[Federal Register Volume 70, Number 94 (Tuesday, May 17, 2005)]
[Rules and Regulations]
[Pages 28204-28211]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-9803]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 284
[Docket No. RM96-1-026]
Standards for Business Practices of Interstate Natural Gas
Pipelines
Issued May 9, 2005.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
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SUMMARY: The Federal Energy Regulatory Commission is amending its
regulations governing standards for conducting business practices with
interstate natural gas pipelines. The Commission is incorporating by
reference the most recent version of the standards, Version 1.7,
promulgated December 31, 2003, by the Wholesale Gas Quadrant (WGQ) of
the North American Energy Standards Board (NAESB); the standards
ratified by NAESB on June 25, 2004 to implement Order No. 2004; the
standards ratified by NAESB on May 3, 2005 to implement Order No. 2004-
A; and the standards implementing gas quality reporting requirements
ratified by NAESB on October 20, 2004. These standards can be obtained
from NAESB at 1301 Fannin, Suite 2350, Houston, TX 77002, 713-356-0060,
http://www.naesb.org.
EFFECTIVE DATES: The rule will become effective June 16, 2005.
Pipelines are required to comply with this rule by making a compliance
filing on or before July 1, 2005 with an effective date of September 1,
2005.
FOR FURTHER INFORMATION CONTACT:
Marvin Rosenberg, Office of Markets, Tariffs, and Rates, Federal Energy
[[Page 28205]]
Regulatory Commission, 888 First Street, NE., Washington, DC 20426;
202-502-8292.
Kay Morice, Office of Markets, Tariffs, and Rates, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426;
202-502-6507.
Jamie Chabinsky, Office of the General Counsel, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426;
202-502-6040.
SUPPLEMENTARY INFORMATION:
Before Commissioners: Pat Wood, III, Chairman; Nora Mead Brownell,
Joseph T. Kelliher, and Suedeen G. Kelly; ORDER NO. 654
1. The Federal Energy Regulatory Commission (Commission) is
amending Sec. 284.12 of its open access regulations governing
standards for conducting business practices and electronic
communications with interstate natural gas pipelines.\1\ The Commission
is incorporating by reference the most recent version, Version 1.7, of
the consensus standards promulgated by the Wholesale Gas Quadrant (WGQ)
of the North American Energy Standards Board (NAESB). The Commission is
also incorporating by reference the standards ratified by NAESB on June
25, 2004 to implement Order No. 2004,\2\ the standards ratified by
NAESB on May 3, 2005 to implement Order No. 2004-A, and the standards
to implement gas quality reporting requirements ratified by NAESB on
October 20, 2004, in Recommendation R03035A, which NAESB intends to
include in its next version of standards (Version 1.8). This rule is
intended to benefit the public by adopting the most recent and up-to-
date standards governing business practices and electronic
communication.
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\1\ 18 CFR 284.12 (2004).
\2\ Order No. 2004, 68 FR 69134 (Dec. 11, 2003), III FERC Stats.
& Regs. Regulations Preambles ] 31,155 (Nov. 25, 2003); Order No.
2004-A, 69 FR 23562 (Apr. 29, 2004), III FERC Stats. & Regs.
Regulations Preambles ] 31,161 (Apr. 16, 2004); Order No. 2004-B, 69
FR 48371 (Aug. 10, 2004) III FERC Stats. & Regs. Regulations and
Preambles ] 31,166 (Aug. 2, 2004), Order No. 2004-C, 70 FR 284 (Jan.
4, 2005), III FERC Stats. & Regs. Regulations Preambles ] 31,172
(Dec. 21, 2004); Order No. 2004-D, FERC Stats. & Regs. Regulations
Preambles ] 61,320 (Mar. 23, 2005).
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I. Background
2. Since 1996, in the Order No. 587 series,\3\ the Commission has
adopted regulations to standardize the business practices and
communication methodologies of interstate pipelines in order to create
a more integrated and efficient pipeline grid. In this series of
orders, the Commission incorporated by reference consensus standards
developed by the WGQ (formerly the Gas Industry Standards Board or
GISB), a private consensus standards developer composed of members from
all segments of the natural gas industry. NAESB is an accredited
standards organization under the auspices of the American National
Standards Institute (ANSI).
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\3\ Standards For Business Practices Of Interstate Natural Gas
Pipelines, Order No. 587, 61 FR 39053 (July 26, 1996), FERC Stats. &
Regs. Regulations Preambles [July 1996-December 2000] ] 31,038 (July
17, 1996), Order No. 587-B, 62 FR 5521 (Feb. 6, 1997), FERC Stats. &
Regs. Regulations Preambles [July 1996-December 2000] ] 31,046 (Jan.
30, 1997), Order No. 587-C, 62 FR 10684 (Mar. 10, 1997), FERC Stats.
& Regs. Regulations Preambles [July 1996-December 2000] ] 31,050
(Mar. 4, 1997), Order No. 587-G, 63 FR 20072 (Apr. 23, 1998), FERC
Stats. & Regs. Regulations Preambles [July 1996-December 2000] ]
31,062 (Apr. 16, 1998), Order No. 587-H, 63 FR 39509 (July 23,
1998), FERC Stats. & Regs. Regulations Preambles [July 1996-December
2000] ] 31,063 (July 15, 1998); Order No. 587-I, 63 FR 53565 (Oct.
