[Federal Register Volume 65, Number 74 (Monday, April 17, 2000)]
[Rules and Regulations]
[Pages 20354-20371]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-9447]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 330 and 385

[Docket No. RM99-5-000; Order No. 639]


Regulations Under the Outer Continental Shelf Lands Act Governing 
the Movement of Natural Gas on Facilities on the Outer Continental 
Shelf; Final Rule

Issued April 10, 2000.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
issuing regulations under the Outer Continental Shelf Lands Act (OCSLA) 
\1\ to ensure that natural gas is transported on an open and 
nondiscriminatory basis through pipeline facilities located on the 
Outer Continental Shelf (OCS). The regulations require OCS gas 
transportation service providers to make available information 
regarding their affiliations and the conditions under which service is 
rendered. This information will assist the Commission and interested 
persons in determining whether OCS gas transportation services conform 
with the open access and nondiscrimination mandates of the OCSLA. The 
final rule, by rendering offshore transactions transparent, should 
provide a sound basis for implementing the uniformly applicable open 
access and nondiscrimination mandates of the OCSLA, thus resulting in 
greater efficiencies in this marketplace.
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    \1\ 43 U.S.C. 1301-1356.

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EFFECTIVE DATE: The rule is effective May 17, 2000.

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

SUPPLEMENTARY INFORMATION:
Before Commissioners: James J. Hoecker, Chairman; William L. Massey, 
Linda Breathitt, and Curt Hebert, Jr.

I. Introduction

    The Federal Energy Regulatory Commission (Commission) is issuing 
regulations under the Outer Continental Shelf Lands Act (OCSLA) \1a\ to 
ensure that natural gas is transported on an open and nondiscriminatory 
basis

[[Page 20355]]

through pipeline facilities located on the Outer Continental Shelf 
(OCS). \2\ The regulations require OCS gas transportation service 
providers to make available information regarding their affiliations 
and the conditions under which service is rendered. This information 
will assist the Commission and interested persons in determining 
whether OCS gas transportation services conform with the open access 
and nondiscrimination mandates of the OCSLA and will enable shippers 
who believe they are subject to anticompetitive practices to bring 
their concerns to the Commission. The final rule, by rendering offshore 
transactions transparent, should provide a sound basis for implementing 
the uniformly applicable open access and nondiscrimination mandates of 
the OCSLA, thus resulting in greater efficiencies in this marketplace. 
The regulations adopted by this final rule do not eliminate or modify 
any existing regulations or Commission policies relating to the 
regulation of offshore facilities pursuant to the Commission's 
authority under the Natural Gas Act (NGA). \3\
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    \1a\ 43 U.S.C. 1301-1356.
    \2\ The OCS is defined as ``all submerged lands lying seaward 
and outside of the area of lands beneath navigable waters * * * and 
of which the subsoil and seabed appertain to the United States and 
are subject to its jurisdiction and control.'' 43 U.S.C. 1331(a). 
See also 43 U.S.C. 1301(a)(1), defining ``lands beneath navigable 
waters'' as ``all lands within the boundaries of each of the 
respective States.''
    \3\ 15 U.S.C. 717
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II. Background

    On June 30, 1999, the Commission issued a Notice of Proposed 
Rulemaking (NOPR), \4\ in which we proposed requiring all entities that 
move natural gas on or across the OCS to submit certain information 
regarding their affiliations, rates, and conditions of service. We 
explained that a uniform regulatory reporting regime would permit the 
Commission and interested persons to ensure adherence to the OCSLA's 
nondiscrimination and open access mandates.
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    \4\ Regulations under the Outer Continental Shelf Lands Act 
Governing the Movement of Natural Gas on Facilities on the Outer 
Continental Shelf, Notice of Proposed Rulemaking, 64 FR 37718 (July 
13, 1999), FERC Stats. & Regs. para. 32,542 (1999).
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    After review of the comments \5\ and further consideration, we 
believe implementing new OCSLA reporting requirements, similar to 
certain existing NGA reporting requirements, will realize the aims 
stated in the NOPR of eliminating distortions in the offshore 
marketplace and encouraging continued investment in the development of 
OCS resources.
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    \5\ A list of commenters appears in the appendix to this order.
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III. Discussion

A. Rationale for the Rule

    As discussed in the NOPR, offshore natural gas, predominately gas 
located in the Gulf of Mexico, has come to play an increasingly 
important role as a secure domestic source of clean-burning fuel 
supplies. We observed that the greater level of OCS activity in recent 
years had prompted a greater interest in the importance of the 
Commission's responsibility under the OCSLA to ensure a competitive 
market for gas pipeline services on the OCS, along with closer 
attention to the applicability of our NGA regulation to activities 
offshore. This attention has focused concern on the impact that the 
multiple, independent, and partially overlapping regulatory regimes at 
play offshore have on the competitive market.
    In the NOPR, we noted that although all OCS gas service providers 
are subject to the OCSLA, only a subset thereof are also subject to the 
NGA, presenting potential competitive inequities that could be 
mitigated if all offshore facilities were subject to more uniform 
regulatory requirements. Currently, offshore service providers subject 
to the NGA, by virtue of compliance with our NGA regulations, are 
likely to be operating in full accord with the OCSLA; however, we have 
no assurance that offshore providers out of our NGA oversight also 
adhere to the OCSLA's open access and nondiscrimination mandates. Under 
the OCSLA reporting requirements promulgated by this rule, offshore 
service providers will report information similar to that now reported 
under the NGA, thereby bringing a similar transactional transparency to 
virtually all activities that take place on the OCS. This should 
moderate the distortion now present due to separate sets of OCS service 
providers being subject to separate regulatory regimes and promote 
policy goals of both the OCSLA and NGA. Making information regarding 
conditions of service available to OCS shippers will enable them to 
make informed and improved transportation arrangements; will enable OCS 
service providers to make better investment decisions; and will allow 
shippers, competitors, and the Commission to monitor the OCS for 
instances of discrimination and the exercise of market power. These 
benefits are unavailable without the transactional transparency 
provided by the OCSLA reporting requirements put in place by this rule. 
Making information publicly available that has heretofore been largely 
inaccessible should enhance competitive options for offshore producers 
and onshore purchasers of natural gas, promote a more efficient 
marketplace, and encourage the continued exploration and development of 
offshore resources.
1. Comments
    Independent Petroleum Association of America (IPAA),\6\ Natural Gas 
Supply Association (NGSA),\7\ and OCS Producers \8\ agree with the 
Commission's view that while the policy objectives of the OCSLA and NGA 
are different, they are complementary, and not mutually exclusive. NGSA 
stresses that the NGA, unlike the OCSLA, allows the Commission to 
undertake cost-based ratemaking to ensure that transportation rates 
remain just and reasonable. Thus, IPAA, NGSA and OCS Producers urge the 
Commission to continue to exercise dual regulatory authority over 
facilities subject to both statutes.\9\
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    \6\ IPAA is composed, generally, of smaller producers and 
shippers.
    \7\ NGSA is composed of integrated and independent gas producers 
and marketers.
    \8\ OCS Producers is composed of the following large and mid-
sized offshore producers: Amerada Hess Corporation; Amoco Energy 
Trading Corporation; Chevron U.S.A. Inc.; Conoco Inc.; Marathon Oil 
Company; Mobil Exploration and Producing U.S., Inc.; OXY USA Inc.; 
Phillips Petroleum Company; Shell Offshore Inc.; Texaco Exploration 
and Production Inc.; and Union Pacific Resources Company.
    \9\ NGSA also argues that conditions be placed on abandonments 
of offshore NGA-jurisdictional facilities and services to preclude 
``a fly-up in the cost of transporting OCS supplies that could cause 
the premature abandonment of OCS projects in mid-production cycle.'' 
NGSA's August 27, 1999 Comments at 4-5. In a similar vein, OCS 
Producers request clarification that the Commission will not change 
its traditional exercise of NGA jurisdiction offshore. On the other 
hand, El Paso Energy Corporation (El Paso) argues that all offshore 
facilities should be deemed gathering, and thereby exempt from the 
NGA, an outcome that would eliminate the dual burden of complying 
with the OCSLA and NGA. Issues relating to the regulatory status of 
particular offshore facilities under the NGA are beyond the scope of 
this rulemaking proceeding. Here, we restrict our considerations to 
how to best carry out our regulatory mandate under the OCSLA. Such 
issues continue to be addressed by the Commission on a case-specific 
basis; see e.g., the decisions in Sea Robin Pipeline Company (Sea 
Robin), 71 FERC para. 61,351 (1995), reh'g denied, 75 FERC para. 
61,332 (1996), vacated and remanded, Sea Robin v. FERC, 127 F.3d 365 
(5th Cir. 1997), order on remand, 87 FERC para. 61,384 (1999), reh'g 
pending. Accordingly, while we do discuss whether certain OCS 
facilities are subject to the OCSLA, we do not reach the question of 
the jurisdictional status of any offshore facilities under the NGA.
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    Commenters note that since enactment of the OCSLA in 1953, the 
Commission has only infrequently invoked its OCSLA authority to address 
issues concerning gas or oil activities

[[Page 20356]]

offshore.\10\ To date, to regulate offshore activity, the Commission 
has relied almost exclusively on its NGA jurisdiction over gas and its 
Interstate Commerce Act (ICA) \11\ jurisdiction over oil. However, 
these statutes cover significantly less than the full range of offshore 
facilities and services. The NGA excludes natural gas facilities 
engaged primarily in production or gathering (roughly half of all the 
Gulf of Mexico offshore facilities, generally smaller lines).\12\ The 
ICA does not apply to oil pipelines transporting oil solely on or 
across the OCS.\13\ In contrast, offshore, the OCSLA's coverage is 
inclusive.\14\
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    \10\ Since 1992, the Commission has exercised jurisdiction under 
the OCSLA in one oil case, Bonito Pipe Line Company (Bonito), 61 
FERC para. (1992), aff'd sub nom., Shell Oil Company v. FERC (Shell 
Oil), 47 F.3d 1186 (D.C. Cir. 1995). In a current gas proceeding, 
Murphy Exploration & Production Company, 81 FERC para. 61,148 
(1997), the Commission has invoked its OCSLA authority in response 
to a complaint alleging discriminatory rate treatment; final action 
in that proceeding is pending.
    \11\ Jurisdiction over the transportation of oil in interstate 
commerce by pipeline was transferred from the Interstate Commerce 
Commission to the Commission on October 1, 1977. See Department of 
Energy Organization Act, Pub. L. 95-91, section 402(b), 91 Stat. 
565, 584 (1977), codified at 42 U.S.C. 7172(b) (1988) (repealed 
1994), recodified as amended at 49 U.S.C. 60502.
    \12\ NGA section (1)(b) states the Act ``shall not apply to * * 
* the facilities used for * * * the production or gathering of 
natural gas.''
    \13\ See Bonito, 61 FERC para. 61,050 at 61,221 (1992), aff'd 
sub nom. Shell Oil, 47 F.3d 1186 (D.C. Cir. 1995) and Oxy Pipeline, 
Inc. (Oxy), 61 FERC para. 61,051 (1992). In the Bonito and Oxy 
cases, the Commission affirmed the OCSLA nondiscrimination 
provisions apply to OCS oil lines.
    \14\ See note 2. Read broadly, the OCSLA reaches across state 
waters to shore, since the statute's authorization extends to 
onshore facilities used to support OCS gas or oil production, with 
production including the transfer of gas or oil to shore. See 43 
U.S.C. 1331(l) and (m), defining, respectively, development and 
production. OCSLA section 1331(m) and (q) define OCS ``production'' 
to include the ``transfer of minerals to shore,'' with gas included 
within the term ``minerals.'' In Order No. 509-A, we interpreted the 
scope of the OCSLA's ``on or across'' the OCS N to include ``the 
seaward movement of gas from either an onshore location or an 
offshore location to any point on the OCS. 54 FR 8301 (Feb. 28, 
1989), FERC Stats. & Regs. para. 30,848 at 31,341 (1989). As defined 
by the OCSLA, the OCS does not include either lands covered by tidal 
waters up to three miles from the coast of a state or lands covered 
by nontidal waters within the boundaries of a state. 43 U.S.C. 
1331(a).
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    Generally, interstate gas pipeline companies and their affiliated 
gatherers assume the absence of a history of vigorous enforcement under 
the OCSLA demonstrates that the Commission's practice of relying on the 
NGA has been satisfactory in ensuring adherence to regulatory practices 
and goals. In view of this, Brooklyn Union Gas Company (Brooklyn 
Union), El Paso, Duke Energy Field Services, Inc. (Duke), Dynergy 
Midstream Services, Limited Partnership (Dynergy), Interstate Natural 
Gas Association of America (INGAA), Leviathan Gas Pipeline Partners, LP 
(Leviathan), Tejas Offshore Pipeline, LLC (Tejas), and Williams 
Companies, Inc. (Williams) conclude the NOPR's proposal to employ the 
OCSLA as a means to monitor offshore gas service providers is 
unnecessary. OCS Producers agree and expect the proposed rule to 
inhibit offshore gas development.
    El Paso and Williams contend the proposed rule does not address the 
competitive disadvantages faced by offshore NGA-jurisdictional 
pipelines in that NGA pipelines are subject to more stringent 
regulation than NGA-exempt facilities (e.g., NGA pipelines require 
prior Commission authorization to construct, modify, or abandon 
facilities or services) and are thus unable to compete effectively with 
OCS NGA-exempt service providers.
    Duke and OCS Producers maintain that absent evidence of need for 
the proposed rule, promulgation as a final rule would constitute legal 
error \17\ and assert that any benefits of the rule would be outweighed 
by the burdens it would impose. Leviathan contends it would be 
arbitrary and capricious for the Commission to enact OCSLA regulations 
without consulting with the Department of Energy, providing for a full 
hearing on the proposed regulations, and taking into account the 
conservation and prevention of waste of OCS resources.\18\ Commenters 
stress that continued reliance on the NGA, in conjunction with the 
Commission's recently revised complaint procedures,\19\ should be 
adequate to ensure open and nondiscriminatory access to OCS facilities.
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    \17\ Citing 5 U.S.C. 557 and 706(E) at 17, n. 24.
    \18\ Leviathan cites 43 U.S.C. 1334(e), which states, ``oil or 
gas pipelines shall transport or purchase without discrimination, 
oil or natural gas produced from submerged lands or outer 
Continental Shelf lands in the vicinity of the pipelines in such 
proportionate amounts as the Federal Energy Regulatory Commission, 
in consultation with the Secretary of Energy, may, after a full 
hearing with due notice thereof to the interested parties, determine 
to be reasonable, taking into account, among other things, 
conservation and the prevention of waste.''
    \19\ 18 CFR 385.206. The Commission's procedures for responding 
to allegations of improper action or inaction were revised and 
expanded by a recent final rule, Complaint Procedures, Order No. 
602, 64 FR 17087 (Apr. 8, 1999), FERC Stat. & Regs. para. 31,071 
(1999), 86 FERC para. 61,324 (1999), order on reh'g and 
clarification, Order No. 602-A, 64 FR 43600 Aug. 11, 1999), FERC 
Stats. & Regs. para. 31,076 (1999), 88 FERC para. 61,114 (1999), 
order on reh'g, Order No. 602-B, 64 FR 53595 (Oct. 8, 1999) FERC 
Stats. & Regs. para. 32,545 (1999), 88 FERC para. 61,249 (1999).
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    Instead of acting under the OCSLA, El Paso suggests the Commission 
modify its NGA regulations and policies relating to offshore facilities 
to make them less burdensome and more market responsive. In particular, 
El Paso would have the Commission issue blanket certificate 
authorization for natural gas companies to construct and abandon 
facilities offshore and permit NGA-jurisdictional companies to 
negotiate terms and conditions of service and charge market rates for 
transportation on the OCS.
2. Commission Response
    In two Notices of Inquiry issued in previous proceedings initiated 
in 1995 \20\ and 1998,\21\ we sought comments on whether we might 
declare all offshore facilities NGA-exempt gathering facilities and 
exercise jurisdiction exclusively under the OCSLA. That option was not 
put forth in our NOPR in this proceeding. Rather, the 1999 NOPR asked 
whether requiring all OCS gas service providers to report information 
about their operations would be an effective means to enforce our 
regulatory mandates under the OCSLA, NGA, and Natural Gas Policy Act 
(NGPA).\22\ However, the comments in response to the NOPR include a 
repetition of arguments presented in response to the prior Notices of 
Inquiry, urging the Commission to either declare all offshore 
facilities gathering or reaffirm that offshore transmission facilities 
are properly functionalized. We do not reach the merits of such 
arguments in this rulemaking. Those comments contemplate revisions to 
the primary function test used to determine NGA jurisdiction over 
offshore facilities.\23\ Here, our concern is limited

