Regulations Under the Outer Continental Shelf Lands Act Governing
the Movement of Natural Gas on Facilities on the Outer Continental
Shelf; Final Rule
[Federal Register: April 17, 2000 (Volume 65, Number 74)]
[Rules and Regulations]
[Page 20354-20371]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17ap00-9]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Parts 330 and 385
[Docket No. RM99-5-000; Order No. 639]
Regulations Under the Outer Continental Shelf Lands Act Governing
the Movement of Natural Gas on Facilities on the Outer Continental
Shelf; Final Rule
Issued April 10, 2000.
AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Final rule.
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SUMMARY: The Federal Energy Regulatory Commission (Commission) is
issuing regulations 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). The regulations require OCS gas
transportation service providers to make available information
regarding their affiliations and the conditions under which service is
rendered. This information 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. The
final rule, by rendering offshore transactions transparent, should
provide a sound basis for implementing the uniformly applicable open
access and nondiscrimination mandates of the OCSLA, thus resulting in
greater efficiencies in this marketplace.
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\1\ 43 U.S.C. 1301-1356.
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EFFECTIVE DATE: The rule is effective May 17, 2000.
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:
Before Commissioners: James J. Hoecker, Chairman; William L. Massey,
Linda Breathitt, and Curt Hebert, Jr.
I. Introduction
The Federal Energy Regulatory Commission (Commission) is issuing
regulations under the Outer Continental Shelf Lands Act (OCSLA) \1a\ to
ensure that natural gas is transported on an open and nondiscriminatory
basis
[[Page 20355]]
through pipeline facilities located on the Outer Continental Shelf
(OCS). \2\ The regulations require OCS gas transportation service
providers to make available information regarding their affiliations
and the conditions under which service is rendered. This information
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 and will enable shippers
who believe they are subject to anticompetitive practices to bring
their concerns to the Commission. The final rule, by rendering offshore
transactions transparent, should provide a sound basis for implementing
the uniformly applicable open access and nondiscrimination mandates of
the OCSLA, thus resulting in greater efficiencies in this marketplace.
The regulations adopted by this final rule do not eliminate or modify
any existing regulations or Commission policies relating to the
regulation of offshore facilities pursuant to the Commission's
authority under the Natural Gas Act (NGA). \3\
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\1a\ 43 U.S.C. 1301-1356.
\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.''
\3\ 15 U.S.C. 717
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II. Background
On June 30, 1999, the Commission issued a Notice of Proposed
Rulemaking (NOPR), \4\ in which we proposed requiring all entities that
move natural gas on or across the OCS to submit certain information
regarding their affiliations, rates, and conditions of service. We
explained that a uniform regulatory reporting regime would permit the
Commission and interested persons to ensure adherence to the OCSLA's
nondiscrimination and open access mandates.
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\4\ 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, 64 FR 37718 (July
13, 1999), FERC Stats. & Regs. para. 32,542 (1999).
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After review of the comments \5\ and further consideration, we
believe implementing new OCSLA reporting requirements, similar to
certain existing NGA reporting requirements, will realize the aims
stated in the NOPR of eliminating distortions in the offshore
marketplace and encouraging continued investment in the development of
OCS resources.
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\5\ A list of commenters appears in the appendix to this order.
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III. Discussion
A. Rationale for the Rule
As discussed in the NOPR, offshore natural gas, predominately gas
located in the Gulf of Mexico, has come to play an increasingly
important role as a secure domestic source of clean-burning fuel
supplies. We observed that the greater level of OCS activity in recent
years had prompted a greater interest in the importance of the
Commission's responsibility under the OCSLA to ensure a competitive
market for gas pipeline services on the OCS, along with closer
attention to the applicability of our NGA regulation to activities
offshore. This attention has focused concern on the impact that the
multiple, independent, and partially overlapping regulatory regimes at
play offshore have on the competitive market.
In the NOPR, we noted that although all OCS gas service providers
are subject to the OCSLA, only a subset thereof are also subject to the
NGA, presenting potential competitive inequities that could be
mitigated if all offshore facilities were subject to more uniform
regulatory requirements. Currently, offshore service providers subject
to the NGA, by virtue of compliance with our NGA regulations, are
likely to be operating in full accord with the OCSLA; however, we have
no assurance that offshore providers out of our NGA oversight also
adhere to the OCSLA's open access and nondiscrimination mandates. Under
the OCSLA reporting requirements promulgated by this rule, offshore
service providers will report information similar to that now reported
under the NGA, thereby bringing a similar transactional transparency to
virtually all activities that take place on the OCS. This should
moderate the distortion now present due to separate sets of OCS service
providers being subject to separate regulatory regimes and promote
policy goals of both the OCSLA and NGA. Making information regarding
conditions of service available to OCS shippers will enable them to
make informed and improved transportation arrangements; will enable OCS
service providers to make better investment decisions; and will allow
shippers, competitors, and the Commission to monitor the OCS for
instances of discrimination and the exercise of market power. These
benefits are unavailable without the transactional transparency
provided by the OCSLA reporting requirements put in place by this rule.
Making information publicly available that has heretofore been largely
inaccessible should enhance competitive options for offshore producers
and onshore purchasers of natural gas, promote a more efficient
marketplace, and encourage the continued exploration and development of
offshore resources.
1. Comments
Independent Petroleum Association of America (IPAA),\6\ Natural Gas
Supply Association (NGSA),\7\ and OCS Producers \8\ agree with the
Commission's view that while the policy objectives of the OCSLA and NGA
are different, they are complementary, and not mutually exclusive. NGSA
stresses that the NGA, unlike the OCSLA, allows the Commission to
undertake cost-based ratemaking to ensure that transportation rates
remain just and reasonable. Thus, IPAA, NGSA and OCS Producers urge the
Commission to continue to exercise dual regulatory authority over
facilities subject to both statutes.\9\
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\6\ IPAA is composed, generally, of smaller producers and
shippers.
\7\ NGSA is composed of integrated and independent gas producers
and marketers.
\8\ OCS Producers is composed of the following large and mid-
sized offshore producers: Amerada Hess Corporation; Amoco Energy
Trading Corporation; Chevron U.S.A. Inc.; Conoco Inc.; Marathon Oil
Company; Mobil Exploration and Producing U.S., Inc.; OXY USA Inc.;
Phillips Petroleum Company; Shell Offshore Inc.; Texaco Exploration
and Production Inc.; and Union Pacific Resources Company.
\9\ NGSA also argues that conditions be placed on abandonments
of offshore NGA-jurisdictional facilities and services to preclude
``a fly-up in the cost of transporting OCS supplies that could cause
the premature abandonment of OCS projects in mid-production cycle.''
NGSA's August 27, 1999 Comments at 4-5. In a similar vein, OCS
Producers request clarification that the Commission will not change
its traditional exercise of NGA jurisdiction offshore. On the other
hand, El Paso Energy Corporation (El Paso) argues that all offshore
facilities should be deemed gathering, and thereby exempt from the
NGA, an outcome that would eliminate the dual burden of complying
with the OCSLA and NGA. Issues relating to the regulatory status of
particular offshore facilities under the NGA are beyond the scope of
this rulemaking proceeding. Here, we restrict our considerations to
how to best carry out our regulatory mandate under the OCSLA. Such
issues continue to be addressed by the Commission on a case-specific
basis; see e.g., the decisions in Sea Robin Pipeline Company (Sea
Robin), 71 FERC para. 61,351 (1995), reh'g denied, 75 FERC para.
61,332 (1996), vacated and remanded, Sea Robin v. FERC, 127 F.3d 365
(5th Cir. 1997), order on remand, 87 FERC para. 61,384 (1999), reh'g
pending. Accordingly, while we do discuss whether certain OCS
facilities are subject to the OCSLA, we do not reach the question of
the jurisdictional status of any offshore facilities under the NGA.
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Commenters note that since enactment of the OCSLA in 1953, the
Commission has only infrequently invoked its OCSLA authority to address
issues concerning gas or oil activities
[[Page 20356]]
offshore.\10\ To date, to regulate offshore activity, the Commission
has relied almost exclusively on its NGA jurisdiction over gas and its
Interstate Commerce Act (ICA) \11\ jurisdiction over oil. However,
these statutes cover significantly less than the full range of offshore
facilities and services. The NGA excludes natural gas facilities
engaged primarily in production or gathering (roughly half of all the
Gulf of Mexico offshore facilities, generally smaller lines).\12\ The
ICA does not apply to oil pipelines transporting oil solely on or
across the OCS.\13\ In contrast, offshore, the OCSLA's coverage is
inclusive.\14\
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\10\ Since 1992, the Commission has exercised jurisdiction under
the OCSLA in one oil case, Bonito Pipe Line Company (Bonito), 61
FERC para. (1992), aff'd sub nom., Shell Oil Company v. FERC (Shell
Oil), 47 F.3d 1186 (D.C. Cir. 1995). In a current gas proceeding,
Murphy Exploration & Production Company, 81 FERC para. 61,148
(1997), the Commission has invoked its OCSLA authority in response
to a complaint alleging discriminatory rate treatment; final action
in that proceeding is pending.
\11\ Jurisdiction over the transportation of oil in interstate
commerce by pipeline was transferred from the Interstate Commerce
Commission to the Commission on October 1, 1977. See Department of
Energy Organization Act, Pub. L. 95-91, section 402(b), 91 Stat.
565, 584 (1977), codified at 42 U.S.C. 7172(b) (1988) (repealed
1994), recodified as amended at 49 U.S.C. 60502.
\12\ NGA section (1)(b) states the Act ``shall not apply to * *
* the facilities used for * * * the production or gathering of
natural gas.''
\13\ See Bonito, 61 FERC para. 61,050 at 61,221 (1992), aff'd
sub nom. Shell Oil, 47 F.3d 1186 (D.C. Cir. 1995) and Oxy Pipeline,
Inc. (Oxy), 61 FERC para. 61,051 (1992). In the Bonito and Oxy
cases, the Commission affirmed the OCSLA nondiscrimination
provisions apply to OCS oil lines.
\14\ See note 2. Read broadly, the OCSLA reaches across state
waters to shore, since the statute's authorization extends to
onshore facilities used to support OCS gas or oil production, with
production including the transfer of gas or oil to shore. See 43
U.S.C. 1331(l) and (m), defining, respectively, development and
production. OCSLA section 1331(m) and (q) define OCS ``production''
to include the ``transfer of minerals to shore,'' with gas included
within the term ``minerals.'' In Order No. 509-A, we interpreted the
scope of the OCSLA's ``on or across'' the OCS N to include ``the
seaward movement of gas from either an onshore location or an
offshore location to any point on the OCS. 54 FR 8301 (Feb. 28,
1989), FERC Stats. & Regs. para. 30,848 at 31,341 (1989). As defined
by the OCSLA, the OCS does not include either lands covered by tidal
waters up to three miles from the coast of a state or lands covered
by nontidal waters within the boundaries of a state. 43 U.S.C.
1331(a).
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Generally, interstate gas pipeline companies and their affiliated
gatherers assume the absence of a history of vigorous enforcement under
the OCSLA demonstrates that the Commission's practice of relying on the
NGA has been satisfactory in ensuring adherence to regulatory practices
and goals. In view of this, Brooklyn Union Gas Company (Brooklyn
Union), El Paso, Duke Energy Field Services, Inc. (Duke), Dynergy
Midstream Services, Limited Partnership (Dynergy), Interstate Natural
Gas Association of America (INGAA), Leviathan Gas Pipeline Partners, LP
(Leviathan), Tejas Offshore Pipeline, LLC (Tejas), and Williams
Companies, Inc. (Williams) conclude the NOPR's proposal to employ the
OCSLA as a means to monitor offshore gas service providers is
unnecessary. OCS Producers agree and expect the proposed rule to
inhibit offshore gas development.
El Paso and Williams contend the proposed rule does not address the
competitive disadvantages faced by offshore NGA-jurisdictional
pipelines in that NGA pipelines are subject to more stringent
regulation than NGA-exempt facilities (e.g., NGA pipelines require
prior Commission authorization to construct, modify, or abandon
facilities or services) and are thus unable to compete effectively with
OCS NGA-exempt service providers.
Duke and OCS Producers maintain that absent evidence of need for
the proposed rule, promulgation as a final rule would constitute legal
error \17\ and assert that any benefits of the rule would be outweighed
by the burdens it would impose. Leviathan contends it would be
arbitrary and capricious for the Commission to enact OCSLA regulations
without consulting with the Department of Energy, providing for a full
hearing on the proposed regulations, and taking into account the
conservation and prevention of waste of OCS resources.\18\ Commenters
stress that continued reliance on the NGA, in conjunction with the
Commission's recently revised complaint procedures,\19\ should be
adequate to ensure open and nondiscriminatory access to OCS facilities.
