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Energy policy from Nixon to Clinton: from grand provider to market facilitator.

I. A Brief History of U.S. Energy Policy

A. 1973 to 1980

While the federal role in energy policy has been significant for decades - the Teapot Dome scandal dates to 1922 and the Atomic Energy Act(1) passed in 1946-for most purposes the modem era in federal energy policy began on October 17, 1973. On that date the Organization of On Producing and Exporting Countries (OPEC) announced its embargo of oil exports to countries supporting Israel in the Yom Kippur War. Although the United States imported only thirty percent of its oil and the embargo applied to only thirty percent of that, "[t]he American reaction approached panic."(2)

Congress and three successive administrations responded over the following five years with an extensive set of laws and regulations based on the expectation that the solution lay in strong intervention by the federal government. President Richard Nixon created the Federal Energy Office(3) and appointed an "energy czar"(4) with the power to allocate oil supplies.(5) Nixon also requested the preparation of a plan, known as "Project Independence," to make the United States independent of imported oil by 1985.(6)

The entitlements program was perhaps the largest and, according to some experts, "the most misguided intervention" during this period.(7) Under this program, higher cost imported oil was effectively subsidized by price-controlled domestic on, resulting in an average price below the world-market level. The perverse result was to subsidize imports, discourage domestic production, and encourage foreign production - exactly the opposite of the desired outcome.

Nixon's belief in the ability of government to mandate new technology was also evident in his environmental policy. In a 1970 message to Congress, Nixon announced a five-year collaboration with industry to produce an unconventionally powered, virtually pollution-free automobile within five years.(8)

The idea of independence from imported oil proved unrealistic and was quickly dropped by President Gerald Ford. However, several major energy laws were passed under his Administration, including the creation of the Strategic Petroleum Reserve (SPR)(9) and minimum efficiency regulations for automobiles(10) and appliances.(11) At the behest of Secretary of State Henry Kissinger, Ford also initiated several efforts aimed at fostering international cooperation among consumers, including the creation of the International Energy Agency (IEA) to promote oil production and alternative energy sources.(12) The enormous political resistance to taxing energy also surfaced during this period when John Sawhill, head of the Federal Energy Administration, was forced to resign following backlash to his support for a five-cent-per-gallon gasoline tax.

President Jimmy Carter included a strong national energy program among his priorities, and at his urging Congress passed five laws that together made up the National Energy Act of 1978.(13) The emphasis on national planning and a strong central authority continued; the Department of Energy (DOE) was formally created as a cabinet agency in 1977,(14) and Carter established a goal of twenty percent solar energy by the year 2000.(15) Other measures sought to pressure utilities and industry to switch from oil and gas to more plentiful and domestically available Coal.(16) The National Energy Conservation Policy Act(17) accelerated and extended the application of efficiency standards.

Several laws adopted in 1978 reflected the emerging influence of market ideology. The Public Utility Regulatory Policies Act (PURPA)(18) partially deregulated the business of generating electricity by allowing anyone the right to generate electricity for sale to the local utility at legally protected rates. The "Gas Guzzler Tax"(19) imposed economic penalties as a disincentive to the purchase of inefficient cars;(20) it conveniently applied disproportionately to foreign imports.(21)

Carter also initially proposed to speed deregulation of natural gas in reaction to shortages that surfaced in the winter of 1976-1977, but he was only partially successful.(22) The Natural Gas Policy Act(23) created twenty different gas categories, reflecting alleged differences in production costs such as location, well distances and depths, volumes produced, and so forth. In order to create incentives for production, categories thought to be high cost were to be deregulated first.(24)

Energy issues again covered the front page when the Ayatollah Khomeini took control of the government in 1979, resulting in another sudden reduction in oil imports and an attendant doubling of oil prices.(25) President Carter's response primarily sought to enlarge the role of government although he also called for decontrolling the price of oil to allow the operation of market forces.(26) However, he also proposed regulations for temperature settings in buildings,(27) a "windfall profits" tax on the oil industry,(28) a quasi-public Synthetic Fuels Corporation with billions of dollars to invest in technology to produce oil substitutes,(29) and an "Energy Mobilization Board" to cut through red tape that might stand in the way of energy projects.(30) All but the last were enacted in some form.

In summary, this period of U.S. energy policy was marked by a willingness to set ambitious national goals, a belief in the ability of the national government to achieve them through centralized agencies, and the commitment of large resources to underwrite the development of new technology. This approach was unfavorably compared with the political and social response to the Soviet launching of Sputnik in 1957, which similarly resulted in a massive federal program under the National Aeronautics and Space Administration (NASA), culminating in the successful landing of a human on the moon twelve year later.(31) The technical challenge for energy policy was arguably no greater than any faced by NASA, but the politics were certainly much more challenging due to the regional and class disparities associated with almost any policy choice. Unlike Japan and most European countries, which were able to absorb market disruptions with less long-term impact,(32) the interests of the United States as a whole were complicated by individual states with greater interests in the benefits of production and increased consumption.(33)

B. 1981 to 1992

The election of President Ronald Reagan marked a dramatic change in approach to energy policy. Reagan cared for the abolition of DOE and saw little need for an energy policy beyond the SPR and a strong military presence in the Middle East.(34) Ms budget director, David Stockman, expressed the Reagan philosophy as "strategic reserves and strategic forces."(35) However, the House of Representatives, which retained a Democratic majority, refused to go along with most of Reagan's proposals other than the accelerated decontrol of of oil and gas.(36) The Synthetic Fuels Corporation also came to a rather ignominious end, and tax incentives for renewable energy and energy conservation were allowed to expire.(37) The conflict between energy and environmental goals also became increasingly controversial. Reagan supported increased oil production in coastal areas, including large tracts in Alaska, but he was largely defeated by environmentalists.(38)

President Reagan was more successful in promoting the deregulation of natural gas through administrative means.(39) The Federal Energy Regulatory Commission (FERC) used its authority to regulate "in the public interest" to accelerate the transition to an open market for gas.(40) After several years of litigation and the political margin afforded by falling prices, FERC's efforts were largely endorsed by the Wellhead Decontrol Act of 1989.(41) The end result was a system in which gas pipelines became regulated monopolies required to provide service as "common carriers." Despite this legislative effort, gas prices were largely the result of market factors.(42)

