Neither the interstate pipelines nor gas producers wereparticularly enamored of FERC’s latest attempt to create a morebalanced, lighter-handed system for regulating gas pipelines on theOuter Continental Shelf (OCS). They both agree the Commission fellshort of its goal in the July proposed rulemaking.
But that’s where the similarity ends because the pipes andproducers have interpreted the Commission’s notice of proposedrulemaking (NOPR) dealing with OCS regulation differently. Thepipelines are threatened by it because they believe the NOPR couldsubject jurisdictional OCS systems, which currently are regulatedunder the Natural Gas Act (NGA), to another layer of regulationunder the Outer Continental Shelf Lands Act (OCSLA). This wouldcompound their regulatory burden because they would be forced tocomply with reporting requirements under both laws, the InterstateNatural Gas Association of America (INGAA) told FERC last week[RM99-5].
The pipeline group urged the Commission to clarify the rule toeliminate the possibility of “duplicative” reporting requirements.”Our idea is that your compliance with [the reporting requirementsof] the Natural Gas Act as a pipeline is so extensive that thatcompliance should be deemed to be sufficient” under the OCSLA, saidLorraine Cross, senior vice president at INGAA.
But gas producers don’t view the NOPR as proposing the doublingof regulation for jurisdictional OCS pipelines. Rather, theCommission in the NOPR and in its remand decision on Sea RobinPipeline “seems to be jettisoning its NGA authority” overjurisdictional OCS pipelines entirely in favor of an “OCSLA only”regime in the offshore, according to the Natural Gas SupplyAssociation (NGSA).
The producer group contends this is contrary to what Congressintended 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 andconditions of service, while the OCSLA was designed to “facilitatethe orderly development of OCS reserves, and to preventdiscrimination,” the NGSA said.
In the event the Commission adopts the policy proposed in theNOPR and Sea Robin remand, producers believe certain “protectiveconditions” should be put in place to mitigate the regulatory risksassociated with the change in OCS regulation. These would includeprotection against rate shock, implementation of effectivecomplaint procedures, a requirement that OCS pipes provideinformation (on rates, tariff terms and conditions and coststructure) on a periodic basis, and a requirement that formerly NGAjurisdictional pipes provide default contracts to ensure rate andservice continuity, the NGSA said.
While producers advocate both NGA and OCSLA regulation foroffshore jurisdictional pipelines, they strongly object to any formof regulation for producer-owned OCS pipelines. The NOPR wouldsubject such pipes, which heretofore have been free of anyregulation, to OCSLA oversight. “Asserting regulatory jurisdictionover production-related lines, platforms, services, facilities andagreements would create confusion, increase costs and establish anew category of regulatory risk that should not burden the alreadyrisky, 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, whichapplies to disputes arising under the OCSLA, INGAA believes theCommission can achieve a light-handed regulatory regime in the OCSwithout imposing a reporting requirement on pipelines. It notedFERC already does this for offshore oil pipelines.
But by itself, INGAA said the Commission’s NOPR “does nothing toachieve a uniform, light-handed regulatory regime on the OCS.”
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