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\17\ Citing 5 U.S.C. 557 and 706(E) at 17, n. 24.
\18\ Leviathan cites 43 U.S.C. 1334(e), which states, ``oil or
gas pipelines shall transport or purchase without discrimination,
oil or natural gas produced from submerged lands or outer
Continental Shelf lands in the vicinity of the pipelines in such
proportionate amounts as the Federal Energy Regulatory Commission,
in consultation with the Secretary of Energy, may, after a full
hearing with due notice thereof to the interested parties, determine
to be reasonable, taking into account, among other things,
conservation and the prevention of waste.''
\19\ 18 CFR 385.206. The Commission's procedures for responding
to allegations of improper action or inaction were revised and
expanded by a recent final rule, Complaint Procedures, Order No.
602, 64 FR 17087 (Apr. 8, 1999), FERC Stat. & Regs. para. 31,071
(1999), 86 FERC para. 61,324 (1999), order on reh'g and
clarification, Order No. 602-A, 64 FR 43600 Aug. 11, 1999), FERC
Stats. & Regs. para. 31,076 (1999), 88 FERC para. 61,114 (1999),
order on reh'g, Order No. 602-B, 64 FR 53595 (Oct. 8, 1999) FERC
Stats. & Regs. para. 32,545 (1999), 88 FERC para. 61,249 (1999).
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Instead of acting under the OCSLA, El Paso suggests the Commission
modify its NGA regulations and policies relating to offshore facilities
to make them less burdensome and more market responsive. In particular,
El Paso would have the Commission issue blanket certificate
authorization for natural gas companies to construct and abandon
facilities offshore and permit NGA-jurisdictional companies to
negotiate terms and conditions of service and charge market rates for
transportation on the OCS.
2. Commission Response
In two Notices of Inquiry issued in previous proceedings initiated
in 1995 \20\ and 1998,\21\ we sought comments on whether we might
declare all offshore facilities NGA-exempt gathering facilities and
exercise jurisdiction exclusively under the OCSLA. That option was not
put forth in our NOPR in this proceeding. Rather, the 1999 NOPR asked
whether requiring all OCS gas service providers to report information
about their operations would be an effective means to enforce our
regulatory mandates under the OCSLA, NGA, and Natural Gas Policy Act
(NGPA).\22\ However, the comments in response to the NOPR include a
repetition of arguments presented in response to the prior Notices of
Inquiry, urging the Commission to either declare all offshore
facilities gathering or reaffirm that offshore transmission facilities
are properly functionalized. We do not reach the merits of such
arguments in this rulemaking. Those comments contemplate revisions to
the primary function test used to determine NGA jurisdiction over
offshore facilities.\23\ Here, our concern is limited
[[Page 20357]]
to the question of how best to harmonize our separate statutory
responsibilities.
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\20\ The 1995 Notice of Inquiry (NOI) 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 para. 61,222 (1996), reh'g dismissed, 75 FERC para. 61,291
(1996).
\21\ Alternative Methods for Regulating Natural Gas Pipeline
Facilities and Services on the Outer Continental Shelf, 83 FERC
para. 61,235 (1998).
\22\ 15 U.S.C. 3301-3432. Section 311 of the NGPA addresses
transportation by or on behalf of intrastate pipelines and local
distribution companies, which in practice restricts the section's
coverage to state waters. The OCSLA covers all non-state waters and
the NGA covers all waters.
\23\ 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 NGPA.
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In the NOPR, we proposed that NGA-jurisdictional pipeline companies
transporting gas across the OCS comply with both NGA and OCSLA
reporting requirements. We stated our expectation that for NGA-
jurisdictional companies, the additional OCSLA report would impose only
a modest additional burden, because under existing NGA regulations, gas
companies already submit the bulk of the information specified in the
new OCSLA regulations. Indeed, in light of revisions to our NGA
reporting requirements,\24\ enacted subsequent to the OCSLA NOPR, we
believe that the information that NGA-regulated companies are required
to provide will prove sufficient to monitor conformity with the OCSLA's
open access and nondiscrimination mandates. We anticipate that the
submission of the information required under the NGA, will provide a
data base adequate to ensure effective enforcement of the OCSLA's
provisions. Therefore, we will revise the proposed OCSLA reporting
exemptions, adding a new Sec. 330.3(a)(4), to specify that facilities
and services of OCS gas service providers that are regulated by the
Commission under the NGA need not submit an OCSLA report.\25\ However,
if an NGA-regulated company's system includes OCS facilities that are
not subject to the NGA, e.g., gathering and production lines, the
company must submit an OCSLA report covering its non-NGA facilities.
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\24\ Regulation of Short-Term Natural Gas Transportation
Services, Order No. 637, 65 FR 10156 (Feb. 25, 2000), FERC Stats. &
Regs para. 31,091 (2000), 90 FERC para. 61,109 (2000) (Final Rule).
This recent rule is intended, in part, to improve reporting
requirements to provide more transparent pricing information and to
permit more effective monitoring for the exercise of market power
and undue discrimination--a goal shared in common with our efforts
here with respect to the OCSLA. Specifically, Order No. 637 requires
that, for firm service under part 284, pipelines post on their web
site contemporaneously with the execution of the contract: The names
of the parties to the contract; an identification number for each
shipper; the contract number for the shipper receiving service and
for the releasing shipper; the rate charged under each contract and
the maximum rate, if applicable; the duration of the contract; the
receipt and delivery points and zones or segments covered by the
contract, as well as the common transaction point codes; the
contract quantity, or volumetric quantity under a volumetric release
and special details pertaining to a pipeline transportation contract
(such as requirements for volume commitments to obtain discounts
under a discounted transportation contract); and any affiliate
relationship between the pipeline and the shipper or between the
releasing and replacement shipper. For interruptible transportation,
pipelines must post on their web site daily: The name of the
shipper; a shipper identification number, the rate charged and
maximum rate, if applicable; the receipt and delivery points and
zones or segments over which the shipper is entitled to nominate
gas, as well as the common transaction point codes; the quantity of
gas the shipper is entitled to nominate; special details pertaining
to a pipeline transportation contract; and any affiliate
relationship between the shipper and the pipeline. See 18 CFR
Sec. 284.13(b).
\25\ We treat the OCSLA, NGA, and NGPA as independent grants of
statutory authority that ``must be applied reciprocally in
furtherance of their individual regulatory purposes.'' Continental
Oil Company v. FPC, 370 F.2d 57, 66-67 (5th Cir. 1966). Thus, to the
extent it appears the information submitted under the NGA is
insufficient to enable enforcement of the OCSLA, we would be
inclined to revisit the OCSLA reporting exemption for NGA compliant
companies.
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El Paso and Williams are concerned that offshore, NGA-
jurisdictional pipelines are disadvantaged in competing against NGA-
exempt lines, and assert it is more burdensome to operate under NGA
jurisdiction than under the OCSLA. The existing difference between NGA
and OCSLA regulation should be diminished by this rule's new reporting
requirements. NGA-exempt OCS operators, for the first time, will have
to present their affiliations, rates and conditions of service for
public scrutiny, similar to NGA jurisdictional pipelines. In any event,
Congress has explicitly charged the Commission with curbing the
exercise of monopoly power in the natural gas industry and has
established separate statutes to do so.
Commenters argue the lack of past reliance on the OCSLA
demonstrates there is little, if any, need for the new reporting
regulations. Although periodically referenced as an enforcement option,
in practice we have had few occasions to employ our authority under the
OCSLA. Thus, we recognize that based solely on past practice, there may
appear to be little call for further exercise of our OCSLA authority.
However, as the Producer Coalition observes, ``the argument that
reporting requirements are not needed because there have been only a
handful of OCSLA complaint misses the point'' which is that ``shippers
do not know whether they are victims of discrimination or not. There
simply is not enough information available to make an evaluation.
Without transactional information, it is very difficult for a shipper
to assemble a complaint.'' \26\ Though OCSLA enforcement actions may
have largely lain dormant because shippers and potential shippers lack
information necessary to know whether they may be subject to
discrimination, or because offshore NGA-exempt facilities were far less
extensive and important than they have become within the last decade,
we expect this rule to gather information adequate to enable effective
oversight and enforcement of the provisions of the OCSLA.\27\
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\26\ Produce Coalition's Discussion Points for Meeting on OCS
Pipeline Reporting Requirements at 1 (Nov. 5, 1999).
\27\ In Order No. 491, Interpretative Rule, 43 FERC para. 61,006
at 61,030 (1988), we observed that ``there has been little need by
potential shippers to invoke the statutory, nondiscriminatory access
provisions of the OCSLA'' in part because ``pipelines were usually
the purchasers of offshore reserves and thus were the primary
shippers of gas. Since pipelines could usually secure transportation
for their gas supplies, open access was seldom an issue.'' The order
contains a brief historical overview of offshore operations and
explains the need to issue an Interpretative Rule addressing the
OCSLA's open access provisions in view of changes brought about
following the voluntary open access provisions instituted by Order
No. 436.
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Further, we may have placed undue reliance solely on the NGA to
deter discriminatory practices offshore. Thus, we are acting now in
part in response to the ruling in Sea Robin, in which the court
directed the Commission to reconsider the manner in which it applied
its primary function test to Sea Robin's predominately offshore system.
Informed by the court's discussion, in our order on remand we found
that a significant portion of Sea Robin's system was engaged in NGA-
exempt gathering.\28\ Given that Sea Robin's entire system had been
regulated under the NGA since its inception 30 years ago, and that some
of the facilities found to be gathering include large lines, it is
conceivable that this decision may result in additional existing
offshore NGA transmission facilities being reclassified as
gathering.\29\ Although reclassified facilities will no longer be
subject to NGA reporting requirements, and shippers using such
facilities will no longer enjoy the formal protections against the
exercise of market power afforded by the NGA, such facilities can be
expected to be subject to the OCSLA reporting requirements introduced
with this rule, and as a result, shippers formerly dependent on the
transparency of the NGA will have an alternative and newfound assurance
that they will
[[Page 20358]]
receive service on a transparent open access and nondiscriminatory
basis.
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\28\ 87 FERC para. 61,384 (1999), reh'g pending.
\29\ We have observed that if Sea Robin, as ``one of the largest
transporters of natural gas produced on the OCS * * * is found to be
a gathering system, then it is likely that other [NGA-
jurisdictional] pipelines on the OCS would also be found to have
that status.'' 71 FERC para. 61,351 at 62,404.
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In view of this potential for facilities' reclassification, and the
importance of the OCS as a source of domestic gas, we find it prudent
to prepare to provide protections for shippers under the OCSLA, and
absent information regarding affiliations, rates, and conditions of
service applicable to OCS transactions, neither the Commission nor
others can gauge whether NGA-exempt OCS service providers are operating
on an open and nondiscriminatory basis. Without such information at
hand, practices prohibited by the OCSLA might only come to light when a
prospective shipper was denied service and objected to the denial by
filing a complaint with the Commission. We conclude that information
regarding the business practices of NGA-exempt OCS gas service
providers is necessary for the Commission to fulfill its
responsibilities under the OCSLA. Given this need, we cannot agree with
Duke's and OCS Producers' contention that there is no rationale for
imposing a reporting requirement on OCS service providers. We believe
our reasoning and the record support the need for new regulations to
establish a means to ensure OCS service providers abide by the
provisions of the OCSLA.
We are unpersuaded by Duke's and OCS Producers' assertion that the
benefits to be derived by providing for public disclosure of OCS terms
and conditions of service will not outweigh the burden of supplying
such information. We have discussed our rationale for imposing the new
requirements above. As discussed below, we seek to moderate the impact
of these requirements by providing exemptions to OCS service providers
that appear to have little to gain by engaging in discriminatory
practices. We anticipate those OCS service providers that are subject
to the reporting requirement should be able to produce the required
documentation without extensive in-house auditing, analysis, or
accounting. We expect the prospect of reporting will invigorate efforts
to comply with OCSLA requirements. In addition, the OCS data base that
this rule will establish will assist potential complainants to identify
issues and articulate allegations. Recent revisions to our complaint
procedures, designed to permit the Commission to process complaints in
a more timely manner,\30\ ask complainants to present an initial
submission containing specific information. Without benefit of the OCS
data base, potential complainants face a greater burden in obtaining
the specific information necessary to present a complaint.
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\30\ See note 19.
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In the NOPR, we estimated that record keeping and reporting will
require 16 hours per respondent per year and an annual expense of
$800.\31\ As discussed below, service providers expressed the
apprehension that frequent changes in their affiliations or operations
could cause actual costs to run much higher. In response, we have
restricted the number of possible reporting updates to four per year,
and in recalculating the burden, we assume every reporting entity will
file every quarter. Although this doubles the data collection burden
estimated in the NOPR, it still imposes a very modest cost on those
service providers that are required to file.
