55726 Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 

1–April 30: 6,000 feet MSL to but not 

including FL 180. 

Times of use. May 1–August 31: 0800–1700 

Monday–Friday; other times by NOTAM. 

September 1–April 30: 0800–2200 Monday– 

Friday; other times by NOTAM. 

12. Tupper South MOA, NY [New] 

Boundaries. Beginning at lat. 43°53′00′′ N., 

long. 75°03′00′′ W.; to lat. 43°53′00′′ N., long. 

74°12′00′′ W.; to lat. 43°40′00′′ N., long. 

74°12′00′′ W.; to lat. 43°30′00′′ N., long. 

74°21′00′′ W.; to lat. 43°30′00′′ N., long. 

75°03′00′′ W.; to the point of beginning. 

Altitudes. May 1–October 31: 8,000 feet 

MSL to but not including FL 180; November 

1–April 30: 6,000 feet MSL to but not 

including FL 180. 

Times of use. May 1–August 31: 0800–1700 

Monday–Friday; other times by NOTAM. 

September 1–April 30: 0800–2200 Monday– 

Friday; other times by NOTAM. 

13. Tupper East MOA, NY [New] 

Boundaries. Beginning at lat. 44°36′00′′ N., 

long. 74°21′00′′ W.; to lat. 44°36′00′′ N., long. 

74°12′00′′ W.; to lat. 44°06′00′′ N., long. 

74°12′00′′ W.; to lat. 44°14′00′′ N., long. 

74°21′00′′ W.; to the point of beginning. 

Altitudes. 10,000 feet MSL to but not 

including FL 180. 

Times of use. May 1–August 31: 0800–1700 

Monday–Friday; other times by NOTAM. 

September 1–April 30: 0800–2200 Monday– 

Friday; other times by NOTAM. 

The Rule 

The FAA is amending Title 14 Code 

of Federal Regulations (14 CFR) part 73 

to establish two new restricted areas, 

R–5202A and R–5202B, in the vicinity 

of Fort Drum, NY. The new restricted 

areas supplement the existing restricted 

area, R–5201, to enable aircrews to train 

in high altitude, long range weapons 

delivery and other modern tactics at the 

Adirondack Range. In the NPRM, the 

FAA also proposed to change the 

designated altitudes of R–5201 from 

‘‘Surface to 23,000 feet MSL,’’ to 

‘‘Surface to but not including 23,000 

feet MSL.’’ After further discussions 

between the controlling agency and the 

proponent, it was determined that this 

change is not needed; therefore, R–5201 

will not be modified as proposed. As a 

result, the proposed FL 230 base 

altitude of the new restricted area, R– 

5202A, which overlies R–5201, is 

changed to 23,000 feet MSL to be 

consistent with the ceiling of R–5201. In 

addition, the NPRM contained an 

incorrect date in the time of designation 

for R–5202A and R–5202B. The portion 

of the time of designation stated in the 

NPRM as ‘‘May 1–August 21’’ should 

read ‘‘May 1–August 31.’’ The correct 

dates are included in this rule. Except 

as noted above, the restricted area 

descriptions are the same as proposed in 

the NPRM. 

The FAA has determined that this 

regulation only involves an established 

body of technical regulations for which 

frequent and routine amendments are 

necessary to keep them operationally 

current. Therefore, this regulation: (1) Is 

not a ‘‘significant regulatory action’’ 

under Executive Order 12866; (2) is not 

a ‘‘significant rule’’ under Department of 

Transportation (DOT) Regulatory 

Policies and Procedures (44 FR 11034; 

February 26, 1979); and (3) does not 

warrant preparation of a regulatory 

evaluation as the anticipated impact is 

so minimal. Since this is a routine 

matter that will only affect air traffic 

procedures and air navigation, it is 

certified that this rule, when 

promulgated, will not have a significant 

economic impact on a substantial 

number of small entities under the 

criteria of the Regulatory Flexibility Act. 

This rulemaking is promulgated 

under the authority described in 

Subtitle VII, Part A, Subpart I, section 

40103. Under that section, the FAA is 

charged with prescribing regulations to 

assign the use of the airspace necessary 

to ensure the safety of aircraft and the 

efficient use of airspace. This regulation 

is within the scope of that authority as 

it modifies special use airspace in New 

York. 

Environmental Review 

The FAA has determined that the 

Final Environmental Assessment (FEA) 

prepared by the Air National Guard 

associated with the proposed project is 

adequate for adoption in accordance 

with FAA Order 1050.1E, 

‘‘Environmental Impacts: Policies and 

Procedures,’’ Paragraph 404d. The FAA 

has independently evaluated the 

information contained in the FEA and 

takes full responsibility for the scope 

and content that addresses FAA actions. 

Further, the FAA has issued its own 

Finding of No Significant Impact. 

List of Subjects in 14 CFR Part 73 

Airspace, Prohibited areas, Restricted 

areas. 

Adoption of the Amendment 

■ In consideration of the foregoing, the 

Federal Aviation Administration 

amends 14 CFR part 73 as follows: 

PART 73—SPECIAL USE AIRSPACE 

■ 1. The authority citation for part 73 

continues to read as follows: 

Authority: 49 U.S.C. 106(g), 40103, 40113, 

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959– 

1963 Comp., p. 389. 

§ 73.52 [Amended] 

■ 2. § 73.52 is amended as follows: 

* * * * * 

R–5202A Fort Drum, NY [New] 

Boundaries. Beginning at lat. 44°01′05′′ N., 

long. 75°37′14′′ W.; to lat. 44°03′20′′ N., long. 

75°40′49′′ W.; to lat. 44°06′55′′ N., long. 

75°42′09′′ W.; to lat. 44°10′50′′ N., long. 

75°38′59′′ W.; to lat. 44°16′07′′ N., long. 

75°32′41′′ W.; to lat. 44°11′24′′ N., long. 

75°22′59′′ W.; to lat. 44°07′10′′ N., long. 

75°26′49′′ W.; to the point of beginning. 

Designated altitudes. 23,000 feet MSL to FL 

290. 

Time of designation. May 1–August 31: 

0800–1700 local time, Monday–Friday; other 

times by NOTAM. September 1–April 30: 

0800–2200 local time, Monday–Friday; other 

times by NOTAM. 

Controlling agency. FAA, Boston ARTCC. 

Using agency. NY ANG, 174FW/Det 1, Fort 

Drum, NY. 

* * * * * 

R–5202B Fort Drum, NY [New] 

Boundaries. Beginning at lat. 44°10′18′′ N., 

long. 75°41′18′′ W.; to lat. 44°20′32′′ N., long. 

75°32′04′′ W.; to lat. 44°14′00′′ N., long. 

75°17′00′′ W.; to lat. 44°06′00′′ N., long. 

75°25′10′′ W.; to lat. 44°06′00′′ N., long. 

75°28′49′′ W.; to lat. 44°07′10′′ N., long. 

75°26′49′′ W.; to lat. 44°11′24′′ N., long. 

75°22′59′′ W.; to lat. 44°16′07′′ N., long. 

75°32′41′′ W.; to lat. 44°10′50′′ N., long. 

75°38′59′′ W.; to lat. 44°09′34′′ N., long. 

75°40′00′′ W.; to the point of beginning. 

Designated altitudes. 6,000 feet MSL to FL 

290. 

Time of designation. May 1–August 31: 

0800–1700 local time, Monday–Friday; other 

times by NOTAM. September 1–April 30: 

0800–2200 local time, Monday–Friday; other 

times by NOTAM. 

Controlling agency. FAA, Boston ARTCC. 

Using agency. NY ANG, 174FW/Det 1, Fort 

Drum, NY. 

* * * * * 

Issued in Washington, DC, on September 

12, 2008. 

Edith V. Parish, 

Manager, Airspace & Rules Group. 

[FR Doc. E8–22646 Filed 9–25–08; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Parts 260, 284 and 385 

[Docket No. RM07–10–001; Order No. 704– 

A] 

Transparency Provisions of Section 23 

of the Natural Gas Act 

Issued September 18, 2008. 

AGENCY: Federal Energy Regulatory 

Commission. 

ACTION: Order on Rehearing and 

Clarification. 

SUMMARY: The Federal Energy 

Regulatory Commission affirms its basic 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 55727 

1Transparency Provisions of Section 23 of the 

Natural Gas Act, Order No. 704, 74 FR 1014 (Jan. 

4, 2008), FERC Stats. & Regs. ¶ 31,260. 

2Energy Policy Act of 2005, Pub. L. No. 109–58, 

119 Stat. 594 (2005). 

3See sections 4 and 5 of the Natural Gas Act, 15 

U.S.C. sections 717c and 717d. 

4See Initial Report on Company-Specific Separate 

Proceedings and Generic Reevaluations; Published 

Natural Gas Price Data; and Enron Trading 

Strategies—Fact Finding Investigation of Potential 

Manipulation of Electric and Natural Gas Prices, 

Docket No. PA02–2–000 (August 2003). 

5Price Discovery in Natural Gas and Electric 

Markets, 104 FERC ¶ 61,121 (2003). 

6 Id. P 43. 

7Federal Energy Regulatory Commission, Report 

on Natural Gas and Electricity Price Indices, at 2, 

Docket Nos. PL03–3–004 et al. (2004). 

8See, e.g., GENERAL ACCOUNTING OFFICE, 

NATURAL GAS AND ELECTRICITY MARKETS: 

FEDERAL GOVERNMENT ACTIONS TO IMPROVE 

PRIVATE PRICE INDICES AND STAKEHOLDER 

REACTION (December 2005). 

9Transparency Provisions of Section 23 of the 

Natural Gas Act, 72 FR 20791 (Apr. 26, 2007), FERC 

Stats. and Regs. ¶ 32,614 (2007) (April 2007 NOPR). 

10Pipeline Posting Requirements under Section 

23 of the Natural Gas Act, 73 FR 1116 (Jan. 7, 2008), 

Continued 

determinations in Order No. 704, while 

granting rehearing in part and 

clarification regarding requirements that 

certain natural gas market participants 

report information regarding their 

reporting of transactions to price index 

publishers and their blanket sales 

certificate status. These natural gas 

market participants must report 

annually certain information regarding 

their physical natural gas transactions 

for the previous calendar year. As 

clarified in the Order on Rehearing and 

Clarification, certain market participants 

engaged in a de minimis volume of 

transactions will not be required to 

report information regarding their 

transactions for the calendar year. The 

reported information will make it 

possible to assess the formation of index 

prices and the use of index pricing in 

natural gas markets. These regulations 

facilitate price transparency in markets 

for the wholesale sale of physical 

natural gas in interstate commerce as 

contemplated by section 23 of the 

Natural Gas Act, 15 U.S.C. 717t–2. 

DATES: Effective Date: This rule will 

become effective October 27, 2008. The 

revisions to FERC Form No. 552 are 

applicable for the reporting of 

transactions occurring in calendar year 

2008. 

FOR FURTHER INFORMATION CONTACT: 

Matthew L. Hunter (Technical), Office 

of Enforcement, Federal Energy 

Regulatory Commission, 888 First 

Street NE., Washington, DC 20426, 

(202) 502–6409. 

Matthew.Hunter@ferc.gov. 

Christopher J. Peterson (Technical), 

Office of Enforcement, Federal Energy 

Regulatory Commission, 888 First 

Street NE., Washington, DC 20426, 

(202) 502–8933, 

Christopher.Peterson@ferc.gov. 

Gabe S. Sterling (Legal), Office of 

Enforcement, Federal Energy 

Regulatory Commission, 888 First 

Street NE., Washington, DC 20426, 

(202) 502–8891, 

Gabriel.Sterling@ferc.gov. 

