RM07-10-002 (Order 704C)

131 FERC ¶ 61,246
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
18 CFR Part 260
[Docket No. RM07-10-002; Order No. 704-C]
Transparency Provisions of Section 23 of the Natural Gas Act
(Issued June 17, 2010)
AGENCY: Federal Energy Regulatory Commission.
ACTION: Order Granting Clarification
SUMMARY: In this Order Granting Clarification, the Commission addresses pending
requests to clarify Form No. 552, under which natural gas market participants must
annually report information regarding physical natural gas transactions that use an index
or that contribute to or may contribute to the formation of a gas index. Order No. 704
required market participants to file these reports in order to provide greater transparency
concerning the use of indices to price natural gas and how well index prices reflect
market forces.
Order No. 704-C revises Form No. 552 so as to (1) exempt from reporting any
unexercised options to take gas under a take-or-release contract; (2) clarify the definition
of exempt unprocessed natural gas transactions as those involving gas that is both not yet
processed (to separate and recover natural gas liquids), and still upstream of a processing
facility; (3) exempt from reporting cash-out and imbalance transactions, since they were
burdensome to report and provided little market information; (4) strike the form’s
references to the blanket sales certificates issued under § 284.402 or § 284.284, since

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they were burdensome to report and provided little market information, so as to also
exempt small entities who were obligated to report solely by virtue of possessing a
blanket sales certificate; and (5) make several non-substantive modifications to Form
No. 552 in an effort to make it more user-friendly.
EFFECTIVE DATE: This rule will become effective September 30, 2010.
FOR FURTHER INFORMATION CONTACT:
Vince Mareino (Legal Information)
Office of the General Counsel
Federal Energy Regulatory Commission
888 First Street, NE
Washington, DC 20426
(202) 502-6167
[email protected]
Thomas Russo (Technical Information)
Office of Enforcement
Federal Energy Regulatory Commission
888 First Street, NE
Washington, DC 20426
(202) 502-8792
[email protected]
SUPPLEMENTARY INFORMATION

131 FERC ¶ 61,246
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: Jon Wellinghoff, Chairman;
Marc Spitzer, Philip D. Moeller,
and John R. Norris.

Transparency Provisions of Section 23 of the Natural
Gas Act

Docket No. RM07-10-002

ORDER NO. 704-C
ORDER GRANTING CLARIFICATION
(Issued June 17, 2010)

Paragraph Numbers
I. Background ............................................................................................................................2.
II. Clarifications.........................................................................................................................9.
A. Use of Indices...................................................................................................................9.
B. “Take or release” Transactions.........................................................................................21.
C. Natural Gas Imported to the Lower 48 States ..................................................................25.
D. Unprocessed and/or upstream natural gas........................................................................27.
E. Cash-out, Imbalance, and Operation-Related Transactions .............................................40.
F. Unit of Measurement ........................................................................................................46.
G. Blanket Certificates ..........................................................................................................51.
H. Other Substantive Requested Clarifications ....................................................................59.
III. Other Non-Substantive Modifications.................................................................................66.
IV. Information Collection Statement .......................................................................................69.
V. Document Availability .........................................................................................................75.
VI. Extension of Time ...............................................................................................................78.

Docket No. RM07-10-002
1.

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The Federal Energy Regulatory Commission’s (Commission) FERC Form

No. 552 requires certain natural gas market participants to identify themselves and
provide summary information about physical natural gas transactions on an annual,
calendar year basis. 1 In this order, the Commission addresses pending requests to clarify
Form No. 552, resolve issues discussed in comments in this docket and at the March 25,
2010 Technical Conference (Technical Conference), and provide additional guidance for
Respondents. Further, the Commission, in light of its experience administering the first
year of Form No. 552, clarifies the exclusion of transactions involving volumes of
unprocessed natural gas. The Commission adopts a revised Form No. 552 incorporating
these modifications, which is included in the Appendix to this order.
I.

Background

2.

On December 26, 2007, the Commission issued a Final Rule in Order No. 704, 2

which amended Part 260 of its regulations to require the annual submission of a new
form, Form No. 552. Order No. 704 has its genesis in the Energy Policy Act of 2005, 3
which added section 23 of the Natural Gas Act (NGA). Section 23 of the NGA, among

1

FERC Form No. 552 (Form No. 552): Annual Report of Natural Gas
Transactions. A copy of Form No. 552, as revised by this order, is attached hereto in the
Appendix. The revised form will be available on the Commission’s website at
www.ferc.gov/docs-filing/forms.asp in the near future. Where appropriate, terms defined
in Form No. 552 are capitalized herein.
2

Transparency Provisions of Section 23 of the Natural Gas Act, Order No. 704,
FERC Stats. & Regs. ¶ 31,260, 73 Fed. Reg. 1,014 (2007) (Final Rule) (Order No. 704).
3

Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (2005).

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other things, directs the Commission “to facilitate price transparency in markets for the
sale or transportation of physical natural gas in interstate commerce, having due regard
for the public interest, the integrity of those markets, and the protection of consumers.” 4
Accordingly, Order No. 704 required natural gas wholesale market participants, including
a number of entities that may not otherwise be subject to the Commission’s traditional
NGA jurisdiction, to report certain information concerning their natural gas sales and
purchases annually.
3.

The basic purpose of these reports is to provide greater transparency concerning

the use of indices to price natural gas and how well index prices reflect market forces.
Many market participants rely on indices as a way to reference market prices without
taking on the risks of active trading. However, the Commission found that there was
insufficient information available to the Commission and market participants to assess
whether the gas indices are derived from a robust market of fixed-price transactions and
thus accurately reflect market forces. For example, there was no way to determine the
volumetric relationships between (a) the fixed-price, next day and next month delivery
transactions that form gas price indices; and (b) transactions that use indices.
4.

Accordingly, Order No. 704, as clarified and modified by Order Nos. 704-A 5 and

704-B, 6 requires market participants with reportable physical natural gas purchases or
4
5

15 U.S.C. § 717t-2(a)(1) (2006).

Transparency Provisions of Section 23 of the Natural Gas Act, Order No. 704-A,
73 Fed. Reg. 55,726 (Sept. 26, 2008), FERC Stats. & Regs. ¶ 31,275 (2008) (Order
No. 704-A).

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sales equal to or greater than 2.2 trillion British Thermal Units7 to report the following
information on Form No. 552:
(1) total volume of the respondent’s reportable physical sales and
purchases during the year;
(2) quantities contracted at fixed prices for next day delivery;
(3) quantities contracted at prices that refer to published daily gas
price indices;
(4) quantities contracted at fixed prices for next month delivery;
(5) quantities contracted at prices that refer to published monthly gas
price indices;
(6) quantities contracted under trigger agreements, such as NYMEX
Plus contracts; and
(7) quantities contracted as physical basis transactions. 8
5.

The Commission has engaged in substantial outreach efforts related to Form

No. 552. These efforts are intended to inform market participants of the obligation to file
Form No. 552, to answer questions regarding the form, and to identify ways to improve

6

Transparency Provisions of Section 23 of the Natural Gas Act, Order No. 704-B,
125 FERC ¶ 61,302 (2008) (Order No. 704-B).
7
8

2.2 TBtus, or roughly 2.2 million dekatherms.

Respondents must also explain any difference between the total volumes of their
reportable purchases and sales reported in response to item (1) above and the sum of the
corresponding quantities reported in response to items (2) through (7).

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it. Commission Staff has provided informal guidance to dozens of individual
Respondents as well as to various natural gas industry associations representing
Respondents. This outreach includes one-on-one telephone conferences with potential
Respondents, conference calls with a number of industry participants, presentations to
groups of market participants, and the creation and updating of a Frequently Asked
Questions (FAQ) list available on the Commission’s website. 9 Commission Staff has
also discussed Form No. 552 compliance with major trade organizations through
conference calls and direct presentations. In addition, the Commission has addressed
specific questions regarding Form No. 552 compliance through our Enforcement Hotline,
Compliance Help Desk, direct calls to Staff members, and e-mails addressed to our
dedicated Form No. 552 mailbox ([email protected]).
6.

