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Transport and storage
What is the general legal framework governing the transportation and storage of oil and gas resources in your jurisdiction?
In the United States, interstate transportation and storage of natural gas are almost entirely regulated by the Federal Energy Regulatory Commission (FERC). Specifically, FERC regulates:
- certain sales of natural gas for resale in interstate commerce (ie, when gas will cross a boundary between two states or gas is commingled with other gas that will cross a state boundary);
- the transportation (including storage) of natural gas in interstate commerce; and
- natural gas companies engaged in these transactions pursuant to the Natural Gas Act of 1938.
FERC also regulates certain transportation transactions by interstate and intrastate pipelines under the Natural Gas Policy Act of 1978. Sales transactions not subject to FERC’s jurisdiction include first sales and sales of imported natural gas (including imported liquefied natural gas (LNG)), which may fall under state laws and regulations.
FERC has broad powers to regulate transportation and storage of natural gas under the Natural Gas Act and Natural Gas Policy Act. FERC has the authority to:
- conduct investigations, gather information, issue subpoenas and compel testimony;
- issue rules and regulations necessary to implement the Natural Gas Act and the Natural Gas Policy Act;
- recommend and make remedies for violations of the Natural Gas Act, the Natural Gas Policy Act and FERC’s rules, regulations and orders issued under the Natural Gas Act and the Natural Gas Policy Act;
- prohibit the manipulation of natural gas sales and transportation markets to ensure transparency in natural gas markets; and
- regulate the siting, construction, operation and abandonment of natural gas transportation and storage facilities, including to LNG import and export terminals.
FERC also regulates the rates offered by interstate pipeline companies and, through its regulations, the terms and conditions of services offered by interstate pipelines. In addition, FERC imposes specific requirements on interstate pipelines and their shippers to promote open and non-discriminatory access and transparency.
- various federal agencies may potentially be involved in the permitting process for natural gas facilities construction projects;
- the Department of Transportation regulates all interstate pipeline safety issues; and
- the Department of Energy regulates imports and exports.
Finally, the Natural Gas Act allows state and local authorities to exercise regulation rights under the federal Clean Air Act, the Clean Water Act and the Coastal Zone Management Act, but these laws remain subject to federal agency review. FERC sets the schedule for all federal and state agencies acting under federal delegated authority to reach a final decision on requests for federal authorisations for natural gas construction projects.
Crude oil FERC’s regulation of crude oil and petroleum product pipelines and shippers is generally more limited. FERC’s authority over interstate oil pipelines derives from the Interstate Commerce Act, which regulates only pipeline rates (not market entry or exit). Specifically, FERC ensures that oil pipeline rates and other charges are just and reasonable and that the terms of service are not discriminatory.
Depending on location, these activities and services may be regulated by applicable state laws and local agencies. Importantly, FERC cannot compel the construction of new pipeline connections. However, FERC has authority over the cancellation of tariffs when the line would remain in operation under another pipeline company’s tariffs. FERC cannot prevent partial discontinuation of a service, but may investigate whether the discontinuation would cause remaining services to violate the Interstate Commerce Act.
In addition to FERC’s regulatory oversight for crude oil and liquids pipeline industry participants, the Department of Transportation regulates all interstate pipeline safety issues. Regulatory authority over oil pipelines located in the US outer continental shelf is primarily exercised by the secretary of the interior and the Bureau of Ocean Energy Management.
How is cross-border transportation of oil and gas resources regulated?
The Natural Gas Act gives FERC jurisdiction over certain wholesale sales of natural gas in interstate commerce. Imports and exports of natural gas as a commodity, where title passes and delivery occur at the international border, are in foreign commerce and regulated by the Department of Energy.
Under Section 3 of the Natural Gas Act, FERC also authorises the siting and construction of cross-border facilities. Any border-crossing facilities used to transport natural gas across an international border must first be approved by presidential permit. The presidential permit authority applies to all new border crossings and all substantial modifications of existing crossings at the international border involving natural gas. In practice, the president delegates his authority to receive and approve presidential permits to the secretary of state; thus, the Department of State has effective authority to approve natural gas cross-border facilities.
