Producers: OCS Jurisdiction Turns on Legal Issue
A group of producers and marketers said it backs the "general
[policy] objectives" on offshore regulation that were espoused by
Energy Secretary Bill Richardson in a letter to FERC last month,
but stresses that debate over the "key issue" of the jurisdictional
status of offshore natural gas pipelines involves "a legal, not a
As part of its broad inquiry into Outer Continental Shelf (OCS)
regulation, FERC has sought comment on three specific issues,
including the proper jurisdictional test under the Natural Gas Act
(NGA) for offshore facilities and the scope and exercise of its
authority under the lighter-handed Outer Continental Shelf Lands
Act (OCSLA). But "rather than address these specific issues,
Secretary Richardson's letter outline[d] a general set of goals"
for offshore regulation, drawn from a 1993 policy paper on domestic
gas and oil initiatives, to guide the Commission in its inquiry,
noted the Producer Coalition, which includes companies that have
"significant investment" in E&P projects in the Gulf of Mexico.
Richardson proposed several aims for FERC's offshore policy -
such as encouraging "competitive transportation options" for
offshore producers and gas buyers, and the removal of "artificial
regulatory barriers" to private sector development of the offshore
- but he "[did] not take a position on any of the [legal] issues"
posed by the Commission in its OCS inquiry, nor did he explain "how
the goals identified in his letter are applicable" to the FERC
proceeding, the coalition responded in a missive to FERC Chairman
James Hoecker earlier this month [RM98-8].
While Richardson's goals may be laudable, "we point out...that
on the key issue of jurisdictional status of OCS facilities, goals
and objectives cannot be determinative" in light of the Fifth
Circuit Court's remand of FERC's decision in Sea Robin Pipeline.
The 1997 remand recommended that the Commission take a hard look at
its primary function test and possibly reformulate it, which
prompted it to initiate a notice of inquiry (NOI) last June. The
test is used as a guidepost to determine whether gas pipelines are
FERC jurisdictional transportation or exempt gathering operations.
The results of the NOI not only will be used to decide the
jurisdictional status of Sea Robin on remand, but also likely could
have generic application for other large pipelines operating on the
offshore. The industry expects FERC to render a decision on its
offshore policy in the near term. "I think their commitment is to
act on it soon. We had thought maybe they'd have something out on
it by the end of this month," said one producer source. The OCS
issue, however, was not listed on the agenda for this week's
In its letter to Hoecker, the Producer Coalition re-asserted its
support for the Commission to exert complementary NGA and OCSLA
authority over offshore activity - the NGA to ensure rate fairness
and the OCSLA to provide for non-discriminatory access to the OCS.
Furthermore, it proposed that FERC replace its primary function
test with the "feeder line" test in Section 5 of the OCSLA, which
defines as exempt gathering those lines that feed into a facility
where gas is first collected or separated, dehydrated or otherwise
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