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Federal Register: February 1, 2010 (Volume 75, Number 20)

DOCID: fr01fe10-5 FR Doc 2010-1546

DEPARTMENT OF ENERGY

U.S. Customs and Border Protection

CFR Citation: 18 CFR Part 284

Docket ID: [Docket No. RM08-2-001; Order No. 720-A]

NOTICE: Part II

DOCID: fr01fe10-5

DOCUMENT ACTION: Order on Rehearing and Clarification.

SUBJECT CATEGORY:

Pipeline Posting Requirements under Section 23 of the Natural Gas Act

DOCUMENT SUMMARY:

The Federal Energy Regulatory Commission modifies its regulations requiring major noninterstate pipelines to post daily scheduled volume information and other data for certain points. These modifications include a requirement that major noninterstate pipelines post information for receipt and delivery points at which design capacity is unknown. The Commission denies requests to revise its regulations requiring interstate natural gas pipelines to post information regarding the provision of nonotice 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. 717t2 (2000 & Supp. V 2005).

Effective Date:

This rule will become effective March 3, 2010.

SUMMARY:

Energy Department, Federal Energy Regulatory Commission

DOCUMENT BODY 2:

January 21, 2010.

SUPPLEMENTAL INFORMATION

Table of Contents
[Issued January 21, 2010]
Paragraph Nos. I. Introduction............................................ 1 II. Discussion............................................. 6

A. Authority for the Rule.............................. 6 1. Requests for Rehearing and Clarification........ 8 2. Commission Determination........................ 16

B. Need for the Rule................................... 20 1. Requests for Rehearing and Clarification........ 21 2. Supplemental Comments........................... 23 3. Commission Determination........................ 24

C. Definition of Major NonInterstate Pipeline......... 37 1. Delivery Threshold.............................. 37 2. Treatment of NonContiguous Pipeline Systems.... 41

D. Posting Requirements for Major NonInterstate 44 Pipelines............................................. 1. Posting Requirements at Points Where Design 44 Capacity Is Unknown or Does Not Exist............. 2. Posting Requirements at Points Where Design 52 Capacity Is Known................................. 3. Timing of Posting of Eligible Points............ 61 4. Clarifications Regarding the Major Non 64 Interstate Posting Requirements...................

E. Exemptions.......................................... 75 1. Pipelines Upstream of Processing Plants......... 75 2. Pipelines That Deliver Primarily to End Users... 81 3. Storage Facilities.............................. 88

F. Safe Harbor......................................... 90

G. Interstate Pipeline Posting of NoNotice Service.... 94

H. Additional Exemptions............................... 102 1. Natural Gas Companies With Service Area 102 Determinations Under NGA Section 7(f)............. 2. Pipelines Owned or Operated by End Users........ 104 III. Cost of Compliance.................................... 105

A. Requests for Rehearing and Clarification............ 105

B. Commission Determination............................ 106 IV. Information Collection Statement....................... 109 V. Regulatory Flexibility Act.............................. 112 VI. Document Availability.................................. 114 VII. Effective Date and Compliance Deadlines............... 115

1. Requests for Rehearing and Clarification............ 116

2. Commission Determination............................ 116 Before Commissioners: Jon Wellinghoff, Chairman; Marc Spitzer, Philip D. Moeller, and John R. Norris.
Order on Rehearing and Clarification
Issued January 21, 2010

I. Introduction

1. On November 20, 2008, the Federal Energy Regulatory Commission (Commission) issued Order No. 720,\1\ requiring interstate and certain major noninterstate natural gas pipelines to post limited information on publicly accessible Internet Web sites regarding their operations. In this order, the Commission grants and denies requests for rehearing and clarification of Order No. 720.
\1\ Pipeline Posting Requirements under section 23 of the Natural Gas Act, 73 FR 73494 (Dec. 2, 2008), FERC Stats. & Regs. 31,283 (2008) (Order No. 720).

2. The Commission issued Order No. 720 and promulgated related regulations consistent with the Energy Policy Act of 2005 (EPAct 2005).\2\ In EPAct 2005, Congress added section 23 to the Natural Gas Act (NGA), 15 U.S.C. 717t
[[Page 5179]]
2 (2000 & Supp. V 2005) authorizing 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 * * * and the protection of consumers.'' \3\ 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.'' \4\
\2\ Energy Policy Act of 2005, Public Law 10958, 119 Stat. 594 (2005).
\3\ NGA Sec. 23, 15 U.S.C. 717t2(a)(1) (2000 & Supp. V 2005). \4\ 15 U.S.C. 717t2(a)(2).

3. On December 21, 2007, the Commission issued a Notice of Proposed Rulemaking (NOPR), proposing to require both interstate and certain major noninterstate natural gas pipelines to post daily information regarding their capacity, scheduled flow volumes, and actual flow volumes at major points and mainline segments.\5\ The Commission proposed regulations that would make available the information needed to track daily flows of natural gas adequately throughout the United States.\6\ The posting proposal would 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.\7\ \5\ Pipeline Posting Requirements under section 23 of the Natural Gas Act, 73 FR 1116 (Jan. 7, 2008), FERC Stats. & Regs., Proposed Regulations 20042007 ] 32,626, at P 3 (2007).
\6\ Id.

\7\ Id. P 5.

4. Order No. 720 required major noninterstate pipelines, defined as those natural gas pipelines that are not natural gas companies under the NGA and deliver more than 50 million MMBtu per year, to post scheduled flow and other information for each receipt or delivery point with a design capacity greater than 15,000 MMBtu per day.\8\ While Order No. 720 required major noninterstate pipelines to comply with the new rules within 150 days of the Final Rule's publication,\9\ a subsequent order in this docket extended the compliance deadline for major noninterstate pipelines until 150 days following the issuance of an order on rehearing.\10\
\8\ Order No. 720 at P 1.
\9\ Id. P 168.
\10\ Pipeline Posting Requirements under section 23 of the Natural Gas Act, 126 FERC ] 61,047, at P 4 (2009).

5. Regarding interstate natural gas pipelines, Order No. 720 expanded the Commission's existing posting requirements under 18 CFR 284 to include nonotice service. Interstate natural gas pipelines were required to comply with this posting requirement no later than 60 days following Order No. 720's publication,\11\ and should therefore be currently complying with the regulations.

\11\ Order No. 720 at P 167.

6. Twentysix requests for rehearing or clarification of Order No. 720 were submitted.\12\ On January 16, 2009, the Commission issued an order granting rehearing for the purpose of providing additional time to respond to the requests for rehearing.\13\
\12\ A list of petitioners requesting rehearing and/or clarification is provided at Appendix A. All requests for rehearing, clarification, or both are referred to herein as ``Requests for Rehearing and Clarification.''
\13\ Pipeline Posting Requirements under section 23 of the Natural Gas Act, Docket No. RM082001, at 1 (Jan. 16, 2009).

