00-18802. Producer-operated Outer Continental Shelf Pipelines That Cross Directly Into State Waters

AGENCY:

Minerals Management Service (MMS), Interior.

ACTION:

Final rule.

SUMMARY:

This final rule will clarify some unresolved regulatory issues involving the 1996 memorandum of understanding (MOU) on Outer Continental Shelf (OCS) pipelines between the Departments of the Interior (DOI) and Transportation (DOT). It addresses producer-operated pipelines that do not connect to a transporting operator's pipeline on the OCS before crossing into State waters. It is complementary to the final rule published on August 17, 1998, which addressed producer-operated oil or gas pipelines that connect to transporting operators' pipelines on the OCS. The rule also establishes procedures for producer and transportation pipeline operators to get permission to operate under either MMS or DOT regulations governing pipeline design, construction, operation, and maintenance according to their operating circumstances.

EFFECTIVE DATE:

August 28, 2000.

FOR FURTHER INFORMATION CONTACT:

Carl W. Anderson, Operations Analysis Branch, at [phone]; e-mail [e-mail].

SUPPLEMENTARY INFORMATION:

Background

MMS, through delegations from the Secretary of the Interior, has authority to issue and enforce rules to promote safe operations, environmental protection, and resource conservation on the OCS. (The Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.) defines the OCS). Under this authority, MMS regulates pipeline transportation of mineral production and rights-of-way for pipelines and associated facilities. MMS approves all OCS pipeline applications, regardless of whether a pipeline is built and operated under DOI or DOT regulatory requirements. MMS also has sole authority to grant rights-of-way for OCS pipelines. MMS administers the following laws as they relate to OCS pipelines:

(1) The Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA), for oil and gas production measurement; and

(2) The Federal Water Pollution Control Act, as amended by the Oil Pollution Act of 1990 (OPA 90), and implemented under Executive Order (E.O.) 12777.

Nothing in this rule will affect MMS's authority under either FOGRMA or OPA 90.

The May 6, 1976, Memorandum of Understanding

Under a May 6, 1976, MOU between DOI and DOT, MMS regulated all oil and gas pipelines located upstream of the “outlet flange” of each facility where produced hydrocarbons were first separated, dehydrated, or otherwise processed. A result of this arrangement was that downstream (generally shoreward) of the first production platform where processing takes place, DOT-regulated pipelines crossed MMS-regulated facilities. Because of incompatible regulatory requirements, this arrangement was not satisfactory for either agency.

The December 1996, Memorandum of Understanding

In the summer of 1993, MMS and DOT's Research and Special Programs Administration (RSPA) began a new series of negotiations that resulted in the MOU of December 1996. MMS and RSPA published the 1996 MOU in a Federal Register notice on February 14, 1997 (62 FR 7037-7039).

Section I, “Purpose,” of the December 10, 1996, MOU concludes: “This MOU puts, to the greatest extent practicable, OCS production pipelines under DOI responsibility and OCS transportation pipelines under DOT responsibility.” Thus, MMS will have primary regulatory responsibility for producer-operated facilities and pipelines on the OCS, while RSPA will have primary regulatory responsibility for transporter-operated pipelines and associated pumping or compressor facilities. Producing operators are companies that extract and process hydrocarbons on the OCS. Transporting operators are companies that transport those hydrocarbons from the OCS. (There are about 130 designated operators of producer-operated pipelines and 75 operators of transportation pipelines on the OCS.)

The 1996 MOU redefines the DOI-DOT regulatory boundary from the OCS facility where hydrocarbons are first separated, dehydrated, or processed to the point at which operating responsibility for the pipeline transfers from a producing operator to a transporting operator. Although the MOU does not address the question of producer-operated pipelines that cross the Federal/State boundary without first connecting to a transportation pipeline, it states that the two departments intend to put producer-operated pipelines under DOI regulation and transporter-operated lines under DOT regulation. Moreover, the MOU includes the flexibility to cover situations that do not correspond to the general definition of the regulatory boundary as “the point at which operating responsibility transfers from a producing operator to a transporting operator.” Paragraph 7 under “Joint Responsibilities” in the MOU provides: “DOI and DOT may, through their enforcement agencies and in consultation with the affected parties, agree to exceptions to this MOU on a facility-by-facility or area-by-area basis. Operators may also petition DOI and DOT for exceptions to this MOU.”

