Federal energy reorganization, issues and options

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Federal energy reorganization, issues and options report to the Committee on Government Operations, United States Senate
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Energy policy -- United States   ( lcsh )
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Bibliography:
Bibliography: p. 205-219.
Statement of Responsibility:
prepared by the Congressional Research Service, Library of Congress for Senator Charles H. Percy, Illinois, September 1976.
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At head of title: 94th Congress, 2d session. Committee print.
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94th Congress COMMITTEE PRINT
2d Session


FEDERAL ENERGY REORGANIZATION


ISSUES AND OPTIONS


REPORT
TO THE

COMMITTEE ON GOVERNMENT OPERATIONS


UNITED


STATES


SENATE


PREPARED BY THE

CONGRESSIONAL RESEARCH SERVICE
LIBRARY OF CONGRESS
FOR

Senator CHARLES H. PERcy, Illinois


SEPTEMBER 1976 'A" *@ ag X




Printed for the use of the Committee on Government Operations


U.S. GOVERNMENT PRINTING OFFICE


76-6730


WASHINGTON : 1976


For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402 Price $2.15































COMMITTEE ON GOVERNMENT OPERATIONS

ABRAHAM RIBICOFF, Connecticut, Chairman


JOHN L. McCLELLAN, Arkansas
HENRY M. JACKSON, Washington
EDMUND S. MUSKIE, Maine
LEE METCALF, Montana
JAMES B. ALLEN, Alabama
LAWTON CHILES, Florida
SAM NUNN, Georgia
JOHN GLENN, Ohio


CHARLES H. PERCY, Illinois
JACOB K. JAVITS, New York
WILLIAM V. ROTH, JR., Delaware
BILL BROCK, Tennessee
LOWELL P. WEICKER, JR., Connecticut


RICHARD A. WEGMAN, Chief Counsel and Staff Director
PAUL HOFF, Counsel
PAUL L. LEVENTHAL, Counsel
ELI E. NOBLEMAN, Counsel
DAVID R. SCHAEFER, Counsel
MATTHEW SCHNEIDER, Counsel
FRED ASSELIN, Investigator
J JOHN B. CHILDERS, Chief Counsel to the Minority
BRIAI4 CONBOY, Special Counsel to the Minority
CHRISTOPHER N. PALMER, Counsel to the Minority
S' MARILYN A. HARRIS, Chief Clerk
ELIZABETH A. PREAST, Assistant Chief Clerk
HAROLD C. ANDERSON, Staff Editor
.. (U)m


* J *













ASIRAHAM SINCOWF'. CONN.. CIRIEMAN
JONI-- L MC CLELJAN. Al. CHAN.RLES N. PKERCY. ILL.
HENY M. JACKSON. WASH. JAClO K. JAVITS. N.Y.
EDMUND IB. MUIKIE. MAINE WILLIAM V. RUTH. JR.. DEL.
Lim MCTCALF. MOUNT. ILL ENOCK. TEN.
JAMES E. ALLEN. ALA. LOWE.L P. WEICKEN, JR., CONN.
LAWTON CHLES, FLA.
Sam CMCnifeb ftafez ^Senafr
NIC A A. WEIMAN COMMITTEE ON
CHEFw CUN81. LND STAF DIRECTOR GOVERNMENT OPERATIONS
WASHINGTON. D.C. 20510
September 7, 1976


The Honorable Abraham Ribicoff
Chairman
Committee on Government Operations
United States Senate
Washington, D.C. 20510


Dear Mr. Chairman:

An issue of high priority facing our Committee is the matter
of rationalizing the current organizational structure for
energy affairs in the Executive Branch. A number of propo-
sals have been made, including your own contained in S. 3339.
Within the next few months, the President will be forwarding
for our consideration his own recommendations based on a
Task Force study now underway under the auspices of the
Energy Resources Council.

As you know, I consider this matter to be one of not only
great urgency but also vital importance to the orderly future
handling of the Nation's energy affairs. Hence, several
months ago, I asked the Congressional Research Service to
assist me in thinking through the fundamental issues involved.

Enclosed is the resulting CRS report, which includes a sum-
mary of two days of deliberation by public administration
specialists at a workshop organized for CRS by the National
Academy of Public Administration Foundation. I have found
it to be a very helpful document, concise yet comprehensive.
In the interest of sharing these insights with the other
Members of the Committee, I request that it be published as
a Committee Print.

Sincerely,




Charles H. Percy
United States Senator


(Ill)



















Digitized by the Internet Archive
in 2013














http://archive.org/details/energyreo00libr













I- 0'
;r, 0 THE LIBRARY OF CONGRESS

\ Congressional Research Service



WASHINGTON, D.C. 20540
August 3, 1976



The Honorable Charles H. Percy
Committee on Government Operations
United States Senate
Washington, D.C. 20510

Dear Senator Percy:

On April 26, 1976, you requested "CRS assistance
in thinking through the fundamental issues relating to
organizational structure and in recommending any changes
to improve the effectiveness and efficiency of Federal
energy action." In response to your request, the Service,
among other things, contracted with the National Academy
of Public Administration Foundation to hold a two-day
workshop in which a number of current and past officials
in the Federal Government and academic specialists in the
discipline of public administration exchanged views.
Other CRS actions include a review of the pertinent litera-
ture and a survey of historical developments in Federal
energy policy.

We transmit herewith the results of these actions.
Included are the following:

1. U.S. National Energy Organization: The Policy
Setting. A background paper by Frances A. Gulick,
CRS.

2. Government Organization for Energy Affairs.
Summary of a June 22-23, 1976, Workshop arranged
for the CRS by the National Academy of Public
Administration Foundation.

3. Government Organization for Energy Affairs:
Statements submitted to NAPAF Workshop.

4. Selected Excerpts from the Transcript of
Proceedings of the NAPAF Workshop.

5. Federal Energy Organization by Susan Abbasi,
CRS. Review of organizational status at
beginning of 94th Congress.

6. Bibliography: A Selected List of Readings
Pertaining to Energy Policy and Energy
Organization. Compiled by Adrienne C. Grenfell,
CRS.


(V)










These documents trace the emergence of current U.S.
energy policies, the history of Federal organization
structures developed in response to the changing policies,
current analyses and criticisms of both the policies and
organizational structures, and, via the NAPAF workshop,
contemporary attitudes toward both policy and organizational
issues.

Two major points emerge, in our opinion. First is the
issue of policy formulation vs. policy implementation.
Clearly displayed in the attached documentation is a consensus
among public administrators that, when one knows where he is
going, the best organizational way to get there is via a
strong, centralized organization within which are placed all
the functions required for implementation. In counterpoint
to this consensus is an equally strong consensus that the
U.S. has not yet developed a comprehensive, agreed-upon policy
to describe where it is going with respect to energy. A major
unresolved issue is the relative role of augmented energy
supply vs. augmented conservation and utilization efficiency.
This lack of policy consensus raises basic questions about the
extent of centralization (particularly between policy formula-
tion and program implementation) which should be sought at
this time.

The second major point is the issue of regulatory policy v.
energy policy. In this issue area as well as the one above,
the documents clearly show a consensus. In this case, that
consensus is that there is as yet no agreement on how the
various regulatory functions relate to each other, what the
major regulatory issues are, and how regulatory policy might
relate to energy policy. This fact indicates that signifi-
cant regulatory reorganizational initiatives would probably
be premature at this time.

Other energy organizational issues, such as data gathering
and analysis, commercialization of Federally-developed tech-
nologies, and inconsistences among ongoing energy programs
appear to be relatively insensitive to the more general policy
issues already discussed.

I hope you will find this CRS exercise to be of value
to you as you formulate your views on future U.S. energy
organizational alternatives. Our efforts were led by
Mr. David E. Gushee and Dr. Frances A. Gulick of our EnvirorTnent
and Natural Resources Division, who remain available to you and
your staff should you wish additional information, analysis, or
other support.

Sincerely yours,



Norman Beckan
Acting Director










CONTENTS

Page
Letter of transmittal---------------------------------- I
Letter to Senator Percy from Norman Beckman, acting direc-
tor, CRS, Library of Congress, August 3, 1976----------- v

I. U.S. NATIONAL ENERGY ORGANIZATION: THE POLICY SETTING.
A BACKGROUND PAPER BY FRANCES A. GULIcK, CRS
What was the substance of U.S. national energy policy up to
the end of 1973? ------------------------------------ 2
The basic policy premise----------------------------------- 2
Broad energy goals------------------- ----------------- 6
Who made substantive energy policy?------------ ----------- 6
What was the role of the Federal Government in shaping the
substance of that policy ?------------------------------ 7
What policy changes can be identified in laws enacted and
organizations created since 1973?----------------------- 10
What are recent proposals for further national energy policy?- 14
1What are the prospects for a consolidated national energy
policy ---------------------- 17
Are there major remaining policy issues, omissions or
inconsistencies? ----------------------------------------- 19
What is the relationship between energy policy goals and other
national objectives?------------------------------------- 22
The ERDA national plan------------------------------ 23
The OTA assessment---------------- ------------------ 24
The ERDA national plan revised------_------------------- 26
Budget options for 1977-------------------------------- 26

II. GOVERNMENT ORGANIZATION FOR ENERGY AFFAIRS. SUMMARY
OF A JUNE 22-23, 1976, WORKSHOP ARRANGED FOR THE
CRS BY THE NATIONAL ACADEMY OF PUBLIC ADMIN-
ISTRATION FOUNDATION (NAPAF)
Preface ------------------------------------------------ 30
Agenda ------------------------------------------- 31
Guidelines for workshop participants----------------------- 32
Participants, June 22-23 workshop------------------------- 36
Acronyms ----------------------------------------------- 38
A central agency or department?-------------------------- 39
National policy formation and coordination----------------- 45
On data gathering and policy analysis---------------------- 47
The relation of public regulation to public policy------------ 50
Concerting Federal and State policy------------- ---------- 54
The Congress---------------------------------------- 56
Appendix: Three basic legislative alternatives--------------- 60


