Contract Regime in Gas and Oil Matter in the USA
| Páginas | 567-589 |
| Autor | Daniel Wm. Fessler |
CONTRACT REGIME IN GAS
AND OIL MATTER IN THE USA
Daniel Wm. FESSLER
SUMMARY: I. Introduction. II. Understanding your nieghbor’s
circumstances and perspective. III. Some useful vocabulary refe-
rences. IV. The market structure serving California. V. The reform
agenda. VI. Acquiring the physical infrastructure. VII. Refocu-
sing regulation. VIII. The federal agenda. IX. California’s New
Regulatory Framework. X. The increasing role of contracting.
XI. Mexicos’s challenge/Mexico’s choice. XII. Appendix A.
I. INTRODUCTION
Permit me to begin with an expression of gratitude for having been inclu-
ded as a participant in this seminar. The title of Visiting Professor at this
most illustrious University ranks as one of the most prized recognitions I
have ever received. Placing my appearance in context, I note that over the
course of the past several weks you have delved into a variety of topics
affecting energy markets and, in the process, contributed substantially to
articulating Mexico’s maturing role as both a provider and consumer. I
also applaud your vision which adopts a North American perspective in
the assessment of both promise and problems inherent in this vital field. I
share that judgment. In the course of my service on the California Public
Utilities Commission I have sought to promote a perception of my state
and its thirty four million inhabitants as part of a regional, transnational
market for energy services and products.
Your gracious invitation was premised on my experience with the
Commission but also embraced my near quarter of a century as a profes-
sor of contract law at the University of California. Drawing upon this
dual background you defined a task which, at first glance, is imminently
reasonable. You have asked that I speak of the role of contracts in both
the oil and gas markets. I intend to do so, but am forced by my many
limitations to tailor a presentation which may fall well short of your opti-
567
mistic, if not charitable, assessment of my abilities. As you are about to
learn in some detail, my experience with these subjects has given me a
somewhat developed theoretical understanding of contract law and an
academician’s perspective on the customs and mores of modern commer-
cial practice.
My duties at the Commission have acquainted me with the funda-
mentals of the natural gas industry. My knowledge of the oil industry is
less satisfactory. In the classroom the political and developments center-
ing on petroleum in the 1970’s are used as a case study in dramatic
change which forced the development fo the law of commercial impracti-
cability and tested the practical application of the concepts of breach and
excusable non-performance.1 Nothing in my public life has occasioned a
study of emerging trends in the oil industry for its affairs are conducted
beyond the purview of my Commission’s jurisdiction. Further, my
knowledge of the gas industry is strongly colored by my service on the
Commission where I seek to guard the interest of the many millions of
consumers who use natural gas as a domestic heating fuel in addition to
critical industrial, commercial and agricultural pursuits. Equally impor-
tant to me are the emerging markets for the commodity as the environ-
mentally dictated fuel for generating electricity, and as a propellant for a
new generation of transportation vehicles. In the context of these many
alternative uses, contracts are vital in linking producers with end users
and defining use of transportation and storage infrastructure as well as the
role of such market participants as aggregators, brokers and local distri-
bution utilities.
Yet a description of the realm of contract would leave you with an
excessively theoretical perspective. In order to understand the natural gas
industry may I respectfully suggest that you must first focus on the cir-
cumstances of the potential market participants and the social or political
objectives which they have defined for accomplishment. It is only in this
setting that one can appreciate the risks as well as the rewards of private
conduct. There is nothing original in this thought. It was better expressed
568 DANIEL Wm. FESSLER
1The sweep of the unfolding events is sometimes reflected in the fact pattern of a single case.
See, for example, Eastern Air Lines, Inc. v. Gulf Oil Corp., 415 F. Supp. 429 (1975). The dispute
surrounded the obligations of the buyer and seller under a requirements contract for aviation fuel
which had been renewed for a five year period in 1972. By March, 1974 the economic terms were
being assailed by the seller as hopelessly at odds with the post-OPEC world. For a summary of the
facts, contentions of the parties and judgment of a talented United States District Judge, see Appen-
dix A.
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