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

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

2. Stagliano Chapter One

3. 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

4. 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 Admin CACVP-Ca Central Valley Project 1935-Federal Power Act (FPC) 1938-Natl Gas Act

5. Roosevelt Oil Policy controlled by Oil companies Interstate Oil Compact Commission Connolly Hot Oil Act of 1935-production quotas WWII-possible oil shortage Ickes authorized to buy and sell foreign oil Interior Dept. authorized to control domestic prices of oil products, ration supplies, and allocate production to defense and civilian use Oil=strategic asset therefore govt. has a duty to be engaged.

6. Truman 1946 Atomic Energy commission-civilian not military Agency. Tool in the cold war demonstrating superiority Of US system. Anti-trust vs Oil companies Synthetic fuels first funded Anglo-Iranian Oil Co.- Iran wage dispute Got anti-trust immunity to deal with it. Interior Dept. created foreign Petroleum supply committee FTC investigation, Justice Dept. Civil damages

7. Truman First Energy sector analysis: Harold Barnett, Interior Energy 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 substitute Liquid fuels derived from coal.

8. Truman Liquid Synthetic Fuels Act of 1944: $225,000 by Interior Dept. of Mines 1951: Interior Sec Krug- $455M loan guarantees for synfuels Expired 1952-costs too high-”5 years away from being cost competitive”

9. Eisenhower Paley commission chartered by Truman: “Meticulous analysis, complex modeling, brilliant graphic Presentations” Agnostic on policy recommendations Cheap foreign oil-10% of imports: affect on domestic Extraction. Troubling %! Mideast oil owned, produced, transported, refined, retailed By 7 sisters: Std. Oil NJ, Texaco, guld, Std Oil CA, Mobil, BP Royal Dutch Shell

10. 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.

11. Eisenhower 1955 voluntary program to reduce oil imports 1959 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 council On foreign economic policy National security justification-backfired?

12. Eisenhower Venezuela immediately formed OPEC Accelerated nationalization fo oil producers 1959 “given the nationalistic climate which today prevails In Venezuela, it is doubtful that the line can be held at any Point short of total govt. control if not expropriation.” -staff report Protectionism has international diplomatic consequences But domestic economic consequences. Nixon later lifted import quotas, but imposed price controls Congress prone to slow deliberations on energy

13. Eisenhower 1953-Atoms for Peace-Cold War propaganda 1954-Atomic Energy Act-AEC ---> NRC 1954-Phillips vs. Wisconsin= natural gas regulation inter -state, not intra-state. 35 year effect Controls of price, production, source had bad effect for 20 years

14. 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 of Northwestern U.-major support for nuclear & concluded Conventional energy was ample.--->buried by agencies Fuel prices declining since 1953.

15. Kennedy& Johnson 1960 RFF-Joseph Fisher: Resource Policy for Great Society Findings: What % oil imports that would endanger natl security? What provision for disruption? Risk of OPEC? AEC wanted Breeder reactors-exaggerated expectations Killed by Carter (nuclear engineer), revived by Reagan 1967 Arab Israeli War (borders)

16. Nixon 1973 removed import quotas, imposed price controls Created: Counselor to President for Nat resources Asst. Secretary of Interior for energy&materials Fed Office Energy conservations Energy/Science office in OMB Oil policy committee in Treasury Appointed John Love-governor of CO, direct White House energy policy office Proposed ERDA-$10B energy R&D

17. Nixon • Sept. 8, 1973 start of war (Ieft Aug 20, 1973) • Oct. 1973 Arab-Israeli War #2 • Oct. 20-US resupply of Israeli weaponry • OAPEC: • embargoed US, Canada, Netherlands • Closed Suez canal • Reduced extraction rate • Price increase $3-$11 barrell • “Project Independence”-spirit of Apollo-No imports by end • Of Decade!

18. 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 oil Connolly Hot Oil Act, put this in federal law. 1973 buying and selling of oil carried out through diplomatic Arrangements among govt. officials. No oil market.

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

20. Ford “Reasonable self-sufficiency” Reduction of oil imports By 1985 end of vulnerability to disruption by foreign Suppliers 3) Develop domestic sources

21. Ford Agenda Feb. 1975 Increase drilling on OCS $1/barrel tariff Deregulate natural gas Excise tax, windfall profits tax, decontrol oil prices Energy efficiency stds. For new buildings $150 tax credit for home insulation Help low-income homeowners buy insulation 40% improvement in gas mileage-defer pollution stds. 1B strategic oil storage, 300M military 200 nuclear plants 250 new coal mines 150 new coal fired power plants

22. Ford Agenda Feb. 1975 (continued) 30 oil refineries 20 synthetic fuel plants Drill thousands of new oil wells Insulate 18M homes Millions of new vehicles using less fuel March 1975-Congress response: Postpone imposition of tariff Historical aversion to oil taxes

23. Ford • May 1975 Surface mining and reclamation Act • Oct. energy policy and conservation Act (EPCA) • SPR • Fuel standards • Federal assistance to state conservation • Joined Intl Energy Agency • Broad R&D

