Understanding the FERC-out Clause: Key Legal Insights
Definition & meaning
A FERC-out clause is a provision found in contracts related to the sale of natural gas. This clause allows for adjustments to the contract price based on regulatory decisions. Specifically, if a regulatory agency prevents the price paid to a producer from being passed on to consumers, the clause stipulates that the contract price will either be reduced or the contract may be terminated. This provision is also referred to as a regulatory-out clause.
Table of content
Everything you need for legal paperwork
Access 85,000+ trusted legal forms and simple tools to fill, manage, and organize your documents.
The FERC-out clause is commonly used in the oil and gas industry, particularly in contracts governed by the Federal Energy Regulatory Commission (FERC). It serves as a risk management tool for producers and buyers, ensuring that they are not adversely affected by regulatory changes. Users can manage contracts with FERC-out clauses through legal templates available from services like US Legal Forms, which provide guidance on drafting and executing such agreements.
Key Legal Elements
Real-World Examples
Here are a couple of examples of abatement:
Example 1: A natural gas producer enters into a contract with a utility company. If a regulatory agency decides that the utility cannot pass on a price increase to consumers, the producer can invoke the FERC-out clause to either lower the contract price or terminate the agreement.
Example 2: A supplier of natural gas has a contract with a distributor. If new regulations prevent the distributor from increasing prices, the supplier may seek to renegotiate the contract under the FERC-out clause. (hypothetical example)
State-by-State Differences
Examples of state differences (not exhaustive):
State
Variation
Texas
FERC-out clauses are commonly used and recognized in gas contracts.
California
Regulatory frameworks may impose additional requirements on contract terms.
Pennsylvania
State laws may influence how FERC-out clauses are enforced.
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
Comparison with Related Terms
Term
Definition
Difference
Regulatory-out clause
A clause allowing contract adjustments based on regulatory decisions.
Similar to FERC-out but may apply to various industries.
Force majeure clause
A clause that relieves parties from liability due to unforeseen events.
Focuses on external events, not regulatory actions.
Common Misunderstandings
What to Do If This Term Applies to You
If you are involved in a contract with a FERC-out clause, review the terms carefully to understand your rights and obligations. If regulatory changes occur, consider consulting a legal professional to explore your options. Users can also find ready-to-use legal form templates on US Legal Forms to help manage these contracts effectively.
Quick Facts
Typical use: Oil and gas contracts.
Jurisdiction: Governed by federal and state regulations.
Possible outcomes: Price reduction or contract termination.
Key Takeaways
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates
This field is required
FAQs
It is a provision in a contract that allows for price adjustments or termination based on regulatory decisions.
They are primarily used by natural gas producers and utility companies.
Yes, parties can negotiate the terms of the clause before finalizing the contract.
