Natural Gas Up

More cost, less drilling

Congress dangled a most attractive carrot before the eyes of gas producers when it passed the contentious and convoluted Natural Gas Policy Act late last year. Unfortunately, gas producers ate the carrot, and are now using the stick on U.S. consumers. The bill, which went into effect on Dec. 1, relaxed the ceiling on domestic natural gas prices, allowing them to rise closer to world market levels. Congress hoped that this would encourage producers to find more gas. Not so. In January and February, the number of wells drilled declined by 7% compared with the equivalent period a year ago.

Industry spokesmen contend that bad weather and their own difficulties in deciphering the bill's complex regulations limited their drilling. But industry had little trouble untangling the complexities of the price deregulation. Natural gas prices have begun to climb. Government experts and gas company executives expect increases of 18% to 25% this year in Chicago, New York City, Memphis, Louisville and elsewhere. A similar rise is expected even in gas-rich Oklahoma over the next few months. The Department of Energy expects that the higher prices will cost U.S. consumers $1.7 billion to $2 billion in 1979.

Senator James Sasser, a Tennessee Democrat and chairman of the Subcommittee on Intergovernmental Relations, which is looking into the economics of the gas industry, thinks that gas inflation will get even worse. He figures that relaxing the ceiling on gas prices may cost Americans as much as $5 billion. Says Sasser: "The ceiling prices are becoming floor prices."

Seventy-two percent of the gas now going out to consumers is bound under long-term contract at the old price of 75-c- per thousand cubic feet. But many of these contracts are about to expire. So, as more gas comes onto the market at the new prices of between $1.99 and $2.26 per thousand cubic feet, consumers will be hit with increases.

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