Advisory Bulletin ADB-08-01 – Direct Sales Pipelines Jurisdiction

Editor’s Note: If you ever wondered why a lot of companies hire us to do jurisdictional determination work, the following article should help make the reasons clear

PHMSA has issued an advisory bulletin stating that the Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 eliminated the former exception of direct sales natural gas pipelines from the definition of an interstate gas pipeline facility.

The Federal pipeline safety laws (49 U.S.C. 60101 et seq.) define an "interstate gas pipeline facility" as a facility subject to the jurisdiction of the FERC under the Natural Gas Act (15 U.S.C. 717 et seq.). Prior to the passage of the Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 (PIPES Act) (Pub. L. 109-468), the interstate gas pipeline facility definition contained an exception for a gas pipeline facility transporting gas:

• from an interstate gas pipeline in a State
• to a direct sales customer in that State
• buying gas for its own consumption

Because of this exception, these pipelines were considered to be intrastate pipelines and were regulated on a state-by-state basis. Section 7 of the PIPES Act changed this by eliminating the exception. As a result, direct sales gas transmission pipelines subject to FERC jurisdiction formerly considered to be intrastate pipelines for purposes of the pipeline safety laws are now considered to be interstate pipelines.

As interstate gas pipeline facilities, direct sales pipelines are subject to the applicable Federal pipeline safety regulations and PHMSA is responsible for regulatory oversight and enforcement. In cases where a State has both an annual certification for gas under 49 U.S.C. 60105 and an agreement under 49 U.S.C. 60106(b), inspections of these direct sales pipelines may continue to be conducted by a State pipeline safety agency acting as PHMSA's representative although any enforcement action must be referred to PHMSA.

If the line has a State certification from the State Public Utility Commission (PUC) that such State PUC has regulatory jurisdiction over the rates and service of the line and is exercising it (i.e. the State PUC is exercising economic regulatory jurisdiction, not FERC), that would be grounds for concluding that the line is not subject to FERC jurisdiction and therefore can be regulated as an intrastate pipeline by a State having a certification for gas under 49 U.S.C. 60105.

This change does not affect direct sales pipelines that are intrastate pipelines because they extend from another intrastate line to the consumer.

For a copy of Advisory Bulletin ADB-08-01 contact Jessica Roger.

Has the Gas Gathering definition affected your pipelines?

RCP can conduct a detailed analysis of your gas pipelines to determine end points of production and gathering based upon the recently finalized definition of gas gathering pipelines. The analysis will also determine whether your gathering pipelines are regulated and whether they are classified as Type A or B regulated gas gathering. For more information, click here to contact Jessica Roger.