[Federal Register: December 2, 2008 (Volume 73, Number 232)]
[Rules and Regulations]
[Page 73493-73518]
[DOCID:fr02de08-15]

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Part III

Department of Energy

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Federal Energy Regulatory Commission

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18 CFR Part 284

Pipeline Posting Requirements Under Section 23 of the Natural Gas Act;
Final Rule

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 284

[Docket No. RM08-2-000; Order No. 720]

Pipeline Posting Requirements Under Section 23 of the Natural Gas
Act

November 20, 2008.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: In this Final Rule, the Commission adds regulations to require
certain major non-interstate natural gas pipelines to post daily
scheduled volume information and design capacity for certain points.
The Commission also revises its regulations to require interstate
natural gas pipelines to post information regarding the provision of
no-notice service. The posting requirements will facilitate price
transparency in markets for the sale or transportation of physical
natural gas in interstate commerce to implement section 23 of the
Natural Gas Act, 15 U.S.C. 717t-2 (2000 & Supp. V 2005).

DATES: Effective Date: This rule will become effective January 2, 2009.

FOR FURTHER INFORMATION CONTACT: Christopher Ellsworth (Technical),
Office of Enforcement, Federal Energy Regulatory Commission, 888 First
Street, NE., Washington, DC 20426,<PHONE_NUMBER>, Gabriel Sterling
(Legal), Office of Enforcement, Federal Energy Regulatory Commission,
888 First Street, NE., Washington, DC 20426,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Table of Contents
I. Introduction and Summary
II. Procedural Background
III. Authority for the Rule
    A. Posting NOPR
    B. Comments
    C. Commission Determination
IV. Need for the Rule
    A. Posting NOPR
    B. Comments
    C. Commission Determination
V. Pipeline Posting Requirements
    A. Overview
    B. Definition of Major Non-Interstate Pipeline
    1. Posting NOPR
    2. Comments
    3. Commission Determination
    C. Scheduled Flow Information on Major Non-Interstate Pipelines
    1. Posting NOPR
    2. Comments
    3. Commission Determination
    D. Receipt and Delivery Point Posting for Major Non-Interstate
Pipelines
    1. Posting NOPR
    2. Comments
    3. Commission Determination
    E. Exemptions to the Major Non-Interstate Pipeline Posting
Requirements
    1. Non-Interstate Pipelines That Are Upstream of a Processing,
Treatment, or Dehydration Plant
    2. Non-Interstate Pipelines that Deliver More Than Ninety-Five
Percent of Volumes to Retail Customers
    3. Non-Interstate Storage Providers
    4. Other Exemptions and Safe Harbor
    F. Posting of No-Notice Service Information by Interstate
Pipelines
    1. Posting NOPR
    2. Comments
    3. Commission Determination
VI. Effective Date of the Final Rule and Compliance Deadlines
VII. Information Collection Statement
VIII. Environmental Analysis
IX. Regulatory Flexibility Act
X. Document Availability
XI. Effective Date and Congressional Notification

I. Introduction and Summary

    1. This Final Rule implements the Commission's authority under
section 23 of the Natural Gas Act (NGA),\1\ as added by the Energy
Policy Act of 2005 (EPAct 2005),\2\ to facilitate transparency in
markets for the sale or transportation of natural gas in interstate
commerce by requiring major non-interstate pipelines and interstate
pipelines to post certain data on their Internet Web sites.
Specifically, the Final Rule requires major non-interstate pipelines,
defined as those natural gas pipelines that deliver more than 50
million MMBtu per year, to post scheduled flow information and to post
information for each receipt and delivery point with a design capacity
greater than 15,000 MMBtu per day. The Final Rule also requires that
interstate pipelines post information regarding no-notice service.
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    \1\ Section 23 of the Natural Gas Act; 15 U.S.C. 717t-2 (2000 &
Supp. V 2005).
    \2\ Energy Policy Act of 2005, Public Law No. 109-58, sections
1261 et seq., 119 Stat. 594 (2005).
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    2. The postings required here will increase price transparency in
the interstate natural gas markets by providing information about the
supply and demand fundamentals that underlie those markets. In this
way, the Commission will meet the goal set forth by Congress in section
23 of the NGA ``to facilitate price transparency in markets for the
sale or transportation of physical natural gas in interstate
commerce,'' \3\ and, at the same time, will respond to commenters'
concerns about the potential cost and burden of posting flow
information.
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    \3\ Section 23(a)(1) of the NGA; 15 U.S.C. 717t-2(a)(1) (2000 &
Supp. V 2005).
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II. Procedural Background

    3. The posting requirements adopted here are grounded in the
Commission's authority under section 23 of the NGA (as added by EPAct
2005), which directs the Commission, in relevant part, to obtain and
disseminate ``information about the availability and prices of natural
gas at wholesale and in interstate commerce.'' \4\ This provision
enhances the Commission's authority to ensure confidence in the
nation's natural gas markets. The Commission's market-oriented policies
for the wholesale natural gas industry require that interested persons
have broad confidence that reported market prices accurately reflect
the interplay of legitimate market forces. Without confidence in the
efficiency of price formation, the true value of transactions is very
difficult to determine.
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    \4\ Section 23(a)(2) of the NGA, 15 U.S.C. 717t-2(a)(2) (2000 &
Supp. V 2005).
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    4. On April 19, 2007, the Commission issued a Notice of Proposed
Rulemaking (Initial NOPR) to explore methods to implement our authority
under NGA section 23. In the Initial NOPR, the Commission set forth two
separate proposals. The first proposal addressed an annual reporting
requirement for certain natural gas market participants and the second
proposal addressed a daily requirement for intrastate pipelines to post
flow information.\5\ On December 21, 2007, the Commission bifurcated
the proceeding into two dockets: The Commission addressed the annual
reporting requirement in a Final Rule issued in Docket No. RM07-10-
000,\6\ and addressed the daily posting requirement for natural gas
pipelines in a new Notice of Proposed Rulemaking, in Docket No. RM08-2-
000 (Posting NOPR).
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    \5\ Initial NOPR at P 1-2. In this preamble, we use the term
``flow information'' generically to include both scheduled volume
information and actual flow information. We use the term ``scheduled
volumes'' herein because it is more precise: The terms ``scheduled
flows'' or ``scheduled flow volumes'' could be confused with the
term ``actual flows.'' In the Posting NOPR, we used the terms
``scheduled flows'' and ``scheduled flow volumes.''
    \6\ Transparency Provisions of Section 23 of the Natural Gas
Act, Order No. 704, 73 FR 1014 (Jan. 4, 2008), FERC Stats. and Regs.
] 31,260 (2007), order on reh'g, Order No. 704-A, 73 FR 55726 (Sept.
26, 2008), FERC Stats. & Regs. ] 31,275 (2008) reh'g pending.
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    5. In the Posting NOPR, we proposed to require both interstate and
certain major non-interstate pipelines to post on public Internet Web
sites capacity, daily scheduled flow and daily actual flow information.
The proposal required posting of capacity and daily actual flow
information by some intrastate pipelines, with some changes relative to

the Initial NOPR. Under the proposal contained in the Posting NOPR,
interstate pipelines would be required to post daily actual flow
information in addition to the currently required posting of capacity
and daily scheduling information. Major non-interstate pipelines would
be required to post daily scheduled flow information in addition to
capacity and daily actual flow information. As explained in the Posting
NOPR, the Commission believed that the proposal would facilitate price
transparency in markets for the sale or transportation of physical
natural gas in interstate commerce.
    6. The Commission issued the Posting NOPR to develop the record
more fully, particularly as to the proposals regarding interstate
natural gas pipelines. The Posting NOPR was intended to give interstate
natural gas pipelines sufficient notice of the changes that seemed
necessary to implement adequately section 23 of the NGA.\7\ Also, in
the Posting NOPR, we directed staff to hold a technical conference to
address implementation issues associated with the proposal, such as
obtaining and posting actual flow information and obtaining and posting
information from storage facilities.\8\
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    \7\ Posting NOPR at P 2.
    \8\ Id. at P 8.
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    7. As directed by the Commission, staff held a technical conference
on April 3, 2008. Comments on the Posting NOPR were due on March 13,
2008; reply comments on April 14, 2008. The Commission received fifty-
five comments and nineteen reply comments.\9\
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    \9\ A list of commenters and abbreviations for the commenters is
contained in Appendix A.
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III. Authority for the Rule

A. Posting NOPR

    8. In the Posting NOPR, we provided our interpretation of section
23 of the NGA and the Commission's authority to enhance transparency in
the interstate natural gas markets. We concluded that Congress granted
us broad authority in EPAct 2005, placing non-interstate pipelines
within the Commission's transparency authority under section 23 of the
GA in order to ensure--for the entirety of the wholesale, physical
natural gas market--transparency of price and availability, including
transparency of market price formation. As we stated in both the
Initial NOPR and Posting NOPR, ``[w]hile 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.'' \10\
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    \10\ Initial NOPR at P 20; Posting NOPR at P 25.
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B. Comments

    9. Several commenters agree that the Commission has broad
transparency authority under section 23 of the NGA, including authority
over non-interstate pipelines.\11\ APGA supports the Commission's
contention that the statute authorizes obtaining information from ``any
market participant'' and not just ``natural gas companies'' as ``tacit
recognition that in order to collect the necessary information about
the wholesale and interstate market, the Commission might well need to
collect information from entities not historically subject to FERC
jurisdiction.'' \12\
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    \11\ APGA Comments at 3-4; TIPRO Comments at 1-2; Yates Comments
at 4.
    \12\ APGA Comments at 4.
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    10. A significant number of commenters hold a different view, and
contend that the term ``any market participant,'' contained in section
23(a)(3)(A) of the NGA, does not include non-interstate pipelines. TPA
asserts that the term ``any market participant'' is limited to the
participants in wholesale interstate natural gas markets.\13\ Thus,
according to TPA, the Commission exceeds its authority under the
transparency provisions by subjecting ```non-interstate' entities that
do not participate in interstate sales markets'' to its transparency
authority.\14\ Further, TPA contends that had ``Congress sought to
expand the Commission's jurisdiction to entities that do not
participate in the interstate commerce market, it could have used the
language `affecting interstate commerce,' which has historically been
read as a more expansive grant of authority.'' \15\ Similarly, Chevron
Pipelines contends that because Congress did not expressly include
intrastate pipelines in section 23, ``one must conclude that the
Commission's jurisdiction was intended by Congress to be no greater
following the enactment of section 23 than that which existed prior to
the passage of that section.'' \16\
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    \13\ TPA Comments at 35.
    \14\ Id. at 36.
    \15\ Id. at 39 (citing City of Centralia v. FERC, 661 F.2d 787
(9th Cir. 1981) and Columbia Gas Transmission Corp., 3 FERC ]
61,115, at 61,239 n.1 (1978)).
    \16\ Chevron Pipelines Comments at 9-10.
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    11. Certain commenters assert that, contrary to the Commission's
conclusions, the de minimis exemption does not aid in the
interpretation of the term ``any market participant.'' TPA interprets
the de minimis exemption to mean that ``the Commission should not
require those with a de minimis presence in the interstate market to be
subject to an added reported burden.'' \17\
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    \17\ TPA Comments at 44.
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    12. Several commenters argue that section 1 of the NGA bars the
Commission from obtaining and disseminating information from a non-
interstate pipeline. TPA claims that sections 1(b) and 1(c) of the NGA
limit the Commission's transparency authority under section 23 of the
NGA.\18\ TPA also contends that ``extensive case law show[s] that
Congress has consistently respected the distinction between interstate
and intrastate sale and transportation of natural gas.'' \19\
Similarly, Copano Energy believes that section 1(b) of the NGA
precludes the Commission from exercising its transparency authority
over transportation of natural gas wholly in intrastate commerce.\20\
In support, Copano Energy points to Union Oil Company of America v.
FPC,\21\ in which the court stated that the ``Natural Gas Act limits
the gathering of intrastate data to gathering it from companies falling
under the Commission's jurisdiction.'' \22\ Commenters argue that
because Congress did not revise section 1 of the NGA, that section
precludes the Commission from exercising transparency authority over
non-interstate pipelines.\23\
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    \18\ Id. at 42.
    \19\ Id. at 43.
    \20\ Copano Energy Comments at 6.
    \21\ 542 F.2d 1036 (9th Cir. 1976).
    \22\ Id. at 1039.
    \23\ See, e.g., Copano Energy Comments at 6.
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    13. Several commenters state that a posting rule on non-interstate
pipelines would constitute improper regulation of a non-interstate
pipeline's operations and rates. TPA contends that the pipeline posting
requirement would ``directly regulate the operations of non-interstate
pipelines'' because the posting of data regarding mainline segments
would require many non-interstate pipelines ``to define segments on
their systems and to install metering equipment to measure gas at those
segments.'' \24\ Such meters, in turn, would affect the operations of
pipelines, hinder efficiency and raise prices.\25\ Similarly, DCP
Midstream holds that a pipeline posting requirement would impermissibly
interfere with states' regulation of intrastate gas pipelines. DCP
Midstream reasons that the costs to meet the requirement would be borne
by intrastate customers and rate payers