7. A staff technical conference was held on March 18, 2009, to gather additional information on three issues raised in the requests for rehearing.\14\ The technical conference addressed: (1) The definition of major noninterstate pipelines; (2) what constitutes ``scheduling'' for a receipt or delivery point; and (3) how a 15,000 MMBtu per day design capacity threshold would be applied.\15\ Panelists making presentations at the conference and commenters from the audience represented a broad crosssection of the U.S. natural gas industry \16\ and the conference was widely attended.\17\
\14\ Pipeline Posting Requirements under section 23 of the Natural Gas Act , Notice of Technical Conference, Docket No. RM082 001 (issued Feb. 24, 2009); Pipeline Posting Requirements under section 23 of the Natural Gas Act, Notice of Agenda for Technical Conference, Docket No. RM082001 (issued March 11, 2009).
\15\ Notice of Agenda for Technical Conference, at P 1. \16\ In the Matter of Pipeline Posting Requirements under section 23 of the Natural Gas Act Docket No. RM082001, at 23 (Mar. 18, 2009) (Transcript of Technical Conference).
\17\ A transcript of this conference is available on the Commission's eLibrary system.

8. On July 16, 2009, the Commission issued an order requesting supplemental comments in response to limited issues raised in requests for rehearing of Order No. 720 and at the technical conference, with comments due within 30 days.\18\ Eight supplemental comments were filed.\19\
\18\ Pipeline Posting Requirements under section 23 of the Natural Gas Act, 128 FERC ] 61,030, at P 1 (2009) (Order Requesting Supplemental Comments).
\19\ A list of persons submitting supplemental comments is provided at Appendix B. These comments are referred herein as ``Supplemental Comments.''

9. As discussed below, the Commission affirms Order No. 720, granting a number of requests for rehearing and clarification and adopting regulations consistent with our findings. As a whole, the modifications that are adopted substantially reduce the number of major noninterstate pipelines that must comply with the proposed transparency regulations.

10. Major noninterstate pipelines must comply with the revised regulations within 150 days following publication in the Federal Register. Interstate pipelines must continue their current compliance with our transparency regulations.
II. Discussion

A. Authority for the Rule

11. Order No. 720 implemented the Commission's authority under section 23 of the NGA,\20\ as added by EPAct 2005,\21\ to facilitate transparency in markets for the sale or transportation of natural gas in interstate commerce by requiring major noninterstate pipelines and interstate pipelines to post certain data on publiclyaccessible Internet Web sites. Congress granted the Commission this statutory authority to ensure transparency of natural gas prices, natural gas availability, and the price formation in the interstate natural gas market.\22\
\20\ 15 U.S.C. 717t2.
\21\ Energy Policy Act of 2005, Public Law 10958, sections 1261 et seq., 119 Stat. 594 (2005).

\22\ Id. P 8.

12. The Commission held in Order No. 720 that NGA section 23 authorizes the Commission to obtain and disseminate information, including information regarding noninterstate natural gas markets that affect the interstate natural gas market. The Commission's decision substantially relied on the language of NGA section 23(a)(3)(A), which allows the Commission to ``obtain the information * * * from any market participant.'' \23\ The Commission identified Congress' use of the term ``any market participant'' as an intentional expansion of ``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.'' \24\ Order No. 720 took particular note of Congress' use of ``any'' in section 23 as a descriptor, attaching jurisdiction to market participants independently of the
[[Page 5180]]
limitations prescribed elsewhere in the NGA.\25\
\23\ 15 U.S.C. 717t2(a)(3)(A) (emphasis added).
\24\ Order No. 720 at P 17.

\25\ Id. P 18.

13. The NGA limits the scope of the Commission's traditional regulatory authority to ``natural gas companies'' as the term is utilized in the NGA.\26\ The Commission held in Order No. 720 that Congress contemplated different jurisdictional parameters for its transparency authority.\27\ Additionally, the Commission found that the scope of section 23 is not limited by section 1(b) of the NGA. \26\ Id. P 19 citing 15 U.S.C. 717.

\27\ Id.

14. The Commission emphasized that the regulations promulgated by Order No. 720 reflect the limitations that Congress placed on the Commission's authority in section 23. Order No. 720 explained that section 23 extends the Commission's authority only to the collection and dissemination of information for the purposes of promoting price transparency in the natural gas market.\28\ The Commission's traditional regulatory authority remains limited to ``natural gas companies'' under section 1(b) of the Act.\29\
\28\ Id. P 22.
\29\ Natural gas producers, processors, or users who have a de minimis market presence are explicitly exempted from the reporting requirements. Id. at P 23.

1. Requests for Rehearing and Clarification

15. Some petitioners support the Commission's assertion of jurisdiction, with at least one petitioner supporting Order No. 720's requirement that certain major noninterstate pipelines post daily scheduled volume information and design capacity for certain receipt and delivery points ``pursuant to [the Commission's] authority under section 32 [sic] of the NGA.'' \30\ Yates and Agave particularly commend the Commission's new regulations and assertion of jurisdiction, stating that ``the major noninterstate pipeline posting requirements adopted in Order No. 720 are a good first step towards the Commission's stated goal of facilitating transparency in markets for the sale or transportation of physical natural gas in interstate commerce.'' \31\ \30\ Yates and Agave Request for Rehearing and Clarification at 1; Williston Basin Request for Rehearing and Clarification at 1 (acknowledging that the Commission has the authority to promulgate Order No. 720's new regulations pursuant to its authority under section 23 of the NGA).
\31\ Yates and Agave Request for Rehearing and Clarification at 34.

16. Several petitioners requesting rehearing argue that the Commission unlawfully expanded its statutory authority by imposing posting requirements on major noninterstate pipelines, including natural gas gathering lines.\32\ They claim that the Commission does not have jurisdiction to impose posting requirements on intrastate pipelines, and that its transparency jurisdiction does not extend to intrastate activities at receipt and delivery points that are not involved in the Commission's jurisdictional activities.\33\ \32\ Enogex Request for Rehearing and Clarification at 510; Gas Processors Request for Rehearing and Clarification at 37; LOC Request for Rehearing and Clarification at 310; California LDCs Request for Rehearing and Clarification at 1315; Railroad
Commission of Texas Request for Rehearing and Clarification at 510; Southwest Gas Request for Rehearing and Clarification at 35, 1314; Targa Request for Rehearing and Clarification at 89; TPA Request for Rehearing and Clarification at 824.
\33\ See, e.g., TPA Request for Rehearing and Clarification at 3132.

