Natural Gas Regulation in the Future: ABSTRACT

Abstract

The pipeline transmission companies and producers may expect more liberal treatment in the future from the courts and the Federal Power Commission because this will be essential in the public interest. The Supreme Court, in the now famous CATCO case, directed the Commission to their responsibility under the Natural Gas Act to fix rates consistent with maintaining a supply of natural gas to the consumers. We must assume that the courts and the Commission will not lose sight of this responsibility, but recent decisions disclose that this regulatory agency is not aware of the fact that they are faced at this time with maintaining a supply of natural gas to consumers. The transmission companies must build and finance additional pipelines to meet increasing demands of consumers, but they have the problem today of obtaining the necessary funds at reasonable costs with the bloom being off pipeline investments. Consideration must be given to the depreciating rate base, rate of return, and other factors which determine the attractiveness of pipeline investments. The Commission has recently followed the practice of not only using area pricing for the purpose of placing a lid on producers' prices, but also for rolling back existing area prices. The failure of many companies to bid on offshore acreage offered recently by the Federal Government and the State of Louisiana in areas known to contain proven or potential natural gas-producing acreage should be a warning that producers are losing their incentive to take the costly capital risks to drill for natural gas. This will have its effect on the supply of gas in 5 or 10 years. However, it is not believed that producers can hope for more liberal treatment until the Commission is convinced that there will be a shortage of natural gas in the near future. End_of_Article - Last_Page 370------------