6, 1998), FERC Stats. & Regs. Regulations Preambles [July 1996-
December 2000] ] 31,067 (Sept. 29, 1998), Order No. 587-K, 64 FR
17276 (Apr. 9, 1999), FERC Stats. & Regs. Regulations Preambles
[July 1996-December 2000] ] 31,072 (Apr. 2, 1999); Order No. 587-M,
65 FR 77285 (Dec. 11, 2000), FERC Stats. & Regs. Regulations
Preambles [July 1996-December 2000] ] 31,114 (Dec. 11, 2000); Order
No. 587-N, 67 FR 11906 (Mar. 18, 2002), III FERC Stats. & Regs.
Regulations Preambles ] 31,125 (Mar. 11, 2002), Order No. 587-O, 67
FR 30788 (May 8, 2002), III FERC Stats. & Regs. Regulations
Preambles ] 31,129 (May 1, 2002); Order No. 587-R, 68 FR 13813 (Mar.
21, 2003), III FERC Stats. & Regs. Regulations Preambles ] 31,141
(Mar. 12, 2003).
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3. On April 14, 2004 NAESB filed with the Commission a report
informing the Commission that the WGQ had adopted a new version of its
standards, Version 1.7. NAESB reports that Version 1.7 includes
standards for partial day recalls which were requested in Order No.
587-N. The Commission previously incorporated these standards by
reference in Order No. 587-R.\4\ Version 1.7 also contains ten
standards regarding creditworthiness \5\ which the Commission proposed
to adopt in a Notice of Proposed Rulemaking (NOPR) in Docket No. RM04-
4-000.\6\ Version 1.7 contains revisions that more accurately reflect
the workings of the market including the definition of transaction
types, charge types, Service Codes, and Reduction Reason Codes. Other
revisions update standards that contained outmoded references, make the
naming conventions more uniform, and permit use of proprietary entity
codes when D-U-N-S[reg] numbers are not available. In
addition, the Version 1.7 standards update the treatment of allocations
as well as requests for information on scheduled quantities,
allocations, and shipper imbalances.
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\4\ Order No. 587-R, 68 FR 13813 (Mar. 21, 2003), III FERC
Stats. & Regs. Regulations Preambles & 31,141 (Mar. 12, 2003).
\5\ The credit-related standards in Version 1.7, which we are
incorporating by reference, are designated as Standards 0.3.3
through 0.3.10, 5.3.59 and 5.3.60. They include procedures for the
following practices: requesting additional information for credit
evaluation; acknowledging and responding to requests and receipt of
information; notice regarding creditworthiness and notice regarding
contract termination due to credit-related issues; forms of
communication; reevaluation of determinations that a Service
Requester is not creditworthy; and awarding capacity release offers
only after a service requester has been determined to meet the
creditworthiness requirements applicable to all services.
\6\ Creditworthiness Standards for Interstate Natural Gas
Pipeline, Notice of Proposed Rulemaking (NOPR), 69 FR 8587 (Feb. 25,
2004), IV FERC Stats. & Regs. Proposed Regulations ] 32,573 (Feb.
12, 2004).
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4. On August 6, 2004, NAESB filed with the Commission a report
informing the Commission that on June 25, 2004 the WGQ membership
ratified a package of modifications to the Version 1.7 standards to
implement Order No. 2004 (2004 Annual Plan Item 2 FERC Order 2004).
These standards modify the Informational Posting requirements for
pipeline web sites to reflect the information required to be posted
pursuant to Order No. 2004 and will be included as part of the WGQ's
Version 1.8 standards.
5. On October 1, 2004, NAESB filed a report with the Commission
informing the Commission that errata to Version 1.7 of the NAESB WGQ
standards were adopted by the Executive Committee on August 26, 2004
and, following a member comment period, the errata would be applied to
Version 1.7 on October 15, 2004. The errata contain minor corrections
which remove the table of code values for Bidder Affiliate from
Standard 5.4.13 and correct the Transaction Status Code data element in
the Code Values Dictionary of Standard 1.4.2.
6. On November 1, 2004, NAESB filed a report with the Commission
informing the Commission that on October 20, 2004 the WGQ membership
ratified standards to implement gas quality reporting requirements
(Recommendation R03035A).\7\ These standards require a pipeline to
provide a link on its Informational Posting Web Site to its gas quality
tariff provisions, or a simple reference guide to such information. In
addition, a pipeline is required to provide on its Informational
Postings Web site, in a downloadable format, daily average gas quality
information for prior day(s) to the extent available for locations(s)
that are
[[Page 28206]]
representative of mainline gas flow for the most recent three-month
period.
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\7\ The standards ratified October 20, 2004 modified Standard
4.3.23 and added Principle 4.1.p1 and Standards 4.3.s1, 4.3.s2,
4.3.s3, and 4.3.s4. On March 18, 2005, NAESB filed a report
informing the Commission that the added Principle and Standards have
been assigned the following permanent numbers: Principle 4.1.40 and
Standards 4.3.89, 4.3.90, 4.3.91, and 4.3.92, respectively.
