[Federal Register: March 27, 2007 (Volume 72, Number 58)]
[Rules and Regulations]
[Page 14235-14239]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27mr07-2]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 358
[Docket No. RM07-6-001; Order No. 690-A]
Order on Clarification and Rehearing
Issued March 21, 2007.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This order responds to four requests for clarification or, in
the alternative, rehearing of the interim rule which the Federal Energy
Regulatory Commission issued on January 9, 2007. The Commission issued
the interim rule in response to the decision of the United States Court
of Appeals for the District of Columbia vacating and remanding the
standards of conduct rule, Order No. 2004, as applicable to interstate
natural gas pipelines, in National Fuel Gas Supply Corporation v. FERC,
468 F.3d 831 (D.C. Cir. 2006).
In this order, the Commission grants clarification that the
standards of conduct for natural gas transmission providers under the
interim rule apply only to natural gas transmission providers that are
affiliated with a marketing or brokering entity that conducts
transportation transactions on such natural gas transmission provider's
pipeline. The Commission also grants clarification that the definition
for a marketing or brokering entity for a natural gas transmission
provider is identical to the definition under the pre-Order No. 2004
standards of conduct. With regards to the other issues for which
clarification or rehearing is sought, the Commission will defer
consideration of these matters in this proceeding and address them
contemporaneously with the rulemaking proceeding in Docket No. RM07-1-
000.
EFFECTIVE DATE: This rule is effective on March 27, 2007.
FOR FURTHER INFORMATION CONTACT:
Stuart Fischer, Office of Enforcement, Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426, Telephone:
(202) 502-8517, E-mail: stuart.fischer@ferc.gov.
[[Page 14236]]
Deme Anas, Office of Enforcement, Federal Energy Regulatory Commission,
888 First Street, NE., Washington, DC 20426, Telephone: (202) 502-8178,
E-mail: demetra.anas@ferc.gov.
SUPPLEMENTARY INFORMATION: Before Commissioners: Joseph T. Kelliher,
Chairman; Suedeen G. Kelly, Marc Spitzer, Philip D. Moeller, and Jon
Wellinghoff.
Standards of Conduct for Transmission Providers
I. Introduction
1. On January 9, 2007, the Commission issued an interim rule
promulgating interim standards of conduct regulations that govern the
relationship between natural gas transmission providers and their
marketing affiliates.\1\ The Commission issued the interim rule to
respond to the decision of the United States Court of Appeals for the
District of Columbia concerning the Standards of Conduct for
Transmission Providers under Order No. 2004.\2\ The purpose of the
interim rule was to repromulgate the standards of conduct not
challenged in the National Fuel appeal in the interim while the
Commission considered how to respond to the court's decision on a
permanent basis. Subsequently, on January 18, 2007, the Commission
issued a Notice of Proposed Rulemaking (NOPR) in which the Commission
proposed making the provisions of the interim rule permanent, as well
as proposing other changes to the standards of conduct for natural gas
and electric transmission providers.\3\ The Commission invited comments
on the proposals in the NOPR, and comments are due on March 30,
2007.\4\
---------------------------------------------------------------------------
\1\ Standards of Conduct for Transmission Providers, Order No.
690, 72 FR 2427 (Jan. 19, 2007); FERC Stats. & Regs. ] 31,327
(2007). (Interim Rule). The Commission issued an errata notice on
January 22, 2007 that made corrections to paragraph 18 and the
regulatory text.
\2\ Standards of Conduct for Transmission Providers, Order No.
2004, FERC Stats. & Regs., Regulations Preambles ] 31,155 (2003),
order on reh'g, Order No. 2004-A, III FERC Stats. & Regs. ] 31,161
(2004), 107 FERC ] 61,032 (2004), order on reh'g, Order No. 2004-B,
III FERC Stats. & Regs. ] 31,166 (2004), 108 FERC ] 61,118 (2004),
order on reh'g, Order No. 2004-C, 109 FERC ] 61,325 (2004), order on
reh'g, Order No. 2004-D, 110 FERC ] 61,320 (2005), vacated and
remanded as it applies to natural gas pipelines, National Fuel Gas
Supply Corporation v. FERC, 468 F.3d 831 (D.C. Cir. 2006) (National
Fuel).
