Natural Gas Market Policy Act of 1984

(Reported to House from the Committee on Energy and Commerce with amendment, H. Rept. 98-814)

Natural Gas Market Policy Act of 1984 - Title I: Wellhead Price Provisions - Amends the Natural Gas Policy Act of 1978 to limit for January 1985 and any month thereafter, price increases to the rate of inflation, for new natural gas, certain natural gas from the Outer Continental Shelf, tight formation gas, and stripper well natural gas.

Authorizes the Federal Energy Regulatory Commission (the Commission), by order on a case-by-case basis, to prescribe a higher maximum lawful ceiling price than would otherwise be applicable to natural gas from any specific well, reservoir, or property, in the case of natural gas dedicated to interstate commerce, a sale of natural gas under a rollover contract, and certain other categories of natural gas.

Title II: Contracting Practices - Declares, for the three year period beginning on the effective date of this Act, any take-or-pay clause of any pre-1984-Act contract (generally, a contract entered into before April 2, 1984) covered by this paragraph to be against public policy and unenforceable to the extent that such clause imposes upon the pipeline an obligation for any period to take delivery of, or make payment for volumes not taken, in excess of 50 percent of the contracted volume. Defines a "take-or-pay clause" to mean any contract provision which requires payment for contracted volumes, or a percentage thereof, in the event the pipeline fails to take delivery. Defines "contracted volume" to mean the annual volume of natural gas which is specified in or determined under any first sale contract and to which a take-or-pay clause applies. Provides that the limitation shall apply to the first sale to an interstate or intrastate pipeline of the following categories of natural gas: (1) new natural gas; (2) new, onshore production wells; (3) certain intrastate contracts; and (4) certain high-cost natural gas, including tight formation gas. Exempts casinghead gas. Permits a seller of released gas (gas not taken because of the take-or-pay limitation) to resell the released gas to a new buyer. Provides that in the case of any volumes of natural gas for which delivery to any interstate or intrastate pipeline is not taken but for which payment is made under a take-or-pay clause of any contract covered by this paragraph, the pipeline shall be entitled, under rules promulgated by the Commission: (1) to take delivery, after the period for which the payments were made, of all natural gas volumes which are paid for but not taken; or (2) if delivery is not subsequently made, to receive refunds of all amounts paid for natural gas volumes which are not taken, plus interest at a rate prescribed by the Commission.

Provides that, in the case of first sales of high cost gas (not including production-enhancement gas) to interstate and intrastate pipelines under contracts entered into before April 2, 1984, and which have not been renegotiated, at any time during the six month period following the effective date of this Act a pipeline may transmit to the seller a written notice requesting that the terms of the contract be renegotiated. Permits any seller so notified to elect within 60 days after such notice to terminate the contract. Requires a pipeline, upon request of the seller or purchaser in any subsequent sale of gas released under this paragraph as a result of a renegotiation request by the pipeline, to transport such gas. Provides for arbitration if the contract has not been renegotiated within the six month period.

Provides that, in the case of first sales of new natural gas, new onshore production wells, and intrastate contracts in which the price of gas exceeds $1.00 per million Btu's any contract for sale to an interstate or intrastate pipeline which was entered into before April 2, 1984, and which is not superceded by a renegotiated contract and which contains any price escalator clause shall be declared against public policy and unenforceable with respect to the delivery of natural gas during the two year period beginning January 1, 1985, to the extent that such clause increases the first sale price of any category of such natural gas during any month above: (1) the maximum lawful price for the gas for December 1984; or (2) if lower, the first sale price paid for the last deliveries of such natural gas occurring on December 31, 1984, or if no deliveries occurred on such date, the first sale price which would have been paid had deliveries occurred on such date. Substitutes, in the preceding sentence, July 1, 1987 for January 1, 1985, June 1987 for December 1984, and June 30, 1987, for December 31, 1984 in the case of any natural gas which: (1) was not committed or dedicated to interstate commerce on the date before the date of the enactment of this Act; and (2) is produced from a completion location which is located at a depth of 5,000 feet or less. Provides for arbitration if the contract has not been renegotiated within the two year period. Provides that following the two year cap any price escalator clause of any contract to which this paragraph applies is declared against public policy and unenforceable. Defines the term "price escalator clause" to mean any contract provision providing for the establishment or adjustment of the price payable for natural gas delivered under such contract by: (1) reference to other prices for natural gas, for crude oil, or for refined petroleum products; or (2) any means other than renegotiation by the parties.

Declares against public policy and unenforceable any minimum commodity bill requirement applicable to any sale of natural gas by any interstate or intrastate pipeline to any purchaser to the extent it requires payment for the recovery of the acquisition costs of natural gas produced or purchased by the seller, fuels costs, or other variable costs, which are not incurred if deliveries to the purchaser are not made. Defines the term "minimum commodity bill requirement" to mean any contract or tariff requirement which requires payment for the minimum quantity of natural gas contracted for in the event the purchaser fails to take delivery.

Directs the Commission to require, in the case of any contract for the first sale of natural gas which is sold for resale and which is to be transported in interstate commerce by any interstate pipeline, the purchaser under the contract to file with the Commission a copy of the contract. Directs the Commission to establish procedures under which material so filed (except for confidential proprietary matter) shall be made available to affected persons and their representatives and to any State and local agencies having any jurisdiction or authority with respect to natural gas sales, production, or transportation.