The Commission extended the deadline for filing the first Form No. 552, for

calendar 2008, from May 1, 2009 to July 1, 2009. 10 The Commission received Form
No. 552 for calendar year 2008 from 1,109 Respondents. The vast majority of these
participants timely submitted Form No. 552, though the Commission granted seven
requests for limited extensions of time to submit the form. Filed copies of each
9

The FAQ is available at http://www.ferc.gov/docs-filing/forms/form-552/form552-faq.pdf. Along with the FAQ, copies of relevant Commission orders and general
filing guidance are provided. The Commission will update the FAQ as necessary and
encourages potential Respondents to review the FAQ prior to filing Form No. 552.
10

Transparency Provisions of Section 23 of the Natural Gas Act, Notice of
Extension of Time (issued Apr. 9, 2009). The order provided for an extension of the
filing deadline for calendar year 2008 data. Calendar year 2009 data must be submitted
by May 1, 2010.

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Respondent’s Form No. 552 are publicly available in the Commission’s website in
eLibrary. The entire Form No. 552 database for calendar year 2008 is also available for
download at http://www.ferc.gov/docs-filing/forms/form-552/data.asp. While most
Respondents correctly completed Form No. 552, the Commission believes that additional
clarifications to Form No. 552 would enhance regulatory certainty and improve the
quality of data elicited in the form.
7.

The American Gas Association (AGA) and Pacific Gas and Electric Company

(PG&E) submitted requests for clarification of Order No. 704 on October 9, 2009 and
November 3, 2009, respectively. These requests are discussed below. In addition,
Commission Staff held a Technical Conference to discuss:
(1) inconsistencies in reporting upstream transactions in the
natural gas supply chain on Form No. 552, and whether these
transactions contribute to wholesale price formation;
(2) whether transactions involving balancing, cash-out,
operational, and in-kind transactions should be reported on
Form No. 552; and
(3) whether the units of measurement (TBtu) currently used
for reporting volumes in the form are appropriate. 11
Lastly, in addition to the discussion at the Technical Conference, the Commission
received numerous written comments in this docket, which we also discuss below.
8.

Although the Commission and its Staff have provided considerable guidance with

regard to these reporting requirements, because of the importance the Commission puts

11

Notice of Form No. 552 Technical Conference (Feb. 22, 2010).

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on compliance and its efforts to provide clear and understandable rules, the Commission
finds that Form No. 552 should be revised to further clarify Respondents’ obligations.
II.

Clarifications
A.

Use of Indices
1.

9.

Request for Clarification

Form No. 552, at page 4 line 3, requires respondents to report “what quantities

were contracted at prices that refer to published Next-Day Delivery gas price indices.”
Similarly, respondents are required to report, at line 5, “what quantities were contracted
at prices that refer to published Next-Month Delivery gas price indices.” AGA requests
that the Commission modify Form No. 552 to state clearly that the transactions reportable
on these lines “are transactions that are contracted at prices that refer to daily or monthly
gas price indices regardless of whether such transactions are themselves for next-day
delivery or for next-month delivery.” 12 AGA claims that this clarification is necessary to
resolve ambiguity in the form that has led some Respondents to submit inaccurate
calendar year 2009 information.
10.

In particular, AGA argues that Order No. 704 was unclear as to whether the index-

priced transactions required to be reported in line 3 or 5 must themselves be next-day or
next-month transactions or whether all transactions that refer to daily or monthly gas
price indices should be reported even if they do not require gas to be delivered the next
day or month.
12

AGA Request for Clarification at p. 1.

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11.

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AGA states that Order No. 704-A appeared to clarify that only index-priced

transactions that were for next-day or next-month delivery were required to be reported in
lines 3 and 5, respectively. Among other things, AGA points out that Order No. 704-A
revised the instructions to Form No. 552 by specifically excluding from the reporting
requirements “Fixed Price transaction volumes that are not Next-Day Delivery or NextMonth Delivery.” 13 Thus, AGA argues, the fact only next-day and next-month fixed
price transactions were required to be reported suggested that, similarly, only index
priced transactions that were themselves next-day or next-month transactions were
required to be reported on line 3 or 5. AGA also points out that that Order No. 704-A
revised lines 3 and 5 of the Form No. 552 to specify that the transactions reportable on
line 3 were volumes “contracted at prices that refer to published Next-Day Delivery gas
price indices,” and that the transactions reportable on line 5 were volumes “contracted at
prices that refer to published Next-Month Delivery gas price indices.” AGA states that
the addition of the phrases “Next-Day Delivery” and “Next-Month Delivery” created
uncertainty as to whether those phrases applied to the transactions to be reported or only
modified the referenced gas price indices.
12.

Against this background, AGA argues that as market participants began to prepare

to file Form No. 552 to report their 2008 calendar year transactions there was continued
uncertainty as to the reporting of index-priced transactions. In some cases, AGA states,
filers included in line 3 or line 5 only those index-based transactions where the day of gas
13

Instruction VII(h).

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flow matched up with the index being used, and did not include, for example,
transactions that were priced based on an average of gas price indices or transactions for
future gas delivery based on historic gas price indices.
13.

Thus, AGA recommends that the Commission modify lines 3 and 5 of the Form

No. 552 to ask for “quantities that were contracted at prices that refer to daily price
indices and “quantities that were contracted at prices that refer to monthly price indices,”
and remove the references to Next-Day and Next-Month delivery.
14.

NiSource, 14 in its comments in response to the Technical Conference, also draws

the Commission’s attention to lines 3 and 5 on page 5 of Form No. 552. 15 NiSource
recommends revising them both so that each line begins “Of the amounts reported on
line 1, regardless of the date the transaction was executed, ...” 16 NiSource argues that
this revision is in keeping with Order No. 704-B, which stated, “[i]ndex-based

14

In this docket, NiSource refers to the following affiliated distribution
companies: Bay State Gas Company; Columbia Gas of Kentucky, Inc.; Columbia Gas of
Maryland, Inc.; Columbia Gas of Ohio, Inc.; Columbia Gas of Pennsylvania, Inc.;
Columbia Gas of Virginia, Inc.; Kokomo Gas and Fuel Company; Northern Indiana
Public Service Company; and Northern Indiana Fuel and Light Company, Inc.
15

These lines ask Respondents, respectively, “Of the amounts reported on line 1,
what quantities were contracted at prices that refer to published Next-Day Delivery gas
price indices?” and “Of the amounts reported on line 1, what quantities were contracted
at prices that refer to published Next-Month Delivery gas price indices?”
16

NiSource Comments at 6.

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transactions are reportable even if they are not for Next-Day Delivery or Next-Month
Delivery.” 17
2.
15.

Discussion

The Commission grants AGA’s request. In granting AGA’s request, we provide

clarification that also addresses the root of NiSource’s comments. The Commission’s
guiding principle is that all transactions that utilize a daily or monthly gas price index,
contribute to index price formation, or could contribute to index price formation must be
reported on Form No. 552. As Order No. 704-A stated:
[T]he focus of Form No. 552’s data collection is transactions
that utilize an index price, contribute to index price formation,
or could contribute to index price formation. Specifically, the
Commission finds that volumes reportable on Form No. 552
should include volumes that utilize next-day or next-month
price indices, volumes that are reported to any price index
publisher, and any volumes that could be reported to an index
publisher even if the respondent has chosen not to report to a
publisher. By ‘could be reported to an index publisher,’ we
mean bilateral, arms-length, fixed price, physical natural gas
transactions between non-affiliated companies at all trading
locations. 18
In Order No. 704-B, in response to a request for clarification regarding retail end-use
transactions, the Commission reiterated that “Form No. 552 requires reporting of

17

Order No. 704-B at P 15.

18

Order No. 704-A at P 13.

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volumes associated with transactions that utilize, contribute to, or could contribute to a
price index.” 19
16.