President George Bush had previously made his fortune in the off industry and he continued to emphasize "market reliance."(43) However, unlike Reagan, he was forced to experience the costs of relying on strategic forces in the war against Iraq in early 1991. His approach was less ideological, as reflected in the National Energy Strategy(44) issued during his tenure:

No single policy tool can substantially increase America's energy security. The basic vulnerability involves oil, but reducing this vulnerability requires a broad array of actions: maintaining adequate strategic reserves; increasing the efficiency of our entire fleet of cars, trucks, trains, planes, and buses; increasing U.S. petroleum production in an environmentally sensitive manner, further deregulation of the natural gas industry; and using alternative transportation fuels.(45)

In response to the war, Congress again considered an aggressive energy program and this time responded with the Comprehensive National Energy Policy Act of 1992.(46) However, this is in many ways most interesting for what was not included. Despite strong pressure to limit oil imports, the two measures most directly responsive to this need - increased Alaskan oil exploration and more stringent auto efficiency standards - were both defeated.(47) The legislation reflected the political tensions and interest group pressures that increasingly limited the federal role in energy policy. The Act's most significant provisions addressed constraints on the evolving role for competition in the generation and sale of electricity, which had gradually taken off in response to PURPA. The legislation also included measures to promote the use of alternative fuels by vehicle fleets and a significant production tax credit (1.5 cents per kilowatt hour) for wind and specified biomass systems.(48)

II. Energy Policy Under the Clinton Administration

Energy policy has not been a high priority under the Clinton Administration in his first two years. Secretary of Energy Hazel R. O'Leary has received favorable attention primarily for matters largely unrelated to energy issues.(49) Research priorities were dramatically shifted such that conservation and renewable energy received dramatic budget increases.(50)

President Clinton has experienced mixed results in his attempts to link energy policy with other issues. The most notable example was his proposed "BTU tax," which would have raised revenue and encouraged energy conservation.(51) However, although the proposed tax was modest and the Administration agreed to adjustments to protect energy-intensive industries, the tax generated so much opposition that it was dropped before coming to a vote.(52)

DOE's Domestic Natural Gas and Oil Initiative, released in December 1993, lists forty-nine specific measures, none of which reflected any dramatic change in the direction or approach of energy policy.(53) Most involved modest support for specific technologies,(54) new studies,(55) or collaborations with states or the oil and gas industry.(56)

The Administration has an opportunity to announce new energy policy initiatives in its National Energy Policy Plan, which is required by the end of 1995.(57) As input for the plan, eight regional meetings were held on different topics between September and December of 1994. The topics indicate a recognition of the linkage between energy, the environment, and economic growth.(58) Several sessions included discussion questions about the sustainability of consumption and production.(59) However, the change in control of Congress and renewed questions about the need for many energy programs as well as an energy department may limit the interest in proposing new initiatives.

Clinton included several energy-related proposals as part of his Climate Action Plan and technology initiatives. In September 1993, the President announced a "Clean Car Initiative" in partnership with the "Big Three" automakers, proposing to develop a prototype automobile within ten years that would triple fuel efficiency while also meeting comfort, safety, arid performance goals.(60)

The Climate Change Action Plan CCAP),(61) released in October 1993, was prepared to achieve the objectives of the 1992 Framework Convention on Climate Change,(62) which set as initial goal that industrialized countries reduce their emissions of greenhouse gases by 2000 to the same level as that of 1990.(63) Since two-thirds or more of greenhouse gases are directly or indirectly associated with fossil fuel combustion,(64) any climate plan must inevitably fall heavily on the energy sector. Notably, the CCAP includes no new regulatory measures but instead relies on voluntary programs and incentives. For example, the Climate Challenge program promotes voluntary commitments by utilities to reduce their emissions of greenhouse gases.(65) Another program, referred to as Golden Carrot partnerships, seeks to create financial incentives for more efficient appliances by combining resources from a variety of mostly private sources.(66) This approach was successfully applied to create a $30 million incentive for the production of a super-efficient refrigerator that operates without ozone-depleting chlorofluorocarbons.(67) Other provisions assure that the net effect of the CCAP on the federal budget is positive, despite the absence of new taxes. The parking cash-out proposal would increase revenue by allowing employees the option of receiving the cash value of employer-provided parking as taxable income, providing an incentive for alternatives to driving.(68)

Although primarily a state initiative, another important direction for energy policy is the trend toward electricity deregulation. Several states have begun serious consideration of policies that could make electricity services much more competitive, similar to the way that changes in law and technology combined to create competitive markets for long-distance telephone services and airlines.(69)

III. What Have We Learned?

By some measures, U.S. energy problems have changed very little since 1973. Dependence on oil exports, the prime concern of President Nixon, has increased from thirty-five percent of consumption in 1973 to approximately fifty percent in 1994.(70) Despite an enormous amount of exploration and drilling, domestic production peaked at nine million barrels per day in 1985 and dropped to about seven million in 1993. Oil imports, therefore, have increased and will continue to do so, perhaps to as much as seventy percent of consumption within a decade.(71) The percentage of imports from Arab OPEC countries has roughly doubled over the same period, but the total role of OPEC in the world oil market has slightly declined due to increased production in the North Sea, Alaska, and other regions.(72) However, OPEC still controls a high proportion of total oil reserves - more than seventy-five percent of proven reserves.(73) One measure of the economic impact of oil imports is its negative influence on the U.S. trade balance, constituting more than sixty percent of the U.S. trade deficit over the last twenty years.(74) Between 1980 and 1992, the U.S. paid $742 billion (1987 dollars) to other countries for oil, versus $498 billion for imported automobiles.(75)

