tation or sale of natural gas, whereas present S 7(a)

facilities

are for the sale of gas. This distinction is not without a difference because the present § 7(a), with its substantive safeguards as to impairment of service, and case law thereunder, relates to sales service, not transportation service. Thus, there

is not an established body of law with respect to transportation only interconnections, and the issues in such circumstances can reasonably be expected to be quite different from those present as to sales interconnections.

As to proposed new $ 7(a)(2), it appears that the language is crafted sufficiently precisely to exclude downstream interconnections for "bypass" purposes. It is difficult to

interconnection

imagine bypass

would be sought with a

circumstances where an natural gas pipeline "to receive" gas "from the petitioner's facilities." The issue of bypass is, however, important enough that this interpretation and the Committee's intent that the section not be applied to accomplish downstream bypass should be emphasized in the legislative history of § 7(a)(2) if it is adopted.

Section 202 -- NEPA Compliance. While the intent of this section is useful, similar language in S. 341 and Senator Bingaman's amendments accomplishes this result in a manner which is more direct, more flexible and fairer. As proposed in $ 202, the authority of the Commission to charge an applicant for environmental documentation costs is wholly unrestrained and could lead to excessive and unreasonable charges.

to the S 311 revisions proposed in S. 341. AGD is strongly opposed to these revisions for the impairment of service and bypass reasons set forth in its March 14 prepared statement. The revisions proposed in S. 570 are, however, even more objectionable than those in S. 341 because the language of S. 570 would explicitly preempt and preclude State regulation of $ 311 facilities even in cases of bypass where State and local interests are at their zenith.

AGD strongly recommends that in cases of bypass of a local distribution company (LDC) either State and local regulation of the $ 311 service be specifically authorized 80 that LDCS and pipelines can fairly compete for such service, or an LDC's willingness to provide service pursuant to State or local regulation be specified as a bar to $ 311 service by a pipeline. In any event, the State preemption set forth in proposed $ 311 is highly inappropriate and unacceptable.

Section 204 Optional Certificate Procedures. This section contains amendments to NGA SS 4 and 7 which essentially provide that rates and charges for transportation and sales service, as well as the terms and conditions of those services, be deregulated, subject only to proscriptions against allocating costs of such services to traditional "jurisdictional" services, proscriptions against participating in proceedings involving competing facilities, and limited "NGA $ 5-like" procedures which in fact

approximate mandatory common carriage. Notably, this option would be available for any present, as well as new, pipeline services and facilities.

То the extent rates, abandonment, impairment of service and bypass issues are implicated here, AGD references its prior prepared statement as well as the foregoing comments herein. The issues raised in this section are in the truest sense fundamental to the operation of the interstate gas industry and its ability to continue to provide adequate and reliable service to consumers. With all due respect to the Administration's effort here, AGD firmly believes that the provisions of S 204 simply go too far too fast.

By and large, the issues raised in § 204 would be better addressed by the Commission where the multitude of

interests af

fected and consequences engendered can be carefully assessed and resolved in a less disruptive manner. It is highly improbable that Congress will be able to assess fully the technical minutiae necessary to facilitate a fair and effective transition to the kind of regulatory structure suggested by $ 204.

By contrast, the optional procedure set forth in S. 341 is a less dramatic departure from present procedures, and it retains

many more due process features of present law than does $ 204 of S. 570. Even at that, however, it is respectfully submitted that

the

administrative,

as opposed to legislative, process is better

equipped to produce an efficacious "option" to the existing cer

seeks to deregulate entirely the transportation or sale of natural gas at the election of the person who would otherwise be a "natural gas company" under the NGA. The only proscription here is that such person not participate in FERC proceedings to consider any competing facilities; further, § 205 (new NGA § 7(k)). facilities would be subject to the new S 7(j) "complaint" procedures. The second objective of $ 205, accomplished through the addition of a new NGA S 4(g), is to remove pipeline transportation or sales rates from NGA regulation upon a Commission finding that the market served by the pipeline is competitive and that the pipeline's transportation or sales services offered in that market are not unduly discriminatory. AGD strongly opposes both of these provisions.

As to the first provision, AGD does not believe that the interstate pipeline industry is sufficiently competitive to warrant providing to it the right to "opt-out" of NGA regulation, even with the NGA S 5-like provisions of proposed new S 7(j) which would apply to such a pipeline. The wholesale abandonment of a regulatory structure, not to mention the obvious potential loss of service, upon which tens of millions of consumers have come to rely is simply unrealistic and unacceptable. There is no evidence that such an "option" is necessary or desirable. The present NGA

regulatory structure

is hardly perfect, but it also is not so

badly broken as to merit its outright repeal by direction or elec

tion.

city-gate.

The second provision of $ 205, authorizing deregulation of pipeline transportation or sales rates by FERC, is equally unwise. As to the transportation function, there are very few instances where "workable competition" for pipeline capacity exists at the Indeed, even where several pipelines serve a particular LDC, it is unusual for there to be redundant capacity, and, if there were significant redundant capacity, it would represent economic waste. Further, $ 205 provides that the pertinent transportation would not be "subject to the jurisdiction of the Commission under the [NGA]" once the competitive/not unduly discriminatory findings had been made. There is, thus, no provision to "resume" NGA jurisdiction if and when circumstances arise where the now deregulated pipeline is subsequently in a position to extract monopoly concessions. Once again, the interstate pipeline industry is simply not sufficiently competitive to allow market forces to supplant regulation in all respects. What is needed is creative regulation, not no regulation.

As to the deregulation of pipeline sales rates, it should be noted that this result has already been obtained at FERC on a few pipeline systems through negotiated settlements premised upon comparability of service as between sales service and the transportation embedded in sales service. These are very complicated ar