Uniform FERC Regulation of All OCS Pipes Proposed
A very divided FERC yesterday approved a proposed rulemaking
that seeks to create a uniform, complaint-driven system for
regulating all offshore gas pipelines based on its authority under
the lighter-handed Outer Continental Shelf Lands Act (OCSLA).
In a 3-2 vote, with Commissioners Vicky Bailey and Curt Hebert
dissenting, the Commission proposed replacing its current
regulatory regime on the Outer Continental Shelf (OCS), where it
has jurisdiction solely over gas transmission facilities, with
lighter-handed regulation of all offshore gas pipelines.
The notice of proposed rulemaking (NOPR) calls for uniform
reporting requirements to be imposed on all OCS gas pipelines to
protect offshore shippers against potential discriminatory
behavior. Pipelines that currently are subject to FERC's Natural
Gas Act (NGA) already would meet the proposed filing requirements.
In fact, jurisdictional pipes are likely to get a break under the
NOPR. The requirements "are significantly less burdensome than what
is currently required under the NGA," said Commissioner Linda
Breathitt. The brunt of the NOPR's impact would be felt by offshore
gas pipelines that currently are non-jurisdictional.
In a related case, the Commission - in an equally divided
decision - took its cue from the Fifth Circuit Court of Appeals and
split the baby on Sea Robin Pipeline, ruling that half of the
pipeline's offshore facilities were gathering and half were
transportation. Specifically, it said Sea Robin's facilities
upstream of the Vermillion 149 platform were gathering, while its
pipeline facilities (a 66-mile, 36-inch line) downstream of the
platform were transmission in nature.
In 1995, the Commission had classified Sea Robin as a
jurisdictional transportation pipeline, but the Fifth Circuit
kicked back the decision and suggested that FERC consider the half
gathering-half transportation approach. It also recommended that
FERC consider reformulation of its primary function test that's
used to determine whether offshore facilities are jurisdictional
transportation or exempt gathering. The Commission did just that
yesterday, deciding that the "totality of the circumstances" on Sea
Robin demonstrated that half of the pipeline's function was
transportation in nature.
With the NOPR, FERC is "looking for a regulatory regime that
works well for everyone, that promotes competition.....without the
primary function test being so determinative of how and who we
regulate, without perhaps some of the burdens of NGA-type
regulation...," said Chairman James J. Hoecker.
OCS pipelines currently are subject to the NGA and OCSLA, which
he described as "overlapping and contradictory forms of
regulation." Despite the divisiveness at the Commission on how to
regulate the offshore, "what we would, I think, all like.....is a
desire for more competitive and regulatory uniformity on the OCS
for all pipelines," Hoecker said.
The NOPR would bring a greater number of offshore pipelines
under FERC's jurisdictional umbrella. And while some might
characterize this as an attempt by the Commission to extend its
jurisdictional reach in the OCS, "I would have to say that's only
half [of] the story. The other half is.....our intent is to
regulate with relatively minimal intrusion," Breathitt said. She
noted NGA-regulated pipelines already would meet the filing
requirements proposed in the NOPR, and many other offshore
pipelines would be exempted from them (i.e. a producer-owned
pipeline that transports gas for itself or an affiliate).
"It's not our purpose in issuing this NOPR to develop another
layer of regulations for pipelines that are already regulated under
the Natural Gas Act...," said Commissioner William Massey. If
anything, he believes the proposed reporting requirements in the
NOPR would benefit pipelines that currently are regulated under the
NGA. "We've heard complaints from NGA-regulated pipelines that they
face unfair competition from non-jurisdictional pipelines in the
OCS. This proposal will provide the Commission with the information
necessary to ensure that any difference in regulatory status under
the NGA or OCSLA does not thwart competition."
The NOPR would require an OCS pipe to submit information to FERC
pertaining to its ownership and corporate affiliations, a
description and map of facilities (including location, length and
size), conditions of service, statement of its operating
conditions, the rates it charges, and how the rates are derived.
In his dissent, Commissioner Hebert said he wasn't "comfortable"
with the NOPR. "Under normal circumstances, I would find.....the
proposal to replace NGA jurisdiction with light handed,
complaint-driven regulation [to be] appropriate. But in this
situation the pairing of lighter-handed regulation for NGA
companies with regulation for currently non-jurisdictional
companies is unacceptable. Yes, the regulatory scheme would be
light handed" for NGA-regulated pipelines, "but when compared to no
regulation [which non-jurisdictional pipes have enjoyed], it can
only seem.....quite heavy handed."
Commissioner Bailey, who would declare the entire OCS
jurisdictional if she had her way, was steadfastly opposed to the
NOPR. "I believe.....that the proposal is not necessary. And I am
concerned that it raises new OCS issues without resolving already
difficult ones presented to us," she said.
"I would prefer to continue the current practice of relying on
the anti-discrimination provisions of the OCSLA if and when
complaints are filed.....I do not find any compelling evidence that
we need to expand our OCSLA regulatory regime by promulgating these
rules." She believes the NOPR would "create at least initially a
dual scheme of regulation for certain pipelines on the OCS."
With respect to the Sea Robin case, Bailey said she would have
granted the pipeline's petition to have its offshore facilities
declared non-jurisdictional gathering. "I remain convinced that the
movement of gas across the OCS is often a collection process"
rather than transportation.