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\31\ 64 FR 37718 at 37724. We change the figures in this final
rule to reflect a reduction in the number of service providers
expected to file OCSLA, due to the exemption for NGA-regulated gas
companies, and an increase in estimated annual hours and expense,
due to doubling (from two to four) the number of responses expected
to be filed per year.
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Leviathan's assertion that we are establishing OCSLA reporting
requirements without providing interested parties the opportunity for a
full hearing is inconsistent with the actions taken in this rulemaking
proceeding. In accordance with section 553 of the Administrative
Procedure Act (APA),\32\ a general notice of this proposed rulemaking
was published in the Federal Register.\33\ That notice described the
proposed changes to our regulations and invited interested persons to
comment on the NOPR. We have considered the comments received, and
respond to them in describing the basis and purpose of the new
regulations. Provisions for an evidentiary, adversary, or adjudicatory
hearing are inapplicable to a rulemaking proceeding.\34\ While the
Commission may exercise its discretion to hold such hearings, or to
institute a conference, or to seek additional information in some other
manner, we see no need to do so in this case. All interested parties
have had adequate opportunity to be heard in this rulemaking
proceeding, as they did in the earlier related 1995 and 1998 NOI
proceedings. We find the written record in this proceeding provides a
sufficient basis for us to reach final determinations.
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\32\ 5 U.S.C. 551-559.
\33\ 64 FR 37718 (July 13, 1999).
\34\ See Natural Resources Defense Council, Inc. v. U.S.
Environmental Protection Agency, 859 F.2d 156 (D.C. Cir. 1991) and
Willapoint Oysters, Inc. v. Ewing, 174 F.2d 676 (9th. Cir. 1949),
cert. denied, 338 U.S. 860 (1949).
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Leviathan questions whether this rulemaking has satisfied the OCSLA
requirement that as a condition on every OCS right of way ``oil or
natural gas pipelines shall transport or purchase without
discrimination, oil or natural gas produced from submerged lands or
outer Continental Shelf lands in the vicinity of the pipelines in such
proportionate amounts as the Federal Energy Regulatory Commission, in
consultation with the Secretary of Energy, may, after a full hearing
with due notice thereof to the interested parties, determine to be
reasonable, taking into account, among other things, conservation and
the prevention of waste.'' \35\ As we reach no decision in this rule
regarding amounts of gas or oil transported or purchased, we do not
believe this hearing and consultation requirement is triggered.\36\
Further, we note that the Secretary of Energy provided comments in
response to our 1998 NOI and expressed the concern that we take no
action that might interfere with the development of resources
offshore.\37\ We have taken the concerns of the Secretary into account,
both in the preparation of the NOPR and in formulating the regulations
put in place by this rule. As discussed herein, we do not believe
instituting a reporting regime will inhibit the expeditious development
of OCS resources.
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\35\ 43 U.S.C. 1334(e).
\36\ While requiring reporting and filing reports does not
impact gas flows, imposition of a remedy might--for example,
prescribing that a pipeline accept gas on a pro-rata basis to effect
open access--and would thereby trigger the need for consultation.
\37\ In response to the 1998 NOI in Docket No. RM98-8-000, the
Secretary of Energy submitted a letter dated February 11, 1999,
encouraging evenhanded treatment and the removal of ``artificial
regulatory barriers which might impede private sector investment,
the development of advanced technologies, and the development of
competitive transportation markets in the Gulf of Mexico.'' See note
21.
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Several OCS service providers suggest that requiring a public
report of their business practices will stifle their ability to
individually tailor service agreements and will inhibit innovations in
operations and organization, thereby discouraging offshore development.
We do not expect this result because, as discussed below, we see no bar
to a service provider offering different shippers different terms--
provided the variation in the terms of service either reflect
differences in costs incurred to provide service or reflect differences
among the shippers served. Thus, we do not expect the new reporting
requirements will impose constraints on OCS service providers that
could inhibit the development of, or transactions across, the OCS.
Rather, we expect the
[[Page 20359]]
disclosure of affiliations, rates, and conditions of service will
encourage continued offshore investment by ensuring shippers that
offshore services are rendered on a transparent and equitable basis.
El Paso suggests that offshore the Commission apply the NGA with a
lighter hand by issuing blanket construction and abandonment
authorization and allowing offshore gas transporters to charge market
rates and set their own conditions of service. We find insufficient
evidence to conclude that this approach could assure fulfillment of our
statutory obligations. The NGA directs that rates be just and
reasonable, an outcome ensured by our prior approval of cost-based
rates for transportation services covered by the NGA. Letting a market
that may not be sufficiently competitive determine rates could not
ensure this same result.
B. Technical Conference
1. Requests To Hold a Technical Conference
Tejas and OCS Producers propose a technical conference to: Address
the need for and scope and aim of the rule; air the opinions of
engineers and corporate executives regarding the desirability of the
new regulations; provide the Commission with the opportunity to become
more familiar with NGA-exempt offshore operations; and examine and
compare the anticipated benefits and burdens of the rule.
2. Commission Response
We have considered the issues of the scope of our jurisdiction
offshore and the need to alter how we exercise our regulatory authority
offshore in the NOPR in this proceeding. Our consideration was informed
by views presented in the prior 1995 and 1998 NOI proceedings, the OCS
policy statement of 1998, and in individual pipeline decisions, most
recently in Sea Robin. Given these several opportunities for interested
parties to express views concerning the existing and proposed
regulatory regime offshore, we do not believe there is a need for yet
another forum for further comments. The rationale for the new OCSLA
reporting requirements, along with anticipated benefits and burdens,
are discussed in the NOPR and this final rule. We think our
understanding of offshore operations is adequate to the task of
determining what information is necessary to identify whether
discriminatory practices are occurring on OCS facilities. Accordingly,
we deny the requests to institute a technical conference.
C. Exemptions
1. Comments
Generally, OCS pipelines providing service for others--i.e.,
pipelines subject to the new reporting requirements--advocated
abolishing the proposed filing exemptions for feeder lines, single-
shipper lines, and owner-shipper lines.
The Minerals Management Service (MMS) of the Department of the
Interior observes that as a royalty owner in every OCS lease, if it
elects to take federal gas royalties in kind (rather than in cash), it
becomes a shipper on every offshore line it might use to bring gas from
the leasehold to shore. MMS implies its potential shipper status should
negate the single-shipper and owner-shipper exemptions. OCS Producers
opposes this approach.
Tejas asks whether a pipeline can come within or fall outside of
the reporting exemption depending on changes in its ownership interests
or shippers. Tejas also asks whether a pipeline exempt from reporting
would lose that exemption if it accepted gas volumes from a third party
on an interruptible basis. Tejas requests the Commission clarify that
the owner-shipper pipeline exemption applies where the same parties
hold different proportionate ownership interests in gas production and
in the pipeline facilities used to transport that gas.
Coastal Field Services Company (Coastal) contends the Commission's
existing complaint procedure is sufficient to ensure open and
nondiscriminatory access on NGA-exempt OCS service providers;
therefore, OCSLA reporting should not apply to these providers. Coastal
requests the proposed Sec. 330.3(a)(1)'s single-shipper reporting
exemption be extended to apply where a gas service provider transports
for a gas producer and for one or more of that producer's working
interest owners under the same rates and conditions of service, i.e.,
that the Commission consider all working interest owners in a
particular producing field as a single entity for the purpose of the
reporting exemption. Coastal also suggests that where one or more joint
working interest owners are affiliated with an OCS service provider,
the Commission treat transportation on that service provider's
facilities as being for a single entity, and thereby exempt.
El Paso argues the reporting exemptions will result in an uneven
competitive playing field and urges the proposed exemptions for feeder
lines, single-shipper lines, and owner-shipper lines be eliminated to
ensure all OCS facilities receive equal treatment.
The Producer Coalition maintains that gas operations in deep water
merit closer scrutiny because such projects tend to be larger than
shallow water efforts, and thus present a greater barrier to entry to
potential competitors. The Producer Coalition presumes that proposed
Sec. 330.3(a)(3) will exempt all deep water ``gathering or feeder
lines,'' and based on this presumption, requests the Commission limit
the scope of deep water exemptions to single-shipper or owner-shipper
lines.
The Producer Coalition asks the Commission to clarify that for the
purposes of proposed Sec. 330.1(b), a ``facility located on the OCS''
be read to include the portion of the same facility that traverses
state waters until the first point of interconnection with an onshore
line.
The Producer Coalition urges the Commission to clarify that
production platforms will be excluded from the definition of an
offshore facility in proposed Sec. 330.1(b). NGSA would extend this
exclusion to production-related lines, services, facilities, and
agreements. OCS Producers want a reporting exclusion that explicitly
includes all activities involving gas extraction and collection,
separation and treatment, and preparation for transportation.
As proposed, Sec. 330.3(a)(2) provides a reporting exemption for 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.'' The
Producer Coalition requests the reference to ``the field'' not be
interpreted to confine the exclusion to a single gas producing field
and urges that the Commission expand this exemption to include owner-
shippers that hold interests in and gather gas from multiple fields.
The reporting exemptions of proposed Sec. 330.3(a)(1) for a single-
shipper service provider and Sec. 330.3(a)(2) for an owner-shipper
service provider hold until a second shipper or a non-owner shipper is
served 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.'' OCS Producers ask the Commission to
clarify the basis upon which it may find a denial of service is
justified. OCS Producers note the NOPR suggests the Commission would
uphold a denial of service if a pipeline lacks available capacity, or
if providing the requested
[[Page 20360]]
service would result in shutting in producing wells, or if the gas
received is of an unacceptable quality. OCS Producers contend that
denying service based on gas quality would be contrary to the result
reached in Shell Oil.\38\ OCS Producers also question whether the
Commission might compel access by means of pro-rationing or the
mandatory expansion of facilities.
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\38\ 47 F.3d 1186 (D.C. Cir. 1995).
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OCS Producers ask if OCS service providers seeking a reporting
exemption must file for such an exemption or if the Commission intends
to issue blanket exemptions. If the former, OCS Producers seek
assurance no filing fee will be charged; if the latter, OCS Producers
request no penalty apply if the service provider is later found to be
non-exempt.
Williams would eliminate the mandatory OCSLA reporting and instead
have the Commission act case-by-case, requesting information from an
OCS service provider only after an existing or prospective shipper
seeks assurance that service is in accordance with the OCSLA's open and
nondiscriminatory access requirements. Williams would require an OCS
service provider to supply, in confidence, no more information than is
necessary to show its practices conform with OCSLA principles.
2. Commission Response
a. Reporting Exemptions for Certain Companies. In the NOPR, we
questioned whether we should contemplate any exemptions to the proposed
OCSLA reporting requirements in view of the fact that we do not now
have data sufficient to assemble an overview of NGA-exempt OCS
transactions. After consideration of the comments, we are persuaded
that it is appropriate to exempt service providers that are least able
or inclined to discriminate. In the NOPR we proposed exemptions for
service providers that confine their operations to moving their own gas
or that of a single shipper. We adopt these exemptions, and in addition
provide an exemption for NGA-regulated OCS service providers, because
as noted above, we are persuaded these service providers, by conforming
to our regulatory requirements under the NGA, present transactional and
market information adequate to the task of identifying practices
prohibited under the OCSLA. Rather than have such entities refile
largely redundant information, we add Sec. 330.3(a)(4) to the new
regulations to exempt from reporting gas service providers that are
regulated by the Commission under the NGA. We do not believe any
essential regulatory purpose would be promoted by having the exempt
entities file OCSLA reports. If we are presented with evidence that
exempt entities are abusing the reporting exemption or are indeed
discriminating, we may restrict or revoke the exemptions.
Because we have not established a data base describing NGA-exempt
OCS entities' facilities and services, existing and prospective OCS
shippers have no means to consider or compare offers, denials, or terms
of service. Therefore, we believe it would be impractical to adopt
Williams' suggestion that we forego OCSLA reporting and instead only
seek information from OCS service providers in response to a specific
shipper's request. Under this approach, shippers and the Commission
would still be faced with the same gap in information that now exists.
We feel a more efficient method to encourage proper practices is to
make transactional information publicly available, then use that
information as a foundation to identify and correct any discrimination
or access problems.
b. Reporting Exemptions for Certain Facilities. The OCSLA, unlike
the NGA, applies to the full range of gas exploration, development,
production, gathering, and transportation.\39\ However, section
1334(f)(2) of the OCSLA does provide the Commission the option to
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
requirement that OCS transportation adhere to the competitive
principles of open and nondiscriminatory access. Such ``feeder line''
facilities are typically owned and operated by the same entity that
holds the right to produce gas from a particular field; we do not
expect issues of access or discrimination to arise where the same
entity owns or leases both the mineral rights and the facilities
necessary to draw gas from its own reservoirs. Therefore,
Sec. 330.3(a)(3) of the new regulations exempts lines that feed into a
facility where gas is first collected, separated, dehydrated, or
otherwise processed from our OCSLA reporting requirements. In addition,
Sec. 330.0(a)(1) and (2) exempt OCS service providers that serve only a
single entity or its own owners. The same rationale holds as for a
producer operating feeder lines on its own behalf: where a service
provider carries gas only for itself or for a single customer, there is
no call to compare conditions of service among multiple shippers.
