Document ID: FERC-2007-0782-0001
Agency: ferc
Document Type: Proposed Rule
Title: Transparency Provisions of Section 23 of the Natural Gas Act; Transparency Provisions of the Energy Policy Act
Posted Date: 2007-04-26T04:00Z

[Federal Register: April 26, 2007 (Volume 72, Number 80)]
[Proposed Rules]               
[Page 20791-20806]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26ap07-32]                         

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 260 and 284

[Docket Nos. RM07-10-000 and AD06-11-000]

 
Transparency Provisions of Section 23 of the Natural Gas Act; 
Transparency Provisions of the Energy Policy Act

April 19, 2007.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In order to implement its authority under section 23 of the 
Natural Gas Act, which was added by section 316 of the Energy Policy 
Act of 2005 (EPAct 2005), the Commission proposes to revise its 
regulations to: require that intrastate pipelines post daily the 
capacities of, and volumes flowing through, their major receipt and 
delivery points and mainline segments in order to make available the 
information needed to track daily flows of natural gas throughout the 
United States; and require that buyers and sellers of more than a de 
minimis volume of natural gas report annual numbers and volumes of 
relevant transactions to the Commission in order to make possible an 
estimate of the size of the physical U.S. natural gas market, assess 
the importance of the use of index pricing in that market, and 
determine the size of the fixed-price trading market that produces the 
information. These revisions would facilitate price transparency in 
markets for the sale or transportation of physical natural gas in 
interstate commerce.

DATES: Comments are due June 11, 2007. Reply comments are due July 10, 
2007.

ADDRESSES: You may submit comments identified by Docket No. RM07-10-
000, by one of the following methods:
     Agency Web Site: http://ferc.gov. Follow the instructions 

for submitting comments via the eFiling link found in the Comment 
Procedures Section of the preamble.
     Mail: Commenters unable to file comments electronically 
must mail or hand deliver an original and 14 copies of their comments 
to the Federal Energy Regulatory Commission, Secretary of the 
Commission, 888 First Street, NE., Washington, DC 20426. Please refer 
to the Comment Procedures Section of the preamble for additional 
information on how to file paper comments.

FOR FURTHER INFORMATION CONTACT: Stephen J. Harvey (Technical), 888 
First Street, NE., Washington, DC 20426, (202) 502-6372, 
Stephen.Harvey@ferc.gov.

Eric Ciccoretti (Legal), 888 First Street, NE., Washington, DC 20426, 
(202) 502-8493, Eric.Ciccoretti@ferc.gov.

SUPPLEMENTARY INFORMATION:

I. Introduction

    1. The Federal Energy Regulatory Commission (Commission), in order 
to facilitate market transparency in natural gas markets, proposes to 
revise its regulations to: (a) Require daily posting of some natural 
gas flow information by intrastate pipelines; and (b) require annual 
filings by buyers and sellers of natural gas in U.S. wholesale markets 
(that transact more than de minimis volumes) of aggregate annual 
purchase and sales information. These proposals exercise expanded 
Commission authority under section 23 of the Natural Gas Act,\1\ which 
was added by the Energy Policy Act of 2005 (EPAct 2005) to require 
reporting from entities not under the Commission's traditional 
jurisdiction.\2\ At this time, as discussed infra, due to other market-
related Commission initiatives, we do not propose additional 
regulations for transparency in electricity markets.
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    \1\ To be codified at 15 U.S.C. 717t-2.
    \2\ Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 
(2005).
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    2. The first proposal, designed to make available the information 
needed to track daily flows of natural gas throughout the United 
States, would

[[Page 20792]]

create a requirement that intrastate pipelines post daily to the 
Internet the capacities of, and volumes flowing through, their major 
receipt and delivery points and mainline segments. Postings would be 
required within 24 hours from the close of the gas day on which gas 
flows, i.e., on or before 9 a.m. central clock time for flows occurring 
on the gas day that ended 24 hours before.
    3. The second proposal, designed to permit the annual estimate of 
(a) The size of the physical domestic natural gas market, (b) the use 
of index pricing in that market, (c) the size of the fixed-price 
trading market that produces price indices from the subset reported to 
index publishers, and (d) the relative size of major traders, would 
create an annual requirement that buyers and sellers of more than a de 
minimis volume of natural gas report numbers and volumes of relevant 
transactions to the Commission. As part of this proposal, the 
Commission would require each holder of blanket marketing certificate 
authority or blanket unbundled sales services certificate authority to 
notify the Commission as to whether it reports its transactions to 
publishers of electricity or natural gas price indices and whether any 
such reporting complies with certain standards. Currently, a holder of 
a blanket marketing certificate or a blanket unbundled sales service 
certificate is required to notify the Commission only when it changes 
its practice regarding such reporting. This part of the proposal would 
make notifications of reporting status more reliable.

II. Background

    4. The Commission's market-oriented policies for the wholesale 
electric and natural gas industries require that interested persons 
have broad confidence that reported market prices accurately reflect 
the interplay of legitimate market forces. 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.'' \3\
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    \3\ See sections 4 and 5 of the Natural Gas Act, 15 U.S.C. 717c, 
717d (2000); sections 205 and 206 of the Federal Power Act, 16 
U.S.C. 824d, 824e (2000).
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    5. 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, inter 
alia, 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.
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    \4\ See 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).
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    6. The Commission recognized staff concerns about price discovery 
in electric and natural gas markets as early as January 2003, when, 
prior to passage of EPAct 2005, the Commission made use of its existing 
authority under the Natural Gas Act and the Federal Power Act to 
restore confidence in natural gas and electricity price indices. The 
Commission expected that, over time, improved price discovery processes 
would naturally increase confidence in market performance. On July 24, 
2003, the Commission issued a Policy Statement on Electric and Natural 
Gas Price Indices (Policy Statement) that explained its expectations of 
natural gas and electricity price index developers and the companies 
that report transaction data to them.\5\ On November 17, 2003, the 
Commission adopted behavior rules for certain electric market 
participants in its Order Amending Market-Based Rate Tariffs and 
Authorizations relying on section 206 of the Federal Power Act to 
condition market-based rate authorizations,\6\ and for certain natural 
gas market participants in Amendments to Blanket Sales Certificates, 
relying on section 7 of the Natural Gas Act to condition blanket 
marketing certificates.\7\ The behavior rules bar false statements and 
require certain market participants, if they report transaction data, 
to report such data in accordance with the Policy Statement. These 
participants must also notify the Commission whether or not they report 
prices to price index developers in accordance with the Policy 
Statement.\8\ On November 19, 2004, the Commission issued an order that 
addressed issues concerning prices indices in natural gas and 
electricity markets and adopted specific standards for the use of price 
indices in jurisdictional tariffs.\9\
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    \5\ Price Discovery in Natural Gas and Electric Markets, Policy 
Statement on Natural Gas and Electric Price Indices, 104 FERC ] 
61,121 (Policy Statement). Subsequently, in the same proceeding, the 
Commission issued an Order on Clarification of Policy Statement on 
Natural Gas and Electric Price Indices, 105 FERC ] 61,282 (Dec. 12, 
2003) (Order on Clarification of Policy Statement) and an Order on 
Further Clarification of Policy Statement on Natural Gas and 
Electric Price Indices, 112 FERC ] 61,040 (July 6, 2005) (Order on 
Further Clarification of Policy Statement).
    \6\ Investigation of Terms and Conditions of Public Utility 
Market-Based Rate Authorizations, 105 FERC ] 61,218, at P 1, 
superseded in part by Compliance for Public Utility Market-Based 
Rate Authorization Holders, Order No. 674, 71 FR 9695 (Feb. 27, 
2006), FERC Stats. and Regs. ] 31,208 (2006).
    \7\ Amendments to Blanket Sales Certificates, Order No. 644, 68 
FR 66,323 (Nov. 26, 2003), FERC Stats. and Regs. ] 31,153, at P 1 
(2003) (citing 15 U.S.C. 717f (2000)), reh'g denied, 107 FERC ] 
61,174 (2003) (Order No. 644-A).
    \8\ Certain portions of the behavior rules were rescinded in 
Amendments to Codes of Conduct for Unbundled Sales Service and for 
Persons Holding Blanket Marketing Certificates, Order No. 673, 71 FR 
9709 (Feb. 27, 2006), FERC Stats. and Regs. ] 31,207 (2006). The 
requirement to report transaction data in accordance with the Policy 
Statement and to notify the Commission of reporting status were 
retained in renumbered sections. 18 CFR 284.288(a), 284.403(a).
    \9\ Price Discovery in Natural Gas and Electric Markets, 109 
FERC ] 61,184, at P 73 (2004).
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    7. In the Policy Statement, among other things, the Commission 
directed 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.\10\ 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.\11\ 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.\12\ Further, in conformance with this 
directive, Commission staff recently concluded audits of three natural 
gas market participants with blanket certificate authority that were 
data providers subject to Sec.  284.403 of the Commission's 
regulations.\13\
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    \10\ Policy Statement at P 43.
    \11\ Federal Energy Regulatory Commission, Report on Natural Gas 
and Electricity Price Indices, at 2, Docket Nos. PL03-3-004 et al. 
(2004).
    \12\ See, e.g., General Accounting Office, Natural Gas and 
Electricity Markets: Federal Government Actions to Improve Private 
Price Indices and Stakeholder Reaction (December 2005).
    \13\ See April 5, 2007 letter issued to Anadarko Energy Services 
Co. in Docket No. PA06-11-000 by Susan J. Court, Director, Office of 
Enforcement, and attached Audit of Price Index Reporting Compliance; 
April 5, 2007 letter issued to BG Energy Merchants, LLC. in Docket 
No. PA06-12-000 by Susan J. Court and attached Audit of Price Index 
Reporting Compliance; April 5, 2007 letter issued to Marathon Oil 
Co. in Docket No. PA06-13-000 by Susan J. Court, and attached Audit 
of Price Index Reporting Compliance.

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[[Page 20793]]

