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For instance, these proposals seek to create two new licensing

options: (1) an optional certificate process which would not

require a hearing or proof of the public convenience and necessity and (2) a nonjurisdictional option under which a person could conduct various activities without obtaining a certificate

from the Commission.

The proposed legislation would also authorize transportation

under section 311 of the Natural Gas Policy Act (NGPA) to be on

behalf of anyone and would expressly provide authority for

section 311 construction. Additionally, it would seek to streamline the Commission's activities under the National

Environmental Policy Act (NEPA) by limiting the actions that

would require environmental review and by permitting the Commission to charge applicants directly for environmental documentation costs. Finally, the legislation proposes various changes related to the statutory regime governing the import and export of natural gas. A section by section analysis or

discussion of the proposals contained in the NESA is set forth

below.

SECTION 201;

GAS DELIVERY INTERCONNECTION

Proposed section 201 would amend section 7(a) of the Natural Gas Act (NGA) with regard to gas delivery interconnections. Currently, NGA section 7(a) provides that, after notice and

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opportunity for hearing, the Commission may direct a natural gas

company to (1) extend or improve its transportation facilities,

(2) establish physical connection of its transportation facilities with the facilities of, and sell natural gas to, any.

person or municipality engaged or legally authorized to engage in the local distribution of natural or artificial gas to the public, and (3) extend its transportation facilities to communities immediately adjacent to such facilities or to

territory served by such natural gas company or person.

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The proposed amendment would make this authority apply to any facility which has been constructed, extended, acquired, or is operating a facility under proposed section 7(k), which is the nonjurisdictional option described in proposed section 205.

As more fully discussed below, a person constructing, extending,

acquiring, or operating a facility for the transportation or sale of natural gas under the proposed nonjurisdictional option does not obtain a certificate, is not considered to be a natural gas company for purposes of the NGA, and may not participate in proceedings to consider competing certificate applications for

facilities that would serve the same area as the

nonjurisdictional facility.

Proposed section 201 would further amend existing NGA

section 7(a) to provide that upon the petition of any person, the Commission may in certain circumstances direct a natural gas

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company or person functioning under the proposed nonjurisdictional option to establish at the petitioner's expense physical connection of its transportation facilities with the petitioner's facilities in order to receive natural gas from the petitioner.

Finally, section 201 would include for both receipt and delivery point interconnections the existing section 7(a) limitation that the Commission does not have authority to compel the enlargement of transportation facilities, or compel a person to establish a physical connection or sell natural gas, when to do so would impair its ability to render adequate service to its

customers.

In order to analyze fully what this proposal entails, it is

important to discuss the history of existing NGA section 7(a). The authorization granted to the Commission by NGA section 7(a)

is limited. The courts have interpreted and applied these limitations strictly. Thus, in Municipal Distributors Group v.

FPC, 467 F.2d 741, 749 (D.c. cir. 1972), the Court stated:

A section 7(a) order under the statute alone represents
a pure exercise of governmental power on behalf of the
potential customer to coerce construction by an
unwilling pipeline. We do not believe it would be at
all unreasonable for the Commission to demand a far
more rigid standard of necessity and convenience from a
section 7(a) applicant relying solely on the statute
than from an applicant seeking enforcement of a tariff
provision.

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In another case, where the Federal Power Commission relied

on section 7(a) to reallocate pipeline deliveries to the

pipeline's public utility customers, the court reversed the Commission. In doing so, the Court pointed to the statutory limitation which "forbids the Commission to compel a natural gas

company to 'sell natural gas when to do so would impair its ability to render adequate service to its customers.'" The Court said that "the theory and purpose of the statutory restriction appears to be that persons desiring gas for the first time or desiring more gas should not get it by taking it away from existing lawful customers." Granite city steel co. V. FPC, 320

F.2d 711, 713 (D.C. Cir. 1963).

The statute further limits the Commission's authority in

providing that physical connection may only be required to municipalities or local distribution companies, and the pipeline may only be required to extend its facilities to communities immediately adjacent to such facilities or to territory served by the natural gas company and only if no other burden will be

placed on the natural gas company.

The authority is further

qualified by the important prohibition against requiring a natural gas. company to enlarge its facilities. Since section 201 proposes language similar to that of existing section 7(a) limitations, the authorization to the Commission would be similarly limited.

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In essence, section 201 would first take the authority currently existing in NGA section 7(a), which as relevant here,

allows the Commission to order a natural gas company to extend its facilities and establish physical connection with the

facilities of any person or municipality engaged in the local

distribution of gas for purposes of delivering gas, and extend it

to facilities which are constructed, extended, acquired, or

operated under the nonjurisdictional option that would be created in proposed section 7(k). Under this authority, the commission's power to order a natural gas company to alter its facilities applies to the delivery of gas to specified entities. The

proposed amendment would extend this authority to order changes

in facilities to include facilities functioning under the

proposed section 7(k) nonjurisdictional option. Thus, any person or municipality currently able to file for a section 7(a) order to take delivery of natural gas from a natural gas company could use this same limited authority to seek an interconnection with a section 7(c) facility.

In addition, proposed section 201 would then provide that

any person may petition the Commission to order a natural gas

company or person functioning under the proposed nonjurisdictional option to establish a physical connection with the petitioner's facilities in order to receive natural gas from

the petitioner.

This would expand the Commission's power, which

as set forth above, previously was limited to matters relating to

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