Appendices — Producer Coalition v. Federal Energy Regulatory Commission

la

APPENDIX A

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Docket No. ADO3-13-000

Application of the Primary

Function Test for Gathering on

The Outer Continental Shelf

NOTICE OF PUBLIC CONFERENCE

(August 14, 2003)

Take notice that on September 23, 2003, the Commission

will convene a public conference in the above captioned

proceeding. The purpose of the conference will be to explore

whether the Commission should reformulate its test for

defining nonjurisdictional gathering in the shallow waters of

the Outer Continental Shelf (OCS) and if so what the new test

should be.

The Commission has considered its offshore gathering

policy a number of times in the past decade.' Nevertheless, a

' See generally Natural Gas Gathering Services Performed by Interstate

Pipelines and Interstate Pipeline Affiliates—Issues Related to Rates and

Terms and Conditions of Service, Docket No. RM94-4-000, Notice of

Public Conference, 65 FERC § 61,136 (1993); Gas Pipeline Facilities and

Services on the Outer Continental Shelf—Issues Related to the Com-

mission’s Jurisdiction Under the Natural Gas Act and the Outer

Continental Shelf Lands Act, Docket No. RM96-5-000, Policy Statement,

74 FERC 4 61,222 (1996) (1996 Policy Statement); Chevron U.S.A., Inc.

v. FERC, 193 F. Supp. 2d 54 (D.D.C., January 11, 2002), appeal pending

sub nom. Williams Companies, et al. v. FERC, No. 02-5056 (D.C. Cir.)

(appeal of district court ruling on motion that FERC did not have

authority under the Outer Continental Shelf Lands Act (OCSLA) to issue

regulations requiring gas service providers on the Outer Continental Shelf

(OCS)to submit quarterly reports of services provided).

2a

satisfactory definition of gathering under the Natural Gas Act

has remained elusive. A clear, consistent approach to off-

shore gathering is needed to pretect producers and customers

from the market power of third party transporters and to avoid

different jurisdictional outcomes for companies that perform

essentially the same economic function.

Background

A. Evolution of the Primary Function Test

Although section 1(b) of the Natural Gas Act states that the

provisions of that act do not apply “to the production or

gathering of natural gas,” the act itself does not define those

terms. The Commission has defined gathering as “the

collecting of gas from various wells and bringing it by

separate and several individual lines to a central point where

it is delivered into a single line.” ° The Supreme Court has

added 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.”

These definitions have been useful in describing gathering as

a concept. Nevertheless, as the courts have recognized, “the

line between gathering and transportation is_ inherently

elusive.”* Attempts to establish a functional test, useful in the

> Lomak Petroleum, Inc. v. FERC, 206 F.3d 1193, 1196 (D.C. Cir

2000), quoting from Barnes Transportation Company, 18 FPC at 372

(1957). See also Conoco, Inc. v. FERC, 90 F.3d 536, 539 n.2 (D.C. Cir.

1996)(“Gathering is the process of taking natural gas from the wells and

moving it to a collection point for further movement through the

pipeline’s principal transmission system.”) (quoting Northwest Pipeline

Corp. v. FERC, 905 F.2d 1403, 1404 n. ‘10th Cir. 1990)).

> Northern Natural Gas Co. y. State C orp. Comm’ n, 372 U.S. 84, 90

(1963).

* Exxon Mobil Gas Marketing Company v. FERC (Exxon), No. 00-

1355 (D.C. Cir. August 6, 2002) (Judge Edwards dissenting) slip op. at

18, citing Conoco, Inc. v. FERC 90 F. 3d 536 at 542 (D.C. Cir. 1996).

3a

context of specific proceedings, resemble the pursuit of a

desert mirage. Historically, the tendency has been to

announce a particular physical characteristic that could be

used to identify nonjurisdictional gathering, only to substitute

other criteria later to reflect changes in the industry or in the

evolution of Commission policy.” In Farmland Industries,

Inc.,° the Commission identified a number of factors for

consideration in analyzing the section 1(b) gathering test, and

stated that “the ultimate test is whether the primary function

can be classified as transportation or gathering.” The primary

function test factors included:

e the length and diameter of a pipeline (longer and wider

pipe indicating transportation);

e the central point in a field;

* For many years, the Commission employed two. principal tests to

differentiate (primarily onshore) transportation from gathering facilities.

