# Opposition Brief — Producer Coalition v. Federal Energy Regulatory Commission

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386015_1163%3A05

## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2003
- **Citation:** 540 U.S. 937

## Text

a)

/ ' MAY 30 2003
No. 02-1215 and 0251265 °

“2K
—
IN THE

Supreme Court of the Gnited States

THE PRODUCER COALITION,
Petitioner,
V.

FEDERAL ENERGY REGULATORY COMMISSION, et ai.,
Respondents.

EXXONMOBIL GAS MARKETING COMPANY,
A DIVISION OF EXXON MOBIL CORPORATION, ef ai.,
Petitioners,
7.

FEDERAL ENERGY REGULATORY COMMISSION, ef a/.,
Respondents.

On Petitions for Writs of Certiorari to the
United States Court of Appeals
for the District of Columbia Circuit

BRIEF OF RESPONDENT
WILLIAMS GAS PROCESSING-GULF COAST
COMPANY, L.P. INOPPOSITION

MARI M. RAMSEY JAMES T. MCMANUS

Senior Attorney (Counsel of Record)
THE WILLIAMS COMPANIES JOSEPH S. KOURY
One Williams Center, 41st Floor WRIGHT & TALISMAN, P.C.
Tulsa, Oklahoma 74172 1200 G Street, N.W., Suite 600
(918) 588-2611 Washington, D.C. 20005

(202) 393-1200
Counsel for Williams Gas Processing-Gulf Coast Company, L.P.
May 30, 2003

LALLA LII OT BEE AL ARAL LACE ELLE TE ISLES ALLL LEE LOLI LE IE ALLELES LISLE SAEED BE EO IES ILL I ALE NS
WILSON-EPES PRINTING Co., INC. — (202) 789-0096 -— WASHINGTON, D.C. 20001

yr

QUESTION PRESENTED

Whether, consistent with this Court’s Chevron principles,
the Court of Appeals for the District of Columbia Circuit
properly affirmed orders of the Federal Energy Regulatory
Commission which ruled that certain offshore natural gas
facilities are “gathering” facilities exempt from the Commis-
sion’s jurisdiction under section 1(b) of the Natural Gas Act.

(i)

ii
RULE 29.6 STATEMENT

Pursuant to Rule 29.6 of the rules of this Court,
Respondent Williams Gas Processing-Gulf Coast Company,
L.P. (“Williams”) states that its direct and indirect parent
companies are:

The Williams Companies, Inc.
Williams Energy Services, LLC
Williams Field Services Group, Inc.
Williams Field Services Company
WGP Enterprises, Inc.

Williams states that the only publicly held company
that owns 10% or more of its stock is The Williams -
Companies, Inc.

TABLE OF CONTENTS
Page
: PRP Rie ETN BURIED cevesheccecccesscsvecensveacceseecceecoases i
| RTA Pe eS PA EIEIO cccecsscosorvecsesesasvonceccccecsveccecoes li
TABLE OF AUTHORITIES .......ssssssessssssssssssssssssessessee iv
EOE DE Raa 2
re OD gin sis csnsdesdavsdcoiassdedeseesecdecossssers 4
PE EOE CO 1 Mis CAE. ooo occ cccsceseescececccesesseoeoeeece 4
REASONS FOR DENYING THE PETITIONS ........... 6
: A. This Case Is Not Appropriate For Review
| Because The Claimed Harm To Consumers Is
| RE et ee eee ee 6
) B. Even Under Petitioners’ Hypothetical Of
| Discontinued FERC Rate Regulation, There Is
) No “Regulatory Gap” With Respect To OCS
| LS ASR OEE 8
C. ExxonMobil Is Consistent With Decisions Of
This Court And Other Circuits............ccccccccsseseee 9
:
D. NGA Section 7(b) Abandonment Require-
ments Do Not Apply To NGA-Exempt
SE FNCUNIIIIY crcsescisscsvnsscacneyerbesuescnsasonsivers 16
ok S| ESERIES ieee eee 17
REESE ETT BER rnp ee ae na la

(ili)

iV
TABLE OF AUTHORITIES
CASES Page
Chevron U.S.A. Inc. v. Natural Resources
Defense Council, 467 U.S. 837 (1984).............. 2, 10
Colorado Interstate Gas Co. v. FPC, 324 U.S.
ee D sscsstaicsinscnlsesalimamianceecasisceo acini. dv anntchanaialode 4
Conoco Inc. v. FERC, 90 F.3d 536 (D.C. Cir.
PE hdaivsisichesiitebsnsihiahsaiibcideadila acai imaaticibnandia diabetes a he
EP Operating Co. v. FERC, 876 F.2d 46 (Sth Cir.
acini sisne etait eA aah cea i 15
FPC vy. Panhandle Eastern Pipe Line Co., 337
Dic, NE Ee ET sniin natecdasiacaaabinkcieeicitanhaaicitaniemantinees 12, 16, 17
Lomak Petroleum, Inc. v. FERC, 206 F.3d 1193
Eira ss ls a nctsticcabisherdialpiniaiaiclcaiintiadndetinmiantiadiiiee 13
Northern Natural Gas Co. v. State Corp.
Commission, 372 U.S. 84 (1963) .........ccccccceeeeees passim
Northwest Central Pipeline Corp. v. State Corp.
Commission, 489 U.S. 493 (1989) .........ccceceeeeeee 12, 13
Northwest Pipeline Co. v. FERC, 905 F.2d 1403
b, g* Seren eeon ene 8, 13, 15, 16
Pacific Gas & Electric Co. v. FERC, 106 F.3d
Be ee Sa Oe Bincssslisciieaiienithiniianiachdenieensiininane 13
Phillips Petroleum Co. v. Wisconsin, 347 U.S.
ie Fi icsiescsiinsanianetibitiateniiinindanaiillinniamaians 10, 13
Sea Robin Pipeline Co. v. FERC, 127 F.3d 365
te ee re ONT, passim
United Distribution Cos. v. FERC, 88 F.3d 1105
eh SE ncianienetenvitiintiiabindiieaiinaualimda 4,5

ADMINISTRATIVE DECISIONS

Natural Gas Gathering Services Performed by
Interstate Pipelines and Interstate Pipeline
Affiliates, 65 FERC 4 61,136 (1993).................. 5

OCS Policy Statement, 74 FERC 4 61,222 (1996). 9

Phillips Petroleum Co., 10 FPC 246 (1951)..........

Vv
TABLE OF AUTHORITIES—Continued

Page
Policy Statement Providing Guidance with
Respect to the Designing of Rates, 47 FERC
| FE eee (OOP cinsviiniemerinewnaiibeiabitain 5
Sea Robin Pipeline Co., 71 FERC 4 61,351
(1995), reh’g denied, 75 FERC 9 61,332
[DORI sihcassinsocebdeisiecestitebataimiseieabdaaciabbiuiiiteteadacias 6
Sea Robin Pipeline Co., 87 FERC § 61,384
(1999), reh’g denied, 92 FERC 9 61,072
(2000), reh’g denied, 94 FERC 4 61,137
(2001), on compliance filing, 95 FERC
{ 61,329, approving settlement, 98 FERC
5 6 ee Ge nites incicicetesnieaees a
Shell Gas Pipeline Co., 78 FERC § 61,192
CET Bsc ionssaneuisbisiintinianniadins Coslvcnncclagesatbieaia aadbbiaceice 12
STATUTES AND REGULATIONS
Ee kk Se ees PID vichiviciinhictssheasibeicnensevensbanenicoces 5
Natural Gas Act
Ate tM iy Sf ERR ORONO NTT passim
ROEM S ol oe 6 SEN m nie ener ee passim
EP ea FO Ie viccnoecionaeicioadincueliduonceclidiaiains 16
Natural Gas Policy Act of -1978 15 U.S.C.
Fe I astikencetie nnccds Nemcucaececneeauas 4
Natural Gas Wellhead Decontrol Act of 1989
Pub. L. No. 101-60, 103 Stat. 157 (1989).......... 4-5
Outer Continental Shelf Lands Act
a Of ef” TRE ea eee passim
FF pees WRIT sia cinsice) nssiisscevmssticmivionduidons 8
Be Ge ies 0 OE weteeinccsciscstiecntakecsbinacseninnes 9
OF Ca CPE sesceriscicnnecticcatsvinccnpiipasbannk 9
BD Ap De EI vs ckasiicscsviniaehinrvettiancacinnntanie 9
FF Rates A BENS Pid scensinsasnicicviseaciaamenicdie 9
SS UGA. D TSP HAD esssieisvcrssscctivsissosions 6,9

vi
TABLE OF AUTHORITIES—Continued

43 U.S.C. § 1334(£)(1)(B).....ccrcccccsrccrssevescoeees 9
GS VBA. TGF vencvaceienteniverestnnsnctinnrnseminenation 9
GS UGG. 9B La bissecvsonsvcennsoccapesansonsnononnonetenses 9
BS USA § TPIT) cerasesosercrssecevecnsntvnsanionnsstss 8
GS U.S.C. 9-1 EDs cernesvessceseserecsonsesssevasie 8

Outer Continental Shelf Lands Act Amendments
of 1978, Pub. L. No. 95-372, 92 Stat. 629
(FSMD vcsasevuiiiativndiubleinvamabuendaaaeiedibadiadassiilias 6

LEGISLATIVE HISTORY
124 Cong. Rec. 2092-93 (Feb. 2, 1978).............006 8

IN THE

Supreme Court of the United States
No. 02-1215

THE PRODUCER COALITION,

Petitioner,
Vv.