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\39\ Section 1(b) of the NGA states: ``The provisions of this
Act shall apply to the transportation of natural gas in interstate
commerce, to the sale in interstate commerce of natural gas for
resale for ultimate public consumption for domestic, commercial,
industrial, or any other use, and to natural-gas companies engaged
in such transportation or sale, but shall not apply to any other
transportation or sale of natural gas or to the local distribution
of natural gas or to the facilities used for such distribution or to
the production or gathering of natural gas.''
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The Producer Coalition argues that due to the large expense and
size of deep water facilities, we should permit only the single-shipper
and owner-shipper reporting exemptions, but not allow such facilities
to come under the feeder-line exemption. We acknowledge that deep water
projects can be orders of magnitude more costly than shallow water
systems, thereby magnifying adverse impacts of anticompetitive actions.
We also acknowledge that the changing technical and geographic nature
of offshore exploration and production has resulted in increased
drilling in deep water. Nevertheless, at this time, we find no cause to
revoke the feeder-line exemption to enhance our scrutiny of deep water
activities. However, we may reconsider this position if we are
presented with evidence that our regulatory oversight is inadequate to
ensure that deep water services conform with the OCSLA's open and
nondiscriminatory access requirements.
OCS Producers and the Producer Coalition request we broaden the
Sec. 330.3(a)(2) ``feeder line'' exemption to include platforms and
production-related facilities and services. The statutory language of
the OCSLA indicates feeder lines are upstream of a point where gas is
first collected, separated, dehydrated, or processed. This point, as a
general proposition, will be on a production platform. But this will
not always be the case; consequently, rather than adopt a bright line,
but over-broad, definition, we believe that identifying a point where
gas is first collected, separated, dehydrated, or processed and
partitioning upstream from downstream facilities, is best done after
examining the facts and circumstances of each specific case. While we
expect exempt upstream feeder line facilities will generally be found
within production fields, we cannot make a generic determination that
all platforms and production-related facilities are, in accordance with
OCSLA section 1334(f)(2), situated upstream of a point where gas is
first collected, separated, dehydrated, or processed. Therefore, we
will deny the requests for a blanket
[[Page 20361]]
extension of the Sec. 330.3(a)(2) feeder line exemption.
MMS urges that we conform our Sec. 330.3(a)(2) feeder line
exemption to MMS' definition of gathering facilities.\40\ We believe it
would be premature to limit our discretion under OCSLA section
1334(f)(2) by tethering it to the MMS definition.\41\ Our preference,
as noted above, is to consider purported feeder line facilities on a
case-by-case basis to determine the point at which gas is first
collected, separated, dehydrated, or otherwise processed.
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\40\ MMS regulations state: ``Gathering means the movement of
lease production to a central accumulation and/or treatment point on
the lease, unit or communitized area, or to a central accumulation
or treatment point off the lease, unit or communitized area as
approved by BLM or MMS OCS operations personnel for onshore and OCS
leases respectively.'' 30 CFR 206.151.
\41\ MMS has considered, but has not enacted, revisions to its
definition of gathering. See, e.g., MMS' Amendments to Gas Valuation
Regulations for Federal Leases NOPR, 60 FR 56007 (Nov. 6, 1995) and
its Notice Withdrawing Proposed Rulemaking and Requesting Comments
on Supplemental Information, 62 FR 19536 (Apr. 22, 1997).
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The federal government is a royalty interest owner in every OCS
lease, and pursuant to the OCSLA, provides MMS the option of collecting
its royalty share in kind or in value.\42\ Almost all royalty payments
are currently rendered in value, i.e., in cash. However, MMS notes it
is undertaking a pilot program whereby royalties due the United States
can be paid in kind in gas.\43\ MMS ``requests that a final regulation
specifically apply the reporting requirement whenever the Federal
government's royalty gas could be moved along with only one other
producer's gas.'' \44\ Were MMS to alter its current practice to take
royalties in kind as gas, and ship such gas from its source of
production to shore, because royalty payments apply to all OCS
leaseholds, MMS could become a second shipper on every line used to
move gas associated with federal royalties. This would effectively end
the reporting exemptions, since MMS could be added as a shipper to
pipelines that would otherwise be dedicated exclusively to single-
shipper or owner-shipper transportation.
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\42\ MMS acts under OCSLA section 1353(a)(1), which, with minor
exceptions, provides for all royalties or net profit shares, or
both, accruing to the United States under any oil and gas lease to
be paid in oil or gas.
\43\ See Federal Oil and Gas Royalty-in-Kind Pilot Programs,
Notice of Intent, 64 FR 37809 (July 13, 1999), stating MMS' intent
to employ several pilot programs to take the government's royalty
share of production in kind from federal oil and gas leases.
\44\ MMS' Comments at 2-3 (August 27, 1999).
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As discussed, we believe those OCS service providers that we
propose to exempt have little apparent motive to deny access or
discriminate. Thus, we hesitate to compel these service providers to
report under Sec. 330.2. However, in the event MMS moves beyond its
present royalty-in-kind pilot program and begins to collect a
significant portion of royalty payments as gas volumes, we may be
inclined to revisit the applicability of the reporting exemptions. We
note that as is, under its own authority, MMS can compel OCS service
providers to disclose information relevant to MMS. Therefore, for now,
we find it appropriate to retain the reporting exemptions.
If requested, we will consider whether a particular OCS service
provider qualifies for a certain reporting exemption, but do not plan
to initiate a blanket evaluation of every OCS entity. An entity
requesting the Commission evaluate its status will be subject to the
declaratory order fee. \45\ Given the limited nature of the reporting
exemptions, we expect OCSLA reports to be filed for the bulk of the OCS
facilities that are located between production platforms and shore.
\46\ Like the production/gathering and Hinshaw exemptions of NGA
sections 1(b) and (c), respectively, we expect service providers to
exercise good faith in determinations as to whether their facilities
and operations qualify for an OCSLA reporting exemption. The
Commission, or any other person, may challenge a non-reporting service
provider's exemption. An entity found to have erroneously presumed
itself exempt can cure its error by filing in accordance with the
reporting requirements established herein.
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\45\ See 19 CFR 381.302.
\46\ At this point, we are not prepared to impose a fee for
Commission services associated with processing OCSLA reports. Annual
charges, assessed in accordance with the provisions of Sec. 154.402
and part 382 of the Commission's regulations, apply to NGA-regulated
gas pipelines, not to pipelines subject exclusively to the OCSLA.
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OCS Producers seek assurance we will not penalize a service
provider for not reporting if that service provider has not reported
because it believes it qualifies for a reporting exemption. As noted,
service providers are to make a good faith effort to evaluate whether
their facilities and operations come under one of the exemptions. If a
service provider elects not to report and is able to present a
reasonable case for its claim to a reporting exemption, that we
nevertheless disagree with, we would not expect recompense beyond
compelling the service provider to commence and continue timely filing
of OCSLA reports. However, if we find a knowing and willful effort to
evade or violate the reporting provisions, we may seek penalties as
provided under OCSLA sections 1134 and 1350.
In the NOPR, we proposed granting OCS service providers newly
subject to these provisions 60 days to prepare and submit an initial
OCSLA report. Comments have convinced us to extend this to 90 days to
alleviate constraints that might otherwise be placed on service
providers, particularly those not previously reporting under the NGA,
in organizing the presentation of a first filing. Proposed
Sec. 330.3(c) specified that after an initial filing, a service
provider subject to reporting must submit a description of a change in
affiliates, customers, rates, or terms and conditions of service within
15 days thereof. As discussed below, we will modify this and limit
filings to, at most, four per year. This puts initial and updated
filings on a similar timetable. Eliminating the proposed 15-day
deadline should significantly reduce the reporting burden.
We clarify that if an OCS gas service provider becomes subject to
reporting for the first time, it must file an initial OCSLA report
within 90 days of the event that triggers the Sec. 330.2(a) and (b)
reporting requirements. It is possible a service provider may qualify
for a reporting exemption, act to invalidate its exemption, then act
again to requalify for an exemption (e.g., a service provider may carry
gas for a single customer, accept interruptible volumes from a second
shipper for a limited period of time, then return to exclusively serve
a sole shipper). \47\ A service provider subject to reporting, that
subsequently becomes exempt, then later loses its exemption, will again
be required to submit an OCSLA report, and to do so within 90 days of
the date that its exempt status ended.
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\47\ We clarify that once a service provider becomes subject to
the reporting requirements, even if remains so only momentarily, an
OCSLA report must be filed within 90 days of the event interrupting
the exemption.
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Coastal proposes the single-shipper exemption be extended so as to
treat a gas producer made up of multiple working interest owners as a
single shipper where transportation is provided to the gas producer and
its working interest affiliates under identical rates and conditions of
service. We find no fault with the end result that Coastal posits:
Multiple shippers served the same. However, without a public
declaration of rates and conditions of service, there is no way to
verify that the rates and terms under which the gas producer receives
service are in fact identical to the rates and terms under
[[Page 20362]]
which each of the various working interest owners receive service.
By way of contrast, where a service provider carries gas for one
shipper, i.e., one entity holds title to all gas moving in one pipe,
there is no opportunity to serve other shippers under different and
potentially discriminatory terms. This would be the case whether the
one entity holding title to the gas is a single producer or is a single
entity composed of multiple parties that together agree to obtain
service under a contract between the single entity and the service
provider.\48\ Under such conditions, the Sec. 330.3(a)(1) exemption
applies, whereas under the Coastal scenario, it does not; hence we find
reporting necessary to verify that multiple shippers all receive the
same rates and terms of service.
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\48\ Provided that a single entity signs a transportation
agreement with a gas service provider and that that party holds
title to the gas shipped, the single-shipper reporting exemption
will apply. The nature of the business interest of the single entity
signing the gas transportation contract is immaterial to the
applicability of this exemption.
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Coastal also proposes a reporting exemption for a service provider
that carries gas that is produced on behalf of multiple working
interest owners when one (or more) of the working-interest owners is
affiliated with the service provider. Coastal maintains these
circumstances are the equivalent of service for a single shipper. We
disagree. Where there are multiple shippers, and particularly where
some are affiliated with the service provider and some are not, a
service provider may find it advantageous to serve different shippers
under different and potentially discriminatory terms. We expect
disclosure will discourage unequal treatment; thus, we find it prudent
not to expand the reporting exemptions.
We clarify that new Sec. 330.3(a)(2), which exempts an OCS service
provider shipping only its own gas, will apply as long as the same
parties hold all ownership interests in both the gas produced and the
pipeline moving the gas. Recognizing the operational reality that gas
shipments do not always track exact working interest owners'
percentages, this exemption will hold where the parties' ownership
shares are disproportionate to the gas volumes flowing in the owner-
shipper line.
Tejas asks if an exempt OCS service provider could offer
interruptible-only transportation to various parties and remain exempt.
We believe the reporting exemption should turn on the identity of the
service provider and its shippers, not the type of service provided.
Regardless of whether a service provider moves gas on a firm or
interruptible basis, where there are multiple shippers, the potential
for differential, discriminatory treatment is present.
The Producer Coalition requests that the Sec. 330.1(b) definition
of gas service provider as, ``any entity that operates a facility
located on the OCS that is used to move natural gas on or across the
OCS,'' be expanded to include not only facilities on the OCS, but
facilities that reach from the OCS and across state waters to the first
point of interconnection with an onshore line. At this time, we do not
find it necessary to apply the OCSLA in such an expansive manner, as we
anticipate our joint OCSLA-NGA jurisdiction will enable us to ensure
open and nondiscriminatory transportation between the OCS and the first
onshore interconnection point. \49\ Further, states can act to regulate
activities within their waters. In view of this, we will not adopt
Producer Coalition's proposal.
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\49\ See Murphy, 81 FERC para. 61,148 at 61,670-71. See also
Order No. 509, 53 FR 50925 (Dec. 19, 1988), FERC Stats. & Regs.
para. 30,842 at 31,274 (1988), stating: ``[T]he Commission believes
the condition of nondiscriminatory access established in Order Nos.
436 and 500 satisfies, in large measure, the open-access requirement
in section 5(f)(1)(A) of the OCSLA. However, unlike onshore
pipelines, OCS pipelines cannot voluntarily choose to not
participate in the open-access program.''