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7. On December 21, 2004, the Commission issued a NOPR \8\ that
proposed to adopt Version 1.7 of the consensus standards, the standards
ratified by NAESB on June 24, 2004 to implement Order No. 2004 and the
standards to implement gas quality reporting requirements ratified by
NAESB in Recommendation R03035A.\9\ Five comments and one reply comment
were filed.\10\ The comments generally support adoption of the
standards, although some comments raise issues regarding the gas
quality standards, creditworthiness standards, and implementation date.
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\8\ Standards for Business Practices of Interstate Natural Gas
Pipelines, Notice of Proposed Rulemaking, 70 FR 319 (Jan. 4, 2005),
FERC Stats. & Regs. Proposed Regulations ] 32,578 (Dec. 21, 2004).
\9\ Section 284.12(a)(2) also is revised to reflect NAESB's
current address.
\10\ Those filing comments are: American Gas Association (AGA);
BP America Production Company and BP Energy Company (jointly
``BP''); Florida Power and Light Company (FPL); the Interstate
Natural Gas Association of America (INGAA); Tennessee Valley
Authority (TVA); and Total Peaking Services, LLC (Total Peaking). On
March 14, 2005, INGAA filed reply comments.
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8. On April 12, 2005, NAESB notified the Commission that the
Executive Committee adopted errata to be applied to Version 1.7 on
April 1, 2005. The errata correct certain errors in the validation
codes in the Code Values Dictionary of NAESB WGQ Standards 1.4.2
(Nomination Quick Response) and 1.4.7 (Confirmation Quick
Response).\11\
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\11\ Additionally, the errata correct the definition of Monthly
Allocation in 2.2.4 in the NAESB WGQ Standards Book 1 of 2. The
correct definition was originally adopted prior to publication of
Version 1.7, but during publication of Version 1.7 the definition
was captured incorrectly. However, the definition is correct in the
NAESB WGQ Flowing Gas Related Standards book.
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9. On April 22, 2005 NAESB notified the Commission that a
modification to Standard 4.3.23 was approved by the NAESB WGQ Executive
Committee on April 4, 2005 and distributed for WGQ member ratification,
with ballots due on May 3, 2005. The modification to the standard
specifies a location for posting voluntary consent to information
disclosure by non affiliated customers as required by Sec. 358 of the
Commission's regulations.\12\
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\12\ 18 CFR 358 (2004). NAESB states that it made the
modification in response to paragraph 10 of the NOPR in this
proceeding.
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II. Discussion
10. The Commission is incorporating by reference Version 1.7 of the
NAESB consensus standards; the standards to implement Order No. 2004
ratified by NAESB on June 25, 2004 (2004 Annual Plan Item 2 FERC Order
2004); the standards to implement Order No. 2004-A ratified by NAESB on
May 3, 2005 (2005 Annual Plan Item 8 FERC Order 2004); and the
standards governing gas quality reporting ratified by NAESB on October
20, 2004 (Recommendation R03035A).\13\ Pipelines will be required to
implement the standards by September 1, 2005, which is the first day of
the month following 90 days after the issuance of this rule.\14\
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\13\ Pursuant to the regulations regarding incorporation by
reference, copies of Version 1.7 are available from NAESB. 5 U.S.C.
552(a)(1); 1 CFR 51 (2001).
\14\ The Commission is also revising Sec. 284.12(a)(2) to
reflect NAESB new address.
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11. The adoption of Version 1.7 \15\ of the NAESB WGQ standards
will help continue the process of updating and improving the current
standards. In adopting the Version 1.7 standards, the Commission is
adopting the new ``Additional Standards'' implementation guide that
contains standards generally applicable to all the business processes.
The Additional Standards include standards governing the use of common
codes to identify entities in transactions and the creditworthiness
standards.
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\15\ In Version 1.7 the NAESB WGQ made the following changes to
its standards, including the creditworthiness standards. It revised
Standards 1.3.32, 2.3.21, 4.3.1, 4.3.2, 5.3.2, 5.3.7, 5.3.41, and
5.3.42, and Datasets 1.4.1 through 1.4.7, 2.4.1 through 2.4.16,
3.4.1 through 3.4.4, and 5.4.1 through 5.4.22. It added Principles
1.1.22, 2.1.6, 5.1.2, 5.1.3, and 5.1.4, Definitions 2.2.4, 2.2.5 and
5.2.3, and Standards 0.3.2, 0.3.3 through 0.3.10, 2.3.51 through
2.3.64, and 5.3.44 through 5.3.60. It deleted Principles 1.1.6,
1.1.8, 1.1.19, and 4.1.14, and Standards 1.3.78, 2.3.24, 2.3.36
through 2.3.39, and 5.3.6.
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12. The Commission is also adopting the NAESB standards related to
gas quality in WGQ Recommendation R03035A. These standards require a
pipeline to provide a link on its Informational Posting Web Site to its
gas quality tariff provisions, or a simple reference guide to such
information. In addition, a pipeline is required to provide on its
Informational Postings Web site, in a downloadable format, daily
average gas quality information for prior day(s) to the extent
available for location(s) that are representative of mainline gas flow
for the most recent three-month period. Adoption of these standards
will provide greater transparency to shippers with respect to the gas
quality requirements of interstate pipelines and available information
on gas quality on such pipelines' systems.