Unlike interstate oil transport, a state’s role in the permitting process for international cross-border oil pipeline facilities is far more limited. Instead, crude oil border-crossing facilities must be preapproved for construction by presidential permit. Further, FERC does not have construction certificate jurisdiction over international cross-border oil pipeline facilities.
Are there specific provisions governing marine and ground transportation of oil and gas resources?
Federally, the Department of Transportation has various safety-related regulations concerning the ground transportation of hazardous materials, including LNG and crude oil. States may provide concurrent or additional safety-related regulations for intrastate vehicular transportation of these hazardous materials.
Security measures for the waterfront portions of marine terminals and LNG ships are regulated by the US Coast Guard, which prevents other ships from getting near to LNG tankers while in transit or docked at a terminal. FERC also serves as a coordinator with the Coast Guard and other agencies on issues of marine safety and security at LNG import facilities. In 2004 FERC entered into an agreement with the Coast Guard and the Department of Transportation to establish roles and responsibilities for each agency regarding LNG security and to ensure that each agency quickly identifies and addresses problem areas.
The Coast Guard also regulates shipments of crude oil by marine vessel destined to foreign or domestic locations.
Construction and infrastructure
How are the construction and operation of pipelines, storage facilities and related infrastructure regulated?
Under the Natural Gas Act, FERC has the authority to regulate the construction, operation and abandonment of natural gas transportation and storage facilities. Following the enactment of the Energy Policy Act of 2005, under the Natural Gas Act, FERC also has jurisdiction to regulate the siting, construction and operation of LNG import and export terminals.
Construction and blanket certificates Any entity seeking to construct, own or operate an interstate pipeline facility subject to FERC’s jurisdiction must first receive a certificate of public convenience and necessity from FERC authorising that entity to do so. The Natural Gas Act similarly sets out certification requirements applicable to entities seeking to modify or abandon pipeline facilities subject to FERC’s jurisdiction.
There are three phases to the FERC certification process:
- the planning process;
- the pre-filing and FERC application process; and
- the construction process.
In many instances, the period between an applicant’s filing of a certificate application and FERC’s issuance of an order approving or denying that application turns on the environmental review required by FERC under the National Environmental Policy Act. Under that act’s review process, a number of federal and state agencies are responsible for approving various environmental permits related to construction of the interstate natural gas facilities. FERC acts as the lead agency to guide cooperation between all federal and state agencies acting under federal delegated authority responsible for permitting and sets the schedule to reach a final decision on requests for federal authorisations for natural gas construction projects. Under the National Environmental Policy Act, FERC’s environmental-impact review of a proposed pipeline project results in FERC’s issuance of either an environmental assessment or an environmental impact statement. Projects that need a close environmental review necessitate preparation of an environmental impact statement, and generally take longer to receive FERC orders approving or denying the projects.
In addition, FERC routinely grants blanket construction certificates to interstate pipelines authorising them to engage in certain routine construction and abandonment activities without first obtaining a certificate for each individual project. Blanket certificates provide two paths for authorisation based on the type of project: automatic and prior notice.
Abandonment Pipelines must receive authorisation from FERC before abandoning facilities or other FERC-authorised services. Abandonment is not limited to instances where facilities are no longer in use; rather, the abandonment of facilities by sale also triggers the prior authorisation requirement.
Crude oil The construction and abandonment of oil pipeline facilities for use in interstate and intrastate transmission are not within FERC’s jurisdiction under the Interstate Commerce Act, and no federal law pre-empts state and local siting requirements. State approvals may be required before the construction of an oil or liquid pipeline, and each state may have different certificate procedures. The construction of oil and liquid pipelines must also comply with federal environmental approvals such as the Clean Water Act, the Clean Air Act and the National Historic Preservation Act.
What rules govern third-party access to pipelines and related infrastructure?
Pipeline companies must provide non-discriminatory access for similarly situated shippers; pipelines are prohibited from:
- showing any undue preference to any shipper;
- subjecting any shipper to undue prejudice; or
- maintaining any unreasonable difference in rates, charges, services or facilities, or in any other respect, between localities or classes of service.
In addition, the terms and conditions of interstate gas transportation services must be memorialised in the natural gas pipeline’s tariff, which must be publicly available on the pipeline company’s website.
FERC has no open access rules for crude oil pipelines; rather, crude oil pipelines are subject to the same common carriage principles as common carriers.
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