A House Energy and Commerce subcommittee will open hearings Monday launching a battle for votes in Congress on whether natural gas prices should remain controlled and, if not, who should bear the costs and reap the rewards.
The battle is the sort guaranteed to strike dread in the heart of a legislator--with the issues and vocabulary of mind-numbing complexity and so many different interests opposing each other that offending somebody is a sure thing.
The debate pits the industry's various segments and customers against each other--producers vs. marketers, interstate pipelines vs. intrastate pipelines, and industrial users vs. residential users. It also has the potential to create serious rifts between environmentalists and consumers--with some environmentalists supporting higher prices to encourage conservation--and to pit middle-income consumers against the poor.
"I think that gas is going to be at the center of some major controversies because the stakes are so high," says Ann K. Lower, director of information for the Consumer Federation of America. CFA opposes decontrol because of its potential impact on the heating bills of residential consumers, most of whom are middle income.
At Monday's hearing, a group of major corporation executives and an environmental group will call for immediate decontrol of natural gas prices, coupled with an increase in welfare benefits for the poor.
"Although additional welfare benefits may be costly, they are a very small price to pay to break the political deadlock over decontrol," according to a study prepared for release Monday by the Committee for Economic Development and the Conservation Foundation.
At the same hearing, CFA will release another study concluding that the 20 largest natural gas producers would reap an additional $68.3 billion in sales to the 15 largest interstate-pipeline purchasers if price controls were immediately lifted--and $45.3 billion if controls were removed gradually.
The top 20 domestic natural gas producers as ranked by the American Petroleum Institute include most of the major oil companies, Lower noted. The top five are Mobil, Exxon, Texaco, Gulf and Shell. "Now that the oil companies can no longer get a boost in the arm from future decontrol of oil, they're going to get it from gas," she said.
For those who would rewrite the Natural Gas Policy Act and blow the lid off natural gas prices, the two studies pose some tricky political questions about the impact of decontrol.
"Taking care of the poor through energy policy is bad energy policy and bad poverty policy," says Thomas Schelling, professor of political economy at Harvard University. Schelling and Grant P. Thomson, senior associate at the Conservation Foundation, directed preparation of the report, "Energy Prices and Public Policy."
The study argues that any move toward decontrol should take into account that poor people are hit much worse than others by increased fuel costs.
In contrast to families at or above the median income, whose direct expenditures on fuel are about 3.5 percent of family income, the poorest one-sixth of the population spends about 15 percent of their total incomes on fuel, according to Schelling.
The increased burden on the poor over the past 10 years, when energy costs climbed faster than inflation in general, is "both a valid claim for additional income assistance and a small price to pay to release this $500 billion sector of the economy that has been distorted in its pricing to take care of the poor," said Schelling. "They should be looked out for by programs designed to help them, not to protect the rest of us."
The hearings called by Fossil and Synthetic Fuels subcommittee chairman Philip R. Sharp (D-Ind.) will not focus on specific legislative proposals. Instead they will examine the current state of the natural gas industry and markets and are expected to lay the groundwork for the serious fight on decontrol anticipated next year.
The Natural Gas Policy Act, which partially decontrols gas prices, was adopted in 1978. Under the act, prices on new-found gas are generally allowed to rise 4 percent more than inflation each year, and beginning in 1985 will be allowed to rise without limit. Price increases on "old" gas, discovered before 1977, are held near the inflation rate now and would continue so indefinitely. Certain types of hard-to-produce gas have been priced higher to provide an incentive for their production. But recent market developments have suggested that the price may be higher than buyers will pay.
The Sharp hearings will look at issues such as whether current policy will keep prices to individual gas users from increasing too rapidly while still providing incentives for additional exploration and production. They also will seek to determine what policies will ensure that the nation's energy needs are met, to the extent possible, by domestic resources.
Other issues to be examined include whether particular regions or segments of the gas industry bear indefensibly heavy costs under existing policy.
Initially, the Reagan administration indicated it would seek to end controls on natural gas prices. But earlier this year the White House backed off that position, a move welcomed with relief in Congress where there was as little will to address the politically difficult question in an election year.
Also it had appeared that the Federal Energy Regulatory Commission might take administrative steps to allow gas prices to increase. That met with vigorous opposition from consumer groups and some members of Congress, and most of that impetus seems to have vanished.
One influential group of consumers, industrial users of natural gas--approximately 40 percent of the market--appears to be lining up in favor of removing controls from gas prices.
Although there may be individual industrial users who would oppose decontrol, groups such as the National Association of Manufacturers have argued for taking off price ceilings.