(VII)





VIn


III. GOVERNMENT ORGANIZATION FOR ENERGY AFFAIRS: STATEMENTS
SUBM-ITTED TO NAPAF WORKSHOP
Page
Senator Charles H. Percy, Senate Committee on Government
Operations ------------------------------------- ---63
Monte Canfield. Jr., Director, Energy and Minerals Division,
General Accounting Office----------------------------- 71
William 0. Doub, partner in the law firm of LeBoeuf, Lamb,
Leiby & MacRae ------------------------- ----------- 80
George C. Eads, Executive Director, National Commission on
Supplies and Shortages-------------------------------- 90
Charles J. Hitch, president, Resources for the Future--------- 95
John C. Sawhill, president, New York University----------- 100
Chauncey Starr, president, Electric Power Research Institute- 101
William E. Warne, consultant---- -------------------- 107
IV. SELECTED EXCERPTS FROM THE TRANSCRIPT OF
PROCEEDINGS OF TIHE NAPAF WORKSHOP
Energy policy---------------------------------------- 117
Federal-State relations-------------------------------- 132
Federal energy regulation------------------------------ 147

V. FEDERAL ENERGY ORGANIZATION BY SUSAN ABBASI, CRS.
REVIEW OF ORGANIZATIONAL STATUS AT BEGINNING OF
94TH CONGRESS
Independent agencies---------- ---------------------- 166
Executive Office of the President------------------------- 176
Executive departments-------------------------------- 179
Department of the Interior----------------- --------- 179
Department of Defense---------------------------- 184
Department of State-------------- ----------------- 185
Department of the Treasury------------------------- 186
Other Agencies and Departments------------------------- 186
Appendices: Examples of agencies involved in specific en-
ergy issues --------------------------------------- 190
Appendix I: Oil and gas leasing in the Outer Continental
Shelf----------------------------------------- 191
Appendix II: Coal production and utilization oper-
ations -----------------------------------------193
"Congress and the Nation's Environment", excerpt from Com-
mittee print by the Committee on Interior and Insular
Affairs, U.S. Senate-------------------------------- 195

VI. BIBLIOGRAPHY: A SELECTED LIST OF READINGS PERTAINING
TO ENERGY POLICY AND ENERGY ORGANIZATION. CoM[-
PLIED BY ADRIENNE C. GRENFELL, CRS.
Selected Readings-Part I .------- ------- --205
Selected Readings-Part II-Government publications------- 212













V *0t
a2 f2 *


The Library of Congress

Congressional Research Service


Washington, D.C.


20540


U.S. NATIONAL ENERGY ORGANIZATION: THE POLICY SETTING


A Background Paper


























by

Frances A. Gulick
Analyst


Environment and Natural Resources Policy Division


August 4, 1976















I. U. S. NATIONAL ENERGY ORGANIZATION: THE POLICY SETTING

A Background Paper



CRS has been asked to analyze the effectiveness of the current Fed-

eral organizational structure including the present administrative arran-

gements for formulating energy policy.

As background for the reassment of the administrative structure, it may

be useful to examine the substance of U. S. energy policy as it has existed

in the past and as it appears to be today. This paper is intended to serve

that function by providing a descriptive overview of U. S. energy policy in

the form of answers to the following questions:


(1) What was the substance of U.S. national energy policy up
to the end 73?

The basic policy premise
Broad energy goals -
Who made substantive energy poly?

(2) What was the role of the Federal Government in shaping the
substance of that policy?

(3) What policy changes can be identified in laws enacted and organi-
zations created since 1973?

(4) What are recent proposals for further national energy policy?

(5) What are the prospects for a consolidated national energy pol-
icy.

(6) Are there major remaining policy issues, omissions or in-
consistencies?

(7) What is the relationship between energy policy goals and other
national objectives?

The ERDA National Plan
The OTA assessment
The ERDA National Plan revised
Budget options for 1977


(1)











1. What was the substance of U.S. national energy policy up to the end of 1973?

It has become commonplace to note the fact that there is no compre-

hensive, coordinated statement of what current U.S. energy policy is to-

day and that there is no comprehensive coordinated Federal energy program.

More than sixty Federal agencies with multiple counterparts at regional,

State and local levels wield a wide range of authorities under an even wider

range of laws and regulations. Collectively, their operations make up the

legal environment within which the nation's total energy supplies are being

produced and consumed, although their collective laws and regulations have

not been formally codified in any statutory statement of energy policy.

The lack of a comprehensive policy statement or a coordinated Fed-

eral program does not mean, however, that the United States has not had

a Federal energy policy in the past. On the contrary, there was a national

energy policy based on a broad consensus. It was fairly specific, fairly

clear cut, and it has operated over the past half century under broad Federal

and State legislative endorsement, encouragement and support.



The Basic Policy Premise

Simply stated, it is this:

It has been U. S. national energy policy to rely to the maximum degree

on private enterprise for the exploration, production, distribution, market-

ing and pricing of an evolving blend of fuels. Consumer choice among

the various kinds of fuels was counted on to produce competition among

suppliers which would in turn provide incentive to keep energy prices low.

Federal intervention was intended to be limited to maintaining a business











and regulatory environment conducive to abundant energy and providing a

leading role in financing research in new energy technologies.


One of the more articulate statements of this policy was presented

by J. Cordell Moore, then Assistant Secretary of the U.,S. Department of

the Interior, to the Energy Committee of the Organization for Economic

Cooperation and Development (OECD) in January 1967.

The very core of U.S. energy policy is that industry is re-
sponsible for production, distribution, marketing, and pricing, ex-
cept in markets where fair prices cannot be guaranteed by competition,
such as, for example, gas and electricity in interstate commerce. The
Federal Government attempts to establish a climate favorable for the
growth of the energy industries. It tries to stimulate initiative, to help
advance technology, and to encourage and maintain competition. It
monitors the overall energy situation to be sure that the national
security and thebroad interests of the public are protected, it applies
constraints to the operations of the private sector where the public
interest so requires, and it makes liberal use of the instrument of
persuasion at times to influence the course followed by the private
sector. But the Federal Government does not control production, it
does not direct the efforts of industry, and it does not involve itself
in company affairs. Even in the regulatory field its posture is main-
ly reactive rather than positive. Information on costs, reserves, pro-
cesses, and plans is generally closely guarded by the companies and
they are not required to divulge it... I stress our lack of author-
itative knowledge concerning these matters because it is a basic
part of our policy, and contrasts, I am sure, with the situation in
nations in which the energy industries are nationalized.

+* ** ** * *^* +* !*l* * *


In stressing .... the lack of direct U.S. Government control over
many aspects of our energy situation, I am outlining the essence of
American energy policy and strategy. We try to achieve our objectives
in the energy field by stimulating initiative in the private sector rather
thanby directing it or doing the work ourselves. We limit regulatory
measures to areas where our objectives cannot be achieved by compe-
tition. And we attempt to avoid protective and other measures that








add to cost, seeking instead to solve long-range problems of security
of supply, cost, and other objectives through technologic advance. */

Replying to questions from OECD representatives regarding official

estimates or forecasts of future energy production, the U.S. representa-

tive said:

The United States Government does not issue official forecasts
of energy production, nor does it issue directives of any kind to the
energy industries regarding their future development. The Admi-
nistration adopts generalgoals concerning economic growth and other
national objectives, of course, and it attempts in the various ways
we have indicated in our written statement to encourage the develop-
ment and progress of the energy industries. But it does not adopt
& plan for future development similar to those issued by many other
other countries. Depending as we do on competition among the energy
industriesto achieve some of our goals, a specific plan for the develop-
ment of individual industries would defeat part of our purpose.


It is important to bear in mind that the underlying rationale for this

basic position is rooted deeply in a national bi-partisan constitutional

adherance to the value of preserving and encouraging individual and corporate

initiative, a point which the U.S. representative undertook to explain in

some detail. His written submission leads off with a discussion of "the

de facto nature of United States energy policies and their philosophical

background", and includes the following among nine interrelated broad

national goals:


*1 J. Cordell Moore, "Part I: Observations on United States Energy Policy",
Paper dated November 1, 1966, prepared as background for the Confrontation
on U.S. Energy Policy for the llth Session of the Energy Committee of
the OECD in Paris, January 26-27, 1967; and "Part II: Some Distinguish-
ing Features of United States Energy Policy," his opening remarks at the
session on January 26, 1967.










Individual and corporate initiative are both a right and a conse-
quence of freedom, and private enterprise is the most efficaceous means
of producing and marketing most of the goods and services required
by American consumers. A major responsibility of government is to
create a climate that stimulates private initiative and enterprise.

This is modified by one of the other broad principles:

While the private sector is responsible for most production and
S distribution of goods and services, government bears responsibility
for maintaining and improving many services and engineering works
that are required for the public welfare but are not readily or efficiently
marketable by the private sector.

In additionto such readily identifiable functions 'asregulation of natural

gas and utility rates, the Federal government has pioneered in development

of hydroelectric power and in development and demonstration of nuclear

energy and in production of enriched uranium for nuclear fuel. Statistically,

however, production in Federal facilities amounts to only a small fraction

of total civilian electrical supplies, still less than 3 percent in 1976,

mainly in the form of electric power from hydro-electric stations. TVA,

the Corps of Engineers and the Bureau of Reclamation produce and market

power from both thermal and hydro sources. The Nuclear Regulatory Com-

mission controls the imports and exports of uranium, thorium and other

fissionable materials. ERDA manufactures and markets enriched uranium

and may have to provide long term management for highly radioactive

nuclear wastes. All of the electricity from nuclear power plants in the U.S.

that are fueled with enriched uranium therefore depend on the Federal

Government for this necessary fuel supply. As landlord the Federal Govern-

ment wields significant power, owning --and leasingtothe private sector --

about 34 percent of the total land area. The mineral rights to an even

larger area, including the Outer Continental Shelf, are also under Federal

control.

