When President Carter first proposed his national energy plan, one principle was clear: The nation's dwinding pool of natural gas would be saved for the homeowners of America. Industry would be coaxed or driven, by taxes, prices and regulatory rules, to shift to other less-precious fuels.
Now, 15 months later, that priority has been reversed.
Carter's compromise natural gas bill, scheduled this week or next for an up-or-down climax vote in the Senate, is skewed in the other direction - big industry is supposed to get more natural gas in the future, a lot more, while homeowners and businesses are expected to get along on less.
The reason for this is simple, according C. William Fischer, deputy administrator of the Department of Energy's quasi-independent analytical section. The final prices set for homeowners are much higher in the compromise measure that they were in the original plan - high enough to drive residential and commercial users away from gas, not toward it.
The NEP originally envisioned an increase in residential-commercial consumption of natural gas of 8 percent by 1985. The compromise bill, according to an evaluation by Fischer's Energy Information Administration, will produce a decrease of about 4 percent. Total industrial consumption, on the other hand, was expected to hold even or decline slightly by 1985, as companies switched to coal and other fuels. Now the administration bill claims that total industrial use will grow by 10 to 14 percent in the next six years.
"There are rational reasons for that," said Fischer, "the main one being the price differentials . . . The compromise has a price for residential of $3.31 per thousand cubic feet) by 1985. That's a significantly higher price, 57 cents higher than the national energy plan. That would tend to drive down consumption in the residential sector."
In terms of future consumption, said a staff professional on the House Commerce Committee, "industrial users are just coming out the big winners."
This is one of the fundamental mutations that have crept into president's program during its arduous journey through Congress, a trip which has left all sids exhausted and politically jangled by so many bargains made and unmade, so many angry speeches and privte deals, so many fortunes won or lost in the fine print of this legislation.
No one seems very eager for the Senate showdown ahead. Another filibuster is expected from the pro-consumer liberals who are opposed to deregulation and higher gas prices, in any form. They may be joined this time by a few pro-oil conservatives who are disgusted with the compromise's extremely complex formula for phased deregulation over seven to 10 years. They think the oil industry should kill this bill and try again next year for immediate deregulation of gas prices.
The administration hopes to break the filibuster on the third or fourth try, depending upon a middle spectrum of Democrats and Republicans, senators who are either loyal to the Carter program or loyal to the oil industry, who started out this fight on opposite sides.
The political imperative that unites them now is to pass something, to settle the matter once and for all, even if the victory if riddled with impurities. Passage of the gas bill would give the president a much-needed political victory, and, for industry, it promises what gas producers have been fighting 24 years to accomplish - an end to federal control over interstate natural gas prices.
What would this bill do for America? Or to America? as the critics would say. All answers and explanations must be hedged by this note of caution: virtually all aspects of this measure - the economic impact, the impact on energy production, the fine print and the larger purposes - are the subject of intense dispute at this moment, extremely technical arguments that are not likely to be resolved by the final political rhetoric coming up in the Senate and the House.
In simplest terms, the measure will authorize a substantial transfer of income within American society - at least $28.5 billion over the next six years - from all the consumers of natural gas to all the companies that produce it. Some critics claim that the transfer will be much larger, closer to $50 billion, but at the very least the gas industry should derive an increase of 17 percent in its expected revenue.
The White House inflation watchers, who are concerned about the inflationary effects of government regulation for safety and the environment, have not shown much interest in the inflationary potential of deregulation. An inquiry at the Council on Wage and Price Stability produced this response: "We have not done anything with natural gas. "It's a very complex, complicated thing. With our limited staff, there wasn't any way we could get into it."
The Department of Energy claims that the $28.5 billion is a good investment for the nation with these benefits: Increased gas production would be stimulated by the higher prices. The nightmare of regional gas shortages in hard winters would be eliminated. The prices would also shift industrial use of gas from wasteful boiler burning to more essential purposes like manufacturing processes. The bill also proposes gradual melding of the two gas markets which now cause so many headaches to energy planners, users and producers - the interstate national market whose prices are controlled by federal government and the unregulated intraslate market of Texas, Louisiana and Oklahoma, where smaller independent producers can sell gas for a much higher price now, as long as their fuel doesn't cross state lines. The dual market is blamed for many problems - large and small companies hold their gas for the higher-priced south-west market, if they can, while northern customers come up short.
Top aides to Energy Secretary James R. Schlesinger did a bit of backing and filling on the question of who will get this new gas production stimulated by the bill. Jim Bishop, Schlesinger's press secretary, first responded by pointing out that the national energy plan mandated a natural gas policy favoring homeowners.
"That's the heart of the Carter policy," Bishop explained. "Gas is going to be reserved for the homeowner."
After more discussion, Bishop referred the question to DOE experts, including Leslie J. Goldman, deputy assistant secretary, who likewise expressed disbelief that any DOE documents were claiming increased industrial consumption as a consequence of the natural gas bill.
Later, Goldman examined the figures and responded with a clarification: Yes, industrial uses would increase - by as much as 2 trillion cubic feet by 1985 - and residential use would be held even.
Goldman argued that these consequences would still be consistent with the president's plan. Total industrial consumption will go up, he said, but the wasteful uses will go down - particularly the use of natural gas for electricity generation and oil refineries. He claims that no oil refineries will be burning natural gas for heat by 1985. Furthermore, he insits that the residential users won't be hurt because insulation and other conservation measures will save so much gas that many more homes will burn the same amount of natural gas by 1985.
It should be noted that some private industry analysts think the administration's projections on future consumption are strange, to put it nicely. They point out that homeowners have fewer options than industry about choosing a fuel to burn. A large factory can easily switch from gas to oil, as many have done in recent years, while residential use of natural gas has continued to increase.
