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Natural Gas Legislation Letters to the Members of the Senate on the Conference Committee Report.

August 31, 1978

Your vote on the natural gas conference report may be the most important decision you will make during the 95th Congress. The enclosed letter describes some of the specific effects of the natural gas bill, but I want to emphasize some overall national considerations.

I personally believe that both energy producers and natural gas consumers will be benefitted by this legislation, but far more is involved than just a carefully balanced compromise between the interests of producers and consumers. Our Nation's international reputation and economic well-being are at stake.

The ability of Congress to enact into law a national energy policy has become, in the eyes of many, a test of our nation's will.

There is no doubt that action on the natural gas bill will have a direct impact on our trade deficit, on the value of the dollar, and on the rate of inflation. The reduction of more than one million barrels per day in imported oil which will result from this bill nearly equals the saving from all the other energy legislation combined. These considerations are crucial.

I realize that this may be a difficult decision for you. The personal opinions and voting history of almost everyone have had to be changed. I know that this has been true of myself and all the members of the Senate and House Conference Committees during the past 16 months.

The compromise proposal is not perfect, but it is the carefully crafted product of a sustained and sincere effort. It is highly unlikely that any new or replacement legislation can or will be evolved next year or in the near future if the Congress should reject this bill.

Our national interests are at stake. I urge you most sincerely to vote for the natural gas conference report.



The natural gas conference report is of overriding national importance.

The problems caused by the current administrative system are substantial: supplies are inadequate in many parts of the country; the pricing structure is un- certain; and incentives necessary for increased production are clearly lacking. These problems are well recognized, but for nearly 30 years solutions have proven to be beyond our reach.

The natural gas compromise presents a rare opportunity for us to replace the existing system with an approach which is fair, balanced and workable.

Several Senate opponents argue that producers are not given enough incentives, while others maintain that the legislation excessively benefits producers to the detriment of consumers. However, opponents of the bill cannot agree on an alternative which would improve the existing system. They are united only in their opposition.

I firmly believe that the compromise does not hold special advantages for any group. The beneficiaries of this legislation will be the American people; the interest served will be the national interest.

As a compromise, the conference report does not include everything that I proposed nor does it include everything that you have supported. The report does, however, substantially increase supplies by creating a national gas market and establishing new and certain incentives for gas producers, and it provides reasonable prices for industrial and residential consumers. It strikes a fair balance between producer interests and consumer concerns, between the over-regulation of the past and the economic hardship of immediate deregulation, and between the bills passed by the Senate and House. The compromise is workable and is far superior to the status quo.

Passage of this bill is essential for several reasons.

The bill abolishes the outmoded dual market system and creates a single national gas market. Substantial additional quantities of natural gas will flow into the interstate market—where it is sorely needed—at prices below that of alternate fuels such as foreign oil, LNG, and SNG. Together with the construction of the Alaska gas pipeline, which will be greatly facilitated by this bill, these increased supplies could mean a 30 percent increase in interstate gas by 1985, a saving of approximately 1.4 million barrels per day of imported oil by 1985, and a $6 to $8 billion-a-year reduction in our trade deficit if OPEC prices rise at about the inflation rate.

With the interstate gas market opened for the first time to intrastate supplies, certain regions of the country will no longer have to suffer through gas-short winters while other regions have more than they need.

There will also be enough gas to resume home hook-ups throughout the country. And industrial users, who have had difficulty relying on gas, would be able to depend on this fuel without fear of abrupt supply cut-offs.

Under the bill's incremental pricing provisions, the industrial gas price in 1985, in almost every region of the country, will still be well below the price of fuel oil—even assuming world oil prices stay constant. Significantly, under the incremental pricing provision, the price of natural gas to industrial users will be lower than the price would have been under the Senate-passed deregulation bill.

New and easily determined production incentives will be mandated under the compromise. Prices will be set legislatively at a level that will encourage increased production. The bill abandons the vague regulatory standards of the past, and spells out in very specific fashion the prices that producers can expect. Consequently, while the compromise appears detailed, the various price determinations that must be made are relatively simple. In addition, the bill resolves the uncertainties associated with recent Supreme Court decisions and simplifies federal regulation.

As you know, the effects of enacting this compromise go well beyond the natural gas industry. During the last several months, it has become increasingly evident that Congressional action on natural gas will have a direct impact on our Nation's economic well-being.

This year our trade deficit may be the highest in the Nation's history. One of the largest contributors to that deficit is imported oil, which is now running at an annual rate of $42 billion. The approximately 1.4 million barrels per day savings resulting from the natural gas bill equals the savings of all the other energy conference reports combined. Because the existing gas surplus in producing states could now be used in interstate markets, the natural gas bill also provides the most immediate and direct oil import savings in the four energy conference reports.

One of the other obvious effects of not having a national energy policy has been the dollar's erosion against other currencies. Since April of last year, the dollar's value has declined 16 percent against the German mark, 34 percent against the Swiss franc, and 31 percent against the Japanese yen. Unless Congress acts soon on a natural gas bill, the world will remain convinced of our unwillingness to face the energy problem, with continuing uncertainties and pressures on the dollar in foreign exchange markets. Over the past year, leaders of the world's major economic countries have attributed a substantial part of the decline of the dollar directly to our failure to adopt a national energy plan. The Chairman of the Federal Reserve System has informed me that he shares this view.

Both the substantial trade deficit and the slide in the value of the dollar adversely affect the inflation rate. For the first six months of this year, the consumer price index rose by 10.4 percent. By stemming the decline of the dollar's value, the gas bill will help eliminate this source of inflation. At present, every 1 percent decline in the dollar's value against the currencies of the countries from whom we import adds 0.1 percent to the consumer price index.

We cannot afford to allow another Congressional Session to end without a natural gas bill and a national energy policy. If we fail to act, the consequences are clear and unfortunate—gas supplies will remain in the producing states while oil imports continue to increase; the Nation will still lack a national energy policy; the trade deficit will remain unacceptably large; we will lose an important source of strength for the dollar.

Clearly, as national leaders we must rise above competing interests, narrow regional concerns, and short-term political considerations. We must act in the domestic and international interests of our country above all else. With the eyes of the world upon us, we cannot afford to fail this test of our national will.



Note: The texts of the letters were released on September 2.

Jimmy Carter, Natural Gas Legislation Letters to the Members of the Senate on the Conference Committee Report. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/248900

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