The Interior Department's Minerals Management Service (MMS) has proposed a new 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 seeking to implement 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.

"MMS believes the court's decision means that the OCSLA provides the secretary of Interior the authority to issue and enforce rules to assure open and nondiscriminatory access to pipelines" operating in the offshore, the agency said in a notice published in the Federal Register last Friday.

The MMS is proposing the new regulations for 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 facilities subject to the new rule would include piping, risers, accessories and appurtenances installed for the purpose of transporting oil or gas, but not production-related facilities on platforms.

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 regulations, 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 new regulations. It noted that these "are fact-specific terms and their application is best left to be determined during adjudication of individual situations." MMS added that it intends to apply a reasonableness standard when deciding such complaints.

Complaints would be filed with the director of MMS. They would include a "comprehensive written brief stating the legal and factual basis for the allegations that a shipper was denied open and nondiscriminatory access with supporting material." The shipper complaint also should clearly identify the action or inaction that is alleged to have occurred, as well as how this violated the OCSLA.

"Since MMS has not been involved in the processing of complaints of this type, it is interested in comments regarding whether there should be time limits placed on the filing of complaints following an action by a grantee or transporter," the agency said..

The MMS also is proposing to establish a toll-free hotline and to offer alternative dispute resolution (ADR) 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 hotline's primary purpose would be to gather facts, evaluate allegations...and recommended resolution options."

ADR may be requested either by calling the MMS hotline or by contacting the agency's associate director for policy and management improvement, the agency said.

The proposed regulations will also apply to pipelines that transport MMS' royalty-in-kind (RIK) production. "This may raise the question of whether MMS, as a shipper of RIK production, can fairly decide other shippers' appeals alleging violations of open and nondiscriminatory access provisions of [the] OCSLA. Furthermore, it also may raise the issue of whether MMS can fairly decide a complaint brought by [its] RIK division," the notice said.

"The MMS believes that this situation is similar to cases in which the MMS director decides lessees' appeals of MMS Minerals Revenue Management (MRM) orders...The MMS director has delegated her authority to decide those appeals to the associate director of policy management improvement (PMI)...Any decisions regarding complaints on open access would also be decided by PMI," the agency noted. Appeals of adverse MMS decisions can be made to the Interior Board of Land Appeals.

MMS did not impose reporting requirements on OCS pipelines as part of the proposed regulations. "Because MMS is not defining 'open access' or 'nondiscriminatory access' in the rulemaking, and because MMS believes complaints extend beyond rate issues, MMS anticipates that it will not need the majority of information [that FERC was gathering under Orders 639 and 639-A]."

Rather, the proposed rule "would allow MMS to require any lessee, operator of a lease or unit, shipper, grantee or transporter...to provide additional information that MMS believes is necessary to make a decision on whether open access or nondiscriminatory access was denied," the agency said.

Comments on the complaint proposal are due at MMS by June 5. Comments specifically addressing the reporting burden should be submitted by May 7, the agency noted.

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