Summary And Conclusion

The major findings of this report are:
1. The federal system of regulating the natural gas industry has created a competitive disparity between the interstate and intrastate markets. Louisiana is particularly disadvantaged by this disparity because of its heavy reliance on intrastate sources of gas. At present, gas prices in Louisiana are higher than in other states. In the future, the unbalanced competitive situation created by federal regulation could cause gas shortages in Louisiana.

2. Congress has the power to solve Louisiana's gas price / supply problem through amendments to the Natural Gas Act and / or the Natural Gas Policy Act. Congress is actively considering legislation at this time. It is impossible to predict whether Congress will act and, if it does, whether its action will help or hurt Louisiana.

3. Louisiana's power to improve conditions in its intrastate gas market is severely limited by the Commerce Clause and the Supremacy Clause of the U.S. Constitution. All of the most logical state actions would be held unconstitutional either because they would impose an impermissible burden on interstate commerce or because they would be inconsistent with federal statutes and regulations.

4. Most of the state actions proposed by participants in the Louisiana intrastate gas market would not survive a constitutional challenge. A few proposals would have a reasonable chance of withstanding a constitutional challenge, but would raise serious policy issues. This category includes: (a) proposals that the state assume a major role in producing and selling gas to intrastate purchasers at subsidized prices; (b) proposals that the state regulate the price of gas in the intrastate market; and, (c) proposals to regulate the price of direct sales by interstate pipelines in a manner that discourages such sales.

5. The proposal that the state assist potential intrastate gas purchasers in obtaining access to gas supplies offers some potential advantages and does not raise significant constitutional issues. The assistance could take the form of providing information to intrastate purchasers and encouraging through informal actions greater cooperation between interstate pipelines, intrastate pipelines and consumers.

Footnotes

1.See, e.g., Means, A Preliminary Analysis of the Natural Gas Market Ordering Problem (University of Texas 1981); Means, Analysis of the Bidding Disparity Between Interstate and Intrastate Pipelines (1982); Pierce Natural Gas Regulation, Deregulation and Contracts 68 Virginia Law Review 631 (1982); Pierce, Developments in Natural Gas Regulation (Proceedings of Southwestern Legal Foundation 1981); Pierce, 1982 Supplement to Natural Gas Regulation Handbook (Executive Enterprises, 1982).

2. See FERC Notice of Inquiry, Docket RM 82-26-000 (April 28, 1982); Department of Energy, The Current State of the Natural Gas Market (1981); Department of Energy, A Study of Alternatives to the Natural Gas Policy Act of 1978 (1981).

3.See Foster Associates, The Impact of the NGPA on Intrastate Markets in Louisiana (1982).

4.Congress is considering a wide variety of Bills. Some would help Louisiana, others would aggravate the situation in Louisiana. At this time, it is impossible to predict whether or how Congress will act. See generally Foster Natural Gas Report Nos. 1407, 1408, and 1409 (March 24, April 1, and April 7, 1983).

5. 102 S. Ct. 1096 (1982) .

6. 102 S. Ct. at 1100.

7. 447 U.S. 429 (1980).

8. 447 U.S. at 443.

9. 441 U.S. 322 (1979). See also New England Power Co. v. New Hampshire, 102 S.CT. at 1100 n.6.

10. 447 U.S. at 443-444.

11. 447 U.S. at 444 n.17.

12. 441 U.S. at 336.

13. 102 S. Ct. 3456, 3463 (1982).

14. 530 F. Supp. 411 (M.D. La. 1981).

15. See, e.g., Sporhase v. Nebraska, 102 S. Ct. at 3465.

16. Commentators have described the Supreme Court's pre-emption decisions as "ad hoc," "unprincipled", "confusing," and "erratic." See Note, The Pre-emption Doctrine - Shifting Perspectives on Federalism and the Burger Court, 75 Colum L. Rev. 623, 624 (1975); Note, A Framework for Pre-emption Analysis, 88 Yale L. J. 363 (1978); Comment, Preemption Doctrine in the Environmental Context: A Unified Method of Analysis, 127 U.Pa. L. Rev. 197 (1978); Hirsch, Toward a New View of Preemption, 1972 U. Ill. L. F. 515.

