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Energy Policy PA 395 US History Gary Flomenhoft http://www.uvm.edu/~gflomenh/ENRG-POL-PA395/

Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

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Page 1: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Energy Policy PA 395US History

Gary Flomenhofthttp://www.uvm.edu/~gflomenh/ENRG-POL-PA395/

Page 2: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Stagliano Chapter One

Page 3: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

P282 “Few words so innocently incorporate into their basic meaning as much simplifying illusion as does the word policy.” -Cordell Moore

“In theory, the making of national policy seeks to redress social ills, remedy economic inefficiencies, provide prudent access to natural resources, and generally transform a multiplicity of special interests into some common good. Policy, however, is made by men and women whose deliberations are driven by political passion and human frailty. Policymaking embraces the maker’s relative skill in the exercise of power, personal standing in the hierarchy of authority and the need to temper the highly desirable with the politically feasible.” -Vito A. Stagliano

Page 4: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Roosevelt-Rise of energy bureaucracy

Natl. Resources Board 1934-Natl. resources planning Board

New Deal:TVA-1933 Tenn Valley Authority-“hotbed of communism”BPA-Bonneville Power AdminCACVP-Ca Central Valley Project

1935-Federal Power Act (FPC)1938-Natl Gas Act

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RooseveltOil Policy controlled by Oil companiesInterstate Oil Compact CommissionConnolly Hot Oil Act of 1935-production quotas

WWII-possible oil shortageIckes authorized to buy and sell foreign oilInterior Dept. authorized to control domestic prices of oil products, ration supplies, and allocate production to defense and civilian useOil=strategic asset therefore govt. has a duty to be engaged.

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Truman

1946 Atomic Energy commission-civilian not military Agency. Tool in the cold war demonstrating superiorityOf US system.Anti-trust vs Oil companiesSynthetic fuels first funded

Anglo-Iranian Oil Co.- Iran wage disputeGot anti-trust immunity to deal with it.Interior Dept. created foreign Petroleum supply committee

FTC investigation, Justice Dept. Civil damages

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Truman

First Energy sector analysis: Harold Barnett, InteriorEnergy Uses and Supplies 1948

“Most fuels were finite in quantity, could not be Increased in production or substituted for each other without substantial lead time, were developed only with very large investments, and were frequently produced in non-competitive industries.”

Over-dependence on foreign oil. Should substituteLiquid fuels derived from coal.

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Truman

Liquid Synthetic Fuels Act of 1944: $225,000 by Interior Dept. of Mines

1951: Interior Sec Krug-$455M loan guarantees for synfuelsExpired 1952-costs too high-”5 years away frombeing cost competitive”

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Eisenhower

Paley commission chartered by Truman:“Meticulous analysis, complex modeling, brilliant graphicPresentations”

Agnostic on policy recommendations

Cheap foreign oil-10% of imports: affect on domesticExtraction. Troubling %!

Mideast oil owned, produced, transported, refined, retailedBy 7 sisters: Std. Oil NJ, Texaco, guld, Std Oil CA, Mobil, BPRoyal Dutch Shell

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Eisenhower

June 1951, Mossadegh regime (IRAN) begins to nationalize

Iranian oil. Anglo-Iranian Oil co. lock out of oil technicians

By Iranian troops=6% shut down of world oil

7 sisters tried to deny technology to run industry. “too

Primitive”

Consortium of western producers including those under

Indictment made deal to get oil flowing.

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Eisenhower

1955 voluntary program to reduce oil imports1959 mandatory oil import quotas to 12%=distortion?Under Trade agreement extension Act of 1955

Predicted effect raise consumer prices-accelerate depletion of US reserves-, and Created trade barriers-Gatt problem(Randall), chairman councilOn foreign economic policy

National security justification-backfired?

Page 12: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Eisenhower

Venezuela immediately formed OPECAccelerated nationalization fo oil producers1959 “given the nationalistic climate which today prevailsIn Venezuela, it is doubtful that the line can be held at anyPoint short of total govt. control if not expropriation.”-staff report

Protectionism has international diplomatic consequencesBut domestic economic consequences.

Nixon later lifted import quotas, but imposed price controlsCongress prone to slow deliberations on energy

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Eisenhower

1953-Atoms for Peace-Cold War propaganda1954-Atomic Energy Act-AEC ---> NRC1954-Phillips vs. Wisconsin= natural gas regulation inter-state, not intra-state. 35 year effectControls of price, production, source had bad effect for 20 years

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Kennedy& Johnson

OPEC established in 1960: Venezuela, Saudi Arabia, Kuwait,Iraq. Total of 13 members

AEC-Seaborg vs. Interior Dept. nuclear vs. fossil fuels

1963 Interdepartmental study group Ali Bulent Campbell ofNorthwestern U.-major support for nuclear & concluded Conventional energy was ample.--->buried by agencies

Fuel prices declining since 1953.

