Regulations under the Outer Continental Shelf Lands Act Governing the Movement of Natural Gas on Facilities on the Outer Continental Shelf; Notice of Proposed Rulemaking

[Federal Register Volume 64, Number 133 (Tuesday, July 13, 1999)]
[Proposed Rules]
[Pages 37718-37727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17251]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Subchapter O, Parts 330 and 385

[Docket No. RM99-5-000]

Regulations under the Outer Continental Shelf Lands Act Governing
the Movement of Natural Gas on Facilities on the Outer Continental
Shelf; Notice of Proposed Rulemaking

June 30, 1999.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Commission is proposing to exercise its authority under
the Outer Continental Shelf Lands Act (OCSLA) to ensure that natural
gas is transported on an open and nondiscriminatory basis through
pipeline facilities located on the Outer Continental Shelf (OCS). To
achieve this, the Commission is considering requiring OCS gas
transportation service providers to make available information
regarding their affiliations and the conditions under which service is
rendered. Making this information available will assist the Commission
and interested persons in determining whether OCS gas transportation
services conform with the open access and nondiscrimination mandates of
the OCSLA. This will enable shippers who believe they are subject to
anticompetitive practices to bring their concerns to the Commission.
The Commission believes this proposed regulatory regime is a key step
to developing a uniformly-applied, light-handed regulatory standard
equally applicable to all OCS gas service providers.

DATES: Comments on the Notice of Proposed Rulemaking are due August 27,
1999. Comments should be filed with the Office of the Secretary and
should refer to Docket No. RM99-5-000.

ADDRESSES: File comments with the Office of the Secretary, Federal
Energy Regulatory Commission, 888 First Street, NE, Washington, DC
20426.

FOR FURTHER INFORMATION CONTACT:

Marc Poole, Office of Pipeline Regulation, 888 First Street, NE,
Washington, DC 20426, (202) 208-0482.
Gordon Wagner, Office of the General Counsel, 888 First Street, NE,
Washington, DC 20426, (202) 219-0122.

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission also provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in the Public Reference Room
at 888 First Street, NE, Room 2A, Washington, DC 20426.
The Commission Issuance Posting System (CIPS) provides access to
the texts of formal documents issued by the Commission from November
14, 1994, to the present. CIPS can be accessed via Internet through
FERC's Home Page (https://www.ferc.fed.us) using the CIPS Link or the
Energy Information Online icon. Documents will be available on CIPS in
ASCII and WordPerfect 6.1 or 8.0. User assistance is available at 202-
208-2474 or by e-mail to cipsmaster@ferc.fed.us.
This document is also available through the Commission's Records
and Information Management System (RIMS), an electronic storage and
retrieval system of documents submitted to and issued by the Commission
after November 16, 1981. Documents from November 1995 to the present
can be viewed and printed. RIMS is available in the Public Reference
Room or remotely via Internet through FERC's Home page using the RIMS
link or the Energy Information Online icon. User assistance is
available at 202-208-2222, or by e-mail to rimsmaster@ferc.fed.us.
Finally, the complete text on diskette in WordPerfect format may be
purchased from the Commission's copy contractor, RVJ International,
Inc. RVJ International, Inc. is located in the Public Reference Room at
888 First Street, NE, Washington, DC 20426.

[[Page 37719]]

Table of Contents

I. Introduction
II. Background
A. The Increasing Importance of OCS Gas Supplies
B. Federal Regulatory Responsibilities
C. The Commission's OCS Regulatory Activity
D. The Proposed Regulations
III. Discussion
A. Purpose
B. Scope of Proposed Regulations
1. Reporting Requirements
2. Circumstances Under Which the Proposed Regulations Will Not
Apply
a. Feeder Lines
b. Pipelines Dedicated to Service for a Single Shipper
c. Other Self-Owned Pipelines
3. Enforcement of the Proposed Regulations
IV. Environmental Analysis
V. Regulatory Flexibility Certification
VI. Information Collection Requirements
VII. Comment Procedure

I. Introduction

The Commission is proposing to exercise its authority under the
Outer Continental Shelf Lands Act (OCSLA) ¹ to ensure that
natural gas is transported on an open and nondiscriminatory basis
through pipeline facilities located on the Outer Continental Shelf
(OCS).² To achieve this, the Commission is considering
requiring OCS gas transportation service providers to make available
information regarding their affiliations and the conditions under which
service is rendered. Making this information available will assist the
Commission and interested persons in determining whether OCS gas
transportation services conform with the open access and
nondiscrimination mandates of the OCSLA. This will enable shippers who
believe they are subject to anticompetitive practices to bring their
concerns to the Commission. The Commission believes this proposed
regulatory regime is a key step to developing a uniformly-applied,
light-handed regulatory standard equally applicable to all OCS gas
service providers.
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\1\ 43 U.S.C. 1301-1356 (1988).
\2\ The OCS is defined as ``all submerged lands lying seaward
and outside of the area of lands beneath navigable waters . . . and
of which the subsoil and seabed appertain to the United States and
are subject to its jurisdiction and control.'' 43 U.S.C. 1331(a).
See also 43 U.S.C. 1301(a)(1), defining ``lands beneath navigable
waters'' as ``all lands within the boundaries of each of the
respective States.'' Thus, the federal OCS does not include offshore
areas that are within state boundaries.
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II. Background

A. The Increasing Importance of OCS Gas Supplies

The OCS is the nation's most promising source of stable energy
supplies, both currently and for the foreseeable future. Already, the
OCS, mainly the Gulf of Mexico, is one of the nation's most important
natural gas supply areas. The Gulf area currently accounts for
approximately 26.2 percent of U.S. annual natural gas marketed
production ³ and is becoming increasingly important to the
energy security of the United States. Gas production from the Gulf of
Mexico in 1997 was 5.24 trillion cubic feet (Tcf).⁴ The
relative importance of the Gulf's gas production to the U.S. grew very
rapidly from only 1-2 percent of production in the mid-1950s. Estimates
of the Gulf resources are large and the current production levels of 5
Tcf can be maintained or increased for years. As of 1997, proven
natural gas reserves in the Gulf of Mexico totaled 27.9 Tcf
⁵ with estimated resources up to 155 Tcf. The Department of
Energy forecasts that offshore production will rise to 6.81 Tcf in 2010
and 7.83 Tcf in 2020. The rapid development of new offshore production
and transmission technologies over the past several years has spawned a
dynamic expansion of exploration, development, production,
construction, and transmission activities throughout the Gulf area. In
1997, 84 percent of new field discoveries were in the federal OCS Gulf
of Mexico, along with 56 percent of new reservoir discoveries in old
fields.⁶
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\3\ Annual Energy Review 1997, Energy Information
Administration.
\4\ Annual Energy Review 1997, Energy Information
Administration, at 12.
\5\ U.S. Crude Oil, Natural Gas, and Natural Gas Liquids
Reserves 1997 Annual, Energy Information Administration, at 28.
\6\ Id., at 30.
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Clearly, the increasing OCS gas resource development is driving
pipeline development. Since 1990, the gas industry has installed
approximately 4,000 miles of new pipe in the Gulf. Stated otherwise,
over 30 percent of the active offshore pipelines have been constructed
over the past nine years. Already, 1,512 miles of new pipe have been
planned and recent estimates predict that another 7,400 miles of pipe
will be needed in the region over the next 15 years.