FEDERAL ENERGY REGULATORY COMMISSION, et al.,
Respondents.

No. 02-1265

EXXONMOBIL GAS MARKETING COMPANY,
A DIVISION OF EXXON MOBIL CORPORATION, ef ai.,

Petitioners,
7.

FEDERAL ENERGY REGULATORY COMMISSION, et al.,

Respondents.

On Petitions for Writs of Certiorari to the
United States Court of Appeals
for the District of Columbia Circuit

BRIEF OF RESPONDENT
WILLIAMS GAS PROCESSING-GULF COAST
COMPANY, L.P. IN OPPOSITION

Respondent Williams Gas Processing-Gulf Coast Com-
pany, L.P. (“Williams”) respectfully requests that this Court
deny the above-captioned petitions for writs of certiorari,

2

which seek review of ExxonMobil Gas Marketing Co. v.
FERC, 297 F.3d 1071 (D.C. Cir. 2002) (“ExxonMobil”).
Williams, an intervenor in the proceedings below, owns and
operates natural gas gathering and processing facilities on the
Outer Continental Shelf (“OCS”) of the Gulf of Mexico. In
ExxonMobil, the United States Court of Appeals for the
District of Columbia Circuit (“D.C. Circuit’) upheld orders of
the Federal Energy Regulatory Commission (“FERC” or the
“Commission” ruling that certain OCS facilities owned by
Respondent Sea Robin Pipeline Company (“Sea Robin’) are
natural gas “gathering” facilities, which are exempt from
FERC’s jurisdiction pursuant to section 1(b) of the Natural
Gas Act (“NGA”). 15 U.S.C. § 717(b). Petitioners assert that
the orders affirmed in ExxonMobil reflect an impermissible
interpretation of the NGA’s gathering exemption. Williams
respectfully submits that the D.C. Circuit properly applied the
two-step analysis prescribed by this Court in Chevron U.S.A.
Inc. v. Natural Resources Defense Council, 467 U.S. 837
(1984), in ruling that FERC’s interpretation of NGA section
1(b) is reasonable. Accordingly, review by this Court is
unwarranted.

SUMMARY

The central theme of the petitions is that the classification
of various of Sea Robin’s OCS facilities as exempt
“gathering” leaves Sea Robin as an unconstrained monopolist
on the OCS and, thus, review of ExxonMobil is warranted to
protect consumers from unregulated rates on OCS pipelines.
But Petitioners fail to mention the most important fact: in
ExxonMobil, FERC did not relinquish jurisdiction over any
rates on any OCS pipeline.

Thus, after ExxonMobil, just as before, FERC continues to
exercise plenary rate jurisdiction over Sea Robin’s entire
pipeline system, including the “gathering” facilities at issue
here, because Sea Robin remains a “natural gas company”
under the NGA. In final, nonappealable rate determinations,

3

FERC ordered Sea Robin to file gathering rates, found those
rates to be “unjust and unreasonable” under NGA section 5,
established procedures to set just and reasonable gathering
rates, and ultimately approved a settlement (to which the
Petitioners are parties) establishing reduced gathering rates.'
On this basis alone, the petitions should be denied.

Moreover, even under Petitioners’ hypothetical case where
NGA rate regulation over gathering would be relinquished,
there still would not be a regulatory gap. Petitioners’
contrary claims disregard the fact that Congress enacted
the Outer Continental Shelf Lands Act (“OCSLA”), 43
U.S.C. § 1331, et seq., to guarantee shippers open and
nondiscriminatory access to all OCS pipelines, including
NGA-exempt gathering lines.

Finally, ExxonMobil is consistent with the decisions of this
Court and each of the Circuits that have addressed similar
issues. In fact, in an earlier phase of this case, on the
identical facts, the Fifth Circuit vacated and remanded FERC
orders that attempted the same result Petitioners seek here,
that is, to assert jurisdiction over Sea Robin’s entire system.
Sea Robin Pipeline Co. v. FERC, 127 F.3d 365 (5th Cir.
1997) (“Sea Robin-I’).2 Petitioners would jettison the legal
basis that has governed more than fifty years of natural gas
industry regulation, including the past two decades of
industry restructuring that has increased competition and
market access through the “unbundling” of natural gas sales,
transportation, and gathering services.

' Sea Robin Pipeline Co., 87 FERC 4 61,384, at 62,432, ordering para.
(C) (1999), reh’g denied, 92 FERC { 61,072 (2000), reh’g denied, 94
FERC 4 61,137, at 61,525 (2001), on compliance filing, 95 FERC
{ 61,329, at 62,172-73, approving settlement, 98 FERC 4 61,263 (2002).

? Dissatisfied with the decision of the Fifth Circuit, Petitioners
appealed FERC’s remand orders (which divided Sea Robin’s system into
jurisdictional and nonjurisdictional segments) to the D.C. Circuit, which
again rejected Petitioners’ position.

4
STATUTES INVOLVED

In addition to the statutes attached to the petitions, this case
involves various provisions of the OCSLA, which are
reproduced in the Appendix to this brief.

STATEMENT OF THE CASE

The reclassification of portions of Sea Robin’s system as
exempt “gathering” is an outgrowth of congressional and
regulatory enactments that have restructured the natural gas
industry. Since the NGA’s inception in 1938, section 1(b)
has stated that the NGA “shall not apply to . . . the production
or gathering of natural gas.” 15 U.S.C. § 717(b). Consistent
with that statutory restriction, FERC has never regulated
gathering performed by “independent” gatherers, i.e., those
that do not also provide bundled NGA-jurisdictional services.
In contrast, gathering and production activities performed by
interstate pipelines have long been FERC-regulated because
those activities were “bundled” with the pipelines’ NGA-
jurisdictional sales and transportation services.

In the 1970s, the structure of the natural gas industry
changed dramatically in response to the failure of gas price
controls and resulting gas shortages. See United Distrib. Cos.
v. FERC, 88 F.3d 1105, 1123 (D.C. Cir. 1996). Those
circumstances prompted Congress to enact measures to limit
regulation and foster competition in the natural gas industry.
For example, the Natural Gas Policy Act of 1978, 15 U.S.C.
§ 3301, et seq., required the phased deregulation of wellhead
prices for certain categories of gas, and later the Natural
Gas Wellhead Decontrol Act of 1989, Pub. L. No. 101-60,

* Such authority was recognized by this Court in Colorado Interstate
Gas Co. v. FPC, 324 U.S. 581, 603 (1945) (NGA “does not preclude the
Commission from reflecting the production and gathering facilities of a
natural gas company .. . for the purposes of determining the
reasonableness of rates subject to its jurisdiction”).

2 te RR

5

103 Stat. 157 (1989), phased out all remaining wellhead price
controls. Following Congress’ lead, FERC established a
program of open-access and nondiscriminatory transportation,
and later mandated the unbundling of gas sales and interstate
_ transportation. Conoco Inc. v. FERC, 90 F.3d 536, 539-40
(D.C. Cir. 1996). Congress saw the Commission’s imple-
mentation of open-access transportation as “essential” to its
decision to deregulate wellhead sales. See United Distri-
bution, 88 F.3d at 1125.