    8. Congress recognized that the Commission might need expanded 
authority to mandate additional reporting to improve market confidence 
through greater price transparency and included in the Energy Policy 
Act of 2005 (EPAct 2005) \14\ authority for the Commission to obtain 
information on wholesale electric and natural gas prices and 
availability. Under the Federal Power Act \15\ and the Natural Gas 
Act,\16\ the Commission has long borne a responsibility to protect 
wholesale electric and natural gas consumers. EPAct 2005 emphasized the 
Commission's responsibility for protecting the integrity of the markets 
themselves as a way of protecting consumers in an active market 
environment. In particular, Congress directed the Commission to 
facilitate price transparency ``having due regard for the public 
interest, the integrity of [interstate energy] markets, [and] fair 
competition.'' \17\ In the new transparency provisions of section 23 of 
the Natural Gas Act and section 220 of the Federal Power Act, Congress 
provided that the Commission may, but is not obligated to, prescribe 
rules for the collection and dissemination of information regarding the 
wholesale, interstate markets for natural gas and electricity, and 
authorized the Commission to adopt rules to assure the timely 
dissemination of information about the availability and prices of 
natural gas and natural gas transportation and electric energy and 
transmission service in such markets.
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    \14\ Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 
594 (2005).
    \15\ 16 U.S.C. 824 et seq.
    \16\ 15 U.S.C. 717 et seq.
    \17\ Section 23(a)(1) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(a)(1); see also section 220 of the Federal Power 
Act, to be codified at 16 U.S.C. 824t (identical language). Section 
316 of EPAct 2005 added section 23 to the Natural Gas Act (natural 
gas transparency provisions); section 1281 of EPAct 2005 added 
section 220 to the Federal Power Act (electric transparency 
provisions) (together, the transparency provisions).
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    9. Consistent with the directive to facilitate price transparency 
in natural gas and electric markets as well as to explore options for 
action under EPAct 2005's expansion of the Commission's authority, 
Commission staff met with interested entities in the summer of 2006. On 
September 26, 2006, staff conducted a workshop to review sources of 
energy market information with interested persons and to lay the 
groundwork for a technical conference held on October 13, 2006. In that 
conference, ideas for potential policy actions by the Commission were 
identified.\18\
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    \18\ At the conference, the Commission convened two panels: (a) 
A panel of seven market participants to discuss price transparency 
in markets for the sale or transportation of physical natural gas in 
interstate commerce; and, (b) a panel of four market participants 
regarding price transparency in markets for the sale and 
transmission of electric energy in interstate commerce. See 
Transparency Provisions of the Energy Policy Act of 2005, Program 
for the Technical Conference, Docket No. AD06-11-000 (Oct. 6, 2006). 
In addition, for each panel, about ten representatives of 
information providers, such as price index publishers, attended to 
provide comment and answer questions.
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    10. Based on those efforts, in this Notice of Proposed Rulemaking 
(NOPR), the Commission sets out two proposals regarding collection and 
dissemination of information about natural gas wholesale markets. The 
Commission does not propose action with respect to electric markets at 
this time. The Commission has recently addressed and is currently 
addressing electric market transparency in other proceedings. For 
example, in its final rule reforming the Open Access Transmission 
Tariff, the Commission referred to its authority under the electric 
transparency provisions to ``promote greater transparency in the 
provision of transmission service * * *'' \19\ In that order, the 
Commission increased the transparency of a transmission provider's 
transmission planning,\20\ the transparency of its calculations of 
Available Transfer Capability,\21\ and the transparency of its business 
rules and practices.\22\ These reforms are consistent with the electric 
transparency provisions because they will ``provide information about 
the availability and prices of wholesale * * * transmission service'' 
to ``users of transmission services'' among others, as contemplated in 
the electric transparency provisions.\23\ Furthermore, in the recently-
initiated wholesale competition review, the Commission is reviewing a 
variety of market-related electricity issues in a series of public 
conferences evaluating the state of competition in wholesale power 
markets.\24\ In the first conference, held February 27, 2007, among 
other issues, the Commission and panelists considered price 
transparency in the context of competition in the wholesale 
markets.\25\ As a separate matter, we note that wholesale electric 
transactions under market-based rates are submitted to the Commission 
and made publicly available through the Electric Quarterly Reports.\26\ 
Further, in organized electricity markets, Regional Transmission 
Organizations (RTOs) and Independent System Operators (ISOs) provide 
transparency by publishing the results of auction markets and by 
posting spot market and day-ahead prices at pre-established intervals. 
The RTOs also provide additional information concerning the electric 
system capacity markets and financial transmission rights that provide 
further transparency concerning the RTO/ISO-administered markets.\27\ 
For these reasons, we do not believe that additional action is needed 
at this time to implement the new electric transparency provisions of 
section 220 of the Federal Power Act.
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    \19\ Preventing Undue Discrimination and Preference in 
Transmission Service, Order No. 890, 72 FR 12266 (March 15, 2007), 
FERC Stats. and Regs. ] 31,241 (2007), at P 80.
    \20\ Id. at P 69, 83.
    \21\ Id. at P 84.
    \22\ Id. at P 88.
    \23\ Section 220(a)(2) of the Federal Power Act, to be codified 
at 16 U.S.C. 824t(a)(2).
    \24\ See, e.g., Conference on Competition In Wholesale Power 
Markets, Docket No. AD07-7-000.
    \25\ See, e.g., Transcript of Feb. 27, 2007 Conference, 
Conference on Competition in Wholesale Power Markets, Docket No. 
AD07-7-000, at 123, 153-154, 244-249.
    \26\ Revised Public Utility Filing Requirements, Order No. 2001, 
67 FR 31043 (May 8, 2002), FERC Stats. & Regs. ] 31,127 (2002), 
reh'g denied, Order No. 2001-A, 100 FERC ] 61,074, reh'g denied, 
Order No. 2001-B, 100 FERC ] 61,342, order directing filing, Order 
No. 2001-C, 101 FERC ] 61,314 (2002), order directing filing, Order 
No. 2001-D, 102 FERC ] 61,334 (2003).
    \27\ Comments of ISO/RTO Council, Docket No. AD06-11-000 (filed 
Oct. 5, 2006) (describing information provided by ISOs and RTOs).
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III. Legal Context

    11. With the passage of EPAct 2005, Congress affirmed a commitment 
to competition in wholesale natural gas and electricity markets as 
national policy, the fifth major Federal law in the last 30 years to do 
so.\28\ As part of this commitment to competition, in the transparency 
provisions, Congress charged the Commission with assuring the integrity 
of the wholesale markets and assuring fair competition by facilitating 
price transparency in those markets. It also significantly strengthened 
the Commission's regulatory tools in the transparency provisions, 
specifically, in new section 220 of the Federal Power Act and new 
section 23 of the Natural Gas Act.
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    \28\ See Energy Policy Act of 1992, Pub. L. No. 102-486, 106 
Stat. 2776 (1992), codified as amended in scattered sections of 16 
U.S.C.; Natural Gas Wellhead Decontrol Act of 1989, Pub. L. No. 101-
60, 103 Stat. 157 (1989), codified in scattered section of 15 
U.S.C.; Public Utility Regulatory Policies Act of 1978, 16 U.S.C. 
2601-2645 (2000); Natural Gas Policy Act of 1978, 15 U.S.C. 3301-
3442 (2000).
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    12. In new section 23(a)(1) of the Natural Gas Act, Congress 
provided the Commission's mandate:

[[Page 20794]]

    The Commission is directed 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, fair competition, and the protection of 
consumers.\29\

    \29\ To be codified at 15 U.S.C. 717(v)(a)(1). The electric 
transparency provisions of the Federal Power Act are nearly 
identical as to the electric wholesale markets. Section 220 of the 
Federal Power Act, to be codified at 16 U.S.C. 824t. Because our 
proposals herein address natural gas transparency, we do not analyze 
the electric transparency provisions, although we expect that 
analysis of electric transparency provisions would be substantially 
similar.
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    In new section 23(a)(2) of the Natural Gas Act, Congress left to 
the Commission's discretion whether to enact rules to carry out this 
mandate and provided that any rules implementing the transparency 
provisions provide for public dissemination of the information 
gathered:

    The Commission may prescribe such rules as the Commission 
determines necessary and appropriate to carry out the purposes of 
this section. 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 to the 
Commission, State commissions, buyers and sellers of wholesale 
natural gas, and the public.\30\

    \30\ To be codified at 15 U.S.C. 717t-2(a).
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    13. In new section 23(a)(3) of the Natural Gas Act, Congress 
contemplated that the transparency provisions would differ from other 
provisions in the Natural Gas Act, both as to the entities covered by 
the Commission's jurisdiction and the possible involvement of third 
parties in implementing the rules. That section reads, with emphasis 
added:

    The Commission may--
    (A) Obtain the information described in paragraph (2) [i.e., 
information about the availability and prices of natural gas sold at 
wholesale and interstate commerce] from any market participant; and
    (B) Rely on entities other than the Commission to receive and 
make public the information, subject to the disclosure rules in 
subsection (b).\31\

    \31\ To be codified at 15 U.S.C. 717t-2(a)(3).
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    By using the term ``any market participant,'' Congress deliberately 
expanded the universe subject to the Commission's transparency 
authority beyond the entities subject to the Commission's rate and 
certificate jurisdiction under other parts of the Natural Gas Act. The 
term ``market participant'' is not defined in the Natural Gas Act and 
is not on its face limited to otherwise jurisdictional entities.
    14. Congress could have limited the scope of entities subject to 
the Commission's transparency authority by referring to ``natural gas 
company'' as defined in the Natural Gas Act \32\ or by referring to 
section 1, 3, or 7 of the Natural Gas Act.\33\ The former approach 
would have excluded intrastate pipelines from the Commission's 
transparency authority. The latter approach would have entailed the 
jurisdictional limitations of those sections, which exclude from the 
Commission's jurisdiction first sales, sales of imported natural gas, 
sales of imported liquefied natural gas, and sales and transportation 
by entities engaged in production and gathering, local distribution, 
``Hinshaw'' pipelines, or vehicular natural gas.\34\ These limitations 
do not apply to the Commission's transparency authority. Given 
Congress's use of the term ``market participant,'' the Commission's 
transparency authority includes any person or form of organization, 
including, for instance, natural gas producers, processors and users.
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    \32\ Section 2(6) of the Natural Gas Act, 15 U.S.C. 717a(6).
    \33\ 15 U.S.C. 717, 717b, 717f.
    \34\ Section 1(b)-(d) of the Natural Gas Act, 15 U.S.C. 717(b)-
(d); section 3 of the Natural Gas Act, 15 U.S.C. 717b; section 7(f) 
of the Natural Gas Act, 15 U.S.C. 717f(f); see, also, section 601(a) 
of the Natural Gas Policy Act, 15 U.S.C. 3431(a). The Commission has 
previously explained that the Natural Gas Policy Act of 1978 (NGPA 
or Natural Gas Policy Act) and the Natural Gas Wellhead Decontrol 
Act of 1989 narrowed its jurisdiction under the Natural Gas Act:
    Under the NGPA, first sales of natural gas are defined as any 
sale to an interstate or intrastate pipeline, LDC [Local 
Distribution Company] or retail customer, or any sale in the chain 
of transactions prior to a sale to an interstate or intrastate 
pipeline or LDC or retail customer. NGPA Section 2(21)(A) sets forth 
a general rule stating that all sales in the chain from the producer 
to the ultimate consumer are first sales until the gas is purchased 
by an interstate pipeline, intrastate pipeline, or LDC. Once such a 
sale is executed and the gas is in the possession of a pipeline, 
LDC, or retail customer, the chain is broken, and no subsequent 
sale, whether the sale is by the pipeline, or LDC, or by a 
subsequent purchaser of gas that has passed through the hands of a 
pipeline or LDC, can qualify under the general rule as a first sale 
on natural gas. In addition to the general rule, NGPA Section 
2(21)(B) expressly excludes from first sale status any sale of 
natural gas by a pipeline, LDC, or their affiliates, except when the 
pipeline, LDC, or affiliate is selling its own production.
    Order No. 644 at P 14.
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    15. The Commission's authority to obtain information from ``any 
market participant'' is not plenary. In the natural gas transparency 
provisions, Congress limited that authority in two respects: the scope 
of the markets at issue and the type of information to obtain and 
disseminate. First, Congress directed the Commission to ``facilitate 
price transparency in markets for the sale or transportation of 
physical natural gas in interstate commerce * * *.'' \35\ Thus, any 
information collected and disseminated must be for the purpose of price 
transparency in those markets. We do not interpret this language to 
limit the Commission to obtaining information only about physical 
natural gas sales or transportation in those markets, provided that the 
information obtained and disseminated pertains to price transparency in 
those markets. Second, Congress provided that any rules ``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 * * *.'' \36\ Thus, the Commission's authority is 
limited to ``information about the availability and prices of natural 
gas sold at wholesale and in interstate commerce.'' \37\ Again, this 
language does not limit the type of information the Commission could 
collect to implement its mandate, provided that such information is 
``about'' (i.e., pertains to) the ``availability and prices of natural 
gas sold at wholesale and in interstate commerce.'' For instance, some 
transportation or sales of natural gas is not in interstate commerce, 
but, nonetheless, would affect the availability and prices of natural 
gas at wholesale and in interstate commerce.
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    \35\ Section 23(a)(1) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(a)(1).
    \36\ Section 23(a)(2) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(a)(2).
    \37\ Id.
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    16. The natural gas transparency provisions further provide that 
the Commission shall ``rely on existing price publishers and providers 
of trade processing services to the maximum extent possible.'' \38\ 
Thus, Congress authorized the Commission to rely on third parties to 
collect and disseminate transparency information. The Commission does 
not herein authorize or empower third parties to collect or disseminate 
information. Nonetheless, we expect that third parties may use the 
information collected pursuant to the proposals in this NOPR and 
repackage it, if sufficient demand for such services arises in the 
information marketplace.\39\
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    \38\ Section 23(a)(4) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(a)(4).
    \39\ We reiterate here our comments made previously regarding 
price index publishers, data hubs, and other trade processing 
services: we do not ``endors[e] any particular entity or approach, 
but continue to encourage industry participants to find optimal 
solutions to better wholesale price formation.'' Order on Further 
Clarification of the Policy Statement at P 11.
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    17. Also, in the transparency provisions, Congress cautioned the 
Commission in providing for any

