Oil for the Lamps of Reagan

By Julie Connelly

A new breed of advisers will push for more production

Ronald Reagan has some good energy news to greet him next month when he takes office. Americans are now using less fuel. Each American this year will use up an estimated 350 million B.T.U.s of energy (the equivalent of 60.3 bbl. of oil), as compared with 358 million in 1979. In addition, the U.S. so far this year has been importing 19.4% less foreign oil than in 1979. Domestic drilling activity is also at an alltime high, as wildcatters dig wells in the prairies of Wyoming and off the coast of Alaska.

The President-elect, though, also faces a darker side of the energy situation. Total U.S. crude oil consumption this year is about 16.8 million bbl. per day, and 6.7 million bbl. of that is imported. Despite their heavy drilling, oilmen are finding fewer gushers. By 1990, U.S. oil production will have diminished by about 20% from current levels. Thus, the U.S. will continue for most of the decade to be vulnerable to Middle East petroleum cutoffs and exorbitant OPEC price demands.

The energy philosophy of the outgoing Carter Administration and that of the new Reagan team do not vary greatly. Underlying both approaches is a desire to find and tap more domestic fuel sources. But the programs of the two administrations are likely to be very different in degree and pace. Reagan has already indicated that he will pursue the goal of increasing domestic energy production, especially of oil and gas, much more aggressively than Jimmy Carter.

The President-elect has a long commitment to the concepts that the U.S. will have to produce, rather than conserve, its way to energy sufficiency and that the free market, rather than the Federal Government, should play the main role in developing future energy sources. "I would get the Government out of the energy industry and turn oilmen loose in the marketplace," Reagan told campaign rallies. The new Administration, therefore, expects to emphasize production by decontrolling natural gas prices before 1985, when controls are due to languish anyway, and to maintain the timetable set up by the Carter Administration for phasing out oil price regulations by the fall of 1981. Reagan has also indicated that he would open up federal wilderness areas of Alaska and more offshore land for exploration and drilling.

The policy advisers around Reagan are very different from those who surrounded Carter. Environmentalists and consumer advocates have been replaced by oil company executives and geologists. Reagan's main cicerone through the tangled thicket of energy policy is Michel Halbouty, 71, an unpolished and sometimes profane wildcatter who looks like the suave character actor Vincent Price. Reagan last August appointed the feisty critic of government regulation as chairman of his Energy Policy Task Force. Since then, Halbouty has been able to recruit an impressive roster of corporate chieftains from Shell Oil, Standard Oil of California and Du Pont to serve with him.

Halbouty's task force wrote a report on energy that was sent to Reagan the day after the election. It charged that the Carter energy program was designed to impede production and curtail consumption. Said the report: "Instead of unleashing the resources of a wealthy nation, we have, in the name of saving energy for some unspecified future time, tucked energy away like a rare bottle of wine." The Halbouty study contended that the U.S. can produce as much oil and gas in the future as it has in its entire history. The report claimed that there is more oil in one area of potential shale production than has been discovered in all the Middle East. The group, though, failed to say where that bonanza is located. They also pointed out that the U.S. has 60 times more coal than oil, 40 times more coal than natural gas, and is still the world leader in most energy technologies.

Reagan has not yet decided on many key details of his energy program, including how to restructure the Department of Energy and whether to cut back the $20 billion synfuel development program. When he does, he will find a fairly cooperative Congress eager to study his proposals. The Republican-dominated Senate is likely to revise some pollution regulations and to open up more public lands to coal mining and oil exploration. Republicans also have an ideological majority in the House, where 40 Southern Democrats often vote with them on energy issues. Nonetheless, a few of the more controversial aspects of the report, like the speedier licensing of nuclear plants and the rapid construction of nuclear waste dumping facilities, may face strong opposition.

The oil industry, which has some of the most skilled lobbyists in Washington, is not expecting quick legislative changes during a Reagan Administration. But it is looking forward to better relations with the federal energy bureaucracy. Says one oilman: "We will at least be moving away from the days when the participants in Earth Day became assistant secretaries at the Department of the Interior."

Even with a shift in atmosphere, President Reagan is likely to find himself in the same narrow valley of limited options that Carter experienced. Already before the election, the Californian was forced to back off from some of his more controversial energy stands. He stopped insisting that the nation could solve its fuel problems in five years, and he began to talk about disciplining, rather than disbanding the Department of Energy. His criticism of the $227 billion windfall profits tax on oil companies became tempered after aides realized that he would need those tax revenues if he wanted to cut personal income taxes, accelerate business depreciation and increase defense spending. The political and economic trade-offs of presidential policymaking are about to become an important factor in energy policy.

--By Julie Connelly. Reported by Jeanne Sadler/Washington and Jacqueline Schmeal/Houston

With reporting by Jeanne Sadler/Washington, Jacqueline Schmeal/Houston

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