Shell Seeks to Nix OCS Reporting Requirements for Producers
In the never-ending battle over the boundaries of FERC
jurisdiction in the Outer Continental Shelf (OCS), three Shell
production companies last week petitioned the Commission for a
ruling to declare they are exempt from the reporting requirements
under Orders 639 and 639-A.
At issue in the petition is whether the Commission's Outer
Continental Shelf Lands Act (OCSLA) jurisdiction is limited solely
to pipeline- and producer-owned natural gas transportation
facilities and services in federal offshore waters, or whether it
also applies to production facilities and services.
In Order 639, the Commission flexed its jurisdiction under the
OCSLA for the first time, imposing a reporting burden on "gas
service providers" that operate non-exempt facilities involved in
"moving gas on or across the OCS." The reporting task mirrored that
which was already required of jurisdictional gas pipelines
operating in the offshore under the Natural Gas Act.
By taking this action, FERC said it was trying to bring some
consistency to the often-conflicting regulatory regimes of the OCS.
But Shell Deepwater Development Inc., Shell Deepwater Production
Inc and Shell Offshore Inc. argue they --- as well as other
similarly situated OCS producers --- are being unfairly subjected
to the reporting requirements by virtue of being lumped into the
catch-all category of "gas service provider."
The Shell Producers "steadfastly maintain" that their production
facilities and services are beyond the scope of FERC's OCSLA
jurisdiction, which they contend applies only to "pipeline"
facilities and "transportation" services [GP01-1]. Duke Energy
Field Services, as well as a number of producers (including Shell
Offshore Inc.), have mounted a challenge to the applicability of
the Order 639 reporting requirements in the U.S. District Court for
the District of Columbia [Civil Action No. 00-2124].
This petition "puts squarely before the FERC the question of
whether the FERC will regulate in an area [production] where
historically it has not, and should not," the Shell Producers said.
The Commission "will be breaking new ground" with its decision on
this, they believe.
In seeking a declaratory order, the Shell Producers specifically
asked FERC to declare they are not "gas service providers" because
the services they provide don't involve the "movement" of gas on
behalf of shippers on or across the OCS. If it should decide
otherwise, the producers called on the Commission to conduct a
facility-by-facility analysis to determine whether each of their
production-related facilities qualify for the feeder-line exemption
under Order 639. FERC "should interpret the 'feeder line' exemption
expansively in each case so as to exempt the entire production
complexes in which production-related activities occur."
If that approach should fail, the Shell Producers asked FERC to
consider whether certain services provided by their production
facilities would qualify for either the "single shipper" or "single
owner" exemption under Order 639. In the meantime, they are
refusing to submit reports on their production facilities and
services to the Commission until it addresses their request for a
Shell Producers concede their production services "in the
literal sense, relate to the 'movement' of natural gas on or across
the OCS," but they argued "these services do not involve 'movement'
of natural gas in the sense of transporting or shipping natural gas
on pipelines." Instead, "they involve services related to
production, collection and treatment of natural gas, through
separation, dehydration and/or other processing facilities located
on the production platforms as part of the production process."
There is "much support for this interpretation" --- that
production-related services and facilities on the OCS should be
excused from the FERC reporting requirements. But, in Orders 639
and 639-A, the Commission "refused to make a generic finding to
this effect, preferring instead to examine the services and
facilities on a case-by-case basis."
Under 639, which FERC reaffirmed in July, offshore "gas service
providers" are required to submit compliance filings each quarter,
spelling out their conditions of service, along with either all of
their current contracts or a statement of their operating
conditions, rates and how the rates were derived, as well as any
changes in their facilities, ownership or affiliations. These
reporting requirements are at the core of Order 639. The first
quarterly filings were due Oct. 15.
The Shell Producers contend these reporting requirements will
dampen investment in the OCS. "The potential disclosure of
sensitive and proprietary information for companies such as the
Shell Producers will have a chilling effect on offshore