13. The NAESB WGQ approved the standards under NAESB's consensus
procedures.\16\ As the Commission found in Order No. 587, adoption of
consensus standards is appropriate because the consensus process helps
ensure the reasonableness of the standards by requiring that the
standards draw support from a broad spectrum of all segments of the
industry. Moreover, since the industry itself has to conduct business
under these standards, the Commission's regulations should reflect
those standards that have the widest possible support. In section 12(d)
of the National Technology Transfer and Advancement Act of 1995,
Congress affirmatively requires federal agencies to use technical
standards developed by voluntary consensus standards organizations,
like NAESB, as means to carry out policy objectives or activities.\17\
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\16\ This process first requires a super-majority vote of 17 out
of 25 members of the WGQ's Executive Committee with support from at
least two members from each of the five industry segments--
interstate pipelines, local distribution companies, gas producers,
end-users, and services (including marketers and computer service
providers). For final approval, 67 percent of the WGQ's general
membership must ratify the standards.
\17\ Pub. L. 104-113, Sec. 12(d), 110 Stat. 775 (1996), 15
U.S.C. 272 note (1997).
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14. The Comments addressing various aspects of the standards will
be addressed below.
A. Implementation Date
15. INGAA requests that the Commission implement the standards on
the first day of the month following 180 days after issuance of a final
rule. INGAA maintains that a transition to the new standards and the
business requirements supported by those standards will be coordinated
most effectively and seamlessly with the existing accounting, billing
and nomination processes if such a transition is implemented at the
beginning of a month. INGAA also states that delaying the required
implementation date to 180 days after issuance of the final rule will
allow time for interstate pipelines to make necessary changes in
systems and procedures to implement the posting of gas quality criteria
and data.
16. The Commission agrees that requiring implementation on the
first of the month allows for a more effective transition, and will
therefore grant INGAA's request. However, we will not grant the
requested 180-day delay in implementation. The pipelines have been on
notice of the consensus standards since the standards were ratified and
adopted. Also, the request relates principally to the gas quality
standards, and thus does not justify a 180-day delay for implementing
all the standards. We recognize that individual pipelines may have more
difficulty in
[[Page 28207]]
implementing some of the standards, and the Commission has in the past
been willing to grant extensions of time for implementation when
pipelines have justified such requests. Accordingly, the Commission is
requiring implementation on the first of the month, following 90 days
after issuance of this final rule.
B. Gas Quality Standards
1. Tariff Provisions Regarding Gas Quality Standards
17. The gas quality standards ratified by NAESB include Standard
4.3.89 (formerly 4.3.s1), which states a pipeline should provide, on
its Web site, a link to the natural gas quality tariff provisions or,
where no tariff exists in the general terms and conditions, a simple
reference guide to such information. FPL maintains that merely
providing a link to the existing tariff provision will not necessarily
provide clarity for end users or operational personnel unless the
Commission encourages development of more clearly written and presented
tariff language. FPL states that additional progress towards gas
quality measurement standardization should be made. Specifically, FPL
states that the absence of a consistent definition of the chemical
characteristics of natural gas can cause problems for end users. FPL
also states that standardized assumptions upon which chemical
characteristics or physical properties are determined are needed.\18\
AGA requests that the Commission confirm the reporting standard does
not relieve pipelines of their responsibility to ensure adherence to
the gas quality specifications in their tariffs.
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\18\ FPL states that the Environmental Protection Agency defines
standard conditions as 68 degrees Fahrenheit at 1 atmosphere of
pressure, but pipelines generally define and measure the volume of
gas transported at 60 degrees Fahrenheit and an absolute pressure of
14.73 pounds per square inch absolute, and variances exist from this
measure.
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18. These requests go beyond the scope of this rule, which
addresses only the posting requirements for standards. Issues as to the
clarity and substance of tariff provisions should be addressed in
individual pipeline proceedings in which these issues are raised. The
Commission has recognized that the issue of how to measure gas quality
is of importance to the industry and has established a Natural Gas
Interchangeability proceeding in Docket No. PL04-3-000 to address these
substantive issues.\19\ The issues raised by FPL and AGA are more
appropriately considered in that proceeding.
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\19\ The Commission held a technical conference on these issues
on February 18, 2004, and on March 2, 2005 issued a request for
comment on two papers filed by the Natural Gas Council: White Paper
on Liquid Hydrocarbon Drop Out in Natural Gas Infrastructure and
White Paper on Natural Gas Interchangeability and Non-Combustion End
Use. On April 13, 2005, the Commission issued a notice of a
technical conference to be held May 17, 2005, to consider further
comments on the NGC reports and recommendations for Commission
action on natural gas quality and liquefied natural gas
interchangeability issues.
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2. Information Posting
19. Standard 4.3.90 (formerly 4.3.s2) states that pipelines should
provide information ``to the extent available, for location(s) that are
representative of mainline gas flow.'' BP states that this standard
does not specify the data to be included in the operational posting,
and the Commission's requirements in Natural \20\ are appropriate and
should be incorporated into this rule. BP contends that the Natural
standards include the requirement that the pipeline must post on its
Internet Web site every receipt point dewpoint value it calculates,
along with the method by which the dewpoint was calculated, and every
blended dewpoint and blended BTU value it calculates for a line segment
of its system. In Natural, the Commission required that the information
must be posted within 24 hours of completion of the calculations.
