To INGAA’s knowledge, there is no current widespread Mobile-Sierra problem regarding the standard of review in the natural gas industry. INGAA has some concern, therefore, that the Commission’s proposal may, contrary to its goal, create contractual uncertainty where none exists.
Nevertheless, if the Commission elects to proceed with a rule, INGAA agrees that it should be limited to new agreements, under which parties would include the language specified in proposed 18 C.F.R. § 370.1(b)(1) if they intend to permit the Commission to consider proposed modifications to the agreement under the “just and reasonable” standard rather than the “public interest” standard. INGAA’s principal concern is that dicta in the NOPR may have the unintended consequence of creating contractual uncertainty. More specifically, INGAA is concerned with the exception for “transportation agreements executed pursuant to the pro forma form of service agreement,” and the Commission’s explanation that “these forms of service agreement already mandate the use of the just and reasonable standard of review.” NOPR at P 3; see also P 5 (such agreements consistently interpreted as permitting change proposals pursuant to a “just and reasonable” standard). The problem is that the parties’ intent regarding the standard of review for proposed unilateral changes to contracts that employ the pipeline’s pro forma contract may vary, depending upon which contract term is at issue. Where the parties to jurisdictional transportation contracts use the pro forma tariff contract published pursuant to § 154.110, there is typically a “Memphis” clause that makes it clear that the governing rate schedule and general terms and conditions of the pipeline’s tariff are subject to unilateral modification proposals, reviewable by the Commission under the “just and reasonable” standard of either NGA § 4 or § 5. Where the parties to such jurisdictional transportation contracts specifically negotiate terms such as the contract term and quantity, delivery points, discounted or negotiated rates, however, they may not intend such contract terms to be open to unilateral modification proposals. To the extent the parties do not specify otherwise, these provisions should be reviewed under the public interest standard.
Also, the Commission should clarify that its statements in the NOPR should not be interpreted to prejudge the parties’ intent with respect to the standard of review for any contract – whether specifically negotiated, “fill-in-the-blank” terms in contracts that employ pro forma form of service agreements under § 154.110 or any other contracts – executed before the rule becomes effective.Related
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