National Gas Policy Act: Business practice standards,

[Federal Register: July 31, 2002 (Volume 67, Number 147)]

[Rules and Regulations]

[Page 49564-49567]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr31jy02-3]

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 284

[Docket No. RM96-1-022; Order No. 587-Q]

Standards for Business Practices of Interstate Natural Gas Pipelines

Issued July 23, 2002. AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule; order on rehearing.

SUMMARY: This order rules on requests for rehearing and clarification of the final rule issued on May 1, 2002 (67 FR 30788) that incorporated by reference Version 1.5 of the consensus natural gas industry standards adopted by the Wholesale Gas Quadrant of the North American Energy Standards Board (NAESB). In particular, the order addresses requests for clarification and rehearing related to the standards governing title transfer tracking.

EFFECTIVE DATE: The regulations became effective June 7, 2002.

FOR FURTHER INFORMATION CONTACT: Michael Goldenberg, Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 208-2294. Marvin Rosenberg, Office of Markets, Tariffs, and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 208-1283. Kay Morice, Office of Markets, Tariffs, and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 208-0507.

SUPPLEMENTARY INFORMATION:

Federal Energy Regulatory Commission Before Commissioners: Pat Wood, III, Chairman; William L. Massey, Linda Breathitt, and Nora Mead Brownell.

Standards for Business Practices of Interstate Natural Gas Pipelines, Order No. 587-Q; Docket No. RM96-1-022; Order on Rehearing and Clarification.

Issued July 23, 2002.

1. In Order No. 587-O,\1\ the Federal Energy Regulatory Commission (Commission) amended Sec. 284.12 of its open access regulations to incorporate by reference Version 1.5 of the consensus industry standards for the natural gas industry promulgated by the Wholesale Gas Quadrant of the North American Energy Standards Board (NAESB). These standards include requirements related to title transfer tracking (TTT) under which pipelines generally are responsible for accommodating title transfer tracking services at all pooling points.

   \1\ Standards For Business Practices Of Interstate Natural Gas Pipelines, Order No. 587-O, 67 FR 30788 (May 8, 2002), III FERC Stats. & Regs. Regulations Preambles, ] 31,129 (May 1, 2002).

2. On May 31, 2002, National Fuel Gas Supply Corporation (National Fuel) fileda request for clarification and rehearing relating to the adoption of the TTT standards. In particular, National Fuel contends that pipelines need only support TTT where the pipeline has a contractual relationship with a Title Transfer Tracking Service Provider or Third Party Account Administrator and that the only parties for whom pipelines need to accommodate TTT services are Title Transfer Tracking Service Providers or Third Party Account Administrators. As discussed below, the Commission provides clarification that a party requesting the processing of title transfers must have a contract with the pipeline, but denies National Fuel's request that pipelines be required to process title transfer nominations only from Title Transfer Tracking Service

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   Providers and Third Party Account Administrators. This decision is in the public interest because it will ensure that pipelines will not limit the processing of title transfers to select parties, but will provide the same service, without undue discrimination, to all shippers.

   Background

3. Title transfer is defined as ``the change of title to gas between parties at a location.'' \2\ Title Transfer Tracking (TTT) is defined as ``the process of accounting for the progression of title changes from party to party that does not effect a physical transfer of the gas.'' \3\ The two NAESB standards generally defining the pipelines' responsibility for processing title transfers are Standards 1.3.64 and 1.3.65.\4\ Standard 1.3.64 provides:

   \2\ 18 CFR 284.12(a)(1)(i), Standard 1.2.14 (Version 1.5).

   \3\ 18 CFR 284.12(a)(1)(i), Standard 1.2.15 (Version 1.5).

   \4\ 18 CFR 284.12(a)(1)(i), Standards 1.3.64 and 1.3.65 (Version 1.5).

   At a minimum, the Transportation Service Providers (TSP) should be responsible for accommodating Title Transfer Tracking (TTT) services at all points identified by the TSP as pooling points, where TTT services are requested. In absence of existing pooling points or in addition to existing pooling points where access to TTT activity is not reasonably accessible for supply receipt locations covered by an OBA, TSPs should be responsible for accommodating TTT

   at no less than one location.

