Natural Gas Decontrol Bill to Go to Congress

The Reagan Administration’s long-awaited natural gas decontrol bill will not affect existing supply contracts, an Energy Department official said Tuesday.

The bill also would require interstate pipelines to transport gas for all shippers under certain circumstances.

“The general rule is contracts continue in place,” Ted Garrish, the department’s legislative liaison, told reporters after a speech by Secretary John S. Herrington.

Herrington outlined provisions of the bill to a luncheon forum organized by the American Gas Assn., a trade group of local distribution companies and pipelines.

Garrish said the bill would be presented to Congress next week.

About 40% of the nation’s natural gas--gas discovered before 1978--is still under price controls. Controls on the rest were removed Jan. 1, 1985.

“The bill will suggest to decontrol upon enactment all gas subject to new and renegotiated contracts, and decontrol all gas by April 1, 1987,” Herrington said.

Garrish said that under the 1987 decontrol deadline in the bill, the Federal Energy Regulatory Commission “no longer sets maximum allowable prices.”

The industry grew up with interstate pipelines buying gas at one end of the line and selling it at the other to large industrial users and local distribution companies.

But falling prices in recent years led large customers to shop for cheap gas on the spot market.

The regulatory commission, under court pressure, has ruled that pipelines must offer to carry customer-owned gas for all if they carry it for any.

However few pipelines have signed up for “open access” transportation, which has limited the benefits of spot market gas.

The Administration offered legislation to decontrol pre-1978 gas in 1982, but that measure did not go anywhere under fears of a drastic price boost.

The fall in prices following the 1985 decontrol of “new” gas has encouraged some department officials to conclude that this time they have a chance, and backers of controls have been notably silent as the Administration has advertised its intentions.

Herrington said Rep. John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee and a vigorous opponent of decontrol in the past, has assured him he would approach any bill “with an open mind.”