FERC Winter Market Assessment

The Federal Energy Regulatory Commission (FERC) has issued its Winter 2012-2013 Energy Market Assessment.  The introduction:  "The U.S. natural gas market is well supplied, with production at almost forty-year highs and inventories approaching last year’s record. This should help keep natural gas prices relatively low into the winter assuming normal winter weather, and also help moderate electric prices. Low natural gas prices for most of 2012 resulted in high usage of natural gas to generate electricity, and staff expects power burn to remain high into the winter. High power burn, coupled with high seasonal natural gas demand from residential and commercial customers, could lead to higher than usual winter peak demand. This may in turn cause congestion on some pipelines in the Northeast which could lead to higher than expected prices."

For a copy, see here.

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Henry Hub Daily Spot Prices

Graphically, this says it all (from the Federal Energy Regulatory Commission's Natural Gas Markets: National Overview):

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FERC: Order No. 894

For pipeline affiliates bidding on capacity (from the summary):  "In this Final Rule, the Federal Energy Regulatory Commission revises its regulations governing interstate natural gas pipelines to prohibit multiple affiliates of the same entity from bidding in an open season for pipeline capacity in which the pipeline may allocate capacity on a pro rata basis, unless each affiliate has an independent business reason for submitting a bid. The Commission does not find it necessary to adopt its proposal in the Notice of Proposed Rulemaking that if more than one affiliate of the same entity participates in such an open season, then none of those affiliates may release any capacity obtained in that open season pursuant to a pro rata allocation to any affiliate, or otherwise allow any affiliate to obtain the use of the allowed capacity."  For a copy of the rule, see here.

Effective date:  December 23, 2011.

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FERC: 2011-2012 Winter Market Assessment

The Federal Energy Regulatory Commission (FERC) has issued its assessment for the upcoming winter season (see here).  There are a number of interesting charts, including this one on regional spot prices:

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FERC: 2010-2011 Winter Energy Market Assessment

The Federal Energy Regulatory Commission (FERC) has published its winter energy market assessment for 2010-2011.  It shows domestic natural gas production growth:

And comments:

Shale gas development has turned the economics of drilling for gas on its head.  The cost of developing shale gas has declined and well productivity has increased as drillers gained experience with the new technology. In some instances, the time needed to drill a shale gas well has plunged from weeks to just days. This has driven down breakeven costs for most gas shales to less than $4/MMBtu, and even lower where natural gas liquids such as propane, ethane and butane are present.

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Prohibited Buy/Sell Transaction?

The Federal Energy Regulatory Commission (FERC) held last month that the prohibition on buy/sell transactions applies equally to interstate open-access transportation services provided by intrastate pipelines under Section 311 of the Natural Gas Policy Act of 1978 and Hinshaw pipelines pursuant to blanket certificates issued under Section 284.224 of the FERC's regulations.  See Order Denying Request for Clarification and Granting Limited Waiver, Arizona Public Service Co. and Sequent Energy Management, L.P., Docket No. PR10-45-000 (Jul. 23, 2010).  This has generated substantial interest, including a request by several marketers for rehearing that asks the FERC to reverse its ruling expanding the buy/sell prohibition to non-interstate pipelines - which the FERC acknowledges is an issue that it has not previously addressed.

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FERC Order No. 712 Upheld

In Interstate Natural Gas Association of America v. FERC (No. 09-1016), the United States Court of Appeals for the D.C. Circuit recently upheld the Federal Energy Regulatory Commission's (FERC's) decision in Order No. 712 lifting the price ceilings for short-term capacity releases for shippers but retaining them for capacity sales by pipelines.  In general, the court found reasonable the distinctions made by FERC between pipelines and shippers when participating in the capacity market.

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FERC Order No. 704-C

The Federal Energy Regulatory Commission (FERC) issued Order No. 704-C recently to clarify certain aspects of Form 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."  Among other things, Order No. 704-C exempts from reporting any unexercised options to take gas under take-or-release contracts; addresses the exemption for unprocessed natural gas transactions (not all are exempt); and exempts cash-out and imbalance transactions.

For more, see here.

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Filing Extension for FERC Form 552

The Federal Energy Regulatory Commission (FERC) has granted a request to extend the filing deadline for 2009 Form 552 to September 1, 2010.  See here for more.

