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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Roberts, John G.: Files
Folder Title: JGR/Draft Bills (1 of 4)
Box: 18
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
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Contact a reference archivist at: [email protected]
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MEMORANDUM
THE WHITE HOUSE
WASHINGTON
February 25, 1983
MEMORANDUM FOR FRED F. FIELDING
FROM:
JOHN G. ROBERTS
2002
SUBJECT:
Draft Legislation, Fact Sheet and
Presidential Statement Re: Natural Gas
Richard Darman has requested comments by close of business
February 25 on draft natural gas decontrol legislation, a
proposed Presidential statement on submission of the legisla-
tion, and a draft fact sheet. The package is accompanied by
a memorandum for the President from Secretary Hodel. Hodel
states that the legislation is the specific proposal developed
from the general outline presented to the Cabinet earlier
this month, revised after consultation with Congressional
leaders. Hodel urges transmittal of the legislation as soon
as possible.
The only difficulty I have with the package is that the
legislation is, in my view, constitutionally suspect.
Section 302 of the bill repeals certain "take or pay"
provisions in contracts for the delivery of natural gas.
Under such not uncommon provisions, purchasers of natural
gas agree to accept certain amounts of gas, or pay for the
gas even if they do not accept it. The legislation, by
repealing these "take or pay" provisions, deprives natural
gas sellers of valuable contract rights. While the Contracts
Clause, barring states from passing laws impairing the
obligation of contracts, U.S. Const. art. I, § 10, does not
by its terms apply to federal laws, contract rights are
property rights and the federal government cannot deprive
private parties of such property rights without just compensa-
tion. U.S. Const. amend. V. The analysis in "takings
clause" cases is an essentially ad hoc balancing of the harm
to private parties against public benefits from the taking,
SO it is difficult to determine in advance whether a par-
ticular law will run afoul of the takings clause. I would
not, therefore, want to derail the proposed legislation at
this late date. I do, however, feel obligated to raise the
concern, and have done so in the proposed memorandum to
Darman. I have also suggested that at some point in the
legislative process a severability clause be added to the
bill, so any problems with $ 302 do not bring down the whole
house of cards.
Attachment
THE W ITE HOUSE
WA HINGTON
February 25, 1983
MEMORANDUM FOR RICHARD G. DARMAN
ASSISTANT TO THE PRESIDENT
FROM:
FRED F. FIELDING RAH/YONFFFF
COUNSEL TO THE PRESIDENT
SUBJECT:
Draft Legislation, Fact Sheet and
Presidential Statement Re: Natural Gas
Counsel's Office has reviewed the proposed natural gas
legislation, Presidential statement, and fact sheet. While
we do not object to going forward with submission of the
legislation and issuance of the statement and fact sheet, it
should be noted that section 302 of the bill raises signifi-
cant Constitutional concerns. That section affects existing
contractual rights in a manner that may be considered to
constitute a "taking" of private property without just
compensation. Those dealing with the legislation should be
prepared to address this issue. In particular, at some
point in the legislative process a severability clause
should be added so that if section 302 is struck down the
entire bill will not be jeopardized.
FFF: JGR: aw 2/25/83
CC: FFFielding
JGRoberts
Subj.
Chron
THE W ITE HOUSE
WA. HINGTON
February 25, 1983
MEMORANDUM FOR RICHARD G. DARMAN
ASSISTANT TO THE PRESIDENT
FROM:
FRED F. FIELDING
COUNSEL TO THE PRESIDENT
SUBJECT:
Draft Legislation, Fact Sheet and
Presidential Statement Re: Natural Gas
Counsel's Office has reviewed the proposed natural gas
legislation, Presidential statement, and fact sheet. While
we do not object to going forward with submission of the
legislation and issuance of the statement and fact sheet, it
should be noted that section 302 of the bill raises signifi-
cant Constitutional concerns. That section affects existing
contractual rights in a manner that may be considered to
constitute a "taking" of private property without just
compensation. Those dealing with the legislation should be
prepared to address this issue. In particular, at some
point in the legislative process a severability clause
should be added so that if section 302 is struck down the
entire bill will not be jeopardized.
FFF:JGR:aw 2/25/83
CC: FFFielding
JGRoberts
Subj.
Chron
Document No. 073145CS
WHITE HOUSE STAFFING MEMORANDUM
DATE:
February 24
ACTION/CONCURRENCE/COMMENT DUE BY: MONDAY, FEB. 28
DRAFT LEGISLATION, FACT SHEET, & PRESIDENTIAL STATEMENT
SUBJECT:
RE NATURAL GAS
ACTION FYI
ACTION FYI
VICE PRESIDENT
GERGEN
MEESE
HARPER
BAKER
JENKINS
DEAVER
MURPHY
STOCKMAN
ROLLINS
CLARK
WHITTLESEY
DARMAN
P
RSS
WILLIAMSON
DUBERSTEIN
VON DAMM
FELDSTEIN
BRADY/SPEAKES
FIELDING
ROGERS
FULLER
BAKSHIAN
Remarks:
Please provide any comments/recommendations by Monday, February 28th.
Thank you.
Richard G. Darman
Assistant to the President
(x2702)
Response:
OF
STATES ENERGY.
THE SECRETARY OF ENERGY
WASHINGTON, D.C. 20585
February 23, 1983
MEMORANDUM FOR THE PRESIDENT
FROM:
DONALD PAUL HODEL Don Hodel
SUBJECT:
Natural Gas Deregulation
On February 10, following the Cabinet meeting of February 8, you
authorized me to consult with Congressional leaders on the speci-
fics of the natural gas proposal I presented at the Cabinet
meeting. That proposal provides for decontrol of natural gas
markets in a way intended to protect consumers and to provide
adequate supplies at reasonable costs.
I have carried out these consultations with results that have
been quite encouraging and frequently more favorable than I had
expected. The Republican leadership on both the Senate and House
Energy Committees has been most supportive and has urged us to
present a specific bill.
Pursuant to these consultations, we have developed specific
legislative language generally in line with the outline that was
given to the Cabinet, and a copy of that draft legislation is
attached. We also have prepared accompanying material, including
a draft Presidential transmittal message, and a policy analysis
of the bill's effects.
It is interesting to note that DOE's analysis shows that if this
bill were enacted, natural gas prices could drop by 10-30 cents
per mcf in the first year, as the market moved toward greater
decontrol and flexibility. We believe this is a careful analysis,
and, should oil prices drop significantly, the natural gas price
drop could be larger.
I urge you to make the decision to transmit this legislation to
Congress at your earliest opportunity. There hardly could be a
better time to make this proposal. The success and wisdom of
your effort in decontrolling oil is becoming more apparent daily.
That courageous decision has had a major impact in producing the
free oil market which has led to a significant price decline in
recent days. Moreover, failure of the Administration to come
forward with a comprehensive legislative proposal would mean
relinquishing the inevitable legislative battle to those who
merely would seek extension of controls, price freezes and other
"quick fixes" that will not work and would be detrimental to the
Nation.
2
It is very important that your personal decision and commitment
be perceived as strong and unequivocal. Our supporters in both
the House and Senate have indicated that the bill should be sent
soon, and it should be sent with strong Presidential support. I
believe that if the transmission is delayed beyond your departure
for California next week, it would be taken as a sign of less
than complete enthusiasm.
I would be pleased to provide additional material as seems
appropriate to you and your staff.
Attachments
FACT SHEET
NATURAL GAS CONSUMER REGULATORY REFORM LEGISLATION
The Natural Gas Policy Act (NGPA) of 1978 currently is causing
natural gas prices to rise in spite of an oversupply of deliv-
erable gas, declining oil prices, and a low rate of inflation.
The proposed natural gas legislation submitted by the President
to the Congress today will benefit consumers by creating a
system in which gas prices can be responsive to the pressures
of the market. Through "deregulation by renegotiation, this
proposal will protect consumers from uneconomic natural gas
price increases while eliminating regulatory barriers that pre-
vent natural gas from being purchased, distributed and used
efficiently.