This restructuring ended the interstate pipelines’ decades-
old role as merchants of bundled service (i.e., purchasing,
gathering, transporting, and reselling natural gas as a single
service) and transformed them into open-access transporters,
effectively serving as common carriers. See id. at 1122-30.
Absent their former merchant sales obligations, pipelines no
longer needed to own extensive gathering systems to secure
gas supplies (see Conoco, 90 F.3d at 539-41), and pipelines
began “unbundling” their NGA-exempt gathering facilities
from their NGA-regulated transportation facilities. To assure
implementation of these policies, FERC required pipelines to
“separately identify cost components attributable to trans-
portation, storage, and gathering costs.’* With gathering
“unbundled” as a stand-alone service, various interstate
pipelines transferred their gathering facilities to non-NGA-
regulated companies that could compete on equal footing
with non-NGA-regulated independent gatherers, such ‘as a
number of the Petitioners (or their affiliates). See Conoco, 90
F.3d at 541. Over the past two decades, onshore pipelines

4 Policy Statement Providing Guidance with Respect to the Designing
of Rates, 47 FERC § 61,295, at 62,059 (1989), (quoting regulations now
codified at 18 C.F.R. § 284.10(c)(2)). See also Natural Gas Gathering
Services Performed by Interstate Pipelines and Interstate Pipeline
Affiliates, 65 FERC § 61,136, at 61,690 (1993) (“The Commission has
required gathering rates to be separately stated and unbundled from
mainline transportation rates in a number of restructuring cases.”).

6

have largely completed their unbundling of gathering, and
offshore pipelines, such as Sea Robin, likewise have re-
quested FERC determinations to identify and unbundle their
NGA-exempt gathering facilities.”

In tandem with these pro-competitive restructuring
initiatives, Congress amended and strengthened the OCSLA
to ensure the expeditious and orderly development of OCS
resources consistent with certain “competitive principles” to
protect OCS shippers. See OCSLA Amendments of 1978,
Pub. L. No. 95-372, 92 Stat. 629 (1978). Among other
things, the OCSLA requires all OCS pipelines to “provide
open and nondiscriminatory access to both owner and
nonowner shippers.” 43 U.S.C. § 1334(f)(1)(A).

REASONS FOR DENYING THE PETITIONS

A. This Case Is Not Appropriate For Review Because
The Claimed Harm To Consumers Is Non-
Existent.

Petitioners claim that review is necessary to protect the
reliance interests of gas producers arising from prior NGA
regulation of OCS facilities, and to protect gas consumers
from unregulated rates on OCS pipelines. Petitioners’
contention has no merit. The harm alleged in their petitions
does not exist here because FERC has not relinquished NGA
rate jurisdiction over any of the facilities at issue.

> Originally, Sea Robin requested a declaratory order that its entire
pipeline system functions as NGA-exempt gathering. FERC denied that
request, ruling that Sea Robin’s entire system is jurisdictional. Sea Robin
Pipeline Co., 71 FERC 4 61,351 (1995), reh’g denied, 75 FERC § 61,332
(1996). On appeal in Sea Robin-l, the Fifth Circuit vacated and remanded
FERC’s orders. On remand, FERC ruled that the portion of Sea Robin’s
system upstream of the Vermilion 149 Station is NGA-exempt gathering,
while the portion downstream of that point is jurisdictional. Petitioners
appealed FERC’s remand orders in ExxonMobil.

7

Specifically, notwithstanding FERC’s determination that a
portion of Sea Robin’s OCS facilities constitute exempt
“gathering” under NGA section 1(b), FERC ruled that it has
full NGA rate authority over Sea Robin’s entire offshore
system, including its gathering facilities:

Sea Robin also asserts that the Commission lacks the
authority to require Sea Robin to file gathering rates
after revoking its NGA Section 7 certificate for the
gathering facilities. Sea Robin is incorrect. In Northern
Natural Gas Company, Division of Enron Corp. v.
FERC, 929 F.2d 1261, 1263 (8th Cir. 1991), cert.
denied, 502 U.S. 856 (1991), the Court ruled that the
FERC “may regulate rates charged for transportation on
the company’s own gathering facilities performed in
connection with jurisdictional interstate transportation.”
Here, Sea Robin still owns the subject gathering
facilities that are used to bring gas to the jurisdictional
portion of its system where <he gas continues on its way
in interstate commerce. As a result, Sea Robin's
gathering rates are within the Commission's rate juris-
diction under the NGA.

Sea Robin, 94 FERC at 61,525 (emphasis added) (footnote
omitted). Moreover, FERC exercised its NGA authority in
ruling that Sea Robin’s rates, including its gathering rates, are
“unjust and unreasonable” and requiring Sea Rubin to file
“separately stated, fully allocated, cost-based rates for [its]
transportation and gathering services.” Sea Robin, 95 FERC
at 61,172 (footnote omitted). It bears emphasis that the
Petitioners participated in Sea Robin’s rate proceeding and
successfully argued that FERC should require Sea Robin to
reduce its rates for gathering and other services.

In short, the lynchpin of Petitioners’ claims regarding the
necessity for this Court’s review, specifically, FERC’s

a

8

purported relinquishment of NGA rate jurisdiction, is non-
existent. For that reason alone, review by this Court cannot
be justified.

B. Even Under Petitioners’ Hypothetical Of Dis-
continued FERC Rate Regulation, There Is No
“Regulatory Gap” With Respect To OCS
Gathering Lines.

Moreover, even assuming the validity of Petitioners’
hypothetical, i.e., the absence of NGA regulation over OCS
gathering lines, no regulatory gap would result, contrary to
Petitioners’ claims.° That is because the OCSLA protects all
shippers on all OCS pipelines, including NGA-exempt
gathering lines.

When Congress amended the OCSLA in 1978 (at about the
same time that it commenced partial decontrol of wellhead gas
prices), it specifically rejected an amendment to extend NGA
jurisdiction to all OCS gas pipelines. 124 Cong. Rec. 2092-93
(Feb. 2, 1978). Moreover, Congress recognized that “the Outer
Continental Shelf is a vital national resource . . . which should
be made available for expeditious and orderly developmient
. .. In a manner which is consistent with the mairtenance of
competition and other national needs.” 43 U.S.C. § 1332(3)
(emphasis added). See also 43 U.S.C. § 1801(7) (finding that
the OCS must be managed “to preserve and maintain
competition”); 43 U.S.C. § 1802(2)(D) (a purpose of the Act
is “to preserve and maintain free enterprise competition”);

° Of course, a purported “regulatory gap” cannot support Commission
jurisdiction over facilities that otherwise qualify as exempt “gathering.”
ExxonMobil, 297 F.3d at 1088 (“We emphatically agree that ‘need for
regulation cannot alone create authority to regulate’”) (quoting Sea Robin-
I, 127 F.3d at 371); Northwest Pipeline Co. v. FERC, 905 F.2d 1403, 1412
(10th Cir. 1990) (“If, upon proper application of the primary function test,
the facilities are indeed exempt from Commission jurisdiction, whatever
‘attractive [regulatory] gap’ results was clearly created by Congress.”).

9

43 U.S.C. § 1334(a) (requiring consultation with the Attorney
General on “matters which may affect competition”); 43
U.S.C. § 1334(f) (mandating “competitive principles” to
govern OCS pipeline operations).

Chief among those “competitive principles” was Congress’
mandate that all OCS pipelines “must provide open and
nondiscriminatory access to both owner and nonowner
shippers.” 43 U.S.C. § 1334 (f)(1)(A). Other sections of the
OCSLA allow FERC in appropriate circumstances to allocate
pipeline capacity in “proportionate amounts” (43 U.S.C. § 1334
(e)), order pipeline expansions (43 U.S.C. § 1334 (f)(1)(B)),
and condition permits to ensure compliance with the OCSLA’s
“competitive principles.” 43 U.S.C. § 1334 (f)(1). Violators of
the OCSLA are subject to injunctions and civil and criminal
penalties (43 U.S.C. § 1350), as well as citizens suits. 43
U.S.C. § 1349. To implement these congressional mandates,
FERC policy calls for vigorous response to complaints filed
pursuant to the OCSLA by shippers on OCS -gathering
pipelines. OCS Policy Statement, 74 FERC § 61,222, at
61,758 (1996).