[[Page 20795]]

dissemination of information pursuant to the transparency provisions to 
ensure that ``consumers and competitive markets are protected from the 
adverse effects of potential collusion or other anticompetitive 
behaviors by untimely disclosure of transaction-specific information.'' 
\40\
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    \40\ Section 23(b)(2) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(b)(2).
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    18. Finally, new section 23(d)(2) of the natural gas transparency 
provisions mandates an exemption from any reporting for ``natural gas 
producers, processors, or users who have a de minimis market presence * 
* *.'' \41\ This paragraph does not exempt all producers and all 
processors from reporting, but exempts only producers that have a de 
minimis market presence and only processors that have a de minimis 
market presence.
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    \41\ Section 23(d)(2) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(d)(2).
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IV. Reporting of Flow Volume and Capacity by Intrastate Pipelines

A. Proposal

    19. The Commission proposes that in order to make available the 
information needed to track daily flows of natural gas throughout the 
United States, each intrastate pipeline would be required to post daily 
to the Internet the capacities of, and volumes flowing through, their 
major receipt and delivery points and mainline segments. Postings would 
be required within 24 hours from the close of the gas day on which gas 
flowed, i.e., at or before 9 a.m. central clock time for flow that 
occurred on the gas day that ended 24 hours before. To illustrate, the 
volume of gas that flowed through a receipt point from 9 a.m. central 
clock time on Monday through 9:00 a.m. central clock time on Tuesday 
would be reported as a daily flow volume for that gas day and must be 
reported by 9 a.m. Wednesday central clock time. The Commission would 
implement this proposal by adding a new Sec.  284.14 to its 
regulations.
    20. As explained in greater detail below, by adding information on 
intrastate pipeline flows to the information already available from 
interstate pipelines, the Commission, market participants, and the 
public could develop a better understanding of daily supply and demand 
conditions that directly affect U.S. wholesale natural gas markets. 
While distinctions between intrastate and interstate natural gas 
markets may be meaningful from a legal perspective, they are not 
meaningful from the perspective of market price formation. The U.S. 
natural gas market produces geographically diverse prices through the 
direct influence of supply, demand and transportation availability, but 
without ever differentiating interstate from intrastate commerce. 
Consequently, this proposal to increase information from intrastate 
pipelines would directly ``facilitate price transparency for the sale * 
* * of physical natural gas in interstate commerce'' as authorized in 
the natural gas transparency provisions.\42\
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    \42\ Section 23(a)(1) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(a)(1).
---------------------------------------------------------------------------

B. Legal Considerations

    21. As discussed above, the natural gas transparency provisions 
provide the authority for the Commission to obtain information from 
otherwise non-jurisdictional entities, including intrastate pipelines. 
The proposal to require intrastate pipelines to post flow information 
raises the additional issue whether such information qualifies as 
``information about the availability and prices of natural gas sold at 
wholesale in interstate commerce.'' \43\ If not, the Commission would 
be foreclosed from requiring the posting.
---------------------------------------------------------------------------

    \43\ Section 23(a)(2) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(a)(2).
---------------------------------------------------------------------------

    22. The Commission believes that the information covered by the 
instant proposal qualifies as ``information about the availability and 
prices of natural gas sold at wholesale and in interstate commerce.'' 
Notwithstanding their intrastate status, most major intrastate 
pipelines today transport or buy and sell wholesale natural gas that 
eventually enters or at least impacts the interstate natural gas 
market. Further, supply and demand in intrastate markets have a direct 
effect on prices of gas destined for interstate markets because both 
intrastate and interstate consumers draw on the same sources of supply. 
This is the case because of the statutory, regulatory and market 
changes that have taken place in the last three decades.
    23. In 1978, in the Natural Gas Policy Act, Congress allowed an 
intrastate pipeline to transport natural gas in interstate commerce on 
behalf of any interstate pipeline or local distribution company served 
by an interstate pipeline, without losing its intrastate status.\44\ 
Congress likewise permitted an intrastate pipeline to sell natural gas 
to any interstate pipeline or any local distribution company served by 
any interstate pipeline, without losing its intrastate status.\45\ In 
addition, at the same time that the Commission issued Order No. 636 in 
1992, it promulgated a new subpart of Part 284 (revised several times 
in the past 15 years) that provides blanket authority to any person who 
is not an interstate pipeline (including intrastate pipelines) to make 
sales for resale of natural gas in interstate commerce.\46\ This 
authorization is a limited jurisdiction certificate, which means that 
the holder does not become subject to the panoply of Natural Gas Act 
regulation by exercising its rights under the certificate.\47\
---------------------------------------------------------------------------

    \44\ See section 311(a)(2) of the Natural Gas Policy Act, 15 
U.S.C. 3371(a)(2); see also 18 CFR part 284, subpart C (Certain 
Transportation by Intrastate Pipelines).
    \45\ See section 311(b) of the Natural Gas Policy Act, 15 U.S.C. 
3371(b); see also 18 CFR part 284, subpart D (Certain Sales by 
Intrastate Pipelines).
    \46\ Pipeline Service Obligations and Revisions to Regulations 
Governing Self-Implementing Transportation and Regulation of Natural 
Gas Pipelines After Partial Wellhead Decontrol, Order No. 636, 57 FR 
13267 (Apr. 16, 1992), FERC Stats. & Regs. ] 30,939 (1992), order on 
reh'g, Order No. 636-A, 57 FR 36128 (Aug. 12, 1992), FERC Stats & 
Regs. ] 30,950 (1992), order on reh'g, Order No. 636-B, 61 FERC ] 
61,272 (1992), order on reh'g, 62 FERC ] 61,007 (1993), aff'd in 
part and remanded in part sub nom United Distribution Cos. v. FERC, 
88 F.3d 1104 (D.C. Cir. 1996), order on remand, Order No. 636-C, 78 
FERC ] 61,186 (1997).
    \47\ See 18 CFR part 284, subpart L (Certain Sales for Resale by 
Non-interstate Pipelines).
---------------------------------------------------------------------------

    24. The market understandably reacted to these statutory and 
regulatory changes since 1978. As relevant here, and explained in 
greater detail below, natural gas sold at or destined to be sold at 
wholesale in the interstate market is frequently exchanged or the 
transactions consummated at market hubs where interstate and intrastate 
pipelines are interconnected (e.g., Waha, Katy, Houston Ship Channel, 
and Carthage in Texas and at Henry Hub in Louisiana). Prices formed at 
these hubs are, in effect, prices for wholesale transactions in 
interstate commerce, even if a portion of the gas priced at each market 
hub is consumed intrastate. In addition, transfer of natural gas can 
take place directly between parties who ship gas on both intrastate and 
interstate pipelines at any pipeline interconnection.

C. Discussion

    25. Currently, through the availability of information regarding 
daily scheduled flows of natural gas through interstate pipelines, 
market participants have an increased, daily understanding of natural 
gas markets, including regional conditions and the pipeline capacity 
available to resolve different geographic supply/demand balances. This 
is due in part to Order No. 637, where the Commission required posting 
of capacity and scheduled volume information on interstate pipelines 
with

[[Page 20796]]

the direct intention of allowing shippers to monitor capacity 
availability.\48\ Accordingly, interstate pipelines must post available 
capacity information, specifically:
---------------------------------------------------------------------------

    \48\ Regulation of Short-Term Natural Gas Transportation 
Services and Regulation of Interstate Natural Gas Transportation 
Services, Order No. 637, 65 FR 10156, at 10204-10205, (Feb. 25, 
2000), FERC Stats. & Regs. ] 31,091, at 31,320-31,321 (2000); order 
on reh'g, Order No. 637-A, 65 FR 35706 (June 5, 2000), FERC Stats. & 
Regs. ] 31,099 (2000); order on reh'g, Order No. 637-B, 65 FR 47284 
(Aug. 2, 2000), affirmed in relevant part, Interstate Natural Gas 
Ass'n of America v. FERC, 285 F.3d 18 (D.C. Cir. 2002), order on 
remand, 101 FERC ] 61,127, order on reh'g, 106 FERC ] 61,088, aff'd 
sub nom. American Gas Ass'n v. FERC, 428 F.3d 255 (D.C. Cir. 2005) 
(Order No. 637).

The availability of capacity at receipt points, on the mainline, at 
delivery points, and in storage fields, whether the capacity is 
available directly from the pipeline or through capacity release, 
the total design capacity of each point or segment on the system; 
the amount scheduled at each point or segment whenever capacity is 
scheduled, and all planned and actual service outages or reductions 
---------------------------------------------------------------------------
in service capacity.\49\

    \49\ 18 CFR 284.13(d).
---------------------------------------------------------------------------

    In Order No. 637, the Commission anticipated that such postings 
would provide useful information regarding supply and demand 
fundamentals:

    The changes to the Commission's reporting requirements will 
enhance the reliability of information about capacity availability 
and price that shippers need to make informed decisions in a 
competitive market as well as improve shippers' and the Commission's 
ability to monitor marketplace behavior to detect, and remedy 
anticompetitive behavior.\50\

    \50\ Order No. 637, 65 FR at 10169.
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    26. Today, interested market participants as well as commercial 
vendors retrieve this information from the Web sites of interstate 
pipelines to obtain schedule information that is then used to estimate 
a variety of supply and demand conditions including geographic and 
industrial sector consumption, storage injections and withdrawals and 
regional production in almost real-time.\51\ Market participants have 
come to rely on this information to help price transactions. Commission 
staff has also come to rely on this information to perform its 
oversight and enforcement functions. In fact, observers believe that 
this information posting has contributed to market transparency by 
revealing the underlying volumetric (or availability) drivers behind 
price movements.\52\
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    \51\ See, e.g., Comments of Bentek Energy, LLC., Docket No. 
AD06-11-000 (filed Oct. 10, 2006).
    \52\ See, e.g., Comments of Platt's, at p. 11-13, Docket No. 
AD06-11-000 (information regarding the supply and demand of natural 
gas explains prices and such information is available from 
interstate pipelines, but not intrastate pipelines).
---------------------------------------------------------------------------

    27. Notwithstanding the contribution of posted interstate schedule 
information to the transparency of price and availability of natural 
gas, this information cannot provide a complete picture of natural gas 
flows in the United States--or even those flows directly relevant to 
the pricing of natural gas flowing in interstate commerce. Several 
major U.S. natural gas pricing points sit at the confluence of multiple 
interstate and intrastate pipelines. A recent study by the Department 
of Energy's Energy Information Administration (EIA) identified 28 
national market centers or pricing hubs, of which 13 are served by a 
combination of interstate and intrastate pipelines.\53\ The table below 
shows the capacity of interstate and intrastate pipelines connected to 
each of these 13 hubs.
---------------------------------------------------------------------------

    \53\ Department of Energy, Energy Information Administration, 
Natural Gas Market Centers and Hubs: A 2003 Update, Oct. 2003, 
http://www.eia.doe.gov/pub/oil_gas/natural_gas/feature_articles/2003/market_hubs/mkthubs03.pdf
.

