A group of producers and marketers said it backs the “general[policy] objectives” on offshore regulation that were espoused byEnergy Secretary Bill Richardson in a letter to FERC last month,but stresses that debate over the “key issue” of the jurisdictionalstatus of offshore natural gas pipelines involves “a legal, not apolicy” matter.

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 itsauthority under the lighter-handed Outer Continental Shelf LandsAct (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 domesticgas and oil initiatives, to guide the Commission in its inquiry,noted the Producer Coalition, which includes companies that have”significant investment” in E&ampP projects in the Gulf of Mexico.

Richardson proposed several aims for FERC’s offshore policy -such as encouraging “competitive transportation options” foroffshore producers and gas buyers, and the removal of “artificialregulatory 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 “howthe goals identified in his letter are applicable” to the FERCproceeding, the coalition responded in a missive to FERC ChairmanJames Hoecker earlier this month [RM98-8].

While Richardson’s goals may be laudable, “we point out…thaton the key issue of jurisdictional status of OCS facilities, goalsand objectives cannot be determinative” in light of the FifthCircuit Court’s remand of FERC’s decision in Sea Robin Pipeline.The 1997 remand recommended that the Commission take a hard look atits primary function test and possibly reformulate it, whichprompted it to initiate a notice of inquiry (NOI) last June. Thetest is used as a guidepost to determine whether gas pipelines areFERC jurisdictional transportation or exempt gathering operations.

The results of the NOI not only will be used to decide thejurisdictional status of Sea Robin on remand, but also likely couldhave generic application for other large pipelines operating on theoffshore. The industry expects FERC to render a decision on itsoffshore policy in the near term. “I think their commitment is toact on it soon. We had thought maybe they’d have something out onit by the end of this month,” said one producer source. The OCSissue, however, was not listed on the agenda for this week’sCommission meeting.

In its letter to Hoecker, the Producer Coalition re-asserted itssupport for the Commission to exert complementary NGA and OCSLAauthority over offshore activity – the NGA to ensure rate fairnessand the OCSLA to provide for non-discriminatory access to the OCS.Furthermore, it proposed that FERC replace its primary functiontest with the “feeder line” test in Section 5 of the OCSLA, whichdefines as exempt gathering those lines that feed into a facilitywhere gas is first collected or separated, dehydrated or otherwiseprocessed.

Susan Parker

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