Something closely akin to a many sided civil war is being fought within the natural gas industry. Gas producers, pipelines, distribution companies and consumers have been set at each others throats by a vicious interplay of market forces.

Market conditions have grown so chaotic that hundreds of smaller gas producers are bankrupt and many others soon will be. Interstate pipelines, standing in a crossfire from producers on one side and distribution companies and consumers on the other, are being squeezed. At least one has been rumored within the industry to be close to bankruptcy.

Profits at distribution companies are also down in many cases as sales to customers have dropped in the face of skyrocketing prices, increased conservation, the deep recession and the warmest winter in years. In addition, many industrial customers that have the ability to use either gas or fuel oil have switched has fuel oil prices have come down.

The chaos in the marketplace is the result of the simultaneous occurrance of two not unrelated events: controls are being lifted from most natural gas prices at the wellhead after nearly 30 years of tight regulation by federal authorities; and in the span of five years, the nation has gone from an acute shortage of gas to a substantial surplus.

The interstate pipelines are caught in the middle. Because of the shortage that persisted between 1971 and 1979, many of the pipelines rushed to buy gas as it became available to them under the terms of the Natural Gas Policy Act passed in 1978. Some purchased significant quantities of very costly gas, including that from very deep wells in the United States, gas from Canada and Mexico, and liquefied natural gas, or LNG, imported from Algeria.

The pipelines also bought large amounts of gas from shallower wells at prices still limited by federal controls, but which are allowed to rise month by month at a pace equal to or greater than that of inflation generally.

Now a portion of that newly purchased gas, and older supplies as well, simply can't be sold--at least at the price called for under the contracts the interstate pipelines signed with the producers. The problem is the same in some instances in which pipelines buy from other pipelines.

As a result, most of the pipelines are unilaterally voiding, at least temporarily, both the price and volume requirements in many of those contracts. Billions of dollars are being snatched from the pockets of gas producers by the pipelines' actions. The pipelines are thus trying to lower or at least hold down gas prices to prop up sales again.

Gas producers understandably are furious, as are the people, the companies and the institutions to whom the producers pay royalties. The gas producers' bankers, already staring at a host of loans turned bad by last year's collapse of the oil and gas drilling boom, are glumly watching their chances of repayment fade as their borrowers' incomes plummet. More loan losses appear unavoidable.

Meanwhile, distribution companies, such as Washington Gas Light Co., and consumer representatives have attacked the pipelines for making unwise and imprudent purchases of unneeded gas at much too high a price. In a case pending before the Federal Energy Regulatory Commission (FERC) involving Columbia Gas Transmission Corp., principal supplier to the Washington and Baltimore areas, distribution companies and consumer representatives have challenged the right of Columbia to pass on some of the costs of that gas.

Columbia and its customers have been especially hard hit by the one-two punches of gas price decontrol and the huge swing in demand. So has United Gas Pipe Line, Inc., which serves Gulf Coast markets from Texas eastward to Pensacola, Fla. Together, the two pipelines provide a graphic illustration of the pipeline industry's distress.

Columbia operates nearly 10,000 miles of pipelines running eastward and northward from Kentucky into nine states. It is a subsidiary of Columbia Gas System, which also owns all or part of several other pipelines, more than half a dozen retail distribution companies, and other subsidiaries exploring for and producing oil and gas and, formerly, importing LNG.

Last year, Columbia Gas Transmission delivered just over 1 trillion cubic feet of gas to its wholesale customers, including Washington Gas Light and Columbia Gas System's own retail subsidiaries.

Its operating revenues reached $3.86 billion, up from $3.43 billion in 1981, even though its actual deliveries of gas were down by 9.4 percent. Profits fell by almost 20 percent, to $73.8 million, with $12.3 million of that reserved against possible refunds in two rate cases.

The company president, James D. Little, won't predict this year's earnings, except to say that they will be "substantially less than" the 12.75 percent rate of return Columbia is authorized by FERC to earn on its investment.

Columbia expects its sales this year to be only 834 billion cubic feet--down 17 percent from 1982 and a whopping 40 percent from what it was selling a decade ago--when it could sell as much as 1.5 trillion cubic feet.

Rising prices have caused most of the decline. According to Columbia's wholesale customers, about 38 percent of the drop is due to users switching to other cheaper fuels, 14 percent to conservation, and 12.5 percent to customers switching to other pipeline suppliers whose prices are lower. The remainder is due to the recession.

Columbia prices have more than doubled in four years, with its current price about $4.40 per thousand cubic feet, or MCF, at the "city gate"--the point at which a pipeline transfers the gas to a distribution company. Earlier, Columbia had estimated the 1983 price could hit $5.46.

