Decontrol: Would it warm up future for natural gas?

Natural gas may be either the bright light or sputtering flame in America's energy future. Within the Reagan administration and in Congress new thought is being given to whether natural gas prices should be decontrolled more rapidly -- a move that would directly affect utility bills for the 43 million US households where the fuel is used.

Beneath the debate is general agreement that natural gas has greater potential as a domestic energy resource, but disagreement over whether it is yet living up to that promise.

The difference of opinion extends to the natural gas industry itself. The industry is split over whether the current phased decontrol of most categories of gas by 1985 under the Natural Gas Policy Act is unlocking more supplies or if higher prices from decontrol are needed to do the job.

"Phased decontrol is working well," asserts George H. Lawrence of the American Gas Association (AGA), which represents gas distributors and utilities. He thinks the law should be left alone except for changes in regulations that restrict future industrial use of natural gas.

On the other hand, Victor Wulc of the Natural Gas Supply Association (NGSA), a trade group of gas producers, contends "we need complete decontrol." He agrees such a move would cost American gas customers more in utility bills, but terms that a "necessary investment in our energy security."

Estimates vary on the cost of faster decontrol. It would depend on the details of any new policy. But raising the average price of domestic natural gas to the prevailing price of comparable petroleum products would double or triple gas bills, according to several analyses.

In recent years, forecasts about future US natural gas supplies have grown more optimistic. The AGA estimates that with faster exploitation of new sources of natural gas --geopressured reservoirs -- total US gas supplies could expand 50 percent in the next 20 years.

"There is plenty of reason to be bullish about natural gas supplies," says Edward Erickson, an economist at North Carolina State University at Raleigh. Dr. Erickson, in a recent study for the NGSAM concluded that even conventional gas sources in the lower 48 states were sufficient to support current US consumption. But it would take a higher level of exploration, he added.

Since 1968, proved US natural gas reserves have declined, with the nation consuming more each year than industry has discovered. The trend fostered a widespread belief that the country was running out of gas.

This notion was supported by the stark fact that if the levels of consumption and new discoveries of the 1970s prevailed, the country would deplete its proved reserves of gas in 20 to 30 years.

This bleak scenario moved Congress and President Carter to pass the Natural Gas Policy Act of 1978. This law was aimed at encouraging more exploration for natural gas while restricting the use of the fuel.

The record of exploration since the passage of the law leaves the industry divided about whether it succeeded.

Erickson sees conditions worsening under the law. He points out that the number of gas wells drilled annually in the US is increasing, but at a slower rate.

In 1977, the number of wells was 25 percent higher than the previous year. The rate of increase since 1978, the year of the new decontrol law, fell steadily -- but then rose 7 percent in 1980.

The reason for the slower growth in drilling activity according to Erickson, is that the price of natural gas continues to be too low to draw the needed level of exploration activity.

Indeed, while the price of natural gas has been rising, the increases have left it lagging far behind the skyrocketing cost of oil. The average wellhead price of natural gas in the US is about one-third the going rate for oil.

The AGA's Mr. Lawrence chooses to focus on the total number of gas wells, which represented a record in 1980. "The NGPA [Natural Gas Policy Act] was a nasty, difficult compromise; it's less than perfect, but it is moving us in the right direction," he asserts.

Lawrence is not as much opposed to more rapidly rising natural gas prices as he is leary of reopening a political debate over decontrol. He speculates that if Congress is pressed into considering more sweeping decontrol, it could well enact a windfall profits tax on natural gas. "That would be the worst of all worlds," he adds.

There is general consensus among analysts in Washington that decontrol would be as divisive an issue in Congress now as it was in 1978.

Senate Energy Committee chairman James A. McClure (R) of Idaho supports faster decontrol of natural gas, but he believes the prospects for such a bill clearing Congress this year "are nil," according to an aide.

Still, the Reagan administration has voiced general support fo the idea of faster natural gas decontrol, and Energy Secretary James Edwards has undertaken a study of the issue to be completed in two or three months.