B. Federal Regulatory Responsibilities

Under the federal scheme, the responsibility for the various
aspects of OCS pipeline regulation resides in several agencies. The
Minerals Management Service (MMS) of the U.S. Department of the
Interior has the responsibility to award permits to pipelines that
transport gas and other products across the OCS. The approval process
covers design, fabrication, and installation plans, as well as the
granting of rights-of-way for the pipeline and accessory structures.
Although section 5(e) of the OCSLA grants ``right-of-way''
responsibility to the MMS, it also requires consultation with the
Secretary of Transportation to assure environmental protection and
safety. Section 5(e) of the OCSLA further states that pipelines with
approved permits must be operated in accordance with competitive
principles.
Section 5(e) of the OCSLA also requires that gas (and oil) be
transported without discrimination, pursuant to standards established
by the Commission. Specifically, section 5(e) requires pipelines to
``transport or purchase without discrimination'' OCS gas ``in such
proportionate amounts'' as the Commission (in consultation with the
Secretary of Energy) determines to be reasonable. Section 5(f)(1) of
the OCSLA states that a pipeline transporting gas on or across the OCS
shall adhere to certain competitive principles, which include the
requirement that ``[t]he pipeline must provide open and
nondiscriminatory access to both owner and nonowner shippers.''
Sections 5(e) and (f) are to be read together, with the more recently
adopted section 5(f) as a ``reaffirmation and strengthening of
subsection 5(e).'' ⁷
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\7\ See the Joint Explanatory Statement of the Committee of
Conference, discussing 1978 amendments to the OCSLA. H.R. Conf. Rep.
1474, 95th Cong., 2d Sess. 37, reprinted in 1978 U.S. Code Cong. &
Admin. News 1674, 1687.
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To assure offshore pipelines adhere to competitive principles,
section 5(f)(3) of the OCSLA requires the Commission (and the Secretary
of Energy) to consult with the Attorney General on specific conditions
to be included in any permit, license, easement, right-of-way or grant
of authority on the OCS.⁸
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\8\ Section 5(f)(3) adds that in preparing requested views, the
Attorney General shall consult with the Federal Trade Commission.
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C. The Commission's OCS Regulatory Activity

The Commission currently exercises authority over offshore gas
service providers under the NGA, the OCSLA, and the Natural Gas Policy
Act (NGPA).⁹ This Notice of Proposed Rulemaking

[[Page 37720]]

(NOPR) requests comments on whether these multiple, overlapping
regulatory regimes complement one another or may be a cause of
inefficient competitive inequities. The Commission expects that a
single set of limited reporting requirements, uniformly applied to all
OCS gas service providers covered under this proposal, will eliminate
any distortions in the offshore marketplace due to competitors'
compliance with different regulatory regimes. We also expect the
simplicity and certainty afforded by a single set of reporting
requirements to encourage continued investment in the development of
OCS resources.
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\9\ Offshore, the NGPA is of relatively little significance,
since the only facilities to which it alone applies are intrastate
facilities in state waters. Intrastate facilities that extend
seaward beyond the reach of state waters are subject to the OCSLA;
interstate facilities located in state waters are subject to the
NGA.
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When the NGA was passed in 1938, offshore production was
negligible, and as a result, that statute and the regulatory regime
developed to enforce it made no effort to distinguish between the
different characteristics of gas operations onshore and
offshore.¹⁰ As gas companies began to extend their onshore
lines into shallow waters, the Commission was able to effectively apply
its NGA regulatory scheme to these facilities near shore. However, as
production areas were developed farther from shore, and as pipelines
were constructed to access these increasingly remote locations, the
validity of the Commission's means for identifying the primary function
of offshore facilities was called into question.¹¹
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\10\ Less than one half of one percent of the offshore
facilities today were in place prior to 1960.
\11\ EP Operating Co. v. FERC, 876 F. 2d 48 (5th Cir. 1989).
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To determine whether a specific facility was engaged in interstate
transmission, and thus subject to the NGA, or was performing primarily
production or gathering, and thus exempt from the NGA pursuant to
section 1(b), the Commission applied a test based on several physical
characteristics.¹² Because this test grew out of the
physical characteristics of gas operations onshore, the Commission
modified its application to suit the different nature of gas operations
offshore.¹³
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\12\ The ``primary function'' test was articulated in Farmland
Industries, Inc. (Farmland), 23 FERC para. 61,063 (1983), which took
into consideration the following factors as relevant: (1) The length
and diameter of the pipeline, (2) the extension of the facility
beyond the central point in the field, (3) the pipelines' geographic
configuration, (4) the location of compressors and processing
plants, (5) the location of wells along all or part of the facility,
and (6) the operating pressure of the line. The primary function
test has been found by the Commission to be applicable to both
onshore and offshore facilities, as modified as applied to offshore
facilities in Amerada Hess Corporation, 52 FERC para. 61,268 (1990).
The criteria set out in Farmland were not intended to be all
inclusive. The Commission has also considered nonphysical criteria
such as the intended purpose, location, and operation of the
facility, the general business activity of the owner of the
facility, and whether the jurisdictional determination is consistent
with the objectives of the NGA and the Natural Gas Policy Act of
1978.
\13\ Amerada Hess Corporation, 52 FERC para. 61,268 (1990). The
Commission's application of its primary function test to gas
operations offshore was challenged in Sea Robin Pipeline Company v.
FERC (Sea Robin), 127 F.3d 365 (5th Cir. 1997), reh'g denied,
(February 2, 1998); the court vacated and remanded a Commission
decision involving the exercise of its NGA jurisdiction over an OCS
pipeline system. In an order on remand in Docket No. CP95-168-002,
the Commission clarifies the application of its modified primary
function test for offshore facilities. This NOPR is not intended to
address issues specific to Sea Robin.
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The OCSLA was passed in 1953 to promote and provide federal
oversight of the exploration, development, and production of OCS
minerals. Section 5(f) of the statute specifies that competitive
principles are to govern OCS pipeline operations. The Commission
determined that adherence to NGA open access provisions would satisfy
OCSLA nondiscrimination requirements.¹⁴
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\14\ See Interpretation of, and Regulations Under, Section 5 of
the OCSLA Governing Transportation of Natural Gas by Interstate
Natural Gas Pipelines on the OCS, Order No. 509, 53 Fed. Reg. 50,925
(December 19, 1988), FERC Stats. & Regs. para. 30,842 (1988), order
on reh'g, Order No. 509-A, 54 FR 8,301 (February 28, 1989), FERC
Stats. & Regs. para. 30,848 (1989).
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The increasing importance and level of OCS activity in recent years
has generated a concomitant increase in the importance of the
Commission's responsibility under the OCSLA to ensure a competitive
market for gas pipeline services on the OCS. Over the past several
years, the Commission has been concerned with and attentive to its
regulatory authority over activities on the OCS.
In separate Notices of Inquiry in 1995 ¹⁵ and
1998,¹⁶ the Commission sought comments on the most suitable
means to regulate OCS activities. Both Notices of Inquiry asked whether
the Commission might act under the OCSLA to regulate offshore pipeline
facilities--either in conjunction with or absent the exercise of any
concurrent NGA jurisdiction--without impeding or distorting offshore
development or production. In developing the regulations proposed in
this docket, we have taken into account those portions of the comments
that address our OCSLA authority.¹⁷
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\15\ The 1995 Notice of Inquiry led to a 1996 Policy Statement
that established a presumption that facilities located in deep water
of 200 meters or more were engaged in production or gathering. Gas
Pipeline Facilities and Services on the Outer Continental Shelf--
Issues Related to the Commission's Jurisdiction Under the Natural
Gas Act and the Outer Continental Shelf Lands Act, 74 FERC 61,222
(1996), reh'g dismissed, 75 FERC para. 61,291 (1996).
\16\ Alternative Methods for Regulating Natural Gas Pipeline
Facilities and Services on the Outer Continental Shelf, 83 FERC
para. 61,235 (1998).
\17\ The Notices of Inquiry also sought responses regarding the
scope of the Commission's NGA authority offshore, and the 1998
Notice of Inquiry was informed by the 1997 decision in Sea Robin.
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In 1988, the Commission acted under the OCSLA to require adherence
to the section 5 principles of open and nondiscriminatory
transportation by issuing an NGA section 7 blanket transportation
certificate to every offshore NGA-jurisdictional pipeline.¹⁸
Pursuant to Subpart G of the Commission's regulations, blanket
certificate holders transport gas on an open access basis subject to a
rate schedule on file with the Commission. The Commission stated its
belief ``that the condition of nondiscriminatory access (open access)
placed on the [blanket] transportation program established in Order
Nos. 436 and 500 will satisfy in substantial measure, the
nondiscriminatory access requirements in section 5 of the OCSLA.''
¹⁹ At that time, although affirming ``that all pipelines on
the OCS have a duty to provide open and nondiscriminatory access to
transportation services,'' ²⁰ the Commission did not require
NGA-exempt OCS pipelines to act to meet this mandate, stating:
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\18\ See Interpretation of, and Regulations Under, Section 5 of
the OCSLA Governing Transportation of Natural Gas by Interstate
Natural Gas Pipelines on the OCS, Order No. 509, 53 FR 50,925
(December 19, 1988), FERC Stats. & Regs. para. 30,842 (1988), order
on reh'g, Order No. 509-A, 54 FR 8,301 (February 28, 1989), FERC
Stats. & Regs. para. 30,848 (1989).
\19\ Order No. 491 at 61,031; see also Order No. 509 at 31,274.
\20\ Order No. 509 at 31,289.
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If problems do arise with respect to either the movement of OCS gas
(1) through state waters, or (2) through gathering or producer-owned
facilities on the OCS, the Commission possesses ample ancillary
authority under the OCSLA to ensure that the statutory requirements of
the OCSLA are not thwarted.²¹
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\21\ Id. at 31,280. On rehearing, in response to concerns that
this placed offshore gathering facilities not regulated under the
NGA beyond the reach of the OCSLA provisions, the Commission stated
that if it ``receives complaints regarding gathering facilities it
will, on a case-specific basis, use its ancillary authority, its
authority under sections 4 and 5 of the NGA, and its authority under
section 5 of the OCSLA, as appropriate under the circumstances
presented.'' Order No. 509-A, at 31,333.
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Until recently, we have not encountered circumstances prompting us
to act under the OCSLA to remedy anticompetitive behavior. However,
lately we have been presented with allegations of offshore
discrimination for which the NGA regulatory regime appears either
inapplicable ²² or