The “behind-the-plant” test presumes that all facilities located between the

wellhead and a processing plant are non-jurisdictional gathering lines,

while facilities downstream of the processing plant are presumptively

transportation facilities. See Phillips Petroleum Co., 10 FPC 246 (1951),

rev'd in part on other grounds sub nom. Phillips Petroleum Co. v.

Wisconsin, 347 U.S. 672 (1954). For gas that required no processing, the

“central-point-in-the-field” test applied, under which lateral lines that

collect gas from separate wells before converging into a larger single line

—typically at the point where the gas is compressed for transportation by

the pipeline—were classified as gathering facilities. E.g., Barnes, supra.

° 23 FERC § 61,063 at 61,143 (1983). The Commission later added a

number of “non-physical” criteria, including (1) the purpose, location and

operation of a facility; (2) the business of the owner; (3) whether the

jurisdictional determination is consistent with the objectives of the NGA

and other legislation; and (4) the changing technical and geographic

nature of exploration and production. Amerada Hess Corp., 52 FERC

{ 61,268 at 61,844-45 (1990). Under the primary function test, no one

factor is determinative, nor do all factors apply in every situation. See,

e.g., Williams Field Services, 194 F.3d at 116; Farmland, 23 FERC

at 61,143.

‘

t

§

E

A

4a

e the pipeline’s geographic configuration (a web-like

pattern, for example, suggesting a gathering function)

e Jocation of compressors and processing plants (i.e., the

“behind the plant” test);

e the location of wells along all or part of the facilities

(typically indicating gathering); and

® operating pressure of a line, with higher pressure

generally associated with the need to propel gas in a

transportation function

The primary function test has been relatively satisfactory

for analyzing onshore facilities. Offshore, however, the test

has proven more difficult to apply.’ Thus, in EP Operating

Co. v. FERC, 876 F.2d 46, 48-49 (Sth Cir. 1989), the Com-

mission initially ruled that under the primary function test the

offshore platform where initial gas treatment took place

constituted a “central point in the field” where the gathering

function was complete, and therefore the 51-mile long, 16-

inch diameter OCS pipeline downstream of the platform at

issue in that case was a jurisdictional transportation facility.

The court reversed that finding, holding that while the length

and diameter of pipeline facilities might indicate a trans-

portation function onshore, those factors had less weight in

the offshore context because of the longer distances between

-the point of production in deep water and the nearest

” As more new facilities were constructed offshore on the OCS, where

the pattern of gathering and distribution differs, the applicability of the

factors was questioned. Specifically, it is often not feasible to process raw

gas On open water. As a result, pipelines on the OCS typically do no

gather gas at a local, centralized point within a producing field as they

would onshore, to prepare it for traditional transportation. Rather, on the

OCS, they construct relatively long lines to carry the raw gas from

offshore platforms, where after production only rudimentary gas treatment

takes place (primarily to remove water), to the shore or a point closer to

shore where it can be processed into “pipeline quality” gas that can be

transported by an interstate pipeline.

Sa

connection with an interstate pipeline. The court further

questioned the validity of a central-point-in-the-field analysis

applied to unitary OCS structures.

In response, the Commission modified its primary function

test for the OCS, stating that as drilling operations pushed

further offshore from existing interstate pipeline connections,

it would apply a sliding scale to allow for the increasing

length and diameter appropriate for gathering lines in

correlation to the distance from shore and the water depth of

the offshore production area. * Later, following a conference

on offshore gathering in Docket No. RM96-5-000, the Com-

mission issued a policy statement announcing that it would

“presume facilities located in deep water [more than 200

meters] are primarily engaged in gathering or production.”

As with onshore facilities, the use of the primary function

test, as modified by the policy statement for deepwater

facilities, seems to be workable, and there has been relatively

little controversy concerning its wsplication in recent years.

