✍ Scribed by Clay, Baker G.
No coin nor oath required. For personal study only.
A conflict is brewing over the issues addressed in the commission's Order No. 500, the resolution of which will permanently shape the structure of the natural gas industry.l While Order N o . 500 has produced many issues that must be resolved at the FERC, the purpose of this article is to address those issues that are most critical and that will ultimately have to be resolved in the courts.
Briefly, shortages have occurred when low wellhead prices have spurred demand while constraining supply. Surpluses have occurred when high wellhead prices have constrained demand while spurring supply. Orders No. 436 and 500 essentially reflect the feeling that regulation has failed and that rather than attempt to improve regulation, it will be more productive to introduce competition. The author's belief is that the commission has attempted to abandon regulation prior to having a workable alternative in place and that this will delay the adoption of either an effective regulatory model or a workable combination of regulation-with-the-proper-mix-of-market-competition model. Thus, there will be much confusion in the interim. This confusion and existing low wellhead prices and constrained demand will act together to slow the addition of reserves and ultimately, will result in shortages of supply and sharply higher prices. These higher prices will not necessarily spur the necessary reserve additions, however, if they are used by the pipelines Regulation of Natural Gas Pipelines After Partial Wellhead Decontrol, III FERC Stats. & Regs. 30,761 (1987). Baker G. CIay is president of Baker G . Clay & Associates, a raiernaking-consulting j k m in Annapolis, Maryfand.
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