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Anatomy of a Gas Purchase Contract

Clyde E. Milligan, Proceedings of 23rd Annual Rocky Mountain Mineral Law Institute (1977)

The natural gas business presently and in the recent past is not and has not been static. Changes occur almost daily which affect the considerations which must be made during the negotiation of agreements for the purchase and sale of natural gas. I will attempt to highlight some of the more important recent changes. As I deal primarily with the agreements governing the purchase and sale of natural gas by pipelines and producers, I will make only abbreviated comments on residue gas purchases and sales contracts.

The subject of this presentation has been covered in many excellent papers and articles in past years, and as may be expected, there will be an overlapping here with those articles.1 Therefore, this paper may, to some extent, constitute a review and perhaps an updating of such articles.

At all times it must be kept in mind that the implementation and effectiveness of certain provisions of gas purchase agreements (especially contracts with interstate [772] pipeline purchasers) are, or may be, subject to the orders and regulations of regulatory bodies.

Insofar as time permits, discussions will be had relative to intrastate as well as interstate purchase contracts. The basic anatomy is, of course, the same for either, but because of regulation or the lack thereof, treatment given in the contracts will be somewhat different. A gas purchase contrac