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ENERGY: Luck Runs Out on Natural Gas

5 minute read

This time, luck ran out at thousands of factories, small plants and even schools that depend on a vital energy source: natural gas. Pointing to rising consumption of the clean-burning fuel, as well as dwindling supplies, gas-industry experts had been forecasting severe shortages for several winters, only to have mild weather make it appear that they had been crying wolf. But this season, the early warnings had been sounded as far back as November—and suddenly they proved all too accurate. “The past four or five winters have been comparatively warm,” said Carl Suchocki of the Natural Gas Supply Committee, an industry lobby. “But this one has been el socko.”

Pipeline Network. It could hardly help having a serious impact. Natural gas is the nation’s second most widely used fuel, after oil, accounting for 30% of total U.S. energy needs. Drawn from deep deposits in Texas, Louisiana and a dozen other states, the gas is distributed to customers across the nation through a vast underground pipeline network that is 649,000 miles long and is operated by 141 major transmission companies. The fuel they supply is the source of heat for half the nation’s homes and provides 40% of the energy used by industry.

As nationwide demand rose sharply over the past two weeks, the pipeline companies scrambled to line up additional supplies of gas and eventually had to tell many industrial customers to curtail their use of gas drastically or shut down altogether. With the Government energy bureaucracy unable even to keep adequate track of the shutdowns, much less manage the crisis, the natural-gas situation became the first practical problem confronting the new Carter Administration.

On the day after the Inauguration, President Carter’s federal energy coordinator, James Schlesinger, met with pipeline executives in Washington to discuss the situation. Later, Carter said he had directed Schlesinger to work with Congress in developing legislation allowing gas companies to share supplies. The President also asked Americans to turn down thermostats to 65° during the day and even lower at night.

Reaching the Peril Point. Very little could be done to ease the present crisis. The transmission companies were faced with insufficient pipeline capacity: they could not fit enough gas into their systems to meet burgeoning demand. As temperatures dropped, meters at monitoring stations showed a lowering of pipeline pressure, indicating big surges in demand. “The gas was being pulled out faster than we could put it in,” said Henry King, an executive of the sprawling Columbia Gas Transmission Corp., a network of seven gas distributors in several mid-Atlantic and Midwestern states. “In some plants we were reaching the peril point.”

At the same time, gas reserves —stored in huge underground chambers of porous rock or played-out wells —were being drawn down to dangerously low levels. It will take some time for those reserves to be rebuilt. Says an official of Southern Natural Gas Co. of Birmingham, Ala.: “The gas situation is so tight now that we won’t be able to fulfill our industrial requirements for three to four weeks. Even a snap of warm weather won’t help.”

Since the winter of 1970-71, when the first gas shortages occurred, the pipeline companies have dealt with temporary supply problems by “curtailments.” These are orders to industrial users to cut back on consumption of gas; under contracts between users and suppliers, fines can be imposed for cheating.

Almost everyone agrees that what is needed is a cut in consumption and an increase in exploration for new supplies. Gas producers say this can be best accomplished through deregulation of the price of natural gas, now fixed by the Federal Power Commission at $1.44 per 1,000 cu. ft. when shipped across state lines. That is too low, the gasmen argue, to encourage conservation by users and prompt producers to undertake the deep (down to 30,000 ft.) and offshore drilling needed to reach the still untapped sources of gas that are too costly to go after under current prices. Says E.L. Williamson, president of Louisiana Land & Exploration Co.: “The cheap gas has already been found.”

The industry would like to see the price of natural gas rise about 40%, to at least $2 per 1,000 cu. ft. At that price, the industry says, homeowners would turn down their thermostats and businesses would try to conserve gas or shift to coal. Gas supplies would then rise to a level where most needs could be met. Without decontrol, the industry insists, gas production could continue to slide, as it has for the past three years (see chart).

The political climate for decontrol is uncertain at best. For instance, Gerald Ford’s tombstone proposal for lifting the ceiling on gasoline prices is almost certain to die on Capitol Hill. Opponents of natural-gas deregulation say that its only assured results would be a windfall for the producers and higher prices for consumers. Indeed, drilling activity is already brisk, despite price controls. But nearly all of the activity is taking place in “safe” old fields with low yields. Drillers appear to be “sitting” on their untapped reserves, preferring not to bring new gas to the market until the price-control issue is settled one way or another.

Various deregulation bills have been introduced in both houses of Congress, although their prospects are uncertain. But Carter believes that the nation needs a coherent energy policy, and he promised last week that “such a program will be formulated promptly.” Public acceptance of the Carter program, which is likely to emphasize conservation, could be enhanced by the shock of the natural-gas shortages. Continued profligacy with energy could lead to cutbacks and cold living rooms that will not be so temporary.

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