Gas gatherers and processors won a major victory when OklahomaGov. Frank Keating vetoed Senate Bill 319 last Friday. Thelegislation would have given the Oklahoma Corporation Commissionbroad authority to regulate rates, terms and conditions ofgathering and processing contracts and to settle disputes betweengatherers and producers.
The legislation essentially would have enabled the OCC to fillFERC’s shoes, making Oklahoma one of the only states to step in tooversee gathering regulation since FERC gave up jurisdiction in1993 and left default gathering contracts in place for two years.Many of those default contracts expired last year. Since that time,producers claim gathering rates have risen significantly – morethan 300% in some cases.
But Keating said the bill contained “many undefined and vagueterms” which could “encourage complaints rather than assist inmaintaining an orderly, efficient marketplace.” The legislation, hesaid, “extends overly broad, statutory regulation of gas gatheringfacilities into the competitive marketplace during a period ofderegulation. [It] initiates, for the first time, regulation of gasprocessing activities. [It] was not heard in committee and lackedadequate public debate and input.”
Keating said, however, he is “convinced that a problem doesexist and that there have been overreaching and discriminatory actson the part of some pipeline companies.” As a concession toproducers, he issued an executive order directing the OCC to issuea Notice of Inquiry and “begin the process of soliciting andinvestigating complaints of discrimination and anti-competitiveactivities by gathering systems.”
Keating also directed the OCC to use its rule- making authorityto hold hearings and develop rules, including a code of conduct, toregulate gathering activities by Jan. 1, 1999. He also asked theOCC to “identify any legislation required to expand or clarify itsauthority to promulgate effective rules for gathering activities,but not to include gas processing activities,” and said he wouldsupport introduction of such legislation in the next session.
Gas processors and pipelines lauded the governor’s decision.”We’re pleased and are looking forward to working with parties onthe committee level,” said John Dreyer, spokesman for Tulsa-basedGas Processors Association. “The [OCC] would have the expertise inthe oil and gas field to develop rules and regs based on thesituation out there and would be much more able to do so than thelegislature. We’ve always said the OCC already does have more powerand authority than some people would like to believe.”
Under existing law, the OCC does not have the authority to stepin and regulate rates when a dispute arises, which means producerscan be shut in until a dispute is resolved, said Jim Palm,president of the Oklahoma Independent Petroleum Association. Inaddition, any dispute that is resolved cannot be used as aprecedent. Palm said the governor’s decision sends them back to thedrawing board.
He said the governor’s veto message to the legislature alsocontained “numerous inaccuracies.”
“We met at the request of the Senate, the House and the governorwith the pipelines and worked with them. They didn’t want it to goto committee and thrash it out in there. They wanted to have us doit, which we did. Now the governor says that because it wasn’t donein committee it wasn’t done properly. It’s just a sell-out to thepipelines.”
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