The Federal Power Commission ordered Texaco, Inc., yesterday to show cause why it should not immediately halt deliveries of natural gas from public lands in the Gulf of Mexico to its refinery in Port Arthur, Tex.
In a unanimous action, the commission also ordered Texaco and the Sabine Pipe Line, a subsidiary, to address the question of whether taking the gas across state lines - from Louisiana to Texas - for private use violates the Natural Gas Act of 1938.
Over a year the amount of gas in question would heat 523,000 homes. Since 1964, Texaco has said, it has taken 580 billion cubic feet for the refinery and related plants in Port Arthur. It plans to take about 730 billion cubic feet more by 1984.
The company said that the refinery, which supplies the East Coast with significant share of its gasoline, heating oil and other fuels, can only burn natural gas, and that conversion to other fuels would take four to eight years.
The show-cause order, effective April 7, ultimately may resolve a controversy over the taking of gas from public lands for private use, possibly by other major producers as well.
If the natural gas moved interstate, according to FPC officials, Texaco would have been required to get specific FPC authorization for such shipments.
The FPC order recalled that in a certificate issued in 1964 it authorized Sabine to transport gas uncommitted to interstate customers from reserves in Vermillion Parish, La., to Port Arthur.
The agency said that Texaco has acknowledged that it is transporting gas to the refinery from the Tiger Shoal Field, which is entirely in the federal domain, and from the Lighthouse Point Field, which is partially in the public domain. Both fields are off the Louisiana coast.
The order recognized that Texaco uses its own facilities to gather, process and transport the gas, but said it nevertheless must review use of the gas by the refinery and determine how much, if any, should be allowed to be diverted from the interstate market.
In addition, the FPC said, it wants to determine whether Texaco owns or controls onshore reserves that could have been used instead of those in the public domain to supply Port Arthur.
In a story Tuesday, The Washington Post said that without the approval or knowledge of the FPC, Texaco has been burning huge amount of public domain at Port Arthur.
Texaco denied this was done without FPC approval or awareness, saying "transportation and use of this gas has been a matter of public record" since issuance of the certificate in 1964. A spokesman told a reporter, however, that the firm's annual reports to the agency did not list quantities of gas taken from public lands.
In addition, Capital Hill sources said that the 1964 certificate did not disclose an intention to take gas from the federal domain. They also said that the commission was surprised when Texaco, in a March 8 telegram, reported that it was burning 55 per cent of the gas from Tger Shoal and Lighthouse Point at Port Arthur.
The company said it "has complied with all requirements" of the FPC in moving gas "from Texaco-owned fields and the state of Louisiana and contiguous offshore waters to Texaco's Port Arthur plants."
Texaco interpreted "contiguous" to include Tiger Shoal and Lighthouse Point. But the Capitol Hill sources said they understood the word to apply to offshore fields within Louisiana. They also expressed doubt that the government, particularly in a period of severe natural gas shortage, would apoproved a policy allowing producers to take immense quantities of natural gas from public lands for themselves.
Texaco said that Sabine, as an interstate pipeline, had to, and did, demonstrate to the FPC that it would have sufficient gas over the long term to justify issuance of the certificate, which permitted shipments from Henry, La., to Port Arthur. The distance is 127 miles.
"In order to have the quantities of gas, as warranted, Texaco designated reserves in the Tiger Shoal and Lighthouse fields for supply to Sabine," the firm said. "Accordingly, under principles normally followed in supporting interstate pipelines, designation of these reserves constitutes a commitment."
The controversy was set off by a recent House Commerce Oversight and Investigations Subcommittees hearing at which Texaco said that the FPC had authorized it to sell independent interstate customers 45 per cent of the gas it produced in the two fields. The 45 per cent comprised only gas taken from specified depths.
The agency did not require commitment of the balance to independent interstate buyers, if it was even aware that there was gas at other depths, congressional sources said.
After the hearing, the staff of the House Commerce Subcommittee on Energy and Power asked the FPC to inquire of Texaco about the 55 per cent not dedicated to interstate commerce.
The March 8 Texaco reply reported that the 55 per cent balance has been going to Port Arthur.