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Go Back to Drawing Board on OCS NOPR, FERC Told

August 30, 1999
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Go Back to Drawing Board on OCS NOPR, FERC Told

Neither the interstate pipelines nor gas producers were particularly enamored with FERC's latest attempt to create a more balanced, lighter-handed system for regulating gas pipelines on the Outer Continental Shelf (OCS). They both agree the Commission fell short of its goal in the July proposed rulemaking.

But that's where the similarity ends because the pipes and producers have interpreted the Commission's notice of proposed rulemaking (NOPR) dealing with OCS regulation differently. The pipelines are threatened by it because they believe the NOPR could subject jurisdictional OCS systems, which currently are regulated under the Natural Gas Act (NGA), to another layer of regulation under the Outer Continental Shelf Lands Act (OCSLA). This would compound their regulatory burden because they would be forced to comply with reporting requirements under both laws, the Interstate Natural Gas Association of America (INGAA) told FERC last week [RM99-5].

The pipeline group urged the Commission to clarify the rule to eliminate the possibility of "duplicative" reporting requirements. "Our idea is that your compliance with [the reporting requirements of] the Natural Gas Act as a pipeline is so extensive that that compliance should be deemed to be sufficient" under the OCSLA, said Lorraine Cross, senior vice president at INGAA.

But gas producers don't view the NOPR as proposing the doubling of regulation for jurisdictional OCS pipelines. Rather, the Commission in the NOPR and in its remand decision on Sea Robin Pipeline "seems to be jettisoning its NGA authority" over jurisdictional OCS pipelines entirely in favor of an "OCSLA only" regime in the offshore, according to the Natural Gas Supply Association (NGSA).

The producer group contends this is contrary to what Congress intended for the OCSLA. Congress meant for the OCSLA to be "complementary" to NGA regulation "rather than mutually exclusive." The NGA gives the Commission authority over rates and terms and conditions of service, while the OCSLA was designed to "facilitate the orderly development of OCS reserves, and to prevent discrimination," the NGSA said.

In the event the Commission adopts the policy proposed in the NOPR and Sea Robin remand, producers believe certain "protective conditions" should be put in place to mitigate the regulatory risks associated with the change in OCS regulation. These would include protection against rate shock, implementation of effective complaint procedures, a requirement that OCS pipes provide information (on rates, tariff terms and conditions and cost structure) on a periodic basis, and a requirement that formerly NGA jurisdictional pipes provide default contracts to ensure rate and service continuity, the NGSA said.

While producers advocate both NGA and OCSLA regulation for offshore jurisdictional pipelines, they strongly object to any form of regulation for producer-owned OCS pipelines. The NOPR would subject such pipes, which heretofore have been free of any regulation, to OCSLA oversight. "Asserting regulatory jurisdiction over production-related lines, platforms, services, facilities and agreements would create confusion, increase costs and establish a new category of regulatory risk that should not burden the already risky, expensive, complex and difficult endeavor of finding, developing and producing natural gas and crude oil on the OCS," producers noted.

With the new, expedited complaint process in place, which applies to disputes arising under the OCSLA, INGAA believes the Commission can achieve a light-handed regulatory regime in the OCS without imposing a reporting requirement on pipelines. It noted FERC already does this for offshore oil pipelines.

But by itself, INGAA said the Commission's NOPR "does nothing to achieve a uniform, light-handed regulatory regime on the OCS."

Susan Parker

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