Nevertheless, as measured by both the proportion of energy produced

and marketed and by the intent of the policy, the Federal role in and con-







trol over the development of energy policies and patterns of use has been

deliberately subordinated to the concept of least feasible interference with

market decision and maximum reliance on private initiative and enterprise.

Broad Energy Goals

In addition to this basic energy policy position -- maximum reliance

on private industry --the U.S. representative also identified certain broadly

understood and generally accepted energy objectives which were sought

and which with the exceptions which have been noted, the U. S. believes

could best be achieved primarily through private sector energy interactions:

1. To assure adequate and diverse supplies of energy -- sufficient
for continued economic growth, dependable under emergency and non-
emergency conditions, and diverse in both source and form.

2. To assure the lowest possible costs and price consistent with sound
business, labor and conservation practices, with health requirements.
and with national security and fiscal needs.

3. To manage wisely and productively publicly-owned energy resources.

4. To operate efficiently public businesses that involve the production
or use of energy.

5. To help meet broader economic and social objectives, including
achievement of internal and external budgetary objectives and the
protection of health, environment, and other resources from damage
resulting from the production and the use of energy.

Who made substantive energy policy?

The result of this basic national energy policy position has been that,

with very few exceptions, uptothe end of 1973 the major substantive national

energy policy decisions --decisions which are now the object of tumultuous

congressional reconsideration -- were deliberately made the responsibility

of the private sector.

These critical responsibilities,* accepted and energetically exercised

by the private sector, shaped national patterns of energy production and use

in such fundamental policy vectors as :
























2 -











-- the amount and direction of energy investment;

-- the extent and location of exploration;

-- the volume and rate of production;

-- the direction and mode of distribution;

-- decisions on prices at wholesale and retail level; and

-- the degree of national dependence on imported fuels.

In sum, uptothe end of 1973 it was U.S. policy to rely to the maximum

degree on private enterprisein the competitive market system to shape and

make the principal components of U.S. national energy policy.


2. What was the role of Federal Government in shaping U.S. energy policy?

If the "very core" of U.S. energy policy was to rely on market forces

to the maximum degree to make and execute the major substantive energy

policy decisions, what was the primary role of the Federal Government?

As already noted in the previous section, government's primary re-

sponsibility was to "create a climate that stimulates private initiative and

enterprise" and, except for taking the lead in developing new technologies,

to keep Federal intervention in the market at a minimum.

Both the basic policy premise of maximum reliance on the private sector

and its regulatory counterpart of minimum governmental interference had

a wide bi-partisan consensual base which has been reflected in the legis-

lative framework over more than half a century. Liberal tax incentives

such as extensive depletion allowances for energy extraction and provisions

allowing generous expensing of exploration costs had been regularly re-

enacted with only minor changes for nearly sixty years before the changes


76-673 0 76 2







reflected in the Tax Reduction Act of 1975, P.L. 94-12, signed March

29, 1975.*/

Similarly, Congresses of varying political persuasions have regularly

reaffirmed support of the Interstate Compact to Conserve Oil and Gas,**/

an endorsement which since its first enactment in 1935 has served to re-

inforce the intent to rely on State laws promoting energy conservation

and market stability by, among other measures, encouraging adjustment

of supply to demand through prorating of production among the private

producers of oil and natural gas.

An examination of energy-related Federal laws and directives through

1973 confirms this relatively self-limiting Federal role in energy policy

formulation.

A compilation of federal laws relating to fuel and energy resources,

prepared for the House Committee onInterior and Insular Affairs and issued

in December 1972, reviewed and reprinted the energy-related sections of

some 40 major laws, collating them by agency, and concluded:


*/In addition to a number of changes which reduced exemptions involving foreign
income, this law repealed the 22 percent depletion allowance in its entirety for
all major oil and natural gas producers, identified as those producing more
than 2,000 barrels of oil per day, or 12 million cubic feet of natural
gas per day, postponing its abolition for independent companies who do not
have retail outlets and produce less than these amounts, on a graduated
schedule until 1984. The depletionallowance was continued for other extrac-
tive fuels.

**/ Most recently, in S. J. Res. 126, to extend the compact through Dec-
ei'mber 31, 1978, which passed the Senate May 4, 1976. See "Interstate
Oil Compact Extension," Hearing before the Senate Committee on Interior
and Insular Affairs, 94th Congress, Second Session, on S. J. Res. 126,
March 24, 1976, for a summary of recent discussions on the role of pricing
as a conservation tool, in the context of the original purposes of the compact
set out in Article if.








If nothing more, arranging these laws by administering agency
serves to underscore both the large number of agencies and other of-
fices having some responsibility in the energy field, and the lack of
central control over energy policy.. There is no national energy pol-
icy by which agencies having fuels and energy responsibility might gauge
proposed actions in the way proposed actions must be assessed in
terms of the National Environmental Policy Act. The National Environ-
mental Policy Act has been interpreted to force a de facto review of
energy policy by forcing an agency to consider the environmental con-
sequences of developing fuels and energy resources -- some of which
may be regulated by another agency. */

Similar conclusions were drawn by a Federal Energy Regulation Study

Team, appointed bythe President in July 1973 to review this area of organi-

zational concern. The team, headed by then AEC Commissioner William

O. Doub, issued its final report in April 1974. Among the principal

findings were these:

There is no mechanism for providing guidance on overall national
energy objectives to regulatory agencies charged with developing and
applying policies in specific energy areas.

Studies of the Federal Government frequently call for the develop-
ment of a "national policy" in one area or another, usually without result.
It would be unrealistic to expect that a common and unified national
policy could be formulated in detail for a subject as complex, diversified,
and pervasive as energy. But a common set of goals and planning
assumptions to guide regulatory deliberations is both feasible and
needed.


Agencies involved in energy regulation are obliged to act in strict
pursuance of their statutory charters. Nevertheless, it is evident that
an overall clarification of national energy policy can improve and ra-
tionalize regulatory decisions that have broad impact on the public
interest and concern such matters as:

1. the relative end-use priorities for all forms of energy;

2. the efficiency of energy utilization and the restriction of energy de-
mand;


*/ U.S. House of Representatives. Committee on Interior and Insular Af-
rairs. 92nd Congress. 2nd Session. Compilation of Federal Laws Relating
to Fuel and Energy Resources, Committee Print 92-7, 898 pp.







10



3. the relationship of energy supply goals to other national objectives,
such as environmental protection, land use, international financial
stability, and national security

4. the use of Federal lands for energy purposes;

5. the development of new energy technologies, such as oil shale,
coal gasificationand liquifaction, synthetic naturalgas, solar ener-
gy, nuclear fusion, and geothermal energy;

6. the distribution of operational energy responsibilities between the
Federal Government and the private sector (e. g., exploration, data
collection and pricing).

Much of the recent public discussion of energy regulation has centered
on the issue of the long leadtimes required to obtain Federal permits.
Delays and schedule slippages have been blamed (sometimes unfairly)
on Federal regulation. However, the evidence gathered by the Study
Team--particularly in the public meetings -- indicates that complaints
about the uncertainty, inconsistency and indecisiveness of the regulatory
system are even more intense and prevalent than the complaints about
delay. The lack of a cohesive energy policy at the national level is
perhaps the greatest single contributor to this and to the other deficien-
cies we have observed in the system. */

3. What policy changes can be identified in laws enacted and organizations
created since the end of 1973 ?

The end of 1973 marked a major turn in the history of U.S. energy

policy and energy formation. Almost overnight, Congress and the nation

as a whole were forced to focus on the fact that an age of what had seemed

to be one of unlimited energy supplies had become one of much more limited

options.

Jolted into action by the mid-October embargo by Arab oil producers

on oil exports to the United States and the almost simultaneous quadrupling


*/ Federal Energy Regulation: An Organizational Study, prepared for public,
congressional and agency comment by the Federal Energy Regulation Study
Team, William 0. Doub, chairman, published by the Government Printing
Office, April 1974; 37 pp. with Appendices A through I.







11


of the price of imported oil, the 93rd Congress launched and the 94th Con-

gress continued an almost non-stop marathon legislative debate on virtual-

ly every aspect of national energy production and consumption, investigat-

ing the operations of the major energy industries, reviewing underlying pre-

mises and still unresolved issues of national energy policy.

By mid-1976, the process of identifying and articulating a new national

energy policy was well under way, already replacing, although only to

a limited extent, the earlier de facto policy of maximum reliance on the

private sector.

Beginning with the enactment of the Alaska Pipeline Authorization (P. L

93-153, signed November 16, 1973) and the Emergency Petroleum Alloca-

tion Act (P.L. 93-159, signed November 27, 1973), the 93rd Congress

legislated a substantial consolidation and reorganization of several energy

management functions. A new Federal Energy Administration was created

(P.L. 83-275. signed May 7, 1974) to administer the provisions of the

petroleum allocation act and undertake new energy information gathering

responsibilities. A new Energy Research and Development Administration

(P.L. 93-438, signed October 11, 1974) took over the research manage-

ment functions of the former Atomic Energy Administration and non-nu-

clear research previously lodged in the National Science Foundation, the

Department of Interior and other agencies.

The same law set up a Nuclear Regulatory Commission to handle licensing

and other residual regulatory functions taken over from the Atomic Energy







12


Commission. An Energy Resources Council was also authorized, in the Of-

fice of the President, to serve as a two-year interim interagency coordi-

nating unit with responsibilities for recommending changes and improve-

ments in energy policy.

Continuing this intensive reassessment of energy issues and program

operations, the 94th Congress has taken steps which begin substantively

to replace the earlier policy premise of maximum reliance on the private

sector.

The law which gives effect tothis significant transition is the previously

noted Energy Policy and Conservation Act of 1975, signed into law as P. L.

