Study indicates higher natural gas prices could actually help Northeast
In a region where worry over energy costs is never far from the surface, three Harvard researchers have dared to suggest the unthinkable:Skip to next paragraph
Subscribe Today to the Monitor
That higher natural gas prices would actually benefit the Northeast.
Last spring, for the second time since taking office, the Reagan administration decided against attempting to speed up the decontrol of natural gas prices - a goal candidate Reagan had pledged to support - on grounds the issue was too politically risky in an election year. Much of the opposition came from the heavily populated but economically distressed Northeast, which also happens to be at the far end of the gas pipelines.
The issue may well come up again in the next Congress.
Energy costs here average 30 to 40 percent higher than the rest of the United States, according to the researchers from the Harvard Energy and Environmental Policy Center.
But, they contend in releasing the findings of their new year-long study, although decontrol would add an estimated $18 billion a year to the national energy bill, by far the largest share of that amount would be borne by regions other than the Northeast. The reasons:
* This nine-state area (New England, plus Pennsylvania, New Jersey, and New York) uses relatively little natural gas compared with the average in other regions - 16.1 percent of the mix as opposed to 36.2 percent elsewhere, according to 1977 statistics.
Firms here compete with those in other regions using up to three times as much government-regulated gas. In fact, Northeastern firms, unlike many of their competitors elsewhere, tend to protect themselves by buying gas under interruptable contracts. They also install fuel-switching capability that allows them to burn oil if it happens to be the cheaper of the two fuels at any given time.
''Given decontrol, natural gas prices in the Northeast aren't going to go down,'' says Robert Leone, one of the three researchers on the study and a lecturer at the Kennedy School of Government at Harvard. ''They'll just go up less than in other parts of the country.''
* The Northeast boasts a substantial share - 20 percent - of the stock ownership in gas-producing corporations through pension funds, insurance policies, and other institutional investments. So, rather than assuming that deregulation of gas prices would mean an automatic windfall for the chief producing states - Louisiana, Arkansas, Oklahoma, and Texas - much of the new revenue would actually flow back into this region.
* Profits that fall to gas producers outside the Northeast would mean more money for them to spend - at least some of which would return here in exchange for items or services needed in exploration and management, such as steel pipe, computers, and other products.
The Harvard researchers estimate the net increase in regional income for the Northeast under gas-price decontrol would be $990 million a year.
The study says that gas bills for consumers here - homeowners as well as industries - probably would rise by $1.65 billion a year, or an average of $34 per person. For the unemployed and those on welfare, this could mean an extra burden without a meaningful share in the wealth, posing added problems for public policy.
The impact on other regions would be even greater. The four major producing states, where gas is cheaper and which use more of it, would pay $5.9 billion a year, or $248 per person. The other states would face increased bills of $11.1 billion a year - or $72 per person.
John Clark, a legislative assistant for energy matters to the Northeast-Midwest Congressional Coalition, which attempts to defend the economic interests of the region, said he has not yet seen the Harvard study.
''We'll have to look into it,'' he said. ''I'm not sure what our position would be, but I guess I would tend to take the traditional view'' - in opposition to decontrol.