Steptoe & Johnson PLLC: FERC Considering Quarterly Reporting and Disclosure of Every Physical Natural Gas Transaction

Steptoe & Johnson PLLC: FERC Considering Quarterly Reporting and Disclosure of Every Physical Natural Gas Transaction

By Kurt Krieger 

On November 15, 2012, the Federal Energy Regulatory Commission ("FERC") issued a Notice of Inquiry ("NOI") - a pre-cursor to a possible notice of proposed rulemaking - seeking comments on whether it should require quarterly reporting and delayed public disclosure of "every natural gas transaction within [FERC's] jurisdiction that entails physical delivery for the next [gas] day or for the next month. . . ." Comments on this NOI must be filed with FERC within 60 days. In addition to considering FERC's new NOI, all companies engaging in the purchase and sale of natural gas should take a moment to ensure they are complying with FERC's similar and existing natural gas transaction reporting requirements embodied in FERC Form No. 552.

In the Energy Policy Act of 2005 ("EPAct 2005"), FERC was directed to "facilitate price transparency in markets for the sale or transportation of physical natural gas in interstate commerce" and enabled FERC to collect data from natural gas market participants. Under this natural gas market transparency provision, FERC issued a series of orders resulting in a new Form No. 552, and requiring "any buyer or seller of more than a de minimis volume of natural gas report volumes of relevant transactions in an annual filing using" Form No. 552 (generally, those buying or selling above 2.2 Bcf annually of wholesale gas for next day or next month delivery; and is a requirement that applies to more than just the traditional, FERC-regulated companies.) Other provisions in EPAct 2005 also further empowered FERC to prohibit certain market manipulation in natural gas markets. In addition to the data reported to FERC on Form Nos. 552, FERC independently reviews prices and transactions in data received from the Intercontinental Exchange ("ICE") and from NYMEX.

In the NOI, FERC states that it now "has identified additional areas of the natural gas market in which it believes increased transparency may be necessary for market participants to better understand the market activities that produce the prices that are reported to indices." FERC asserts that this additional information may be necessary to help the FERC detect and deter "market manipulation in the natural gas markets." In the NOI, FERC observes the deficiencies in currently available data, and seeks comment on the idea of requiring quarterly, electronic reporting of the following additional data elements for all jurisdictional transactions involving physical next day or month delivery:

  • Name, address and contact information of the trading company
  • Name and location of its holding company
  • Product traded (next day or month physical delivery)
  • Trade execution method (exchange or off-exchange and name of exchange or broker)
  • Fixed or index-priced settlement
  • Volume traded, location, price, date and time of the transaction
  • Name of the counterparty
  • Name of the index publisher to which each transaction is reported
  • Aggregated data that does not provide transaction specific details
  • Transactional details of off-exchange transactions of physical natural gas are unavailable
  • Form No. 552 data does not include price, date, location, or counterparty information
  • Form No. 552 data reports only on those monthly transactions conducted during bid week for next month delivery
  • Form No. 552 data does not identify the index publisher to who the transaction was reported
  • Interstate pipeline flow data is only available in the aggregate

Furthermore, FERC is "considering releasing the transactional information to the public on a quarterly basis, one month after it is reported to [FERC]."

The FERC's goal - as with all of its transparency initiatives - is to facilitate greater price transparency, provide for a better understanding of trading and pricing that contributes to daily and monthly price indices, and increase confidence in the indices and natural gas prices and markets. As the FERC considers its proposal, it seeks public comments on how to enhance natural gas market transparency, and comments on numerous specific questions set forth in the NOI. A copy of the NOI can be accessed here.

Kurt Krieger focuses his practice in the area of energy law with experience representing interstate natural gas pipeline companies, midstream companies and public utilities before the Federal Energy Regulatory Commission (FERC), and state and commonwealth public service (or utility) commissions.

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