which would encroach upon state ratemaking authority.\26\
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    \24\ TPA Comments at 40.
    \25\ Id.
    \26\ DCP Midstream Comments at 7-8; see also Railroad Commission
of Texas Comments at 7.
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    14. Other commenters assert that two clauses in section 23 preclude
the Commission's authority to obtain information about gas that flows
on a non-interstate pipeline because such gas is sold only in
intrastate commerce, not in interstate commerce. First, commenters
contend that the statutory language in subsection (a)(1) ``for the sale
or transportation of physical natural gas in interstate commerce''
limits the type of price transparency that the Commission may
facilitate.\27\ Second, commenters contend that the statutory language
in subsection (a)(2), which permits the Commission to issue rules that
provide for the ``disseminat[ion] * * * [of] information about the
availability and prices of natural gas sold at wholesale and in
interstate commerce,'' does not include information about gas that
flows on a non-interstate pipeline, because it is not ``sold at
wholesale and in interstate commerce.'' \28\ For instance, TPA argues
that this language does not authorize the Commission to mandate the
posting of ``data about transportation of gas that may never be `sold
at wholesale and in interstate commerce,' '' as it is ``directed at
increased transparency in sales and transportation in interstate
commerce.'' \29\
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    \27\ See, e.g., Atmos Comments at 11-12.
    \28\ See, e.g., DCP Midstream Comments at 8-9. See also Atmos
Comments at 11-12.
    \29\ TPA Comments at 35 (emphasis original).
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C. Commission Determination

    15. Section 23 of the NGA gives the Commission broad authority to
facilitate price transparency in the interstate natural gas market. For
that purpose, section 23 further authorizes the Commission to obtain
and disseminate information. As now explained, the regulations
promulgated in this Final Rule do not exceed that broad authority.
    16. Section 23(a)(1) of the NGA directs the Commission 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.'' \30\ Congress left
to the Commission's discretion whether to enact rules to carry out this
direction and provided that any rules implementing this section provide
for public dissemination of the information gathered:
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    \30\ 15 U.S.C. 717t-2(a)(1) (2000 & Supp. V 2005).

    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.\31\
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    \31\ 15 U.S.C. 717t-2(a)(2) (2000 & Supp. V 2005).

    17. Further, section 23(a)(3)(A) of the NGA allows the Commission
``to obtain the information * * * from any market participant.'' \32\
By using the term ``market participant,'' Congress deliberately
expanded the universe of entities subject to the Commission's
transparency authority beyond the entities subject to the Commission's
traditional rates, terms, and conditions jurisdiction under other
sections of the NGA. The term ``market participant'' is not defined in
the NGA and is not on its face limited to otherwise jurisdictional
entities. As we explained in the Posting NOPR, this authorization is
expansive. Congress was aware that other sections of the NGA limited
the scope of entities subject to the Commission's traditional
regulatory authority to natural gas companies as that term is defined
in the statute, but chose not to apply this same limitation in section
23. Congress clearly recognized that the Commission might not obtain
sufficient price transparency from those ``natural gas companies''
subject to our traditional regulatory authority. This is consistent
with the Commission's findings here that a complete picture of the
interstate natural gas market and the supply and demand fundamentals
underlying that market require information from non-interstate natural
gas pipelines.\33\
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    \32\ Section 23(a)(3)(A) of the NGA; 15 U.S.C. 717t-2(a)(3)(A)
(2000 & Supp. V 2005).
    \33\ We have recently stated in Order No. 704-A that the term
``market participant'' in section 23 of the NGA is not limited only
to natural gas pipelines, but to all relevant segments of the
natural gas supply and distribution chain. Order No. 704-A at P 37.
As we discussed in this previous exercise of our authority under
section 23 of the NGA, the statute grants broad latitude to the
Commission to effectuate Congressional transparency goals.
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    18. Moreover, the statutory language emphasizes the broad meaning
of the phrase ``market participant'' by adding ``any'' as a descriptor.
Our authority attaches not to a subset of market participants (for
example, only those market participants traditionally subject to our
regulation), but to any such participant.\34\ Court precedent confirms
that the word ``any'' gives the term it modifies (in this case,
``market participant'') an expansive meaning.\35\ We believe that
Congress used the expansive term ``any market participant'' because it
intended to provide broad transparency authority to the Commission. By
this choice, Congress recognized that the Commission may need to obtain
information from a wide variety of entities in order to facilitate
transparency.
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    \34\ See Posting NOPR at P 28.
    \35\ Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 31-32 (2004) (the
word ``any'' gives the word it modifies an expansive reading);
Dep't. of Housing and Urban Dev. v. Rucker, 535 U.S. 125, 130-31
(2002); TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (one must give
effect to each word in a statute so that none is rendered
superfluous); United States v. Gonzales, 520 U.S. 1, 5 (1997)
(``any'' is an expansive term, meaning ``one or some
indiscriminately of whatever kind,''); New York v. EPA, 443 F.3d
880, 885-87 (DC Cir. 2006) (the word ``any'' is broadly construed to
reflect Congress' intent that all types of physical changes are
subject to the Clean Air Act's New Source Review program).
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    19. The Commission disagrees with commenters who argue that section
1(b) of the NGA precludes the Commission from imposing the daily
posting requirement on non-interstate pipelines. Section 1(b) of the
NGA provides that the ``provisions of this chapter * * * shall apply to
the transportation of natural gas in interstate commerce, to the sale
in interstate commerce of natural gas for resale * * *'' and that such
provisions ``shall not apply to any other transportation or sale of
natural gas.'' \36\ Likewise, we disagree that section 23 has limited
application only to ``natural gas companies.'' Section 1 is not
referenced in section 23 and the term ``natural gas company'' is
nowhere found in the section. Including such a reference would have
been the simplest way for Congress to demonstrate an intent to limit
the Commission's transparency authority only to entities which we
already regulate.
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    \36\ Section 1(b) of the NGA, 15 U.S.C. 717(b).
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    20. We likewise disagree with certain commenters' arguments
regarding application of pre-EPAct 2005 caselaw in this circumstance.
The cases cited by commenters apply the jurisdictional limits set forth
in section 1 of the NGA prior to the enactment of EPAct 2005.\37\ These
arguments run afoul of the principle of statutory construction that
``Congress is presumed to be aware of an administrative or judicial
interpretation of a statute.'' \38\ Thus, Congress was

presumably aware that prior to the enactment of section 23, the NGA
could be construed as limiting the Commission's authority to obtain
data on intrastate natural gas flows to obtaining it from companies
falling under the Commission's jurisdiction.\39\ In using the term
``any market participant'' instead of ``natural gas company,'' Congress
signaled its intent to expand the Commission's transparency authority
beyond the universe of natural gas companies to which it would
otherwise be limited. TPA observes that courts have held that the
Commission cannot exceed its statutory authority.\40\ This is an
unremarkable and unassailable conclusion, but one that provides no
guidance where the issue is not whether the Commission may exceed its
statutory authority but what is the extent of the Commission's
transparency authority.
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    \37\ See, e.g., Union Oil Co., 542 F.2d at 1039. In a post-EPAct
2005 case as noted by commenters, Transmission Agency of N. Cal. v.
FERC, the U.S. Court of Appeals for the DC Circuit discussed the
limits of the Commission's jurisdiction, but that court was not
reviewing the NGA, let alone section 23. 495 F.3d 663 (DC Cir.
2007).
    \38\ Lorillard v. Pons, 434 U.S. 575, 580 (1978) (internal
citations omitted); accord 2A Norman J. Singer, Sutherland Statutory
Construction sec. 45.12 (5th ed. 1992) (``legislative language will
be interpreted on the assumption that the legislature was aware of *
* * judicial decisions'').
    \39\ Union Oil Co., 542 F.2d at 1039 (Observing that the NGA
limits the Commission's ``gathering of intrastate data to gathering
it from companies falling under the Commission's jurisdiction'').
    \40\ Reply Comments of TPA at 16-17 (citing Transmission Agency
of N. Cal., 495 F.3d 663 and United Distrib. Cos. v. FERC, 88 F.3d
1105 (DC Cir. 1996)).
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    21. For similar reasons, we do not find persuasive the argument
that Congress could have expressed its intent to subject non-interstate
pipelines to the Commission's transparency authority only by revising
or amending section 1 of the NGA. First, section 1 of the NGA
delineates the set of entities subject to the Commission's traditional
ratemaking and certificate authority. If Congress amended section 1 of
the NGA to apply to a new set of entities, it would have been providing
the Commission not only a limited grant of transparency authority, but
the broader grant of authority that section 1 entails. Second, altering
the exceptions in section 1, as commenters suggested, is not the only
way to alter the statute to give the Commission transparency authority.
Section 23 could, and in fact did, confer such authority separately
from our authority under section 1. Third, if Congress intended to
exclude non-interstate pipelines from the Commission's authority under
section 23 of the NGA, it would have used the term ``natural gas
company'' in section 23, instead of the term ``any market
participant.''
    22. Nevertheless, while the authority granted to us in section 23
is broad, we do not mean to imply that the Commission's authority to
obtain information from ``any market participant'' is plenary. In
section 23, Congress limited our transparency authority in three
respects. First, Congress directed the Commission to ``facilitate price
transparency in markets for the sale or transportation of physical
natural gas in interstate commerce. * * *'' \41\ 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, however, provided
that the information obtained and disseminated pertains to price
transparency in those markets. Second, Congress required that the
Commission's 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. * * *'' \42\ 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.'' Where transportation or
sales of natural gas are not in interstate commerce, they nonetheless
fall under the Commission's transparency mandate if they affect the
availability and prices of natural gas at wholesale and in interstate
commerce.
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    \41\ Section 23(a)(1) of the NGA; 15 U.S.C. 717t-2(a)(1) (2000 &
Supp. V 2005).
    \42\ Section 23(a)(2) of the NGA; 15 U.S.C. 717t-2(a)(2) (2000 &
Supp. V 2005).
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    23. Perhaps the most important limitation on our transparency
authority is contained in section 23(d)(2) which mandates an exemption
from any reporting for ``natural gas producers, processors, or users
who have a de minimis market presence. * * *'' \43\ It is noteworthy
that this limitation 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. Section 1(b) of the NGA explicitly excludes these entities
from the Commission's traditional regulation. If, as some commenters
assert, Congress did not intend to give the Commission authority over
any entity excluded by section 1(b) of the NGA, a de minimis exemption
would have been unnecessary; in other words, section 23(d)(2) would
have been surplusage. Congress is not presumed to enact surplus
language.\44\ To avoid this improper result, we interpret section 23 of
the NGA to give effect to the de minimis language by interpreting the
term ``any market participant'' to include those entities otherwise
excluded from the Commission's NGA jurisdiction by section 1(b) of the
act.
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    \43\ Section 23(d)(2) of the NGA; 15 U.S.C. 717t-2(d)(2) (2000 &
Supp. V 2005).
    \44\ City of Roseville v. Norton, 348 F.3d 1020, 1028 (DC Cir.
2003) (citing Babbitt v. Sweet Home Chapter of Cmty. for a Greater
Oregon, 515 U.S. 687, 698 (1995)).
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    24. The regulations promulgated by this Final Rule reflect
Congress' limitations on the Commission's authority. The Commission's
traditional regulatory authority remains limited to ``natural gas
companies'' under section 1 of the act. Section 23 of the NGA
authorizes the Commission only to obtain and disseminate information.
The Commission is not regulating the intrastate operations of non-
interstate pipelines; nor is the Commission regulating the rates or
terms and conditions of service for non-interstate pipelines.
Consistent with its limited transparency authority set forth in section
23 of the NGA, the Commission will require major non-interstate
pipelines only to post information.
    25. Based upon the text of section 23 of the NGA and the clear
intent of Congress, we determine that we have ample authority to issue
this Final Rule, including the promulgation of regulations requiring
additional posting obligations on both interstate and major non-
interstate pipelines.