Transactions that utilize daily or monthly indices are reported on lines 3 and 5,

respectively, of Form No. 552. Transactions that contribute to, or could contribute to a
gas index are reported on lines 2, 4, 6 and 7 of Form No. 552. Consistent with the
purpose of Order No. 704 of providing greater transparency concerning the use of indices
to determine natural gas prices and how well index prices reflect market forces, the
Commission seeks information concerning all transactions that use indices, regardless of
any other aspect of the transaction. Thus, the Commission intended that all transactions
using indices be reported on lines 3 and 5 no matter when they were transacted. 20 Such
information is necessary to determine, for example, the volumetric relationship between
(a) transactions that use indices to determine natural gas prices; and (b) the fixed-price
next day or next month delivery transactions, NYMEX trigger agreements, including
NYMEX plus contracts, and physical basis transactions that form gas indices.
17.

Accordingly, we are modifying Form No. 552 to provide greater clarity. In

particular, as requested by AGA, the Commission eliminates the references to “Next-Day
Delivery” and “Next-Month Delivery” in page 4, lines 3 and 5 of Form No. 552 and
revises the question on page 4, line 3 to ask for “quantities that were contracted at Prices

19
20

Order No. 704-B at P 13.

Multi-year physical natural gas transactions that refer to an index would report
only those volumes that flowed during a given reporting year in the Form No. 552.

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that Refer to published Daily Indices*.” The question on page 4, line 5 is similarly
revised to ask for “quantities that were contracted at Prices that Refer to published
Monthly Indices*.” 21
18.

In addition, we are modifying the definitions in the Form No. 552 to provide

additional guidance to respondents concerning what transactions should be treated as
reportable transactions that refer to daily or monthly indices. In the revised definitions,
the Commission clarifies that transactions that refer to “weekly,” “yearly,” or other gas
price indices may, in fact, be based on daily gas price indices and are reportable on page
4, line 3 of Form No. 552. For example, a transaction that references a “weekly” index
that is formed by averaging multiple daily indices is reportable as referencing a daily
index. Similarly, a transaction that refers to a yearly index that is formed by averaging
twelve monthly indices would be reported as referencing a monthly index.
19.

The Commission also clarifies that the referenced index need not be solely a gas

index. Thus, a transaction that relies on a basket of indices which includes a gas index
and other daily or monthly indices such as coal, petroleum, LNG, inflation, etc. would
also be reportable on lines 3 and 5 of the Form No. 552. The Commission will ask
Respondents that use a basket of daily or monthly indices that includes gas and other
indices to identify the names of the indices used on page 4 in line 8 or 9. The

21

In particular, the revised Form No. 552, on page 4, line 3, asks for “quantities
that were contracted at prices that refer to published daily gas price indices” and on page
4, line 5 asks for “quantities that were contracted at prices that refer to published monthly
gas price indices.”

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Commission reminds Respondents that the NYMEX Natural Gas Futures price outside of
bidweek is not considered an index for purposes of Form No. 552 and is not to be
reported.22
20.

Finally, while all transactions referring to daily or monthly indices must be

reported without regard to whether they are for next day or next month delivery, the fixed
price transactions to be reported on lines 2, 4, 6 and 7 of the Form No. 552 are limited to
transactions which are for next-day or next-month delivery. The transactions to be
reported on those lines are transactions that contribute to gas index price formation, or
could contribute to gas index price formation. The only fixed price transactions that can
contribute to a daily price index are fixed price contracts for next day delivery. Similarly,
the only fixed price contracts that can contribute to a monthly gas price index are
contracts for next month delivery reported on lines 4, 6 and 7. The Commission is
modifying and adding definitions in the Form No. 552 to make clear that the terms
“Next-Day Delivery or Next-Month Delivery” only pertain to Fixed Price transactions

22

See Order No. 704 at P 113 (“Unlike in the NOPR, Form No. 552 no longer
requests information on NYMEX contracts that go to physical delivery because the
purpose of the form is to focus on fixed-priced spot transactions and how they are used.
Further, information attributable to such contracts is available from NYMEX.
Consequently, to reduce the burden on market participants, this instruction has been
removed and a market participant may not include volume information related to
physically-settled future contracts.”)

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which are reportable on lines 2 and 4, respectively 23 and to clarify what transactions on
the form do or may contribute to daily and monthly gas price indices.
B.

“Take or release” Transactions
1.

21.

Request for Clarification

AGA states that gas is sometimes purchased under long-term contracts that offer

the purchaser an option to either take (i.e.) purchase gas up to a contract maximum
quantity on a monthly or daily basis or release the gas back to the seller for it to market to
other purchasers. AGA refers to these contracts as “take or release contracts.” AGA
states that the orders in this proceeding do not specifically address how take or release
transactions are to be reported. AGA notes that, under the definition of “Physical Natural
Gas Transaction,” Form No. 552 provides that “[i]t is not necessary that natural gas
actually be delivered under the transactions, only that the delivery obligation existed in
the agreement when executed.” AGA believes that this raises the question whether the
option to take or release a volume of natural gas under a take or release contract
constitutes a “delivery obligation” within the meaning of “Physical Natural Gas
Transaction” such that the optional amount the purchaser could take must be reported, or
whether only the volumes that actually flowed under the contract should be reported.
22.

AGA recommends that the Commission clarify that respondents must report only

those volumes that actually flowed under a take or release contract. AGA believes that
23

Lines 3 and 5 of the schedule appearing on page 4 of Form No. 552 have also
been slightly modified to remove references to “Next-Day Delivery” and “Next-Month
Delivery.”

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the option to take or release a portion of the volumes of natural gas under such a contract
does not give rise to a delivery obligation that would make such volumes reportable. The
nature of the contract is such that some portion of the contract volumes may or may not
be delivered, and the exact amount of the volumes that must be delivered remains
unknown until the purchaser actually exercises the option. In other words, the delivery
obligation only arises when the option to take is actually exercised. Indeed, argues AGA,
the parties to a take or release contract contemplate that some volumes will not be
delivered at all. As a result, it is the quantity of gas that is actually delivered that has an
impact on pricing, according to AGA. AGA recommends that the Commission clarify
that the option to take or release a volume of natural gas under a take or release contract
does not constitute a “delivery obligation” within the meaning of a “Physical Natural Gas
Transaction” such that only the volumes that actually flowed under the contract are
reportable on FERC Form No. 552.
2.
23.

Discussion

The Commission grants AGA’s requested clarification. The Commission adopted

the reporting requirements in the Form No. 552 in order to monitor the use of price
indices in the natural gas market, including determining the volumetric relationships
between (a) the fixed-price for next day or next month delivery and other transactions
that form gas indices; and (b) transactions that use indices to price natural gas
transactions. For this purpose, the Commission seeks information concerning what
volumes of natural gas are purchased and sold in physical natural gas transactions based
on price indices and what volumes are purchased under fixed price contracts which could

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contribute to a gas index. Where gas is sold under long-term contracts which give the
purchaser an option to either take gas or release the gas back to the seller, the relevant
volumes to be reported are those that actually flowed under the contract during the course
of the year for which the report is being filed. An unexercised option to take gas under a
contract does not constitute a reportable physical natural gas transaction.
24.

The take or release contracts described by AGA differ from the contracts

addressed by the statement in the Form No. 552 definition of “Physical Natural Gas
Transaction” that “[i]t is not necessary that natural gas actually be delivered under the
transactions, only that the delivery obligation existed in the agreement when executed.”
That statement contemplated a contract which required the seller to deliver a specified
amount, without either party having any option to modify the amount to be delivered. By
contrast, the take or release contracts give the purchaser an option whether to purchase.
In the latter situation, only volumes actually delivered pursuant to the option should be
reported on the form if they use an index, contribute to or may contribute to gas price
formation.
C.
25.