United States oil consumption is closely connected to a love affair with the automobile. Despite the successful doubling of new car fuel economy mandated by the corporate average fuel economy (CAFE) standards, motor vehicle fuel use has increased more than forty percent since 1970 due to increases in car ownership and miles traveled.(76) Oil use by other sectors of the economy has steadily declined - by over fifty percent since 1973 in the case of electric utilities - but increased use by motor vehicles has caused total oil consumption to remain about the same.(77) Transportation now accounts for over two-thirds of U.S. oil consumption, a troubling fact from the standpoint of national security because vehicles are largely incapable of fuel switching during an emergency.(78) Between 1970 and 1990, the number of cars on the road increased by more than 75 percent to 189 million; population increased only 23 percent during the same period.(79)

The low price of gasoline is clearly the greatest barrier to decreasing private consumers' oil use. U.S. prices are one-quarter to one-half those of many industrialized countries, where off is heavily taxed and its use is correspondingly less.(80) Adjusted for inflation, current oil prices are not much higher than at any time in the past forty years.(81) In fact, "[i]n 1989, gasoline was cheaper than almost any other liquid, including bottled water."(82) With automobiles generally achieving greater fuel economy, the cost of gasoline is a small factor in consumers' decisions to drive.

President Clinton's Clean Car Initiative arguably reflects the continuing search for a technological solution not too dissimilar from that proposed by President Nixon. The strategy most often proposed by economists - energy taxes - remains politically unacceptable despite its broad acceptance in most industrialized nations. The importance of lifestyle choices and how they might be influenced remains largely outside policy debates, despite evidence indicating that one-half or more of total energy consumption in industrialized countries is a function of consumer choices that are not directly related to providing food, clothing, and shelter.(83) But, in other respects, much has changed.

One important change has been the decline in the energy intensity of industrialized economies.(84) Although prior to 1973 it was typically thought that energy and the Gross National Product (GNP) were closely connected, this link has since disappeared.(85) During the period from 1973 to 1993, GNP increased over fifty percent in the United States but energy consumption increased only thirteen percent.(86) This trend occurred even during the 1980s when energy prices were falling and public interest in energy issues was virtually nonexistent.(87) The factors responsible for the decline in energy intensity are complex. They include materials substitution (less steel and more plastics in cars), rapid growth in less energy-intensive services relative to manufacturing, and improvements in technology (such as the replacement of incandescent light bulbs with compact fluorescent ones).(88) The likelihood that this trend will continue or even accelerate is of great importance for public policy, because it bears directly on the cost of measures to reduce oil consumption and pollution.(89)

Another change is in the composition of the global demand for energy. Increasingly, the global demand for energy is being shaped by developing countries. Whereas energy use in countries belonging to the Organization for Economic Cooperation and Development increases slightly more than one percent a year, energy demand in developing countries increases about four-and-one-half percent per year.(90) Oil demand in Asia has grown more than fifty percent since 1985.(91) Thus, the price of oil, and effectively the country's energy future, is less and less within U.S. control.

For similar reasons, any effective effort to address the buildup of greenhouse gas emissions must deal with the need to provide energy in the largest developing nations. The expected growth in emissions in China, India, Indonesia, and Brazil could easily offset efforts by the U.S. and other industrialized nations.(92) This problem is not amenable to a military solution but must be fought at the negotiating table.(93)

Another major change has been the switch to market-based approaches as a substitute for more prescriptive regulatory mandates. This is evident in numerous spheres, including the "market transforming" strategies emphasized in CCAP;(94) the system of competitive bidding for new power plants that has evolved in response to PURPA;(95) the emissions trading system central to the acid rain program for coal burning power plants incorporated in the Clean Air Act Amendments of 1990;(96) and the concept of "joint implementation," a variant of emissions trading included in the Framework Convention on Climate Change.(97) All of these programs provide regulated industry with greater latitude in choosing means to achieve energy and environmental goals, while creating incentives for technological innovation.

A related development is the evolution of partnerships between utilities and other industries and environmentalists that allow for mutually beneficial outcomes, as opposed to litigation and regulatory confrontations with winners and losers.(98) This illustrated by the structure of utility conservation programs negotiated with the support of environmental groups that allow utilities to share in the savings and recoup revenues lost due to sales reduction.(99) Consumers benefit from cost-effective efficiency improvements while utilities are allowed to increase their profits.(100) Another example of collaboration is the negotiated of appliance efficiency standards, which were originally contested by industry.(101) The standard levels were successfully negotiated by industry and environmentalits.(102) The Clinton Administration attempted to promote this trend in the transportation sector by formally chartering a federal advisory committee with representatives from a wide range of interest groups for the purpose of identifying acceptable policies for improving automobile efficiency.(103)

Another major development is the steady improvement in a variety of small-scale renewable energy technologies, some of which are now competitive with fossil fuels in certain applications.(104) Wind turbines are now being introduced in states with favorable wind conditions, and they compete with new coal-fired power plants.(105) This was accomplished with only about $70 million in federal subsidies and without any radical technological breakthroughs.(106) A similar and potentially even more significant cost reduction is occurring with photovoltaic cells, which convert sunlight into electricity. This technology was initially developed for the space program, but accumulated production experience has allowed steady cost reductions.(107) Further cost reductions now hold the promise of technology competitiveness in many regions, such that every home could generate a substantial part of its electrical needs, and rural villages in developing countries could electrify without costly grid extensions.(108)

An important chracteristic of these technologies is that increasing production results in declining costs up to the point at which the technology becomes mature - witness the stunning decline in the cost of computers over the past decade.(109) This is opposite to what occurs with natural resources, which rise in price as the lowest cost sources are exhausted. The emerging substitution of technology for fossil fuels may be the most important and least noticed development in energy policy since 1973.(110)

A final major change over the last decade is the growing intersection of energy and environmental policy. Although there are still surprisingly few formal bureaucratic connections between the Environmental Protection Agency (EPA) and DOE (each has its own "voluntary" program for greenhouse gas emission reductions),(111) they are increasingly involved in overlapping issues such as acid rain(112) and global warming.(113) EPA's interest in pollution prevention has led to programs that include energy conservation and renewable energy as substitutes for fossil fuels.(114) For example, EPA developed the Green Lights program, which encourages companies to upgrade their lighting with more energy efficient technology, as a pollution prevention program.(115) In turn, DOE increasingly justifies its programs on the basis of environmental benefits under the banner of "sustainable development."(116)

IV. Conclusion

The issues facing DOE today are in some ways not much different from those of twenty years ago: identifying acceptable policy responses to increasing oil imports with limited technological options and numerous environmental constraints. The preferred policy options have evolved over that period in ways that mirror changing public attitudes toward large federal programs with ambitious goals. Such policies have gradually given way to a preference for more market-based approaches with less governmental direction.