[[Page 20357]]

to the question of how best to harmonize our separate statutory 
responsibilities.
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    \20\ The 1995 Notice of Inquiry (NOI) led to a 1996 Policy 
Statement that established a presumption that facilities located in 
deep water of 200 meters or more were engaged in production or 
gathering. Gas Pipeline Facilities and Services on the Outer 
Continental Shelf--Issues Related to the Commission's Jurisdiction 
Under the Natural Gas Act and the Outer Continental Shelf Lands Act, 
74 FERC para. 61,222 (1996), reh'g dismissed, 75 FERC para. 61,291 
(1996).
    \21\ Alternative Methods for Regulating Natural Gas Pipeline 
Facilities and Services on the Outer Continental Shelf, 83 FERC 
para. 61,235 (1998).
    \22\ 15 U.S.C. 3301-3432. Section 311 of the NGPA addresses 
transportation by or on behalf of intrastate pipelines and local 
distribution companies, which in practice restricts the section's 
coverage to state waters. The OCSLA covers all non-state waters and 
the NGA covers all waters.
    \23\ The ``primary function'' test was articulated in Farmland 
Industries, Inc. (Farmland), 23 FERC para. 61,063 (1983), which took 
into consideration the following factors as relevant: (1) the length 
and diameter of the pipeline, (2) the extension of the facility 
beyond the central point in the field, (3) the pipelines' geographic 
configuration, (4) the location of compressors and processing 
plants, (5) the location of wells along all or part of the facility, 
and (6) the operating pressure of the line. The primary function 
test has been found by the Commission to be applicable to both 
onshore and offshore facilities, as modified as applied to offshore 
facilities in Amerada Hess Corporation, 52 FERC para. 61,268 (1990). 
The criteria set out in Farmland were not intended to be all 
inclusive. The Commission has also considered nonphysical criteria 
such as the intended purpose, location, and operation of the 
facility, the general business activity of the owner of the 
facility, and whether the jurisdictional determination is consistent 
with the objectives of the NGA and the NGPA.
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    In the NOPR, we proposed that NGA-jurisdictional pipeline companies 
transporting gas across the OCS comply with both NGA and OCSLA 
reporting requirements. We stated our expectation that for NGA-
jurisdictional companies, the additional OCSLA report would impose only 
a modest additional burden, because under existing NGA regulations, gas 
companies already submit the bulk of the information specified in the 
new OCSLA regulations. Indeed, in light of revisions to our NGA 
reporting requirements,\24\ enacted subsequent to the OCSLA NOPR, we 
believe that the information that NGA-regulated companies are required 
to provide will prove sufficient to monitor conformity with the OCSLA's 
open access and nondiscrimination mandates. We anticipate that the 
submission of the information required under the NGA, will provide a 
data base adequate to ensure effective enforcement of the OCSLA's 
provisions. Therefore, we will revise the proposed OCSLA reporting 
exemptions, adding a new Sec. 330.3(a)(4), to specify that facilities 
and services of OCS gas service providers that are regulated by the 
Commission under the NGA need not submit an OCSLA report.\25\ However, 
if an NGA-regulated company's system includes OCS facilities that are 
not subject to the NGA, e.g., gathering and production lines, the 
company must submit an OCSLA report covering its non-NGA facilities.
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    \24\ Regulation of Short-Term Natural Gas Transportation 
Services, Order No. 637, 65 FR 10156 (Feb. 25, 2000), FERC Stats. & 
Regs para. 31,091 (2000), 90 FERC para. 61,109 (2000) (Final Rule). 
This recent rule is intended, in part, to improve reporting 
requirements to provide more transparent pricing information and to 
permit more effective monitoring for the exercise of market power 
and undue discrimination--a goal shared in common with our efforts 
here with respect to the OCSLA. Specifically, Order No. 637 requires 
that, for firm service under part 284, pipelines post on their web 
site contemporaneously with the execution of the contract: The names 
of the parties to the contract; an identification number for each 
shipper; the contract number for the shipper receiving service and 
for the releasing shipper; the rate charged under each contract and 
the maximum rate, if applicable; the duration of the contract; the 
receipt and delivery points and zones or segments covered by the 
contract, as well as the common transaction point codes; the 
contract quantity, or volumetric quantity under a volumetric release 
and special details pertaining to a pipeline transportation contract 
(such as requirements for volume commitments to obtain discounts 
under a discounted transportation contract); and any affiliate 
relationship between the pipeline and the shipper or between the 
releasing and replacement shipper. For interruptible transportation, 
pipelines must post on their web site daily: The name of the 
shipper; a shipper identification number, the rate charged and 
maximum rate, if applicable; the receipt and delivery points and 
zones or segments over which the shipper is entitled to nominate 
gas, as well as the common transaction point codes; the quantity of 
gas the shipper is entitled to nominate; special details pertaining 
to a pipeline transportation contract; and any affiliate 
relationship between the shipper and the pipeline. See 18 CFR 
Sec. 284.13(b).
    \25\ We treat the OCSLA, NGA, and NGPA as independent grants of 
statutory authority that ``must be applied reciprocally in 
furtherance of their individual regulatory purposes.'' Continental 
Oil Company v. FPC, 370 F.2d 57, 66-67 (5th Cir. 1966). Thus, to the 
extent it appears the information submitted under the NGA is 
insufficient to enable enforcement of the OCSLA, we would be 
inclined to revisit the OCSLA reporting exemption for NGA compliant 
companies.
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    El Paso and Williams are concerned that offshore, NGA-
jurisdictional pipelines are disadvantaged in competing against NGA-
exempt lines, and assert it is more burdensome to operate under NGA 
jurisdiction than under the OCSLA. The existing difference between NGA 
and OCSLA regulation should be diminished by this rule's new reporting 
requirements. NGA-exempt OCS operators, for the first time, will have 
to present their affiliations, rates and conditions of service for 
public scrutiny, similar to NGA jurisdictional pipelines. In any event, 
Congress has explicitly charged the Commission with curbing the 
exercise of monopoly power in the natural gas industry and has 
established separate statutes to do so.
    Commenters argue the lack of past reliance on the OCSLA 
demonstrates there is little, if any, need for the new reporting 
regulations. Although periodically referenced as an enforcement option, 
in practice we have had few occasions to employ our authority under the 
OCSLA. Thus, we recognize that based solely on past practice, there may 
appear to be little call for further exercise of our OCSLA authority. 
However, as the Producer Coalition observes, ``the argument that 
reporting requirements are not needed because there have been only a 
handful of OCSLA complaint misses the point'' which is that ``shippers 
do not know whether they are victims of discrimination or not. There 
simply is not enough information available to make an evaluation. 
Without transactional information, it is very difficult for a shipper 
to assemble a complaint.'' \26\ Though OCSLA enforcement actions may 
have largely lain dormant because shippers and potential shippers lack 
information necessary to know whether they may be subject to 
discrimination, or because offshore NGA-exempt facilities were far less 
extensive and important than they have become within the last decade, 
we expect this rule to gather information adequate to enable effective 
oversight and enforcement of the provisions of the OCSLA.\27\
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    \26\ Produce Coalition's Discussion Points for Meeting on OCS 
Pipeline Reporting Requirements at 1 (Nov. 5, 1999).
    \27\ In Order No. 491, Interpretative Rule, 43 FERC para. 61,006 
at 61,030 (1988), we observed that ``there has been little need by 
potential shippers to invoke the statutory, nondiscriminatory access 
provisions of the OCSLA'' in part because ``pipelines were usually 
the purchasers of offshore reserves and thus were the primary 
shippers of gas. Since pipelines could usually secure transportation 
for their gas supplies, open access was seldom an issue.'' The order 
contains a brief historical overview of offshore operations and 
explains the need to issue an Interpretative Rule addressing the 
OCSLA's open access provisions in view of changes brought about 
following the voluntary open access provisions instituted by Order 
No. 436.
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    Further, we may have placed undue reliance solely on the NGA to 
deter discriminatory practices offshore. Thus, we are acting now in 
part in response to the ruling in Sea Robin, in which the court 
directed the Commission to reconsider the manner in which it applied 
its primary function test to Sea Robin's predominately offshore system. 
Informed by the court's discussion, in our order on remand we found 
that a significant portion of Sea Robin's system was engaged in NGA-
exempt gathering.\28\ Given that Sea Robin's entire system had been 
regulated under the NGA since its inception 30 years ago, and that some 
of the facilities found to be gathering include large lines, it is 
conceivable that this decision may result in additional existing 
offshore NGA transmission facilities being reclassified as 
gathering.\29\ Although reclassified facilities will no longer be 
subject to NGA reporting requirements, and shippers using such 
facilities will no longer enjoy the formal protections against the 
exercise of market power afforded by the NGA, such facilities can be 
expected to be subject to the OCSLA reporting requirements introduced 
with this rule, and as a result, shippers formerly dependent on the 
transparency of the NGA will have an alternative and newfound assurance 
that they will

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receive service on a transparent open access and nondiscriminatory 
basis.
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    \28\ 87 FERC para. 61,384 (1999), reh'g pending.
    \29\ We have observed that if Sea Robin, as ``one of the largest 
transporters of natural gas produced on the OCS * * * is found to be 
a gathering system, then it is likely that other [NGA-
jurisdictional] pipelines on the OCS would also be found to have 
that status.'' 71 FERC para. 61,351 at 62,404.
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    In view of this potential for facilities' reclassification, and the 
importance of the OCS as a source of domestic gas, we find it prudent 
to prepare to provide protections for shippers under the OCSLA, and 
absent information regarding affiliations, rates, and conditions of 
service applicable to OCS transactions, neither the Commission nor 
others can gauge whether NGA-exempt OCS service providers are operating 
on an open and nondiscriminatory basis. Without such information at 
hand, practices prohibited by the OCSLA might only come to light when a 
prospective shipper was denied service and objected to the denial by 
filing a complaint with the Commission. We conclude that information 
regarding the business practices of NGA-exempt OCS gas service 
providers is necessary for the Commission to fulfill its 
responsibilities under the OCSLA. Given this need, we cannot agree with 
Duke's and OCS Producers' contention that there is no rationale for 
imposing a reporting requirement on OCS service providers. We believe 
our reasoning and the record support the need for new regulations to 
establish a means to ensure OCS service providers abide by the 
provisions of the OCSLA.
    We are unpersuaded by Duke's and OCS Producers' assertion that the 
benefits to be derived by providing for public disclosure of OCS terms 
and conditions of service will not outweigh the burden of supplying 
such information. We have discussed our rationale for imposing the new 
requirements above. As discussed below, we seek to moderate the impact 
of these requirements by providing exemptions to OCS service providers 
that appear to have little to gain by engaging in discriminatory 
practices. We anticipate those OCS service providers that are subject 
to the reporting requirement should be able to produce the required 
documentation without extensive in-house auditing, analysis, or 
accounting. We expect the prospect of reporting will invigorate efforts 
to comply with OCSLA requirements. In addition, the OCS data base that 
this rule will establish will assist potential complainants to identify 
issues and articulate allegations. Recent revisions to our complaint 
procedures, designed to permit the Commission to process complaints in 
a more timely manner,\30\ ask complainants to present an initial 
submission containing specific information. Without benefit of the OCS 
data base, potential complainants face a greater burden in obtaining 
the specific information necessary to present a complaint.
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    \30\ See note 19.
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    In the NOPR, we estimated that record keeping and reporting will 
require 16 hours per respondent per year and an annual expense of 
$800.\31\ As discussed below, service providers expressed the 
apprehension that frequent changes in their affiliations or operations 
could cause actual costs to run much higher. In response, we have 
restricted the number of possible reporting updates to four per year, 
and in recalculating the burden, we assume every reporting entity will 
file every quarter. Although this doubles the data collection burden 
estimated in the NOPR, it still imposes a very modest cost on those 
service providers that are required to file.
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    \31\ 64 FR 37718 at 37724. We change the figures in this final 
rule to reflect a reduction in the number of service providers 
expected to file OCSLA, due to the exemption for NGA-regulated gas 
companies, and an increase in estimated annual hours and expense, 
due to doubling (from two to four) the number of responses expected 
to be filed per year.
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    Leviathan's assertion that we are establishing OCSLA reporting 
requirements without providing interested parties the opportunity for a 
full hearing is inconsistent with the actions taken in this rulemaking 
proceeding. In accordance with section 553 of the Administrative 
Procedure Act (APA),\32\ a general notice of this proposed rulemaking 
was published in the Federal Register.\33\ That notice described the 
proposed changes to our regulations and invited interested persons to 
comment on the NOPR. We have considered the comments received, and 
respond to them in describing the basis and purpose of the new 
regulations. Provisions for an evidentiary, adversary, or adjudicatory 
hearing are inapplicable to a rulemaking proceeding.\34\ While the 
Commission may exercise its discretion to hold such hearings, or to 
institute a conference, or to seek additional information in some other 
manner, we see no need to do so in this case. All interested parties 
have had adequate opportunity to be heard in this rulemaking 
proceeding, as they did in the earlier related 1995 and 1998 NOI 
proceedings. We find the written record in this proceeding provides a 
sufficient basis for us to reach final determinations.
---------------------------------------------------------------------------