     Table 1.--Inter- and Intrastate Pipeline Delivery Capacity at Selected U.S. Natural Gas Pricing Points
----------------------------------------------------------------------------------------------------------------
                                                                                   Receipt and delivery capacity
                                                                                 -------------------------------
                   Hub name                                   State                 Interstate      Intrastate
                                                                                     pipelines       pipelines
                                                                                      (MMcfd)         (MMcfd)
----------------------------------------------------------------------------------------------------------------
Carthage......................................  TX..............................           1,120           1,355
Henry Hub.....................................  LA..............................           2,770           1,215
Katy--Enstore.................................  TX..............................           1,370           3,815
Katy--DEFS....................................  TX..............................             260           2,360
Mid Continent.................................  KS..............................           1,112             627
Moss Bluff....................................  TX..............................           1,050           1,800
Nautilus......................................  LA..............................           1,200           1,350
Perryville....................................  LA..............................           3,652             350
Aqua Dulce....................................  TX..............................             855             835
Waha--Lone Star...............................  TX..............................             810           1,140
Waha--Encina..................................  TX..............................             525             800
Waha--El Paso.................................  TX..............................           1,165           1,660
Waha--DEFS....................................  TX..............................             300          1,850
----------------------------------------------------------------------------------------------------------------
Source: Unpublished Energy Information Administration update to March 2005 of information presented in Natural
  Gas Market Centers and Hubs: A 2003 Update, October 2003.

    28. Many of these pricing points are closely connected to other 
regions of the United States, influencing prices across the country. 
The figure below shows the location and flow patterns of natural gas 
moving between intrastate and interstate markets through several of 
these pricing points.
BILLING CODE 6717-01-P

[[Page 20797]]

[GRAPHIC] [TIFF OMITTED] TP26AP07.000

    29. One pricing point directly connected to both interstate and 
intrastate pipelines is Henry Hub, Louisiana, the location for delivery 
of natural gas under the New York Mercantile Exchange's (NYMEX) futures 
contract. Monthly settlement of NYMEX's Henry Hub natural gas future 
contract has become important in determining a variety of monthly index 
prices used to set natural gas prices in a variety of transactions, 
some in interstate commerce, particularly along the East Coast and Gulf 
Coast of the United States. The nature of this influence is detailed in 
Commission staff's 2006 State of the Markets Report.\54\
---------------------------------------------------------------------------

    \54\ Federal Energy Regulatory Commission, 2006 State of the 
Markets Report, at 48-50 (Jan. 2007), http://www.ferc.gov/market-oversight/market-oversight.asp
, (follow link to the State of the 

Markets Full Report).
---------------------------------------------------------------------------

    30. Purchasers of natural gas in interstate commerce draw on the 
same sources of supply as users and buyers of natural gas in intrastate 
commerce. For example, much of the recent Barnett Shale development in 
the Fort Worth basin flows into intrastate systems before moving into 
interstate markets. In total, slightly more than 40 percent of total 
on-shore production in Texas is connected to interstate pipelines, less 
than 60 percent in Louisiana and less than 80 percent in Oklahoma.\55\ 
Though daily volume flowing from intrastate into interstate pipelines 
can be estimated, the supply dynamics that make these volumes available 
cannot.
---------------------------------------------------------------------------

    \55\ BENTEK Energy, LLC analysis of supply scheduled into 
interstate pipelines compared with EIA data from its table Natural 
Gas Gross Withdrawals and Production for Texas and Oklahoma 
available at http://tonto.eia.doe.gov/dnav/ng/ng_prod_sum_dcu_NUS_m.htm
.

---------------------------------------------------------------------------

    31. Send-out from current liquefied natural gas (LNG) terminals--
Cove Point, Elba Island, Everett and Lake Charles--is observable 
through interstate receipt point flow postings. Of seven approved, but 
not yet operational, terminals in Texas and Louisiana, all would 
discharge in whole or in part to intrastate pipelines.\56\
---------------------------------------------------------------------------

    \56\ Texas Railroad Commission, Onshore LNG Supply Terminal 
Projects Proposed for Texas (June 28, 2006), http://www.rrc.state.tx.us/commissioners/carrillo/press/LNGprojects.html
.

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    32. The Commission proposes to require posting of actual flow 
information from intrastate pipelines rather than scheduled volumes, as 
it does for interstate pipelines. Intrastate pipelines operate in 
different regulatory and business contexts from interstate pipelines, 
making scheduled volumes less helpful in estimating movement of natural 
gas. For example, interstate pipelines primarily operate as open access 
transporters, not as sellers of natural gas. Scheduled volumes 
represent the communication that must occur between the shipper and the 
pipeline to conduct most of their business. As a consequence, 
interstate receipt, transportation and delivery schedules, as updated 
before and

[[Page 20798]]

through the delivery day, reflect actual flows on their systems as 
well.\57\ In contrast, intrastate pipelines often sell gas directly to 
customers under a variety of regulatory regimes. Much of such gas can 
flow without being scheduled, especially for customers' variable 
requirements. Similarly, many direct pipeline purchases from the 
wellhead and from smaller gathering systems need not be scheduled. 
Given the different business models, and the likelihood that scheduling 
information on intrastate pipelines would be unhelpful, we conclude 
that actual flow information, posted after-the-fact, would be needed to 
develop an understanding of these flows.
---------------------------------------------------------------------------

    \57\ In the case of ``no-notice'' service, see 18 CFR 
284.7(a)(4), interstate pipeline schedules do not reflect flows. 
Consequently, information about interstate flows in areas using no-
notice service is less useful.
---------------------------------------------------------------------------

    33. The daily posting of flow information by intrastate pipelines 
would provide several benefits to the functioning of natural gas 
markets in ways that would protect the integrity of physical, 
interstate natural gas markets, protect fair competition in those 
markets and consequently serve the public interest by better protecting 
consumers. First, by providing a more complete picture of supply and 
demand fundamentals, these postings would improve market participants' 
ability to assess supply and demand and to price physical natural gas 
transactions. Second, during periods when the U.S. natural gas delivery 
system is disturbed, for instance due to hurricane damage to facilities 
in the Gulf of Mexico, these postings would provide market participants 
a clearer view of the effects on infrastructure, the industry, and the 
economy as a whole. Finally, these postings would allow the Commission 
and other market observers to identify and remedy potentially 
manipulative activity. We discuss each of these points in turn.
    34. First, the proposed daily intrastate pipeline capacity and 
volume postings would improve market participants' ability to assess 
supply and demand and price physical natural gas transactions by 
providing a more complete picture of supply and demand 
fundamentals.\58\ As discussed above and noted in comments filed in 
these proceedings, interstate pipeline information does not provide a 
complete picture of the supply and demand fundamentals that apply to 
interstate commerce because much of the natural gas in the U.S. is 
moved through the intrastate pipeline system.\59\
---------------------------------------------------------------------------

    \58\ See, e.g., Comments of Platt's, at p. 11, Docket No. AD06-
11-000 (filed Nov. 1, 2006) (explaining that, to understand prices, 
``the marketplace must look to * * * information on [the] 
availability of and demand for natural gas * * *.'').
    \59\ See Comments of Platt's, at p. 13, Docket No. AD06-11-000 
(filed Nov. 1, 2006) (stating that much of the fundamental supply 
and demand data is missing from natural gas markets and advocating 
for reporting by intrastate pipelines).\
---------------------------------------------------------------------------

    35. Second, the proposed daily intrastate pipeline capacity and 
volume postings would provide market participants--and the Commission 
in its market oversight efforts--a clearer view of the effects on 
infrastructure, the industry, and the economy as a whole during periods 
when the U.S. natural gas delivery system is disturbed. For example, 
after landfall of hurricanes Katrina and Rita in late 2005, even the 
most interested of governmental and commercial market observers were 
not able to obtain complete information regarding the extent of the 
damage at production facilities.\60\ By monitoring receipt and delivery 
points for production facilities on interstate pipelines, market 
participants were able to obtain only a limited sense of production 
facility output.\61\ Similarly, market participants, State commissions 
and others were unable to assess effects on natural gas consumption in 
the Gulf Coast, including consumption by the petrochemical industry, 
for some period. The significance and duration of these effects on this 
industry--vulnerable to energy price and availability disruptions--
remain unclear. This proposal would allow interested governmental and 
private parties to gain a much better picture of disruptions in natural 
gas flows in the case of future hurricanes in the Gulf region.\62\
---------------------------------------------------------------------------

    \60\ See, e.g., Transcript of the Oct. 13, 2006 Technical 
Conference (Tr.), at 25, Transparency Provisions of the Energy 
Policy Act of 2005, Docket No. AD06-11-000 (Comments of Sheila 
Rappazzo, Chief of Policy Section of the Office of Gas and Water of 
the New York State Department of Public Service).
    \61\ Tr. at 25 (Comments of Sheila Rappazzo) (describing how 
after the 2005 hurricanes data availability differed widely).
    \62\ Along these lines, this proposal is consistent with a 
recent Commission final rule and a proposed survey by EIA. On August 
23, 2006, the Commission revised its reporting regulations to 
require jurisdictional natural gas companies to report damage to 
facilities due to a natural disaster or terrorist activity that 
results in a reduction in pipeline throughput or storage 
deliverability. Revision of Regulations to Require Reporting of 
Damage to Natural Gas Pipeline Facilities, Order No. 682, 71 FR 
51098 (Aug. 29, 2006), FERC Stats. and Regs. ] 31,227 (2006), order 
on reh'g, 118 FERC ] 61, (2007). On January 30, 2007, EIA proposed 
to survey natural gas processing plants ``to monitor their 
operational status and assess operations of processing plants during 
a period when natural gas supplies are disrupted.'' Agency 
Information Collection Activities, 72 FR 4248 (Jan. 30, 2007). The 
purpose of the survey would be to ``inform the public, industry, and 
the government about the status of supply and delivery activities in 
the area affected by the disruption.'' Id.
---------------------------------------------------------------------------

    36. Third, the proposed daily intrastate pipeline capacity and 
volume postings would allow the Commission and other market observers 
to identify and remedy potentially manipulative activity more actively 
by tracking price movement in the context of natural gas flows.\63\ In 
particular, information regarding availability on intrastate pipelines 
could be used to track manipulative or unduly discriminatory behavior 
intended to cause harm to consumers by distorting market prices in 
interstate commerce. For example, Commission staff overseeing markets 
routinely check for unused interstate pipeline capacity between 
geographically distinct markets with substantially different prices as 
a sign that flows may be managed to manipulate prices. Given the 
importance of intrastate pipeline connections to 13 major pricing hubs, 
including Henry Hub, as discussed above, the lack of flow information 
on intrastate pipelines hinders the Commission's market oversight and 
enforcement efforts.
---------------------------------------------------------------------------

    \63\ See Prohibition of Energy Market Manipulation, Order No. 
670, 71 FR 4244 (Jan. 26, 2006), FERC Stats. & Regs. ] 31,202 (2006) 
(implementing section 4A of the Natural Gas Act, to be codified at 
15 U.S.C. 717c-1, which prohibits natural gas market manipulation), 
reh'g denied, 114 FERC ] 61,300 (2006).
---------------------------------------------------------------------------

    37. This benefit comports with EPAct 2005, in which Congress 
directed the Commission to facilitate price transparency in physical, 
interstate natural gas markets ``with due regard for the public 
interest, the integrity of those markets, fair competition, and the 
protection of consumers.'' \64\ By this language, Congress intended 
that the improvement of Commission market oversight activities is a 
legitimate justification for proposing rules under the natural gas 
transparency provisions. Monitoring and preventing manipulative or 
unduly discriminatory activity would meet the Commission's 
responsibility for ensuring the integrity of the physical interstate 
natural gas markets. The proposal to make intrastate pipeline 
information available to the public would assist the Commission in 
fulfilling that responsibility.
---------------------------------------------------------------------------