The greatest change in the nature of the energy policy challenge since 1973 has arguably been the increasing influence of development by other nations and the concomitant loss of ability to control this country's destiny. The price of oil and buildup of greenhouse gases will be determined by the decisions of many nations that the U.S. has only a limited ability to influence.

Another critical constraint that has emerged in thinking about the future of the global energy system is time. The next two to three decades will put in place the basic infrastructure for much of the world's population; for example, eighty percent of the industrial capacity expected in Indonesia by the year 2010 has yet to be installed.(117) The consequences of short-term decisions are most evident with respect to the transportation sector; once in place, roads and urban development patterns are major determinants of energy consumption and are exceedingly difficult to transform.(118)

A difficulty lies in the long lags between the development of technology and its widespread dissemination. The technologies being developed today may not be commercially introduced for a decade.(119) Once introduced, it may be several decades before they achieve significant impact. Once in place, they may continue to be used for decades to come. Thus, there exists a surprisingly brief opportunity to influence the basic energy choices that will dominate the next century.(120)

The modest energy policy initiatives so far introduced by the Clinton Administration do not reflect any urgency about the implications of energy choices by developing nations.(121) However, the technology available to these countries will largely be determined by investments in the industrialized countries.(122)

The recent election of a Republican majority in Congress raises new questions about the likely future of U.S. energy policy. President Reagan's proposal for abolishing DOE has been discussed anew as part of a renewed emphasis on budget cutting.(123) On the other hand, some Republican leaders are strongly identified as supporters of particular fuels or energy technologies.(124) Conservatives consider some of President Clinton's energy programs to be thinly disguised industrial policies that merit elimination,(125) but Republicans are more likely to express support for continuing deregulation initiatives and giving the states greater latitude for experimentation. In short, despite the strong basic trends in policy apparent over the past two decades, the future of U.S. energy policy is as uncertain and unpredictable as ever.

Americans have been unable to support a strong national energy policy except in times of threatened shortage or war. As a consequence, a program born with the promise of energy independence has become a target for elimination.(126) We are moving closer than ever to the energy policy of "strategic reserves and strategic forces" envisioned by David Stockman. However, the underlying rationales for a national energy policy remain strong as recognized by virtually every other major industralized nation. These include the high dependence on imported oil in general and OPEC nations in particular; the close connection between energy and major environmental problems, especially air pollution and global warming; and the importance of energy in meeting development goals for the majority of the world's population. Moreover, our ability to address these issues is increasingly dependent on cooperation with other nations, which also requires national leadership.