Efforts to apply the primary function test to offshore facilities

in the shallow OCS, however, have been contentious.

B. The Sea Robin Pipeline

Difficulties applying the primary function test to offshore

facilities were highlighted by the Commission’s decision in

Sea Robin Pipeline Company (Sea Robin). '° Sea Robin’s

offshore pipeline facilities were certificated as jurisdictional

transmission facilities by the Commission in 1969. The

system consists of 438 miles of pipeline that transports

unprocessed gas from shallow water on the OCS to a

processing plant onshore. The system is configured in the

form of a “Y”. Along the two arms of the “Y”, 45 lateral

* See Amerada Hess, 52 FERC at 61,988 (1990).

” See 1996 Policy Statement, note | supra.

"71 FERC 961,351 (1995), reh’g denied, 75 FERC § 61,332 (1996).

|

6a

lines with diameters ranging from 4.5 to 30 inches are

connected to 67 receipt points located on production plat-

forms, or at subsea taps. Through those upstream arms, Sea

Robin moves the gas to a manned platform with two turbine

compressor units at the fork of the “Y” closer to shore. The

bottom line of the “Y”’, from the platform to shore, consists of

66.3 miles of 36-inch pipeline. Along this segment the gas is

mingled with additional gas from four platforms.

In response to a request to reclassify the Sea Robin

facilities from transmission to gathering, the Commission

found fat the primary function of Sea Robin’s entire system

was and continued to be jurisdictional transportation. In

reaching that conclusion, the Commission emphasized the

length and size of Sea Robin’s pipeline, and also certain non-

physical factors, such as the reliance of shippers in the

Original jurisdictional determination. The U.S. Court of

Appeals for the Fifth Circuit remanded that decision.'' In

doing so the court said the Commission had relied too heavily

on the size of Sea Robin’s sysiem as a determinative factor

and did not give enough consideration to the different nature

of gathering on the OCS. The court also faulted the Com-

mission for reliance on non-physical considerations, such as

Sea Robin’s ownership and shipper expectations. The court

specifically found that the Commission’s consideration of a

“regulatory gap” in the abserice of Natural Gas Act juris-

diction was inappropriate: “Need for regulation cannot alone

create authority to regulate.” ”

In its decision, the court suggested that the primary func-

tion test could be adapted to the operational characteristics of

the OCS, so that portions of its system could be considered to

be predominantly gathering and other parts predominantly

transportation. On remand, then, the Commission adopted this

'' Sea Robin Pipeline Company v. FERC, 127 F.3d 365 (Sth Cir. 1997).

'? Td.at 371.

Ta

suggestion and reformulated the primary function test to draw

the jurisdictional line at an internal point on the Sea Robin

system, at the junction of the “Y”.'> The Commission

concluded that the part of Sea Robin’s pipeline facilities from

the platform to shore was a jurisdictiona! transportation

system. Upstream of that point the two legs of the “Y”

formed a non-jurisdictional gathering system.

In reformulating its primary function test, the Commission

concluded that the “behind-the-plant” factor is not necessarily

determinative of where gathering ends when applied to off-

shore facilities. In addition, the Commission announced that

where a pipeline system includes a facility where gas is

delivered by several relatively small diameter lines for

aggregation and preparation for further delivery onshore

through a single larger diameter pipeline, the location of

that collection facility will be afforded considerable

weight for purposes of identifying the demarcation point

between gathering and transportation on OCS systems.'*

Although not all OCS pipeline systems exhibit such a cen-

tralized aggregation point, e.g., facilities with a straight-line

or spine-and-lateral type configuration, the presence of such a

location would be considered the offshore analogue of the

onshore “‘central-point-in-the-field” criterion.

The Commission’s decision on remand, based on its re-

formulated test that included the central point of aggregation

as a factor offshore, was upheid by the U.S. Court of Appeals

for the District of Columbia Circuit in Exxon (note 4 supra).