17. Many petitioners reiterated arguments, made in comments to the NOPR, that the reference in NGA section 23 to ``any market participant'' is restricted to participants in the interstate market.\34\ Gas Processors suggests that the Commission has derived its expanded jurisdictional powers from an ambiguous term without sufficient support, and that Congressional intent over that term ``must not be read in a vacuum.'' \35\ It also argues that the term ``market participant'' was not intended to extend the Commission's jurisdiction to intrastate pipelines because: (1) Section 23 was not intended to cover intrastate pipelines; (2) the Commission has never had jurisdiction over intrastate pipelines; and (3) Congress did not ``expressly or implicitly'' provide such jurisdiction in section 23.\36\ Quoting section 23, Gas Processors points out the repeated use of the term ``interstate'' throughout the section, emphasizing that if Congress intended an expansion into the intrastate pipelines, they would have selected different language.\37\ RRC agrees, stating that ``[n]othing in the plain language of Section 23 of the NGA or the legislative history of [EPAct 2005] evinces Congressional intent to expand the FERC's authority over intrastate pipelines.'' \38\ \34\ California LDCs Request for Rehearing and/or Clarification at 1415; Gas Processors Request for Rehearing at 34; LOC Request for Rehearing at 89; Railroad Commission of Texas Request for Rehearing at 58; Southwest Gas Request for Clarification and Rehearing at 1314; Targa Request for Rehearing at 89; TPA Request for Rehearing and Clarification at 911.
\35\ Gas Processors Request for Rehearing and Clarification at 34.
\36\ Id. at 4.
\37\ Id.; see also RRC Request for Rehearing and Clarification at 68; TPA Request for Rehearing and Clarification at 812; LOC Request for Rehearing and Clarification at 10.
\38\ RRC Request for Rehearing and Clarification at 6; see also LOC Request for Rehearing and Clarification at 9.

18. TPA opines that the plain language of section 23 provides that ``market participant'' be limited to the interstate natural gas market.\39\ It further argues that Congress had no need to exclude intrastate pipelines from the Commission's transparency jurisdiction because those entities are not subject to the Commission's jurisdiction ``in the first place.'' \40\
\39\ TPA Request for Rehearing and Clarification at 911. \40\ Id. at 11.

19. TPA repeats arguments made in its NOPR comments, and seeks rehearing of the Commission's determination that it has authority to issue the posting regulations. TPA argues that expansion of the jurisdiction of the Commission usually occurs through amendment of NGA section 1(b) by Congress.\41\ TPA asserts that Order No. 720 expands the Commission's jurisdiction using a process that is not supported by the Commission's own precedent.\42\ TPA cites Order No. 670,\43\ discussing the procedures used to process market manipulation allegations, in support of its claim that the Commission should wait until Congress explicitly expands its jurisdiction to assert such authority over traditionally nonjurisdictional entities.\44\ TPA further argues that the Natural Gas Policy Act of 1978 (NGPA) section 311 shows a clear distinction between intrastate and interstate jurisdiction, and concludes that, if Congress had intended to expand the Commission's jurisdiction, it would have amended NGA section 1(b) in a similar fashion.\45\
\41\ TPA Request for Rehearing and Clarification at 12; Gas Processors Request for Rehearing and Clarification at 45; LOC Request for Rehearing and Clarification at 6; RRC Request for Rehearing and Clarification at 78.
\42\ TPA Request for Rehearing and Clarification at 12. \43\ Prohibition of Energy Market Manipulation, Order No. 670, 71 FR 4244 (Jan. 26, 2006), FERC Stats. & Regs. ] 31,202 (2006). \44\ TPA Request for Rehearing and Clarification at 12. \45\ Id. at 21 (citing 15 U.S.C. 3371(a)(2)).

20. Several petitioners, echoing comments that the Commission addressed in Order No. 720, argue that the regulations exceed the Commission's jurisdiction under section 1(b) of the NGA.\46\ Petitioners argue that NGA section 23 is not ``a stand alone [[Page 5181]]
provision,'' but is subject to the jurisdictional limits established in section 1(b).\47\ Thus, they contend that the fact that Congress did not amend the language in section 1(b) demonstrates that Congress did not intend to modify the Commission's jurisdiction with section 23.\48\ Petitioners state that section 1(b) is ``unequivocally clear'' regarding the entities to which section 23 applies.\49\ The petitioners argue that because section 1(b) expressly bars the Commission from jurisdiction over intrastate pipelines, section 23 does as well.\50\ \46\ Enogex Request for Rehearing and Clarification at 67; LOC Request for Rehearing and Clarification at 34; Railroad Commission of Texas Request for Rehearing and Clarification at 89; TPA Request for Rehearing and Clarification at 8, 1619.
\47\ LOC Request for Rehearing and Clarification at 3; Enogex Request for Rehearing and Clarification at 7; Railroad Commission of Texas Request for Rehearing and Clarification at 89; TPA Request for Rehearing and Clarification at 2223.
\48\ LOC Request for Rehearing and Clarification at 9; RRC Request for Rehearing and Clarification at 8.
\49\ RRC Request for Rehearing and Clarification at 8.
\50\ RRC Request for Rehearing and Clarification at 8, LOC Request for Rehearing and Clarification at 89; Enogex Request for Rehearing and Clarification at 67; TPA Request for Rehearing and Clarification at 2829.

21. Several petitioners also state that section 311 of the NGPA \51\ limits the Commission's transparency jurisdiction to only interstate activities.\52\ These petitioners claim that, although section 311 ``vests the Commission with the power to authorize an intrastate pipeline to transport natural gas on behalf of interstate pipelines,'' section 311 did not expand the Commission's jurisdiction under the NGA.\53\ In fact, the NGPA explicitly defines ``intrastate pipeline'' as one ``not subject to the jurisdiction of the Commission under the NGA.'' \54\ LOC states, for example, that the Commission cannot ``destroy'' this jurisdictional distinction placing intrastate pipelines beyond its NGA authority without express amendment from Congress.\55\ Moreover, TPA cites to Associated Gas Distributors v. FERC,\56\ where the court held that it was unreasonable for the Commission to presume that ``obscure'' language in section 311 authorized an expansion of its jurisdiction without legislative history to support an expansion.\57\ TPA, LOC, and RRC also focus on previous caselaw limiting the Commission's traditional rates, terms, and conditions jurisdiction under section 311.\58\
\51\ 15 U.S.C. 3371(a)(2).
\52\ Enogex Request for Rehearing and Clarification at 9; LOC Request for Rehearing and Clarification at 58; Railroad Commission of Texas Request for Rehearing at 9; TPA Request for Rehearing and Clarification at 1822.
\53\ LOC Request for Rehearing and Clarification at 56; RRC Request for Rehearing and Clarification at 9; TPA Request for Rehearing and Clarification at 1822.
\54\ LOC Request for Rehearing and Clarification at 56; RRC Supplemental Comments at 9; TPA Request for Rehearing and
Clarification at 1822.
\55\ LOC Request for Rehearing and Clarification at 6.
\56\ Assoc. Gas Distrib. v. FERC, 899 F.2d 1250 (D.C. Cir. 1990).
\57\ TPA Request for Rehearing and Clarification at 1920. \58\ TPA Request for Rehearing and Clarification at 2122; LOC Request for Rehearing and Clarification at 610; RRC Request for Rehearing and Clarification at 16. TPA and LOC also raise arguments linking section 311 to section 601 of the NGPA. LOC Request for Rehearing and Clarification at 58; TPA Request for Rehearing and Clarification at 1821.