The Purpose of this Rule

The rule would amend 30 CFR part 250, Subpart J—Pipelines and Pipeline Rights-of-Way, § 250.1000, “General Requirements,” and § 250.1001, “Definitions.” It has three purposes:

1. To address questions about producer-operated pipelines that cross the Federal/State boundary (the “OCS/State boundary”) without first connecting to a transporting operator's pipeline on the OCS;

2. To clarify the status of producer-operated pipelines that connect production facilities on the OCS; and

3. To set up a procedure that OCS operators can use to petition to have their pipelines regulated as either DOI or DOT facilities.

The background and rationale for this regulation was fully provided in the Notice of Proposed Rulemaking (NPR) published in the Federal Register on Friday, October 1, 1999 (64 FR 53298-53302).

Discussion and Analysis of Comments

MMS received three comments on the NPR. The commenters were the State of Florida, Chevron U.S.A. Production Company, and the Offshore Operator's Committee (OOC).

The State of Florida commented that they had no objection to the proposed rule. Chevron U.S.A. Production Company said that they “fully support the efforts of the Department of the Interior in clarifying the remaining issues related to the implementation of the Memorandum of Understanding.” They also said that Chevron participated in the development of the OOC's comments and recommendations and fully supports those comments and recommendations. The OOC's comments and our responses are provided below.

OOC recommended deletion of paragraph 250.1000(c)(9) in the proposed rule because, in their view, it is “redundant to paragraph (c)(11).” OOC explained:

“* * * The regulations clearly identify those pipelines based on the MOU that are subject to MMS regulations. Proposed language in 30 CFR 250.1000(c)(11) states that all pipeline segments on the OCS not subject to DOT regulations are subject to MMS regulations. DOT regulations should more appropriately classify those pipeline segments subject to its regulations or as has been customarily, those pipeline segments exempt from 49 CFR parts 192/195.”

Paragraph 250.1000(c)(9) is not entirely redundant to paragraph (c)(11); it is largely complementary to it. Paragraphs (c)(9) and (c)(11) are both necessary to eliminate confusion about jurisdictional boundaries. The purpose of paragraph (c)(9) is to recognize that there are certain producer-operated lines on the OCS that must be under DOT regulation. This is principally because of existing valve locations and the unfeasibility of isolating pipeline segments at the Federal/State boundary. Paragraph (c)(9) works in conjunction with paragraphs (c)(6) and (c)(11). Paragraph (c)(6) identifies the specific producer-operated lines covered by the new rule. Paragraph (c)(11) ensures that there are no pipeline operators on the OCS who escape regulation entirely. These three paragraphs taken together should eliminate any confusion as to which agency has regulatory responsibility in a given situation involving a producer-operated pipeline that does not connect to a transporter-operated pipeline on the OCS.

OOC recommended deletion of paragraph 250.1000(c)(10), which states that “DOT may inspect all upstream safety equipment * * * that serve to protect the integrity of DOT-regulated pipeline segments.” OOC states:

“Although this may be desirable by DOT, DOT requirements should not be included in MMS regulations. Since the described upstream safety equipment is on the MMS segment, inspection, maintenance or testing will be subject to MMS inspection requirements. Any inspection that DOT may require should be in accordance with MMS regulations and not DOT.”

We do not agree with OOC. Paragraph 250.1000(c)(10) was, in fact, included in the proposed rule at DOT's request, and MMS believes that DOT was reasonable in making this request. Systems for cathodic protection, leak detection, over-pressure protection, or pigging can extend across jurisdictional boundaries. Any system set up to protect an MMS-regulated segment of a pipeline may overlap into any DOT-regulated segment that happens to connect to that line. If either DOT or MMS wishes to ensure that a system protects the line segment under its jurisdiction, there should be no question that the agency has the authority to inspect such a system. This applies regardless of whether the system conforms to DOT or MMS standards.

OOC recommends a change of wording to paragraph 250.1000(c)(13), asking that the words “design, construction” be deleted from the first sentence and a second sentence be added as follows: “Any subsequent repairs or modifications will also be subject to MMS regulations governing design and construction.” OOC explains:

“Pipelines constructed and designed in accordance with DOT regulations may not meet the MMS requirements due to differences in the regulations. Only future changes should be subject to the design and construction requirements of the MMS.”

