On Jan. 12, the Federal Energy Regulatory Commission (FERC) issued data requests to four interstate pipelines that are proposing incremental recourse rates in pending Natural Gas Act (NGA) Section 7 certificate applications.1 This action was significant because it appears to be FERC’s first step toward responding to tax law changes in the Law to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, also known as the Tax Cuts and Jobs Act of 2017 (2017 Tax Act).
FERC permits pipelines and public utilities to recover their actual or potential tax expenses in their regulated rates. The 2017 Tax Act reduces the corporate tax rate to 21 percent and allows certain investments to receive bonus depreciation treatment. FERC asked each pipeline to 1) explain how the 2017 Tax Act impacts its proposed project cost of service and the resulting initial recourse rate proposal; 2) provide an adjusted cost of service and recalculated initial incremental recourse rates; and 3) provide all supporting work papers and formulas.2 (more…)
This week’s enforcement update covers:
- CFTC enters into non-prosecution agreements with former Citigroup Global Markets Inc. traders in spoofing case;
- CFTC orders $5.2 million in civil penalties for wash sales designed to generate exchange rebate fees;
- FERC hosts technical conference on developments in natural gas index liquidity and transparency;
- Senate Energy & Natural Resources Committee releases new energy bill;
- President Trump announces intent to nominate Richard Glick as FERC Commissioner;
- FERC Enforcement and City Power file status report on settlement; and
- Judge grants Kraft Foods motion to compel discovery from the CFTC.
On Wednesday March 30, 2017, the North American Energy Standards Board (“NAESB”) Wholesale Gas Quadrant (“WGQ”) Contracts Subcommittee voted to move forward with the development of a Mexican Addendum to the NAESB Base Contract for the Purchase and Sale of Natural Gas. Developing a Mexican Addendum should make Mexico a more desirable market for natural gas trading by providing greater certainty about the legal structure of gas trades.
As part of the 2017 NAESB WGQ Annual Plan, the WGQ Executive Committee proposed, and the Board approved, a proposal to review whether to develop a Mexican Addendum. In December 2016, WGQ members voted not to pursue a Mexican Addendum. However, that meeting was not well-attended and several parties who had advocated for creating a Mexican Addendum were not present.
The Texas-based oil and natural gas equipment company National Oilwell Varco, Inc., and its subsidiaries Dreco Energy Services, Ltd. (Dreco), and NOV Elmar (Elmar) (collectively NOV) recently settled potential civil penalties with the U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce Bureau of Industry and Security (BIS) and executed a nonprosecution agreement (NPA) with the U.S. Department of Justice (U.S. Attorney’s Office for the Southern District of Texas). NOV, which did not voluntarily disclose the alleged violations to the government, will pay a total of US$25 million to resolve the charges.
On October 6, 2016, Sajid Javid, U.K.’s Secretary of State for Communities and Local Government, overruled local objections by granting Cuadrilla Resources permission for up to four horizontally-drilled, high-volume hydraulically-fractured wells to produce natural gas from shale formations in North Lancashire, U.K. The decision marks Britain’s first approval of new wells using the controversial method to produce natural gas from shale since Cuadrilla’s exploratory drilling was halted due to seismic activity in 2011. Earlier this year another producer was granted permission to “frack” a well it had already drilled in 2013.