DOE INITIATIVE MEANS TROUBLE FOR INDUSTRY

The U.S. oil and natural gas industry--make that natural gas and oil industry--should not be fooled by the Domestic Natural Gas and Oil Initiative published last week by the Department of Energy. It's trouble. Amid all the studies, cooperative efforts, comprehensive programs, and dialogue enhancements called for in the initiative are some measures that, at first, sound good. The government will stimulate markets for natural gas. The government will simplify rules and try a new approach

Dec. 20, 1993

3 min read

Amid all the studies, cooperative efforts, comprehensive programs, and dialogue enhancements called for in the initiative are some measures that, at first, sound good. The government will stimulate markets for natural gas. The government will simplify rules and try a new approach to environmental regulation. The government will help industry develop and demonstrate technology.

Get it? The initiative puts government back where it doesn't belong. Has the U.S. learned nothing from past energy mistakes?

ANTIOIL THEME

From its title on, the initiative resonates with a theme that first surfaced in the ill-fated BTU tax. The government of President Bill Clinton doesn't like oil. Much of DOE's initiative is given over to finding ways for the government to replace oil-the document says imported oil but suggests no way to make the distinction-with natural gas. This certainly is no favor to people who produce and process oil, imported or otherwise. And it is no favor to people who produce and process gas. Government interventions create inefficiencies that hurt economies and, therefore, energy markets. Gas producers, pipelines, and marketers should be the first to resist a new role for government in their business. It wasn't until pricing and transportation ceased to be essentially state functions that gas began to be thought of as the fuel of the future.

Yes, gas is an environmentally superior fuel. But it isn't as environmentally superior as it used to be. The U.S. leads the world in development of technologies that improve the environmental performance of vehicles and their fuels. It has paid and will continue to pay dearly, even excessively, for the progress. The reward is vastly cleaner air in all but a few areas with unique problems. Why undercut this progress with uneconomic mandates for fuel substitution?

Already, the administration has compromised the DOE initiative's promise of cost-effective environmental protection. Last week the Environmental Protection Agency required that 30% of the reformulated gasoline mandated by the Clean Air Act in 1995 be derived from renewable sources-meaning taxpayer-subsidized ethanol. That's politics, not cost-effective environmental protection. It's what happens when governments, not markets, select fuels.

And for refiners it's a second twist of the knife. The DOE initiative says only that the government will review the National Petroleum Council's study on the refining industry. So here's the deal: Refiners will be permitted to continue spending billions of dollars to follow technically challenging government fuel recipes that can be changed on a moment's notice. In return, the government promises to read about the industry's problems while regulating away its markets-all in the name of national security, job creation, and environmental protection.

POLICY STANDARDS

This is energy policy-making at its worst. The government's aim should be maximum supply of the most-efficient energy available. That means setting environmental performance standards and letting markets select fuels. It means encouraging development of natural resources on federal land. It means tax policies that encourage drilling. It means fair treatment of refiners. It means self-restraint by government. Assessed against those standards, the DOE initiative amounts to little more than a trendy-sounding agenda of meetings chaired by bureaucrats who hold all the power.