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<br />f " i ' <br /> <br />2.3.1 Natural Gas Act (NGA) <br />The Natural Gas Act was passed in 1938 to control the distribution <br />and sale of natural gas in interstate commerce. 55 The Federal Power <br />Commission (FPC), created by the Federal Water Power Act in 1920, was <br />given authority to regulate the following areas of natural gas supply. <br />. The transportation of natural gas in interstate commerce. <br />. The sale of natural gas in interstate commerce which is for <br />resale and ultimate public consumption. <br />. Natural gas companies engaged in such transportation and sales. <br />Excluded from regulation under the statute were the following areas <br />of natural gas supply. <br />. Any other transportation and sale of natural gas. <br />. Local distribution of natural gas. <br />. Facilities used for local distribution. <br />. Production or gathering of natural gas. <br />Basically the FPC had jurisdiction over the rates received by inter- <br />state pipeline companies for transporting natural gas and were to insure <br />that these rates were "just and reasonable." If the Commission decided <br />that rates were not just and reasonable, they could impose rates. Control <br />over interstate transmission facilities was accomplished through issuance of <br />certificates before construction and through abandonment approval before <br />the cessation of services. <br />Under NGA, producers and local distributors were exempt from pricing <br />or facility siting requirements while pipeline companies came under increas- <br />ing controls. 56 Both the FPC and the courts consistently interpreted the <br />NGA as a directive "to protect consumers against exploitation at the hands <br />of natural gas companies. ,,57 <br />In 1954, the Supreme Court in Phillips Petroleum Company vs. Wisconsin58 <br />reinterpreted the production or gathering exemption in NGA for production <br />of natural gas as referring only to the physical facilities used, but not to <br />the actual production. Thus, FPC pricing control authority was extended <br />to include producers. Since NGA had not been written with wellhead price <br />controls in mind, FPC encountered severe problems in developing a system <br /> <br />2-19 <br /> <br />