Opinion ID: 491453
Heading Depth: 2
Heading Rank: 1

Heading: Legislation and Regulation

Text: 11 During the Depression, the few pipelines that existed exerted double-edged control over the natural gas market. As both monopsonists and monopolists, the pipelines could buy and sell natural gas according to their own whims, with producers and consumers caught in the resultant squeeze, both as to price and supply. 12 The Natural Gas Act of 1938 changed all that. For the first time, the Federal Power Commission (FPC or Commission) was authorized to regulate the rates at which natural gas could be bought and sold. The FPC's jurisdiction extended only to the interstate market, but since gas that traveled interstate at any point was included in the Commission's jurisdiction, see California v. Lo-Vaca Gathering Co., 379 U.S. 366, 85 S.Ct. 486, 13 L.Ed.2d 357 (1965), its authority covered a broad span. 2 13 The abandonment provision was one aspect of Congress' scheme to protect natural gas consumers from exploitation: 14 No natural-gas company shall abandon all or any portion of its facilities subject to the jurisdiction of the Commission, or any service rendered by means of such facilities, without the permission and approval of the Commission first had and obtained, after due hearing, and a finding by the Commission that the available supply of natural gas is depleted to the extent that the continuance of service is unwarranted, or that the present or future public convenience or necessity permit such abandonment. 15 15 U.S.C. Sec. 717f(b). Under this provision, before a natural gas producer can sell gas outside the Commission's jurisdiction after its interstate contract expires, it must seek the Commission's approval. In an energy market in which natural gas supplies were problematic and in which the unregulated intrastate markets threatened to swallow up large portions of those supplies, the abandonment provision served as a brake on the movement of gas out of the interstate stream. 16 The Commission, of course, had the responsibility to formulate a more precise abandonment test than public convenience or necessity. In Michigan Consolidated Gas Co. v. FPC, 283 F.2d 204, 214-16 (D.C.Cir.), cert. denied, 364 U.S. 913, 81 S.Ct. 276, 5 L.Ed.2d 227 (1960), and Transcontinental Gas Pipe Line Corp. v. FPC, 488 F.2d 1325, 1328-29 (D.C.Cir.1973), cert. denied, 417 U.S. 921, 94 S.Ct. 2629, 41 L.Ed.2d 226 (1974), this court approved the FPC's comparative needs test: 17 The fundamental tenets established by Michigan Consolidated are that the public interest is the ultimate criterion under Sec. [717f(b) ] and that all factors relevant to the determination of which course of action best promotes the overall public interest must be fully considered. The Commission there proposed, and this court accepted, a comparative needs test which balanced the relative needs of the competing pipelines and their ultimate consumers as the principal index of the public interest. 18 Transcontinental, 488 F.2d at 1328. 19 In the late 1970's the Natural Gas Policy Act (NGPA) reshaped the landscape of natural gas regulation. The Act was the product of two forces, an energy shortage, caused in large part by the Organization of Petroleum Exporting Countries' control over foreign imports, and an emerging view on Capitol Hill that deregulation of many heavily controlled national economic markets was needed to stimulate the nation's growth and development. 20 The NGPA itself reflected a compromise between widely divergent views on how best to protect consumers: some legislators believed that moderate price controls were still necessary to ward off residual oligopolistic tendencies in the natural gas industry, while others were convinced that only sweeping deregulation could produce a booming agora of new supplies and lower prices. The lengthy debates that preceded the NGPA's passage in 1978 focused almost exclusively on the question of what degree of deregulation of new gas was appropriate. All of the legislators agreed that the regulatory structure of the NGA would continue to govern pre-NGPA old gas; since production-investment decisions with regard to that gas had already been made, there was no need to calibrate the price of that gas to the costliness of its production. Thus, although the NGPA ushered in a deregulated natural gas market for new gas, it explicitly left gas that was already committed or dedicated to interstate commerce, 15 U.S.C. Sec. 3301(18), under the watchful eye of the Commission (now dubbed the Federal Energy Regulatory Commission, or the FERC). See 15 U.S.C. Sec. 3431(a)(1)(A) (providing that the NGA shall not apply to natural gas not committed or dedicated to interstate commerce by date of passage). As to this old gas, the abandonment provision remained intact. 3