Natural Gas Imported to the Lower 48 States

PG&E requests that the Commission clarify the reporting status of purchases of

natural gas outside of the United States for use in the United States. 24 In particular,
PG&E requests that the Commission clarify the reporting status of purchases by a Local
Distribution Company (LDC) of gas outside the United States for use in the
24

PG&E Request for Clarification at p. 1.

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United States. PG&E argues that it is not clear from Order No. 704 and the orders on
rehearing of Order No. 704 the extent to which gas purchase transactions by an LDC that
occur outside of the United States are reportable on Form No. 552. 25
26.

In Order No. 704-A, the Commission addressed whether transactions outside the

lower forty-eight states are reportable on Form No. 552. In relevant part, Order
No. 704-A provides that:
Regarding transactions involving possible international
transportation, we clarify that: (1) volumes originating
outside the lower 48 states and delivered at locations outside
the lower 48 states are not reportable; (2) volumes originating
from inside the lower 48 states and delivered outside the
lower 48 states are reportable; and (3) volumes delivered
inside the lower 48 states are reportable. Thus, any volumes
that originate or are delivered into the lower 48 states
should be reported on Form No. 552 to the same extent as
purely domestic volumes. 26
The Commission reaffirms the above statement from Order No. 704-A and clarifies that it
applies to all Respondents, including any LDC.
D.
27.

Unprocessed and/or Upstream Natural Gas

Order No. 704-A held that transactions involving unprocessed natural gas were not

reportable on Form No. 552. 27 The Commission made this holding in response to two
requests on rehearing of Order No. 704. Hess Corporation (Hess) requested that the order
25

Id. at p. 2. Furthermore, PG&E claims LDCs have been given conflicting
unofficial guidance by Commission Staff on this issue.
26

Order No. 704-A at P 74 (emphasis added).

27

Order No. 704-A at P 78.

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exclude entities engaged in transactions behind a processing plant priced pursuant to a
percentage-of-proceeds contract under which the producer is entitled to receive a
percentage of the proceeds realized by the buyer upon resale of the natural gas.
Similarly, the Oklahoma Independent Petroleum Association (OIPA) sought rehearing of
Order No. 704 so as to exempt producers of natural gas that sell wellhead gas at the initial
first sales point under a percentage of proceeds contract.
28.

On rehearing the Commission held, “transactions involving unprocessed gas

should not be reported on Form No. 552 and should not be counted when determining
whether an entity falls below the de minimis threshold. Transactions involving
unprocessed natural gas are not relevant to wholesale price formation.” 28 The
Commission did not, however, define the term “unprocessed natural gas.” Commission
Staff sought further input at the Technical Conference on industry practice in order to
determine whether upstream natural gas contributes to wholesale price formation. 29
29.

Through Staff’s outreach efforts and the below comments, the Commission finds

that there remains some confusion regarding the filing requirement and that Respondents
have interpreted the requirement in various ways. Commission Staff administering Form
No. 552 responded to a number of informal requests for clarification involving pipelinequality natural gas. For instance, some Respondents questioned whether pipeline-quality
natural gas that is sold directly into an interstate or intrastate natural gas pipeline without
28

Id.

29

Notice of Form No. 552 Technical Conference.

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processing involved “unprocessed natural gas” and, thus, need not be reported. Other
Respondents reported transactions of pipeline-quality gas under the assumption that
“unprocessed natural gas” was natural gas that required processing.
1.
30.

Comments

In general, commenters supported the unprocessed natural gas exemption, but

were disparate in their understanding of what the precise metes and bounds of the
exemption should be. Three commenters 30 simply request that the Commission
promulgate a clear and consistent definition. Others propose specific definitions of the
exemption, as laid out below. While some commenters seek a broadly-worded
exemption, others recommend that some volumes be understood not to fall under the
exemption.
31.

Hess limits its concern to that in its original filing: that the Commission exclude

transactions behind a processing plant priced pursuant to a percentage-of-proceeds
contract.
32.

DCP Midstream, LLC (DCP) recommends that Form No. 552 should be revised so

as to only apply to Dry Natural Gas, using the definition developed by the Energy
Information Administration (EIA):
Natural gas which remains after: (1) the liquefiable
hydrocarbon portion has been removed from the gas stream
(i.e., gas after lease, field, and/or plant separation); and
(2) any volumes of nonhydrocarbon gases have been removed
30

Services.

Occidental Energy Marketing, Statoil Natural Gas, and Summit Energy

Docket No. RM07-10-002

- 20 -

where they occur in sufficient quantity to render the gas
unmarketable. Note: Dry natural gas is also known as
consumer-grade natural gas. The parameters for
measurement are cubic feet at 60 degrees Fahrenheit and
14.73 pounds per square inch absolute. 31
Similarly, Independent Petroleum Association of America (IPAA) urges the Commission
to use EIA definitions, and calls for a blanket exclusion of transactions involving
unprocessed gas. IPAA argues that the Commission would still capture these volumes in
transactions downstream of the processing facility.
33.

Devon Energy Corporation (Devon) argues that the Commission has a choice

between a definition based on gas quality, and a definition based on the type of
transaction. Focusing on gas quality, it argues, runs the risk of requiring Respondents to
conduct a complex, burdensome well-by-well examination of their supplies. Instead, it
urges the Commission to clarify that the exclusion applies to Unprocessed Natural Gas
Transactions, a phrase that it defines as “transactions in which title transfers prior to the
physical act of process and [prior to when] the gas is physically delivered to a processing
[facility].” Devon states that its definition would exclude some upstream transactions
regardless of whether they reference an index or could be reported to an index.
Nevertheless, it argues, any such volumes would be reported at the first non-affiliate sale
downstream of the processing plant, so the Commission could adopt Devon’s proposal
without endangering its goal of facilitating price transparency in the wholesale market.

31

EIA, Energy Glossary, “D”, available at
http://www.eia.doe.gov/glossary/glossary_d.htm (May 19, 2010).

Docket No. RM07-10-002
34.

- 21 -

By contrast, Shell Producers 32 offer a three-part definition, which they argue is

consistent with the guidance that Commission Staff has provided:
(i) Title to the gas involved in the transaction passes to the
buyer at, or upstream of, a processing plant;
(ii) The gas is physically unprocessed at the time of the title
transfer. (Wellhead separation and treating is not defined as
processing for purposes of this exemption); and
(iii) Other transactions (not covered in (i) and (ii)) involving
unprocessed gas are also exempt from reporting if they do not
use, contribute to, or could contribute to a price index;
however, if an unprocessed gas transaction is downstream of
a plant (or no plant is in the vicinity) and does use, contribute
to, or could contribute to a price index, the transaction is
reportable.
Shell Producers also urge the Commission to clarify the difference between processing,
treating, and separating natural gas.
35.

Natural Gas Supply Association (NGSA), similarly, argues that there are situations

in which it might be appropriate to report unprocessed gas transactions. NGSA gives the
example of a firm-to-wellhead pipeline with long-haul shippers: producers often transfer
title to long-haul shippers upstream of the processing plant, but only sell the net quantity
of post-processing gas. NGSA argues that the parties to these transactions “should be
allowed to report these volumes.” This scenario aside, NGSA proposes to exempt
transactions that meet both of two criteria:

32

In this docket, Shell Producers refers to Shell Gulf of Mexico Inc., Shell
Offshore Inc., and SWEPI LP.

Docket No. RM07-10-002

- 22 -

1. Title to the gas involved in the transaction passes to the
buyer at, or upstream of, a processing plant; and
2. The gas is physically unprocessed at the time of the title
transfer.
2.
36.

Discussion

The Commission understands there is no uniform industry processing practice. As

such, it is not practical for the Commission to attempt to provide guidance designed to
address every situation involving natural gas that may be subject to processing.
However, the Commission provides the following clarification to assist Respondents in
meeting their Form No. 552 filing obligations.
37.

