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Under this option, it appears that the construction of facilities would be entirely outside the Commission's jurisdiction, as well as that of the States except under limited

circumstances.

In this regard, the sectional analysis states

that no Federal right of eminent doma in would attach to facilities constructed or extended under this provision.

It is also stated in the sectional analysis that since no

Commission action would be required for the construction of such

facilities, any environmental review would be by State or other

Federal agencies. While the Commission apparently would be relieved of all responsibility to conduct an environmental review

under this option, other Federal and State agencies would be

obligated to conduct such reviews as recognized in the sectional analysis. Receiving the requisite state and Federal approvals, rights of way and permits is often the most time-consuming element of construction. Therefore, this procedure may not

necessarily result in completion of projects in a more timely

fashion.

A final issue relates to the fact that under the proposed

nonjurisdictional option a person may elect to acquire a facility

for the transportation or sale of natural gas through that

facility without a certificate. Presumably, abandonment authority would be required for a facility certificated under . NGA

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section 7 and the traditional standards relating to abandonment

would apply.

Section 205 (b)

Section 205(b) would amend existing NGA section 4 to provide that the Commission would be authorized to issue an order finding

that rates charged by a natural gas company in a market are not within the Commission's jurisdiction under the NGA if, after a hearing upon the application of a natural gas company, the Commission finds that the market is competitive and that the natural gas company offers transportation or sales service to that market on a basis which is not unduly discriminatory. stated in the sectional analysis that this authority is in addition to the Commission's existing authority to determine that

It is

market-based rates meet the just and reasonable standard when

sufficient competition exists to protect consumers from market

power abuses.

Although this amendment to NGA section 4 is located in the

same section as the nonjurisdictional construction option, it

appears to pertain only to facilities subject to the Commission's jurisdiction. That follows from its application to "natural gas companies." Accordingly, its intention is the deregulation of existing (or subsequently certificated) interstate pipelines'

sales and transportation rates. With respect to sales rates, the

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amendment is in accord with the Commission's efforts to establish

market-based rates in the context of its gas inventory proceedings. The Commission has permitted such sales rates only

when it has found sufficient divertible supplies and

comparability of transportation and sales service to ensure that

the pipelines do not possess market power.

To date, however, the

Commission has not had the opportunity to address the

deregulation of pipelines' transportation rates. In large part, this is due to the predominantly monopolistic configuration of the existing interstate pipeline grid. In fact, the continued regulation of pipelines' transportation rates has been an important factor in the Commission's determinations that pipelines' sales rates require less regulatory scrutiny.

In addition to the observation above on the importance of the regulation of pipelines' transportation rates to the deregulation of their sales rates, a major concern with regard to

this proposed amendment is what happens if, once rates are

deregulated, circumstances change such that the market the

natural gas company is authorized to serve is no longer

competitive and the transportation or sales service is no longer offered on a basis that is not unduly discriminatory. Would the

Commission be able to reassert jurisdicticn over those rates and

charges?

If so, what would be the jurisdictional predicate for

the exercise of that authority?

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SECTIONS 211, 212, 213:

NATURAL GAS. IMPORT/EXPORT DEREGULATION

Subtitle B of the National Energy Strategy Act, comprising

sections 212, 213, and 214, proposes certain changes pertaining

to the regulation of imports and exports of natural gas, which would in effect deregulate those activities. In accordance with

the request at the hearing of March 7, 1991, comments on that

aspect of the proposed legislation are set forth as follows.

Prior to 1977, jurisdiction to regulate natural gas imports and exports under NGA section 3 was vested in our predecessor

agency, the Federal Power Commission (FPC).

In 1977, Congress

vested exclusive jurisdiction to decide import and export issues arising under section 3 in the Secretary of Energy, pursuant to $ $301(b) and 402(f) of the Department of Energy Organization Act.

42 U.S.c. $7152(a), 42 U.S.c. $7172 (a).

The Secretary thereafter

delegated and divided section 3 authority between the Administrator of the Economic Regulatory Administration (ERA) and the Federal Energy Regulatory Commission (FERC), pursuant to a series of delegation orders.

Pursuant to the Secretary's delegation orders, the Administrator of the ERA was given exclusive jurisdiction under

section 3 to authorize imports and exports of gas.

ERA

import/export authorization is dependent upon considerations of,

among other things, the competitiveness of the import, the need

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for the gas, the security of supply and any other appropriate

matters.

By order issued February 7, 1989, the Secretary

transferred the authority to regulate natural gas imports and

exports held by the ERA to the Assistant Secretary for Fossil

Energy (DOE/FE).

The Commission was delegated jurisdiction under section 3 to

approve or disapprove the construction and operation, including the site at which the facilities are located, of particular facilities incidental to the importation of natural gas. Commission also has the authority to perform all functions under

The

sections 4, 5, and 7 of the NGA.

Section 212 of the proposed bill would rewrite section 3 in

its entirety and would, in effect deregulate the international

gas market.

At the same time, the definition of interstate

commerce in section 2 of the NGA would be revised to include

natural gas following importation or preceding exportation. This would eliminate the previous distinction between "interstate

commerce" and "foreign commerce,

as defined in various court

decisions.

Seg, Border Pipe Line Company V, FPC, 171 F.2d 149

(1948);

Distrigas corporation v. FPC., 495 F.2d 1057 (1974).

The sectional analysis appropriately points out that, under this proposal, gas imports would be treated in the same manner as domestic natural gas production and gas exports would be treated

as gas sold to any consumer.

However, it should be noted here

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