Pipeline Issues Dominate Natural Gas Industry Needs/say Graves, House

THE JOURNAL RECORD, May 21, 1986 | Go to article overview
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Pipeline Issues Dominate Natural Gas Industry Needs/say Graves, House

WASHINGTON, D.C. - The lack of accessible and reasonably-priced pipeline transportation is the dominant problem in the U.S. natural gas industry, two spokesmen for the Oklahoma Independent Petroleum Association (OIPA) told a U.S. Senate committee Tuesday.

U.S. Energy Secretary John S. Herrington, meanwhile, told the Senate Energy and Natural Resources Committee it should approve a controversial natural gas decontrol proposal even though the administration-backed measure faces strong opposition on the Senate floor and in the House.

Sen. Don Nickles, R-Okla., is a member of the committee. It is chaired by Sen. James A. McClure, R-Ohio.

Jack Graves, OIPA president, and David House, chairman of the association's natural gas policy committee, both of Tulsa, asked the committee to concentrate on transportation problems despite expressing support for complete decontrol of natural gas wellhead prices and for repeal of the 1978 Powerplant and Industrial Fuel Use Act.

Both Graves and House, who represent 1,500 Oklahoma independent producers, said decontrol would not be acceptable to producers if it required existing contracts with pipelines.

"Unrestricted access to reasonably-priced transportation is the gas industry's number one priority," said Graves, president of Tulsa-based Calumet Oil Co.

"Excessive tariffs," he said, "inhibit producers' ability to deliver adequate supplies of gas to consumers. Order 436 by the Federal Energy Regulatory Commission (FERC) was purported to be a majorstep toward open access transportation. But it has been negated by a series of regressive steps which have exacerbated the disruption in the industry."

House, who is vice president-administration for Tulsa's Samson Resources Corp., said tariffs and conditions proposed by the pipelines are generally so restrictive that they "really discourage, not encourage, transportation.

"Pipelines certainly have every right to protect their system, but penalties of $5 and $10 (for small) imbalances are unduly restrictive and, in fact, discriminatory," he added. "The lack of nondiscriminatory and truly open access hinders many willing buyers and sellers today."

Graves said wellhead price controls on gas, which have been completely or partially in place since passage of the 1978 Natural Gas Policy Act, "alternatively punish producers of old gas (discoveredprior to the law's enactment) and producers of new gas.

"The NGPA (Natural Gas Policy Act) gave incentives to find new gas and severely limited the potential revenue from sales of old gas," he said. "Now, the block billing portion of Order 423, if it goes into effect as scheduled, will force new gas, which is more expensive to find, to take a back seat in favor of old gas."

The OIPA endorsed a bill, introduced by Nickles, to decontrol all wellhead prices. It gave qualified support to a bill by McClure, which represents President Ronald Reagan's decontrol plan, because the bill calls for contract abrogation.

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