FERC Clarifies Reporting Requirements for Natural Gas Transactions
On Thursday June 17, 2010, FERC issued a clarification order regarding the terms and features of Form No. 552, the annual report for natural gas transactions (Transparency Provisions of Section 23 of the Natural Gas Act, Order No. 704-C, 131 FERC ¶ 61,246 (2010) (“Order No. 704-C”)). Under Form No. 552, market participants must report their physical natural gas transactions that either (a) use an index price, (b) contribute to an index price, or (c) could contribute to an index price. Market participants filed the first round of Forms No. 552 in July 2009 reflecting calendar year 2008 transaction data; since then, the Commission and Staff have undertaken to refine certain aspects of the Form No. 552 submissions.
In Order No. 704-C, the Commission has clarified several terms used on Form No. 552, and has issued a new version of the form. The modifications/clarifications include:
- Clarification that Form No. 552 submissions should include transactions that use a daily or monthly index price, even if the transaction itself is not for next-day or next-month delivery (Order No. 704-C at P 15);
- Clarification that the terms “Next-Day Delivery or Next-Month Delivery” as used on Form No. 552 pertain only to fixed-price transactions (Order No. 704-C at P 20);
- Clarification that the only volumes to be reported on Form No. 552 are those volumes that actually flow (Order No. 704-C at P 23). Thus, under a “take or release” contract, if the volumes are released back to the seller rather than purchased, such volumes should not be reported on Form No. 552;
- Clarification that “within the context of Form No. 552, ‘unprocessed natural gas’ refers to natural gas that is not yet processed, but will be processed prior to delivery to an end-user, and is sold on an unprocessed basis.” (Order No. 704-C at P 38). On Form No. 552, transactions involving unprocessed gas are not reportable. However, transactions involving lean natural gas, which may not require any processing, should be reported on Form No. 552 (Order No. 704-C at P 38). If the seller does not know whether the purchaser intends to process the gas prior to transporting it to an end-user, such volumes should be included on Form No. 552 (Order No. 704-C at n. 37).
- Elimination of the requirement that cash-out and imbalance transactions be included on Form No. 552 (Order No. 704-C at P 45). The Commission found that such volumes were insignificant. However, transactions involving operational volumes, such as those used to maintain system pressure, should be reported on Form No. 552 (Order No. 704-C at P 45).
- Modification of Form No. 552 to include the conversion ratios for various reporting units (Order No. 704-C at P 50). Volumes on Form No. 552 are reported in trillions of British Thermal Units (“TBtu”). Form No. 552 will now show how to convert other units commonly used in the natural gas industry (such as dekatherms, or Billion cubic feet) into TBtu;
- Elimination of the requirement that a market participant state on Form No. 552 whether it operates under a blanket sales certificate issued pursuant to either 18 C.F.R. § 294.402 or § 284.284 (Order No. 704-C at P 55); and
- Other, non-substantive, modifications to Form No. 552 to make it more user-friendly (Order No. 704-C at P 66-68).
The Commission declined to extend the safe-harbor for respondents who under-report or mis-report on their Forms No. 552 (Order No. 704-C at P 61). However, the Commission clarified that it “will focus any enforcement efforts on instances of intentional submission of false, incomplete, or misleading information to the Commission, of failure to report in the first instance, or of failure to exercise due diligence in compiling and reporting data.” (Order No. 704-C at P 61).
The terms of Order No. 704-C will go into effect on September 30, 2010. Accordingly, the Commission has extended the deadline for submitting Form No. 552 with 2009 transaction data until October 1, 2010 (Order No. 704-C at P 79). Order No. 704-C can be found here: http://www.ferc.gov/whats-new/comm-meet/2010/061710/G-1.pdf; a revised copy of Form No. 552 can be found here: http://www.ferc.gov/docs-filing/forms/form-552/fil-instr.asp