Standards of Conduct Request for Expedited Clarification of INGAA 2-2-07

INGAA requests clarification or, in the alternative, rehearing of the FERC’s (Commission) Interim Rule issued on January 9, 2007.  The Interim Rule represents the Commission’s interim response to the decision of the United States Court of Appeals for the District of Columbia Circuit vacating Order No. 2004 series of orders and associated Standards of Conduct rule as applied to interstate natural gas pipelines and remanding the matter to the Commission

In the Interim Rule, the Commission states that it has adhered to “both the letter and the spirit” of the court’s decision in National Fuel The Interim Rule seeks to accomplish that goal by fashioning an interim rule under which the Standards of Conduct “do not apply to the relationship between natural gas transmission providers and energy affiliates.”  In addition, the Interim Rule addresses provisions of Order No. 2004 that were challenged by petitioners, but not directly addressed by the court other than through the mandate vacating Order No. 2004.  With respect to those, the Interim Rule seeks “to treat each of the sections challenged on appeal as if the court had held those sections infirm as well.”

In several important ways, however, the Interim Rule does not follow the National Fuel decision.  The Commission stated that it intended to “eliminat[e] the provisions of Order No. 2004 that were subject to appeal and instead adopt[] provisions originally promulgated in Order No. 497[.]”  Under Order No. 497, the standards of conduct applied only if:  (1) an affiliate performed “marketing or brokering” as defined in Section 161.2(c) of the regulations; and (2) the affiliate conducted transportation transactions on its affiliated natural gas pipeline Transmission Provider.  Order No. 2004 expanded the reach of the Standards of Conduct to encompass some affiliates selling natural gas regardless of whether that affiliate conducts transportation transactions on its affiliated pipeline.  On appeal, petitioners challenged this expansion of the Standards of Conduct.  To fulfill its stated goals for the Interim Rule, and to satisfy the requirements applicable to an interim rule issued without notice and comment, the Commission must promulgate revised regulatory text clarifying that an affiliate is subject to the Standards of Conduct only when it undertakes gas “marketing or brokering” activities and conducts transportation transactions on its affiliated natural gas pipeline Transmission Provider.  Alternatively, the Commission should grant rehearing on this issue. 

INGAA also requests that the Commission clarify or rehear the following aspects of the Interim Rule: (1) affiliates the Commission intended to exempt from the Order No. 2004 Standards of Conduct pursuant to Section 358.3(d)(6) should not be subject to the Interim Rule inadvertently; (2) Section 358.3(k) should be revised to make clear that, with respect to a natural gas pipeline Transmission Provider, a Marketing Affiliate means an affiliate or a unit that engages in “marketing or brokering” activities as those terms are defined at § 358.3(l); (3) Section 358.4(a)(6) should be revised to make clear that Order No. 2004’s restrictions on sharing risk management employees do not apply to natural gas pipeline Transmission Providers; and (4) new Section 358.5(c)(4)(ii) requires only the logging of tariff “waivers,” and does not require the logging of all “exercises of discretion” under the tariff.