[[Page 37721]]

inadequate.²³ Such allegations, and a review of offshore
regulation in general, persuades us that the best way to ensure
adherence to the nondiscriminatory provisions of the OCSLA is to adopt
an even-handed approach whereby OCS gas service providers covered under
the proposed rule will be held to a single, uniform reporting standard.
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\22\ For example, in Murphy Exploration & Production Company, 81
FERC para. 61,148 (1997), the Commission was faced with a case of
alleged rate discrimination on an offshore gathering line. In
response, the Commission stated that because NGA jurisdiction does
not extend to facilities used for gathering and production, it would
act to remedy discrimination on the NGA-exempt line, if necessary,
under its authority under the OCSLA. Commission action on this order
is pending. A similar approach was employed in Bonito Pipe Line
Company, 61 FERC para. 61,050 (1992), wherein the Commission found
OCS oil facilities were exempt from the Commission's authority under
the Interstate Commerce Act but were subject to the OCSLA. After
determining that a refusal to provide new service contravened the
OCSLA section 5 open access requirement, the Commission acted
pursuant to the OCSLA to order an existing OCS oil line to provide
the requested service. This decision was affirmed in Shell Oil
Company v. FERC, 47 F.3d 1186, 1200 (D.C. Cir. 1995), in which the
court ``accept[ed] the Commission's determination that it had
authority to order an interconnection with an existing pipeline with
excess capacity where the interconnection is necessary to the
Commission's enforcement of the open access requirements of the
OCSLA.''
\23\ For example, Sea Robin's February 26, 1999 proposal in
Docket No. RP99-238-000 to revise its tariff in order to charge
certain discounted rates was protested, not as being inconsistent
with the NGA, but on the grounds that such discounting could lead to
different rates for similarly situated shippers in contravention of
the OCSLA nondiscrimination provisions. See Burlington Resources Oil
& Gas' March 10, 1999 Protest.
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Making information available pursuant to the regulations proposed
herein will allow the Commission and interested persons to monitor the
activities of OCS gas service providers and identify potential
violations of the OCSLA and, we anticipate, of the NGA as well. Whereas
all OCS gas service providers are subject to the OCSLA, only a subset
thereof are also subject to the NGA.²⁴ The competitive
inequities that this can cause could be mitigated if OCS operators
would be subject to identical, light-handed regulations under the
proposed inform-and-enforce regime. We expect disclosure to serve as a
means to enable market discipline to displace part of the Commission's
role in overseeing OCS operations.
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\24\ As indicated in note 9, we expect there are very few
facilities subject exclusively to the OCSLA and the NGPA.
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D. The Proposed Regulations

The Commission has completed a review of its policy governing
offshore natural gas facilities and services, informed by the comments
submitted in response to the 1998 Notice of Inquiry. We conclude that
the key issue for shippers using OCS facilities is the assurance of
open access and nondiscriminatory conditions of service, including
nondiscriminatory rates. Accordingly, to ensure that these competitive
characteristics will exist on all facilities used to move gas on or
across the federal OCS, the Commission believes it is necessary to
institute a single set of regulatory requirements under the OCSLA that
are equally applicable to NGA-jurisdictional and NGA-exempt offshore
gas service providers. Thus, all OCS gas service providers will be
subject to the same OCSLA regulatory regime and, unless exempt under
proposed section 330.3(a), make available the information specified in
proposed sections 330.2(a) and (b).
The Commission anticipates that the proposed reporting requirements
will result in lighter-handed oversight than under the NGA while
offering even-handed treatment for all market participants. The
approach the Commission proposes balances the OCS gas service
providers' interest in light-handed regulation with OCS shippers'
interest in ensuring they are not subject to discriminatory practices.
This should encourage competitive options for offshore producers and
onshore purchasers of natural gas.