Other nations have as of yet shown no inclination to abandon their national energy policies, including large gasoline taxes and strong support for clean technology.(127) If they are successful, we may look toward a future of imported clean technology as a substitute for imported dirty. fuels.(128) (1) Pub. L No. 83-703, 68 Stat. 919 (amending Atomic Energy Act of 1946, Pub. L. No. 79-724, 60 Stat. 755) (codified as amended at 42 U.S.C. [subsections] 2011-2297 (1988 & Supp. V 1993)). (2) David H. Davis, Energy Politics 105 (1993). (3) Exec. Order No. 11,930, 41 Fed. Reg. 32,397 (1976); see also Davis, supra note 2, at 105. (4) Davis, supra notes 2, at 105. (5) The allocation system contributed to shortages in many states, because the calculation favored states with substantial tourism prior to the boycott. The result was long gasoline lines in many parts of the country, adding to the sense of crisis. Id. at 105-06; see also Daniel Yergin, The Prize: The Epic Quest for Oil, Money and Power 613-25 (1991). (6) Davis, supra note 2, at 107. (7) Douglas R. Bohi & Joel Darmstadter, Twenty Years After the Energy Crisis: What Lessons Were Learned? 116 Resources 16, 16 (1994). (8) Richard M. Nixon, PUB. Papers 13 (Sept. 22, 1970). (9) Energy Policy and Conservation Act, 42 U.S.C. [sections] 6234 (1988); see Davis, supra note 2, at 113 (explaining that the SPR entailed pumping one billion barrels of crude oil into Louisiana's salt domes for emergency purposes); see generally Alfred A. Marcus, Controversial Issues in Energy Policy 38-45 (1992) (discussing the government's response to the 1973 oil embargo). (10) 42 U.S.C. [sections] 6201(5) (1998); see Davis, supra note 2, at 113 (noting that President Ford's Administration set efficiency standards aiming for 20 miles per gallon in 1980 and 28 in 1985). (11) 42 U.S.C. [sections] 6295 (1988). (12) The creation of the IEA was part of an overall U.S. strategy of working with other major oil-consuming nations and non-OPEC oil-producing nations (most notably the former Soviet Union, which the U.S. approached with a "barrels for bushels" proposal to exchange wheat for oil) to limit the threat presented by the emergence of OPEC as a major economic and political force. There were three basic strategies available to the West - conservation, alternative fuel development, and exploration of new sources of oil outside OPEC. The IEA provided a nonconfrontational framework for participating nations to pursue these strategies in their own ways. See Yergin, Supra note 5, at 643, 653-54. For example, after the 1979 oil embargo IEA members collectively agreed to reduce oil demand by two million barrels per day to help meet essential needs and hold down price increases. Terrence R. Fehner & Jack M. Holl, Department of Energy 1977-1994: A Summary of History 26 (1994); see also Davis, supra note 2, at 110 (noting that the IEA sought new sources, such as North Sea Oil, and new technologies, such as coal liquification). (13) The National Energy Act of 1978 is the generic name for the following five statutes: the Public Utility Regulatory Policies Act of 1978, Pub. L. No. 95-617, 92 Stat. 3117; the Energy Tax Act of 1978, Pub. L. No. 95-618, 92 Stat. 3174; the National Energy Conservation Policy Act, Pub. L. No. 95-619, 92 Stat. 3206; the Powerplant and Industrial Fuel Use Act of 1978, Pub. L. No. 95-620, 92 Stat. 3289; and the Natural Gas Policy Act of 1978, Pub. L. No. 95-621, 92 Stat. 3350. (14) Department of Energy, 42 U.S.C. [subsections] 7111-7112 (1988 & Supp. V 1993). (15) Jimmy Carter, Pub. Papers 1864 (Sept 22, 1980). (16) Energy policies to promote coal use were arguably partially offset by more stringent environmental policies adopted during the same period, including the Surface Mining Control Act, 30 U.S.C. [sections] 1201 (1988), and amendments to the Clean Air Act, 42 U.S.C. [subsections] 7401-7671 (1988 & Supp. V 1993), that restricted the use of tall stacks as a means of dispersing pollution. See Davis, supra note 2, at 39-57 (discussing the history of the relationship between government and the coal industry); see generally Larry McBride & John Pendergrass, Coal, in Sustainable Environmental Law: Integrating Natural Resource and Pollution. Abatement Law from Resources to Recovery 993 (Celia Campbell-Mohn et al. eds., 1993). (17) 42 U.S.C. [subsections] 8201-8286 (1988 & Supp. V 1993). (18) 16 U.S.C. [subsections] 2601-2645 (1988 & Supp. V 1993). (19) 40 C.F.R. [sections] 600.513 (1981). (20) Id. [sections] 600.513(a)(3). (21) Id. [sections] 600.513(a)(1). (22) Davis, supra note 2, at 157-58. (24) Piettro S. Nivola, Gridlocked or Gaining Ground? US. Regulatory Reform in the Energy Sector, Brookings Rev., Summer 1993, at 36-38. (25) Davis, supra note 2, at 118. (26) See id. at 119 (noting Carter's strategy of decontrolling oil prices to respond to unstable foreign supply). (27) Id. at 121; see National Energy Conservation Policy Act, Pub. 1. No. 95-619, [sections] 212(b)(1), 92 Stat. 3209 (1978). (28) Davis, supra note 2, at 122 (defining windfall profits as "the increased profits the oil companies would make as their selling price grew so much faster than their costs of production"). (29) Id. at 119. (30) President Carter proposed the Energy Mobilization Board as part of a package of national energy policy proposals in a July 15, 1979 address to the nation. Fehner & Holl, supra note 12, at 29-30. In a close vote, the House of Representatives defeated the proposal. See Alfred A. Marcus, Controversial Issues in Energy Policy 94-95 (1992). (31) Harvey Brooks, History as a Guide to the Future, in Uncertain Power: The struggle for a National Energy policy 219, 220 (Dorothy S. Zinberg ed., 1983). There was even some overlap in administrative leadership; Robert Seamans, Deputy Administrator of NASA during a critical research and development period, headed the Energy Research and Development Administration (precursor to DOE) when its major research priorities were established. (32) Office of Technology Assessment, Saving in U.S. Transportation 25-26 (1994) [hereinafter Saving Energy]; see also Dan McCosh, Emerging Technologies for the Supercar, Populare Sci., June 1994, at 95 (discussing ways to improve fuel economy through design refinements and technology improvements); John DeCicco & Marc Ross, Improving Automotive Efficiency, Sci. Am., Dec. 1994, at 52. (33) See generally Brooks, supra note 31, at 222-23. (34) See Davis, supra note 2, at 124-25 (noting that Japan and Europe use far less on per capita for passenger and freight transport). (35) See Curtis Moore & Alan Miller, Green Gold: Japan, Germany, the United States and the Race for Environmental Technology 101 (1994). Some analysts questioned why the SPR was not also identified as an unnecessary intrusion into the market because private companies are also perfectly capable of stockpiling oil. The rather ironic response was that companies would not do so out of fear that reserves would be commandered by government in time of need. Another notable exception to Reagan's anti-government stance was his support for federal subsidies to the nuclear