Natural Gas Act of 1938, United States
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The Natural Gas Act (NGA) of 1938 was the first instance of direct Federal regulation of the natural gas industry. The Act gave the US Federal Power Commission (FPC) limited certification powers over construction, operation, and abandonment of pipelines and facilities used by interstate companies. The Act stated that no company could construct a pipeline in another company's supply market. In 1942, the FPC’s certification powers extended to the point where companies had to receive approval to build any interstate pipeline.
Due to the concern over the monopolistic tendencies of interstate pipeline owners to charge high prices, and the heavy concentration of natural gas companies, Congress enacted the Natural Gas Act in 1938 to regulate the natural gas industry. For the first time, the federal government became involved in regulating rates charged by interstate gas transmission companies and gained jurisdiction over interstate deliveries. Although the Natural Gas Act established rates for pipeline services, it did not specify prices of natural gas at the wellhead.
Another aspect of the NGA required the Department of Energy to approve all imports and exports of natural gas or liquefied natural gas (LNG). In 1977, responsibilities given to the Federal Power Commission by the NGA became distributed between the Federal Energy Regulatory Commission (FERC) and the Department of Energy.
The Natural Gas Act has had an enormous impact on the interstate natural gas market in the United States. Although the natural gas industry has undergone tremendous change since 1938, and pipeline companies no longer function as resellers of gas to local distribution companies (LDCs), the key principles continue to motivate natural gas regulation in the United States. Concern about market power continues to be a key driver of natural gas regulation and monitoring of the market.
Further Reading
- U.S. Energy Information Administration. Natural Gas Act of 1938: Description and Impact.