In short, Congress was well aware that its OCSLA
regulatory scheme would leave OCS “gathering” pipelines
exempt from NGA rate regulation, but chose instead to
regulate OCS pipelines by enhancing “competition” and
providing comprehensive mechanisms, described above, to
prevent abuse in the marketplace. Thus, Congress avoided
the purported “regulatory gap” about which Petitioners
complain.

e. ExxonMobil Is Consistent With Decisions Of This
Court And Other Circuits.

The decision below properly applied Chevron’s two-step
analysis in reviewing FERC’s interpretation of the term
“gathering” as used in NGA section 1(b). In that regard, no
party disputes that, in the NGA, Congress has not “directly

10

spoken to” the meaning of the term “gathering.” Chevron,
467 U.S. at 842. Thus, the reviewing court’s task is to
determine “whether the agency’s answer is based on a
permissible construction of the statute” (id. at 843), and it
must accord “deference” and “considerable weight” to the
agency’s construction of the statute. /d. at 844. Ignoring
Chevron, Petitioners argue that FERC’s interpretation of
NGA section 1(b) conflicts with Northern Natural Gas Co. v.
State Corp. Commission, 372 U.S. 84 (1963) and other
decisions of this Court and the Circuits. Petitioners’ position
is seriously flawed.

1. Northern Natural is a preemption case that concerned
orders of the Kansas State Corporation Commission
attempting to regulate the manner in which pipelines purchase
gas from production fields for resale in interstate markets.
The Corporation Commission’s orders required each pipeline
to purchase gas “ratably” from all Kansas wells to which a
given pipeline was connected. /d. at 86. This Court rejected
the argument that the NGA’s “gathering or production”
exemption allowed the state to dictate the manner in which
sales are made in interstate markets. /d. at 89-93. The Court
explained that “‘production’ and ‘gathering’ are terms
narrowly confined to the physical acts of drawing the gas
from the earth and preparing it for the first stages of
distribution.” Jd. at 90 (emphasis added). Petitioners distort
the holding of Northern Natural, which recognized the
“physical” basis for NGA-exempt gathering, as distinct from
“business” activities such as gas sales conducted from the
gathering facilities. See also Phillips Petroleum Co. v.
Wisconsin, 347 U.S. 672, 678, 681 (1954) (“the ‘production
or gathering’ exemption applies to the physical activities,
facilities, and properties used in the production and gathering

11

of natural gas,” but not to “the ‘business’ of production or
gathering, with the sale of the product considered an integral
part of such ‘business.””).’

The jurisdictional determination affirmed below is fully
consistent with the “physical” nature of gathering recognized
in Northern Natural and Phillips. Indeed, for over fifty years,
the Commission has distinguished non-jurisdictional gath-
ering from jurisdictional transportation based on various
“physical criteria,” and since 1983 those criteria have been
embodied in the Commission’s “primary function” test.
ExxonMobil, 297 F.3d at 1077. In this case, the Commission
considered “13 physical factors . . . in concluding that the
[Sea Robin] facilities upstream of the Vermilion 149 Station
are engaged in non-jurisdictional gathering.” Jd. at 1081
(emphasis added). Moreover, the Sea Robin system “carries
a raw stream of unpurified natural gas and_ liquid
hydrocarbons taken directly from the gas wells” (id. at 1078),
and delivers the raw gas to compressor stations and
processing plants near Erath, Louisiana, “where the gas is
separated, dehydrated, and processed . . . [in preparation] for
delivery to downstream transmission pipelines at five nearby
entry points.” Jd. Such physical factors are fully consistent
with the Court’s recognition in Northern Natural that
gathering involves “preparing [the gas] for the first stages of
distribution.”* 372 U.S. at 90.

J Additionally, while Phillips held that producer sales for resale in
interstate commerce are subject to FERC’s jurisdiction, Phillips left intact
FERC’s (then the Federal Power Commission) NGA exemption for gas
processing plants and the pipelines delivering gas to them. See Phillips
Petroleum Co., 10 FPC 246, 277-78 (1951).

* The fact that Sea Robin’s entire System moves raw, unprocessed gas
to Erath for processing indicates that Sea Robin’s entire system may serve
an NGA-exempt gathering function, as Sea Robin contended in its
original petition to FERC. See supra note 5. Indeed, the court below (297
F.3d. at 1084) stated: “Were we the Federal Energy Regulatory Com-

12

Ignoring the “physical” realities of gathering recognized in
Northern Natural and Phillips (as well as over fifty years of
Commission practice), Petitioners argue that “[i]n section
1(b) of the NGA, Congress adopted the ‘mechanical’ line of
this Court’s Commerce Clause cases ‘as the statutory line
dividing federal and state jurisdiction’” (Petition No. 02-1265
at 13) (internal quotes omitted), and that the scope of
gathering is limited by a purported “congressional intent to
occupy the field of interstate commerce in natural gas.” /d. at
18. Petitioners’ theory is flatly contradicted by this Court’s
reccegnition that:

When it enacted the NGA, Congress carefully divided
up regulatory power over the natural gas industry. /f
“did not envisage federal regulation of the entire
natural-gas field to the limit of constitutional power.
Rather it contemplated the exercise of federal power as
specified in the Act.”

Northwest Cent. Pipeline Corp. v. State Corp. Comm'n, 489
U.S. 493, 510 (1989) (quoting FPC v. Panhandle E. Pipe Line
Co., 337 U.S. 498, 502-03 (1949)) (emphasis added).
Recognizing Congress’ careful limitation of federal authority
under the NGA, in Northwest Central the Court explained
that section 1(b)’s gathering and production exemption,

mission, we might draw the [jurisdictional] line at Erath.” However, the
issue of whether FERC should have found Sea Robin’s entire system
nonjurisdictional was not before the court in ExxonMobil because Sea
Robin did not appeal FERC’s orders on remand in Sea Robin-l.
Additionally, despite Petitioners’ repeated references to “consumer
protection” concerns, the raw, unprocessed gas moved by Sea Robin is
not suitable for sale to consumer markets and indeed no such consumer
markets exist on the OCS. Rather, in the restructured natural gas industry,
gas prices are set by competitive forces at the market or market “hubs”
well downstream of the field, while upstream producers and transporters
(including gatherers) allocate their respective shares of the downstream
market-set price on a “netback” basis. See Shell Gas Pipeline Co., 78
FERC 4 61,192, at 61,828-29 (1997) (Santa, Comm’r dissenting).

13

“expressly reserv[ed] to the States the power to regulate,
among other things ‘the production or gathering of natural
gas,’ that is, ‘the physical acts of drawing gas frem the earth
and preparing it for the first stages of distribution.’”” Jd.
(quoting Northern Natural, 372 U.S. at 90). Thus, Petitioners’
theory that Congress defined the NGA gathering exemption
as narrowly as constitutionally permissible is conclusively
refuted by Northwest Central’s recognition that the NGA’s
gathering exemption is not constricted by “federal regulation
. .. to the limit of constitutional power.” Jd.

Finally, the erroneous nature of Petitioners’ restrictive
interpretation of NGA section 1(b) is also demonstrated by
the fact that gathering commonly occurs in very large
pipeline networks that extend across state borders and
undeniably operate in interstate commerce. In fact, the
gathering systems involved in Phillips consisted of “nine such
networks of pipelines” of which “five are located entirely in
Texas, one in Oklahoma, one in New Mexico, and two extend
in both Texas and Oklahoma.” Phillips, 347 U.S. at 675
(emphasis added).

2. ExxonMobil is also consistent with decisions of other
Circuits that have addressed the scope of NGA-exempt
gathering. While Petitioners strain to portray a conflict

” Likewise, a number of Circuit decisions have recognized that NGA-
exempt gathering can occur in large pipeline systems operating in
interstate commerce. See e.g., Pac. Gas & Elec. Co. v. FERC, 106 F.3d
1190, 1193 (Sth Cir. 1997) (affirming the Commission’s relinquishment
of NGA jurisdiction over twenty-nine gathering facilities in New Mexico,
Colorado, Oklahoma, and Texas); Northwest Pipeline, 905 F.2d at 1404
(overturning FERC’s assertion of jurisdiction over six gathering facilities
in Colorado and Utah); Conoco, 90 F.3d at 541-50 (affirming FERC’s
relinquishment of jurisdiction over gathering facilities located at 105 sites
in Arkansas, Louisiana, Oklahoma, and Texas); and Lomak Petroleum,
Inc. v. FERC, 206 F.3d 1193, 1195-98 (D.C. Cir. 2000) (affirming
FERC’s relinquishment of jurisdiction over a gathering system located in
New York and Pennsylvania).

