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FERC Clarifies Ruling on Standards of Conduct

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 marketing affiliates.

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 conduct."

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."

Susan Parker

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