QUESTIONS FOR THE RECORD FROM SENATOR DOMENICI

Question 7: Suppose that gas sold at the border in a first sale is resold by a marketer. Would that resale also be exempted from Natural Gas Act jurisdiction under the proposed Natural Gas Act section 3 (a)?

Answer: Yes. Since proposed Natural Gas Act section 3(a) provides that importation of gas would be considered a first sale that appears to be covered by Natural Gas Policy Act section 601 (a)(1)(A), sales of imported gas made by a marketer would be exempt from Natural Gas Act jurisdiction.

QUESTIONS FOR THE RECORD FROM SENATOR DOMENICI

Question 8: Under proposed Natural Gas Act section 3(b), would FERC retain the jurisdiction to "level the playing field" regarding differences in rate design between U.S. and Canadian gas?

Answer: Under proposed Natural Gas Act section 3 (b), the Commission would retain jurisdiction to "level the playing field" to the extent the rates, charges, and practices at issue fall under its NGA jurisdiction.

QUESTIONS FOR THE RECORD FROM SENATOR DOMENICI

Question 9: Could proposed Natural Gas Act section 3 (c) or 3(d) be used to overturn or preempt the U.S. Canada Free Trade Agreement?

Answer:

Generally speaking, if a treaty and a Federal statute are incompatible, an attempt must be made to interpret them in such a manner that the inconsistency is resolved. If there is no way to resolve the inconsistency, the "later-in-time" rule applies. For example, an incompatible subsequent Federal statute is superior to a previous treaty. However, the general principle is that "an Act of Congress ought never to be construed to violate the law of nations, if any other possible construction remains " Murray v. Schooner Charming Betsy, 6 U.S. (2Cranch) 64, 118 (1804) (Marshall, C.J.). As discussed in our supplemental testimony, this matter should be clarified.

QUESTIONS FOR THE RECORD FROM SENATOR DOMENICI

Question 10: Could proposed Natural Gas Act section 3 (d) be used to overturn FERC Opinion No. 256?

Answer: It does not appear that proposed Natural Gas Act section 3 (d) is intended to be used to overturn FERC Opinion No. 256. That opinion establishes the Commission's policy for how U.S. pipelines should pass through to sales customers the costs of imported gas once that gas enters the United States. In other words, it does not involve the actual importation. By its provisions, proposed section 3(d) of the Natural Gas Act would permit the President to waive, or establish an expedited timetable for compliance with, provisions of law relating to the exportation or importation of natural gas. Its stated purpose is to ensure that if the President finds a significant exportation or importation project important to the national interest, the project would not be delayed unnecessarily. Therefore, proposed section 3 (d) appears to be aimed only at the arrangements for export or import, not at the specific rate treatment of gas supplies that are exported or imported under those arrangements. However, this analysis could change depending on how broadly or narrowly the phrase "provisions of law relating to" gas imports or exports would be construed and interpreted.

QUESTIONS FOR THE RECORD FROM SENATOR DOMENICI

Question 11: Regarding domestic first sale under the NGPA, FERC has interpreted the guaranteed passthrough provision as entitling the purchaser the opportunity to try to recover costs in commodity rates and not necessarily the guarantee of "as billed" treatment. Could proposed section 3 (b) be used to give imported gas a regulatory advantage over domestic gas?

Answer: Proposed section 3 (b) of the Natural Gas Act could not be used to give imported gas a regulatory advantage over domestic gas (except to the extent that until January 1, 1993 some domestic gas is still subject to Natural Gas Act certificate requirements and Natural Gas Policy Act maximum lawful prices). Proposed section 3(b) is intended to serve to ensure uniform regulatory treatment of domestic and imported gas supplies. Accordingly, while the Commission under proposed section 3 (a) could not in any way affect the price charged a purchaser for the importation of gas, it still could, in the exercise of its Natural Gas Act sections 4 and 5 authority, determine the way in which a domestic pipeline recovered the costs for imported gas in its resale rates to its customers. However, proposed section 3(b) would require that the Commission, in determining how a domestic purchaser should be allowed to recover the costs of imported gas, ensure that imported gas is treated no differently from domestic gas.