SUPPLEMENTARY INFORMATION: 

Before Commissioners: Joseph T. 

Kelliher, Chairman; Suedeen G. Kelly, 

Marc Spitzer, Philip D. Moeller, and Jon 

Wellinghoff. 

I. Introduction 

1. On December 26, 2007, the 

Commission issued Order No. 704, 

which imposed an annual reporting 

requirement on certain natural gas 

market participants.1 The order requires 

certain natural gas buyers and sellers to 

file annually FERC Form No. 552 and 

report summary information about 

physical natural gas transactions for 

each calendar year. 

2. Order No. 704 has its genesis in the 

Energy Policy Act of 2005 (EPAct 

2005).2 EPAct 2005 added section 23 of 

the Natural Gas Act (NGA), 15 U.S.C. 

§ 717t-2 (2000 & Supp. V 2005) to 

authorize 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.’’ Section 23 

further provides that the Commission 

may issue such rules as it deems 

necessary and appropriate to ‘‘provide 

for the dissemination, on a timely basis, 

of information about the availability and 

prices of natural gas sold at wholesale 

and interstate commerce to the 

Commission, State commissions, buyers 

and sellers of wholesale natural gas, and 

the public.’’ 

3. Section 23 of the NGA enhances the 

Commission’s authority to ensure 

confidence in the nation’s natural gas 

markets. The Commission’s marketoriented policies for the wholesale 

natural gas industry require that 

interested persons have broad 

confidence that reported market prices 

accurately reflect the interplay of 

legitimate market forces. Without 

confidence in the fairness of price 

formation, the true value of transactions 

is very difficult to determine. Further, 

price transparency makes it easier for us 

to ensure that jurisdictional prices are 

‘‘just and reasonable.’’ 3

4. The performance of Western 

electric and natural gas markets early in 

the decade shook confidence in posted 

market prices for energy. In examining 

these markets, the Commission’s staff 

found that some companies submitted 

false information to the publishers of 

natural gas price indices, so that the 

resulting reported prices were 

inaccurate and untrustworthy.4 As a 

result, questions arose about the 

legitimacy of published price indices, 

remaining even after the immediate 

crisis passed. Moreover, market 

participants feared that the indices 

might have become even more 

unreliable, since reporting (which has 

always been voluntary) declined to 

historically low levels in late 2002. 

5. One of the Commission’s responses 

to these developments was the issuance, 

on July 24, 2003, of a Policy Statement 

on Electric and Natural Gas Price 

Indices (Policy Statement) that 

explained our expectations of natural 

gas and electricity price index 

developers and the companies that 

report transaction data to them.5 The 

Policy Statement, among other things, 

directed the Commission’s staff to 

continue to monitor price formation in 

wholesale markets, including the level 

of reporting to index developers and the 

amount of adherence to the Policy 

Statement standards by price index 

developers and by those who provide 

data to them.6 In adhering to this 

directive, Commission staff documented 

improvements in the number of 

companies reporting prices from back 

offices, adopting codes of conduct, and 

auditing their price reporting practices.7

These efforts resulted in significant 

progress in the amount and quality of 

both price reporting and the information 

provided to market participants by price 

indices.8 It is against this backdrop that 

Congress passed EPAct 2005 and 

provided us with expanded authority to 

mandate additional reporting and 

improve market confidence through 

greater price transparency. 

6. In an April 19, 2007 Notice of 

Proposed Rulemaking, the Commission 

proposed regulations consistent with 

these new responsibilities.9 The April 

2007 NOPR contained both an annual 

transaction reporting requirement for 

market participants as well as a daily 

posting requirement for pipelines. On 

December 26, 2007, the Commission 

issued Order No. 704 regarding the 

annual reporting requirement. The daily 

pipeline posting requirement proposal 

was separated from the annual filing 

requirement and a new Notice of 

Proposed Rulemaking regarding the 

pipeline posting requirement was issued 

concurrently in Docket No. RM08–2– 

000.10


sroberts on PROD1PC70 with RULES
55728 Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 

FERC Stats. and Regs. ¶ 32,626 (2007). A technical 

conference has been held in Docket No. RM08–2– 

000 and the pipeline posting requirement is 

pending further action by the Commission. 

11Order No. 704 at P 3. See also id. P 13. 

12 Id. P 67. 

13 Id. 

14 Id. P 7 and 62. 

15 Id. P 66 (citing sections 4 and 5 of the NGA, 

15 U.S.C. sections 717c and 717d). 

16Policy Statement at P 6. 

17We note that this understanding tracks closely 

with our discussion of transactions that are 

reportable to index developers in the Policy 

Statement. See Policy Statement at P 34. 18Further, as discussed in greater detail below, 

observers will be able to parse data to compare 

activities of purchasers and sellers in the market. 

19Order No. 704 at PP 18 and 69. Similarly, P 5 

of the order indicates that an understanding ‘‘in 

broad terms’’ of the extent of the natural gas market 

is a goal of the rule. 

7. 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 identify themselves and 

report summary information about their 

physical natural gas transactions on an 

annual, calendar year basis. To facilitate 

such reporting, Order No. 704 created 

FERC Transaction Report FERC Form 

No. 552: Annual Report of Natural Gas 

Transactions (Form No. 552) and 

various implementing regulations. Form 

No. 552 is to be filed by May 1, 2009, 

for transactions occurring in calendar 

year 2008 and by May 1 of each year 

thereafter for each previous calendar 

year. 

8. Thirteen requests for rehearing or 

clarification of Order No. 704 were 

timely filed. No request for rehearing or 

clarification argues that the rule is 

unnecessary or should not have been 

issued. Rather, the requests seek 

modification or clarification of specific 

aspects of Order No. 704. Commission 

staff held two technical conferences 

during which potential filers of Form 

No. 552 and other industry stakeholders 

discussed the form. Stakeholders at 

these two technical conferences 

represented a broad spectrum of market 

participants and observers, including 

producers, interstate pipelines, 

intrastate pipelines, natural gas 

marketers, commodities traders, local 

distribution companies (LDCs), electric 

generation end-users, industrial endusers, and natural gas price index 

developers. Many conference 

participants filed comments following 

one or both of these conferences. 

9. As discussed below, we largely 

affirm Order No. 704, granting a limited 

number of rehearing requests and 

clarifying the order. 

II. Discussion 

A. The Value of Aggregated Annual 

Data Regarding Volumes That Utilize, 

Contribute to, or Could Contribute to the 

Development of Price Indices 

10. Order No. 704 focused primarily 

on ‘‘price formation in spot markets’’ 

and accordingly sought information 

about the ‘‘amount of daily or monthly 

fixed-price trading that [is] eligible to be 

reported to price index publishers as 

compared to the amount of trading that 

uses or refers to price indices.’’ 11 As we 

stated in the order, the ‘‘information 

collected under this requirement is 

focused specifically on daily and 

monthly physical spot or ‘cash’ market 

activity and the contracting based on the 

prices developed in those markets.’’ 12

The rationale for this focus is that a 

‘‘[b]etter understanding of the role and 

functioning of wholesale natural gas 

spot markets can increase confidence 

that posted market prices of natural gas 

accurately reflect the interplay of 

legitimate market forces.’’ 13

Additionally, information on price 

index utilization and formation would 

greatly enhance the Commission’s 

efforts to monitor price formation in the 

wholesale markets in support of the 

Commission’s market-oriented 

policies.14 As we explained, ‘‘without 

confidence in the basic processes of 

price formation, market participants 

cannot have faith in the value of their 

transactions, the public cannot believe 

that the prices they see are fair, and it 

is more difficult for the Commission to 

ensure that jurisdictional prices are ‘just 

and reasonable.’ ’’ 15

11. Our recognition of the importance 

of price formation on market confidence 

is, of course, not new. The Commission 

has often remarked on the need to 

ensure price transparency and accurate 

price reporting, including, for example, 

our 2003 Policy Statement on price 

reporting to index developers. As we 

there recognized: 

Price indices are widely used in bilateral 

natural gas and electric commodity markets 

to track spot and forward prices. They are 

often referenced in contracts as a price term; 

they are related to futures markets and used 

when futures contracts go to delivery; basis 

differentials in indices are used to hedge 

natural gas transportation costs; indices are 

used in many gas pipeline tariffs to settle 

imbalances or determine penalties; and state 

commissions use indices as benchmarks in 

reviewing the prudence of gas or electricity 

purchases. Since index dependencies 

permeate the energy industry, the indices 

must be robust and accurate and have the 

confidence of market participants for such 

markets to function properly and 

efficiently.16

We continue to believe that ensuring 

price transparency is a vital policy goal, 

especially as it relates to transactions 

that utilize, contribute, or could 

contribute to a price index. 

12. Section 23(a)(4) of the NGA 

requires us to ‘‘consider the degree of 

transparency provided by existing price 

publishers and providers of trade 

processing services, and [] rely on such 

publishers and services to the maximum 

extent possible.’’ We have reviewed 

existing price index publications and, 

while the Commission recognizes the 

substantial value that these publications 

have enhancing market transparency, 

we determine that the additional data 

required on Form No. 552 is necessary. 

Section 23 is consistent with our belief 

that transparency is furthered by 

shedding light on price indices and 

their formation. 

13. The Commission reiterates that 

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. 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.17 Transactions that do 

not occur at a specific location currently 

designated by an index developer as a 

reporting location are nonetheless 

reportable on Form No. 552. 

14. This focus on index price-related 

transactions will increase market 

participant confidence by providing 

greater transparency in the use of index 

prices and how well index prices reflect 

market forces. This data will also allow 

the Commission’s staff, state 

commissions, and all other industry 

observers to evaluate the level of index 

price usage at both a company level and 

nationally.18 Data on index 

development and use would be of 

substantial value in the Commission’s 

transparency and market monitoring 

missions. 

15. We also clarify that Form No. 552 

does not seek the broader range of 

transaction data necessary to evaluate 

the size of the national physical natural 

gas market. While Order No. 704 

mentioned such a calculation as one 

result of the data to be collected,19 we 

elect not to craft Form No. 552 to 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 55729 

20 Id. P 86. 

21 Id. PP 85–86. 

22 15 U.S.C. section 717t–2(d)(2). 

23Form No. 552 must be submitted by any section 

204.402 or section 284.284 blanket certificate 

holder even if the entity has aggregate purchases 

and sales less than the de minimis threshold. Such 

an entity must provide identification information 

on Form No. 552 and must answer questions 

regarding price reporting to price index publishers, 

but need not submit Form No. 552’s aggregate 

volume data. Order No. 704 at P 60. 

24 Id. P 78. 

25Copano comments at 8. 

26 Id. 5. 

27 Id. at 6. 

28 Id. at 7. 

29 Id. at 7–8. 

capture the data necessary to calculate 

a national market. At this time, we do 

not believe that such data would further 

the transparency of the natural gas 

markets other than determining an 

aggregate approximation of the entirety 

of physical gas transactions. Further, 

unless volumes that utilize price indices 

or that could contribute to such indices 

were separately reported on Form No. 

552 (with an additional, substantial 

reporting burden), the analytical 

benefits noted above would be lost. 

Lastly, any attempt to rationally 

estimate the size of the physical gas 

market on a national level would 

require reporting from a substantially 

larger group of respondents than the 

narrower focus adopted in Order No. 

704. Respondents would necessarily 

include smaller market participants for 

whom the reporting burden would be 

undue. For these reasons, we reiterate 

and emphasize our determination that 

data provided on Form No. 552 should 

be limited to transactions that utilize, 

contribute to, or could contribute to 

index price formation. However, the 

Commission understands that the 

natural gas market is ever evolving and 

dynamic. At a future date we may elect 

to amend Form No. 552 to obtain 

additional information necessary to 

facilitate transparency of the market. 