\3\ Standards of Conduct for Transmission Providers, 72 FR 3958
(Jan. 29, 2007), FERC Stats. & Regs. ] 32,611 (2007).
\4\ On March 1, 2007, the Commission issued an order extending
the deadline for submitting initial comments by 15 days to March 30,
2007 and extending the deadline for submitting reply comments an
additional 10 days to April 30, 2007.
---------------------------------------------------------------------------
2. Four petitioners, the Interstate Natural Gas Association of
America (INGAA), CenterPoint Energy Gas Transmission Company
(CenterPoint), the National Fuel Companies (National Fuel) and Spectra
Energy Transmission, LLC (Spectra) (petitioners or four petitioners),
filed requests for clarification or, in the alternative, rehearing of
the interim rule.\5\ INGAA and CenterPoint seek expedited consideration
so that a decision is issued prior to the comment deadline for the
NOPR. As discussed below, the Commission grants clarification that the
standards of conduct for natural gas transmission providers under the
interim rule apply only to natural gas transmission providers that are
affiliated with a marketing or brokering entity that conducts
transportation transactions on such natural gas transmission provider's
pipeline, and that the definition for ``marketing or brokering'' is
consistent with the definition of that term under the natural gas
transmission standards of conduct prior to Order No. 2004. The
Commission will amend the regulatory text accordingly to reflect these
clarifications. With regards to the other issues for which
clarification or rehearing is sought, the Commission will address those
issues contemporaneously with the rulemaking proceeding in Docket No.
RM07-1-000.
---------------------------------------------------------------------------
\5\ CenterPoint incorporated by reference INGAA's filing.
---------------------------------------------------------------------------
II. The D.C. Circuit's Decision in National Fuel
3. In National Fuel, the court found that the Commission did not
support the standards of conduct's expansive definition of energy
affiliates, vacated Order Nos. 2004, 2004-A, 2004-B, 2004-C and 2004-D
(collectively referred to as Order No. 2004) as applied to natural gas
pipelines, and remanded the orders to the Commission.\6\ Specifically,
the court rejected the Commission's extension of the standards of
conduct beyond pipelines' relationships with their marketing affiliates
to govern pipelines' relationships with numerous non-marketing
affiliates, such as producers, gatherers, and local distribution
companies (non-marketing energy affiliates), as well as extending the
standards of conduct to affiliates that do not ship on their affiliated
pipelines.\7\ In light of these findings, the court found moot the
other issues raised on appeal.\8\
---------------------------------------------------------------------------
\6\ National Fuel, slip op. at 4. Order No. 2004 was not
appealed as it applies to electric utility transmission providers.
\7\ Id., slip op. at 25.
\8\ Id., slip op. at 4.
---------------------------------------------------------------------------
III. The Interim Rule
4. In the interim rule, the Commission repromulgated the standards
of conduct not challenged in the National Fuel appeal and adopted or
revised other provisions of the standards of conduct that had been the
subject of the appeal, while the Commission considers how to respond to
the court's decision on a permanent basis.\9\ The Commission intended
the interim rule to eliminate any uncertainty about how the standards
of conduct apply to natural gas transmission providers while the
Commission developed a final rule.\10\ The Commission adhered to both
the letter and the spirit of the court's decision in National Fuel by
fashioning an interim rule under which the standards of conduct do not
apply to the relationship between natural gas transmission providers
and non-marketing energy affiliates, which is the aspect of the
standards of conduct that the court found infirm.\11\
---------------------------------------------------------------------------
\9\ Interim Rule at P 2.
\10\ Id.
\11\ Id. at P 5 and 7.
---------------------------------------------------------------------------
5. Although the DC Circuit did not consider petitioners' other
issues on appeal, under the interim rule the Commission treated each of
those issues as if the court had also overturned those sections.