94-163 on December 22, 1975. Culminating more than two and a half

years of almost continuous debate by the 93rd and 94th Congresses,

this landmark law codified an enlarging compromise between Congress and

the Administration and a new, though incomplete, national energy policy

position.

The essence of this enlarging consensus was that management of price,

supply and demand for oil --'the dominant fuel in our country--would now

be subject to regular and continuing oversight by public government rather

than being deliberately relegated to the private sector as had been the case

up to the present. While the result may be that the price of oil may rise

to equal the cartel-set import price, the process will be subjected to con-

tinuous Federal monitoring and statutory authority is in place for further

intervention if this seems desirable in the public interest.

As finally enacted, the Energy Policy and Conservation Act consolidates

the provisions of five major bills introduced in the 94th Congress and includes:







13



-- authorization to create a system of national strategic petroleum re-
serves;

--a wide range of standby energy emergency legislation, including
authority for allocation of scarce materials and petroleum;

-- graduated decontrol of oil prices over 39 months;

--extended authority for the FEA Administratror to force industrial
conversion from oil and natural gas to other fuels;

-- mandatory labeling for energy-using appliances; and

-- mandatory compliance with automobile fuel-efficiency standards;

-- authority to demand and receive energy information from all integrated
oil companies on virtually all aspects of their operations has also now been
claimed by and vested in Congress and its agents.

Other substantive energy actions are proposed in various bills covering

mandatory building standards and winterization assistance, graduated dereg-

ulation of natural gas, and a wide range of taxation and other financial

incentives to individual companies and private consumers to encourage

capital investment, conservation, recycling or conversion to alternative

fuels--measures which are said to be, in substantial degree, acceptable

to the Administration. Other active proposals on which less of a consensus

exists include Clean Air Act revisions, stripmining and other land use

regulations, and establishment of quantitative oil import quotas.

Not all of these measures represent departures from energy policy as

generally understood and practised before the end of 1973. It was to be expected

that the Federal Government would assume responsibility for extraordinary

allocation and conservation measures in time of energy emergency. Similar-

ly, the action authorizing creating of national strategic petroleum reserves

simply activates a long standing national security objective.







14


Special tax and investment incentives to industries and individual con-

sumers to undertake energy production, conservation, recycling, solar or

other renewable energy resources can be considered an extension of the

old policy which provided incentives to the private sector but left the choice

of acceptance and degree of action up to the private producer or consumer.

Similarly, although both the 93rd and the 94th Congresses have intervened

to insist that higher priority and resources be given to research and develop-

ment of non-nuclear fuels and technologies, this move could still be con-

sidered to remain within the framework of the earlier policy which made

Federal leadership in-new energy technologies an exception to the premise

of maximum reliance on the private sector.

Nonetheless, the assertion of congressional authority over the process

of oil price deregulation and of independent energy information gathering

powers are clearly Federal energy policy initiatives that substantively

change previous national energy policy premises.


4. What are recent proposals for further national energy policy changes?

The two most active recent proposals for national energy policy are

represented in the President's energy message of February 26, 1976,

which updates the proposals for Project Energy Independence first unveiled

in February 1974, and the Democratic Majority program, announced in

February 1975, entitled "The Congressional Program of Economic Recovery

and Energy Sufficiency," reissued in December 1975, annotated to show

action taken during the first session of the 94th Congress.







15


The consensus summarized in the previous section */ represents

a quite reliable and bipartisan legislated agreement on measures which

both branches of government and both political parties believe are in

the national interest, partially replacing the earlier major energy pol-

icy premise inthe areas of price and information monitoring and manage-

ment authority.

Both the Administration and the Congressional majority have engaged

in another policy-related function, that of identifying quantitative pro-

duction goals, a prerogative hitherto exercised almost exclusively by the

private sector.

The Administration laid out the following as time-bound production

targets, hopefully to be achieved by 1985:

-- Doubling coal production, to exceed one billion tons in 1985.

--Increase domestic production of natural gas by over 4 trillion
cubic feet in 1905 (25 percent increase).

-- Complete 179 nuclear power plants now planned or committed with
a capacity of 196, 000 megawatts, adding to the 57 nuclear plants
now on line with a capacity of almost 40,000 megawatts.

--Hold imports of oil and oil products to about 6.5 million b/d
in 1978 and reduce to 3. 5 million b/d by 1985.
-- Step up production from Naval Petroleum Reserves (NPRs) 1,2, 3,
and 4 to reach about 300,000 by 1979 and 1. 000,000 by 1985.

Produce 350,000 $1 of synthetic fuels by 1985.

-- No quantitative targets were set for solar, geothermal or other
renewable fuels.



*1 See also The 94th Congress and the Energy Record, a progress report pre-
pared by the Congressional Research Service for the Senate Committee
on Interior, and Insular Affairs, April 1976. Committee Print, Serial No.
94-30(92-120).







16


The Congressional Majority also laid down time -bound quantitative

goals not too different from those of the Administration:

-- Double coal production by 1985.

-- Natural gas production will stay about even.

-- Nuclear and new sources of energy would double, from 2. 5 million
boe/d to 5. 2 million boe/d. */

Hold imports of oil and oil products to 4 million b/d in 1980
and 1, 000.,000 in 1985. (However. H. R. 6860 which passed the
House on June 19, 1975 and is pending in the Senate Finance Com-
mittee, target 6. 5 million a day for 1980 and thereafter).

-- Step up production from NPR's to 300, 000 b/d by 1977 and 2 million
b/d by 1985.

-- Produce 500, 000 boe/d of synthetic gas by 1985, which together with
solar, geothermal and renewable fuels would be produced on a
contract or joint venture basis with private industry.

The Administration continues to place central reliance on the private

sector, proposing price deregulation for both oil and natural gas and relax-

ation of environmental constraints, 'combined with generous grant, loan

and loan guarantee programs as incentives to private investors who would

otherwise be unwillingto take the risk of the large commitments of capital

needed for the required energy facilities.

In addition to a wide variety of tax and other fiscal incentives, the

President's February 1976 energy message included the following:

-- A $1 billion Federal Energy Impact Assistance Program in loans,
loan guarantees and planning grants tofinance energy-related pub-
lic facilities prior to production.

-- A $2 billion synthetic fuels commercialization program to aid the
private sector in developing commercial facilities in these new
fuels.

-- A $100 Energy Independence Authority, a new government corpora-
tion to assist private sector financing of new facilities.


*/ barrels of oil equivalent per day.











The Democratic Majority also endorses phased price deregulation of

oil and natural gas and liberal tax, grant and loan incentives to speed

private initiatives in both conservation and in expanding and developing

additional energy supplies. Although the Majority, in general, opposes

the Administration's proposed $100 billion Energy Independence Authority

as a "give away to big business," its members have proposed generous

alternatives. Recent examples are:

-- The Energy Conservation Act which includes $10 billion in grant,
loan and loan guarantees to speed up both State and Government
energy conservation efforts.

-- Synthetic fuel subsidy programs of up to $6 billion.


5. What are the prospects for a consolidated national energy policy?

Measured on these terms, the prospects for a consolidated bipartisan

national energy policy which could significantly replace the previous de

facto policy would appear to be fairly strong Although the Administration

has been criticized for giving inadequate attention to the role of conserva-

tion and too low a priority to solar and other renewable fuels, these could

be interpreted as reflecting differences of degree and timing, rather than

substance.

The major remaining policy difference exists, not in the ends, but

in the means which are to be invoked to achieve these quantitative goals,

if the generous incentives prove insufficient to stimulate the requisite vol-

ume of private initiative and effort or if private industry selects very

different quantitative energy production and consumption goals.

In contrast to the Administration's position, the Democratic Majority

energy proposals include a number of mandatory quantitative energy mana-

gement measures which, if enacted and enforced, would produce a







18



a distinctive alternative to the Administration's much heavier reliance

on a market-oriented approach.

Three key bills pending in the 94th Congress have incorporated mandatory

quantitative control concepts of this type:

-- The House Ways and Means energy bill (H. R. 6860) approved
by the House, June 19, 1975, would place quantitative limits -- sub-
ject to some flexibility -- on the volume of crude oil and oil pro-
ducts which could be imported.

-- The Senate national petroleum and natural gas conservation
bill (S. 1777) would limit the number of oil-and-gas-fired power-
plants and industrial boilers to those existing now and would require
them to convert to coal by 1980; and require all new powerplants and
industrial boilers to be capable of burning coal and to convert to
coal by 1985.

The National Energy Production Board (S. 740) to be pat-
terned after the War Production Board of World War II, would be
charged with establishing quantitative energy production goals and
programs whose priority claims on scarce materials and capital would
have the effect of placing quantitative limits on all less essential claims
and energy and materials.

The Energy Policy and Conservation Act (H.R. 7014, later enacted

as P.L. 94-163) includes discretionary authority to impose direct controls

on refinery operations to limit the production of gasoline. It also extended

the discretionary authority of the Federal Energy Administrator to compel

powerplants and other industrial fuel burning installations to convert to

the use of domestic coal. A quantitative ceiling on the volume of gasoline

which could be consumed annually was included inthe bill as it passed

the House, but was dropped in conference.

Although S. 740, S. 1777, and H.R. 6860 have been targeted by

the Democratic Majority for early floor action, none of the three has

yet been reported from their respective Senate Committees where mark

up has been pending for almost a year.







19



The Administration is opposed to formalizing, through additional legis-

lation, mandatory management tools of this type. Its spokesmen have

argued that sufficient authority is available under existing legislation,

includingthe Defense Production Act, to accomplish the purposes intended

if future developments require more than enabling incentives and hortatory

enjoinders to private industry to meet targets.

In any event, the issue of whether agreement could be reached on a

consolidated national energy policy which would include such mandatory

quantitative management measures remains moot until the bills as

ultimately marked up are put to final vote.