We have accepted OOC's recommendation and have changed the paragraph accordingly. If a pipeline originally built under DOT design and construction requirements were to come under MMS regulation, it would be our policy not to require changes in pipeline design or construction until there was need for a repair or modification to the line. We would not immediately require changes in construction of the pipeline, because of the expense involved in making such changes and the potential hazards to employees making the changes. In due time, however, any pipeline will require a major repair or modification and, at that time, different design or construction criteria may be applied.

OOC requested that the words “currently operated” be inserted in the first paragraph defining “DOT pipelines” under § 250.1001, so that it reads as follows: “DOT pipelines include:

“(1) Transporter-operated pipelines currently operated under DOT requirements governing design, construction, maintenance, and operation; or” OOC explained:

“Some pipelines may have been designed and constructed to other regulations prior to becoming a ‘DOT Pipeline.’ This clarifies that, regardless of original design, a transporter-operated pipeline operated under DOT requirements will be called a DOT Pipeline.”

We have accepted OOC's recommendation and have changed the definition accordingly. In our own review of the definition of DOT pipelines, we noticed that we neglected to include in the definition the very class of producer-operated pipelines downstream (generally shoreward) of the last valve on the last OCS production facility that the proposed rule itself identified as DOT pipelines. Therefore, we have included these pipelines in the definition.

Procedural Matters

Regulatory Planning and Review (E.O. 12866)

This is not a significant rule under E.O. 12866 and does not require review by the Office of Management and Budget (OMB). An analysis of the rule indicates that the direct costs to industry for the entire rule total approximately $167,000 for the first year, and that for succeeding years, the maximum cost of the rule to industry in any given year would not likely exceed $53,800.

This rule will not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency.

This rule does not alter the budgetary effects or entitlements, grants, user fees, or loan programs or the rights or obligations of their recipients.

This rule does not raise novel legal or policy issues.

Regulatory Flexibility Act

DOI has determined that this rule will not have a significant economic effect on a substantial number of small entities. While this rule will affect a substantial number of small entities, the economic effects of the rule will not be significant.

The regulated community for this proposal consists of 35 producer-pipeline operators in the Gulf of Mexico OCS and 8 producer-pipeline operators in the Pacific OCS. Of these operators, 15 are considered to be “small.” Of the small operators to be affected by the rule, almost all are represented by Standard Industrial Classification code 1311 (crude petroleum and natural gas producers).

DOI's analysis of the economic impacts indicates that direct costs to industry for the entire rule total approximately $167,000 for the first year, and in succeeding years, the maximum cost of the rule to industry in any given year would not likely exceed $53,800.

These annual costs would not persist for long, because all pipelines converted to MMS regulation eventually would come into compliance with MMS safety valve requirements. There are up to 150 designated operators of leases and 75 operators of transportation pipelines on the OCS (both large and small operators), and the economic impacts on the oil and gas production and transportation companies directly affected will be minor. Not all operators affected will be small businesses, but much of their modification costs may be paid to offshore service contractors who may be classified as small businesses. Perhaps two or three operators may eventually be required to install new automatic shutdown valves as a result of transferring under MMS regulations. These few operators will sustain the greatest economic impact from this rule.

To the extent that this rule might eventually cause some of the relatively larger OCS operators to make modifications to their pipelines, it may have a minor beneficial effect of increasing demand for the services and equipment of smaller service companies and manufacturers. This rule will not impose any new restrictions on small pipeline service companies or manufacturers, nor will it cause their business practices to change.

Your comments are important. The Small Business and Agriculture Regulatory Enforcement Ombudsman and 10 Regional Fairness boards were established to receive comments from small business about Federal agency enforcement actions. The Ombudsman will annually evaluate the enforcement activities and rate each agency's responsiveness to small business. If you wish to comment on the enforcement actions of MMS, call toll-free [phone].

Small Business Regulatory Enforcement Fairness Act (SBREFA)

This rule is not a major rule under 5 U.S.C. 804(2), the SBREFA. Based on our economic analysis, this rule:

a. This rule does not have an annual effect on the economy of $100 million or more. As indicated in our cost analysis, direct costs to industry for the entire proposed rule total approximately $167,000 for the first year. In succeeding years, the cost of the rule to industry would not likely exceed $53,800 in any given year. The proposed rule will have a minor economic effect on the offshore oil and gas and transmission pipeline industries.

b. This rule will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions.

c. This rule does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises.

