42 U.S.C. § 8441: Preservation of contractual…

Summary

Lets someone who, on April 20, 1977, had a contract to get natural gas but can no longer use that gas because of a rule, sell all or part of their right to receive the gas to someone else and get paid. The buyer can pay up to a set maximum called "just compensation." If a pipeline or distributor would lose business because of the sale, they can also be paid by the buyer for that loss. The Federal Energy Regulatory Commission (FERC) must make rules that say how to figure the maximum payment. The seller and buyer can agree on the price and tell FERC. If they cannot agree, FERC can decide the price, using any liquidated-damage rules in the contract when possible. Contract rules or state laws that try to stop these sales are not enforceable. The buyer takes on the contract duties, but the seller still has to cover any duties the buyer does not perform. Suppliers do not have to deliver more gas than the smallest of four volume limits, including the contract’s maximum and the last 12-calendar-month deliveries. Definitions (short): "Just compensation" for the seller = the extra cost of using another fuel instead of natural gas over the rest of the contract, minus the contract gas price, and it can include amortizing undepreciated gas-related equipment. "Just compensation" for a pipeline/distributor = the revenue lost because deliveries stopped, so long as it is not made up by other traffic. "Contractual interests" = the right to receive gas, including under curtailment plans. "State" = each state, D.C., Puerto Rico, territories, and political subdivisions. "Interstate pipeline" = a pipeline governed by FERC under the Natural Gas Act. "Commission" = the Federal Energy Regulatory Commission. "Contract" = a gas receipt contract in effect on April 20, 1977 (renewals after that date count only if the receiver used an option to renew). Any FERC action here can be reviewed by courts under chapter 7 of title 5.

Title 42, §8441

The Public Health and Welfare, Source: USLM XML via OLRC

(a)Right to transfer contractual interests

(1)If any person receives natural gas, the use of which is prohibited by the provisions of subchapter III or any rule or order thereunder, and if such natural gas is received pursuant to a contract in effect on April 20, 1977, between such person and any other person, such person receiving such natural gas may transfer all or any portion of such person’s contractual interests under such contract and receive consideration from the person to whom such contractual interests are transferred. The consideration authorized by this subsection shall not exceed the maximum consideration established as just compensation under this section.

(2)Any person who would have transported or distributed the natural gas subject to a contract with respect to which contractual interests are transferred pursuant to paragraph (1) shall be entitled to receive just compensation (as determined by the Commission) from the person to whom such contractual interests are transferred.

(b)Determination of consideration

(1)The Commission shall, by rule, establish guidelines for the application on a regional or national basis (as may be appropriate) of the criteria specified in subsection (e)(1) to determine the maximum consideration permitted as just compensation under this section.

(2)The person transferring contractual interests pursuant to subsection (a)(1) and the person to whom such interests are transferred may agree on the amount of, or method of determining, the consideration to be paid for such transfer and certify such consideration to the Commission. Except as provided in paragraph (4), such agreed-upon consideration shall not exceed the consideration determined by application of the guidelines prescribed by the Commission under paragraph (1).

(3)In the event the person transferring contractual interests pursuant to subsection (a)(1) and the person to whom such interests are to be transferred fail to agree, under paragraph (2), on the amount of, or method of determining, the consideration to be paid for such transfer, the Commission may, at the request of both such persons, prescribe the amount of, or method of determining, such consideration. Upon the request of either such person, the Commission shall make such determination on the record, after an opportunity for agency hearing. In any such latter case, the determination of the Commission shall be binding upon the party requesting that such determination be made on the record of the agency hearing. The consideration prescribed by the Commission shall not exceed the maximum consideration permitted as just compensation under this section. In prescribing the amount of, or method of determining, consideration under this paragraph, to the maximum extent practicable, the Commission shall utilize any liquidated damages provision set forth in the applicable contract, but in no event may the Commission prescribe consideration in excess of the maximum consideration permitted as just compensation under this section.

(4)In the event that the consideration agreed upon under paragraph (2) exceeds the consideration determined by application of the guidelines prescribed by the Commission under paragraph (1), the Commission may approve such agreed-upon consideration if the Commission determines such agreed-upon consideration does not exceed the maximum consideration permitted as just compensation under this section.

(5)If consideration is agreed upon under paragraph (2) and such consideration exceeds the consideration determined by application of the guidelines prescribed under paragraph (1), but does not exceed the maximum consideration permitted as just compensation under this section, the Commission may not require a refund of any portion of the agreed-upon consideration paid with respect to deliveries of natural gas occurring prior to the Commission’s action under paragraph (4) approving or disapproving such consideration unless the Commission determines—

(A)such agreed-upon consideration was fraudulently established;

(B)the processing of the request for approval of such agreed-upon consideration under paragraph (4) was willfully delayed by a party to the transfer; or

(C)such agreed-upon consideration exceeds the maximum consideration permitted as just compensation under this section.

