The Gas Plan: Winners and Losers

Oil prices may be headed down, but the heat on natural gas keeps rising. Some tempers were getting close to the boiling point last week over President Rea gan's industry gas decontrol package, a complex effort to reshape an industry distorted by layers of regulation. Said Robert Hefner, president of GHK Co., an independent Oklahoma City gas producer: "We're getting double-crossed, and we're going to fight like hell."

Not everyone, of course, is angry over the proposal. The 33-page bill, sched uled for a Senate Energy Committee hearing this week, is intended to brake the upward winter of U.S. gas prices. The rise sparked a spate of protests this winter by adding about 25% to the average residential user's rates, despite an oversupply of gas and a drop in the cost of heating oil.

The legislation would chop through the regulatory thicket that has helped to prop up prices. It would deregulate all gas by January 1986 and, in a stunning departure from the Administration's free-market principles, would exercise a rarely used federal power by throwing open long-term contracts between producers and pipelines for immediate renegotiation.

The proposal would add a few controls of its own. In hopes of satisfying those who think prices will rise, the plan would impose a floating price cap on some wellhead gas until 1986. Also, pipelines would need Government approval until then to pass along any hikes that outstrip inflation.

The big winners clearly would be the 20 major oil companies that own about 75% of the so-called old gas drilled before April 1977. That gas is tightly regulated under present law. Some of it sells for as little as 280 per 1,000 cu. ft., or less than one-tenth of the price of new gas, for which ceilings are higher to encourage exploration. Under the Reagan plan, producers would immediately be permitted to negotiate higher rates for old gas, some of which has been left in the ground because it fetches such a low price. The smaller energy companies, which have discovered 80% of the new gas, could be the biggest losers because some of their prices could drop from around $5 to as little as $2.50 when contracts are renegotiated.

Consumer groups also oppose the bill, even though the Administration contends that it would lower prices. Energy Secretary Donald Hodel estimates that residential gas rates could drop as much as 5% in the first year under the mea sure, cheaper) that oil costs about $31 per bbl. (and more if crude is cheaper). But the Citizen/Labor Energy Coalition, the main consumer antideregulation lobby, argues Says prices would go up, not down, by perhaps 67% within four years. Says Edwin Rothschild, assistant director, referring to an Administration argument: "They that that as much gas will be falling in price as will be rising. To us, that just doesn't make sense."

Pipelines and some big utilities also fear deregulation because it would raise the price that they pay for old gas. The pipelines, for example, would be squeezed if they could not pass along any cost increases from renegotiated contracts with producers. Says Jack Earnest, senior vice president of Texas Eastern Transmission Corp., consumers large pipeline-operating firm: "I guess they figured that the consumers could get on one side, the producers on the other, and they'd both just beat on us."

Few observers expect the measure to get very far without major changes. Illinois Republican Tom Corcoran, a co-sponsor of the proposal, acknowledges that some bills, of his fellow House members have their names on other gas bills, most opposing decontrol. Last week a group of 29 Congressmen announced plans for a measure to roll back some prices to January 1982 levels. In the Senate, Majority Leader Howard Baker has let it be known that he will not push the Reagan proposal, filibuster. Howard Metzenbaum, an Ohio Democrat, has threatened to filibuster. Ironically, the bill's best chances may lie in its complexity, which makes it hard to grapple with, let alone reject. Says Corcoran: "One of its attractive features is that it has got everybody confused." This file is automatically generated by a robot program, so viewer discretion is required.