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Contract Considerations For All Buyers and Sellers

Judith M. Matlock, Negotiating Natural Gas Contracts in the Order 636 Environment (1993)

Sample provision:

Buyer represents that its purchase of gas under this contract is a sale for a “high priority end use” such as is defined by the FERC under 18 C.F.R. 157.202; or a sale for end uses designated by the FERC in 18 C.F.R. 157.209; or, any other sale authorized by the FERC which permits transportation of the subject gas hereunder to buyer by interstate pipeline transmission companies.

Reasons for being outdated:

Prior to Order 436, natural gas transportation by interstate pipeline to end users was permitted under FERC Order 319 for high priority end uses. Direct sales to these end users were referred to as authorized sales. Examples of authorized uses included natural gas used by hospitals, schools, some commercial establishments, process or feedstock uses, plant protection and essential agricultural purposes. The purpose of Order 319 was to assist interstate pipelines in responding to price competition from alternative fuels by facilitating direct sales. Order 319, along with a similar program under FERC Order 234-B authorizing transportation of direct sales gas to low priority end users, was vacated by the U.S. Court of Appeals for the District of Columbia Circuit in Maryland People's Counsel v. FERC, 761, F.2d 768 (D.C. Cir. 1985) on the grounds that they discriminated against pipeline captive customers who could not take advantage of t