22. Other petitioners focus on NGA section 23(d)(2) which provides that the Commission shall not require natural gas producers, processors, or users who have a de minimis market presence to comply with the reporting requirements of section 23.\59\ On rehearing, RRC renews arguments made in response to the NOPR regarding the de minimis exception. Contrary to the Commission's interpretation, RRC believes that, had Congress intended to give the Commission even limited jurisdiction over intrastate pipelines, it would have listed them in section 23(d)(2).\60\ Because section 23(d)(2) makes no such reference, RRC contends that the Commission's findings are contrary to the plain language of section 23.\61\
\59\ 15 U.S.C. 717t2(d)(2).
\60\ RRC Request for Rehearing and Clarification at 7; see also TPA Request for Rehearing and Clarification at 2324.
\61\ RRC Request for Rehearing and Clarification at 78.

23. Some petitioners assert that the Commission is seeking information on gas flows that are outside of the Commission's jurisdiction, regardless of the facilities at issue.\62\ TPA argues that the collection of design capacity and gas flow data does not relate to the availability and prices of natural gas, thereby exceeding the Commission's transparency jurisdiction.\63\ Enogex argues that the new regulations make it impossible to discern the Commission's jurisdiction from State jurisdiction because the intrastate and interstate volumes of gas that move on the Enogex system are so commingled that they cannot be distinguished for capacity posting purposes.\64\
\62\ Enogex Request for Rehearing at 910; TPA Request for Rehearing and Clarification at 1315.
\63\ TPA Request for Rehearing and Clarification at 1315. \64\ Enogex Request for Rehearing and Clarification at 910.

24. Targa, California LDCs, RRC, and TPA all contend that Order No. 720 is an improper regulation of intrastate operations and rates.\65\ These petitioners argue that the Final Rule may adversely interfere with State regulation of noninterstate pipelines.\66\ California LDCs challenge the Commission's claim that it is not regulating intrastate operations of noninterstate pipelines. The petitioner alleges that compliance with Order No. 720 entails daily postings of customer specific and facilityspecific information, effectively regulating intrastate operations.\67\
\65\ Targa Request for Rehearing and Clarification at 9; California LDCs Request for Rehearing and Clarification at 1415; RRC Request for Rehearing and Clarification at 911; TPA Request for Rehearing and Clarification at 2528.
\66\ California LDCs Request for Rehearing and Clarification at 1415; RRC Request for Rehearing and Clarification at 911; TPA Request for Rehearing and Clarification at 3, 2528.
\67\ California LDCs Request for Rehearing and Clarification at 1415.

2. Commission Determination

25. After consideration, the Commission rejects the requests for rehearing and reaffirms its holding that it has jurisdiction over the matters addressed in Order No. 720. NGA section 23 provides the Commission limited jurisdiction over major noninterstate pipelines for the purpose of requiring public disclosure of information to enhance market transparency.

26. Most petitions for rehearing reiterate arguments the Commission considered and addressed at length in Order No. 720. For example, petitioners take issue with the Commission's interpretation of the expansive language used in NGA section 23. In Order No. 720, the Commission held that Congress deliberately chose the term ``any market participant'' in section 23 to expand the Commission's jurisdiction beyond the universe of natural gas companies to which it would otherwise be limited, recognizing that the public needs information from a wide variety of entities in order to facilitate
transparency.\68\ Section 1 is not referenced in section 23 and the term ``natural gas company'' is not used in section 23. Petitioners have not raised any new arguments regarding the meaning of ``any market participant'' in section 23. The Commission continues to believe that Congress did not intend to limit the Commission's transparency jurisdiction to entities it traditionally regulates.\69\
\68\ Order No. 720 at P 18.

\69\ Id. P 19.

27. As stated in Order No. 720, section 23(d)(2) would be unnecessary surplusage if Congress did not intend to give the Commission authority over entities otherwise excluded by section 1(b) of the NGA.\70\ Petitioners raise no new arguments regarding this issue.
[[Page 5182]]
Likewise, no new arguments were presented regarding the Commission's authority to enact rules under sections 23(a)(1) and 23(a)(2). These subsections grant discretion to the Commission to achieve interstate price transparency and to provide for public dissemination of information.\71\
\70\ Id. P 23.

\71\ Id. P 16.

28. The Commission also finds no merit in arguments raised by petitioners related to section 311 of the NGPA. While section 311 limits the Commission's jurisdiction regarding some intrastate natural gas pipeline activities, section 23 of the NGA provides a different jurisdictional basis promoting different Congressional goals. Section 23 grants the Commission authority to ensure that the information necessary for interstate market transparency is available to the public. The term any market participant includes noninterstate pipelines, thus the Commission has the authority to require those participants to post certain information to facilitate market transparency.

29. Petitioners also reiterated arguments, addressed in Order No. 720, that previous case law limits the Commission's transparency jurisdiction.\72\ The Commission affirms its conclusion that the cases cited by commenters apply only to the jurisdictional limits set forth in section 1 of the NGA prior to the enactment of EPAct 2005.\73\ Such case law is not applicable to regulations adopted by the Commission pursuant to section 23 of the NGA.
\72\ Railroad Commission of Texas Request for Rehearing and Clarification at 1516; LOC Request for Rehearing and Clarification at 67; Enogex Request for Rehearing and Clarification at 67. \73\ Order No. 720 at P 20.

30. In response to Enogex, it is immaterial for purposes of our transparency jurisdiction whether noninterstate and interstate volumes of gas are commingled. Under section 23, if natural gas volumes have a greater than de minimis effect on the interstate natural gas market, and the other requirements of section 23 are met, the Commission has the authority to require posting of such volumes regardless of whether flowing natural gas is characterized as ``interstate'' or ``non interstate.''

