Congress and the Clinton administration suddenly seem serious about scrapping the U.S. Department of Energy. The oil and gas industry should encourage the move - but not for the given reasons.
Asking why the U.S. needs one or another agency or program is always a healthy exercise. So why does the U.S. need a cabinet-level agency presiding over energy?
POLICIES FROM ELSEWHERE
The answer tells much. The U.S. does not now have a cabinet-level agency presiding over energy. DOE mainly manages nuclear programs divested from the military. Energy programs-the Strategic Petroleum Reserve, research, the Energy Information Administration-account for a small part of the department's budget and work.
Important policies affecting energy emerge from agencies other than DOE: the Environmental Protection Agency, the Departments of Interior and Defense, and the autonomous Federal Energy Regulatory Commission. The government thus has a cabinet-level energy department with little voice in energy policy-making.
Why? To insulate energy consumers from markets. DOE began life as a consolidation of existing energy and nuclear activities with a significant addition: the Economic Regulatory Administration (ERA). ERA's job was to administer oil price and allocation controls, which rank among history's worst energy policy moves.
The end of price and allocation controls voided ERA's mission. The legacy, nevertheless, lives on in DOE, and it is not a healthy one for energy producers or consumers. History is clear. Participants in free markets fare better than do coddled wards of government.
Continuation of a department established to administer a state role in markets implies that such a role ever is appropriate. It is not. It was not appropriate in the 1970s and 1980s, and it is not appropriate today. DOE's finest hour was when international trade lost 4.3 million b/d of oil after Iraq invaded Kuwait in 1990 and DOE did nothing to interrupt the market's swift correction.
Yet doing nothing at other times hurt. DOE under Presidents Reagan and Bush did nothing-all in the name of market freedom-while the Department of Interior crimped oil and gas leasing of federal land and while EPA raised the legal risks associated with physical activity.
DOE could not have done much in any event. Nothing but logic ever assigned it the role as advocate within government on behalf of energy supply. Besides, most top DOE officials have found it politically less troublesome to push conservation.
Beyond SPR administration, DOE's main energy function is to stand ready to blunder on command back where government doesn't belong. A few relatively harmless years notwithstanding, DOE was born to govern energy markets and will do so again if given the chance. It's like a full bucket of paint set on a school room shelf: Eventually, the thing will make a mess.
FEW SAVINGS LIKELY
That's not why Congress and the administration are discussing DOE's demise, though. They claim to have fiscal motives. In fact, most of DOE's programs and costs will continue whether or not the department does, although it never hurts to ask why they should and in what other departments they might contribute more relevantly to national interests.
The best reason to scrap DOE is mostly symbolic and partly preemptive. Dismantling this mechanism for government intrusion into energy markets would signify an important lesson learned. It also would make it slightly more difficult for the government to repeat historic mistakes in future market disruptions.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
