FOR the first time in the modern era of our industry, we have no regulation on production or on end use. Because of that, we see a very exciting, very exciting period for natural gas," says Michael Baly, president of the American Gas Association (AGA).It's easy to understand why. Disastrous federal regulations crimped gas supplies until 1978, then opened the floodgates. The ensuing chaos hasn't fully ended: Some producers must still sell price-controlled gas for less than the going rate. And Columbia Gas System, whose pipeline subsidiary serves 14 states, recently declared bankruptcy to escape contracts that make it buy gas for up to five times the current spot price. But price controls are phasing out. And the Bush administration's proposed national energy strategy calls for eliminating an unnecessary "regulatory morass" that remains. If Congress acts, the resulting increase in natural gas consumption could displace 3.7 quadrillion British thermal units (quads) of oil by 2000, the Bush administration says. Meanwhile, Carter-era predictions about running out of natural gas fell flat when price decontrol gave producers an incentive to drill. The reserve replacement rate quickly went from 48 percent of production over the 1970s to 94 percent during the '80s. Proven reserves were 175 quads at the start of 1990. An estimated 400 quads of gas remain to be discovered. Weird weather and competition from cheap oil still hurt gas producers, but the long slide in consumption has reversed. From its 1972 peak of 23 quads, sales fell below 17 quads in 1986, then rose steadily. Last year's total stood above 19 quads. Demand for natural gas is forecast to rise 2 to 4 percent above 1990 levels, according to the AGA. But the supply has been increasing even faster. The net result: Prices in some places this year dipped below a dollar per thousand cubic feet at the wellhead.