FERC has extended until Feb. 12 the deadline for comments on its notice of inquiry (NOI) on whether to require quarterly reporting of jurisdictional next-day and next-month transactions under the Natural Gas Act in order to increase transparency in the wholesale natural gas market.
The NOI, which was issued in mid-November, would for the first time require buyers and sellers to report, on a quarterly basis, the prices of individual transactions (see NGI, Nov. 19, 2012). Currently, much of the market information available to the Commission is in aggregate form and therefore does not provide full market visibility.
Initially the comments on the NOI were due Jan. 22. But nine energy trade associations — American Forest & Paper Association, Natural Gas Supply Association, Process Gas Consumers Group, Interstate Natural Gas Association of America, Independent Petroleum Association of America, Edison Electric Institute, Texas Pipeline Association and the American Gas Association — called for a three-week extension of the comment deadline, saying that the “intervening holidays have delayed our ability to coordinate with our respective members and to finalize our positions.”
The changes proposed in the NOI would affect the entire natural gas market, including producers, marketers, pipelines, local distribution companies and end-users.
The Federal Energy Regulatory Commission (FERC) is considering whether quarterly reporting of every jurisdictional natural gas transaction that entails physical delivery for next day (next day gas) or the next month (next month gas) would provide useful information for improving natural gas market transparency. The agency also is weighing whether these reporting requirements should be in addition to, or in lieu of, the existing Form No. 552 reporting requirements.
The agency said this information may be necessary for market participants to better understand market activities that produce prices that are reported to indices, and/or to detect and deter market manipulation.
“The NOI raises difficult issues regarding FERC’s limited statutory authority to collect natural gas sales data in a robust natural gas commodity market in which most transactions are outside of FERC’s regulatory control. [It] also raises practical issues regarding the difficulty and (perhaps impossibility) of determining which natural gas transactions are FERC-jurisdictional and which ones are not,” said Ballard Spahr attorneys Dena E. Wiggins and Jack N. Semrani, who represent the American Forest & Paper Association and the Process Gas Consumers Group.
Moreover, “given the lack of clarity in the NOI as to the precise reason why the additional data is needed, and given the statutory restrictions on FERC’s authority, many industry participants are struggling with the tension between any claimed need for the additional data and the actual burden on the industry, and are questioning whether FERC should proceed further with the NOI,” they said.
While it’s up to FERC, “I’m hopeful that they will not pursue this, Wiggins told NGI. “I think a lot of industry participants are concerned. They are worried about the burden to them and FERC’s jurisdictional limitations.” Wiggins noted that while the agency may have jurisdiction over first sales, it does not have jurisdiction over sales for resale. Since many gas packages change hands a number of times between the wellhead and the burner tip, that would leave possibly as much as two-thirds of the transactions unreported, NGI estimates.
The FERC inquiry asks a series of questions on how best to enhance transparency and surveillance of gas markets, covering issues such as the scope and types of transactional information that should be part of the quarterly reports, what types of possible public dissemination of information would be appropriate and what would be the burden on market participants to provide the information.
Since the Commission finalized its market reporting process for natural gas in 2008, laying down strict rules for publishers and marketers who participate in the voluntary daily and monthly spot market price surveys, there have been no reports of any misdeeds. Companies have been reporting annual aggregated trading data starting with information from 2008, and the Commission has issued survey reports each year on the natural gas purchase and sales volumes in total, by company, and amounts indexed or settled by fixed prices.
The natural gas industry and the price publishers (including NGI) cooperated with FERC in setting up the new rules for price reporting in order to preserve the market following the collapse of Enron Corp. and much of the rest of the natural gas trading market in the early 2000s in a morass of FERC and Justice Department accusations and convictions for market manipulation.
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