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The Producer Coalition points out that proposed Sec. 330.3(a)(2)'s
exemption for a service provider transporting only its own gas refers
to ``the gas produced from the field connected to the pipeline.'' The
Producer Coalition, noting that gas can be gathered into a single line
from more than a single producing field, asks that ``field'' be made
plural. We recognize there may be circumstances where gas from a single
field is carried to a pipeline by means of a lateral line that crosses
the territory of an adjacent field, or where a pipeline's owners all
hold working interests in more than one field along the route of a
single line. We believe Sec. 330.3(a)(2) should capture such
situations, and will modify the language accordingly. However, this
applies only where the working interest owners of the producing
field(s) flow their gas through a single pipe, and only where all the
gas in that one line is from the producing field(s) of the working-
interest owners. The principle remains the same, service providers
serving themselves are not expected to deny access to or discriminate
against themselves.
OCS Producers request we elaborate upon the criteria to be used to
decide when a service provider would be justified in refusing a request
for service and ask whether the Commission intends to make use of pro-
rationing or mandatory expansion as remedies. In the NOPR, we stated a
denial of service may be upheld ``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.'' \50\ Until faced with specific facts and circumstances, we
are not prepared to speculate what, if any, additional reasons for
denial we might find acceptable. Pro-rationing, provided it can be
implemented without adversely impacting ongoing development and
production, remains an option. Mandatory expansion of throughput
capacity, as described in section 1334(f)(B) of the OCSLA, also remains
an option. However, given that the statute states that our authority to
compel expansions does not apply to facilities in the Gulf of Mexico or
Santa Barbara Channel, we do not foresee this issue arising with any
frequency.
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\50\ 64 FR 37718 at 37722. OCS Producers contends denying
service based on gas quality would conflict with the result in Shell
Oil. We disagree. We rejected an OCS oil pipeline's contention that
accepting a request to transport sour crude, oil with a high sulfur
content, would degrade the sweet, low sulfur, oil stream carried by
the pipeline. Our rejection was based on our finding that capacity
was available, the pipeline was accepting sour crude from other
shippers, and the additional requested volumes would not materially
affect the quality of the pipeline's oil stream. This finding does
not conflict with our statement that a pipeline may legitimately
reject a request to accept new gas when the new volumes would be
incompatible with the characteristics of the gas flowing in the
line.
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D. Reporting Requirements
1. Comments
Numerous commenters express concern with the extent of the
reporting burden that the proposed rule would impose. INGAA, El Paso,
Leviathan, and Williams assert that even if all OCSLA-required
information is already on file with the Commission pursuant to NGA-
required submissions, the task of refiling under the OCSLA to cross-
reference such information could be avoided if the proposed rule were
to explicitly deem that NGA compliance fulfills the OCSLA reporting
requirement. Enron Interstate Pipelines (Enron) urges an OCSLA
reporting exemption be added under Sec. 330.3 for NGA-jurisdictional
pipelines.
Williams contends it is impractical to itemize a rate per
particular gas pathway due to the complexity of existing
[[Page 20363]]
arrangements and routes to shore, stating ``the prices and terms for
transporting each of two shippers' gas streams through the same
pipeline from the same point of receipt to the same point of delivery
can and will differ as the result of the myriad facts and circumstances
which exist over time both upstream and downstream of that pipeline.''
\51\
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\51\ Williams' Comments at 11 (August 27, 1999).
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OCS producers and gatherers, not now subject to the NGA, state that
any OCSLA filing requirement would be a new and unwelcome
responsibility. OCS Producers emphasize that even after the effort of
making an initial filing, the reporting burden would continue as
conditions change, triggering revised filings. Duke, Dynergy, OCS
Producers, and Tejas believe the proposed reporting requirement would
compel the disclosure of sensitive or proprietary information. Tejas
suggests the Commission permit the filing of redacted contracts in
order to protect shipper confidentiality.
Duke and Leviathan state that mandatory disclosure of customer
contracts will undercut OCS gatherers' efforts to tailor services to
meet individual shipper's needs. Leviathan and Tejas predict that gas
service providers, to avoid charges of discrimination, will offer all
customers a standardized, rigid set of contract terms. OCS Producers
foresee a reordering of ownership interests in order to come within the
reporting exemption.
Duke believes the proposed reporting exemption for owner-shipper
pipelines would afford such lines a competitive advantage over non-
exempt pipelines and induce pipelines to structure ownership so as to
come within the reporting exemption. Tejas and Williams anticipate
single-shipper or owner-shipper lines will be inclined to avoid serving
other parties to maintain their exempt status. They also anticipate--
based on the Commission's suggestion that it may sustain a fully
subscribed pipeline's refusal to serve additional customers in the
interests of conservation and prevention of waste--that construction of
larger multi-shipper lines will diminish in favor of smaller
proprietary lines, since the latter, if full, may be able to refuse to
serve third parties yet retain a reporting exemption.
Duke claims the proposed reporting requirements conflict with
provisions of the ICA prohibiting the release of contract
information.\52\
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\52\ 49 U.S.C. app. section 15(13) (1988) prohibits a common
carrier from disclosing certain information.
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Tejas and Williams ask why the reporting requirements are limited
to OCS gas service providers and do not apply with equal force to OCS
oil service providers.
Coastal views the proposed OCSLA filing as equivalent to an NGA
tariff filing and suggests the Commission reject the rule, or
alternatively, limit reporting to require that each gas service
provider file a map of its system,\53\ the name of a contact person,
and an affirmation by an authorized officer that the company will not
engage in discriminatory practices.
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\53\ The Producer Coalition requests the Commission specify that
submitted maps be legible and understandable. We so state our
presumption. We will also require that where a service providers'
system undergoes significant changes, an updated map is to be
submitted.
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Leviathan expects its own reporting burden alone will exceed the
Commission's estimate for the all reporting entities,\54\ and
anticipates OCS service providers will spend hundreds of thousands of
hours and millions of dollars in contract renegotiation and litigation
costs. Tejas predict its reporting burden will be 200 hours for an
initial report and 1,000 hours annually for updates, on top of which it
expects to bear the additional burden of defending itself against
charges of discrimination. El Paso cites as an example its affiliate
Tennessee Gas Pipeline Company, which during a recent 12-month period,
incurred 3,077 reportable events, which could have compelled it to
submit near daily updates to keep current information on file.
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\54\ In the NOPR, the Commission estimates 70 parties will file
twice per year, each party requiring 8 hours to prepare each
submission, resulting in an annual total of 1,120 hours to prepare
filings at an estimated cost of $56,000. In response to comments, we
double these estimated totals, as discussed below.
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El Paso proposes that OCSLA filings, consistent with NGA filings,
should not require updating where nonmaterial changes are made to filed
contracts. Further, El Paso sees no need for an OCS gas service
provider to identity affiliates that are not shippers on the OCS. OCS
Producers would restrict this further and only require identifying
affiliates that ship on a reporting party's pipeline.
Tejas asks for clarification regarding which event will trigger the
reporting requirement: An offer to serve or a shipper's acceptance
thereof? Williams notes that some existing non-NGA rate structures
include escalator or adjustor clauses and seeks clarification that, as
long as the formula for determining the current rate is on file,
refiling will not be required each time a new rate takes effect.
The Producer Coalition is concerned that describing affiliations,
rates, and certain terms is insufficient to provide a full and accurate
view of OCS transactions, because such a report may omit material
conditions of service such as: Agreements regarding the construction of
facilities; dedication of gas supples, daily volumes; gas quality
standards; priorities for scheduling services; imbalance provisions;
and billing and payment arrangements. The Producer Coalition would
eliminate the option to report rates and a limited description of the
conditions of service and instead require a report that includes full
contracts and all incidental and related letter agreements or
amendments, to be updated each time a new contract is executed or an
existing contract is modified, expires, or is canceled.
The Producer Coalition requests that gas service providers file in
a form that alphabetically indexes (1) shippers by name, with the
primary and secondary receipt points associated with each contract and
the rate applicable to each pair of points and (2) receipt points by
OCS block, with a cross-reference to the contracts and rates associated
with each such point.
MMS proposes that all OCS gas service providers that do not submit
contracts instead file a complete description of costs.\55\ MMS would
remove the Sec. 330.3 reporting exemption, noting that it is a royalty
owner in every OCS lease, and given that it may accept gas volumes as
royalty payments, it is a potential shipper from every OCS lease. MMS
observes that adopting its proposal would permit OCS lessees and
affiliated providers to maintain a single set of books for their OCS
transportation costs for all federal regulatory purposes.
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\55\ See MMS regulations at 30 CFR 206.157(b).
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OCS Producers opposes MMS' proposal, arguing it would be burdensome
and require the disclosure of confidential producer data. Accordingly,
OCS Producers urge that participation in MMS in-kind royalty payments
should not be treated as shipping for a third party, so as not to undo
the single-shipper and owner-shipper reporting exemptions.
Tejas asks how, mechanically, OCSLA filings will be made. OCS
Producers ask whether reporting is to be submitted system-wide or line-
by-line. OCS Producers also ask which party is responsible for filing
when there are
[[Page 20364]]
multiple owners of an OCS pipeline or when the pipeline owner is not
the pipeline operator.
2. Commission Response
The free flow of information regarding offshore gas activities is
critical to the successful creation of a competitive and efficient
marketplace. Access to relevant information is necessary for shippers
to make informed decisions about capacity purchases and for the
Commission and shippers to monitor transactions to determine if market
power is being exercised in violation of the applicable statutes. The
ready availability of information will become increasingly important,
both for efficient trading and for the monitoring for the exercise of
market power. We believe the information specified in Secs. 330.2 and
330.3(b) and (c), as modified below, is the minimum necessary to
provide a meaningful overview of OCS service providers' treatment of
their different shippers. Thus, we reject requests that we require
either more or less information from service providers.
Concerns relating to the overlap of information submitted under the
NGA and OCSLA and the inconvenience of duplicative filings are resolved
by the new Sec. 330.3(a)(4) reporting exemption for OCS service
providers currently regulated by the Commission under the NGA.
Several commenters contend the total reporting burden will exceed
our estimate of 1,120 hours and $56,000 annually. In response, we will
make the following changes, in order to simplify and diminish the
effort required to comply with the new requirements. As proposed,
Sec. 330.2(a)(6) directs a service provider to list all its affiliates.
Such affiliates, commenters note, may include companies engaged in
activities unrelated to the natural gas industry. We acknowledge there
are affiliates that play no part in OCS operations and agree there is
no practical need to name such entities. OCS Producers and El Paso
suggest restricting named affiliates to those that ship on a service
provider's facilities; El Paso believes this more limited disclosure to
be sufficient to identify anticompetitive practices. Such a restriction
calls for a very narrow, or very charitable, interpretation of a
service provider's self-interest. We can, for example, envision
circumstances in which an OCS service provider might be inclined to act
to the advantage of an upstream non-shipper producer affiliate or an
onshore non-shipper processor affiliate. In view of this, we will
qualify Sec. 330.2(a)(6): only affiliates engaged in the exploration,
development, production, processing, transportation, marketing,
consumption, or sale of natural gas need be identified in the OCSLA
report.\56\
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\56\ As stated in the NOPR, we will use the definition of
``affiliate'' given in Sec. 161.2(a) of our regulations as ``another
person which controls, is controlled by, or is under common control
with, such person.'' As specified in Sec. 161.2(b), ``control''
``includes, but is not limited to, the possession, directly or
indirectly and whether acting alone or in conjunction with others,
of the authority to direct or cause the direction of the management
or policies of a company. A voting interest of 10 percent of more
creates a rebuttable presumption of control.'' Although these
definitions appear under Part 161 of our regulations, ``Standards of
Conduct for Interstate Pipelines with Marketing Affiliates,'' for
the purpose of OCSLA reporting, they include, but are not limited
to, marketing affiliates.
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Comments tend to identify ongoing compliance filings, rather than
the initial OCSLA report, as a source of difficulty. In response, we
will expand the time provided for filing an initial report and for
filing updates and will limit the potential number of filings per year
to a maximum of four. We will extend the time to submit an initial
OCSLA report from the proposed 60 days until 90 days after the date a
service provider becomes subject to Sec. 330.2 or Sec. 330.3(c)
requirements. For the initial submission of OCSLA reports following
issuance of this rule, OCS service providers' reports will be based on
conditions on the first day of the first full calender quarter that
begins after the effective date of this rule, with initial reports due
on the first business day after the close of the quarter. This assures
OCS service providers will have more than one full quarter in which to
prepare their initial OCSLA reports.
We will also alter proposed Sec. 330.3(c), which stated service
providers are to file a description of certain changes in service
within 15 days. We are persuaded that existing and prospective shippers
will not be significantly disadvantaged by relaxing the 15-day schedule
to have service providers update changes quarterly. Rather than try to
keep a running record of OCS service providers' operations, we believe
a periodic snapshot of OCS transactions will be adequate to expose
potentially discriminatory practices to public view. Accordingly, OCS
gas services providers will be required to submit a description of
their operations as they stand on the first day of each calender
quarter; this report will be due the first business day of the
subsequent quarter; e.g., the filing due April 1, the first day of the
second quarter, will describe operations as they stood on January 1,
the first day of the first quarter. Thus, a service provider will have
90 days to prepare its OCSLA report, which report will be limited to
describing the service provider's status on one particular day. This
approach should substantially reduce service providers'
responsibilities from the reporting regime proposed in the NOPR.
