The Energy Mess

By Richard Lacayo

Some lessons are hard to learn. Three times in the past two decades, the U.S. has been burned by its unbridled appetite for energy and its dependence on foreign oil. First came the OPEC embargo in response to the Arab-Israeli war of 1973. Iran administered the second oil shock six years later. Both episodes produced some national hand-wringing and a spate of conservation measures that cut imports in half between 1977, their peak year, and 1985. But when world oil prices collapsed in 1986, the nation's per capita oil consumption began to climb again, the fuel efficiency of American cars slid downward, and oil imports returned to the levels of the 1970s.

Now comes the bill for that profligacy. U.S. troops are fighting a war spurred at least partly by fear that Saddam Hussein's seizure of Kuwait would give him decisive control over the Middle East's oil. With the real cost of energy dependency -- in both dollars and lives -- more apparent than ever, Americans may at last be receptive to a durable energy plan. And George Bush is prepared to lead them to it, but only halfway.

Next week the President is expected to unveil a national energy policy that will favor increased use of natural gas and nuclear power and stepped-up oil exploration -- including a controversial proposal to drill in the Arctic National Wildlife Refuge. But the plan is almost certain to ignore any significant steps to promote conservation. Most notably, although automobiles, buses and trucks account for two-thirds of U.S. oil use, the program is expected to shun the two most effective means to put the brakes on fuel consumption: a hike in the gas tax and a higher federal fuel-efficiency standard for U.S. autos.

Nearly two years have passed since Bush asked Energy Secretary James Watkins to shape a plan. Watkins, former head of Ronald Reagan's commission on AIDS, conducted 18 public hearings and waded through 22,000 pages of written comments from individuals and organizations. From these, he culled dozens of proposals, which he forwarded late last year to the White House's Economic Policy Council, where many of them were handled like incoming Scuds, shot down quickly before they could have any impact.

The big gunners were three White House aides: Budget Director Richard Darman, White House chief of staff John Sununu and Michael Boskin, chairman of the Council of Economic Advisers. The troika treated most measures that would compel conservation as unwarranted government interference in the free market. "Watkins' proposals just got blasted by Sununu, Darman and Boskin," says a White House official. "They just tore them apart."

The plan the President will make public preserves mostly those Energy Department suggestions that suit the Administration's step-on-the-gas philosophy. The most controversial by far will be a call for Congress to permit oil exploration in the Arctic National Wildlife Refuge, an ecologically sensitive area that has been closed to drilling since it was established in 1960. Environmental groups, fearing irreversible damage to the ecosystem, are promising to fight that proposal with an all-out campaign that could turn into this year's version of the bitter Robert Bork confirmation battle. "We'll fight to the end," says Sierra Club spokesman Marty Hayden. "There's no compromise on ANWR."

The White House plan is also expected to include proposals to streamline the licensing of natural-gas pipelines and nuclear plants. One idea is to decrease the number of public hearings required before a license is granted. In another boost to the nation's moribund nuclear-power industry -- one that is sure to raise the hackles of antinuclear activists and state lawmakers -- the plan proposes to cut states out of the approval process when selecting sites for storing nuclear waste.

At most, alternative-energy sources will be given only modest gestures of support, including extension of tax incentives for solar and geothermal-energy investments. The conservation measures that survived the White House triage are even more modest. Most likely to be included are tax breaks for builders of energy-efficient homes and office buildings and energy-efficiency labeling requirements for products.

Even many Administration officials concede that any serious effort to cut oil consumption would have to be built around an increased gas tax. But the President, a former Texas oilman, won't hear of it. The White House fears that higher gas prices could put downward pressure on an economy already in recession. Bush is also mindful of the potential cost to his popularity. He remembers all too vividly how his standing in the polls plunged during the federal budget fight last autumn, when he mishandled the budget deal that resulted in a nickel-a-gallon gas-tax increase.

Congressional Democrats are blaming Bush for a failure of leadership. "The President could call for a 10 cents- or 15 cents-per-gal. tax on gasoline, and the American people would back him all the way," says Michigan Democrat John Dingell, chairman of the House Energy and Commerce Committee. "He could call it a tax to support our war effort, and it would rally the nation."

But given American resistance to new taxes, Democrats may simply be asking the President to walk the plank ahead of them. Republican pollster Robert Teeter has provided the White House with data showing that a gas tax is especially unpopular with so-called Reagan Democrats, the blue-collar swing voters whom Bush needs for re-election in 1992. "Cheap fuel is part of our standard of living," says oil expert Robert Bradley of the Cato Institute, a Washington-based think tank. "You can force Americans to drive small, unsafe cars, pay $5 per gallon for gas, and force the poor to abandon their automobiles. But Americans don't want that."

Legislative strategy is another reason why conservation measures were neglected in the plan. The President's proposals are merely a first move in what is sure to be a lengthy tug-of-war with Congress. Sununu and Darman were concerned that the opening bid not be too generous. That's the mistake they feel Bush made in his initial version of last year's Clean Air Act, which gave Congress the chance to make the law significantly tougher and more expensive during a year of negotiations.

The counterbids are already appearing in Congress, where two dozen energy- related bills are circulating, including several that would require higher fuel-efficiency levels. One that was introduced in the Senate last week by Nevada Democrat Richard Bryan and Washington Republican Slade Gorton would oblige U.S. automakers to increase the current 27.5-m.p.g. average fuel- efficiency standard to 34 m.p.g. within five years and to 44 m.p.g. within a decade. Supporters are confident they have the votes to win. A similar measure was defeated in the Senate last year.

Predicting the final shape of an energy plan is tricky. Energy politics don't divide along party lines. When the time comes to vote, liberal Democrats from oil-patch states, like Oklahoma Congressman Mike Synar, tend to line up with the petroleum industry. Detroit Democrats like Congressman Dingell back away from fuel-efficiency standards that are opposed by hometown automakers. And defenders of the environment can still turn up on both sides of the aisle. On Aug. 4, two days after the invasion of Kuwait, the House voted 281 to 82 effectively to ban for one year any drilling for natural gas along North Carolina's Outer Banks, one of the nation's largest untapped energy reserves.

Any effective national energy plan must contain two strands: increased domestic energy production and more efficient consumption. The President is ^ tugging at the production strand. Congress appears to be groping toward the other. The question is whether they can weave them together and give the country the leadership it urgently needs on this vital issue.

With reporting by Jerome Cramer and Michael Duffy/Washington