6. Are there major remaining policy issues, omissions or inconsistencies?

The appearance of an emerging consensus on this wide-ranging, multi-

purpose composite package of energy actions, however, does not add

up to the equivalent of a comprehensive new national energy policy. On

the contrary, the most important remaining issues rest on resolution

of whether the basic policy premise, already modified, needs further

substantive replacement.

The question was posed bluntly in the report to the Senate and House

Committees on the Budget, published by the Congressional Budget Office

on March 15. 1976, under the title "Budget Options for Fiscal Yearl977":

The major budget issues are the extent to which Federal financial
support should shape future technology developments and stimulate
their commercialization.

At one extreme, it is argued that development of energy sources
should be left entirely to the private sector, that rising prices will
induce conservation and appropriately constrain demand, and that the
forces of the marketplace will generate new supplies as necessary
to meet demands. At the other extreme, it is argued that the market-
place will not provide stimuli adequate to achieve larger social goals,







20



such as timely reduction in reliance on imports or preservation of
environmental quality, and that the Federal Government will have
to offer further financial and regulatory inducements to achieve so-
cial goals.

It should be noted that none of the substantive modifications reflected

in energy legislation so far enacted would prevent continued reliance on

the private sector for most of the key substantive energy decisions which,

up to the end of 1973, had been made by private choice. Assertion of

authority to moderate and monitor the rise of oil prices and to demand

and monitor a wide range of data on energy production and consumption

could still be consistent with allowing all the rest of the decisions to

be made through the collective interactions of the private sector.

As outlined earlier in this essay these include, but are not limited

to, such important vectors of policy as:

-- the amount and direction of energy investment;

-- the extent and location of exploration;

--the volume and rate of production;

-- the direction and mode of distribution;

-- decisions on prices at wholesale and retail level; and

-- the degree of national dependence on imported fuels.

Furthermore, until actively replaced by a Federal directive to the con-

trary, or by a Federal energy policy or program that substitutes a public

decision for the market composite of private acts, these decisions, as

in the past, continue to be made by the private sector.











Consequently, present U. S. energy still leaves unanswered such cri-

tical related policy questions as:

-- Should oil imports be deliberately reduced by quantitative restraints
to hasten the transition to other fuels or will this only "drain
America first"?

--What relative priorities are to be given to reliance on nuclear
energy as compared with fossil fuels and with the development of
alternative renewable fuels?

-If voluntary private sector choices do not result in a distribution
of investment and resultant output which reflect the chosen priorities,
should mandatory measures be adopted to influence quantitative
production results?

-- How much authority over siting of energy facilities and other related
energy decisions should be delegated to State and lower local levels?

-- What should be the pattern of ownership, funding, organization and
structure of the new or expanded energy producing and using sys-
tems? Is divestiture to any degree necessary or desirable?

--How should crude oil prices be managed after the moderated,
monitored increases reach the new world levels?

While thelack of answers to any of these questions may appropriately

be labeled is "omissions", perhaps the major "inconsistency" would ap-

pear to be found in the issues relating to oil imports and price.

On the assumption that there may still be general agreement on the

broad energy goals identified earlier in this essay */ any use of pricing

as an energy policy tool ought at least to address itself to the general

goals and objectives.

How high -- or low -- a price per barrel of domestic crude is needed

to achieve these objectives:


*/ See p. 6 above.







22



1. To assure adequate-and diverse supplies of energy -- sufficient
for continued economic growth, dependable under emergency and
non emergency conditions, and diverse in both sources and form.

2. To assure the lowest possible costs and price consistent with
sound business, labor and conservation practices, with health
requirements, and with national security and fiscal needs.

3. To manage wisely and productively publicly-owned energy re-
sources.

4. To operate efficiently public businesses that involve the production
or use of energy.

5. To help meet broader economic and social objectives, including
achievement of internal and external budgetary objectives and the
protection of health, environment, and othet resources from dam-
age resulting from the production and the use of energy.

Similarly, what kind of import policy can most effectively support

these goals? Oil imports, however high their price, at least arrive

without domestic environmental risks or damage attendant on their pro-

duction.

None of these issues can be answered within the framework of energy
I
policy alone. Even these statements of broad energy goals already identify

as parameters of constraint such other high priority national goals as

"continued economic growth", and "national security and fiscal needs,"

a relationship discussed in the next and final section.

7. What is the relationship between energy policy goals and other national
objectives?

There does not seem to be any disagreement, as between the Ex-

ecutive and Legislative branches or between the major parties, that ener-

gy policy goals ought to be at least considered in the context of other

national objectives, if for no other reason than to assure that other high

priorities are not unwittingly infringed by energy decisions -- short term

or otherwise -- which cannot be deferred.







23


The examination of energy policy in the larger context of national

priorities and goals is not new to the current energy debate, but until

mid-1975 it was on an ad hoc basis and largely limited to foreign policy

considerations. The Cabinet Task Force on Oil Import 'Control, reporting

in February 1970, focused its full attention on the relationship of oil

imports to national security. Project Independence, first unveiled at

the Washington Energy Conference, February 11-12, 1974, acknowledged

as reasons for striving for energy independence the need to relieve strains

on world oil supplies, to avoid energy-caused balance of payments prob-

lems, and to prevent jeopardizing foreign policy and national security

goals.

The national debate has recently been institutionally enlarged to in

clude major national domestic priorities and policy goals as a focus for

energy policy alternatives and decisions.

The ERDA National Plan .

A statutorily required national energy plan, issued by the Energy Research

and Development Administration in June 1975, as "A National Plan for Energy

Research Development and Demonstration: Creating Energy Choices for the

Future," (ERDA-48, June 28, 1975) acknowledges in the Summary chapter

that:

This Plan recognizes five national policy goals as a focus for energy
policy.

-- To maintain the security and policy independence of the Nation.

-- To maintain a strong and healthy economy, providing adequate
employment opportunities and allowing fulfilment of economic
aspirations (especially in the less affluent parts of the popula-
tion).


76-673 0 76 3







24


-- To provide for future needs so that life styles remain a matter of
choice and are not limited by the unavailability of energy.

-- To contribute to world stability through cooperative international
efforts in the energy sphere.

-- To protect and improve the Nation's environmental quality by as-
suring that the preservation of land, water, and air resources is
given high priority.


The OTA Assessment

While these goals as summarized in ERDA-48 were not elaborated

to any degree in either of the two volumes which make up the Plan, their

importance -- and the omission of further discussions -- was immediately

flagged in an early evaluation of the report. An analysis of the ERDA

Plan undertaken by the Office of Technology Assessment (OTA). at the

request of the House Committee on Science and Technology and issued

in October 1975, provides the first round of what could become an expanded

debate on the crucial topic of the interrelationships of energy policy and.
N
national goals.

The authors of the OTA report take ERDA to task for adopting what

they call a "very narrow, technological interpretation" of the five na-

tional policy goals. Their comments on two of these goals are repro-

duced here:

With reference to the first goal--"To maintain the security and policy

independence of the Nation," the OTA appraisal states:


ERDA, especially in the systems methodology of ERDA-48,
volume I, reduces this goal to a narrow concern for eliminating oil
imports, which seriously distorts the meaning of policy indepen-
dence. ERDA could have read this goal as a mandate to explore
with a far greater sense of urgency any of the following, for ex-
ample:







25


--New international institutions for managing fissionable materials
and fission products.

-- The role of the multinational corporations in global energy policy
and the impacts of actual and potential United States, foreign,
and international regulations on their conduct.

--The potential role of the United States as an exporter of fuels
(e.g., coal and uranium) and energy technologies (e.g., solar
heating and cooling and synthetic fuel processes).
-- The potential for cartelization of critical materials other than oil,
notably uranium.

Commenting on the ERDA treatment of the second goal, summarized

in ERDA-48 as "To maintain a strong and healthy economy, providing

adequate employment opportunities, and allowing the fulfillment of econo-

mic aspirations (especially in the less affluent parts of the population"),

the OTA appraisal states:

ERDA nowhere interprets this goal explicitly. The goal state-
ment perhaps does not address a critical question concerning energy
and society -- the degree of coupling of the maintenance of "a strong
and healthy economy" with the perpetuation of increases in the quan-
tity of physical resources used in the Nation's economy each year.
ERDA's scenarios (including its conservation scenarios) postulate
exponential increase in the use of these resources, continuing in-
definitely. ERDA could have seized this goal as a mandate to launch
a vigorous socioeconomic research program to gain some under-
standing of the relationship of economic growth, energy, and the qua-
lity of life, and to shed light on the potential viability of low-growth
societies.

The OTA assessment finds the need for early review and agreement

on the relative priorities to be assigned to these goals:

Unless there is agreement between the Administration and the
Congress on the priorities given different national energy goals, ERDA's
development of an R, D & D program is made more difficult.

A congressional review of the priorities assigned to the five goals
takes on particular importance because energy is so central to other
policy areas. Other Government agencies will be planning programs
ranging from foreign trade to welfare based on their perceptions of
these priorities. For those reasons maximum clarification of priorities
will be beneficial.







26


The ERDA National Plan Revised

The Executive Summary of the revised report, ERDA-76, dated April 15,

1976. omits reference to national goals. However, the report repeats

the original version in Chapter I1, introducing the same five goals with

the phrase, "The National Plan for Energy RD & D is based on five national

goals formulated to guide the introduction of new technology." There is

no subsequent elaboration of the relationship to these goals of the proposed

programs for a national energy research and development effort.


Budget Options for 1977

Another opportunity for considering energy policy options within the

wider framework of national priorities is provided by the new Congres-

sional budget review procedure. A recent document already mentioned

in this paper, "Budget Options for Fiscal Year 1977," includes, pursuant

to the instructions of Public Law 93-344, a number of alternative five-

year budgets, three of which were set forth this year as illustrative program

and funding mixes which could emerge from differing national priority

emphases.

The three illustrative budgets permit comparison of choices based on

three major premises: in the first case, emphasizing national security;

in the second, concentrating Federal efforts on social programs; and, in

the third, strengthening control by state and local government and the pri-

vate sector.

