[Federal Register Volume 67, Number 53 (Tuesday, March 19, 2002)]
[Rules and Regulations]
[Pages 12468-12470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6555]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 2

[Docket No. RM01-7-000; Order No. 624]


Policy on Certificates of Public Convenience and Necessity for 
Gas Transmission Facilities in the Off-shore Southern Louisiana Area; 
Final Rule

Issued March 13, 2002.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
removing from its regulations the general statement of policy with 
respect to the issuance of certificates of public convenience and 
necessity for the construction and operation of pipeline transmission 
facilities in the Louisiana off-shore area. The Commission announced a 
new policy with respect to pipeline construction in the off-shore 
Louisiana area in ANR Pipeline Company (ANR).\1\ Since the old policy 
has changed, we are removing it from the regulations.
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    \1\ 78 FERC para.61,326 (1997); reh'g denied 85 FERC para.61,056 
(1998); appeal denied ANR Pipeline Co. v. FERC, 205 F.3d 403 (D.C. 
Cir. 2000).

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DATES: This final rule is effective upon the date of issuance.

FOR FURTHER INFORMATION CONTACT:  Cecilia Desmond, Office of the 
General Counsel, Federal Energy Regulatory Commission, 888 First 
Street, NE., Washington, DC 20426, (202) 208-2280.

SUPPLEMENTARY INFORMATION:

Federal Energy Regulatory Commission

    Before Commissioners: Pat Wood, III, Chairman; William L. Massey, 
Linda Breathitt, and Nora Mead Brownell.

[Docket No. RM01-7-000; Order No. 624]

Policy on Certificates of Public Convenience and Necessity for Gas 
Transmission Facilities in the Off-shore Southern Louisiana Area; Final 
Rule

Issued March 13, 2002.

I. Introduction

    The Federal Energy Regulatory Commission (Commission) is removing 
18 CFR Sec. 2.65 from its regulations. Section 2.65 sets out a general 
policy with respect to the issuance of certificates of public 
convenience and necessity for the construction and operation of 
pipeline transmission facilities in the Louisiana off-shore area. The 
Commission's predecessor agency, the Federal Power Commission (FPC), 
announced the policy on June 4, 1968, in Order No. 363, to maximize the 
use of off-shore Louisiana facilities and to ensure that off-shore 
facilities were properly sized.\1\ In ANR Pipeline Company (ANR), the 
Commission confirmed that Sec. 2.65 no longer reflects its policy with 
respect to pipeline construction in the off-shore Louisiana area.\2\ 
Since the Commission's policy with respect to construction of off-shore 
facilities has changed, we are removing Sec. 2.65 from the regulations.
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    \1\ Order No. 363,39 FERFC para.925 (1968).
    \2\ 78 FERC para.61,326 (1997); reh'g denied 85 FERC para.61,056 
(1998); appeal denied ANR Pipeline Co. v. FERC, 205 F.3d 403 (D.C. 
Cir. 2000).
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II. Discussion

    In promulgating Sec. 2.65 in Order No. 363, the FPC noted the 
increasing importance of off-shore Louisiana as a

[[Page 12469]]