Unfunded Mandates Reform Act (UMRA) of 1995

This rule does not contain any unfunded mandates to State, local, or tribal governments, nor would it impose significant regulatory costs on the private sector. Anticipated costs to the private sector will be far below the $100 million threshold for any year that was established by UMRA.

Takings (E.O. 12630)

DOI certifies that this rule does not represent a governmental action capable of interference with constitutionally protected property rights.

Federalism (E.O. 13132)

According to E.O. 13132, the rule does not have significant Federalism implications. The rule does not substantially and directly affect the relationship between the Federal and State Government. The rule merely establishes jurisdictional boundaries with DOT and will not impose costs on States or localities.

Civil Justice Reform (E.O. 12988)

DOI has certified to OMB that this regulation meets the applicable civil justice reform standards provided in sections 3(a) and 3(b)(2) of E.O. 12988.

Paperwork Reduction Act (PRA) of 1995

As part of the NPR process, OMB approved the proposed collection of information under the PRA (44 U.S.C. 3501 et seq.) and assigned OMB control number (1010-0134). MMS did not receive any comments on the information collection aspects in the NPR. The final rule does not change any of the information collection requirements. The PRA provides that an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a current valid OMB control number.

The collection of information for this rule consists of:

(1) In paragraph 250.1000(c)(8), operators may request that MMS recognize valves landward of the last production facility but still located on the OCS as the point where MMS regulatory authority begins. We estimate one or two such request(s) at most each year with an estimated burden of 1/2 hour per request for a total annual burden of 1 hour.

(2) In paragraph 250.1000(c)(12), producing operators operating pipelines under DOT regulatory authority may petition MMS to continue to operate under DOT upstream of the last valve on the last production facility. In the first year, nearly all producer-pipeline operators would decide whether to automatically convert to DOI regulation or apply to remain under DOT regulation. We estimate that not more than 10 one-time requests to remain under DOT regulation, with an estimated average burden of 40 hours per request. Annualized over a 3-year period, this would result in 135 annual burden hours. We anticipate that in following years, not more than two operators a year would petition to change their regulatory status.

(3) In paragraph 250.1000(c)(13), transportation pipeline operators operating pipelines under DOT regulatory authority may also petition the Office of Pipeline Safety (OPS) and MMS to operate under MMS regulations governing pipeline design, construction, operation, and maintenance. Although we have allowed for this possibility in the final rule, we expect these would be rare. We estimate the burden would be 40 hours per request.

The total public reporting burden for this information collection requirement is estimated to be 176 annual burden hours. This includes the time for reviewing instructions, searching existing data sources, and gathering the data. The proposed rule requires no recordkeeping burdens. At $35 per hour, the annual paperwork “hour” burden would be $6,160.

The requirement to respond is mandatory in some cases and required to obtain or retain a benefit in others. MMS uses the information to determine the demarcation where pipelines are subject to MMS design, construction, operation, and maintenance requirements, as distinguished from similar OPS requirements.

Converting to DOI regulation could also result in the installation of as many as three automatic shutdown valves, either in the first year or in subsequent years. In these instances, operators would be subject to the regulatory and paperwork requirements in 30 CFR part 250, subpart J, on Pipelines and Pipeline Rights-of-Way. The information collection requirements in this subpart have already been approved by OMB under OMB control number 1010-0050.

National Environmental Policy Act

Under 516 DM 6, Appendix 10.4, “issuance and/or modification of regulations” is considered a categorically excluded action causing no significant effects on the environment and, therefore, does not require preparation of an environmental assessment or impact statement. DOI completed a Categorical Exclusion Review (CER) for this action on March 26, 1999, and concluded: “The proposed rulemaking does not represent an exception to the established criteria for categorical exclusion. Therefore, preparation of an environmental document will not be required, and further documentation of this CER is not required.”

List of Subjects in 30 CFR Part 250

• Continental shelf
• Environmental impact statements
• Environmental protection
• Government contracts
• Incorporation by reference
• Investigations
• Mineral royalties
• Oil and gas development and production
• Oil and gas exploration
• Oil and gas reserves
• Penalties
• Pipelines
• Public lands—mineral resources
• Public lands—rights-of-way
• Reporting and recordkeeping requirements
• Sulphur development and production
• Sulphur exploration
• Surety bonds

Dated: July 14, 2000.

