To the debate over US President George W. Bush's proposal for a cabinet-level Department of Homeland Security, the history of energy regulation offers a useful question: How much does it matter to energy conditions in the US that in 1977 the government created the cabinet-level Department of Energy? The answer: very little.
To be sure, US energy circumstances are better now than they were when DOE began life. Some of the improvement certainly comes from work done by DOE in areas such as information-gathering, research, and management of the Strategic Petroleum Reserve, all vital to national interests.
The question is not about the importance of DOE's work. It's about misperceptions that arise when a government performs important but routine energy work through a cabinet-level bureaucracy with "energy" in its name while conducting regulation with greater energy consequence elsewhere.
Price decontrol
Since 1977, the government's most significant contributions to US energy conditions have occurred independently of DOE. There are two of them: removal of price controls from crude oil in 1981 and from natural gas at the wellhead in 1989. In fact, oil decontrol dismissed DOE from what originally was one of its largest energy responsibilities: enforcement of price regulations and allocation of oil products.
DOE now does little as a regulator of importance to oil and gas. Far more important in that area are the Department of Interior, Environmental Protection Agency, and the independent Federal Energy Regulatory Commission.
Furthermore, most of DOE's business has nothing to do with energy. The department's defense-related nuclear and environmental programs receive four times the funding that energy programs do.
So DOE, notwithstanding its undeniable accomplishments of the past quarter-century, and through no fault of its own, can claim no direct credit for the country's biggest energy advances. All of its energy activities can occur elsewhere in government, as most have done in the past, and amount to a small share of departmental functions. And all significant regulation important to oil, gas, and coal comes from other agencies.
Why, then, does the US have a cabinet-level energy department? The answer bears on the current push for a cabinet-level homeland-defense department.
The US has a cabinet-level energy department because in 1977 the country had daunting energy problems that seemed-in the thinking of the day-to have solutions obtainable only at the highest level of government. Subsequent events disproved the thinking. They showed that the country's largest energy problems resulted from the government itself as an agent of market distortion. But the urge to respond to crisis with bureaucracy was irresistible in 1977. It is hardly less so now.
This is not opposition to the creation of a cabinet-level Department of Homeland Security, which might be precisely what the US needs to defend itself against terrorist threat. This is a warning about a hazard that can result once government, at its highest levels, takes aboard a crisis.
After the US installed its cabinet-level energy department and began filling the SPR, energy drifted out of public consciousness. Energy gave way to environmental protection as a political priority and has suffered as a result. Energy problems remain-most of them, as before, the results of government activism. But the subject receives popular attention only when fuel prices rise.
From the beginning, DOE suffered from a disadvantage that a homeland security agency would escape. DOE began life largely to support government activism in markets. A Department of Homeland Security would sprout from better ground: fortification of government efforts to fulfill a constitutional duty. That difference alone means that to wonder about DOE isn't to argue against the agency now proposed.
False promise
Experience with DOE teaches that stature and title can create false promise. Although relatively little of DOE even addresses the subject for which it was named, it exists near the top of government. It's part of the cabinet. So while the Department of Interior presides over a swelling hoard of undrillable federal land, while EPA runs refiners out of business, and while ethanol makers maneuver their heavily subsidized product into gasoline markets, Americans feel no need to worry about energy regulation.
The hazard is complacency. With energy, the consequences are elevated costs from poor regulation. With terrorism, they could be fatal.
