FERC Notice of Inquiry on Market Transparency Extended to February 12

by Ballard Spahr LLP
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The Federal Energy Regulatory Commission (FERC) has extended the deadline for comments on the Notice of Inquiry (NOI) regarding Enhanced Natural Gas Market Transparency until February 12, 2013. Initially, the comments on the NOI were due on January 22, 2013; however, a coalition comprising a broad cross-section of energy industry trade associations and led by Ballard Spahr attorneys Dena Wiggins and Jack Semrani requested additional time to respond, given the importance of the issues raised in the NOI.

The NOI seeks comments regarding any changes that should be made to FERC regulations under the natural gas market transparency provisions. Any such changes are expected to affect all natural gas market participants, including producers, marketers, pipelines, LDCs, and end users. FERC is considering whether quarterly reporting of every jurisdictional natural gas transaction that entails physical delivery for the next day (i.e., next day gas) or the next month (i.e., next month gas) would provide useful information for improving natural gas market transparency. FERC is also considering whether these reporting requirements should be in addition to, or in lieu of, the existing Form No. 552 reporting requirements.

FERC stated that this information may be necessary for market participants to better understand the market activities that produce the prices that are reported to indices. FERC also believes this information may be necessary to facilitate price transparency and assist FERC in detecting and deterring market manipulation.

The NOI raises difficult issues regarding FERC’s limited statutory authority to collect natural gas sales data in a robust natural gas commodity market in which most transactions are outside of FERC's regulatory control. The NOI also raises practical issues regarding the difficulty (and perhaps impossibility) of determining which natural gas transactions are FERC-jurisdictional and which ones are not in light of the web of rules and the complex history setting forth the extent of FERC’s jurisdiction over natural gas transactions in a largely decontrolled environment. In addition, many industry participants are questioning the ultimate usefulness of data that appears to pertain only to a small slice of the market.

Given the lack of clarity in the NOI as to the precise reason why the additional data is needed, and given the statutory restrictions on FERC's authority, many industry participants are struggling with the tension between any claimed need for the additional data and the actual burden on the industry, and are questioning whether FERC should proceed further with the NOI.

If you have any questions or comments, please contact Dena E. Wiggins at wigginsd@ballardspahr.com or 202.661.2225, or Jack N. Semrani at semranij@ballardspahr.com or 202.661.7640.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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