20354 Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations

1 43 U.S.C. 1301–1356. 1a 43 U.S.C. 1301–1356.

directories must be based on the 2000

DOE cost figure for electricity beginning

on the effective date of that notice.

For Operating Cost Representations

Respecting Covered Products in

Catalogs

Operating cost representations in

catalogs that are drafted and printed

while the 2000 cost figures are in effect

must be derived using the 2000 energy

costs beginning July 17, 2000.

For Operating Cost Representations

Respecting Products Covered by EPCA

but not by the Commission’s Rule

Manufacturers of products covered by

section 323(c) of EPCA, 42 U.S.C.

6293(c), but not by the Appliance

Labeling Rule (clothes dryers, television

sets, kitchen ranges and ovens, and

space heaters) must use the 2000 DOE

energy costs in all operating cost

representations beginning July 17, 2000.

Regulatory Flexibility Act

The provisions of the Regulatory

Flexibility Act relating to a Regulatory

Flexibility Act analysis (5 U.S.C. 603–

604) are not applicable to this

proceeding because the amendments do

not impose any new obligations on

entities regulated by the Appliance

Labeling Rule. Thus, the amendments

will not have a ‘‘significant economic

impact on a substantial number of small

entities’’ (5 U.S.C. 605). The

Commission has concluded, therefore,

that a regulatory flexibility analysis is

not necessary, and certifies, under

Section 605 of the Regulatory Flexibility

Act (5 U.S.C. 605(b)), that the

amendments announced today will not

have a significant economic impact on

a substantial number of small entities.

List of Subjects in 16 CFR Part 305

Advertising, Energy conservation,

Household appliances, Labeling,

Reporting and recordkeeping

requirements.

PART 305—[AMENDED]

Accordingly, 16 CFR Part 305 is

amended as follows:

1. The authority citation for Part 305

continues to read:

Authority: 42 U.S.C. 6294.

2. Section 305.9(a) is revised to read

as follows:

§ 305.9 Representative average unit

energy costs.

(a) Table 1 to this paragraph contains

the representative unit energy costs to

be utilized for all requirements of this

part.

TABLE 1.—REPRESENTATIVE AVERAGE UNIT COSTS OF ENERGY FOR FIVE RESIDENTIAL ENERGY SOURCES (2000)

Type of energy In commonly used terms As required by DOE test procedure Dollars per

million Btu 1

Electricity ................................................. 8.03/¢/kWh 2,3 .......................................... $0.0803/kWh ........................................... $23.53

Natural Gas ............................................. 68.8¢/therm 4 or $7.07/MCF 5,6 ................ $0.00000688/Btu ..................................... 6.88

No. 2 heating oil ...................................... $1.09/gallon 7 ........................................... $0.00000786/Btu ..................................... 7.86

Propane ................................................... $.92/gallon 8 ............................................. $0.00001007/Btu ..................................... 10.07

Kerosene ................................................. $1.14/gallon 9 ........................................... $0.00000844/Btu ..................................... 8.44

1Btu stands for British thermal unit.

2 kWh stands for kiloWatt hour.

3 1 kWh=3,412 Btu.

4 1 therm=100,000 Btu. Natural gas prices include taxes.

5 MCF stands for 1,000 cubic feet.

6For the purposes of this table, I cubic foot of natural gas has an energy equivalence of 1,027 Btu.

7For the purposes of this table, 1 gallon of No. 2 heating oil has an energy equivalence of 138,690 Btu.

8For the purposes of this table, 1 gallon of liquid propane has an energy equivalence of 91,333 Btu.

9For the purposes of this table, 1 gallon of kerosene has an energy equivalence of 135,000 Btu.

* * * * *

Donald S. Clark,

Secretary.

[FR Doc. 00–9527 Filed 4–14–00; 8:45 am]

BILLING CODE 6750–01–M

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.

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.

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 He ́bert, 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

Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations 20355

2The 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

4Regulations 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. ¶ 32,542 (1999).

5A list of commenters appears in the appendix

to this order.

6 IPAA is composed, generally, of smaller

producers and shippers.

7NGSA is composed of integrated and

independent gas producers and marketers.