B. Both Sales and Purchase Data Are To 

Be Included on Form No. 552 

16. Order No. 704 required the annual 

reporting both of relevant natural gas 

sales and purchases. We explained that 

purchase information was the opposing 

side of a sale transaction and, thus, was 

as relevant to the Commission’s 

transparency mission as the reporting of 

sales.20 Further, we noted that we have 

often found the reporting of purchase 

information beneficial both independent 

of sales figures and as a cross-check on 

such volumes.21

17. Although we understand that 

some participants in the technical 

conferences objected to the collection of 

purchase data in various contexts, we 

continue to believe that purchase data is 

a vital component to Form No. 552 and 

the Commission’s transparency goals. 

Not only is purchase information 

important as a cross-check on reported 

sales volumes, but it has independent 

value. If only sales were reported on 

Form No. 552, Commission staff, state 

commissions, and other market 

observers would be unable to discern, 

for example, whether significant 

numbers of gas purchasers were 

transacting under contracts referencing 

an index price. Analysis of Form No. 

552 purchase information will also 

provide trend data regarding purchase 

activity, which would be very useful for 

those charged with monitoring the 

natural gas markets. With purchase data, 

the public will be able to discern which 

purchasers are utilizing index-based 

contracts, whether there is geographic 

disparity regarding use of price indices 

among purchasers, the overall reliance 

upon gas price indices by purchasers, 

and other information relevant to 

market analysis and market confidence. 

While we acknowledge that removing 

purchases from volumes that must be 

reported on Form No. 552 would 

somewhat reduce the reporting burden 

on certain market participants, we 

continue to believe that the substantial 

benefits of having such data publicly 

available outweigh this burden. 

C. The De Minimis Reporting Threshold 

18. Section 23(d)(2) of the NGA 

requires the Commission to exempt 

from new transparency reporting 

requirements ‘‘natural gas producers, 

processors or users who have a de 

minimis market presence.’’ 22 Consistent 

with this directive, Order No. 704 

provided that most buyers or sellers of 

less than a de minimis volume of 

natural gas are not required to submit 

Form No. 552.23 The order set the de 

minimis threshold at 2.2 million 

MMBtus; that is, annual sales plus 

annual purchases of more than 2.2 

million MMBtus required a market 

participant to report transaction 

information. In setting this threshold, 

the Commission ‘‘sought to require 

reporting from a sufficient number of 

significant market participants to 

ensure, in the aggregate, an accurate 

picture of the physical natural gas 

market as a whole.’’ 24 The Commission 

explained that: 

[T]he [2.2 million MMBtu] figure was 

based on the simple calculation of one-ten 

thousandth (1/10,000th) of the annual 

physical volumes consumed in the United 

States, which is approximately 22 trillion 

cubic feet (Tcf) (or roughly 22 billion 

MMBtus). Looked at another way, a de 

minimis market participant would trade the 

equivalent of less than one standard NYMEX 

futures contract per day. Although a market 

participant that contracts for 1/10,000th of 

the nation’s annual physical volume may 

appear to have little effect on natural gas 

prices, that participant may be transacting 

only at one location and, thus, have a much 

greater pricing effect there. 

Requests for Clarification or Rehearing 

19. Copano Energy L.L.C. (Copano) 

requests rehearing of the de minimis 

threshold and argues that 2.2 million 

MMBtu is such a low threshold so as to 

render meaningless the NGA’s directive 

that the Commission exempt from 

annual reporting requirements market 

participants that have a de minimis 

market presence.25 Copano argues that 

the Congressional purpose behind the 

de minimis threshold was to exclude 

entities that are too small to have an 

impact on market prices in the 

interstate, wholesale gas market. Copano 

states that a threshold one-hundred 

times as large (i.e., 220 million MMBtu/ 

year) would represent less than 1 

percent of annual physical volumes of 

gas consumed in the country and 

‘‘would therefore have no ability to 

impact prices in the wholesale, 

interstate natural gas market.’’ 26 Copano 

notes that Order No. 704 justifies the 

selected threshold by noting that even 

small amounts of gas purchases can 

have a price effect at certain locations.27

Copano believes that this reinforces its 

conclusion that a threshold should be 

established that measures market 

presence at market hubs.28 Instead of a 

single-number de minimis threshold, 

Copano suggests a two-pronged 

approach that considers both the impact 

of a market participant’s transactions on 

the overall wholesale gas market (a 

twenty-two million MMBtu threshold) 

and the impact of a market participant’s 

transactions at market hubs (5 percent of 

the total jurisdictional sales at the 

hub).29

20. American Public Gas Association 

(APGA) requests clarification of section 

260.401(b) of the Commission’s 

regulations. As currently written, the 

regulation exempts an entity that does 

not hold a blanket sales or marketing 

certificate from the reporting 

requirement if the entity either made 

fewer than 2.2 million Dth of wholesale 

sales or 2.2 million Dth of wholesale 

purchases. APGA proposes that the 

Commission clarify this language so as 

to ensure that an entity with fewer than 

2.2 million MMBtu of purchases is 

exempted from reporting purchases and 

an entity with fewer than 2.2 million 


sroberts on PROD1PC70 with RULES
55730 Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 

30APGA comments at 2. 31Shell is, collectively, Shell Gulf of Mexico, 

Shell Offshore, Inc., Shell Rocky Mountain 

Production LLC, and SWEPI LP. Shell comments at 

28. 32 Id. at 28–29. 33 Id. at 29. 34Order No. 704 at P 81. 35For example, we clarify below that a bundled 

retail transaction made at a state-approved tariff rate 

is not reportable. We anticipate that this 

clarification will significantly limit the reporting 

obligation on smaller market participants. 

36Reportable sales include off-system, balancing, 

and other assorted reportable sales as discussed 

elsewhere in this order. 

37APGA’s request for clarification on this point 

is therefore denied. 

38As detailed herein, physical transactions of 

companies that fall below the de minimis threshold 

are excluded from the data collected by Form No. 

552. Physical transactions need not be reported if 

they are not Next-Day or Next-Month transactions 

as those terms are defined in Form No. 552. In this 

same vein, financial transactions, transactions 

between affiliates, and traditional retail transactions 

(as discussed below), are not reportable on Form 

No. 552. 

39Order No. 704 at PP 60 and 97. 

MMBtu of sales is exempted from 

reporting sales.30

21. Shell requests that the 

Commission clarify whether purchases 

and sales should be aggregated for 

purposes of calculating an entity’s total 

reportable volumes.31 Additionally, 

Shell seeks guidance regarding how 

market participants are to determine 

whether they fall into the de minimis 

exception when part of the relevant total 

sales or purchases are to an affiliate or 

under other circumstances.32 Shell also 

requests clarification as to whether 

volumes that total exactly 2.2 TBtu fall 

into or out of the de minimis exception 

as the rule references amounts above 

and below the threshold, but not 

precisely at the threshold.33

Commission Determination 

22. Regarding the appropriate de 

minimis threshold, we affirm our 

findings in Order No. 704 and retain the 

2.2 million MMBtu level. As the 

Commission stated in Order No. 704, 

even market participants with total 

reportable volumes slightly above the 

threshold may have a significant effect 

on local wholesale markets.34 While it is 

possible that a respondent that exceeds 

the de minimis threshold exemption 

does not actually contribute to price 

formation, it is certain that some do and, 

in any event, market observers cannot 

yet know with any degree of 

assuredness which market participants 

have or do not have local price 

relevance. Likewise, these entities may 

rely upon price indices for a sizeable 

portion of their natural gas transactions. 

Form No. 552 seeks data only for 

volumes that either reference price 

indices or could contribute to the 

formation of price indices. A number of 

transactions are not reportable (as 

identified on Form No. 552, as 

discussed in Order No. 407, and as 

clarified in this order). Market 

participants should bear in mind that 

the Commission is not seeking data on 

all gas sales and purchases made by an 

entity, but rather a subset of these 

transactions.35

23. Nothing in Copano’s request for 

rehearing provides new information 

regarding the establishment of a proper 

de minimis threshold. While we 

acknowledge that there are a number of 

rational ways to establish a de minimis 

threshold consistent with our 

Congressional mandate, we continue to 

believe that 2.2 million MMBtu is an 

appropriate threshold for the reasons 

expressed herein and in Order No. 704. 

24. Regarding APGA and Shell’s 

requests involving how volumes are to 

be calculated to determine whether an 

entity meets or exceeds the de minimis 

threshold, the Commission clarifies that 

an entity that has 2.2 million MMBtu of 

reportable sales or purchases must file 

Form No. 552. That is, a potential 

respondent with either reportable 

purchases equal to or greater than 2.2 

million MMBtu or reportable sales 36

equal to or greater than 2.2 million 

MMBtu must submit the form. The 

following table, regarding reportable 

purchase and sale volumes, explains 

how the de minimis threshold will 

apply: 

Reportable sales volumes Reportable purchase volumes Does the entity report? 

≥ 2.2 million MMBtu ........................ ≥ 2.2 million MMBtu ....................... Yes, both sales and purchases. 

≥ 2.2 million MMBtu ........................ < 2.2 million MMBtu ...................... Yes, both sales and purchases. 

< 2.2 million MMBtu ........................ ≥ 2.2 million MMBtu ....................... Yes, both sales and purchases. 

< 2.2 million MMBtu ........................ < 2.2 million MMBtu ...................... No (unless the entity has a blanket certificate, in which case it will 

provide non-volume information only). 

25. We also clarify that sales and 

purchase volumes do not ‘‘net each 

other out’’ for purposes of determining 

whether an entity meets or exceeds the 

de minimis threshold. Additionally, an 

entity that must file Form No. 552 must 

report both reportable sales and 

reportable purchases regardless of the 

total volumes associated with each 

component volume. For example, if a 

potential respondent has annual 

reportable sales of 2.0 million MMBtu 

and reportable purchases of 3.0 million 

MMBtu, then it must file Form No. 552 

as its purchases exceed the de minimis 

threshold of 2.2 million MMBtu. 

Further, it would report both its sales 

and purchases on the form.37

26. We further clarify that, if a 

transaction is reportable on Form No. 

552, then volumes associated with the 

transaction should be counted towards 

the threshold. The converse is also true: 

if a transaction volume would not be 

included on the form, then volumes 

associated with it should not be counted 

towards the threshold. We emphasize 

that not all physical natural gas 

purchases and sales count towards the 

threshold.38

27. If a company chooses to aggregate 

volumes from affiliates, then such 

volumes are aggregated for purposes of 

determining whether the corporation 

meets or exceeds the de minimis 

threshold. In response to Shell’s 

requested clarification, Order No. 704 

already makes clear that ‘‘a company 

with multiple affiliates may choose to 

report separately or in aggregate, as best 

meets its needs.’’ 39 A company with 

multiple affiliates that chooses to 

aggregate must, however, aggregate all of 

its affiliates’ data (i.e., it may not choose 

to aggregate some affiliates but not 

others). Consistent with Shell’s other 

requests, we have modified Form No. 

552 to make clear that entities that meet 

or exceed the de minimis volume must 

submit the form. 

28. Regarding the format of amounts 

reported on Form No. 552, the 

Commission will require that 

volumetric entries on Form No. 552 be 

rounded to the nearest tenth of a TBtu. 

We understand that there was some 

confusion among participants at the 

technical conferences regarding the 

rounding of volume figures on Form No. 

552. Form No. 552 currently requests 

reporting of volumes to the nearest TBtu 

(i.e. , a reportable volume of 2.499 TBtu 

would be reported as 2.0 TBtu). We 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 55731 

40These commenters included American Forest & 

Paper Association (AF&PA), Industrial Energy 

Consumers of America (IECA), and Natural Gas 

Supply Association (NGSA). 

