North Carolina's new governor yesterday warned the Federal Power Commission that his state's economy is facing a "serious and drastic" crisis within a matter of hours, because of natural gas shortages.
Maryland's Eastern Shore also is in danger, said Rep. Robert E. Bauman (R-Md.) of Easton. He told the FPC that Chesapeake Utilities of Salisbury has curtailed gas supplies to plants of Crown Cork & Seal and Dresser Industries, affecting about 800 jobs. The cutbacks may be extended to smaller firms in the near future, putting 1,800 people out of work in an already depressed area, Bauman stated.
Despite the dire predictions of plant closings, a member of the commission staff testified that industrial users of gas have reported "no significant production losses or unemployment."
Gov. James B. Hunt Jr. of North Carolina told a jampacked FPC hearing - open to television and photographic coverage in an unprecedented move - that 119 industries in his state without alternate fuel sources already have been notified that supplies will be cut off in a few days, throwing 36,000 persons out of work.
Describing the natural gas shortage as a "grave, emergency matter" that also would force North Carolina to begin closing public schools and court-houses, Hunt told the agency's members: "We need your help."
Hunt was joined by members of the House and Senate from his state and from South Carolina, plus dozens of government and business spokesmen for firms in Virginia, Pennsylvania, New Jersey, Mississippi and other affected states, in seeking FPC approval for additional purchases of "emergency" gas supplies.
In effect, they have given the FPC an apparently thorny choice of allowing additional purchases on an emergency basis of natural gas normally sold in intrastate markets - and not subject to federal price ceilings - or blocking such sales and contributing to a regional economic crisis.
The FPC already has permitted such emergency sales for a 60-day period that expired early this month. In considering a second 60-day period for purchase of "emergency" gas supplies, the agency is faced with the contention by critics of deregulation that the agency would be approving "de facto" end to federal price controls.
As agency chairman Richard L. Dunham noted yesterday, the ability of the FPC to consider a further 60-day purchase permit is subject to dispute because of a federal court decision overturning an earlier permit for 180 days of emergency sales.
That case was brought by the Consumer Federation of America and a spokeswoman for that group said yesterday that it would oppose an additional 60-day permit, although no decision has been made on whether a court challenge would be lodged.
The FPC, which heard testimony on the gas shortages from 10 a.m. to 7:40 p.m., is scheduled to resume hearing witnesses at 8 this morning and possibly vote on a decision, Dunham said yesterday that the abnormally cold winter weather should be considered the "controlling circumstance" in deciding what action to take.
With the onset of cold weather last fall, consumption of natural gas east of the Rocky Mountains has been soaring, leading gas utilities to shut off supplies to large users with alternate fuels but not yet threatening residential users. If additional purchases of unregulated gas are not permitted, customers without alternate fuels and residences could face cutoffs in some communities, according to officials interviewed yesterday.
Donald Gilman, the chief long-range forecaster with the government's National Weather Service, testified yesterday that states east of the Rockies suffered from the "coldest fall in 90 years" and a further cold wave was reported yesterday to be heading East.
Hunt said the FPC is facing a "supreme test . . . the public interest absolutely requires the relief being sought." The gas is available, albeit at high prices, and "we need the gas," he added.
Rep. James G. Martin (R.N.C.) said he was appealing to the FPC for action "on behalf of consumers, the real ones, not groups," an obvious reference to organized consumer groups that have opposed natural gas price deregulation.
Several of the members of Congress who testified yesterday, including Sen. Ernest F. Hollings (D-S.C.), voiced the opinion that a final decision on price regulation will be made this year, in the wake of the current crisis. Deregulation legislation was narrowly defeated in the House last year.
"We may be asked to give a Band-Aid approach to this winter," but the real solution is new legislation to permit agency action in such emergencies, FPC member James G. Watt told Hollings.
"This may be a Band-Aid approach in this case, but it will have an overcoat result," Hollings responded.
The specific request before the FPC is a petition from Houston Pipe Line Co., which normally sells gas only in Texas, to make emergency sales to Transcontinental Pipe Line Co. (Transco) of Houston and United Gas Pipe Line Co. of Shreveport. Transco, the sole supplier to natural gas utilities in the Carolinas and parts of Virginia, Maryland, New Jersey and Pennsylvania, has been unable to meet demand without the additional purchases.
The Houston gas has been costing up to $2.50 per thousand cubic feet compared with the current FPC ceiling on interstate sales of $1.42. Although new purchases of unregulated gas at the sharply higher cost have resulted in soaring energy bills, spokesmen for affected states said yesterday they must pay that price if the alternative is industrial shutdowns.
Rep. Martin noted that shutting down industries of the Carolinas will result in layoffs in New York among textile workers and in such national industries as automobile and furniture production that depend on goods and parts produced in the South.
Both Hunt and a spokesman for Houston Pipe Line insisted yesterday that the additional 60-day permit being sought be considered a new contract and not merely an extension, because legal uncertainties could be created. Hunt said the gas would come from a different well in a different county than the purchases for November and December, but commissioner John H. Holloman said such a decision could allow back-to-back 60-day emergency contracts on an indefinite basis, adding up to price deregulation.
Currently, Houston is not sending any additional gas through Transco because of shortages in Texas, spokesman Richard C. Alsup testified.
In a brief interview yesterday, Bauman said "it makes no sense to have intrastate and interstate prices" for natural gas. A supporter of price deregulation, Bauman said large firms that consume gas in the Baltimore area have been purchasing intrastate gas in Louisiana and shipping it north to provide firm supplies while other companies are facing shutdowns.
George H. Lawrence, president of the American Gas Association, called on Congress to enact emergency legislation to permit gas distributing and transmission firms greater flexibility in obtaining supplies from the intrastate, unregulated markets.