Before launching into the "what we're doing and how we're doing- it" description, I do want to note two things. . First, the Commission took no position on whether the NGPA was a good bill or a bad bill, and I'm not here to defend it today. It is useful, however, as someone who was faced with the prospect of another contentious biennial review of producer prices and the increasing frustration of diverging inter- and intrastate market prices and supply, the NGPA was a relief -- of sorts. We were forced to exchange old, familiar problems for new, challenging ones. The second point is that the FERC has a strong commitment , to making the NGPA work. We realize that not everyone is pleased with the compromise the Congress reached, but it is the law of the land and we take very seriously our responsibility to implement and enforce the provisions of the Act.
I would like to divide the NGPA in to three categories of action for the omission---
the Title I pricing mechanism and state determination process,
non-Title I activities that are governed by statutorily controlled deadlines, such as Titles II and IV and
the remaining miscellaneous items that require Commission attention
Unfortunately, I'm afraid that each of these three divisions is like a new hatchling, whichever one yells the loudest gets the Commission's attention. As a result, the public has no clear perception of the Commission's order of procedure or its progress to date. I hope to clear up some of that confusion today.
Title I of the NGPA lists the various categories of gas and the ceiling prices applicable to each. Those prices became effective December 1, 1979. The act was passed November 9, 1979. The Commission panicked on November 10th. (work commences earlier).
Nonetheless, we were able to implement the pricing structure by December 1st through the use of interim regulations. These rules are now in effect and seem to be working quite well, but they must be finalized. The comment period ended on January 31, 1979, and the staff is now in the process of evaluating the written and oral submissions. Staff will present proposed final regulations to the Commission for our consideration sometime in the future. I would not predict a large number of drastic changes, but let me outline a couple of the areas of difficulty that we must re-examine.
The regulation that has generated the greatest confusion is the definition of a first sale as it applies to production by pipelines and their affiliates, known as the attribution rule. The NGPA establishes prices for all first sales, and all sales are first sales, EXCEPT sales by pipelines, EXCEFT that a pipeline sale can be a first sale if the natural gas is "attributable" to the pipeline's own production.
The interim regulations contain a rule, B 270.203, that implements this provision of the NGPA. I call this a case of doing something bad to avoid doing something dreadful. Others call the rule ridiculous, absurd, illegal, untenable, unworkable, and unrealistic. I anticipate the final regulations will be modified, but let me show you how we got into this box.