The goal of Order No. 704-A is to facilitate transparency of the price formation

process by collecting information concerning the use of indices to determine the price of
natural gas and certain fixed prices in natural gas markets. As stated in Order No. 704-A:
“the focus of Form No. 552’s data collection is transactions that utilize an index price,
contribute to index price formation, or could contribute to index price formation.” 33 In
response to Hess and OIPA’s request to exempt transactions behind a processing plant
priced pursuant to a percentage-of-proceeds contract under which the producer is entitled
to receive a percentage of the proceeds realized by the buyer upon resale of the natural
gas, the Commission in Order No. 704-A exempted unprocessed natural gas from the
Form No. 552 data collection because “[t]ransactions involving unprocessed natural gas

33

Order No. 704-A at P 13.

Docket No. RM07-10-002

- 23 -

are not relevant to wholesale price formation.” 34 Nothing has changed regarding our
exemption of percentage-of-proceeds contracts associated with unprocessed gas. While
this holding clearly exempts the particular transactions referred to by Hess and OIPA, it
has not been clear to some Respondents whether the Commission does, indeed, intend to
grant a broader exemption for unprocessed natural gas, and if so, how the Commission
defines unprocessed natural gas.
38.

The Commission clarifies that, within the context of Form No. 552, “unprocessed

natural gas” refers to natural gas that is not yet processed, but will be processed prior to
delivery to an end-user, and is sold on an unprocessed basis. The EIA defines
unprocessed gas as “natural gas that has not gone through a processing plant.” 35 EIA
further defines a processing plant as “a surface installation designed to separate and
recover natural gas liquids from a stream of produced natural gas … and to control the
quality of natural gas ….” 36 We apply the quoted definitions, with one exception. In
some instances, lean natural gas may emerge from the wellhead without the need for any
further processing to remove natural gas liquids before consumption. If this natural gas is
produced and eventually transported to end users without any processing then
transactions involving such natural gas are reportable at all stages, if the transactions use
34

Order No. 704-A at P 78.

35

EIA, Energy Glossary, “U”, available at
http://www.eia.doe.gov/glossary/glossary_u.htm (June 1, 2010).
36

EIA, Energy Glossary, “P”, available at
http://www.eia.doe.gov/glossary/glossary_p.htm (June 1, 2010).

Docket No. RM07-10-002

- 24 -

an index, or contribute to, or may contribute to gas index formation. Accordingly,
transactions involving natural gas that is both (1) not processed; and (2) upstream of a
processing facility (that is, volumes reasonably expected to travel through a processing
facility before consumption) are not reportable. 37
39.

Whether certain natural gas is lean, separated, or treated does not necessarily

resolve whether a transaction is reportable. Separation (the removing of water and
petroleum liquids) and treatment (the removing of other impurities) are distinct from
processing (the removal and recovery of natural gas liquids). Thus, wellhead separation
and treatment do not necessarily render natural gas reportable under Form No. 552. In all
instances, the question is whether the gas is of sufficient quality that it could contribute to
gas index formation. To the extent a Respondent is unsure as to whether a particular
transaction is reportable, it may request informal guidance from Staff or request waiver
from the Commission.
E.
40.

Cash-out, Imbalance, and Operation-Related Transactions

In Order No. 704, we required market participants to report sale and purchase

volumes related to cash-outs, imbalance make-ups, and operations. 38 These transactions
include transactions to resolve shippers’ transportation imbalances on pipelines and

37

The Commission understands that, in limited circumstances, a seller of natural
gas may not know whether the purchaser intends to process natural gas prior to
transportation to an end-user. In such case, the seller should report the relevant volumes
on Form No. 552.
38

Order No. 704 at P 107.

Docket No. RM07-10-002

- 25 -

LDCs. Such imbalances are often cashed out pursuant to provisions in the pipeline or
LDC tariffs based on specified price indices. The cash-out prices may be set at a
premium to the relevant price index in order to penalize shippers which incur significant
imbalances. These transactions also include operational purchases and sales by pipelines
and LDCs and production-related balancing activities, such as those between producers
and working interest owners.
41.

In Order No. 704, we stated that, while some volumes related to such transactions

are not utilized to create price indices, many volumes do refer to or utilize such indices,
and therefore these transactions should be included in the Form No. 552 reports. 39 In
Order No. 704-A, we reiterated, “It has been our experience that a significant number of
balancing, cash-out, and similar transactions include references to price indices.
Understanding the magnitude of this reliance on price indices is therefore a legitimate
policy goal.” 40
42.

After respondents filed their Form No. 552s for 2008, Staff reviewed the filings

and made preliminary findings that the volumes of natural gas identified as cash-outs are
relatively low in relation to the total reportable physical natural gas reported on Form
No. 552. Therefore, Staff sought through the Technical Conference and comment
process to better understand the burden and benefits of reporting these volumes. 41
39

Order No. 704 at P 108.

40

Order No. 704-A at P 61.

41

Notice of Form No. 552 Technical Conference.

Docket No. RM07-10-002
1.
43.

- 26 -

Comments

Almost every party that filed comments in response to the Technical Conference

commented on cash-out and related transactions, including seven trade associations and
six companies. 42 All of these Commenters urge the Commission to exclude cash-out and
imbalance transactions in Form No. 552, and generally provide the same arguments for
exclusion. Commenters claim that reviewing and reporting these transactions takes
roughly between one-third and one-half of the person-hours that the typical Respondent
devotes to Form No. 552. 43 Moreover, since cash-out and imbalance transactions are
fairly unpredictable and spread out over a wide range of contracts, the process of
reviewing them will not become significantly more efficient over time. In terms of
volume, however, cash-out and imbalance transactions are relatively minor: between 0
and 3 percent of most Respondents’ reportable volumes. 44 Volumes are low because
cash-out and imbalance transactions are netting transactions. Finally, commenters argue
42

The trade associations are AGA, Electric Power Supply Association (EPSA),
Interstate Natural Gas Association of America (INGAA), IPAA, NGSA, Northwest
Industrial Gas Users (NWIGU), and Process Gas Consumers Group (PGC). The
companies are Carolina Gas Transmission Corporation (CGT), DCP, Devon, NiSource,
Shell Producers, and Summit Energy Services (Summit).
43

Commenters state that they or their members devoted the following personhours, or proportion of person-hours, to cash-out and imbalance volumes. DCP: 90
person-hours or half their time; IPAA: 100 person-hours (data for one representative
member); NGSA: 50 person-hours; PGC: 32 percent; Shell Producers 30 person-hours.
44

As a percentage of total reportable volumes, Commenters state that they or their
members reported the following cash-out and imbalance volumes. AGA: under 3
percent; DCP: 1 percent; Devon: under 1 percent; IPAA: under 1 percent (data for one
representative member); NGSA: 0.5 percent; PGC: 1 percent; Shell Producers: zero.

Docket No. RM07-10-002

- 27 -

that cash-out transactions take place after the fact as a method of settling imbalances, and
thus cannot contribute to market price index formation.
44.

AGA agrees with the other commenters that cash-out and imbalance transactions

should be excluded from reporting on Form No. 552. AGA argues, however, that it may
be appropriate to continue reporting operational volumes unrelated to the resolution of
imbalances. For example, LDCs may purchase or sell wholesale volumes in advance to
address balancing concerns on their distribution systems. Such advance purchases should
continue to be reported, AGA argues, because the volumes are acquired through the
typical procurement channels as their end-use volumes, and would require
disproportionate effort to exclude from reports.
2.
45.

Discussion

Upon review of the comments in this docket, as well as Staff’s review of initial

year Form No. 552 submissions for 2008, we have reconsidered our position with regard
to cash-out and imbalance transactions. As several Commenters note, cash-out and
imbalance transactions represent an insignificant portion of the total reportable volumes
because the transactions, while frequent, do not accumulate to significant volumes for
any one Respondent. The Commission’s interest is in aggregated totals, so eliminating
cash-out and imbalance transactions has little effect on our mission to monitor aggregate
reliance on indices. Further, given the after-the-fact nature of accounting for these sorts
of operational transactions, we find that it may be unduly burdensome for some
Respondents to report these volumes as compared to any benefit achieved by such
reports. Accordingly, Respondents are no longer required to report cash-out, and

Docket No. RM07-10-002

- 28 -

imbalance transactions that refer to or use indices or that may contribute to gas indices.
However, as AGA requests, respondents should continue to report transactions related to
operational volumes unrelated to the resolution of imbalances. These operational volumes
are commonly used to maintain system pressure and provide line pack for pipelines and
other gas distributions systems.
F.
46.

