Supreme Court to Hear Appeal of Gas Ruling : U.S. Seeking End to ‘Propped-Up’ Prices

The Supreme Court, entering a case that government attorneys contend could save consumers $100 million a year, agreed Monday to hear a Reagan Administration appeal to further loosen government controls on natural gas.

The case concerns the 1978 Natural Gas Policy Act, which established a system to phase out the regulation of natural gas prices while ensuring an adequate supply of gas for interstate delivery. The law generally continued regulated prices for “old” gas--that produced from wells operating before the measure was passed--and for gas produced under certain extenuating circumstances, while decreeing that most “new” gas be sold at free-market prices.

In 1985, at the Administration’s behest, the Federal Energy Regulatory Commission ruled that gas overlapping the regulated and deregulated categories automatically be considered free of controls and therefore subject to the lower market prices.

In March, however, a federal appeals court sided with several big gas producers, citing a provision of the act that it said specifically allowed such gas to be sold at “the highest price”--whether that was the regulated price or market price at the time.

‘Enormous Costs’

In its appeal, the government said the language of this provision is ambiguous and that Congress never intended to use the deregulation law to prop up prices for the big producers. It contended that the language in question applies only to gas that would fit in more than one category set for regulation, not for gas that could be covered by the deregulated category.

If allowed to stand, the appeals court ruling “creates a bizarre system” of propped-up gas prices and “would impose enormous additional costs on purchasers of natural gas,” the government said.

Eight large producers, including Exxon, Amoco and Phillips Petroleum, have urged the court to dismiss the government appeal. Siding with the commission are an array of companies that ship gas through pipelines and sell it to consumers, including Southern California Gas, Pacific Gas & Electric and Unocal.

The justices will hear arguments in the case (FERC vs. Martin Exploration Management Co., 87-363) in the spring and render a decision by July.

The court also:

- Agreed to decide whether cities or the Federal Communications Commission has the authority to regulate the signal quality of cable television. The FCC says it alone can regulate technical standards for cable television, and a federal appeals court upheld that conclusion (New York vs. FCC, 87-339). But the cities of New York and Miami say cable should be locally regulated.

- Heard arguments in a case (Lyng vs. Northwest Indian Cemetery Protective Assn., 86-1013) in which a group of Indians from several tribes are seeking to block the building of a federal highway in Northern California. Last year, a federal appeals court, ruling for the group, halted construction of a road in the Six Rivers National Forest because it ran across the perimeter of a sacred burial ground. U.S. attorneys urged the justices to overturn that ruling, saying the road would not disrupt actual burial sites.