41Order No. 704 at P 3. 

42 Id. P 90. 

43 Id. 

44AGA NOPR comments at 3; NEM NOPR 

comments at 5. See also NGSA NOPR comments at 

12. 

45AF&PA NOPR comments at 5. 

46Order No. 704 at PP 39–40. 

47See, e.g., Order No. 704 at PP 60, 89, and 90. 

48 Id. P 90. 

49NGSA comments at 3. 

50 Id. 4. 

51 Id. 

52 Id. 5. 

53Encana Marketing (USA) Inc. (distinct from its 

joint rehearing request as part of the Canadian 

Suppliers). 

54AGA supplemental comments at 3–5. 

55NGSA’s request for rehearing or clarification of 

this issue is, therefore, denied. 

56See, e.g., Order No. 704 at PP 60, 89, and 90. 

direct respondents to round volumes up 

or down, as appropriate, to the nearest 

tenth of a TBtu. Rounding to the nearest 

tenth of a TBtu will make the reporting 

obligation consistent with the proposed 

de minimis threshold volume 

calculation, which is measured to the 

nearest tenth of a TBtu. Further, more 

precise reporting of data would allow 

for a more accurate review of market 

activity and we believe that aggregating 

volumes to the nearest tenth of a TBtu 

would be no more burdensome for 

respondents than the rounding currently 

required in the form. 

D. Certain End-Use Transactions Should 

Be Reported on Form No. 552 

29. Several commenters to the April 

2007 NOPR objected to the inclusion of 

end-use transactions in the annual 

report.40 Order No. 704 addressed these 

concerns by exempting certain types of 

transactions from the reporting 

requirement. The order states that the 

rule ‘‘focuses the reporting requirement 

solely on wholesale buyers and sellers 

by excluding retail transactions.’’ 41 The 

order did not require ‘‘end-use 

customers or retail buyers’’ to report 

transaction information unless those 

entities also made wholesale sales or 

purchases that were greater than the de 

minimis threshold.42 Likewise, the 

order stated that ‘‘a transaction made to 

an end-user is not to be included in the 

volumes reported on the form.’’ 43

30. However, the order did not 

adequately distinguish between two 

distinct types of end-use transactions 

(i.e. transactions that utilize or could 

contribute to a price index and 

transactions to customers as part of a 

bundled retail sale). The American Gas 

Association (AGA) and the National 

Energy Marketers Association (NEM), 

for example, specifically argued in 

comments on the April 2007 NOPR that 

end-use sales at retail should be 

excluded from the reporting 

requirement.44 These types of end-use 

transactions involved retail service 

provided by a LDC to consumers subject 

to the LDC’s state commission-approved 

tariff. Other commenters argued for a 

broader exemption, including all enduse transactions.45 These types of 

transactions would include not only 

bundled retail service subject to 

traditional state jurisdiction, but also 

direct end-use deliveries by interstate 

pipelines (an activity traditionally 

subject to the Commission’s 

jurisdiction). 

31. Order No. 704 correctly, though 

summarily, describes these participants’ 

comments,46 but then proceeded to 

utilize the term ‘‘retail’’ interchangeably 

with ‘‘end-use’’ when describing 

transactions that would be exempt from 

the reporting requirement.47 For 

example, under a section entitled, 

‘‘Exclusion of Retail Transactions,’’ the 

order states that ‘‘[a]lthough some 

transactions reported to indices may 

include purchases by large end-users, 

the Commission is generally interested 

in wholesale prices.’’ 48 Our exclusion 

in Order No. 704 is aimed at traditional 

retail transactions (i.e., those that are in 

markets functionally separate from the 

wholesale markets) rather than other 

end-use transactions involving volumes 

in the wholesale market—although the 

language of the rule’s exclusion could 

easily be read so as to reach to all enduse transactions. 

Requests for Clarification or Rehearing 

32. NGSA requests clarification or 

rehearing regarding a seller’s obligation 

to exclude end-use volumes from 

volumes reported on Form No. 552. 

NGSA quotes paragraph 90 of Order No. 

704 indicating that ‘‘a transaction made 

to an end-user is not to be included in 

the volumes reported on the form.’’ 49

NGSA argues that requiring the seller to 

delineate between end-use and non-enduse customers is unduly burdensome 

and that requiring such disclosure to 

sellers from purchasers would limit 

market liquidity.50 NGSA requests that 

the Commission clarify that, when in 

doubt, it is acceptable for a seller to 

include end-use volumes in Form No. 

552.51 Any exclusion of end-use 

transactions should be applied from the 

buyers’ perspective, argues NGSA.52

33. We understand that a number of 

participants at the technical conference 

(including AGA, Encana,53 and others) 

had both substantive and technical 

questions regarding Order No. 704’s 

references to ‘‘end-use’’ transactions and 

‘‘retail’’ transactions. There was 

significant confusion regarding whether 

certain types of transactions to 

consumers of natural gas were 

reportable. AGA filed supplemental 

comments in the docket requesting 

various clarifications regarding an LDC’s 

responsibility to report sales to endusers, among other transactions.54

Commission Determination 

34. The Commission clarifies here 

that there will be no categorical 

exclusion of end-use transactions from 

Form No. 552. Nevertheless, Form No. 

552 will collect only information 

regarding that subset of end-use 

transactions that relies upon price 

indices or that could be utilized to form 

a price index. Accordingly, as we 

explain below, reporting of traditional, 

bundled retail transactions made by an 

LDC at a state-approved tariff rate (i.e., 

the majority of transactions to retail 

customers) would not contribute to the 

Commission’s transparency mission and 

are not subject to reporting. We believe 

that this is a ‘‘bright-line’’ rule easily 

understood by potential respondents.55

35. While Order No. 704 utilized the 

phrase ‘‘retail’’ transactions 

interchangeably with ‘‘end-use’’ 

transactions,56 the overall thrust of our 

order was that transactions that are 

typically perceived to be at retail are not 

reportable while transactions that 

utilize, contribute to, or may contribute 

to price indices should be reportable. 

Depending upon the type of transactions 

involved, end-use transactions can have 

a substantial impact on price formation 

and the functioning of the wholesale 

markets, particularly in localized areas. 

36. While precise data is not readily 

available (indeed, obtaining that data is 

one of the goals of Form No. 552), it is 

our experience and industry common 

knowledge that many end-use 

transactions utilize price indices and/or 

could be relied upon to form price 

indices. End-use transactions, 

specifically transactions involving large 

consumers of natural gas that compete 

directly with wholesale market 

participants, are very relevant to the 

Commission’s transparency mission. For 

example, use of natural gas for power 

generation has increased markedly since 

2000. According to annual figures from 

the Energy Information Administration 

(EIA), natural gas used to produce 

electric power is up from 14.2 Bcf/d in 

2000 to 18.8 Bcf/d in 2007, an increase 

of 32 percent. As a result, natural gas 

generation’s share of overall gas use is 

up, too. In 2000, EIA figures indicate 


sroberts on PROD1PC70 with RULES
55732 Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 

57 Derived from information provided by EIA on 

their Natural Gas Navigator Web site, http:// 

tonto.eia.doe.gov/dnav/ng/hist/n3045us2a.htm. 

58 Derived from information provided by EIA on 

their Natural Gas Navigator Web site, http:// 

tonto.eia.doe.gov/dnav/ng/ 

ng_sum_lsum_dcu_nus_a.htm. 

59 Derived from the ‘‘U.S. Power Burn Report’’, 

Bentek Energy, LLC. 

60Order No. 704 at P 6. 

61 15 U.S.C. section 717b–717i. 

62 15 U.S.C. section 717t–2(a)(1). 

63 15 U.S.C. section 717t–2(a)(3)(A). 

64Section 1(b) of the NGA, 15 U.S.C. section 

717(b), provides in part that the Commission’s 

jurisdiction generally does not apply to ‘‘the local 

distribution of natural gas.’’ 

65 15 U.S.C. section 717t–2(d)(2) (emphasis 

added). 

66We have drawn a parallel distinction in the 

electric context. In Order No. 888, the Commission 

exercised its jurisdiction over unbundled 

transmission to end-users in interstate commerce, 

yet declined to exert jurisdiction over bundled 

retail transmission. See Promoting Wholesale 

Competition Through Open Access Nondiscriminatory Transmission Services by Public 

Utilities; Recovery of Stranded Costs by Public 

Utilities and Transmitting Utilities, Order No. 888, 

61 FR 21540 (May 10, 1996), FERC Stats. & Regs. 

¶ 31,036, at p. 31,781 (1996). The U.S. Supreme 

Court approved of this distinction in New York v. 

FERC, 535 U.S. 1, 28 (2002). While not a 

jurisdictional question, in this rulemaking, we 

incorporate a similar distinction between 

unbundled natural gas transactions to consumers 

(which are reportable in Form No. 552 if they 

utilize or contribute to the formation of a price 

index) and bundled transactions through an LDC 

subject to state-approved tariff rates (which are not 

reportable). 

that natural gas used for power 

generation accounted for 18 percent of 

total U.S. natural gas consumption; by 

the end of 2007 it represented 30 

percent.57 On a peak day in the summer, 

natural gas generation’s share of gas use 

can be much higher. According to EIA, 

the U.S. delivered a total of 21.3 Tcf of 

natural gas to consumers in 2007 or on 

average about 58.3 Bcf per day.58 On 

August 8, 2007, estimates of gas use for 

power generation reached 38 Bcf/d or 65 

percent of 2007 average daily gas use.59

Moreover, in many regional power 

markets, natural gas is the marginal fuel 

during the majority of hours power 

plants are being dispatched, therefore a 

better understanding of how natural gas 

indices are formed will aid the 

Commission and the public in 

understanding power market dynamics. 

For these reasons, we conclude that 

where a transaction could contribute to 

the formation of price indices and/or 

relies upon a price index, the 

transaction should be reportable even if 

the reporting entity is a natural gas enduser. 

37. Requiring end-users to supply 

transaction data if the transaction 

utilizes, contributes to, or could 

contribute to price index formation is 

well within EPAct 2005’s Congressional 

mandate. The Commission accurately 

stated in Order No. 704 that price 

formation in natural gas markets makes 

no distinction between transactions that 

are traditionally jurisdictional to the 

Commission and those that are not.60

Congress, recognizing this fact, gave the 

Commission expansive jurisdiction 

under the transparency provisions of 

EPAct 2005. The Commission’s 

traditional jurisdiction under sections 4, 

5, and 7 of the NGA is limited to 

‘‘natural gas companies.’’ 61 In contrast, 

section 23(a) of the NGA directs the 

Commission ‘‘to facilitate price 

transparency in markets for the sale or 

transportation of physical natural gas in 

interstate commerce’’ 62 including 

obtaining information from ‘‘any market 

participant.’’ 63 There is no applicable 

statutory limitation on the collection of 

information that may involve 

transportation through distribution-level 

facilities, as applies to the Commission’s 

traditional jurisdiction.64

38. In addition, the first sentence of 

section 23(a)(2) gives the Commission 

broad authority to ‘‘prescribe such rules 

as the Commission determines 

necessary and appropriate to carry out 

the purposes of this section,’’ i.e. 

facilitating price transparency. This 

broad grant of authority is followed, in 

the second sentence of the section, with 

the requirement that the ‘‘rules shall 

provide for the dissemination on a 

timely basis of information about the 

availability and prices of natural gas 

sold at wholesale and in interstate 

commerce.’’ The requirement in the 

second sentence, including the 

reference to ‘‘gas sold at wholesale,’’ 

does not limit the broad authority 

granted by the first sentence. Rather, the 

rules required by the second sentence 

should be viewed as a subset of the 

rules the first sentence of section 

23(a)(2) authorizes the Commission to 

adopt. Put another way, section 23(a)(2) 

should be interpreted as providing that 

the Commission may adopt rules 

collecting information about any 

transactions, including non-wholesale 

end-use transactions, if necessary to 

facilitate price transparency, but such 

rules must include the collection of 

information about wholesale 

transactions in interstate commerce. 

