The enormous amount of budgetary red ink facing the nation has breathed new life into the oil and gas lobby's efforts to decontrol the price of natural gas. Eager to get its hands on an additional $180 billion in revenue over the next three years, the lobby is trying hard to sell decontrol coupled to a "windfall profits tax" that might yield the Treasury $10 billion to $20 billion a year.
Revenues lost to some of the outrageous provisions of the Economic Recovery Act of 1981--like "leasing" of tax credits, and tax-free savings plans benefiting upper-income brackets-- would be recouped at the expense of poor people trying to keep their homes warm in wintertime.
Speaking for a consumers' lobby, actor Paul Newman and labor leader William W. Winpisinger charge that the effort to make decontrol more palatable through a windfall profits tax is "a Trojan Horse that will still double people's gas bills" while the government and the oil companies split the take.
Of the industry-wide $180 billion bonanza, the largest gas producers--14 of the 15 largest integrated oil companies -- would collect a cool $82 billion, according to consumer lobbyists. Exxon alone would rake in an extra $15.2 billion, followed by Texaco with $13 billion.
Is this gift to the oil and gas giants, already flush with tax and deregulation benefits at the expense of the rest of the economy, really necessary?
Under the present phased-in schedule of generous gas price increases established by the Natural Gas Policy Act of 1978, gas exploration is at an all- time high. Gas prices at the wellhead have almost doubled since 1978. By 1985, under the present law, 40 percent of all natural gas would be decontrolled, and the balance decontrolled over time as old wells die out.
It should be noted that while oil and gas producers support decontrol, opponents include not only consumer, farm, and labor groups, but gas distributing and transmission companies. And pipeline companies are divided: those holding investments in gas exploration and production favor decontrol, those that don't are against it.
According to testimony presented by the American Gas Association (the distributors) to the Senate Committee on Energy and Natural Resources last month, "Given the current oil glut and the recently announced freezing of OPEC prices at $34 a barrel through 1982, the rate of increase for gas prices should exceed that of crude oil prices over the next few years, if these oil pricing trends continue."
But this isn't enough for the hungry oil barons. The industry's goal is to achieve immediate price equivalency with crude oil for gas at the wellhead, and President Reagan promised during the 1980 campaign to give it to them. A bill introduced by Texas Democrat Phil Gramm accelerates the decontrol process and removes price regulations from 100 percent of the supply by 1985. This, says a newly formed Citizen/Labor Energy Coalition, could skyrocket average natural gas prices from the current $1.65 to $6 per thousand cubic feet.
Natural gas is used by about 55 percent of all residential and commercial establishments in the United States, providing about 27 percent of the energy consumed. Thanks to OPEC, it has been about 60 percent more expensive to heat with oil than price-regulated gas.
Decontrol of gas would have staggering effects. The average household, which now spends about $500 per season for heating and cooking with gas, may have to spend over $1,100 in 1983. It will be worse in some places: in the coldest parts of the country, the gas bill for an average household could soar to $300- $400 per month during the winter.
The impact would be enormous on farms, and in industries such as food processing, steel, textiles and chemicals. Decontrolled gas prices are likely to induce large industrial users to switch to oil, helping to reverse the recent trend of lowered dependence on OPEC to the tune of 800,000 barrels of oil a day.
But the president's gas decontrol promise is complicated by the fact he is also on record (in a letter to Rep. Glenn English when his support on the Reagan budget was being solicited) as promising to veto a windfall profits tax. Whether that pledge will be kept may depend on how panicky the president and his advisers get over deficits approaching or topping $100 billion annually.
But there is a way that the oil industry can get its gas decontrol, the president can keep his promise not to slap on a windfall tax--and still squeeze $10 billion to $20 billion in tax revenue out of the energy sector: an excise tax on decontrolled natural gas. This frightening possibility was raised the other day by chief economic adviser Murray Weidenbaum, even though the tax would fall squarely on consumers, rather than producers.
As the opposition party, congressional Democrats have a chance to stand squarely with labor, consumers, farmers, and small businessmen on this issue, against decontrol whatever the tax tie-in. If they knuckle under to the campaign-check-writing oil lobby on this one--as they did on the Alaskan pipeline bill--they deserve to be a minority for a long time to come.