A federal administrative law judge has approved a gigantic scheme to import a billion cubic feet of liquefied natural gas a day from Algeria, at three times the maximum price now permitted on domestic gas.
But Judge Nahum Litt also has approved a controversial plan for softening the price impact of this imported gas by averaging it in with domestic fuel so that all consumers along a pipeline would bear some of the extra cost, rather than specific end-users.
This second, cushioning part of his decision would make Algerian gas more attractive to U.S. users. It would thus add to imports, and for that reason it poses a special problem for President Carter's new Department of Energy, which must approve it.
The reason is that Carter's whole energy program is ostensibly aimed at reducing import; not encouraging them. Energy Secretary James R. Schlesinger Jr. has repeatedly complained that current oil pricing policy subsidizes expensive foreign imports by allowing a kind of averaging with low-priced domestic output similar to the gas plan that Litt approved last week.
Litt approved a $4.5 billion project of the Tenneco Atlantic Pipeline Co. to import 1 billion cubic feet of liquefied natural gas (LNG) a day from Algeria. When the project begins to deliver LNG in 1983, the gas would seell for $4.50 per 1,000 cubic feet - three times the present $1.47 domestic ceiling and more than twice the $1.75 Carter called for in his energy pln for new domestic gas supplies.
The high price for LNG results from the enormous capital requirements for LNG projects, which typically cost from $4 billion to $5 billion apiece. This liquefield gas would be brought by tanker to New Brunswick, where it would be converted back to gas form in a complex plant, then piped to the United States.
The Federal Energy Regulatory Commission's decision, in accordance with the law creating the Energy Department, is subject to review by Schesinger, who has delegated the authority on LNG imports to David J. Bardin, head of the Economic Regulatory Administration. Bardin also is leading an interagency task group that will lay out a new LNG policy before the end of the year. Gas imports now account for only about 5 per cent of U.S. consumption, but that percentage is expected to rise.
Litt's decision also approved so-called "rolled-in pricing for highcost LNG, which, in effect, spreads the cost so that all consumers - not just end-users - share the burden.
Last month FERC approved another Algerian LNG project offered by El Paso Eastern Co. to import almost 1 billion cubic feet of gas over a 20-year period starting at $3.23 per thousand cubic feet. A third project, to import Indonesian LNG to the Pacific Coast, awaits Bardin's approval.
Senior administration officials, however, say they have serious doubts about the desirability of increasing LNG imports. The internatal debate, just getting under way, focuses on the pricing and dependency question. The State Department and many Energy Department officials favor "incremental pricing," which essentially would have specific end-users pay the full price of the imported LNG they use.
"Rolled-pricing is a subsidy to matual gas imports - it comes down to a question of equities," said Edwin P. Mampe of the Energy Department.
Natural gas pipeline companies have lobbied hard on Capitol companies have tobbied hard on Capitol Hill against incremental pricing in general because it would lead to higher prices for some consumers, reducing the industry's share of the energy market. In the case of LNG, their opposition is even sharper.
"If incremental pricing were forced on us it would kill LNG projects the gas just wouldn't be marketable at those prices," said Jerome J. McGrath of the Interstate Natural Gas Association. McGrath says that there is little danger of the United States becoming dependent on LNG imports because the country at mos will import Only 15 per cent of its gas supply by 1990.
In recent years, the Federal Power Commission - FERC's predecessor - twice reversed decisions favoring incremental pricing for LNG [TEXT OMITTED FROM SOURCE] Energy and State Department officials are especially concerned about the potential balance-of-payments impact that LNG shipments could have on the mounting drain energy imports have put on the U.S. trade deficit. This year the United States will spend more than $45 billion on oil imports. A senior Energy Department official said. "The FPC LNG decisions never looked at the balance-of-payments implications."
Bardin's interagency LNG task force expects to issue a detailed statement of policy by the end of the year addressing reliability of the supplier, price, consumer impacts, siting questions and contingeney planning in the event of an interruption. The administration then expects to review LNG project applications on a case-by-case basis.