Gas decontrol: don't forget half of America
The whole tangled issue of natural gas deregulation should be getting more public attention than is now the case. Yet, according to some speculation, the issue may be put on the back burner until later this year or early next year for political reasons so as not to divert attention from congressional preoccupation with budget cuts.
The reasons why a clearer public discussion is in order are obvious. For starters, Mr. Reagan came into office promising a speedy decontrol of natural gas, which is used to heat more one half of all American homes. Yet decontrol while likely spurring new production and ensuring energy conservation, will mean sharply higher prices for consumers and as yet unknown economic consequences for the Northern states most dependent on natural gas for industrial purposes.
But the main reason why more discussion is necessary is the need to measure with more certainty exactly will happen in early 1985 when all "new" natural gas is decontrolled under the terms of the Natural Gas policy Act, which was enacted after turbulent debate back in 1978 and which provided for a phased-in decontrol. "Old" gas, which makes up about half of all natural gas and comes from wells that started producing before 1977, will remain subject to controls. Gas from wells that started producing after that time will jump to uncontrolled market levels. But what worries many experts is that there could be a huge "flyup," or spurtu in consumer prices in early 1985, as gas prices jump to reach the levels of oil prices. Would it not be better, then, as so many producers argue, to hasten decontrol now and avoid what could well be a wrenching hike in prices just down the road?
The arguments in favor of a stepped-up decontrol have much to be said for them. It would help promote conservation. Moreover, given the fact that decontrol of at least half of all production is just a few years ahead anyway, why not speed up that process slightly to avoid any pricing shock?
The government should not lose sight of the potential adverse impact of decontrol on the American family as well as the Midwest and Northeastern states most dependent on gas. Currently most major gas producers, particularly those that are also oil companies, such as Exxon, the nation's largest natural gas company as well as oil company, are awash in money. So hitting the already financially strapped family or small business, school district, or industry to siphon off dollars for purposes of "exploration" seems a somewhat dubious argument.
Accelerated decontrol, according to a study by the Energy Action Educational Foundation, would add a staggering $370 billion to US natural gas bills between 1981 and 1985. For many typical families, any gains from the administration's tax cut would be more than wipe out by the hike in gas costs. That, of course, would also work against the economic recovery plan which is predicted on investment from the tax cut.
For these reasons, the administration might prudently be considering two courses of action: either leave the current phased-in decontrol law in place or, alternatively, if stepped-up decontrol is to be advocated do so only if made contingent on enactment of a hefty windfall profits tax that could be used for energy assistance or for mass transit and other public-service activities.
Stepped-up decontrol, if and when it comes, must not be allowed to impose intolerable costs on the American consumer -- nor work against the very budget cuts and supply-side incentives already put into place by the administration. In the case of natural gas deregulation, a balancing of interests seems to be in the best interests of all Americans.