FERC Clarifies Ruling on Standards of Conduct
FERC recently conceded some degree of latitutde on the issue of
access to information by shared employees, but it refused to budge
on other aspects of an earlier ruling dealing with the standards of
conduct governing the relationship between pipelines and their
In a rehearing order involving Natural Gas Pipeline Co. of
America (NGPL) and Amoco Production, the Commission addressed the
issue of whether non-operating employees were bound by Standards E
and F, which ban pipelines from relaying information to their
marketing affiliates to give them a competitive edge over
non-affiliates [RP97-232]. Standard E prohibits a pipeline from
disclosing to its affiliate any information it receives from a
non-affiliated shipper, while Standard F requires pipelines to
provide information contemporaneously to all shippers on their
systems - both affiliates and non-affiliates..
The central issue in the case was whether Standards E and F
applied to non-operating employees, such as officers and members of
boards of directors, as well as to operating employees, which are
involved in the day-to-day operation of the pipeline. Natural and
the Interstate Natural Gas Association of America (INGAA) argued
that non-operating employees were exempted from the two standards,
but FERC saw it differently.
"...Standards E and F are not limited in their scope to
operating employees," the order said [RP97-232]. The Commission
disagreed with Natural and INGAA that this was a new policy. FERC
"has consistently applied Standards E and F to all employees,
operating and non-operating, in reviewing pipelines' standards of
The Commission, however, conceded that access to information by
shared employees is not by itself tantamount to disclosure, as it
earlier had ruled. "...[W]e will grant the petitioners' request for
clarification that access to such information does not constitute
disclosure," it said, adding that a violation would occur only if
an employee actually "receives" the information.
"For example, if a non-operating senior executive officer has
'access' to non-affiliated shipper information in a pipeline's file
rooms, a Standard E violation is not triggered unless he or she
actually 'receives' [the] non-affiliated shipper's information."
In the event information is 'received' by a shared employee yet
not communicated to a marketing affiliate, the Commission ruled
this would constitute disclosure. In citing a Tenneco Gas court
decision, FERC said the court ruled "because an individual cannot
segregate or divide the information in his or her head, the
information is automatically disclosed to the marketing affiliate."
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