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U.S. Code as of:
01/19/04
Section 717y. Voluntary conversion of natural gas users to heavy fuel oil
(a) Transfer of contractual interests
(1) In order to facilitate voluntary conversion of facilities
from the use of natural gas to the use of heavy petroleum fuel oil,
the Commission shall, by rule, provide a procedure for the approval
by the Commission of any transfer to any person described in
paragraph 2(B)(i), (ii), or (iii) of contractual interests
involving the receipt of natural gas described in paragraph 2(A).
(2)(A) The rule required under paragraph (1) shall apply to -
(i) natural gas -
(I) received by the user pursuant to a contract entered into
before September 1, 1977, not including any renewal or
extension thereof entered into or on or after such date other
than any such extension or renewal pursuant to the exercise by
such user of an option to extend or renew such contract;
(II) other than natural gas the sale for resale or the
transportation of which was subject to the jurisdiction of the
Federal Power Commission under the Natural Gas Act [15 U.S.C.
717 et seq.] as of September 1, 1977;
(III) which was used as a fuel in any facility in existence
on September 1, 1977.
(ii) natural gas subject to a prohibition order issued under
section 717z of this title.
(B) The rule required under paragraph (1) shall permit the
transfer of contractual interests -
(i) to any interstate pipeline;
(ii) to any local distribution company served by an interstate
pipeline; and
(iii) to any person served by an interstate pipeline for a high
priority use by such person.
(3) The rule required under paragraph (1) shall provide that any
transfer of contractual interests pursuant to such rule shall be
under such terms and conditions as the Commission may prescribe.
Such rule shall include a requirement for refund of any
consideration, received by the person transferring contractual
interests pursuant to such rule, to the extent such consideration
exceeds the amount by which the costs actually incurred, during the
remainder of the period of the contract with respect to which such
contractual interests are transferred, in direct association with
the use of heavy petroleum fuel oil as a fuel in the applicable
facility exceeds the price under such contract for natural gas,
subject to such contract, delivered during such period.
(4) In prescribing the rule required under paragraph (1), and in
determining whether to approve any transfer of contractual
interests, the Commission shall consider whether such transfer of
contractual interests is likely to increase demand for imported
refined petroleum products.
(b) Commission approval
(1) No transfer of contractual interests authorized by the rule
required under subsection (a)(1) of this section may take effect
unless the Commission issues a certificate of public convenience
and necessity for such transfer if such natural gas is to be resold
by the person to whom such contractual interests are to be
transferred. Such certificate shall be issued by the Commission in
accordance with the requirements of this subsection and those of
section 7 of the Natural Gas Act [15 U.S.C. 717f], and the
provisions of such Act [15 U.S.C. 717 et seq.] applicable to the
determination of satisfaction of the public convenience and
necessity requirements of such section.
(2) The rule required under subsection (a)(1) of this section
shall set forth guidelines for the application on a regional or
national basis (as the Commission determines appropriate) of the
criteria specified in subsection (e)(2) and (3) of this section to
determine the maximum consideration permitted as just compensation
under this section.
(c) Restrictions on transfers unenforceable
Any provision of any contract, which provision prohibits any
transfer of any contractual interests thereunder, or any
commingling or transportation of natural gas subject to such
contract with natural gas the sale for resale or transportation of
which is subject to the jurisdiction of the Commission under the
Natural Gas Act [15 U.S.C. 717 et seq.], or terminates such
contract on the basis of any such transfer, commingling, or
transportation, shall be unenforceable in any court of the United
States and in any court of any State if applied with respect to any
transfer approved under the rule required under subsection (a)(1)
of this section.
(d) Contractual obligations unaffected
The person acquiring contractual interests transferred pursuant
to the rule required under subsection (a)(1) of this section shall
assume the contractual obligations which the person transferring
such contractual interests has under such contract. This section
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) The term "natural gas" has the same meaning as provided by
section 2(5) of the Natural Gas Act [15 U.S.C. 717a(5)].
(2) The term "just compensation", when used with respect to any
contractual interests pursuant to the rule required under
subsection (a)(1) of this section, means the maximum amount of,
or method of determining, consideration which does not exceed the
amount by which -
(A) the reasonable costs (not including capital costs)
incurred, during the remainder of the period of the contract
with respect to which contractual interests are transferred
pursuant to the rule required under subsection (a)(1) of this
section, in direct association with the use of heavy petroleum
fuel oil as a fuel in the applicable facility, exceeds
(B) the price under such contract for natural gas, subject to
such contract, delivered during such period.
