02-6555. Policy on Certificates of Public Convenience and Necessity for Gas Transmission Facilities in the Off-shore Southern Louisiana Area; Final Rule

Issued March 13, 2002.

AGENCY:

Federal Energy Regulatory Commission, DOE.

ACTION:

Final rule.

SUMMARY:

The Federal Energy Regulatory Commission (Commission) is removing from its regulations the general statement of policy with respect to the issuance of certificates of public convenience and necessity for the construction and operation of pipeline transmission facilities in the Louisiana off-shore area. The Commission announced a new policy with respect to pipeline construction in the off-shore Louisiana area in ANR Pipeline Company (ANR).^[1] Since the old policy has changed, we are removing it from the regulations.

DATES:

This final rule is effective upon the date of issuance.

FOR FURTHER INFORMATION CONTACT:

Cecilia Desmond, Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, [phone].

SUPPLEMENTARY INFORMATION:

Federal Energy Regulatory Commission

Before Commissioners: Pat Wood, III, Chairman; William L. Massey, Linda Breathitt, and Nora Mead Brownell.

Policy on Certificates of Public Convenience and Necessity for Gas Transmission Facilities in the Off-shore Southern Louisiana Area; Final Rule

Issued March 13, 2002.

I. Introduction

The Federal Energy Regulatory Commission (Commission) is removing 18 CFR § 2.65 from its regulations. Section 2.65 sets out a general policy with respect to the issuance of certificates of public convenience and necessity for the construction and operation of pipeline transmission facilities in the Louisiana off-shore area. The Commission's predecessor agency, the Federal Power Commission (FPC), announced the policy on June 4, 1968, in Order No. 363, to maximize the use of off-shore Louisiana facilities and to ensure that off-shore facilities were properly sized.^[1] In ANR Pipeline Company (ANR), the Commission confirmed that § 2.65 no longer reflects its policy with respect to pipeline construction in the off-shore Louisiana area.^[2] Since the Commission's policy with respect to construction of off-shore facilities has changed, we are removing § 2.65 from the regulations.

II. Discussion

In promulgating § 2.65 in Order No. 363, the FPC noted the increasing importance of off-shore Louisiana as a source of natural gas for the nation and the much higher cost of installing off-shore pipeline facilities compared to on-shore facilities. Taking this into account, the FPC announced a policy under which it would review applications for construction of pipelines in the Louisiana off-shore area in the Gulf of Mexico on both a joint and individual company basis. The FPC intended to promote joint use arrangements and wanted pipeline companies to develop gas exchange procedures to minimize cross-hauls. The FPC believed that this would assure both timely and cost-effective full utilization of large capacity facilities in the Gulf of Mexico and development of the off-shore gas reserves.

Thus, the policy outlined in § 2.65 states that a pipeline applying for a certificate of public convenience and necessity for the construction and operation of off-shore pipeline facilities should include certain information in its application: (1) A detailed description of the applicant's efforts to transport its gas using another pipeline's existing or proposed off-shore facilities (§ 2.65 (a)(1)); (2) a demonstration that it consulted with other pipelines about using the applicant's proposed facilities to transport their gas to onshore facilities (§ 2.65 (a)(2)); (3) that the applicant will install 30-inch or larger diameter pipe or demonstrate the feasibility of a smaller proposed line (§ 2.65 (a)(3)); and (4) a demonstration that its proposed facilities will be used at a minimum annual load factor of 60 percent of the annual capacity available by the end of a 12-month period following construction, or seek a waiver of this requirement (§ 2.65(a)(4)). Section 2.65 also states that the Commission intends to enforce the 60 percent load factor requirement by permitting off-shore pipeline facilities to be included in the applicant's cost-of-service in future rate proceeedings at an average unit cost predicated on load factors of not less that 60 percent (§ 2.65(b)).

Section 2.65 also states that pipelines should file applications for off-shore facilities by September 1 of the year immediately preceding the proposed installation of the facilities. This would allow staff to review all applications, on a joint and individual company basis, at the same time. In 1976, for example, in High Island Offshore System (HIOS), the Commission convened public conferences to discuss a possible alternative joint approach to three competitive applications requesting authorization to construct off-shore pipeline facilities.^[3] The three competing applicants ultimately amended and unified their applications to propose one system rather than the three originally proposed, as anticipated by § 2.65.