31. The Commission emphasizes that its transparency jurisdiction is limited to the dissemination of information that will aid in market transparency. Section 23 gives the Commission no jurisdiction related to, and our regulations do not govern the rates, terms, and conditions of service of major noninterstate pipeline operations. The Commission is requiring only the posting of essential information to ensure market transparency and is not engaging in traditional regulation of rates, terms, and conditions of service.

32. The Commission finds that Order No. 720 accurately implemented its authority under the limited jurisdiction Congress conferred in NGA section 23.\74\ Therefore, we deny rehearing.
\74\ The Commission's conclusion here is consistent with its findings in Order No. 704 regarding the annual reporting requirement for market participants adopted pursuant to our NGA section 23 authority. See 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. 704A, 73 FR 55726 (Sept. 26, 2008), FERC Stats. & Regs. ] 31,275 (2008), order on reh'g, Order No. 704B, 125 FERC ] 61,302 (2008).

B. Need for the Rule

33. Order No. 720 found that a broad crosssection of the natural gas industry supports the transparency goals of the pipeline posting requirements.\75\ In Order No. 720, the Commission exercised the authority conferred by Congress following consideration of comments on the NOPR, and based on its experience regulating the interstate natural gas market. Order No. 720 discussed interstate pipeline postings as well as other sources of market information, determining that additional information by noninterstate pipelines would enhance transparency further.\76\
\75\ Order No. 720 at P 29.
\76\ Id. P 3950. Additionally, the Commission determined that increased transparency regarding nonotice natural gas flows was needed on interstate pipelines. Id. P 161.

34. Order No. 720 found that information regarding wholesale natural gas price fundamentals was incomplete given the lack of access to scheduled flow information from major noninterstate pipelines.\77\ This informational gap exists because, while interstate pipelines must post daily scheduled flow information under our current regulations, no similar information is available regarding scheduled flows prior to or following transportation on interstate pipelines. Order No. 720 attempted to fill this informational gap with supplyrelated information from large noninterstate pipelines upstream of interstate pipelines and demandrelated information from large noninterstate pipelines downstream of interstate pipelines. Supply and demand fundamentals for the interstate natural gas market can be more fully understood utilizing information from noninterstate pipelines. \77\ Id. P 40.

1. Requests for Rehearing and Clarification

35. On rehearing, a limited number of petitioners object to Order No. 720's findings that transparency needs to be increased in the interstate natural gas market, and question whether the regulations adopted in Order No. 720 actually increase transparency.

36. For example, LOC states that Order No. 720 ``failed to support its finding that there exists any necessity for the enactment of the proposed rules.'' \78\ RRC argues that our pipeline posting regulation is ``a solution in search of a problem,'' adding that recent Commission initiatives have improved market transparency and that there has been no showing that additional transparency is required.\79\
\78\ LOC Request for Rehearing and Clarification at 11. See also TRC Request for Rehearing and Clarification at 1415.
\79\ RRC Request for Rehearing and Clarification at 1115.

37. TPA requests rehearing on the grounds that the Commission has not demonstrated that interstate market transparency is enhanced by major noninterstate pipeline information. It alleges that the Commission has ``consistently disregarded the consensus among market participants'' on this point.\80\
\80\ TPA Request for Rehearing and Clarification at 33.

38. TPA takes Order No. 720 to task for focusing on comments ``of a handful of intervenors expressing general support for the [NOPR]'' rather than acknowledging the substantial number of intrastate pipelines and other participants that see no need for increased transparency.\81\ TPA argues, citing National Fuel Gas Supply Corporation v. FERC, \82\ that the Commission must cite evidence of an industry problem prior to rulemaking action.\83\ TPA particularly objects to Order No. 720's finding that the transparency rule assists market participants to understand the impact of hurricanes and other natural disasters on natural gas supply. Further, TPA argues that ``nowhere in this proceeding has the Commission or any market participant provided an adequate explanation of how the proposed rule would detect market manipulation.'' \84\
\81\ Id. at 3537.
\82\ 468 F.3d 831, 843 (D.C. Cir. 2006).
\83\ TPA Request for Rehearing and Clarification at 37. \84\ Id. at 39.

39. Southwest Gas argues that the transparency rule did not specifically demonstrate a need for information from LDCs related to daily capacity and
[[Page 5183]]
scheduled retail transportation.\85\ Southwest Gas complains that Order No. 720 did not adequately explain the nexus between data provided by Stateregulated LDCs and price formation for natural gas sold at wholesale and in interstate commerce.\86\
\85\ Southwest Gas Request for Rehearing and Clarification at 12.

\86\ Id. at 1314.

40. Additionally, some petitioners request rehearing on the grounds that Order No. 720 failed to fully consider the existing sources of data regarding noninterstate natural gas flows as required by section 23.\87\
\87\ LOC Request for Rehearing and Clarification at 11; RRC Request for Rehearing and Clarification at 1115; TPA Request for Rehearing and Clarification at 3031.

2. Supplemental Comments

41. In its supplemental comments, AGA makes arguments similar to Southwest Gas.\88\ AGA states that LDCs are fundamentally distributors of natural gas and that LDC scheduled flow postings would not further the Commission's transparency goals.\89\ AGA notes that no wholesale natural gas price formation occurs on an LDC's system \90\ and argues that available capacity calculations for LDCs may be misleading.\91\ \88\ The Order Requesting Supplemental Comments requested additional comments on discrete issues raised by commenters in requests for rehearing and clarification. Order Requesting Supplemental Comments at P 710. Some commenters submitted
supplemental comments on subjects outside the requested scope. While the Commission did not request such extraneous supplemental comments, such as AGA's supplemental comments regarding need for the rule, we nevertheless address such comments in this order to ensure that the record is complete.
\89\ AGA Supplemental Comments at 10.
\90\ Id. at 13.
\91\ Id. at 1617. See also California LDCs Supplemental Comments at 8.

3. Commission Determination

42. The Commission continues to believe that the major non interstate pipeline posting requirements are needed and denies the requests for rehearing.

43. The Commission notes, as an initial matter, that some of the requests for rehearing appear to argue that the Commission has substantially increased transparency in interstate markets in recent years, but that such transparency is sufficient and more need not be done. However, these petitioners misconstrue section 23 of the NGA and Congress' transparency objectives. As discussed in Order No. 720, the Commission has been directed by Congress to facilitate price transparency in markets for the sale or transportation of physical natural gas in interstate commerce \92\ and given the authority to prescribe such rules as may be necessary to effectuate the Congressional goal.\93\ As the Congressional mandate implicitly acknowledges, lack of transparency is not a ``problem'' readily susceptible to a single regulatory solution. Transparency enhances the ability of market participants to make informed, efficient decisions based upon public information. In other words, enhanced transparency is typically beneficial to markets, even markets, such as the U.S. wholesale natural gas market, that are already competitive. It is not a necessary prerequisite to adoption of our regulations to find, as some petitioners appear to demand, that the interstate natural gas market cannot function without the rule. As petitioners acknowledge, the Commission has improved market transparency in several different ways in recent years and the interstate natural gas market is competitive and robust. These successes, however, do not preclude other means of further enhancing transparency. This is particularly true where the Commission has identified a ``gap'' in relevant market information available to market participants.
\92\ 15 U.S.C. 717f2(a)(1).