For purposes of subparagraph (A), the reasonable costs directly
associated with the use of heavy petroleum fuel oil as a fuel
shall include an allowance for the amortization, over the
remaining useful life, of the undepreciated value of depreciable
assets located on the premises containing such facility, which
assets were directly associated with the use of natural gas and
are not usable in connection with the use of such heavy petroleum
fuel oil.
(3) The term "just compensation", when used with respect to any
intrastate pipeline which would have transported or distributed
natural gas with respect to which contractual interests are
transferred pursuant to the rule required under subsection (a)(1)
of this section, 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 the rule
required under subsection (a)(1) of this section, 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 the rule
required under subsection (a)(1) of this section; and
(B) is not offset by -
(i) a reduction in expenses associated with such
discontinuation; and
(ii) revenues derived from other transportation or
distribution which would not have occurred if such
contractual interests had not been transferred.
(4) The term "contractual interests" means the right to receive
natural gas under contract as affected by an applicable
curtailment plan filed with the Commission or the appropriate
State regulatory authority.
(5) The term "interstate pipeline" means any person engaged in
natural gas transportation subject to the jurisdiction of the
Commission under the Natural Gas Act [15 U.S.C. 717 et seq.].
(6) The term "high-priority use" means any use of natural gas
(other than its use for the generation of steam for industrial
purposes or electricity) identified by the Commission as a high
priority use for which the Commission determines a substitute
fuel is not reasonably available.
(7) The term "heavy petroleum fuel oil" means number 4, 5, or 6
fuel oil which is domestically refined.
(8) The term "local distribution company" means any person,
other than any intrastate pipeline or any interstate pipeline,
engaged in the transportation, or local distribution, of natural
gas and the sale of natural gas for ultimate consumption.
(9) The term "intrastate pipeline" means any person engaged in
natural gas transportation (not including gathering) which is not
subject to the jurisdiction of the Commission under the Natural
Gas Act.
(10) The term "facility" means any electric powerplant, or
major fuel burning installation, as such terms are defined in the
Powerplant and Industrial Fuel Use Act of 1978 [42 U.S.C. 8301 et
seq.].
(11) The term "curtailment plan" means a plan (including any
modification of such plan required by the Natural Gas Policy Act
of 1978 [15 U.S.C. 3301 et seq.] ), in effect under the Natural
Gas Act or State law, which provides for recognizing and
implementing priorities of service during periods of curtailed
deliveries by any local distribution company, intrastate
pipeline, or interstate pipeline.
(12) The term "interstate commerce" has the same meaning as
such term has under the Natural Gas Act.
(f) Coordination with this chapter
(1) Consideration in any transfer of contractual interests
pursuant to the rule required under subsection (a)(1) of this
section shall be deemed just and reasonable for purposes of
sections 4 and 5 of the Natural Gas Act [15 U.S.C. 717c, 717d] if
such consideration does not exceed just compensation.
(2) No person shall be subject to the jurisdiction of the
Commission under the Natural Gas Act [15 U.S.C. 717 et seq.] as a
natural gas-company (within the meaning of such Act) 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 contractual
interests are transferred pursuant to the rule required under
subsection (a)(1) of this section.
(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 jurisdiction of
the Commission under such Act without regard to the transfer of
contractual interests pursuant to the rule required under
subsection (a)(1) of this section.
(4) Nothing in this section shall exempt any person from any
obligation to obtain a certificate of public convenience and
necessity for the sale in interstate commerce for resale or the
transportation in interstate commerce of natural gas with respect
to which contractual interests are transferred pursuant to the rule
required under subsection (a)(1) of this section.
(g) Volume limitation
No supplier of natural gas under any contract, with respect to
which contractual interests have been transferred pursuant to the
rule required under subsection (a)(1) of this section, shall be
required to supply natural gas during any relevant period in volume
amounts which exceed the lesser of -
(1) the volume determined by reference to the maximum delivery
obligations specified in such contract;
(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 pursuant to
the rule required under subsection (a)(1) of this section, if no
such transfer had occurred; and
(3) 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.
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