US Energy Firms Welcome Appointment of O'Leary

Many consider secretary-designate one of their own

MONEY tops the list of things that most segments of the energy industry want from the Department of Energy (DOE) under its designated secretary, Hazel O'Leary. Producers are looking to the DOE to help their prospects by encouraging domestic resource development, or helping them finance the complicated process of nuclear-waste storage.

The Senate will hold its confirmation hearing for Mrs. O'Leary next Tuesday. A lawyer who worked in the Ford and Carter energy departments, O'Leary later managed her own energy consulting practice. Most recently she has been a top executive of Northern States Power Company, a Minneapolis-based utility that relies on coal and nuclear power.

Carl Goldstein, a vice president of the nuclear industry trade group US Council for Energy Awareness, is pleased that O'Leary is familiar with the nuclear-waste storage issue. Northern States nearly had to shut down a nuclear plant because of accumulated waste, but avoided doing so in a compromise that O'Leary negotiated with state regulators.

The federal government is decades behind in providing a permanent waste-storage facility, despite collecting $600 million a year from nuclear utilities for the work. Mr. Goldstein hopes O'Leary will push forward the fight with Nevada to bury the waste under the state's Yucca Mountain.

And if utilities have to build temporary storage facilities, he hopes O'Leary will help them get their storage dollars rebated.

"We've really got to get cracking," he says. "We think O'Leary is the person to do it. She's very adroit at getting results."

Until the waste-storage issue is solved, it will be difficult - and illegal in California - to build more nuclear plants, Goldstein says.

"I'm generally bullish on Mrs. O'Leary," adds Scott Sklar, executive director of the Solar Energy Industries Association. "She's frankly one of the first energy secretaries we've ever had with a background in energy."

Mr. Sklar says the renewable-energy industry - solar, biomass, geothermal, and wind - could cut its cost of delivering energy in half if it scaled up manufacturing. But investors won't invest without an ensured market. Only DOE, through a partnership or guarantee to utilities, can ensure that, he says.

John Grasser, vice president of the National Coal Association, calls O'Leary "a very good choice" because of her experience in both government and the private sector. Noting that the US has 300 years' worth of coal reserves, he says the industry will want to see DOE maintain its $5 billion program to develop technology to reduce emissions from coal-fired plants.

Although Vice President-elect Al Gore Jr. has advocated a "carbon tax," which would make coal quite costly to burn compared to oil and natural gas, Mr. Grasser doubts such a tax is imminent. Rather he sees a gasoline tax to reduce the deficit as more likely.

"We're very pleased," notes Michael Baly, president of the American Gas Association. Mr. Baly says that O'Leary was "very fair" despite her responsibility as the former head of the DOE's Economic Regulatory Administration (now defunct) for implementing "some bad laws" like the Fuel Use Act, which stifled demand for natural gas.

O'Leary drives a car that can burn natural gas as well as gasoline. At Northern States, she implemented a demand-side management plan that saved energy equal to the output of a 650-megawatt plant. Baly says she "fits to a T" President-elect Clinton's energy plan. Mr. Clinton favors natural gas, renewable fuels, conservation, and environmentally sound decisions.

Baly says the AGA would like a partnership with DOE to develop the gas-powered heat pump, which he says could lower energy use for home heating and cooling by 25 percent. Natural gas supplies 25 percent of the nation's energy but receives only 7 percent of federal energy research funds, he adds.

Independent petroleum producers reacted more cautiously to O'Leary's appointment. They welcomed her stated commitment to reducing the nation's dependence on imported oil and increasing its demand for natural gas. But they called for initiatives to increase exploration and production in the United States.

The American Petroleum Institute, which represents major oil companies, declined as a matter of policy to comment on the appointment. Some of its members should benefit from rising gas demand.

But they oppose initiatives that restrict or tax oil imports or that give alternate fuels an artificial advantage.