President Reagan yesterday was urged by a Cabinet-level group to press for legislation that would accelerate decontrol of natural gas prices by lifting all restrictions on Jan. 1, 1985, according to administration officials.
Under current law, controls on about 65 percent of the nation's natural gas supply would be lifted on that date. The rest would remain under price controls.
The president, while indicating that he would not make a final decision on the recommendation until March 1, gave Energy Secretary Donald P. Hodel approval to draft legislation and to seek support for the initiative on Capitol Hill.
Any proposal by the White House to lift all controls on natural gas prices is certain to run into a chorus of protests on Capitol Hill, particularly in view of the recent run-up in natural gas prices that has produced a variety of bills designed to hold down prices.
Reagan, who once before backed away from a proposal to lift all natural gas price controls, has been receiving mixed advice from administration officials over whether to tackle the controversial issue now.
But the president, after reviewing a variety of options yesterday afternoon with his Cabinet Council on Natural Resources and the Environment, indicated that he was willing to press ahead and favored ending controls in 1985 rather than immediately.
White House spokesman Larry Speakes issued a vague statement reporting that the Cabinet council had told Reagan of "the need to correct certain fundamental flaws" in the 1978 Natural Gas Policy Act, which has permitted increases of more than 20 percent in gas prices this winter.
Speakes said that the president wants to "solve problems in the current law governing natural gas, while protecting the consumer from the present rapid increase in natural gas prices."
He added that the Cabinet council told Reagan that the current law "is not protecting the consumer from rapid price increases, and is instead operating to subsidize more expensive imports and uneconomic production of natural gas."
The options presented to Reagan yesterday:
* Immediate and total decontrol of all natural gas prices. The government has regulated gas prices for almost 30 years, but gradually is dismantling controls on a timetable that will lift price restrictions on about 65 percent of the gas supply by Jan. 1, 1985. This option would accelerate this process, and lift controls on all gas.
* "Modified" immediate and total decontrol. Under this option, the government would lift all controls immediately, but would attempt to prevent large price increases to the consumer by imposing some restrictions on long-term contracts.
* Delayed total decontrol. The government would lift all controls on natural gas by Jan. 1, 1985, but would establish a procedure designed to prevent further large price hikes in the meantime.
The Cabinet council, which is composed of several Cabinet secretaries, is leaning heavily toward the third option, and Hodel circulated a memo to other Cabinet members earlier this week spelling out that proposal.
Speakes said yesterday that the administration has studies showing that accelerated decontrol would result in only a 5 percent increase in prices.
But in an effort to insure that gas prices do not fly up, sources said the administration is considering a provision that would limit how high consumer prices can rise during the next two years.
"We want built-in safeguards to protect the consumer," Speakes said.
To achieve that, the administration would seek to enhance the ability of the Federal Energy Regulatory Commission to police contracts between gas producers and pipelines, and to limit the cost increases that can be passed through to utilities and then on to consumers.
The administration also is considering a proposal to deal with long-term contracts, which presently lock some pipelines into buying high-priced gas while lower-cost gas goes begging, by declaring an "open season" during which all contracts could be renegotiated.