Transparency INGAA Comments 7-11-07

 In exercising its new legal authority to require greater transparency in natural gas markets, the Commission proposes to revise its regulations to require that intrastate pipelines post daily the natural gas volumes flowing through their major receipt and delivery points and mainline segments.  The Commission also proposes to require that buyers and sellers of more than a de minimis volume of natural gas report annual numbers and volumes of relevant transactions to the Commission.  The Commission states that the proposed revisions are designed to “facilitate price transparency in markets for the sale or transportation of physical natural gas in interstate commerce.”  Id. 

INGAA is a non-profit trade association that represents the interstate natural gas pipeline industry, which, since the Commission’s Order No. 636, is engaged principally in providing natural gas transportation rather than sales service.  While the NOPR is directed principally at intrastate pipelines, and at buyers and sellers of the commodity in interstate commerce, the NOPR nevertheless has some implications of concern to interstate pipeline transporters.  Specifically: 

A.  Actual Flow Data for Interstate pipelines.  INGAA opposes the suggestion that interstate pipelines be required to report actual flow gas volume data.  The gas scheduling information that interstate pipelines currently post to their websites more accurately reflects the volume of flowing gas that is being marketed in interstate commercial transactions on their systems.  Including actual flow information on interstate pipelines in the calculation of the volume of gas available “in the markets for the sale or transportation of physical natural gas in interstate commerce” (NGA § 23 (a)(1)) would be misleading and counterproductive because, on any given day, that figure would include volumes used purely for pipeline operations – volumes that do not have an impact in the commercial markets.  With respect to no-notice service in particular, the fact that no-notice volumes may not show up in scheduled volumes on interstate pipelines is of no significance here.  No-notice service consists principally of storage withdrawals, which represent past commercial transactions that were scheduled (and thus posted) when the gas was injected into storage.

B.  Annual Reporting of Natural Gas Transactions.

            1.  Consistent with the discussion in the NOPR, the Commission should amend the regulatory text of proposed § 260.284 so that de minimis market participants are required to report annually only limited information regarding their index reporting practices.

            2.  As Morgan Stanley Capital Group recommends, the Commission should raise its proposed de minimis level to the equivalent of 200 NYMEX natural gas contracts to avoid capturing market participants that have no effect on natural gas market prices, even in specific geographic markets.

            3.  The Commission should clarify that “cash outs” and other purchases and sales related to the operation of an interstate pipelines are not covered by the rule.  Including the volume of such operational transactions would distort the quantity of gas available for trading in the interstate market.