   Standard 1.3.65 states:

   The Title Transfer Tracking services should be supported by means of the nominations, quick responses and scheduled quantities processes. At the Transportation Service Provider's election, the confirmation process may also be utilized with Title Transfer Tracking Service Providers within the TSP's system.

4. In Order No. 587-O, the Commission interpreted these standards as requiring pipelines to permit and process, on a non-discriminatory basis, transportation nominations (along with required responsive scheduling information) effecting transfers of title at pooling points by any party including shippers, poolers, or third party account administrators.\5\ The Commission provided the following example of the pipeline's obligations under the standards. In the example, Producer A aggregates 1000 Dth of gas from three receipt points at its pool at Pool 1, sells 1000 Dth to Marketer B at Marketer B's pool at Pool 1, and Marketer B sells 1000 Dth to Shipper C at the pooling point for transportation to Shipper C's delivery point under Shipper C's firm transportation contract. The Commission explained that, under the NAESB standards, the pipeline would have to process a transportation nomination from Producer A and the required scheduling responses to reflect the transfer of gas from Producer A's pool to Marketer B's pool. Other than processing the transportation nomination to reflect the in-place transfer of gas, the pipeline would be required to provide no other ``accounting services'' \6\ respecting the transfer of title.

   \5\ A Third Party Account Administrator is defined as a Title Transfer Tracking Service Provider other than the Transportation Service Provider. Standard 1.2.17 (Version 1.5).

   \6\ Standard 1.2.15 defines title transfer tracking as ``the process of accounting for the progression of title changes from party to party that does not effect a physical transfer of the gas.''

   [GRAPHIC] [TIFF OMITTED] TR31JY02.000

5. In its rehearing request, National Fuel maintains the Commission should clarify that pipelines need only support TTT where the pipeline has a contractual relationship with a Title Transfer Tracking Service Provider or

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   Third Party Account Administrator. National Fuel further contends that the only parties for whom pipelines need to accommodate TTT services are Title Transfer Tracking Service Providers or Third Party Account Administrators.

6. On June 7, 2002, Dominion Resources, Inc. also fileda request for rehearing or reconsideration and clarification of Order No. 587-O. This rehearing request was filedlate, and, accordingly, will not be addressed.\7\

   \7\ Order No. 587-O was issued on May 1, 2002, and Dominion Resources rehearing request was not fileduntil June 7, 2002, more than 30 days from the date of issuance. Under the Natural Gas Act and the Commission regulations, rehearing requests must be filed ``within thirty days after the issuance of such order.'' Natural Gas Act, Sec. 19, 15 U.S.C. 7174 (a); 18 CFR 385.713 (rehearing requests must be filedno later than 30 days after issuance of final decision or final order); 18 CFR 385.2007 (issuance is defined as the earliest of posting or public notice).

   Discussion

7. National Fuel maintains that the Commission's statement in Order No. 587-O (that pipelines must ``effect[] transfers of title at pooling points by any party including shippers, poolers, or third party account administrators'') can be read to require pipelines to process title transfers regardless of whether there is a contractual relationship between the party transferring title and the pipeline. National Fuel further argues that the Commission has incorrectly provided that pipelines must accommodate TTT services from other than Title Transfer Tracking Service Providers (and Third Party Account Administrators),\8\ and it urges the Commission to clarify that the obligation of a pipeline to accommodate TTT services arises in the context of services requested to be performed by Title Transfer Tracking Service Providers and Third Party Account Administrators.

   \8\ Under the standards, a ``Title Transfer Tracking Service Provider is a party conducting the title transfer tracking activity,'' and a ``Third Party Account Administrator is a Title Transfer Tracking Service Provider other than the Transportation Service Provider.'' Standards 1.2.16 and 1.2.17.

8. The Commission agrees with National Fuel that pipelines need only process title transfers from parties with contractual relationships with the pipeline. Pipelines need to be able to verify the parties with whom they deal. The obligation to process title transfer nominations, however, extends to any party with a contractual relationship with the pipeline, including, but not limited to, parties with transportation or storage contracts, pooling contracts or operational balancing agreements, Third Party Account Administrators, and agents of any of the foregoing.

