s existing provisions if 

it wishes to terminate the transaction. While the releasing shipper would have the right to 

exercise all recall conditions in the release agreement, we will not provide the releasing 

shipper exercising those recall rights with the additional right to terminate the release 

transaction prior to its expiration date (unless that is specified in the agreement).

23. We trust that the parties to capacity release transactions will be able to resolve any 

issues between themselves. However, in order to establish a reasonable approach for 

processing any possible complaints, we expect that if parties to a capacity release 

transaction are unable to agree on alternative recall rights, the releasing shipper must 

 8 Under the standards prior to April 1, 2016, a capacity release transaction with an 

Intraday 2 only recall condition would allow the replacement shipper to reserve natural 

gas flow from the beginning of the gas day at 9:00 a.m. CCT to 9:00 p.m. CCT, the start 

of gas flow for an Intraday 2 nomination. Under the revised Intraday 3 cycle, the 

replacement shipper could reserve natural gas flow until 10:00 p.m. CCT, the start of gas 

flow for an Intraday 3 nomination, which is only one hour later. In contrast, under the 

Associations’ proposal, the replacement shipper would lose three hours of natural gas 

flow, because its flow could be reserved only until 6:00 p.m. CCT, the start of gas flow 

for a revised Intraday 2 nomination. We also note that allowing the releasing shipper to 

recall its capacity during the new Intraday 2 cycle would permit it to bump flowing 

interruptible service, an additional benefit which it had not reserved when it agreed to an

Intraday 2 only recall condition under the standards in effect before April 1, 2016. We 

therefore find that translating an Intraday 2 only recall condition to an Intraday 3 only 

recall condition better approximates the parties’ intent.
Docket No. RM14-2-002 - 9 -

notify the applicable pipeline and the replacement shipper by November 13, 2015 that the 

parties do not agree on alternative recall rights and specify what it believes should be the 

alternative recall rights.9 In the absence of any such notification by the releasing shipper, 

our interpretations above will control on April 1, 2016. If the replacement shipper 

disagrees with the releasing shipper’s designation of alternative recall rights, the 

replacement shipper should file a complaint with the Commission by December 14, 2015,

providing transaction specific justifications for adopting a different contractual 

interpretation than that designated by the releasing shipper.

10 If the replacement shipper

does not file a complaint in this situation, the releasing shipper’s designation of 

alternative recall rights will apply. For any releases taking place after November 13, 

2015, the default interpretations will control unless the parties specify different 

provisions in the special terms and conditions of their release or notify the pipeline 

through other procedures.

The Commission orders:

(A) The Commission provides default interpretations to apply to capacity 

release transactions that span a period before and after April 1, 2016, as discussed in the 

body of this order.

 9 Releasing shippers should be the party proposing such alternatives since they 

perform a jurisdictional function in releasing capacity. See 18 C.F.R. § 284.8(g) (2015) 

granting releasing shippers blanket certificates to release capacity. See also United 

Distribution Companies v. FERC, 88 F.3d 1105, 1152 (D.C. Cir. 1996) (citing Pipeline 

Service Obligations and Revisions to Regulations Governing Self-Implementing 

Transportation Under Part 284 of the Commission’s Regulations, Regulation of Natural 

Gas Pipelines After Partial Wellhead Decontrol and Order Denying Rehearing in Part, 

and Clarifying Order No. 636; Order No. 636-A, FERC Stats. & Regs. ¶ 30,950, at 

30,551 (1992))) (“By controlling such capacity, the assignors are effectively determining 

by whom, and under what circumstances, gas will be transported and are using the 

pipeline's facilities as if they were the assignors' facilities.”).

10 The Commission’s ability to respond by April 1, 2016 to any complaints filed 

depends on the number of complaints we receive. While the Commission will act on 

complaints filed after December 14, 2015, the Commission will give priority to 

processing complaints filed by December 14, 2015 in an effort to resolve them before 

April 1, 2016. In the event the Commission is unable to act on a complaint prior to April 

1, 2016, the pipeline should proceed with the releasing shipper’s interpretation of the 

recall rights as long as the releasing shipper made its required notification to the 

applicable pipeline and the replacement shipper by November 13, 2015 as discussed 

above.
Docket No. RM14-2-002 - 10 -

(B) Releasing shippers are directed to notify the applicable pipeline and 

replacement shippers by November 13, 2015 if the parties do not agree on alternative 

recall rights and specify what the releasing shipper believes should be the alternative 

recall rights, as discussed in the body of this order.

By the Commission.

( S E A L )

Kimberly D. Bose,

Secretary.