In 1996, a number of interstate pipeline companies, including ANR and Nautilus Pipeline Company (Nautilus), filed applications requesting authorization to construct pipeline facilities in the Gulf of Mexico in response to significant new deepwater gas reserves being developed in several off-shore Louisiana producing regions. ANR argued that § 2.65 of the Commission's regulations required the Commission to consolidate ANR's application for authority to construct pipeline facilities in the Gulf of Mexico with Nautilus' similar application for off-shore facilities and to hold a joint hearing to consider the two applications.^[4] Citing changed circumstances since the FPC adopted the policy announced in Order No. 363, the Commission confirmed that its policy with respect to off-shore facilities has changed and denied ANR's request for consolidation.^[5]

ANR appealed the Commission's order, arguing that the Commission had violated its own regulation since § 2.65 required the Commission to hold a comparative hearing on its and Nautilus' applications.^[6] In denying ANR's appeal, the court stated that, since § 2.65 is a policy statement, not a regulation, it is not binding on the Commission. Noting that an agency may not depart from prior policy without explanation, the court stated that the Commission's explanation in ANR adequately explained how changed circumstances justified a new policy. In response to the court's suggestion that the Commission should amend § 2.65 to reflect its new policy,^[7] we are issuing this rule.

As explained in ANR, since the 1968 issuance of Order No. 363, both off-shore natural gas production and the Commission's regulatory approach to the construction of pipeline infrastructure have undergone significant changes that have affected the Commission's policy with respect to interstate pipeline construction in the Gulf of Mexico. The Gulf of Mexico, considered a few years ago to be a mature producing area, contains significant newly discovered deep water reserves of natural gas. In recent years, the Commission's regulatory approach has been to encourage the operation of market forces and competition wherever possible to determine what pipeline facilities are constructed.

Thus, rather than allocating limited production in the Gulf of Mexico among a limited number of pipelines as set out in Order No. 363 and § 2.65, the Commission now seeks to encourage an interstate pipeline infrastructure capable of transporting natural gas from newly developed production areas in the Gulf of Mexico. This market-oriented approach allows for the most efficient, cost effective, and timely development of new off-shore reserves and transportation facilities.

In ANR, the Commission determined that application of the evaluation standards reflected in § 2.65 to decide which project would meet off-shore capacity requirements could needlessly delay construction of the necessary pipeline infrastructure, delay production plans, and retard further exploration and development in the area. Instead, the Commission stated that the market should determine which projects are best suited to serve the area's infrastructure needs.

Since § 2.65 no longer accurately describes the Commission's policy and the Commission no longer wishes to codify in the regulations its policy on constructing infrastructure in the Gulf of Mexico, the Commission is removing § 2.65.

III. Administrative Findings

The Administrative Procedure Act (APA) requires rulemakings to be published in the Federal Register and also mandates that an opportunity for comments be provided when an agency promulgates regulations. However, the APA exempts general statements of policy from its notice and comment requirements.^[8] Therefore, since § 2.65 is a policy statement rather than a substantive rule, we are removing it from our regulations without a period for public comment.

IV. Effective Date and Congressional Notification

The APA exempts general statements of policy from the requirement that rules become effective only after thirty days' notice.^[9] Therefore, this final rule will be effective upon the date of its issuance. The Commission has determined, with the concurrence of the Administrator of the Office of Information and Regulatory Affairs of the Office of Management and Budget, that the removal of this policy statement is not a major rule within the meaning of section 351 of the Small Business Regulatory Enforcement Fairness Act of 1996.^[10] The Commission is submitting this final rule to both houses of Congress and to the Comptroller General.

V. Environmental Analysis

Commission regulations describe the circumstances where preparation of an environmental assessment or an environmental impact statement will be required.^[11] The Commission has categorically excluded certain actions from this requirement as not having a significant effect on the human environment.^[12] Since removing an outdated policy statement from the regulations falls within categorical exclusions in the Commission's regulations for rules that are clarifying, corrective, or procedural, no environmental assessment or environmental impact statement is necessary.^[13]

VI. Regulatory Flexibility Impact Statement

The Regulatory Flexibility Act of 1980 (RFA)^[14] generally requires a description and analysis of proposed rules that will, if promulgated, have a significant economic impact on a substantial number of small entities. The Commission is not required to make such analysis if a rule would not have such an effect.^[15]

The Commission does not believe that the removal of § 2.65 from its regulations would have such an impact on small entities. The removal would have an impact only on interstate pipelines, which generally do not fall within the RFA's definition of small entity.^[16] Accordingly, pursuant to section 605(b) of the RFA, the Commission certifies that the removal of § 2.65 will not have a significant economic impact on a substantial number of small entities.

