The FERC majority voted yesterday to once again submerge itselfinto the “familiar, yet very rocky waters” of pipeline regulationon the Outer Continental Shelf (OCS). Specifically, it initiated anotice of inquiry (NOI) into alternatives to the Commission’spresent method of exercising its jurisdiction over offshorepipelines.

The Commission’s action was in response to a remand of the SeaRobin Pipeline case last fall in which the D.C. Court of Appealssuggested FERC take another look at its jurisdictional test andpossibly reformulate it [RM98-8]. The test is used by theCommission to distinguish whether natural gas pipeline facilitiesare jurisdictional or exempt gathering operations.

In the NOI, FERC poses “several, specific questions” to industryon how to reshape the primary function test. In addition, itexplores the issue of basing the Commission’s OCS policy on themore hands-off oversight under the Outer Continental Shelf LandsAct (OCSLA), as opposed to the Natural Gas Act (NGA).

“Whichever statute you’re talking about [the OCSLA or NGA],there are interesting questions here about who we’re protecting andfrom whom and from what, and what mechanisms might work with regardto alternative forms of regulation,” said Chairman James Hoecker.”We want to ask those questions. I think it’s important that wemake an attempt to get answers before we move ahead.”

He noted FERC has been as flexible as possible in the past whenapplying its NGA authority to the OCS. “We’ve employed negotiatedrates for example. And we tried not to impede in anyway thedevelopment of OCS projects.” But it’s “always looking forsimpler, more efficient approaches to regulation,” Hoeckeracknowledged.

Not surprisingly, Commissioner Vicky Bailey dissented in partfrom the majority’s decision. She, along with former commissionerDonald Santa Jr., consistently criticized the Commission’s primaryfunction test, saying it had built-in biases that often resulted inoffshore facilities being found jurisdictional in nature. Bothfavored an OCS policy predicated on the lighter handed approach ofthe OCSLA, which would tend to loosen the restrictions for OCSpipelines to qualify as gathering facilities.

“I continue to believe that we should adopt a common sensedefinition of gathering” for pipelines operating on the OCS. “Weshould recognize that today’s deep-water production needs evenlonger and wider lines to move production to market, and that themovement of gas across the OCS is often a collection process”rather than a jurisdictional transportation process, Bailey said.

“While it might be ideal to preserve FERC Natural Gas Actjurisdiction as a backstop in case a complaint arises, I do notthink we have that right if the function of the line can be viewedas gathering under a common-sense analysis,” she noted. OCSproducers still would have statutory protections under the OCSLA.”This Commission has acknowledged its jurisdiction [under that]statute and would respond promptly to complaints filed by shipperson OCS gathering lines that are not otherwise subject to theCommission’s NGA jurisdiction.”

In short, “I do not find that the fear of regulatory gap to beso compelling that we should adopt a strained definition of whatconstitutes a gathering line,” Bailey noted.

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