IV. Need for the Rule

A. Posting NOPR

    26. As discussed in the Posting NOPR, section 23 of the NGA is a
clear expression of Congress' belief that the Commission may rightly
perceive a need ``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, and the protection of consumers.'' Section 23 further provides
that the Commission may issue such rules as it deems necessary and
appropriate to ``provide for the dissemination, on a timely basis, of
information about the availability and prices of natural gas sold at
wholesale and interstate commerce to the Commission, State commissions,
buyers and sellers of wholesale natural gas, and the public.'' The
Posting NOPR stated that natural gas markets function more efficiently,
and market problems are more readily identifiable, if participants and
observers have timely access to

natural gas transportation data. As we stated in Order No. 636:

    The Commission believes that * * * it is vital to give all gas
purchasers ([local distribution companies (LDCs)] and end users,
such as industrials and gas-fired electric generators) the ability
to make market-driven choices about the price of gas as a commodity
and about the cost of delivering the gas. Simply put, efficiency in
the national gas market can be realized only when the purchasers of
a commodity know, in a timely manner, the prices of the distinct
elements associated with the full range of services needed to
purchase and then deliver gas from the wellhead to the burnertip.
Only then will gas purchasers be able to purchase, based upon their
needs, the exact services they want with full recognition of the
prices that they would have to pay. And only then will the
Commission be assured that all gas is transported to the market
place on fair terms. What best serves the interests of gas
purchasers--the ability to make informed choices--is also important
for gas sellers.\45\
---------------------------------------------------------------------------

    \45\ Pipeline Service Obligations and Revisions to Regulations
Governing Self-Implementing Transportation; and Regulation of
Natural Gas Pipelines After Partial Wellhead Decontrol, Order No.
636, FERC Stats. & Regs. ] 30,939, at p. 30,393, order on reh'g,
Order No. 636-A, FERC Stats. & Regs. ] 30,950, 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 1105 (DC Cir. 1996), order on
remand, Order No. 636-C, 78 FERC ] 61,186 (1997).

    27. In the Posting NOPR, the Commission proposed that major non-
interstate \46\ natural gas pipelines post information on actual flows
and scheduled volumes. The Commission defined a ``major non-interstate
pipeline'' as one that is not a ``natural gas company'' under section 1
of the NGA\47\ and that flows greater than 10 million (10,000,000)
MMBtus of natural gas per year. Such a major non-interstate pipeline
would post daily ``capacity, scheduled flow volumes, and actual flow
volumes at major points and mainline segments.'' \48\ The Commission
did not define ``major points and mainline segments.'' The Commission
proposed two exemptions to the definition of ``major non-interstate
pipeline.'' First, the Commission proposed to exempt non-interstate
natural gas pipelines that ``fall entirely upstream of a processing
plant.'' \49\ Second, the Commission proposed to exempt non-interstate
natural gas pipelines ``that deliver more than 95 percent of the
natural gas volumes they flow directly to end-users.'' \50\ The
Commission also proposed that interstate natural gas pipelines post
information on actual flows,\51\ in addition to the existing
requirement to post capacity and scheduled flows.\52\
---------------------------------------------------------------------------

    \46\ In the Initial NOPR, the Commission used the term
``intrastate pipeline.'' In the Posting NOPR, the Commission used
the term ``non-interstate pipeline.'' The latter term more
accurately describes the scope of the rule, which is issued pursuant
to section 23 of the NGA. This section applies to both interstate
and non-interstate pipelines and does not use the term ``intrastate
pipeline.''
    \47\ 15 U.S.C. 717 (2007).
    \48\ Posting NOPR at P 3.
    \49\ Id. at P 4.
    \50\ Id.
    \51\ Id.
    \52\ Id.
---------------------------------------------------------------------------

    28. In the Posting NOPR, the Commission articulated three goals to
be served by posting of flow information by non-interstate pipelines.
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 United States 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.\53\
---------------------------------------------------------------------------

    \53\ Id. at P 60.
---------------------------------------------------------------------------

B. Comments

    29. A broad cross-section of the industry, representing producers,
end-users, LDCs, and information providers, supports the goals of the
pipeline posting requirement.\54\ In the Posting NOPR, the Commission
asked for comment on whether the pipeline posting proposal would
``provide a more complete picture of supply and demand fundamentals and
improve market participants' ability to assess supply and demand and to
price physical natural gas transactions.'' \55\ Several commenters
support posting requirements, particularly for non-interstate
pipelines, as a means to meet this goal. NGSA states that ``the [ ]
proposed flow data posting requirement has the potential to provide
market participants and regulators with additional information
regarding underlying natural gas supply and demand fundamentals.'' \56\
Similarly, APGA supports the Commission's rationale for obtaining daily
flow information from major non-interstate pipelines.\57\ IPAA also
supports the posting of flow data from non-interstate pipelines, ``but
with a close watch on the costs of compliance, as the producer is
likely to end up bearing much of those costs.'' \58\
---------------------------------------------------------------------------

    \54\ See, e.g., NGSA Reply Comments at 5; TIPRO Comments at 3;
APGA Comments at 4; Calpine Comments at 2-3; Bentek Comments at 3.
    \55\ Posting NOPR at P 71.
    \56\ NGSA Comments at 14.
    \57\ APGA Comments at 4.
    \58\ IPAA Comments at 1.
---------------------------------------------------------------------------

    30. TIPRO contends that the pipeline posting proposal meets the
goal of increasing transparency of supplies that affect prices.\59\
Bentek, which collects and publishes information based on interstate
flows, contends that requiring non-interstate pipelines to report daily
flows and capacity ``will significantly improve industry's ability to
understand natural gas supply and demand issues throughout the
country'' making ``the market more transparent, less volatile, more
reliable, and more efficient.'' \60\
---------------------------------------------------------------------------

    \59\ TIPRO Comments at 3.
    \60\ Bentek Comments at 12.
---------------------------------------------------------------------------

    31. Some commenters argue that the posting proposal, particularly
regarding non-interstate pipelines, is not justified. Atmos believes
that the need for the information has not been demonstrated and that
there is already sufficient price transparency in interstate
markets.\61\ Chevron Pipelines acknowledge that flow information from
non-interstate pipelines may provide a more complete picture of supply
and demand fundamentals, but state that such flow information would
have a de minimis effect on market participants' assessments of supply
and demand and pricing of physical natural gas transactions.\62\
---------------------------------------------------------------------------

    \61\ Atmos Comments at 10-11.
    \62\ Chevron Pipelines Comments at 25.
---------------------------------------------------------------------------

    32. Kinder Morgan Intrastate maintains that due to the bundled
sales function and the highly variable types of services provided by
intrastate pipelines, a snapshot of available capacity on a given
pipeline at a given time would not necessarily reflect pricing
fundamentals. Because Kinder Morgan Intrastate provides no-notice
service to many industrial users and must reserve physical capacity to
serve this no-notice service, it asserts that capacity is not available
for other customers. Thus, it alleges, posted capacity information
would send the wrong signals to the market because it would reflect the
complexity of pipeline operations rather than the overall supply
situation in the market.\63\
---------------------------------------------------------------------------

    \63\ Kinder Morgan Intrastate Comments at 16-17.
---------------------------------------------------------------------------

    33. In the Posting NOPR, the Commission also asked for comment on
whether the proposal would provide a clearer view of the effects on
infrastructure, the industry, and the economy during periods when the
United States natural gas delivery system is disturbed, for instance,
due to

hurricane damage to facilities in the Gulf of Mexico. Several
commenters contend that the posting of flow information by non-
interstate pipelines would support this goal.\64\ Chevron Pipelines
assert that the requirements on non-interstate natural gas pipelines
already are sufficient to gain a sense of how a significant disruption
may affect natural gas pipeline facilities.\65\ TPA believes that
significant disruptions such as hurricanes would preclude postings by
non-interstate pipelines and evaluation of the impact of such
disruptions on pipeline facilities could be obtained through less
obtrusive means, such as contacting the pipeline.\66\
---------------------------------------------------------------------------

    \64\ Yates Comments at 7; TIPRO Comments at 2; APGA Comments at
4; Royalty Owners Comments at 2-3.
    \65\ Chevron Pipelines Comments at 25.
    \66\ TPA Comments at 20.
---------------------------------------------------------------------------

    34. Finally, in the Posting NOPR, the Commission asked for comment
on another goal of the pipeline posting proposal--whether the proposal
would allow market observers to identify potentially manipulative
activity. In response, several commenters assert that the posting of
flow information by non-interstate pipelines would support this
goal.\67\
---------------------------------------------------------------------------

    \67\ See, e.g., TIPRO Comments at 2; APGA Comments at 4; Royalty
Owners Comments at 2-3; Yates Comments at 8.
---------------------------------------------------------------------------

    35. By contrast, Chevron Pipelines declare that the information to
be posted has no relation to pricing decisions, and therefore, the
potential for misconduct by not making public such information is
unfounded.\68\ Kinder Morgan Intrastate expresses concern that postings
by non-interstates pipelines would lead market participants to suspect
price manipulation where none was occurring. In support, Kinder Morgan
Intrastate provides the example of a net segment flow of zero due to
forward-hauls and backhauls canceling each other out.\69\ TPA adds that
the Commission has not demonstrated how the proposed pipeline posting
rule could be used to track manipulative behavior.\70\
---------------------------------------------------------------------------

    \68\ Chevron Pipelines Comments at 25.
    \69\ Kinder Morgan Intrastate Comments at 17.
    \70\ TPA Comments at 48.
---------------------------------------------------------------------------

    36. Several commenters contend that there are alternatives
available to daily posting of flow information by non-interstate
pipelines. Commenters point to the following information as
alternatives: Postings of capacity and scheduling data for ``points at
which intrastate pipelines connect to the interstate grid;'' \71\
postings by interstate natural gas pipelines; \72\ Bentek's ``Texas
Intrastate Report;'' \73\ data ``filed annually by intrastate pipelines
pursuant to section 311 of the Natural Gas Policy Act;'' \74\ price
information provided by ``NYMEX, CME, Globex, ICE and voice brokers, as
well as price index publishers;'' \75\ state commission production
data; \76\ and information available from the United States Department
of Energy's Energy Information Administration (EIA).\77\ Genscape
describes its natural gas pipeline flow monitoring product, which can
measure flows on pipelines, and which Genscape uses presently to
``monitor [ ] injections and withdrawals of gas at multiple storage
facilities in Texas and Louisiana that are connected in whole or in
part to intrastate pipeline systems.'' \78\
---------------------------------------------------------------------------

    \71\ Id. at 21-22.
    \72\ Id. at 21.
    \73\ Id. at 23.
    \74\ Id. at 22.
    \75\ Id.
    \76\ Id. at 22 n 59.
    \77\ Id. at 22.
    \78\ Reply Comments of Genscape, Inc., at 3, Docket No. AD06-11-
000 (filed Aug. 23, 2007).
---------------------------------------------------------------------------

    37. Commenters argue that a posting requirement on non-interstate
pipelines would pose a competitive risk for non-interstate pipelines
and for their customers. Atmos states: ``the public dissemination of
capacity information could provide competitors with insight into the
pipeline's ability to continue to provide services to existing and
prospective customers, which could influence the location of new
facility construction or how offers are made to prospective
customers.'' \79\ Atmos describes a possible scenario in which two
competing pipelines could serve one customer. When publicly
disseminated information shows that one of those pipelines is at
capacity, the other would have the opportunity to raise its price.\80\
---------------------------------------------------------------------------

    \79\ Atmos Comments at 9.
    \80\ Id.
---------------------------------------------------------------------------

    38. Calpine, however, supports a posting obligation for non-
interstate pipelines, stating that requiring the same posting
requirements on both non-interstate and interstate pipelines would
eliminate an existing competitive advantage for non-interstate
pipelines.\81\
---------------------------------------------------------------------------

    \81\ Calpine Comments at 5.
---------------------------------------------------------------------------

C. Commission Determination

    39. Based upon the comments received and the input from
stakeholders at the technical conference, we continue to believe that
this Final Rule is needed because the information currently provided by
interstate pipelines presents an incomplete picture of the supply and
demand fundamentals that underlie the interstate natural gas market.
While, as discussed above, Congress has given authority to the
Commission to obtain additional information from market participants to
increase transparency, we acknowledge that section 23 of the NGA grants
us discretion as to whether and how to utilize this authority. The
current picture of the interstate natural gas market derives from
information on scheduled natural gas volumes and available capacity
posted by interstate pipelines. In compliance with the regulations
adopted in Order No. 637,\82\ interstate pipelines currently post daily
information on the Internet about scheduled natural gas volumes for
most of the continental United States. Shippers and other market
participants rely on information posted by interstate pipelines to
price both transportation and commodity transactions.\83\ As we
described in the Posting NOPR, market participants retrieve the posted
information on scheduled volumes from the Web sites of interstate
natural gas pipelines, which they use to estimate in near real-time a
variety of supply and demand conditions including geographic and
industrial sector consumption, storage injections and withdrawals, and
regional production.\84\ This posted scheduled flow information
contributes to market transparency by providing information about the
supply and demand fundamentals that drive price movements.\85\ Further,
our staff

relies on this posted information to perform oversight and enforcement
functions. In sum, the existing posting requirements for interstate
pipelines provide the Commission, market participants, and other market
observers with a picture of the availability of natural gas (both the
commodity and transportation needed to move the commodity to market
centers).\86\
---------------------------------------------------------------------------

    \82\ Regulation of Short-Term Natural Gas Transportation
Services and Regulation of Interstate Natural Gas Transportation
Services, Order No. 637, 65 FR 10,156 (Feb. 25, 2000), FERC Stats. &
Regs. ] 31,091, at 31,332, clarified, Order No. 637-A, FERC Stats. &
Regs. ] 31,099, reh'g denied, Order No. 637-B, 92 FERC ] 61,062
(2000), aff'd in part and remanded in part sub nom. Interstate
Natural Gas Ass'n of America v. FERC, 285 F.3d 18 (DC Cir. 2002),
order on remand, 101 FERC ] 61,127 (2002), order on reh'g, 106 FERC
] 61,088 (2004), aff'd sub nom. American Gas Ass'n v. FERC, 428 F.3d
255 (DC Cir. 2005).
    \83\ In this regard, we disagree with commenters, such as Atmos,
that increased transparency would harm competition. Such has not
been our experience with interstate natural gas pipeline posting
requirements. To the contrary, increased transparency has allowed
for more informed decision making by market participants. In the
scenario posited by Atmos (i.e., two pipelines, one of which is at
capacity, that could serve a single customer), the posting of
scheduled flow information at a particular point would typically not
be sufficient to affect competition. Even if disclosure did have an
effect, the effect would be to allow all market participants to make
efficient determinations based upon equal access to relevant
information.
    \84\ Posting NOPR at P 55. See also Comments of Bentek, Docket
No. AD06-11-000 (filed Oct. 11, 2006).
    \85\ See, e.g., Comments of Platt's at 11-13, Docket No. AD06-
11-000 (filed Nov. 1, 2006) (information regarding the supply and
demand of natural gas explains prices and such information is
available from interstate pipelines, but not intrastate pipelines).
    \86\ See, e.g., id. at 11 (explaining that, to understand
prices, ``the marketplace must look to * * * information on [the]
availability of and demand for natural gas. * * *'').
---------------------------------------------------------------------------

    40. Nevertheless, this picture is incomplete. Because the
Commission's existing pipeline posting regulations do not apply to non-
interstate pipelines, market observers cannot determine the
availability of natural gas and transportation on a non-interstate
pipeline to the same extent as they could for an interstate pipeline.
These gaps in information are significant because, as detailed further
below, major gas flows between producing basins and interstate markets
occur on non-interstate pipelines and are thus invisible to the market.
Often, the availability and price of natural gas on large non-
interstate pipelines affects the availability and price of natural gas
nation-wide because these pipelines serve as important pricing points
and gateways for flows to much of the United States. Interstate and
non-interstate pipeline infrastructure is functionally inter-connected
in the United States. The gaps in information about non-interstate
flows result from the limitations on the Commission's authority over
non-interstate pipelines prior to the enactment of EPAct 2005.
    41. For instance, there is a significant lack of information about
supply and demand fundamentals in the south-central region of the
country: Texas, Louisiana, and Oklahoma, and in southern California. As
we discussed in the Initial and Posting NOPRs, several major United
States natural gas pricing points sit at the confluence of multiple
interstate and non-interstate pipelines. A study by EIA identified
twenty-eight national market centers, of which thirteen are served by a
combination of interstate and non-interstate pipelines.\87\ The table
below shows the capacity of interstate and non-interstate pipelines
connected to each of these thirteen locations. Significantly, as
relevant here, at nine of these thirteen locations, non-interstate
capacity is greater than interstate capacity.
---------------------------------------------------------------------------

    \87\ 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 United States Natural Gas Pricing Points
                                                      \88\
----------------------------------------------------------------------------------------------------------------
                                                                                Receipt and delivery capacity
                                                                                -------------------------------
                            Hub name                                   State        Interstate    Non-interstate
                                                                                pipelines       pipelines
                                                                                (MMcf/d)        (MMcf/d)
----------------------------------------------------------------------------------------------------------------
Carthage........................................................              TX           1,120           1,355
Henry Hub.......................................................              LA           2,770           1,215
Katy--Enstor....................................................              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
----------------------------------------------------------------------------------------------------------------

    42. No place is more indicative of the integration of interstate
and non-interstate pipelines than Henry Hub in Louisiana. Henry Hub
acts as an interchange for natural gas, where numerous interstate and
non-interstate pipelines meet. It serves as 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 futures
contract has become important in determining a variety of monthly index
prices used to set natural gas prices in a large number of transactions
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.\89\ Because Henry
Hub is connected to both interstate and non-interstate pipelines, the
picture of flows and availability on the pipelines that feed into the
Henry Hub is incomplete.
---------------------------------------------------------------------------

    \88\ The information on this chart is derived from Table 2 of
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). updated utilizing data available from
EIA for 2005.
    \89\ Federal Energy Regulatory Commission, 2006 State of the
Markets Report at 48-50 (Jan. 2007), www.ferc.gov/market-oversight/
market-oversight.asp (follow link to the State of the Markets Full
Report).
---------------------------------------------------------------------------

    43. Figure 1 below demonstrates the integration of interstate and
non-interstate flows in many of these markets. One cannot understand
flow patterns on interstate natural gas pipelines nationwide without
understanding flows on non-interstate pipelines in those areas. Non-
interstate pipelines provide crucial physical links between interstate
natural gas pipelines (particularly in Texas, Oklahoma, Louisiana, and
California) as well as links between market hubs. Figure 1 shows major
East-West flows of natural gas between the major production basins,
such as Waha production area and major market locations, such as the
Carthage Hub, but because such flows generally take place on non-
interstate natural gas pipelines, they are invisible to market
participants and other market observers.

[GRAPHIC] [TIFF OMITTED] TR02DE08.072

    44. The magnitude of missing market information is indicated in a
comparison of the types of information available for interstate and
non-interstate pipelines. Gas delivery data in Texas from interstate
natural gas pipeline postings show approximately 1 bcf of deliveries to
Texas end users on any given day in 2006.\90\ EIA shows that total
average daily consumption of gas in Texas was approximately 9.4 Bcf/day
in 2006.\91\ This means that delivery information for 90 percent of the
gas consumed in the state is only provided in the aggregate for all of
Texas and published monthly with a lag of several months while 10
percent of the gas delivered is reported daily by receipt and delivery
point. Therefore, nearly 90 percent of consumption was invisible to
market participants and other market observers on a daily basis.
---------------------------------------------------------------------------

    \90\ While this EIA data is two years old, based upon our
experience, we believe that similar circumstances exist in the
market today.
    \91\ ``EIA Natural Gas Consumption by End Use,'' http://
www.tonto.eia.doe.gov/dnav/ng/ng_cons_sum_a_EPG0_VC0_mmcf_
a.htm. (providing consumption figures by state).
---------------------------------------------------------------------------

    45. Purchasers of natural gas in interstate commerce draw on the
same sources of supply as users and purchasers of intrastate natural
gas. Intrastate markets often compete from basin to basin with
interstate markets. Southern California, for example, competes with
several large Texas markets for Waha supplies. Interstate/intrastate
competition is expected to increase. Much of the recent Barnett Shale
development in the Fort Worth basin in west Texas flows into intrastate
systems before moving into interstate markets and, recently, two
pipeline companies announced a major intrastate pipeline project that
would transport 1 Bcf/day from the Barnett Shale development.\92\ In
total, slightly more than 40 percent of total on-shore production in
Texas is connected to interstate natural gas pipelines, close to 60
percent in Louisiana and almost 80 percent in Oklahoma.\93\ Although
daily volume scheduled to flow from non-interstate into those
interstate natural gas pipelines can be observed, the supply dynamics
that determine the availability of such volumes cannot be observed
because they occur on non-interstate pipelines. A market participant
that understands the flows on non-interstate pipelines will better
understand the availability of supply for the interstate natural gas
market, thereby, enhancing transparency.
---------------------------------------------------------------------------

    \92\ ``Enbridge, Atmos Energy propose new line to move 1 Bcf/d
of northern Texas output,'' Inside FERC, Sept. 1, 2008 (``The
Barnett Intrastate Gas Pipeline would connect Atmos Energy's Line X
in Johnson Country, Texas, to Enbridge's Double D and Clarity
Pipelines at Bethel in Anderson County, Texas.'').
    \93\ To derive these figures, Commission staff compared
information from Bentek on supply scheduled on interstate pipelines
with EIA information on withdrawals and production. EIA Natural Gas
Gross Withdrawals and Production for Texas and Oklahoma, http://
www.tonto.eia.doe.gov/dnav/ng/ng_prod_sum_dcu_NUS_m.htm.
---------------------------------------------------------------------------

    46. Taken together, this information shows that market prices of
physical natural gas in interstate commerce result from the aggregate
of interstate and non-interstate pipeline flows. Because of this
relationship, information about the flows on non-interstate pipelines
would promote price transparency by providing market participants with
highly relevant information as they make day-to-day economic choices.
    47. Additionally, the proposed pipeline capacity and volume
postings would provide market participants--and entities charged with
oversight of the markets--a clearer view of the effects on
infrastructure, the industry,

and the economy as a whole during periods when the United States
natural gas delivery system is disturbed. For example, after the
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 output by
potentially-damaged production facilities.\94\ By monitoring receipt
and delivery points for production facilities on interstate natural gas
pipelines, market observers were able to obtain only a limited sense of
production facility output.\95\ Similarly, market participants, state
commissions and other market observers were unable to assess effects on
natural gas availability in the Gulf Coast, including, for instance,
availability to the petrochemical industry. The significance and
duration of these effects on this industry--vulnerable to energy price
and availability disruptions--remain unclear. Regulations promulgated
by this Final Rule will allow market participants and other market
observers to gain a much better picture of disruptions in natural gas
flows in the case of future hurricanes in the Gulf region.\96\
---------------------------------------------------------------------------