source of natural gas for the nation and the much higher cost of 
installing off-shore pipeline facilities compared to on-shore 
facilities. Taking this into account, the FPC announced a policy under 
which it would review applications for construction of pipelines in the 
Louisiana off-shore area in the Gulf of Mexico on both a joint and 
individual company basis. The FPC intended to promote joint use 
arrangements and wanted pipeline companies to develop gas exchange 
procedures to minimize cross-hauls. The FPC believed that this would 
assure both timely and cost-effective full utilization of large 
capacity facilities in the Gulf of Mexico and development of the off-
shore gas reserves.
    Thus, the policy outlined in Sec. 2.65 states that a pipeline 
applying for a certificate of public convenience and necessity for the 
construction and operation of off-shore pipeline facilities should 
include certain information in its application: (1) A detailed 
description of the applicant's efforts to transport its gas using 
another pipeline's existing or proposed off-shore facilities (Sec. 2.65 
(a)(1)); (2) a demonstration that it consulted with other pipelines 
about using the applicant's proposed facilities to transport their gas 
to onshore facilities (Sec. 2.65 (a)(2)); (3) that the applicant will 
install 30-inch or larger diameter pipe or demonstrate the feasibility 
of a smaller proposed line (Sec. 2.65 (a)(3)); and (4) a demonstration 
that its proposed facilities will be used at a minimum annual load 
factor of 60 percent of the annual capacity available by the end of a 
12-month period following construction, or seek a waiver of this 
requirement (Sec. 2.65(a)(4)). Section 2.65 also states that the 
Commission intends to enforce the 60 percent load factor requirement by 
permitting off-shore pipeline facilities to be included in the 
applicant's cost-of-service in future rate proceeedings at an average 
unit cost predicated on load factors of not less that 60 percent 
(Sec. 2.65(b)).
    Section 2.65 also states that pipelines should file applications 
for off-shore facilities by September 1 of the year immediately 
preceding the proposed installation of the facilities. This would allow 
staff to review all applications, on a joint and individual company 
basis, at the same time. In 1976, for example, in High Island Offshore 
System (HIOS), the Commission convened public conferences to discuss a 
possible alternative joint approach to three competitive applications 
requesting authorization to construct off-shore pipeline facilities.\3\ 
The three competing applicants ultimately amended and unified their 
applications to propose one system rather than the three originally 
proposed, as anticipated by Sec. 2.65.
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    \3\ 55 FPC 2674 (1976)(the three applicants were Texas Offshore 
Pipeline System, Inc., Amtex Offshore Pipeline Co., and Natural Gas 
Pipeline Co. of America).
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    In 1996, a number of interstate pipeline companies, including ANR 
and Nautilus Pipeline Company (Nautilus), filed applications requesting 
authorization to construct pipeline facilities in the Gulf of Mexico in 
response to significant new deepwater gas reserves being developed in 
several off-shore Louisiana producing regions. ANR argued that 
Sec. 2.65 of the Commission's regulations required the Commission to 
consolidate ANR's application for authority to construct pipeline 
facilities in the Gulf of Mexico with Nautilus' similar application for 
off-shore facilities and to hold a joint hearing to consider the two 
applications.\4\ Citing changed circumstances since the FPC adopted the 
policy announced in Order No. 363, the Commission confirmed that its 
policy with respect to off-shore facilities has changed and denied 
ANR's request for consolidation.\5\
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    \4\ 78 FERC para. 61,326 (1997).
    \5\ Id. at 62,407.
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    ANR appealed the Commission's order, arguing that the Commission 
had violated its own regulation since Sec. 2.65 required the Commission 
to hold a comparative hearing on its and Nautilus' applications.\6\ In 
denying ANR's appeal, the court stated that, since Sec. 2.65 is a 
policy statement, not a regulation, it is not binding on the 
Commission. Noting that an agency may not depart from prior policy 
without explanation, the court stated that the Commission's explanation 
in ANR adequately explained how changed circumstances justified a new 
policy. In response to the court's suggestion that the Commission 
should amend Sec. 2.65 to reflect its new policy,\7\ we are issuing 
this rule.
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    \6\ ANR Pipeline Co. v. FERC, 205 F.3d 403 (D.C. Cir. 2000).
    \7\ Id. at n. 2.
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    As explained in ANR, since the 1968 issuance of Order No. 363, both 
off-shore natural gas production and the Commission's regulatory 
approach to the construction of pipeline infrastructure have undergone 
significant changes that have affected the Commission's policy with 
respect to interstate pipeline construction in the Gulf of Mexico. The 
Gulf of Mexico, considered a few years ago to be a mature producing 
area, contains significant newly discovered deep water reserves of 
natural gas. In recent years, the Commission's regulatory approach has 
been to encourage the operation of market forces and competition 
wherever possible to determine what pipeline facilities are 
constructed.
    Thus, rather than allocating limited production in the Gulf of 
Mexico among a limited number of pipelines as set out in Order No. 363 
and Sec. 2.65, the Commission now seeks to encourage an interstate 
pipeline infrastructure capable of transporting natural gas from newly 
developed production areas in the Gulf of Mexico. This market-oriented 
approach allows for the most efficient, cost effective, and timely 
development of new off-shore reserves and transportation facilities.
    In ANR, the Commission determined that application of the 
evaluation standards reflected in Sec. 2.65 to decide which project 
would meet off-shore capacity requirements could needlessly delay 
construction of the necessary pipeline infrastructure, delay production 
plans, and retard further exploration and development in the area. 
Instead, the Commission stated that the market should determine which 
projects are best suited to serve the area's infrastructure needs.
    Since Sec. 2.65 no longer accurately describes the Commission's 
policy and the Commission no longer wishes to codify in the regulations 
its policy on constructing infrastructure in the Gulf of Mexico, the 
Commission is removing Sec. 2.65.

