By Ronda Fears Journal Record Staff Reporter The entire natural
gas industry would be hurled into the closest thing to a free
market system for the first time since the 1930s in a sweeping
proposal by federal regulators now under debate.
"Mega-NOPR," as the notice of proposed rule-making is commonly
referred to, is anticipated to rock the industry, spanning from
producers to marketers to local distribution companies to
interstate pipelines, and even trickle down to consumers. No direct
impact is anticipated for intrastate pipelines, except as the
State regulators will also find themselves and their regulated
public _ producers, in-state pipelines and utilities _ in a new
world. Oklahoma will especially feel the repercussions, being the
third natural gas producing state in the nation.
The natural gas industry has been in a constant state of
disarray for nearly 15 years because of laws gradually eliminating
regulatory impediments to a national gas market. Federal regulation
dates back to the Natural Gas Act of 1938.
Aimed at cultivating a truly competitive climate in the natural
gas industry, the proposed rule filed July 31 at the Federal Energy
Regulatory Commission suggests a "light-handed" approach to
interstate pipeline regulation. More specifically, it is a final
step to separate merchant or sales functions from transportation of
gas, and emphatically is not intended to deregulate the pipeline
It is inextricably linked, however, to the deregulation of
natural gas wellhead prices, which was signed into law in 1989 by
President Bush, and to FERC measures taken subsequent to the
Natural Gas Policy Act of 1978, which partially decontrolled gas
prices. The latter act spawned FERC Order 436 in 1985, which
created an indiscretionary open-access market for transporting gas
on interstate pipelines.
Those two acts set the tone for the current undertaking by
federal regulators, and indeed made action vital to accomplish the
stated goal of Congress to foster a national gas market.
"The (FERC) commission's own experience since the
implementation of open access transportation in 1985, and the
passage of the Natural Gas Wellhead Decontrol Act of 1989 . . .
have led the commission to conclude that the structure of
interstate pipeline sales services may no longer be well suited to
the present economic environment of the natural gas industry," the
proposed rule making states.
"The goal, simply put, is to recognize the current
characteristics of the natural gas industry _ which is now
dominated by pipeline transportation, not by traditional merchant
service _ and to create a regulatory framework that will
accommodate the meeting of as many gas sellers and buyers as
possible." The 96-page proposed rule-making eclipses virtually
every nuance of the natural gas industry.
Under the proposal, pipelines can retain historic merchant
affiliates _ marketing arms _ but they cannot show preference to
haul gas sold by their affiliates. Any seller or marketer
theoretically would have "comparability," or equal access to
pipeline capacity. Too, transportation services provided by
pipelines would include storage space. …