    \94\ See, e.g., Comments on Initial NOPR of New York PSC at 2;
Comments on Initial NOPR of Bentek at 15-16 & 21-22; Comments on
Initial NOPR of APGA at 3-4; Transcript of the Oct. 13, 2006
Technical Conference (Tech. 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 PSC).
    \95\ Tech. Conference Tr. at 25 (Comments of Sheila Rappazzo)
(describing how after the 2005 hurricanes data availability differed
widely).
    \96\ Along these lines, this Final Rule is consistent with Order
No. 682 and with a recently developed survey by EIA. In Order No.
682, 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 No. 682-B order denying
reh'g, 118 FERC ] 61,188 (2007). Recently, EIA developed Form EIA-
757, ``Survey of Natural Gas Processing Plants'' which is used to
``collect information on the capacity, status, and operations of
natural gas processing plants and to monitor constraints of natural
gas processing plants during periods of supply disruption in areas
affected by an emergency, such as a hurricane.'' Department of
Energy, Energy Information Administration, Form EIA-757, ``Survey of
Natural Gas Processing Plants'', http://www.eia.doe.gov/oil_gas/
natural_gas/survey_forms/drafteia757/ng757_instructions.pdf.
---------------------------------------------------------------------------

    48. Scheduled volume information would be useful whether a
disruption were major or minor. TPA asserts that because pipeline
facilities would be inaccessible during a major disruption, a non-
interstate pipeline could not post flow information and, thus, a
posting requirement would fail to meet this goal.\97\ But, during a
disruption, the fact that scheduled volumes were not posted, itself,
would send a signal about the extent and duration of a disruption. It
would be useful information during and following a disruption to know
whether some points on a non-interstate were affected but not others.
For example, following the landfall of hurricanes Gustav and Ike this
past hurricane season, some pipelines in the affected areas were able
to post information about flows before actual flows could resume.
---------------------------------------------------------------------------

    \97\ TPA Comments at 20.
---------------------------------------------------------------------------

    49. We also believe that the regulations promulgated in this Final
Rule will more readily allow the Commission and other market observers
to identify and remedy potentially manipulative activity. The goal of
identifying and remedying potential market manipulation conforms to the
transparency directive in section 23 for the Commission to ``hav[e] due
regard for the public interest [and] the integrity of those markets. *
* *'' \98\ By this language, Congress intended that the improvement of
the Commission's market oversight is a legitimate justification for
prescribing a transparency rule. Monitoring and preventing manipulative
or unduly discriminatory activity meets the Commission's responsibility
for ensuring the integrity of the physical interstate natural gas
markets.\99\
---------------------------------------------------------------------------

    \98\ Section 23(a)(1) of the NGA; 15 U.S.C. 717t-2(a)(1) (2000 &
Supp. V 2005).
    \99\ See Prohibition of Energy Market Manipulation, Order No.
670, FERC Stats. & Regs. ] 31,202, (2006).
---------------------------------------------------------------------------

    50. Information regarding availability on non-interstate pipelines
could be used to discover potentially manipulative or unduly
discriminatory behavior in physical natural gas sales or
transportation. In the Commission's experience, the fact that a price
for natural gas is not supported by supply and demand fundamentals may
be an indication that a market participant has violated the NGA's
prohibitions regarding undue discrimination or market manipulation. On
a daily basis, as part of its oversight responsibilities, the
Commission tracks natural gas prices to determine whether they are
justified by supply and demand fundamentals. To do this, we rely on,
among other things, the scheduled volume postings by interstate natural
gas pipelines. This information also serves as an important tool to
analyze natural gas markets. Similar postings by non-interstate
pipelines would make this analysis more accurate because it would
provide additional information currently lacking about supply and
demand fundamentals, a point discussed above. With information from
non-interstate pipelines, we can better account for how supply and
demand fundamentals affect daily changes to physical prices for much of
the gas transported to key interstate markets. For example, in
overseeing markets, the Commission routinely checks for unused
interstate natural gas pipeline capacity between geographically
distinct markets with substantially different prices as a sign that
flows may be managed to manipulate prices.
    51. In summary, the posting of scheduled flow information by major
non-interstate pipelines will increase transparency by meeting the
three goals set forth in the Posting NOPR. Such postings will: (1)
Improve market participants' ability to assess supply and demand and to
price physical natural gas transactions and transportation; (2) provide
market participants a clearer view of the effects on infrastructure,
the industry and the economy from disruptions to the United States
natural gas delivery system, for instance due to hurricane damage to
facilities in the Gulf of Mexico; and (3) allow the Commission, market
participants and other market observers to identify potentially
manipulative activity.\100\ We believe that these are worthy goals.
---------------------------------------------------------------------------

    \100\ Posting NOPR at 60.
---------------------------------------------------------------------------

    52. Further, we do not believe that these transparency goals can be
met by less intrusive means or through reliance upon existing market
data. For example, TPA refers to the ``data filed annually by
intrastate pipelines pursuant to Section 311 of the [Natural Gas Policy
Act of 1978 (NGPA)]'' as a possible substitute for this Final
Rule.\101\ Section 284.126(b) of the Commission's regulations requires
intrastate pipelines providing section 311 transportation to file an
annual report of volumes of section 311 transportation service, to be
used to determine the rates applicable to section 311 service.\102\
This existing data is inadequate to meet our transparency goals,
however, because section 311 volumes are only a subset of all volumes
transported by intrastate pipelines, the information is aggregated and
is reported annually and, therefore, delayed by at least three months.
---------------------------------------------------------------------------

    \101\ TPA Comments at 22 (citing 15 U.S.C. 717-717z).
    \102\ 18 CFR 284.126(b).
---------------------------------------------------------------------------

    53. TPA also refers to ``additional sources of natural gas price
information,'' including, for example, ``NYMEX, CME, Globex, ICE and
voice brokers, as well as price index

publishers.'' \103\ These sources are not a useful substitute for the
pipeline posting requirements. They do not provide any scheduled flow
information and, thus, cannot explain the supply and demand
fundamentals that underlie the prices in the same way as postings by
non-interstate pipelines. Additionally, TPA generally refers to state
commission production data available from Texas, Louisiana, and New
Mexico.\104\ However, this data includes only production data (and not
other transportation volumes) and is only available on a monthly basis.
Similarly, the data from production information Web sites does not
include transportation volumes.\105\
---------------------------------------------------------------------------

    \103\ TPA Comments at 22.
    \104\ Id. at 22 n. 59.
    \105\ Id. at 22.
---------------------------------------------------------------------------

    54. TPA references various EIA reports as possible replacement
sources for data regarding pipeline flows,\106\ but none of these
reports is an adequate substitute for the posting of scheduled volume
information by major non-interstate pipelines; none of these sources
provides scheduled pipeline-by-pipeline flow data on a daily basis. EIA
Monthly Storage Reports provide only information about aggregated
storage flows on a monthly or weekly basis. EIA Weekly Storage Reports
provide only storage information, are issued only once each week, and
provide aggregated data for three regions. Form EIA-895 provides only
production data aggregated by state. Form EIA-176 does not provide
daily transportation information, and is significantly lagged and
aggregated annually and by company. Form EIA-857 provides only ``volume
and cost data on natural gas delivered to residential, commercial, and
industrial consumers'' \107\ estimated by reviewing a monthly sample of
natural gas companies that deliver to consumers in the United States.
The survey does not report disaggregated daily transactional data at
receipt and delivery points, but instead only provides partial retail
sales. While we appreciate the value of EIA's data collection and
publications, we are not persuaded that these activities are adequate
substitutes for the daily, point-specific postings required by this
Final Rule.
---------------------------------------------------------------------------

    \106\ Id. at 22 n. 59.
    \107\ http://www.tonto.eia.doe.gov/dnav/ng/TblDefs/ng_
statdetails.html.
---------------------------------------------------------------------------

    55. As for Genscape's work monitoring flows on pipelines, its
project does not provide sufficient coverage of non-interstate
pipelines as it appears limited to storage facilities in Texas and
Louisiana and some major interstate pipelines. Most importantly,
Genscape's services are available only for a fee and only to
subscribers. The Commission's intent in this Final Rule is to increase
transparency for the public's benefit.
    56. We also believe that the goals of this Final Rule outweigh the
burdens to be placed upon non-interstate and interstate pipelines.
Based upon our experience, as a matter of business acumen and good
operational practice, most if not all of the gas control divisions of
the affected companies currently have ready access to the information
captured by this Final Rule. Pipelines already track flows on points
with a design capacity equal to or greater than 15,000 MMBtu/day to
ensure the operational integrity of their systems; to plan and schedule
operations; to monitor and control the pipelines; and to respond to and
correct abnormal operations. Natural gas pipeline schedulers need this
information on a daily basis so that they can match supply to nominated
demand and maintain system balance. Furthermore, some companies that
own several major non-interstate pipelines also own interstate natural
gas pipelines, which already post scheduled volume information. For
such companies, the requirement is a familiar one and they should have
the infrastructure in place, or easily put in place, to meet the
requirement on their major non-interstate pipelines.

V. Pipeline Posting Requirements

A. Overview

    57. Based on the comments received and the discussion at the
technical conference held on April 3, 2008, the Commission will modify
the proposal in the Posting NOPR in a number of significant ways. We
have increased the minimum delivery threshold defining major non-
interstate pipelines from 10 to 50 million MMBtu per year. Also, we
have determined that neither major non-interstate pipelines nor
interstate pipelines will be required to post actual flow information
at this time. Instead, the regulations promulgated in this Final Rule
require major non-interstate pipelines to post scheduled flow
information at each receipt and delivery point with a design capacity
greater than 15,000 MMBtu per day, and interstate pipelines to post
certain information on no-notice service.\108\ Further, we provide for
a number of exemptions and clarifications of the new posting
requirements that we believe will further limit the burden on entities
subject to the Final Rule. We address the salient aspects of the
regulations in turn, below.
---------------------------------------------------------------------------

    \108\ Under 18 CFR 284.7(a)(4), an interstate natural gas
pipeline must provide no-notice service, which is defined as ``a
firm transportation service under which firm shippers may receive
delivery up to their firm entitlements on a daily basis without
penalty.''
---------------------------------------------------------------------------

B. Definition of Major Non-Interstate Pipeline

1. Posting NOPR
    58. In the Posting NOPR, the Commission proposed that only major
non-interstate pipelines would be required to post flow information.
The Posting NOPR provisionally defined a ``major non-interstate
pipeline'' as ``a pipeline that fits the following criteria: (1) It is
not a `natural gas company' under section 1 of the NGA; and (2) it
flows annually more than 10 million (10,000,000) MMBtu of natural gas
measured in average receipts or in deliveries for the past 3 years.''
\109\ The Commission asked for comment on the proposed 10 million MMBtu
delivery threshold and whether it should be increased or
decreased.\110\
---------------------------------------------------------------------------

    \109\ Posting NOPR at P 67.
    \110\ Id.
---------------------------------------------------------------------------

2. Comments
    59. Several commenters support both a delivery threshold approach
and the 10 million MMBtu delivery threshold proposed in the Posting
NOPR.\111\ Copano Energy supports a 10 million MMBtu threshold but adds
that only jurisdictional flows should be counted for that delivery
threshold.\112\
---------------------------------------------------------------------------

    \111\ Bentek Comments at 6; see also TIPRO Comments at 2.
    \112\ Copano Energy Comments at 10.
---------------------------------------------------------------------------

