Toward a National Energy Policy

The subject of oil prices dominated much of the year's international news as new royalty and taxing formulas pushed them ever higher. Along with the many fumbling reactions to such OPEC actions came a notable attempt at in-depth, orderly assessment. This was the governmental policy-analysis effort known as "Project Independence," carried out by the U.S. Federal Energy Administration. The published findings are a valuable compilation of the relevant evidence and a comprehensive analytical exploration of various energy demand-supply options, but are almost barren of recommendations. Thus, at year-end, all the key policy questions remained to be decided, including such issues as natural gas price deregulation, security stock-piles, relationship of the domestic to the world oil market, and environmental safeguards to accompany expanded coal production. However, the year did witness some progress in policy making. For example, the decision seems to have been made to push actively toward much higher rates of outer continental shelf leasing, although these rates will not reach the originally announced 10-million-acre per year goal. There also has been increasing recognition of the need to take into account the political and legal capacities, if not the legitimate reservations, of environmentalists and concession-seeking state governments. The U.S. sponsored conference of energy-consuming countries, held in February 1974, led eventually to the creation, under OECD auspices, of a sixteen-nation International Energy Agency, though the hope that it would become an effective instrument for cooperation among consuming countries remained somewhat clouded as the result of French abstention. Prospects for setting up a $25-billion fund to insure against sudden shifts of floating Arab oil dollars were similarly dimmed by the seeming reluctance of the French to approve a fund of this size as an OECD, rather than an International Monetary Fund, instrument, as well as by a general concern that the fund's existence would weaken the resolve of potential beneficiaries to exert maximum efforts toward energy conservation.

One conspicuous forward step came in the form of legislation creating an Energy Research and Development Administration which, as of January 1975, absorbed the energy R&D activities previously spread over a variety of federal bureaus and departments. In particular, ERDA took over all the non regulatory functions of the expiring Atomic Energy Commission, whose other responsibilities will henceforth reside within a Nuclear Regulatory Commission. This long-awaited divorcement of nuclear regulatory functions, such as atomic power plant licensing and safety, from promotional ones ended an intertwined AEC responsibility to which even some of the milder nuclear policy critics had taken exception. Interior Department programs transferred to ERDA include those of the Office of Coal Research and the fossil fuel R&D of the Bureau of Mines. The principal solar and geothermal activities of the National Science Foundation, as well as the Environmental Protection Agency's "alternative automotive power" programs, likewise shift over to ERDA. Given the substantial long-term energy R&D support which Congress has now funded, the new agency promises to become a principal actor on the U.S. energy scene.

However, the establishment of RDA has not wholly rationalized federal energy organization. In some ways, at least for the present, it introduces new confusion and uncertainty. For example, along with ERDA there has been created an Energy Resources Council, an advisory body within the Executive Office of the President headed by Interior Secretary Rogers C. B. Morton. There is a concurrent R&D responsibility within FEA, and under the ERDA legislation the President is expected to spell out by mid-75 additional plans for a "super" Department of Energy and Natural Resources.

In spite of the uncertainty and paper shuffling that, to a substantial degree, has gripped energy decision making, at least one new note is beginning to be sounded with increasing frequency: energy conservation. Federal authorities who formerly reflected the popular preoccupation with economic expansion are now coupling policies to expand energy supplies with a concurrent emphasis on means of dampening future increases in demand. The "Project Independence" study reflects the conservation theme in a marked way, and some Administration officials have also taken up the conservation watchword. However, what mixture of voluntarism, price rises, and regulatory action is to be applied toward achieving the conservation objective is a central issue yet to be decided. No senior federal official has come out as clearly for conservation for conservation's sake as did the Ford Foundation's Energy Policy Project (EPP), whose conclusions were expressed in its summary report, A Time to Choose. There it is argued that an annual 2 percent energy consumption growth rate between now and 1985 (compared with a recent historical rate of 4-5 percent and a longer-range one of less than 3 percent) is not only feasible and compatible with society's continually rising economic aspirations, but distinctly preferable to the alternative of accelerated supply development.

Indeed, the EPP study finds that, at a 2 percent growth rate, the needed supply expansion to the mid-1980s can be achieved wholly without reliance on environmentally questionable energy sources and locations. It sees adequate supplies available from a combination of new oil and gas discoveries onshore, offshore oil and gas production in the Gulf of Mexico, improved recovery from existing wells, deep-mined coal, coal from areas "where surface mining reclamation is feasible," and (given a possible deceleration of electric power growth from the historical rate of 6.5 to 7 per-cent to one of 3.3 percent yearly) such electric power plant capacity as is already under construction. The report discounts the necessity of exploiting new offshore oil provinces (such as the Atlantic coast), or "massive new commitments" to Western coal, a higher level of imports, or additional nuclear power. Moreover, in the EPP view, even the interim deceleration in the energy growth rate to 2 percent per year presupposes a major new governmental policy commitment to energy conservation. Rising fuel and power prices are judged an insufficient inducement by themselves to curb consumption to the degree deemed necessary. Hence the virtue of such proposed measures as setting minimum fuel economy standards for new cars and liberalizing credit terms for home insulation.

The authors recognize that in time even a 2 percent rate of growth in energy consumption means considerable recourse to what they consider undesirable sources. Hence they speculate, with obvious sympathy, on the feasibility of moving toward zero energy growth by the mid- or latter-1980s. Such a development is viewed as compatible with overall economic growth, though it would entail some fairly fundamental shifts within the economy toward "non-energy-intensive" activities.