VII. Information Collection Statement

The Office of Management and Budget's (OMB) regulations require that OMB approve certain information collection requirements imposed by agency rules.^[17] However, this Final Rule contains no information reporting requirements, and therefore is not subject to OMB approval.

VIII. Document Availability

In addition to publishing the full text of this document in the Federal Register, the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the Internet through FERC's Home Page (http://www.ferc.fed.us) and in FERC's Public Reference Room during normal business hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, N.E., Room 2A, Washington, DC 20426.

From FERC's Home Page on the Internet, this information is available in both the Commission Issuance Posting System (CIPS) and the Records and Information Management System (RIMS).

—CIPS provides access to the texts of formal documents issued by the Commission since November 14, 1994.

—CIPS can be accessed using the CIPS link or the Energy Information Online icon. The full text of this document is available on CIPS in ASCII and WordPerfect 8.0 format for viewing, printing, and/or downloading.

—RIMS contains images of documents submitted to and issued by the Commission after November 16, 1981. Documents from November 1995 to the present can be viewed and printed from FERC's Home Page using the RIMS link or the Energy Information Online icon. Descriptions of documents back to November 16, 1981, are also available from RIMS-on-the-Web; requests for copies of these and other older documents should be submitted to the Public Reference Room.

User assistance is available for RIMS, CIPS, and the Website during normal business hours from our Help line at [phone] (E-Mail to [e-mail]) or the Public Reference at [phone] (E-Mail to [e-mail]).

During normal business hours, documents can also be viewed and/or printed in FERC's Public Reference Room, where RIMS, CIPS, and the FERC Website are available. User assistance is also available.

List of Subjects in 18 CFR Part 2

• Administrative practice and procedure
• Electric Power
• Natural gas
• Pipelines
• Reporting and recordkeeping requirements

By the Commission.

Magalie R. Salas,

Secretary.

For the reasons set forth in the foregoing, the Commission is removing § 2.65 of Part 2, Chapter 1, Title 18, Code of Federal Regulations, as follows.

PART 2—GENERAL POLICY AND INTERPRETATIONS

1. The authority citation for Part 2 continues to read as follows:

Authority: 5 U.S.C. 601; 15 U.S.C. 717-717w, 3301-3432; 16 U.S.C. 792-825y, 2601-2645; 42 U.S.C. 4321-4361, 7101-7352.

2. Remove § 2.65.

§ 2.65

[Removed]

Footnotes

1.  78 FERC ¶61,326 (1997); reh'g denied 85 FERC ¶61,056 (1998); appeal denied ANR Pipeline Co. v. FERC, 205 F.3d 403 (D.C. Cir. 2000).

1.  Order No. 363,39 FERFC ¶925 (1968).

2.  78 FERC ¶61,326 (1997); reh'g denied 85 FERC ¶61,056 (1998); appeal denied ANR Pipeline Co. v. FERC, 205 F.3d 403 (D.C. Cir. 2000).

3.  55 FPC 2674 (1976)(the three applicants were Texas Offshore Pipeline System, Inc., Amtex Offshore Pipeline Co., and Natural Gas Pipeline Co. of America).

4.  78 FERC ¶ 61,326 (1997).

5.  Id. at 62,407.

6.  ANR Pipeline Co. v. FERC, 205 F.3d 403 (D.C. Cir. 2000).

7.  Id. at n. 2.

8.  5 U.S.C. 553(b).

9.  5 U.S.C. 553 § (d)(2).

10.  5 U.S.C. § 804(2).

11.  Regulations Implementing National Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), codified at 18 CFR Part 380.

12.  18 CFR 380.4.

13.  See 18 CFR 380.4(a)(2)(ii).

14.  5 U.S.C. 601-612.

15.  5 U.S.C. 605(b).

16.  5 U.S.C. 601(3), citing to section 3 of the Small Business Act, 15 U.S.C. 632. Section 3 of the Small Business Act defines a “small business concern” as a business which is independently owned and operated and which is not dominant in its field of operations.

17.  5 CFR Part 1320.