III. Discussion

A. Purpose

Sections 5(e) and (f) of the OCSLA state that offshore gas
pipelines must transport or purchase OCS gas without discrimination and
provide open and nondiscriminatory access to both owner and nonowner
shippers. The Commission is proposing to require OCS gas service
providers to make certain information available to assist the
Commission and interested persons in monitoring compliance with these
OCSLA mandates.
Currently, offshore pipeline companies subject to the Commission's
NGA jurisdiction must, among other requirements, make information
available to assist the Commission and interested persons in assessing
whether the pipeline companies are providing open and nondiscriminatory
access.\25\ However, there are no similar reporting requirements
applicable to offshore pipelines that are not regulated under the NGA.
The proposed OCSLA reporting requirements will apply to both NGA-
jurisdictional and NGA-exempt OCS pipelines. Because the proposed OCSLA
reporting requirements are less rigorous than those in place under the
NGA, to the extent an OCS gas service provider is subject to the NGA,
it should be able to fulfill the proposed OCSLA reporting requirements,
in large part or in full, by referencing information already on file
with the Commission pursuant to present NGA regulations.
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\25\ In addition to information made available in support of an
NGA certificate application, NGA-regulated pipelines are required to
file periodic publicly available reports, for example, the Major
Natural Gas Pipeline Annual Report, Form No. 2, 18 CFR 260.1; Non-
Major Pipeline Annual Report, Form No. 2a, 18 CFR 260.2; Quarterly
Statement on Monthly Data, Form No. 11, 18 CFR 260.3; Index of
Customers Report, 18 CFR 284.106(c) and 18 CFR 284.223(b); or the
Discount Rate Report, 18 CFR 284.7(c)(6).
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The proposed regulations are intended to enable a shipper--or the
Commission or any other interested person--to compare the terms and
rates under which offshore gas service providers offer service to
shippers. If a shipper believes it has been subject to discrimination
or has been unjustifiably denied access by a gas service provider, it
may seek redress through a number of means, including use of the
Commission's Enforcement Hotline,\26\ alternative dispute resolution
(ADR) processes,\27\ or by filing a complaint.\28\
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\26\ 18 CFR Part 1b.
\27\ 18 CFR 385.604-06.
\28\ 18 CFR 385.206. The Commission's procedures for responding
to allegations of improper action or inaction were revised and
expanded in the recently issued Complaint Procedures, Final Rule, 64
FR 17,087 (April 8, 1999), FERC Stat. & Regs. para. 31,071 (1999),
86 FERC para. 61,324 (1999), reh'g pending.
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The Commission is requesting comments on the proposed regulations,
including the practicality of the proposed reporting requirements as a
means to prevent, monitor, and remedy anticompetitive practices by OCS
gas service providers. In addition, the Commission requests comments on
the extent to which NGA and NGPA obligations may be met by relying on
OCS competitors' adherence to the proposed OCSLA reporting
requirements.

B. Scope of Proposed Regulations

1. Reporting Requirements
The reporting requirements are contained in proposed sections
330.2(a) and (b). Proposed section 330.2(a) states that an OCS gas
service provider must identify itself, the facilities it operates, and
its affiliates. Proposed section 330.2(b) states that a gas service
provider must submit copies of all current customer contracts or,
alternatively, the OCS gas service provider must instead submit a
statement of its conditions of service with a detailed description of
rates charged and if rates are not uniform, the gas service provider
must list each of its

[[Page 37722]]