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\20\ Natural Gas Pipeline Co., 102 FERC ] 61,234, order on
reh'g, 104 FERC ] 61,322 (2003) (Natural).
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20. The Commission is incorporating the standards as developed by
the WGQ. These standards represent a consensus of the industry as to
the minimum posting requirements for information on gas quality that
are applicable to all pipelines. In individual pipeline cases, such as
in Natural, the Commission may have specified additional information be
posted.\21\ Pipelines that are required to comply with such
requirements must continue to do so, and the WGQ standards accommodate
such postings. However, whether such requirements developed in
individual cases should be extended to the entire industry is beyond
the scope of this proceeding. Such issues can be raised in the
proceeding in Docket No. PL04-3-000 that the Commission has instituted.
Regarding BP's concern with the timeliness of posting, we expect that
pipelines will promptly post their information.
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\21\ The procedures developed in Natural were the result of
problems Natural experienced during the winter of 2000-2001 when gas
prices were so high that liquefiable hydrocarbons had a greater
value to shippers as constituents of the gas stream than as
extracted liquids. Shippers ceased their common practice of
extracting the liquefiable hydrocarbons before tendering the gas to
Natural, and this caused the closing of two gas processing plants
that normally would tender processed residue gas.
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21. Additionally, BP states that pipelines should not be able to
avoid compliance with the data posting requirements by claiming that
the data are not available at a specific location, and that the rule
should provide that all pipelines must develop the means, to the extent
they do not already have equipment in place, to measure gas quality at
key points. TVA states that consumers should have access to documented
information on the quality of the product being received, and that
information should include measurements against a well-defined,
documented formula and be publicly posted. INGAA states such a
requirement would involve pipelines installing additional gas quality
equipment, thus imposing on pipelines and their ratepayers millions of
dollars of investment for new equipment. INGAA maintains the
installation of additional equipment at each receipt point would add
little or no value in improving safety and/or efficiency of pipeline
operations.
22. These standards involve only the posting of information
obtained by the pipeline and require only that the pipeline post
information it already has obtained. Issues relating to the development
of additional information or other substantive questions are beyond the
scope of this proceeding and should be addressed in individual cases or
in the Commission's generic proceeding on gas quality.
23. AGA states that, in adopting the NAESB gas quality standards,
the Commission should include direction to the pipelines that in
implementing the standards they should consult with their customers to
determine which points are ``representative of mainline gas flow'' on
its system. AGA states that the pipelines should provide meaningful
indication of gas quality at all major delivery points. The Commission
agrees that the pipelines should post information relevant to their
shippers and consult with shippers in determining the information
posted.
3. Exemption
24. Total Peaking proposes an exemption from the gas quality
posting requirements for natural gas companies that do not physically
deliver natural gas into the facilities of an interstate pipeline.
Total Peaking states it is a liquid natural gas storage company subject
to Natural Gas Act jurisdiction and is required to have a tariff on
file with the Commission. It states that the purpose of gas quality
reporting cannot be served by imposing additional gas quality and
measurement and reporting obligations on entities such as Total
[[Page 28208]]
Peaking, which do not physically deliver natural gas into the
facilities of an interstate pipeline.
25. We decline to grant a generic waiver of the standards as
proposed by Total Peaking. The standards are intended to provide
information regarding the quality of a particular pipeline or storage
facility's system. Even though Total Peaking may not delivery gas to an
interstate pipeline, the gas quality information may be useful to its
customers. Although we decline to grant the generic exemption Total
Peaking requests, entities such as Total Peaking may request a waiver
of the requirements in their individual compliance filings where
justified.
C. Creditworthiness
26. In the NOPR, we proposed to incorporate by reference the
creditworthiness standards adopted by NAESB that had previously been
noticed in the creditworthiness rulemaking in Docket No. RM04-4-
000.\22\ In the NOPR in this proceeding, the Commission stated it would
address the comments filed on these standards before the issuance of a
final rule adopting these standards.\23\
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\22\ Creditworthiness Standards for Interstate Natural Gas
Pipelines, Notice of Proposed Rulemaking, 69 FR 8587 (Feb. 25,
2004), FERC Stats. & Regs. Regulations Preambles ] 32,573 (Feb. 12,
2004).
\23\ We are addressing the comments filed in Docket No. RM04-4-
000 regarding creditworthiness here.
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27. The ten WGQ standards on creditworthiness provide procedural
rules by which pipelines should deal with their customers with respect
to credit issues, such as providing shippers with the reasons a
pipeline is requesting credit information, procedures for
communications between pipelines and customers, and the timeline for
providing responses to requests for credit reevaluation.
28. Commenters in Docket No. RM04-4-000 generally support, or do
not oppose, the consensus standards on creditworthiness. Many shippers
urge the Commission to adopt the ten creditworthiness consensus
standards.\24\ Several pipelines also support the incorporation of the
ten NAESB standards into the Commission's regulations.\25\ Commenters,
however, raise several issues which will be discussed below.
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\24\ See, e.g., Northwest Industrial Gas Users at 7; Process Gas
Consumers Group, et al. at 9-13; Calpine Corporation at 18; Encana
Marketing (USA) Inc. at 4, 9-10.