A primary purpose of the proposal is to see that consumers not
bear the risk of price increases from this effort to let the
market work. This proposal modifies, until January 1, 1986,
the current Federal Energy Regulatory Commission regulations
which allow pipelines immediately to pass through to consumers
all wellhead cost increases. This will provide fairness to
consumers and provide incentives to suppliers and pipelines to
renegotiate contracts to minimize costs.
-- Purchased gas costs automatically passed to consumers will
be limited to the pre-enactment levels plus the increase
attributable to inflation.
-- Price increases above the rate of inflation may not be
passed to consumers unless such increases specifically are
approved by the Federal Energy Regulatory Commission after
a public proceeding with appropriate standards.
Under current market conditions, the proposed natural gas
legislation should result in a first year drop in the average
price of gas of 10 to 30 cents per thousand cubic feet (mcf).
This estimate is based on assumptions about the extent of
producer/pipeline renegotiations, the current excess of deliv-
erable gas supplies, the rate of economic growth and what path
oil prices will follow over the next few years. If, for
example, oil prices were to fall below the cautious projections
used (which do not take into account recent price reduction
announcements by major foreign oil producing nations), we would
expect gas prices to drop even further in the near-term.
Under the proposed legislation, any new contracts for natural
gas purchases may be negotiated and existing contracts may be
2
renegotiated at the option of the contracting parties, and all
these contracts will operate on whatever terms the parties
agree. As an incentive to renegotiation, either party will be
allowed to opt out of any pre-enactment contract beginning
January 1, 1985.
O Before 1986, the average price of gas purchased through renego-
tiated and new contracts will become the "gas cap," and the
price for all regulated gas will be limited to the lower of
either the "gas cap" or the NGPA-controlled price, with the
exception of "tight sands" gas which is capped at its maximum
lawful price at date of enactment.
O The price of gas not currently regulated -- so called "deep
gas" -- will be capped at the higher of the contract price as
of the date of enactment or the "gas cap" until January 1,
1986, unless such contracts are renegotiated prior to that
date.
O The "gas cap" will be applied as a ceiling for price escalator
clauses in existing contracts until January 1, 1986, or sooner
if such contracts are renegotiated.
Until January 1, 1986, the legislative proposal will allow
pipeline companies to reduce their minimum rates of take to
70 percent under those "take-or-pay" provisions that require
pipelines to pay for a specified quantity of gas regardless of
how much gas they can sell. If the purchaser elects to reduce
the amount of gas taken under "take-or-pay" provisions, the
seller may sell that portion of the gas elsewhere.
The proposal will require pipelines to carry gas at an incen-
tive rate where producers find buyers other than the pipeline
concerned, there is available capacity, and existing pipeline
customers are not penalized.
DRAFT
2/23/83
PRESIDENTIAL STATEMENT - NATURAL GAS
It is a pleasure today to do what we long have anticipated:
to send to Congress our proposal for correcting problems that
have resulted from excessive regulation of the natural gas
market. Our goal must be to obtain an adequate supply of natural
gas at a reasonable price. Anything less is not sufficient and
will not solve the problems currently faced by many Americans who
depend on natural gas.
In recent months, thousands of people have written to me, to
Members of Congress and to state and local officials expressing
their distress about rapidly rising natural gas bills. Some
areas of the country have been especially hard hit. It is clear
that consumers are being poorly and unfairly served by the
existing regulatory system a system which prevents natural gas
producers and their customers from establishing contracts that
respond to market forces, including downward pressure on prices
that otherwise would occur as a result of plentiful gas supplies
and declining oil prices. There is widespread agreement that
something must be done to relieve the regulatory straight jacket
in which the natural gas market now operates.
The proposal I am submitting to the Congress today will
achieve the needed result. It is not a partisan plan, nor does
2
it resort to seemingly simple "quick fixes," which would turn out
to be neither simple nor quick and ultimately would not fix the
problems. Instead, our approach is a comprehensive proposal that
can -- and I believe will -- be supported by Congressmen and
Senators of both parties and will be beneficial to the consumers
they represent.
Our legislative package will allow, but not require, the par-
ties to negotiate toward a free market, so that there will be
real and long-term incentives to produce and market abundant gas
supplies at the lowest possible cost. In this regard, I note the
decline in gasoline and home heating oil prices that have occurred
since we deregulated oil two years ago.
Although we believe free markets not only can, but will,
achieve these results, the American consumer need not take this on
faith alone. To assure the consumer is protected, I have insisted
on a provision which reverses the present law by providing that,
until 1986, there will be a moratorium on the automatic pass-
through of increased gas costs other than those increases attribu-
table to inflation, which as you know has been declining steadily.
We believe these ideas offer the best achievable combination of
consumer protection and efficient, economic use of our valuable
gas resources. I look forward to working closely with the
Congress to obtain passage of this urgently needed legislation
without delay.
PRELIMINARY WORKING DRAFT
2/23/83
1:00 p.m.
A BILL
To correct deficiencies in the Natural Gas Policy Act of 1978,
to protect natural gas consumers from price increases because
of current distortions in the regulated market for natural
gas, to provide for a free market for natural gas, to permit
natural gas contracts to reflect the change from a regulated
to a free market, to eliminate incremental pricing require-
ments for natural gas, to eliminate certain fuel use restric-
tions, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That this Act
may be cited as the "Natural Gas Consumer Regulatory Reform
Amendments of 1983".
TABLE OF CONTENTS
TITLE I -- PURCHASED GAS COST
Sec. 101. Purchased Gas Cost.
TITLE II -- REMOVAL OF WELLHEAD PRICE CONTROLS AND REPEAL
OF JURISDICTION OVER CERTAIN FIRST SALES
Sec. 201. Removal of Wellhead Price Controls.
Sec. 202. Repeal of Natural Gas Act Jurisdiction Over First Sales
of Committed or Dedicated Natural Gas.
2
Sec. 203. Repeal of Provisions Allowing Reimposition of Price
Controls and Report to Congress.
TITLE III -- TRANSITIONAL PRICE AND CONTRACT PROVISIONS
Sec. 301. Limitation on Ceiling Prices for Natural Gas.
Sec. 302. Repeal of Certain Contract Requirements and Imposition
of Take-or-Pay Limits.
Sec. 303. Market-Out Provision.
Sec. 304. Effect of Gas Cap Price.
TITLE IV -- REMOVAL OF IMPEDIMENTS TO INTERSTATE
MOVEMENTS OF GAS
Sec. 401. Authorization of Certain Interstate Sales, Transpor-
tation and Assignments.
Sec. 402. Access to Interstate Supply Sources.
Sec. 403. Contract Carrier Authorization.
TITLE V -- REPEAL OF CERTAIN RESTRICTIONS
ON NATURAL GAS AND PETROLEUM USE AND PRICING
Sec. 501. Repeal of Certain Sections of the Powerplant and
Industrial Fuel Use Act of 1978.
Sec. 502. Conforming Amendments.
Sec. 503. Repeal of Incremental Pricing Requirements.
TITLE I -- PURCHASED GAS COST
PURCHASED GAS COST
SEC. 101. (a) Title VI of the Natural Gas Policy Act of 1978
(15 U.S.C. $3431 et seq.) is amended by adding a new section 603
to read as follows:
3
"SEC. 603. LIMITATION ON THE PASSTHROUGH OF CERTAIN PURCHASED
GAS COSTS.
" (a) LIMITATION ON PURCHASED GAS ADJUSTMENTS. -- Notwith-
standing section 601 (c) of this Act, for purposes of sections 4
and 5 of the Natural Gas Act, from the first day of the first
month following enactment of the Natural Gas Consumer Regulatory
Reform Amendments of 1983 through December 31, 1985, the part of
a rate of a pipeline rate that reflects purchased gas costs may
not exceed its allowed rate for purchased gas cost.
(b) RECOVERY OF ADDITIONAL PURCHASED GAS COST. -- A pipeline
may file an application under this subsection with the Commission
to increase its rates to reflect any purchased gas cost that sub-
section (a) of this section prevents it from recovering.