Regardless of the number of changes in affiliates, customers, rates,
conditions of service, or facilities, a service provider will be
required to file, at most, four OCSLA reports per year. If a service
providers' operations are identical on the first and last days of any
given quarter, the service provider need not submit an update the
following quarter.
El Paso asks that service providers be permitted to make
nonmaterial changes to filed contracts without triggering the
obligation to report such changes. Because we are not prepared to parse
material from nonmaterial contract terms, we will decline.\57\ As a
practical matter, because companies need only file OCSLA reports
quarterly--or not at all, if there are no changed circumstances--we do
not believe it will require any significant effort to maintain an up-
to-date inventory of affiliates and current operating conditions with
the Commission. El Paso's apprehension that submitting notice of non-
material changes within 15 days thereof might require near continual
filings should be put to rest by the change we adopt here. Further, we
clarify that we see no need to report changes that do not disrupt the
basic transparency we seek. Thus, where a contract contains provisions
that provide for periodic adjustments to its terms, such as an
escalator clause, and as long as current terms can be straightforwardly
derived from the information on file, no update is required.
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\57\ See Filing Requirements for Interstate Natural Gas
Companies, Order No. 582, 60 FR 52960 (Sep. 28, 1995), FERC Stats. &
Regs. para. 31,025 (1995) and Order No. 582-A, 61 FR 9613 (Mar. 11,
1996), 74 FERC para. 61,224 (1996). These orders explain that an NGA
pipeline, after filing an unexecuted pro forma service agreement as
part of its tariff, need not file individual service agreements
unless they deviate materially from the pro forma agreement. We
found that ``materiality'' is likely to vary with the circumstances
of each case; therefore, we found it better to allow the term to
remain less strictly defined in order that the particular facts of a
given contract will determine whether the deviation is material and
needs to be filed. We follow that rationale here.
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Williams maintains the complexity and rapidly changing conditions
of offshore gas transactions make it impractical to specify shippers'
rates and conditions of service between receipt and delivery points.
This assertion challenges the premise of this rule, namely, that
reporting can render a service provider's transactions transparent
enough to allow interested persons to compare services among shippers.
We believe the OCSLA report,
[[Page 20365]]
while not requiring a service provider to report every aspect of its
operations in real time, will nevertheless be adequate to serve as the
basis for informed objections. The Producer Coalition proposes more
detailed reporting, with service providers directed to file full
contracts and specify all factors affecting service and rates. MMS
would require a complete description of each service providers'
transportation costs where contracts are unavailable. We are not
persuaded an expansion of the filing requirements is necessary. The
point of this rule is to establish a data base as a foundation for
identifying discrimination. At present, there is no such record for OCS
transactions. Reporting can cure this, provided the information
supplied is sufficient to allow interested persons to identify
instances of unequal treatment. We expect the Sec. 330.2 reporting
requirements, without being unduly intrusive, will be adequate to this
task.
Commenters are concerned the new OCSLA requirements will expose
sensitive aspects of their operations to public view. This may be so,
and if so, is an abrupt shift for non-NGA OCS service providers,
heretofore accustomed to operating in comparative privacy. However,
without making OCS transactions transparent, it is not possible to
determine whether shippers are subject to discrimination. We presume
OCS service providers currently offer service on an equitable basis,
and thereby presume disclosure will not intrude upon or disrupt present
practices. Commenters are also concerned that reporting will disclose
information that could compromise their competitiveness. Service
providers that believe the information they submit should be withheld
from public view can request privileged and confidential treatment for
such information, pursuant to Sec. 388.112 of our regulations,\58\
stating the rationale for their request.
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\58\ 18 CFR 388.112.
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OCS pipelines stress the need to tailor individually the services
they offer to meet customers' particular needs. This rule need not
alter such efforts. Provided an individualized service genuinely
reflects a specific customer's unique requirements, we would not expect
any but the designated customer to have cause to sign up for such
service. Several commenters worry that rather than try to adapt to
shippers' needs, the required reporting will induce OCS service
providers prophylactically to retreat to the rigidity of a one-size-
fits-all service agreement. This rule does not compel uniformity. We
will accept distinctions in customers' rates, conditions of service,
and services rendered as long as sound reasons are put forth to warrant
divergent treatment.
Duke, OCS Producers, Tejas, and Williams anticipate this rule will
go beyond inducing OCS service providers to move to a standardized
contract. They expect service providers to reorder their ownership
interests to come within the reporting exemptions. They further suggest
that owner-shippers, in order to retain their reporting exemption, will
intentionally construct facilities no larger than needed to ship owner-
produced gas, so as to be able to legitimately claim that capacity
constraints preclude serving third parties.
We see little detriment to service providers modifying ownership
interests to come within the Sec. 330.3 reporting exemptions, although
we doubt whether compliance with these reporting requirements would
motivate such actions. As noted earlier, it is neither unknown nor
unlawful for companies to organize their affairs so as to avoid one
regulatory regime or to embrace another. Further, a reporting exemption
in no way diminishes the exempt service provider's obligation to abide
by the OCSLA's open access and nondiscrimination provisions. The
presumption inherent in the reporting exemption is that an entity will
not exploit itself. Where an exempt entity contravenes the OCSLA, we
expect a principal of that entity (in all probability the person
adversely impacted) will object. We dismiss speculation that exempt
owner-shipper service providers might deliberately undersize new
facilities so as to be able to turn away prospective third party
customers. It seems unlikely that a facility owner would forego
otherwise obtainable revenues merely to avoid the reporting
requirements. Given that exempt and non-exempt service providers must
ultimately abide by the same OCSLA nondiscrimination provisions, we do
not expect opting out of reporting will confer a noticeable commercial
advantage.
Duke indicates the ICA precludes disclosure of the information
specified in the reporting requirements. We disagree. The ICA applies
to the transportation of oil, not natural gas, and applies to common
carriers, which oil pipelines are, \59\ but gas pipelines are not. \60\
Moreover, the Commission has determined that it lacks jurisdiction
under the ICA to regulate oil pipelines located wholly on the OCS. \61\
Thus, we do not believe it is appropriate to rely on the ICA as a model
for gas regulation under the OCSLA.
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\59\ The ICS provides that oil pipelines function as common
carriers. However, ICA jurisdiction does not extend to oil lines
located wholly on the OCS. See note 13.
\60\ In amending the OCSLA, Congressman Morris Udall proposed
that OCS oil and gas pipelines be operated as common carriers in
order to ``require the OCS * * * pipelines accept, convey,
transport, or purchase at reasonable rates and without
discrimination.'' H.R. Rep. No. 95-590, 3 (1978), reprinted in 1978
U.S.C. C.A.N. 1528. This proposal was not incorporated into the
amendments.
\61\ Bonito, 61 FERC para. 61,050, aff'd sub nom., Shell Oil, 47
F.3d 1186 (D.C. Cir. 1995) and Oxy, 61 FERC para. 61,051 (1992).
Shell Oil contested the Commission's determination regarding ICA
jurisdiction, but the court did not reach this issue in its review
of the Commission's decision. 47 F.3d 1186, 1200.
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Duke, Tejas, and Williams query why our regulations are directed
exclusively at OCS gas service providers, and not OCS oil service
providers as well, since the open and nondiscriminatory provisions of
the OCSLA apply with equal force to both OCS gas and oil operations.
Here we have elected to confine our considerations to gas matters,
given that we have found rates for transportation on oil pipelines to
be just and reasonable, \62\ yet have made no such finding for rates
for transportation on gas lines exempt from the NGA. Thus, to protect
gas shippers using NGA-exempt OCS facilities from discriminatory,
exorbitant charges, we look to the OCSLA.
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\62\ See Revision to Oil Pipeline Regulations Pursuant to the
Energy Policy Act of 1992, 58 FR 58753 (Nov. 4, 1993), FERC Stats. &
Regs. para. 30,985 (1993). Whether this presumption of just and
reasonable oil rates applies to oil lines located wholly on the OCS
has yet to be affirmed by judicial review.
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In place of reporting, Coastal urges that we require only a map,
the name of a company contact person, and an affirmation by an officer
that the company will behave in accordance with the OCSLA. This is
insufficient. Our experience, affirmed across the broad spectrum of
federal, state, and local regulatory practice, is that, in general, a
promise of propriety is not an adequate bulwark against sharp
practices. We believe reporting, and the transparency it brings, will
be a more reliable guarantor that appropriate practices and procedures
are followed.
We clarify that the new regulatory requirements will not be
triggered by either an OCS service provider's offer to a prospective
shipper, a proposal to change the terms of an existing shipper's
contract, or a shipper's request for new or modified service. We view
offers, proposals, and requests as aspects of negotiating. Until an
offer to serve or request for service is accepted,
[[Page 20366]]
i.e., until discussions result in an exchange of promises to perform or
parties' commitment to an agreement, neither party is under any
obligation, and the Sec. 330.2 reporting requirements are not
triggered.
Given the complexities of offshore operations, the array of
entities offshore, and the fact that we have not heretofore collected
the information described in Secs. 330.2 and 330.3(b) and (c), we feel
it premature to fix the filing format of an OCSLA report at this time.
The new regulations, described below, will require the filing entity to
identify itself and its affiliates, submit a map of its system, and
itemize certain transactional information.
Submissions are to include a cover sheet titled ``OCSLA Reporting
Form,'' with the name of the OCS gas service provider, the date of the
filing, and designating whether the filing is an initial or updated
report. OCSLA Reports are to be filed in accordance with Rules 2001,
2003, 2004, and 2005 of our rules of practice and procedure.\63\
Reports are to be submitted to the Office of the Secretary, Federal
Energy Regulatory Commission, 888 First Street, NE, Washington, DC
20426. An original and 14 paper copies of the OCSLA Reporting Form must
be submitted to the Commission. The filed OCSLA Reports will be
available in the Commission's Public Reference Room and may be accessed
remotely via Internet through the FERC Home Page (http://
www.ferc.fed.us) using the Records and Information Management System
(RIMS) link or the Energy Information Online icon.\64\
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\63\ 18 CFR 385.2001, .2003, .2004, and .2005.
\64\ In Docket No. PL98-1-000, Public Access to Information and
Electronic Filing, we anticipate that, with limited exceptions, all
filings by regulated entities will be made in electronic form. We
expect OCSLA reports, at some future point, to be made
electronically, and expect, after further experience, to provide a
format for such filings.
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The party submitting the OCSLA report should be the party
responsible for providing the service described. This may be either the
owner or the operator of the facility. As with NGA submissions, where
multiple parties are involved in the ownership and/or operation of an
OCS facility, the parties will typically jointly authorize a single
entity (composed of one or more of the owners or operators) to be
formally responsible for the filing.\65\ We leave to the OCS service
provider's discretion whether to submit a single system-wide report or
file separate facility-by-facility reports. Where facilities under the
control of one entity can be straightforwardly segregated into several
discrete subsystems, it may be more useful to submit an OCSLA report or
reports that treat the separate subsystem individually.
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\65\ The party submitting the OCSLA report should retain the
filed information in accordance with Part 225 of the Commission's
regulations. 18 CFR part 225.
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Under Sec. 330.2(a), OCS service providers are to specify the date
of the filing; name and address of the gas service provider; name and
address of a contact person; and the title, name, and address of the
gas service provider's officers if a corporation or general partners if
a partnership. In addition, the gas service provider must submit a
description and map of its facilities, denoting the facilities'
location, length, size, and the points at which service is rendered,
with the boundaries of any rate zones or rate areas identified. The map
is to be updated in the event of any major changes to the service
provider's facilities. The gas service provider must identify all
affiliates engaged in the exploration, development, production,
processing, transportation, marketing, consumption, or sale of natural
gas, providing the names and state of incorporation of all
corporations, partnerships, business trusts, and similar organizations
that directly or indirectly hold control over the service provider,
and, the names and state of incorporation of all corporations,
partnerships, business trusts, and similar organizations directly or
indirectly controlled by the service provider.