\25\ National Fuel at 2; Vector at 2-3; Williston Basin at 3;
INGAA at 42.
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1. Notice to Releasing Shippers
29. Standard 5.3.60 provides that a pipeline should provide the
original releasing shipper with Internet E-mail notification
``reasonably proximate in time'' of the following events: (1) Notice to
the replacement shipper regarding the replacement shipper's past due,
deficiency, or default status pursuant to the pipeline's tariff; (2)
notice to the replacement shipper regarding the replacement shipper's
suspension of service notice; (3) notice to the replacement shipper
regarding the replacement shipper's contract termination notice due to
default or credit-related issues; and (4) notice to the replacement
shipper that the replacement shipper(s) is no longer creditworthy and
has not provided credit alternative(s) pursuant to the pipeline's
tariff.
30. Several commenters point out that in creditworthiness orders,
the Commission required pipelines to provide simultaneous notice to a
releasing shipper and a replacement shipper upon determining that a
replacement shipper is not creditworthy.\26\ Commenters argue that the
standard of ``simultaneous notice'' is preferable to the standard of
``reasonably proximate in time'' in Standard 5.3.60 (formerly 5.3.zF)
given the importance of timely notice of credit-related events, since
notice need only be sent to a small list of parties (the original
releasing shipper(s)), since simultaneity is unambiguous, and since
releasing shippers could be liable for unpaid reservation charges if a
replacement shipper defaults.\27\ If the Commission retains the
``reasonably proximate'' standard, Peoples requests a limitation in the
rule clarifying that no more than one business day constitutes
``reasonably proximate.'' \28\ Moreover, Peoples requests clarification
that given the time sensitivity associated with credit related
information, the requirement is not that the releasing shipper receive
the notice that the pipeline sent to the replacement shipper, but only
that the releasing shipper receive notice that such a notice was
sent.\29\
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\26\ See, e.g., Tennessee Gas Pipeline Co., 102 FERC ] 61,075 at
P 78 (2003); Northern Natural Gas Co., 103 FERC ] 61,276 at P 43
(2003).
\27\ AGA at 10-11, Dominion at 6-7, Peoples at 6-8.
\28\ Peoples at 6-7.
\29\ See Peoples at 8 (suggesting revised regulatory language).
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31. Alliance, however, contends that requiring the pipeline to
provide the releasing shipper with notice regarding the replacement
shipper's financial performance could expose the pipeline to claims of
liability, particularly where the replacement shipper has not defaulted
on its contractual obligations, but is merely past due or deficient, or
in situations where the replacement shipper has not authorized the
release of confidential information to third parties.\30\ Alliance
argues that, if the releasing shipper wants to require the replacement
shipper to provide the releasing shipper with notice of any changes in
its financial performance, the releasing shipper should make such a
requirement a condition of the release. Alliance contends that the
pipeline should not be required to keep the releasing shipper apprised
of the replacement shipper's performance.
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\30\ Alliance at 15-17.
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32. The Commission will adopt the standard as proposed by the WEQ
since this standard reflects the consensus of the industry. Providing
simultaneous notice is not necessary, as long as the notice to the
releasing shipper is provided promptly, such as on the same day as the
notice to the replacement shipper.
33. Nor does the Commission see a need to revise Standard 5.3.60 to
respond to the comments filed by Peoples and Alliance. The standard
does not require the pipeline to provide an identical notice to the
releasing shipper, only that the releasing shipper should receive
notice that one of the events has occurred. With respect to Alliance's
concerns, we find that it is a reasonable default provision for the
pipeline to notify the releasing shipper of conditions that may affect
the replacement shipper's ability to perform under its release. Such
information is relevant, for example, to the releasing shipper's
decision whether to recall capacity. Further, replacement shippers that
object to this condition can seek to obtain agreement from the
releasing shipper that the releasing shipper will not receive such a
notice. Alliance has not shown that liability will attach to the
pipeline in such a case.
34. Alliance suggests that such notice only be provided when the
releasing shipper includes the provision in the terms and conditions of
the release. However, given the comments by releasing shippers on the
proposed standard and in many of the creditworthiness cases, it appears
that, in the majority of cases, the releasing shipper will insist on
such a provision in a release, and, therefore, we find the inclusion of
this standard reasonable as the default provision. However, we clarify
that if the releasing and replacement shippers agree that such
[[Page 28209]]
notice not be provided, that agreement can be included in the terms and
conditions of the release, in which case the pipeline will not provide
the notice.
2. Publishing the Standards in the Regulations
35. NiSource contends the Commission should restate the ten
consensus standards in the regulations since the standards are a
critically important component of this rulemaking. NiSource states that
restating the standards in the regulations will facilitate the
interpretation and implementation of the rules.
36. As the Commission has explained in previous orders, the Freedom
of Information Act and implementing regulations establish that the
proper method of adopting private sector standards is to incorporate
those standards by reference into the agency's regulations.\31\ Because
these standards are copyrighted, reproducing them in the regulations is
not appropriate.\32\ However, the standards are available on compact
disc from NAESB at the reasonable price of $100.\33\
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\31\ Standards for Business Practices of Interstate Natural Gas
Pipeline, 95 FERC ] 61,127, at 61,400-01 (2001); Standards for
Business Practices of Interstate Natural Gas Pipelines, 77 FERC ]
61,061, at 61,232-33 (1996).