8OCS 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.

9NGSA 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 ¶ 61,351 (1995), reh’g denied, 75

FERC ¶ 61,332 (1996), vacated and remanded, Sea

Robin v. FERC, 127 F.3d 365 (5th Cir. 1997), order

on remand, 87 FERC ¶ 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.

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

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.

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.

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

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

20356 Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations

10Since 1992, the Commission has exercised

jurisdiction under the OCSLA in one oil case,

Bonito Pipe Line Company (Bonito), 61 FERC ¶

(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 ¶ 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.

12NGA section (1)(b) states the Act ‘‘shall not

apply to * * * the facilities used for * * * the

production or gathering of natural gas.’’

13See Bonito, 61 FERC ¶ 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 ¶

61,051 (1992). In the Bonito and Oxy cases, the

Commission affirmed the OCSLA

nondiscrimination provisions apply to OCS oil

lines.

14See 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. ¶

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).

17Citing 5 U.S.C. 557 and 706(E) at 17, n. 24. 18Leviathan 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.

¶ 31,071 (1999), 86 FERC ¶ 61,324 (1999), order on

reh’g and clarification, Order No. 602–A, 64 FR

43600 Aug. 11, 1999), FERC Stats. & Regs. ¶ 31,076

(1999), 88 FERC ¶ 61,114 (1999), order on reh’g,

Order No. 602–B, 64 FR 53595 (Oct. 8, 1999) FERC

Stats. & Regs. ¶ 32,545 (1999), 88 FERC ¶ 61,249

(1999).

20The 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 ¶ 61,222 (1996), reh’g dismissed, 75 FERC

¶ 61,291 (1996).

21Alternative Methods for Regulating Natural Gas

Pipeline Facilities and Services on the Outer

Continental Shelf, 83 FERC ¶ 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 nonstate waters and the NGA covers all waters.

23The ‘‘primary function’’ test was articulated in

Farmland Industries, Inc. (Farmland), 23 FERC

¶ 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

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

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 NGAexempt 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.

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 NGAjurisdictional 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

Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations 20357

be applicable to both onshore and offshore

facilities, as modified as applied to offshore

facilities in Amerada Hess Corporation, 52 FERC

¶ 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.

24Regulation of Short-Term Natural Gas

Transportation Services, Order No. 637, 65 FR

10156 (Feb. 25, 2000), FERC Stats. & Regs ¶ 31,091

(2000), 90 FERC ¶ 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 § 284.13(b).

25We 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.

26Produce 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

¶ 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.

28 87 FERC ¶ 61,384 (1999), reh’g pending.

29We 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 ¶ 61,351 at 62,404.

to the question of how best to

harmonize our separate statutory

responsibilities.

In the NOPR, we proposed that NGAjurisdictional 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 § 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.

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

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

20358 Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations

30See note 19.

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.

32 5 U.S.C. 551–559.

33 64 FR 37718 (July 13, 1999).

34See 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).

35 43 U.S.C. 1334(e).

36While 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.

receive service on a transparent open

access and nondiscriminatory basis.

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 NGAexempt 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.

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.

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.

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.

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

Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations 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 ownershipper 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 NGAexempt OCS service providers;

therefore, OCSLA reporting should not

apply to these providers. Coastal

requests the proposed § 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 § 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 § 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 § 330.1(b). NGSA would

extend this exclusion to productionrelated 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, § 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

§ 330.3(a)(1) for a single-shipper service

provider and § 330.3(a)(2) for an ownershipper 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

20360 Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations

38 47 F.3d 1186 (D.C. Cir. 1995).

39Section 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.’’

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.

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 caseby-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 § 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, § 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, § 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.

The Producer Coalition argues that

due to the large expense and size of

deep water facilities, we should permit

only the single-shipper and ownershipper 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

§ 330.3(a)(2) ‘‘feeder line’’ exemption to

include platforms and productionrelated 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

Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations 20361

40MMS 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.

41MMS 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).

42MMS 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.

43See 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.

44MMS’ Comments at 2–3 (August 27, 1999).

45See 19 CFR 381.302.