power industry. Daniel Yergin, The Political Geology of the Energy Problem, in Uncertain Power, supra note 31, at 236; Linda R. Cohen & Roger G. Noll, The Technology Pork Barrel 217-58 (1991). (36) Fehner & Noll, supra note 12, at 34. "One week after his inauguration, President Reagan lifted remaining price and allocation controls on gasoline, propane, and crude oil, allowing domestic gasoline and off prices to seek free market levels." Id. This symbolic move served only to hasten the final deregulation originally scheduled for October 1, 1981. Franklin Tugwell, The Energy Crisis and the American Political Economy 129-30 (1988) (observing that at the time of Reagan's decision, all but 15% of crude on processed by American refineries had been decontrolled). (37) From 1970 to When the Synfuels program ended in 1984, cumulative federal expenditures were about $2 billion. See Cohen & Noll supra note 35, at 259-319. (38) James Watt, the first Secretary of the Department of Interior (DOI) under President Reagan, aggressively sought to expand domestic oil and gas leasing on public lands, but congressional opposition and court orders stymied many of his efforts. For example, of 41 sales of oil leases planned by DOI, fewer than 30 issued,- of 265 million acres offered, only 13 million were actually leased. Tugwell supra note 36, at 132-34. The most controversial actions involved proposed leases of off-shore off rights, typically opposed by state authorities and environments. See Natural Resources Defense Council, Inc. v. Hodel, 865 F.2d 288 (D.C. Cir. 1988) (requiring greater assessment of environmental effects); Commonwealth of Mass. v. Watt, 716 F.2d 946 (1st Cir. 1983) (finding a probable National Enviromnental Policy Act violation). (39) Nivola, supra note 24, at 38. (40) Id. (41) 15 U.S.C. [sections] 3301 (Supp. V 1993). (42) Nivola, supra note 24, at 38; see also Department of Energy, National Energy Strategy: Powerful Ideas For America 88-93 (1991) [hereinafter National Energy Strategy]. (43) National Energy Strategy, supra note 42, at 2. (44) Id. (45) Id. at 4. (46) 42 U.S.C. [sections] 13201 (Supp. V 1993). (47) Karl Hausker, Two Cheers for the Energy Policy Act!, Electricity J., Jan.-Feb. 1993, at 27-28; Nivola, supra note 24, at 40. (48) Keith L. Kozloff & Roger C. Dower, A New Power Base: Renewable Energy Policies for the Nineties and Beyond 138-39 (1993). (49) For example, O'Leary opened files on human testing done with radioactive materials. See Comment, The Buchenwald Touch, The Progressive, fEB. 1994, AT 8; Chip Brown, The Science Club Serves Its Country, Radiation Tests on Children in the 1950s, Esquire, Dec. 1994, at 122; Feds Admit Concealed Nuke Tests; 200 Weapons Trails, 800 Radiation Experiments Kept Mum, Houston Chron., Dec. 8, 1993, at A4. (50) For fiscal year 1995, the energy efficiency budget increased by about $101 million to $793 million, while the renewable energy budget increased by $64 million to $388 million. The total DOE budget is $17.5 billion. Energy Efficiency, Renewables Capture Larger Share of Shrinking DOE Budget, Alliance Update, Fall 1994, at 1; see also Department of Energy, The Domestic Natural Gas and Oil Initiative: Energy Leadership in the World Economy 2 (1993) [hereinafter Natural Gas and Oil]; Christopher Flavin & Nicholas Lenssen, Power Surge: Guide to the Coming Energy Revolution 302-03 (1994) (noting that 23 member countries of the IEA spent 85% of their total energy research and development budgets on nuclear energy and fossil fuels between 1978 and 1991). (51) See Office of Management & Budget, A Vision of Change for America 105 (1993) (proposing to tax all types of energy as measured in British Thermal Units); see also J. Andrew Hoerner & Frank Muller, The Impact of a Broad-based Energy Tax on the Competitiveness of U.S. Industry, NAT. Resources Tax Rev., July-Aug. 1993, at 428-58. (52) Hoerner & Muller, supra note 51, at 428. (53) Natural Gas and Oil, supra note 50, at 4. (54) Id. at 8 (listing advanced rock drilling as one technology slated for support). (55) Id. at 11 (supporting, for example, a study that reviews tax treatment of geologic and geophysical expenditures). (56) Id. at 10 (noting, for example, that DOE and state regulators will identify barriers to the use of natural gas vehicle). (57) Section 801 of the Department of Energy Organization Act, 42 U.S.C. [sections] 7321 (1988). requires the President to submit a National Energy Policy Plan to Congress every two years. No plan was submitted in 1993 due to the change in administration. The Bush Administration published its National Energy Strategy in 1991. See National Energy Strategy, supra note 42. (58) Department of Energy, National Energy Policy Plan Update 1-2 (1994). (59) Id. Numerous background papers were prepared as part of the process of public hearings and comment feeding into the Plan. There is even a National Energy Policy Plan Public Information Hotline, which can be reached via phone at (615) 241-2545, facsimile at (615) 241-3851, or the Internet at NEPP@ORAU.GOV. (60) Saving Energy, supra note 32, at 25-26. (61) William J. Clinton & Albert Gore, Jr., The Climate Change Action Plan (1993). (62) Report of the Intergovernmental Negotiating Committee for a Framework Convention on Climate Change on the Work of the Second Part of Its Fifth Session, 5th Sess., pt. 2, Annex 1, U.N. Doc. A/AC.237/18 (1992) reprinted in 31 I.L.M. 851 [hereinafter Framework Convention on Climate Change]. (63) Clinton & Gore, supra note 61; see generally Climate Action Report, Submission of the United States of America Under the United Nations Framework Convention on Climate Change (1994) [hereinafter Climate Action Report]. For an excellent overview of the convention's evolution, structure, and future prospects, see Daniel Bodansky, The United Nations Framework Convention on Climate Change: A Commentary, 18 Yale J. Int'l. 451 (1993). (64) The calculation of the relative greenhouse warming caused by different activities and their associated emissions is a complex subject The most recent and authoritative source is an international scientific consensus report by the Intergovernmental Panel on Climate Change (IPCC). Radiative Forcing of Climate Change: the 1994 Report of the Scientific Assessment Working Group of the IPCC (1994). The report gives the following estimates of increased radiative forcing (warming) from the most important greenhouse gases: carbon dioxide, 1.56 W m-2 (watts per square meter); methane, 0.5 W m-2; nitrogen oxides (NOx), halocarbons, and other gases, less than 0.45 W m-2. Id. at 5. Fossil fuels directly or indirectly cause most of the increase in carbon dioxide. The source of the increase in atmospheric concentrations of methane and NOx is less clearly known but is at least partly attributable to fossil fuels as web. For example, natural gas is essentially methane, so natural gas leaks and flaring are a source of methane emissions. Similarly, fossil fuel combustion produces NOx emissions. Id at 11, 18, 23; see generally Intergovernmental Panel On Climate Change, Climate Change: The IPCC Scientific