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Drafting Natural Gas Sales Contracts Under Conditions of Gas Supply Shortage—The Producer-Seller's View

John R. Rebman, Proceedings of 19th Annual Rocky Mountain Mineral Law Institute (1973)

Few areas of legal endeavor have experienced such far-reaching changes as have occurred in the natural gas legal practice in the past three years. This type of practice involves both participation in evolving Federal Power Commission regulation and the recognition of the impact of that regulation on the drafting of contracts for the sale of natural gas in the field.1 There are in effect two separate bodies of law which impact on the sale of gas by a producer for resale in interstate commerce. One is the law of contracts as stated by the local jurisdiction. Super-imposed is a body of law comprised of administrative and judicial decisions based upon the Natural Gas Act of 1938.2 This overlay of one system of laws upon another cannot be understood or effectively interpreted without an understanding of the history which brought it about. As may be apparent, this paper does not consider intra-state gas sales where the law of the local jurisdiction is determinative.

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The Present Natural Gas Shortage

Since 1970, pipelines subject to the jurisdiction of the Federal Power Commission have increasingly been unable to obtain contracts to purchase new supplies of gas on either a short- or long-term basis in quantities sufficient to ensure that natural gas consumers will be adequately served. Most of these interstate pipelines are unable to provide service