    60. Several commenters seek an increase in the proposed delivery
threshold. Contending that a 10 million MMBtu delivery threshold is
unnecessarily low, NGSA suggests that the delivery threshold should be
50 million MMBtu.\113\ Relying upon EIA data regarding intrastate
pipelines, NGSA contends that a 50 million MMBtu delivery threshold
would capture approximately 90 percent of the intrastate pipeline
volumes and apply to only 57 intrastate pipelines. By contrast,
according to NGSA, a 10 million MMBtu threshold would capture 99
percent of such volumes and apply to approximately 100 intrastate
pipelines. NGSA contends that the benefit from this increase in
reported volumes that would result from establishing a lower threshold
is not sufficient to justify greater costs related to implementation of
a 10 million MMBtu delivery

threshold.\114\ Similarly, Chevron Pipelines proposes raising the
delivery threshold; it proposes a delivery threshold for reporting
based on daily flows of 100,000 mcf/day (which equates to 36.5 MMBtu/
year).\115\
---------------------------------------------------------------------------

    \113\ NGSA Comments at 5-6.
    \114\ Id. at 5-6.
    \115\ Chevron Pipelines Comments at 23-24.
---------------------------------------------------------------------------

    61. Calpine supports a greater delivery threshold and proposes
setting out two minimum thresholds based on gross and net throughput
levels. It would set a de minimis daily volume threshold of 100,000 Dth
(100,000 MMBtu) of net throughput, net of gas consumed by directly
connected end-users, or 300,000 Dth (300,000 MMBtu) of gross peak day
throughput.\116\
---------------------------------------------------------------------------

    \116\ Calpine Comments at 6-7.
---------------------------------------------------------------------------

    62. TPA suggests that the Commission adopt the delivery threshold
used in FERC Form No. 2, 50 million Dth (50 million MMBtu), so that
only non-interstate pipelines that transported over 50 million Dth (50
million MMBtu) in each of the three prior years would be required to
post.\117\
---------------------------------------------------------------------------

    \117\ TPA Comments at 45; see also Kinder Morgan Intrastate
Comments at 21; NGSA Comments at 5.
---------------------------------------------------------------------------

    63. Shell seeks clarification regarding the calculation of the
proposed delivery threshold. It contends that the use of thermal units,
i.e., MMBtu, is more appropriate than volumetric units, i.e., Bcf.
Shell suggests that the word ``average'' should be added in front of
the word ``deliveries'' so the calculation would apply both to average
receipts and/or deliveries. Shell seeks clarification if the three-year
average is a rolling average and whether it should be calculated
annually. It also seeks clarification on whether the delivery threshold
should be applied on a facility-by-facility basis or corporate
wide.\118\
---------------------------------------------------------------------------

    \118\ Shell Comments at 27-29.
---------------------------------------------------------------------------

3. Commission Determination
    64. In consideration of the comments filed in this proceeding, the
Commission will define a major non-interstate pipeline as a pipeline
that ``(1) is not a `natural gas company' under section 1 of the NGA;
and (2) delivers annually more than 50 million MMBtu of natural gas
measured in average receipts or in average deliveries for the past
three years.'' \119\ The definition adopted in this Final Rule differs
substantially from that proposed in the Posting NOPR and adopts a five-
fold increase in the delivery threshold. Further, the definition bases
the threshold on deliveries instead of flows. In addition, the
definition clarifies that the delivery threshold should be determined
on a facility-by-facility basis.
---------------------------------------------------------------------------

    \119\ See new section 284.14(a).
---------------------------------------------------------------------------

    65. As an initial matter, we believe that a delivery threshold of
50 million MMBtu provides sufficient information to meet the
Commission's goal of tracking daily flows of natural gas adequately
throughout the United States by providing flow information in areas for
which interstate natural gas pipeline posting is not adequate. EIA Form
176 data demonstrates the reach of the 50 million MMBtu threshold.
Excluding deliveries by interstate natural gas pipelines, pipelines
that deliver greater than 50 million MMBtu annually account for 75
percent of total non-interstate volumes delivered in the United
States.\120\ While the EIA Form 176 categories are not a precise match
to the data required to be posted by this Final Rule, the categories
are sufficiently similar to show that the 50 million MMBtu delivery
threshold will provide a significant amount of flow information to the
Commission, market participants, and observers and improve the
understanding of the supply and demand fundamentals affecting
interstate markets. Assuming this data is representative, capturing
roughly three-fourths of non-interstate pipelines would be a
significant stride in filling in the gaps regarding flows in the United
States.\121\
---------------------------------------------------------------------------

    \120\ Derived from EIA Form 176 data for 2006 based on the ratio
of non-interstate pipelines reporting deliveries greater than 50
million MMBtu per year to total deliveries on all non-interstate
pipelines. NGSA estimates that a 50 million MMBtu threshold would
capture 90 percent of the relevant intrastate pipeline volumes. NGSA
comments at 5-6. We have been unable to duplicate NGSA's methodology
used to derive this figure, although we note that NGSA has included
certain interstate volumes and excluded some non-interstate volumes
in its calculations.
    \121\ We believe that a 50 million MMBtu annual threshold for
``major non-interstate pipelines'' is appropriate since this
threshold includes almost all non-interstate pipelines that
interconnect with major hubs. However, experience with pipeline
postings following implementation of this Final Rule could lead us
to revisit this determination in the future.
---------------------------------------------------------------------------

    66. The 50 million MMBtu delivery threshold is likewise consistent
with the threshold used in the Commission's FERC Form No. 2
requirements. FERC Form No. 2 is a compilation of financial and
operational information filed by interstate natural gas pipelines. An
interstate natural gas pipeline must file a FERC Form No. 2 if it
transports or stores for a fee volumes of natural gas greater than 50
million Dth.\122\ If an interstate natural gas pipeline transports or
stores for a fee volumes of natural gas less than 50 million Dth, it is
not considered a major pipeline and files FERC Form No. 2A, which
entails a lesser accounting burden.
---------------------------------------------------------------------------

    \122\ 18 CFR 260.1(b).
---------------------------------------------------------------------------

    67. By adopting the significantly higher 50 million MMBtu delivery
threshold, the Commission also will eliminate compliance burdens on
many smaller pipelines which may have fewer resources to meet the
posting requirement. We agree with various commenters that the 10
million MMBtu delivery threshold in the Posting NOPR would have
burdened smaller pipelines without providing a proportionate amount of
useful information. A review of EIA Form 176 data for those pipelines
that describe themselves to EIA as intrastate pipelines is
illustrative. Under a 10 million MMBtu delivery threshold, thirty-seven
of such pipelines would be required to post. In contrast, under a 50
million MMBtu delivery threshold, only sixteen of such pipelines will
be required to post.\123\
---------------------------------------------------------------------------

    \123\ Looking at the EIA data another way also supports the 50
million MMBtu delivery threshold. The 50 million MMBtu threshold
would capture 85 major non-interstate pipelines that do not qualify
under the exemptions. These 85 pipelines flow greater than 75
percent of total non-interstate volumes, according to the EIA Form
176 data. The Commission's definition of ``major non-interstate''
does not match exactly the categories used by EIA. Thus, these
numbers may differ.
---------------------------------------------------------------------------

    68. Additionally, the Commission clarifies the definition of major
non-interstate pipeline in a few other respects. The Commission uses
the term ``deliveries'' instead of ``flows'' for determining the
threshold. We believe that the term ``deliveries'' is a more precise
term and is more easily understood by both pipelines and their
customers. Further, the delivery threshold for defining a ``major non-
interstate pipeline'' must be measured by a non-interstate pipeline's
average deliveries for the previous three calendar years. If in the
previous three calendar years, a non-interstate pipeline's deliveries
averaged greater than 50 million MMBtu then it would be required to
post the information required under this Final Rule. This approach,
too, is consistent with the Commission's FERC Form No. 2
requirements.\124\
---------------------------------------------------------------------------

    \124\ See FERC Form No. 2, Instructions, p. i, http://
www.ferc.gov/docs-filing/eforms/form-2/form-2.pdf (``Each natural
gas company whose combined gas transported or stored for a fee
exceed 50 million dekatherms in each of the previous three years
must submit FERC Form Nos. 2 and 3-Q'').
---------------------------------------------------------------------------

C. Scheduled Flow Information on Major Non-Interstate Pipelines

1. Posting NOPR
    69. In the Posting NOPR, the Commission proposed to require major
non-interstate pipelines to post information regarding capacity,

scheduled flow volumes, and actual flow volumes.\125\
---------------------------------------------------------------------------

    \125\ Posting NOPR at P 22 and 49.
---------------------------------------------------------------------------

2. Comments
    70. Several commenters assert that scheduled volume information
would provide sufficient insight on supply and demand fundamentals to
meet the Commission's transparency goals. TPA, for example, claims that
``[t]he use of scheduled volumes is widespread within the natural gas
industry and is the current standard used by interstate natural gas
pipelines'' and would provide the transparency that the Commission
wants at minimal costs.\126\ Similarly, Kinder Morgan Intrastate
maintains that actual flows do not reflect the actual supply and demand
picture due to, for instance, back-hauls, operational balancing
agreements, equipment outages, and other operating conditions.\127\
Commenters object to the requirement that non-interstate pipelines post
actual flows as overly burdensome. For example, Kinder Morgan
Intrastate objects to the cost of posting scheduled volumes; it
estimates that the proposal would cost $250,000 for information
technology modifications to obtain and post scheduled volumes and
another $250,000 for information technology modifications to obtain and
post actual flow volumes.\128\ TPA recommends posting of only scheduled
volumes rather than actual volumes as a way to significantly reduce the
costs of compliance with the Final Rule.\129\
---------------------------------------------------------------------------

    \126\ TPA Comments at 8.
    \127\ Kinder Morgan Intrastate at 13-14.
    \128\ Kinder Morgan Intrastate at 12. Kinder Morgan estimates
additional costs for obtaining flow information at segments, which
is not required in the Final Rule.
    \129\ TPA Comments at 6-7.
---------------------------------------------------------------------------

    71. TIPRO supports the posting of actual flows as a way to verify
scheduled activity as compared to actual activity, but acknowledges
that posting of actual flows may not be feasible on a daily basis and
that should be taken into account in the final rulemaking.\130\
---------------------------------------------------------------------------

    \130\ TIPRO Comments at 4.
---------------------------------------------------------------------------

3. Commission Determination
    72. We will not require major non-interstate pipelines to post
actual flow information. As noted by Kinder Morgan Intrastate, the
information gained from requiring non-interstate pipelines to post
actual flows would not be that much greater than that gained from the
posting of scheduled volumes, particularly given that non-interstate
pipelines are not required to provide no-notice service (although some
do).
    73. We recognize that some non-interstate pipelines will incur
costs to comply with this rule, including the posting of scheduled
volumes. However, we believe that the benefits of posting and the need
for this rule outweigh those costs. In any event, we do not believe
that the costs are as great as those estimated by commenters.
Commenters' estimated costs included the cost of metering at segments,
but posting at segments is not a requirement of this Final Rule.\131\
Similarly, commenters' estimated costs include the cost of new metering
and the posting of actual flow information, but posting actual flow is,
likewise, not a requirement of this Final Rule. We also disagree with
Kinder Morgan Intrastate's estimated $250,000 in costs to obtain and
post volumetric information.\132\ The Commission believes that this
figure is too great because, as discussed by TPA, ``most of the
information already collected by intrastate pipelines relates to
scheduled volumes at receipt and delivery points. * * *'' \133\
---------------------------------------------------------------------------

    \131\ Our decision not to require posting by segment is
discussed infra.
    \132\ Kinder Morgan Intrastate at 12.
    \133\ Our staff's research indicates that such costs could be
less than $30,000 for major non-interstate pipelines. The estimate
includes both the software and labor costs associated with
implementing the rule. Software costs include a one-time capital
cost (amortized over ten years) to create a standard informational
posting Web site for reporting scheduled volumes and the monthly
fees associated with maintaining this site. In addition, the cost
factors daily labor costs to upload this information on the Internet
and to have an attorney or compliance office review these postings
on a routine basis.
---------------------------------------------------------------------------

