Where did the idiom “That’s gas” originate?

As OP has noted in a comment, the origin of the phrase may have originated in James Joyce's 1914 anthology Dubliners, specifically the short story "An Encounter" (emphasis mine, link to story here):

When I had been sitting there for five or ten minutes I saw Mahony’s grey suit approaching. He came up the hill, smiling, and clambered up beside me on the bridge. While we were waiting he brought out the catapult which bulged from his inner pocket and explained some improvements which he had made in it. I asked him why he had brought it and he told me he had brought it to have some gas with the birds. Mahony used slang freely, and spoke of Father Butler as Old Bunser.

Since the speaker seems to identify this as slang, maybe it's something Joyce overheard when working on the story.

Per Google Ngram Viewer, the phrase really seems to have picked up and stayed constant in the latter half of the 2nd century:

Interestingly, the Frank Sinatra song "Saturday Night" uses the phrase "Monday to Friday are a gas" in later recordings, but the phrase "Monday to Friday go fast" in earlier ones. This might be an instance of the slang term becoming more common.

It’s probably a variant of the old expression It’s a gas which ultimately referred to the discovery of nitrous oxide and its power to give euphoria to those who inhaled it:

Scientist Humphrey Davy noticed that nitrous oxide produced a state of induced euphoria which led to laughter followed by a state of stupor and, finally, a dreamy and sedated state. Seeing no harm in the use of the gas, he introduced nitrous oxide to the British upper class as a recreational drug in 1799 at gatherings that were quickly coined “laughing parties.

At these “laughing parties” guests would take a whiff of nitrous oxide and then throw themselves in what were referred to as “nitrous oxide capers.” These capers led guests to stumbling about, slurring their speech and falling down. Davy noted that some people at these “laughing parties” found themselves in a state of induced euphoria due to the gas.

It didn’t take long for the term “it’s a gas” to become a sort of code for what one could expect if they attended a certain British upper class gathering.

It wouldn’t be until 1835 that nitrous oxide would be used medically but by then, the term “laughing gas” had stuck even with medical professionals.

While the “laughing parties” and “nitrous oxide capers” are things of the past, the term “it’s a gas” continues to imply that the event or activity is sure to amuse and bring gales of laughter to those attending the event or participating in the activity.

(Historically Speaking)