Specifically, for natural gas transmission providers, the interim rule:
(1) Omitted restrictions on shared risk management employees \12\ and
(2) revised the requirement for logging waivers of tariff provisions so
that it was identical to the Order No. 497 requirements.\13\ The
Commission also incorporated modifications consistent with petitioners'
appeals of two issues discussed in the preamble of Order No. 2004, but
not codified in regulatory text.
[[Page 14237]]
Specifically, the interim rule stated that: (1) Natural gas
transmission providers could treat lawyers as permissibly shared
employees; and (2) newly certificated natural gas pipeline transmission
providers would not be required to observe the standards of conduct
until they commence transmission services.\14\
---------------------------------------------------------------------------
\12\ Section 358.4(a)(6) of the Commission's regulations states
that ``Transmission Providers are permitted to share risk management
employees that are not engaged in Transmission Functions or sales or
commodity Functions with their Marketing and Energy Affiliates.'' 18
CFR 358.4(a)(6). The interim rule modified this provision by adding
a second sentence that states, ``This provision does not apply to
natural gas transmission providers.''
\13\ Section 358.5(c)(4) of the Commission's regulations states
that ``The Transmission Provider must maintain a written log,
available for Commission audit, detailing the circumstances and
manner in which it exercised its discretion under any terms of the
tariff. The information contained in this log is to be posted on the
OASIS or Internet web site within 24 hours of when a Transmission
Provider exercises its discretion under any terms of the tariff.''
18 CFR 358.5(c)(4). The interim rule changed 18 CFR 358.5(c)(4) by
renumbering it as 18 CFR 358.5(c)(4)(i) and added a new provision in
18 CFR 358.5(c)(4)(ii) as follows: ``[N]atural gas Transmission
Providers must maintain a written log of waivers that the natural
gas Transmission Provider grants with respect to tariff provisions
that provide for such discretionary waivers and provide the log to
any person requesting it within 24 hours of the request.'' 18 CFR
358.5(c)(4)(ii).
\14\ Former 18 CFR 161.3(k); Interim Rule at P 22.
---------------------------------------------------------------------------
6. The Commission issued the interim rule consistent with the three
factors articulated in Mid-Tex Electric Cooperative, Inc. v. FERC (Mid-
Tex) \15\ for issuing an interim rule without prior notice and comment
under the Administrative Procedure Act.\16\ First, the Commission
stressed that the interim rule was not intended to serve as a permanent
rule and that it was commencing a rulemaking proceeding through the
issuance of a NOPR (issued nine days after the interim rule).\17\
Second, the interim rule followed the court's opinion in National Fuel
because, for natural gas pipelines, it eliminated the provisions of
Order No. 2004 that were subject to appeal and instead adopted
provisions originally promulgated in Order No. 497, which was upheld in
relevant part by the court in Tenneco Gas v. FERC.\18\ Third, the
Commission issued the interim rule to avoid regulatory confusion. When
the Commission adopted Order No. 2004, it rescinded the standards of
conduct promulgated by Order No. 497. Because National Fuel vacated
Order No. 2004 as applied to natural gas transmission providers,
without the interim rule there would have been no existing regulations
governing the relationship between natural gas transmission providers
and their marketing affiliates. Such a situation would not have been in
the public interest because the standards of conduct have for almost
two decades played an important role in the Commission's program to
ensure non-discriminatory access by pipeline customers to competitive
natural gas markets.\19\
---------------------------------------------------------------------------
\15\ Mid-Tex Electric Cooperative, Inc. v. FERC, 822 F.2d 1123
(DC Cir. 1987).
\16\ Interim Rule at P 3-6.
\17\ Id. at P 6.
