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FERC Flexes Muscle Over Nonjurisdictional Pipes

FERC last Thursday issued a final rule that requires all interstate natural gas pipelines and certain noninterstate pipes to post operational information on their websites in an attempt to further boost the price transparency of gas markets.

Moreover, the Federal Energy Regulatory Commission issued a notice of inquiry (NOI) seeking comment on whether the agency should require certain intrastate pipelines to post details of their transactions with individual shippers in a manner comparable to the reporting requirements that interstate gas pipeline must meet [RM08-2, RM09-2 and RP08-66].

The final rule establishes new positing requirements under Section 23 of the Natural Gas Act (NGA) that call for all interstate and certain major noninterstate pipelines to post on their publicly accessible websites daily operational information, such as scheduled volume information and design capacity for certain receipt and delivery points.

The order defines a major noninterstate pipeline as a pipe that is not classified as a natural gas company under the NGA and delivers on average more than 50 Bcf/year during a three-year period. Noninterstate pipes with deliveries at this level contribute to price formation, FERC said. These pipes are now subject to the transparency regulations under NGA Section 23, which asserts FERC jurisdiction over any market participant for the purposes of enhancing market transparency.

The FERC initiative would require these noninterstate pipelines to post daily specific scheduled flow information at each receipt or delivery point with a design capacity of 15 MMcf/d or more.

"It is important to recognize that our transparency authority allows FERC to collect information from a much broader universe than our traditional regulated community. We are authorized to collect information from market participants, rather than the more narrow classes of 'natural gas companies' and 'public utilities,'" said FERC Chairman Joseph Kelliher. FERC staff estimated that the new rule will enable the agency to capture information on about 75% of the market.

"We don't want to put undue burden on the industry" with the posting requirements, said Commissioner Suedeen Kelly, but she noted that the information is necessary to ensure the gas market is a "well-run market" and to "identify and remedy potentially manipulative" behavior.

Interstate pipelines will have 60 days from publication in the Federal Register to comply with the rule, and noninterstate pipes will have 150 days from publication.

In related action, the FERC NOI explores whether changes are needed to regulations requiring daily posting of transactions of pipelines operating under Section 311 of the Natural Gas Policy Act (NGPA) and Hinshaw pipelines, which generally are intrastate pipelines that provided interstate services.

The inquiry arises from a request filed by SG Resources Mississippi LLC (SGRM), an interstate storage provider with market-based rate authority. SGRM sought a waiver of FERC's regulations that require interstate pipes to post the rates charged in firm and interruptible transactions no later than the first nomination for service. It also sought a similar waiver on behalf of all interstate storage providers with market-based rates.

SGRM argued the mandatory disclosure of commercially sensitive pricing information provides prospective customers and competitors, especially intrastate pipelines providing service under Section 311 of the NGPA, with an unfair competitive advantage. FERC denied both of SGRM's requests.

However, the agency now is seeking public comment on whether the disparate reporting requirements for interstate and NGPA Section 311 and Hinshaw pipelines have an adverse competitive effect on the interstate pipelines. If that is the case, FERC asked whether it should change the posting requirements for Section 311 intrastate pipelines and Hinshaw pipelines to make them comparable to the posting requirements for interstate pipelines under Section 284 of the NGA.

Comments on the NOI are due at FERC within 60 days of publication in the Federal Register.

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