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Trading and distribution

Regulation

How are oil and gas resources traded in your jurisdiction and what (if any) regulations and procedures apply to oil and gas sales, distribution and marketing activities, both nationally and internationally?

Natural gas

Domestic wholesale sales and marketing The Natural Gas Act of 1938 gives the Federal Energy Regulatory Commission (FERC) jurisdiction over certain wholesale sales of natural gas in interstate commerce when gas will cross a state border or is commingled with gas that will cross a state border. FERC jurisdictional sales are subject to a code of conduct that addresses price reporting and record retention requirements.

Price reporting is not mandatory for marketers or sellers of natural gas. To the extent that a marketer reports transactions to publishers of natural gas indices, it must provide accurate and factual information in accordance with procedures set out in FERC’s Policy Statement on Natural Gas and Electric Prices Indices. In the event that an entity elects to change its reporting status, that entity must indicate the change in an annual report submitted to FERC through Form 552.

FERC’s jurisdiction also includes the regulation of capacity releases from one shipper to another. An interstate pipeline that offer transportation service on a firm basis under Parts 284B or 284G of the FERC regulations must have a mechanism in place within its tariff that allows firm shippers to release firm capacity to the pipeline for resale by the pipeline.

Market manipulation Under the Natural Gas Act, FERC’s core responsibility has been to ensure just and reasonable rates for transmission or sale of electric energy and transportation or sale of natural gas at wholesale in interstate commerce. That core responsibility has been unaltered by subsequent regulatory changes that set rates for jurisdictional sales through market mechanisms rather than through cost-of-service ratemaking.

In 2005 Congress altered FERC’s authority to regulate certain manipulative activities in the Energy Policy Act of 2005. That legislation provided for significant civil penalties for violations of all sections of the Natural Gas Act, and augmented FERC’s existing anti-manipulation authority by expressly prohibiting manipulative acts in connection with jurisdictional transactions by “any entity”. Specifically, the Energy Policy Act created Section 4A of the Natural Gas Act, which broadly prohibited the use or employment of “any manipulative or deceptive device or contrivance” in connection with jurisdictional transactions in the natural gas markets. It also created Section 22 of the Natural Gas Act, which provided for maximum civil penalties of $1 million per day, per violation, for any violation of the Natural Gas Act or a rule or order thereunder.

International sales of natural gas and crude oil As described on the Department of Energy website, the Natural Gas Act requires that any person wishing to import or export natural gas from or to a foreign country must first obtain an authorisation from the department. The authorisations are granted by the Department of Energy Office of Regulation and International Engagement, Division of Natural Gas Regulation.

The Department of Energy grants two types of authorisation:

  • a short-term (blanket) authorisation, which enables a company to import or export natural gas on a short term or spot-market basis for up to two years; and
  • a long-term authorisation, which is generally used when a company has a signed gas purchase or sales agreement or contract, tolling agreement or other agreement resulting in the import or export of natural gas, for longer than two years.

Is oil and gas pricing regulated in your jurisdiction?

The price for natural gas sold in interstate commerce is not subject to federal regulation. The regulation of retail sales of natural gas varies by state.

Because crude oil is a global commodity, its prices are determined by international economic supply and demand factors. Crude oil prices are not regulated by the US federal government.

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