Unit of Measurement

Form No. 552 required respondents to report transactions in trillions of British

Thermal Units (TBtu). However, this caused some confusion among filers whose
transactions were expressed in other measurement units, such as MMBtus (millions of
British Thermal Units) as to how to convert those transactions to TBtus. As a result,
converting data to TBtus led to a number of filing errors, and subsequent resubmissions
to correct the data were required. Accordingly, Staff sought feedback on whether to
change the reporting units to a more common magnitude or unit. 45
1.
47.

Comments

While several parties filed comments on the appropriate unit of measurement, the

commenters generally stated that the issue is minor relative to their other concerns.
IPAA, for instance, favors retaining TBtus in order to “minimize disruption,” but states
that “this recommendation is less urgent than” its other requests. 46 DCP and NGSA
briefly ask the Commission to continue with TBtus which, NGSA states, is reflective of
45

Notice of Form No. 552 Technical Conference.

46

IPAA Comments at 4.

Docket No. RM07-10-002

- 29 -

the way gas is purchased and sold in the wholesale market. NWIGU, however, asks the
Commission to switch to MMBtus or another more common unit. Summit, rather than
recommending a unit, instead recommends that in the event that the Commission
continues with TBtus, the instructions to Form No. 552 should provide more detail on
how to convert other units to TBtus.
48.

AGA does not reach a firm conclusion, but offers the most detailed analysis. In

favor of a new unit, it notes that the NAESB Base Contract Transaction Confirmation
Form uses millions of British Thermal Units (MMBtus) as its base unit, and defines an
MMBtu as equal to a dekatherm. It also suggests that “[r]eporting at the thousanddekatherm (or BBtu) level would provide … 100 times more detail than currently
reported.” 47 AGA warns, however, that either switch could prove to be too fine a level of
detail, leading to unnecessary revisions, or could lead to another round of conversion
errors as Respondents adjust to the new reporting magnitude. If no change is made, AGA
recommends that Form No. 552 include a definition advising Respondents that 1 TBtu is
equal to 1,000,000 MMBtu.
2.
49.

Discussion

Given the lack of interest in changing units, the Commission will retain the TBtu

as its unit of reporting. While Staff’s review of the initial Form No. 552 submissions
found numerous unit-conversion errors, it also appears that correcting those errors has
been relatively simple for Respondents, and that Respondents anticipate far fewer errors
47

AGA Comments at 6.

Docket No. RM07-10-002

- 30 -

going forward. We acknowledge, however, the confusion caused by using a unit that is
orders of magnitude greater than the units commonly used in most natural gas contracts.
50.

Accordingly, the revised Form No. 552 will include a brief description of the

proper conversion ratios. A TBtu is one trillion British Thermal Units; a BBtu is one
billion British Thermal Units; and an MMBtu is one million British Thermal Units. A
dekatherm (Dth) is, by definition, one MMBtu. One thousand Cubic Feet (Mcf) of
natural gas at standard pressure and heat content produces almost exactly one MMBtu of
heat, so these terms may be treated as equal for purposes of Form No. 552 unless doing
so would produce a significantly misleading result; similarly, one billion Cubic Feet
(Bcf) may be treated as equal to one TBtu. Thus, when filing Form No. 552, respondents
should convert as follows: 1 TBtu = 1,000 BBtu = 1,000,000 MMBtu = 1,000,000 Dth =
1,000,000 Mcf = 1 Bcf.
G.
51.

Blanket Certificates

In Order No. 704, the Commission required that each market participant, including

a de minimis market participant, state in the Form No. 552 whether it operates under a
blanket sales certificate issued under § 284.402 or § 284.284 of the Commission’s
regulations. 48 Section 284.402 grants to any entity which is not an interstate pipeline a
blanket marketing certificate, authorizing it to make sales for resale at negotiated rates in
interstate commerce of any category of gas that is subject to the Commission’s NGA

48

The current Form No. 552 implements this requirement by asking, “At any time
during the report year, did the Reporting Company operate under a Blanket certificate?”

Docket No. RM07-10-002

- 31 -

jurisdiction. Section 284.284 grants open access interstate pipelines a blanket certificate
to make unbundled sales.
52.

Order No. 704 stated that the requirement for market participants to state whether

they operate under a blanket sales certificate would give the Commission a measure of
the number of holders of such certificates. The Commission also stated that it would
permit some breakdown of market information between jurisdictional and nonjurisdictional components, which is useful for effective oversight and monitoring for
market manipulation.49
1.
53.

Comments

In its comments after the technical conference, NGSA seeks clarification of when

a market participant should be considered to be operating under a blanket marketing
certificate. It points out that § 284.402(a) automatically grants the blanket marketing
certificate to all market participants who are not interstate pipelines, without the need to
file an application for the certificate or for any Commission action. It also notes that
§ 284.402(d) authorizes abandonment under NGA section 7(b) of any sales service
performed under the certificate upon the expiration of the contractual term of that service
or upon termination of each individual sales arrangement. NGSA asserts that these
provisions create confusion as to whether a respondent has operated under the blanket
certificate in certain scenarios. NGSA explains:

49

Order No. 704 at P 91.

Docket No. RM07-10-002

- 32 -

It is not clear if a company that used a blanket marketing
certificate in year one for certain transactions, but didn't use
the certificate in subsequent years, continues to hold the
certificate in perpetuity (unless the certificate is rescinded by
the Commission); or whether a new certificate is allowed in a
subsequent year if the company needs to enter into a
transaction that requires a blanket certificate. If the future
transaction is several years later, should the company be
required to report in interim year Form 552’s that it holds a
blanket marketing certificate or is it acceptable for the
company to assume the original certificate was abandoned
when the original transactions ended; and a new certificate
commences with the subsequent transaction? 50
54.

NGSA recommends that the Commission clarify that the reporting requirement

only applies if the respondent actually used the blanket marketing certificate during the
reporting year. It requests clarification that this reporting requirement be limited to
market participants using a blanket marketing certificate above the de minimis volume.
2.
55.

Discussion

The Commission has determined to remove from Form No. 552 the requirement

that market participants state whether they operate under a blanket sales certificate issued
under either § 284.402 or § 284.284 of the Commission’s regulations. 51 Our experience
reviewing completed reports for the year 2008 indicates that this requirement does not
provide sufficiently useful and reliable information to justify its continuation.

50
51

NGSA Comments at 8.

The current Form No. 552 implements this requirement by asking, “At any time
during the report year, did the Reporting Company operate under a Blanket certificate?”

Docket No. RM07-10-002
56.

- 33 -

As illustrated by NGSA’s request for clarification, it can be difficult for market

participants to know whether they have operated under a blanket marketing certificate
during a reporting year. A market participant only operates under a blanket marketing
certificate when it makes a sale subject to our NGA jurisdiction. In order for a sale to be
within our NGA jurisdiction it must be a sale for resale in interstate commerce, which
does not qualify a “first sale” of natural gas, as defined in section 2(21) of the Natural
Gas Policy Act. 52 The first sale definition is very complicated. As the Commission
explained in Order No. 644:
Under the NGPA, first sales of natural gas are defined as any
sale to an interstate or intrastate pipeline, LDC, or retail
customer or any sale in the chain of transactions prior to a
sale to an interstate or intrastate pipeline or LDC or retail
customer. NGPA section 2(21)(A) sets forth a general rule
stating that all sales in the chain from the producer to the
ultimate consumer are first sales until the gas is purchased by
an interstate pipeline, intrastate pipeline, or LDC. Once such
a sale is executed and the gas is in the possession of a
pipeline, LDC, or retail customer, the chain is broken, and no
subsequent sale, whether the sale is by the pipeline, or LDC,
or by a subsequent purchaser of gas that has passed through
the hands of a pipeline or LDC, can qualify under the general
rule as a first sale of natural gas. In addition to the general
rule, NGPA section 2(21)(B) expressly excludes from first
sale status any sale of natural gas by a pipeline, LDC, or their
affiliates, except when the pipeline, LDC, or affiliate is
selling its own production. 53
52

The Natural Gas Wellhead Decontrol Act of 1989 removed all “first sales” from
our NGA jurisdiction.
53

Amendments to Blanket Sales Certificates, Order No. 644, FERC Stats. & Regs.,
Regulations Preambles 2001-2005 ¶ 31,153, at P 14 (2003) (Order No. 644). See also
Order No. 644 at P 22, clarifying the provision concerning an affiliate’s own production.

