On Capitol Hill, the energy conferees are searching for a way to keep natural gas prices down. But in Texas, there is a somewhat different problem: how to keep them up.
Supplies have been climbing in the intrastate Texas market, putting downward pressure on prices. So the Texas Railroad Commission, the agency that regulates oil and gas production in the state, has taken steps to relieve some of that pressure.
What the commission did was to ask producers how much they could produce and consumers how much they wanted to consume -- these figures are called "nominations." Then, if necessary, the commission set out procedures to issue orders to producers to pro rate output so that supply will match demand.
The commission's move, while lauded inside the state as necessary and prudent, is proving an embarrassment to industry spokesmen on Capitol Hill. As Congress wrestles with President Carter's energy bill, the industry has been arguing that it wants nothing more than to be permitted to compete freely and openly in the marketplace.
"They preach laissez faire capitalism up here, but Adam Smith dies inside the Texas state borders," says one senior Energy Department official, labeling the commission's action "hypocritical."
Energy Secretary James R. Schlesinger Jr. uses more restrained arguments against the case for early deregulation. "The concept of a free market in natural gas has limited applicability," he says, dryly.
The industry prefers to speak in less philosophical terms.
One respected oilman, Dale Wooddy who heads Exxon's domestic natural gas operations, calls the glut a case of temporary "overdeliverability," resulting in 'a stabilization of prices over the last year."
The chairman of the Texas Railroad Commission, Mack Wallace, says the commission's action was justified because "We have a situation in Texas where more gas supply has been developed than the pipeline companies are prepared to take."
Wallace also said in a recent letter that the commission's action would prevent wasting natural gas, and protect "correlative rights" -- a legalism for gas producers sharing production and profits in the same field.
One of the most vigorous spokesmen for deregulation is Jack Allen, president of the Independent Petroleum Association of America, who says the commission's finding "would protect the small producer from being discriminated against," ensuring that their gas would not be squeezed out of the market by softening gas prices.
"Even though we have a temporary soft [gas] market, we have to develop said if the playing floor had not been more supplies," Allen says, calling for deregulation of new gas prices now or, at the least, some time within the next 4 years.
There are no federal price controls on gas produced and sold within one state.But interstate gas prices have been regulated since 1954. Last April President Carter proposed increasing new gas prices from $1.46 to $1.75 per thousand cubic feet, and extending controls to the intrastate market.
The contrast between the arguments in Congress over deregulating gas prices and what has happened in the gas markets since last winter's crippling gas shortages mirrors the familiar terrain in energy markets --temporary shortages and oversupplies, accompanied by both rising and falling prices.
Despite the momentary bloated Texas markets, where more than 80 percent of new gas discovered remains, oilmen are quick to point out that the United States has used more gas than it has discovered each year since 1968. At the same time, however, they point out that gas production turned upward in 1977 for the first time in years because of higher prices.
Others say the national gas supply picture over the next year may, in fact, be improving.
A major reason for this is that large industrial consumers have moved with what Energy Under Secretary John F. O'Leary calls "a vengeance" away from higher-priced natural gas toward oil and coal. Depressed world oil product prices have added to this, resulting in what O'Leary calls "a rolling phenomenon."
There also is a growing recognition among federal regulators such as Federal Energy Regulatory Commissioner Don Smith that gas distribution companies have tended to overstate potential shortages -- or curtailments --through the years.
"The fact that industries do get along with reported curtailments tells you that the shortages are not as severe," Smith says, adding that the gap between available supplies and demand nationwide now set at about 4 trillion cubic feet a year, is probably closer to 0.5 trillion cubic feet or less.
Still another factor that has put pressure on the gas market and improved the supply outlook is the prospect of increased supplies from Mexico and Canada, where energy officials, buoyed by new gas finds, are eyeing exports to the lucrative U.S. market.
Despite the brightening natural gas picture, however, oilmen have continued to press aggressively for critical concessions on natural gas. "Natural gas is the most important piece of the energy package -- that's where the best chances are for new supplies and new revenues," says Standard Oil Co. of Indiana chief economist Ted Eck.
Eck raises a point that has been obscured in the congressional energy debate -- the company's potential for increased profits from gas.
Today, the country produces more natural gas on an energy equivalent basis than it does oil. Further, gas prices, which now average $4.20 a barrel on an energy equivalency basis, lag far behind the $8 or so a barrel that domestic oil costs. As both domestic oil and gas prices move upward toward the $13.50 a barrel imported oil costs, producers stand to get larger revenue gains from gas than they will from oil.
In the meantime, the Senate conferees, under Henry M. Jackson (D-Wash.), remain deadlocked, with the future of natural gas legislation and the president's energy bill hanging in doubt.
The impasse is not new after more than two decades of debate over deregulating gas prices.Market forces, however, have prevailed in part.
Days after the recent Texas Railroad Commission decision went into effect last month, Houston Natural Gas President Joe Foy said his company and other intrastate pipelines would be willing to ship gas northward to the Midwestern states hardhit by the lingering coal strike.