D. Receipt and Delivery Point Posting for Major Non-Interstate
Pipelines

1. Posting NOPR
    74. The Posting NOPR sought comments regarding whether the
Commission's transparency goals could be sufficiently advanced through
the posting of flows in and out of major market hubs and, if so, which
hub-related data should be reported.\134\ The Commission suggested two
possible approaches to postings by non-interstate pipelines. First,
under a delivery threshold approach, whether a non-interstate pipeline
posts flow information depends on the amount of flows or deliveries the
non-interstate pipeline flows or delivers annually at the hub. Second,
under a market hub approach, or market hub alternative, whether a non-
interstate pipeline posts flow information depends on whether it
interconnects to a major market hub. The Commission sought comment on
adopting a market hub approach, but did not propose a market hub
approach.
---------------------------------------------------------------------------

    \134\ Posting NOPR at P 75.
---------------------------------------------------------------------------

    75. The Posting NOPR also proposed that non-interstate pipelines
post flow information for ``major points or segments.'' We did not
delineate for which ``major points or segments'' a major, non-
interstate pipeline should post but requested comment on the subject.
The Posting NOPR proposed that non-interstate pipelines post ``on a
daily basis on an Internet Web site and in downloadable file formats,
in conformity with section 284.12 of this chapter, equal and timely
access to'' flow information.\135\
---------------------------------------------------------------------------

    \135\ See new section 284.14(a).
---------------------------------------------------------------------------

2. Comments
    76. Several commenters support a market hub approach (as opposed to
a points or segment-based approach) for determining which non-
interstate pipelines should post flow information.\136\ Chevron
Pipelines argue that a market hub approach would ``ensure and
facilitate more accurate pricing with little loss of meaningful
information.'' \137\ EOG Resources supports posting at the thirteen
market hubs referred to in the Initial and Posting NOPRs because it
would more likely provide meaningful information on flows affecting
wholesale natural gas markets and would cost less than the proposed
posting requirement.\138\ Atmos also advocates posting at the thirteen
hubs because the hubs represent market points where index prices are
regularly published and the market hubs ``come closer than any other
points to satisfying the statutory requirement that the information be
about physical pricing at wholesale and interstate commerce.'' \139\
---------------------------------------------------------------------------

    \136\ See, e.g., National Fuel Distribution Comments at 2.
    \137\ Chevron Pipelines Comments at 27.
    \138\ EOG Resources Comments at 11; see also Oklahoma
Corporation Commission Comments at 4; Shell Comments at 11-17.
    \139\ Atmos Comments at 7.
---------------------------------------------------------------------------

    77. Yates asserts that a market hub approach would address the lack
of supply and demand information in production areas because the
thirteen major market hubs are located in the major production areas in
Louisiana and Texas.\140\ Supply and demand information, according to
this commenter, is available for other production areas through
interstate postings.\141\ Similarly, because the market hub approach
focuses on the Gulf Coast, Yates claims, it would address the goal of
understanding the

effects of a major disruption in that area.\142\
---------------------------------------------------------------------------

    \140\ Yates Comments at 6-8.
    \141\ Yates Comments at 7.
    \142\ Id. at 7-8.
---------------------------------------------------------------------------

    78. Other commenters oppose adoption of a market hub approach.
Royalty Owners contend that limiting the postings to hubs would exclude
vast, relevant segments of the intrastate system. For instance, Royalty
Owners declare that, since Oklahoma does not have one of the thirteen
market hubs listed in the Posting NOPR, every pipeline in the state
could be exempt, yet Oklahoma is the third largest producing state with
approximately 8.8 percent of the nation's total production.\143\ TIPRO
similarly opposes limiting the proposal to only pipelines that flow in
and out of major hubs because significant information would be lost and
the transparency goals would not be met.\144\
---------------------------------------------------------------------------

    \143\ Royalty Owners Comments at 2.
    \144\ TIPRO Comments at 2.
---------------------------------------------------------------------------

    79. Commenters also addressed possible postings by receipt and
delivery points. Several commenters object to the fact that the Posting
NOPR did not define the ``major points of receipt and delivery'' at
which non-interstate pipelines would be required to post flow
information. Atmos believes that the lack of a definition of major
points hindered the ability to comment on the burden and costs of the
proposal.\145\ NGSA suggests requiring the posting of flow information
at receipt and delivery points that flow on average more than 15 mmcf/
day and at all metered points.\146\ PGC requests that the Final Rule
exclude posting at points serving private pipelines or LDC bypasses,
noting the Commission's comments that it was not interested in posting
for ``extremely small points connected to one or a few customers.''
\147\
---------------------------------------------------------------------------

    \145\ Atmos Comments at 5; see also TPA Comments at 32; Calpine
Comments at 9-11.
    \146\ NGSA Comments at 7-10.
    \147\ PGC Comments at 2.
---------------------------------------------------------------------------

    80. Several commenters express concern that the public posting of
flow information at receipt and delivery points could result in a
competitive disadvantage for individual customers.\148\ TPA objects to
the posting of design capacity for a point as it would allow a
determination of a non-interstate pipeline's available capacity.\149\
Kinder Morgan Intrastate contends that the posting proposal would harm
its end-use customers by causing the release of confidential
information.\150\ To avoid this result, Kinder Morgan Intrastate
suggests that the Commission exempt the reporting of information
regarding deliveries made to power generators, LDCs and industrial
customers.\151\ Calpine seeks to keep confidential an individual
customer's transportation volumes and consumption patterns by excluding
individual customer laterals and focusing the posting requirement on
high-volume segments with multiple shippers.\152\ But, as to
confidentiality, Bentek observes that data for power plants and nearly
800 industrial facilities that are directly connected to interstate
natural gas pipelines is posted daily with ``no apparent adverse
impact.'' \153\ Bentek concludes that the Commission should not
``protect something in the non-interstate context that is not protected
in the interstate context.'' \154\
---------------------------------------------------------------------------

    \148\ See, e.g., Atmos Comments at 8.
    \149\ TPA Comments at 16.
    \150\ Kinder Morgan Intrastate Comments at 19.
    \151\ Id. at 22.
    \152\ Calpine Comments at 5.
    \153\ Bentek Comments at 9.
    \154\ Id.
---------------------------------------------------------------------------

    81. Several commenters object to posting information on segments.
Atmos opposes posting information at segments because it does not
measure flows at segments.\155\ Atmos also states that it has 1,200
receipt and delivery points on its system and thousands of minor ones
resulting in a multitude of possible postings for segments.\156\ PG&E
urges the Commission to focus on receipt and delivery points on non-
interstate pipelines, rather than on mainline segments because posting
at segments would not provide any information that is not already
apparent from posting capacity, scheduled volume and actual flows at
receipt and delivery points.\157\ In this regard, other commenters
maintain that the requirement to post flows at segments would create a
significant burden.\158\ TPA explains that the estimates of costs from
the proposed requirement to post flow information arises from the
assumption that the proposal entails reporting at segments:
---------------------------------------------------------------------------

    \155\ Atmos Comments at 5.
    \156\ Id. at 6.
    \157\ PG&E Comments at 5.
    \158\ See, e.g., TPA Comments at 25-26; Atmos Comments at 5.
---------------------------------------------------------------------------

    The burdens and costs associated with the proposed rule would be
substantially greater than the Commission estimated. A large reason
for this is that intrastate pipelines do not typically collect
information related to segment flow--most of the information already
collected by intrastate pipelines relates to scheduled volumes at
receipt and delivery points, rather than segments.\159\
---------------------------------------------------------------------------

    \159\ TPA Comments at 25.

For instance, Atmos estimates that determining actual gas flows at
major pipeline segments would require a capital investment of at least
$13 million.\160\ Kinder Morgan Intrastate estimates that installing
meters to measure flow at segments would cost approximately $62.7
million.\161\ The ONEOK Gathering Companies observe that narrowly
defining the term ``major point or mainline segment'' in proposed
section 284.14(a) would reduce the number of new meters that would need
to be installed, operated and maintained and would thus keep the burden
to a minimum.\162\ TPA contends that adding segment meters to a
pipeline would cause a drop in pressure.\163\
---------------------------------------------------------------------------

    \160\ Atmos Comments at 5.
    \161\ Kinder Morgan Intrastate at 11.
    \162\ ONEOK Gathering Companies Comments at 12-13.
    \163\ TPA Comments at 41.
---------------------------------------------------------------------------

3. Commission Determination
    82. The Commission determines that a major non-interstate pipeline
must post scheduling information for each receipt and delivery point
with a design capacity of equal to or greater than 15,000 MMBtu/day (a
point-based delivery threshold). In addition, a non-interstate pipeline
must post the design capacity for each such point. Specific information
that is to be posted is discussed below.\164\ Postings at market hubs
or for segments will not be required.
---------------------------------------------------------------------------

    \164\ We remind pipelines that must comply with this Final Rule
that the Commission has established a help desk to facilitate
responses to questions regarding compliance with our regulations.
See Obtaining Guidance on Regulatory Requirements, 123 FERC ] 61,157
(2008).
---------------------------------------------------------------------------

a. Posting at Receipt and Delivery Points
    83. The delivery threshold approach adopted herein will provide
broader, more useful information about the supply and demand
fundamentals that underlie the interstate natural gas market than a
hub-based approach and at a cost less than a segment-based approach.
The delivery threshold approach is not limited to a few market hubs or
published pricing points. It will provide information about flows that
either eventually feed into market hubs or that affect pricing at those
market hubs. Such market hubs or published pricing points are generally
already relatively liquid--the delivery threshold approach will promote
transparency at less liquid and currently less transparent points.
    84. Posting points' design capacity will allow the Commission and
market participants to better determine availability, a key component
of supply and demand fundamentals. Market observers may estimate
availability by subtracting scheduled volumes from design capacity.
Requiring the posting

