A supply-side plan for US energy

Bush gives a nod to conservation, but he relies on market forces and new production.

President Bush's new energy policy is, in many ways, a bold plan to reshape America's energy landscape.

It would put controversial new emphasis on drilling for oil and gas on federal lands and on boosting coal and nuclear power.

Yet observers also see it as carefully calibrated to reflect the political and economic realities of the times. In a historical sense, for instance, it's far less dramatic than both President Nixon's 1971 price controls and President Reagan's '80s-era deregulation.

Instead, the plan pushes America further along an energy-policy path it started down two decades ago - toward reliance on free-market forces, not government dominance and regulation.

And while it raises the ire of environmentalists by proposing drilling in Alaska's arctic refuge, it also includes specific nods to conservation, like a tax credit for those who buy hybrid or fuel-cell cars.

The report is cautiously crafted to avoid the mistakes of President Clinton's 1993 healthcare plan. That plan called for new government regulation of an industry, and was criticized as being so complex and detail-ridden that Congress was loath to tackle it. By contrast, the Bush energy policy will, if anything, loosen government contols - and it has few specifics, numerical targets, or deadlines that could swamp it amid legislative squabbling.

The unknowable variable now, though, is how fast market forces will work to shrink fuel prices and ease consumer worries. Republicans up for election in 2002 - that is, all GOP lawmakers in the House and at least 18 in Senate - would like some assurance that they won't be punished at the polls if Bush doesn't respond convincingly enough to this year's energy crunch.

Overall, the report rules out a major government role in energy. "We've pretty much agreed that things like price controls don't work," says Jay Hakes, who until recently headed the Energy Information Administration here. But, he adds, the US public is of two minds on the topic. "When things go bad, we say, 'Where's the government?' "

To the degree that Bush proposes intervention by Uncle Sam, his favorite tool is tax credits - financial breaks for companies and individuals who buy, say, fuel-efficient cars or who invest in wind power, for example. But his plan rejects the more dramatic steps such as electricity price caps - which Democrats championed in an alternative plan they unveiled this week.

Bush is also trying to strike a balance between big impact and political viability. The memory of Hillary Rodham Clinton's big-content healthcare plan, a dismal failure politically, still haunts Washington. Consequently, the Bush plan is light on action that requires Congress - and is filled instead with items that use presidential or Cabinet fiat. Of the report's 105 recommendations, 73 are directives to federal agencies. Just 20 require congressional action.

The conservation element

In package and presentation, the plan is designed to blunt the biggest criticism: that it's a drill-and-dig strategy unconcerned with conservation, renewables, and the environment.

Yesterday in St. Paul, Minn., Bush implored Americans to stop seeing this as an either-or choice. "The truth is, energy production and environmental protection are not competing priorities. They're dual aspects of a single purpose - to live well and wisely upon the earth."

His plan calls for $5 billion in new spending over 10 years, mostly in tax credits for conservation, renewable-energy sources such as wind and solar power, high-mileage vehicles, and power plants that use organic waste.

Critics point to Bush's budget proposals for next year, which would cut spending on energy-efficiency research by 29 percent and renewable-energy research by 32 percent.

Neither does the plan directly address gas-guzzling automobiles. It calls for more study of whether to raise fuel-efficiency standards, including for SUVs. This could be a difficult issue for Bush, because it involves some of his biggest corporate supporters (the oil industry and automakers) and millions of SUV owners.

Other criticisms are about pollution and global warming. By characterizing the US energy picture as a crisis and by urging construction of 1,900 power plants over 20 years, Bush "is trying to scare the American public into buying into an energy plan that contributes to global warming, destroys the environment, and pollutes the air," says Jennifer Morgan, climate change specialist with the World Wildlife Fund.

Bush also faces skepticism from Western conservatives. His plan to let federal regulators use eminent domain power to create routes for electric-power lines - perhaps 50,000 miles' worth - isn't popular out West. That's because the government could appropriate private land. "There is almost an atmosphere of wartime haste, and if you are not careful, citizens get stomped on," says Chuck Cushman of the American Land Rights Association in Battle Ground, Wash.

Nuclear

It's perhaps the toughest choice: bring down prices in the short term versus long-term systemic change. Bush hews toward long-term relief, a choice that even congressional Republicans have criticized.

To that end, Bush does not ignore the controversial idea of reviving nuclear power - even though no one imagines a new plant operating in the US before 2010.

Still, nuclear is on a roll.

* Bush's plan calls for extending the government's guarantee to pay up to $9.3 billion in public liability claims if a nuclear accident occurs.

* It promises to let "sound science" guide Bush's pending decision on the use of Yucca Mountain in Nevada for nuclear-waste storage.

* It recommends that nuclear reprocessing get another look. This procedure, which involves chemically salvaged plutonium from used reactor fuel, arouses deep fears of nuclear proliferation - the risk of terrorists acquiring sufficient material to build a bomb. But it also makes for much less nuclear waste.

Oil and gas

Oil and gas are the biggest key to lower electric rates and pump prices. Already buoyed by high prices, the industry has upped plans for production and pipelines. Big oil firms reportedly plan to invest about $41 billion to boost natural-gas supplies this year. The number of new gas rigs is at a record high - nearly 1,000.

Although they get none of Bush's tax incentives, they do get looser regulations and another big boon: opening of federal lands. In fact, this may be one of the most important - and controversial - Bush moves.

"If the Bush plan does nothing else but open up new lands, companies will go through the hassle of permitting and building new wells," says Amy Jaffe, an energy expert at Rice University in Houston.

Coal

As America's cheapest energy source, coal is capable of pushing down electric rates. Bush's plan puts $2 billion over 10 years into developing "clean coal" technologies. These aim to decrease coal's carbon-dioxide emissions, which contribute to global warming.

Yet there are hurdles to quick new coal production.

* The industry has slumped for a decade, and miners have left for other jobs. Dozens of mines have closed. This makes rebuilding the industry hard.

* Bringing power plans on-line is politically difficult, and Washington has little say in siting them. Coal-fired plants, in particular, draw a lot of environmental scrutiny.

Yet there are signs of market-driven activity.

"As recently as a year ago, there were probably only a couple of coal-fired generation projects in the works," says Quin Shea of the Edison Electric Institute. "That number has now ballooned to somewhere between 40 and 50 announced projects nationwide."

Contributing to this report were staff writers Brad Knickerbocker in Ashland, Ore., and David R. Francis in Boston, as well as Craig Savoye in St. Louis and Todd Wilkinson in Bozeman, Mont.

(c) Copyright 2001. The Christian Science Monitor