\18\ Order No. 497, 53 FR 22139 (June 14, 1988), FERC Stats. &
Regs., Regulations Preambles 1986-1990 ] 30,820 (June 1, 1988);
Order No. 497-A, order on reh'g, 54 FR 52781 (Dec. 22, 1989), FERC
Stats. & Regs., Regulations Preambles 1986-1990 ] 30,868 (Dec. 15,
1989); Order No. 497-B, order extending sunset date, 55 FR 53291
(Dec. 28, 1990), FERC Stats. & Regs., Regulations Preambles 1986-
1990 ] 30,908 (Dec. 13, 1990); Order No. 497-C, order extending
sunset date, 57 FR 9 (Jan. 2, 1992), FERC Stats. & Regs.,
Regulations Preambles 1991-1996 ] 30,934 (Dec. 20, 1991), reh'g
denied, 57 FR 5815 (Feb. 18, 1992), 58 FERC ] 61,139 (Feb. 10,
1992); Tenneco Gas v. FERC (affirmed in part and remanded in part),
969 F.2d 1187 (D.C. Cir. 1992); Order No. 497-D, order on remand and
extending sunset date, 57 FR 58978 (Dec. 14, 1992), FERC Stats. &
Regs., Regulations Preambles 1991-1996 ] 30,958 (Dec. 4, 1992);
Order No. 497-E, order on reh'g and extending sunset date, 59 FR 243
(Jan. 4, 1994), FERC Stats. & Regs., Regulations Preambles 1991-1996
] 30,987 (Dec. 23, 1993); Order No. 497-F, order denying reh'g and
granting clarification, 59 FR 15336 (Apr. 1, 1994), 66 FERC ] 61,347
(Mar. 24, 1994); and Order No. 497-G, order extending sunset date,
59 FR 32884 (June 27, 1994), FERC Stats. & Regs., Regulations
Preambles 1991-1996 ] 30,996 (June 17, 1994).
\19\ Interim Rule at P 6.
---------------------------------------------------------------------------
IV. Petitions for Clarification and Rehearing
7. Petitioners filed requests for clarification or rehearing on
five issues. First, the four petitioners seek clarification or
rehearing as to whether the interim rule limits the application of the
standards of conduct to natural gas transmission providers that are
affiliated with a marketing or brokering entity that conducts
transportation transactions on such natural gas transmission provider's
pipeline. The four petitioners contend that under Order No. 497, a
natural gas transmission provider was not subject to the standards of
conduct if its marketing affiliate did not engage in transportation
transactions on its pipeline. INGAA states that if the Commission
intended the interim rule to return to the pre-Order No. 2004 standards
of conduct requirements for natural gas pipelines, this condition must
be included or the interim rule should not have been issued without
notice or comment. All four petitioners request that Sec. 358.1 of the
interim rule be amended to include the language from the prior
standards of conduct in former Sec. 161.1, which limited the
application of the standards of conduct to natural gas transmission
providers which conduct transportation transactions with its marketing
or brokering affiliates.\20\
---------------------------------------------------------------------------
\20\ Former 18 CFR 161.1 stated that ``This part applies to any
interstate natural gas pipeline that transports gas for others
pursuant to subpart A of part 157, and subparts B or G or part 284
and is affiliated in any way with a natural gas marketing or
brokering entity and conducts transportation transactions with its
marketing or brokering affiliate.''
---------------------------------------------------------------------------
8. Second, the petitioners assert that the Commission erred in
defining marketing affiliate in Sec. 358.3(k) of the Commission's
regulations. INGAA contends that the definition of ``Marketing
Affiliate'' in Sec. 358.3(k) should treat natural gas pipeline
transmission providers separately from electric transmission providers:
for natural gas transmission providers, the definition of marketing
affiliate should reference the definition of ``marketing or brokering''
in Sec. 358.3(l). For electric transmission providers, the definition
of marketing affiliate should reference the definition of ``marketing,
sales, or brokering'' in Sec. 358.3(e). This change, INGAA contends,
would make clear that Sec. 358.3(e)'s definition of ``marketing, sales
or brokering'' is not relevant to identifying the marketing affiliates
of natural gas transmission providers. INGAA asserts that sales of
electric energy were not part of the definition of ``marketing or
brokering'' under the former natural gas standards of conduct under
Order No. 497, and thus should not apply to natural gas transmission
providers under the interim rule. All four petitioners support an
identical language change to the definition of marketing affiliate in
Sec. 358.3(k) to clarify this point.