Docket No. RM07-10-002
57.

- 34 -

Thus, whether a market participant makes a sale pursuant to the blanket marketing

certificate depends on a number of factors, including whether: (1) the gas was previously
purchased and sold by a pipeline or LDC; (2) whether the purchaser will resell the gas;
(3) whether the seller is pipeline, LDC or an affiliate thereof; and (4) if so, whether the
seller is selling gas produced by any member of the affiliated group. Because the first
two of these factors involve events occurring before and after the relevant sale, it is
possible that a market participant may not have all the information necessary to
determine whether its sale is subject to NGA jurisdiction and thus made pursuant to the
blanket marketing certificate. For example, it may be particularly difficult for the market
participant to know whether the gas it is selling previously passed through the hands of a
pipeline or LDC. Moreover, for many market participants the relevant factors causing a
sale to be subject to our NGA jurisdiction will be present for some sales, but not others.
Thus, such market participants will be operating pursuant to the blanket marketing
certificate for only some portion of their sales, not all.
58.

As a result of these complications, the responses to the Form No. 552 blanket

certificate question have not provided useful information to the Commission. The
Commission had hoped that those responses would permit some breakdown of market
information between jurisdictional and non-jurisdictional components. However, given
the widespread confusion as to whether particular sales are jurisdictional, the market
participants’ statements in the Form No. 552 as to whether they operated under the
blanket marketing certificate do not appear reliable. Moreover, a simple statement of
whether the market participant made sales pursuant to the blanket marketing certificate

Docket No. RM07-10-002

- 35 -

does not reveal whether those sales constituted most, or only a very few, of the market
participant’s sales. Without that information, it is not possible to determine, with any
degree of accuracy, what proportion of gas sales are subject to our NGA jurisdiction. 54
In any event, information about whether sales are jurisdictional is not relevant to the
fundamental purpose of the Form No. 552, which is to obtain information concerning the
relative volumes of fixed price transactions that contribute or may contribute to a gas
index versus the volume of transactions that refer to indices. For all these reasons, the
Commission eliminates the requirement that market participants report whether they
make sales under a blanket certificate. Accordingly, the Commission will modify section
260.401 of its regulations to strike 18 C.F.R. § 260.401(b)(1)(i), which prevented blanket
certificate holders from benefitting from the de minimis exemption to the annual filing
requirement. The instructions on Form No. 552 shall be modified to reflect this holding.
H.
59.

Other Substantive Requested Clarifications

Several commenters, in responding to the issues raised at the Technical

Conference, took the opportunity to raise other issues related to Form No. 552. Some of
these comments concerned the timing and enforcement of the revised reporting
requirements, mainly in the form of the requests for extension of time noted below. In
addition, DCP states that it “does not support significant changes … that would require

54

Interstate pipelines filing the Form No. 552 reported insignificant volumes of
sales pursuant to the § 284.284 blanket certificate authorizing pipelines to make
unbundled sales. Few, if any, pipelines use that certificate, because almost all pipeline
exited the merchant business after Order No. 636.

Docket No. RM07-10-002

- 36 -

another burdensome process.” Similarly, IPAA requests an extension of the safe harbor
for any inadvertent errors, while NWIGU and NGSA request an extension of the safe
harbor period in the event that the Commission makes any substantive changes to Form
No. 552 in this or future orders.
60.

In response to DCP’s comments, we clarify that the present order does not require

Respondents who have under-reported or mis-reported their 2008 Form No. 552 to
correct their filings based on our guidance herein.
61.

We will not institute any additional safe-harbor period. However, as previously

stated, the Commission will focus any enforcement efforts on instances of intentional
submission of false, incomplete, or misleading information to the Commission, of failure
to report in the first instance, or of failure to exercise due diligence in compiling and
reporting data. 55
62.

NGSA also raises the issue of whether a Sarbanes-Oxley 56 signoff standard

applies to Form No. 552’s signature requirement. NGSA argues that it does not, and
urges the Commission to clarify that the entity signoff can be from any official that is
able to bind the company.
63.

The Commission does require Annual Corporate Officer Certification and

Sarbanes-Oxley signoff for some forms: e.g., Form Nos. 1, 2, 2-A, 6, 60, 3-Q, and 6-Q.
55
56

Order No. 704 at P 114.

Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745. In certain
situations, the Sarbanes-Oxley Act requires chief corporate officers to personally vouch
for the veracity, timeliness, and fairness of their companies’ public disclosures.

Docket No. RM07-10-002

- 37 -

These forms are financial reports that include balance sheets, income statements, and
similar financial data. However, we do not interpret the Sarbanes-Oxley Act to compel
the Commission to require such a standard for Form No. 552. At this time, we believe
that it is sufficient that the person signing Form No. 552 be one whose signature legally
binds the company with respect to the accuracy and completeness of the submission. The
instructions on Form No. 552 as well as the form shall be modified slightly to clarify this
holding.
64.

NiSource requests that the Commission exempt from reporting any “transactions

that occur under a local distribution company’s state-approved retail tariff that refer to
next-day or next-month price indices.” 57 NiSource states that gathering such information
is administratively burdensome for it because NiSource has several state-approved tariffs
among several affiliates and currently lacks “one consistent IT system that can be used to
pull this data.” 58 NiSource also states that some of these tariffs only rely upon index
prices when certain conditions are met, and that NiSource’s IT systems only record the
actual price and fail to record the reason why the price was charged. NiSource states that,
among its nine LDC affiliates, it has identified 26 state-approved tariff provisions that
refer to gas price indices, providing for different variations of cash-outs and a number of
imbalance situations.

57

NiSource Comments at 1.

58

NiSource Comments at 4.

Docket No. RM07-10-002
65.

- 38 -

We reject the requested exemption for state-approved retail tariffs. All of the

examples of reportable transactions that NiSource gives in its comments involve cash-out
or imbalance provisions. Accordingly, the exemption granted above in this order for
cash-out and imbalance transactions that reference a price index appears to sufficiently
address NiSource’s concerns.
III.

Other Non-Substantive Modifications

66.

In response to informal questions by Respondents and in an effort to make the

Form No. 552 more user friendly, we approve a number of other non-substantive
modifications to Form No. 552. These modifications do not affect the data to be
collected by Respondents and provided on the form. However, the modifications more
clearly identify the data to be provided and more understandable direction to
Respondents. A copy of revised Form No. 552 is attached to this order. 59
67.

For example, the instructions to Form No. 552 have been modified to allow

potential Respondents to more easily determine whether they must submit the form, the
types of transactions that are reportable, and the procedure to eFile the form. The
instructions also explain that typing the name of the company officer constitutes an
electronic signature of a company officer is acceptable under the Commission’s
regulations. 60 Additionally, the schedule on page three of Form No. 552 is modified to
59

The copy of the Form No. 552 in the Appendix should not be eFiled with the
Commission at this time. Staff will make available a fillable PDF Form No. 552 at a later
date.
60

See 18 C.F.R. § 385.2005(c).

Docket No. RM07-10-002

- 39 -

explain that each Respondent Reporting Company and Affiliate should be listed and
required to answer the questions on the schedule.
68.

