Rep. McKinley Introduces Legislation to Exempt Certain Natural Gas Facilities from Regulation under the Natural Gas Act

On September 27, 2013, Rep. David McKinley (R-WV) introduced H.R. 3208 (To clarify that certain natural gas facilities are not subject to the Natural Gas Act).  The proposed legislation is intended to eliminate barriers to greater domestic use of Liquefied Natural Gas (LNG) in transportation and other end-use applications.  To do so, the proposed legislation clarifies the scope of Federal Energy Regulatory Commission (FERC) jurisdiction over facilities used to liquefy, store, and deliver natural gas. 

The proposed legislation would add a new subsection (e) to Section 1 of the Natural Gas Act (“NGA”) to exempt from NGA regulation any person who constructs or operates “a facility not otherwise subject to [the NGA] that liquefies, stores, processes, or delivers natural gas for vehicular natural gas or other end use purposes,” even if such person re-injects natural gas into an interstate natural gas pipeline, if that re-injection is incidental to the facility’s provision of natural gas for vehicular or other end-use purposes.  Such incidental re-injection might involve certain natural gas constituents, such as ethane, rejected from the liquefaction process as byproducts, but which the facility operator cannot consume or reprocess on site.

NGA Section 1(d) already exempts from FERC regulation persons engaged in the sale or transportation of vehicular natural gas.  However, a person engaged in liquefying, storing, processing, or delivering natural gas for vehicular or other end-use purposes who takes natural gas from an interstate pipeline or other jurisdictional facility and later re-injects it into an interstate pipeline could be deemed subject to regulation under NGA Section 1(b) as a “natural-gas company” engaged in the “transportation of natural gas in interstate commerce.”  The proposed legislation would clarify the existing exemption to prevent divergent outcomes in cases involving the jurisdictional status of certain LNG facilities, which the FERC previously has approached on a case-by-case basis. 

Representatives Mike Doyle (D-PA), Bill Johnson (R-OH), and Tim Ryan (D-OH) co-sponsored the bill, which was referred to the House Committee on Energy and Commerce on the day it was introduced.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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