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that gas imports would not be subject to the regulatory restraints of NGPA Title I and NGA section 7, as would certain domestic production. Of course, the final step in wellhead deregulation, effective January 1, 1993, pursuant to the Natural Gas Wellhead Decontrol Act of 1989, would erase these residual distinctions between imported gas and domestic production.

Further, under section 3, as presently written, and the pertinent delegation orders, the Commission approves the site of construction of border facilities to be used to import or export gas. The proposed legislation would remove Commission review of these facilities under section 3. However, while the bill removes section 3 authority to review these construction projects, by including imports and exports in the definition of interstate commerce in NGA section 2, the proposed bill would result in mandating Commission review of the construction of these facilities pursuant to NGA section 7 (c), as with any other construction of facilities to be used in interstate commerce.

However, there would be instances where the Commission's section 7 review authority would not apply. For instance, if a company planned to construct facilities from the border to a certain point within the same state (in other words, no state line would be crossed) to transport imported gas that would be consumed within that state, the construction of facilities would be exempt from section 7 review by virtue of NGA section 1(c).

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However, if instead, the pipeline extended across a state line, section 7 jurisdiction would attach for the full length of the pipeline, i.e. from the border to the end of the pipeline.

That sales of imported gas would be treated the same as domestic production is highlighted by the amendment to section 3 which states that importation of natural gas is considered a "first sale." The deregulation of international gas trade is completed by the proposed section 3 provision which would bar the Commission or any state from prohibiting or conditioning the importation or exportation of natural gas.

The proposed revisions to section 3 set forth authority for the President to prohibit or condition importation or exportation of gas if required by the national interest. The President would also be given authority to waive any law relating to the import/export of natural gas or specify by schedule or otherwise, when a particular pertinent law is satisfied. The sectional analysis states that this provision is intended to allow the President to intercede to facilitate a project, if required by the national interest. The necessity for these provisions is not clear. In addition, the precise meaning of terms such as "national interest" should be explained.

Furthermore, it is

unclear whether this proposal would confer upon the President the

authority to waive any laws, such as the Free Trade Agreement, if it was in the national interest.

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In conclusion, as stated in our previous testimony, we respectively submit that in many ways the legislative proposals currently under consideration seek to build upon the progress the Commission has made to promote competition in the gas industry and to streamline the regulatory process. We continue to believe it is important that the overall question of what Commission authorizations should exist to fulfill the mandates of assuring the public interest and expediting pipeline construction be carefully considered. We stand ready to assist the Committee in any way we can on this vitally important matter.

QUESTIONS FOR THE RECORD FROM SENATOR WIRTH

Question 1A: There have been several efforts by FERC, and parallel legislative proposals, to provide for deregulation or simplification of the regulation of natural gas pipelines which are found by FERC to serve "competitive" markets. In determining whether competition exists in a market, does FERC look only at whether there are alternative natural gas pipelines into the market?

The

Answer: The focus of FERC's competitive analysis for natural gas pipelines has been on the resale of natural gas ("the merchant function") and not whether there is competition in the transportation of the gas to market ("the transportation function"). These analyses, usually done in the context of gas inventory charge ("GIC") proceedings, focus on whether customers have effective alternatives to buying gas from the pipeline. competitive analysis focuses on whether the pipeline's transportation of third party gas is comparable to the transportation service embedded in the pipeline's bundled sales service, whether the transportation gives customers access to wellhead markets on competitive terms, and whether there is competitive third party gas supply available. Thus, a market which is served by only one pipeline may be competitive for the merchant function but not for the transportation function.

QUESTIONS FOR THE RECORD FROM SENATOR WIRTH

Question 18: Isn't oil a source of competition for natural gas in many uses?

Answer: For certain markets and services, primarily industrial boiler and power generation, oil and natural gas do compete. Generally, for environmental and technical reasons, the competition is between the more expensive grades of oil products like distillate (number 2 oil) and low sulfur residual oil (number 6 oil) and natural gas. In recent years, the relative prices of these oil products and gas have resulted in gas being the preferred fuel. Generally those facilities which have both gas and oil burning capability have been burning gas except for those times when service was not available.

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