Notwithstanding section 4 (e) of the Natural Gas Act, no increase
to the rates of a pipeline that may be recovered under this sub-
section may go into effect unless the Commission, after oppor-
tunity for hearing, issues an order that grants the application,
in whole or in part, with such modifications and upon such terms
and conditions as the Commission may find necessary and
appropriate. This hearing shall be conducted by the Commission
separately from proceedings on other rate applications that are
filed under section 4 of the Natural Gas Act. In any proceeding
involving an application under this subsection, the Commission
- shall allow recovery if it determines that the costs sought to be
recovered were just, reasonable, and prudently incurred. In
4
making this determination, the Commission shall consider the
reasonable availability of lower cost supplies to the pipeline
and the necessity of such costs for the pipeline to render ade-
quate service to its existing customers. Within sixty days of
the date of the enactment of the Natural Gas Consumer Regulatory
Reform Amendments of 1983, the Commission shall prescribe rules
for applications under this subsection. These rules shall faci-
litate expeditious decisions on these applications.
" (c) DEFINITIONS. --
"(1) ALLOWED RATE FOR PURCHASED GAS. -- The term
"allowed rate for purchased gas" means, for a particular
pipeline, for a particular month, the pipeline's average cost
per million Btu's for purchased gas delivered to the pipeline
during the month preceding the enactment of the Natural Gas
Consumer Regulatory Reform Act of 1983 plus the adjustment
amount for that particular month.
" (2) ADJUSTMENT AMOUNT. -- The term "adjustment amount"
means, for a particular month, the difference between the
national rate and the adjusted national rate for that par-
ticular month.
" (3) NATIONAL RATE. -- The term "national rate" means
the national average cost per million Btu's for purchased gas
delivered to all interstate pipelines during the month pre-
ceding the enactment of the Natural Gas Consumer Regulatory
Reform Amendments of 1983.
5
" (4) ADJUSTED NATIONAL RATE. -- The term "adjusted
national rate" means --
" (A) for the month in which the Natural Gas
Consumer Regulatory Reform Amendments of 1983 is
enacted, the national rate multiplied by the annual
inflation adjustment factor (as defined in section
101 (a) ) for that month; and
"(B) for any particular succeeding month, the
adjusted national rate for the preceding month
multiplied by the annual inflation factor (as defined in
section 101 (a) ) for that particular month.
" (d) REPORTING REQUIREMENT. -- By the fifth day following the
enactment of the Natural Gas Consumer Regulatory Reform Amend-
ments of 1983, each interstate pipeline shall report its average
cost per million Btu's for purchased gas delivered to it during
the month preceding the enactment of the Natural Gas Consumer
Regulatory Reform Amendments of 1983 and the volume of purchased
gas delivered to it during that month.
"(e) PUBLICATION. -- The Commission shall compute and publish
the adjustment amount for each month at least five days before the
beginning of that month.
" (f) AFFILIATED PRODUCTION. -- No interstate pipeline may
recover any costs associated with its own production or purchases
from any affiliated producer to the extent such production or
purchases were not reduced to a percentage of deliverability to
6
which the pipeline had exercised contemporaneously a contractual
right to reduce its takes of less expensive gas."
(b) The table of contents of the Natural Gas Policy Act of
1978 (15 U.S.C. $3301 note) is amended by inserting after the
item relating to section 602 the following:
"Sec. 603. Purchased Gas Cost." n
TITLE II -- REMOVAL OF WELLHEAD PRICE CONTROLS AND REPEAL
OF JURISDICTION OVER CERTAIN FIRST SALES
REMOVAL OF WELLHEAD PRICE CONTROLS
SEC. 201. Section 121 of the Natural Gas Policy Act of 1978
(15 U.S.C. $3331) is amended to read as follows:
"SEC. 121. ELIMINATION OF PRICE CONTROLS FOR CERTAIN NATURAL GAS
SALES.
"(a) GENERAL RULE. -- Beginning January 1, 1986, the provi-
sions of subtitle A respecting maximum lawful price shall cease
to apply to the first sale of any natural gas.
" (b) HIGH-COST NATURAL GAS. -- Beginning on the effective
date of the incremental pricing rule required under section 201,
the provisions of subtitle A respecting the maximum lawful price
for the first sale of natural gas shall cease to apply to the
first sale of high-cost natural gas which is described in section
107 (c) (1), (2), (3), or (4). Beginning on the date of enactment
of the Natural Gas Consumer Regulatory Reform Amendments of 1983
through December 31, 1985, the price of natural gas, which is
subject to this subsection and which subsection (c) of this sec-
7
tion does not exempt from the maximum lawful prices of subtitle A
of this Act, shall not exceed the higher of the contract price on
the date of the enactment of the Natural Gas Consumer Regulatory
Reform Amendments of 1983 or the gas cap price for the month
during which the gas is delivered.
" (c) REMOVAL OF WELLHEAD PRICE CONTROLS ON CERTAIN CONTRACTS. --
The provisions of subtitle A respecting the maximum lawful
price for any first sale of natural gas shall cease to apply to
-
any first sale of natural gas subject to any contract --
"(1) that expired, lapsed, or was terminated pursuant to
its own terms or section 316 of this Act, or
"(2) that was executed or amended,
after the date of enactment of the Natural Gas Consumer Regulatory
Reform Amendments of 1983, unless the contract specifically
provides that the contract shall not operate to terminate the
application of subtitle A. "
REPEAL OF NATURAL GAS ACT JURISDICTION OVER FIRST
SALES OF COMMITTED OR DEDICATED NATURAL GAS
SEC. 202. Section 601 (a) (1) of the Natural Gas Policy
Act of 1978 (15 U.S.C. $3431 (a) (1)) is amended by amending
subparagraph (B) to read as follows:
"(B) COMMITTED OR DEDICATED NATURAL GAS. --
Effective on January 1, 1985, for the purposes of section
1 (b) of the Natural Gas Act, the provisions of such Act
and the jurisdiction of the Commission shall not apply
8
solely by reason of any first sale of natural gas which
was committed or dedicated to interstate commerce as of
the day before the date of enactment of this subsection.
Effective on the date of enactment of the Natural Gas
Consumer Regulatory Reform Amendments of 1983 through
December 31, 1984, for the purposes of section 1 (b) of
the Natural Gas Act, the provisions of such Act and the
jurisdiction of the Commission under such Act shall not
apply solely by reason of any first sale of natural gas
which is committed or dedicated to interstate commerce
as of the day before the date of enactment of this Act
and which is --
"(i) high-cost natural gas (as defined in
section 107 (c) (1), (2), (3), or (4) of this Act);
"(ii) new natural gas (as defined in
section 102 (c) of this Act);
"(iii) natural gas produced from any new,
onshore production well (as defined in section
103 (c) of this Act); or
"(iv) natural gas exempted from the operation
of subtitle A of title I pursuant to section 121 (c). "
REPEAL OF PROVISIONS ALLOWING REIMPOSITION OF PRICE
CONTROLS AND REPORT TO CONGRESS
SEC. 203. (a) Sections 122, 123, and 507 of the Natural Gas
Policy Act of 1978 (15 U.S.C. $$3332, 3333, and 3417) are repealed
9
effective upon enactment of the Natural Gas Consumer Regulatory
Reform Amendments of 1983.
(b) The table of contents of the Natural Gas Policy Act
of 1978 (15 U.S.C. $3301 note) is amended by striking the items
relating to sections 122, 123, and 507.
TITLE III -- TRANSITIONAL PRICE AND CONTRACT PROVISIONS
LIMITATION ON CEILING PRICES FOR CERTAIN NATURAL GAS
SEC. 301. (a) Title I of the Natural Gas Policy Act of 1978
(15 U.S.C. S$3311-3333) is amended by adding the following new
section:
"SEC. 111. LIMITATION ON CEILING PRICES FOR CERTAIN NATURAL GAS.
" (a) GENERAL RULE. -- Beginning on the date of enactment
of this section, the maximum lawful price of any first sale of
natural gas subject to this subtitle shall not exceed the lower
of the applicable price as calculated pursuant to sections 102
through 106, 108, and 109 or the published gas cap price, as
defined in subsection (b).
" (b) SPECIAL RULE FOR SECTION 107 GAS. -- Beginning on the
date of the enactment of the Natural Gas Consumer Regulatory
Reform Amendments of 1983, the maximum lawful price for gas
described in subsection (c) (5) of section 107 of this Act shall
be no higher than the maximum lawful price for such gas during
the month in which the Natural Gas Consumer Regulatory Reform
Amendments of 1983 are enacted.
