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C&ENOct. 27, 1975
Editorial
Legislating ourselves out of a shortage Although many residential consumers of natural gas are growing more and more worried over our impending crisis in natural gas, the major expected impact will lie elsewhere—in plant shutdowns and the widespread layoffs that will accompany such shutdowns. The chemical industry, in particular, will be hard hit by the anticipated shortfall between supply and demand. At present, we are slowly recovering from our worst recession in recent years, and it is very easy to visualize the adverse impact a shortage will have on that recovery. Depending on the solutions used to solve the dilemma, we could even end up with another layer of inflationary increases over the entire economy. It is a very difficult problem we have arranged for ourselves—and it doesn't look like we're doing much in the way of solving it either. The Senate just passed a bill removing federal price ceilings on new natural gas, but that won't go into effect until next April. Under the Senate bill, gas from old fields still will remain under federal regulation, although the Federal Power Commission will allow the price to rise as existing supply contracts expire. Again, however, none of this will resolve this winter's natural gas shortfall, which is what Congress needs to address itself to first. The Senate bill does include a section designed to meet crisis shortages. It is extremely important that the House address itself to this latter issue first and, at the moment, exclusively. Considering the speed of operations in Congress, there is no way the House ever will be able to consider the broader issue of deregulation in time for this winter's shortages. I don't really expect any action by the House on that broad issue until next year's general elections. Even now, it may be too late for the House to pass more limited legislation on the crisis shortage issue, but it does need to make it a highest priority item on its calendar. The Senate crisis section would allow interstate sales for shortage areas to go up to $2.00 per thousand cu ft even though the federal ceiling price is presently about 52 cents per thousand cu ft. These supply cost increases will, of course, have a noticeable effect on end-product costs and prices, but this is a more livable condition than plant shutdowns and removal of the price ceiling will eliminate the interstate shortage created by federal regulation of natural gas pricing. In fact, nonproducing reserves increased almost 10% last year, so there is more than enough to go around at the present time—if the selling price is right. FPC has been chided recently about its laxity in handling natural gas affairs, and I agree, but such recriminations do little to resolve our present dilemma. It only points out a further need to review and improve our unwieldy and unworkable federal regulatory structure. This is a more long-range affair. For now, the most important matter is assuring an adequate supply of natural gas to the industrial sector. Even if it comes down to a choice between residential and industrial uses, I would opt for colder houses and full industrial operations. Massive plant shutdowns and layoffs will play havoc with our recession recovery, with unemployment, and with our economy. It is something we cannot afford. Higher natural gas prices would be disturbing and will have an inflationary impact, but the immediate alternatives are certainly much worse. Albert F. Plant
C&EN EDITORIALS REPRESENT ONLY THEVIEWS OF THE AUTHOR AND AIM AT INITIATING INTELLIGENTDISCUSSION.