14

among the Circuits, just the opposite is true. '° The Circuits
that have addressed this issue have unanimously endorsed a
multi-factor analysis to identify NGA-exempt gathering
facilities based on the physical criteria of the Commission’s
“primary function” test. In fact, in an earlier phase of these
proceedings, the Fifth Circuit—just like the D.C. Circuit in
ExxonMobil—specifically rejected the Petitioners’ position
on the merits. Thus, in Sea Robin-/ the Fifth Circuit vacated
and remanded the Commission’s initial orders attempting to
assert jurisdiction over Sea Robin’s entire pipeline system,
i.e., the jurisdictional result advocated by Petitioners. The
Fifth Circuit recognized that “Congress drew a distinction
based on the physical patterns of the industry, gathering
versus transporting,” and admonished the Commission for
placing too much reliance on “non-physical” factors. Sea
Robin-I, 127 F.3d at 371 (emphasis added). The Fifth Circuit
held that “[i]f the Commission is to remain tethered to statute,
as it must, that [jurisdictional] inquiry must be based
primarily on physical criteria and the realities of the field.”
Id. (emphasis added). The Fifth Circuit even suggested that
FERC might (as FERC, in fact, did) adopt the Vermilion
Compressor Station as the jurisdictional demarcation point:

Discomfort in drawing jurisdictional lines at points
internal to an overall system may be soothed with the
reminder that Congress did not intend to extend FERC’s
jurisdiction to all natural gas pipelines; indeed it
demands the drawing of jurisdictional lines, even when
the end of gathering is not easily located (consider, for

” Petitioners cite Circuit cases applying the unsurprising principle that

exceptions to a primary grant of authority should be strictly construed (see
Petition No. 02-1265 at 18), a principle with which ExxonMobil and the
subject FERC orders are fully consistent, as demonstrated by FERC’s
very conservative approach to relinquishing jurisdiction in the face of
record facts supporting a much broader nonjurisictional finding. See
supra note 8.

15

example, a distinction between the field south of the
Vermillion [sic] Compressor Station and the pipelines
leading north to Erath, Louisiana).

Id. In sum, ExxonMobil is fully consistent with the holding
and reasoning of the Fifth Circuit’s decision on the identical
facts in Sea Robin-I. Indeed, the instant Petitions are
effectively collateral attacks on Sea Robin-I.

Additionally, in EP Operating Co. v. FERC, 876 F.2d 46
(Sth Cir. 1989), the Fifth Circuit reversed the Commission’s
attempt to assert jurisdiction over a 51-mile OCS pipeline.
The court expressly rejected the theory (espoused by
Petitioners in the proceedings below) that exempt “gathering”
ends at the upstream floating platforms where gas is
produced. /d. at 49. The court ruled that the Commission’s
jurisdictional determination under the “primary function” test
must be based on “consideration of all the facts and
circumstances . . . rather than application of any overarching
bright line standards” (id. at 48), and found that the subject
51-mile pipeline functioned as “an integral part of the natural
gas gathering system” because it “is simply the most practical
way to move the product from the seabed to a point nearer
shore where it can be processed and introduced into a
pipeline.” /d. at 49.

Similarly, in Northwest Pipeline the Tenth Circuit over-
turned the Commission’s attempt to assert jurisdiction over
various gathering facilities owned by an interstate pipeline
and rejected the Commission’s argument that “ultimately, the
facilities are owned by and eventually connected to a
company which has as its primary function the interstate
transportation of gas.” 905 F.2d at 1410. The Tenth Circuit
emphasized that “[t]he gathering exemption was not meant to
attach only to certain owners/operators but to facilities” (id. at
1411), and found that the physical factors of the Com-

16

mission’s primary function analysis had been improperly
“subsumed” by the non-physical ownership consideration.
Id. at 1409-11."!

D. NGA Section 7(b) Abandonment Requirements Do
Not Apply To NGA-Exempt Gathering Facilities.

Nor is there any merit to Petitioners’ claim that FERC was
required to conduct a public interest “abandonment” analysis
under NGA section 7(b) with respect to facilities found to be
NGA-exempt gathering. Petition No. 1265 at 22-27. First, as a
practical matter, Sea Robin did not “abandon” any services (/.e.,
service was not terminated to any customers). See ExxonMobil,
297 F.3d at 1088. Second, and more fundamentally, in
Panhandle, 337 U.S. at 509, this Court, relying on the plain
words of the statute, held that the abandonment requirements of
NGA section 7(b) apply only to “facilities subject to the
jurisdiction of the Commission,” and not to “gathering”
facilities exempt from the NGA under section 1(b). The Court
rejected arguments of the Federal Power Commission (now
FERC) that otherwise exempt production or gathering facilities
would nevertheless be subject to section 7(b):

The argument here is that since natural gas is the
“lifeblood” of a pipe-line system, a company by disposing
of its gas reserves, unhampered by Commission control,
may render itself unable to continue service; consequently
abandonment of facilities and service without the consent
of the Commission will result. The argument begs the

Finally, Petitioners argue that FERC’s nonjurisdictional
determination for portions of Sea Robin’s system must be unreasonable
because a jurisdictional pipeline (the Garden Banks pipeline)
interconnects with Sea Robin’s gathering facilities. _ However, the
ExxonMobil court properly disposed of that argument noting that in prior
cases presenting such a circumstance, the jurisdictional upstream pipeline
was ultimately reclassified, which “suggests that it is the Garden Banks
pipeline, rather than Sea Robin, that has been erroneously classified.” 297
F.3d at 1087.

17

question. The section, like those above, covers only
“facilities subject to the jurisdiction of the Commission.”

To accept these arguments springing from power to
allow interstate service, fix rates, and control aban-
donment would establish wide control by the Federal
Power Commission over the production and gathering of
gas. It would invite expansion of power into other phases
of the forbidden area. It would be an assumption of
powers specifically denied the Commission by the words
of the Act....

Id. at 509 (footnotes omitted) (emphasis added).'”

CONCLUSION

Wherefore, Respondent Williams Gas Processing-Gulf
Coast Company respectfully submits that the Petitions for
Writs of Certiorari should be denied.

Respectfully submitted,

MARI M. RAMSEY JAMES T. MCMANUS

Senior Attorney (Counsel of Record)
THE WILLIAMS COMPANIES JOSEPH S. KOURY
One Williams Center, 41st Floor WRIGHT & TALISMAN, P.C.
Tulsa, Oklahoma 74172 1200 G Street, N.W., Suite 600
(918) 588-2611 Washington, D.C. 20005

(202) 393-1200
Counsel for Williams Gas Processing-Gulf Coast Company, L.P.
May 30, 2003

'? The abandonment cases cited by Petitioner (Petition No. 02-1265 at 22-
25) are off point. In ExxonMobil, the subject service was NGA-exempt
gathering, while the cases cited by Petitioner involved the abandonment of
NGA-jurisdictional sales or transportation services.

APPENDIX

la
APPENDIX

Excerpts from Outer Continental Shelf Lands Act, 43
U.S.C. § 1331, et seq.

43 U.S.C. § 1332 (2003)
§ 1332. Congressional declaration of policy

It-is hereby declared to be the policy of the United States
that—

(1) the subsoil and seabed of the outer Continental Shelf
appertain to the United States and are subject to its
jurisdiction, control, and power of disposition as provided in
this Act;

(2) this Act shall be construed in such a manner that the
character of the waters above the outer Continental Sheif as
high seas and the right to navigation and fishing therein shall
not be affected;

(3) the outer Continental Shelf is a vital national resource
reserve held by the Federal Government for the public, which
should be made available for expeditious and orderly
development, subject to environmental safeguards, in a
manner which is consistent with the maintenance of
competition and other national needs;

(4) since exploration, development, and production of the
minerals of the outer Continental Shelf will have significant
impacts on coastal and non-coastal areas of the coastal States,
and on other affected States, and, in recognition of the
national interest in the effective management of the marine,
coastal, and human environments—

(A) such States and their affected local governments
may require assistance in protecting their coastal zones and
other affected areas from any temporary or permanent
adverse effects of such impacts;

2a

(B) the distribution of a portion of the receipts from the
leasing of mineral resources of the outer Continental Shelf
adjacent to State lands, as provided under section 8(g) [43
U.S.C. § 1337(g)], will provide affected coastal States and
localities with funds which may be used for the mitigation of
adverse economic and environmental effects related to the
development of such resources; and

(C) such States, and through such States, affected local
governments, are entitled to an opportunity to participate, to
the extent consistent with the national interest, in the policy
and planning decisions made by the Federal Government
relating to exploration for, and development and production
of, minerals of the outer Continental Shelf].;]

(5) the rights and responsibilities of all States and, where
appropriate, local governments, to preserve and protect their
marine, human, and coastal environments through such
means as regulation of land, air, and water uses, of safety, and
of related development and activity should be considered and
recognized; and

(6) operations in the outer Continental Shelf should be
conducted in a safe manner by well-trained personnel using
technology, precautions, and techniques sufficient to prevent
or minimize the likelihood of blowouts, loss of well control,
fires, spillages, physical obstruction to other users of the
waters or subsoil and seabed, or other occurrerices which may
cause damage to the environment or to property, or endanger
life or health.

