News
July-September 2005
News Release: September 15, 2005 | ![]() |
Docket Numbers: PL05-10-000; RP02-99-010 |
Commission launches inquiry into criteria for reassertion
of jurisdiction over offshore gathering services
The Federal Energy Regulatory Commission today launched an inquiry
to evaluate possible changes in the criteria used to determine
when the Commission may invoke its jurisdiction to guard against
abusive practices by offshore gathering affiliates of natural
gas pipeline companies.
"Current law contains a regulatory gap that permits offshore gathering
companies to collect monopoly rents, which can lead to shut-in
of offshore gas production. The Commission has tried different
legal theories to prevent monopoly rents, and suffered a series
of court defeats. We may have run out of theories. If the law
permits monopoly rents, it is time to change the law," said Commission
Chairman Joseph T. Kelliher.
"This regulatory gap is a particular concern in the wake of Hurricane
Katrina. Restoration of offshore gas production is critical to
mitigating high natural gas prices this winter. Allowing monopoly
rents in offshore gathering may retard restoration of offshore
gas production. The time has come for Congress to close this regulatory
gap," Chairman Kelliher added.
Today's Notice of Inquiry seeks comment on the criteria set forth
in a 1994 order, Arkla Gathering Service Co., under which
the Commission may invoke its "in connection with" jurisdiction
under the Natural Gas Act to protect against monopoly rents by
unregulated gathering affiliates of pipeline companies.
Gathering facilities beyond state waters are unregulated, and
state and federal regulators have no express statutory authority
to oversee their costs and rates. The Commission's Arkla
test involves a determination that, as a result of the concerted
action of a pipeline and its gathering affiliates, the Commission's
effective regulation of the pipeline has been circumvented or
frustrated. The Commission would then reassert jurisdiction over
the gathering services "in connection with" interstate rates subject
to the Commission's Natural Gas Act oversight.
Today's action stems from a July 13, 2004, decision by the D.C.
Circuit U.S. Court of Appeals, in which the court vacated and
remanded Commission orders in response to a complaint by Shell
Offshore Inc. regarding Williams Field Services, a gathering affiliate
of Transcontinental Gas Pipe Line Corp.
The court determined that the Commission, in granting Shell's
complaint and reasserting jurisdiction over the spun-down Transco
affiliate, had misapplied the Arkla criteria.
In a related order today, the Commission denied a rehearing request
from Shell in the case involving its complaint against the Transco
affiliate. The Commission determined that the focus of Shell's
rehearing request would involve abandoning the Arkla
test and adopting new criteria for reasserting jurisdiction over
gathering services of pipeline affiliates.
Changing the Arkla criteria within the context of Shell's
complaint would not be equitable, the Commission said. "Making
any change to the Arkla test raises industrywide implications,"
the Commission said in terminating the Shell complaint proceeding.
"The Commission would not abandon the Arkla test and
develop new criteria without a better understanding of such a
change on the industry."
As a result of the appeals court decision, the Commission is reevaluating
the criteria under the Arkla test. "The Commission is
interested in reevaluating both its legal authority to reassert
jurisdiction and then policy considerations in deciding whether
to do so," today's Notice of Inquiry states.
The Notice seeks comment on 13 detailed questions, such as whether
there is an inherent anticompetitive issue involved when pipelines
spin down gathering facilities to affiliates, and whether it is
common for such companies to seek higher rates for gathering services
than were available from the Commission-regulated pipeline company
before it spun down the gathering affiliate.
The Notice asks for comment on the relevant factors in determining
whether a gathering company is separate from its pipeline affiliate,
and what kind of conduct should trigger the Commission's reassertion
of jurisdiction over the gathering affiliate. The Notice also
asks whether states have incentives to ensure that gathering service
providers do not engage in anticompetitive behavior, and asks
for assessments of the nature of any gap between state and Commission
regulation of natural gas companies.
Comments are due 60 days after publication in the Federal Register.
For more information on the Notice of Inquiry on Criteria
for Reassertion of Jurisdiction Over the Gathering Services of
Natural Gas Company Affiliates, go to www.ferc.gov.
R-05-60
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