In proposed Sec. 330.2(b)(1) in the NOPR, we specified OCS service
providers were to file copies of all current gas service contracts. We
are persuaded by the comments that full disclosure of all terms of all
contracts is not necessary to reach a workable degree of transactional
transparency; thus, we will modify the requirement set forth in the
NOPR to diminish the burden on reporting entities. Also, we expect
information necessary to permit comparisons of shippers' rates and
conditions of service can be most effectively accessed if summarized
and presented in tabular form, rather than as a bundle of individual
contracts. Accordingly, we will not require copies of actual contracts
to be filed. Instead, pursuant to revised Sec. 330.2(b), gas service
providers must provide a table of shippers and services. This portion
of the OCSLA report should contain headings that specify: each
customer's full legal name and indicate whether the customer is an
affiliate; the contract number under which each customer receives
service; the nature of the service provided; the primary receipt
point(s) and the primary delivery point(s); the rate between the points
in cents, or dollars and cents, per thermal unit, including an
explanation of how the rate is derived if it is composed of separate
components (e.g., a reservation charge and a usage charge). Clearly,
important conditions of service include contract volumes, the effective
and expiration date of the contract, dedication of gas supply, gas
quality standards, scheduling priorities, imbalance agreements, billing
and payment arrangements, and customer alternatives. Where these or
other conditions are relevant to accurately evaluate whether similarly
situated shippers receive nondiscriminatory treatment, we expect the
service provider to supply all terms needed to permit a meaningful
comparison among shippers served. Not to do so is to invite a
Commission inquiry into apparent service disparities or allegations of
inequitable treatment.
As noted in comments, certain OCS companies may not render service
under formal contracts. Although we believe that comparing rates and
conditions of service among customers can be done most effectively when
information is presented in the manner described above, to accommodate
OCS entities that are not in a position to submit reports based on
existing contracts, we will retain the alternative reporting
requirements proposed in the NOPR in Sec. 330.2(b)(2), now redesignated
as Sec. 330.2(b)(9). This alternative report must provide information
sufficient to derive rates charged (in cents, or dollars and cents, per
thermal unit) and conditions applicable for service between two points.
Nondiscrimination implies all customers would be offered service under
the same terms. Any deviation from this practice calls for further
explanation, as specified in Sec. 330.2(b)(9)(iv).
E. Discrimination and Denial of Access
1. Comments
El Paso requests that the Commission state that the OCSLA's
nondiscrimination provision is equivalent to the NGA's prohibition
against undue discrimination, thereby placing all offshore service
providers under a single standard. El Paso notes that the Commission
has already done so, in part, by stating that compliance with Part 284
regulations regarding open-access under the NGA would fulfill the
OCSLA's nondiscrimination requirements.\66\
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\66\ See Order No. 509-A, stating Order No. 509 does not
preclude OCS pipelines from selectively discounting Part 284
offshore transportation rates ``for shippers that are not similarly
situated.'' Leviathan reads Order Nos. 509 and 509-A as
affirmatively finding that selective discounting enhances
competition and serves the public interest.
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[[Page 20367]]
El Paso, the Producer Coalition, and Tejas ask if selective
discounting would be considered discriminatory under the OCSLA. El Paso
maintains that provided there is a reasonable basis for differentiating
among shippers, discounting is not unduly discriminatory under the
NGA.\67\ El Paso asserts that an OCSLA prohibition on discounting would
preclude pipelines from lowering rates to meet competition. El Paso and
Leviathan worry a strict interpretation of discrimination under the
OCSLA could put an end to all FT-2 rates.\68\
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\67\ Citing Order No. 509-A, finding that the discounting
procedures of Sec. 284.7 of the Commission's regulations were not
inconsistent with the OCSLA.
\68\ An FT-2 rate is offered to a shipper who agrees to
transport all of a specific gas reserve, in exchange for which, the
shipper is not held to a fixed daily quantity or reservation charge.
See, e.g., Garden Banks Gas Pipeline, LLC, 78 FERC para. 61,066
(1997) and Shell Gas Pipeline Company, 76 FERC para. 61,126 (1996).
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Burlington Resources Oil & Gas Company (Burlington) requests
clarification of the discrimination standard and advocates acceptance
of differential rates if such rates reflect a difference in the cost to
provide the similar services to different shippers.\69\ However, where
different rates are charged for similar services, Burlington proposes
shifting the burden of proof to the gas service provider to demonstrate
that in incurs unequal costs to supply similar services.
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\69\ Burlington raised a similar issue in a rate proceeding in
response to revised tariff sheets submitted by Sea Robin. In that
proceeding, we determined this rulemaking would be the more
appropriate forum to address general issues concerning the
interpretation of the OCSLA's nondiscrimination standard with
respect to discounting. Sea Robin, 88 FERC para. 61,120 at 61,314
(1999).
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2. Commission Response
a. Discrimination: Several commenters cite the Commission's
statement in Order No. 491 that it ``interprets the language `without
discrimination' in section 5 of the OCSLA to be a higher standard than
the NGA requirement to offer transportation `without undue
discrimination.' '' \70\ Although the statutes use different
terminology, it is unnecessary here to determine whether or to what
extent the standards for prohibited discrimination are different. As a
practical matter, compliance with NGA regulations will satisfy the
OCSLA standard. Operating under this presumption, as El Paso has
articulated, has the advantage of measuring all offshore service
providers by one standard and is not inconsistent with our previous
interpretation of the separate statutes.
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\70\ 43 FERC para. 61,006 at 61,032.
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In Order No. 509, we issued all OCS NGA pipelines blanket
transportation certificates to ensure they would operate on an open and
nondiscriminatory basis.\71\ We commented that ``with respect to either
the movement of OCS gas (on non-NGA facilities) (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.'' \72\ By now exercising our authority under the OCSLA to
require certain non-NGA OCS service providers to provide information
regarding their operations, we have even greater assurance that the
OCSLA's requirements will be observed. As a general proposition, we
believe that practices permitted under the NGA conform with OCSLA
standards. None of the examples raised in the comments and discussed
below set forth instances of discrimination barred under the OCSLA but
acceptable under the NGA. Therefore, although we will not bar bringing
a claim that a particular action acceptable under the NGA violates the
OCSLA, we will presume that adherence to the NGA's open access and
nondiscrimination requirements will satisfy OCSLA mandates too.
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\71\ In Order No. 509, we observed that ``the condition of
nondiscriminatory access placed on the transportation program
established in Order Nos. 436 and 500 satisfies, in large measure,
the open-access requirement in section 5(f)(1)(A) of the OCSLA.'' 53
FR 50925 (Dec. 19, 1988), FERC Stats. & Regs. (Regulations
Preambles) para. 30,842 at 31,274 (1988).
\72\ Id. at 31,280.
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As a general proposition, under the NGA and OCSLA, similarly
situated shippers should not be charged different rates for the same
service. Nevertheless, we accept that as a matter of fact a gas service
provider, as a result of its own physical and operational
characteristics, may not incur the same costs to provide the same
service to each of its shippers. Where variations in shippers' rates
and conditions of service reflect genuine cost-to-serve variations,
different rates and conditions are not necessarily discriminatory.
Thus, we view neither the NGA sections 4 and 5 bans on ``undue
preference,'' ``unreasonable difference,'' and ``unduly
discriminatory'' treatment, nor the OCSLA's ban on discrimination, as
an absolute prohibition on different rates or conditions of service for
different customers.
We deny Burlington's request that we shift the burden of proof from
the party submitting a complaint to an OCS service provider when
differential rates and conditions of service are identified.
Notwithstanding our above observation that certain cost-based
differentials could be acceptable under the OCSLA, unequal rates or
conditions of service are inherently suspect. Given this, a complainant
that alleges such inequities effectively obliges the service provider
to explain and justify apparently discriminatory treatment.
Consequently, where a service provider files an OCSLA report that
contains different conditions of service or different services for
similarly situated shippers, the service provider is advised to include
in its report additional information. Such information might be found
to justify differing rates or terms based on the service provider's
cost of service or shippers' competitive characteristics or may
elaborate on the nature of the conditions of service (e.g., a lower
rate for larger volumes). Without the benefit of such further
information, we may well attribute differing rates for seemingly
similarly shippers to discrimination on the part of the service
provider.
In its comments, Burlington focused on rate discounts. We have
previously considered the issue of discounting and determined that
discounting disparities alone do not constitute unlawful discrimination
under the NGA.\73\ Burlington contends the OCSLA's nondiscrimination
standard should preclude discounting based on differing characteristics
of customers and should only be permitted where it can be demonstrated
that discounting is required to lower operating costs or increase
capacity. The United States Court of Appeals for the District of
Columbia Circuit has not interpreted the OCSLA's nondiscrimination
requirements as rigidly as Burlington. In American Gas Association v.
FERC,\74\ the court affirmed the Commission's holding that pipelines
could refuse to transport a producer's gas absent take-or-pay credits
without violating the OCSLA's ban on discrimination. In the course of
its discussion, the court stated:
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\73\ Cities of Bethany v. FERC, 727 F.2d 1131, 1139 (D.C. Cir.
1984), cert. denied, 469 U.S. 917, 105 S.Ct. 293 (1984).
\74\ 912 F.2d 1496, 1511-12 (D.C. Cir. 1990).
The producers argue that the plain meaning of
``nondiscriminatory'' precludes any restriction on producer access
to OCS pipelines. But as we noted in AGD I,(\75\) statutory bans on
discrimination by natural monopolies have always allowed the
regulatory agencies discretion to permit differing categories,
including, for example,
[[Page 20368]]
rate classifications based on customers' differing elasticities of
demand.\76\
---------------------------------------------------------------------------
\75\ Citing AGD I, 824 F.2d 981, 1011.
\76\ 912 F.2d 1496,1512. See also Williston Basin Interstate
Pipeline Company, 85 FERC para. 61,247 at 62,028-29 (1999), wherein
we found discounting to meet competitive conditions, i.e.,
customers' capability to switch fuel supplier or type, is not per se
discriminatory, since ``[o]ffering discounts sufficient to keep
customers with elastic demands on the system will maximize
throughput and revenue recovery from those customers, thereby
benefitting all customers on the system.''
The portion of AGD I referred to above affirmed the Commission's
original decision in Order No. 436 to allow open access pipelines to
offer selective discounts. Accordingly, the court has not interpreted
the OCSLA to prohibit OCS service providers from offering selective
discounts similar to those authorized in Order No. 436. Thus, we reject
Burlington's contention that customer-based discounting which could be
permitted under the NGA should be prohibited under the OCSLA. Of
course, as the court itself stated in AGD I, this does not mean that
all selective discounts are nondiscriminatory.\77\
---------------------------------------------------------------------------
\77\ 824 F.2d 981, 1011-12. We may find discounting unacceptable
if offered for reasons other than to meet competitive pressures, or
if offered preferentially, e.g., only to a service provider's
affiliates. See our discussion of discounting under the NGA in
Williston Basin Interstate Pipeline Company, 84 FERC para. 61,348
(1998), reh'g denied, 85 FERC para. 61,247 (1998); Southern Natural
Gas, 67 FERC para. 61,155 (1994); and in the Policy Statement
Providing Guidance with Respect to the Designing of Rates, 47 FERC
para. 61,295 (1989).
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Commenters ask whether FT-2 rates could remain in effect under the
OCSLA's nondiscrimination standard. We see no reason to preclude such
rates. An FT-1 shipper agrees to transport an expressly stated quantity
of gas for a fixed time, whereas an FT-2 shipper commits to transport
all gas reserves from a certain site for its productive life. The
latter commitment can offer a service provider greater flexibility in
developing its facilities and greater assurance that its facilities'
capacity will be filled over a longer term. In view of this, we are not
prepared to find inherent and improper discrimination based solely on a
service provider's offer to make separate rates available for separate
types of firm transportation services. Typically, variable terms--such
as volume incentive pricing or lower charges for customers willing to
enter into longer commitments--are acceptable as long as the service
provider offers the same price to all shippers willing to meet the same
terms.
b. Denial of Access. Generally, a service provider may turn aside
allegations of unlawful discrimination due to disparities in rates or
conditions of service when it can convince the Commission that such
terms are a function of differences in the costs it incurs to perform
the same service for separate shippers or are attributable to
differences in the competitive characteristics of the customers served.
We note that an OCS service provider offering uniform rates and
conditions of service is not immunized from charges of discrimination
or a denial of access. For example, an OCS service provider may offer
all customers identical terms of service, but may charge rates
disproportionately higher than rates charged by regional competitors
for comparable service. In such a case, particularly if the service
provider's customers lack any transportation alternatives, we may find
that high rates have the effect of denying access. Thus, rates that
appear to conform with the OCSLA's nondiscrimination requirement may
nonetheless be found to conflict with the OCSLA's open access
requirement.
F. Enforcement
1. Comments
OCS Producers find it unreasonable for the Commission to require
OCSLA reports while at the same time declaring it does not intend 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.'' \78\
---------------------------------------------------------------------------
\78\ NOPR, 64 FR 37718 at 37723.
---------------------------------------------------------------------------
Tejas requests the Commission specify how enforcement will proceed.
