FERC, CFTC, and State Energy Law Developments

On February 16, 2012, FERC issued a Notice of Proposed Rulemaking proposing to amend its standards for pipeline business operations and communications[1] to incorporate By reference Version 2.0 of the business practice standards adopted By the Wholesale Gas Quadrant (WGQ) of the North American Energy Standards Board (NAESB) for natural gas pipelines.[2] FERC found that incorporating the new standards will help update and improve NAESB’s business practice standards to benefit the wholesale gas market and further the coordination between the natural gas and electric industries. Certain proposed standards addressing record retention requirements and posting information on operationally available and unsubscribed capacity will not be incorporated By reference because FERC found that they are inconsistent with existing regulations.[3]

On February 15, 2012, FERC issued a notice announcing that it is establishing a docket to solicit comments exploring the extent to which the natural gas and electricity markets are interdependent and how FERC should oversee coordination between such markets. FERC explained that the creation of Docket No. AD12-12-000 is in response to a request for comments issued By Commissioner Philip Moeller on February 3, 2012.

FERC explains in its notice that electricity generation will increasingly rely on natural gas. As a result, the interdependence of the electricity and natural gas markets warrants careful attention.

In a move that will save the industry about $400,000 each year, on January 19, 2012, FERC eliminated the semiannual storage reporting requirements for (i) interstate pipelines transacting under the Natural Gas Act and (ii) intrastate and Hinshaw pipelines that provide interstate services under section 311 of the Natural Gas Policy Act of 1978 and section 284.224 of the Commission’s regulations, respectively, finding them duplicative with other reporting requirements.[1] This elimination was the result of FERC’s continuing effort to streamline and update its regulations.

On January 6, 2012, FERC issued an order rejecting Portland Natural Gas Transmission System’s (Portland Natural) compliance filing addressing certain nonconforming service agreements.[1] In an order issued in October 2010, FERC found that the firm transportation (FT) agreement between Portland Natural and EnergyNorth Natural Gas (EnergyNorth) contained an impermissible deviation from Portland Natural’s FERC Gas Tariff.[2] Specifically, the agreement granted the shipper the option to reduce its firm Maximum Daily Quantity “in the event that Transporter enters into a . . . contract for firm transportation service with any other shipper, excluding Crown Vantage . . . that calls for delivery at the Berlin Station.”[3] FERC directed Portland Natural to either remove the provision or offer the right to reduce contract demand on a nondiscriminatory basis because such a provision could enable a shipper to avoid significant liability for future reservation charges.

On September 15, 2011, FERC issued a Notice of Proposed Rulemaking (NOPR) proposing to eliminate the semiannual storage reporting requirements for interstate and intrastate natural gas companies. These requirements are set forth in 18 C.F.R. § 284.13(e) for interstate natural gas companies and in 18 C.F.R. § 284.126(c) for section 311 and Hinshaw pipelines providing interstate storage service. FERC found that these reports are largely duplicative of other reporting requirements.

On August 16, FERC and NERC issued a joint report on the outages and curtailments that occurred in the southwest during the extraordinary cold snap in early February 2011.

The report summarizes the events that occurred in early February, describing the scope of the generator outages that occurred and the natural gas production that declined due to the extreme cold weather. As noted in the report, the cold weather led to the unavailability of approximately one-third of Electric Reliability Council of Texas (ERCOT) generation at one point during the event, and spot prices in the ERCOT market hit $3,000 per MWh. In addition, the loss of natural gas production resulted in the curtailment of 50,000 customers in the southwest.

Describing what it considers "a significant number of outages of generating facilities" along with disruptions in natural gas deliveries during the recent extreme cold weather across Texas and the Southwest, on February 14, the Federal Energy Regulatory Commission (FERC or Commission) directed the creation of a staff task force to conduct a broad inquiry into those events. Unlike the FERC-led investigation following the 2008 Florida Blackout, this investigation is not, at this time, intended to discover whether any regulations, requirements, or standards were violated. Instead, the investigation is intended to identify (1) the causes of the outages and disruptions and (2) the actions FERC might undertake to prevent a recurrence of these issues.

On January 20, 2011, the Federal Energy Regulatory Commission (FERC) issued Order No. 710-B, revising the financial forms, statements, and reports for natural gas companies contained in FERC Form Nos. 2, 2-A, and 3-Q to include functionalized fuel data (on pages 521a through 521c of those forms) and the amount of fuel waived, discounted, or reduced as part of a negotiated rate agreement.

On January 7, 2011, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) in Murray Energy Corp. v. FERC, No. 09-1207 (D.C. Cir. Jan. 7, 2011), denied a petition for review By Murray Energy Corporation (Murray) of Federal Energy Regulatory Commission (FERC) orders authorizing construction of Rockies Express Pipeline LLC’s (REX’s) REX-East pipeline. The court rejected arguments concerning agency delegation of authority, fulfillment of certificate conditions, and consideration of safety issues.

On October 21, the Federal Energy Regulatory Commission (FERC or Commission) denied rehearing of its ruling in Arizona Public Service Co. (APS), 132 FERC ¶ 61,064 (2010), where it announced that the prohibition against buy/sell transactions applies equally to intrastate pipelines engaged in NGPA Section 311 transactions and to Hinshaw pipelines. At the same time, the Commission issued a Notice of Inquiry (NOI) in Docket No. RM11-1 seeking comments on whether and how holders of firm interstate capacity on intrastate pipelines and Hinshaw pipelines can allow others to use their capacity, including whether buy/sell transactions should be permitted.  Read more…