President Reagan yesterday sent Congress his proposal to strip federal price controls from natural gas. He would drop controls from all gas on Jan. 1, 1986, but for the next year or two, aides say, his plan would not let prices rise as much as under current law.
Energy Secretary Donald P. Hodel predicted that the president's plan would result in an average gas price decline of 10 to 30 cents per thousand cubic feet at the wellhead in the first year, which would save the average family that heats with gas a total of $14 to $52.
Gas prices have risen more than 25 percent this winter. But Hodel said they could rise by no more than the general rate of inflation under the administration plan.
He thus maintained that the White House plan to decontrol all natural gas prices--which have been regulated for almost half a century--poses "no risk for the consumer."
The administration's claims, however, were greeted with a mix of skepticism and disbelief by consumer groups, and even by some industry groups that generally support decontrol.
Under present law, there are two broad categories of gas: old and new. New is the gas from wells drilled since 1977. Old gas will stay under price controls as long as it keeps flowing, and the price ceilings on old gas are relatively low. New gas ceilings are higher and will phase out on Jan. 1, 1985.
Reagan would move this phase-out date for new gas back to Jan. 1, 1986, and would tighten controls on this gas between now and then. But for old gas he would relax controls, and on Jan. 1, 1986, abolish them entirely.
Gas prices are now limited not just by law but by long-term contracts between producers and distributors. The bill would encourage renegotiations of these existing contracts.
But temporary restraints would remain on how much prices could rise through this process of renegotiation; among other things, the Federal Energy Regulatory Commission would be empowered to limit pass-throughs of price increases.
"Since this bill accelerates decontrol of old gas, we are fearful it is going to create upward price pressure, and have trouble seeing how it is going to result in lower prices," said George Lawrence, president of the American Gas Association. He said this even though his group supports the legislation.
"Where the producers have old gas which is low-priced, we can see where they would be pretty interested in negotiating their prices upward," Lawrence said. "But it might be a little stickier to persuade producers that have new gas that is higher priced to negotiate their prices downward."
Edwin Rothchild, spokesman for the Citizen/Labor Energy Coalition, also said he "could not find any rationale" for the administration contention that producers will be willing to renegotiate contracts downward, since this would force producers in turn to justify reducing the royalties they pay to the people who actually own the land.
"We're not just talking about irate farmers and ranchers," said Rothchild. "The U.S. government is one of the largest of the landowners collecting royalties under onshore and offshore leases. It will be interesting to see if Interior Secretary James Watt is going to let the producers cut their prices, and thus reduce the royalties to the federal treasury."
The administration bill also encountered a predictably cool reception from Democrats on Capitol Hill.
Sen. Howard M. Metzenbaum (D-Ohio), who led a successful three-week filibuster against President Carter's effort to decontrol oil prices six years ago, estimated that gas decontrol would cost consumers $60 billion and predicted that 10 to 20 senators would join him in a new filibuster.
But Sen. James R. McClure (R-Idaho), chairman of the Senate Energy Committee, scheduled four days of hearings on the bill beginning March 9 and forecast early Senate approval.
The legislation's prospects appeared even more doubtful in the Democratic-controlled House. While Hodel said Rep. John D. Dingell (D-Mich.), chairman of the House Energy Committee, had told him he was "intrigued by the bill's innovative or imaginative approach" to protecting consumers, Dingell later in the day made it clear that he felt continued controls on at least old gas remain necessary.
Noting that most of the bills introduced in Congress to deal with rising natural gas prices call for more control rather than less, Dingell said that if any gas legislation is passed this year, "it will take into account my earlier statement: decontrol over my dead body."