\93\ 15 U.S.C. 717f2(a)(2).

44. Many of the petitions for rehearing repeat arguments made in response to the NOPR and addressed in Order No. 720. As the Commission found in Order No. 720, there presently exists a gap in information available to interstate market participants necessary to more fully understand supply and demand fundamentals and therefore price formation.\94\ A significant amount of natural gas flows from producing basins to interstate markets on noninterstate pipelines. These scheduled flows impact supply considerations in interstate markets. Similarly, flows on noninterstate pipelines at the end of the delivery chain impact demand considerations in the interstate market.\95\ These considerations are fundamental to Order No. 720's determination that information about scheduled noninterstate pipeline natural gas flows would enhance transparency in the interstate natural gas market. Without access to information about supply and demand, interstate natural gas market participants are left with incomplete information to understand interstate wholesale prices. Incomplete information leads to market inefficiencies because wholesale buyers and sellers of natural gas have inconsistent levels of market knowledge and are less able to understand price outcomes.\96\
\94\ Order No. 720 at P 39.
\95\ Of course, noninterstate pipelines that deliver natural gas to endusers may also deliver gas to other pipelines for subsequent transportation similar to transportation provided by interstate pipelines.
\96\ Transparency plays a fundamental role in the fairness, efficiency, and functioning of orderly markets. Greater transparency results in greater market efficiency because price signals to market participants more accurately reflect underlying supply and demand fundamentals.

45. Existing interstate pipeline posting data is used extensively by the public to understand daily market conditions and price formation. The public can access an interstate pipeline's Internet Web site to ascertain capacity availability and operational conditions. Also, data aggregators scour these Web sites and sell analysis and services based on this data, with many market participants, including producers, pipelines, end users, marketers, traders, and financial firms paying subscription fees to these data aggregators to evaluate the interstate natural gas market. The demand for such data by market participants is a persuasive factor regarding its transparency value. Based upon the comments in this rulemaking and our natural gas market experience, the Commission believes that there is robust interest by the public regarding similar scheduled flow data from noninterstate pipelines to form a more complete picture of the U.S. wholesale natural gas market. We therefore disagree with commenters arguing that such data is not valued by the public.

46. As discussed below, data provided by major noninterstate pipelines will help interstate natural gas market participants understand both supply and demand and, thus, price formation. Understanding of Supply Fundamentals Will Be Enhanced

47. Some petitioners, including TPA, argue that information from noninterstate pipelines that provide natural gas supplies would not enhance interstate market transparency. Order No. 720 notes the substantial impact that noninterstate pipelines have on the establishment of national wholesale natural gas prices. Noninterstate pipelines, particularly those in the southcentral United States, connect large production areas with interstate pipelines.\97\ \97\ Order No. 720 at P 45.

48. Despite TPA's protestations, obtaining data from TPA's members is particularly important for interstate market transparency. Onshore Texas locations account for thirty percent
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(approximately 5.7 Tcf in 2007) of U.S. natural gas production.\98\ Texas has more noninterstate pipelines than any other State45,000 of the 58,600 miles of natural gas pipelines in the State are intrastate pipelines and account for almost 16 Bcf/d of pipeline capacity.\99\ The pipeline network in Texas has experienced significant growth over the past several years as a result of increased demand for pipeline capacity caused by the rapid development and expansion of natural gas production in the Barnett Shale Formation.\100\ New pipelines have been built, and expansions to existing ones undertaken, to meet increased demand. The importance of Texas noninterstate transportation to understanding interstate price fundamentals is growing as production shifts from old depleting gas basins to new gas basins.
\98\ U.S. Energy Information Administration, Natural Gas Annual 2007, Gross Withdrawals and Marketed Production of Natural Gas by State and the Gulf of Mexico 20032007 (2007), p. 8 (available at http://www.eia.doe.gov/pub/oil_gas/natural_gas/data_publications/ natural_gas_annual/current/pdf/table_003.pdf).
\99\ Energy Information Administration, Intrastate Natural Gas Segment (available at http://www.eia.doe.gov/pub/oil_gas/natural_ gas/analysis_publications/ngpipeline/intrastate.html). The size and importance of noninterstate transportation in Texas is manifest. Sixteen Bcf/d is enough gas to serve all the industrial or power load in the U.S.
\100\ U.S. Energy Information Administration, Expansion of the U.S. Natural Gas Pipeline Network: Additions in 2008 and Projects through 2011, (Sept. 2009) (available at http://www.eia.doe.gov/pub/ oil_gas/natural_gas/feature_articles/2009/pipelinenetwork/
pipelinenetwork.pdf) (``About 10 percent of all newly added natural gas pipeline capacity for 2008, or 4.6 Bcf per day, was attributable to new intrastate pipelines built to transport expanding Barnett shale production specifically'').

49. The value of noninterstate pipeline supply flows is not confined to Texas. In Colorado, Wyoming, and Utah, development of new, largediameter intrastate pipelines is proceeding at a fast pace, as proved reserves of coalbed methane, tight sands, and conventional natural gas supplies are identified.\101\ During the past several years, at least eight largecapacity pipeline header systems have been built in Wyoming to transport natural gas from local gathering systems.\102\ In the Piceance Basin in western Colorado and the Uinta Basin in eastern Utah, several new large gathering systems have been developed to feed expanding natural gas production into the interstate pipeline network.\103\ These supply sources have a significant effect on interstate price formation because new supply can reduce regional and national gas prices. The faster the implications of new supply are assessed, the better the market can integrate those implications into pricing decisions.
\101\ U.S. Energy Information Administration, supra note 97. \102\ Id.

\103\ Id.

50. In these states and elsewhere, capacity could be limited at key points, impacting regional, interstate wholesale prices. Supply or demand driven events on noninterstate pipelines that impact regional wholesale prices cannot be fully understood by market participants without access to receipt and delivery point information.

