Society of Petroleum Engineers 6200 North Central Expressway Dallas, Texas 75206


American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc.


Until and unless Congress passes deregulation legislation, interstate gas ceiling prices will be set by the Federal Power prices will be set by the Federal Power Commission. In 1976, the FPC issued orders setting out a complex new nationwide rate structure an made decisions affecting the use of various procedures for making interstate sales at prices procedures for making interstate sales at prices above the nationwide rates. These order decisions are reviewed. The current gas crisis demonstrates the continuing failure of cost-based regulation by the FPC and underscores the importance of deregulation to minimize future shortages.


As this paper goes to the printer's, our nation is experiencing its worst natural gas crisis ever. Prolonged cold weather, including the coldest average temperatures ever recorded for many parts of the Southeast, have increased demands on interstate pipelines supplying most of the country. Because of limited supplies, a number of such pipelines are unable to meet the needs of their highest priority customers. Schools and factories have closed. President Carter estimates that 200,000 workers have been laid off. Supplies to residences and small commercial users have been severely restricted. Many governors have declared states of emergency.

The winter will end, but the crisis will not. It has been growing for years. In fact, for several years, only unusually warm winters have contained the crisis at manageable levels. Gradual recognition of the crisis has focused more and more political attention on the question of natural gas price regulation. In 1976, this attention reached such levels that the year began and ended with hopes for Congressional deregulation. It will be interesting to see what impact the winter of 1977 will have on deregulation legislation in the new session.

In the meantime, the Federal Power Commission is stuck with the job of regulating interstate natural gas prices. 1976 was a "vintage" year for Commission regulation, highlighted by the adoption of new nationwide rate ceilings to govern interstate producer sales.

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