of design capacity will allow shippers and other market observers to
understand the availability of transportation that affects interstate
wholesale markets. Further, this approach is consistent with the
Commission's policies for interstate natural gas pipelines. In Order
No. 637, the Commission stated that interstate natural gas pipelines
had the option of posting at either (i) receipt and delivery points or
(ii) segments. It has been our experience that most, but by no means
all, interstate pipelines elect to post by receipt and delivery point
and not by segment.
    85. Some commenters object to the threshold approach as not
advancing transparency in the interstate market because, for example,
as they claim ``[v]ery few intrastate delivery or receipt points and no
intrastate segments exist at the same location as published pricing
indices. If these points do not represent established pricing points
for the interstate market, there is no advancement of the increased
price transparency goal from the proposed reporting.'' \165\ This
criticism assumes that only flow information for a published pricing
point can promote transparency. First, this assumption is incorrect
because prices are affected by flows that feed a pricing point or that
affect the supply available to a pricing point. Second, this assumption
incorrectly assumes that price transparency is solely about the price
of natural gas at published price indices. Price transparency also
includes the price of transportation of natural gas. Congress
contemplated that this price transparency would be derived from not
only information about prices but also information about availability.
Section 23 of the NGA authorizes the Commission to obtain ``information
about the availability'' of natural gas, in addition to information
about the ``prices'' of natural gas. Unlike the market hub approaches,
the delivery threshold approach would obtain information regarding
availability of transportation broadly which would facilitate price
transparency of both ``sales and transportation of physical natural gas
in interstate commerce.* * *'' \166\
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    \165\ Atmos Comments at 7.
    \166\ Section 23(a)(1) of the NGA; 15 U.S.C. 717t-2(a)(1) (2000
& Supp. V 2005).
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    86. We believe that a delivery threshold will be less burdensome
for major non-interstate pipelines than either a hub-based or segment-
based approach as many such pipelines already collect such information.
These pipelines may incur some additional costs to comply with the
Final Rule's posting requirements, however, we believe the substantial
transparency benefits, discussed above, outweigh those costs. In any
event, the Commission expects that compliance costs will not be nearly
as great as those estimated by some commenters. As discussed above,
most commenters' cost estimates include the cost of metering at
segments, but posting at segments is not a requirement. Other cost
estimates include the cost of metering and posting actual flow
information, but posting actual flow information is, likewise, not a
requirement.
    87. Only a few commenters provided cost estimates that did not
assume obtaining and posting flow information for pipeline segments and
that did not assume obtaining and posting actual flow information.
Kinder Morgan Intrastate, for example, estimated a cost of $250,000 for
obtaining and posting scheduled volume information.\167\ The Commission
believes that this figure is likely exaggerated because, as noted by
TPA, ``most of the information already collected by intrastate
pipelines relates to scheduled volumes at receipt and delivery
points.'' \168\ We believe that the costs of collecting existing
scheduled volume information and posting it on a Web site is likely to
be far less.\169\
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    \167\ Kinder Morgan Intrastate at 12.
    \168\ TPA Comments at 25.
    \169\ As noted above, supra note 130, our staff's research
indicates that such costs could be less than $30,000 per year.
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    88. Lastly, we have carefully considered the arguments by some
commenters that additional pipeline postings could affect the
competitive position of customers who have a dedicated delivery point
with a design capacity equal to or greater than 15,000 MMBtu/day on a
major, non-interstate pipeline. In this respect, the regulations that
we adopt here may affect ``fair competition, and the protection of
consumers''--considerations that the Commission must take into account
pursuant to section 23(a)(1) of the NGA. Nonetheless, information about
the scheduled volumes to a customer with a delivery point with a
capacity greater than 15,000 MMBtu/day will provide useful information
to the Commission, market participants, and other market observers and
will greatly increase market transparency. We believe that this benefit
outweighs the concerns about publicly posting information about
scheduled volumes to such a customer. Further, we understand that such
customers would be placed in the same situation as customers on
interstate natural gas pipelines with whom they often compete.\170\
Currently, interstate natural gas pipelines post daily scheduled
volumes for delivery points dedicated to a single customer regardless
of the size of the meter. There have been no indications that
competitive balance has been harmed since the interstate requirement to
post was instituted.
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    \170\ Those customers whose delivery point has a design capacity
of less than 15,000 MMBtu/day would not be affected. Those customers
of non-interstate pipelines that did not flow greater than 50
million MMBtu per year also would not be affected.
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    89. The Commission will require all postings to be public; we will
not provide for posting information to be kept confidential as
requested by some commenters. In section 23(a)(2) of the NGA, Congress
called for any transparency rule to provide for the ``dissemination, on
a timely basis, of information about the availability and prices of
natural gas sold at wholesale and interstate commerce to the
Commission, State commissions, buyers and sellers of wholesale natural
gas, and the public.'' \171\
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    \171\ Section 23(a)(2) of the NGA; 15 U.S.C. 717t-2(a)(2) (2000
& Supp. V 2005) (emphasis added).
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    90. In this Final Rule we determine that each major non-interstate
pipeline must post information for each receipt or delivery point with
a design capacity equal to or greater than 15,000 MMBtu/day. We believe
that this threshold represents significant load at delivery points
(major pipeline interconnections, substantial industrial use, etc.) and
major receipt points. However, the 15,000 MMBtu/day threshold should be
sufficiently large so as to exclude insignificant or minor points on a
pipeline system. To put this threshold in context, 15,000 MMBtu/day
corresponds roughly to the gas used by an 85 MW baseload gas fired
power plant at a relatively efficient heat rate of 7,500 Btu/kWh--a
facility that could serve over 40,000 households each with a 2 kW load.
    91. The Commission will require posting based on each receipt and
delivery point's design capacity rather than average flows at a point
because posting at points based on design capacity should be less
burdensome for pipelines. The average flows over a receipt or delivery
point may change from year-to-year and designation of posting points
based upon fluctuating averages would require pipelines to add and
subtract points from posting on a rolling basis. By comparison, points'
design capacities are relatively fixed and lend themselves to stable
posting requirements.

    92. In the circumstance where the design capacity of a receipt or
delivery point could vary according to operational or usage conditions,
a major non-interstate pipeline must post the design capacity for the
most common operating conditions of its system during peak periods.
This guidance is identical to that provided to interstate natural gas
pipelines in Order No. 637 regarding postings. Also consistent with our
directives in Order No. 637, a pipeline's posting of the total design
capacity of a point is not a daily posting requirement, but pipelines
must update this information from time-to-time as changes in design
capacity occur.
    93. The Commission will not require major non-interstate pipelines
to post information for each point that has a meter as suggested by
NGSA. Such a requirement would not be uniform for each pipeline as some
systems have significantly more physical meter points than others.
Further, such a requirement could create a disincentive for a major
non-interstate pipeline to install new meters.
    94. The Commission will require that a major, non-interstate
pipeline post the following scheduled volume information for each
receipt and delivery point that has a design capacity equal to or
greater than 15,000 MMBtu/day: Transportation Service Provider Name,
Posting Date, Posting Time, Nomination Cycle, Location Name, Additional
Location Information if Needed to Distinguish Between Points, Location
Purpose Description (Receipt, Delivery, or Bilateral), Design Capacity,
Scheduled Volume, Available Capacity, Measurement Unit (Dth, MMBtu, or
MCf).
    95. Regarding the timing of postings, the Commission considers that
scheduled flow information that is not provided on a daily basis is
simply untimely and of vastly diminished use to market participants. We
believe that, in this regard, our interstate natural gas pipeline
postings set an appropriate standard: Postings should occur at least on
a daily basis. Further, this standard conforms to Congress' direction
in section 23 of the NGA, which requires that our transparency rules
``provide for the dissemination, on a timely basis, of information
about the availability and prices of natural gas. * * *'' \172\
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    \172\ Section 23(a)(2) of the NGA (emphasis added); 15 U.S.C.
717t-2(a)(2) (2000 & Supp. V 2005).
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    96. These postings will provide information comparable to the daily
postings made by interstate natural gas pipelines. Major non-interstate
pipelines must post scheduled volumes according to a daily posting
deadline. Currently, interstate natural gas pipelines must provide at
least four nomination cycles to their shippers with the following
nomination: Timely, evening, intra-day 1, and intra-day 2.\173\ Once
these volumes are scheduled, they must be posted on the public Internet
under Operationally Available Capacity section of an interstate natural
gas pipeline's Informational Postings according to the following cycle
deadlines: Timely (no later than 4:30 p.m. central clock time for the
day prior to gas flow); evening (no later than 9 p.m. central clock for
the day prior to gas flow); intra-day 1 (no later than 5 p.m. on flow
day); and intra-day 2 (no later than 9 p.m. on flow day). Currently,
major non-interstate pipelines employ a variety of nomination deadlines
on their systems. Some use the standard North American Energy Standards
Board (NAESB) guidelines followed by interstate natural gas pipelines;
others do not have specific nomination deadlines.
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    \173\ Standard 1.3.2, Nominations Related Standards, North
American Energy Standards Board, Wholesale Gas Quadrant, July 31,
2002.
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    97. The Commission will require that major non-interstate pipelines
post scheduled volumes no later than 10 p.m. central clock time the day
prior to gas flow. This deadline occurs after interstate natural gas
pipelines are required to post their evening cycle schedule
confirmations by receipt and delivery point. The deadline enables non-
interstate pipelines ample time to review their gas control set-up for
the next day and limits the burden of posting to a single, daily
reporting cycle.
    98. Regarding comments made by TPA, the Commission clarifies that
the pipeline posting regulations do not impose NAESB requirements on
non-interstate pipelines. Rather, the proposed regulations required a
major non-interstate pipeline to post daily its scheduled volumes, ``in
conformity with Sec.  284.12 of this chapter. * * *'' The commenter
erroneously assumes that this would require a non-interstate pipeline
to conform to all of section 284.12 instead of to conform with the
manner of posting set forth in that section. The Commission clarifies
that posting pipelines need only comply with the manner of posting
outlined in section 284.12 and need not comply with all other
requirements of that section.
b. Posting at Market Hubs or by Segment
    99. The Commission identified, in the Initial and Posting NOPRs,
thirteen market hubs served by both interstate and non-interstate
pipelines as a way to illustrate and provide examples of the wider
range of deficient information about the physical natural gas market.
We asked for comment on whether these thirteen hubs should help
determine which non-interstate pipelines should post flow
information.\174\ Some commenters seized on these thirteen market hubs
as a way to define the particular points at which pipelines that should
post flow information. While the Commission adopts a posting method
based upon points of receipt and delivery, the Commission appreciates
the effort that commenters expended in evaluating the Posting NOPR and
proposing other alternatives (including posting at market hubs) as well
as comments on posting by segment. We now explain why we are not
adopting any of these alternatives.
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    \174\ Posting NOPR at P 71.
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    100. The market hub alternatives proposed by NGSA and TPA focus on
locations which have obvious import to understanding pricing in the
interstate markets. However, we believe that a hub-based approach would
be unwieldly at best and would not provide the data needed to meet the
Commission's transparency goals. The market hub alternatives would
require posting only by those non-interstate pipelines that connect to
major market hubs. These alternatives would be quite difficult to
implement and would provide insufficient information to market
participants.
    101. The market hub alternatives also present too great a challenge
in trying to keep up with the constantly changing nature and location
of market hubs. Even the initial identification of relevant market hubs
would present a challenge. Market hubs are uniform only in that they
serve as pricing points; they are not uniform physically. There is a
wide variety of hub types: pooling points, salt-cavern based storage
hubs, and pipeline hubs (including one, two, or even three different
pipelines). In spite of this lack of uniformity, a pipeline posting
would require physical posting as if every market hub were physically
the same. In such circumstances, posting information would not be
comparable among different hubs and the resulting data would be of
marginal value.
    102. After market hubs were initially determined, ongoing
challenges would remain. A regulatory listing of market hubs would need
to be established and maintained, yet trading in the market determines
which market hubs are, in fact, relevant to the market as a whole. This
list of relevant market hubs would need to be constantly modified as

trading trends evolved. For instance, on July 2, 2008, Gas Daily
reported on numerous changes involving price reporting and the
establishment of new trading hubs, including El Paso South Mainline. El
Paso South Mainline is a market hub that, under a market hub approach,
could be considered as a market hub at which interconnected pipelines
should post flow information. New pipelines would also change which
market hubs were important to the overall transparency of the
market.\175\ The listing of specific hubs could not keep up with this
constantly changing market, would require the commitment of significant
Commission resources, and would result in perpetual regulatory
uncertainty regarding posting obligations. Each time a market hub were
added to the list of relevant hubs, a new set of pipelines would be
required to begin posting information.
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    \175\ IPAA Comments at 3.
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    103. An additional drawback, particular to NGSA's proposed market
hub approach, would be determining how far upstream of the market hub a
non-interstate pipeline should post data. NGSA proposes only postings
of flow information at the pipeline immediately connected to the market
hub.\176\ This limitation would result in too little information: It
would provide flow information only at the immediate interconnecting
pipeline. The Commission, market participants, and observers would lose
significant information from a supply-chain standpoint.
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    \176\ NGSA Reply Comments at 2.
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    104. The TPA market hub alternative would provide even less
information and less benefit to market participants and observers.
Because the TPA market hub alternative would not include points
upstream of the market hub interconnection, this alternative would
provide no information about the availability of transportation to the
market hub. The Commission's experience with postings by interstate
natural gas pipelines suggests that the value of such posting is to
understand the availability of supply at different points on a
pipeline, not just the one point at the interconnection. Further, if
the market hub interconnection is with an interstate natural gas
pipeline, the interstate natural gas pipeline already posts scheduled
volume information for that receipt point, thus rendering the TPA
proposal redundant for many points.\177\
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    \177\ The AGA states, in objecting to posting such points for
local distribution companies, that requiring the posting of ``daily
information for receipt and delivery points that are
interconnections with interstate pipelines would be unnecessarily
redundant and would add no valuable information to the Commission's
or others' understanding of the supply and demand conditions that