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DOE's Richardson Espouses Investor-Friendly Offshore Policy

DOE's Richardson Espouses Investor-Friendly Offshore Policy

Energy Secretary Bill Richardson has called on FERC to design an offshore policy that encourages private-sector investment in the Gulf of Mexico gas infrastructure and the development of advanced production technologies. Such a policy would be in keeping with the Clinton administration's 1993 domestic natural gas and oil initiative, he wrote in a recent letter to Chairman James Hoecker.

The Commission kicked off an inquiry into its current offshore policy, which gives facilities in depths of 200 meters or more a presumption of gathering, following an appellate court remand in late 1997. As part of the review, FERC is looking at possibly reformulating 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 and important," 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 "regulatory regime" in the Gulf that would encourage competitive transportation options for offshore producers and onshore purchasers of gas. "Of course, the development of such options requires the evenhanded treatment of all participants." Richardson did not say whether the "regulatory regime" should be Natural Gas Act (NGA) regulation or OCSLA oversight.

In the final analysis, he urged FERC to "remove artificial regulatory barriers, which might impede private-sector investment, the development of advanced technologies, and the development of competitive transportation markets in the Gulf of Mexico."

The goals espoused by Richardson for FERC's offshore policy can only be accomplished by applying NGA regulation to all pipelines on the Outer Continental Shelf, producers contend. In a letter to Hoecker last week, sixteen major producers said they agreed with Richardson's "stated goals" for an OCS policy, and insisted that the "best way to accomplish these goals [was] to continue to maintain and protect competitive transportation options by application of NGA regulation evenhandedly to all pipelines" on the offshore.

Susan Parker

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