A Bit of Good Energy News

The President's program makes progress, but more action may be needed

For Jimmy Carter, happy news on energy is about as rare as a drunk at Sunday school. But now from Congress come some welcome tidings to mix with all the bad reports out of Iran and the other oil-producing countries. The key energy recommendations made after the President's eleven-day retreat at Camp David last July should be signed into law within a few weeks. While this action will not forestall another price increase when OPEC meets next month in Caracas, it represents the most serious step taken to deal with the nation's energy woes since the oil crisis exploded in 1973.

The House and Senate have already passed by large margins two of the three major Carter recommendations, and will soon begin working out minor differences before sending the legislation to the White House. One act would create an Energy Mobilization Board, which would be able to bulldoze through bureaucratic red tape, legal roadblocks and laws, like the Clean Air Act, that now delay refineries, pipelines and other energy projects. The board would have the power to make some decisions for federal, state or local agencies that were delaying needed developments. The House-passed bill goes further than Carter proposed and gives the board power even to overturn federal laws, although state and local ones remain outside its domain, Arizona Democrat Morris Udall and other Capitol Hill environmentalists feared that the new agency might repeal two decades of antipollution crusades. But a strong coalition demanding an end to energy delays resisted substantial weakening of the new body's authority.

On the other hand, Congress has decided to go more slowly than the President wanted in developing synthetic gas or oil from coal, shale and tar sands. In July Carter suggested spending $88 billion over the next decade to build some 40 synthetic fuel plants. But three Senate consultants concluded that such a program would be too much, too fast, and waste billions of dollars. As a result, the Senate this month passed a more modest $20 billion bill that will offer loans and price guarantees over the next five years to private companies to open perhaps a dozen commercial synthetic fuel plants. The House passed a smaller synfuels program in early summer but is expected to accept the Senate's larger bill with minor reservations. In 1985 Congress will re-examine synthetic fuel development and decide whether the new technology's progress merits the additional $68 billion investment that Carter proposed.

With the two bills now virtually wrapped up, the Senate also began debate last week on the toughest Carter proposal: a new tax on extra profits that U.S oil companies could make from OPEC price increases. Because the price of American petroleum has been controlled by Washington since 1973, most domestic oil sells for only about half as much as OPEC crude. To encourage both conservation and exploration, the President proposed raising U.S. prices to world levels. But he linked that measure to an additional 50% tax on the oil companies' so-called windfall profits. Under Carter's recommendation, energy companies would pay $291 billion in extra taxes over the next decade.

Last summer the House easily passed a bill very close to the President's request. But oil producers traditionally have more friends in the Senate than in the House, and the Senate is debating a bill passed by its Finance Committee that would levy "only" $138 billion in new taxes. Administration lobbyists are now trying to increase the bite on energy companies to $242 billion. A new report from the Congressional Budget Office, headed by Democratic Economist Alice Rivhn, concluded that such action would enrich the Treasury but result in less oil for the country. The study showed that domestic oil production in 1990 under the tough House tax would be 7.1 million bbl. per day, while it would be 7.6 million with the lighter Senate bill and 7.9 million with no tax at all. Lower taxes encourage more drilling by offering the incentive of a larger jackpot to wildcatters finding oil or gas.

Although he philosophically opposes any windfall levy, Louisiana's Russell Long, the Finance Committee chairman who is the floor leader of the Senate debate, says the tax is the political cost that the energy industry must pay in order to end crude oil controls. Long, who himself has extensive oil holdings, argues further that the nation can no longer afford a witch hunt against the petroleum companies. Last week he told a cheering Manhattan meeting of energy producers: "Those who defame us, curse us, abuse us and lie about us, would be in one hell of a fix without us." The Senate is expected to pass a windfall profits tax in early December, probably about $200 billion, and the final bill should be ready for the President's signature by Christmas.

The Iranian oil cutoff and ever higher OPEC prices have raised the possibility of still further energy action. "It is clear that we must embark on new initiatives in all sectors and rethink what is possible," says Deputy Energy Secretary John Sawhill. He adds that the Administration is considering ways to boost gasohol production, force utilities to use more coal and other oil conservation measures. Such proposals would save as much as 600,000 bbl. of oil per day; up to now, the U.S. has been importing some 700.000 bbl. daily from Iran.

Both the Administration and Congress remain reluctant to roll out the two Big Berthas of energy conservation: a stiff new gasoline tax and rationing. The White House so far has not supported the proposal by Anti-Inflation Adviser Alfred Kahn for a 50-c- per gal. tax. Even Connecticut Democrat Toby Moffett, a former rationing advocate, now concludes that that step "should be the last resort." But if plaintive appeals from Washington to "drive three miles a day less" go unheeded, the nation may be forced to begin considering such Stygian last resorts.

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