Assessment 5-68 (1990). (65) Clinton & Gore, supra note 61. (66) Climate Action Report, supra note 63, at 83-90. (67) Id. (68) Id. at 90. (69) Flavin & Lenssen, supra note 50, at 240-66; see generally 8 Nat. Resources & Env't Winter 1994 (containing various articles discussing energy regulation and market competition). The pros and cons of deregulatory proposals and pertinent decisions at state and federal levels are also featured in the Electricity Journal. One of the most controversial issues is that open markets for electricity with result in "stranded investment" - generating equipment currently worth tens of billions of dollars that has to be written off because it will not be competitive. Kennedy P. Maize, Stranded Investment - $300 Billion Anchor, or `Tonya Harding' Issue, Electricity J., Mar. 1994, at 17-19. (70) Nivola, supra note 24, at 41; The Energy Policy for the Hydrogen Future Act of 1995: Hearing Before the House Comm. on Science, 104th Cong., 1st Sess. 3 (1995) (testimony of Robert H. Williams, Senior Research Scientist, Center for Energy and Environmental Studies) [hereinafter Energy Policy Hearing]. (71) Natural Gas And Oil, supra note 50, at 3; see also Flavin & Lenssen, supra note 50, at 44-49; see generally James J. MacKenzie, Why We Need A National Energy Policy (1990). (72) Brooks, supra note 31, at 235. (73) Energy Policy Hearing, supra note 70, at 3 (testimony of Robert H. Williams). (74) Natural Gas And Oil, supra note 50, at 3. (75) Id. Japan and most European nations import a higher percentage of their off but consume much less per capita for passenger transport and per unit of Gross National Product (GNP) for freight transport. Saving Energy, supra note 32, at 124-25. (76) MacKenzie, supra note 71, at 3. (77) Moore & Miller, Supra note 32, at 103. (78) Saving Energy, supra note 32, at 123. (79) James J. MacKenzie, The Keys To The Car: Electric And Hydrogen Vehicles For The 21st Century 5 (1994). (80) MacKenzie, supra note 71, at 3. (81) Energy Policy Hearing, supra note 70, at 3 (testimony of Robert H. Williams). (82) MacKenzie, supra note 71, at 3. (83) Lee Schipper et al., Linking Life-Styles and Energy Use: A Matter of Time? 14 Ann. Rev. Energy 273, 276-78 (1989); see also Loren Lutzenhiser, Social and Behavioral Aspects of Energy Use, 18 Ann. Rev. Energy 247 (1993) (discussing role of behavioral factors in energy analysis). Some environmentalists urge that environmental policy focus more directly on individual behavior and perhaps incorporate some concept of consumption limits. See, e.g., Alan T. Durning, How Much Is Enough?: The Consumer Society And The Future Of The Earth (1992); Union of Concerned Scientists, U.S. Consumption and the Environment (1994). The difficulties facing even modest efforts to focus on individual behavior are illustrated by the response to a DOE project begun to explore public relations strategies that might improve public acceptance of alternative fuels. The plan drew an irate reaction from the American Petroleum Institute. See Cindy Skrzycki, How the DOE Produced Spontaneous Combustion, Wash. Post, Oct. 28, 1994, at D1. (84) Henry C. Kelly et al., Energy Use and Productivity: Current Trends and Policy Implications, 14 Ann. Rev. Energy 321 (1989). (85) Id. (86) Id. at 322. (87) Id. at 321-22. (88) Id. at 333. (89) The decline in energy intensity was most significant between 1973 and about 1986; since that time, the trend has leveled off in the United States and other industrialized countries. Notably, energy prices during this period also leveled off or declined in real terms. Office of Technology Assessment, Industrial Energy Efficiency 11 (1993). A recent detailed global energy study concludes that "[a]veraged over all sectors ... the net decline [in energy intensity] will likely be much smaller than that which occurred before 1985 and is unlikely to keep pace with the pressure on energy demand from rising activity." Lee Schipper et al., World Energy: Building a Sustainable Future 3 (1992); see also World Energy Council, Energy for Tomorrow's World 39-86 (1993). (90) Estimates of developing country energy use growth rates vary depending on the comparison period, the included nations, and (for future projects) the assumptions made about economic growth and energy intensity. From 1973 to 1988, energy growth in developing countries averaged 5.4% (excluding Eastern Europe and the former Soviet Union). Mark D. Levine et al., Energy Efficiency, Developing Nations, and Eastern Europe 11 (1991). Commercial energy consumption in the developing nations should triple over the next 30 years. Office of Technology Assessment, Fueling Development: Energy Technologies for Developing Countries 3 (1992). (91) Flavin & Lenssen, supra note 50, at 44-46. (92) See Office of Technology Assessment, Climate Treaties and Models: Issues in the International Management of Climate Change 6-7 (1994). (93) The challenge of global warming has important economic and political dimensions. for avoid a long-term increase in carbon dioxide concentrations, developing nations with much faster energy growth rates must be induced to implement technologies being developed in the already industrialized countries. Such technologies are likely to cost more, at least initially, and developing nations see no reason to delay their economic development because of a problem almost entirely due to economic benefits gained by the developed nations. Thus, industrialized nations must develop new technologies and pay most if not all the added costs of emission reductions in developing nations. One modest step in that direction is the designation of a financial mechanism in the Climate Convention, the Global Environmental Facility. A second potentially relevant concept in the Convention is "joint implementation," the possibility of greenhouse gas emissions trading so that industrialized nations might transfer technology to developing nations as part of a commitment to meeting their obligations as industrialized nations. See generally Bodansky, supra note 63, at 520-23; David G. Victor & Julian E. Salt, From Rio to Bertin: Managing Climate Change, Env't, Dec. 1994, at 6. (94) For a definition and detailed discussion, see Howard Geller & Steve Nadel, Market Trnsformation Strategies to Promote End-Use Efficiency, 19 Ann. Rev. Energy 301 (1994). (95) 16 U.S.C. [subsection] 2601-2645 (1988 & Supp. V 1993). (96) 42 U.S.C. [subsection] 7401-7642 1988 & Supp. V 1993). (97) See generally Framework Convention on Climate Change, supra note 62. (98) Flavin & Lenssen, supra note 50, at 251-56. (99) Id. at 253; see also Stephen Wiel, Making Electric Efficiency Profitable, Pub. Until. Fort., July 6, 1989, at 9, 13-15; David H. Moskovitz, Profits and Progress Through Least-Cost Planning, 15 Ann. Rev. Energy 399, 414-15 (1990). (100) Wiel, supra note 99, at 15. (101) Office of Technology Assessment, U.S. Congress, Building Energy Efficiency 109-13 (1992). (102) See id. (103) This process was part of the government's efforts to identify politically acceptable measures that will reduce greenhouse gas emissions in compliance with the