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Kennedy& Johnson

1960 RFF-Joseph Fisher: Resource Policy for Great SocietyFindings:1) What % oil imports that would endanger natl security?2) What provision for disruption?3) Risk of OPEC?

AEC wanted Breeder reactors-exaggerated expectationsKilled by Carter (nuclear engineer), revived by Reagan

1967 Arab Israeli War (borders)

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Nixon

1973 removed import quotas, imposed price controlsCreated:Counselor to President for Nat resourcesAsst. Secretary of Interior for energy&materialsFed Office Energy conservationsEnergy/Science office in OMBOil policy committee in TreasuryAppointed John Love-governor of CO, directWhite House energy policy officeProposed ERDA-$10B energy R&D

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Nixon

Sept. 8, 1973 start of war (Ieft Aug 20, 1973)Oct. 1973 Arab-Israeli War #2Oct. 20-US resupply of Israeli weaponryOAPEC:

embargoed US, Canada, NetherlandsClosed Suez canalReduced extraction rate

Price increase $3-$11 barrell

“Project Independence”-spirit of Apollo-No imports by end Of Decade!

Page 18: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Nixon

Regulation of natural gas lead to more oil use.

1933 Texas Railroad Commission limit US production.1960’s States had complete control to ration, regulate, price caps on oilConnolly Hot Oil Act, put this in federal law.

1973 buying and selling of oil carried out through diplomaticArrangements among govt. officials. No oil market.

Page 19: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Nixon/

May 1974 FEA-successor to White House FEC

July 2, 1974 Nixon’s last address on energy:Become self-sufficient (autarky vs. competitive advantage)

FordProject Independence blueprint Nov 1974.Treasury Secretary William Simon=“energy czar”Oct. 1974-creation of ERDA, Energy resources Council, NRC“Reasonable self-sufficiency”

Page 20: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Ford

“Reasonable self-sufficiency”1) Reduction of oil imports2) By 1985 end of vulnerability to disruption by foreign Suppliers3) Develop domestic sources

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Ford

Agenda Feb. 1975Increase drilling on OCS$1/barrel tariffDeregulate natural gasExcise tax, windfall profits tax, decontrol oil pricesEnergy efficiency stds. For new buildings$150 tax credit for home insulationHelp low-income homeowners buy insulation40% improvement in gas mileage-defer pollution stds.1B strategic oil storage, 300M military200 nuclear plants250 new coal mines150 new coal fired power plants

Page 22: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Ford

Agenda Feb. 1975 (continued)30 oil refineries20 synthetic fuel plantsDrill thousands of new oil wellsInsulate 18M homesMillions of new vehicles using less fuel

March 1975-Congress response:Postpone imposition of tariffHistorical aversion to oil taxes

Page 23: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Ford

May 1975 Surface mining and reclamation ActOct. energy policy and conservation Act (EPCA)

SPRFuel standardsFederal assistance to state conservationJoined Intl Energy AgencyBroad R&D

Page 24: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Ford

Summer 1976 Energy Cons & Production Act$2B loan guarantees for conservationDeregulate stripper oil wellsReorganize energy and resource agenciesOffice of energy info and analysis41 yrs. Of energy legislation

Page 25: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

CarterOvercast day in 1977.“Energy markets uncompetitive and need to be regulated.”“CONAES” by natl acad science-250 analysts 4yrsDatabase and state of the art models-”social and politicalAs well as technological choices

1974 Ford Foundation Study-David S. Freeman“world manipulated by domestic and intl energy companiesWhose influence on govt. was pernicious.

20th Century Fund-federal price incentives for domesticOi land gas production, development of oil and gas resour-ces on Alaska North slope and OCS, support nuclear&coal

Page 26: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

CarterAmory Lovins-Soft Energy Paths-demand side management

Carter-moral equivalent of war:James Schlesinger-Energy Policy planning officeFEA-John O’Leary

Page 27: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Carter1st NEP1) Reduction of demand growth to 2% annually2) Reduction of gasoline consumption by 10% below

1977 level3) Reduction of oil imports to 6MMB/d from 1980

projection of 16MMB/d4) Establish 1BBL SPR5) Increase coal production to 1 Billion tons per year6) Increase energy efficiency for 90% of new homes7) Use of soalr energy in 2.5 M homesPhilosophy: moral suasion (lower thermostat), style, (sweater) pain(taxes)

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CarterOil and gas price decontrolsNatl Energy Policy Act Nov. 9 1978

Natl Energy conservation Policy Act (NECPA)Powerplant and industrial Fuel Use Act (PIFUA)Public Utilities Regulatory Policy Act (PURPA)Natural Gas Policy Act (NGPA)Created the DOE

