Marketing Alberta Natural Gas in the United States after the Free Trade Agreement: Negotiating the U.S. Regulatory Maze

Abstract

Although the border between Canada and the United States for natural gas has been open for some time now, the free-market development of natural gas industries is changing from short-term deal-making to long-term industry placement. Here the Canada-United States Free Trade Agreement will take on a critical role in permitting decisions on elements of trade to be made more confidently. This article focuses on key U. S. federal regulatory principles and programs and how Congress's intention in the Natural Gas Act has been carried through so that the federal government will no longer occupy the field of gas regulation, but ensure that where the use of that commodity involves the interests of two or more states, the overall national public interest would be protected. Therefore, producing states would regulate the physical production of gas before it enters the stream of interstate commerce as well as control matters entirely intrastate in nature. The future of contract demand conversions and gas inventory charges will allow customers to purchase gas from a variety of competitive suppliers without suffering a loss of service reliability. In effect gas inventory charges represent the Federal Energy Regulatory Commission's attempt to prevent pipelines from finding them selves with massive take-or-pay liabilities. Through Order No. 436, the Commission has attempted to streamline the regulatory approval process for pipeline construction projects and in turn to foster market competition. The author argues that rate reform is making its way towards what he feels is its natural conclusion where contract, rather than regulation, will be the principal determinant of right and obligation between industry participants at the interstate level. The Federal Energy Regulatory Commission would become more of a referee than director for questions of anti-competitive behaviour in the use of interstate facilities.