9. The Commission does not agree with National Fuel's interpretation of the standards as providing that pipelines are required to accommodate title transfers only with Third Party Account Administrators, and denies the rehearing request. The Commission finds that, as discussed below, National Fuel's interpretation is not supported by the text of the standards. Moreover, adopting National Fuel's interpretation, which would limit the obligation of a pipeline to provide nomination services only for certain third parties, would lead to practical difficulties, and would be inconsistent with a pipeline's obligation to provide services in a not unduly discriminatory manner under the Natural Gas Act, and the Commission's regulations.

10. The two principal standards defining the pipelines' obligations to support title transfers are Standards 1.3.64 and 1.3.65. In relevant part, these standards provide that ``at a minimum, the Transportation Service Providers (TSP) should be responsible for accommodating Title Transfer Tracking (TTT) services at all points identified by the TSP as pooling points, where TTT services are requested,'' and that ``the Title Transfer Tracking services should be supported by means of the nominations, quick responses and scheduled quantities processes.'' These standards do not state that pipelines are to support title transfer tracking only with Title Transfer Tracking Service Providers or Third Party Account Administrators.\9\ These standards impose a general obligation on pipelines to accommodate title transfer tracking at pooling points through the nominations, quick responses and scheduled quantities processes.\10\ While other standards do require pipelines to accommodate title transfer tracking from Third Party Account Administrators, these standards do not provide that Third Party Account Administrators and Title Transfer Tracking Service Providers are the sole parties from whom pipelines are required to accommodate title transfer nominations. The ability to use Third Party Account Administrators is an additional option under the standards for obtaining title transfer tracking services; the standards do not make it the exclusive method of obtaining title transfer tracking services, nor do the standards specifically preclude shippers or others from undertaking the process of accounting for title transfers themselves.\11\

    \9\ The only relevant issue in National Fuel's rehearing request relates to Third Party Account Administrators, since the underlying assumption of National Fuel's rehearing is that the pipeline will not be establishing a Title Transfer Tracking Service Provider.

    \10\ In effect, the standards require pipelines to process a nomination that reflects the movement of gas from the pool of the party selling gas to the pool of the purchaser. In the prior example, at P 4, Producer A would be transporting gas from its Pool to Marketer B's pool.

    \11\ No pipeline or party other than National Fuel has contested the Commission's interpretation of the standards.

11. Moreover, the standards define a Third Party Account Administrator only as ``a Title Transfer Tracking Service Provider other than the Transportation Service Provider.''\12\ This definition does not specifically define or limit who can be a Third Party Account Administrator, nor does it preclude a shipper, pooler, point operator, or other firm with a contract with the pipeline from acting as a Third Party Account Administrator only with respect to its own sales. National Fuel fails to provide citation to a specific definition of the characteristics necessary qualify as a Third Party Account Administrator, nor does it explain why under the standards any party, including a shipper, pooler, point operator, cannot qualify as a Third Party Account Administrator with respect only to its own transactions. The definition of Third Party Account Administrator, therefore, is sufficiently broad to include any party wanting to account for its own title transfers and supports the conclusion that pipelines are required to process nominations reflecting title transfers from any party with a contractual relationship with the pipeline.

    \12\ Standard 1.2.17.

12. National Fuel asserts that standard 1.2.19 (which provides that ``[a] title transfer Nomination is a nomination line item requesting the service of Title Transfer Tracking and is sent by an Account Holder to a Title Transfer Tracking Service Provider'') and standard 1.2.16 (which defines a Title Transfer Tracking Service Provider as a ``party conducting the title transfer tracking activity'') support its view that title transfer tracking nominations will be made only to the Title Transfer Tracking Service Provider, not the pipeline. But these standards only define the method by which shippers choosing to use a Third Party Account Administrator will communicate with the Third Party Account Administrator; the standards do not specifically state that pipelines are required to process title transfers only from Third Party Account Administrators or that pipelines can refuse to process title transfers from shippers or other parties.\13\

    \13\ Indeed, as pointed out above, the standards would not specifically preclude shippers, poolers, or point operators from qualifying as Third Party Account Administrators in order to process their own title transfers.

