A House Commerce subcommittee yesterday rejected President Carter's natural gas pricing plan and instead voted 12 to 10 to remove federal price controls from new gas. The administration said this could cost consumers an exta $86 billion over the next eight years.
The gas industry has fought for price deregulation for more than 20 years, and if it stays in the omnibus energy bill, it will be a major defeat for the President. He wants to discourage consumption and stimulate production, but does not want to drop regulation entirely.
Both the full Commerce Committee and the House were almost evenly divided on this issue in the last Congress. The Senate voted deregulation of new gas two years ago.
Gas is now subject to a dual system. The wellhead price of gas shipped across state lines is regulated by the Federal Power Commission, with a present ceiling for new gas of $1.45 per thousand cubic feet. Intrastate gas consumed in the state where produced is not regulated and sells at an average of about $1.85. This led to critical shortages in the North last winter because of the lower regulated price, while in Texas and other non-regulated producing states gas is put in all sorts of low-priority use such as boiler fuel.
Cater sought to wipe out the distorted dual market by extending federal regulation to all gas and raising the ceiling for new gas to $1.75. James R. Schlesinger, the President's energy adviser, said this was a high enough price to encourage exploration for new gas and make producers a lot of money. Old gas flowing under contracts from existing wells would continue to be sold at the lower contracted prices.
Carter's bill defined new gas as gas from a well drilled after April 20, the date of his energy message to Congress, and at least 2 1/2 miles away from or 1,000 feet deeper than an existing well. This was to prevent a producer from tapping an old well to get higher priced gas.
Producers contended Carter's plan wasn't enough. Rep. Robert C. Krueger (D-Tex.) led the fight for them as he had last year, when his deregulation bill lost on the House floor by four votes.
Krueger's substitute that won yesterday would deregulate all new gas, except offshore gas, which would remain under regulation through 1982. Krueger defines new gas as gas from a well drilled after April, with no restrictions on the distance from existing wells.
The administration sent the sub-committee figures yesterday stating that under the Krueger amendment if the price of new gas went up to $2.50 it would cost consumers from $56.8 billion to $86.2 billion in higher gas bills by 1985. The Carter proposal would cost consumers about $15 billion more than now, it said. Krueger said he had not had time to analyze the administration figures, Rep. David A. Stockman (R-Mich.), who supported Krueger, said the administration figures were two or three times too high.
Rep. Richard L. Ottinger (D-N.Y.) opposed Kruger, saying: "Everybody but the gas producers will be the losers. They will walk away with a big bundle of our money."
Rep. Albert Gore Jr. (D-Tenn.) said Krueger's amendment managed to protect both of his constituencies, gas producers and consumers in producing states. Krueger would take the ceiling off new gas prices, said Gore, but would insulate Texas consumers by putting a ceiling of $1.45 on the price interstate pipelines could bid for intrastate gas.
Krueger insisted that deregulation was the only way to encourage new production and meet demand. Supply has been dwindling for several years. Last winter there were shortages in Ohio and other Northern areas that put hundreds of thousands out of work during the cold spell.
The Krueger proposal won with the backing of the seven Republicans on the Subcommittee and five of its 15 Democrats. They were Reps. Bob Gammage (D-Tex.), John M. Murphy (D-N.Y.), Timothy E. Wirth (D-Colo.), David E. Satterfield (D-Va.) and Krueger.
Wirth said he felt some deregulation was essential to produce more gas but would offer amendments in the full committee to tighten up Krueger's definition of new gas and make other pro-consumer changes.