51. Existing data sources on gas supply flows are insufficient for participants to adequately evaluate physical daily market activity. As the Commission discussed in Order No. 720, the Energy Information Administration (EIA) publishes data on monthly production by State based on a survey and with a three month lag.\104\ Similarly, monthly consumption data is published by State with a four month lag.\105\ \104\ Energy Information Administration, Natural Gas Deliveries to All Consumers by State 20072009 (Nov. 2009) (available at http:/ /www.eia.doe.gov/oil_gas/natural_gas/data_publications/natural_ gas_monthly/ngm/current/pdf/table_16.pdf).
\105\ Energy Information Administration, Marketed Production of Natural Gas in Selected States and the Federal Gulf of Mexico (Nov. 2009) (available at http://www.eia.doe.gov/oil_gas/natural_gas/ data_publications/natural_gas_monthly/current/pdf/table_05.pdf). Understanding of Demand Fundamentals Will Be Enhanced

52. Petitioners not only question the value of increased transparency of the operations of noninterstate pipelines at the beginning of the delivery chain, but also at the end of the delivery chain. For example, Southwest Gas and AGA argue that the Commission has not articulated an adequate nexus between data provided by LDCs (oftentimes companies that primarily deliver natural gas to endusers) and interstate natural gas price formation. The Commission disagrees and continues to believe that the pipeline posting regulations will enhance understanding of demand fundamentals.

53. Order No. 720 not only identified the information gap now present, but also provided data explaining the possible scope of the transparency problem regarding demand for natural gas. For example, we noted that up to 90 percent of daily consumption of natural gas in Texas is not captured through the Commission's current interstate pipeline posting requirements.\106\ Instead, such consumption data is available only from EIA in aggregated format several months following actual delivery.\107\ Such stale data is unhelpful for interstate market participants seeking to understand price formation in today's rapidlychanging energy markets.
\106\ Order No. 720 at P 44.

\107\ Id.

54. Demand clarity is a persistent problem in U.S. interstate natural gas markets. For example, California accounts for 10 percent of U.S. natural gas consumption, of which onethird is utilized for electric power generation.\108\ About 13 percent of California's consumption is met by inState production with the rest met by imports from surrounding states.\109\ Interstate pipelines serving California, with four exceptions, terminate at the State border.\110\ Market participants can currently ``see'' imports into California, flows between PG&E and Southern California Gas Company (SoCal Gas), and flows into SoCal Gas producing zones by virtue of the Commission's existing interstate pipeline posting regulations and using PG&E's and SoCal Gas' Pipe Ranger and Envoy systems.\111\ However, market participants have limited information regarding gas receipts and deliveries once gas is delivered to PG&E's and SoCal Gas' systems. Noninterstate
transportation and distribution are dominated by: PG&E, with 6,136 miles of transportation pipelines); SoCal Gas, with 2,890 miles of transmission and storage pipelines; and SDG&E, with 168 miles of transmission pipelines.\112\
\108\ U.S. Energy Information Administration, Natural Gas Annual 2007: Consumption of Natural Gas 20032007 by State, 2007 (2007) at 41 (available at http://www.eia.doe.gov/pub/oil_gas/natural_gas/ data_publications/natural_gas_annual/current/pdf/table_015.pdf). \109\ Id.
\110\ Interstate pipelines currently serving California include El Paso Natural Gas Company (El Paso), Kern River Transmission Company, Mojave Pipeline Company, Gas TransmissionNorthwest, Transwestern Pipeline Company (Transwestern), Questar Southern Trails Pipeline, Tuscarora Pipeline and the Bajanorte/North Baja Pipeline. Kern River, Mojave, Tuscarora, and North Baja pipeline have significant capacity in California, while all other pipelines terminate at the California border. See California Public Utilities Commission, Natural Gas Market Study (Feb. 2006) at 28 (available at http://www.docs.cpuc.ca.gov/WORD_PDF/REPORT/54256.pdf). \111\ Sempra's Envoy system posts daily information at SoCal Gas' interconnection with interstate pipelines, PG&E, and five ``producer zones.'' PG&E's Pipe Ranger system posts daily
information only at interconnects with interstate pipelines and SoCal Gas' system. Most of the gas flow information posted on Envoy and Pipe Ranger is readily available from interstate pipeline postings and provides little additional market information useful for understanding the intrastate flow of gas. Envoy Interactive Map (available at https://www.envoyproj.sempra.com/help/help_pipeline_ map.html).
\112\ Pacific Gas and Electric Co., Fast Facts (available at http://www.pge.com/about/company/profile/); Securities and Exchange Commission, Sempra Energy Form 10K Annual Report at 25 (Feb. 24, 2009) (available at http://www.investor.shareholder.com/sre/ secfiling.cfm?filingID=865210910&CIK=1032208).

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55. SoCal Gas and PG&E are two of the largest distribution companies in the U.S. When major natural gas transportation interruptions occur on these systems inside California, market participants are unable to accurately assess interstate market implications.\113\ For example, the western energy crisis of 20002001 resulted in high power and natural gas prices in California which were compounded by restricted flows of gas into California due to an explosion on the El Paso pipeline that connects west Texas production to California earlier in 2000. The ability to observe flows on the PG&E and SoCal systems would have enabled market participants, the California Public Utility Commission, and the public to better understand the severity of local gas shortages and their impact on prices and gas supply.
\113\ Since most information is only posted at major
interconnections with interstate pipelines and between PG&E and SoCal Gas, conditions instate are not readily discernible.

56. The frequent price differences observed between PG&E and SoCal Gas city gate prices provide a further example of the need for greater transparency in the California intrastate market. Intrastate pipeline constraints within California likely cause these price divergences, but the nature and extent of these constraints is unobservable to the public. The public has access to flow data at the interconnects of PG&E with two interstate pipelines in southern California (with El Paso at the Topock receipt point and Transwestern at the Needles receipt point). Capacity at the Topock receipt point is not fully utilized and cheaper gas should theoretically flow north on PG&E's system to equalize prices between PG&E and SoCal Gas. In order to effectively understand constraints on intrastate pipelines (and the effects on interstate market prices), it is imperative that the public have access to better, more timely information on intrastate scheduled gas flows in California.

57. Lack of demand transparency in California markets is detrimental to well functioning and competitive interstate markets in a number of ways. For example, a holder of pipeline capacity on PG&E's noninterstate pipeline system could potentially hoard capacity at key points, driving up gas prices in California, while depressing interstate prices at the California border. Such noninterstate activity not only would have an immediate impact on interstate wholesale prices at the border, but would have a ripple effect outward, perhaps affecting prices throughout the southwest. In another example, the regional impact of a surge in California gas demand by power generators, perhaps due to hot weather or a nuclear outage, could be more easily understood and assessed if the location of such surges could be identified at individual delivery points. Again, obtaining information only at the California border would be insufficient to understand interstate market prices since the priceaffecting constraints may be occurring within the State.