" (c) SPECIAL RULE FOR CERTAIN GAS DELIVERED DURING 1985. --
10
Notwithstanding subsection (a) of this section, beginning
January 1, 1985, the gas cap price shall be the maximum lawful
price for --
"(1) NEW NATURAL GAS. -- New natural gas (as defined in
section 102(c)).
"(2) NEW, ONSHORE PRODUCTION WELLS. -- Natural gas pro-
duced from any new, onshore production well (as defined
in section 103(c)), if such natural gas --
-
" "(A) was not committed or dedicated to interstate
commerce on April 20, 1977; and
"(B) is produced from a completion location which
is located at a depth of more than 5,000 feet.
"(3) " INTRASTATE CONTRACTS IN EXCESS OF $1.00. --- Natural
gas sold under an existing contract, any successor to an
existing contract, or any rollover contract, if --
"(A) such natural gas was not committed or dedi-
cated to interstate commerce on the day before the date
of the enactment of this Act; and
"(B) the price paid for the last deliveries of such
natural gas occurring on December 31, 1984, or, if no
deliveries occurred on such date, the price would have
been paid had deliveries occurred on such date is higher
than $1.00 per million Btu's.
" (d) DEFINITION OF GAS CAP PRICE. -- The term "gas cap price"
means, for a particular month, the volume-weighted average price
11
of natural gas that was --
" (1) delivered during the second, third, and fourth
months preceding that particular month; and
'(2) delivered during the first three months of deli-
veries under a contract filed under subsection (d) of this
section.
" (e) CALCULATION OF THE GAS CAP PRICE. -- Beginning with the
fourth month after enactment of the Natural Gas Consumer
-
Regulatory Reform Amendments of 1983, the Commission (in accor-
dance with section 101 (a) (6) of this subtitle) shall compute and
publish the gas cap price for each month through December 1985.
"(f) FILING REQUIREMENT. -- A purchaser of natural gas subject
to a contract executed or amended on or after the enactment of the
Natural Gas Consumer Regulatory Reform Amendments of 1983 shall
file with the Commission within five days of that date on which
the contract is executed or amended --
"(1) a summary of the contract and all ancillary
agreements, including all pricing provisions;
"(2) the prices to be paid under the contract
during the first three months of deliveries;
"(3) the estimated volumes (in millions of Btu's)
to be delivered during the first year of the contract; and
"(4) any additional data required by the Commission.
"(g) COMMISSION RULES. -- Within thirty days of the enactment
of the Natural Gas Consumer Regulatory Reform Amendments of 1983,
12
the Commission shall issue rules to implement this section. If
(b) The table of contents of the Natural Gas Policy Act of
1978 (15 U.S.C. $3301 note) is amended by inserting after the
item relating to section 110 the following:
"Sec. 111. Limitation on Ceiling Prices for Certain Natural Gas. "
(c) Section 101 (b) (5) of the Natural Gas Policy Act of 1978
(15 U.S.C. $3311 (b) (5)) is amended by striking the period at the
end and inserting the following:
", but in no event shall the operation of this paragraph
be deemed to entitle any seller to collect a price in
excess of that established pursuant to section 111."
(d) Section 105 (b) (3) (B) of the Natural Gas Policy Act of
1978 is amended by adding a new sentence at the end to read as
follows:
"This definition shall not include any clause
which establishes the price for natural gas
exempted from the operation of this subtitle
pursuant to section 121 (c) "
REPEAL OF CERTAIN CONTRACT REQUIREMENTS AND IMPOSITION
OF TAKE-OR-PAY LIMITS
SEC. 302. (a) Section 315 of the Natural Gas Policy Act
of 1978 (15 U.S.C. $3375) is repealed, and a new section 315 is
inserted in its place to read as follows:
"SEC. 315. IMPOSITION OF TAKE-OR-PAY LIMITS.
" (a) GENERAL RULE. -- In the case of any contract in effect
13
on the date of enactment of the Natural Gas Consumer Regulatory
Reform Amendments of 1983, which has not been amended subsequent
to the date of enactment, and which contains a clause requiring a
purchaser to take delivery of, or if not taken, to pay for, volu-
mes of gas in excess of 70 percent of available deliverability
from those wells included under a contract, the purchaser may
exercise without obligation to pay for volumes not taken in
excess of 70 percent of well deliverability, a right not to
accept delivery of any portion of the total volume which exceeds
70 percent of well deliverability. This right applies only to
deliveries under a contract from the date of enactment of the
Natural Gas Consumer Regulatory Reform Amendments of 1983 through
December 31, 1985.
(b) NOTICE REQUIREMENT. -- Any purchaser electing to reduce
volumes purchased pursuant to this section must give the seller
a minimum of thirty days written notice prior to the date of
delivery of the natural gas involved.
" (c) RELEASE OF CONTRACTUAL OBLIGATIONS. -- Upon receipt of
the notice provided for in subsection (b), the seller shall have
the right to terminate the contract with respect only to amounts
not taken by reason of this section. If the seller elects to
terminate the contract in accordance with this section, the
purchaser shall tender to the seller full and unconditional
release from all duties and obligations in contract or in law.
The purchaser, if a transporter of natural gas, shall tender
14
transportation in accordance with the provisions of section
316(d).
(d) CASINGHEAD NATURAL GAS AND DRAINAGE SITUATIONS. --
The Commission, by rule or order, may determine that this section
shall not apply to the extent the production of the volume for
which delivery is required to be taken is necessary --
"(1) in order to prevent drainage and protect the corre-
lative rights of the person producing the natural gas involved;
-
or
"(2) because the natural gas involved is casinghead
gas.
" (e) CONTRACTS COVERING MORE THAN ONE CATEGORY OF NATURAL
GAS. -- For purposes of this section, any contract establishing
two or more categories of natural gas for purposes of pricing
the natural gas delivered under the contract shall be treated
as separate contracts for each such category."
(b) The table of contents of the Natural Gas Policy Act
of 1978 (15 U.S.C. $3301 note) is amended by striking the item
relating to section 315 and inserting in its place the following:
"Sec. 315. Imposition of Take-or-Pay Limits."
MARKET-OUT PROVISION
SEC. 303. (a) Title III of the Natural Gas Policy Act of 1978
(15 U.S.C. $$3361-3375) is amended by adding a new section 316 to
read as follows:
"SEC. 316. MARKET-OUT PROVISION.
15
" (a) GENERAL RULE. -- Beginning January 1, 1985, either party
to a contract for the first sale of natural gas which was in
effect on the date of enactment of the Natural Gas Consumer
Regulatory Reform Amendments of 1983 and which was not thereafter
amended shall have the right to terminate the contract under the
following conditions:
"(1) the party wishing to terminate the contract must
give notice to the other party between November 16, 1984,
and November 15, 1985, and at least 45 days in advance, that
the contract is to be terminated;
"(2) the party giving notice of termination does not
materially breach the contract at any time prior to the end
of the notice period; and
"(3) the party giving notice of termination must offer
to the other party a full and unconditional release from all
future duties and obligations in contract or in law relating
to the contract, which release is effective upon termination
of the notice period.
" (b) EFFECT OF SECTION 315 REDUCTION. -- A reduction of
a take-or-pay obligation pursuant to section 315 shall not be
considered an amendment for purposes of subsection (a) of this
section.
"(c) OBLIGATIONS OF PARTIES UPON TERMINATION. -- Neither
party to a contract terminated pursuant to this section shall
have an obligation to perform any act because of the contract on
16
and after the effective date of the termination of the contract
except that a party that has received a good or service under the
contract before the effective date of its termination shall have
a duty to pay for that good or service as provided for in the
contract and that a party that has received payment under the
contract for a good or service that was not provided before the
effective date of its termination shall have a duty to make
restitution of the payment.
" (d) TRANSPORTATION OBLIGATION. --
"(1) IN GENERAL. -- In the event that a contract is ter-
minated under this section, a pipeline that was a party to
the terminated contract shall have an obligation to transport
natural gas for a producer that was a party to the terminated
contract; Provided that, the obligation of the pipeline shall
not exceed on an annual basis the volume delivered under the
contract during the year prior to its termination.