Some of Columbia's customers claim in the FERC proceeding that the pipeline itself is to blame for a significant portion of the price increases through last year. In some instances, they argue, the company deliberately paid higher prices than necessary for gas in order to be able to pay itself or Columbia Gas System's production subsidiary top dollar for gas resold to Columbia customers.

The complaining customers also charge that when it became necessary to begin to reduce the amount of gas being taken from producers and other pipelines, Columbia did not do so in a way that would minimize average gas prices. In other words, it did not shut off higher priced gas first.

A FERC administrative law judge ruled last December that Columbia had engaged in transactions that involved conflicts-of-interest and that gas supplies had not been cut back in ways to minimize gas costs. Columbia, in rebuttal, disputed essentially every point in the law judge's finding, including the propriety of even considering some of the issues raised in the particular type of proceeding involved.

The highly complex case is expected to be decided soon by the full commission.

But in any case, events have overtaken Columbia's decisions about supply cutbacks in 1981. The company is taking roughly 50 percent of contracted volumes from most of the 2,500 producers with which it deals even though some of the contracts call for paying as much as 90 percent of the volume whether it is taken or not. Similarly, Columbia has refused to pay so-called minimum bills for contracted volumes from other pipelines.

These actions allowed Columbia to cut its purchased gas cost by 26 cents per MCF on April 1, but it has told customers prices probably will be going up again in the fall. (Washington Gas' other supplier, Transcontinental Gas Pipeline Co., is charging nearly 50 cents less per MCF. As a result, Columbia will provide only about 60 percent of Washington Gas' needs this year rather than the usual 85 percent, according to Washington Gas officials.)

Columbia's Little defends the gas purchases that have his customers up in arms as necessary to alleviate the shortages experienced by those same customers through most of the 1970s. To get the gas required paying high prices and accepting high "take-or-pay" provisions. "You either did that or you had to forego the gas," Little says.

But should Columbia have not bought the gas? At Washington Gas, Executive Vice President Richard C. Vierbuchel complains that Columbia "has not done a particularly good job of keeping their customers informed about its purchasing practices" and that, beginning in 1981, prices began rising much faster than Columbia had projected they would only a few months earlier.

In the FERC proceeding, the customers argue that Columbia should have known it could not sell such large quantities of high cost gas.

The turn in the market has left United Gas Pipe Line in just as much of a bind as Columbia.

United, whose system is nearly as large as that of Columbia, sold 1,062 billion cubic feet of gas in 1981 and 865 BCF last year. Unlike Columbia Gas Transmission, it sells about one-fourth of its gas directly to industrial customers and public utilities or municipalities, some of which are suing because United did not deliver as much gas as it was supposed to during the shortage period.

Ironically, when plagued by too much gas, United just settled one of the suits brought by Gulf States Utilities Co., which had been seeking $700 million in damages. United agreed to pay $112 million in cash and give other considerations, a settlement that knocked the after-tax income of United Energy Resources, Inc.--the pipeline's parent company--down from $178.6 million to $118.2 million for 1982.

In the remaining suits, the plaintiffs are seeking another $800 million in actual damages from United. Some of the plaintiffs, claiming anti-trust violations, also want treble damages, raising the total sought to $1.43 billion.

Because of the suits and the current market related squeeze on United, there have been persistent rumors it could go bankrupt. Jack Angell, United's Washington representative, says the pipeline will make it.

"Are we going under? Hell, no!" he declares. "We may be a little puny at time, but I don't think they will throw dirt in our face."

Angell says his company has improved its position in a variety of ways, including capping prices in some contracts and reducing volume taken under most contracts by 10 percent beyond what the contracts allow. United has also unilaterally told Canadian suppliers--whose gas had been costing nearly $5 per MCF--that United will take about 150 million cubic feet of gas daily, about half of what is required under a contract there.

Columbia, United and many other pipelines still face major problems. Angry producers could decide to sue over the cutbacks. FERC could uphold the administrative law judges finding. United's customers might win their suits. More gas customers could switch to oil. And so forth.

Little of Columbia believes the "deliverability surplus" will last through 1986. If prices don't come down, Washington Gas's Vierbuchel thinks it could last longer than that.

But the essential point is that price competition has finally hit the natural gas industry. As some other long-regulated but more simply organized industries--trucking and airlines particularly--have found, price competition can be a painful experience.

Regardless whether Congress makes any of the additional changes in the remainder of the old regulations as it is considering, the chaos in the natural gas industry likely will continue for years to come.