Title III: Pipeline Accountability - Defines the term "similar grounds" with respect to the usage of such term for purposes of the guaranteed cost passthrough to consumers of a pipeline's purchase costs. Defines the term to include: (1) misrepresentation; (2) imprudence by the pipeline in its purchase of natural gas, including any purchasing or operating practice which does not result in the lowest reasonable rates; (3) failure by the pipeline to bargain at arm's-length with any natural gas seller; and (4) the providing by any pipeline of any undue preference or advantage to any affiliate or production operations of the pipeline. Prohibits, with respect to natural gas which is exempt from price controls: (1) the establishment of maximum lawful prices for the first sale of such natural gas; or (2) the establishment of any policy or requirement that sets forth any first sale price of such natural gas at or above which any particular purchase by a pipeline is presumed imprudent or at or below which any particular purchase by a pipeline is presumed prudent.

Directs the Commission to make an appropriate reduction in the rate of return allowed an interstate pipeline if the Commission finds that any interstate pipeline: (1) has engaged in any action or practice which the Commission determines to be imprudent; (2) has refused to provide required transportation if the pipeline could have provided such transportation and also continued to render service under contracts then in existence; or (3) has granted an undue preference or advantage in providing required transportation to an affiliate of such pipeline.

States that nothing in the Natural Gas Policy Act of 1978 shall be construed to affect the exclusivity of the Commission's jurisdiction under such Act and under the Natural Gas Act with respect to the purchasing practices of interstate pipelines.

Directs the Commission, within 12 months after the effective date of this paragraph, to prescribe standards for interstate pipeline tariffs which shall be designed to: (1) assure that prices of natural gas purchased by interstate pipelines in first sales, and the volumes committed to be taken, are sensitive to end-use market conditions and that end-use market signals are effectively transmitted to pipelines and producers; (2) discourage preferential pricing; and (3) place the pipeline fully at risk that it will not collect its allowed rate of return unless its purchasing and operating practices are designed to meet the competition of alternative fuels and prevent curtailment. Directs the Commission, within 24 months of the effective date, to review interstate pipeline tariffs to assure they meet such standards. Requires tariffs filed thereafter to meet such standards if they are to be approved.

Title IV: Contract Carriage - Directs the Commission to encourage, expedite, and facilitate, by rule or order, the transportation of natural gas by any pipeline on behalf of any person. Exempts an intrastate pipeline or field gathering system if the State commission having regulatory jurisdiction over such pipeline or system certifies to the Commission that it has, and will exercise, the authority to require such pipeline or system to transport natural gas without discrimination. Exempts a person from the Commission's jurisdiction solely by reason of any transportation required by this Act except to the extent necessary to assure compliance with this paragraph. Provides that no obligation shall be imposed upon: (1) any local distribution company to the extent of its facilities used in the local distribution of natural gas; or (2) any person for which a service area has been determined under the Natural Gas Act of April 2, 1984. Directs the Commission, on the petition of any person and after providing opportunity for hearing, to require a pipeline (to the extent of its available capacity) to transport natural gas (at a just and reasonable rate) on behalf of such person whenever the Commission finds that such pipeline's refusal to transport such natural gas is discriminatory or the Commission finds that such transportation is required for the public convenience and necessity. Directs the Commission to require each pipeline to file a report every six months describing the available capacity in the pipeline's facilities. Directs the Commission to: (1) monitor and gather data concerning transactions carried out pursuant to this paragraph; (2) evaluate such data; and (3) report to Congress. Sets forth effective date provisions for this paragraph.

Title V: Certain Imported Gas - Prohibits the importation of natural gas after April 2, 1984, unless the Secretary of Energy has found prior to such importation: (1) that the price for the natural gas is reasonable in comparison to any alternative supplier of natural gas available to the market involved; and (2) that the contract terms governing the sale of such natural gas are responsive to changes in the natural gas market. States that this paragraph shall apply with respect to any terminal and associated facilities owned by U.S. persons: (1) which are for the importation of liquefied natural gas; and (2) which were placed in full service after September 1, 1982, and before the effective date of this Act.

Title VI: Miscellaneous Provisions - Repeals restrictions under the Powerplant and Industrial Fuel Use Act of 1978 on the use of natural gas or petroleum in new facilities, existing major fuel-burning installations, certain boilers used for space heating, decorative outdoor lighting, and existing electric powerplants.

Repeals the incremental pricing program of the Natural Gas Policy Act of 1978.

Directs the Commission to issue proposed regulations which prohibit preferential pricing by: (1) any local distribution company, in the case of any sale to any person for a nonpriority use; (2) any interstate or intrastate pipeline, in the case of any direct sale to any end-user for a nonpriority use; or (3) any interstate or intrastate pipeline, in the case of transportation provided to any person for a nonpriority use. Directs the Commission to: (1) evaluate each of the proposed prohibitions and determine if each such prohibition, and any combination of such prohibitions, would limit the subsidization of nonpriority use customers by priority use customers; and (2) issue final regulations. Defines "preferential pricing", "priority use", and "nonpriority use."

Sets forth: (1) technical conforming amendments; and (2) effective date provisions.