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MMS Issues Rule to Settle Access Feuds with OCS Pipes

The Interior Department's Minerals Management Service (MMS) Wednesday issued a final rule aimed at resolving shipper disputes with Outer Continental Shelf (OCS) oil and natural gas pipelines that are subject to regulation under the Outer Continental Shelf Lands Act (OCSLA).

Specifically, the MMS is implementing complaint procedures and informal alternative processes to address allegations that a shipper has been denied open and nondiscriminatory access to an OCSLA pipeline. The agency's action is largely in response to an appellate court ruling in 2003, which found that the Federal Energy Regulatory Commission has only limited authority to enforce open-access rules on the OCS (see Daily GPI, Oct. 13, 2003).

The final rule, which was published in the Federal Register (FR), applies to OCSLA pipelines only, which it defines as any oil or natural gas pipeline for which MMS has issued a permit, license, easement, right-of-way or other grant of authority under the OCSLA. The agency said it intends to defer to FERC on pipelines under the jurisdiction of the Natural Gas Act or Interstate Commerce Act. In its new rule, the MMS said it will presume that FERC-regulated pipelines provide open and nondiscriminatory access.

The Interior agency did not define "open access" and "nondiscriminatory access" in the final regulation. Instead, "MMS prefers to approach disputes over pipeline access by using a broad 'reasonableness' standard that provides more flexibility rather than numerous rigid parameters that have only limited application," the agency said in the FR.

"The MMS refrained from specifically adopting FERC-based discrimination standards because the mandates and authorizing statutes for FERC and [the] MMS differ...Thus, MMS continues to decline to adopt specific standards clarifying what constitutes discriminatory behavior or whether denial of open access has occurred," it said.

Complaints would be filed with the director of MMS. "The MMS carefully considered whether it would adopt a formal complaint procedure similar to that of FERC. MMS determined that it would adopt as a model the appeal process for royalty disputes...because of the number of disputes anticipated (based on FERC's prior experience), the costs and the labor involved," the agency said.

"MMS believes that this process is more cost-effective and less intrusive, and thus lessens the chilling effect that a more extensive formal process would have on prospective complainants." In addition, the agency said it would set a two-year time limit for parties to file formal complaints.

As for penalties, the agency said it "believes that such relief is not authorized under OCSLA. The purpose of this rule is to assure open and nondiscriminatory access to OCS pipelines, not to make whole the injured party of such actions. That is an appropriate role for the courts."

However, "if the appropriate remedy to provide open and nondiscriminatory pipeline access includes the construction of facilities such as an interconnecting pipeline, MMS agrees that in such a case, 60 days may not be adequate to comply with the MMS order. Thus, a grantee or transporter has a period of 10 days after the conclusion of diligent construction of needed facilities or 60 days after receipt of the MMS order, whichever is later, to comply and provide open and nondiscriminatory access," the agency said in the FR.

The MMS final rule also would establish a toll-free hotline to receive allegations of denial of open and nondiscriminatory access, and to allow shippers and transporters to request alternative dispute resolution to help settle disputes prior to the filing of formal complaints. Shippers and service providers endorsed the concept of a hotline, according to MMS.

The final rule would also apply to pipelines that transport MMS' royalty-in-kind (RIK) production, which triggered concerns as to whether the MMS, as a shipper of RIK production, could fairly decide other shippers' appeals alleging violations of open and nondiscriminatory access provisions of the OCSLA.

The MMS believes that this situation is similar to a case in which the MMS director decides lessees' appeals of MMS Minerals Revenue Management orders. The MMS director delegates his/her authority to decide those appeals to the associate director of policy management improvement (PMI). Any decision regarding an open-access complaint would also be decided by the PMI official, the agency noted. As final protection, a party could appeal an adverse MMS decision to the Interior Board of Land Appeals.

MMS did not impose reporting requirements on OCS pipelines as part of the rule."The routine submittal of information by service providers and pipeline companies that are not involved in complaint proceedings is not 'essential' to MMS's mandate of assuring open and nondiscriminatory pipeline access to the OCS," it said.

The final rule takes effect Aug. 18.

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