24. Ford Summer 1976 Energy Cons & Production Act $2B loan guarantees for conservation Deregulate stripper oil wells Reorganize energy and resource agencies Office of energy info and analysis 41 yrs. Of energy legislation

25. Carter Overcast day in 1977. “Energy markets uncompetitive and need to be regulated.” “CONAES” by natl acad science-250 analysts 4yrs Database and state of the art models-”social and political As well as technological choices 1974 Ford Foundation Study-David S. Freeman “world manipulated by domestic and intl energy companies Whose influence on govt. was pernicious. 20th Century Fund-federal price incentives for domestic Oi land gas production, development of oil and gas resour- ces on Alaska North slope and OCS, support nuclear&coal

26. Carter Amory Lovins-Soft Energy Paths-demand side management Carter-moral equivalent of war: James Schlesinger-Energy Policy planning office FEA-John O’Leary

27. Carter 1st NEP Reduction of demand growth to 2% annually Reduction of gasoline consumption by 10% below 1977 level Reduction of oil imports to 6MMB/d from 1980 projection of 16MMB/d Establish 1BBL SPR Increase coal production to 1 Billion tons per year Increase energy efficiency for 90% of new homes Use of soalr energy in 2.5 M homes Philosophy: moral suasion (lower thermostat), style, (sweater) pain(taxes)

28. Carter • Oil and gas price decontrols • Natl 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

29. Carter DOE 2nd Oil crisis 1979 Iranian oil = 4% of Us imports NEP#2: Energy Conservation Increase nat gas availability Mandated coal for electricity and expanded R&D Nuclear-national waste dump, R&D, March 1979; 3 Mile Isle. Renewable Energy

30. Carter Reorganizations failed: Synth Fuel Corp, led by Sawhill, cost $2B for nothing Gasoline rationing coupons

31. Reagan DOE slated for extinction Decontrol of oil price market, jan 29 1981. Price collapsed to $9 barrel. OPEC in disarray Production quotas adopted, but cheating prevented it. 1985-86 price collapsed 1972-1982 real oil price $10-$39/barrel. 1980 $46 barrel 26% reduction in US energy use

32. Reagan James Edwards-Energy Secretary Dislike of regulatory and policy functions of DOE Fired 300 policy office career staff Political vindictiveness Ignored defense related functions who were at the core Of the environmental, health, safety debacle DOE Defense function>>civilian function Manhatten Project-nuclear weapons labs: Lawrence Livermore Los Alamos Sandia

33. Reagan Defense & Civilian natl. labs: Argonne, Brookhaven, Oak Ridge, idaho, Lawrence Berkeley Conventional Energy labs: Pittsburgh & Morgantown energy Tech Center for coal Natl Renewable Energy lab (NREL) Natl Institute for Petroleum Research, Oklahoma Physics labs: Stanford Linear accelerator Fermi national Accelerator in Chicago Nuclear fusion-Princeton Plasma Physics Lab

34. Reagan DOE-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

35. Reagan Biannual preparation for National Energy Plan 1981 NEPP 1) Rejected theories of natural resource limits 2) distanced govt from management of energy 3) minimized analysis based on long-term projections of supply&demand

36. Reagan • 1st NEPP-continued • Energy Security • Reliance on market forces even during an emergency • Rapid growth of SPR • Criteria for use of SPR • Encourage industry capability for dual fuel use • Plan for supply increase in emergency • Intl coordination of emergency response

37. Reagan 2nd NEPP-1983 “Adequate supply of energy at reasonable cost” Removal of price controls on wellhead nat gas Reform nuclear licensing and regulation Nuclear budget raised Conservation and renewables cut 400BBL SPR at this time

38. Reagan 3rd NEPP-1983 Issues dormant “America’s Energy triad”: Conservation, coal, nuclear John Herrington- “Uninformed mentality of an energy secretary-attorney by training-lacking grounding in the fundamentals of Energy policy data, analysis, and history. Submitted in Spring 1985 and forgotten”

39. Reagan International-1980 natural gas pipeline Reagan obsession 3600 mile gas pipeline from Siberia to Europe Yamal pipeline “Ostpolitik”-opening to the east Richard Perle-Threatens security Helmut Schmidt (social democrat) vs. Reagan (neo-liberal) Martial law in Poland Ban on US companies including European subsidiaries to export to Soviet union.

40. Reagan Deployment of Pershing missiles to Europe in dnager Regan compromised. Fired Haig, named George Schulz secretary of state. Yamal pipeline built. Neither sides prediction came true. Served as cold war tool.

41. Reagan Reagan II-Energy Security Serious 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 after 1986 price collapse. Also effecting banking, real estate, Service sectors in TX, LU, OK, CO Low prices slowing conservation

42. Reagan Reagan II-Energy Security Report to Pres March 1987 Issues Ramifications of oil price collapse in 1986? Role of market forces in electricity sector? Should Congress decontrol natural gas prices? 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

43. Reagan Departments: No new Policy necessary Martin took it to Economic Policy Council Recommendations: Federal policy on alt fuels Case for reform of wholesale electricity generation Revitalized energy debate “Petroleum imports impair national security, but “no action to adjust to imports need be taken”