9. Third, the four petitioners contend that Sec. 358.1(e) of the
Commission's regulations promulgated in the interim rule has the
unintended consequence of including more entities as marketing
affiliates than under the prior gas standards of conduct.\21\
Specifically, INGAA and National Fuel contend that an entity that falls
under one of the exceptions to the definition of an energy affiliate
under Sec. 358.3(d)(6) of the Commission's regulations could now be
considered to be classified as a marketing affiliate of a gas pipeline.
---------------------------------------------------------------------------
\21\ Section 358.1(e) of the Commission's regulations states
that the standards of conduct do not govern the relationship between
a natural gas transmission provider and its energy affiliate. 18 CFR
358.1(e).
---------------------------------------------------------------------------
10. Fourth, the four petitioners contend that the Commission erred
by amending Sec. 358.4(a)(6) of the Commission's regulations to
remove, for natural gas transmission providers, the exception allowing
transmission providers to share risk management employees with
marketing and energy affiliates provided that the risk managers are not
engaged in transmission functions or sales or commodity functions.
INGAA contends it appealed this issue to the D.C. Circuit on the
grounds that the Commission had imposed too many restrictions on the
sharing of risk management personnel. As such, the four petitioners
contend that the Commission should add a provision that expressly
permits natural gas transmission providers to share risk management
employees with their marketing affiliates.
11. Finally, the four petitioners request that the Commission
clarify the effect of restoring the language of former Sec. 161.3(k)
of the Commission's regulations, requiring natural gas transmission
providers to maintain a waiver log, in new Sec. 358.5(c)(4)(ii) of the
Commission's regulations. Specifically, they assert that the current
provision (as well as the prior provision in Sec. 161.3(k))
[[Page 14238]]
apply only to granting waivers under the tariff and does not apply to
acts of discretion under the tariff. INGAA requests that the Commission
clarify that a pipeline will be in compliance with the interim rule if
the pipeline logs waivers, but not every act of discretion, in a
situation when (1) a pipeline tariff expressly permits the pipeline to
waive a specific tariff requirement; and (2) the pipeline waives a
tariff requirement.
V. Commission Determination
12. As noted earlier, the Commission's intent in promulgating the
interim rule with respect to natural gas transmission providers was to
restore the pre-Order No. 2004 standards of conduct in order to avoid a
regulatory gap once the D.C. Circuit issued its decision in National
Fuel vacating Order No. 2004 as applied to natural gas transmission
providers. The interim rule was intended to be a temporary measure
while the Commission promulgated permanent regulations in light of
National Fuel, a process the Commission started in the NOPR in Docket
No. RM07-1-000. The Commission did not intend for the interim rule to
create any new standards of conduct obligations or new exceptions for
natural gas transmission providers that were not in place prior to
Order No. 2004.
13. As such, the Commission will grant clarification to revise the
standards of conduct regulations under the interim rule to reflect the
prior standards of conduct for natural gas transmission providers under
Order No. 497. Specifically, the Commission agrees with the requests
to: (a) Revise Sec. 358.1 to include the language from former Sec.
161.1 limiting the standards of conduct to natural gas transmission
providers that conduct transmission transactions with their marketing
or brokering affiliates; and (b) revise the definition of ``marketing
affiliate'' in Sec. 358.3(k) to tie it to the definition of
``marketing and brokering'' for natural gas transmission provider in
Sec. 358.3(l) (which uses the definition under Order No. 497). With
respect to entities covered by the standards of conduct, these
clarifications reflect the Commission's intent that the scope of the
interim rule track the scope of the standards of conduct requirements
for natural gas transmission providers in Order No. 497.
14. Accordingly, the standards of conduct will not govern the
relationship of a natural gas transmission provider and its affiliate
that engages in marketing or brokering activities (as defined in Sec.
