Energy Secretary Bill Richardson has called on FERC to design anoffshore policy that encourages private-sector investment in theGulf of Mexico gas infrastructure and the development of advancedproduction technologies. Such a policy would be in keeping with theClinton administration’s 1993 domestic natural gas and oilinitiative, he wrote in a recent letter to Chairman James Hoecker.

The Commission kicked off an inquiry into its current offshorepolicy, which gives facilities in depths of 200 meters or more apresumption of gathering, following an appellate court remand inlate 1997. As part of the review, FERC is looking at possiblyreformulating its modified primary function test and at the role,if any, that its lighter handed Outer Continental Shelf Lands Act(OCSLA) authority could play in overseeing offshore facilities.

Richardson noted that FERC’s policy review was both “timely andimportant,” given that the Gulf currently accounts for about 27% of”indigenous” domestic gas supplies and is “increasingly important”to the energy security of the United States.

He said the Department of Energy (DOE) supports a “regulatoryregime” in the Gulf that would encourage competitive transportationoptions for offshore producers and onshore purchasers of gas. “Ofcourse, the development of such options requires the evenhandedtreatment of all participants.” Richardson did not say whether the”regulatory regime” should be Natural Gas Act (NGA) regulation orOCSLA oversight.

In the final analysis, he urged FERC to “remove artificialregulatory barriers, which might impede private-sector investment,the development of advanced technologies, and the development ofcompetitive transportation markets in the Gulf of Mexico.”

The goals espoused by Richardson for FERC’s offshore policy canonly be accomplished by applying NGA regulation to all pipelines onthe Outer Continental Shelf, producers contend. In a letter toHoecker last week, sixteen major producers said they agreed withRichardson’s “stated goals” for an OCS policy, and insisted thatthe “best way to accomplish these goals [was] to continue tomaintain and protect competitive transportation options byapplication of NGA regulation evenhandedly to all pipelines” on theoffshore.

Susan Parker

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