    \64\ Section 23(a)(1) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(a)(1).
---------------------------------------------------------------------------

D. Solicitation of Comments

    38. The Commission seeks comments on its proposal to be codified in 
subpart A of part 284 of the Commission's regulations that intrastate 
pipelines be required to post daily to the Internet the capacities of, 
and volumes flowing through their major receipt and delivery

[[Page 20799]]

points and mainline segments.\65\ In particular, the Commission seeks 
comment on whether market participants believe that the posting of flow 
information on intrastate pipelines would provide valuable additional 
information on supply and demand fundamentals for interstate markets 
and whether such information would be sufficient. The Commission also 
seeks comment on the burden this proposal would impose on intrastate 
pipelines. Those providing burden estimates should provide support for 
their estimate and compare that estimate to the burden currently borne 
by interstate pipelines that report capacity availability pursuant to 
Sec.  284.13(d) of the Commission's regulations.
---------------------------------------------------------------------------

    \65\ The Commission is not proposing to amend subparts C and D 
of part 284, because those subparts govern interstate transactions 
by intrastate pipelines under the authority of the Natural Gas 
Policy Act. The instant proposal is based on the Commission's 
Natural Gas Act jurisdiction as amended by EPAct 2005.
---------------------------------------------------------------------------

    39. The Commission seeks comment on how to define ``major'' receipt 
and delivery points and mainline segments on intrastate systems. The 
Commission does not wish to include extremely small points connected to 
one or a few customers, which it would consider burdensome and possibly 
even anti-competitive in certain cases.
    40. The proposal does not make an exception for intrastate 
pipelines transporting de minimis volumes. Although the natural gas 
transparency provisions mandate that the Commission create an exception 
from reporting requirements for ``natural gas producers, processors, or 
users who have a de minimis market presence,'' they do not mandate a de 
minimis exception for natural gas pipelines.\66\ The Commission seeks 
comment on whether the Commission should create a de minimis threshold 
under which certain intrastate pipelines should not be required to 
report or should create a method for certain intrastate pipelines to 
seek waiver of these requirements. How would such a de minimis 
threshold be measured, for instance, by throughput volume? The 
Commission also seeks comment on whether the proposed flow posting 
requirements should apply to all intrastate pipelines, or whether it 
should be limited to intrastate pipelines in states where a significant 
percentage of supply and demand information is not observable through 
current interstate pipeline posting requirements.
---------------------------------------------------------------------------

    \66\ Section 23(d)(2) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(d)(2).
---------------------------------------------------------------------------

    41. The Commission seeks comment on the difference in approach 
applied to intrastate and interstate pipelines by requiring intrastate 
pipelines to post actual natural gas flows instead of scheduled flows. 
Should the Commission require intrastate pipelines to post information 
about capacity availability at major points on a daily basis, similar, 
or identical, to the information that interstate pipelines are required 
to post under Sec.  284.13(c)? Is it possible to determine major 
intrastate pipeline flows using schedule information?
    42. Regarding the method of posting, the Commission seeks comment 
on the format for posting flow information by intrastate pipelines, 
including whether intrastate pipelines should follow the standards of 
the North American Energy Standards Board. If not, what additional 
accommodations would need to be made for their different operations? 
Further, how would Sec.  284.12, which outlines formatting requirements 
for interstate pipeline postings be modified to accommodate intrastate 
pipelines and to accommodate posting of flow information as opposed to 
scheduling information? Also, the timing in the proposal requires the 
posting of flow information within 24 hours from the close of the gas 
day on which gas flows (i.e., on or before 9 a.m. central clock time 
for flows occurring on the gas day that ended 24 hours before). Does 
this timing create an undue burden? Is it sufficiently timely?
    43. Finally, the Commission seeks comment on whether it should 
revise the posting requirements applicable to interstate pipelines 
provided in Sec.  284.13(d)(1) of the Commission's regulations.\67\ 
Since those posting requirements were mandated, have there been changes 
in technology or the marketplace that justify changing the posting 
requirements for interstate pipelines? In addition to current posting 
requirements, should interstate pipelines be required to post actual 
flow information as we propose to require intrastate pipelines to do? 
Would posting of actual flow information provide useful information 
regarding actual capacity use, for instance, by providing information 
regarding no-notice service?
---------------------------------------------------------------------------

    \67\ 18 CFR 284.13(d)(1).
---------------------------------------------------------------------------

V. Annual Reporting of Natural Gas Transactions

A. Proposal

    44. The Commission proposes that buyers and sellers of more than a 
de minimis volume of natural gas be required to report aggregate 
numbers and volumes of relevant transactions in an annual filing using 
an electronic form to be provided by the Commission on its Internet Web 
page. This proposal would be codified at Sec.  260.401 of the 
Commission's regulations. This information would provide regularly an 
estimate of (a) the size of the physical domestic natural gas market, 
(b) the use of index pricing in that market, (c) the size of the fixed-
price trading market that produces price indices, and (d) the relative 
size of major traders. Although the natural gas transparency provisions 
authorize the Commission to require reporting of detailed transaction-
by-transaction information, the Commission proposes obtaining this more 
limited set of information designed to assess the market. The 
requirement would be applied to companies both traditionally 
jurisdictional to the Commission and others. This form would also serve 
to identify users of blanket certificates and document their reporting 
status as required under Sec.  284.403(c) and Sec.  284.288(a), 
discussed further below. A proposed form for the report is set forth in 
Appendix A.\68\
---------------------------------------------------------------------------

    \68\ Pursuant to Sec.  375.314(f) and (g), the Director of the 
Office of Enforcement or the Director's designee, could deny or 
grant waivers of the requirements of this form and could act on 
requests for extensions of time to file the form. 18 CFR 375.314(f) 
and (g). The Commission anticipates directing staff to make changes 
to the format of the form. Cf. Revised Public Utility Filing 
Requirements, 106 FERC ] 61,281 (2004) (directing staff to make 
future changes to the Electric Quarterly Reports).
---------------------------------------------------------------------------

    45. Under the proposed reporting requirement, certain natural gas 
buyers and sellers would identify themselves to the Commission and 
report summary information about physical natural gas transactions for 
the previous calendar year including: (a) Their total amount of 
physical \69\ natural gas transactions by number and volume; (b) the 
breakdown of their transactions by purchases and sales; (c) the number 
and volume breakdown of their purchases and sales by whether they were 
conducted in monthly or daily spot markets; and (d) the number and 
volume breakdown of their purchases and sales by type of pricing, in 
particular whether that pricing was fixed or indexed.
---------------------------------------------------------------------------

    \69\ Although the standard contract for the most significant 
natural gas futures market traded on the New York Mercantile 
Exchange (NYMEX) requires physical delivery, the vast majority of 
those transactions do not go to delivery. For the purposes of this 
proposal, and despite the particulars of the futures contract 
language, we intend to explicitly exclude volumes of futures 
transactions from consideration. Indeed, information about volumes 
of futures transactions is already publicly available through a 
variety of commercial means or directly through NYMEX at http://www.nymex.com
, so collection of the information would be redundant 

and unnecessary.

---------------------------------------------------------------------------

[[Page 20800]]

    46. In addition, a natural gas seller would be required to state 
whether it operates under blanket certificate authority under Sec.  
284.402 of the Commission's regulations, and whether it reports 
transactions to price index publishers and whether any such reporting 
complies with the standards provided in Sec.  284.403(a). Similarly, an 
interstate pipeline would be required to state whether it operates 
under blanket certificate authority under Sec.  284.284 of the 
Commission's regulations, and whether it reports transactions to price 
index publishers and whether any such reporting complies with the 
standards provided in Sec.  284.288(a).\70\
---------------------------------------------------------------------------

    \70\ The Commission recognizes that few if any interstate 
natural gas pipelines still make wholesale sales. Nevertheless, if 
they were to sell gas at wholesale in interstate commerce, they 
would be subject to the proposed rule. More relevant, of course, is 
the fact that all of their affiliates making wholesale sales in 
interstate commerce would be subject to the proposed rule.
---------------------------------------------------------------------------

B. Legal Considerations

    47. The Commission intends ``physical natural gas transaction'' to 
mean a sale or purchase of natural gas with an obligation to deliver or 
receive physically, even if the natural gas is not physically 
transferred due to some offsetting or countervailing trade. Thus, with 
one explicit exception, even if the transaction does not go to physical 
delivery, it would still be included as a physical transaction. The 
exception is physically settled futures contracts. The Commission would 
require such a contract to be reported only if it actually goes to 
delivery. Although the language of the natural gas transparency 
provisions address sales of natural gas, it does not limit the 
Commission from seeking information about natural gas purchases as well 
as sales. They are simply different sides of the same transaction. 
Congress directed the Commission to ``facilitate price transparency in 
markets for the sale * * * of physical natural gas in interstate 
commerce,'' but that language does not limit the Commission to seeking 
information regarding only sales.\71\ Purchases of physical natural gas 
are also a part of such markets; there is no market for the sale of 
natural gas that does not include purchases. Nor does the natural gas 
transparency provision language that provides for the ``dissemination * 
* * of information about the availability and prices of natural gas 
sold at wholesale and interstate commerce'' restrict the 
Commission.\72\ As a practical matter, information regarding purchases 
of natural gas is necessary to evaluate the reliability of information 
regarding sales of natural gas. Both types of information are necessary 
to obtain a useful gauge of price transparency in natural gas markets.
---------------------------------------------------------------------------

    \71\ Section 23(a)(1) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(a)(1).
    \72\ Section 23(a)(2) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(a)(2) (emphasis added).
---------------------------------------------------------------------------

    48. Further, in its Policy Statement, the Commission states that 
data providers should provide both sale and purchase information to 
price index developers.\73\ As the Policy Statement and related 
Commission initiatives were major Commission proceedings regarding this 
topic, we can presume that Congress was aware of this Policy Statement 
when it wrote the transparency provisions and, thus, contemplated that 
the Commission would continue its practice of seeking both sale and 
purchase information in facilitating price transparency.
---------------------------------------------------------------------------

    \73\ Policy Statement on Price Indices at P 34.
---------------------------------------------------------------------------

    49. The proposed public nature of the filings would comport with 
the transparency provisions which require that any such rules ``provide 
for the dissemination, on a timely basis, of information * * * to the 
public.'' \74\ The transparency provisions further direct the 
Commission to ``rely on [existing price publishers and providers of 
trade processing services] to the maximum extent possible.'' \75\ By 
requiring public filings by market participants, the Commission would 
provide an opportunity for trade publications and commercial vendors to 
aggregate the information and provide any analysis should a desire for 
such services arise in the energy information marketplace.
---------------------------------------------------------------------------

    \74\ Section 23(a)(2) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(a)(2).
    \75\ Section 23(a)(4) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(a)(4).
---------------------------------------------------------------------------

C. Discussion

    50. Because of the way transactions currently take place in the 
natural gas industry, there is no way to estimate in even the broadest 
terms the overall size of the natural gas market or its breakdown by 
types of contract provision, including pricing and term (e.g., spot or 
longer term forwards).\76\ More particularly, there is no way to 
determine important volumetric relationships between the fixed-price 
day-or month-ahead transactions that form price indices or to determine 
the use of price indices themselves. As noted by the price index 
developer Platt's, the question of what is the total size of the traded 
market has ``hung over the gas market for years.'' \77\ Without the 
most basic of volumetric information, the Commission has been hampered 
in its oversight and its ability to assess the adequacy of price-
forming transactions. Market participants are likewise unable to 
evaluate their use of indexed transactions. Typically, market 
participants rely on index-price transactions as a way to reference 
market prices without taking on the risks of active trading. These 
market participants rely on index prices, often whether or not those 
prices are derived from a robust market of fixed-price transactions.
---------------------------------------------------------------------------