customers, the services provided, and the rates applicable thereto.
One area of the Commission's concern is the potential for
discrimination between the affiliates and non-affiliates of a gas
service provider. Identifying service provider and shipper affiliations
\29\ should permit interested persons to judge whether a gas service
provider is treating an affiliate more favorably than a non-affiliate
and to weigh whether such treatment amounts to discrimination or a
denial of access.
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\29\ For purposes of applying the proposed regulations, the
Commission herein adopts the definitions of ``affiliate'' and
``control'' as defined in sections 161.2(a) and (b) respectively of
the Commission's regulations.
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The reporting requirements of proposed sections 330.2(a) and (b)
are met by filing the specified information with the Commission.
However, such information is of use only as long as it remains
accurate, since interested persons cannot meaningfully compare and
consider conditions of service unless they reflect current conditions.
Thus, proposed section 330.3(d) states that an OCS gas service provider
that files information pursuant to proposed sections 330.2(a) and (b)
must refile in the event that there are changes to the information
initially filed. To ensure information on file remains up to date,
proposed section 330.3(d) directs an OCS gas service provider to submit
a description of changes in its affiliates, customers, rates, or terms
and conditions of service within 15 days of the date the change occurs.
An OCS gas service provider that has fulfilled the proposed reporting
requirements need not subsequently submit any further information for
as long as its status remains unchanged.
As to the initial filing, we direct all affected OCS gas service
providers to submit the information described in proposed sections
330.2(a) and (b) within 60 days of the issuance date of the final rule
in this proceeding.
The proposed regulations would amend Rule 2011 of the Commission's
Rules of Practice and Procedure to allow all filings made pursuant to
the proposed sections 330.2(a) and (b) to be via electronic media.
2. Circumstances Under Which the Proposed Regulations Will Not Apply
As discussed below, the proposed regulations will exempt certain
types of facilities, based on their location, and certain gas service
providers, based on the nature of the service performed. The Commission
is considering whether it would be more appropriate to omit this latter
exemption and apply the proposed reporting requirements to OCS gas
service providers universally, without regard to the type of service
offered or shippers served. Our aim is to strike a balance between, on
the one hand, instituting a reporting regime broad enough to ensure
that shippers are able to identify potential discrimination and, on the
other hand, narrowing the applicability of this reporting regime to
exclude circumstances where the prospects of finding discrimination are
remote. However, given the limited use to date of the OCSLA to define,
prevent, and remedy discrimination, and given that where there is no
information available on conditions of service there is no way to
discover potential discrimination, we are concerned that instituting
exemptions for certain gas service providers might compromise the
efficient development and transportation of offshore gas supplies.
Therefore, the Commission is requesting comments on whether it would be
prudent to issue a final rule without the exclusions contained in
sections (b) and (c) below.
a. Feeder Lines. Section 5(f)(2) of the OCSLA states that the
Commission may exempt ``any pipeline or class of pipelines which feeds
into a facility where oil and gas are first collected or a facility
where oil and gas are first separated, dehydrated, or otherwise
processed'' from the requirements of open and nondiscriminatory access.
The Commission is exercising its authority to do so, as provided in
proposed section 330.3(a)(2).
b. Pipelines Dedicated to Service for a Single Shipper. Where an
OCS gas service provider carries gas exclusively for a single shipper,
either itself or another party, there is no possibility for multiple
shippers to be subject to different, potentially discriminatory
conditions of service. In such circumstances, we see no reason to
require the gas service provider to make information concerning its
terms and rates available for public inspection; indeed, where the gas
service provider is carrying gas only for itself, there may be no rates
or terms and conditions of service as such. Thus, proposed section
330.3(a)(1) states that the reporting requirements regarding affiliates
and terms and conditions of service would not apply in such
circumstances. Such circumstances would be present where a single OCS
gas producer owns and operates a pipeline to carry its own gas from a
producing field to shore or to an interconnection with another offshore
pipeline. As long as the OCS producer serves only itself or a single
other party, we see no cause to be concerned about anticompetitive
practices.
If a gas service provider offers new service to a second shipper,
this gives rise to the prospect of similarly situated shippers on the
same pipeline being subject to different and potentially discriminatory
conditions of service. Pursuant to proposed section 330.3(c), the
reporting requirements would then apply.
A request for new service from a second shipper may also give rise
to the possibility for similarly situated shippers to be served under
different and potentially discriminatory terms or rates. If the gas
service provider accepts the request to serve a second shipper, then as
noted above, this offer to serve triggers the obligation to comply with
the reporting requirements under proposed section 330.3(c).
If the gas service provider denies service on the grounds that it
is physically unable to transport the requested volumes, and the party
denied service complains, the Commission will first address and assess
the rationale for denying service, without triggering the reporting
requirements. If the Commission deems the denial justifiable--e.g., if
the receipt of additional volumes could cause gas from producing wells
to be shut in contrary to the OCSLA section 5(e) admonishment
concerning conservation or the prevention of waste, or if the content
of the proposed gas stream would be incompatible with the
characteristics of gas volumes currently flowing--then, as described in
proposed section 330.3(a)(1), the reporting requirements would not
apply, and the gas service provider may continue to serve its single
customer. However, if the gas service provider's claim that it is
physically unable to serve another customer is found to be unwarranted
and rejected by the Commission, or if the gas service provider denies
access on some other basis, then the prospective shipper may pursue its
claim respecting the denial of service, and the gas service provider's
response must include the information specified in the proposed
reporting requirements.
c. Other Self-Owned Pipelines. In general, we do not believe
allegations of anticompetitive conduct will arise unless a gas service
provider is carrying gas for more than one shipper, hence the preceding
reporting exemption for single-shipper pipelines. We also believe there
are certain circumstances where a pipeline carrying gas for multiple
parties has no incentive to discriminate. Where a pipeline is used
exclusively to transport gas to shore or to an interconnection with
another gas service provider's facilities, and the same parties jointly
own all interests in

[[Page 37723]]

the pipeline and the gas carried by that pipeline, we see no need to
require disclosure of the conditions of service on that pipeline. The
Commission views this as the equivalent of the above example of an OCS
producer that owns and operates a pipeline to carry its own gas
production. Presumably, each of the several parties holding ownership
interests in the gas produced, and the pipeline over which that gas is
carried, is fully informed regarding the conditions of service on its
own pipeline. Therefore, in such situations, the proposed reporting
requirements will not apply.
This exemption will cease if one of the existing shippers alleges
denial of access or discrimination. Further, this exemption will end if
the OCS gas service provider operating the pipeline offers service to
any person that does not hold an ownership interest in both the
pipeline and the gas produced from the field served by the pipeline.
Finally, this exemption will end if the gas service provider rejects a
service request submitted by a person that has no ownership interest,
unless the Commission determines the requested service was denied due
to a physical inability to accept the proposed additional volumes. If
the Commission finds that physical access is possible or if the reason
for refusing service is based on other grounds, then the OCS gas
service provider would have to comply with the proposed reporting
requirements.
3. Enforcement of the Proposed Regulations
The proposed reporting requirements will provide the Commission and
interested persons with information on OCS gas service providers'
affiliates and conditions of service as a means to examine and identify
discriminatory practices. Although we expect to monitor compliance with
the proposed reporting requirements, we do not expect to scrutinize
each submission with the aim of identifying and challenging every
aspect of a gas service provider's operations that could conceivably
lead to an OCSLA-barred act. Instead, we anticipate the proposed
regulations will result in a shipper-initiated, complaint-driven
enforcement process.
This approach differs from NGA regulation, under which natural gas
companies must obtain Commission authorization prior to initiating,
altering, or abandoning facilities or services. In contrast, under the
proposed OCSLA regulation, gas service providers will not be required
to obtain Commission approval prior to acting. In this sense,
regulation under the OCSLA will be lighter-handed; compliance will
consist of describing affiliations and operations. While the proposed
OCSLA regulations will impose a new reporting requirement on certain
OCS gas service providers that do not currently file any information
with the Commission, the proposed regulations impose no new constraints
on these gas service providers' actions. Information made available
pursuant to the proposed reporting requirements should aid our efforts
to enforce the current OCSLA nondiscrimination provisions.
Actions that shippers or others believe constitute discrimination
under the OCSLA should be described in a complaint to the
Commission.³⁰ Where a denial of access is alleged, the gas
service provider will respond with an explanation of whether and why
service was denied. The Commission will review the response and may
instruct the gas service provider to submit the information specified
in proposed sections 330.2(a) and (b) if it has not previously done so.
Where the gas service provider's response contains information
previously unavailable to the complaining shipper, the shipper may cite
this as cause to request that it be allowed to supplement its initial
filing.
---------------------------------------------------------------------------

\30\ The recent Complaint Procedures Final Rule provides for
different processing paths that the Commission may use to resolve
issues raised in complaints. ``These complaint resolution paths are
(1) alternative dispute resolution, (2) decision on the pleadings by
the Commission, and (3) hearing before an ALJ.'' Order No. 602, 64
FR 17,087 (April 8, 1999), FERC Stat. & Regs. para. 31,071 at 30,764
(1999), 86 FERC para. 61,324 (1999), reh'g pending.
---------------------------------------------------------------------------

IV. Environmental Analysis

Commission regulations describe the circumstances where preparation
of an environmental assessment or an environmental impact statement
will be required.³¹ The Commission has categorically
excluded certain actions from this requirement as not having a
significant effect on the human environment.³² No
environmental consideration is necessary for the promulgation of a rule
that is clarifying, corrective, or procedural, or that does not
substantially change the effect of legislation or regulations being
amended.³³
---------------------------------------------------------------------------

\31\ Regulations Implementing National Environmental Policy Act,
52 FR 47,897 (Dec. 17, 1987), codified at 18 CFR Part 380.
\32\ 18 CFR 380.4(a)(2)(ii).
\33\ 18 CFR 380.4.
---------------------------------------------------------------------------

This proposed rule is procedural in nature. It directs certain
offshore gas service providers to make certain information publicly
available. Thus, no environmental assessment or environmental impact
statement is necessary for the requirements proposed in the rule.

