Debra Ann PalmerAGA 8th Annual Energy Market

Regulation ConferenceAlbuquerque, NM, October 8, 2015

FERC imposes reporting and recordkeeping requirements upon LDCs in two circumstances:when the LDC is engaged in wholesale sales of natural gaswhen the LDC provides interstate transportation or storage service

under a blanket certificate issued pursuant to 18 C.F.R. § 284.224

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An LDC that is a Hinshaw pipeline with a certificate to provide interstate transportation or storage services under 18 C.F.R. § 284.224 is subject to reporting requirements found in 18 C.F.R. § 284.126(b)

Reports must filed on Form 459D – Quarterly Transportation and Storage Report for Intrastate Natural Gas and Hinshaw Pipelines

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FERC adopted Form 549D in Order No. 735*Section 311 of NGPA permits FERC to prescribe terms and

conditions of service Intrastate and Hinshaw pipelines face far less onerous

reporting requirements than interstate pipelinesPrior to Order No. 735, intrastate and Hinshaw pipelines were

required to submit certain data regarding transportation, but not storage, transactions annually and Form 549

* Contract Reporting Requirements of Intrastate Natural Gas Companies, 131 FERC ¶ 61,150, order on reh’g, 133 FERC ¶ 61,216 (2010)

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Order No. 735 found that additional reporting requirements were needed to increase transparency regarding transportation and storage service provided by intrastate and Hinshaw pipelines

Order No. 735 modifies the Commission’s regulations to require intrastate and Hinshaw pipelines to file Form 549D on a quarterly basis

Form 549D must be filed publicly

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Form 549D requires the following data to be submitted by intrastate and Hinshaw pipelines:shipper’s legal name and identification number, including any affiliate

relationship with the pipelinetype of service, such as firm or interruptible transportation or storage servicethe rate charged under each contractprimary receipt and delivery points, including industry codes where availablegas quantity the shipper is entitled to transport or storeduration of any firm contracttotal volumesannual revenues for each shipper, excluding revenues received for storage

services

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In addition to reporting requirements associated with the provision of interstate transportation and storage services by LDCs that are also Hinshaw pipelines, FERC imposes reporting and recordkeeping requirement on entities that participate in wholesale gas markets

LDCs that buy or sell gas at wholesale must file Form 552 on an annual basis and keep certain records regarding their wholesale sales

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FERC adopted Form 552 in Order No. 704* Congress added transparency provisions to NGA § 23 in

EPAct 2005 (15 U.S.C. § 717t-2) that require FERC:“to facilitate price transparency in markets for the sale or

transportation of physical natural gas in interstate commerce” andto “prescribe such rules” that “shall provide for the dissemination, on a

timely basis, of information about the availability and prices of natural gas sold at wholesale….”

Form 552 makes price formation in wholesale gas markets more transparent, permits FERC to monitor price indices, and enhances market integrity

* Transparency Provisions of Section 23 of the Natural Gas Act, 121 FERC ¶ 61,295 (2007), order on reh’g, 124 FERC ¶ 61,269 (2008), further order on reh’g, 125 FERC ¶ 61,302 (2008), further order on reh’g, 131 FERC ¶ 61,246 (2010).

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Form 552 covers transactions for which physical delivery is contemplated

Volumes should be reported in Trillion British Thermal Units (TBtus)

Form 552 must be filed publiclyDue on May 1 of each year for previous calendar year

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De minimis threshold: Any entity with “reportable” wholesale purchases or sales of 2.2 million MMBtu or more in a calendar year must submit Form 552

Entities that do no meet threshold but operate under blanket sales authority must submit more limited data on Form 552

Entities must disclose whether they report transactions to publishers of price indices

Affiliates may report separately or in the aggregateCustomers of asset managers must determine whether to file

Form 552 and asset managers may have separate obligations to file

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Based on dated of contracted delivery, rather than date of execution of contract

Physical Natural Gas Transaction: Obligation to deliver natural gas at a specified location and a specified time, but does not include futures contracts that are physically delivered; physical delivery is not required, but when executed, the contract must have include a delivery obligation

Reportable Physical Natural Gas Transaction: Refers to a pricing index, contributes to a pricing index, or could contribute to a pricing index

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Includes:transactions referring to daily or monthly price indicestransactions for fixed price next day or next month deliveryphysical basis transactionsvolumes related to book-outsroyalty in-kind transactionsgas provided for PTRpurchases and sales related to gathering and processingoperational volumes purchased by an LDC to manage the distribution

systeminternational transactions involving volumes either sourced from or

delivered to the lower 48 states

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Excludes: transactions among affiliates retail sales made pursuant to state commission tariffs fixed price transactions that are not for next day or next month delivery financially-settled transactions without physical delivery obligations sales or purchased of unprocessed gas that is likely to be processed imported LNG traded before re-gasification or exported LNG after liquefaction volumes related to cash-out and imbalance make-up

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Submission of Form 552 is mandatory, but FERC does not intend to penalize parties for inadvertent reporting errors

FERC does not require entities engaged in fixed-price transactions to report those prices to index publishers

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FERC issued an NOI on November 15, 2012 in Docket No. RM13-1

NOI sought comments regarding proposal to require quarterly reporting of every FERC-jurisdictional natural gas transaction calling for physical delivery for the next day or the next month

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Many parties, including AGA, filed comments opposing the NOI’s proposals

Objections focused on FERC’s limited jurisdiction over wholesale sales of natural gas; Wellhead Decontrol Act restricts FERC’s authority to “first sales”

Commenters noted that, due to FERC’s limited jurisdiction would lead to incomplete data regarding natural gas markets

FERC issued data requests to certain wholesale gas sellers shortly after NOI

FERC has taken no action on NOI

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Order No. 644 imposes codes of conduct and recordkeeping requirements on entities holding blanket sales certificates*

Goal is transparency in wholesale natural gas marketsReporting requirements found in 18 C.F.R. § 284.403:If a seller reports transactions to publishers of price indices, it must do

so accuratelyCertificate holders must retain all data and information upon which it

billed the prices for natural gas sold pursuant to blanket marketing certificates for a five-year period

* Amendments to Blanket Sales Certificates, 105 FERC ¶ 61,217 (2003)

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FERC imposes certain reporting and recordkeeping requirements upon LDCs that engage in FERC-jurisdictional transactions

Goal is transparency in wholesale sales and transportation markets

Any questions?

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Debra Ann PalmerSchiff Hardin LLP901 K Street, NW, Suite 700Washington, DC 20001(202) 778-6439dpalmer@schiffhardin.com

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