39. This interpretation is buttressed 

by the fact that section 23(a)(3)(A) 

expressly permits the Commission to 

obtain ‘‘the information described in 

paragraph (2) from any market 

participant,’’ a term which includes 

end-users. EPAct 2005’s de minimis 

threshold requirement in section 

23(d)(2) provides further support for 

this position. That provision states: 

The Commission shall not require natural 

gas producers, processors, or users who have 

a de minimis market presence to comply with 

the reporting requirements of this section.65

The logical corollary to this 

Congressional directive is that a user 

that has greater than de minimis market 

presence could be made subject to the 

reporting requirement. By establishing a 

de minimis threshold volume of 2.2 

million MMBtu (and, as further 

explained herein, exempting traditional 

retail transactions from reporting), the 

Commission appropriately limits 

reporting by end-users only to those 

users with a more than a de minimis 

market presence and only to those enduse transactions that utilize, contribute 

to, or could contribute to price index 

formation. 

40. While a large industrial end-user 

may not be a customer ‘‘at wholesale,’’ 

it is doubtless a ‘‘market participant’’ in 

the interstate wholesale energy market 

and its actions may have a direct impact 

on the wholesale market or market 

indices, especially in a localized area. 

We also note that the collection of 

information on an annual basis is 

qualitatively different than our 

customary regulation of rates, terms, 

and conditions applicable to natural gas 

companies. Requiring reporting from 

large end-users that engage in 2.2 

million MMBtu of annual sales or 

purchase transactions (other than 

transactions associated with bundled 

retail tariff service) is a conservative 

outcome compared to the broad 

authority granted to us by Congress in 

section 23 of the NGA. Our approach 

strikes a balance between the data that 

the Commission requires to meet its 

transparency-related obligations and the 

burden placed upon market participants 

to provide this data. 

41. However, not all end-use 

transactions have the potential to 

contribute to the formation of price 

indices or rely upon price indices. For 

example, traditional retail transactions, 

even those involving annual volumes 

greater than the de minimis threshold, 

neither utilize an index for a price nor 

contribute to index price formation. 

These retail transactions are not relevant 

to the Commission’s transparency goals. 

A bundled retail transaction through an 

LDC at a state-approved tariff rate is 

properly excluded from purchase and 

sales volumes to be reported on Form 

No. 552.66 The reporting burden on 

retail consumers would greatly 

outweigh any minimal transparency 

benefit. To the extent that a potential 

respondent purchases or sells gas at a 

bundled retail tariff rate, it should not 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 55733 

67One caveat is that, if the end-user or other 

market participant holds a blanket certificate from 

the Commission, it must, at a minimum, submit the 

identification and price reporting data required on 

Form No. 552. 

68See, e.g., Public Utilities Commission of the 

State of California v. FERC, 900 F.2d 269 (D.C. Cir. 

1990). 

69Kinder Morgan Interstate Gas Transmission 

LLC, 99 FERC ¶ 61,186, at n.30 (2002). 

70One such modification is the definition of 

‘‘Physical Natural Gas Transactions’’ in the 

Definitions portion of current Form No. 552. The 

definition clearly indicates that reportable volumes 

are only those that utilize, contribute to, or may 

contribute to the formation of price indices. The 

definition also explicitly excludes volumes 

associated with bundled retail sales and purchases 

at state-approved tariff rates. 

71Order No. 704 at PP 60 and 101–102. 

72NGSA comments at 5. 

73 Id. at 6 (citing the Policy Statement). 

74 Id. at 6–7. 

75 Id. at 7. 

76 Id. 

77Policy Statement at P 34 (emphasis added). 

78Consistent with the determination, we will no 

longer direct the Commission’s staff to retain a list 

of reportable locations on the Commission’s Web 

site. 

count those volumes towards the de 

minimis threshold and, if required to 

submit Form No. 552, it would not 

include those volumes in its report.67

We note that this ‘‘bright-line’’ 

clarification would also resolve NGSA’s 

concerns regarding a selling entity’s 

ability to identify what purchasers are 

consuming gas—if gas is sold by an LDC 

under a bundled retail tariff rate, then 

it need not be reported. 

42. This proposed approach is similar, 

though not identical, to the 

Commission’s jurisdictional reach over 

natural gas transportation service to 

end-users. FERC exerts its customary 

jurisdiction over direct transportation of 

natural gas from an interstate pipeline to 

an end-user.68 However, the 

Commission has traditionally declined 

to exercise jurisdiction over 

transportation to ‘‘retail customers in a 

localized geographical area behind 

either a town border station or behind 

facilities * * * that connect to rural 

delivery points outside the boundaries 

of towns.’’ 69 Where transportation to an 

end-user occurs in interstate commerce 

and not as part of local distribution, the 

Commission has jurisdiction. 

43. We conclude that exempting from 

reporting those volumes associated with 

bundled retail transactions made at 

state-approved tariff rates, while 

including volumes associated with 

direct pipeline-to-end-user and other 

end-user transactions, is appropriate. 

This modification regarding the 

reportability of certain end-use 

transactions necessitates changes to the 

language of Form No. 552.70

E. Respondents Need Not Distinguish 

Between Transactions Based Upon 

Location 

44. Order No. 704 provided that a 

market participant must categorize 

transaction volumes by whether each 

transaction was made at a ‘‘reportable 

location.’’ Reportable locations are 

locations where index developers 

currently collect fixed-price information 

for transactions with Next-Day or NextMonth Delivery obligations, and 

produce index prices. Thus, Order No. 

704 tied the meaning of ‘‘fixed-price’’ 

reported volumes to volumes that may 

be reported to index developers at 

specific points. To this end, we directed 

our staff to list on the Commission’s 

Web site all reportable locations at 

which fixed-price volumes were to be 

reported on Form No. 552.71

Requests for Rehearing and Clarification 

45. NGSA requests rehearing of Order 

No. 704 so as to require submission of 

data at all trading locations rather than 

limited to specific reportable 

locations.72 NGSA argues that this 

approach would be consistent with the 

Policy Statement on price reporting.73

Further, NGSA states that designated 

‘‘reportable locations’’ will change over 

time, hampering the Commission’s longterm analysis of the market.74 NGSA 

argues that limiting reported data only 

to specific reportable locations would be 

more burdensome to most respondents 

than reporting all aggregate, relevant 

data.75 Lastly, NGSA asserts that 

different index developers utilize 

different means to collect data at the 

same index point and, thus, data 

collected from market participants for 

particular reportable points will not 

offer a reasonable comparison to 

reported indices.76

46. Participants at the technical 

conferences echoed some of these 

themes. The NiSource Companies 

(NiSource) and Encana, for example, 

questioned how reporting was to be 

accomplished for certain reportable 

locations given that different reporting 

services defined the locations in 

multiple ways. 

Commission Determination 

47. We grant rehearing of Order No. 

704 on this issue and provide that 

respondents need not categorize 

volumes based upon whether such 

volumes relate to transactions at specific 

price index locations. We agree with 

NGSA that: (1) It would be substantially 

less burdensome for market participants 

to provide aggregate data regarding their 

transactions than to differentiate 

between volumes that occur within or 

outside reportable locations; (2) defining 

workable ‘‘reportable locations’’ would 

be difficult, would require substantial 

detail regarding geographic scope and 

types of transactions at specific 

locations, and would unduly complicate 

respondents’ Form No. 552 responses; 

and (3) specific reportable locations 

would change on a yearly basis, limiting 

the value of data collected by location. 

We also understand that participants at 

the technical conferences indicated a 

substantial preference for this 

modification. 

48. The Policy Statement provides 

that the minimum standards for data 

providers include a commitment to 

report ‘‘each bilateral, arm’s-length 

transaction between non-affiliated 

companies in the physical (cash) 

markets at all trading locations.’’ 77

Modification of Form No. 552 to 

eliminate data collected at specific 

reporting locations would make the 

annual reporting obligation consistent 

with the Policy Statement. 

Consequently, for respondents that 

already comply with the Policy 

Statement standards, data collection and 

reporting on Form No. 552 would be 

significantly less burdensome. In fact, 

we believe that it would be easier for 

most entities that do not comply with 

the Policy Statement standards to 

provide aggregate data for all reportable 

transactions rather than to segregate 

data regarding transactions at specific 

locations. 

49. Further, comments by conference 

participants and NGSA’s request for 

rehearing make clear that it would be 

administratively difficult to 

geographically define each reportable 

location in a way that would capture all 

transactions that were eligible for 

reporting to the various price indices. 

This is due to the fact that different data 

collection methodologies are used by 

index developers at the same point as 

well as the fact that different index 

developers accept different transactions 

from these points to form indices. 

50. For these reasons, we grant 

rehearing of Order No. 704 and 

determine that respondents need only 

provide aggregated data for reportable 

transactions at all transaction locations. 

Respondents need not provide data 

segregated by reportable location.78

F. Balancing, Cash-out, Operational, 

and In-Kind Transactions Are 

Reportable 

51. In Order No. 704, we required 

market participants to report sale and 

purchase volumes related to cash-outs, 


sroberts on PROD1PC70 with RULES
55734 Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 

79Order No. 704 at P 107. 

80 Id. P 108. 

81 Id. 

82Shell comments at 14–15; NGSA comments at 

11. 

83Shell comments at 14–15. 

84 Id. at 15. 

85 Id. at 16. 

86NGSA comments at 9–10. NGSA repeats many 

of these same arguments in its subsequent 

supplemental comments at 4–6. See also Shell 

comments at 15–16 (stating in passing that 

imbalance trading transactions should not be 

considered a purchase or sale). 

87Copano comments at 8–9. 

88 Id. at 9–10. 

89AF&PA/IECA comments at 6. 

90 Id. at 4–6. 

91 Id. at 6–7. 

92Shell comments at 15–16. 

93NGSA comments at 12–13. 

94 Id. at 12. 

95Shell comments at 17. 

96 Id. 

97 Id. 

98NGSA supplemental comments at 4. 

