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Uniform FERC Regulation of All OCS Pipes Proposed

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.

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