42 U.S.C. § 8441 — Preservation of contractual interest

(a) Right to transfer contract rights.
(1) If a person^* receives natural gas^* whose use is prohibited by subchapter III or a rule or order under it, and the person receives that gas under a contract in effect on April 20, 1977, with another person, the receiving person may transfer all or part of the person’s contract rights under that contract. The receiving person may receive payment from the person to whom the rights are transferred. The payment cannot be more than the maximum payment allowed as “just compensation” under this section. This section does not define “subchapter III” or “rule or order.”

(2) A person who would have transported or distributed the natural gas under the contract must receive “just compensation,” as determined by the Commission, from the person to whom the contract rights are transferred.

(b) Determining the payment.
(1) The Commission must issue a rule establishing guidelines for using the criteria in subsection (e)(1). The guidelines must apply on a regional or national basis, as appropriate, to determine the maximum payment allowed as “just compensation” under this section. This section does not define “guidelines.”

(2) The person transferring the contract rights under subsection (a)(1) and the person receiving those rights may agree on the payment amount or on a method for determining the payment. They may certify that payment to the Commission. Except as provided in paragraph (4), the agreed payment cannot be more than the payment determined under the Commission’s paragraph (1) guidelines.

(3) If the two persons do not agree under paragraph (2) on the payment amount or on a method for determining it, the Commission may set the amount or method if both persons ask it to. If either person asks, the Commission must make the determination on the record after an opportunity for an “agency hearing.” This section does not define “record” or “agency hearing.” In that situation, the Commission’s determination binds the person who asked for the determination to be made on the record of the agency hearing. The payment set by the Commission cannot be more than the maximum payment allowed as “just compensation” under this section. When setting the amount or method, the Commission must, to the greatest extent practical, use any “liquidated damages provision” in the applicable contract. This section does not define “liquidated damages provision.” In no event may the Commission set a payment above the maximum payment allowed as just compensation under this section.

(4) If the payment agreed to under paragraph (2) is more than the payment determined under the paragraph (1) guidelines, the Commission may approve the agreed payment if it determines that the agreed payment is not more than the maximum payment allowed as just compensation under this section.

(5) The Commission may not require a refund of any part of an agreed payment that was paid for natural-gas deliveries before the Commission acted under paragraph (4) to approve or reject that payment, if the agreed payment was more than the paragraph (1) guideline amount but not more than the maximum payment allowed as just compensation under this section. The Commission may require a refund if it determines that—
(A) the agreed payment was established fraudulently;
(B) a party to the transfer willfully delayed the processing of the request to approve the agreed payment under paragraph (4); or
(C) the agreed payment is more than the maximum payment allowed as just compensation under this section.

(c) Transfer restrictions cannot be enforced.
(1) A contract provision that prohibits a transfer authorized by subsection (a)(1), or that ends the contract because of such a transfer, cannot be enforced in any court of the United States or any state court.

(2) A State may not enforce a prohibition on a transfer authorized by subsection (a)(1). “State” is defined in subsection (e)(4).

(d) Contract duties are not changed.
The person who acquires contract rights transferred under subsection (a)(1) must take on the contract duties that the transferring person has under the contract. But this does not release the transferring person from a contract duty if the acquiring person does not perform that duty.

(e) Definitions.
For this section—

(1) “Just compensation,” when used for a transfer of contract rights authorized by subsection (a)(1), means the maximum payment amount or payment method that does not exceed the amount by which—
(A) the “reasonable costs” (not including “capital costs”) incurred during the rest of the contract period, in direct association with using a fuel other than natural gas as the primary energy source^* for the applicable existing electric powerplant^*, are more than
(B) the price of natural gas under the contract during that period.
This section does not define “reasonable costs,” “capital costs,” “primary energy source,” or “applicable existing electric powerplant^*.”

For subparagraph (A), the reasonable costs associated with using a fuel other than natural gas as the primary energy source must include an allowance for amortization, over the remaining useful life, of the undepreciated value of depreciable assets located on the premises containing the electric powerplant^*, if those assets were directly associated with using natural gas and cannot be used with the other fuel. This section does not define “remaining useful life,” “depreciable assets,” “premises,” or “directly associated.”

(2) “Just compensation,” when used for subsection (a)(2), means an amount equal to any loss of revenue during the remaining contract period, to the extent that the loss—
(A) is directly incurred because transportation or distribution of natural gas stopped as a result of the transfer of contract rights under subsection (a)(1); and
(B) is not offset by revenue from other transportation or distribution that would not have happened if the contract rights had not been transferred.
This section does not define “loss of revenue” or “offset.”

(3) “Contractual interests,” for a contract described in subsection (a)(1), includes the right to receive natural gas as affected by any applicable “curtailment plan” filed with the Commission or the appropriate State regulatory authority. This section does not define “curtailment plan” or “appropriate State regulatory authority.”

(4) “State” means each State, the District of Columbia, Puerto Rico, each territory or possession of the United States, and each political subdivision of any of them.

(5) “Interstate pipeline” means a person engaged in transporting natural gas in interstate commerce who is subject to the Commission’s jurisdiction under the Natural Gas Act (15 U.S.C. 717 et seq.).

(6) “Commission” means the Federal Energy Regulatory Commission.

(7) “Contract,” when used for a contract to receive natural gas that existed on April 20, 1977, does not include a renewal or extension after that date. It does include such a renewal or extension if it occurs because the person receiving the natural gas exercised an option under the contract.

(f) Coordination with the Natural Gas Act.
(1) A payment made by an interstate pipeline under this section is considered “just and reasonable” for sections 4, 5, and 7 of the Natural Gas Act (15 U.S.C. 717c, 717d, and 717f). The Commission may not deny that interstate pipeline’s passing through of the payment because of the payment’s amount. This section does not define “passthrough.”

(2) A person does not become subject to the Commission’s jurisdiction under the Natural Gas Act, or become regulated as a common carrier under any federal or State law, solely because the person sells or transports natural gas for which a transfer of contract rights is authorized under subsection (a)(1).

(3) Nothing in this section exempts from the Commission’s jurisdiction under the Natural Gas Act any interstate-commerce transportation of natural gas, any interstate-commerce sale of natural gas for resale, or any person engaged in that transportation or sale, to the extent that the transportation, sale, or person is subject to the Commission’s jurisdiction under that Act without regard to the transfer of contract rights under subsection (a)(1).

(4) Nothing in this section exempts a person from any duty to obtain a certificate of public convenience and necessity for an interstate pipeline’s transportation of natural gas for which a transfer of contract rights is authorized under subsection (a)(1). The Commission may not deny such a certificate for interstate-commerce transportation of natural gas because of the amount of payment made under this section.

(g) Volume limit.
No supplier of natural gas under a contract whose contract rights were transferred under subsection (a)(1) must supply natural gas during any relevant period in an amount greater than the smallest of these four volumes:
(1) the volume determined by referring to the contract’s maximum delivery duties;
(2) the volume the supplier would have had to supply under the curtailment plan in effect for that supplier to the person who transferred the contract rights, if no transfer had occurred;
(3) the volume that would have been delivered, or for which payment would have been made, under the contract except for the prohibition on using the natural gas under subchapter III of this chapter or a rule or order under it; and
(4) the volume actually delivered, or for which payment would have been made, under the contract during the 12-calendar-month period ending immediately before the transfer of contract rights under this section.

(h) Judicial review.
Any Commission action under this section is subject to judicial review under chapter 7 of title 5.