The author, CBO Director Alice Rivlin, emphasized the purely illus-

trative character of these budgets and pointed out that in none of the

cases would even "a relatively 'pure' philosophy" necessarily produce any







27


particular combination. Any of them could include almost infinite variants

among the related priorities.

For example, under the first option outlined where prime concern

was assumed to be national security, with defense expenditures rising

from $106 billion to $158 billion over five years, the following were sug-

gested as energy-related actions:

--Increase flexibility and efficiency of the national transportation
system, through changes in regulations; maintain current level of
support for Federal-aid highways, aviation programs, rail, mass
transit, water, and other transportation programs.

-- Stimulate major industrial adjustment to constrained energy mar-
kets, by increasing Federal initiatives in energy R & D and tech-
nology demonstration, providing incentives for commercialization
of energy research and production, phased decontrol and dereg-
ulation of domestic energy markets, and increasing support for
other resource development programs.

The possibility of alternative energy programs, as of programs sup-

porting other related priorities, appears fairly easy to envisage in this

case. At other times in the nation's history, expansion and moderniza-

tion of the armed forces was accompanied by increased, rather than de-

creased. control of the private market, and by increased taxes, rather

than tax cuts, in order both to finance increased military expenditures

and to curtail civilian expenditures which could stimulate inflation.

It is interesting that the third suggested option, where prime con-

cern is assumed tobe an "emphasis on returning control toState and local

governments and the private sector," includes estimated levels of federal

energy and natural resources expenditures for 1977-1981 identical to those

suggested for a budget giving primary priority to national security, although

within these identical levels differing energy program combinations could

be found.







28


As noted earlier, in discussing the issues which are involved in

choosing among alternative energy program options, the report highlights

the critical role played by the confrontation of views of (a) those who be-

lieve that maximum reliance on the private sector and the market will best

serve the objectives of reducing and redirecting energy demand and of

increasing energy supplies; and (b) those who believe the dynamics of the

marketplace will not be adequate to achieve these objectives.

These exchanges areuseful as illustrations of how energy policy goals

and policy and program decisions need to be -- and can be -- considered

in the context of other major national priorities.






29


II. GOVERNMENT ORGANIZATION FOR ENERGY AFFAIRS
















A Summary of a
June 22-23, 1976 Workshop
I
Arranged for the
Congressional Research Service


by the .

National Academy of Public Administration Foundation
Washington, D.C.


July 1976







30



Preface




This paper summarizes the principal observations on the government

organization for energy affairs raised in the course of a June 22-23, 1976

workshop in the Whittall Pavilion at the Library of Congress. The workshop

was arranged by the National Academy of Public Administration Foundation for

the Congressional Research Service in response to a request by Senator Charles

Percy of the Senate Committee on Government Operations. Its timing and

content were designed to assist that Committee in its consideration of legisla-

tion extending or revising the authority of the Federal Energy Administration

and other Executive energy bodies.

In addition to the transcript of the discussions, this summary draws

upon written statements submitted by a number of participants and other authori-

ties, and discussions with a few persons who were unable to attend. Because

of time pressure, it has not been reviewed by participants.











Agenda

Workshop on Covernoent Organization for Energy Affairs

Arranged by the National Academy of Public Administration
for the Congressional Research Service

June 22-23, 1976
9:30 AM to 4:30 PM each day
Whittall Pavilion, Library of Congress


Tuesday, June 22


9:30 -- 11:00


11:00 -

12:30 -

1:30 -

3:00 -


12:30


1:30

3:00


Introduction Senator Charles H. Percy. Energy
programs: Federal Energy Administration, Energy
Research and Development Administration, and In-
terior

The regions, states, and cities


Lunch


On getting adequate, reliable data


4:30 Program coordination and central policy formula-
tion: Federal Energy Administration, Energy Re-
sources Council, Energy Research and Development
Administration, Office of Management and Budget,
and the Economic Policy Board


Wednesday, June 23


9:30 11:00


11:00 12:30



12:30 1:30

1:30 3:00

3:00 4:30


Regulation: Federal Energy Administration, Federal
Power Commission, Nuclear Regulatory Commission, etc.

The Senate, and Congressional agencies: General
Accounting Office, Office of Technology Assessment,
Congressional Budget Office, Congressional Research

Lunch

Industry and the public


Summary: findings and conclusions







32


GUIDELINES FOR WORKSHOP PARTICIPANTS






The timing and content of this workshop are designed to assist

the Senate Government Operations Committee in its consideration of legis-

lation extending or revising the authorization of the Federal Energy

Administration and other energy organizations. Workshop participants and

other authorities who are unable to participate but wish to make their

views known are invited to respond to the following broad questions, and

to as many of the subsidiary questions as they wish. Replies, a full

transcript of the workshop discussions, and a summary of the principal

conclusions will be placed on public record and will be available to the

Congressional Research Service, the Government Operations Committee, and

other interested parties.


Broad Questions

A. What are the principal weaknesses in the present organization and

administration of federal energy programs and how may they be rectified?

B. What are the principal weaknesses in present arrangements for for-

mulating, coordinating, and implementing national energy policies and how

may they be corrected?

C. How can energy policies and plans be integrated with broader national

economic and social goals?


Subsidiary Questions

1. Federal Operating Programs

The greater centralization of major energy programs--particularly

those of Interior, ERDA, and FEA--into a Department of Energy and Natural







33



Resources has been advocated in several quarters; the amalgamation of the

policy responsibilities of FEA with the operating and policy responsibil-

ities of ERDA into a National Energy Administration has been recommended

as a logical first step to the creation of such a department.

What are the benefits and drawbacks of these two proposals?

Can a better regrouping of programs be suggested? On balance, is any

regrouping superior to existing arrangements?

2. Regulatory Functions

Regulatory responsibilities with significant consequences for

energy supply and conservation now lodge in the Federal Power Commission,

the Nuclear Regulatory Commission, the Department of Interior, the Federal

Energy Administration, and the Environmental Protection Agency, as well as

the Treasury and other agencies. Conflicts are apparent between the ob-

jectives of certain regulatory agencies, such as FEA and EPA, and between

the assurance of increased energy supplies and public safety, health, and

other social objectives.

Can and should some organizational and/or administrative steps

be taken to reduce or temper these conflicts, and if so, what steps?

Should a closer compact be arranged between at least some regulatory

agencies such as FEA and FPC?

3. Policy Formulation and Coordination

Responsibility for the formulation and coordination of energy

policies is now lodged in a number of agencies, including the Economic

Policy Board, the Energy Resources Council, the Office of Management

and Budget, and the FEA.

Are these arrangements satisfactory or, if not, why not? What

arrangements now exist for reviewing energy policy in the context of







34


national security, environment, and full employment goals? Are they

adequate? Should the policy responsibilities, authority, and resources

of any of these bodies-particularly ERC and FEA-be modified? Is a

new policy-making body needed?

4. Data Collection

Industry complains about the excessive and duplicative data

demands of government agencies; others complAin that present data are

inadequate for planning purposes and for the formulation and timely

revision of energy policies and regulations, and that data are either

misrepresented or selectively reported to promote the interests of

those who supply or report it.

Are changes indicated in the present agency data responsibil-

ities and performance? Can better data be obtained by assigning to a

new agency, or a component of an existing agency, special powers, re-

sponsibilities, and independence?

5. Conservation

Responsibility for energy conservation programs is dispersed

among several agencies, including ERDA, FEA, DOI, and EPA. Some critics

contend that the potential of energy conservation is being largely

neglected. Should the organization for conservation policy and programs

be changed, and, if so, how?

6. The Senate and the Congress

Are any changes called for in the organization and responsi-

bilities of the Senate and other Congressional entities such as the

General Accounting Office, the Congressional Budget Office, and the

Library of Congress to discharge better their responsibilities in energy

affairs? What are the implications for the Senate of a continuance







35


of present Executive arrangements? Of a greater centralization of

Execuitve energy responsibilities?

7. The Regions, States, and Localities

Attention has lately been focused on conflicts between the

energy policies, interests, and powers of state and federal agencies

in such matters as the power of eminent domain and of licensing, reg-

ulating, taxing, and aiding the extraction, production, and delivery

of fuel and energy.

Are such conflicts inevitable or can they be reduced by

closer collaboration of state and federal authorities in energy

planning, policy formulation, and implementation? Are present mech-

anisms adequate to promote this collaboration or is new machinery and

authority needed?

8. The Private Sector

For all its powers, the federal government is powerless without

the cooperation of industry and the public, yet there is ample evidence

of suspicion and distrust between the government and many sectors of

industry; public attitudes and consumption habits can vitiate the best

energy plans and policies.

What can the government do to secure the fuller cooperation

of industry and the public in defining and attaining the nation's energy

goals? Are new private organizations and activities needed for this

purpose and, if so, what should the government do to help them succeed?







36


Participants, June 22-23 Energy Workshop



Charles F. Bingman, Deputy Administrator, Urban Mass Transportation
Administration; former energy specialist, Office of Management
and Budget

Lynn Alan Brooks, Commissioner, Connecticut State Devartment of Planninu
and Energy Affairs
*
Monte Canfield, Jr., Director, Eneray and Minerals DiviRion, General
Accounting Office; former Deputy Director, Energy Policy Project,
Ford Foundation

Chester L. Cooper, Institute for Energy Analysis, Oak Ridge Associated
Universities; former Director, International and Social Studies,
Institute for Defense Analyses

Alan L. Dean, Vice President, U.S. Railway Association; former Senior
Analyst, Bureau of the Budget; Assistant Secretary, Department of
Transportation
*
William 0. Doub, Attorney; former Commissioner, Atomic Energy Commission;
Chairman, Federal Energy Regulation Study Team
*
George C. Eads, Executive Director, National Commission on Supplies and
Shortages

Harold B. Finger, Manager, Center for Energy Systems, General Electric
Company; former Director, nuclear systems and propulsion, National
Aeronautics and Space Administration and Atomic Energy Commission

Bernard L. Gladieux, Consultant; former Partner, Booz, Allen and Hamilton;
Director, Knight, Gladieux and Smith
*
Charles J. Hitch, President, Resources for the Future; former President,
University of California; Assistant Secretary, Department of Defense

Frank Pollara, Special Assistant to the Officers, American Federation
of Labor-Congress of Industrial Organizations

Clem Rastatter, Director, Energy Conservation Project, The Conservation
Foundation

Cecily Cannan Selby, President, Americans for Energy Independence; former
Executive Director, Girl Scouts

Robert F. Steadman. Consultant: former Director of (^nvPr7-ment StudieR,
Committee for Economic Development

William E. Warned, Consultant; former Assistant Secretary, Department of
Interior


Submitted written statement.
Submitted written statement.







