House-Senate energy conterees yesterday finally reached the explosive issue of natural gas pricing with billion of dollars riding on the outcome.
The two chambers went in opposite directions on gas when they passed their original versions of President Carter's energy-saving package. The House narrowly approved his plan to continue price controls at higher levels than now, while the Senate narrowly voted for deregulation, which the industry has sought for 23 years.
Yesterday's meeting was just to give member; a chance to make their speeches on the issue. The task of seeking a compromise will begin on Monday.
Sen. J. Bennett Johnston (D-La.), the leading Senate spokesman for deregulation, said he believed the differences could be compromised if members would hold down the rhetoric which the natural gas issue always provokes.
Three was rhetoric enough yesterday. Sen. James Abourezk (D-S.D.) said there is not competition in the oil and gas industry and that monpoly without regulation is just "legalized plunder." He called deregulation warmed robbery."
Sen. Howard M. Metzenbaum (D-Ohio), who teamed with Abourezk in a two-week filibuster that failed to block the Senate's deregulation vote, said Energy Secretary James R. Schlesinger appeared to be ready to give gas producers a higher price in order to win approval of the crude oil tax Metzenbaum, called it an "absurdity" to ask conferees to vote for higher gas prices than they think justified in order to permit passage of an oil tax they think wrong.
The wellhead price on natural gas piped across state lines is now regulated by the federal government, at a ceiling for "new" gas of $1.46 per thousand cubic feet (MCF), while gas consumed in the state where produced is not. This has led to a distorted, dual market with gas being used for low priority items such as boiler fuel in producing states like Texas, while northern consuming states had shortages last year that closed factories and schools.
Carter would abolish the dual market by extending regulation to intrastate gas and raising the wellhead price ceiling for all newly discovered onshore gas to $1.75 now, with later increases to cover rising costs.
Those supporting deregulation say the industry needs more incentive to explore. The President's supporters contend that the $1.75 is incentive enough and that a higher price won't produce much more gas. They point out that the price ceiling for "new" gas has increased 600 per cent in the last five years while production has decreased.
Rep. John D. Dingell (D-Mich.), chief architect of the House bill, said a study by his subcommittee showed that deregulation would cost consumers $52 billion more by 1985 than would the House bill. The average family of four using gas heat would pay $125 more per year under deregulation, he said.
Dingell's study predicted the price of gas would go to $4 per mef under deregulation but that natural gas production would increase by only 5 per cent. He predicted it would cause the loss of 250,000 jobs by 1985.
Supporters of deregulation concede that prices would rise if controls are lifted, but contend they would soon settle out at about $2.50 per mef. The unregulated price of intrastate gas in Texas is less than $2 at the wellhead.
Rep. Charles Wilson (D-Tex.), supporter of deregulation who helped work out a compromise that won approval for continued regulation in the House, said neither side could have its way but could reach a workable compromise. "If President Sadat could go to Jerusalem we can work this out in two weeks," said Wilson. House leaders are saying the agreements have to be worked out by next weekend if Congress is to have a chance to take final votes on the bill by Christmas.
Rep. Clarence J. Brown (R-Ohio: conceded that deregulation would mean higher prices paid by consumers, but contended that regulation means shortages plus higher prices paid for alternate fuels. His Ohio district was especially hard hit by shortages last winter.
Sen. Clifford P. hansen (R-Wyo.) asked: "How can consumers be helped by regulation if gas stays in the ground and we pay more for foreign gas?"
The House conferees strongly favor Carter's position. But the Senate conferees are divided 9 to 9 on the gas issue.
The principal ingredients from which a compromise will be fashioned, it there is one are price, control of the intrastate market and the definition of "new" gas, which alone would qualify for the higher price ceiling.
Rep. Toby Moffett (D-Conn.) and a group of about 30 younger House members who think Carter's proposed $1.75 ceiling is too high went to the White House yesterday morning to urge him again not to give way on natural gas prices or payments to oil producers in exchange for approval of the crude oil tax. Members said the President promised he would not back away from his program without telling them first. He noted that a conference has to make compromise to settle differences.