43 U.S.C. § 1334 (2003)
§ 1334. Administration of leasing

(a) Rules and regulations; amendment; cooperation with State
agencies; subject matter and scope of regulations.

The Secretary shall administer the provisions of this Act
relating to the leasing of the outer Continental Shelf, and shall

3a

prescribe such rules and regulations as may be necessary to
carry out such provisions. The Secretary may at any time
prescribe and amend such rules and regulations as he
determines to be necessary and proper in order to provide for
the prevention of waste and conservation of the natural
resources of the outer Continental Shelf, and the protection of
correlative rights therein, and, notwithstanding any other
provisions herein, such rules and regulations shall, as of their
effective date, apply to all operations conducted under a lease
issued or maintained under the provisions of this Act. In the
enforcement of safety, environmental, and conservation laws
and regulations, the Secretary shall cooperate with the
relevant departments and agencies of the Federal Government
and of the affected States. In the formulation and
promulgation of regulations, the Secretary shall request and
give due consideration to the views of the Attorney General
with respect to matters which may affect competition. In
considering any regulations and in preparing any such views,
the Attorney General shail consult with the Federai Trade
Commission. The regulations prescribed by the Secretary
under this subsection shall include, but not be limited to,
provisions—

(1) for the suspension or temporary prohibition of any
operation or activity, including production, pursuant to any
lease or permit (A) at the request of a lessee, in the national
interest, to facilitate proper development of a lease or to allow
for the construction or negotiation for use of transportation
facilities, or (B) if there is a threat of serious, irreparable, or
immediate harm or damage to life (including fish and other
aquatic life), to property, to any mineral deposits (in areas
leased or not leased), or to the marine, coastal, or human
environment, and for the extension of any permit or lease
affected by suspension or prohibition under clause (A) or (B)
by a period equivalent to the period of such suspension or
prohibition, except that no permit or lease shall be so
extended when such suspension or prohibition is the result of

4a

gross negligence or willful violation of such lease or permit,
or of regulations issued with respect to such lease or permit;

(2) with respect to cancellation of any lease or permit—

(A) that such cancellation may occur at any time, if the
Secretary determines, after a hearing, that—

(i) continued activity pursuant to such lease or permit
would probably cause serious harm or damage to life
(including fish and other aquatic life), to property, to any
mineral (in areas leased or not leased), to the national security
or defense, or to the marine, coastal, or human environment;

(ii) the threat of harm or damage will not disappear or
decrease to an acceptable extent within a reasonable period of
time; and

(iii) the advantages of cancellation outweigh the
advantages of continuing such lease or permit in force;

(B) that such cancellation shall not occur unless and
until operations under such lease or permit shall have been
under suspension, or temporary prohibition, by the Secretary,
with due extension of any lease or permit term continuously
for a period of five years, or for a lesser period upon request
of the lessee;

(C) that such cancellation shall entitle the lessee to
receive such compensation as he shows to the Secretary as
being equal to the lesser of (i) the fair value of the canceled
rights as of the date of cancellation, taking account of both
anticipated revenues from the lease and anticipated costs,
including costs of compliance with all applicable regulations
and operating orders, liability for cleanup costs or damages,
or both, in the case of an oilspill, and all other costs
reasonably anticipated on the lease, or (ii) the excess, if any,
over the lessee’s revenues, from the lease (plus interest
thereon from the date of receipt to date of reimbursement) of
all consideration paid for the lease and all direct expenditures

Sa

made by the lessee after the date of issuance of such lease and
in connection with exploration or development, or both,
pursuant to the lease (plus interest on such consideration and
such expenditures from date of payment to date of
reimbursement), except that (I) with respect to leases issued
before the date of enactment of this subparagraph [enacted
Sept. 18, 1978], such compensation shall be equal to the
amount specified in clause (i) of this subparagraph; and (II) in
the case of joint leases which are canceled due to the failure
of one or more partners to exercise due diligence, the
innocent parties shall have the right to seek damages for such
loss from the responsible party or parties and the right to
acquire the interests of the negligent party or parties and be
issued the lease in question;

(3) for the assignment or relinquishment of a lease:
(4) for unitization, pooling, and drilling agreements;

(5) for the subsurface storage of oil and gas other than by
the Federal Government;

(6) for drilling or easements necessary for exploration,
development, and production;

(/)for the prompt and efficient exploration and
development of a lease area; and

(8) for compliance with the national ambient air quality
Standards pursuant to the Clean Air Act (42 U.S.C.§ 7401
et seq.), to the extent that activities authorized under this Act
significantly affect the air quality of any State.

(b) Compliance with regulations as condition for issuance,
continuation, assignment, or other transfer of leases.

The issuance and continuance in effect of any lease, or of
any assignment or other transfer of any lease, under the
provisions of this Act shall be conditioned upon compliance
with regulations issued under this Act.

6a
(c) Cancellation of nonproducing lease.

Whenever the owner of a nonproducing lease fails to
comply with any of the provisions of this Act, or of the lease,
or of the regulations issued under this Act, such lease may be
canceled by the Secretary, subject to the right of judicial
review as provided in this Act, if such default continues for
the period of thirty days after mailing of notice by registered
letter to the lease owner at his record post office address.

(d) Cancellation of producing lease.

Whenever the owner of any producting lease fails to
comply with any of the provisions of this Act, of the lease, or
of the regulations issued under this Act, such lease may be
forfeited and canceled by an appropriate proceeding in any
United States district court having jurisdiction under the
provisions of this Act.

(e) Pipeline rights of way; forfeiture of grant.

Rights-of-way through the submerged lands of the outer
Continental Shelf, whether or not such lands are included in a
lease maintained or issued pursuant to this Act, maybe
granted by the Secretary for pipeline purposes for the
transportation of oil, natural gas, sulphur, or other minerals,
or under such regulations and upon such conditions as may be
prescribed by the Secretary, or where appropriate the
Secretary of Transportation, including (as provided in section
21(b) of this Act [43 U.S.C. § 1347(b)]) assuring maximum
environmental protection by utilization of the best available
and safest technologies, including the safest practices for
pipeline burial and upon the express condition that 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

Ta

interested parties, determine to be reasonable, taking into
account, among other things, conservation and the prevention
of waste. Failure to comply with the provisions of this section
or the regulations and conditions prescribed under this section
shall be ground for forfeiture of the grant in an appropriate
judicial proceeding instituted by the United States in any
United States district court having jurisdiction under the
provisions of this Act.

(f) Competitive principles governing pipeline operation.

(1) Except as provided in paragraph (2), every permit,
license, easement, right-of-way, or other grant of authority for
the transportation by pipeline on or across the outer
Continental Shelf of oil or gas shall require that the pipeline
be operated in accordance with the following competitive
principles: -

(A) The pipeline must provide open and_nondis-
criminatory access to both owner and nonowner shippers.

(B) Upon the specific request of one or more owner or
nonowner shippers able to provide a guaranteed level of
throughput, and on the condition that the shipper or shippers
requesting such expansion shall be responsible for bearing
their proportionate share of the costs and risks related thereto,
the Federal Energy Regulatory Commission may, upon
finding, after a full hearing with due notice thereof to the
interested parties, that such expansion is within technological
limits and economic feasibility, order a subsequent expansion
of throughput capacity of any pipeline for which the permit,
license, easement, right-of-way, or other grant of authority is
approved or issued after the date of enactment of this
subparagraph [enacted Sept. 18, 1978]. This subparagraph
shall not apply to any such grant of authority approved or
issued for the Gulf of Mexico or the Santa Barbara Channel.

