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Pipes, Producers Seek Changes to OCS Rule

Pipes, Producers Seek Changes to OCS Rule

Twelve OCS producers last week accused FERC of illegally subjecting offshore production and production-related facilities to the reporting requirements in its final rule dealing with the regulation of gas transportation facilities on the Outer Continental Shelf (OCS). Interstate pipelines weren't especially happy with the final OCS rule either, saying it added another layer of unnecessary regulation.

"The impact of the rule, unless modified and clarified on rehearing, is to subject previously unregulated production and production-related activities and facilities to FERC regulation for the first time under the [Outer Continental Shelf Lands Act], for no valid regulatory purposes and with significant compliance complexities, burdens, expense and harm," the producers told the Commission [RM99-5].

By its action, they contend that FERC exceeded its authority under Section 5 of the OCSLA, which the producers said limits the Commission's jurisdiction in the OCS to "pipeline facilities and pipeline transportation or pipeline purchases."

The producers urged FERC to issue a "generic declaration" specifying that nothing in the final rule, Order 639, would apply to "production or production-related facilities, services and agreements, including, but not limited to, lease facilities, platforms, collection lines, separators, dehydrators, platform-usage, treatment, handling, processing, [and] operational and various leasing and rental agreements."

Moreover, they asked the Commission to redefine the rule's exemption for "feeder line" facilities so that it would apply to "services rendered over any pipeline or class of pipelines which feeds into a facility where natural gas is first collected, or a facility where natural gas is separated, dehydrated or otherwise processed, including the platform and related facilities where such activities are performed."

In Order 639, which was released in late March, the Commission sought to bring some "symmetry" to the regulation of transportation on the OCS by imposing similar reporting burdens on all "gas service providers" based on its authority under the lighter-handed OCSLA. It's those three words that have producers so concerned. They want FERC to clarify that offshore production facilities, which heretofore have been unregulated, aren't "gas service providers."

The Interstate Natural Gas Association of America (INGAA), which represents interstate pipelines, argued the final rule was unwarranted since there's "no pervasive problem of undue discrimination on the OCS."

FERC "should direct its efforts to the original problem.....i.e. the multiple, overlapping regulatory regimes on the OCS that are contributing to inefficiency and competitive inequities. That problem should be addressed by eliminating unwarranted regulation on the OCS, rather than by adding unneeded regulation," INGAA said in its request for rehearing of Order 639.

Susan Parker

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