A cabinet-level committee has recommended that President Reagan propose legislation for immediate price decontrol of newly discovered natural gas and to phase out controls on all other gas prices by 1985, administration officials said.
Decontrol could nearly double the price of gas for Washington area home owners, although some energy experts believe the impact would be smaller.
Nationally, decontrol of all gas prices would add about $40 billion annually to bills of residential, commercial and industrial users, according to the Department of Energy.
The decontrol recommendation before the president was drafted by the Cabinet Council on Natural Resources and the Environment headed by Interior Secretary James G. Watt. Some industry sources, including officials of the Natural Gas Supply Association, said they expect Reagan to approve the propsal in time for it to be sent to Capitol Hill before Congress returns from its August recess.
Other industry representatives, however, doubt the administration will move that fast.
Within the administration, only Engergy Secretary James B. Edwards opposed the effort to seek a faster end to natural gas price controls than is called for by the Natural Gas Policy Act of 1978, sources said.Under the 1978 law, controls on the wellhead price of newly discovered gas are to be phased out by 1985, but controls would remain on the about 40 percent of all gas then flowing which had been found in earlier years. a
The administration proposal would eliminate controls on that gas as well.
Sources said Edwards argued against speeding decontrol on grounds that it would be inflationary and politically unpopular. In addition, they said, he predicted Congress would not be willing to deal with the issue any time soon.
Other sources claimed Edwards' real concern was that he may want to run for governor of South Carolina next year and would not like to be doing so just as gas prices were going up.
Most congressional observers predicted that if Reagan does propose quicker decontrol he will not make the same sort of massive lobbying effort that he did for his budget and tax plan.
But if the Senate does not act on a decontrol bill this year, even industry backers agree passage would be unlikely in mid-1982 just before the beginning of a congressional election campaign.
Congress is not likely to welcome any proposal on decontrol at this time. Sen. James A. McClure (R-Idaho), chairman of the Senate Energy Committee, has said flatly that his committee will not deal with decontrol this year.
On the House side prospects are hardly more favorable. As one congressional expert put it, "The only way to get the natural gas decontrol package through the House is with a windfall tax included a President Reagan has said he would veto any bill with a windfall profits tax in it."
A similar tax was part of the compromise leading to decontrol of crude oil prices beginning in 1979.
A number of oil and gas industry executives have been urging the administration not to seek immediate decontrol of all gas, the route favored by some administration officials, because they fear part of the price would be a windfall tax.
However, a recent DOE study of decontrol said the option chosen by the cabinet council, "The price increases in the first year are almost as large as the price increases under full decontrol in 1982 because of the tenderncy for the deregulated gas price to increase sufficiently to allow the average wellhead price to balance the market."
With average wellhead prices below $3 per 1,000 cubic feet (mcf), the price of some already decontrolled gas, such as from recent discoveries from wells more than 15,000 feet deep, is selling for $8 or more an mcf.
Pipeline companies can afford to pay that much since the high cost gas is averaged in with cheaper gas still under control, some of which sells for less than $1 an mcf.
Decontrol is supposed to lead to additional supplies of gas in the long run and modest reduction in oil imports. Most gas distribution companies, however, have feared decontrol could lead to such a large increase in prices that they would lose customers who could switch to other fuels, including oil.
There is a wide range of estimates of how high wellhead prices would rise if controls are lifted.
Some economists say the average price would settle at about $4.50 an mcf, about at 60 percent increase from the present level. Others say it could rise as high as the price of an equivalent amount of oil. That would be about $6.50 an mcf and represents more than a doubling of wellhead prices.
Originally, the 1978 law was supposed to close the gap between gas and oil prices when controls ended in 1985. But the expectation then was that crude oil would be selling for only about $15 a barrel in 1985, whereas the current world average price is already about $36.