In Milwaukee recently, 450 senior citizens confronted Sen. Robert W. Kasten Jr. (R-Wis.) and chanted "yes or no, yes or no" when he hedged in saying whether he was for a speed-up in deregulation of natural gas prices.
When he finally said he opposed it, an organizer rushed to the stage and, to the cheers of those assembled, handed him a written pledge. He signed it.
On the eastern seaboard, the directors of the Interstate Natural Gas Association of America (INGAA) met here last month on the same subject of speedier deregulation. The association literally is in the middle of the issue: its members are the pipeline companies that carry the gas from the producing states and the utilities that distribute it.
The pipeline companies, many of which are also producers, want the increased revenue that would flow from higher prices; the distributors fear the higher prices would drive off customers and cost them money. The association's pro-deregulation vote was 12 to 11.
For a year now, the multibillion-dollar question of gas deregulation has been lurking on the outskirts of official Washington, mostly invisible to the public but taking on an outsized dimension in places where lobbyists, trade associations and consumer activists do business.
The question is how quickly should the government lift controls from the price of this fuel that supplies more than a fourth of the nation's energy and heats more than half its homes.
The issue's long run on the fringes of the public policy process may be nearly over. Within weeks President Reagan is expected by both sides to send Congress an accelerated natural gas decontrol bill, setting off what could become one of the most thunderous legislative battles of the year.
As the public debate is poised to begin, the backstage jockeying--the extra-governmental process by which ideas for legislation are offered, refined, negotiated, sidetracked, championed, buried or whatever--has grown ever more feverish.
In Washington and in Houston, executives from different subgroups of a large and fractious natural gas industry are meeting almost daily, with members of Congress sometimes serving as their go-betweens, trying to bargain out their substantial differences.
Consumer groups and labor unions, meantime, are not waiting for the opening gun of the legislative showdown to try to scuttle whatever the administration proposes. Door-to-door canvasses are under way in 20 cities, and mass meetings, occasionally confrontational in tone, like the one with Kasten, have been held in dozens of congressional districts.
"It's their last great holy war," John G. Buckley, co-chairman of a group of New England fuel oil dealers who support decontrol, says of the consumer groups' early and active organizing. "They're fighting like zealots."
There's no shortage of passion on the industry side as well. Nor is it hard to understand what all the fuss is about; the stakes are gigantic. Natural gas supplies 40 million American homes with heat. It provides industry and farms with nearly half of their energy needs, and, overall, the clean-burning fuel accounts for 27 percent of the nation's energy diet.
The cost of accelerated decontrol is a matter of intense debate. The one thing everyone agrees on is that even if Congress takes no action, natural gas prices will rise sharply over the next three years: 44 percent above the rate of inflation, according to the average of four recent government and industry studies.
Producers contend that the additional increase from accelerated decontrol would amount to no more than 15 percent over three years. Consumer groups such as Energy Action and the Citizens/Labor Energy Coalition (C/LEC) say accelerated decontrol will make prices double, or even triple.
"These are the same folks, remember, who said the cost of gas would go over $2 a gallon when oil was decontrolled," says Buckley drily. The industry fears the political bite of the pocketbook issue, and it angrily accuses the consumer groups of hyping their numbers.
In 1978, Congress called for a quarter of a century of U.S. natural gas price controls to be lifted gradually in a complex process that will see controls removed from 60 percent of the domestic supply in 1985, with the remaining "old" gas staying under controls until its supply is exhausted, sometime in the 1990s.
The producers, which are dominated by such familiar names from the petroleum industry as Exxon, Shell, Texaco, and Mobil, want to speed up the process. They contend that the controls are inequitable to consumers who don't use natural gas and inefficient for the economy as a whole. Sheltering gas customers from real-world prices, they say, depresses supply, discourages conservation and forces the nation to rely too heavily on high-priced imported crude oil.
Consumer groups argue that it's bad enough that the Organization of Petroleum Exporting Countries sets our oil prices; why let it set our natural gas prices as well? They also say the industry has plenty of incentive to drill for natural gas, but it's leaving the stuff in the ground in the expectation of greater returns after full decontrol.
Reagan, a committed free marketeer, is siding with the producers. But he chose last year to keep his legislative agenda free of issues that would divert attention from the budget and taxes fights, so the battle was not joined in 1981.
Now industry leaders are worried that the clock may have wound down too far. They speak nervously of a "window of opportunity" that, they fear, will be closed by midsummer, when Congress starts getting restive about campaigns and the November elections. The last decontrol fight, they ruefully remember, was a bloodletting affair that lasted 18 months.
"It would take a rather heroic effort on the part of a lot of people to get anything through this year," says George H. (Bud) Lawrence, president of the American Gas Association (AGA), which represents distributors and pipeline companies. "I would say it is very much in doubt."
One of those making the effort is Rep. Phil Gramm (D-Tex.), a key ally of the producers, who has positioned himself as a mediator in the intra-industry battles. Gramm, trying to hammer out what he calls a "drill-tip-to-burner-tip consensus" on decontrol, has chaired two large meetings of industry leaders on Capitol Hill.