(c)Restrictions on transfers unenforceable

(1)Any provision of any contract, which prohibits any transfer authorized by subsection (a)(1) or terminates such contract on the basis of such transfer, shall be unenforceable in any court of the United States and in any court of any State.

(2)No State may enforce any prohibition on any transfer authorized by subsection (a)(1).

(d)Contractual obligations unaffected

The person acquiring contractual interests transferred pursuant to subsection (a)(1) shall assume the contractual obligations which the person transferring such contractual interests has under such contract. This subsection shall not relieve the person transferring such contractual interests from any contractual obligation of such person under such contract if such obligation is not performed by the person acquiring such contractual interests.

(e)Definitions

For purposes of this section

(1)

(2)The term “just compensation”, when used with respect to subsection (a)(2), means an amount equal to any loss of revenue, during the remaining period of the contract with respect to which contractual interests are transferred pursuant to subsection (a)(1), to the extent such loss (A) is directly incurred by reason of the discontinuation of the transportation or distribution of natural gas resulting from the transfer of contractual interests pursuant to subsection (a)(1), and (B) is not offset by revenues derived from other transportation or distribution which would not have occurred if such contractual interests had not been transferred.

(3)The term “contractual interests”, with respect to a contract described in subsection (a)(1), includes the right to receive natural gas as affected by any applicable curtailment plan filed with the Commission or the appropriate State regulatory authority.

(4)The term “State” means each of the several States, the District of Columbia, Puerto Rico, any territory or possession of the United States, and any political subdivision of any of the foregoing.

(5)The term “interstate pipeline” means any person engaged in the transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission under the Natural Gas Act [15 U.S.C. 717 et seq.].

(6)The term “Commission” means the Federal Energy Regulatory Commission.

(7)The term “contract”, when used with respect to a contract for receipt of natural gas, which contract was in existence on April 20, 1977, does not include any renewal or extension occurring after such date unless such renewal or extension occurs pursuant to the exercise of an option by the person receiving natural gas under such contract.

(f)Coordination with Natural Gas Act

(1)Consideration paid by any interstate pipeline pursuant to this section shall be deemed just and reasonable for purposes of section 4, 5, and 7 of the Natural Gas Act [15 U.S.C. 717c, 717d, 717f]. The Commission shall not deny a passthrough by such interstate pipeline of such consideration based upon the amount of such consideration paid pursuant to this section.

(2)No person shall be subject to the jurisdiction of the Commission under the Natural Gas Act [15 U.S.C. 717 et seq.] or to regulation as a common carrier under any provision of Federal or State law solely by reason of making any sale, or engaging in any transportation, of natural gas with respect to which the transfer of contractual interests is authorized under subsection (a)(1).

(3)Nothing in this section shall exempt from the jurisdiction of the Commission under the Natural Gas Act [15 U.S.C. 717 et seq.] any transportation in interstate commerce of natural gas, any sale in interstate commerce for resale of natural gas, or any person engaged in such transportation or such sale to the extent such transportation, sale or person is subject to the juridiction of the Commission under such Act without regard to the transfer of contractual interests under subsection (a)(1).

(4)Nothing in this section shall exempt any person from any obligation to obtain a certificate of public convenience and necessity for the transportation by an interstate pipeline of natural gas with respect to which the transfer of contractual interests is authorized under subsection (a)(1). The Commission shall not deny such a certificate for the transportation in interstate commerce of natural gas based upon the amount of consideration paid pursuant to this section.

(g)Volume limitation

No supplier of natural gas under any contract, with respect to which contractual interests have been transferred under subsection (a)(1), shall be required to supply natural gas during any relevant period in volume amounts which exceed the lesser of— (1)

(2)the volume which such supplier would have been required to supply, under the curtailment plan in effect for such supplier, to the person, who transferred contractual interests under subsection (a)(1), if no such transfer had occurred;

(3)the volume which would have been delivered, or for which payment would have been made, pursuant to such contract but for the prohibition on the use of such natural gas under subchapter III of this chapter or any rule or order thereunder; and

(4)the volume actually delivered or for which payment would have been made pursuant to such contract during the 12-calendar-month period ending immediately before such transfer of contractual interests pursuant to this section.

(h)Judicial review

Any action by the Commission under this section is subject to judicial review in accordance with chapter 7 of title 5.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Natural Gas Act, referred to in subsecs. (e)(5) and (f)(2), (3), is act June 21, 1938, ch. 556, 52 Stat. 821, which is classified generally to chapter 15B (§ 717 et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 717w of Title 15 and Tables.

Amendments

1987—Subsec. (a)(1). Pub. L. 100–42, § 1(c)(21)(A), struck out reference to subchapter II of this chapter. Subsec. (e)(1). Pub. L. 100–42, § 1(c)(21)(B), struck out “or major fuel-burning installation” after “powerplant” in subpar. (A) and “or major fuel-burning installation” after “powerplant” in last sentence. Subsec. (g)(3). Pub. L. 100–42, § 1(c)(21)(A), struck out reference to subchapter II of this chapter.

§8441 Preservation of Contractual Interest