    \32\ 5 U.S.C. 551-559.
    \33\ 64 FR 37718 (July 13, 1999).
    \34\ See Natural Resources Defense Council, Inc. v. U.S. 
Environmental Protection Agency, 859 F.2d 156 (D.C. Cir. 1991) and 
Willapoint Oysters, Inc. v. Ewing, 174 F.2d 676 (9th. Cir. 1949), 
cert. denied, 338 U.S. 860 (1949).
---------------------------------------------------------------------------

    Leviathan questions whether this rulemaking has satisfied the OCSLA 
requirement that as a condition on every OCS right of way ``oil or 
natural gas pipelines shall transport or purchase without 
discrimination, oil or natural gas produced from submerged lands or 
outer Continental Shelf lands in the vicinity of the pipelines in such 
proportionate amounts as the Federal Energy Regulatory Commission, in 
consultation with the Secretary of Energy, may, after a full hearing 
with due notice thereof to the interested parties, determine to be 
reasonable, taking into account, among other things, conservation and 
the prevention of waste.'' \35\ As we reach no decision in this rule 
regarding amounts of gas or oil transported or purchased, we do not 
believe this hearing and consultation requirement is triggered.\36\ 
Further, we note that the Secretary of Energy provided comments in 
response to our 1998 NOI and expressed the concern that we take no 
action that might interfere with the development of resources 
offshore.\37\ We have taken the concerns of the Secretary into account, 
both in the preparation of the NOPR and in formulating the regulations 
put in place by this rule. As discussed herein, we do not believe 
instituting a reporting regime will inhibit the expeditious development 
of OCS resources.
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    \35\ 43 U.S.C. 1334(e).
    \36\ While requiring reporting and filing reports does not 
impact gas flows, imposition of a remedy might--for example, 
prescribing that a pipeline accept gas on a pro-rata basis to effect 
open access--and would thereby trigger the need for consultation.
    \37\ In response to the 1998 NOI in Docket No. RM98-8-000, the 
Secretary of Energy submitted a letter dated February 11, 1999, 
encouraging evenhanded treatment and the removal of ``artificial 
regulatory barriers which might impede private sector investment, 
the development of advanced technologies, and the development of 
competitive transportation markets in the Gulf of Mexico.'' See note 
21.
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    Several OCS service providers suggest that requiring a public 
report of their business practices will stifle their ability to 
individually tailor service agreements and will inhibit innovations in 
operations and organization, thereby discouraging offshore development. 
We do not expect this result because, as discussed below, we see no bar 
to a service provider offering different shippers different terms--
provided the variation in the terms of service either reflect 
differences in costs incurred to provide service or reflect differences 
among the shippers served. Thus, we do not expect the new reporting 
requirements will impose constraints on OCS service providers that 
could inhibit the development of, or transactions across, the OCS. 
Rather, we expect the

[[Page 20359]]

disclosure of affiliations, rates, and conditions of service will 
encourage continued offshore investment by ensuring shippers that 
offshore services are rendered on a transparent and equitable basis.
    El Paso suggests that offshore the Commission apply the NGA with a 
lighter hand by issuing blanket construction and abandonment 
authorization and allowing offshore gas transporters to charge market 
rates and set their own conditions of service. We find insufficient 
evidence to conclude that this approach could assure fulfillment of our 
statutory obligations. The NGA directs that rates be just and 
reasonable, an outcome ensured by our prior approval of cost-based 
rates for transportation services covered by the NGA. Letting a market 
that may not be sufficiently competitive determine rates could not 
ensure this same result.

B. Technical Conference

1. Requests To Hold a Technical Conference
    Tejas and OCS Producers propose a technical conference to: Address 
the need for and scope and aim of the rule; air the opinions of 
engineers and corporate executives regarding the desirability of the 
new regulations; provide the Commission with the opportunity to become 
more familiar with NGA-exempt offshore operations; and examine and 
compare the anticipated benefits and burdens of the rule.
2. Commission Response
    We have considered the issues of the scope of our jurisdiction 
offshore and the need to alter how we exercise our regulatory authority 
offshore in the NOPR in this proceeding. Our consideration was informed 
by views presented in the prior 1995 and 1998 NOI proceedings, the OCS 
policy statement of 1998, and in individual pipeline decisions, most 
recently in Sea Robin. Given these several opportunities for interested 
parties to express views concerning the existing and proposed 
regulatory regime offshore, we do not believe there is a need for yet 
another forum for further comments. The rationale for the new OCSLA 
reporting requirements, along with anticipated benefits and burdens, 
are discussed in the NOPR and this final rule. We think our 
understanding of offshore operations is adequate to the task of 
determining what information is necessary to identify whether 
discriminatory practices are occurring on OCS facilities. Accordingly, 
we deny the requests to institute a technical conference.

C. Exemptions

1. Comments
    Generally, OCS pipelines providing service for others--i.e., 
pipelines subject to the new reporting requirements--advocated 
abolishing the proposed filing exemptions for feeder lines, single-
shipper lines, and owner-shipper lines.
    The Minerals Management Service (MMS) of the Department of the 
Interior observes that as a royalty owner in every OCS lease, if it 
elects to take federal gas royalties in kind (rather than in cash), it 
becomes a shipper on every offshore line it might use to bring gas from 
the leasehold to shore. MMS implies its potential shipper status should 
negate the single-shipper and owner-shipper exemptions. OCS Producers 
opposes this approach.
    Tejas asks whether a pipeline can come within or fall outside of 
the reporting exemption depending on changes in its ownership interests 
or shippers. Tejas also asks whether a pipeline exempt from reporting 
would lose that exemption if it accepted gas volumes from a third party 
on an interruptible basis. Tejas requests the Commission clarify that 
the owner-shipper pipeline exemption applies where the same parties 
hold different proportionate ownership interests in gas production and 
in the pipeline facilities used to transport that gas.
    Coastal Field Services Company (Coastal) contends the Commission's 
existing complaint procedure is sufficient to ensure open and 
nondiscriminatory access on NGA-exempt OCS service providers; 
therefore, OCSLA reporting should not apply to these providers. Coastal 
requests the proposed Sec. 330.3(a)(1)'s single-shipper reporting 
exemption be extended to apply where a gas service provider transports 
for a gas producer and for one or more of that producer's working 
interest owners under the same rates and conditions of service, i.e., 
that the Commission consider all working interest owners in a 
particular producing field as a single entity for the purpose of the 
reporting exemption. Coastal also suggests that where one or more joint 
working interest owners are affiliated with an OCS service provider, 
the Commission treat transportation on that service provider's 
facilities as being for a single entity, and thereby exempt.
    El Paso argues the reporting exemptions will result in an uneven 
competitive playing field and urges the proposed exemptions for feeder 
lines, single-shipper lines, and owner-shipper lines be eliminated to 
ensure all OCS facilities receive equal treatment.
    The Producer Coalition maintains that gas operations in deep water 
merit closer scrutiny because such projects tend to be larger than 
shallow water efforts, and thus present a greater barrier to entry to 
potential competitors. The Producer Coalition presumes that proposed 
Sec. 330.3(a)(3) will exempt all deep water ``gathering or feeder 
lines,'' and based on this presumption, requests the Commission limit 
the scope of deep water exemptions to single-shipper or owner-shipper 
lines.
    The Producer Coalition asks the Commission to clarify that for the 
purposes of proposed Sec. 330.1(b), a ``facility located on the OCS'' 
be read to include the portion of the same facility that traverses 
state waters until the first point of interconnection with an onshore 
line.
    The Producer Coalition urges the Commission to clarify that 
production platforms will be excluded from the definition of an 
offshore facility in proposed Sec. 330.1(b). NGSA would extend this 
exclusion to production-related lines, services, facilities, and 
agreements. OCS Producers want a reporting exclusion that explicitly 
includes all activities involving gas extraction and collection, 
separation and treatment, and preparation for transportation.
    As proposed, Sec. 330.3(a)(2) provides a reporting exemption for a 
gas service provider ``that serves exclusively shippers with ownership 
interests in both the pipeline operated by the Gas Service Provider and 
the gas produced from the field connected to the pipeline.'' The 
Producer Coalition requests the reference to ``the field'' not be 
interpreted to confine the exclusion to a single gas producing field 
and urges that the Commission expand this exemption to include owner-
shippers that hold interests in and gather gas from multiple fields.
    The reporting exemptions of proposed Sec. 330.3(a)(1) for a single-
shipper service provider and Sec. 330.3(a)(2) for an owner-shipper 
service provider hold until a second shipper or a non-owner shipper is 
served or ``the Commission determines that the Gas Service Provider's 
denial of a request for service is unjustified, and the shipper denied 
service contests the denial.'' OCS Producers ask the Commission to 
clarify the basis upon which it may find a denial of service is 
justified. OCS Producers note the NOPR suggests the Commission would 
uphold a denial of service if a pipeline lacks available capacity, or 
if providing the requested

[[Page 20360]]

service would result in shutting in producing wells, or if the gas 
received is of an unacceptable quality. OCS Producers contend that 
denying service based on gas quality would be contrary to the result 
reached in Shell Oil.\38\ OCS Producers also question whether the 
Commission might compel access by means of pro-rationing or the 
mandatory expansion of facilities.
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    \38\ 47 F.3d 1186 (D.C. Cir. 1995).
---------------------------------------------------------------------------

    OCS Producers ask if OCS service providers seeking a reporting 
exemption must file for such an exemption or if the Commission intends 
to issue blanket exemptions. If the former, OCS Producers seek 
assurance no filing fee will be charged; if the latter, OCS Producers 
request no penalty apply if the service provider is later found to be 
non-exempt.
    Williams would eliminate the mandatory OCSLA reporting and instead 
have the Commission act case-by-case, requesting information from an 
OCS service provider only after an existing or prospective shipper 
seeks assurance that service is in accordance with the OCSLA's open and 
nondiscriminatory access requirements. Williams would require an OCS 
service provider to supply, in confidence, no more information than is 
necessary to show its practices conform with OCSLA principles.
2. Commission Response
    a. Reporting Exemptions for Certain Companies. In the NOPR, we 
questioned whether we should contemplate any exemptions to the proposed 
OCSLA reporting requirements in view of the fact that we do not now 
have data sufficient to assemble an overview of NGA-exempt OCS 
transactions. After consideration of the comments, we are persuaded 
that it is appropriate to exempt service providers that are least able 
or inclined to discriminate. In the NOPR we proposed exemptions for 
service providers that confine their operations to moving their own gas 
or that of a single shipper. We adopt these exemptions, and in addition 
provide an exemption for NGA-regulated OCS service providers, because 
as noted above, we are persuaded these service providers, by conforming 
to our regulatory requirements under the NGA, present transactional and 
market information adequate to the task of identifying practices 
prohibited under the OCSLA. Rather than have such entities refile 
largely redundant information, we add Sec. 330.3(a)(4) to the new 
regulations to exempt from reporting gas service providers that are 
regulated by the Commission under the NGA. We do not believe any 
essential regulatory purpose would be promoted by having the exempt 
entities file OCSLA reports. If we are presented with evidence that 
exempt entities are abusing the reporting exemption or are indeed 
discriminating, we may restrict or revoke the exemptions.
    Because we have not established a data base describing NGA-exempt 
OCS entities' facilities and services, existing and prospective OCS 
shippers have no means to consider or compare offers, denials, or terms 
of service. Therefore, we believe it would be impractical to adopt 
Williams' suggestion that we forego OCSLA reporting and instead only 
seek information from OCS service providers in response to a specific 
shipper's request. Under this approach, shippers and the Commission 
would still be faced with the same gap in information that now exists. 
We feel a more efficient method to encourage proper practices is to 
make transactional information publicly available, then use that 
information as a foundation to identify and correct any discrimination 
or access problems.
    b. Reporting Exemptions for Certain Facilities. The OCSLA, unlike 
the NGA, applies to the full range of gas exploration, development, 
production, gathering, and transportation.\39\ However, section 
1334(f)(2) of the OCSLA does provide the Commission the option to 
exempt any ``pipeline or class of pipelines which feeds into a facility 
where oil and gas are first collected or a facility where oil and gas 
are first separated, dehydrated, or otherwise processed'' from the 
requirement that OCS transportation adhere to the competitive 
principles of open and nondiscriminatory access. Such ``feeder line'' 
facilities are typically owned and operated by the same entity that 
holds the right to produce gas from a particular field; we do not 
expect issues of access or discrimination to arise where the same 
entity owns or leases both the mineral rights and the facilities 
necessary to draw gas from its own reservoirs. Therefore, 
Sec. 330.3(a)(3) of the new regulations exempts lines that feed into a 
facility where gas is first collected, separated, dehydrated, or 
otherwise processed from our OCSLA reporting requirements. In addition, 
Sec. 330.0(a)(1) and (2) exempt OCS service providers that serve only a 
single entity or its own owners. The same rationale holds as for a 
producer operating feeder lines on its own behalf: where a service 
provider carries gas only for itself or for a single customer, there is 
no call to compare conditions of service among multiple shippers.
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    \39\ Section 1(b) of the NGA states: ``The provisions of this 
Act shall apply to the transportation of natural gas in interstate 
commerce, to the sale in interstate commerce of natural gas for 
resale for ultimate public consumption for domestic, commercial, 
industrial, or any other use, and to natural-gas companies engaged 
in such transportation or sale, but shall not apply to any other 
transportation or sale of natural gas or to the local distribution 
of natural gas or to the facilities used for such distribution or to 
the production or gathering of natural gas.''
---------------------------------------------------------------------------

    The Producer Coalition argues that due to the large expense and 
size of deep water facilities, we should permit only the single-shipper 
and owner-shipper reporting exemptions, but not allow such facilities 
to come under the feeder-line exemption. We acknowledge that deep water 
projects can be orders of magnitude more costly than shallow water 
systems, thereby magnifying adverse impacts of anticompetitive actions. 
We also acknowledge that the changing technical and geographic nature 
of offshore exploration and production has resulted in increased 
drilling in deep water. Nevertheless, at this time, we find no cause to 
revoke the feeder-line exemption to enhance our scrutiny of deep water 
activities. However, we may reconsider this position if we are 
presented with evidence that our regulatory oversight is inadequate to 
ensure that deep water services conform with the OCSLA's open and 
nondiscriminatory access requirements.
    OCS Producers and the Producer Coalition request we broaden the 
Sec. 330.3(a)(2) ``feeder line'' exemption to include platforms and 
production-related facilities and services. The statutory language of 
the OCSLA indicates feeder lines are upstream of a point where gas is 
first collected, separated, dehydrated, or processed. This point, as a 
general proposition, will be on a production platform. But this will 
not always be the case; consequently, rather than adopt a bright line, 
but over-broad, definition, we believe that identifying a point where 
gas is first collected, separated, dehydrated, or processed and 
partitioning upstream from downstream facilities, is best done after 
examining the facts and circumstances of each specific case. While we 
expect exempt upstream feeder line facilities will generally be found 
within production fields, we cannot make a generic determination that 
all platforms and production-related facilities are, in accordance with 
OCSLA section 1334(f)(2), situated upstream of a point where gas is 
first collected, separated, dehydrated, or processed. Therefore, we 
will deny the requests for a blanket

[[Page 20361]]

extension of the Sec. 330.3(a)(2) feeder line exemption.
    MMS urges that we conform our Sec. 330.3(a)(2) feeder line 
exemption to MMS' definition of gathering facilities.\40\ We believe it 
would be premature to limit our discretion under OCSLA section 
1334(f)(2) by tethering it to the MMS definition.\41\ Our preference, 
as noted above, is to consider purported feeder line facilities on a 
case-by-case basis to determine the point at which gas is first 
collected, separated, dehydrated, or otherwise processed.
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    \40\ MMS regulations state: ``Gathering means the movement of 
lease production to a central accumulation and/or treatment point on 
the lease, unit or communitized area, or to a central accumulation 
or treatment point off the lease, unit or communitized area as 
approved by BLM or MMS OCS operations personnel for onshore and OCS 
leases respectively.'' 30 CFR 206.151.
    \41\ MMS has considered, but has not enacted, revisions to its 
definition of gathering. See, e.g., MMS' Amendments to Gas Valuation 
Regulations for Federal Leases NOPR, 60 FR 56007 (Nov. 6, 1995) and 
its Notice Withdrawing Proposed Rulemaking and Requesting Comments 
on Supplemental Information, 62 FR 19536 (Apr. 22, 1997).
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    The federal government is a royalty interest owner in every OCS 
lease, and pursuant to the OCSLA, provides MMS the option of collecting 
its royalty share in kind or in value.\42\ Almost all royalty payments 
are currently rendered in value, i.e., in cash. However, MMS notes it 
is undertaking a pilot program whereby royalties due the United States 
can be paid in kind in gas.\43\ MMS ``requests that a final regulation 
specifically apply the reporting requirement whenever the Federal 
government's royalty gas could be moved along with only one other 
producer's gas.'' \44\ Were MMS to alter its current practice to take 
royalties in kind as gas, and ship such gas from its source of 
production to shore, because royalty payments apply to all OCS 
leaseholds, MMS could become a second shipper on every line used to 
move gas associated with federal royalties. This would effectively end 
the reporting exemptions, since MMS could be added as a shipper to 
pipelines that would otherwise be dedicated exclusively to single-
shipper or owner-shipper transportation.
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    \42\ MMS acts under OCSLA section 1353(a)(1), which, with minor 
exceptions, provides for all royalties or net profit shares, or 
both, accruing to the United States under any oil and gas lease to 
be paid in oil or gas.
    \43\ See Federal Oil and Gas Royalty-in-Kind Pilot Programs, 
Notice of Intent, 64 FR 37809 (July 13, 1999), stating MMS' intent 
to employ several pilot programs to take the government's royalty 
share of production in kind from federal oil and gas leases.
    \44\ MMS' Comments at 2-3 (August 27, 1999).
---------------------------------------------------------------------------

    As discussed, we believe those OCS service providers that we 
propose to exempt have little apparent motive to deny access or 
discriminate. Thus, we hesitate to compel these service providers to 
report under Sec. 330.2. However, in the event MMS moves beyond its 
present royalty-in-kind pilot program and begins to collect a 
significant portion of royalty payments as gas volumes, we may be 
inclined to revisit the applicability of the reporting exemptions. We 
note that as is, under its own authority, MMS can compel OCS service 
providers to disclose information relevant to MMS. Therefore, for now, 
we find it appropriate to retain the reporting exemptions.
    If requested, we will consider whether a particular OCS service 
provider qualifies for a certain reporting exemption, but do not plan 
to initiate a blanket evaluation of every OCS entity. An entity 
requesting the Commission evaluate its status will be subject to the 
declaratory order fee. \45\ Given the limited nature of the reporting 
exemptions, we expect OCSLA reports to be filed for the bulk of the OCS 
facilities that are located between production platforms and shore. 
\46\ Like the production/gathering and Hinshaw exemptions of NGA 
sections 1(b) and (c), respectively, we expect service providers to 
exercise good faith in determinations as to whether their facilities 
and operations qualify for an OCSLA reporting exemption. The 
Commission, or any other person, may challenge a non-reporting service 
provider's exemption. An entity found to have erroneously presumed 
itself exempt can cure its error by filing in accordance with the 
reporting requirements established herein.
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    \45\ See 19 CFR 381.302.
    \46\ At this point, we are not prepared to impose a fee for 
Commission services associated with processing OCSLA reports. Annual 
charges, assessed in accordance with the provisions of Sec. 154.402 
and part 382 of the Commission's regulations, apply to NGA-regulated 
gas pipelines, not to pipelines subject exclusively to the OCSLA.
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    OCS Producers seek assurance we will not penalize a service 
provider for not reporting if that service provider has not reported 
because it believes it qualifies for a reporting exemption. As noted, 
service providers are to make a good faith effort to evaluate whether 
their facilities and operations come under one of the exemptions. If a 
service provider elects not to report and is able to present a 
reasonable case for its claim to a reporting exemption, that we 
nevertheless disagree with, we would not expect recompense beyond 
compelling the service provider to commence and continue timely filing 
of OCSLA reports. However, if we find a knowing and willful effort to 
evade or violate the reporting provisions, we may seek penalties as 
provided under OCSLA sections 1134 and 1350.
    In the NOPR, we proposed granting OCS service providers newly 
subject to these provisions 60 days to prepare and submit an initial 
OCSLA report. Comments have convinced us to extend this to 90 days to 
alleviate constraints that might otherwise be placed on service 
providers, particularly those not previously reporting under the NGA, 
in organizing the presentation of a first filing. Proposed 
Sec. 330.3(c) specified that after an initial filing, a service 
provider subject to reporting must submit a description of a change in 
affiliates, customers, rates, or terms and conditions of service within 
15 days thereof. As discussed below, we will modify this and limit 
filings to, at most, four per year. This puts initial and updated 
filings on a similar timetable. Eliminating the proposed 15-day 
deadline should significantly reduce the reporting burden.
    We clarify that if an OCS gas service provider becomes subject to 
reporting for the first time, it must file an initial OCSLA report 
within 90 days of the event that triggers the Sec. 330.2(a) and (b) 
reporting requirements. It is possible a service provider may qualify 
for a reporting exemption, act to invalidate its exemption, then act 
again to requalify for an exemption (e.g., a service provider may carry 
gas for a single customer, accept interruptible volumes from a second 
shipper for a limited period of time, then return to exclusively serve 
a sole shipper). \47\ A service provider subject to reporting, that 
subsequently becomes exempt, then later loses its exemption, will again 
be required to submit an OCSLA report, and to do so within 90 days of 
the date that its exempt status ended.
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    \47\ We clarify that once a service provider becomes subject to 
the reporting requirements, even if remains so only momentarily, an 
OCSLA report must be filed within 90 days of the event interrupting 
the exemption.
---------------------------------------------------------------------------

    Coastal proposes the single-shipper exemption be extended so as to 
treat a gas producer made up of multiple working interest owners as a 
single shipper where transportation is provided to the gas producer and 
its working interest affiliates under identical rates and conditions of 
service. We find no fault with the end result that Coastal posits: 
Multiple shippers served the same. However, without a public 
declaration of rates and conditions of service, there is no way to 
verify that the rates and terms under which the gas producer receives 
service are in fact identical to the rates and terms under

[[Page 20362]]

which each of the various working interest owners receive service.
    By way of contrast, where a service provider carries gas for one 
shipper, i.e., one entity holds title to all gas moving in one pipe, 
there is no opportunity to serve other shippers under different and 
potentially discriminatory terms. This would be the case whether the 
one entity holding title to the gas is a single producer or is a single 
entity composed of multiple parties that together agree to obtain 
service under a contract between the single entity and the service 
provider.\48\ Under such conditions, the Sec. 330.3(a)(1) exemption 
applies, whereas under the Coastal scenario, it does not; hence we find 
reporting necessary to verify that multiple shippers all receive the 
same rates and terms of service.
---------------------------------------------------------------------------

    \48\ Provided that a single entity signs a transportation 
agreement with a gas service provider and that that party holds 
title to the gas shipped, the single-shipper reporting exemption 
will apply. The nature of the business interest of the single entity 
signing the gas transportation contract is immaterial to the 
applicability of this exemption.
---------------------------------------------------------------------------

    Coastal also proposes a reporting exemption for a service provider 
that carries gas that is produced on behalf of multiple working 
interest owners when one (or more) of the working-interest owners is 
affiliated with the service provider. Coastal maintains these 
circumstances are the equivalent of service for a single shipper. We 
disagree. Where there are multiple shippers, and particularly where 
some are affiliated with the service provider and some are not, a 
service provider may find it advantageous to serve different shippers 
under different and potentially discriminatory terms. We expect 
disclosure will discourage unequal treatment; thus, we find it prudent 
not to expand the reporting exemptions.
    We clarify that new Sec. 330.3(a)(2), which exempts an OCS service 
provider shipping only its own gas, will apply as long as the same 
parties hold all ownership interests in both the gas produced and the 
pipeline moving the gas. Recognizing the operational reality that gas 
shipments do not always track exact working interest owners' 
percentages, this exemption will hold where the parties' ownership 
shares are disproportionate to the gas volumes flowing in the owner-
shipper line.
    Tejas asks if an exempt OCS service provider could offer 
interruptible-only transportation to various parties and remain exempt. 
We believe the reporting exemption should turn on the identity of the 
service provider and its shippers, not the type of service provided. 
Regardless of whether a service provider moves gas on a firm or 
interruptible basis, where there are multiple shippers, the potential 
for differential, discriminatory treatment is present.
    The Producer Coalition requests that the Sec. 330.1(b) definition 
of gas service provider as, ``any entity that operates a facility 
located on the OCS that is used to move natural gas on or across the 
OCS,'' be expanded to include not only facilities on the OCS, but 
facilities that reach from the OCS and across state waters to the first 
point of interconnection with an onshore line. At this time, we do not 
find it necessary to apply the OCSLA in such an expansive manner, as we 
anticipate our joint OCSLA-NGA jurisdiction will enable us to ensure 
open and nondiscriminatory transportation between the OCS and the first 
onshore interconnection point. \49\ Further, states can act to regulate 
activities within their waters. In view of this, we will not adopt 
Producer Coalition's proposal.
---------------------------------------------------------------------------

    \49\ See Murphy, 81 FERC para. 61,148 at 61,670-71. See also 
Order No. 509, 53 FR 50925 (Dec. 19, 1988), FERC Stats. & Regs. 
para. 30,842 at 31,274 (1988), stating: ``[T]he Commission believes 
the condition of nondiscriminatory access established in Order Nos. 
436 and 500 satisfies, in large measure, the open-access requirement 
in section 5(f)(1)(A) of the OCSLA. However, unlike onshore 
pipelines, OCS pipelines cannot voluntarily choose to not 
participate in the open-access program.''
---------------------------------------------------------------------------

    The Producer Coalition points out that proposed Sec. 330.3(a)(2)'s 
exemption for a service provider transporting only its own gas refers 
to ``the gas produced from the field connected to the pipeline.'' The 
Producer Coalition, noting that gas can be gathered into a single line 
from more than a single producing field, asks that ``field'' be made 
plural. We recognize there may be circumstances where gas from a single 
field is carried to a pipeline by means of a lateral line that crosses 
the territory of an adjacent field, or where a pipeline's owners all 
hold working interests in more than one field along the route of a 
single line. We believe Sec. 330.3(a)(2) should capture such 
situations, and will modify the language accordingly. However, this 
applies only where the working interest owners of the producing 
field(s) flow their gas through a single pipe, and only where all the 
gas in that one line is from the producing field(s) of the working-
interest owners. The principle remains the same, service providers 
serving themselves are not expected to deny access to or discriminate 
against themselves.
    OCS Producers request we elaborate upon the criteria to be used to 
decide when a service provider would be justified in refusing a request 
for service and ask whether the Commission intends to make use of pro-
rationing or mandatory expansion as remedies. In the NOPR, we stated a 
denial of service may be upheld ``if the receipt of additional volumes 
could cause gas from producing wells to be shut in contrary to the 
OCSLA section 5(e) admonishment concerning conservation or the 
prevention of waste, or, if the content of the proposed gas stream 
would be incompatible with the characteristics of gas volumes currently 
flowing.'' \50\ Until faced with specific facts and circumstances, we 
are not prepared to speculate what, if any, additional reasons for 
denial we might find acceptable. Pro-rationing, provided it can be 
implemented without adversely impacting ongoing development and 
production, remains an option. Mandatory expansion of throughput 
capacity, as described in section 1334(f)(B) of the OCSLA, also remains 
an option. However, given that the statute states that our authority to 
compel expansions does not apply to facilities in the Gulf of Mexico or 
Santa Barbara Channel, we do not foresee this issue arising with any 
frequency.
---------------------------------------------------------------------------

    \50\ 64 FR 37718 at 37722. OCS Producers contends denying 
service based on gas quality would conflict with the result in Shell 
Oil. We disagree. We rejected an OCS oil pipeline's contention that 
accepting a request to transport sour crude, oil with a high sulfur 
content, would degrade the sweet, low sulfur, oil stream carried by 
the pipeline. Our rejection was based on our finding that capacity 
was available, the pipeline was accepting sour crude from other 
shippers, and the additional requested volumes would not materially 
affect the quality of the pipeline's oil stream. This finding does 
not conflict with our statement that a pipeline may legitimately 
reject a request to accept new gas when the new volumes would be 
incompatible with the characteristics of the gas flowing in the 
line.
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D. Reporting Requirements

1. Comments
    Numerous commenters express concern with the extent of the 
reporting burden that the proposed rule would impose. INGAA, El Paso, 
Leviathan, and Williams assert that even if all OCSLA-required 
information is already on file with the Commission pursuant to NGA-
required submissions, the task of refiling under the OCSLA to cross-
reference such information could be avoided if the proposed rule were 
to explicitly deem that NGA compliance fulfills the OCSLA reporting 
requirement. Enron Interstate Pipelines (Enron) urges an OCSLA 
reporting exemption be added under Sec. 330.3 for NGA-jurisdictional 
pipelines.
    Williams contends it is impractical to itemize a rate per 
particular gas pathway due to the complexity of existing

[[Page 20363]]

arrangements and routes to shore, stating ``the prices and terms for 
transporting each of two shippers' gas streams through the same 
pipeline from the same point of receipt to the same point of delivery 
can and will differ as the result of the myriad facts and circumstances 
which exist over time both upstream and downstream of that pipeline.'' 
\51\
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    \51\ Williams' Comments at 11 (August 27, 1999).
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    OCS producers and gatherers, not now subject to the NGA, state that 
any OCSLA filing requirement would be a new and unwelcome 
responsibility. OCS Producers emphasize that even after the effort of 
making an initial filing, the reporting burden would continue as 
conditions change, triggering revised filings. Duke, Dynergy, OCS 
Producers, and Tejas believe the proposed reporting requirement would 
compel the disclosure of sensitive or proprietary information. Tejas 
suggests the Commission permit the filing of redacted contracts in 
order to protect shipper confidentiality.
    Duke and Leviathan state that mandatory disclosure of customer 
contracts will undercut OCS gatherers' efforts to tailor services to 
meet individual shipper's needs. Leviathan and Tejas predict that gas 
service providers, to avoid charges of discrimination, will offer all 
customers a standardized, rigid set of contract terms. OCS Producers 
foresee a reordering of ownership interests in order to come within the 
reporting exemption.
    Duke believes the proposed reporting exemption for owner-shipper 
pipelines would afford such lines a competitive advantage over non-
exempt pipelines and induce pipelines to structure ownership so as to 
come within the reporting exemption. Tejas and Williams anticipate 
single-shipper or owner-shipper lines will be inclined to avoid serving 
other parties to maintain their exempt status. They also anticipate--
based on the Commission's suggestion that it may sustain a fully 
subscribed pipeline's refusal to serve additional customers in the 
interests of conservation and prevention of waste--that construction of 
larger multi-shipper lines will diminish in favor of smaller 
proprietary lines, since the latter, if full, may be able to refuse to 
serve third parties yet retain a reporting exemption.
    Duke claims the proposed reporting requirements conflict with 
provisions of the ICA prohibiting the release of contract 
information.\52\
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    \52\ 49 U.S.C. app. section 15(13) (1988) prohibits a common 
carrier from disclosing certain information.
---------------------------------------------------------------------------

    Tejas and Williams ask why the reporting requirements are limited 
to OCS gas service providers and do not apply with equal force to OCS 
oil service providers.
    Coastal views the proposed OCSLA filing as equivalent to an NGA 
tariff filing and suggests the Commission reject the rule, or 
alternatively, limit reporting to require that each gas service 
provider file a map of its system,\53\ the name of a contact person, 
and an affirmation by an authorized officer that the company will not 
engage in discriminatory practices.
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    \53\ The Producer Coalition requests the Commission specify that 
submitted maps be legible and understandable. We so state our 
presumption. We will also require that where a service providers' 
system undergoes significant changes, an updated map is to be 
submitted.
---------------------------------------------------------------------------

    Leviathan expects its own reporting burden alone will exceed the 
Commission's estimate for the all reporting entities,\54\ and 
anticipates OCS service providers will spend hundreds of thousands of 
hours and millions of dollars in contract renegotiation and litigation 
costs. Tejas predict its reporting burden will be 200 hours for an 
initial report and 1,000 hours annually for updates, on top of which it 
expects to bear the additional burden of defending itself against 
charges of discrimination. El Paso cites as an example its affiliate 
Tennessee Gas Pipeline Company, which during a recent 12-month period, 
incurred 3,077 reportable events, which could have compelled it to 
submit near daily updates to keep current information on file.
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    \54\ In the NOPR, the Commission estimates 70 parties will file 
twice per year, each party requiring 8 hours to prepare each 
submission, resulting in an annual total of 1,120 hours to prepare 
filings at an estimated cost of $56,000. In response to comments, we 
double these estimated totals, as discussed below.
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    El Paso proposes that OCSLA filings, consistent with NGA filings, 
should not require updating where nonmaterial changes are made to filed 
contracts. Further, El Paso sees no need for an OCS gas service 
provider to identity affiliates that are not shippers on the OCS. OCS 
Producers would restrict this further and only require identifying 
affiliates that ship on a reporting party's pipeline.
    Tejas asks for clarification regarding which event will trigger the 
reporting requirement: An offer to serve or a shipper's acceptance 
thereof? Williams notes that some existing non-NGA rate structures 
include escalator or adjustor clauses and seeks clarification that, as 
long as the formula for determining the current rate is on file, 
refiling will not be required each time a new rate takes effect.
    The Producer Coalition is concerned that describing affiliations, 
rates, and certain terms is insufficient to provide a full and accurate 
view of OCS transactions, because such a report may omit material 
conditions of service such as: Agreements regarding the construction of 
facilities; dedication of gas supples, daily volumes; gas quality 
standards; priorities for scheduling services; imbalance provisions; 
and billing and payment arrangements. The Producer Coalition would 
eliminate the option to report rates and a limited description of the 
conditions of service and instead require a report that includes full 
contracts and all incidental and related letter agreements or 
amendments, to be updated each time a new contract is executed or an 
existing contract is modified, expires, or is canceled.
    The Producer Coalition requests that gas service providers file in 
a form that alphabetically indexes (1) shippers by name, with the 
primary and secondary receipt points associated with each contract and 
the rate applicable to each pair of points and (2) receipt points by 
OCS block, with a cross-reference to the contracts and rates associated 
with each such point.
    MMS proposes that all OCS gas service providers that do not submit 
contracts instead file a complete description of costs.\55\ MMS would 
remove the Sec. 330.3 reporting exemption, noting that it is a royalty 
owner in every OCS lease, and given that it may accept gas volumes as 
royalty payments, it is a potential shipper from every OCS lease. MMS 
observes that adopting its proposal would permit OCS lessees and 
affiliated providers to maintain a single set of books for their OCS 
transportation costs for all federal regulatory purposes.
---------------------------------------------------------------------------

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

    OCS Producers opposes MMS' proposal, arguing it would be burdensome 
and require the disclosure of confidential producer data. Accordingly, 
OCS Producers urge that participation in MMS in-kind royalty payments 
should not be treated as shipping for a third party, so as not to undo 
the single-shipper and owner-shipper reporting exemptions.
    Tejas asks how, mechanically, OCSLA filings will be made. OCS 
Producers ask whether reporting is to be submitted system-wide or line-
by-line. OCS Producers also ask which party is responsible for filing 
when there are

[[Page 20364]]

multiple owners of an OCS pipeline or when the pipeline owner is not 
the pipeline operator.
2. Commission Response
    The free flow of information regarding offshore gas activities is 
critical to the successful creation of a competitive and efficient 
marketplace. Access to relevant information is necessary for shippers 
to make informed decisions about capacity purchases and for the 
Commission and shippers to monitor transactions to determine if market 
power is being exercised in violation of the applicable statutes. The 
ready availability of information will become increasingly important, 
both for efficient trading and for the monitoring for the exercise of 
market power. We believe the information specified in Secs. 330.2 and 
330.3(b) and (c), as modified below, is the minimum necessary to 
provide a meaningful overview of OCS service providers' treatment of 
their different shippers. Thus, we reject requests that we require 
either more or less information from service providers.
    Concerns relating to the overlap of information submitted under the 
NGA and OCSLA and the inconvenience of duplicative filings are resolved 
by the new Sec. 330.3(a)(4) reporting exemption for OCS service 
providers currently regulated by the Commission under the NGA.
    Several commenters contend the total reporting burden will exceed 
our estimate of 1,120 hours and $56,000 annually. In response, we will 
make the following changes, in order to simplify and diminish the 
effort required to comply with the new requirements. As proposed, 
Sec. 330.2(a)(6) directs a service provider to list all its affiliates. 
Such affiliates, commenters note, may include companies engaged in 
activities unrelated to the natural gas industry. We acknowledge there 
are affiliates that play no part in OCS operations and agree there is 
no practical need to name such entities. OCS Producers and El Paso 
suggest restricting named affiliates to those that ship on a service 
provider's facilities; El Paso believes this more limited disclosure to 
be sufficient to identify anticompetitive practices. Such a restriction 
calls for a very narrow, or very charitable, interpretation of a 
service provider's self-interest. We can, for example, envision 
circumstances in which an OCS service provider might be inclined to act 
to the advantage of an upstream non-shipper producer affiliate or an 
onshore non-shipper processor affiliate. In view of this, we will 
qualify Sec. 330.2(a)(6): only affiliates engaged in the exploration, 
development, production, processing, transportation, marketing, 
consumption, or sale of natural gas need be identified in the OCSLA 
report.\56\
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    \56\ As stated in the NOPR, we will use the definition of 
``affiliate'' given in Sec. 161.2(a) of our regulations as ``another 
person which controls, is controlled by, or is under common control 
with, such person.'' As specified in Sec. 161.2(b), ``control'' 
``includes, but is not limited to, the possession, directly or 
indirectly and whether acting alone or in conjunction with others, 
of the authority to direct or cause the direction of the management 
or policies of a company. A voting interest of 10 percent of more 
creates a rebuttable presumption of control.'' Although these 
definitions appear under Part 161 of our regulations, ``Standards of 
Conduct for Interstate Pipelines with Marketing Affiliates,'' for 
the purpose of OCSLA reporting, they include, but are not limited 
to, marketing affiliates.
---------------------------------------------------------------------------

    Comments tend to identify ongoing compliance filings, rather than 
the initial OCSLA report, as a source of difficulty. In response, we 
will expand the time provided for filing an initial report and for 
filing updates and will limit the potential number of filings per year 
to a maximum of four. We will extend the time to submit an initial 
OCSLA report from the proposed 60 days until 90 days after the date a 
service provider becomes subject to Sec. 330.2 or Sec. 330.3(c) 
requirements. For the initial submission of OCSLA reports following 
issuance of this rule, OCS service providers' reports will be based on 
conditions on the first day of the first full calender quarter that 
begins after the effective date of this rule, with initial reports due 
on the first business day after the close of the quarter. This assures 
OCS service providers will have more than one full quarter in which to 
prepare their initial OCSLA reports.
    We will also alter proposed Sec. 330.3(c), which stated service 
providers are to file a description of certain changes in service 
within 15 days. We are persuaded that existing and prospective shippers 
will not be significantly disadvantaged by relaxing the 15-day schedule 
to have service providers update changes quarterly. Rather than try to 
keep a running record of OCS service providers' operations, we believe 
a periodic snapshot of OCS transactions will be adequate to expose 
potentially discriminatory practices to public view. Accordingly, OCS 
gas services providers will be required to submit a description of 
their operations as they stand on the first day of each calender 
quarter; this report will be due the first business day of the 
subsequent quarter; e.g., the filing due April 1, the first day of the 
second quarter, will describe operations as they stood on January 1, 
the first day of the first quarter. Thus, a service provider will have 
90 days to prepare its OCSLA report, which report will be limited to 
describing the service provider's status on one particular day. This 
approach should substantially reduce service providers' 
responsibilities from the reporting regime proposed in the NOPR. 
Regardless of the number of changes in affiliates, customers, rates, 
conditions of service, or facilities, a service provider will be 
required to file, at most, four OCSLA reports per year. If a service 
providers' operations are identical on the first and last days of any 
given quarter, the service provider need not submit an update the 
following quarter.
    El Paso asks that service providers be permitted to make 
nonmaterial changes to filed contracts without triggering the 
obligation to report such changes. Because we are not prepared to parse 
material from nonmaterial contract terms, we will decline.\57\ As a 
practical matter, because companies need only file OCSLA reports 
quarterly--or not at all, if there are no changed circumstances--we do 
not believe it will require any significant effort to maintain an up-
to-date inventory of affiliates and current operating conditions with 
the Commission. El Paso's apprehension that submitting notice of non-
material changes within 15 days thereof might require near continual 
filings should be put to rest by the change we adopt here. Further, we 
clarify that we see no need to report changes that do not disrupt the 
basic transparency we seek. Thus, where a contract contains provisions 
that provide for periodic adjustments to its terms, such as an 
escalator clause, and as long as current terms can be straightforwardly 
derived from the information on file, no update is required.
---------------------------------------------------------------------------

    \57\ See Filing Requirements for Interstate Natural Gas 
Companies, Order No. 582, 60 FR 52960 (Sep. 28, 1995), FERC Stats. & 
Regs. para. 31,025 (1995) and Order No. 582-A, 61 FR 9613 (Mar. 11, 
1996), 74 FERC para. 61,224 (1996). These orders explain that an NGA 
pipeline, after filing an unexecuted pro forma service agreement as 
part of its tariff, need not file individual service agreements 
unless they deviate materially from the pro forma agreement. We 
found that ``materiality'' is likely to vary with the circumstances 
of each case; therefore, we found it better to allow the term to 
remain less strictly defined in order that the particular facts of a 
given contract will determine whether the deviation is material and 
needs to be filed. We follow that rationale here.
---------------------------------------------------------------------------

    Williams maintains the complexity and rapidly changing conditions 
of offshore gas transactions make it impractical to specify shippers' 
rates and conditions of service between receipt and delivery points. 
This assertion challenges the premise of this rule, namely, that 
reporting can render a service provider's transactions transparent 
enough to allow interested persons to compare services among shippers. 
We believe the OCSLA report,

[[Page 20365]]

while not requiring a service provider to report every aspect of its 
operations in real time, will nevertheless be adequate to serve as the 
basis for informed objections. The Producer Coalition proposes more 
detailed reporting, with service providers directed to file full 
contracts and specify all factors affecting service and rates. MMS 
would require a complete description of each service providers' 
transportation costs where contracts are unavailable. We are not 
persuaded an expansion of the filing requirements is necessary. The 
point of this rule is to establish a data base as a foundation for 
identifying discrimination. At present, there is no such record for OCS 
transactions. Reporting can cure this, provided the information 
supplied is sufficient to allow interested persons to identify 
instances of unequal treatment. We expect the Sec. 330.2 reporting 
requirements, without being unduly intrusive, will be adequate to this 
task.
    Commenters are concerned the new OCSLA requirements will expose 
sensitive aspects of their operations to public view. This may be so, 
and if so, is an abrupt shift for non-NGA OCS service providers, 
heretofore accustomed to operating in comparative privacy. However, 
without making OCS transactions transparent, it is not possible to 
determine whether shippers are subject to discrimination. We presume 
OCS service providers currently offer service on an equitable basis, 
and thereby presume disclosure will not intrude upon or disrupt present 
practices. Commenters are also concerned that reporting will disclose 
information that could compromise their competitiveness. Service 
providers that believe the information they submit should be withheld 
from public view can request privileged and confidential treatment for 
such information, pursuant to Sec. 388.112 of our regulations,\58\ 
stating the rationale for their request.
---------------------------------------------------------------------------

    \58\ 18 CFR 388.112.
---------------------------------------------------------------------------

    OCS pipelines stress the need to tailor individually the services 
they offer to meet customers' particular needs. This rule need not 
alter such efforts. Provided an individualized service genuinely 
reflects a specific customer's unique requirements, we would not expect 
any but the designated customer to have cause to sign up for such 
service. Several commenters worry that rather than try to adapt to 
shippers' needs, the required reporting will induce OCS service 
providers prophylactically to retreat to the rigidity of a one-size-
fits-all service agreement. This rule does not compel uniformity. We 
will accept distinctions in customers' rates, conditions of service, 
and services rendered as long as sound reasons are put forth to warrant 
divergent treatment.
    Duke, OCS Producers, Tejas, and Williams anticipate this rule will 
go beyond inducing OCS service providers to move to a standardized 
contract. They expect service providers to reorder their ownership 
interests to come within the reporting exemptions. They further suggest 
that owner-shippers, in order to retain their reporting exemption, will 
intentionally construct facilities no larger than needed to ship owner-
produced gas, so as to be able to legitimately claim that capacity 
constraints preclude serving third parties.
    We see little detriment to service providers modifying ownership 
interests to come within the Sec. 330.3 reporting exemptions, although 
we doubt whether compliance with these reporting requirements would 
motivate such actions. As noted earlier, it is neither unknown nor 
unlawful for companies to organize their affairs so as to avoid one 
regulatory regime or to embrace another. Further, a reporting exemption 
in no way diminishes the exempt service provider's obligation to abide 
by the OCSLA's open access and nondiscrimination provisions. The 
presumption inherent in the reporting exemption is that an entity will 
not exploit itself. Where an exempt entity contravenes the OCSLA, we 
expect a principal of that entity (in all probability the person 
adversely impacted) will object. We dismiss speculation that exempt 
owner-shipper service providers might deliberately undersize new 
facilities so as to be able to turn away prospective third party 
customers. It seems unlikely that a facility owner would forego 
otherwise obtainable revenues merely to avoid the reporting 
requirements. Given that exempt and non-exempt service providers must 
ultimately abide by the same OCSLA nondiscrimination provisions, we do 
not expect opting out of reporting will confer a noticeable commercial 
advantage.
    Duke indicates the ICA precludes disclosure of the information 
specified in the reporting requirements. We disagree. The ICA applies 
to the transportation of oil, not natural gas, and applies to common 
carriers, which oil pipelines are, \59\ but gas pipelines are not. \60\ 
Moreover, the Commission has determined that it lacks jurisdiction 
under the ICA to regulate oil pipelines located wholly on the OCS. \61\ 
Thus, we do not believe it is appropriate to rely on the ICA as a model 
for gas regulation under the OCSLA.
---------------------------------------------------------------------------

    \59\ The ICS provides that oil pipelines function as common 
carriers. However, ICA jurisdiction does not extend to oil lines 
located wholly on the OCS. See note 13.
    \60\ In amending the OCSLA, Congressman Morris Udall proposed 
that OCS oil and gas pipelines be operated as common carriers in 
order to ``require the OCS * * * pipelines accept, convey, 
transport, or purchase at reasonable rates and without 
discrimination.'' H.R. Rep. No. 95-590, 3 (1978), reprinted in 1978 
U.S.C. C.A.N. 1528. This proposal was not incorporated into the 
amendments.
    \61\ Bonito, 61 FERC para. 61,050, aff'd sub nom., Shell Oil, 47 
F.3d 1186 (D.C. Cir. 1995) and Oxy, 61 FERC para. 61,051 (1992). 
Shell Oil contested the Commission's determination regarding ICA 
jurisdiction, but the court did not reach this issue in its review 
of the Commission's decision. 47 F.3d 1186, 1200.
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    Duke, Tejas, and Williams query why our regulations are directed 
exclusively at OCS gas service providers, and not OCS oil service 
providers as well, since the open and nondiscriminatory provisions of 
the OCSLA apply with equal force to both OCS gas and oil operations. 
Here we have elected to confine our considerations to gas matters, 
given that we have found rates for transportation on oil pipelines to 
be just and reasonable, \62\ yet have made no such finding for rates 
for transportation on gas lines exempt from the NGA. Thus, to protect 
gas shippers using NGA-exempt OCS facilities from discriminatory, 
exorbitant charges, we look to the OCSLA.
---------------------------------------------------------------------------

    \62\ See Revision to Oil Pipeline Regulations Pursuant to the 
Energy Policy Act of 1992, 58 FR 58753 (Nov. 4, 1993), FERC Stats. & 
Regs. para. 30,985 (1993). Whether this presumption of just and 
reasonable oil rates applies to oil lines located wholly on the OCS 
has yet to be affirmed by judicial review.
---------------------------------------------------------------------------

    In place of reporting, Coastal urges that we require only a map, 
the name of a company contact person, and an affirmation by an officer 
that the company will behave in accordance with the OCSLA. This is 
insufficient. Our experience, affirmed across the broad spectrum of 
federal, state, and local regulatory practice, is that, in general, a 
promise of propriety is not an adequate bulwark against sharp 
practices. We believe reporting, and the transparency it brings, will 
be a more reliable guarantor that appropriate practices and procedures 
are followed.
    We clarify that the new regulatory requirements will not be 
triggered by either an OCS service provider's offer to a prospective 
shipper, a proposal to change the terms of an existing shipper's 
contract, or a shipper's request for new or modified service. We view 
offers, proposals, and requests as aspects of negotiating. Until an 
offer to serve or request for service is accepted,

[[Page 20366]]

i.e., until discussions result in an exchange of promises to perform or 
parties' commitment to an agreement, neither party is under any 
obligation, and the Sec. 330.2 reporting requirements are not 
triggered.
    Given the complexities of offshore operations, the array of 
entities offshore, and the fact that we have not heretofore collected 
the information described in Secs. 330.2 and 330.3(b) and (c), we feel 
it premature to fix the filing format of an OCSLA report at this time. 
The new regulations, described below, will require the filing entity to 
identify itself and its affiliates, submit a map of its system, and 
itemize certain transactional information.
    Submissions are to include a cover sheet titled ``OCSLA Reporting 
Form,'' with the name of the OCS gas service provider, the date of the 
filing, and designating whether the filing is an initial or updated 
report. OCSLA Reports are to be filed in accordance with Rules 2001, 
2003, 2004, and 2005 of our rules of practice and procedure.\63\ 
Reports are to be submitted to the Office of the Secretary, Federal 
Energy Regulatory Commission, 888 First Street, NE, Washington, DC 
20426. An original and 14 paper copies of the OCSLA Reporting Form must 
be submitted to the Commission. The filed OCSLA Reports will be 
available in the Commission's Public Reference Room and may be accessed 
remotely via Internet through the FERC Home Page (http://www.ferc.fed.us) using the Records and Information Management System 
(RIMS) link or the Energy Information Online icon.\64\
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    \63\ 18 CFR 385.2001, .2003, .2004, and .2005.
    \64\ In Docket No. PL98-1-000, Public Access to Information and 
Electronic Filing, we anticipate that, with limited exceptions, all 
filings by regulated entities will be made in electronic form. We 
expect OCSLA reports, at some future point, to be made 
electronically, and expect, after further experience, to provide a 
format for such filings.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \65\ The party submitting the OCSLA report should retain the 
filed information in accordance with Part 225 of the Commission's 
regulations. 18 CFR part 225.
---------------------------------------------------------------------------

    Under Sec. 330.2(a), OCS service providers are to specify the date 
of the filing; name and address of the gas service provider; name and 
address of a contact person; and the title, name, and address of the 
gas service provider's officers if a corporation or general partners if 
a partnership. In addition, the gas service provider must submit a 
description and map of its facilities, denoting the facilities' 
location, length, size, and the points at which service is rendered, 
with the boundaries of any rate zones or rate areas identified. The map 
is to be updated in the event of any major changes to the service 
provider's facilities. The gas service provider must identify all 
affiliates engaged in the exploration, development, production, 
processing, transportation, marketing, consumption, or sale of natural 
gas, providing the names and state of incorporation of all 
corporations, partnerships, business trusts, and similar organizations 
that directly or indirectly hold control over the service provider, 
and, the names and state of incorporation of all corporations, 
partnerships, business trusts, and similar organizations directly or 
indirectly controlled by the service provider.
    In proposed Sec. 330.2(b)(1) in the NOPR, we specified OCS service 
providers were to file copies of all current gas service contracts. We 
are persuaded by the comments that full disclosure of all terms of all 
contracts is not necessary to reach a workable degree of transactional 
transparency; thus, we will modify the requirement set forth in the 
NOPR to diminish the burden on reporting entities. Also, we expect 
information necessary to permit comparisons of shippers' rates and 
conditions of service can be most effectively accessed if summarized 
and presented in tabular form, rather than as a bundle of individual 
contracts. Accordingly, we will not require copies of actual contracts 
to be filed. Instead, pursuant to revised Sec. 330.2(b), gas service 
providers must provide a table of shippers and services. This portion 
of the OCSLA report should contain headings that specify: each 
customer's full legal name and indicate whether the customer is an 
affiliate; the contract number under which each customer receives 
service; the nature of the service provided; the primary receipt 
point(s) and the primary delivery point(s); the rate between the points 
in cents, or dollars and cents, per thermal unit, including an 
explanation of how the rate is derived if it is composed of separate 
components (e.g., a reservation charge and a usage charge). Clearly, 
important conditions of service include contract volumes, the effective 
and expiration date of the contract, dedication of gas supply, gas 
quality standards, scheduling priorities, imbalance agreements, billing 
and payment arrangements, and customer alternatives. Where these or 
other conditions are relevant to accurately evaluate whether similarly 
situated shippers receive nondiscriminatory treatment, we expect the 
service provider to supply all terms needed to permit a meaningful 
comparison among shippers served. Not to do so is to invite a 
Commission inquiry into apparent service disparities or allegations of 
inequitable treatment.
    As noted in comments, certain OCS companies may not render service 
under formal contracts. Although we believe that comparing rates and 
conditions of service among customers can be done most effectively when 
information is presented in the manner described above, to accommodate 
OCS entities that are not in a position to submit reports based on 
existing contracts, we will retain the alternative reporting 
requirements proposed in the NOPR in Sec. 330.2(b)(2), now redesignated 
as Sec. 330.2(b)(9). This alternative report must provide information 
sufficient to derive rates charged (in cents, or dollars and cents, per 
thermal unit) and conditions applicable for service between two points. 
Nondiscrimination implies all customers would be offered service under 
the same terms. Any deviation from this practice calls for further 
explanation, as specified in Sec. 330.2(b)(9)(iv).

E. Discrimination and Denial of Access

1. Comments
    El Paso requests that the Commission state that the OCSLA's 
nondiscrimination provision is equivalent to the NGA's prohibition 
against undue discrimination, thereby placing all offshore service 
providers under a single standard. El Paso notes that the Commission 
has already done so, in part, by stating that compliance with Part 284 
regulations regarding open-access under the NGA would fulfill the 
OCSLA's nondiscrimination requirements.\66\
---------------------------------------------------------------------------

    \66\ See Order No. 509-A, stating Order No. 509 does not 
preclude OCS pipelines from selectively discounting Part 284 
offshore transportation rates ``for shippers that are not similarly 
situated.'' Leviathan reads Order Nos. 509 and 509-A as 
affirmatively finding that selective discounting enhances 
competition and serves the public interest.

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[[Page 20367]]

    El Paso, the Producer Coalition, and Tejas ask if selective 
discounting would be considered discriminatory under the OCSLA. El Paso 
maintains that provided there is a reasonable basis for differentiating 
among shippers, discounting is not unduly discriminatory under the 
NGA.\67\ El Paso asserts that an OCSLA prohibition on discounting would 
preclude pipelines from lowering rates to meet competition. El Paso and 
Leviathan worry a strict interpretation of discrimination under the 
OCSLA could put an end to all FT-2 rates.\68\
---------------------------------------------------------------------------

    \67\ Citing Order No. 509-A, finding that the discounting 
procedures of Sec. 284.7 of the Commission's regulations were not 
inconsistent with the OCSLA.
    \68\ An FT-2 rate is offered to a shipper who agrees to 
transport all of a specific gas reserve, in exchange for which, the 
shipper is not held to a fixed daily quantity or reservation charge. 
See, e.g., Garden Banks Gas Pipeline, LLC, 78 FERC para. 61,066 
(1997) and Shell Gas Pipeline Company, 76 FERC para. 61,126 (1996).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \69\ Burlington raised a similar issue in a rate proceeding in 
response to revised tariff sheets submitted by Sea Robin. In that 
proceeding, we determined this rulemaking would be the more 
appropriate forum to address general issues concerning the 
interpretation of the OCSLA's nondiscrimination standard with 
respect to discounting. Sea Robin, 88 FERC para. 61,120 at 61,314 
(1999).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \70\ 43 FERC para. 61,006 at 61,032.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \71\ In Order No. 509, we observed that ``the condition of 
nondiscriminatory access placed on the transportation program 
established in Order Nos. 436 and 500 satisfies, in large measure, 
the open-access requirement in section 5(f)(1)(A) of the OCSLA.'' 53 
FR 50925 (Dec. 19, 1988), FERC Stats. & Regs. (Regulations 
Preambles) para. 30,842 at 31,274 (1988).
    \72\ Id. at 31,280.
---------------------------------------------------------------------------

    As a general proposition, under the NGA and OCSLA, similarly 
situated shippers should not be charged different rates for the same 
service. Nevertheless, we accept that as a matter of fact a gas service 
provider, as a result of its own physical and operational 
characteristics, may not incur the same costs to provide the same 
service to each of its shippers. Where variations in shippers' rates 
and conditions of service reflect genuine cost-to-serve variations, 
different rates and conditions are not necessarily discriminatory. 
Thus, we view neither the NGA sections 4 and 5 bans on ``undue 
preference,'' ``unreasonable difference,'' and ``unduly 
discriminatory'' treatment, nor the OCSLA's ban on discrimination, as 
an absolute prohibition on different rates or conditions of service for 
different customers.
    We deny Burlington's request that we shift the burden of proof from 
the party submitting a complaint to an OCS service provider when 
differential rates and conditions of service are identified. 
Notwithstanding our above observation that certain cost-based 
differentials could be acceptable under the OCSLA, unequal rates or 
conditions of service are inherently suspect. Given this, a complainant 
that alleges such inequities effectively obliges the service provider 
to explain and justify apparently discriminatory treatment. 
Consequently, where a service provider files an OCSLA report that 
contains different conditions of service or different services for 
similarly situated shippers, the service provider is advised to include 
in its report additional information. Such information might be found 
to justify differing rates or terms based on the service provider's 
cost of service or shippers' competitive characteristics or may 
elaborate on the nature of the conditions of service (e.g., a lower 
rate for larger volumes). Without the benefit of such further 
information, we may well attribute differing rates for seemingly 
similarly shippers to discrimination on the part of the service 
provider.
    In its comments, Burlington focused on rate discounts. We have 
previously considered the issue of discounting and determined that 
discounting disparities alone do not constitute unlawful discrimination 
under the NGA.\73\ Burlington contends the OCSLA's nondiscrimination 
standard should preclude discounting based on differing characteristics 
of customers and should only be permitted where it can be demonstrated 
that discounting is required to lower operating costs or increase 
capacity. The United States Court of Appeals for the District of 
Columbia Circuit has not interpreted the OCSLA's nondiscrimination 
requirements as rigidly as Burlington. In American Gas Association v. 
FERC,\74\ the court affirmed the Commission's holding that pipelines 
could refuse to transport a producer's gas absent take-or-pay credits 
without violating the OCSLA's ban on discrimination. In the course of 
its discussion, the court stated:
---------------------------------------------------------------------------

    \73\ Cities of Bethany v. FERC, 727 F.2d 1131, 1139 (D.C. Cir. 
1984), cert. denied, 469 U.S. 917, 105 S.Ct. 293 (1984).
    \74\ 912 F.2d 1496, 1511-12 (D.C. Cir. 1990).

    The producers argue that the plain meaning of 
``nondiscriminatory'' precludes any restriction on producer access 
to OCS pipelines. But as we noted in AGD I,(\75\) statutory bans on 
discrimination by natural monopolies have always allowed the 
regulatory agencies discretion to permit differing categories, 
including, for example,

[[Page 20368]]

rate classifications based on customers' differing elasticities of 
demand.\76\
---------------------------------------------------------------------------

    \75\ Citing AGD I, 824 F.2d 981, 1011.
    \76\ 912 F.2d 1496,1512. See also Williston Basin Interstate 
Pipeline Company, 85 FERC para. 61,247 at 62,028-29 (1999), wherein 
we found discounting to meet competitive conditions, i.e., 
customers' capability to switch fuel supplier or type, is not per se 
discriminatory, since ``[o]ffering discounts sufficient to keep 
customers with elastic demands on the system will maximize 
throughput and revenue recovery from those customers, thereby 
benefitting all customers on the system.''

    The portion of AGD I referred to above affirmed the Commission's 
original decision in Order No. 436 to allow open access pipelines to 
offer selective discounts. Accordingly, the court has not interpreted 
the OCSLA to prohibit OCS service providers from offering selective 
discounts similar to those authorized in Order No. 436. Thus, we reject 
Burlington's contention that customer-based discounting which could be 
permitted under the NGA should be prohibited under the OCSLA. Of 
course, as the court itself stated in AGD I, this does not mean that 
all selective discounts are nondiscriminatory.\77\
---------------------------------------------------------------------------

    \77\ 824 F.2d 981, 1011-12. We may find discounting unacceptable 
if offered for reasons other than to meet competitive pressures, or 
if offered preferentially, e.g., only to a service provider's 
affiliates. See our discussion of discounting under the NGA in 
Williston Basin Interstate Pipeline Company, 84 FERC para. 61,348 
(1998), reh'g denied, 85 FERC para. 61,247 (1998); Southern Natural 
Gas, 67 FERC para. 61,155 (1994); and in the Policy Statement 
Providing Guidance with Respect to the Designing of Rates, 47 FERC 
para. 61,295 (1989).
---------------------------------------------------------------------------

    Commenters ask whether FT-2 rates could remain in effect under the 
OCSLA's nondiscrimination standard. We see no reason to preclude such 
rates. An FT-1 shipper agrees to transport an expressly stated quantity 
of gas for a fixed time, whereas an FT-2 shipper commits to transport 
all gas reserves from a certain site for its productive life. The 
latter commitment can offer a service provider greater flexibility in 
developing its facilities and greater assurance that its facilities' 
capacity will be filled over a longer term. In view of this, we are not 
prepared to find inherent and improper discrimination based solely on a 
service provider's offer to make separate rates available for separate 
types of firm transportation services. Typically, variable terms--such 
as volume incentive pricing or lower charges for customers willing to 
enter into longer commitments--are acceptable as long as the service 
provider offers the same price to all shippers willing to meet the same 
terms.
    b. Denial of Access. Generally, a service provider may turn aside 
allegations of unlawful discrimination due to disparities in rates or 
conditions of service when it can convince the Commission that such 
terms are a function of differences in the costs it incurs to perform 
the same service for separate shippers or are attributable to 
differences in the competitive characteristics of the customers served. 
We note that an OCS service provider offering uniform rates and 
conditions of service is not immunized from charges of discrimination 
or a denial of access. For example, an OCS service provider may offer 
all customers identical terms of service, but may charge rates 
disproportionately higher than rates charged by regional competitors 
for comparable service. In such a case, particularly if the service 
provider's customers lack any transportation alternatives, we may find 
that high rates have the effect of denying access. Thus, rates that 
appear to conform with the OCSLA's nondiscrimination requirement may 
nonetheless be found to conflict with the OCSLA's open access 
requirement.

F. Enforcement

1. Comments
    OCS Producers find it unreasonable for the Commission to require 
OCSLA reports while at the same time declaring it does not intend to 
``scrutinize each submission with the aim of identifying and 
challenging every aspect of a (gas service provider's) operations that 
could conceivably lead to an OCSLA-barred act.'' \78\
---------------------------------------------------------------------------

    \78\ NOPR, 64 FR 37718 at 37723.
---------------------------------------------------------------------------

    Tejas requests the Commission specify how enforcement will proceed.
2. Commission Response
    OCS Producers' apprehension that the Commission will play only a 
passive role is unfounded; we do not expect to rely solely on voluntary 
compliance with the OCSLA requirements. We draw a distinction between 
the prior approval required under the NGA and the after-the-fact 
monitoring we will take on under the OCSLA. While we anticipate 
shippers, potential shippers, and competitors will actively follow the 
OCSLA reports and be able to bring examples of alleged discrimination 
to our attention, we expect to monitor the filings and act on our own 
initiative where we suspect discrimination. The transparency engendered 
by reporting should permit us to police practices presently obscured 
from view.
    Information is the essential predicate to a complaint. Where before 
we presumed service providers operated on an open and nondiscriminatory 
basis, we will now have affirmative assurance that this is the case. We 
expect reporting will move us from a laissez faire to a light-handed 
regulatory regime. Ideally, complaints will be resolved based 
exclusively on information contained in a service provider's OCSLA 
report and supplied by the complainant.\79\ However, we recognize that 
when a claim is raised, further investigation may nevertheless be 
required to resolve certain issues.
---------------------------------------------------------------------------

    \79\ This outcome would conform with aspirations we expressed in 
revising Rule 206 of our rules of practice and procedure to require 
a complainant satisfy a higher threshold in terms of the information 
presented in the interest of realizing an expedited resolution. See 
18 CFR 385.206(b).
---------------------------------------------------------------------------

    When a service provider's report meets minimum Sec. 330.2 
requirements, but in so doing presents the appearance of impropriety 
(e.g., affiliates seemingly served on more favorable terms than 
nonaffiliates), it may behoove the service provider to include 
information that justifies any apparent disparate treatment. Otherwise, 
the Commission, on its own initiative or in response to a request, may 
require the service provider to give further detail and explanation 
regarding its transactions.
    In addition to acting via the complaint process, allegations of 
OCSLA discrimination may be addressed and resolved via the Commission's 
Enforcement Hotline \80\ and alternative dispute resolution 
processes.\81\
---------------------------------------------------------------------------

    \80\ 18 CFR part 1b. In the Commission's recent revision of its 
complaint procedures, it codified as Sec. 385.218 simplified 
procedures for small controversies, which may prove an effective 
means to resolve certain OCS conflicts.
    \81\ 18 CFR 385.604-06.
---------------------------------------------------------------------------

IV. Environmental Analysis

    The Commission is required to prepare an Environmental Assessment 
or an Environmental Impact Statement for any action that may have a 
significant adverse effect on the human environment.\82\ However, the 
Commission has categorically excluded certain actions from this 
requirement as not having a significant effect on the human 
environment.\83\ The action taken here--the promulgation of a rule that 
is clarifying, corrective, or procedural, or that does not 
substantially change the effect of legislation or regulations being 
amended--qualifies for such an exclusion.\84\ This rule is procedural 
in nature, it directs certain offshore gas service providers to make 
certain information publicly available. Therefore, no environmental 
analysis is necessary, and none has been done in

[[Page 20369]]

connection with the regulations promulgated by this rule.
---------------------------------------------------------------------------

    \82\ Order No. 486, Regulations Implementing National 
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & 
Regs. para. 30,783 (1987), codified at 18 CFR part 380.
    \83\ 18 CFR 380.4(a)(2)(ii).
    \84\ 18 CFR 380.4.
---------------------------------------------------------------------------

V. Regulatory Flexibility Certification

    The Regulatory Flexibility Act of 1980 (RFA) \85\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small entities. 
The Commission is not required to make such analyses if a rule would 
not have such an effect.\86\
---------------------------------------------------------------------------

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

    The Commission does not believe that this rule would have a 
significant economic impact on small entities. Commenters claim some of 
the entities that will be required to file for the first time pursuant 
to the new regulations may fall within the RFA's definition of small 
entity.\87\ Although none of the comments name any such entities, we 
acknowledge that there may be businesses qualifying as small under the 
RFA definition that will be compelled to report information heretofore 
withheld from public view. However, generally, companies that transport 
gas for hire on the OCS do not qualify as small. OCS producers are more 
likely to qualify as small, but the exemptions of Sec. 330.3 should 
effectively exclude producers from the new reporting requirements. 
Therefore, the Commission certifies that this rule will not have a 
significant economic impact on a substantial number of small entities. 
Accordingly, no regulatory flexibility analysis is required.
---------------------------------------------------------------------------

    \87\ 5 U.S.C. 601(3). Section 3 of the Small Business Act 
defines a ``small business concern'' as a business which is 
independently owned and operated and which is not dominant in its 
field of operations. A business engaged in oil and gas extraction 
may be small if it has fewer than 500 employees, a business engaged 
in oil and gas field exploration services may be small if annual 
revenues are less than $5 million. See 13 CFR 121.201.
---------------------------------------------------------------------------

VI. Information Collection Requirements

    The following collection of information contained in this final 
rule (new Subchapter O) is being submitted to the Office of Management 
and Budget (OMB) for review under section 3507(d) of the Paperwork 
Reduction Act of 1995.\88\ The Commission will identify the information 
required as FERC-545 for OCSLA-jurisdictional gas service providers.
---------------------------------------------------------------------------

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

    The regulations will impose new reporting requirements on non-NGA-
regulated OCS gas service providers with multiple non-owner shippers, 
requiring them to make an initial submission of specific information--
information which should be readily available in the ordinary course of 
business--and then make quarterly filings if there are changes to the 
initially submitted information. As long as the status of a gas service 
provider's affiliations, customers, rates, conditions of service, and 
facilities remain the same, there is no need to file again. The new 
rule will not apply to facilities located upstream of a point where gas 
is first collected, separated, dehydrated, or otherwise processed; 
thereby generally exempting OCS entities engaged exclusively in 
exploration and production.
    Considering the complex nature of the offshore operating 
environment, we cannot state with assurance the exact number of 
entities likely to be subject to the new regulations. We estimate that, 
excluding entities engaged exclusively in exploration and production, 
there are less than 200 gas service providers total that transport gas 
on or across the OCS; approximately 30 of these are currently subject 
to our NGA jurisdiction. We expect the majority of the NGA-exempt OCS 
service providers will qualify for a reporting exemption pursuant to 
Sec. 330.3(a)(1) or (2). This final rule modifies the exemptions 
proposed in the NOPR by adding Sec. 330.3(a)(4), which exempts NGA-
regulated service providers from the OCSLA reporting requirements. This 
additional exemption reduces the number of service providers that will 
be subject to the new filing requirements. In the NOPR, we estimated 70 
service providers could be expected to file OCSLA reports under the new 
regulations. This number included the NGA-regulated entities that are 
now exempt. Consequently, we reduce the number of service providers we 
expect to file from 70 to 55.
    In the NOPR, we anticipated that the OCS service providers subject 
to the new regulations would be required to update the information on 
file twice a year. The comments have convinced us that a significant 
portion of OCS service providers are likely to alter their affiliates, 
customers, rates, conditions of service, or facilities far more 
frequently. In response, we have eliminated the proposed Sec. 330.3(c) 
requirement that service providers update their reports within 15 days 
of any change. Instead, we will require that filed reports, when 
necessary, be updated quarterly. For the purposes of estimating the 
reporting burden, we will assume all reporting entities will file every 
quarter. The estimated number of hours per response remains the same.
    The burden estimates for complying with this rule are as follows:
    Public Reporting Burden: Estimated Annual Burden.

----------------------------------------------------------------------------------------------------------------
                                                     Number of       Number of       Hours per     Total annual
                 Data collection                    respondents      responses       response          hours
----------------------------------------------------------------------------------------------------------------
FERC-545........................................              55               4               8           1,760
----------------------------------------------------------------------------------------------------------------

    Total Annual Hours for Collection (Reporting + Record Keeping (if 
appropriate)) = 1,760.
    During the first year after the proposed rules become effective, 
most of the burden will consist of an initial, one-time compliance 
filing. In subsequent years, most of the burden will consist of OCSLA 
reports updating the initial filing.
    Information Collection Costs: The Commission projects the average 
annualized cost per respondent to comply with the new OCSLA reporting 
requirement will be as follows:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Annualized Capital/Startup Costs..........  0
Annualized Costs (Operations &              $88,000 ($50 per hour)
 Maintenance).
    Total Annualized Costs................  $88,000
------------------------------------------------------------------------

    The OMB regulations require OMB to approve certain information 
collection requirements imposed by agency rule.\89\ Accordingly, 
pursuant to OMB regulations, the Commission is providing notice of this 
information collection to OMB.
---------------------------------------------------------------------------

    \89\ 5 CFR 1320.11.
---------------------------------------------------------------------------

    Title: FERC-545, Gas Pipeline Rates: Rate Change (Non-Formal).
    Action: Proposed Data Collection.
    OMB Control No.: 1902-0154. The respondent shall not be penalized 
for failure to respond to this collection of information unless the 
collection of information displays a valid OMB control number.

[[Page 20370]]

    Respondents: Business or other for-profit, including small 
businesses.
    Frequency of Responses: Initial, one-time filing; updated if status 
changes.
    Necessity of the Information: The final rule implements the 
Commission's authority under the OCSLA to assure open and 
nondiscriminatory access for gas moving on or across the OCS by 
collecting certain information concerning OCS gas service providers' 
affiliations, rates, terms and conditions of service, and facilities. 
Without this information, neither the Commission nor a prospective or 
existing shipper will be able to determine whether the existing or 
proposed conditions of service discriminate or deny access. 
Implementation of these data requirements will help the Commission 
carry out its responsibilities under the OCSLA and coincide with the 
current competitive regulatory environment which the Commission 
fostered under Order No. 636.
    Internal Review: The Commission has assured itself, by means of its 
internal review, that there is specific, objective support for the 
burden estimates associated with the OCSLA reporting requirements. The 
Commission's staff will use the data in the OCS gas service providers' 
filings to determine whether their operations are consistent with the 
nondiscriminatory, open access provisions of the OCSLA. These 
requirements conform to the Commission's plan for efficient information 
collection, communication, and management within the natural gas 
industry.

VII. Document Availability

    In addition to publishing the full text of this document in the 
Federal Register, the Commission also provides all interested persons 
an opportunity to view and/or print the contents of this document via 
the Internet through FERC's Home Page (http://www.ferc.fed.us) and on 
FERC's Public Reference Room during normal business hours (8:30 a.m. to 
5:00 p.m., Eastern time) at 888 First Street, NE, Room 2A, Washington, 
DC 20426.
    From FERC's Home Page in the Internet, this information is 
available in both the Commission Issuance Posting System (CIPS) and 
RIMS.
--CIPS provide access to texts of formal documents issued by the 
Commission since November 14, 1994.
--CIPS can be accessed using the CIPS link or the Energy Information 
Online icon. The full text of this document is available on CIPS in 
ASCII and WordPerfect 8 format for viewing, printing, and/or 
downloading.
--RIMS contains images of documents submitted to and issued by the 
Commission after November 16, 1981. Documents from November 1995 to the 
present can be viewed and printed from FERC's Home Page using the RIMS 
link or the Energy Information Online icon. Descriptions of documents 
back to November 16, 1981, are also available from RIMS-on-the-Web; 
requests for copies of these and other older documents should be 
submitted to the Public Reference Room.
    User assistance is available for RIMS, CIPS, and the FERC Website 
during normal business hours from our Help line at (202) 208-2222 (E-
mail to WebMaster@ferc. fed.us.) or the Public Reference at (202) 208-
1371 (E-Mail to <a href="/cdn-cgi/l/email-protection#2a5a5f4846434904584f4c4f584f44494f584545476a4c4f5849044c4f4e045f59"><span class="__cf_email__" data-cfemail="fe8e8b9c92979dd08c9b989b8c9b909d9b8c919193be989b8c9dd0989b9ad08b8d">[email protected]</span></a>).
    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.
---------------------------------------------------------------------------

    \90\ 5 U.S.C. 801.
---------------------------------------------------------------------------

List of Subjects

18 CFR Part 330

    Natural gas, Pipelines, Reporting and record keeping requirements.

18 CFR Part 385

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

By the Commission.
David P. Boergers,
Secretary.

    In consideration of the foregoing, the Commission amends Chapter I, 
Title 18, of the Code of Federal Regulations, as follows:
    1. Subchapter O, consisting of Part 330, is added to read as 
follows:

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

PART 330--CONDITIONS OF SERVICE REPORTING REQUIREMENTS

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

    Authority: 43 U.S.C. 1301-1356.


Sec. 330.1  Definitions.

    Affiliate has the same meaning as found in Sec. 161.2(a) of this 
chapter.
    Control has the same meaning as found in Sec. 161.2(b) of this 
chapter.
    Gas Service Provider means any entity that operates a facility 
located on the OCS that is used to move natural gas on or across the 
OCS.
    Outer Continental Shelf (OCS) has the same meaning as found in 
section 1331(a) of the Outer Continental Shelf Lands Act (OCSLA);


Sec. 330.2  Reporting requirements.

    (a) Gas Service Providers must file with the Commission an OCSLA 
Reporting Form consisting of the:
    (1) Date of the filing;
    (2) Full legal name and address of the Gas Service Provider;
    (3) Name and address of a contact person;
    (4) The title, name, and address of the Gas Service Provider's 
officers if a corporation or general partners if a partnership;
    (5) A description and map of the facilities operated by the Gas 
Service Provider, denoting the facilities' location, length, and size, 
the points at which service is rendered, with the boundaries of any 
rate zones or rate areas identified; and
    (6) For all entities affiliated with the Gas Service Provider and 
engaged in the exploration, development, production, processing, 
transportation, marketing, consumption, or sale of natural gas: the 
names and state of incorporation of all corporations, partnerships, 
business trusts, and similar organizations that directly or indirectly 
hold control over the Gas Service Provider, and, the names and state of 
incorporation of all corporations, partnerships, business trusts, and 
similar organizations directly or indirectly controlled by the Gas 
Service Provider (where the Gas Service Provider holds control jointly 
with other interest holders, so state and name the other interest 
holders).
    (b) Gas Service Providers must file with the Commission the 
conditions of service for each shipper served, consisting of:

[[Page 20371]]

    (1) The full legal name of the shipper receiving service;
    (2) A notation of shipper affiliation, if any;
    (3) The contract number under which the shipper receives service;
    (4) The type of service provided;
    (5) Primary receipt point(s);
    (6) Primary delivery point(s);
    (7) Rates between each pair of points, and;
    (8) Other conditions of service deemed relevant by the Gas Service 
Provider or, alternatively;
    (9) A statement of the Gas Service Provider's rules, regulations, 
and conditions of service that includes:
    (i) The rate between each pair of receipt and delivery points, if 
point-to-point rates are charged;
    (ii) The rate per unit per mile, if mileage-based rates are 
charged;
    (iii) Any other rate employed by the Gas Service Provider, with a 
detailed description of how such rate is derived, identifying customers 
and the rate charged to each customer;
    (iv) Any adjustments made by the Gas Service Provider to the rates 
charged based on gas volumes shipped, the conditions of service, or 
other criteria, identifying customers and the rate adjustment 
applicable to each customer.


Sec. 330.3  Applicability of reporting requirements.

    (a) The Sec. 330.2(a) and (b) reporting requirements do not apply 
with respect to:
    (1) A Gas Service Provider that serves exclusively a single entity 
(either itself or one other party), until such time as the Gas Service 
Provider agrees to serve a second shipper, or the Commission determines 
that the Gas Service Provider's denial of a request for service is 
unjustified, and the shipper denied service contests the denial;
    (2) A Gas Service Provider that serves exclusively shippers with 
ownership interests in both the pipeline operated by the Gas Service 
Provider and the gas produced from a field or fields connected to a 
single pipeline, until such time as the Gas Service Provider offers to 
serve a non-owner shipper, or the Commission determines that the Gas 
Service Provider's denial of a request for service is unjustified, and 
the shipper denied service contests the denial;
    (3) Services rendered over facilities that feed into a facility 
where natural gas is first collected, separated, dehydrated, or 
otherwise processed; and
    (4) Gas Service Providers' facilities and services regulated by the 
Commission under the Natural Gas Act.
    (b) A Gas Service Provider that makes no filing pursuant to 
Sec. 330.3(a)(1) must comply with the specified reporting requirements 
within 90 days of agreeing to serve a new shipper or when required by 
the Commission.
    (c) When a Gas Service Provider subject to these reporting 
requirements alters its affiliates, customers, rates, conditions of 
service, or facilities, within any calender quarter, it must then file 
with the Commission, on the first business day of the subsequent 
quarter, a revised Sec. 330.2 report describing the status of its 
services and facilities as of the first day of the previous quarter.

PART 385--RULES OF PRACTICE AND PROCEDURE

    2. Part 385 is amended as follows:
    3. The authority citation for Part 385 is revised to read as 
follows:

    Authority: 5 U.S.C. 551-557; 15 U.S.C. 717-717z, 3301-3432; 16 
U.S.C. 791a-8225r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-7352; 
49 U.S.C. 60502; 49 App. U.S.C. 1-85 (1988).

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


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

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

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

Appendix

List of Commenters

    Brooklyn Union Gas Company
    Burlington Resources Oil & Gas Company
    Coastal Field Services Company
    Duke Energy Companies
    Dynergy Midstream Services, Limited Partnership
    El Paso Energy Corporation
    Enron Interstate Pipelines
    Leviathan Gas Pipeline Partners, L.P.
    Independent Petroleum Association of America
    Interstate Natural Gas Association of America
    Natural Gas Supply Association
    OCS Producers
    Producer Coalition
    United States Department of the Interior, Minerals Management 
Service
    Williams Companies, Inc.
    Tejas Offshore Pipeline, LLC

[FR Doc. 00-9447 Filed 4-14-00; 8:45 am]
BILLING CODE 6717-01-U


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