President Carter won a major victory yesterday, 227 to 199, as the House approved his plan to continue price controls on natural gas at a higher level.
Gas producers lost their multibillion-dollar fight to deregulate new onshore natural gas after the House added a sweetener that picked up some votes and Speaker Thomas P. (Tip) O'Neil Jr. (D-Mass.) told the House he believed the President's omnibus energy bill would be defeated if deregulation were made part of it.
Administration officials have said deregulation would cost consumers up to $86 billion in extra costs by 1985. O'Neil put it at $200 more per year for the average family. Supporters of deregulation contend it is the only way to encourage more production to meet shortages. They said continued controls would cost consumers $48 bilion more by 1985 in higher payments for alternative fuels when they are unable to get gas.
Gas regulation has been a highly controversial issue for 23 years since the Supreme Court ruled that no gas piped across state lines is subject to federal price regulation at the well-head.
Since gas consumed in the state where it is produced is not controlled, this has created a distorted dual market. Northern consuming states suffered crippling shortages last winter while there was a glut of gas in producing states such as Texas, which uses it for low priority purposes such as boiler fuel.
Carter proposed eliminating the dual market by extending controls to instrate gas but raising the ceiling allowed for newly discovered gas from $1.46 per thousand cubic feet to $1.75. Old gas now flowing under contracts would remain at lower levels and never rise above $1.45.
The deregulation proposal offered yesterday by Rep. Clerence J. Brown (R-Ohio) would have deregulated new onshore gas as of next April. Old gas would have remained controlled. Controls on offshore gas would have been lifted in five years. The delay in decontrol was to give Congress time to enact an excess profits tax if it chose to keep windfall profits from gas producers.
Brown sought to protect residential users by providing that industrial users would pay all price increases until the price of gas exceeded 120 per cent of the cost of imported oil. Opponents said that could happen very quickly if gas were deregulated during a period of shortage.
In an effort to assure defeat of deregulation, which failed in the House last year by only four votes, supporters of the President came up with an amendment to liberalize the definition of new gas eligible for the new ceiling of $1.75.
The President's bill defined new gas as that taken from a well at least 2 1/2 miles away from or 1,000 feet below an existing well. It was presumed that any gas taken from within this cylinder would be tapping old gas from an existing reservoir.
The amendment, which was approved by a voice vote, would permit gas from wells within the cylinder to qualify as new gas if it could be shown it came from new reservoirs. This would be policed by state regulatory agencies under federal supervision.
The amendment won over Majority Leader Jim Wright (D-Tex.) from supporting to opposing deregulation now, Wright told the House he favors deregulation as a long-range goal but fears that sudden decontrol in a period of shortage would cause too great a price increase.
Rep. Thomas P. Ashley (D-Ohio), manager of energy bill, said deregulation could push the price of new gas to $5 per thousand cubic feet without producing much more gas. Brown insisted that after a possible initial leap up the decontrolled price would settle back to about $2.40.
Deregulation supporters said opponents gave a distorted picture when they talk of the price of gas doubling. The price the argument is about is that paid producers at the well. This represents only about 18 per cent of the delivered price of gas, deregulators said.
The rest goes to pipeline companies and local distributors. So even if the well head price doubled, that in itself would mean only an 18 per cent increase to residential consumers, they said, And the deregulated new gas would be mixed slowly with controlled old gas.
On the vote rejecting deregulation, 72 Democrats and 127 Republicans voted for deregulation, while 210 Democrats and 17 Republicans voted against. All Washington-area members - Democrats Gladys N. Spellman (Md.), Joseph L. Fisher (Va.) and Herbert E. Harris (Va.) and Republican Newton I. Steers Jr. (Md.) - voted with the President.