    \76\ In its supplemental comments, Platt's provided information 
regarding its use of physical basis transactions in compiling 
monthly indices. Supplemental Comments of Platt's, Transparency 
Provisions of the Energy Policy Act, Docket No. AD06-11-000 (filed 
Feb. 23, 2007).
    \77\ Comments of Platt's, at 6, Transparency Provisions of the 
Energy Policy Act, Docket No. AD06-11-000, (filed Nov. 1, 2006).
---------------------------------------------------------------------------

    51. Price formation in natural gas markets makes no distinction 
between transactions that are jurisdictional to the Commission under 
the Natural Gas Act absent new section 23 of that statute and those 
that are not. As discussed above, generally, while the Commission's 
traditional jurisdiction arising from sections 3 through 10 of the 
Natural Gas Act is limited to ``natural gas compan[ies],'' \78\ this 
limitation is not applicable to the Commission's jurisdiction under new 
section 23 of the Natural Gas Act,\79\ the natural gas transparency 
provisions. As a consequence, in order to assess the size and structure 
of U.S. natural gas markets, information is required from transacting 
companies whether or not they fall under the Commission's traditional 
jurisdiction.
---------------------------------------------------------------------------

    \78\ See, 15 U.S.C. 717b-717i (2000).
    \79\ To be codified at 15 U.S.C. 717t-2.
---------------------------------------------------------------------------

    52. Notwithstanding Congress's broadening of the scope of the 
Commission's jurisdiction in new section 23 of the Natural Gas Act with 
respect to transparency, Congress also mandated that the Commission 
exempt ``natural gas producers, processors or users who have a de 
minimis market presence [from compliance] with the reporting 
requirements of this section.'' \80\ In establishing a de minimis 
threshold for reporting, which would apply to all market participants, 
the Commission seeks to require reporting from only those market 
participants whose transactions could have an effect on the price for 
the sale of physical natural gas in interstate commerce and to obtain 
reporting from a sufficient number of market participants to ensure, in 
the aggregate, an accurate picture of the physical natural gas market 
as a whole. To this end, we propose to define such a de minimis market 
participant as a market

[[Page 20801]]

participant that engages in physical natural gas transactions that 
amount by volume to less than 2,200,000 MMBtus annually.\81\ This 
figure is based on the rather simple calculation of one-ten thousandth 
(\1/10,000\\th\) of the annual physical volumes consumed in the United 
States, which is approximately 22 trillion cubic feet (Tcf) (or roughly 
22,000,000,000 MMBtus).\82\ Consequently, 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 \1/10,000\th 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. Although we do not expect annual physical volumes 
consumed in the United States to remain constant, the figure of 22 Tcf 
is a useful snapshot of consumption and a useful starting-point for 
setting the de minimis exemption.
---------------------------------------------------------------------------

    \80\ Section 23(d)(2) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(d)(2).
    \81\ Proposed 18 CFR 284.401 (defining de minimis market 
participant). The Commission proposes to define a market participant 
as ``any buyer or seller that engaged in physical natural gas 
transactions for the previous calendar year.'' Proposed 18 CFR 
284.401.
    \82\ Department of Energy, Energy Information Administration, 
Natural Gas Summary, Data Series: Total Consumption, 2006, http://tonto.eia.doe.gov/dnav/ng/ng_sum_lsum_dcu_nus_a.htm
.

---------------------------------------------------------------------------

    53. The proposed reporting requirement would also shift the 
notification regarding the index reporting practices of companies 
selling under blanket certificates to this annual form and away from 
the prior practice of a letter notification upon a change in company 
policy. Consequently, if a market participant makes use of its blanket 
certificate authority, even if its sales are de minimis, it would still 
be required to report, but only its identification information, whether 
it reports transaction information to price index publishers, and 
whether any such reporting complies with the regulations governing 
reporting to price index publishers. This proposal would be codified at 
Sec.  284.403(a) for blanket marketing certificate holders and at Sec.  
284.288(a) for interstate pipelines with unbundled sales service 
certificates. The Commission would impose these requirements on all 
blanket certificate holders regardless of size.\83\
---------------------------------------------------------------------------

    \83\ The Commission makes this proposal under section 4, 5 and 7 
of the Natural Gas Act, 15 U.S.C. 717c, 717d, and 717f (2000), and, 
thus, is not required to create a de minimis exception for holders 
of blanket marketing certificates or for interstate pipelines that 
have blanket unbundled sales services certificates.
---------------------------------------------------------------------------

    54. In Order No. 644, the Commission required each holder of 
blanket marketing certificate authority to notify the Commission 
whether it engages in reporting of its transactions to publishers of 
electricity or natural gas price indices according to the standards set 
out in the Commission's Policy Statement on Price Indices.\84\ Pursuant 
to Sec.  284.403(a) of the Commission's regulations, if a holder of a 
blanket marketing certificate changes its reporting standards, it is 
required to report that change to the Commission.\85\ Pursuant to Sec.  
284.288(a) of the Commission's regulations, if an interstate pipeline 
that holds blanket unbundled sales service certificate, it is similarly 
required to report that change to the Commission.
---------------------------------------------------------------------------

    \84\ Order No. 644 at P 70-72.
    \85\ 18 CFR 284.403(a).
---------------------------------------------------------------------------

    55. Several data providers asked for clarification as to whether 
they may report certain classes of products traded, but not others. In 
one instance, related to electricity, the data provider was reporting 
all transactions other than next-hour electric transactions.\86\ We 
clarify 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. A data provider would be required to notify the 
commission of any change in the types of products it reports within 15 
days of any such change. We intend to reiterate this clarification in 
the preamble of any final rule issued in these proceedings.
---------------------------------------------------------------------------

    \86\ See, Pinnacle West Capital Corporation and Pinnacle West 
Marketing and Trading Co., LLC, Investigation of Terms and 
Conditions of Market-Based Rate Tariffs and Authorizations, Docket 
No. EL01-118-000 (filed Feb. 12, 2007).
---------------------------------------------------------------------------

    56. At the October 13, 2006 technical conference, several 
participants called for mandatory reporting of all fixed-price 
transactions.\87\ Mandatory reporting would appear to provide 
additional benefits in that it could assist in determining whether the 
price indices are an accurate reflection of underlying fixed-price 
trading. Market participants, State commissions, and this Commission 
could gain a clearer sense of the volume and number of natural gas 
transactions that form prices by location and duration. For the 
following reasons, however, we believe that mandatory reporting is not 
appropriate at this time.
---------------------------------------------------------------------------

    \87\ Tr. at 13-14 (Ms. Lewis-Raymond on behalf of the American 
Gas Association) (calling for mandatory reporting of fixed-price 
trades); Tr. at 18-19 (Mr. Les Fyock on behalf of the American 
Public Gas Association (APGA)) (calling for mandatory price 
reporting); Comments of the APGA, Transparency Provisions of the 
Energy Policy Act, Docket No. AD06-11-000 (filed Nov. 1, 2006) 
(same).
---------------------------------------------------------------------------

    57. First, mandatory reporting of certain transactions would create 
an incentive for wholesale buyers and sellers to consider structuring 
transactions based on avoiding reporting requirements rather than 
simply on the economics of the transaction. Even very subtle shifts in 
the form of transactions could easily make them non-reportable in any 
pre-defined system. For instance, if the Commission required reporting 
of fixed-price, day-ahead transactions, market participants could 
create two-day transactions, achieve substantially the same economic 
result and avoid reporting.
    58. Second, buyers and sellers might shift away from fixed-price 
transactions to indexed-price transactions. Fixed-price transactions 
could easily decrease to the point that indices that rely on them would 
no longer represent reliable indicators of the market. Such indices 
would likely become more volatile as they moved more in response to 
fewer transactions. At the October 13, 2006 technical conference, 
several panelists raised similar concerns and advocated against 
mandatory price reporting.\88\
---------------------------------------------------------------------------

    \88\ See, e.g., Tr. at 12-13 (Mr. Christopher Conway on behalf 
of Conoco-Phillips Gas and Power, the Natural Gas Supply 
Association, and the Independent Producers Association of America) 
(asserting that mandatory price reporting could drive market 
participants away from reportable transactions, thereby, possibly 
reducing liquidity); Tr. at 35-36, 38-39 (Mr. Alex Strawn on behalf 
of the Process Gas Consumers Group) (asserting that mandatory 
reporting of fixed price transactions would drive market 
participants to use index-price transactions, thereby, reducing 
liquidity); Comments of Independent Petroleum Association of 
America, at p. 3, Transparency Provisions of the Energy Policy Act, 
Docket No. AD06-11-000 (filed Nov. 1, 2006) (mandatory reporting 
would push market participants away from reportable transactions and 
cause them to do more index-price transactions); Comments of Natural 
Gas Supply Association, Transparency Provisions of the Energy Policy 
Act, Docket No. AD06-11-000 (filed Nov. 1, 2006) (similar).
---------------------------------------------------------------------------

    59. Third, broad availability of detailed transaction data might 
prove to be anticompetitive. By contrast, our proposal herein is 
intended to adhere to the requirement provided in section 23 of the 
Natural Gas Act that the Commission ``shall seek to ensure that 
consumers and competitive markets are protected from the adverse 
effects of potential collusion or other anticompetitive behaviors that 
can be facilitated by untimely public disclosure of transaction-
specific information.'' \89\ In its comments in these proceedings, the 
Department of Justice echoed this caution, stating that the Commission 
``may be able to achieve the benefits of

[[Page 20802]]

transparency while limiting its potential harm by aggregating, masking, 
and lagging the release of such information.'' \90\ The Commission's 
proposal would not provide for the collection and disclosure of 
``transaction-specific information.'' The proposal is intended to avoid 
facilitating anti-competitive behavior in several ways: (i) Reported 
information would not include specific price information; (ii) reported 
information would be aggregated information over a period of one year 
and not transaction-specific information; and (iii) reported 
information would be made on an aggregated, national level, and not by 
point or even region.
---------------------------------------------------------------------------

    \89\ Section 23(b)(2) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(b)(2).
    \90\ Comments of the Department of Justice, Antitrust Division, 
Transparency Provisions of the Energy Policy Act, Docket No. AD06-
11-000 (filed Jan. 25, 2007). The Department of Justice's comments 
focused on the electricity markets, although it did note that the 
same general considerations that applied to electricity markets also 
applied to natural gas markets.
---------------------------------------------------------------------------

    60. The Commission also does not propose that market participants 
report information regarding their financially-settled transactions nor 
regarding their physically-settled futures contracts that do not go to 
delivery.\91\ The Commission has noted significant interactions among 
financial, futures and physical natural gas markets.\92\ The most 
direct and important influence of this type on physical markets is from 
the futures market, which is regulated by the Commodities Futures 
Trading Commission (CFTC). The CFTC actively monitors that market, and 
communicates regularly with the Commission regarding market 
matters.\93\
---------------------------------------------------------------------------

    \91\ See, e.g., Tr. at 22-24, Comments of Industrial Energy 
Consumers of America, (arguing that because the physical and 
financial natural gas markets are linked, the Commission and the 
Commodity Futures Trading Commission should make Over-the-Counter 
markets more transparent.)
    \92\ Federal Energy Regulatory Commission, 2006 State of the 
Markets Report, at 48-50 (Jan. 2007), http://www.ferc.gov/market-oversight/market-oversight.asp
, (follow link to the State of the 

Markets Full Report).
    \93\ In the transparency provisions, Congress mandated that this 
Commission and the CFTC conclude a memorandum of understanding 
relating to information sharing to include ``provisions ensuring 
that information requests to markets within the respective 
jurisdiction of each agency are properly coordinated to minimize 
duplicative information requests, and provisions regarding the 
treatment of proprietary trading information.'' Section 23(c)(1) of 
the Natural Gas Act, 15 U.S.C. 717t-2(c)(1); see also section 
220(c)(1) of the Federal Power Act, 16 U.S.C. 824t(c)(1) (identical 
language). The Commission and the CFTC entered into the memorandum 
of understanding on October 12, 2005. Memorandum of Understanding 
Between FERC and the CFTC Regarding Information Sharing And 
Treatment Of Proprietary Trading And Other Information, available at 
http://www.ferc.gov/legal/maj-ord-reg/fed-sta/ene-pol-act.asp 