2. Commission Response
OCS Producers' apprehension that the Commission will play only a
passive role is unfounded; we do not expect to rely solely on voluntary
compliance with the OCSLA requirements. We draw a distinction between
the prior approval required under the NGA and the after-the-fact
monitoring we will take on under the OCSLA. While we anticipate
shippers, potential shippers, and competitors will actively follow the
OCSLA reports and be able to bring examples of alleged discrimination
to our attention, we expect to monitor the filings and act on our own
initiative where we suspect discrimination. The transparency engendered
by reporting should permit us to police practices presently obscured
from view.
Information is the essential predicate to a complaint. Where before
we presumed service providers operated on an open and nondiscriminatory
basis, we will now have affirmative assurance that this is the case. We
expect reporting will move us from a laissez faire to a light-handed
regulatory regime. Ideally, complaints will be resolved based
exclusively on information contained in a service provider's OCSLA
report and supplied by the complainant.\79\ However, we recognize that
when a claim is raised, further investigation may nevertheless be
required to resolve certain issues.
---------------------------------------------------------------------------
\79\ This outcome would conform with aspirations we expressed in
revising Rule 206 of our rules of practice and procedure to require
a complainant satisfy a higher threshold in terms of the information
presented in the interest of realizing an expedited resolution. See
18 CFR 385.206(b).
---------------------------------------------------------------------------
When a service provider's report meets minimum Sec. 330.2
requirements, but in so doing presents the appearance of impropriety
(e.g., affiliates seemingly served on more favorable terms than
nonaffiliates), it may behoove the service provider to include
information that justifies any apparent disparate treatment. Otherwise,
the Commission, on its own initiative or in response to a request, may
require the service provider to give further detail and explanation
regarding its transactions.
In addition to acting via the complaint process, allegations of
OCSLA discrimination may be addressed and resolved via the Commission's
Enforcement Hotline \80\ and alternative dispute resolution
processes.\81\
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\80\ 18 CFR part 1b. In the Commission's recent revision of its
complaint procedures, it codified as Sec. 385.218 simplified
procedures for small controversies, which may prove an effective
means to resolve certain OCS conflicts.
\81\ 18 CFR 385.604-06.
---------------------------------------------------------------------------
IV. Environmental Analysis
The Commission is required to prepare an Environmental Assessment
or an Environmental Impact Statement for any action that may have a
significant adverse effect on the human environment.\82\ However, the
Commission has categorically excluded certain actions from this
requirement as not having a significant effect on the human
environment.\83\ The action taken here--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--qualifies for such an exclusion.\84\ This rule is procedural
in nature, it directs certain offshore gas service providers to make
certain information publicly available. Therefore, no environmental
analysis is necessary, and none has been done in
[[Page 20369]]
connection with the regulations promulgated by this rule.
---------------------------------------------------------------------------
\82\ Order No. 486, Regulations Implementing National
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. &
Regs. para. 30,783 (1987), codified at 18 CFR part 380.
\83\ 18 CFR 380.4(a)(2)(ii).
\84\ 18 CFR 380.4.
---------------------------------------------------------------------------
V. Regulatory Flexibility Certification
The Regulatory Flexibility Act of 1980 (RFA) \85\ 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.\86\
---------------------------------------------------------------------------
\85\ 5 U.S.C. 601-612.
\86\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------
The Commission does not believe that this rule would have a
significant economic impact on small entities. Commenters claim some of
the entities that will be required to file for the first time pursuant
to the new regulations may fall within the RFA's definition of small
entity.\87\ Although none of the comments name any such entities, we
acknowledge that there may be businesses qualifying as small under the
RFA definition that will be compelled to report information heretofore
withheld from public view. However, generally, companies that transport
gas for hire on the OCS do not qualify as small. OCS producers are more
likely to qualify as small, but the exemptions of Sec. 330.3 should
effectively exclude producers from the new reporting requirements.
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.
---------------------------------------------------------------------------
\87\ 5 U.S.C. 601(3). 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. A business engaged in oil and gas extraction
may be small if it has fewer than 500 employees, a business engaged
in oil and gas field exploration services may be small if annual
revenues are less than $5 million. See 13 CFR 121.201.
---------------------------------------------------------------------------
VI. Information Collection Requirements
The following collection of information contained in this final
rule (new Subchapter O) is being submitted to the Office of Management
and Budget (OMB) for review under section 3507(d) of the Paperwork
Reduction Act of 1995.\88\ The Commission will identify the information
required as FERC-545 for OCSLA-jurisdictional gas service providers.
---------------------------------------------------------------------------
\88\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------
The regulations will impose new reporting requirements on non-NGA-
regulated OCS gas service providers with 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 quarterly filings if there are changes to the
initially submitted information. As long as the status of a gas service
provider's affiliations, customers, rates, conditions of service, and
facilities remain the same, there is no need to file again. The new
rule will not apply to facilities located upstream of a point where gas
is first collected, separated, dehydrated, or otherwise processed;
thereby generally exempting OCS entities engaged exclusively in
exploration and production.
Considering the complex nature of the offshore operating
environment, we cannot state with assurance the exact number of
entities likely to be subject to the new regulations. We estimate that,
excluding entities engaged exclusively in exploration and production,
there are less than 200 gas service providers total that transport gas
on or across the OCS; approximately 30 of these are currently subject
to our NGA jurisdiction. We expect the majority of the NGA-exempt OCS
service providers will qualify for a reporting exemption pursuant to
Sec. 330.3(a)(1) or (2). This final rule modifies the exemptions
proposed in the NOPR by adding Sec. 330.3(a)(4), which exempts NGA-
regulated service providers from the OCSLA reporting requirements. This
additional exemption reduces the number of service providers that will
be subject to the new filing requirements. In the NOPR, we estimated 70
service providers could be expected to file OCSLA reports under the new
regulations. This number included the NGA-regulated entities that are
now exempt. Consequently, we reduce the number of service providers we
expect to file from 70 to 55.
In the NOPR, we anticipated that the OCS service providers subject
to the new regulations would be required to update the information on
file twice a year. The comments have convinced us that a significant
portion of OCS service providers are likely to alter their affiliates,
customers, rates, conditions of service, or facilities far more
frequently. In response, we have eliminated the proposed Sec. 330.3(c)
requirement that service providers update their reports within 15 days
of any change. Instead, we will require that filed reports, when
necessary, be updated quarterly. For the purposes of estimating the
reporting burden, we will assume all reporting entities will file every
quarter. The estimated number of hours per response remains the same.
The burden estimates for complying with this 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........................................ 55 4 8 1,760
----------------------------------------------------------------------------------------------------------------
Total Annual Hours for Collection (Reporting + Record Keeping (if
appropriate)) = 1,760.
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 OCSLA
reports updating the initial filing.
Information Collection Costs: The Commission projects the average
annualized cost per respondent to comply with the new OCSLA reporting
requirement will be as follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
Annualized Capital/Startup Costs.......... 0
Annualized Costs (Operations & $88,000 ($50 per hour)
Maintenance).
Total Annualized Costs................ $88,000
------------------------------------------------------------------------
The OMB regulations require OMB to approve certain information
collection requirements imposed by agency rule.\89\ Accordingly,
pursuant to OMB regulations, the Commission is providing notice of this
information collection to OMB.
---------------------------------------------------------------------------
\89\ 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.
[[Page 20370]]
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 final 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, rates, terms and conditions of service, and facilities.
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 OCSLA 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.
VII. Document Availability
In addition to publishing the full text of this document in the
Federal Register, the Commission also provides all interested persons
an opportunity to view and/or print the contents of this document via
the Internet through FERC's Home Page (http://www.ferc.fed.us) and on
FERC's Public Reference Room during normal business hours (8:30 a.m. to
5:00 p.m., Eastern time) at 888 First Street, NE, Room 2A, Washington,
DC 20426.
From FERC's Home Page in the Internet, this information is
available in both the Commission Issuance Posting System (CIPS) and
RIMS.
--CIPS provide access to texts of formal documents issued by the
Commission since November 14, 1994.
--CIPS can be accessed using the CIPS link or the Energy Information
Online icon. The full text of this document is available on CIPS in
ASCII and WordPerfect 8 format for viewing, printing, and/or
downloading.
--RIMS contains images 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 from FERC's Home Page using the RIMS
link or the Energy Information Online icon. Descriptions of documents
back to November 16, 1981, are also available from RIMS-on-the-Web;
requests for copies of these and other older documents should be
submitted to the Public Reference Room.
User assistance is available for RIMS, CIPS, and the FERC Website
during normal business hours from our Help line at (202) 208-2222 (E-
mail to WebMaster@ferc. fed.us.) or the Public Reference at (202) 208-
1371 (E-Mail to public.referenceroom@ferc.fed.us).
During normal business hours, documents can also be viewed and/or
printed in FERC's Public Reference Room, where RIMS, CIPS, and the FERC
Website are available. User assistance is also available.
VIII. Effective Date and Congressional Notification
The final rule will be effective May 17, 2000. The Small Business
Regulatory Enforcement Act of 1966 requires agencies to report to
Congress on the promulgation of final rules prior to their effective
dates.\90\ That reporting requirement applies to this final rule. The
Commission has determined, with the concurrence of the Administrator of
the Office of Information and Regulatory Affairs of OMB, that this rule
is not a major rule as defined in section 351 of the Small Business
Regulatory Enforcement Fairness Act of 1996.
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\90\ 5 U.S.C. 801.
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List of Subjects
18 CFR Part 330
Natural gas, Pipelines, Reporting and record keeping requirements.
18 CFR Part 385
Administrative practice and procedure, Electric utilities,
Penalties, Pipelines, Reporting and record keeping requirements.
By the Commission.
David P. Boergers,
Secretary.
In consideration of the foregoing, the Commission amends Chapter I,
Title 18, of the Code of Federal Regulations, as follows:
1. Subchapter O, consisting of 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. 1301-1356.
Sec. 330.1 Definitions.
Affiliate has the same meaning as found in Sec. 161.2(a) of this
chapter.
Control has the same meaning as found in Sec. 161.2(b) of this
chapter.
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.
Outer Continental Shelf (OCS) has the same meaning as found in
section 1331(a) of the Outer Continental Shelf Lands Act (OCSLA);
Sec. 330.2 Reporting requirements.
(a) Gas Service Providers must file with the Commission an OCSLA
Reporting Form consisting of the:
(1) Date of the filing;
(2) Full legal name and address of the Gas Service Provider;
(3) 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,
the points at which service is rendered, with the boundaries of any
rate zones or rate areas identified; and
(6) For all entities affiliated with the Gas Service Provider and
engaged in the exploration, development, production, processing,
transportation, marketing, consumption, or sale of natural gas: 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 the
conditions of service for each shipper served, consisting of:
[[Page 20371]]
(1) The full legal name of the shipper receiving service;
(2) A notation of shipper affiliation, if any;
(3) The contract number under which the shipper receives service;
(4) The type of service provided;
(5) Primary receipt point(s);
(6) Primary delivery point(s);
(7) Rates between each pair of points, and;
(8) Other conditions of service deemed relevant by the Gas Service
Provider or, alternatively;
(9) 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, 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 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 the Gas Service
Provider agrees 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 a field or fields connected to a
single 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;
(3) Services rendered over facilities that feed into a facility
where natural gas is first collected, separated, dehydrated, or
otherwise processed; and
(4) Gas Service Providers' facilities and services regulated by the
Commission under the Natural Gas Act.
(b) A Gas Service Provider that makes no filing pursuant to
Sec. 330.3(a)(1) must comply with the specified reporting requirements
within 90 days of agreeing to serve a new shipper or when required by
the Commission.
(c) When a Gas Service Provider subject to these reporting
requirements alters its affiliates, customers, rates, conditions of
service, or facilities, within any calender quarter, it must then file
with the Commission, on the first business day of the subsequent
quarter, a revised Sec. 330.2 report describing the status of its
services and facilities as of the first day of the previous quarter.
PART 385--RULES OF PRACTICE AND PROCEDURE
2. Part 385 is amended as follows:
3. The authority citation for Part 385 is revised to read as
follows:
Authority: 5 U.S.C. 551-557; 15 U.S.C. 717-717z, 3301-3432; 16
U.S.C. 791a-8225r, 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 (1988).
4. 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 will not appear in the Code of
Federal Regulations.
Appendix
List of Commenters
Brooklyn Union Gas Company
Burlington Resources Oil & Gas Company
Coastal Field Services Company
Duke Energy Companies
Dynergy Midstream Services, Limited Partnership
El Paso Energy Corporation
Enron Interstate Pipelines
Leviathan Gas Pipeline Partners, L.P.
Independent Petroleum Association of America
Interstate Natural Gas Association of America
Natural Gas Supply Association
OCS Producers
Producer Coalition
United States Department of the Interior, Minerals Management
Service
Williams Companies, Inc.
Tejas Offshore Pipeline, LLC
[FR Doc. 00-9447 Filed 4-14-00; 8:45 am]
BILLING CODE 6717-01-U
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