Framework Convention on Climate Change. See CLIMATE Action Report, supra note 63, at 191 (noting that "[t]he committee will make recommendations in mid-1995 on policies that would, if adopted, lead to consensus on cost-effective returns to 1990 levels of greenhouse gas emissions from personal motor vehicles by the years 2005, 2015, and 2025, with no upturn thereafter"). (104) Flavin & Lenssen, Supra note 50, at 121 (wind), 137-38 (solar heating), 157-61 (photovoltaics for off-grid applications), 180 (power generation by combustion of plants). (105) Id. at 121; Lester R. Brown et al., Vital Signs 1995 at 54-55 (1995). (106) Energy Policy Hearing, supra note 70, at 3 (testimony of Robert H. Williams). (107) Brown Et Al, supra note 105, at 56. (108) Flavin & LENSSEN, Supra note 50, at 157-60. (109) Id. at 152-73. (110) Id. at 21-23. (111) DOE administers the Climate Challenge, a program directed toward promoting voluntary commitments by electric utilities to reduce their emissions of greenhouse gases. DOE also has a voluntary program, to promote the use of more efficient electric cars, called the Motor Challenge. EPA has its own voluntary programs including Green Lights (more efficient lighting), Energy Star Buildings (more efficient buildings), and Energy Star Transformers. The two agencies jointly developed Climate-Wise Companies, directed toward industry more generally. See generally Clinton & Gore, supra note 61. (112) The implementation of the acid rain program is primarily EPA's responsibility, but DOE and state utility regulatory agencies have had significant roles as well. See Robert W. Hahn & Carol A. May, The Behavior of the Allowance Market: Theory and Evidence, 7 Electricity J. 28 (1994); see also Marc Smolonsky et al., a1994 Annual Review of the U.S. Environmental Protection Agency 35-36 (1994) (noting that DOE objections delayed EPA regulations on NOx emissions from coal-fired electric utility boilers). (113) See supra note 111. (114) Atmospheric Pollution Prevention Div., U.S. Envtl. Protection Agency, 1994 Accomplishments and Prospects for 1995 (1994). (115) Id. at 2-5. (116) See generally Fehner & Holl, supra note 12, at 84-87. (117) George R. Heaton, Jr. et al., Missing Links: Technology and Environmental Improvement in the Industrializing World 1 (1994) (citing The World Bank, Indonesia's Environment and Development: Challenges for the Future (1994)). (118) Per capita travel tends to be low and use of public transportation systems high in cities with high residential densities (12 persons per acre), a strong central core, and a mixing of residential and commercial land uses. These factors are in turn influenced by numerous policy choices, such as subsidies for roadbuilding and mass transit, land use planning, and parking regulations. Saving Energy supra note 32, at 22-23, 199-212. (119) The Clinton Administration has identified the gap between technology development and commercialization as a major barrier to the success of important new technologies. Government support is greatest for research and development - the technology development end - and industry involvement is most effective at the opposite end, when new technologies are commercialized However, in between there is often a missing link in the demonstration, testing, and evaluation of new technologies sufficient to satisfy private investors. National Science and Technology Council, Technology for a Sustainable Future 50-53, 61-65 (1994). Several technologies with major environmental benefits, including selective catalytic reduction and fuel cells, were originally developed in the United States but partly or entirely sold to foreign investors in countries with more stringent environmental regulations or with greater national support for technology development. Moore & Miller, supra note 35, at 141-75. (120) See J.P. Holdren & R.K. Pachauri, Energy, in an Agenda of Science for Environment and Development into the 21st Century 103-18 (1992). (121) The timing of energy investments, in developing nations is an important but inadequately appreciated issue. The largest developing nations, such as Brazil, India, and China, have rapidly growing economies and energy sectors. See Office of Technology Assessment, supra note 90, at 3. These rapid growth rates will continue for roughly the next two decades but are expected to moderate thereafter, when basic infrastructure Investments (such as roads, powerplants, and sewage systems) will decline as a portion of total investment. See Robert C. Means & Alan S. Miller, Limiting United States Carbon Dioxide Emissions: Implications of the Goal 63-67 (1995) (unpublished working paper, Center for Global Change) (on file with author). (122) Most technology used in developing countries is purchased from industrialized countries; exports from developing nations have a much greater proportion of basic commodities. Brown et al., supra note 105, at 74. One important influence on the rate of energy growth in developing nations is therefore the extent to which these nations obtain the newest and most efficient equipment rather than older (and usually much less expensive) alternatives. The direct adoption of the best equipment would allow for what has been termed "leapfrogging," in that intermediate stages of moderate improvements in efficiency could be skipped over. Office of Technology Assessment, supra note 90, at 32-33. (123) GOP Freshmen in House Push for Abolition of Agencies, Including DOE, Inside Energy with Federal Lands, Feb. 20,1995, at 13; Kathleen Hart, DOE Critics Decry Proposal to Eliminate Department, Nucleonics Week, Sept. 15 1994, available in WESTLAW, Allnews Library, File No. 1994 WL 2714407. (124) Representative Richard K Armey (R-Tex.), the House Majority Leader, is an outspoken advocate of greater support of the domestic oil industry. Representative Robert S. Walker (R-pa.), the new chair of the House Science Committee, has a longstanding interest in the development of technologies for producing and using hydrogen as an energy source. (125) See, e.g., Michael McKenna, Power Failure. Let's Pull the Plug on Federal Energy Programs, Pol'y Rev., Winter 1994, at 81 arguing that Clinton's energy policies are justified (126) Proposals to eliminate DOE would shift many of its functions to other agencies, including several of its largest budget components - nuclear weapons development, nuclear waste cleanup, management of a nuclear waste repository, and management of the Strategic Petroleum Reserve. Together these items constitute almost @fourths of DOE's 1995 fiscal year budget request of over $18 billion. Fehner & Holl, supra note 12, at 141. (127) See Brown et al., supra note 105, at 5&56 (discussing rapid growth in renewable energy installations in Europe and Japan). (128) See generally Moore & Miller, supra note 35 discussing the possibility of importing clean technologies).
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Title Annotation:Symposium on Clinton's New Land Policies
Author:Miller, Alan S.
Publication:Environmental Law
Date:Jun 22, 1995
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