99 15 U.S.C. section 717t–2(a)(1). 

imbalance make-ups, and operations.79

We noted that, while some volumes 

related to such transactions are not 

utilized to create price indices, many 

volumes do refer to or utilize such 

indices.80 The Commission concluded 

that the data collected from such 

transactions is useful in assessing how 

spot prices are being used 

commercially. Specifically, the order 

required market participants to include 

on Form No. 552 volumes related to 

royalty-in-kind transactions and 

purchases and sales related to 

production and gathering functions.81

Requests for Rehearing or Clarification 

52. Regarding transactions on 

interstate pipelines, Shell and NGSA 

seek rehearing of Order No. 704 so as to 

exclude cash-out, imbalance makeup, 

and operational volumes from the realm 

of reportable transactions. Both Shell 

and NGSA argue that such transactions 

do not affect the interstate natural gas 

market, though they may often rely 

upon natural gas indices for their 

price.82 Shell states that data regarding 

such transactions may not reflect actual 

market activity as prices may vary 

according to whether the pipeline or 

shipper owes gas and there is a onemonth lag on the timing of many 

makeup transactions.83 For this reason, 

the use of index prices in makeup 

transactions, Shell argues, does not 

reflect the value of natural gas for 

purposes of assessing wholesale natural 

gas spot markets and will actually 

distort relevant data received by the 

Commission.84 In the alternative, if 

rehearing on this point is denied, Shell 

seeks clarification that, if a pipeline 

provides imbalance cash-out data, then 

shippers need not provide the identical 

data on Form No. 552.85 NGSA 

reiterates many of these arguments, adds 

that pipeline balancing transactions are 

governed by the pipeline’s tariff, and 

argues that balancing should not be 

considered a purchase or sale in the 

wholesale market.86

53. Regarding intrastate pipelines, 

Copano seeks clarification or rehearing 

regarding whether ‘‘non-interstate 

pipeline’’ market participants must 

report, and include for purposes of 

meeting the de minimis threshold, 

volumes related to cash-outs and other 

operational activities.87 Copano argues, 

much as does Shell and NGSA regarding 

interstate pipelines, that these sorts of 

transactions are operational in nature, 

are not based on market conditions, and 

provide no benefit to the Commission’s 

transparency goals.88

54. Regarding transactions involving 

end-users, AF&PA and IECA, in a joint 

submittal, seek clarification or rehearing 

to exempt balancing-type transactions 

from reporting. Additionally, these 

entities request that blanket certificate 

holders under section 284.402, that hold 

such a certificate solely by virtue of 

their status as a pipeline customer 

engaged in balancing or cash out 

transactions pursuant to a consumer 

level gas service contract, be allowed to 

forego filing of Form No. 552.89 AF&PA 

and IECA argue that the benefit of 

obtaining this information is minimal 

compared to the burden of reporting the 

data. They contend that: (1) Such 

transactions are often ‘‘involuntary’’ and 

that it may be very difficult for endusers to determine whether their 

balancing activity exceeds the de 

minimis threshold; (2) the applicable 

volumes already likely are reported at 

the pipeline level; and (3) balancing 

transactions that occur pursuant to 

individual end-use contracts will not 

factor appreciatively into wholesale 

price formation.90 They also state that it 

is likely that many end-user blanket 

certificate holders under section 

284.402 do not know that they hold 

such certificate authority or that 

balancing provisions in existing 

contracts with pipelines could trigger 

the rule’s annual reporting 

requirement.91

55. Shell seeks clarification that ‘‘inkind’’ balancing transactions of all 

stripes are not reportable transactions 

under the rule as such transactions do 

not involve a ‘‘sale’’ or a ‘‘purchase.’’ 92

Relatedly, NGSA requests clarification 

or rehearing, as necessary, that the 

entity that purchases or sells royalty-inkind interests is responsible for 

reporting royalty-in-kind transactions— 

not well operators.93 NGSA argues that 

well operators do not necessarily have 

knowledge of the contractual relations 

of royalty interest holders.94

56. Shell also seeks clarification 

regarding the location that cash-out, inkind, or other imbalance transactions 

occur for purposes of determining 

whether the transaction occurs at a 

‘‘reportable location.’’ 95 Shell requests 

further clarification as to whether such 

transactions are considered ‘‘next-day,’’ 

‘‘next-month,’’ or ‘‘other’’ for purposes 

of completing Form No. 552.96 Finally, 

Shell seeks clarification that all 

production-related balancing activities, 

such as those between producers and 

working interest owners, are not to be 

reported.97 We understand that 

producers at the technical conferences 

requested similar clarification from 

staff. 

57. In supplemental comments, NGSA 

suggests that, if the Commission 

continues to require the submission of 

cash-out transaction data (including 

thermal reduction volumes), such data 

should be reported on a separate line on 

Form No. 552.98

58. A significant number of 

commenters at the technical conferences 

raised questions regarding balancing 

transactions of various types. 

Commenters wished to know whether 

balancing transactions were to be 

reported on a ‘‘net’’ basis for each year 

or whether activity in each direction 

(cash-ins and cash-outs) should be 

separately accounted. 

Commission Determination 

59. We deny the requests for 

rehearing. Balancing, cash-out, 

operational, in-kind, and similar 

transactions must be reported on Form 

No. 552 if they rely upon, contribute to, 

or could contribute to a price index. 

60. Section 23 of the NGA requires 

that our data collection have ‘‘due 

regard’’ for ‘‘the integrity of [the 

physical natural gas] markets, [and] fair 

competition.’’ 99 Public confidence in 

the reporting of natural gas prices to gas 

price index developers and the 

reasonable use and reliance on such 

indices in the market is squarely within 

the Commission’s purview. This 

includes not just transactions that 

directly impact wholesale price 

formation, but also transactions that 

reference indices. As we stated in Order 

No. 704, one of the goals of Form No. 

552 is to allow the Commission to ‘‘not 

only understand the transactions used 

to formulate price indices; it is to 

understand how influential price 

indices are in the overall transacting of 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 55735 

100Order No. 704 at P 73. 

101As with the reporting of purchase and sale 

transactions, we clarify that balancing transactions 

should be reported for both cash-ins and cash-outs 

and not on a net basis. 

102Technical requests regarding how these types 

of transactions should be reported on Form No. 552 

are addressed through clarifications discussed 

elsewhere in this order. Regarding the request for 

clarification by AF&PA and IECA on this point, the 

Commission declines to clarify the Final Rule in the 

manner suggested by the commenters. While 

AF&PA and IECA did not supply sufficient detail 

in their request regarding the transactions of 

concern to their members for us to offer more 

specific guidance, we expect that the clarifications 

provided in this order will allow these 

organizations’ members to determine both whether 

they must submit Form No. 552 and the transaction 

volumes that must be reported therein. 

103Order No. 704 at P 114. 

104 Id. 

105Shell comments at 29–31. 

106Powerex comments at 5. 

107 Id. 

108AGA supplemental comments at 2–3. 

109 Id. 

110NGSA supplemental comments at 3. 

111See Policy Statement at P 37. 

112 Id. P 3. 

natural gas in U.S. wholesale 

markets.’’ 100 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. Form No. 552 

will provide this information and we 

can conceive of no less intrusive way to 

obtain this relevant data. 

61. In any event, we do not agree with 

the proposition that balancing 

transactions, as described by 

commenters, could not themselves 

contribute to the formation of price 

indices. The fact that a purchase or sale 

is made for operational or balancing, 

rather than market, reasons is irrelevant. 

This includes, for example, base or 

cushion gas purchases for storage 

facilities, balancing between pipelines 

or between a supplier and a customer, 

and purchases of gas for compression. 

Some portion of these transactions 

could be utilized to establish index 

prices. Balancing, cash-out, operational, 

and in-kind transactions should 

therefore be reportable on Form No. 552 

to the same extent as other types of 

transactions.101

62. Further, reporting of balancing 

transactions by all entities subject to the 

annual reporting requirement is entirely 

appropriate. Specifically, balancing 

transactions involving end-users are 

likely a significant total of natural gas 

contracts that reference price indices. 

Understanding the prevalence of such 

contracts may allow the Commission 

and other market observers to assess 

weaknesses in price index 

development.102

63. For all these reasons, we continue 

to require that reportable sales and 

purchases on Form No. 552 include 

balancing, cash-out, operational, and inkind transactions that utilize, contribute 

to, or could contribute to the formation 

of a price index. 

G. Safe Harbor 

64. In Order No. 704, we noted our 

intent not to prosecute or penalize 

companies for inadvertent reporting 

errors on Form No. 552.103 However, we 

drew a clear distinction between the 

safe harbor provided to voluntary 

reporting to price index publishers in 

the Policy Statement and the mandatory 

annual report required by Order No. 

704.104 The Commission rejected calls 

to include a similar safe harbor for the 

submission of Form No. 552. 

Requests for Rehearing or Clarification 

65. Shell notes that the Commission 

stated that it ‘‘does not intend to 

prosecute or penalize parties for 

inadvertent errors in reporting,’’ but did 

not include a safe harbor provision for 

market participants that attempt to 

comply in good faith with Order No. 

704. Shell urges the Commission to 

adopt an explicit, rebuttable 

presumption of good faith as it did in 

the Policy Statement on price 

reporting.105

66. Powerex Corporation (Powerex) 

notes that, in the April 2007 NOPR, the 

Commission responded to queries from 

‘‘several data providers * * * as to 

whether they may report certain classes 

of products traded, but not others.’’ 106

The April 2007 NOPR stated that ‘‘a 

data provider remains eligible for the 

safe harbor provisions if it reports 

certain products, but not others, 

provided that it provides all of the same 

type of transactions and that it notifies 

the Commission which products it will 

report in its annual filing or other 

notification.’’ 107 The Commission stated 

that it would repeat this safe harbor 

clarification in the final rule. However, 

no such clarification was included in 

Order No. 704. 

67. In supplemental comments to the 

technical conferences, AGA requests 

that the Commission institute a ‘‘pilot 

program’’ for compliance with Order 

No. 704 for calendar year 2008 data.108

AGA suggests that the Commission not 

penalize market participants that make 

good faith efforts to complete Form No. 

552 but ‘‘make errors’’ or ‘‘include data 

that is inconsistent with the way other 

market participants have completed the 

form.’’ 109 NGSA, in supplemental 

comments, requests that the 

Commission adopt a safe harbor for 

2008 calendar-year data, including 

allowing respondents ‘‘to base 

information * * * on transaction data 

collected using existing processes and 

systems.’’ 110

Commission Determination 

68. The Commission herein adopts a 

one-year safe harbor, covering 

transactions occurring in calendar year 

2008 and reported on Form No. 552 on 

May 1, 2009. However, we decline to 

extend this safe harbor for additional 

calendar year reporting. 

69. The Policy Statement includes a 

safe harbor provision that grants a data 

provider that adopts the Policy 

Statement standards a rebuttable 

presumption that data submitted to 

index developers is accurate, timely, 

and submitted in good faith.111

However, a similar perpetual safe harbor 

is not warranted regarding the reporting 

of data on Form No. 552. The Policy 

Statement set forth standards that data 

providers could choose to adopt should 

they voluntarily elect to provide data to 

price index developers. One goal of the 

Policy Statement was to ‘‘encourage 

[industry participants] voluntarily to 

report energy transactions to the 

providers of price indices.’’ 112 The safe 

harbor that we adopted in the Policy 

Statement was a direct extension of this 

policy goal. 

70. Form No. 552 is a mandatory 

annual filing adopted consistent with 

EPAct 2005, not the voluntary reporting 

of price data to an index developer. 

There is no policy need to provide an 

incentive for the filing of Form No. 552 

similar to the encouragement to 

reporting price data to index developers. 

Other mandatory forms, such as FERC 

Form No. 2, do not include such a safe 

harbor. For this reason, we are not 

persuaded that a perpetual safe harbor 

is warranted. 

71. However, a one-year safe harbor 

(including data collected for calendar 

year 2008 and reported by May 1, 2009) 

is appropriate. Market participants have 

begun data collection for the current 

calendar year without the benefit of an 

order on rehearing of Order No. 704. We 

acknowledge that this Order on 

Rehearing and Clarification is issued 

well after respondents’ data collection 

has been underway for 2008. Further, 

we herein offer a number of 

clarifications of Order No. 704 that may 

impact such data collection activities. A 

one-time safe harbor for the 2009 Form 

No. 552 is, under these unique 

circumstances, reasonable. Consistent 

with the Policy Statement, the 


sroberts on PROD1PC70 with RULES
55736 Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 

113Collectively, Encana Marketing (USA) Inc., 

Nexen Marketing (USA) Inc., Petro-Canada 

Hydrocarbons Inc., and Talisman Energy Inc. 

114CAPP comments at 1; Canadian Suppliers 

comments at 3; Powerex comments at 6–7. 

115Marathon comments at 4–5; NGSA comments 

at 13–14. 

116AGA supplemental comments at 6–9. 

117Shell comments at 9; NGSA comments at 11– 

12. 

118Shell comments at 10; NGSA comments at 11. 

119Order No. 704 at P 108. 

