Natural Gas Act

Natural Gas Act
Name	Natural Gas Act
Enacted by	United States Congress
Cite public law	Public Law 75-688
Enacted	1938
Signed by	Franklin D. Roosevelt
Affected	Federal Power Act; Public Utility Regulatory Policies Act of 1978; Energy Policy Act of 1992
Keywords	natural gas, interstate commerce, regulation, tariffs

Natural Gas Act

The Natural Gas Act is a United States federal statute enacted in 1938 that established a comprehensive federal regulatory regime for the interstate sale and transportation of natural gas. It created economic and safety oversight mechanisms that transformed relationships among New Deal, Federal Power Commission, public utility companies, state regulatory commissions, and private investors in the energy industry. The Act's framework has been shaped by subsequent statutes, major litigation, and administrative decisions involving institutions such as the Supreme Court of the United States, Federal Energy Regulatory Commission, and state agencies.

Background and Legislative History

The Act emerged from debates during the New Deal era over control of interstate commerce in energy following controversies involving companies like Pan American Petroleum and Transport Company and regulatory initiatives such as the Wheeler-Rayburn Act. Congressional consideration involved hearings with witnesses from American Gas Association, National Association of Regulatory Utility Commissioners, and academics tied to Harvard University and Columbia University. The enactment built on precedent in the Interstate Commerce Act and complemented statutes including the Federal Power Act and decisions from the Supreme Court of the United States addressing federal preemption and the scope of the Commerce Clause. Early administrative authority rested with the Federal Power Commission, later succeeded by the Federal Energy Regulatory Commission through reorganization under the Department of Energy Organization Act.

Key Provisions and Regulatory Framework

Core provisions required that companies engaged in the interstate sale or transportation of natural gas obtain certificates of public convenience and necessity, subject to oversight by federal authorities and interaction with state regulators like the New York Public Service Commission and the California Public Utilities Commission. The Act empowered regulators to approve or modify interstate tariffs, examine rate structures submitted by entities such as Panhandle Eastern Pipe Line Company or Transcontinental Gas Pipe Line Company, and impose reporting obligations used by agencies including the Energy Information Administration. Enforcement tools drew upon judicial interpretations by the United States Court of Appeals for the District of Columbia Circuit and policy guidance from the Department of Justice in merger reviews involving firms like ExxonMobil and Chevron Corporation.

Federal Energy Regulatory Commission (FERC) Authority

FERC, successor to the Federal Power Commission, exercises authority to issue certificates under the statute, adjudicate complaints, and enforce anti-discrimination mandates affecting interstate pipelines and wholesale sellers like Enron Corporation and Kinder Morgan. The Commission’s rulemaking and orders have been reviewed by courts such as the United States Court of Appeals for the Second Circuit and the Supreme Court of the United States in landmark cases that clarified standards for cost-of-service rates, federal preemption, and evidentiary burdens. FERC’s jurisdictional reach has been influenced by agency decisions involving regional organizations like North American Electric Reliability Corporation and market constructs used by PJM Interconnection and New York Independent System Operator.

Interstate Pipeline Regulation and Tariffs

The statute governs construction of interstate pipeline projects requiring certificates, public hearings, and environmental review which intersect with procedures under laws like the National Environmental Policy Act and consultation obligations with entities such as the National Park Service and Environmental Protection Agency. Tariff regulation addresses rate baselines, reservation charges, and negotiated rate policies involving carriers including Williams Companies and El Paso Corporation, and has implications for commodity markets connected to hubs like the Henry Hub and terminals managed by firms like Cheniere Energy. Pipeline siting and eminent domain authority have prompted litigation involving landowners, state courts, and federal bodies including the United States Court of Appeals for the Ninth Circuit.

Impact on Markets, Consumers, and Environmental Policy

By shaping interstate commerce, the Act influenced market structures seen in periods such as the 1970s energy crisis and the shale gas revolution. Regulatory decisions affected prices for end consumers overseen by state commissions like the Massachusetts Department of Public Utilities and large purchasers including American Airlines and General Electric in industrial procurement. Environmental implications relevant to Clean Air Act and Clean Water Act compliance emerged in proceedings involving extraction, pipeline construction, and liquefied natural gas export facilities evaluated by agencies such as the Department of the Interior and Bureau of Land Management. The statute’s role in federalism debates has intersected with decisions by the Supreme Court of the United States and scholarly commentary from institutions including the Brookings Institution and Resources for the Future.

Major Amendments, Litigation, and Precedents

Significant amendments and related statutes include the Natural Gas Policy Act of 1978, the Energy Policy Act of 1992, and regulatory changes following the Enron scandal that prompted reforms in market oversight. Key Supreme Court and appellate decisions—such as rulings by the Supreme Court of the United States and the United States Court of Appeals for the D.C. Circuit—addressed certificate standards, market manipulation, and preemption questions involving players like Consolidated Edison and Southern Company. Litigation over pipeline projects and export authorizations has involved parties ranging from multinational firms like Shell plc and BP to state attorneys general and tribal nations represented before federal courts and agencies including the Federal Energy Regulatory Commission and the Department of Justice.

Category:United States federal energy legislation