\32\ 5 U.S.C. 553 (a)(1) (2000); 1 CFR 51.7(4) (2005). See 28
U.S.C. 1498 (2000) (government liability for patent and copyright
infringement).
\33\ NAESB Home Page, http://www.naesb.org/pdf/ordrform.pdf.
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D. 2004 Standards
37. As the Commission stated in the NOPR, the NAESB standards with
respect to the Order No. 2004 affiliate standards establish uniform
posting requirements for the Commission requirements. However, the
NAESB standards were developed prior to the issuance of Order No. 2004-
A, and revised Standard 4.3.23 did not specify a location for posting
voluntary consent to information disclosure by non affiliated customers
as required by Sec. 358 of the Commission's regulations.\34\ The
Commission noted that electric utilities and pipelines have been
posting this information as a separate category from other non-
discrimination requirements, and that posting this information as a
separate category represents a better practice, since it will make it
easier for the Commission as well as other parties to find and access
this information. The Commission stated that it expects pipelines and
electric utilities to post this information as a separate category.
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\34\ 18 CFR 358 (2004).
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38. On May 3, 2005, the NAESB membership ratified a revision to
Standard 4.3.23 to provide for a separate category for posting
voluntary consent information consistent with the Commission's policy,
and the Commission will incorporate this modification into its
regulations.
Notice of Use of Voluntary Consensus Standards
39. Office of Management and Budget Circular A-119 (Sec. 11)
(February, 10, 1998) provides that when a Federal agency issues or
revises a regulation containing a standard, the agency should publish a
statement in the final rule stating whether the adopted standard is a
voluntary consensus standard or a government-unique standard. In this
rulemaking, the Commission is incorporating by reference voluntary
consensus standards developed by the WGQ.
Information Collection Statement
40. The Office of Management and Budget's (OMB) regulations in 5
CFR 1320.11 (2005) require that it approve certain reporting and
recordkeeping requirements (collections of information) imposed by an
agency. Upon approval of a collection of information, OMB will assign
an OMB control number and an expiration date. Respondents subject to
the filing requirements of this Rule will not be penalized for failing
to respond to these collections of information unless the collections
of information display a valid OMB control number.
41. The final rule will affect the following existing data
collections: FERC-545 ``Gas Pipeline Rates: Rate Change (Non-Formal)''
(OMB Control No. 1902-0154) and FERC-549C ``Standards for Business
Practices of Interstate Natural Gas Pipelines'' (OMB Control No. 1902-
0174). The following burden estimates are related only to this rule and
include the costs of complying with Version 1.7 of the WGQ's consensus
standard as modified by the standards ratified by the WGQ on June 25,
2004, to implement Order No. 2004 and the standards to implement gas
quality reporting requirements ratified by the WGQ on October 20, 2004,
in Recommendation R03035A. The burden estimates for the FERC-545 data
collection are related to the tariff filings required to implement
these standards. The burden estimates for the FERC-549C data collection
are related to implementing the latest version of the business practice
standards and related data sets. The costs for both of these data
collections are primarily related to start-up and will not be on-going
costs.
----------------------------------------------------------------------------------------------------------------
Number of
Data collection Number of responses per Hours per Total annual
respondents respondent response hours
----------------------------------------------------------------------------------------------------------------
FERC-545........................................ 93 1 38 3,534
FERC-549C....................................... 93 1 2,614 243,102
----------------------------------------------------------------------------------------------------------------
The total annual hours for collection is 246,636 hours.
------------------------------------------------------------------------
FERC-549C FERC-545
------------------------------------------------------------------------
Annualized Capital/Startup Costs........ $12,691,327 $184,495
Annualized Costs (Operations & 0 0
Maintenance)...........................
-----------------
Total Annualized Costs.............. 12,691,327 184,495
------------------------------------------------------------------------
[[Page 28210]]
The cost per respondent is $138,450 (rounded off).
42. The Commission sought comments to comply with these
requirements. Comments were received from six entities. No comments
addressed the reporting burden imposed by these requirements. The
substantive issues raised by the commenters are addressed in this
preamble.
43. The Commission's regulations adopted in this rule are necessary
to further the process begun in Order No. 587 of creating a more
efficient and integrated pipeline grid by standardizing the business
practices and electronic communication of interstate pipelines.
Adoption of these regulations will update the Commission's regulations
relating to business practices and communication protocols to conform
to the latest version, Version 1.7, of the WGQ's consensus standards
and the standards to implement Order No. 2004 and gas quality reporting
requirements.
44. The Commission has assured itself, by means of its internal
review, that there is specific, objective support for the burden
estimates associated with the information requirements. The information
required in this final rule will help the Commission carry out its
responsibilities under the Natural Gas Act and conforms to the
Commission's plan for efficient information collection, communication,
and management within the natural gas industry.
45. Interested persons may obtain information on the reporting
requirements by contacting the following: Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426 [Attention:
Michael Miller, Office of the Chief Information Officer, CI-1, (202)
502-8415, or [email protected]] or the Office of Management and
Budget, Office of Information and Regulatory Affairs, Attention: Desk
Officer for the Federal Energy Regulatory Commission, 725 17th Street,
NW., Washington, DC 20503. The Desk Officer can also be reached at
(202) 395-7856, or fax: (202) 395-7285.
