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Natural Gas


What is natural gas?

Natural Gas is a naturally occurring mix of hydrocarbon and associated gases, mainly methane, found in geologic formations beneath the earth’s surface. Of all the fossil fuels External Link, natural gas produces the smallest amount of pollution when burned. Only carbon dioxide and water are released. Yet, pollutants such as carbon monoxide, nitrous oxide, sulfur, and trace chemicals may be released due to inefficiencies in the burning process. Natural gas is odorlessNatural gas is odorless. The "smell" of natural gas is actually an added chemical that allows people to detect a gas leak. This chemical, called mercaptans, has a very strong smell and contributes slightly to pollution.

What are the FERC's responsibilities for regulating natural gas?

  • Granting permission to construct and operate interstate pipelines, storage facilities, and liquefied natural gas plants.
  • Granting permission to abandon facilities.

What FERC does not regulate

  • Local distribution pipeline companies. (Pipelines that serve individual residences, commercial buildings, etc. are regulated by the state authorities. These pipelines are usually smaller in diameter, operate at lower pressure, and are often constructed of plastic instead of steel).
  • Compensation to landowners for land affected by installation of natural gas facilities.
  • The development and operation of natural gas fueled vehicles, such as cars, buses, etc.

Pipeline Construction

  • Pipelines are buried at least three feet underground;
  • Backhoes and trenching machines are used to dig trenches;
  • The pipe, usually manufactured in 40 foot segments, is welded together and laid in the trench by a tractor equipped with a side boom;
  • Soil, or spoil, is placed back on the pipeline
  • The construction area is restored and planted with new vegetation; then
  • The pipe is hydrostatically tested, meaning that water is pressurized into the pipeline to check for leaks.

The environmental staff continually monitors construction and restoration activities to ensure compliance with the Commission’s requirements. Once they are convinced that project is completed and the area is restored satisfactorily, then the applicant may transport gas.

FERC evaluates numerous natural gas pipelines projects. Search for Projects Near you. In the future FERC staff will be evaluating the Alaska Natural Gas Pipeline.

FERC also evaluates liquefied natural gas (LNG) Import terminals projects.

Brief History of Natural Gas Regulation

In 1938, a report by the Department of Justice and the Federal Trade Commission found that the pipeline industry was quickly becoming a 'natural monopoly.'

A natural transmission monopoly occurs when only one company owns the means of delivering a product, here natural gas. Because natural gas pipelines that are in interstate commerce (i.e., cross state borders) are extremely expensive and time-consuming to build, once built, it is easier for an owner of such a pipeline to exercise market power in any given market.

Thus, the Natural Gas Act External Link was passed and the federal government began to regulate the natural gas industry for the first time.

The Natural Gas Act gave the commission the authority to:

  • Establish rates on the interstate transmission of natural gas;
  • Grant certificates for construction of interstate natural gas pipelines. (This authority is called a Certificate of Public Convenience and Necessity);
  • Set "just and reasonable rates" for interstate transmission of natural gas; and
  • Set natural gas prices at the wellhead External Link

In 1969 the National Environmental Policy Act External Link (NEPA) made the Commission responsible for reporting environmental impacts associated with the construction of interstate natural gas facilities. The environmental staff prepares an Environmental Impact Statement External Link (EIS) or environmental assessment (EA), which includes a review of the construction proposal and recommendations for reducing environmental impacts.

In 1993, due to an inefficient supply of natural gas, prices at the wellhead were deregulated by Congress. The Wellhead Decontrol Act of 1989 External Link deregulated natural gas and now the price of natural gas is set by supply and demand.

Do you want to learn more about Natural Gas? See these other helpful Web sites.
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