Energy Policy from Nixon to Clinton: From Grand Provider to Market Facilitator

Article excerpt

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. …