V. Regulatory Flexibility Certification

The Regulatory Flexibility Act of 1980 (RFA) ³⁴
generally requires a description and analysis of final rules that will
have significant economic impact on a substantial number of small
entities. The Commission is not required to make such analyses if a
rule would not have such an effect.³⁵
---------------------------------------------------------------------------

\34\ 5 U.S.C. 601-612 (1988).
\35\ 5 USC 605(b) (1988).
---------------------------------------------------------------------------

The Commission does not believe that this rule would have a
significant economic impact on small entities. Most entities that will
be required under the proposed rule to file for the first time do not
fall within the RFA's definition of small entity.³⁶ Further,
many of the entities that will be required to meet the new reporting
requirements are currently regulated under the NGA and as such have
already submitted information to the Commission that largely fulfills
the proposed new requirements. To the extent information submitted
pursuant to NGA regulations duplicates that required under the proposed
OCSLA regulations, NGA-regulated gas companies may satisfy the proposed
OCSLA reporting requirements by referencing that already-filed
information. Hence, this new rule should have little impact on these
companies. Further, NGA-regulated gas companies with offshore
facilities are generally too large to fall within the RFA definition of
a small entity. Similarly, we anticipate that the non-NGA gas service
providers that file for the first time will, for the most part, fall
outside of the RFA definition of a small entity. With respect to small
entities, the effort involved to comply with the proposed reporting
requirements should be minimal. Therefore, the Commission certifies
that this rule will not have a significant economic impact on a
substantial number of small entities. Accordingly, no regulatory
flexibility analysis is required.
---------------------------------------------------------------------------

\36\ 5 U.S.C. 601(3) (1988), citing to section 3 of the Small
Business Act, 15 USC 632 (1988). Section 3 of the Small Business Act
defines a ``small business concern'' as a business which is
independently owned and operated and which is not dominant in its
field of operations.
---------------------------------------------------------------------------

VI. Information Collection Requirements

The following collection of information contained in this proposed
rule (proposed new Subchapter O) is being submitted to the Office of
Management and Budget (OMB) for

[[Page 37724]]

review under Section 3507(d) of the Paperwork Reduction Act of
1995.³⁷ The Commission proposes to identify the information
required as FERC-545 for OCSLA-jurisdictional gas service providers.
Currently, NGA-jurisdictional companies file with the Commission most
or all the information that will be required by this NOPR under
Subchapters E, G, and I. Thus, the reporting burden imposed on NGA-
jurisdictional companies will be minimal or merely ministerial, as they
can comply with the proposed rules in large part or in full by
submitting a statement describing the extent to which the information
required by this OCSLA NOPR is already on file pursuant to existing NGA
regulations.
---------------------------------------------------------------------------

\37\ 44 U.S.C. 3507(d) (1988).
---------------------------------------------------------------------------

The proposed regulations impose new reporting requirements on OCS
gas service providers that offer service to multiple non-owner
shippers, requiring them to make an initial submission of specific
information--information which should be readily available in the
ordinary course of business--and then make timely filings if there are
any changes in the initially submitted information. To the extent the
status of a gas service provider's affiliations, customers, and
conditions of service remain the same, there is no need to file again.
To the extent that a gas service provider is currently subject to the
NGA's reporting requirements, the proposed OCSLA reporting requirements
should call for little or no additional information. The proposed
regulations would not apply to service provided by means of facilities
located upstream of a point where gas is first collected, separated,
dehydrated, or otherwise processed.
Considering the complex nature of the offshore operating
environment, we cannot state with assurance the exact number of
entities that will be subject to the proposed regulations.
Consequently, we request parties submitting comments to clarify whether
and to what extent the proposed requirements might apply to offshore
operations. In addition, we seek comments on the Commission's need for
this information, whether the information will have practical utility,
the accuracy of the provided burden estimates, ways to enhance the
quality, utility, and clarity of the information to be collected, and
any suggested methods for minimizing respondents' burden, including the
use of automated information techniques. The burden estimates for
complying with this proposed rule are as follows:
Public Reporting Burden: Estimated Annual Burden.

----------------------------------------------------------------------------------------------------------------
Number of Number of Hours per Total annual
Data collection respondents responses response hours
----------------------------------------------------------------------------------------------------------------
FERC-545.................................... 70 2 8 1,120
----------------------------------------------------------------------------------------------------------------

Total Annual Hours for Collection

(Reporting + Record Keeping, (if appropriate)) = 1,120

For NGA-jurisdictional gas companies, the current annual reporting
burden for FERC-545 is 58,201 hours. Over the next year, the total
annual burden under the proposed OCSLA reporting requirements is
estimated to be 1,120 hours. Based on the Commission's experience with
processing filings by NGA-regulated pipelines for the fiscal year 1996-
1997, it is estimated that about 140 filings per year will be made with
an average burden of 8 hours per response. The burden under the
proposed OCSLA regulations would minimally increase current burden
levels for pipelines already subject to the NGA.
During the first year after the proposed rules become effective,
most of the burden will consist of an initial, one-time compliance
filing. In subsequent years, most of the burden will consist of minor
filings updating the initial filing.
Information Collection Costs: The Commission seeks comments on the
costs to comply with these requirements. It has projected the average
annualized cost per respondent to be the following:

Annualized Capital/Startup Costs........................... 0.
Annualized Costs (Operations and Maintenance).............. $56,000 ($50 per hour).
----------------------------------------------------
Total Annualized Costs................................. $56,000.

The OMB regulations require OMB to approve certain information
collection requirements imposed by agency rule.³⁸
Accordingly, pursuant to OMB regulations, the Commission is providing
notice of its proposed information collection to OMB.
---------------------------------------------------------------------------

\38\ 5 CFR 1320.11.
---------------------------------------------------------------------------

Title: FERC-545, Gas Pipeline Rates: Rate Change (Non-Formal).
Action: Proposed Data Collection.
OMB Control No.: 1902-0154. The respondent shall not be penalized
for failure to respond to this collection of information unless the
collection of information displays a valid OMB control number.
Respondents: Business or other for-profit, including small
businesses.
Frequency of Responses: Initial, one-time filing; updated if status
changes.
Necessity of the Information: The proposed rule implements the
Commission's authority under the OCSLA to assure open and
nondiscriminatory access for gas moving on or across the OCS by
collecting certain information concerning OCS gas service providers'
affiliations and conditions of service. Without this information,
neither the Commission nor a prospective or existing shipper will be
able to determine whether the existing or proposed conditions of
service discriminate or deny access. Implementation of these data
requirements will help the Commission carry out its responsibilities
under the OCSLA and coincide with the current competitive regulatory
environment which the Commission fostered under Order No. 636.
Internal Review: The Commission has assured itself, by means of its
internal review, that there is specific, objective support for the
burden estimates associated with the proposed reporting requirements.
The Commission's staff will use the data in the OCS gas service
providers' filings to determine whether their operations are consistent
with the nondiscriminatory, open access provisions of the OCSLA. These
requirements conform to the Commission's plan for efficient information
collection, communication, and management within the natural gas
industry.