37


National Academy of Public Administration


Roy W. Crawley, Executive Director (workshop chairman)

Erasmus Kloman, Harold Orlans (staff)


Contributors


James E. Akins, former Ambassador, Saudi Arabia; former Director,
Office of Fuels and Energy, Department of State; Energy Adviser,
White House

Harold P. Green, Attorney; Professor, National Law Center, George
Washington University

William A. Johnson, Director, Energy Policy Research Project, George
Washington University; former Assistant Administrator, Federal
Energy Office

Hans H. Landsberg, Co-Director, Energy and Materials Division, Resources
for the Future

John C. Sawhill, President, New York University; former Administrator,
Federal Energy Office
*
Chauncey Starr, President, Electric Power Research Institute; former
Dean, School of Engineering, University of California at Los
Angeles; former president, Atomics International

Mason Willrich, Professor, Law School, University of Virginia























*
Submitted written statement.
**Did not attend workshop but provided helpful counsel.
Did not attend workshop but provided helpful counsel.







38


Acronyms



AEC Atomic Energy Commission

CBO Congressional Budget Office

CEQ Council on Environmental Quality

CRS Congressional Research Service

DENER Department of Energy and Natural Resources (proposed)

EPA Environmental Protection Agency

ERC Energy Resources Council

ERDA Energy Research and Development Administration

FEA Federal Energy Administration

FPC Federal Power Commission

GAO General Accounting Office

NRC Nuclear Regulatory Commission

OMB Office of Management and Budget

OTA Office of Technology Assessment











A Central Energy Agency or Department?



The arguments for and against concentrating important energy

programs in a major new agency or department were extensively discussed.

Against a Central Agency: Reorganization is costly in the time

it takes a new agency and new officials to settle in and function effec-

tively. There has been too much energy reorganization already and too

frequent changes in leadership and direction--"The United States has had

at least nine energy czars in three years." ERDA was established only

in January 1975 and should be given a chance to prove itself. It could

be hurt by inclusion in a new agency, especially a department in which

old line agencies of the Department of the Interior would have a major

voice. Large bureaucracies are often inefficient and have difficulty

attracting good people to serve in subsidiary positions; ERDA is al-

ready "a giant" and FEA, "a jungle." There is a tendency to expect

too much from a new organization--that it formulate and implement a

consistent national energy policy, whereas the inconsistency of govern-

ment policies reflects the diversity of domestic interests that is

likely to persist despite any reorganization.

A large agency can lead to an excessive concentration of

power and the reduction of public debate, the subduing of rejected view-

points that can find expression in one of many independent agencies.

This viewpoint was stressed especially by Clem Rastatter, who feared

that conservationist efforts might lose out in a centralized organiza-

tion, and by Chauncey Starr, who was concerned to maintain a maximum

number of policy options. In a fragmented structure, policy conflicts


*
William A. Johnson, "Why U.S. Energy Has Failed" (April 1976), in
Robert Kalter and William Vogely, eds., Energy Supply and Government
Policy, Cornell University Press (forthcoming).


76-673 0 76 4







40



are more likely to be aired in public before they are resolved in the Ex-

ecutive Office of the President and the Congress.

All of the programs and powers important to the formulation and

achievement of the nation's energy goals could be concentrated in a

single department only if the entire government were put into one depart-

ment. The Treasury, State, Defense, Housing, and Transportation depart-

ments, for example, all have major responsibilities that effect the supply

or use of energy and therefore will remain powerful independent forces in

energy affairs. Nonetheless, many programs are candidates for inclusion

in a centralized department.

A major centralization of energy programs and controls

assumes that we know, or can resolve upon, a concerted course of action

to deal with the nation's complex and difficult energy problems. "Since

we don't know the right answr-i, it is very dangerous to assume one direc-

tion to the detriment of all others....With an uncertain future and

uncertain outcomes of any action the wisest path is one of multiple

programs, each of which has potential merit either as an investment in

our energy future or as an insurance against negative outcomes. The

answer...is judicious diversity" (Chauncey Starr).

For a Central Agency: The present dispersion and fragmentation

of agencies and programs produces waste, confusion, duplication of effort,

and needless bureaucratic conflicts. The nation has accomplished too little

for its energy efforts and expenditures -- "we're not getting very far very

fast." Though the amalgamation or agglomeration of independent agencies

into a large organization provides no assurance that their independent

programs will be coordinated, duplicated activities eliminated, and con-

flicting policies reconciled, it makes these goals more feasible. To be

sure, all energy programs and powers cannot be concentrated in one depart-







41



ment, but the secretary of a modern department has the power and resources
to forge and administer meaningful national policies and to defend them

in Executive and Congressional councils more forcefully than can the

heads of numerous minor agencies. And the assignment to one secretary

of responsibility for fractionated energy functions can promote more

balanced programs, as the formation of ERDA has promoted a better

balance between research on nuclear and other fuels and the Department

of Transportation has helped to provide a better balance between auto-

motive and other modes of transportation.

The key to the effectiveness of a modern department is the

assignment to it of major related functions; the removal of encrusted

legislative restrictions; the transference to the secretary of power

to realign functions and to delegate responsibilities as he sees fit;

and the provision, in the secretary's office, of sufficient, high-

quality staff to monitor, evaluate, and coordinate the previously

independent functions and to propose general policies. It is not size

but the failure to clarify and delegate responsibility that creates

inefficiency and makes the recruitment of able staff difficult. The

fear that a department will inhibit public debate is unwarranted--

"The Cabinet Secretaries are not going to take over the country."

Secretaries and their line officials are accountable to the Congress;

close communication with, and promotion of, their special constituencies

is characteristic of departmental units, which leak like sieves. Con-

trariwise, the dispersion of functions among independent agencies

frustrates public accountability and participation in policy development,

as agency conflicts are resolved by nameless presidential aides protected

by Executive privilege, operating in a highly politicized situation, and

unaccountable to the Congress or the public. A major reorganization of







42


energy affairs would be opportune and advisable early in 1977, when a

fresh administration should enjoy the customary period of grace extended

to a newly elected president.

The Composition of a New Energy Agency

Few would perpetuate the present Federal Energy Administration,

a stopgap agency with inadequate and temporary authority and accomplish-

ments. A reconstituted FEA, given stronger powers and data-gathering func-

tions, together with ERDA, and a new public body to finance energy facilities,

such as the proposed Energy Independence Authority, would constitute the

core of any new agency. The distinction between an energy "agency" or

"authority" and a "department" hinges largely on the Department of In-

terior natural resource responsibilities that might be incorporated in

the latter, particularly the Bureaus of Mines, Land Management, and

Reclamation; its five Power Administrations; and the Geological Survey.

Opponents of a Department of Energy and Natural Resources fear that it

will be nothing more than "a retreaded Interior," a stultified bureau-

cracy that is a "captive" of Western interests. They might favor such

a department were it possible, by waving a wand, to make existing

statutes and staff vanish and reappear in fresh forms suited to current

realities.

In an independent ERDA, Senator Percy suggests, "researchers

tend to select...technical approaches which do not completely meet the

needs of the users of new technology...." The inclusion of ERDA in an

agency with broader energy functions should link research more closely

to application and, hence, promote the early adoption by industry and

the public of new modes of energy production, transmission, and con-

servation. It would also, Charles Hitch observes, be more likely to







43


provide incentives for private energy research and demonstration:

A technology oriented agency like ERDA, with the best of
Intentions (which it has), is always likely to "tilt" to-
ward government sponsored R and D. In a Department of Energy
and Natural Resources, an Assistant Secretary for Fossil Fuels,
for example, exercising what are now PEA and ERDA and perhaps
other functions, might be expected to ask: wouldn't it be
better if industry built this demonstration plant...and isn't
there some way--other than a government R and D contract--
to induce them to do it? Or an Assistant Secretary for Conser-
vation might well decide that the most effective thing he
could do in the residential area would be to provide help to
homeowners to finance the purchase of insulation, heat pumps,
and (hopefully before long) solar heating and cooling units.

However, some consider the resultant emphasis upon the early commercial-

ization of new technology as grounds for opposing the inclusion of ERDA

in a larger agency, because they regard commercialization as a proper

function of industry, not government, or because they are concerned

lest attention to short-term technological improvements draw attention and

funds from such long-term developments as fusion, the breeder reactor, or

solar energy, And Chauncey Starr is so much in favor of the dispersion of

power that he would break up ERDA into three agencies devoted, respectively,

to nuclear energy, fossil fuel, and advanced technical systems.

Even if all of Interior, including the National Park Service

and the Bureau of Indian Affairs, were absorbed into a new department,

significant energy-related programs such as those of the Forest Service,

the Army Corps of Engineers, and the National Oceanic and Atmospheric

Administration would remain in other departments. The location of the


"...it is clear from the structure of ERDA that this agency has segre-
gated Itself into several major areas. The current experience with
that agency would indicate that it could probably be operated more
effectively if the nuclear sector, the fossil fuel sector, and the
advanced technical systems each had the national status which was
originally that of the five-man AEC. The overlap of technical pro-
grams between such groups is so small that coordination of their
activities could well take place at a coordinating level rather than
at an operating level."









