[Congressional Record Volume 143, Number 154 (Thursday, November 6, 1997)]
[Senate]
[Pages S11873-S11874]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROBERTS (for himself and Mr. Brownback):
  S. 1388. A bill to provide relief from unfair interest and penalties 
on refunds retroactively ordered by the Federal Energy Regulatory 
Commission; to the Committee on Energy and Natural Resources.


                  THE KANSAS NATURAL GAS INDUSTRY ACT

  Mr. ROBERTS. Mr. President, today I am introducing legislation that 
speaks directly to the issue of fairness in public policy.
  The Kansas natural gas industry operates on the slimmest of margins. 
It is still subject to the heavy regulatory ambitions of the Federal 
Government. It employs 24,000 individuals, operates in 89 of 105 Kansas 
counties, and in 1996 paid $132 million in mineral and property taxes 
in the State. Mr. President, the natural gas industry is a major 
industry, an important industry, and a beneficial industry to the 
citizens and local governments of Kansas. Unfortunately, as happens too 
often, a regulatory body of the Federal Government is about to cripple 
another valuable industry.
  At issue is the failure of the Federal Energy Regulatory Commission 
to use discretionary authority and mitigate damages to the Kansas 
natural gas industry resulting from a retroactive and punitive order. 
Since 1974, first sellers of natural gas in Kansas have been allowed to 
recover the cost of a State ad valorem tax. First the Federal Power 
Commission and, later the Federal Energy Regulatory Commission, held 
the Kansas ad valorem tax was eligible for recovery as a reimbursable 
tax under the Federal price ceilings established by the Federal Power 
Commission and later under section 110 of the Natural Gas Policy Act. 
In 1983, an interstate pipeline company petitioned the Commission to 
overturn treatment of the Kansas ad valorem tax as recoverable. In 1986 
and 1987, the Commission responded to this petition by stating the 
Kansas tax clearly qualified as recoverable. In 1988 the D.C. Circuit 
court reviewed these prior rulings and, believing the Commission had 
failed to adequately explain its orders, remanded the issue to the 
Commission. In 1993, five years after the court remand, the Commission 
reversed 19 years of regulatory treatment of the Kansas ad valorem tax 
and ordered refunds retroactive to the year 1988 based on the date of 
the District of Columbia Circuit's remand order. Kansas gas producers 
paid the ordered refunds for the period after 1988, both principal and 
interest. Unfortunately, in 1996 the D.C. Circuit reversed the 
Commission's decision and required refunds back to 1983, based on the 
Federal Register notice of the 1983 interstate pipeline company's 
petition to the Commission. In essence, what had been legal for 19 
years was retroactively declared illegal, to the serious financial 
detriment of not only the Kansas natural gas industry, but local and 
state government budgets that rely on this industry's economic base. 
The burden on the industry was made even heavier by the assessment of 
interest on the period 1983 to 1988.
  Mr. President, today I introduce legislation to alleviate the unjust 
and punitive financial burden placed upon this Kansas industry by the 
Commission. This legislation does not address the legality of the 
Commission or the court rulings. The subject of this legislation, the 
interest penalty on the principal between the years 1983 to 1988 with 
such interest accumulated to the present, was never considered by the 
D.C. Circuit. This is an issue of equity and of the proper exercise of 
discretion and authority by the Commission in association with an order 
retroactively declaring a practice ruled legal for 19 years illegal.
  While the industry and the State of Kansas still are in the process 
of assessing the cost of this Federal action, there is no question the 
cost will be huge and threatens to bankrupt many small producers. 
Relieving the industry of severe interest penalties is appropriate.
  Congress entrusts oversight and administration of law to regulatory 
bodies. When that regulatory body fails to properly administer a law, 
or when it exercises authority in an egregious, inequitable manner 
inconsistent with congressional intent, Congress has the

[[Page S11874]]

responsibility to intervene. Notwithstanding the D.C. Circuit's 
decision in this case, the actions of the Commission are unacceptable. 
If ever a case demonstrated the need for oversight of administrative 
bodies and corrective action, this is the case.
  The natural gas industry and the administrative bodies in Kansas 
government had every right to follow established regulatory guidance in 
treatment of the Kansas ad valorem tax. Indeed, since 1974, Kansas 
producers had been permitted to recover this tax. In 1978, with passage 
of the Natural Gas Policy Act, Congress explicitly used the term ad 
valorem tax in report language to clarify the intent of section 110. 
Further, upon another challenge in 1983, the Commission reaffirmed and 
ruled favorably on the Kansas ad valorem tax as recoverable several 
times. Clearly a precedent was established and, over a fourteen year 
period, not once did Kansas gas producers have any reason to suspect or 
question the Commission's rulings.
  Mr. President, this is an issue of fairness, of equity, of this 
Congress' oversight responsibilities. Regulated industries have every 
right--indeed a responsibility--to follow and rely upon established 
Commission regulatory guidelines based on statutorily granted 
authority. I rise today to reaffirm the proper Federal-State 
relationship and a state's right to rely on regulatory decisions in 
establishing and administering the natural resource policies of the 
State.
  Mr. President, I ask unanimous consent that the text of this bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1388

       Be it enacted by the Senate and House of Representatives of 
     the United States in Congress assembled, That the Natural Gas 
     Policy Act of 1978, as amended, is amended by adding the 
     following new section:
       ``Sec. 603. In the event any refunds of any rates and 
     charges made, demanded, or received for reimbursement of 
     State ad valorem taxes in connection with the sale of natural 
     gas prior to 1989 are ordered to be made by the Commission, 
     the refunds shall be ordered to be made without interest or 
     penalty of any kind.''.
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