III. Administrative Findings

    The Administrative Procedure Act (APA) requires rulemakings to be 
published in the Federal Register and also mandates that an opportunity 
for comments be provided when an agency promulgates regulations. 
However, the APA exempts general statements of policy from its notice 
and comment requirements.\8\ Therefore, since Sec. 2.65 is a policy 
statement rather than a substantive rule, we are removing it from our 
regulations without a period for public comment.
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    \8\ 5 U.S.C. 553(b).
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IV. Effective Date and Congressional Notification

    The APA exempts general statements of policy from the requirement 
that rules become effective only after thirty days' notice.\9\ 
Therefore, this final rule will be effective upon the date of its 
issuance. The Commission has determined, with the concurrence of the

[[Page 12470]]

Administrator of the Office of Information and Regulatory Affairs of 
the Office of Management and Budget, that the removal of this policy 
statement is not a major rule within the meaning of section 351 of the 
Small Business Regulatory Enforcement Fairness Act of 1996.\10\ The 
Commission is submitting this final rule to both houses of Congress and 
to the Comptroller General.
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    \9\ 5 U.S.C. 553 Sec. (d)(2).
    \10\ 5 U.S.C. Sec. 804(2).
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V. Environmental Analysis

    Commission regulations describe the circumstances where preparation 
of an environmental assessment or an environmental impact statement 
will be required.\11\ The Commission has categorically excluded certain 
actions from this requirement as not having a significant effect on the 
human environment.\12\ Since removing an outdated policy statement from 
the regulations falls within categorical exclusions in the Commission's 
regulations for rules that are clarifying, corrective, or procedural, 
no environmental assessment or environmental impact statement is 
necessary.\13\
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    \11\ Regulations Implementing National Environmental Policy Act, 
52 FR 47897 (Dec. 17, 1987), codified at 18 CFR Part 380.
    \12\ 18 CFR 380.4.
    \13\ See 18 CFR 380.4(a)(2)(ii).
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VI. Regulatory Flexibility Impact Statement

    The Regulatory Flexibility Act of 1980 (RFA)\14\ generally requires 
a description and analysis of proposed rules that will, if promulgated, 
have a significant economic impact on a substantial number of small 
entities. The Commission is not required to make such analysis if a 
rule would not have such an effect.\15\
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    \14\ 5 U.S.C. 601-612.
    \15\ 5 U.S.C. 605(b).
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    The Commission does not believe that the removal of Sec. 2.65 from 
its regulations would have such an impact on small entities. The 
removal would have an impact only on interstate pipelines, which 
generally do not fall within the RFA's definition of small entity.\16\ 
Accordingly, pursuant to section 605(b) of the RFA, the Commission 
certifies that the removal of Sec. 2.65 will not have a significant 
economic impact on a substantial number of small entities.
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    \16\ 5 U.S.C. 601(3), citing to section 3 of the Small Business 
Act, 15 U.S.C. 632. 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.
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VII. Information Collection Statement

    The Office of Management and Budget's (OMB) regulations require 
that OMB approve certain information collection requirements imposed by 
agency rules.\17\ However, this Final Rule contains no information 
reporting requirements, and therefore is not subject to OMB approval.
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    \17\ 5 CFR Part 1320.
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VIII. Document Availability

    In addition to publishing the full text of this document in the 
Federal Register, the Commission 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 in 
FERC's Public Reference Room during normal business hours (8:30 a.m. to 
5:00 p.m. Eastern time) at 888 First Street, N.E., Room 2A, Washington, 
DC 20426.
    From FERC's Home Page on the Internet, this information is 
available in both the Commission Issuance Posting System (CIPS) and the 
Records and Information Management System (RIMS).

--CIPS provides access to the 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 8.0 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 Website during 
normal business hours from our Help line at (202) 208-2222 (E-Mail to 
[email protected]) or the Public Reference at (202) 208-1371 (E-
Mail to [email protected]).
    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.

List of Subjects in 18 CFR Part 2

    Administrative practice and procedure, Electric Power, Natural gas, 
Pipelines, Reporting and recordkeeping requirements.

    By the Commission.
Magalie R. Salas,
Secretary.

    For the reasons set forth in the foregoing, the Commission is 
removing Sec. 2.65 of Part 2, Chapter 1, Title 18, Code of Federal 
Regulations, as follows.

PART 2--GENERAL POLICY AND INTERPRETATIONS

    1. The authority citation for Part 2 continues to read as follows:

    Authority: 5 U.S.C. 601; 15 U.S.C. 717-717w, 3301-3432; 16 
U.S.C. 792-825y, 2601-2645; 42 U.S.C. 4321-4361, 7101-7352.


    2. Remove Sec. 2.65.


Sec. 2.65  [Removed]

[FR Doc. 02-6555 Filed 3-18-02; 8:45 am]
BILLING CODE 6717-01-P