120Hess comments at 1. 

121OIPA comments at 2. 

122Order No. 704 at P 98. 

123NGSA comments at 15. 

124Order No. 704 at P 98. 

125APGA comments at 2–3. 

126 Id. at 2 (citing Order No. 704 at P 94). 

Commission finds that respondents 

submitting Form No. 552 in 2009 will 

benefit from a rebuttable presumption 

that the data provided is accurate and 

submitted in good faith. Further, we do 

not intend to penalize respondents for 

errors in reporting on Form No. 552 

provided that respondents use 

reasonable efforts to comply with the 

regulations regarding and instructions 

for Form No. 552. We emphasize that 

the Commission expects respondents 

submitting Form No. 552 in 2009 to do 

so in good faith and on a timely basis. 

H. Additional Clarifications 

72. In addition to resolution of the 

rehearing and clarification issues 

discussed above, we clarify a number of 

minor or technical aspects of Form No. 

552. 

Some Volumes Associated With 

Transactions Outside the Lower 48 

States Should Be Reported 

73. The Canadian Association of 

Petroleum Producers (CAPP), Canadian 

Suppliers,113 and Powerex request 

clarification, or in the alternative, 

rehearing, that reported data should 

include only sales or purchases made 

inside the geographic boundaries of the 

United States.114 Marathon Oil 

Company (Marathon) and NGSA request 

clarification or rehearing regarding the 

scope of the rule vis-a`-vis natural gas 

production in Alaska.115 AGA, in 

supplemental comments, also requests 

that the Commission address this 

issue.116

74. 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. Form No. 552 is 

designed to capture all transactions that 

reference price indices or that could 

contribute to price indices and these 

types of international transactions are 

not categorically excluded. 

Transactions Related to Exploration 

Activities, Production Area Operations, 

and Gathering Functions Are Not 

Exempted From Reporting 

75. Shell and NGSA request 

clarification or rehearing of Order No. 

704 so as to categorically exclude 

exploration activities, production area 

operations, and gathering functions 

from reporting. They argue that the 

entirety of the Commission’s rationale 

for including these transactions is that 

these transactions often make use of 

price indices.117 They also argue that 

these transactions do not impact the 

wholesale interstate gas market and are 

excluded from traditional NGA 

regulation under section 1(b) of the 

Act.118

76. In Order No. 704, the Commission 

stated that, ‘‘while these transactions 

may not affect the formation of price 

indices in wholesale markets, these 

transactions often make use of price 

indices * * * to the extent that transfers 

of value take place based on price 

indices, it is important that the 

Commission and other market observers 

be able to understand the extent of that 

transfer and its dependency on price 

indices as well.’’ 119 As explained in the 

order, determining the scope of price 

index reliance in the market is a 

significant goal of this rulemaking. The 

public availability of this data will 

increase market transparency and 

confidence. Transactions involving 

exploration activities, production area 

operations, and gathering functions that 

rely upon or could contribute to the 

creation of price indices are to be 

reported in the same manner as other 

types of transactions. 

Transactions Involving Unprocessed 

Gas Are Not Reportable 

77. Hess Corporation (Hess) requests 

rehearing of Order No. 704 so as to 

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.120 Similarly, 

the Oklahoma Independent Petroleum 

Association (OIPA) seeks 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.121

78. We agree with Hess and OIPA that 

transactions regarding 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. 

A Customer of an Asset Manager Is 

Responsible for Reporting Volumes 

Managed by the Asset Manager 

79. Order No. 704 states that asset 

managers may not aggregate customer 

volumes and report the same on Form 

No. 552.122 NGSA requests that the 

Commission clarify that individual 

customers of asset managers are 

responsible for the submission of Form 

No. 552 and reporting volumes managed 

by the asset manager as well as any 

other reportable sales or purchases.123

80. We clarify the rule in the manner 

suggested by NGSA. In Order No. 704, 

we stated that asset managers may not 

report aggregated information for their 

customers.124 However, this statement 

should not be read so as to relieve 

customers that hire asset managers from 

their obligation to file Form No. 552 if 

they are required to do so. Individual 

customers of asset managers (assuming 

that their activities do not fall below the 

de minimis threshold) are responsible 

for reporting volumes both as managed 

by an asset manager and independently 

sold and purchased. The Commission 

also notes that an asset manager, to the 

extent that its market activities are not 

undertaken on behalf of an asset 

management client, may itself be 

required to submit Form No. 552. 

A Public Joint Action Agency May 

Report an Aggregate of Members’ 

Volumes 

81. Order No. 704 does not directly 

address the filing of Form No. 552 by 

public joint action agencies. APGA 

requests clarification that a public joint 

action agency may aggregate members’ 

annual volume data for purposes of the 

report.125 APGA notes that, in Order No. 

704, aggregation is permitted between 

privately-owned affiliates.126

82. We clarify that public joint action 

agencies, such as certain members of 

APGA, will be allowed to report 

members’ data on an aggregate basis in 

the same manner as corporate affiliates. 

We see no reason to treat public joint 

action agencies differently from private 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 55737 

127Order No. 704 at P 113. 

128NGSA comments at 14. 

129Order No. 704 at P 111 and Form No. 552, 

Definition VII, Physical Natural Gas. 

130NEM comments at 4–6. 

131 Id. at 3. 

132 Id. at 3–4. 

133NEM comments at 4–5. 

134Order No. 704 at P 60. 

135These types of transactions involve transfers of 

physical natural gas utilizing basis differentials. 

The transactions are executed during the bid-week 

at a fixed differential to the last day of settlement. 

136NGSA comments at 8. 

137AGA supplemental comments at 5–6. 

138NGSA comments at 8. 

139Order No. 704 at PP 82–84. 

corporate families. Allowing a public 

joint action agency to report members’ 

volumes will significantly reduce the 

reporting burden on those members. Of 

course, members of public joint action 

agencies and affiliates within a 

corporate family remain free to report 

separately, should they wish. 

Additionally, we clarify that armslength transactions between members of 

a public joint action agency may be 

reportable transactions. 

Physically-Settled Non-NYMEX Options 

Are Reportable 

83. Order No. 704 excluded from 

reporting NYMEX options that 

physically settle. The rationale for this 

exclusion was that data regarding these 

transactions did not necessarily relate to 

fixed-price spot price formation, the 

data was readily available to the public 

through NYMEX, and reporting these 

volumes on Form No. 552 would be 

duplicative and burdensome.127

However, Order No. 704 does not 

explicitly address non-NYMEX 

transactions that result in physical flow. 

When such options are exercised, they 

result in physical deliveries in the 

wholesale market. NGSA requests 

clarification and, if needed, rehearing to 

ensure that physically-settled, nonNYMEX options are included in 

reported volumes.128

84. We agree with NGSA and grant 

the requested clarification. A 

physically-settled non-NYMEX 

transaction must be reported on Form 

No. 552 if it utilizes or could contribute 

to the formation of a price index. 

Certain ‘‘NYMEX Plus’’ Contracts Are 

Reportable 

85. Order No. 704 excluded from 

reporting any type of financially-settled 

transaction.129 NEM requests 

clarification regarding reporting of 

‘‘NYMEX Plus’’ contract volumes. 

Specifically, NEM requests clarification 

regarding the definition of Physical 

Natural Gas on Form No. 552.130 The 

form excludes from reporting ‘‘any type 

of financially-settled transaction.’’ NEM 

is uncertain whether NYMEX Plus 

contracts fall into this exclusion. NEM 

explains that under a NYMEX Plus 

contract an entity purchases or sells a 

volume of gas on a wholesale basis at a 

reportable location for a month or series 

of months with the price determined by 

reference to the monthly settlement 

price of a NYMEX futures contract plus 

an adder.131 NEM is unsure whether 

such volumes should be reported on 

Form No. 552 line 5 as ‘‘prices that refer 

to published next-month gas price 

indices’’ or line 6 (the ‘‘other’’ 

category).132 NEM is also uncertain as 

to: (1) The calendar year and months in 

which contract volumes related to a 

multi-month or multi-year NYMEX Plus 

contract should be reported; and (2) the 

price that should be reported on Form 

No. 552 if a price is to be set at a future 

date.133

86. Based upon the facts as detailed 

by NEM, the Commission believes that 

only a subset of NYMEX Plus contracts 

should be reported. Specifically, we 

clarify that NYMEX Plus transactions 

are reportable only when: (1) Executed 

during bid week and that can contribute 

to a next-month price index, or (2) they 

utilize a NYMEX settlement price 

during bid week that can contribute to 

a next-month index. In that regard, the 

Commission is adding a new line 

between current lines 6 and 7 to page 5 

of Form No. 552 for the purpose of 

reporting data regarding NYMEX Plus 

and other ‘‘triggered’’ physical gas 

transactions. 

87. Further, we clarify that, for all 

contracts where deliveries occur or may 

occur over multiple calendar years and 

such volumes are reportable, only 

volumes attributable for delivery that 

use or may contribute to the formation 

of price indices during the subject 

calendar year should be reported on 

Form No. 552. In Order No. 704, the 

Commission indicated that transactions 

are to be reported based upon whether 

their expected delivery dates are within 

the reporting year—contract formation 

dates are irrelevant.134 For example, for 

a contract that could contribute to the 

formation of a price index and requires 

deliveries at times between July of the 

first year through February of the next, 

the respondent should report July– 

December volumes for the Form No. 552 

corresponding to the first year’s 

volumes and January–February volumes 

in the next year’s Form No. 552. For a 

multi-year contract that relies on a price 

index to establish a price, the relevant 

volumes should be reported in the year 

in which the index is referenced. 

Bid-Week, Fixed Price Differential 

Physical Basis Transactions Tied to the 

Last Day of Settlement Are Reportable 

88. NGSA requests rehearing such 

that the definition of ‘‘Fixed Price’’ in 

Form No. 552 includes bid-week fixed 

price differential physical basis 

transactions tied to the last day of 

settlement.135 NGSA notes that these 

agreements form a material portion of 

the reported transactions at index 

points.136 AGA, in supplemental 

comments in the docket, suggests that 

physical basis transactions be reported 

on a separate line on Form No. 552.137

NGSA argues that including these 

volumes would ease the administrative 

burden on respondents as these volumes 

would not need to be monitored and 

removed from aggregate volume 

numbers.138

89. The Commission agrees that Form 

No. 552 should include bid-week, fixed 

price differential physical basis 

transactions. These transactions are a 

significant aspect of wholesale natural 

gas markets and utilize or could 

contribute to the formation of price 

indices. Consistent with AGA’s 

recommendation, we will include a new 

line item in Form No. 552, requiring the 

reporting of all physical basis 

transactions, including fixed differential 

basis transactions that can contribute to 

or rely upon a price index. 

All Data Provided on Form No. 552 Will 

Be Publicly Available 

90. At least one participant at the 

technical conference requested that the 

Commission act to protect allegedly 

proprietary information contained in 

completed Form No. 552. Specifically, 

the concern was raised by Samson 

Resources Company (Samson) that, by 

requiring submission of data based upon 

transactions at specific locations, the 

form would provide sensitive 

commercial information to competitors 

who may already know the point or 

points where the respondent transacts. 

Samson also claimed that the names of 

affiliates should be confidential as well. 

91. We reiterate that Form No. 552 

data will be publicly available. In Order 

No. 704, the Commission addressed 

requests that data included on Form No. 

552 be treated as confidential or 

proprietary.139 We found that Congress 

directed the Commission to provide 

aggregate information to the public. We 

balanced this transparency goal with the 

asserted need for confidentiality. 

Among the factors we considered were: 

(1) Data would be reported in the 

aggregate; (2) no specific pricing 

information would be reported; (3) data 


sroberts on PROD1PC70 with RULES
55738 Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 

140 Id. P 83. 

141 Id. P 105. 

142NEM comments at 2. 