Page 29: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

CarterDOE

2nd Oil crisis 1979Iranian oil = 4% of Us imports

NEP#2:Energy ConservationIncrease nat gas availabilityMandated coal for electricity and expanded R&DNuclear-national waste dump, R&D, March 1979;3 Mile Isle.Renewable Energy

Page 30: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

CarterReorganizations failed:Synth Fuel Corp, led by Sawhill, cost $2B for nothingGasoline rationing coupons

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ReaganDOE slated for extinctionDecontrol of oil price market, jan 29 1981.Price collapsed to $9 barrel. OPEC in disarrayProduction quotas adopted, but cheating prevented it.1985-86 price collapsed

1972-1982 real oil price $10-$39/barrel. 1980 $46 barrel26% reduction in US energy use

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ReaganJames Edwards-Energy SecretaryDislike of regulatory and policy functions of DOEFired 300 policy office career staffPolitical vindictiveness

Ignored defense related functions who were at the core Of the environmental, health, safety debacle

DOE Defense function>>civilian functionManhatten Project-nuclear weapons labs:Lawrence LivermoreLos AlamosSandia

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ReaganDefense & Civilian natl. labs:Argonne, Brookhaven, Oak Ridge, idaho, Lawrence

Berkeley

Conventional Energy labs:Pittsburgh & Morgantown energy Tech Center for coalNatl Renewable Energy lab (NREL)Natl Institute for Petroleum Research, Oklahoma

Physics labs:Stanford Linear acceleratorFermi national Accelerator in ChicagoNuclear fusion-Princeton Plasma Physics Lab

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ReaganDOE-continued:Design, construction, waste management of all nuclear

reactors for ships & submarines

Founders:J Robert Oppenheimer, Enrico Fermi, Edward Teller,

Emilio Segre, Admiral Hyman Rickover

1000s of anonymous workers on environmental cleanup due to cold-war and Reagan arms buildup

Edwards moved on in 1982 (short vicious reign) replaced by Donald Hodel

Page 35: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

ReaganBiannual preparation for National Energy Plan

1981 NEPP1) Rejected theories of natural resource limits2) distanced govt from management of energy3) minimized analysis based on long-term projections of supply&demand

Page 36: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Reagan1st NEPP-continuedEnergy Security

1) Reliance on market forces even during an emergency2) Rapid growth of SPR3) Criteria for use of SPR4) Encourage industry capability for dual fuel use5) Plan for supply increase in emergency6) Intl coordination of emergency response

Page 37: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

Reagan2nd NEPP-1983“Adequate supply of energy at reasonable cost”Removal of price controls on wellhead nat gasReform nuclear licensing and regulation

Nuclear budget raisedConservation and renewables cut

400BBL SPR at this time

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Reagan3rd NEPP-1983Issues dormant“America’s Energy triad”: Conservation, coal, nuclearJohn Herrington-“Uninformed mentality of an energy secretary-attorney by

training-lacking grounding in the fundamentals ofEnergy policy data, analysis, and history. Submitted inSpring 1985 and forgotten”

Page 39: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

ReaganInternational-1980 natural gas pipelineReagan obsession3600 mile gas pipeline from Siberia to EuropeYamal pipeline“Ostpolitik”-opening to the eastRichard Perle-Threatens securityHelmut Schmidt (social democrat) vs. Reagan (neo-liberal)

Martial law in PolandBan on US companies including European subsidiaries to

export to Soviet union.

Page 40: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

ReaganDeployment of Pershing missiles to Europe in dnagerRegan compromised. Fired Haig, named George Schulz

secretary of state.

Yamal pipeline built. Neither sides prediction came true.Served as cold war tool.

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ReaganReagan II-Energy SecuritySerious policy analysis resumed in 1986 with appointment

of William Martin as dep Sec of Energy-well respected

“Those who think that all virtue is to be found in their own party principles push matters to extremes.” Aristotle in Politics

Markets were devastating the US oil and gas industry after1986 price collapse. Also effecting banking, real estate,Service sectors in TX, LU, OK, COLow prices slowing conservation

Page 42: Energy Policy PA 395 US History Gary Flomenhoft gflomenh/ENRG-POL-PA395

ReaganReagan II-Energy Security Report to Pres March 1987Issues1) Ramifications of oil price collapse in 1986?2) Role of market forces in electricity sector?3) Should Congress decontrol natural gas prices?4) market not static, so policy shouldn’t be either

Oil industry wanted relief from price drop:import fee, price floor, tax credits for drilling/exploration

Natural gas wanted wellhead decontrol, but not transportation

Electrical sector wanted no reform

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ReaganDepartments: No new Policy necessary

Martin took it to Economic Policy Council

Recommendations:Federal policy on alt fuelsCase for reform of wholesale electricity generationRevitalized energy debate

“Petroleum imports impair national security, but“no action to adjust to imports need be taken”