Resolving take-or-pay liabilities: Progress through voluntary renegotiation: Discussion paper No. 049
The take-or-pay liabilities of natural gas pipelines are raised from time to time as a policy issue. Recent comments filed by individual pipeline companies at the Federal Energy Regulatory Commission (FERC) in response to a Department of Energy (DOE) proposal to collapse the vintaging of old gas prices reveal renewed dissatisfaction with the extent to which take-or-pay liabilities have been resolved through voluntary contract renegotiation. This dissatisfaction has erupted despite considerable evidence that many take-or-pay disputes have been resolved through renegotiation or outright waivers granted by producers. Some pipeline companies continue to call for legislative or regulatory relief as a means of resolving outstanding liabilities. This paper takes a further look at the take-or-pay issue, utilizing data submitted by interstate pipelines to the FERC on take-or-pay prepayments and on amounts such companies have spent to buy their way out from take-or-pay liabilities. The data cover the five year period 1980 to 1984. They provide a systematic overview of the take-or-pay issue and the extent of prepayments and buyouts made by pipelines. The findings of this paper are as follows: the take-or-pay problem, measured in terms of prepayments, first materialized in 1982; the bulk of prepayments have been borne by just a few firms; pipeline companies have eliminated a high proportion of their take-or-pay liabilities with one-time buyouts; the actual burden of take-or-pay liabilities has been far less than what was originally projected by the pipeline industry; the net burden of take-or-pay liabilities on pipelines - after taking into account rate adjustments - is well below the nominal burden; rate adjustments made to compensate pipelines for take-or-pay prepayments have had a minimal impact on consumers; and, shifting the costs of unsold gas from pipelines to producers would not benefit gas consumers. 9 tabs.
- Research Organization:
- American Petroleum Inst., Washington, DC
- OSTI ID:
- 6891237
- Report Number(s):
- NP-7900655; ON: TI87900655
- Country of Publication:
- United States
- Language:
- English
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Related Subjects
030600 -- Natural Gas-- Economic
Industrial
& Business Aspects
032000* -- Natural Gas-- Transport
Handling
& Storage
CONTRACTS
ENERGY SYSTEMS
INDUSTRY
LIABILITIES
NATIONAL ORGANIZATIONS
NATURAL GAS DISTRIBUTION SYSTEMS
NATURAL GAS INDUSTRY
PIPELINES
US DOE
US FERC
US ORGANIZATIONS