46At 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

§ 154.402 and part 382 of the Commission’s

regulations, apply to NGA-regulated gas pipelines,

not to pipelines subject exclusively to the OCSLA.

47We 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.

extension of the § 330.3(a)(2) feeder line

exemption.

MMS urges that we conform our

§ 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.

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 ownershipper transportation.

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 § 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.

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 § 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 § 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.

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

20362 Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations

48Provided 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.

49See Murphy, 81 FERC ¶ 61,148 at 61,670–71.

See also Order No. 509, 53 FR 50925 (Dec. 19,

1988), FERC Stats. & Regs. ¶ 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.’’

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.

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

§ 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.

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 § 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 § 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.

The Producer Coalition points out

that proposed § 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

§ 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 workinginterest 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.

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 OCSLArequired information is already on file

with the Commission pursuant to NGArequired submissions, the task of

refiling under the OCSLA to crossreference 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 § 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

Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations 20363

51Williams’ Comments at 11 (August 27, 1999).

52 49 U.S.C. app. section 15(13) (1988) prohibits

a common carrier from disclosing certain

information.

53The 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.

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. 55See MMS regulations at 30 CFR 206.157(b).

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

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

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.

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.

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 § 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.

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 ownershipper 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

20364 Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations

56As stated in the NOPR, we will use the

definition of ‘‘affiliate’’ given in § 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 § 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.

57See Filing Requirements for Interstate Natural

Gas Companies, Order No. 582, 60 FR 52960 (Sep.

28, 1995), FERC Stats. & Regs. ¶ 31,025 (1995) and

Order No. 582-A, 61 FR 9613 (Mar. 11, 1996), 74

FERC ¶ 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.

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 §§ 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 § 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, § 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

§ 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

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

§ 330.2 or § 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 § 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.

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,

Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations 20365

58 18 CFR 388.112.

59The 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.

61Bonito, 61 FERC ¶ 61,050, aff’d sub nom., Shell

Oil, 47 F.3d 1186 (D.C. Cir. 1995) and Oxy, 61 FERC

¶ 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.

62See Revision to Oil Pipeline Regulations

Pursuant to the Energy Policy Act of 1992, 58 FR

58753 (Nov. 4, 1993), FERC Stats. & Regs. ¶ 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.

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 § 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 § 388.112 of our

regulations,58 stating the rationale for

their request.

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 § 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.

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.

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,

20366 Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations

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.

65The party submitting the OCSLA report should

retain the filed information in accordance with Part

225 of the Commission’s regulations. 18 CFR part

225.

66See 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

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 § 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

§§ 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

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.

Under § 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 § 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 § 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 § 330.2(b)(2), now redesignated

as § 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

§ 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

Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations 20367

affirmatively finding that selective discounting

enhances competition and serves the public

interest.

67Citing Order No. 509–A, finding that the

discounting procedures of § 284.7 of the

Commission’s regulations were not inconsistent

with the OCSLA.

68An 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 ¶ 61,066 (1997)

and Shell Gas Pipeline Company, 76 FERC ¶ 61,126

(1996).

69Burlington 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 ¶ 61,120 at 61,314

(1999).

70 43 FERC ¶ 61,006 at 61,032.

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) ¶ 30,842 at 31,274

(1988).

72 Id. at 31,280.

73Cities 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).

75Citing AGD I, 824 F.2d 981, 1011.

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

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.

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.

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.

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 takeor-pay credits without violating the

OCSLA’s ban on discrimination. In the

course of its discussion, the court stated:

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,

20368 Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations

76 912 F.2d 1496,1512. See also Williston Basin

Interstate Pipeline Company, 85 FERC ¶ 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.’’

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 ¶ 61,348

(1998), reh’g denied, 85 FERC ¶ 61,247 (1998);

Southern Natural Gas, 67 FERC ¶ 61,155 (1994); and

in the Policy Statement Providing Guidance with

Respect to the Designing of Rates, 47 FERC ¶ 61,295

(1989). 78NOPR, 64 FR 37718 at 37723.

79This 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).

80 18 CFR part 1b. In the Commission’s recent

revision of its complaint procedures, it codified as

§ 385.218 simplified procedures for small

controversies, which may prove an effective means

to resolve certain OCS conflicts.

