NGI The Weekly Gas Market Report / NGI All News Access

FERC Ends Divided OCS Regulation

FERC Ends Divided OCS Regulation

Tossing aside its "tortuous" modified primary function method for deciding the jurisdiction of offshore pipelines, FERC last week issued a long-awaited final rule that's designed to bring "symmetry" to the regulation of natural gas pipelines on the Outer Continental Shelf (OCS) by imposing similar reporting burdens on all facilities.

By a 4-0 vote, the Commission moved to impose uniform reporting requirements on all gas pipelines operating on the OCS using its authority under the lighter-handed Outer Continental Shelf Lands Act (OCSLA). The rule will have the biggest impact on offshore gas pipelines that heretofore have enjoyed non-jurisdictional status. They will become subject to reporting requirements under the OCSLA that are very similar to the requirements that Natural Gas Act-regulated pipelines have had to fulfill all along [RM99-5].

NGA-regulated pipes in the OCS got a break in the final rule. Although the proposed rulemaking envisioned a sort of combined NGA-OCSLA reporting burden for these pipelines, the final rule maintained the status quo for them. This means jurisdictional offshore pipes will be required to only meet the reporting burden of the NGA, not the OCSLA.

"This change was a result of the desire not to impose another layer of reporting requirements on those pipelines already regulated under the Natural Gas Act," said Commissioner William Massey. However, he noted the NGA jurisdictional pipelines will have to satisfy the OCSLA reporting requirements for their non-regulated gathering assets in the OCS.

Under the final order, all OCS pipelines will be required to file with FERC information on their ownership, corporate affiliations, a description of the pipeline facilities (location, length, size et al) and a map of the facilities. Also, the pipes will have to submit compliance filings each quarter, spelling out their conditions of service along with either all of their current contracts or a statement of their operating conditions, rates and how the rates were derived. These reporting requirements are the "centerpiece" of the rule, and will help to ensure open and non-discriminatory access for shippers in the OCS, said Commissioner William Massey.

"This rule explores, I think, the potential for rates, terms and conditions' regulation under the OCSLA that applies across the entire Outer Continental Shelf and, therefore, doesn't necessitate the tortuous and often challenged jurisdictional determinations under our modified primary function test that we use under the Natural Gas Act. And that, at least in my view, is partly what's broken" with the Commission's regulation of the OCS, said Chairman James Hoecker. "There are disproportionate regulatory requirements on the OCS for facilities that do essentially the same things."

Hoecker hinted the Commission wasn't done with the OCS yet. "The Commission has to get comfortable with its OCSLA authority before it contemplates any further changes in its application of the NGA on the Outer Continental Shelf," he said.

Hoecker said the Commission FERC released the final rule now because of how "critically important" the Gulf of Mexico is to the nation's energy future, and to provide greater certainty to investors in the OCS. He noted the Gulf produced 5.24 Tcf of gas in 1997 and has proven reserves of nearly 30 Tcf.

"As a result of these prospects, exploration and production has been at record levels in the Gulf deep-water areas," he said. But the "lower oil and gas prices since 1997 have impacted shallow-water areas in the Gulf....., where decline rates have increased and drilling has virtually stopped." Hoecker believes the "recent price reversals" for oil and gas are going to change that situation. "This means more infrastructure, more drilling activity and more connecting up to the interstate pipeline grid," he said, adding that this "substantially changes the situation from a regulatory perspective [to] a competitive perspective."

Susan Parker

©Copyright 2000 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.

Copyright ©2018 Natural Gas Intelligence - All Rights Reserved.
ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus