FERC: Offshore gathering authority limited

The US Federal Energy Regulatory Commission is dropping efforts to expand its jurisdiction over offshore natural gas gathering facilities. But it still intends to intervene if an interstate pipeline's gathering affiliate uses market power to benefit the pipeline as it supplies transportation and sales services to producers.

Nick Snow
Washington Correspondent

WASHINGTON, DC, Feb. 22 -- The US Federal Energy Regulatory Commission is dropping efforts to expand its jurisdiction over offshore natural gas gathering facilities. But it still intends to intervene if an interstate pipeline's gathering affiliate uses market power to benefit the pipeline as it supplies transportation and sales services to producers.

A Feb. 15 policy statement responds to comments received after FERC launched a notice of inquiry in September 2005 at Shell Offshore Inc.'s request to consider reexamining offshore gathering system regulation criteria established in a 1994 proceeding involving Arkla Gathering Service Co. FERC had previously ruled in Shell Offshore's favor in a complaint relating to Transcontinental Gas Pipe Line Corp.'s North Padre Island offshore gathering system in Texas, but a federal appeals court vacated the order in 2004.

"The commission has tried a number of times to assert jurisdiction over offshore gathering facilities to protect against undue preference and the exercise of monopoly power but has been repeatedly rebuffed by the courts," FERC Chairman Joseph T. Kelliher observed. "We must accept the judgment of the courts. Under current law, offshore gathering is an unregulated monopoly. That will remain the case unless and until the law changes."

Gathering systems beyond state waters are not regulated, but FERC has tried to establish its authority by arguing that a pipeline and gathering system should be treated as a single entity if the gathering system circumvents the commission's regulation of the pipeline. The Natural Gas Act allows FERC to invoke its authority in such instances, the commission said. It said it also does not need to determine that concerted action between the pipeline and gathering affiliate necessarily occurred in those cases.

FERC also denied Shell Offshore's request for a rehearing of its complaint and suggested that the producer take the matter up with the US Department of the Interior since it has regulatory jurisdiction over offshore gathering systems under the Outer Continental Shelf Lands Act.

Contact Nick Snow at nsnow@cox.net.

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