DOE MASKS ENERGY POLICY PROBLEMS

Hazel O'Leary is not the first person to have become the top U.S. energy official without knowing much about the oil and gas industry. There was a time when the Department of Energy came into being, to be exact - when officialdom treated industry experience as an ethical drawback for energy regulators. Compared with her predecessors, O'Leary looks richly qualified to be Secretary of Energy: She worked as executive vice-president for corporate affairs at a Minneapolis power utility. Yet she made it obvious at a Cambridge Energy Research Associates conference in Houston this month that the job taught her little about oil and gas.

FINDING A LEADER

O'Leary implored the industry to find a leader to fight its political battles someone, she said, like former Chrysler Corp. Chairman Lee Iacocca. It stretches the benefit of the doubt to suggest that she simply chose a bad metaphor. The U.S. automobile industry is a manufacturing business dominated by three companies. One part of the U.S. oil and gas industry involves manufacturing. At least 80 companies work in it, some of them large, some small. The industry also has a raw materials sector encompassing hundreds of companies of widely varying size. Some of them have manufacturing-refining-interests, and some do not. Some of them produce oil and gas, and some concentrate on one or the other.

From this tangle of commercial and regulatory interests O'Leary thinks a single leader should emerge. She needs to visit Houston more. She also needs to review history. If the oil and gas industry somehow produced a single leader the Justice Department would start an antitrust investigation.

Maybe technicalities like these shouldn't matter to makers of policy. But O'Leary doesn't set energy policy, which evolves chiefly from leasing and environmental decisions made outside of DOE. The main job of energy secretaries is to administer nuclear weapons and defense programs, activities that account for nearly two thirds of DOE's $18 19 billion/year budget. That's partly why knowledge about the oil and gas business has never been a requirement of the energy secretary's job. It's also why energy secretaries, when they do address energy issues, tend to dabble in superficialities such as the oil and gas industry's perennial public image problems.

For these reasons, O'Leary's cock eyed talk in Houston should revive a question: If energy is mainly a sideshow at DOE, and if energy secretaries don't need to know much about the industry that provides 60% of the nation's energy, why have a DOE?

FUTURE SUPPLY

To be sure, DOE has important responsibilities. But they can be handled where they are more relevant. The energy programs DOE does administer have a place in government: the Strategic Petroleum Reserve, data reporting, conservation, and research and development, for example. But they do not add up to assurance of future supply of economic energy, which should be the benchmark for energy policy.

Existence of something called the Department of Energy and assignment of someone to a cabinet level job entitled Secretary of Energy create the impression of serious attention to energy policy. But energy policy cannot ensure future supply of economic energy while it remains hostile to production of oil and gas. Energy policy oriented in this way simply cannot succeed by standards that matter. That, not the oil and as industry's public relations frustrations, is the problem. O'Leary and DOE can only paper over it. It's time to scrap DOE and focus attention on the problems of energy policy where it is made.