[[Page 37725]]

Interested persons may obtain information on the reporting
requirements by contacting the following: Federal Energy Regulatory
Commission, 888 First Street, NE, Washington, DC 20426, [Attention:
Michael Miller, Office of the Chief Information Officer, Phone: (202)
208-1415, fax: (202) 208-2425, e-mail: michael.p.miller@ferc.fed.us].
For submitting comments concerning the collection of information
and the associated burden estimate, please send your comments to the
contact listed above and to the Office of Management and Budget, Office
of Information and Regulatory Affairs, Washington, DC 20503.
[Attention: Desk Officer for the Federal Energy Regulatory Commission,
phone: (202) 395-3087, fax: (202) 395-7285].

VII. Comment Procedure

The Commission invites interested persons to submit written
comments on the matters and issues proposed in this notice to be
adopted, including any related matters or alternative proposals that
commenters may wish to discuss.
The original and 14 copies of such comments must be recieved by the
Commission before 5 p.m., August 27, 1999. Comments should be submitted
to the Office of the Secretary, Federal Energy Regulatory Commission,
888 First Street, NE, Washington, DC 20426, and should refer to Docket
No. RM99-5-000.
In addition to filing paper copies, the Commission encourages the
filing of comments either on computer diskette or via Internet E-Mail.
Comments may be filed in the following formats: WordPerfect 8.0 or
below, MS Word Office 97 or lower version, or ASCII format.
For diskette filing, include the following information on the
diskette label: Docket No. RM99-5-000; the name of the filing entity;
the software and version used to create the file, and the name and
telephone number of the contact person. Attach the comment to the E-
Mail in one of the formats specified above. The Commission will send an
automatic acknowledgment to the sender's E-Mail address upon receipt.
Questions on electronic filing should be directed to Brooks Carter at
202-501-8145, E-Mail address brooks.carter@ferc.fed.us.
Commenters should take note that, until the Commission amends its
rules and regulations, the paper copy of the filing remains the
official copy of the document submitted. Therefore, any discrepancies
between the paper filing and the electronic filing or the diskette will
be resolved by reference to the paper filing.
All written comments will be placed in the Commission's public
files and will be available for inspection in the Commission's Public
Reference Room at 888 First Street, NE, Washington, DC 20426, during
regular business hours. Additionally, comments may be viewed, printed,
or downloaded remotely via the Internet through FERC's Homepage using
the RIMS or CIPS links. RIMS contains all comments but only those
comments submitted in electronic format are available on CIPS. User
assistance is available at 202-208-2222, or by E-Mail to
rimsmaster@ferc.fed.us.

List of Subjects

18 CFR Part 330

Reporting and recordkeeping requirements.

18 CFR Part 385

Administrative practice and procedure, Electric utilities,
Penalties, Pipelines, Reporting and recordkeeping requirements.

By direction of the Commission.

Commissioners Bailey and Hebert dissented with separate
statements attached.
David P. Boergers,
Secretary.
In consideration of the foregoing, the Commission proposes to amend
Chapter 1, Title 18, of the Code of Federal Regulations, as set forth
below.
1. A new Subchapter O, including part 330 is added to read as
follows:

SUBCHAPTER O--REGULATIONS UNDER THE OUTER CONTINENTAL SHELF LANDS ACT
(OCSLA)

PART 330--CONDITIONS OF SERVICE REPORTING REQUIREMENTS

Sec.
330.1 Definitions.
330.2 Reporting requirements.
330.3 Applicability of reporting requirements.

Authority: 43 U.S.C. 1334.

Sec. 330.1 Definitions.

(a) Outer Continental Shelf (OCS) has the same meaning as found in
section 2(a) of the OCSLA (43 U.S.C. 1331(a)); and
(b) Gas Service Provider means any entity that operates a facility
located on the OCS that is used to move natural gas on or across the
OCS.
(c) Affiliate has the same meaning as found in 18 CFR 161.2(a).
(d) Control has the same meaning as found in 18 CFR 161.2(b).

Sec. 330.2 Reporting requirements.

(a) Gas Service Providers must file with the Commission a
declaration of affiliation consisting of:
(1) The date of the filing;
(2) The name and address of the Gas Service Provider;
(3) The name and address of a contact person;
(4) The title, name, and address of the Gas Service Provider's
officers if a corporation or general partners if a partnership;
(5) A description and map of the facilities operated by the Gas
Service Provider, denoting the facilities' location, length, and size;
and
(6) For all entities affiliated with the Gas Service Provider: the
names and state of incorporation of all corporations, partnerships,
business trusts, and similar organizations that directly or indirectly
hold control over the Gas Service Provider, and, the names and state of
incorporation of all corporations, partnerships, business trusts, and
similar organizations directly or indirectly controlled by the Gas
Service Provider (where the Gas Service Provider holds control jointly
with other interest holders, so state and name the other interest
holders).
(b) Gas Service Providers must file with the Commission its
conditions of service consisting of:
(1) Copies of all current Gas Service Provider and customer
contracts for gas shipments or, alternatively;
(2) A statement of the Gas Service Provider's rules, regulations,
and conditions of service that includes:
(i) The rate between each pair of receipt and delivery points
available under the Gas Service Provider's contracts, if point-to-point
rates are charged;
(ii) The rate per unit per mile, if mileage-based rates are
charged;
(iii) Any other rate employed by the Gas Service Provider, with a
detailed description of how such rate is derived, identifying customers
and the rate charged to each customer;
(iv) Any adjustments made by the Gas Service Provider to the rates
charged based on gas volumes shipped, the terms and conditions of
service, or other criteria, identifying customers and the rate
adjustment applicable to each customer.

Sec. 330.3 Applicability of Reporting Requirements.

(a) The Sec. 330.2 (a) and (b) reporting requirements do not apply
with respect to:
(1) A Gas Service Provider that serves exclusively a single entity
(either itself or one other party), until such time as

[[Page 37726]]

the Gas Service Provider offers to serve a second shipper, or the
Commission determines that the Gas Service Provider's denial of a
request for service is unjustified, and the shipper denied service
contests the denial;
(2) A Gas Service Provider that serves exclusively shippers with
ownership interests in both the pipeline operated by the Gas Service
Provider and the gas produced from the field connected to the pipeline,
until such time as the Gas Service Provider offers to serve a non-owner
shipper, or the Commission determines that the Gas Service Provider's
denial of a request for service is unjustified, and the shipper denied
service contests the denial; and
(3) Services rendered over facilities that feed into a facility
where natural gas is first collected, separated, dehydrated, or
otherwise processed.
(b) A Gas Service Provider that makes no filing pursuant to
Sec. 330.3(a)(1) must comply with the specified reporting requirements
within 15 days of offering to serve a new shipper or when required by
the Commission.
(c) A Gas Service Provider subject to these reporting requirements
that alters its affiliates, customers, rates, or terms and conditions
of service must file with the Commission a description of the change
within 15 days of the effective date of such alteration.

