President Carter was dealt an important but inconclusive defeat last night as the Senate refused 52 to 46 to kill a proposal that would remove price controls from newly discovered natural gas.
The trial vote defeated a motion to table and thus kill a deregulation proposal to replace Carter's plan, which is to continue current price controls but at a higher level.
This does not settle the multibillion-dollar question of natural gas price regulation. But it suggests that a majority of the Senate favors some kind of deregulation. The result may be a filibuster by the President's supporters until they can regroup or find an acceptable compromise. It takes 60 votes to break a filibuster and force an issue to a vote.
Sen. Henry M. Jackson (D.Wash.), a leading supporter of the President's plan, predicted that failure of his tabling motion means "we'll get a lot of amendments covering everything under the sun."
Jackson said that ultimately the natural gas issue will have to be settled in a House-Senate conference because the House approved Carter's plan by a margin of 27 votes.
Senate Minority Leader Howard H. Baker Jr. (R-Tenn.) told reporters he saw no compromise in sight for the moment. "Both sides are too dug in. But the time is clearly at hand where there has to be some give," he said.
The proposal that survived Jackson's tabling motion was offered by Sens. James B. Pearson(R-KAN.) and Lloyd M. Bentsen Jr.(D-Tex.). It would take price controls off new onshore natural gas right away, and phase them out by 1982 on offshore wells.
The Senate passed this same Pearson-Bentsen plan in 1975, but the House did not concur.
President Carter was on the telephone to wavering senators, and Secretary of Energy James R. Schlesinger was at the Capitol talking to members as the Senate neared a vote on this most explosive part of the President's energy plan.
The gas industry, which has been fighting for deregulation for 23 years, contends this is the only way to reverse the decline of gas production in recent years and avoid shortages, which has become critical in some Northern states last winter.
Carter, on the other hand, contends that his plan to continue controls on natural gas at a higher price than now would provide ample incentives for the industry to explore for more gas. He says deregulation would cost consumers $10 billion more a year than his plan, which would also increase prices but not so much.
The President's energy package has had tough going in the Senate after its cakewalk through the House. The Senate Finance Committee rejected the proposed tax on gas-guzzling cars; indicated it would approve his centerpiece wellhead tax on oil only if proceeds are put into new energy development, which Carter opposes, and appears likely to kill or drastically cut back his proposed tax on industrial use of oil and gas. The Senate Energy Committee rejected his plan to save energy by forcing changes in electric utility rate structures.
The Supreme Court ruled in 1954 that the Natural Gas Act empowered the Federal Power Commission to set a price ceiling for natural gas shipped across state lines, but not for gas consumed in the state where it was produced. This has produced a distorted dual market.
Last winter there were critical shortages in some Northern consuming states dependent on regulated gas with a price ceiling of $1.45 per thousand cubic feet (mcf), while in producing states such as Texas a glut of unregulated gas was consumed at about $2 per mcf for such low-priority purposes as boiler fuel.
Carter's proposal is to extend controls to cover intrastate as well as interstate gas and raise the ceiling for new gas to $1.75 per mcf. Old gas would continue to flow at its contract price. The ceiling price of new gas is five times higher than it was five years ago.
All Virginia and Maryland senators except Sen. Paul S. Sarbanes (D-Mc.) voted against the President's position yesterday.
The House adopted the President's plan with one change. He had defined new gas as that taken from a reservoir at least 2 1/2 miles from or 1,000 feet below an existing well. This was to prevent a producer from tapping an existing reservoir and calling it new gas eligible for the higher price. The House bill provides that gas found within that 2 1/2-mile-by-1,000-foot cylinder could qualify for the higher price if it were proved it came from a new reservoir.
Opponents of deregulation warn that the wellhead price of gas could shoot up to $5 per mcf if price controls are removed. Supporters of deregulation dispute this and contend that after a brief increase the wellhead price of gas would settle at about $2.50 per mcf in plentiful supply.
Furthermore, the industry points out that a doubling or tripling in the wellhead price of new gas would not mean any such increase to residential consumers, for two reasons. First, the price at which gas is sold by the producer at the well is only one-third or less the total cost of home-delivered gas. The rest of the cost is pipeline transportation and distributiom by local utilities - which should not increase. Also, only new gas would be deregulated, and it would fed into the pipeline gradually mixed with old gas that may still be selling under long-term contracts at about 20 cents per mcf.
In a celebrated letter during last year's campaign, Carter seemed to endorse natural gas deregulation. But in fashioning his energy plan after the election, he backed off that stance, a shift that has caused some bitterness in gasproducing states in the South-west.