Power Outage

June 5, 2001 • Commentary

Having charged during the campaign that years of neglect by the Clinton administration severely damaged the energy economy, President Bush has offered a “comprehensive national energy strategy” to cure our nation’s energy ills. To be sure, the Bush administration has brought to the debate the long‐​neglected truth that government policies can aggravate energy problems. Unfortunately, the administration proposes to do little to about it.

Perhaps the worst of the report’s many sins is its failure to provide a coherent, convincing demonstration that bad governmental policy is a problem. In fact, the report fails to make a coherent, convincing statement of anything at all. Dozens of proposals are made with little justification beyond “seems like a good idea to us.” The second sin is that the report promises more than can be delivered. For instance, the administration argues that increased domestic oil production will protect us from OPEC price manipulation, ignoring the basic fact that a cut in cartel production drives up the price of West Texas crude just as surely as it does the price of Kuwaiti crude.

The real case for increasing domestic production is that some undeveloped energy fields in the United States might be competitive with imports. The one good thing about this energy plan is its call to open up some of those fields for development.

The evidence is overwhelming that oil and gas production is one of the least environmentally damaging ways to get energy. The hysterical attacks against drilling in the Arctic National Wildlife Refuge are little but recycled attacks launched three decades ago against development at nearby Prudhoe Bay. However, environmental impacts there have been minimal. For instance, there were about 5,000 caribou on the North Slope of Alaska when drilling began there. Today, there are 23,000. Offshore oil development and drilling in the lower 48 states — including, as The New York Times recently reported, in wildlife refuges — involves even fewer problems.

Overpromising is also rife in the plan’s call to streamline federal regulations affecting the pipeline and refining industries, to remove unnecessary barriers to nuclear power plant investment, and to eliminate antiquated restrictions on how public utilities may organize. While these initiatives are indeed salutary, it’s unclear whether they’ll accomplish much. Excessively burdensome federal regulations can have only modest impacts on the supply of energy.

The energy plan’s third sin is its enthusiastic embrace of ideas that range from the patently silly to the patently bad. Of the many examples of the former, my favorite is the call for energy companies to engage in public service advertising about key energy issues. Perhaps the administration is too busy appearing on television to catch the half‐​baked issue ads already filling the airwaves.

Unfortunately, the bad ideas are legion. Although you wouldn’t know it from the media coverage, the report urges increased subsidies for energy conservation and federal prohibitions on existing appliances deemed too energy inefficient. The plan likewise hints at tightening federal standards for automobile fuel efficiency, which amounts to a backdoor tax on large cars, SUVs and minivans. Every form of “alternative” energy is slated for a subsidy or tax break despite a 20‐​year record of failure. The beneficiaries include combined heat and electricity ventures, new types of motor vehicles and roadways, clean coal technology (one of the longest running white elephants on the books), renewable energy such as wind and biomass, and hydrogen.

Worse, these proposals come complete with 1970s‐​style assertions that consumers cannot properly evaluate energy options without federal guidance. This is hardly the trust of the American people on which Bush campaigned.

Curious environmental initiatives are likewise proposed. Sulfur dioxide, nitrogen oxides, and mercury emissions from power plans are identified as major concerns. Yet the first two are already extensively controlled and the third was previously considered one of a group of minor pollutants.

Just to make sure that virtually all conservative principles are duly violated, the plan argues for granting the federal government the power to use eminent domain to force the construction of new power lines. The administration hardly bothers to argue why stimulus is needed or why this power should be taken from the states, and doesn’t recognize, let alone treat, the property rights issues involved. The report also contains a confused mass of international policy proposals that mostly call for facilitating free trade in energy. Of course, these otherwise reasonable instincts clash with the administration’s high decibel drumbeat against oil imports. The report also rightly calls for a re‐ evaluation of trade embargoes and other sanctions against rogue oil‐​producing countries. The administration is correct to question whether such plans ever have or ever will work.

On the down side, America’s long term but counterproductive love of government oil stockpiles inspires seven suggestions to strengthen the program. Private stocks, which are crowded out by these programs, remain a feasible and preferable option. The administration also calls for a more serious dialog between oil‐ producing and oil‐​consuming nations. Years of experience, however, make clear that nothing useful can come from such talks. The problem is simple: OPEC is in the business of restricting output to raise prices. Rivalry both inside and outside of OPEC is the only preventative.

Finally, the report advocates specific pipeline projects for the Caspian region. This extends to other countries the report’s tendency to intervene in areas in which private enterprise has proved preferable to government intervention. Where is the promised scaling back of international involvement?

Given that the Bush administration initiated the study of energy, it had freedom to set priorities. The “comprehensive national energy plan” fails on that front. To make matters worse, experience suggests that the bad ideas incorporated in this report are more likely to be enacted than the good. Better the administration had never bothered with this effort in the first place.

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