81 18 CFR 385.604–06.

82Order No. 486, Regulations Implementing

National Environmental Policy Act, 52 FR 47897

(Dec. 17, 1987), FERC Stats. & Regs. ¶ 30,783 (1987),

codified at 18 CFR part 380.

83 18 CFR 380.4(a)(2)(ii).

84 18 CFR 380.4.

rate classifications based on customers’

differing elasticities of demand.76

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

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

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 afterthe-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.

When a service provider’s report

meets minimum § 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

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

Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations 20369

85 5 U.S.C. 601–612. 86 5 U.S.C. 605(b). 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.

88 44 U.S.C. 3507(d).

89 5 CFR 1320.11.

connection with the regulations

promulgated by this rule.

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

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 § 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.

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.

The regulations will impose new

reporting requirements on non-NGAregulated 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

§ 330.3(a)(1) or (2). This final rule

modifies the exemptions proposed in

the NOPR by adding § 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 § 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.

Data collection Number of

respondents

Number of

responses

Hours per

response

Total annual

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 &

Maintenance).

$88,000 ($50 per

hour)

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.

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.

20370 Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations

90 5 U.S.C. 801.

Respondents: Business or other forprofit, including small businesses.

Frequency of Responses: Initial, onetime 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 RIMSon-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.

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.

§ 330.1 Definitions.

Affiliate has the same meaning as

found in § 161.2(a) of this chapter.

Control has the same meaning as

found in § 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);

§ 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:

Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules and Regulations 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-topoint 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.

§ 330.3 Applicability of reporting

requirements.

(a) The § 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 § 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 § 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 § 385.2011, new paragraph (b)(6)

is added to read as follows:

§ 385.2011 Procedures for filing on

electronic media (Rule 2011).

* * * * *

(b) * * *

(6) Material submitted electronically

pursuant to § 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

RAILROAD RETIREMENT BOARD

20 CFR Part 220

RIN 3220–AB42

Determining Disability

AGENCY: Railroad Retirement Board.

ACTION: Final rule.

SUMMARY: The Railroad Retirement

Board (Board) hereby amends its

disability regulations to discontinue the

current policy of conducting continuing

disability reviews (CDR’s) for medical

recovery of disability annuitants in

medical improvement not expected

(MINE) cases. The Board has found that

these reviews have not been cost

effective and impose an unnecessary

burden on the annuitant.

EFFECTIVE DATE: This rule will be

effective May 17, 2000.

ADDRESSES: Secretary to the Board,

Railroad Retirement Board, 844 North

Rush Street, Chicago, Illinois 60611.

FOR FURTHER INFORMATION CONTACT:

Marguerite P. Dadabo, Senior Attorney,

(312) 751–4945, TDD (312) 751–4701.

SUPPLEMENTARY INFORMATION: The Board

conducts continuing disability reviews

(CDRs) to determine whether or not a

disability annuitant continues to meet

the disability requirements contained in

the Railroad Retirement Act and, in

some cases, the Social Security Act.

Payment of cash benefits based on

disability ends if the medical or other

evidence shows that the annuitant is no

longer disabled under the standards set

out in the Railroad Retirement Act or,

for some benefits, the Social Security

Act. Section 220.186 of the regulations

of the Board provides when and how

often the Board will conduct a CDR.

This rulemaking would amend

§ 220.186(d) to discontinue the Board’s

current policy of conducting a CDR in

cases where medical improvement is

not expected (MINE). The current

regulation requires a review no less

frequently than once every 7 years but

no more frequently than once every 5

years in MINE cases. The Board’s CDR

of MINE cases has not proved cost

effective. For fiscal years 1995 through

1997 the Board conducted 552 MINE

exams; however, in only 1 case did the

evidence merit termination of the

annuity. For fiscal years 1998 and 1999,

300 MINE reviews were conducted with

no annuity terminations. Such results,

in the Board’s view, do not justify

continuation of this program.

Consequently, the Board proposes to

cease routine continuing disability

review in these cases. The cessation will

be of routine reviews only. These cases