Sylvia V. Baca,

Assistant Secretary, Land and Minerals Management.

For the reasons stated in the preamble, MMS amends 30 CFR part 250 as follows:

PART 250—OIL AND GAS AND SULPHUR OPERATIONS IN THE OUTER CONTINENTAL SHELF

1. The authority citation for part 250 continues to read as follows:

Authority: 43 U.S.C. 1331, et seq.

2. In § 250.1000, paragraphs (c)(6) through (c)(13) are added as follows:

§ 250.1000

General requirements.

* * * * *

(c) * * *

(6) Any producer operating a pipeline that crosses into State waters without first connecting to a transporting operator's facility on the OCS must comply with this subpart. Compliance must extend from the point where hydrocarbons are first produced, through and including the last valve and associated safety equipment (e.g., pressure safety sensors) on the last production facility on the OCS.

(7) Any producer operating a pipeline that connects facilities on the OCS must comply with this subpart.

(8) Any operator of a pipeline that has a valve on the OCS downstream (landward) of the last production facility may ask in writing that the MMS Regional Supervisor recognize that valve as the last point MMS will exercise its regulatory authority.

(9) A pipeline segment is not subject to MMS regulations for design, construction, operation, and maintenance if:

(i) It is downstream (generally shoreward) of the last valve and associated safety equipment on the last production facility on the OCS; and

(ii) It is subject to regulation under 49 CFR parts 192 and 195.

(10) DOT may inspect all upstream safety equipment (including valves, over-pressure protection devices, cathodic protection equipment, and pigging devices, etc.) that serve to protect the integrity of DOT-regulated pipeline segments.

(11) OCS pipeline segments not subject to DOT regulation under 49 CFR parts 192 and 195 are subject to all MMS regulations.

(12) A producer may request that its pipeline operate under DOT regulations governing pipeline design, construction, operation, and maintenance.

(i) The operator's request must be in the form of a written petition to the MMS Regional Supervisor that states the justification for the pipeline to operate under DOT regulation.

(ii) The Regional Supervisor will decide, on a case-by-case basis, whether to grant the operator's request. In considering each petition, the Regional Supervisor will consult with the Office of Pipeline Safety (OPS) Regional Director.

(13) A transporter who operates a pipeline regulated by DOT may request to operate under MMS regulations governing pipeline operation and maintenance. Any subsequent repairs or modifications will also be subject to MMS regulations governing design and construction.

(i) The operator's request must be in the form of a written petition to the OPS Regional Director and the MMS Regional Supervisor.

(ii) The MMS Regional Supervisor and the OPS Regional Director will decide how to act on this petition.

* * * * *

3. In § 250.1001, the definition for the term “DOI pipelines” is revised and the definitions for the terms “DOT pipelines,” and “production facility” are added in alphabetical order as follows:

§ 250.1001

Definitions.

* * * * *

DOI pipelines include:

(1) Producer-operated pipelines extending upstream (generally seaward) from each point on the OCS at which operating responsibility transfers from a producing operator to a transporting operator;

(2) Producer-operated pipelines extending upstream (generally seaward) of the last valve (including associated safety equipment) on the last production facility on the OCS that do not connect to a transporter-operated pipeline on the OCS before crossing into State waters;

(3) Producer-operated pipelines connecting production facilities on the OCS;

(4) Transporter-operated pipelines that DOI and DOT have agreed are to be regulated as DOI pipelines; and

(5) All OCS pipelines not subject to regulation under 49 CFR parts 192 and 195.

DOT pipelines include:

(1) Transporter-operated pipelines currently operated under DOT requirements governing design, construction, maintenance, and operation;

(2) Producer-operated pipelines that DOI and DOT have agreed are to be regulated under DOT requirements governing design, construction, maintenance, and operation; and

(3) Producer-operated pipelines downstream (generally shoreward) of the last valve (including associated safety equipment) on the last production facility on the OCS that do not connect to a transporter-operated pipeline on the OCS before crossing into State waters and that are regulated under 49 CFR parts 192 and 195.

* * * * *

Production facilities means OCS facilities that receive hydrocarbon production either directly from wells or from other facilities that produce hydrocarbons from wells. They may include processing equipment for treating the production or separating it into its various liquid and gaseous components before transporting it to shore.

* * * * *