Publications

Back to Publications

Alternative Marketing Approaches: Natural Gas Purchasing From the Perspective of An Industrial End-User and End-User Take-Or Pay Concerns

David H. Hawk, Natural Gas Marketing (1987)

Every consumer of natural gas pays, in some way, for the opportunity to utilize this fuel for residential, commercial, and industrial purposes. The methods of payment may vary from a minimum bill, service charge, or demand-commodity arrangement to [14-2] the producer's desire for a maximum take or pay based upon maximum deliverability of the source.

This section will present a series of concerns with which an end-user, who would transport gas for its own behalf or merely consume system gas, should be familiar.

There are five basic types of contractual agreements that are commonly used by the industrial end-user and/or its pipeline and local distribution company (LDC) suppliers:

1.Long Term Sale

2.Spot Sale

3.Transportation

4.Purchase for Resale

5.Brokerage — Agency

Whether one seeks to transport or not, it is in the user's best interest to understand how natural gas is purchased, transported and sold. The team approach of the major interstate pipeline and the LDC working together on behalf of a capitive end-user has, for the most part, served users well for many years. The opportunities presented now, through deregulation of most gas and the FERC orders to and including Order 436, have made and will continue, for those who desire it, to make the team sport one in which free agency is the rule.