Newspaper article THE JOURNAL RECORD

U.S. Appeals Court Reverses Ferc Decision on Natural Gas Category

Newspaper article THE JOURNAL RECORD

U.S. Appeals Court Reverses Ferc Decision on Natural Gas Category

Article excerpt

DENVER (AP) - The 10th Circuit U.S. Court of Appeals has reversed a Federal Energy Regulatory Commission ruling that for natural gas qualified both in a regulated category and deregulated category the deregulated category will always determine the applicable price.

In the same decision Monday on challenges brought by natural gas producers to FERC orders, the appeals court found FERC's interpretation of the provisions governing the deregulation of intrastate gas reasonable and affirmed that part of the order.

The appeal presented challenges by natural gas producers to the FERC orders interpreting the statutory mandate of the Natural Gas Policy Act of 1978 to deregulate certain natural gas prices.

The statutory scheme established by the NGPA divides natural gas production into numerous categories that are distinguished by the state the production began from a well or the particular type of drilling involved.

Gas in these categories can be broadly classified as ``old" gas, "new" gas or "difficult to produce" gas. Old gas is generally that produced from wells that were operating before passage of the Natural Gas Policy Act, while new gas is generally that produced from wells that began production after passage.

Several methods of production are specifically described in the statute as difficult to produce gas.

However those categories are not mutually exclusive. A particular sale may be "dually qualified" within a "new" and "old" gas category and also a difficult to produce category.

The act established ceiling prices for each of these categories of natural gas production.

Generally the lowest ceiling prices were for old gas, higher ceiling prices for new gas and the highest ceiling prices were for difficult to produce gas.

The purpose of creating different ceilings was to create an incentive to drill for new gas, particularly gas that is costly to produce. …

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