(2) The Federal Energy Regulatory Commission may, by
order or regulation, exempt from any or all of the

8a

requirements of paragraph (1) of this subsection 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.

(3) The Secretary of Energy and the Federal Energy
Regulatory Commission shall consult with and give due
consideration to the views of the Attorney General on specific
conditions to be included in any permit, license, easement,
right-of-way, or grant of authority in order to ensure that
pipelines are operated in accordance with the competitive
principles set forth in paragraph (1) of this subsection. In
preparing any such views, the Attorney General shall consult
with the Federal Trade Commission.

(4) Nothing in this subsection shall be deemed to limit,
abridge, or modify any authority of the United States under
any other provision of law with respect to pipelines on or
across the outer Continental Shelf.

(g) Rates of production.

(1) The leasee [lessee] shall produce any oil or gas, or both,
obtained pursuant to an approved development and
production plan, at rates consistent with any rule or order
issued by the President in accordance with any provision of
law.

(2) If no rule or order referred to in paragraph (1) has been
issued, the lessee shall produce such oil or gas, or both, at
rates consistent with any regulation promulgated by the
Secretary of Energy which is to assure the maximum rate of
production which may be sustained without loss of ultimate
recovery of oil or gas, or both, under sound engineering and
economic principles, and which is safe for the duration of the
activity covered by the approved plan. The Secretary may
permit the lessee to vary such rates if he finds that such
variance is necessary.

9a

(h) Federal action affecting outer Continental Shelf;
notification; recommended changes.

The head of any Federal department or agency who takes
any action which has a direct and significant effect on the
outer Continental Shelf or its development shall promptly
notify the Secretary of such action and the Secretary shall
thereafter notify the Governor of any affected State and the
Secretary may thereafter recommend such changes in such
action as are considered appropriate.

(i) Flaring of natural gas.

After the date of enactment of this section [enacted Sept.
18, 1978], no holder of any oil and gas lease issued or
maintained pursuant to this Act shall be permitted to flare
natural gas from any well unless the Secretary finds that there
is no practicable way to complete production of such gas, or
that such flaring is necessary to alleviate a temporary
emergency situation or to conduct testing or work-over
operations.

(j) Cooperative development of common _hydrocarbon-
bearing areas.

(1) Findings. [(A)] The Congress of the United States finds
that the unrestrained competitive production of hydrocarbons
from a common hydrocarbon-bearing geological area
underlying the Federal and State boundary may result in a
number of harmful national effects, including—

(i) the drilling of unnecessary wells, the installation of
unnecessary facilities and other imprudent operating practices
that result in economic waste, environmental damage, and
damage to life and property;

(ii) the physical waste of hydrocarbons and an
unnecessary reduction in the amounts of hydrocarbons that
can be produced from certain hydrocarbon-bearing areas; and

10a

(iii) the loss of correlative rights which can result in the
reduced value of national hydrocarbon resources and
disorders in the leasing of Federal and State resources.

(2) Prevention of harmful effects. The Secretary shall
prevent, through the cooperative development of an area, the
harmful effects of unrestrained competitive production of
hydrocarbons from a common hydrocarbon-bearing area
underlying the Federal and State boundary.

43 U.S.C. § 1349 (2003)
§ 1349. Citizens suits, jurisdiction and judicial review

(a) Persons who may bring actions; persons against whom
action may be brought; time of action; intervention by
Attorney General; costs and fees; security.

(1) Except as provided in this section, any person having a
valid legal interest which is or may be adversely affected may
commence a civil action on his own behalf to compel
compliance with this Act against any person, including the
United States, and any other government instrumentality or
agency (to the extent permitted by the eleventh amendment to
the Constitution) for any alleged violation of any provision of
this Act or any regulation promulgated under this Act, or of
the terms of any permit or lease issued by the Secretary under
this Act.

(2) Except as provided in paragraph (3) of this subsection,
no action may be comnienced under subsection (a)(1) of this
section—

(A) prior to sixty days after the plaintiff has given notice
of the alleged violation, in writing under oath, to the
Secretary and any other appropriate Federal official, to the
State in which the violation allegedly occurred or is
occurring, and to any alleged violator; or

lla

(B) if the Attorney General has commenced and is
diligently prosecuting a civil action in a court of the United
States or a State with respect to such matter, but in any such
action in a court of the United States any person having a
legal interest which is or may be adversely affected may
intervene as a matter of right.

(3) An action may be brought under this subsection
immediately after notification of the alleged violation in any
case in which the alleged violation constitutes an imminent
threat to the public health or safety or would immediately
affect a legal interest of the plaintiff.

(4) In any action commenced pursuant to this section, the
Attorney General, upon the request of the Secretary or any
other appropriate Federal official, may intervene as a matter
of right.

(5) A court, in issuing any final order in any action brought
pursuant to subsection (a)(1) or subsection (c) of this section,
may award costs of litigation, including reasonable attorney
and expert witness fees, to any party, whenever such court
determines such award is appropriate. The court may, if a
temporary restraining order or preliminary injunction is
sought, require the filing of a bond or equivalent security in a
sufficient amount to compensate for any loss or damage
suffered, in accordance with the Federal Rules of Civil
Procedure.

(6) Except as provided in subsection (c) of this section, all
suits challenging actions or decisions allegedly in violation
of, or seeking enforcement of, the provisions of this Act, or
any regulation promulgated under this Act, or the terms of
any permit or lease issued by the Secretary under this Act,
shall be undertaken in accordance with the procedures
described in this subsection. Nothing in this section shall
restrict any right which any person or class of persons may
have under any other Act or common law to seek appropriate
relief.

12a
(b) Jurisdiction and venue of actions.

(1) Except as provided in subsection (c) of this section, the
district courts of the United States shall have jurisdiction of
cases and controversies arising out of, or in connection with
(A) any operation conducted on the outer Continental Shelf
which involves exploration, development, or production of
the minerals, of the subsoil and seabed of the outer
Continental Shelf, or which involves rights to such minerals,
or (B) the cancellation, suspension, or termination of a lease
or permit under this Act. Proceedings with respect to any
such case or controversy may be instituted in the judicial
district in which any defendant resides or may be found, or in
the judicial district of the State nearest the place the cause of
action arose.

(2) Any resident of the United States who is injured in any
manner through the failure of any operator to comply with
any rule, regulation, order, or permit issued pursuant to this
Act may bring an action for damages (including reasonable
attorney and expert witness fees) only in the judicial district
having jurisdiction under paragraph (1) of this subsection.

(c) Review of Secretary’s approval of leasing program;
review of approval, modification or disapproval of
exploration or production plan; persons who may seek
review; scope of review; certiorari to Supreme Court.

(1) Any action~of the Secretary to approve a leasing
program pursuant to section 18 [43 U.S.C. § 1344] of this
Act shall be subject to judicial review only in the United
States Court of Appeal [Appeals] for the District of
Columbia.

(2) Any action of the Secretary to approve, require
modification of, or disapprove any exploration plan or any
development and production plan under this Act shall be
subject to judicial review only in a United States court of
appeals for a circuit in which an affected State is located.

13a

(3) The judicial review specified in paragraphs (1) and (2)
of this subsection shall be available only to a person who (A)
participated in the administrative proceedings related to the
actions specified in such paragraphs, (B) is adversely affected
or aggrieved by such action, (C) files a petition for review of
the Secretary’s action within sixty days after the date of such
action, and (D) promptly transmits copies of the petition to
the Secretary and to the Attorney General.

(4) Any action of the Secretary specified in paragraph (1)
or (2) shall only be subject to review pursuant to the
provisions of this subsection, and shall be specifically
excluded from citizen suits which are permitted pursuant to
subsection (a) of this section. 7

(5) The Secretary shall file in the appropriate court the
record of any public hearings required by this Act and any
additional information upon which the Secretary based his
decision, as required by section 2112 of title 28, United States
Code. Specific objections to the action of the Secretary shall
be considered by the court only if the issues upon which such
objections are based have been submitted to the Secretary
during the administrative proceedings related to the actions
involved.

(6) The court of appeals conducting a proceeding pursuant
to this subsection shall consider the matter under review
solely on the record made before the Secretary. The findings
of the Secretary, if supported by substantial evidence on the
record considered as a whole, shall be conclusive. The court
may affirm, vacate, or modify any order or decision or may
remand the proceedings to the Secretary for such further
action as it may direct.

