[Federal Register Volume 61, Number 120 (Thursday, June 20, 1996)]
[Notices]
[Pages 31521-31522]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15688]



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DEPARTMENT OF ENERGY
[Docket No. RM96-5-001]


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; Order 
Dismissing Requests for Rehearing

Issued: June 14, 1996.
    On February 28, 1996, the Commission issued a Statement of Policy 
(policy statement) in this proceeding which reviewed issues concerning 
the status, scope and effect of its regulation of gathering and 
transportation on the Outer Continental Shelf (OCS).\1\ The policy 
statement articulated, clarified and, to some extent, modified the 
criteria the Commission will use to determine whether pipeline 
facilities located on the OCS have a primary function of gathering or 
transmission. Specifically, the Commission added a new factor to its 
existing primary function test for facilities located in water depths 
of 200 meters or more. The Commission stated that such facilities would 
be presumed to have a primary purpose of gathering up to the point or 
points of potential connection with the interstate pipeline grid. From 
that point on, the Commission would continue to apply the existing 
primary function test.
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    \1\ 74 FERC para. 61,076 (1996), 61 FR 8611 (March 5, 1996).
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    Four parties filed requests for rehearing and/or clarification or 
reconsideration.\2\ As discussed below, the Commission will dismiss the 
requests for rehearing, reconsideration or clarification.
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    \2\ They are: BP Exploration & Oil, Inc. (BP), Columbia Gas 
Transmission Corporation and Columbia Gulf Transmission Company 
(Columbia) (filing jointly), the Interstate Natural Gas Association 
of America (INGAA), and Williams Field Services Group, Inc. and 
Transcontinental Gas Pipe Line Corporation (Williams) (filing 
jointly).
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Summary of the Requests

    The following issues were raised by one or more of the parties in 
their requests for rehearing, reconsideration and/or clarification. The 
parties seek assurance that the Commission in the policy statement did 
not intend to create a presumption that all facilities located in water 
depths of less than 200 meters are transmission. They contend that the 
``bright line'' test or new factor added to the primary function test 
for deep water facilities is inconsistent with Commission policy as 
articulated in Amerada Hess Corporation (Amerada Hess).\3\ 
Additionally, some parties argue that any presumption or bright line 
test is inconsistent with EP Operating Co. v. FERC,\4\ which mandates a 
case-by-case application of the physical factors of the primary 
function test. Some parties note that many certificated offshore 
facilities are not necessarily transmission facilities and that the 
Commission did not scrutinize the function of such facilities when 
certificating them. Thus, these parties argue that the Commission has 
no rational basis for determining that pipelines are transmission 
facilities because of their proximity to certificated interstate 
pipelines when the ``in-proximity'' facilities may be 
misfunctionalized.
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    \3\ 52 FERC para. 61,268 (1990). In Amerada Hess, the Commission 
stated it would consider the changing technical and geographic 
nature of exploration and production offshore when applying the 
primary function test to offshore facilities. Amerada Hess provided 
for a ``sliding scale'' approach where facilities with increasing 
length and diameters could still be classified as gathering where 
these physical factors are a function of the distance from shore and 
of the water depth of production areas.
    \4\ 876 F. 2d 46 (5th Cir. 1989).
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    The parties also contend that the distinction between deep and 
shallow-water facilities articulated in the policy statement results in 
determinations of primary function based on a pipeline's vintage (older 
offshore pipelines tend to be in shallower waters and were 
certificated) or geographical location, rather than on the physical 
factors applied in the traditional primary function test. Other parties 
express concern that the new approach outlined in the policy statement 
will result in the Commission's giving undue weight to certain factors 
of the primary function test, such as size, operating pressure and 
central point in the field, when attempting to determine the function 
of facilities located in shallower water. They posit that this occurred 
in Shell Gas Pipeline Company,\5\ where the Commission applied the 
approach outlined in the policy statement for the first time. 
Overemphasizing these factors for offshore facilities, they argue, is 
inconsistent with Amerada Hess and subsequent cases where the sliding 
scale approach was used. Additionally, they argue that the new approach 
can result in a single line being considered both gathering and 
transmission, which would be arbitrary and capricious.
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    \5\ 74 FERC para. 61,219 (1996).
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    Some parties are primarily concerned that the policy statement did 
not resolve issues related to whether there is a level playing field 
for regulated and unregulated offshore pipelines. Columbia argues that 
the Commission erred by not deciding to regulate all offshore pipelines 
under the Outer Continental Shelf Lands Act and by leaving a dual 
regulatory scheme in place. Further, Columbia asserts that the 
Commission erred by not initiating a generic production area rate 
design proceeding to address the issues raised by the commenters in 
this proceeding. INGAA maintains that the ability of interstate 
pipelines to utilize alternative ratemaking approaches does not solve 
the problems of the dual regulatory scheme, and that the Commission 
erred in the policy statement by so suggesting.
    Finally, clarification is sought that the policy statement was 
intended to provide guidance and not intended to have the force and 
effect of a rule.

Discussion

    The purpose of the policy statement in this proceeding was to 
provide the natural gas industry with guidance by stating the criteria 
the Commission will use to determine the function of offshore 
pipelines, especially new facilities constructed in deep water 
producing areas. A policy statement is not a rule, and generally 
objections to such a statement are not directly reviewable.\6\ Rather, 
such review must await implementation of the policy in a specific 
case.\7\ Therefore, the Commission declines to consider at this time 
the issues raised in the requests for

[[Page 31522]]

rehearing, reconsideration or clarification, but will consider such 
issues and arguments in the specific cases where the policy is applied. 
In this regard, we note that many of the issues raised in the requests 
for rehearing in this proceeding are raised in the rehearing requests 
filed in Shell Gas Pipeline Company.\8\ Therefore, we are dismissing 
the requests for rehearing, reconsideration or clarification filed in 
this proceeding.
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    \6\ See, eg., Alternatives to Traditional Cost-of-Service 
Ratemaking for Natural Gas Pipelines, 75 FERC para. 61,024 (1996).
    \7\ See American Gas Association v. FERC, 888 F. 2d 136 (D.C. 
Cir. 1989).
    \8\ Supra. note 5.
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    By the Commission.
Linwood A. Watson, Jr.,
Acting Secretary.
[FR Doc. 96-15688 Filed 6-19-96; 8:45 am]
BILLING CODE 6717-01-M