58. Based upon the foregoing examples and the Commission's discussion in Order No. 720, the Commission believes that there is sufficient nexus between demandside noninterstate flow information and interstate price formation to sustain the Commission's regulations, contrary to the position of AGA and Southwest Gas.
NonInterstate Pipeline Scheduled Flow Postings During Times of Natural Disaster Would Benefit Interstate Market Participants

59. TPA objects to Order No. 720's conclusion that information regarding supply flowing through noninterstate pipelines is particularly important during times of natural disaster or when pipelines are unexpectedly shut down. TPA contends that most non interstate pipelines will not be able to post scheduled flow data during an emergency.\114\ The Commission disagrees and continues to believe that noninterstate pipeline postings are crucial to ameliorate market misunderstandings during hurricanes and other situations that occasion pipeline outages.
\114\ TPA Request for Rehearing and Clarification at 38.

60. Even if, as TPA suggests without support, major noninterstate pipelines would be unable to meet their posting obligations during hurricanes, the fact that an emergency is so severe as to preclude postings would provide an important signal to the market regarding the emergency's impact on natural gas supply. Further, posting information up to and following an emergency would give crucial insight regarding staged shutdown of supply before an emergency event and renewed operation of supply infrastructure following an emergency event.

61. For example, in September 2005, hurricanes Katrina and Rita forced the shut down of Henry Hub for 11 days.\115\ Henry Hub is the location for interconnection of four noninterstate and nine interstate pipelines. Because of these interconnections, the location is of vital importance for transportation of natural gas from the producing region in the Gulf to the consuming markets in the Northeast and the Midwest.\116\ It is also a crucial pricing point for interstate natural gas. Although no interstate pipeline flows were scheduled or prices reported for this fourteen day period, the lack of postings reflected the outage status of Henry Hub. Resumption of scheduled flow postings by interstate pipelines sent an important signal to market participants that markets were beginning to normalize.
\115\ 2008 State of Markets Report, Federal Energy Regulatory Commission, Division of Energy Market Oversight at 6 (available at http://www.ferc.gov/marketoversight/stmktovr/2008somfinal.pdf). \116\ Henry Hub is the interconnecting location of twelve pipelines and transportation capacity at the Hub is more than 1.8 Bcf per day.
Scheduled Flow Information Posted by Major NonInterstate Pipelines Could Be Utilized To Detect Manipulation and Discriminatory Behavior

62. We also reject TPA's assertion that noninterstate scheduled flow information could not be utilized to detect market manipulation and discriminatory behavior. As we discussed in Order No. 720, the Commission and other market participants regularly review supply and demand fundamentals to determine if prices are the result of such market forces.\117\ Understanding supply in large noninterstate pipelines leading into the interstate market and demand in large non interstate pipelines downstream of the interstate market will enable market observers to better understand prices and, therefore, identify potential cases of market manipulation.

\117\ Order No. 720 at P 50.

63. The Commission has utilized interstate scheduled flow postings in its investigations of market manipulation and unduly discriminatory behavior. The Commission will now include relevant noninterstate posting data in its evaluations of such allegations.
C. Definition of Major NonInterstate Pipeline

1. Delivery Threshold

64. Consistent with the need for greater transparency in the interstate natural gas market and Congress' directive in section 23 of the NGA, Order No. 720 required major noninterstate pipelines to post daily information regarding scheduled volumes at specified points of receipt
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and delivery. The Commission adopted a definition of ``major non interstate pipeline'' as a pipeline that: (1) Is not a ``natural gas pipeline'' under section 1 of the NGA; and (2) delivers annually more than 50 million MMBtu of natural gas measured in average deliveries over the past three years.\118\ The Commission found that a delivery threshold of 50 million MMBtu would capture large noninterstate pipelines with operations that have a substantial impact on interstate natural gas prices. Further, the 50 million MMBtu threshold is consistent with the threshold that the Commission has adopted for interstate pipelines to file FERC Form No. 2.\119\ The Commission also held that such a threshold would eliminate compliance burdens for smaller noninterstate pipelines.\120\
\118\ See 18 CFR 284.1(d). Fifty million MMBtu of natural gas deliveries per year is roughly equivalent to 136 MMcf of deliveries per day.
\119\ Order No. 720 at P 66.
\120\ Id. P 67.

a. Requests for Rehearing and Clarification

65. Encana requests that the Commission clarify that new pipelines will not be required to post information until at least three years following initial operation as they will not have average deliveries for the three previous calendar years upon which to determine if they exceed the threshold.\121\ TPA supports Encana's requested clarification.\122\ Shell requests clarification that a major non interstate pipeline is one that delivered annually more than 50 million MMBtus for each of the preceding three years.\123\
\121\ Encana Request for Clarification and Clarification at 3. \122\ TPA Request for Rehearing and Clarification at 5152. \123\ Shell Request for Rehearing and Clarification at 68. b. Commission Determination

66. Section 284.1(d)(2) of the Commission's regulations provides that major noninterstate pipelines are pipelines that deliver ``annually more than fifty (50) million MMBtus (million British thermal units) of natural gas measured in average deliveries for the previous three calendar years.'' \124\ We believe this language to be unambiguous, requiring the aggregation of pipeline deliveries over the previous three calendar years and division by three. Shell's request for clarification is therefore denied.

\124\ 18 CFR 284.1(d)(2).

67. As Encana argues,\125\ the Commission did not explicitly state how the threshold calculation would apply to pipelines with less than three years of operational data. The Commission finds that the appropriate threshold to determine if a new pipeline qualifies as major noninterstate pipeline is whether the pipeline has the capability to deliver more than 50 million MMBtu of natural gas annually. That is, until a noninterstate pipeline has experienced three years of operational flow, it must utilize its maximum delivery capacity to determine whether it is a major noninterstate pipeline subject to this transparency rule. Section 284.1(d), defining ``major noninterstate pipeline,'' is amended accordingly.
\125\ Encana Request for Rehearing and Clarification at 3.

68. The Commission disagrees with Encana and TPA that new pipelines, including large noninterstate pipelines with possible natural gas flows that could have significant effects on the interstate markets, should be wholly exempt from the posting requirements of this rule for the first three years of their existence. New major non interstate pipelines have more than a de minimis impact on interstate markets and, as such, the Commission's posting requirements shall apply.

69. Further, the Commission will not adopt a threshold for new pipelines that utilizes projected threeyear natural gas deliveries as a proxy for actual deliveries. The Commission agrees with Encana that a noninterstate pipeline that gathers production may ``have difficulty in projecting the volume of natural gas that

FOR FURTHER INFORMATION CONTACT

Steven Reich (Technical), Office of Enforcement, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 5026446, Steven.Reich@ferc.gov. Gabe S. Sterling (Legal), Office of Enforcement, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 5028891, Gabriel.Sterling@ferc.gov.