United States: FERC Holds Williams Field Services' Offshore Pipeline To Be Exempt Gathering Facility

On June 2, 2016, FERC issued a declaratory order finding Williams Field Services – Gulf Coast Company LP's ("WGC") proposed offshore facilities located on Transcontinental Gas Pipe Line Corporation's ("Transco") existing jurisdictional platform, including metering equipment on the platform and a 5.8-mile, 12-inch-diameter pipeline extending from that platform, to be gathering facilities exempt from FERC's jurisdiction. Notably, FERC held that WGC's proposed pipeline will primarily function as a gathering facility, despite being downstream from jurisdictional facilities, because WGC will not commingle gas that has moved through jurisdictional facilities.

On December 11, 2015, WGC filed a petition seeking FERC's determination that WGC's proposed facilities will primarily be gathering facilities exempt from FERC's jurisdiction. WGC stated that it will construct, own, and operate facilities that include (1) a 16-inch-diameter "riser" pipeline on the existing jurisdictional platform operated by Transco, located approximately 60 miles off the coast of Alabama in waters approximately 300 feet deep, which will raise the gas to metering, heating, and specification break facilities; (2) metering facilities on that platform; and (3) a 5.8-mile, 12-inch-diameter pipeline from the platform to an interconnection with an existing jurisdictional pipeline operated by Destin Pipeline Company, L.L.C. ("Destin"). WGC stated that the proposed facilities will receive gas from the Appomattox Development, located approximately 200 miles off the coast of Louisiana in waters more than 7,500 feet deep, via Shell Offshore Inc.'s Norphlet Pipeline. WGC stated that the proposed facilities would then meter the gas and split it into two streams. One stream will flow into Transco's existing 4B Lateral Pipeline to be transported to the Williams Mobile Bay Processing Plant located onshore in Alabama, and the other stream will be diverted into WGC's new 5.8-mile pipeline, which interconnects with Destin's pipeline to transport the gas to the Pascagoula Processing Plant located onshore in Mississippi. Finally, WGC explained that it plans to meter and divide the gas received from the Norphlet Pipeline on Transco's platform because metering facilities cannot be operated underwater.

In the order, FERC stated that it uses the Farmland test to determine the primary function of a facility. The Farmland test considers the (1) length and diameter of a pipeline; (2) extension of facilities beyond a central point in a field; (3) geographic configuration; (4) location of compressors and processing plants; (5) location of wells along all or part of a pipeline; and (6) operating pressure. In addition to physical factors, FERC stated that it also considers non-physical factors, such as the original purpose and operation of the facility and the business activity of the facility owner.

For offshore facilities, FERC has modified the Farmland test due to operational differences that can cause offshore facilities to be larger and longer than onshore facilities. FERC explained that it applies a "sliding scale which will allow the use of gathering pipelines of increasing lengths and diameters in correlation to the distance from shore and the water depth of the offshore production area." In Sea Robin, FERC revised the test for facilities offshore by (1) adopting an additional factor for systems with a centralized aggregation point; (2) adjusting the weight afforded the "behind-the-plant" criterion so the location of processing plants is not necessarily determinative and can be outweighed by other factors; and (3) focusing primarily on physical factors. FERC also explained that it adopted a rebuttable presumption that facilities designed to collect gas produced in waters with depths of 200 meters (656 feet) or more are non-jurisdictional. In addition, FERC stated that facilities downstream of a centralized aggregation point are presumed to be jurisdictional.

Applying the modified test to WGC's proposed facilities, FERC found that the primary function of WGC's facilities will be gathering. FERC found that the modest scope of WGC's project and the absence of compression facilities are indicative of a gathering function. Further, FERC stated that since WGC's facilities will be offshore, it discounted the fact that the facilities will be located upstream of processing, because it would be impractical to place processing plants offshore. FERC also stated that the projected operating pressure of 1,200 pounds per square inch gauge of WGC's pipeline is a product of the wellhead pressure and thus is not indicative of the pipeline's function. In addition, FERC stated that although there will be no wells connected to the pipeline, the pipeline will only be 5.8 miles long and 12 inches in diameter, and that the absence of wells is not determinative of a jurisdictional transmission function if the facilities are relatively small consistent with a gathering function.

Finally, FERC explained that although WGC's facilities will become part of the configuration for which Transco's jurisdictional platform serves as the central aggregation point for Transco's 4B Lateral, WGC's facilities only will receive gas from the non-jurisdictional Norphlet Pipeline and will not commingle any gas that has moved through jurisdictional facilities. Moreover, in making its jurisdictional determination, FERC considered that WGC is constructing the 5.8-mile pipeline to connect to Destin's pipeline because the gas WGC will receive from the Appomattox Development has more liquids and inert gases than Transco or Destin can blend into their pipelines individually and has more liquids and inert gases than the plants can process individually.

A copy of the order is available here.

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