Producers: OCS Jurisdiction Turns on Legal Issue
A group of producers and marketers said it backs the "general
[policy] objectives" on offshore regulation that were espoused last
month by Energy Secretary Bill Richardson in a letter to FERC, but
stresses that debate over the "key issue" of the jurisdictional
status of offshore natural gas pipelines involves "a legal, not a
As part of its broad inquiry into Outer Continental Shelf (OCS)
regulation, FERC has sought comment on three specific issues,
including the proper jurisdictional test under the Natural Gas Act
(NGA) for offshore facilities and the scope and exercise of its
authority under the lighter handed Outer Continental Shelf Lands
Act (OCSLA). But "rather than address these specific issues,
Secretary Richardson's letter [to Chairman James Hoecker] outlines
a general set of goals" for offshore regulation, drawn from a 1993
policy paper on domestic gas and oil initiatives, to guide the
Commission in its inquiry, noted the Producer Coalition, which
includes companies that have "significant investment" in E&P
projects in the Gulf of Mexico.
Based on that policy paper, Richardson proposed several aims for
FERC's offshore policy - such as encouraging "competitive
transportation options" for offshore producers and gas buyers, and
the removal of "artificial regulatory barriers" impeding private
sector development - but he "does not take a position on any of the
[legal] issues" posed by the Commission in its OCS inquiry, "nor
does he explain how the goals identified in his letter are
applicable," the coalition responded in a missive to Hoecker
earlier this month [RM98-8].
While Richardson's goals may be laudable, "we point out...that
on the key issue of jurisdictional status of OCS facilities, goals
and objectives cannot be determinative" in light of the Fifth
Circuit Court's remand of FERC's decision on Sea Robin Pipeline.
The 1997 remand recommended that the Commission take a hard look at
its primary function test and possibly reformulate it, which
prompted it to initiate a notice of inquiry (NOI) last June. The
test is used as a guidepost to determine whether gas pipelines are
FERC jurisdictional transportation or exempt gathering operations.
The results of the NOI not only will be used to decide the
jurisdictional status of Sea Robin on remand, but also likely could
have generic application for other large pipelines operating on the
offshore. The industry expects that a decision will be forthcoming
soon from FERC on its offshore policy. "I think their commitment is
to act on it soon. We had thought maybe they'd have something out
on it by the end of this month," said one producer source.
The Producer Coalition favors a policy in which the Commission
would assert complementary NGA and OCSLA authority over the
offshore - the NGA to ensure rate fairness and the OCSLA to provide
for non-discriminatory access to the OCS. Furthermore, it proposes
that FERC replace its primary function test with the "feeder line"
test in Section 5 of the OCSLA, which defines as exempt gathering
those lines that feed into a facility where gas is first collected
or separated, dehydrated or otherwise processed.
The coalition believes that FERC's treatment of offshore
pipelines under the NGA has been both "evenhanded and responsive"
to the changing needs of the industry and has allowed offshore
projects to be financed and constructed in a "timely and
environmentally sensitive manner" so as to keep pace with market
demand. But it sees "even greater competitive options...available
to OCS shippers once the Commission implements Section 5 of the
OCSLA to effect transactional transparency and combat
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