(follow ``Interagency/Tribal,'' then, ``MOU'').
---------------------------------------------------------------------------

    61. By obtaining the number and volume of transactions conducted 
for each market participant, the Commission, market participants and 
others would be able to determine the overall level of activity of 
market participants in the physical natural gas market. In particular, 
the information would provide regularly an estimate of (a) The size of 
the physical U.S. domestic natural gas market, (b) the use of index 
pricing in that market, (c) the size of the fixed-price trading market 
that produces price indices, and (d) the relative sizes of major 
traders.
    62. The information provided through the Commission's proposal 
would improve the understanding of index pricing by interested 
entities, including the market participants and State energy regulators 
who use them. The number and volume break-down of transactions by price 
type, fixed-price or index-price, should permit an overall assessment 
of the ratio of index-using transactions to price-forming transactions, 
i.e., fixed-price transactions. At present, we do not know how much 
fixed-price transactions are a part of the universe of natural gas 
transactions, although they may be the minority of natural gas 
transactions.\94\
---------------------------------------------------------------------------

    \94\ Tr. at 32 (Comments of Ms. Jane Lewis-Raymond, American Gas 
Association) (surmising that we currently cannot know the amount of 
fixed-price transactions and the amount of fixed-price trades that 
make up an index).
---------------------------------------------------------------------------

    63. As noted in the introduction, the Commission has taken several 
steps to restore confidence in natural gas index prices and their 
formation.\95\ By obtaining information regarding the extent that 
market participants make fixed-price transactions, market participants 
would be able to evaluate their confidence in the index prices that are 
formed by those fixed-price transactions. By collecting sales and 
purchases information, results could also be cross-checked to ensure 
that information was accurate. In effect, total sales should roughly 
equal total purchases, with some allowance for de minimis buyers and 
sellers.
---------------------------------------------------------------------------

    \95\ See supra, notes 5-11.
---------------------------------------------------------------------------

    64. The Commission also proposes to require a holder of blanket 
market certificates or an interstate pipeline with an unbundled sales 
service certificate to notify the Commission annually about its 
reporting of transaction information to price index publishers and 
whether any such reporting conforms to the Policy Statement. After the 
Policy Statement's notification requirement took effect, we observed 
that blanket marketing certificate holders may have overlooked this 
requirement and we provided the opportunity for blanket marketing 
certificate holders to notify the Commission by August 1, 2005 of their 
reporting status.\96\ Based on Commission staff's experience monitoring 
price indices and adherence to the Policy Statement, as discussed in 
the introduction, the Commission believes that notification on an 
annual basis would make the information more reliable. As a further 
benefit, notifying companies would have the opportunity to review their 
practices in coordination with their response to the data collection 
proposal described above.
---------------------------------------------------------------------------

    \96\ Order on Further Clarification of Policy Statement at P 21.
---------------------------------------------------------------------------

D. Solicitation of Comments

    65. The Commission seeks comment on this proposal, including 
whether market participant responses to the questions would provide 
useful information to market participants, State commissions, this 
Commission and the public in understanding the natural gas market, the 
price formation process, and the use of price indices.
    66. In particular, the Commission encourages market participants to 
review the questions (in draft form at Appendix A) and determine 
whether they would result in useful information for understanding the 
prices and availability of physical natural gas in interstate commerce. 
What adjustments might improve these questions? What alternative or 
additional questions might add sufficient information to justify 
additional burden on filers? Does the format for responses ensure 
consistency for aggregation and analysis? The Commission anticipates 
holding meetings, if needed, to consider the details of this annual 
filing requirement.
    67. The Commission seeks comment on its proposed definition of a de 
minimis market participant. Is this threshold sufficiently low to 
permit a comprehensive picture of the U.S. wholesale natural gas 
market? Is it sufficiently high so that persons or municipalities not 
able to prices of natural gas in interstate commerce are not required 
to report? Is there another, more effective bright-line measure that 
allows market participants to determine easily whether they are exempt? 
Further, the Commission seeks comment on the burden this proposal would 
impose on market participants. For instance, is it unduly burdensome 
for market participants to file the information by February 15 of each 
year?
    68. The Commission seeks comments on its proposal that buyers and 
sellers of more than a de minimis volume of

[[Page 20803]]

natural gas be required to report aggregate numbers and volumes of 
relevant transactions in an annual filing with the Commission. Does 
information regarding purchases of natural gas at wholesale 
``facilitate price transparency in markets for the sale and 
transportation of physical natural gas in interstate commerce,'' as 
provided in the natural gas transparency provisions? \97\
---------------------------------------------------------------------------

    \97\ Section 23(a)(1) of the Natural Gas Act, to be codified at 
15 U.S.C. 717t-2(a)(1).
---------------------------------------------------------------------------

    69. The Commission seeks comment on whether reporting information 
aggregated by calendar year is adequate. Would a monthly breakdown 
create an undue burden compared to providing the information by 
calendar year? Would it provide a better understanding of the physical 
natural gas market given the seasonal nature of the market?
    70. The Commission seeks comment on the proposed modifications to 
the notification requirements regarding reporting of transactions to 
publishers of price indices imposed on those entities who hold blanket 
marketing certificates in proposed Sec.  284.403(a) and imposed on 
intrastate pipelines with blanket unbundled sales service certificates 
in proposed Sec.  284.288(a). Also, as currently codified, those 
sections refer to the procedural requirements for reporting to 
publishers of price indices ``set forth in the Policy Statement on 
Electric and Natural Gas Price Indices, issued by the Commission in 
PL03-3-000 and any clarifications thereto.'' \98\ Instead of referring 
to policy statements in that proceeding for the procedural 
requirements, should the Commission codify in the regulations the 
procedural requirements that such reporting entities must follow in 
reporting transactions to publishers of electric and natural gas price 
indices?
---------------------------------------------------------------------------

    \98\ 18 CFR 284.403(a); see, also, 18 CFR 284.288(a) (identical 
language).
---------------------------------------------------------------------------

    71. The Commission seeks comment on making public participant 
responses to these questions through public filing requirements. 
Commenters who suggest an alternate method, such as aggregating data 
received before disseminating it to the public, should address whether 
such an approach meets the objectives of the statute sufficiently.
    72. The Commission seeks comment on whether, in lieu of this 
proposal, to require mandatory, detailed transaction reporting by 
market participants. Commenters should address the burdens and benefits 
of such an approach. Commenters supporting mandatory reporting of 
transactions should address the cautions set forth in the natural gas 
transparency provisions and echoed by the Department of Justice in the 
discussion above. If detailed transaction reporting were mandatory, 
could these concerns be addressed by making the reporting non-public, 
aggregating the reported information, and disseminating publicly only 
the aggregated information (either by the Commission or, as 
contemplated in the natural gas transparency provisions, by other 
entities) subject to sufficient disclosure rules? \99\
---------------------------------------------------------------------------

    \99\ Section 23(a)(3)(B) and (b) of the Natural Gas Act, to be 
codified at 15 U.S.C. 717t-2(a)(3)(B) and (b).
---------------------------------------------------------------------------

VI. Information Collection Statement

    73. The Office of Management and Budget (OMB) regulations require 
it to approve certain reporting and recordkeeping (information 
collection) requirements imposed by an agency.\100\ In this NOPR, the 
Commission makes two proposals that would require the posting or 
collection of information.\101\ The Commission is submitting 
notification of these proposed information collection requirements to 
OMB for its review and approval under section 3507(d) of the Paperwork 
Reduction Act of 1995.\102\
---------------------------------------------------------------------------

    \100\ 5 CFR 1320.11.
    \101\ The OMB regulations cover both the collection of 
information and the posting of information. 5 CFR 1320.3(c). Thus, 
the proposal to post information would create an information 
collection burden.
    \102\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------

    74. The proposal to require intrastate pipelines to post flow 
information would impose an information collection burden on intrastate 
pipelines. We presume that intrastate pipelines already collect flow 
information for receipt and delivery points and, thus, the burden that 
would be imposed by this proposed requirement is only for the posting 
of this information in the required format.\103\ The proposal to 
require market participants to file annually a form regarding their 
physical natural gas transactions would impose an information 
collection burden on market participants. Again, we presume that market 
participants already collect transaction information and, thus, the 
burden imposed by this proposed requirement is only for completing and 
submitting the form.
---------------------------------------------------------------------------

    \103\ See 5 CFR 1320.3(b)(2) (``The time, effort, and financial 
resources necessary to comply with a collection of information that 
would be incurred by persons in the normal course of their 
activities (e.g., in compiling and maintaining business records) 
will be excluded from the ``burden'' if the agency demonstrates that 
the reporting, recordkeeping, or disclosure activities needed to 
comply are usual and customary.'')
---------------------------------------------------------------------------

    75. OMB regulations require OMB to approve certain information 
collection requirements imposed by agency rule. The Commission is 
submitting notification of this proposed rule to OMB.
    Public Reporting Burden: The start-up and annual burden estimates 
for complying with this proposed rule are as follows:

----------------------------------------------------------------------------------------------------------------
                                                                     Estimated                       Estimated
                                                     Number of    annual  burden   Total annual      start-up
         Data collection             Number of    responses  per    hours  per    hours for  all    burden per
                                    respondents      respondent     respondent      respondents     respondent
                                                    (per year)        (hours)                         (hours)
----------------------------------------------------------------------------------------------------------------
Part 284 FERC-xxx:
    Intrastate Pipeline Postings             179             365             183          32,757             160
    Annual Reporting Requirement           1,500               1               4           6,000              40
                                 -------------------------------------------------------------------------------
        Total...................  ..............  ..............  ..............          38,757  ..............
----------------------------------------------------------------------------------------------------------------

The total annual hours for collection (including recordkeeping) for all 
respondents is estimated to be 38,757.
    Information Collection Costs: The average annualized cost for each 
respondent is projected to be the following (savings in parenthesis):

[[Page 20804]]

----------------------------------------------------------------------------------------------------------------
                                                      Annualized capital/
                                                       startup costs (10     Annual costs      Annualized costs
                                                      year amortization)                             total
----------------------------------------------------------------------------------------------------------------
FERC-xxx:
    Intrastate Pipeline Postings....................              $1,600             $18,300             $19,900
    Transaction Reporting Requirement...............                 400                 400                 800
----------------------------------------------------------------------------------------------------------------

    Title: FERC-xxx.
    Action: Proposed Information Posting and Information Filing.
    OMB Control No:
    Respondents: Business or other for profit.
    Frequency of Responses: Daily posting requirements and annual 
filing requirements.
    Necessity of the Information: The daily posting of flow information 
by intrastate pipelines is necessary to provide information regarding 
the price and availability of natural gas to market participants, State 
commissions, the FERC and the public. The annual filing of transaction 
information by market participants is necessary to provide information 
regarding the size of the physical natural gas market, the use of the 
natural gas spot markets and the use of fixed and index price 
transactions.
    Internal Review: The Commission has reviewed the requirements 
pertaining to natural gas pipelines and natural gas market participants 
and determined they are necessary to provide price and availability 
information regarding the sale of natural gas in interstate markets.
    76. These requirements conform to the Commission's plan for 
efficient information collection, communication, and management within 
the natural gas industry. The Commission has assured itself, by means 
of internal review, that there is specific, objective support for the 
burden estimates associated with the information posting requirements. 
The Commission seeks comment on these estimates.
    77. Interested persons may obtain information on the reporting 
requirements by contacting: Federal Energy Regulatory Commission, 888 
First Street, NE., Washington, DC 20426, [Attention: Michael Miller, 
Office of the Chief Information Officer], phone: (202) 502-8415, fax: 
(202) 208-2425, e-mail: Michael.Miller@ferc.gov. Comments on the 
requirements of the proposed rule also may be sent to the Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
Washington, DC 20503 [Attention: Desk Officer for the Federal Energy 
Regulatory Commission].
    78. Comments on the requirements of the proposed rule may also be 
sent to the Office of Information and Regulatory Affairs, Office of 
Management and Budget, Washington, DC 20503 [Attention: Desk Officer 
for the Federal Energy Regulatory Commission] (202) 395-4650 or 
oira_submission@omb.eop.gov.