358.3(l)) if that affiliate does not conduct transportation
transactions on that natural gas transmission provider's pipeline. Also
the standards of conduct do not govern the relationship between a
natural gas transmission provider and its electric affiliate that
engages in electric marketing, sales or brokering activities (as
defined in Sec. 358.3(e)) as long as that electric affiliate does not
(i) Engage in natural gas marketing activities under Sec. 358.3(l) and
(ii) conduct transportation transactions on the affiliated natural gas
transmission provider's pipeline.
15. The Commission intends to address the remainder of the issues
raised by the four petitioners contemporaneously with the rulemaking
proceeding in Docket No. RM07-1-000. Unlike the requests for which the
Commission is granting clarification, the four petitioners' remaining
requests do not seek to have the Commission restore the language of the
standards of conduct for natural gas transmission providers as it
existed prior to Order No. 2004. Instead, the four petitioners'
remaining requests seek rehearing by asserting that certain provisions
in Order No. 2004 which the court had vacated should be applicable to
them or by seeking interpretations of language that the Commission
restored from Order No. 497. As such, the consideration of such issues
goes beyond the scope of what the Commission intended in the interim
rule, namely, to restore the rules in place prior to National Fuel
until the current rulemaking proceeding is completed. The Commission
believes that consideration of the remaining issues with the rulemaking
proceeding in Docket No. RM07-1-000 will lead to a more efficient
disposition of the four petitioners' remaining contentions, because
they relate to which provisions of Order No. 2004 should be retained
and how they should be interpreted. Again, the Commission affirms that
the clarifications made to the standards of conduct for natural gas
transmission providers in the interim rule were not intended to create
new standards of conduct requirements beyond the requirements prior to
Order No. 2004.
VI. Document Availability
16. 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.
17. From FERC's Home Page on the Internet, this information is
available on eLibrary. The full text of this document is available on
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or
downloading. To access this document in eLibrary, type the docket
number excluding the last three digits of this document in the docket
number field.
18. User assistance is available for eLibrary and the FERC's Web
site during normal business hours from our Help line at (202) 502-8222
or the Public Reference Room at (202) 502-8371 Press 0, TTY (202) 502-
8659. E-Mail the Public Reference Room at
public.referenceroom@ferc.gov.
VII. Effective Date
19. These revisions in this order on clarification and rehearing
are effective on March 27, 2007.
List of Subjects in 18 CFR Part 358
Natural gas, Reporting and recordkeeping requirements.
By the Commission.
Philis J. Posey,
Acting Secretary.
0
In consideration of the foregoing, the Commission amends part 358,
Chapter I, Title 18, Code of Federal Regulations, to read as follows:
PART 358--STANDARDS OF CONDUCT
0
1. The authority citation for part 358 continues to read as follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 16 U.S.C. 791-825r,
2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-7352.
0
2. In Sec. 358.1, paragraph (a) is revised to read as follows:
Sec. 358.1 Applicability.
(a) This part applies to any interstate natural gas pipeline that
transports gas for others pursuant to subpart A of part 157 or subparts
B or G of part 284 of this chapter and is affiliated in any way with a
marketing or brokering entity and conducts transportation transactions
with its marketing or brokering affiliate.
* * * * *
0
3. In Sec. 358.3, paragraph (k) is revised to read as follows:
Sec. 358.3 Definitions.
* * * * *
(k) Marketing Affiliate means an Affiliate as that term is defined
in Sec. 358.3(b) or a unit that--
(1) With respect to a natural gas pipeline Transmission Provider,
engages in ``marketing and brokering'' activities
[[Page 14239]]
as those terms are defined at Sec. 358.3(l); and
(2) With respect to an electric Transmission Provider, engages in
marketing, sales or brokering activities as those terms are defined at
Sec. 358.3(e).
* * * * *
[FR Doc. E7-5497 Filed 3-26-07; 8:45 am]
BILLING CODE 6717-01-P