[Federal Register: April 26, 2007 (Volume 72, Number 80)]
[Proposed Rules]
[Page 20791-20806]
[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,<PHONE_NUMBER>,
<EMAIL_ADDRESS>

Eric Ciccoretti (Legal), 888 First Street, NE., Washington, DC 20426,
(202) 502-8493<EMAIL_ADDRESS>
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

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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    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:

    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

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).
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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

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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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

[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
.

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

    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

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

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.

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

    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

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

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

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):

----------------------------------------------------------------------------------------------------------------
                                                      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:<PHONE_NUMBER>, fax:
(202) 208-2425, e-mail<EMAIL_ADDRESS>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]<PHONE_NUMBER> or
<EMAIL_ADDRESS>

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

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<PHONE_NUMBER>
or the Public Reference Room at<PHONE_NUMBER>, Press 0, TTY (202) 502-
8659. E-Mail the Public Reference Room at
<EMAIL_ADDRESS>

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:

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