'* Sea Robin Pipeline Company, Order on Remand, 87 FERC 61,384

(1999) (Comm. Bailey dissenting), rehearing denied, 92 FERC § 61,072

(2000).

'S 87 FERC at 62,248.

'* See also Williams Gas Processing - Gulf Coast Company, L.P. et al.

v. FERC, No. 01-1327 (D.C. Cir. June 20, 2003).

8a

C. The “Reformulated, Modified Primary Function Test”

Despite the several modifications of the primary function

test described above, its utility in identifying nonjurisdictional

gathering facilities remains uneven. As mentioned, the rule

seems to work fairly well onshore, possibly because where

other factors are not conclusive, there is usually a processing

plant located at the end of a gathering system that serves as a

logical demafcation point between jurisdictional and non-

jurisdictional systems. Also, after an initial round of deci-

sions interpreting the 1996 Policy Statement applying the

primary function test to facilities located in deep water

beyond the OCS, there has been relatively little controversy.

In the shallow areas on the OCS, on the other hand, the status

of facilities remains unsettled. The Commission continues to

receive requests to reclassify jurisdictional transmission

facilities as gathering, over the objection of customers who

have been served through the facilities. In these types of

cases, the correct interpretation of the primary function test is

usually the main issue. .

Based on the number of contested cases presented to us, we

are concerned about the high degree of uncertainty that seems

built into the primary function test as applied offshore. The

primary function test lists numerous factors for consideration,

with no one factor having priority. Thus, for example, the size

of a particular system may suggest that it is transmission, but

the configuration may suggest gathering. The primary

function test does not indicate how such inconsistencies

should be resolved. The result, over time, has been the

gradual reclassification of more and larger systems as

gathering, even in cases where systems had been regulated for

many years under the Natural Gas Act. Systems with

generally similar physical characteristic may have a different

regulatory status because of relatively minor physical dif-

ferences. This result can produce different regulatory results

for competitors who perform essentially the same economic

9a

function. It is also seems unfair to customers who may have

made investments relying on the regulated status of a

transporter, only to find themselves subject to the market

power of that transporter in its new deregulated form. The

“need for regulation” may not create authority to regulate; on

the other hand, inconsistent classification and regulatory

treatment cannot be what Congress intended when it estab-

lished a comprehensive scheme of federal regulation that

included transportation from the OCS.

Public Conference

The Commission is convening a public conference to hear

suggestions from interested persons on developing a new test

for gathering on the OCS that is reasonably objective and that

furthers the regulatory goals of the Natural Gas Act. (The

conference will not include the policy adopted for deepwater

facilities in Docket No. RM96-5-000.) A new test should

ensure that similar facilities are subject to similar regulatory

treatment. It should also provide incentives for investment in

production, gathering, and transportation infrastructure off-

shore, without subjecting producers to the unregulated market

power of third party transporters. Persons who appear at the

conference should be prepared to indicate how the Com-

mission’s definition of gathering can be changed to achieve

these goals. Persons seeking to make formal statements at the

public conference should be prepared to address questions set

forth below. Other questions may arise during the course of

the proceedings.

Questions

1. To what extent should a gathering test that be based on

the length and diameter of the pipeline, the extent the

facilities are operationally integrated with either production

or transportation facilities, the function of compression in

relation to the facilities, and the proximity to the pipeline

transportation grid?

—

10a

2. To what extent should the location of processing plants,

the central point of aggregation, the operating pressure of a

line, and geographic configuration of facilities, be considered

relevant in evaluating the status of facilities on the OCS?

What are the advantages and disadvantages of relying on

these factors? Are there any other factors that should be

considered?

3. What should be the relevance of non physical factors

such as a facility’s history of regulation or the major business

purpose of an owner?

4. If formerly certificated facilities are determined to be

gathering, may the Commission nonetheless require the

company to file for abandonment under section 7(b) of the

Natural Gas act before the facilities may be transferred to

another company?

Procedures

The public conference convened by this notice will be held

on September 23, 2003 at the offices of the Federal Energy

Regulatory Commission, 888 First Street, N.E., Washington,

D.C. 20426. All interested persons are invited to attend.

