Foundations and Trends® in Microeconomics > Vol 11 > Issue 4

Natural Gas Pipeline Regulation in the United States: Past, Present, and Future

Matthew E. Oliver, Georgia Institute of Technology, USA, matthew.oliver@econ.gatech.edu Charles F. Mason, University of Wyoming, USA, bambuzlr@uwyo.edu
 
Suggested Citation
Matthew E. Oliver and Charles F. Mason (2018), "Natural Gas Pipeline Regulation in the United States: Past, Present, and Future", Foundations and Trends® in Microeconomics: Vol. 11: No. 4, pp 227-288. http://dx.doi.org/10.1561/0700000070

Published: 31 May 2018
© 2018 M. E. Oliver and C. F. Mason
 
Subjects
Industrial Organization:Regulatory Economics
 
Keywords
JEL Codes: L9 Industry Studies: Telecommunications and UtilitiesN5 Agriculture, Natural Resources, Environment, and Extractive IndustriesQ34 Natural Resources and Domestic and International ConflictsQ4 Energy
natural gaspipeline industryenergy regulationregulatory change
 

Free Preview:

Article Help

Share

Download article
In this article:
1. Introduction
2. History of Natural Gas Pipeline Regulation in the U.S.
3. Current Regulation of U.S. Interstate Natural Gas Pipelines
4. Possibilities for the Future of Gas Pipeline Regulation
5. Conclusion
References

Abstract

This monograph provides a detailed overview of federallevel regulation of the U.S. interstate natural gas pipeline industry. To develop a more complete understanding of the current regulatory environment, we place contemporary rules and regulations into their proper historical context by first reviewing the evolution of gas pipeline regulation over the course of the 20th Century. We then discuss the market restructuring process that culminated in 1992 with FERC Order No. 636, review the economic and policy research that studied its effects on pipeline operations (and on the U.S. natural gas market writ large), and examine the current regulations and industry structure that have since emerged. Finally, we explore possibilities for the future of regulation in the gas pipeline industry, offering some predictions regarding the likely direction of regulatory changes, paying particular attention to the possibility of incentive-based regulation in natural gas transmission.

DOI:10.1561/0700000070
ISBN: 978-1-68083-452-9
74 pp. $60.00
Buy book
 
ISBN: 978-1-68083-453-6
74 pp. $140.00
Buy E-book
Table of contents:
1. Introduction
2. History of Natural Gas Pipeline Regulation in the U.S.
3. Current Regulation of U.S. Interstate Natural Gas Pipelines
4. Possibilities for the Future of Gas Pipeline Regulation
5. Conclusion
References

Natural Gas Pipeline Regulation in the United States: Past, Present, and Future

Natural Gas Pipeline Regulation in the United States: Past, Present, and Future provides a detailed economic overview of these regulations and reviews the relevant economic and policy literature that has tracked the evolution and regulation of the U.S. gas transmission market over the past century. Section 2 provides a detailed history of U.S. federal regulation of interstate gas pipelines, highlighting the most impactful regulatory changes and discussing both the immediate and lasting effects they had on the market. It shows how specific regulatory measures were critical in helping the nascent and integrated natural gas extraction and transmission industry establish itself as a cornerstone of the U.S. energy portfolio, and how these same regulations, after the industry had grown, resulted in severe market distortions. In response to these distortions and to increase market competition, the Federal Energy Regulatory Commission (FERC) issued Order 636 in 1992, mandating that the U.S. natural gas industry be fully restructured into separate production, transportation, and distribution sectors. A wealth of economic and policy literature has since analyzed the impacts of Order 636, both on the behavior of pipeline operators specifically and on the U.S. natural gas market. Section 3 provides a thorough review of this literature and discusses the current industry structure that has emerged. It also includes a detailed explanation of FERC’s current rate setting methodology for gas pipelines, a discussion of the “primary” and “secondary” markets for natural gas transmission and FERC’s formal capacity release system, and a brief review of several important non-price regulations faced by pipeline operators. Finally, Section 4 discusses the future of regulation in the gas pipeline industry, offering predictions and recommendations to policy makers and pipeline operators regarding the likely direction of regulatory changes. A growing body of economic literature now praises the benefits of transitioning away from rate-of-return regulation in infrastructure-intensive industries, in favor of more flexible ‘incentive-based’ regulatory models and the authors discuss the likelihood and implications of a move toward incentive-based regulation in the U.S. gas pipeline industry.

 
MIC-070