143AGA supplemental comments at 3. 

144See Obtaining Guidance on Regulatory 

Requirements, 123 FERC ¶ 61,157 (2008). 

145Order No. 704 at P 96. 

146SCS comments at 2–3. 

147 5 CFR 1320. 

148Order No. 486, Regulations Implementing the 

National Environmental Policy Act, 52 FR 47897 

(Dec. 17, 1987), FERC Stats. & Regs ¶ 30,783 (1987). 

149 18 CFR 380.4(a)(5) and (a)(27). 

150 5 U.S.C. 601–612. 

would be reported on a national level, 

not locally or regionally; and (4) data 

would not be reported until four months 

following the reporting year.140 We see 

no reason to modify our determination 

in this regard. We note, however, that 

our determination herein to eliminate 

the reporting of data at specific 

reportable locations, further reduces any 

concerns that reported data is 

commercially sensitive. 

We Decline To Modify the Effective 

Date of the Rule 

92. Under Order No. 704, respondents 

must submit Form No. 552 no later than 

May 1, 2009 for data collected in 

calendar year 2008.141 We understand 

that one participant at the technical 

conference requested that the 

Commission delay reporting of data 

until 2010 (for calendar year 2009 data). 

NiSource argued that it did not have the 

ability to electronically record data 

required by Form No. 552 and, given 

that the Commission had yet to issue an 

order on rehearing, it may be very 

difficult or impossible for some 

companies to comply with a 2009 filing 

date. 

93. The Commission declines to 

modify the effective date of the rule or 

the date by which Form No. 552 is first 

to be filed. We note that no entity raised 

this issue on rehearing or a formal 

request for clarification. We have 

confidence in respondents’ capabilities 

to report the general volume data 

requested on Form No. 552 by the May 

1, 2009 filing date. With the adoption of 

a one-year safe harbor, discussed above, 

concerns regarding the difficulty of 

collecting 2008 data for reporting in 

2009 should be mitigated. 

We Do Not at This Time Establish 

Additional Formal Procedures To 

Address Market Participant Questions 

Regarding Form No. 552 

94. NEM requests that the 

Commission establish ongoing 

procedures in which staff may offer 

informal advice to market participants 

regarding reporting requirements in 

Form No. 552. NEM proposes a 

‘‘technical compliance forum’’ to 

include a combination of measures such 

as an additional hotline, a designated 

interactive Web page for industry 

questions regarding Form No. 552 

(including a Frequently Asked 

Questions page), designation of specific 

staff members to field questions, and 

periodic technical conferences leading 

up to the May 2009 filing deadline.142

Additionally, AGA and Merrill Lynch 

Commodities (Merrill Lynch), during 

the technical conference process, 

suggested that staff complete and 

distribute a sample Form No. 552 based 

upon various types of transactions. AGA 

also requested in supplemental 

comments that the Commission commit 

to provide further guidance on the 

reporting obligation following 

submission of annual reports in 2009.143

95. We do not believe that additional 

informational or educational outreach 

regarding Form No. 552 is necessary at 

this time. To the extent that additional 

clarification is necessary following the 

issuance of this Order on Rehearing and 

Clarification, requests for further 

clarification and rehearing are permitted 

and additional technical conferences 

may be held at our discretion. Further, 

we note that, once entities begin to 

complete Form No. 552 with calendar 

year 2008 data, respondents may direct 

informal questions through appropriate 

means, including the new compliance 

help desk.144

The Reach of the Safe Harbor Provision 

in the Policy Statement On Natural Gas 

and Electric Price Indices 

96. Referring to the 2003 Policy 

Statement, Order No. 704 stated, in 

passing, that ‘‘[a] market participant that 

does not hold blanket sales certificates 

is not required to comply with the 

Policy Statement processes, nor does it 

receive the safe harbor available in the 

Policy Statement.’’ 145 Southern 

Company Services, Inc. (SCS) requests 

clarification of this statement. SCS 

argues that non-jurisdictional entities 

have engaged in price reporting while 

relying on an interpretation of the 

Policy Statement’s safe harbor 

provision. SCS argues that the Policy 

Statement safe harbor applies to any 

‘‘data provider’’ regardless of whether 

the provider is a certificate holder.146

97. SCS’s request is effectively a 

request to clarify the Policy Statement, 

not Order No. 704. The referenced 

comment was not a prerequisite to our 

determinations in the order. SCS’s 

request is inappropriate as a request for 

clarification of Order No. 704. 

III. Information Collection Statement 

98. 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.147 The information 

collection requirements for Form No. 

552 respondents were approved under 

OMB Control Nos. 1902–0242. This 

order further revises these requirements 

in order to more clearly state the 

obligations imposed in Order No. 704, 

but does not substantively alter those 

requirements. OMB approval of this 

order is therefore unnecessary. 

However, the Commission will send a 

copy of this order to OMB for 

informational purposes only. 

IV. Environmental Analysis 

99. The Commission is required to 

prepare an Environmental Assessment 

or an Environmental Impact Statement 

for any action that may have a 

significant adverse effect on the human 

environment.148 The actions taken here 

fall within categorical exclusions in the 

Commission’s regulations for 

information gathering, analysis, and 

dissemination, and for sales, exchange, 

and transportation of natural gas that 

requires no construction of facilities.149

Therefore, an environmental assessment 

is unnecessary and has not been 

prepared in this rulemaking. 

V. Regulatory Flexibility Act 

100. The Regulatory Flexibility Act of 

1980 (RFA) 150 generally requires a 

description and analysis of rules that 

will have significant economic impact 

on a substantial number of small 

entities. The RFA requires consideration 

of regulatory alternatives that 

accomplish the stated objectives of a 

proposed rule and that minimize any 

significant economic impact on such 

entities. The RFA does not, however, 

mandate any particular outcome in a 

rulemaking. At a minimum, agencies are 

to consider the following alternatives: 

Establishment of different compliance 

or reporting requirements for small 

entities or timetables that take into 

account the resources available to small 

entities; clarification, consolidation, or 

simplification of compliance and 

reporting requirements for small 

entities; use of performance rather than 

design standards; and exemption for 

certain or all small entities from 

coverage of the rule, in whole or in part. 

101. The annual reporting 

requirement set forth in the Order on 

Rehearing and Clarification will not 

have a significant economic impact on 

a substantial number of small entities. 

The requirement for annual reporting of 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 55739 

physical natural gas transactions will 

have minimal impact on small entities. 

By incorporating a de minimis 

exemption into the regulations, the 

Commission has reduced the number of 

small entities subject to the 

requirements; de minimis entities 

without blanket sales certificates will 

not be required to report. This reporting 

requirement will affect small entities 

but the burden on them will be 

minimal. For each entity, small or 

otherwise, that is required to comply 

with the annual reporting requirement, 

the Commission estimates that the 

compliance would require a one-time 

cost of approximately $4,000 and an 

annual cost thereafter of $400. Although 

some costs would increase for market 

participants with a greater number of 

transactions, we expect that that 

increase would be likely offset because 

such entities would have already 

compiled information regarding their 

transactions in the aggregate. This 

amount is not a significant burden on 

small entities. The de minimis 

exemption provides a regulatory 

alternative that will reduce the 

economic impact on certain small 

entities from coverage of the rule. 

Accordingly, the Commission certifies 

that the order will not have a significant 

economic impact on a substantial 

number of small entities. 

VI. Document Availability 

102. In addition to publishing the full 

text of this document in the Federal 

Register, the Commission provides all 

interested persons an opportunity to 

view and/or print the contents of this 

document via the Internet through 

FERC’s Home Page (http://www.ferc.gov) 

and in FERC’s Public Reference Room 

during normal business hours (8:30 a.m. 

to 5 p.m. Eastern time) at 888 First 

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

20426. 

103. From FERC’s Home Page on the 

Internet, this information is available on 

eLibrary. The full text of this document 

is available on eLibrary in PDF and 

Microsoft Word format for viewing, 

printing, and/or downloading. To access 

this document in eLibrary, type the 

docket number excluding the last three 

digits of this document in the docket 

number field. 

104. 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 e-mail 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. 

VII. Effective Date 

105. Changes to Order No. 704 

adopted in this Order on Rehearing and 

Clarification will become effective 

October 26, 2008. 

The Commission orders: 

The requests for clarification and 

rehearing are granted in part and denied 

in part as discussed in the body of this 

order. 

List of Subjects 

18 CFR Part 260 

Natural gas, Reporting and 

recordkeeping requirements. 

18 CFR Part 284 

Continental shelf; Natural gas; 

Reporting and recordkeeping 

requirements. 

18 CFR Part 385 

Administrative practice and 

procedure; Electric power; Penalties; 

Pipelines; Reporting and recordkeeping 

requirements. 

By the Commission. 

Kimberly D. Bose, 

Secretary. 

■ In consideration of the foregoing, the 

Commission amends 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 revised as follows: 

■ a. Paragraph (a) is amended by 

removing the word ‘‘reporting’’ between 

the words ‘‘annual’’ and ‘‘report.’’ 

■ b. Paragraph (b)(1) introductory text is 

amended by removing the word 

‘‘wholesale,’’ between the words ‘‘in’’ 

and ‘‘physical’’ and removing the word 

‘‘As’’ and inserting the words, 

‘‘However, as’’ at the beginning of the 

final sentence. 

■ c. Paragraph (b)(1)(i) is amended by 

removing the word ‘‘and’’ at the end of 

the paragraph. 

■ d. Paragraph (b)(1)(ii) is revised and 

paragraph 260.401(b)(1)(iii) is added to 

read as follows: 

§ 260.401 FERC Form No. 552, Annual 

Report of Natural Gas Transactions. 

* * * * * 

(b) * * * 

(1) * * * 

(ii) It engages in reportable physical 

natural gas sales that amount to less 

than 2,200,000 MMBtus for the previous 

calendar year; and 

(iii) It engages in reportable physical 

natural gas purchases that amount to 

less than 2,200,000 MMBtus for the 

previous calendar year. 

* * * * * 

PART 284—CERTAIN SALES AND 

TRANSPORTATION OF NATURAL GAS 

UNDER THE NATURAL GAS POLICY 

ACT OF 1978 AND RELATED 

AUTHORITIES 

■ 3. The authority citation for Part 284 

continues to read as follows: 

Authority: 15 U.S.C. 717–717w, 3301– 

3432; 42 U.S.C. 7101–7352; 43 U.S.C. 1331– 

1356. 

■ 4. Section 284.403(a) is amended by 

removing the word ‘‘must’’ in the final 

sentence, and inserting the word 

‘‘Seller’’ in its place. 

Note: The following appendix will not be 

published in the Code of Federal Regulations. 

BILLING CODE 6717–01–P 


sroberts on PROD1PC70 with RULES
55740 Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER26SE08.420</GPH>
Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 55741 


sroberts on PROD1PC70 with RULESER26SE08.421</GPH>
55742 Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER26SE08.422</GPH>
Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 55743 


sroberts on PROD1PC70 with RULESER26SE08.423</GPH>
55744 Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER26SE08.424</GPH>
Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 55745 


sroberts on PROD1PC70 with RULESER26SE08.425</GPH>
55746 Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER26SE08.426</GPH>
Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 55747 


sroberts on PROD1PC70 with RULESER26SE08.427</GPH>
55748 Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 


sroberts on PROD1PC70 with RULESER26SE08.428</GPH>
Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / Rules and Regulations 55749 

[FR Doc. E8–22358 Filed 9–25–08; 8:45 am] 

BILLING CODE 6717–01–C 


sroberts on PROD1PC70 with RULESER26SE08.429</GPH>