Persons interested in speaking or making a _ presentation

should indicate their interest no later than September 3, 2003

by a letter addressed to the Secretary, Federal Energy

Regulatory Commission, 888 First Street, NE, Washington,

DC 20426, and should refer to Docket No. ADO3-13-000.

Each request to participate must include the name of a contact

person, their telephone number and e-mail address. There is

no need to provide advance notice to the Commission simply

to attend the conference.

Comments addressing the questions set out in this notice

may also be filed by September 3, 2003. Every effort will be

made to accommodate requests to make presentations, but

depending on the number of requests received, a limit may

lla

have to be placed on the number of presenters and the time

allowed for presentations.

Members of the Commission intend to participate in the

public conference and will reserve time for questions and

answers. In a subsequent notice, we will provide further

details on the conference, including the agenda and a list of

participants, as plans evolve. For additional information,

please contact Gordon Wagner, Office of General Counsel,

phone 202-502-8947, e-mail: gordon.wagner@ferc.gov.

Magalie R. Salas

Secretary

12a

APPENDIX B

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

Shelf 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 govern-

ments may require assistance in protecting their

coastal zones and other affected areas from any tem-

porary or permanent adverse effects of such impacts;

13a

(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

occurrences which may cause damage to the environ-

ment or to property, or endanger life or health.

’

Lea

43 U.S. § 14.46 (2003)

§ 1334. Administration of leasing

(a) Rules and regulations; amendment; cooperation with

State agencies; subject matter and scope of regu-

lations.

The Secretary shall administer the provisions of this Act

relating to the leasing of the outer Continental Shelf, and shall

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 prom-

ulgation 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 shall consult with the Federal 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

1Sa

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 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

(ili) 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

16a

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 (11) 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 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;

17a

(5) for the subsurface storage of oil and gas other than

by the Federal Government;

(6) for drilling or easements necessary for arenes,

development, and production;

(7) 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 seqg.), 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 over transfer of any lease, under the

provisions of this Act shall be conditioned upon compliance

with regulations issued under this Act.

(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.

18a

(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, may be

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

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:

i ia i i

19a

(A) The pipeline must provide open and

nondiscriminatory 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 preportionate 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 require-

ments of paragraph (1) of this subsection any pipeline or ciass

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 conipetitive

principles set forth in paragraph (1) of this subsection. In

preparing any such views, the Attorney General shall consult

with the Federal Trade Commission.

20a

(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 _pro-

duction 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 ihe

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.

(h) Federal action affecting outer Continental Shelf; noti-

fication; 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

2la

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 under-

lying 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

(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.

Na a ERE ENS NEN A LE, ARTI ENN

22a

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 commenced 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

(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.

23a

(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.

(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 Con-

tinental 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

24a

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 explor-

ation 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.

(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.

25a

(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.

(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

shall be subject to review by the Supreme Court of the United

States upon writ of certiorari.

(d) [Repealed]

26a

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.

(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

27a

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 of 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.

(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

28a

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 de-

pendent 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 environ-

ment;

(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 com-

petition, and to reflect the public interest;

29a

(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 govern-

ments;

(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 Govern-

ment must assume responsibility for the minimization or

elimination of any conflict associated with such

exploitation;

30a

(14) the oil and gas resources of the Outer Continental

Shelf are limited, nonrenewable resources which must be

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 made available to pay for damage

to commercial fishing vessels and gear resulting from

activities involving oil and gas exploration, develop-

ment, 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

rapidiy 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 Sheif, and (D) to preserve and main-

tain free enterprise competition;

3la

(3) e.:courage 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;

(4) provide States, and through States, local govern-

ments, which are impacted by Outer Continental Shelf

oil and gas exploration, development, and production

with comprehensive assistance in order to anticipate and

plan for such impact, and thereby to assure adequate

protection of the human environment:

(5) assure that States, and through States, local gov-

ernments, have timely access to information regarding

activities on the Outer Continental Shelf, and oppor-

tunity 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 gov-

ermments, 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 ex-

ploration, 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;

32a

(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.