In the never-ending battle over the extent of FERC jurisdictionin the Outer Continental Shelf (OCS), three Shell productioncompanies this week petitioned the Commission for an orderdeclaring they are exempt from the reporting requirements underOrder 639 and 639-A.

At issue in the petition is whether the Commission’sjurisdiction under the Outer Continental Shelf Lands Act (OCSLA)extends only to pipeline- and producer-owned natural gastransportation facilities in the OCS, or whether it also applies toproduction facilities and services.

In Order 639, the Commission flexed its jurisdiction under theOuter Continental Shelf Lands Act (OCSLA) for the first time,imposing a reporting burden on “gas service providers” that operatenon-exempt facilities involved in “moving gas on or across theOCS.” The reporting task was similar to that already required ofinterstate gas pipelines under the Natural Gas Act.

By taking this action, FERC said it was trying to bring someconsistency to the often-conflicting regulatory regimes on the OCS.But Shell Deepwater Development Inc., Shell Deepwater ProductionInc. and Shell Offshore Inc. argue their facilities as well asthose of similarly situated OCS producers — have been unfairlysubjected to the reporting requirements.

The Shell Producers “steadfastly maintain” that their productionfacilities and services are beyond the scope of FERC’s OCSLAjurisdiction, which they contend applies only to “pipeline”facilities and “transportation” services [GP01-1].

This petition “puts squarely before the FERC the question ofwhether [it] will regulate in an area where historically it hasnot, and should not,” the Shell producers said. The Commission”will be breaking new ground” with its decision on this, theybelieve.

In seeking a declaratory order, the Shell Producers specificallyasked FERC to declare they are not “gas service providers” becausethe services they provide don’t involve the “movement” of gas onbehalf of shippers on or across the OCS. If it should decideotherwise, they called on the Commission to conduct afacility-by-facility analysis to determine whether eachproduction-related facility qualifies for the feeder-line exemptionunder Order 639.

In the meantime, they are refusing to submit reports on theirproduction facilities and services to the Commission until adeclaratory order is issued.

The Shell Producers said they didn’t believe the Commissionintended to subject production-related services and facilities tothe rule, “even though the definition of ‘gas service provider,’as written, when interpreted literally, does apply toproduction-related services and facilities.” In Order 639, FERCdefined a “gas service provider” as being “any entity that operatesa facility located on the OCS that is used to move natural gas onor across the OCS.”

Under 639, which FERC reaffirmed in July, offshore “gas serviceproviders” are required to file with the Commission information ontheir ownership and corporate affiliations, and a description oftheir pipeline facilities and a map. They also are required tosubmit compliance filings each quarter, spelling out theirconditions of service, along with either all of their currentcontracts or a statement of their operating conditions, rates andhow the rates were derived, as well as any changes in theirfacilities, ownership or affiliations. These reporting requirementsare the core of Order 639. The first quarterly filings were dueOct. 15.

The Shell Producers contend these reporting requirements coulddampen OCS investment. “The potential disclosure of sensitive andproprietary information for companies such as the Shell Producerswill have a chilling effect on offshore development.”

The Commission “should assist producers to maximize offshoreexploration, production and development, which is the primary goalof the OCSLA. It should not set up arbitrary roadblocks, such asreporting requirements.”

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