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Wimping Out On Energy?


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WIMPING OUT ON ENERGY?

It would seem to be the perfect time for a full-fledged debate on a national energy policy. Some 500,000 U. S. troops are fighting a war that is largely about oil. The public is as concerned as it has ever been about long-term environmental issues--from global warming to massive oil spills. Meanwhile, volatile energy prices have taken motorists on a roller-coaster ride and helped send some U. S. airlines into bankruptcy.

Yet President Bush is about to propose a long-awaited National Energy Strategy built mainly around the status quo. He will toss in a few proposals to increase domestic oil production, such as opening Alaska's Arctic National Wildlife Refuge (ANWR) and expanding exploration in the Outer Continental Shelf (OCS). He will offer some encouragement for nuclear plants, hydropower, and natural gas. And he will shun conservation measures, such as fuel taxes, that could inflict the slightest pain on the public.

'BIRTHRIGHT.' For the most part, former Texas oilman Bush simply wants markets to control energy price and supply. And as long as prices are relatively low and supplies plentiful, that seems to suit voters. A recent Union of Concerned Scientists/Alliance to Save Energy poll shows that 60% of Americans oppose a phased-in, 50~-a-gallon gasoline tax earmarked for an environmental trust fund. "Americans regard cheap gasoline as a birthright," observes Robert Ebel, vice-president at Dallas energy company Enserch Corp.The Administration's 10-watt proposal is based on a year of hearings by Energy Dept. officials, who traveled to 48 states, called 448 witnesses, and pored over more than 200,000 pages of documents. But the U. S. is already home to two-thirds of the world's approximately 900,000 producing wells. And the country is so picked over that a production-oriented policy will do precious little to reduce dependence on imported oil--which averaged 50% of U. S. consumption before Iraq's Aug. 2 invasion of Kuwait. "It just doesn't look like there's that much oil to be found in the U. S," says Marion B. Stewart, an energy economist at National Economic Research Associates Inc. in White Plains, N. Y.

When the strategy is sent to Congress in late February, it will join a raft of rival proposals already in the hopper--sparking a bruising lobbying battle that will pit oil producers and nuclear power advocates against environmentalists, who seek a far greater emphasis on conservation.

A divided Congress, like the fractious Administration, may end up doing little. Energy Secretary James D. Watkins pushed hard for a sweeping national policy that would have combined production measures with proposals to curb consumption--such as efficiency standards for electric lights. But Watkins was overruled by key White House officials. Chief of Staff John H. Sununu, Budget Director Richard G. Darman, and Council of Economic Advisers Chairman Michael J. Boskin believe that programs that raise costs to consumers will slow an economy already mired in recession.

Yet people will stop guzzling oil only if their pocketbooks are squeezed. Congressional tax experts reckon it would take a politically lethal gas-tax hike of at least 50~ a gallon to slash demand and push drivers to more energy-efficient cars.

It's a similar story with production. Even if the import oil could be reduced for a while, "higher and more stable prices are required to make an old province like the U. S. attractive," notes Bob Benner, manager of business analysis for independent producer Oryx Energy Co. Many independents, who can't afford a piece of the ANWR action, want the feds to ensure stability by setting a floor on domestic prices--at, say, $25 a barrel. But a subsidy, or a tax on imported crude that keeps U. S. oil competitive, isn't palatable to Bush. "It makes no sense to spend large sums to displace imported energy," says the Economic Report of the President released on Feb. 12.

CRUDE FOCUS. The Administration's energy strategy isn't hinged solely on oil. It would ease licensing procedures for nuclear plants and cut red tape for hydroelectric facilities. It would also reduce restrictions on building natural-gas pipelines. But the strategy's focus is clearly on crude. The most important provisions, opening ANWR to exploration and expanding access to the OCS, infuriate environmentalists. Yet even these proposals show the strategy's limits. The Interior Dept. figures ANWR may hold 3.6 billion barrels of oil recoverable at $28 a barrel. That's about a third the size of Alaska's Prudhoe Bay field--which is dwindling after just 13 years of production--and won't long curb the import needs of a nation that consumes as much as 17.3 million barrels a day.Conservationists insist the best way to curb imports is to cut demand. But a draft of the Administration strategy holds few eptions on this front. It encourages the use of natural gas and other alternative fuels in cars, including corporate fleets. But other conservation measures ran afoul of the Office of Management & Budget. Those options, still heatedly debated in the Administration, would grant tax credits for electricity generated from renewable sources, exempt energy-efficiency rebates from income taxes, and set up a fund to curb energy use in federal buildings (table). Some of these options may yet emerge when the legislation is sent to Congress.

Perhaps the most popular conservation plan is one the White House isn't going to propose--setting higher Corporate Average Fuel Economy (CAFE) standards for autos. Toughening these standards has broad Democratic support on Capitol Hill and will likely be part of any energy bill adopted by Congress, say House aides. In fact, last year, a Senate majority supported a bill pushed by Senator Richard Bryan (D-Nev.) to raise the current 27.5 mpg standard 40% by 2001, but a Republican filibuster killed the measure. Bryan's bill would have saved some 2.5 million barrels of oil a day by 2005. But auto makers say meeting such standards could lead to lighter cars and more highway fatalities.

'CARTE BLANCHE.' The two senior members of the Senate Energy & Natural Resources Committee are seeking a compromise that would appeal to each of the warring factions. Senators J. Bennett Johnston (D-La.) and Malcolm Wallop (R-Wyo.) have introduced a bill that would help producers by opening up the ANWR and permitting new offshore drilling. But the lawmakers are trying to appease conservationists by calling on the Transportation Secretary to set tougher CAFE standards--without setting specific targets. Still, environmentalists aren't satisfied. "It gives the Transportation Dept. carte blanche to do nothing," says Charles Mendler, an analyst for the liberal Energy Conservation Coalition.

As guns blaze in the Persian Gulf, the Johnston-Wallop proposal and the President's competing plan will trigger a much-needed debate over national energy strategy. But oil still is flowing freely around $20 a barrel, even in the midst of the "mother of all battles." And without gasoline lines or higher fuel prices, it may prove impossible for politicians to persuade voters that the country needs a serious national energy strategy.

ENERGY CONSERVATION MEASURES

NOW IN DISPUTE

Mandating a 40% rise in corporate average

fuel economy standards for carmakers

ESTIMATED SAVINGS:

2.5 million barrels of oil a day by 2005

Establishing an energy conservation standard for electric lights

ESTIMATED SAVINGS:

Approximately $800 million per year

Exempting energy efficiency rebates given by public utilities from taxation

ESTIMATED SAVINGS:

7 billion to 10 billion kilowatt hours per year

Granting tax credits for electricity produced by such renewable sources as solar thermal, geothermal, wind, photovoltaic, or biomass methods

ESTIMATED SAVINGS:

630,000 barrels of oil per day by 2000

Creating a fund to finance energy efficiency programs for federal facilities

ESTIMATED SAVINGS:

$1.5 billion over 10 years

DATA: ENERGY DEPT., ALLIANCE TO SAVE ENERGY, BWPeter Hong and Howard Gleckman, with Tim Smart, in Washington, and Robert Buderi in New York


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