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FERC: State of the Markets Report 2009

Every year, the Federal Energy Regulatory Commission (FERC) issues a state of the market report reviewing significant events of the past year.  This year, the agency addresses what it characterizes as a new gas paradigm:

Not that long ago, it would take several months from the start of drilling to initial production.  Average-time-to-drill in 2009 was about 20 days.  Nowadays, production is almost certain before drilling begins, and well efficiency increases as producers learn the particular nuances of a given play.  Because shale production has many of the characteristics of gas in storage, companies have greater flexibility to produce gas when the market calls for it.  Production can be deferred without risking the integrity of the well.  Ending long production lead times and the risk of failure or loss may dramatically temper the gas market's systemic boom-and-bust cycle.

For a complete copy of the report, see here.  Review it all - it's pretty interesting.

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FERC Form 552

We mentioned previously that the Federal Energy Regulatory Commission (FERC) would be holding a technical conference to address certain issues identified by the FERC Staff regarding Form 552 (Transparency Provisions of Section 23 of the Natural Gas Act).  The Staff recently posted an agenda (including industry panelists), noting that the issues to be addressed include:  "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."

For more, see here.

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FERC Technical Conferences

The Federal Energy Regulatory Commission (FERC) has issued several notices regarding upcoming technical conferences:  for Electronic Tariff Filings, see here; for Guidance on the Preparation of Market-Based Rate filings, see here (with webcast available); and for FERC Form 552 potential changes, see here.

[Update:  If you are interested in the technical conference on FERC Form 552, it will now be webcast.  See here for the details.  (Moved up.)]

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Laser Marcellus

We reported previously on the petition filed by Laser Marcellus Gathering Company, LLC, for a declaratory order that pipeline facilities it intends to construct from Pennsylvania into New York are functionally gathering and therefore exempt from Federal Energy Regulatory Commission jurisdiction under Section 1(b) of the Natural Gas Act.  The Commission recently granted that petition, noting that the fact that the facilities crossed the Pennsylvania-New York border did not affect the exemption:

The history of Commission and court interpretation of Section 1(b), … makes clear that there is a distinction between gathering and transportation, such that the two functions are mutually exclusive. Consequently, otherwise non-jurisdictional production or gathering does not become jurisdictional on the basis that the facilities employed therefor cross a state line.

For a copy of the Commission's decision, see here (search Docket No. CP10-35).

Negotiated Rates (FERC)

The U.S. Court of Appeals for the District of Columbia Circuit recently rejected a shipper's attempt to require FERC approval for a pipeline's rate changes under a negotiated contract.  See Iberdrola Renewables, Inc. v. Federal Energy Regulatory Commission (Docket No. 08-1195) (Feb. 26, 2010) (see here - opinions).  The court found that:

The contract’s plain language settles this matter. Even if we were to consider this extrinsic evidence, it is of no help to Iberdrola. Both parties were aware that FERC had instructed Alliance to remove that language [i.e., language making rate changes subject to FERC review] from its tariff and to include it in the Transportation Agreement if the parties wanted FERC approval for any negotiated rate changes. They were, therefore, on notice that FERC would only review rate changes if the parties included such a provision in their contract. Their knowledge of how FERC would read the contract is the most probative piece of extrinsic evidence of the parties’ intent, and it cuts strongly against Iberdrola.

Because the negotiated contract did not include an express role for FERC, the court followed "the well-established rule that freely negotiated rates are presumed just and reasonable."

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FERC - Market-Based Rate Guidance

The Federal Energy Regulatory Commission (FERC) will be holding a technical conference on Wednesday, March 3, 2010, focusing on the mechanics of preparing an initial electric public utility market-based rate application and subsequent filings.  For a copy of the public notice, see here.

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FERC NOPR - Interstate Natural Gas Transmission

The Federal Energy Regulatory Commission (FERC) recently published a Notice of Proposed Rulemaking (NOPR) seeking comments on a proposal "to incorporate by reference the latest version (Version 1.9) of business practice standards adopted by the Wholesale Gas Quadrant of the North American Energy Standards Board (NAESB) applicable to natural gas pipelines."  See 74 Fed. Reg. 62261.

Comments are due January 11, 2010.

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FERC Investigates Pipeline Rates

The Federal Energy Regulatory Commission (FERC) has initiated Section 5 rate investigations for Natural Gas Pipeline Company of America, LLC (NGPL), Northern Natural Gas Company, and Great Lakes Gas Transmission LP.  The purpose of the investigations - to determine whether the companies over-recovered costs causing their rates to be unjust and unreasonable.

