View from oil-company office: why US should decontrol gas
No one knows exactly what would happen if Congress decides to drop all price controls on natural gas. But unless prices take a nose dive, one group of sure winners would be the big oil companies.
Not only do these companies own 54 percent of the nation's proven gas reserves, but even more important, they own as much as 80 percent of the gas drilled before 1977. That ''old gas,'' the most stringently regulated, sells for as little as 28 cents per thousand cubic feet, while gas from newer wells fetches as much as $8.50.
If a deregulation plan backed by the Reagan administration passes Congress, old gas prices would be allowed to rise and new gas prices to fall. Clearly, the companies with the most old gas would benefit most.
In a glass-walled conference room overlooking a panorama of Dallas, an official of one of those companies concedes, ''We may gain a little bit'' from decontrol. But not as much as some predict, he says.
Chad J. Bardon, vice-president for external affairs for Sun Exploration and Production Company, a division of Sun Company Inc., says he does not look for a windfall from old gas decontrol. ''We have gas that would come down'' in price, he says. Sun, which provides about 2 percent of the nation's gas, owns reserves of both old and new gas. About 40 percent is classified as ''old.''
Moreover, Mr. Bardon maintains that a free market would not raise consumer prices and might boost gas supply.
''We believe prices would stay about the same or lower, on average,'' he says.
''There's just so much distortion in the market because of regulation,'' says the Sun spokesman, adding that his company has a staff of 50 to 60 lawyers working full-time on interpreting the natural-gas regulations.
Government regulations have not stopped recent price rises, says the Sun spokesman, pointing to the National Gas Policy Act (NGPA) of 1978, which sets gas prices according to category. The law gives newly drilled gas and gas taken from deep wells or ''tight sands'' premium prices.
''We've been able to get higher prices beil14l,0,7l,5pcause of the NGPA,'' says Bardon. Sun's average price for its gas went up from $1.63 per thousand cubic feet in 1980 to $2.24 in 1982, despite the fact that natural gas has been glutting the United States market.
That glut is only a temporary ''bubble,'' stress Sun Company and other gas suppliers. According to the US Department of Energy, gas reserves have been shrinking almost steadily since 1970, as the US uses more gas per year than drilling companies discover.
''What we really need is an orderly market so people will be able to drill on an economic basis,'' says Aubrey V. Hamilton, marketing adviser for Sun's natural-gas division. Now, say Sun officials, government regulations encourage explorers to seek the highest-cost, deepest gas first because it brings the highest prices. Cheaper gas is left in the ground.
For example, Sun has abandoned some old gas fields because the yield was too low. Since the gas from those fields is held low by regulation, the company does not find it worthwhile to install ''enhancement'' technology to increase the flow.
But if the government permitted a higher price for that ''enhanced'' old gas, reasons Mr. Hamilton, then Sun and other suppliers might increase production by nearly 3 trillion cubic feet throughout the US. On average, the US consumes 20 trillion cubic feet per year.
Sun officials say they are keeping in close touch with Congress members, especially the Texas delegation, to push for deregulation.
They are also trying to counter the efforts of the Citizen/Labor Energy Coalition, whose workers are knocking on doors in a grass-roots effort to bring about stricter regulation of natural gas. Such new regulation would hurt supply, say Sun officials.
It would mean that producers ''will tend to put their money elsewhere,'' says Bardon. ''I don't think there's a case of anything where prices below market have increased supply.''
The grass-roots groups now lobbying for more controls either ''have no understanding of the economy, or they don't believe in our system of life, that free enterprise should be allowed to exist,'' says Bardon.