PART 385--RULES OF PRACTICE AND PROCEDURE

2. The authority citation for part 385 continues to read as
follows:

Authority: 5 U.S.C. 551-557; 15 U.S.C. 717-717z, 3301-3432; 16
U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-7352; 49
U.S.C. 60502; 49 App. U.S.C. 1-85.

3. In Sec. 385.2011, new paragraph (b)(6) is added to read as
follows:

Sec. 385.2011 Procedures for filing on electronic media (Rule 2011).

* * * * *
(b) * * *
(6) Material submitted electronically pursuant to Sec. 330.2 of
this chapter.

Note: The following appendix to the preamble will not appear in
the Code of Federal Regulations.

Appendix to the Preamble

Bailey, Commissioner, dissenting.
I respectfully dissent from the issuance of this rulemaking
proposal. As noted in my dissent in the Sea Robin remand proceeding
(also decided today), my views reflect the evolution of my thinking
about OCS issues over the last several years.
The jurisdictional status of existing OCS pipelines reflects
conflicting applications of the primary function test. This
situation was aggravated by the implementation of the 1996 OCS
Policy Statement, when it became apparent that lines declared to be
gathering only a few years earlier would be found jurisdictional if
decided under the new policy.
Attempts to define gathering versus transmission on the OCS
continue to be driven by concerns for the need to retain FERC/NGA
rate jurisdiction as a backstop in case a complaint arises. But, as
I have stated on other occasions, I do not think we have that right
if the function of a line can be viewed as gathering under a common
sense analysis. Without a statutory definition of gathering, I find
the analysis set forth in EP Operating Company v. FERC, 876 F. 2d 46
(Fifth Cir. 1989) to be controlling. In the end, I remain convinced
that the movement of gas across the OCS is most often a collection
process.
I appreciate that these proposed OCSLA regulations are a first
step in preparing for what is an expected increase in the number of
lines found to be gathering under the reformulated primary function
test outlined in today's Sea Robin remand order. And I respect the
effort to create what is meant to be a light-handed regulatory
approach. I believe, however, that the proposal is not necessary,
and I am concerned that it raises new OCS issues without resolving
the already difficult ones presented to us.
I would prefer to accept that, under the EP Operating analysis,
much of the activity on the OCS is gathering. I would likewise
prefer to continue the current practice of relying on the
antidiscrimination provisions of the OCSLA if, and when, complaints
are filed by shippers on OCS gathering lines. I do not find any
compelling evidence that we need to expand our OCSLA regulatory
regime by promulgating these rules. The Commission has acknowledged
quite clearly its jurisdiction pursuant to this statute and
specifically emphasized in the 1996 Policy Statement that it would
respond promptly to complaints filed thereunder. We receive very few
such complaints.
In sum, I see no reason to endorse a proposal that will create,
at least initially, a dual scheme of regulation for certain
pipelines on the OCS. And I am uncomfortable embarking on a course
that may invite new legal challenges to our regulation of the
offshore, without resolving the confusion underlying our attempts to
apply the existing primary function test.
Vicky A. Bailey,
Commissioner.
Hebert, Commissioner, dissenting.
In this proposed rulemaking the Commission is developing a
series of regulations to enhance its ability to ensure that the
competitive principles governing pipeline operation on the Outer
Continental Shelf (OCS) are met. As I understand it, the Commission
in response to the precepts of Section 5(e) of the Outer Continental
Shelf Lands Act (OCSLA) ¹ which requires that pipelines
must provide open and nondiscriminatory access to both owner and
nonowner shippers, has proposed these regulations to ensure that the
Commission has the authority to address any allegations of
discriminatory treatment on the OCS or concerns about open access.
---------------------------------------------------------------------------

\1\ 43 U.S.C. 1334(f) (1988).
---------------------------------------------------------------------------

While I fully support the competitive principles on the OCS, and
I recognize the importance of these principles, I am not comfortable
with how the majority has chosen in this document to address OCSLA
regulation. Specifically, the NOPR intends to require OCS gas
transportation service providers to file with the Commission
information regarding the conditions under which they render service
on the OCS and indicating their affiliates. While the provision of
this information will obviously not be burdensome to service
providers currently subject to NGA jurisdiction, the NOPR's
requirement also goes to a population that is currently not subject
to NGA jurisdiction.
The indications from this NOPR are that once filed, the
information used to support Commission OCSLA jurisdiction will be
used only as part of a light-handed, complaint driven regulatory
process. Under normal circumstances I would find a proposal to
replace NGA jurisdiction with light-handed complaint driven
regulation as appropriate, but in this situation, the pairing of
lighter regulation for NGA companies with regulation for currently
non-jurisdictional companies is unacceptable. Yes, the regulatory
scheme would be light-handed but when compared to no regulation, it
can only be seen as heavy-handed. (REGULATORY GAP).
My uncomfortableness with extending Commission jurisdiction in
this proposal is not a failure to uphold the competitive principles
of the OCS. Instead, I believe that the OCSLA provides the
Commission with the necessary authority to act to address issues of
discrimination and open access through its own provisions, even
though that authority has heretofore lain dormant. As opposed to
subjecting the Commission's jurisdiction under the OCSLA to the
vagaries of future and inevitable court challenges which a NOPR of
this design would involve, the Commission should act with confidence
on any complaints that are brought before it under the OCSLA. The
Commission has recently refined and expedited its complaint process
which is a workable vehicle for bringing these issues to the
Commission in a timely manner. Additionally, as has been noted by
Commissioner Bailey on this matter, if the OCSLA did ultimately fail
to remedy a showing of discriminatory rates, a legislative solution
could be pursued. I also take guidance from the Circuit Court's
statement that the ``need for regulation cannot alone create
authority to regulate.'' ²
---------------------------------------------------------------------------

\2\ 127 F.3d at 371.
---------------------------------------------------------------------------

While I can understand the interest some may have in ensuring
full comprehension of the extent of the Commission's powers under
the OCSLA, I think the more appropriate course of action would be to
be receptive and responsive to filed complaints, with the confidence
of assured jurisdiction, as opposed to the exploration through a
proposed rulemaking of the very same property.
My belief that the Commission can remedy violations of the
competitive principles of the

[[Page 37727]]

OCS as well as my concern that the extension of jurisdiction, light-
handed as it may be, to currently non-jurisdictional OCS companies
prevents me from providing the instant NOPR with my support.
Accordingly, I dissent from the issuance of this proposed
rulemaking.

Respectfully,
Curt Hebert, Jr.,
Commissioner.
[FR Doc. 99-17251 Filed 7-12-99; 8:45 am]
BILLING CODE 6717-01-P

Regulations under the Outer Continental Shelf Lands Act Governing the Movement of Natural Gas on Facilities on the Outer Continental Shelf; Notice of Proposed Rulemaking

Federal Register Citation

Suggested Web Citation