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13. National Fuel also asserts that an interpretation requiring pipelines to accept ``nominations * * * effecting transfers of title'' from all comers would inappropriately require pipelines to assume the role of a Title Transfer Tracking Service Provider. However, as the Commission stated in Order No. 587-O, under the standards, pipelines are required only to process, on a non-discriminatory basis, nominations to reflect the in-place transfer of gas; they are not required to provide the other ``accounting'' services that constitute title transfer tracking.\14\ Under the standards, pipelines are required only to process in-place title transfers using the same nomination and confirmation procedures used to process other transportation nominations. National Fuel moreover has not shown that applying the same nomination processes to title transfers is unduly burdensome.

    \14\ Standard 1.2.15 defines title transfer tracking as the ``process of accounting for the progression of title changes from party to party.'' (emphasis added).

14. The Commission also rejects National Fuel's proposed interpretation of the standards because it would create practical difficulties for shippers. On some pipelines, the number of shippers that want to conduct title transfers or the overall number of such transactions may not be sufficient to economically support a third- party firm that offers accounting services for title transfers. Under National Fuel's interpretation, however, these shippers could be precluded from transferring title at pooling points even though they are willing to account for those transfers themselves.

15. In addition, National Fuel's interpretation of the standards ignores the requirement in the Natural Gas Act \15\ and the Commission's regulations \16\ that pipelines provide services connected with interstate transportation without undue discrimination. Under National Fuel's interpretation, pipelines would be discriminating in their handling of title transfer nominations by processing such nominations from Third Party Account Administrators or Title Transfer Tracking Service Providers, but refusing to provide the same service for other parties doing business on the pipelines. In implementing and interpreting NAESB's standards, the standards need to be interpreted in a way that is consistent with the Natural Gas Act and Commission regulations.\17\ The Commission finds that requiring pipelines to process title transfer nominations on a non-discriminatory basis is more consonant with its statutory and regulatory obligations than National Fuel's interpretation.

    \15\ 15 U.S.C. 717c(b) (``no natural gas company shall * * * (1) make or grant any undue preference or advantage to any person or subject any person to any undue prejudice or disadvantage, or (2) maintain any unreasonable difference in rates, charges, service, facilities, or in any other respect, either as between localities or as between classes of service'').

    \16\ 18 CFR 284.7 & 284.9 (``An interstate pipeline or intrastate pipeline must provide such service without undue discrimination, or preference, including undue discrimination or preference in the quality of service provided, the duration of service, the categories, prices, or volumes of natural gas to be transported, customer classification, or undue discrimination or preference of any kind'').

    \17\ See United Distribution Cos. v. FERC, 88 F.3d 1105, 1166 (D.C. Cir 1996), Independent Insurance Agents v. Hawke, 211 F.3d 638, 643 (D.C. Cir. 2000) (under the Chevron test, an agency's interpretation of a statute must be reasonable and consistent with the statute's purpose). See also Concrete Pipe and Products v. Construction Laborers Pension Trust, 508 U.S. 602, 629 (statutes are to be construed to avoid serious doubt of their constitutionality).

16. National Fuel states that it anticipates that it will raise its requested clarifications with NAESB and suggests that the Commission defer addressing these issues until NAESB has an opportunity to interpret the standards. The Commission will not defer ruling on National Fuel's rehearing request. Since the NAESB standards do not compel or support National Fuel's reading, and National Fuel's interpretation raises issues regarding compliance with statutory and regulatory requirements, the Commission finds that the requirement in Order No. 587-O that pipelines process title transfer nominations with all parties is more consistent with those responsibilities.

    The Commission orders: The request for clarification is granted and the request for rehearing is denied as discussed in the body of the order.

    By the Commission. Magalie R. Salas, Secretary.

    [FR Doc. 02-19277Filed7-30-02; 8:45 am]

    BILLING CODE 6710-01-P