Natural Gas Deregulation Key Terms

Understand natural gas deregulation key terms

As the production and use of natural gas increases, transportation of natural gas across state lines has become more common. While local municipalities were at one point able to oversee the transportation of natural gas within their jurisdiction, the growth of the industry left a gap in oversight once intrastate transportation commenced. In response, states stepped in to regulate transportation within their jurisdiction, however, as interstate movement increased, the federal government took regulatory action.

Over time, regulation, which was initially put in place to protect consumers, started hurting consumers. Consequently, the age of deregulation began. It started with the Natural Gas Act of 1978 and progressed gradually over the subsequent decades. To understand this progression, it's important to understand the following key terms.

Natural Gas Act of 1938

During the 1930's there was an increasing sense of concern regarding the ability of interstate pipeline companies to set pricing. Consequently, the Natural Gas Act of 1938 was created, giving the Federal Power Commission authority to establish rates deemed to be just and reasonable.
EIA) details various aspects of the Natural Gas Act of 1938.

Phillips decision

Phillips Petroleum Co. versus Wisconsin, 37 U.S. 672, was a case presented before the United States Supreme Court. The final decision in this case meant that the FPC could set the prices at which the natural gas producers sold their product to interstate gas companies. Prior to this decision, the FPC only had control over the prices set by interstate gas companies when selling their product.

Natural Gas Wellhead Decontrol of 1989

The Natural Gas Wellhead Decontrol of 1989 was the act which mandated that sales of natural gas would be deregulated by 1993. This act also retracted all regulations on the pricing of wellhead sales.

FERC Order 636

FERC Order 636 placed an emphasis on the unbundling of services provided by interstate pipelines. Basically, this meant that the sale of natural gas could not be combined with the cost of transportation. As a consequence of this order, customers could decide which gas sales, transportation and storage provider suited their needs.

FERC Order 637

FERC Order 637 tweaked Order 636 by regulating short term pipeline services and interstate pipelines. It also allowed the natural gas companies more leeway when managing pipeline capacity contracts.

Copyright © 2013 Business.com, Inc. All Rights Reserved.

---