17. See e.g., Ray v. Atlantic Richfield Co., 435 U.S. 151, 158 (1978).

18. See FPC v. State Corporation Commission of Oklahoma, 363 F. Supp. 522 (W.D. Ok. 1973), aff'd, 415 U.S. 961 (1974) (holding orders of state Commission establishing minimum prices for gas producer sales in interstate commerce invalid under Supremacy Clause and NGA).

19. See, e.g., Public Service Commission of West Virginia v. FPC, 437 F.2d 1234 (4th Cir. 1971) (holding invalid statute giving state Commission concurrent jurisdiction to approve transfer of interstate facilities from one corporation to another). See also Tenneco Inc. v. Sutton, 530 F. Supp. at 438 (holding invalid a Louisiana statute purporting to regulate intrastate pipeline transportation of gas for interstate pipelines because such transportation was subject to federal regulation under sections 311 and 312 of NGPA).

20.See, e.g., Florida Lime and Avocado Growers, Inc. v. Paul, 373 U.S. 132 (1963); California v. Zook, 336 U.S. 725 (1949).

21. See, e.g., Mobil Oil Corp. v. Tully, 653 F.2d 497, 500-502 (EM. Ct. Ap. 1981) (federal decision to deregulate certain petroleum products was intended to preclude state regulation as well). See also Tenneco Inc. v. Sutton, 530 F. Supp. at 438 (congressional decision to eliminate requirement of prior certification of certain gas sales was intended to preclude state certification requirements as well).

22. In some cases, a congressional decision not to impose a requirement has been used as part of the basis for a judicial determination that the state is free to impose a comparable requirement. See, e.g., Head v. New Mexico Bd. of Examiners, 374 U.S. 424, 444 (1963); Savage v. Jones, 225 U.S. 501, 532-33 (1912).

23. See, e.g., Campbell v. Hussey, 368 U.S. 297 (1961); Tenneco, Inc. v. Sutton, 530 F. Supp. at 437-438 (congressional goal of enhancing flow of gas to interstate market was frustrated by Louisiana statutory provisions requiring producers to make bona fide offer of sale to intrastate market and to obtain certificate before making a sale to the interstate market).

24. For instance, Montana's thirty percent severance tax on coal made it more difficult for the federal government to pursue various statutory goals. Yet, the Court declined to hold the tax unconstitutional on this basis. Commonwealth Edison Co. v. Montana, 101 S. Ct. 2946, 2961-2964 (1981).

25. See, e.g., Jones v. Rath Packing Co., 430 U.S. 519 (1977); Northern Natural Gas Co. v. State Corporation Commission of Kansas, 372 U.S. 83 (1963); Tenneco Inc. v. Sutton, 530 F.2d at 436- 438.

26. Energy Reserves Group, Inc. v. Kansas Power and Light Co., 103 S. Ct. 697 (1983).

27. FERC Docket No. CP82-202-000.

28. Given the comprehensive federal regulation of interstate pipelines under NGA and NGPA, and the substantial potential for conflict between state and federal orders concerning gas transportation by such pipelines, Ohio's chances of prevailing are very poor. See Northern Natural Gas Co. v. State Corporation Commission of Kansas 373 U.S. 83 (1963). See also California v. Lo-Vaca Gathering Co., 379 U.S 366 (1965); Louisiana Power & Light Co. v. FPC, 483 F.2d 623 (5th Cir. 193), cert. denied, 416 U.S. 974 (1974).

29. See Foster Natural Gas Report No. 1386, App. pp. 1-23 (Oct. 21, 1982); Foster Natural Gas Report No. 1389, pp.3-9 (Nov. 11, 1982).

30. See Foster Natural Gas Report No. 1405, pp. 9-10 (Mar. 10, 1983).

31. Compare FPC v. Louisiana Power & Light Co., 406 U.S. 621 (1972), with City of Hastings v. FPC, 221 F.2d 31 (1954), cert. denied, 349 U.S. 920 (1955).

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