The Commission believes that the modifications to Form No. 552 will provide

regulatory certainty and reduce erroneous filings by Respondents. We encourage
potential Respondents to utilize other Commission resources should they have questions
regarding the filing of Form No. 552. In addition to consulting the Form No. 552 FAQ at
http://www.ferc.gov/docs-filing/forms/form-552/form-552-faq.pdf and other filing
guidance at http://www.ferc.gov/docs-filing/forms/form-552/fil-instr.asp, Respondents
may request informal assistance through our Compliance Help Desk or by submitting
questions via e-mail to [email protected].
IV.

Information Collection Statement

69.

The Office of Management and Budget (OMB) regulations require that OMB

approve certain reporting, recordkeeping, and public disclosure (collections of
information) imposed by an agency. 61 The information collection requirements or Form
No. 552 respondents were approved under OMB Control No. 1902-0242. This order
further revises these requirements in order to more clearly state the obligations imposed
in Order No. 704. While the net result of these revisions is to decrease the overall burden
as well as the number of Respondents, because the Commission has made “substantive or

61

5 C.F.R. § 1320.

Docket No. RM07-10-002

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material modifications” to the information collection requirement, we will submit them
for OMB review under the Paperwork Reduction Act. 62
70.

The Commission identifies the information provided under Part 260 as contained

in FERC Form No. 552. The Commission solicited comments on the need for this
information, whether the information would provide useful transparency information,
ways to enhance the quality, utility, and clarity of the information to be collected, and any
suggested methods for minimizing respondents’ burden. Where commenters raised
concerns that information collection requirements would be burdensome to implement,
the Commission has addressed those concerns above in this order.
71.

In Order No. 704, the Commission estimated the burden for complying with the

Final Rule as follows:
Data
Collection
Part 260
FERC Form
No. 552
Annual
Reporting
Requirement

No. of
Respondents

No. of
Responses
per
Respondent

1,500

1 per year

Estimated
Annual
Burden
Hours per
Respondent
4 hours

Total
Annual
Hours For
All
Respondents
6,000

Estimated
Start-Up
Burden Per
Respondent
40 hours

The Commission further estimated average annualized cost for each respondent to be the
following:

62

See 44 U.S.C. § 3507(h)(3).

Docket No. RM07-10-002
FERC Form No. 552

Annual
Reporting Requirement

- 41 -

Annual Costs Annualized Costs
Annualized
Total
Capital/Startup Costs
(10 year amortization)
$400
$400
$800

The Commission did not change its burden estimate upon release of Order Nos. 704-A or
704-B.
72.

Several factors influence the Commission’s revised numbers. If the Commission

were making no changes to Order No. 704-B, then it would be revising the estimates
upward. Many Respondents reported unexpectedly high start-up burdens, primarily due
to the difficulty of gathering information on cash-out and imbalance transactions.
However, virtually every clarification or revision provided above in this order should act
to reduce the burden on Respondents. In addition, the experience in filing the initial
Form No. 552 reports should drastically reduce the start-up burden in responding to the
revised Form No. 552.
73.

Based on data collected for calendar year 2008, the number of Respondents was

1,109, not 1,500 as estimated. The elimination of the requirement for parties to file
information about their use of certain blanket certificates should reduce the number of
Respondents even further, as 369 Respondents filed solely to meet the blanket certificate
reporting requirement. As a result, the Commission estimates the burden for complying
with the Final Rule as follows:

Docket No. RM07-10-002
Data
Collection
Part 260
FERC Form
No. 552
Annual
Reporting
Requirement

- 42 -

No. of
Respondents

No. of
Responses
per
Respondent

740

1 per year

Estimated
Annual
Burden
Hours per
Respondent
4 hours

Total
Annual
Hours For
All
Respondents
2,9600

Estimated
Start-Up
Burden Per
Respondent
5 hours

Information Collection Costs: The average annualized cost for each respondent is
projected to be the following:

FERC Form No. 552

Annual
Reporting Requirement

Annual Costs Annualized Costs
Annualized
Total
Capital/Startup Costs
(10 year amortization)
$50
$400
$450

Title: FERC Form No. 552.
Action: Proposed Revised Information Filing.
OMB Control No: 1902-0242
Respondents: Business or other for profit.
Frequency of Responses: Annually.
Necessity of the Information: The annual filing of transaction information by market
participants is necessary to provide information regarding the size of the physical natural
gas market, the use of the natural gas spot markets and the use of fixed- and indexedprice transactions. The revisions to the filing reduce the burden to respondents.

Docket No. RM07-10-002
74.

- 43 -

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 Executive Director]
e-mail: [email protected]
Phone: (202) 502-8415, Fax: (202) 273-0873.
For submitting comments concerning the collection of information and the associated
burden estimate(s), please send your comments to the contact listed above and to:
Office of Information and Regulatory Affairs,
Office of Management and Budget,
725 17th Street, NW,
Washington, DC 20503
[Attention: Desk Officer for the Federal Energy Regulatory Commission]
Phone: (202) 395-4638, Fax: (202) 395-7285.
Due to security concerns, comments should be sent electronically to the following e-mail
address: [email protected]. Please reference OMB Control No. 1902-0242
and the docket number of this order in your submission.
V.

Document Availability

75.

In addition to publishing the full text of this document, except for the Appendix, in

the Federal Register, the Commission provides all interested persons an opportunity to

Docket No. RM07-10-002

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view and/or print the contents of this document, including the Appendix, 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 5:00 p.m. Eastern time) at 888 First
Street, NE, Room 2A, Washington, DC 20426.
76.

From FERC’s Home Page on the Internet, this information is available on

eLibrary. The full text of this document, including the Appendix, 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.
77.

User assistance is available for eLibrary and the FERC’s web site during normal

business hours from FERC Online Support at 202-502-6652 (toll free at 1-866-208-3676)
or email at [email protected], or the Public Reference Room at (202) 5028371, TTY (202) 502-8659. E-mail the Public Reference Room at
[email protected].
VI.

Extension of Time

78.

On May 24, 2010, the Secretary of the Commission issued in this docket an

extension of time until September 1, 2010 for Respondents to file Form No. 552 with
calendar year 2009 data. 63 The report for calendar year 2010 remains due on May 1,
2011, as per § 260.401(b)(2) of the Commission’s regulations.

63

See 18 C.F.R. § 375.302(b).

Docket No. RM07-10-002
79.

- 45 -

OMB regulations require a notice and comment period before changes to the Code

of Federal Regulations may take effect. Accordingly, this order’s revision to section
260.401 exempting blanket certificate holders with de minimis transaction volumes will
be effective September 30, 2010. In order to allow these entities to be exempt from the
2009 filing requirement, and also to allow other Respondents to review and revise their
data in light of the clarifications provided in this order, Respondents are granted an
extension of time until October 1, 2010 to file calendar year 2009 data.
List of Subjects for Part 260
18 CFR Part 260
Natural gas, Reporting and recordkeeping requirements.
The Commission orders:
(A)

AGA’s and PG&E’s requests for clarification are granted as described

(B)

FERC Form No. 552 is modified as discussed herein.

(C)

Form No. 552 Respondents are granted an extension of time until

herein.

October 1, 2010 to file calendar year 2009 data.
By the Commission.
(SEAL)

Nathaniel J. Davis, Sr.,
Deputy Secretary.

Docket No. RM07-10-002

- 46 -

In consideration of the foregoing, the Commission amends part 260, Chapter I, Title 18,
Code of Federal Regulations to read as follows:
PART 260 - STATEMENTS AND REPORTS (SCHEDULES)
1. The authority citation for part 260 continues to read as follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.
2. Sec. 260.401 is amended as follows:
a. Paragraph (b)(1)(i) is removed.
b. Paragraphs (b)(1)(ii) and (iii) are redesignated as paragraphs (b)(1)(i) and (ii)
respectively.
c. Paragraph (b)(1)(iii) is moved to (b)(1)(ii).

Docket No. RM07-10-002

- 47 -

Appendix