VII. Environmental Analysis

    79. 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.\104\ 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.\105\ Therefore, an 
environmental assessment is unnecessary and has not been prepared in 
this rulemaking.
---------------------------------------------------------------------------

    \104\ Order No. 486, Regulations Implementing the National 
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & 
Regs. Preambles 1986-1990 ] 30,783 (1987).
    \105\ 18 CFR 380.4(a)(5) and (a)(27).
---------------------------------------------------------------------------

VIII. Regulatory Flexibility Act Analysis

    80. The Regulatory Flexibility Act of 1980 (RFA) generally requires 
a description and analysis of final rules that will have significant 
economic impact on a substantial number of small entities.\106\ The two 
proposals in this NOPR will not have a significant economic impact on a 
substantial number of small entities.
---------------------------------------------------------------------------

    \106\ 5 U.S.C. 601-612.
---------------------------------------------------------------------------

    81. The proposal to require daily postings by intrastate pipelines 
will not impact small entities. Natural gas pipelines are classified 
under NAICS code, 486210, Pipeline Transportation of Natural Gas.\107\ 
A natural gas pipeline is considered a small entity for the purposes of 
the Regulatory Flexibility Act if its average annual receipts are less 
than $6.5 million.\108\ The Commission does not believe that any 
intrastate pipeline has receipts less than $6.5 million. Thus, the 
daily posting proposal will not impact small entities.
---------------------------------------------------------------------------

    \107\ This industry comprises establishments primarily engaged 
in the pipeline transportation of natural gas from processing plants 
to local distribution systems. 2002 North American Industry 
Classification System (NAICS) Definitions, http://www.census.gov/epcd/naics02/def/ND486210.HTM
.

    \108\ See Table of Small Business Size Standards, U.S. Small 
Business Administration (effective July 31, 2006), available at 
http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf
.

---------------------------------------------------------------------------

    82. The proposal to require annual reporting of physical natural 
gas transactions will have minimal impact on small entities.\109\ 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 certificates will not 
be required to report. This reporting proposal 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. The 
Commission bases its one-time cost estimate on an assumption that it 
would take approximately one person one week to set up the reporting 
and file the report initially and that their time costs $100 per hour. 
The Commission bases its annual estimate on an assumption that it would 
take one person four hours to compile the information and that his or 
her time costs $100 per hour. On an annualized basis, costs would 
amount to approximately $1,200 per entity. This amount is not a 
significant burden on small entities. The Commission seeks comment on 
its Regulatory Flexibility Act analysis and the assumptions on which it 
is based.
---------------------------------------------------------------------------

    \109\ For the purposes of analyzing the impact of the proposed 
filing requirement on small entities, the Commission classifies 
market participants under the NAICS category of ``Natural Gas 
Distribution,'' Code 221210, which includes gas marketers, and 
establishments engaged in gas distribution. Under that 
classification, a small entity is any entity with less than 500 
employees. See Table of Small Business Size Standards, U.S. Small 
Business Administration (effective July 31, 2006), available at 
http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf
.

---------------------------------------------------------------------------

IX. Comment Procedures

    83. The Commission invites interested persons to submit comments on 
the

[[Page 20805]]

matters and issues proposed in this notice to be adopted, including any 
related matters or alternative proposals that commenters may wish to 
discuss. Comments are due June 11, 2007. Reply comments are due July 
10, 2007. Comments must refer to Docket No. RM07-10-000, and must 
include the commenter's name, the organization they represent, if 
applicable, and their address in their comments. Comments may be filed 
either in electronic or paper format.
    84. Comments may be filed electronically via the eFiling link on 
the Commission's Web site at http://www.ferc.gov. The Commission 

accepts most standard word processing formats and requests commenters 
to submit comments in a text-searchable format rather than a scanned 
image format. Commenters filing electronically do not need to make a 
paper filing. Commenters that are not able to file comments 
electronically must send an original and 14 copies of their comments 
to: Federal Energy Regulatory Commission, Secretary of the Commission, 
888 First Street, NE., Washington, DC 20426.
    85. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this proposal are 
not required to serve copies of their comments on other commenters.

X. Document Availability

    86. 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.
    87. 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.
    88. User assistance is available for eLibrary and the FERC's Web 
site during normal business hours from our Help line at (202) 502-8222 
or the Public Reference Room at (202) 502-8371, Press 0, TTY (202) 502-
8659. E-Mail the Public Reference Room at 
public.referenceroom@ferc.gov.

List of Subjects

18 CFR Part 260

    Natural gas; Reporting and recordkeeping requirements.

18 CFR Part 284

    Continental Shelf; Incorporation by reference; Natural gas; 
Reporting and recordkeeping requirements.

    By direction of the Commission.
Philis J. Posey,
Deputy Secretary.

    In consideration of the foregoing, the Commission proposes to amend 
parts 260 and 284 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. Section 260.401 is added to read as follows:

Sec.  260.401  FERC Form No. [X], Annual Reporting of Natural Gas 
Transactions and Blanket Certificate Authorities.

    Unless otherwise exempted or granted a waiver by Commission rule or 
order, each natural gas market participant that is not a de minimis 
market participant as defined in Sec.  284.401 of this chapter and each 
de minimis market participant that holds a blanket marketing 
certificate under Sec.  284.402 of this chapter or a blanket unbundled 
sales service certificate under Sec.  284.284 of this chapter must file 
with the Commission by February 15, 2008, and by February 15 of each 
year thereafter, a report, FERC Form No. [X], for the prior calendar 
year. Every such report must be prepared in conformance with the 
Commission's software and guidance posted and available for downloading 
from the FERC Web site (http://www.ferc.gov).

PART 284--CERTAIN SALES AND TRANSPORATION 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 284.14 is added to read as follows:

Sec.  284.14  Intrastate pipeline flow information.

    An intrastate pipeline must provide on a daily basis on an Internet 
Web site and in downloadable file formats, in conformity with Sec.  
284.12 of this chapter, access to information on flowing volumes and 
capacities at each major receipt point, mainline segment, and delivery 
point on its pipeline. This information must be posted within 24 hours 
from the close of the gas day on which gas flows, i.e., on or before 
9:00 a.m. central clock time for flows occurring on the gas day that 
ended 24 hours before.
    5. In Sec.  284.288, paragraph (a) is revised to read as follows:

Sec.  284.288  Code of conduct for unbundled sales service.

    (a) To the extent Seller engages in reporting of transactions to 
publishers of electricity or natural gas indices, Seller shall provide 
accurate and factual information, and not knowingly submit false or 
misleading information or omit material information to any such 
publisher, by reporting its transactions in a manner consistent with 
the procedures set forth in the Policy Statement on Natural Gas and 
Electric Price Indices, issued by the Commission in Docket No. PL03-3-
000 and any clarifications thereto. Seller shall notify the Commission 
as part of its annual reporting requirement in Sec.  260.401 of this 
chapter whether it reports its transactions to publishers of 
electricity and natural gas indices. Seller shall notify the Commission 
within 15 days of any subsequent change to its transaction reporting 
status. In addition, Seller shall adhere to such other standards and 
requirements for price reporting as the Commission may order.
* * * * *
    6. In Sec.  284.401, definitions of ``de minimis market 
participant'' and ``market participant'' are added in alphabetical 
order to read as follows:

Sec.  284.401  Definitions.

* * * * *
    De minimis market participant. For purposes of this subpart, a de 
minimis market participant is a market participant that engaged in 
physical natural gas transactions that by volume amounted to less than 
2,200,000 MMBtus for the previous calendar year.
    Market participant. For purposes of this subpart, a market 
participant is any buyer or seller that engaged in physical natural gas 
transactions the previous calendar year.
    7. In Sec.  284.403, paragraph (a) is revised to read as follows:

[[Page 20806]]

Sec.  284.403  Code of conduct for persons holding blanket marketing 
certificates.

    (a) To the extent Seller engages in reporting of transactions to 
publishers of electricity or natural gas indices, Seller shall provide 
accurate and factual information, and not knowingly submit false or 
misleading information or omit material information to any such 
publisher, by reporting its transactions in a manner consistent with 
the procedures set forth in the Policy Statement on Natural Gas and 
Electric Price Indices, issued by the Commission in Docket No. PL03-3-
000 and any clarifications thereto. Seller shall notify the Commission 
as part of its annual reporting requirement in Sec.  260.401 of this 
chapter whether it reports its transactions to publishers of 
electricity and natural gas indices. Seller shall notify the Commission 
within 15 days of any subsequent change to its transaction reporting 
status. In addition, Seller shall adhere to such other standards and 
requirements for price reporting as the Commission may order.
* * * * *

    Note: The following Appendix will not be published in the Code 
of Federal Regulations.

Appendix A to Notice of Proposed Rulemaking--Transparency Provisions of 
Section 23 of the Natural Gas Act; Transparency Provisions of the 
Energy Policy Act of 2005, Docket Nos. RM07-10-000 and AD06-11-000: 
Proposed FERC Form No. [X]

    Provide accurate and complete responses to the following 
questions.

----------------------------------------------------------------------------------------------------------------
                                                                   Purchases by                      Sales by
                                                   Purchases by    volume (TBtu/     Sales by      volume (TBtu/
                                                      number           Bcf)           number           Bcf)
----------------------------------------------------------------------------------------------------------------
A. How much physical gas,* did you transact in    ..............  ..............  ..............  ..............
 the prior calendar year?
----------------------------------------------------------------------------------------------------------------
B. Of the amount reported in Row A, what number   ..............  ..............  ..............  ..............
 and volume are transacted for next-day
 delivery?
----------------------------------------------------------------------------------------------------------------
C. Of these next-day transactions, what number    ..............  ..............  ..............  ..............
 and volume are priced at a fixed price?
----------------------------------------------------------------------------------------------------------------
D. Of these next-day transactions, what number    ..............  ..............  ..............  ..............
 and volume are priced at an index price?
----------------------------------------------------------------------------------------------------------------
E. Of the amount reported in Row A, what number   ..............  ..............  ..............  ..............
 and volume are transacted for delivery in the
 next month?
----------------------------------------------------------------------------------------------------------------
F. Of your transactions for delivery in the next  ..............  ..............  ..............  ..............
 month, what number and volume are priced at a
 fixed price during bid week? **
----------------------------------------------------------------------------------------------------------------
G. Of your transactions for delivery in the next  ..............  ..............  ..............  ..............
 month, what number and volume are priced at an
 index price?
----------------------------------------------------------------------------------------------------------------
H. Of your transactions for delivery beyond next- ..............  ..............  ..............  ..............
 day or month, what number and volume are priced
 using next-day or next-month index prices?
----------------------------------------------------------------------------------------------------------------
* Notwithstanding its physical delivery provisions, for the purposes of this form, exclude NYMEX futures
  contracts or any other physically-settled futures contract unless the contract actually goes to delivery.
** Bid week is defined as the last 5 working days prior to the delivery month. Please include those transactions
  in this row.

 [FR Doc. E7-7822 Filed 4-25-07; 8:45 am]

BILLING CODE 6717-01-P