Once a home is hooked up for gas, the owner is not likely to switch, even if stuck with a sharp price increases. Total industrial consumption has reclined since the early 1970s when energy prices shot up - a trend that might be accelerated, not reversed, by future price increases.
Homeowners have always paid much higher rates for natural gas than industrial or commercial customers. The original plan favoring homeowners was to shrink that difference drastically but, as various amendments and industrial exemptions were bargained into the pricing formula, that goal evaporated. The final version does reduce the gap, but by only a few cents, from an average of 85 cents to 72 cents.
The irony of all this back and forth is that the substantial increase targeted for industry may be an embarrassment to energy planners - but has also become one of the major political selling points for their bill. Administration lobbyists, according to one DOE memo, should remind business and labor and senators of this point:
"Industrial use of gas could increase by more than 2 trillion cubic feet; there would be no curtailment of firm demand. The gas supply in the heavily industralized midwest would increase by nearly 50 percent."
The unions are an important battle-ground in this political struggle - union members are homeowners who oppose higher heating bills but they are also workers who need industrial growth for jobs. The administration argument is that, on balance, the compromise bill hurts homeowners less than the alternative of total deregulation and it will also stimulat economic growth. Unions, as a matter of principle, oppose deregulation, but the question is how hard they will fight against Carter's version of it.
"The consumer folks," said one administration official, "are trying to get the unions to look at this in terms of higher prices. We're trying to get them to look at it in terms of jobs."
On a regional basis, the adminstration is selling broad economic benefits to most sections of the country, quite apart from the national impact of higher prices for everyone. The sales pitch goes like this:
The midwestern industrial cities - the great centers of steel, glass, autos - are being promised a reliable supply for healthy industrial growth.
Midwestern agriculture, which depends heavily in natural gas for chemical fertilizer and corn-drying and other processes, will pay more for gas - but agriculture production has been exempted from the higher-priced pool that affects most industrial users. This same argument will appeal to other farm regions, like the South, where textiles and food-processing plants are also exempted from the higher industrial prices.
In the East, the increase in natural gas is supposed to displace more expensive fuels - liquefied natural gas and synthetic gas - that are used there in small amounts, thus moderating the average costs for everyone. If you are paying $3.60 or so for LNG, then natural gas at $2.13 looks pretty good.
For New England, which doesn't burn much gas in any case, the argument heard on Capitol Hill is any gas-pricing measure that raises the cost of manufacturing for the rest of the nation is bound to help the depressed industrial base of New England.
For the West, there is an additional argument: passage of the natural gas bill would pave the way for pipeline projects to bring vast new quantities of gas by the late 1980s from both Alaska and Mexico.
The Carter administration suspended negotiations with the Mexican government on an import project for its newly discovered gas until after passage of this bill. Mexico wants a guaranteed price for $2.60, well above the current market, and the bargaining is expected to resume if Congress raises the U.S. price closer to that target.
The Alaskan gas pipeline is waiting on the higher prices too. A higher price base would make it easier to arrange financing for the mammoth project. In the meantime, states like Alaska have arranged an exemption of their own - ensuring that state-enacted severance taxes on natural gas will be excluded from the federal pricing scale.
Everyone in Congress understands that the major regional beneficiary would be the southwest, though the benefits won't be spread evenly there by any means. The oil-producing states are where most of America's natural gas lies and that's where most of the $28.5 billion would go. The administration reminds everyone that the prices and the cash transfer would have been much worse under the total deregulation bill passed by the Senate last year.
The pro-consumer opponents of this compromise would argue that all this money doesn't have to change hands in order to accomplish the various economic benefits promised by the Carter administration. Their solution, in the extreme, would be simply to extend federal price control to all that intrastate gas production in Texas, Louisiana and Oklahoma and then, by federal regulation, allocate the sale of that gas to the customers who will need it most.
If there is any doubt that the oil industry came out of this legislative struggle with good results, listen to Sen. J Bennett Johnston (D-La.) addressing a meeting of Texas independent gas producers in Houston last month, trying to persuade them to support the compromise:
"I tell you this - compared to the president's program, compared to the House bill, compared to what we feared and, frankly, even compared to what we had hoped, this is a magnificent bill, believe it or not."
Many of the smaller independents do not believe it. They have smaller wells that sell gas in the unregulated intrastate market - so this bill puts them under the thumb of Uncle Sam for the first time. Their gas production would become subject to a night-marish system of price categories - 17 different flavors of natural gas or 23, depending on who does the counting. This "reregulation", as DOE officials now call it, is supposed to expire by 1985, but the oil men are skeptical - they fear that a future president or a future Congress will change their minds and they'll be stuck permanently under federal regulation.
In any case, the largest benefits will flow to the larger companies that control the major reservoirs, either onshore or in offshore waters. This is natural gas that would inevitably be sold to interstate customers in the North, whether price controls continue or not.
When Carter announced his energy plan, the regulated interstate price for new gas was an average of $1.42, up from 52 cents in 1976. The president first proposed $1.75. The argument moved upward to $1.93. The compromise bill envisions a final price by 1985 in the neighborhood of $2.60 per thousand cubic feet.
Even allowing for the distortion of inflation built into those figures, they demonstrate crudely the way this argument has gone - in favor of the producers. Major companies that have purchased expensive offshore leases, as one petroleum analyst puts it, "were sitting on a lot of 50-cent gas that's now going to seel for $1.80 or $2."
The administration is "cautiously confident" that this package of interests will sell the natural gas legislation, when the votes are counted. Working in its favor now is plain fatigue; everyone is sick of fighting over this horribly complex subject.
"What we hear on the Hill", said one energy aide, "is: Let's get it through. Let's get it out of here.