"(2) LIMITATION OF OBLIGATION. -- The Commission,
upon application by the pipeline and after opportunity for
hearing, may order a limitation of the obligation of the
pipeline under this subsection if compliance with the obliga-
tion would require construction of additional facilities or
would impair the ability of the pipeline to render adequate
service to its existing customers.
"(3) CONSIDERATION. -- The consideration for any
transportation provided under the contract provisions pro-
17
vided by this section shall be $.05 per million Btu's plus
the cost of such transportation, as established by the
appropriate State or Federal regulatory body, unless the
Commission has established, by rule, a different rate as just
compensation for such transportation. No amount of such con-
sideration shall be required to be credited and flowed back
to the customers of such pipeline."
(b) The table of contents of the Natural Gas Policy Act
of 1978 (15 U.S.C. $3301 note) is amended by inserting after
the item relating to section 315 the following:
"Sec. 316. Market-Out Option.
EFFECT OF GAS CAP PRICE
SEC. 304. (a) Title III of the Natural Gas Policy Act of 1978
(15 U.S.C. SS3361-3375) is amended by adding a new section 316 to
read as follows:
"SEC. 318. EFFECT OF GAS CAP PRICE.
"(a) PRICE ESCALATOR CLAUSES. -- No price escalator clause
may operate to establish a price for natural gas which is subject
to the provisions of subtitle A respecting the maximum lawful
price for the first sale of natural gas, other than natural gas
described in section 107 of this Act, higher than the gas cap
price. For purposes of this paragraph, the term "price escalator
clause" means any contract clause which provides for a periodic
price increase, either on a fixed or indefinite basis, which
references other natural gas prices, Federally imposed price
18
ceilings, or prices of other commodities.
"(b) AREA RATE CLAUSES. -- For purposes of applying an area
rate clause, the gas cap price shall be deemed a Federally
established rate or price.'
(b) The table of contents of the Natural Gas Policy Act of
1978 (U.S.C. $3301 note) is amended by inserting after the item
relating to section 317 the following:
"Sec. 318. Effect of Gas Cap Price."
TITLE IV -- REMOVAL OF IMPEDIMENTS
TO INTERSTATE MOVEMENTS OF GAS
AUTHORIZATION OF CERTAIN INTERSTATE SALES,
TRANSPORTATION AND ASSIGNMENTS
SEC. 401. (a) Section 311 of the Natural Gas Policy Act of
1978 (15 U.S.C. $3311) is amended by adding a new subsection (d)
to read as follows:
" (d) DEFINITION OF INTRASTATE PIPELINE AND LOCAL DISTRIBUTION
COMPANY. -- For purposes of this section, the terms "intrastate
pipeline" and "local distribution company" include any company
that is not subject to the jurisdiction of the Commission solely
by reason of section 1 (c) of the Natural Gas Act." "
(b) Section 311 (a) of the Natural Gas Policy Act of 1978
(15 U.S.C. $3371 (a)) is amended by --
(1) inserting "AND LOCAL DISTRIBUTION COMPANIES" after
"INTRASTATE PIPELINES" in the paragraph (2) heading;
(2) inserting in paragraph (2) "or local distribution
&
19
company" after "intrastate pipeline";
(3) amending subparagraph (A) (ii) of paragraph (2) to
read as follows:
"(ii) any intrastate pipeline or local distribu-
tion company. This clause does not apply to the
transportation of natural gas that is not intended to
leave the state in which the gas is produced or
transported." and
(4) in subparagraph (B) (ii) (I) and (II) of paragraph
(2), inserting "or company" after "pipeline."
(c) Section 311 (b) of the Natural Gas Policy Act of 1978
(15 U.S.C. $3371 (b)) is amended by --
(1) amending paragraph (1) to read as follows:
"(1) IN GENERAL. -- The Commission may, by rule or
order, authorize -
" (A) any interstate pipeline to sell natural gas
to any intrastate pipeline or local distribution
company; and
"(B) any intrastate pipeline or local distribution
company to sell natural gas to --
"(i) any interstate pipeline; and
"(ii) any intrastate pipeline or local distri-
bution company. This clause does not apply to the
sale of natural gas that is not intended to leave
the state in which the gas is produced or sold."
20
(2) amending paragraph (2) by --
(A) inserting "INTRASTATE PIPELINES AND LOCAL
DISTRIBUTION COMPANIES" after the subparagraph designa-
tor "A";
(B) adding "or local distribution company"
following "pipeline" and "or local distribution
company's" following "pipelines" wherever they appear; and
(C) adding a new subparagraph (D) to read as follows:
" (D) INTERSTATE PIPELINES. JUST AND REASONABLE
RATES. -- The rates and charges of any interstate pipe-
line with respect to any sales authorized under sub-
paragraph (b) (1) (A) shall be just and reasonable (within
the meaning of the Natural Gas Act). .";
(3) in paragraph (4), striking "pipeline's" and
inserting in its place "seller's," and striking out
"INTRASTATE" in the heading and inserting in its place
"EXISTING";
(4) in paragraphs (4)-(7), except for subparagraph
(5) (a) (i), striking "intrastate pipeline" or "pipeline"
wherever they appear and inserting in their place "seller";
(5) in paragraph (5)(A)(i), striking "interstate pipe-
line or local distribution" and inserting in its place
"purchasing"; and
(6) adding a new paragraph (8) to read as follows:
" (8) DEFINITION OF SELLER. -- For purposes of this
21
subsection, the term 'seller' means any person that sells gas
under paragraph (b) (1) "
(d) Section 312 of the Natural Gas Policy Act of 1978
(15 U.S.C. $3372) is amended --
(1) by amending subsection (a) to read as follows:
(a) AUTHORIZATION OF ASSIGNMENTS. -- The Commission may, by
rule or order, authorize a pipeline or local distribution company
to assign, without compensation, to any other pipeline or local
-
distribution company, all or any portion of the assignor's right
to receive surplus natural gas at any first sale, upon such terms
and conditions as the Commission determines appropriate." and
(2) by amending subsection (c) to read as follows:
"(c) SURPLUS NATURAL GAS. -- For purposes of this section,
the term 'surplus natural gas' means, with respect to any pipe-
line or local distribution company, any natural gas which exceeds
the then current demands of such person for natural gas, as
determined by the Commission, or the State agency having regula-
tory jurisdiction over that person.'
ACCESS TO INTERSTATE SUPPLY SOURCES
SEC. 402. (a) Section 314 of the Natural Gas Policy Act of
1978 (15 U.S.C. $3374) is amended by --
(1) striking "first" in subsection (a), and
(2) amending subsection (b) to read as follows:
" (b) NATURAL GAS COVERED BY THIS ACT. -- For purposes of
subsection (a), the term 'natural gas covered by this Act' means --
22
" (1) for any contract for the first sale of natural gas,
natural gas which is not subject to the jurisdiction of the
Commission under the Natural Gas Act by reason of section
601 (a) (1) (A) or (B); and
" (2) for any contract for the sale or transportation of
natural gas, natural gas which is not deemed to be gas in
interstate commerce by reason of section 601 (d) of this Act.
(b) Section 601 of the Natural Gas Policy Act of 1978
(15 U.S.C. $3431) is amended by adding new subsections (d) and
(e) to read as follows:
" (d) LIMITATION OF COMMISSION JURISDICTION OVER INTRASTATE
TRANSACTIONS. -- The provisions of the Natural Gas Act shall not
apply to any person solely because that person --
" (1) receives natural gas directly or indirectly from
another person who is not subject to the jurisdiction of the
Commission solely by reason of section 1 (c) of the Natural
Gas Act, and such gas shall not on that basis be deemed to be
gas in interstate commerce, or
" (2) receives, transports, or sells natural gas within
the same state and the natural gas shall not on that basis be
deemed to be gas in interstate commerce if all transportation
of the natural gas between States or between a State and the
Outer Continental Shelf is performed pursuant to section
302 (c), 303 (b), (c), (d), or (h), 311(a), or 317.
