Your Annual FERC Form Reporting Guide - From Data to Decision

More than ever before, the various esoteric financial filings that the Federal Energy Regulatory Commission (FERC) requires regulated pipeline facilities to complete on a quarterly basis are in the limelight. In response to FERC's actions motivated by the Tax Cuts and Jobs Act (Tax Act), as well as FERC's changes to its tax allowance policies affecting Master Limited Partnerships (MLP), industry stakeholders, including developers, shippers and investors, are scrambling to determine the impact on their assets and to spot new found competitive opportunities. To move from data to decision faster, decision makers must understand FERC's reporting requirements.

The FERC requires various quarterly financial filings from both natural gas and liquids pipelines. In addition, both inter- and intrastate natural gas pipelines are required to file a list of firm transportation contracts, along with the contracts' terms, on a quarterly basis. And in the fall, the FERC will require that certain companies file the Form 501-G -- designed to collect the financial information required to evaluate the impact of the Tax Act and MLP tax policy change, as described in our latest Special Report. These filings are a component of the data, models and expert analyses that our team provides to our customer base. So, what are the filing requirements for these "forms"?

Natural Gas Reporting - Needle in a Haystack

Natural gas pipeline assets, as distinct from their corporate or partnership owners, report their financial and operational data on the FERC's Form 3-Q, Form 2 or Form 2-A. Why so many different forms? The Form 3-Q is filed following the first, second and third quarters. Following the fourth quarter, the Form 2 is filed by "major" filers, while the Form 2-A is filed by "minor" filers. The FERC established the distinction between "major" and "minor" based on the dekatherms of gas transported or stored. In particular, if a natural gas company whose combined gas transported or stored for a fee exceeded 50 million dekatherms in each of the previous three years, then the company must submit FERC Forms 2 and 3-Q. Companies that do not meet that filing threshold, but which have total gas sales or volume transactions exceeding 200,000 dekatherms in each of the previous three calendar years, must submit FERC Form 2-A.

But perhaps more importantly, when exactly are these filings available? And what do they include? These forms are filed after the conclusion of a quarter, which, for the annual Form 2 and 2-A filings, is April 18. Given the recent changes wrought by the Tax Act and the revised MLP tax policies, many stakeholders are anxiously awaiting the company filings. The FERC Form 3-Q must be filed by major pipelines within 60 days after the reporting quarter, while minor pipelines must file within 70 days after the reporting quarter. This means that, rather than becoming available in bulk on one day, completed forms will trickle in over several weeks. Although some pipelines make an effort to file early, others file well after the deadline. To receive notifications when Form 2s are filed by companies of interest -- and the filing began over a week ago -- our customers rely upon our alerting system. Shortly after the companies file, the data is parsed, analyzed and included in our platform.

What's in these mystical forms? The forms include everything from typical financial sections, such as an income statement, balance sheet and statement of cash flows, to industry specific accounting. For example, quantities of shipper supplied gas are reported on a monthly basis with an annotation of whether or not the pipeline's revenue came from negotiated, discount, or recourse rates. These forms also capture consultative services payments, including payments for contractors employed for construction and the law firms engaged for representation. This data can be paired with firm contract data available on the Form 549B in order to get a clear lens into the success of a pipeline's operations, particularly when it comes to revenues. The Form 549B, which is forward-looking and filed on the first day of the quarter, identifies those contracts which are subject to a negotiated rate, which we've enriched with actual rate data by diving into tariff and rate proceedings.

Form 2, 2-A and 3-Q Filings

Liquids Reporting - Not the Same as Gas

To the chagrin of many market participants, liquids pipeline operating assets(which FERC refers to as "oil pipelines," although such pipelines include crude oil, refined products and natural gas liquids pipelines)are prohibited from filing firm transportation and storage contract data. Like their natural gas counterparts, however, they are obligated to file a Form 6 following the fourth quarter and a Form 6-Q following each other quarter. Similar to the Form 2, the Form 6 must be filed by April 18 and Form 6-Q must be filed for each calendar quarter within 70 days of the end of the reporting quarter. Newly established entities must use projected data to determine whether FERC Form 6 must be filed in its entirety or in part.

Each oil pipeline whose annual jurisdictional operating revenues exceeded $500,000 for each of the three previous calendar years must file FERC Form 6 and Form 6-Q. Oil pipelines whose annual jurisdictional operating revenues have been more than $350,000, but less than $500,000, for each of the three previous calendar years must prepare and file page 301, "Operating Revenue Accounts (Account 600), and page 700, "Annual Cost of Service Based Analysis Schedule" (Page 700) of FERC Form 6. Similarly, oil pipelines exempt from filing FERC Form 6 and page301, and whose annual jurisdictional operating revenues were $350,000 or less for each of the three previous calendar years, must prepare and file page 700.

The Page 700 is not new to controversy. In the past, various liquids shippers have petitioned the FERC to make modifications to the page in an effort to gain greater insight into operations of the various parts of liquids pipeline system. This lack of transparency was cited as a barrier to the shippers' ability to bring rate cases. Following the FERC's recent decision to address any double recovery resulting from the Commission's current income tax allowance and rate of return policies by no longer permitting an MLP to recover an income tax allowance in its cost of service, the Page 700, which we extract for all oil pipeline filers, is once again centerstage.