(7) Upon the filing of the record with the court, pursuant to
paragraph (5), the jurisdiction of the court shall be exclusive
and its judgment shall be final, except that such judgment

14a

shall be subject to review by the Supreme Court of the United
States upon writ of certiorari.

(d) [Repealed]
43 U.S.C. § 1350 (2003)

§ 1350. Remedies and procedures
(a) Injunctions, restraining orders, etc.

At the request of the Secretary, the Secretary of the Army,
or the Secretary of the Department in which the Coast Guard
is operating, the Attorney General or a United States attorney
shall institute a civil action in the district court of the United
States for the district in which the affected operation is
located for a temporary restraining order, injunction, or other
appropriate remedy to enforce any provision of this Act, any
regulation or order issued under this Act, or any term of a
lease, license, or permit issued pursuant to this Act.

(b) Civil penalties; hearing.

(1) Except as provided in paragraph (2), if any person fails
to comply with any provision of this Act, or any term of a
lease, license, or permit issued pursuant to this Act, or any
regulation or order issued under this Act, after notice of such
failure and expiration of any reasonable period allowed for
corrective action, such person shall be liable for a civil
penalty of not more than $ 20,000 for each day of the
continuance of such failure. The Secretary may assess,
collect, and compromise any such penalty. No penalty shall -
be assessed until the person charged with a violation has been
given an opportunity for a hearing. The Secretary shall, by
regulation at least every 3 years, adjust the penalty specified
in this paragraph to reflect any increases in the Consumer
Price Index (all items, United States city average) as prepared
by the Department of Labor.

1Sa

(2) If a failure described in paragraph (1) constitutes or
constituted a threat of serious, irreparable, or immediate harm
or damage to life (including fish and other aquatic life),
property, any mineral deposit, or the marine, coastal, or
human environment, a civil penalty may be assessed without
regard to the requirement of expiration of a period allowed
for corrective action.

(c) Criminal penalties.

Any person who knowingly and willfully (1) violates any
provision of this Act, any term of a lease, license, or permit
issued pursuant to this Act, or any regulation or order issued
under the authority of this Act designed to protect health,
safety, or the environment or conserve natural resources, (2)
makes any false statement, representation, or certification in
any application, record, report, or other document filed or
required to be maintained under this Act, (3) falsifies,
tampers with, or renders inaccurate any monitoring device or
method of record required to be maintained under this Act, or
(4) reveals any data or information_required to be kept
confidential by this Act shall, upon conviction, be punished
by a fine of not more than $100,000, or by imprisonment for
not more than ten years, or both. Each day that a violation
under clause (1) of this subsection continues, or each day that
any monitoring device or data recorder remains inoperative or
inaccurate because- of any activity described in clause (3) of
this subsection, shall constitute a separate violation.

(d) Liability of corporate officers and agents for violations by
corporation.

Whenever a corporation or other entity is subject to
prosecution under subsection (c) of this section, any officer or
agent ci such corporation or entity who knowingly and
willfully authorized, ordered, or carried out the proscribed
activity shall be subject to the same fines or imprisonment, or
both, as provided for under subsection (c) of this section.

l6a
(e) Concurrent and cumulative nature of penalties.

The remedies and penalties prescribed in this Act shall be
concurrent and cumulative and the exercise of one shall not
preclude the exercise of the others. Further, the remedies and
penalties prescribed in this Act shall be in addition to any
other remedies and penalties afforded by any other law or
regulation.

43 U.S.C. § 1801 (2003)
§ 1801. Congressional findings
The Congress finds and declares that—

(1) the demand for energy in the United States is increasing
and will continue to increase for the foreseeable future;

(2) domestic production of oil and gas has declined in
recent years;

(3) the United States has become increasingly dependent
upon imports of oil from foreign nations to meet domestic
energy demand;

(4) increasing reliance on imported oil is not inevitable, but
is rather subject to significant reduction by increasing the
development of domestic sources of energy supply;

(5) consumption of natural gas in the United States has
greatly exceeded additions to domestic reserves in recent
years;

(6) technology is or can be made available which will
allow significantly increased domestic production of oil and
gas without undue harm or damage to the environment;

(7) the Outer Continental Shelf contains significant
quantities of oil and natural gas and is a vital national
resource reserve which must be carefully managed so as to
realize fair value, to preserve and maintain competition, and
to reflect the public interest;

ee

17a

(8) there presently exists a variety of technological,
economic, environmental, administrative, and legal problems
which tend to retard the development of the oil and natural
gas reserves of the Outer Continental Shelf:

(9) environmental and safety regulations relating to
activities on the Outer Continental Shelf should be reviewed
in light of current technology and information;

(10) the development, processing, and distribution of the
oil and gas resources of the Outer Continental Shelf, and the
siting of related energy facilities, may cause adverse impacts
on various States and local governments;

(11) policies, plans, and programs developed by States and
local governments in response to activities on the Outer
Continental Shelf cannot anticipate and ameliorate such
adverse impacts unless such States, working in close
cooperation with affected local governments, are provided
with timely access to information regarding activities on the
Outer Continental Shelf and an opportunity to review and
comment on decisions relating to such activities;

(12) funds must be made available to pay for the prompt
removal of any oil spilled or discharged as a result of
activities on the Outer Continental Shelf and for any damages
to public or private interests caused by such spills or
discharges;

(13) because of the possible conflicts between exploitation
of the oil and gas resources in the Outer Continental Shelf
and other uses of the marine environment, including fish and
shellfish growth and recovery, and recreational activity, the
Federal Government must assume responsibility for the
minimization or elimination of any conflict associated with
such exploitation;

(14) the oil and gas resources of the Outer Continental
Shelf are limited, nonrenewable resources which must be

18a

developed in a manner which takes into consideration the
Nation’s long-range energy needs and also assures adequate
protection of the renewable resources of the Outer
Continental Shelf which are a continuing and increasingly
important source of food and protein to the Nation and the
world; and

(15) funds must be r :de available to pay for damage to
commercial fishing vess ‘Is and gear resulting from activities
involving oil and gas exploration, development, and
production on the Outer Continental Shelf.

43 U.S.C. § 1802 (2003)
§ 1802. Congressional declaration of purposes
The purposes of this Act are to—

(1) establish policies and procedures for managing the oil
and natural gas resources of the Outer Continental Shelf
which are intended to result in expedited exploration and
development of the Outer Continental Shelf in order to
achieve national economic and energy policy goals, assure
national security, reduce dependence on foreign sources, and
maintain a favorable balance of payments in world trade;

(2) preserve, protect, and develop oil and natural gas
resources in the Outer Continental Shelf in a manner which is
consistent with the need (A) to make such resources available
to meet the Nation’s energy needs as rapidly as possible, (B)
to balance orderly energy resource development with
protection of the human, marine, and coastal environments,
(C) to insure the public a fair and equitable return on the
resources of the Outer Continental Shelf, and (D) to preserve
and maintain free enterprise competition;

(3) encourage development of new and improved
technology for energy resource production which will
eliminate or minimize risk of damage to the human, marine,
and coastal environments;

19a

(4) provide States, and through States, local governments,
which are impacted by Outer Continental Shelf oil and gas
exploration, development, and production with compre-
hensive assistance in order to anticipate and plan for such
impact, and thereby to assure adequate protection of the
human environment;

(5S) assure that States, and through States, local
governments, have timely access to information regarding
activities on the Outer Continental Shelf, and opportunity to
review and comment on decisions relating to such activities,
in order to anticipate, ameliorate, and plan for the impacts of
such activities;

(6) assure that States, and through States, local
governments, which are directly affected by exploration,
development, and production of oil and natural gas are
provided an opportunity to participate in policy and planning
decisions relating to management of the resources of the
Outer Continental Shelf;

(7) minimize or eliminate conflicts between the
exploration, development, and production of oil and natural
gas, and the recovery of other resources such as fish and
shellfish;

(8) establish an oilspill liability fund to pay for the prompt
removal of any oil spilled or discharged as a result of
activities on the Outer Continental Shelf and for any damages
to public or private interest caused by such spills or
discharges;

(9) insure that the extent of oil and natural gas resources
of the Outer Continental Shelf is assessed at the earliest
practicable time; and

(10) establish a fishermen’s contingency fund to pay for
damages to commercial fishing vessels and gear due to Outer
Continental Shelf activities.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386015_1163%3A05. Public record. Not legal advice.