Environmental Analysis
46. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\35\ The
Commission has categorically excluded certain actions from these
requirements as not having a significant effect on the human
environment.\36\ The actions adopted here fall within categorical
exclusions in the Commission's regulations for rules that are
clarifying, corrective or procedural, for information gathering,
analysis, and dissemination, and for sales, exchange, and
transportation of natural gas the requires no construction of
facilities.\37\
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\35\ Order No. 486, Regulations Implementing the National
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. &
Regs. Preambles 1986-1990 ] 30,783 (1987).
\36\ 18 CFR 380.4 (2004).
\37\ See 18 CFR 380.4(a)(2)(ii), 380.4(a)(5), 380.4(a)(27)
(2004).
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Regulatory Flexibility Act Certification
47. The Regulatory Flexibility Act of 1980 (RFA) \38\ generally
requires a description and analysis of final rules that will have
significant economic impact on a substantial number of small entities.
The regulations adopted here impose requirements only on interstate
pipelines, the majority of which are not small business, and, these
requirements are, in fact, designed to benefit all customers, including
small business. Accordingly, pursuant to Sec. 605(b) of the RFA, the
Commission hereby certifies that the regulations adopted herein will
not have a significant adverse impact on a substantial number of small
entities.
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\38\ 5 U.S.C. 601-612 (2000).
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Document Availability
48. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's
Public Reference Room during normal business hours (8:30 a.m. to 5 p.m.
eastern time) at 888 First Street, NE., Room 2A, Washington DC 20426.
49. From FERC's Home Page on the Internet, this information is
available in eLibrary. The full text of this document is available in
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or
downloading. To access this document in eLibrary, type the docket
number excluding the last three digits of this document in the docket
number field.
50. User assistance is available for eLibrary and the FERC's Web
site during normal business hours. For assistance contact FERC Online
Support at [email protected] or toll-free at (866) 208-3676 or
for TTY, contact (202) 502-8659.
Implementation Dates And Procedures
51. Pipelines are required to file tariff sheets to reflect the
changed standards on or before July 1, 2005, with an effective date of
September 1, 2005. Pipelines incorporating the Version 1.7 standards
into their tariffs must include the standard number and Version 1.7.
Pipelines incorporating by reference the gas quality standards must
refer to the standard number (e.g. 4.3.89) and the Recommendation
number in which the standard is adopted (R03035A). Pipelines
incorporating the standards adopted by NAESB to implement Order No.
2004 must refer to the standard as 2004 Annual Plan Item 2 FERC Order
2004 and 2005 Annual Plan Item 8 (May 3, 2005) (Affiliate Order
standards).
Effective Date
52. These regulations are effective June 16, 2005. The Commission
has determined, with the concurrence of the Administrator of the Office
of Information and Regulatory Affairs of OMB, that this rule is not a
``major rule'' as defined in section 351 of the Small Business
Regulatory Enforcement Fairness Act of 1996.
List of Subjects in 18 CFR Part 284
Continental shelf, Incorporation by reference, Natural gas,
Reporting and recordkeeping requirements.
By the Commission.
Magalie R. Salas,
Secretary.
0
In consideration of the foregoing, the Commission amends part 284,
Chapter I, Title 18, Code of Federal Regulations, as follows:
PART 284--CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS UNDER THE
NATURAL GAS POLICY ACT OF 1978 AND RELATED AUTHORITIES
0
1. The authority citation for part 284 continues to read as follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352;
43 U.S.C. 1331-1356.
0
2. Section 284.12 is amended as follows:
0
a. In paragraph (a)(2), the reference to ``1100 Louisiana, Suite 3625''
is revised to read ``1301 Fannin, Suite 2350''.
0
b. Paragraphs (a)(1)(i) through (v) are revised and a new paragraph
(a)(1)(vi) is added to read as follows:
Sec. 284.12 Standards for pipeline business operations and
communications.
(a) * * *
(1) * * *
(i) Additional Standards (General Standards and Creditworthiness
Standards) (Version 1.7, December 31, 2003);
[[Page 28211]]
(ii) Nominations Related Standards (Version 1.7, December 31, 2003,
including errata, October 15, 2004 and April 1, 2005);
(iii) Flowing Gas Related Standards (Version 1.7, December 31,
2003);
(iv) Invoicing Related Standards (Version 1.7, December 31, 2003);
(v) Electronic Delivery Mechanism Related Standards (Version 1.7,
December 31, 2003) with the exception of Standard 4.3.4, and including
the standards contained in 2004 Annual Plan Item 2 (June 25, 2004)
(Order No. 2004 standards) and the standard contained in 2005 Annual
Plan Item 8 (May 3, 2005) (Affiliate Order standards), and the
standards contained in Recommendation R03035A (October 20, 2004) (gas
quality reporting); and
(vi) Capacity Release Related Standards (Version 1.7, December 31,
2003, including errata, October 15, 2004).
* * * * *
[FR Doc. 05-9803 Filed 5-16-05; 8:45 am]
BILLING CODE 6717-01-P