Different elements of the industry dislike the current law for different reasons, and Gramm is trying to set in motion some serious horsetrading.
In addition to wanting more revenues more quickly, the producers are worried about what has come to be known as a "fly-up" of prices expected to occur in 1985 if the National Gas Policy Act of 1978 is not revised.
The law was designed to phase out price controls on "new gas" gradually between 1978 and 1985, so the overall effect at the end would be as a ramp rather than as the face of a cliff.
But its phasing was based on assumptions about the market equivalent price of oil that became obsolete as soon as the law was passed. In 1978, Congress figured the 1985 price of crude oil would be $15 a barrel. It is already $34 a barrel. The result is a skewed phasing schedule that has kept natural gas a half to a third less expensive than fuel oil for the residential user.
The producers' fear is that as 1985 approaches, the looming "fly-up" will be so forbidding that Congress will recontrol prices out beyond 1985. They want the mid-course correction now.
They also dislike the complexities of the NGPA, which sets up two dozen different pricing categories for gas, depending on where, when, how deep and by whom it is drilled.
To cite one dramatic example, the 1978 law immediately decontrolled prices on deep wells, those drilled below 15,000 feet, as an incentive for producers to go prospecting in more exotic areas. That scheme has made some deep-well drillers rich, for their product is now fetching four times the price of the industry average, but it creates market distortions that drive the rest of the producers wild.
"It's as though Congress deregulated the apples at the top of the tree and provided incentives to pick them with helicopters," says David Foster, head of the Natural Gas Supply Association, a leading producers' group.
At the other end of the industry, the distributors have a different sort of "fear of fly-up," as the wags have dubbed it. They fret that the decontrol of 1985 will trigger escalator clauses that have been written into most contracts between the producers and the pipeline companies. The clauses, a testament to the market strength of the producers, could drive the price of natural gas above that of oil, according to some studies.
Gramm is trying to get the industry to work out a compromise that addresses both problems. The INGAA proposal, adopted after months of debate, was an effort to establish the framework for such a compromise. But so far the distributors aren't going along.
They represent companies that deal directly with residential consumers, companies whose rates are regulated by local utility commissions, companies that feel the heat and the squeeze when prices go up. The AGA's Lawrence, despite his philosophical support for decontrol, has made no real concessions at the bargaining table.
"No one's really looked at his hole card yet," Lawrence said, adding that only when Reagan gets involved in the fight will serious bargaining begin.
For all his ardor for decontrol, Reagan has some anxieties about the coming fight. He is on record against coupling accelerated decontrol with a "windfall profits" tax. Indeed, he wrote Rep. Glenn English (D-Okla.) last summer promising to veto such a tax. But since then the era of 12-digit federal budget deficits has dawned and the president's own party leaders on the Hill have been telling him that no bill can get through Congress without some sort of tax attached to it.
The betting now is that Reagan will propose a decontrol bill and let Congress initiate the idea of a tax. At the crucial moment, the scenario goes, industry will send signals that it is willing to put up with a tax as the price of decontrol, thereby releasing Reagan from his pledge.
But now come the consumer groups. They see a profits tax just the way Rep. Gramm, who remains publicly opposed to one, sees it: "The trouble with that kind of tax," says Gramm, "is that Exxon never pays it, Aunt Sarah does."
So for months now, the activists have been raising red flags about the "Trojan horse" of windfall. "It's just a device for Reagan to try to balance his budget on the backs of the poor gas customer," says Robert Brandon, Washington director of C/LEC.
Democrats on the Hill have begun to sing the same tune. They have no interest in going out of their way to help Reagan solve his deficit problem; nor are they eager to cast an election-year vote for higher gas heating bills.
The exception are Democrats from the gas-producing states of the South and Southwest, which would be on the receiving end of an enormous regional transfer of wealth under accelerated decontrol.
Those states have a second incentive for decontrol: as a result of the contortions of the NGPA, most gas customers in the intrastate market are paying higher prices than customers in the interstate market where natural gas used to be more expensive.
Not surprisingly, consumer groups have concentrated their organizing efforts in other sections of the country, where they are finding the soil quite fertile. Long before the introduction of an administration bill, they have lined up written pledges, like the one they wrested from Sen. Kasten, from 125 congressmen and senators.
Opposition to accelerated decontrol is most intense in the Midwest, where gas use is heaviest. The Midwestern Governors Conference, 11 of whose 13 members are Republicans, is unanimously opposed to accelerated decontrol. Rep. Delbert Latta (R-Ohio) recently told Reagan that pushing decontrol could cost the GOP seats this November.
So of all of the preshowdown players of the past year, it is the consumer groups that are convinced they are poised for battle with the fullest arsenal. At a time of one setback after another for their movement, it is a welcome switch.
"Usually it's the industry that gets out in front on an issue," says Ed Rothschild, director of Energy Action, "But this is the best preorganizing I've ever seen in the consumer movement. This time, it's the industry that is beating its head against a wall, trying to play catch-up."