Bad time for energy policy

Federico Peña is trying to do the impossible. The U.S. Secretary of Energy wants to design an energy policy that will, among other things, reverse the decline in domestic oil production and still survive the environmentalist gauntlet of the Clinton administration. If coherence is a standard, his goal is unattainable.

When Peña, soon after taking office last March, first declared his energy-policy ambition, the oil industry had reason to wish he'd confine himself to other tasks. Through mischief such as refusal to expand oil and gas leasing of federal frontiers, the ill-fated bid to heavily tax energy consumption, and an election-year lock-up of land by making it a national monument, the Clinton administration had long before made its predispositions clear. To it, energy is important mainly as a source of government revenue and as a tool for environmentalist seduction.

Climate darkens

Since Peña's move to the Department of Energy, the climate for policy-making has darkened even more. The government has taken new steps toward liquidating the Strategic Petroleum Reserve, the tangible core of whatever energy policy now exists. And an aggressive administrator of the Environmental Protection Agency, Carol M. Browner, has toughened air pollution standards unnecessarily in a move certain to strain the economics of petroleum refining.

Most recently, Vice-President Al Gore swept into last month's climate change treaty negotiations in Kyoto, Japan, and instructed U.S. representatives to compromise everything. The U.S. now finds itself committed to an exercise in energy futility.

The Kyoto treaty would punish Americans for living in a large country, participating in a vigorous economy, feeding much of the impoverished world, and sustaining a military able not only to defend themselves and their allies but also to keep the world in relative peace. When they catch on, Americans will ask tough questions about the scientific foundations of the pact and wonder what their representatives were thinking in Kyoto.

Clinton, never slow to recognize political trouble, has finessed the issue with characteristic skill. He will not, he quickly declared, submit the treaty to the Senate until developing countries commit to it. He thus claimed the only safe ground in sight: between a Senate ready to shred the treaty for the folly that it is and a financially struggling Asia in no mood to vow economic sacrifice. The gambit puts off serious consideration of the Kyoto treaty at least until after the 1998 congressional elections and more probably until Gore's run at the presidency, which is where it belongs.

But how does a cabinet official make energy policy in the meantime? Should Peña, who wants a draft ready by spring, assume that the country eventually will shackle itself to the Kyoto goals for emissions of greenhouse gases?

In that case, he must choose one of two evils. He either proposes energy taxes of the type that tore apart his political party in the Clinton administration's first term. Or he mandates energy choices and manipulates business decisions in ways that mock the use of words like "market-driven."

Otherwise, the Energy Secretary can make the not unreasonable assumption that the Kyoto accord smothers in its own nonsense. He then can feel free to propose an energy policy truly driven by market principles. In the process, though, he would alienate Gore, who might use Browner to sabotage the initiative.

Political hazards

The oil and gas industry should watch Peña's energy policy initiative closely. He probably means well. But the Kyoto mousetrap and hostility elsewhere in the Clinton administration toward drilling and petroleum consumption represent serious hazards. With supplies adequate and prices low, the only political pressures that would build over an energy policy all point in the wrong direction.

The industry doesn't need the grief. And the country doesn't need an energy policy of the kind likely to emerge now.

Copyright 1997 Oil & Gas Journal. All Rights Reserved.