" (e) NONDISCRIMINATION PROVISION. -- In acting on any appli-
23
cation for sale or transportation under section 311 of this
Act or section 7 of the Natural Gas Act, for any gas produced
from the Outer Continental Shelf, the Commission may not
impose a condition or restriction upon such sale or transpor-
tation, and may not grant or deny authorization, solely on
the basis that such gas is dedicated to or will be received
by either an intrastate or interstate purchaser or user or on
the basis of general conditions in the intrastate and
interstate markets for natural gas.
CONTRACT CARRIER AUTHORIZATION
SEC. 403. (a) Title III of the Natural Gas Policy Act of 1978
(15 U.S.C. S$3361-3375) is amended by adding a new section 317
to read as follows:
"SEC. 317. CONTRACT CARRIER AUTHORIZATION.
"(a) IN GENERAL. -- Upon application by a producer of
natural gas or by a purchaser of natural gas from a producer, the
Commission shall order any interstate pipeline to carry gas under
contract between producer and purchaser upon such terms and sub-
ject to such conditions as it considers just and reasonable if
the Commission finds that such pipeline has available capacity,
that no undue burden will be placed upon such pipeline, that no
construction of new facilities would be required, and that such
order would not impair the ability of such pipeline to render
adequate service to its existing customers.
"(b) CONSIDERATION. -- The consideration for any transpor-
24
tation provided under the contract provisions provided by this
section shall be $.05 per million Btu's plus the cost of such
transportation, as established by the appropriate State or
Federal regulatory body, unless the Commission has established,
by rule, a different rate as just compensation for such transpor-
tation. No amount of such consideration shall be required to be
credited and flowed back to the customers of such pipeline."
(b) The table of contents of the Natural Gas Policy Act
of 1978 (15 U.S.C. $3301 note) is amended by inserting after
the item relating to section 316 the following:
"Sec. 317. Contract Carrier Authorization. .
TITLE V -- REPEAL OF CERTAIN RESTRICTIONS ON NATURAL GAS
AND PETROLEUM USE AND PRICING
REPEAL OF CERTAIN SECTIONS OF THE POWERPLANT AND INDUSTRIAL FUEL
USE ACT OF 1978
SEC. 501. (a) The following sections of the Powerplant and
Industrial Fuel Use Act of 1978 (42 U.S.C. $8301 et seq.)
are repealed:
(1) sections 102 (a) (16), (a) (18), (a) (19), and (a) (29)
( 42 U.S.C. §8302 (a) (16), (a) (18), (a) (19), and (a) (29));
(2) sections 201 and 202 (42 U.S.C. $$8311 and 8312);
(3) section 302 (42 U.S.C. §8342);
(4) section 401 (42 U.S.C. $8371);
(5) section 402 (42 U.S.C. $8372); and
(6) section 405 (42 U.S.C. $8375).
25
(b) The table of contents in section 101 (b) of the
Powerplant and Industrial Fuel Use Act of 1978 (42 U.S.C.
$8301 (b)) is amended by striking the items relating to the sec-
tions repealed by subsection (a) of this section.
CONFORMING AMENDMENTS
SEC. 502. (a) Section 102 of the Powerplant and Industrial
Fuel Use Act of 1978 (42 U.S.C. $8301) is amended by striking
"and major fuel-burning installations" and "and new" wherever
these phrases appear.
(b) Section 103 of the Powerplant and Industrial Fuel Use
Act of 1978 (42 U.S.C. $8302) is amended --
(1) in subsection (a) (13) (B), by --
(A) striking clause (ii) (III);
(B) striking "; or" at the end of clause (ii) (II),
and inserting a period in its place; and
(C) inserting "and" at the end of clause (ii) (I);
(2) in subsection (a) (15), by striking "or major fuel-
burning installation" and "or new" wherever these phrases
appear;
(3) in subsection (a) (20), by striking "or major fuel-
burning installation";
(4) by redesignating subsections (a) (17), (a) (20), (a) (21),
(a) (22), (a) (23), (a) (24), (a) (25), (a) (26), (a) (27), and (a) (28)
as subsections (a) (16), (a) (17), (a) (18), (a) (19), (a) (20),
(a) (21), (a) (22), (a) (23), (a) (24), and (a)(25);
26
(5) in subsection (b), by striking or "major fuel-
burning installation" wherever this phrase appears;
(6) in subsection (b) (1) (D), by striking everything
after "synthetic gas involved" and inserting in its place a
period; and
(7) by striking subsection (b) (3), and redesignating
subsection (b) (4) as subsection (b) (3).
(c) Section 104 of the Powerplant and Industrial Fuel Use
Act of 1978 (42 U.S.C. $8303) is amended to read as follows:
"The provisions of this Act shall apply in all the States,
Puerto Rico, and the territories and possessions of the United
States.
(d) Section 303 of the' Powerplant and Industrial Fuel
Use Act of 1978 (42 U.S.C. $8343) is amended --
(1) by striking "or installation" and "or installations"
wherever the phrases appear;
(2) by striking "or 302" wherever the phrase appears;
(3) by striking subsection (a)(3);
(4) by amending subsection (b) (1) to read as follows:
"(1) The Secretary may prohibit, by rule, the use of
natural gas or petroleum under section 301 (b) in existing
electric powerplants.
(5) in subsection (b) (3), by striking "or major fuel-
burning installation"; and
(6) by amending the last sentence of subsection (b) (3)
27
to read as follows:
"Any such rules shall not apply in the case of any existing
electric powerplant with respect to which a comparable
prohibition was issued by order."
(e) Section 403 of the Powerplant and Industrial Fuel Use
Act of 1978 (42 U.S.C. $8373) is amended by striking --
(1) in subsection (a) (1), "major fuel-burning installa-
tion, or other unit" and the comma immediately preceding
this phrase and "installation, or unit" and the comma imme-
diately preceding this phrase;
(2) in subsection (a) (2), "installation, or other unit"
and the comma immediately preceding that phrase, and installa-
tion, or unit" and the comma immediately preceding that phrase;
(3) in subsection (a) (2), the last sentence; and
(4) subsection (a) (3).
(f) Section 404 of the Powerplant and Industrial Fuel Use Act
of 1978 (42 U.S.C. $8374) is amended by striking --
(1) in subsection (c), "new or" in the phrase "applicable
to any new or existing electric powerplant"; and
(2) subsection (g).
(g) Section 701 of the Powerplant and Industrial Fuel Use
Act of 1978 (42 U.S.C. $8411) is amended by striking --
(1) in the last sentence of subsection (b), "or
installation";
(2) subsection (c);
28
(3) in the title of subsection (d), "AND EXEMPTIONS";
(4) in the first sentence of subsection (d) (1), "or any
petition for any order granting an exemption (or permit)";
(5) in subsection (d) (1) (B), "or in the consideration
of such petition";
(6) in subsection (f), "or a petition for an exemption
(or permit) under this Act (other than under section 402 or
404),"; and
(7) subsection (g).
(h) Section 702 of the Powerplant and Industrial Fuel Use
Act of 1978 (42 U.S.C. $8412) is amended by striking --
(1) in the title of subsection (a), "OR EXEMPTION";
(2) in subsection (a), "or granting an exemption (or
permit)";
(3) subsection (b), and redesignating subsection (c) as
subsection (b);
(4) in the first sentence. of subsection (b) (1) (as
redesignated), "or by the denial of a petition for an order
granting an exemption (or permit) referred to in subsec-
tion (b),";
(5) in the first sentence of subsection (b) (1) (as
redesignated), "such rule, order, or denial is published
under subsection (a) or (b)" and inserting in its place
"such rule, or order is published under subsection (a)";
(6) in the first sentence of subsection (b) (2) (as
29
redesignated), "the rule, order, or denial" and inserting
in its place "the rule or order";
(7) in the second sentence of subsection (b) (2) (as
redesignated), "(or denial thereof)'
(8) in subsection (b) (3) (as redesignated), "any such
rule, order, or denial" and inserting in its place "any such
rule or order".
-
(i) Section 711 of the Powerplant and Industrial Fuel Use
Act of 1978 (42 U.S.C. $8421) is amended by striking in the first
sentence of subsection (a), "or major fuel-burning installation".