Very unusual.  For more, see here.

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FERC Cease and Desist Power

According to this article in the NYT, the Senate Energy and Natural Resources Committee has approved an amendment to energy legislation that would give the Federal Energy Regulatory Commission (FERC) authority to address suspected market manipulation through the issuance of cease and desist orders without a prior hearing on the matter.

[Update:  For more on upcoming hearings, see this article in the NYT.  (Moved up).]

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FERC 2008 Market Report

The Federal Energy Regulatory Commission (FERC) has issued its 2008 State of the Markets Report.  Among other things, it notes that the dramatic natural gas price levels and fluctuations seen last year can only be explained in part by market forces.  It also discusses how unconventional shale production is altering the nature of natural gas markets.  An interesting report (a copy can be found here).

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FERC Form 552

Last year, in a series of orders the Federal Energy Regulatory Commission (FERC) required certain market participants to report limited information on the previous calendar year's natural gas transactions by May 1st of the following year (see here for more information, including forms).  At the request of the Independent Petroleum Association of America and others, the deadline for compliance this year has been extended to July 1, 2009.

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FERC Capacity Release Update

In Order No. 712, the FERC revised Commission regulations governing the release of interstate capacity in light of changes in the market for short-term pipeline transportation services.  Among other things, it addressed market-based pricing for asset management agreements and the prohibition against tying and bidding requirements for capacity releases associated with state-approved open access programs.  The FERC recently denied rehearing generally of that order in Order No. 712-A, but also clarified several issues raised by marketers and others with respect to asset management agreements and state open access programs.

FERC Enforcement Decisions

The FERC recently issued two enforcement orders approving stipulations between the Office of Enforcement and natural gas marketing and asset management companies that resolve self-reported violations of the FERC's shipper-must-have-title requirements.  NorthWestern Corporation and NorthWestern Services, LLC, agreed to a civil penalty of $450,000.  Cornerstone Energy, Inc., agreed to a civil penalty of $325,000.

FERC Notice of Inquiry - Pipeline Reporting Requirements

The FERC has issued a Notice of Inquiry seeking comments on whether "the Commission should impose additional reporting requirements on (1) intrastate pipelines providing interstate services pursuant to section 311 of the Natural Gas Policy Act of 1978 (NGPA) and (2) Hinshaw pipelines providing interstate services subject to the Commission's Natural Gas Act (NGA) jurisdiction pursuant to blanket certificates issued under s. 284.224 of the Commission's regulations."  More specifically, the Commission is asking whether it should require section 311 and Hinshaw pipelines to post shipper transaction details in a manner similar to that required of interstate lines under the Commission's regulations.

Comments are due 60 days from the date the NOI is published in the Federal Register.

FERC Terminates Fuel Retention Inquiry

Late last year, the FERC issued a Notice of Inquiry (NOI) seeking comments on whether it should change its current policy on the in-kind recovery of fuel and lost-and-unaccounted-for gas by interstate pipelines.  That policy, in general, allowed pipelines two options - One, to establish a fixed fuel retention percentage that would remain unchanged until the pipeline filed a subsequent NGA Section 4 rate case.  Two, to establish a tariff mechanism that allowed for periodic adjustments to the fuel retention percentage outside of a general NGA Section 4 rate case, but which included a true-up mechanism for over- and under-recoveries of fuel.  The NOI asked whether the Commission should change it policy for the purpose of minimizing over-recoveries and provide greater incentives to reduce fuel loss.

In response, shippers and end-use customers generally urged the Commission to require all pipelines to use a tracker and true-up mechanism to protect against the over-recovery of costs.  Pipelines, on the other hand, urged the Commission to retain its current policy and the flexibility it provided.

After reviewing the comments, the FERC has decided to terminate the NOI and consider changes on a case-by-case basis.  To require all pipelines to adopt a fuel tracker and true-up mechanism:

 [T]he Commission would have to act under NGA section 5 to require pipelines which currently have fixed fuel charges established in general section 4 rate cases to adopt trackers and true-up mechanisms.  In order to do that, the Commission would have to find that all fixed fuel charges are unjust and unreasonable and that the only just and reasonable method for pipelines to recover fuel costs is through a tracker with a true-up mechanism.  The commenters have failed to provide the Commission a basis to take such generic action under NGA section 5.