Rep. Joe Barton (R-TX), chairman of the House Energy and Commerce Committee, is floating a discussion draft of a bill that would, among other things, give FERC the authority to regulate the rates for natural gas gathering service on the federal Outer Continental Shelf (OCS), said energy analyst Christine Tezak.

Although the Barton proposal seeks primarily to spur the construction of new refinery facilities in the United States, tucked away in the measure is language providing the Federal Energy Regulatory Commission with jurisdictional authority over rates of unregulated offshore gathering affiliates of natural gas pipelines, an authority that FERC Chairman Joseph Kelliher had requested earlier from Congress, said Tezak of Stanford Washington Research Group in Washington, DC.

Noting that neither federal nor state regulators have jurisdiction over gathering rates in the OCS, FERC in mid-September launched a notice of inquiry (NOI) to review various options that would permit the agency to assert authority over non-jurisdictional gathering rates. At the same time, Kelliher and FERC Commissioner Suedeen Kelly urged Congress to change the law to give the agency outright authority over offshore gathering rates. Kelliher said the action was especially important in the wake of the extensive production shut-ins in the Gulf of Mexico following Hurricane Katrina, which have now been compounded by Hurricane Rita.

“Current laws contains a regulatory gap that permits offshore gathering companies to collect monopoly rents [higher rates than normal], which can lead to shut-ins of offshore gas production. The Commission has tried different legal theories to prevent monopoly rents, and suffered a series of court defeats. We may have run out of theories. If the law permits monopoly rents, it is time to change the law,” Kelliher said.

The Commission NOI proceeding stems from a July 2004 court ruling. A federal appeals court vacated an order in which FERC reasserted jurisdiction over a portion of North Padre Island (NPI) unregulated gathering facilities that Transcontinental Gas Pipe Line had spun down to its gathering affiliate, Williams Field Services (WFS). FERC took this action after Shell Offshore Inc. accused WFS of charging an exorbitant gathering rate and attaching anticompetitive conditions to its gathering service on the NPI facilities.

The U.S. Court of Appeals for the District of Columbia Circuit ruled that FERC exceeded its jurisdiction under the Natural Gas Act when it reasserted jurisdiction over the WFS gathering facilities. This was the latest in a number of court defeats that the Commission suffered in its quest to regulate offshore gathering rates.

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