(j) Section 721 of the Powerplant and Industrial Fuel Use
Act of 1978 (42 U.S.C. $8431) is amended by striking subsection
(c) and redesignating subsection (d) as subsection (c).
(k) Section 723 of the Powerplant and Industrial Fuel Use
Act of 1978 (42 U.S.C. $8433) is amended by striking subsection
(b) and redesignating subsections (c) and (d) as subsections (b)
and (c).
(1) Section 731 of the Powerplant and Industrial Fuel Use
Act of 1978 (42 U.S.C. $8441) is amended by striking --
(1) "or major fuel-burning installation" wherever the
phrase appears; and
(2) "title II or" in subsections (a) (1) and (g) (3).
(m) Section 745 of the Powerplant and Industrial Fuel Use
Act of 1978 (42 U.S.C. $8455) is amended by striking in the first
sentence of subsection (a), "from new and existing electric
30
powerplants and major fuel-burning installations" and inserting
in its place "from existing electric powerplants".
(n) Section 761 of the Powerplant and Industrial Fuel Use
Act of 1978 (42 U.S.C. $8471) is amended by striking --
(1) in subsection (a), "any existing or new electric
powerplant or major fuel-burning installation" and inserting
in its place "any existing electric powerplant"; and
-
(2) in subsection (b) --
(1) "new or" in the phrase "In the case of any new
or existing facility"; and
(2) "except to the extent provided under section
212 (b) or section 312(b)" and the comma immediately
preceding that phrase.
(o) The amendments made by this Act to the Powerplant and
Industrial Fuel Use Act of 1978 (42 U.S.C. $8301 et seq.) shall
not apply to any electric powerplant for which a final order was
issued pursuant to section 301 (b) or (c) of the Powerplant and
Industrial Fuel Use Act of 1978 (42 U.S.C. $8341 (b) or (c))
before August 13, 1981.
(p) The amendments made by this Act to the Powerplant and
Industrial Fuel Use Act of 1978 (42 U.S.C. $8301 et seq.) shall
not apply to any electric powerplant issued a proposed order
under section 301(b) or (c) of the Powerplant and Industrial Fuel
Use Act of 1978 --
(1) whose order was pending on August 13, 1981, and
31
(2) which has elected not to have the amendments made
by section 1021 of the Omnibus Budget Reconciliation Act of
1981 (95 Stat. 615) to section 301 (b) or (c) of the
Powerplant and Industrial Fuel Use Act of 1978 (42 U.S.C.
$8341 (b) or (c)) apply with respect to that powerplant.
(q) (1) The amendments made by this Act to the Powerplant
and Industrial Fuel Use Act of 1978 shall not affect the
validity of any final order issued under section 301 (b) or
(c) (42 U.S.C. $8341 (b) or (c)) of the Powerplant and
Industrial Fuel Use Act of 1978 before August 13, 1981.
(2) This Act shall not affect the validity of any
proposed order issued under section 301(b) or (c) of the
Powerplant and Industrial Fuel Use Act of 1978 (42 U.S.C.
$8341 (b) or (c)) in the case of powerplants covered by
elections made under section 1022 (b) of the Omnibus Budget
Reconciliation Act of 1981 (95 Stat. 616).
(3) The authority of the Secretary of Energy to amend,
repeal, rescind, modify, or enforce any order referred to in
paragraph (q) (1) or (q) (2), or rules applicable thereto,
shall remain in effect notwithstanding any such amendments.
REPEAL OF INCREMENTAL PRICING REQUIREMENTS
SEC. 503. (a) Subject to subsections (b) and (c) of this sec-
tion, title II of the Natural Gas Policy Act of 1978 (15 U.S.C.
S$3341-3348) is repealed, and the items relating to title II are
stricken from the table of contents of that Act.
32
(b) A rule promulgated by the Commission under title II of
the Natural Gas Policy Act of 1978 shall continue in effect only
with respect to the flow-through of costs incurred before the
enactment of the Natural Gas Consumer Regulatory Reform Amend-
ments of 1983, including any surcharges based on such costs.
(c) The Commission may take appropriate action to implement
this section.
JER July.
DRAFT BILLS
MEMORANDUM
THE WHITE HOUSE
WASHINGTON
January 31, 1983
FOR:
FRED F. FIELDING
FROM:
JOHN G. ROBERTS
JSR
SUBJECT:
Draft Bill on Establishment
of Offshore Boundaries
Robert McConnell has provided copies of the proposed "Seabed
Boundary Act, a proposed transmittal letter from him to
Speaker O'Neill, and a letter from him to David Stockman
seeking OMB clearance of both items. The bill, which received
Administration clearance in the last Congress, authorizes the
Attorney General, with the concurrence of other pertinent
Cabinet Officers, to agree with state officials on the boundary
between seabed (federal jurisdiction) and subsoil (state
jurisdiction). No such authority presently exists, so the
boundary must be determined by complex litigation, even if
there is no real dispute. The bill also provides several
means of making a legal boundary permanent, to increase
certainty, even when the geologic line is ambulatory. Only
two minor and non-controversial changes from the previously
approved bill have been made. I see no legal objections and
no need for any action on your part.
ID #
121609 CU
WHITE HOUSE
NR004
CORRESPONDENCE TRACKING WORKSHEET
0 OUTGOING
H INTERNAL
I - INCOMING
Date Correspondence
Received (YY/MM/DD)
/
/
Name of Correspondent:
Robert A. The Connell
MI Mail Report
User Codes: (A)
(B)
(C)
Subject: Draft biue to authorize the attorney
General b negotiate with constal states
in the establishment of their affahore
boundarus letter to David Stockman & Thomas
ROUTE TO:
oneill Jr.)
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5/81
United States Department of Justice
Roberts
121609
ASSISTANT ATTORNEY GENERAL
Cu
LEGISLATIVE AFFAIRS
WASHINGTON, D.C. 20530
24
Honorable David A. Stockman
Director
Office of Management and Budget
Washington, D.C. 20503
Dear Mr. Stockman:
There is enclosed a draft bill which would authorize the
Attorney General, with the concurrence of other interested agency
heads, to negotiate with coastal states in the establishment of
their offshore boundaries. At present, no federal offical has
authority to set the dividing line between state and federal
rights to resources of the offshore submerged lands. That line
must be established by expensive and time consuming litigation.
What is more, the line is ambulatory, moving as the shoreline
from which it is measured moves with erosion and accretion.
The bill would make it possible for the federal government
to agree on a boundary line if there were no disagreement with a
coastal state. It would also permit the parties to fix that line.
This would reduce the need for litigation and simplify the admini-
stration of leases for the states and federal government. It would
also give more security to lessees who would no longer lease from
one government and later find that, through erosion or accretion,
their leases now covered land under control of another government.
The bill is non-controversial. It does not withdraw any
right now available to the federal government or the states. We
would expect support from states and oil companies.
This proposal received Administration clearance during the
97th Congress and was introduced by Chairman Rodino of the House
Judiciary Committee as H.R. 5477. Based on discussions with
other parties, two minor amendments have been placed in this
draft. First, the bill has been expanded to permit the parties
to negotiate the immobilization of boundaries for both living and
non-living resources, not just non-living resources. The second
change, new section 204, would permit a state and the federal
government to agree to allow a final decree of the Supreme Court
establishing a specific boundary to become the permanent boundary.
Both of these changes have previously been conveyed to your Office.
As this proposal received Administration clearance during the 97th
Congress, we request an expeditious review of the enclosed draft
bill.
Sincerely,
ROBERT A. McCONNELL
Assistant Attorney General
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Department V. 9.
Office of Legislative Affairs
Office of the Assistant Attorney General
Washington, D.C. 20530
Honorable Thomas P. O'Neill, Jr.
Speaker
House of Representatives
Washington, D.C. 20515
Dear Mr. Speaker:
There is enclosed for your consideration and appropriate
reference a legislative proposal entitled the "Seabed Boundary Act.
This proposed legislation is addressed to the problem of
delimiting the boundary between the area of the seabed and subsoil
over which the Federal Government has exclusive jurisdiction for
exploration and exploitation of the living and non-living natural
resources and that area over which the States of the Union have
such jurisdiction.
In 1953 the Submerged Lands Act, 67 Stat. 29, granted to the
States rights in the natural resources of the submerged lands gener-
ally out to a distance of three miles from the coastline of the
States. At the same time, Congress reaffirmed the Federal claim to
the continental shelf seaward of the State grants. Because the
coastline from which the States' three-mile grants are measured is
subject to natural changes, the boundaries separating the seabed
areas subject to State rights from Federal rights are ambulatory.
Since the passage of the Submerged Lands Act, this Department has
engaged in major litigation with most of the coastal States to
determine the boundary between the rights in those resources of the
States and the Federal Government.
Title I would authorize the Attorney General, with the concur-
rence of the Secretaries of State, Commerce, the Interior and other
concerned departments and agencies, to agree with a state on the
location of the boundary. The Attorney General, as an incident of
the authority to settle litigation, may agree to the location of a
seabed boundary, where that boundary is the subject of a suit. But
absent litigation, no official in the Federal Government, at the pre-
sent time, has the authority to establish a boundary line between
Federal and state resources. Obviously, where there is no real
disagreement between the State and Federal Government as to the
location of a boundary line, some Federal officers should possess
the necessary authority to declare, on behalf of the United States,
where the boundary is. Title I would establish this authority.
Title II of this proposal establishes a means by which the
boundary may be frozen for all time. The Federal/State boundary is
measured from the coastline and is ambulatory, changing as the
coastline changes. The direct result of this is an insecurity in
title to the resources and a decrease in the value of leases to the
resources near the boundary line. The ambulatory boundary also
creates a situation that encourages endless and expensive litigation
due to the fact that the determination of the boundary at one time
may be relitigated shortly thereafter due to a change in the coast-
line. Without such a provision there could be no end to the sub-
merged lands litigation that has already gone on for 25 years.
Title II also provides a means for a state and the Federal Govern-
ment to agree that a final decree of the Supreme Court establishing
a boundary is the permanent boundary.
Title III establishes a procedure by which states may waive
any rights which might accrue from changes in the coastline. At
the present time, when Federal approval is required for the construc-
tion of an artificial structure extending seaward from the natural
coastline which could extend the area of state jurisdiction, such
rights to submerged lands within three miles of the structure but
more than three miles from the natural coastline have been waived
by states in order to secure the Federal approval. This Title
merely preserves this process and establishes a procedure for hand-
ling such waivers. This provision would only be important prior to
the time that the State and the Federal Government froze the boundary
as provided for in Title II of this proposal.
Title IV makes clear that boundaries determined under this
Act shall not affect the location of the territorial sea of the
United States or its baseline.
Passage of this legislation will make it possible to develop
the petroleum resources of the outer continental shelf more quickly
than if litigation were required. The fixed boundaries which result
will be advantageous to the Federal Government, the States and the
lessee petroleum companies.
On behalf of the Attorney General, I urge early considera-
tion and adoption of this proposed legislation.
The Office of Management and Budget has advised this Department
that there is no objection to the submission of this legislative
proposal to the Congress and that its enactment would be consistent
with the objectives of the Administration.
Sincerely,
ROBERT A. McCONNELL
Assistant Attorney General
- 2 -
H.R.
IN THE HOUSE OF REPRESENTATIVES
A BILL
To Provide For Seabed Boundary Agreements
Between The United States And Any Coastal
State And The Immobilization Of The
Seabed Boundary Of Any State
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, that this Act
may be cited as the "Seabed Boundary Act."
TITLE I
Boundary Agreements
Sec. 101. The Attorney General, with the concurrence of the
Secretary of State, the Secretary of the Interior, the Secretary of
Commerce and the Secretary or other head of any Federal department
or agency having administrative responsibility or jurisdiction over
any areas of the seabed and subsoil involved, is authorized to
agree with similarly authorized officials of any state, as to the
specific description of all or part of the boundary between the
areas of the seabed and subsoil in which the United States and the
State are respectively entitled, on the date of agreement, to con-
trol the exploration for and exploitation of the living and/or non-
living natural resources. Whenever such an agreement has become
binding on the State, either by virtue of the authority vested in
the officials negotiating on behalf of the State or by virtue of
subsequent ratification by the State in the manner provided by the
law of the State, the Governor and Attorney General of the State
shall so certify and shall cause the agreement to be deposited,
with their certificate in the National Archives and to be published
in the Federal Register.
Sec. 102. An agreement entered into under this Title shall
determine the location of the boundary until modified by a subse-
quent agreement or the decree of a court of competent jurisdiction.
It is recognized that changes in the coastline may justify changes
in the boundary. In such case either party may seek such changes
through a subsequent agreement or judicial decree. However, such
subsequent agreement or decree shall have no retroactive effect.
TITLE II
Immobilization of Boundaries
Sec. 201. Whenever the entire boundary between the areas of
the seabed and subsoil in which the United States and a state are
respectively entitled to control the exploration for and exploitation
of the natural resources has been specifically described by one or
more final decrees and agreements, and if no legal proceeding is
pending to revise the description of any part of such boundary, the
United States or the State may propose to immobilize the entire
boundary as so described.
Sec. 202. The proposal may be initiated by the Attorney
General or by an authorized official of the State. When such action
is initiated by the State it may be taken in any way authorized by
the constitution and laws of the State, provided that the Governor
and Attorney General of the State shall furnish to the Attorney
General of the United States a copy of the statute or other document
embodying the state action, together with their certification that
it is in compliance with and effective under the constitution and
laws of the State.
Sec. 203. The Attorney General of the United States shall
consult with the Secretary of State, Secretary of the Interior,
Secretary of Commerce and the Secretary or other head of any Federal
department or agency having administrative responsibility or juris-
diction over any areas of the seabed or subsoil involved as to
whether the proposed immobilization is in the best interest of the
United States. If any Secretary, the Attorney General or other
head of any Federal department or agency believes it is not, the
Attorney General shall notify the Governor and Attorney General of
the State that the proposal is rejected. If all concur that the
proposed immobilization is in the best interests of the United
States, the Attorney General shall notify the Governor and Attorney
General of the State that the proposal is accepted, and shall
deposit in the National Archives and cause to be published in the
Federal Register the documents received from the State and his
certificate of acceptance, together with a complete description of
the boundary referred to if the other documents do not contain such
a description. Upon such publication, the boundary so described
shall become an immovable boundary for the purposes of delimiting
the areas of the seabed or subsoil in which the United States and
the State are respectively entitled to control exploration for and
exploitation of the living and/or nonliving natural resources as
provided in the agreement and regulation and taxation thereof; but
such boundary shall have no other legal effect.
Sec. 204. Whenever the extent of the rights acquired by a
state under the Submerged Lands Act has been determined by a final
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decree of the United States Supreme Court and fixed by coordinates,
the line SO fixed shall be immobilized as described in said decree
and shall not be ambulatory in determining the seaward extent of
the rights acquired by said state under the Submerged Lands Act,
unless within two years of the date of the final decree either
party formally objects to the immobilization of such line. Any
such objection shall be deposited in the National Archives and pub-
lished in the Federal Register.
TITLE III
Sec. 301. If any state waives its right to the living and/
or nonliving natural resources of the seabed or subsoil which would
accrue to it as a result of changes in any portion of its coastline
by either serving on the Attorney General a waiver of those rights
duly signed by authorized officials of that State, or by entering
into an agreement signed by the Attorney General and the Secretary
of the Interior with the concurrence of the Secretary or head of
any Federal department or agency having administrative cognizance
or jurisdiction over any areas of the seabed and subsoils involved
and similarly authorized officials of that State, the Attorney
General shall, when that agreement or waiver becomes binding,
cause it to be deposited in the National Archives and a copy be
published in the Federal Register.
TITLE IV
Sec. 401. No boundary established pursuant to this Act
shall be deemed to affect, determine, or prejudice the location of
the territorial sea of the United States or the baseline from which
the breadth of the territorial sea of the United States is measured.
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Nor shall any such agreement be determinative of state boundaries
for any purpose except exploration for and exploitation of the
natural resources of the seabed and subsoil, including the regula-
tion and taxation thereof.
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