Independent Environmental Protection Agency and the Council on Environ-

mental Quality in the Executive Office of the President would also have

to be determined. Some favor and others oppose the addition of EPA to

a department, but even those who favor it would retain the CEQ as an

independent voice for environmental concerns at the highest levels of
*
government.

The location of regulatory and data-gathering functions will

be discussed subsequently.

In sum: A minority of workshop participants favored a con-

tinuation of the present proliferation of energy agencies; the majority

favored the union of FEA and ERDA into a new agency or the establish-

ment of a new department including FEA, ERDA, most of Interior, and

perhaps EPA and portions of other departments. The support for such a

Department of Energy and Natural Resources was more evident in the

workshop than it has been in much recent public discussion. William

Warne conceives of DENR as an interim ("25-year") step toward the eventual

creation of a mammoth Department of Civil Resources Management embracing

but retaining DENR, Commerce, and Labor as separate departments, much as

the Department of Defense embraces the separate services. Similarly,

those who deem the early creation of a Department of Energy and Natural

Resources inadvisable or impracticable may accept the formation of a



*
This was also the view of the Committee for Economic Development in its
December 1974 report Achieving Energy Independence, which recommended
the transfer of EPA to a department of energy and natural resources:
"...the Council on Environmental Quality [should] be retained in the
Executive Office of the President as an independent monitor of environ-
mental impact..."







45


more modest energy agency as a reasonable compromise or interim step.


National Policy Formation and Coordination

The executive organization for formulating and coordinating

energy policies is disorderly and inadequate or adequate only for

formulating disorderly policies. Few will openly defend this situation

except those who contend it is better than a tidy organization which

produces consistent policies that can be disastrous. Thus Chauncey

Starr states, "...we have only a primitive knowledge of the real role

of energy in our society....legislative and administrative actions taken

under these circumstances are apt to be at best superficial and palliative,

and at worst may be dangerously destructive." However, the dispersion

of power limits the damage even a powerful government executive can wreak.

"...an energy 'czar' in government would not be given the tools and the

full responsibility to perform, but would likely become at best an ex-

pediter, usually a coordinator, and at worst a bottleneck."

Does the nation have an energy policy? "It's a happening, not

a policy." Or, it is a policy but "a bad one: to do nothing"; "to import

regardless of price"; to provide "an abundance of clean, secure energy"

with some attention to conservation. Evident conflicts exist between

energy policies (such as attaining energy independence and depleting

*
That is the position, among others, of John Sawhill and the General
Accounting Office. GAO has "proposed combining FEA's permanent
energy policy responsibilities with ERDA's energy research and devel-
opment policy responsibilities into a new National Energy Administra-
tion. The most critical need in solving the Nation's energy problems
is to have a unified and concentrated effort for developing national
energy policies, plans, and programs....this new agency can bring
about this effort, and its creation is a logical first step toward
the longer term creation of a Department of Energy and Natural Re-
sources" (Monte Canfield, Jr.).







46


national fuel reserves or letting market forces operate freely and

yet regulating their operation) and between energy and other public

policies (such as increasing energy supply and improving the environ-


ment or raising energy prices to increase

inflation). If a reduction of oil imports

independence, that policy is failing.

A clear organizational focus for

is now lacking. No single organization is

oil, for coal, or, since the Atomic Energy

nuclear power. "No one has an overview of

fuels," Mason Willrich remarks. FEA lacks


supply and yet fighting

is a fair test of energy


energy policy formulation

shaping national policy for

Commission was bifurcated, for

any one fuel or of all the

"clout"; the Energy Resources


Council lacks independent staff and, as a council of equals, has diffi-

culty imposing consistent policies upon its members.

This situation can be improved by 1) assigning to a new

energy agency or department responsibility for developing Executive

energy policies, and by 2) strengthening ERC with independent staff

and statutory authority, or replacing it with an Energy Policy Council

in the Executive Office of the President. The council should monitor

and coordinate all Executive programs and policies with major effects

upon the supply and use of energy, and attempt to concert the nation's

energy policies with its economic, social, environmental, foreign, and

security policies.

Some see an energy unit as part of the Office of Management and

Budget. James Akins believes that, if a Department of Energy and Natural

Resources is established, no independent unit is needed and that existing

bodies in the Executive Office of the President such as the National Security

Council, the Economic Policy Board, and the Office of Management and Budget can

undertake any government-wide policy responsibilities that a DENR Secretary







47


cannot discharge. However, the predominant view is that energy affairs

are sufficiently important and pervasive to merit the exclusive atten-

tion of a special independent Energy Council and staff in the Executive

Office. It should take the lead in formulating and coordinating national

policy for new and conventional fuels; give policy guidance to independent

regulatory agencies; help to coordinate federal and state, domestic and for-

eign energy policy; and concert energy policy with other economic and social

policy.
4
On Data Gathering and Policy Analysis

Many agencies are collecting data on energy and fuel supplies,

demand, reserves, stocks, and prices, notably the Federal Energy Admin-

istration, ERDA, the Bureau of Mines, Geological Survey, Federal Trade Com-

mission, and Federal Power Commission. As new energy functions are added, so

are new data requirements and much duplication results; industry com-

plaints about duplication "are largely valid." The government is said

to operate "98 separate computerized data bases or major files...of

energy-related data." Denied access to industry data gathered by the

Census, on grounds of confidentiality, FEA proposes to collect the same

data Independently; four agencies have conducted natural gas reserves

studies, yet the data base of each is incompatible with the others.**

On the whole, data on fuel production and exports are good; data on oil,

gas, coal, and uranium resources are poorer. In one ten-day period,

estimates of the oil reserves in the Atlantic Outer Continental Shelf

*
Improvement Still Needed in Federal Energy Data Collection, Analysis
and Reporting, Report to the Congress by the Comptroller General of
the United States, June 15, 1976, p. 22.

Ibid., pp. 34-35.







48



dropped from 132 to 2-4 billion barrels. "The federal government knows

next to nothing about the quality and types of coal that it owns." There

is a limit to what can be learned from additional paper studies; to improve

our knowledge of the nation's fuel reserves, direct investigation is needed:

dip-stick verification of oil stocks; government field exploration for oil,

gas, and uranium.

Different projections of future national energy requirements

have been issued by ERDA, FEA, and the Bureau of Mines and no effort has

been made to rectify or explain the differences. Different data and

forecasts lend weight to different policies and undermine public confidence

in the reliability of each data series and the objectivity of their analysis.

Rightly or wrongly, the credibility of FEA data continues to be questioned

because of the agency's reliance on industry sources. The General Accounting

Office can do "a mediocre job" and have credibility, Monte Canfield remarks;

FEA cannot. The widespread suspicion of industry and government energy data

has led to the assignment to GAO, in the 1975 Energy Policy and Conservation

Act, of responsibility for verifying energy data submitted to federal agencies.

The dilemma of data collection and analysis is that, if they are

to be relevant to policy issues--to inform and clarify public debate and

promote rational policy decisions--they should be undertaken in close

proximity to the agencies and officials responsible for energy policies.

Yet that very closeness endangers their credibility, since it is assumed

that data are collected, selected, and--especially--published to support the

interests and policies of those who collect and analyze them. The solution

recommended by the General Accounting Office and generally accepted by the

workshop is to locate primary responsibility for energy data collection and

analysis in a unit that is part of the FEA or whatever new energy agency or

department may succeed it, and to protect the unit's independence and







49



professional integrity by measures that would give it a status akin to

that of the Census or the Bureau of Labor Statistics. Some measures
*
suggested by the GAO are:

--Appointment of the director by the President for a term
of 5 to 9 years and his confirmation by the Senate.
4
--The director and deputy director should be professionally
qualified and chosen on a merit basis.

--The director should report directly to the administrator
of FEA or its successor agency.

--The independence of the agency should be stipulated by
statute and its director authorized and instructed to
testify directly before Congress.

George Eads advances a comparable proposal for an independent staff in

the Executive Office of the President to analyze not only energy issues
**
but a broad range of government-wide economic and resource questions."

The credibility of industry data is also related to its confiden-

tiality. Industry asks for confidentiality to protect Itself from competitors

and, no doubt, from adverse government action. However, a GAO report con-

tends that "the terms confidential and proprietary...have been overused

and...steps should be taken to restrict confidential data to the absolute

minimum." The good record of the Census in obtaining public


*
In a statement prepared for the workshop by Monte Canfield, Jr.
**
"...one option I find intriguing involves the creation, either within
or closely attached to OMB or the Council of Economic Advisers, of a
small group of Senior Specialists who would serve the needs of all
Executive Office agencies for advice on and evaluation of the current
status and long-run prospects of key industries and other important
segments of the economy, who would Initiate and coordinate cross-
agency and cross-industry analyses of the impact of current and pro-
posed governmental actions..., and who would serve to bring emerging
longer run problems to the attention of senior decision-makers."

improvement Still Needed..., p. 36.







50


and industry cooperation is founded in part upon its special legislative

authority to maintain confidentiality, and some experts believe that

similar authority is a key to obtaining reliable energy data from

industry.


The Relation of Public Regulation to Public Policy

Over 40 federal bodies exercise regulatory powers over the supply

or use of energy. Although a recent Presidential commission noted "remarkably
little duplication of statutory authority' among them, the number,

independence, and frequent inconsistency of their objectives and standards

present serious obstacles to the implementation of consistent national

energy policies. The regulatory scene is further complicated by the power

of the states to regulate plant siting and safety, power transmission,

utility prices, gasoline taxes, etc. (The role of the states will be

discussed subsequently.)

Regulatory bodies tend to operate on an Individual case basis,

a "piecemeal approach...leading to inconsistent and incompatible decisions

which could be counterproductive to national needs and priorities." As the

number of agencies and interests involved in a particular case has increased,

"regulation by consensus" has developed in which the regulatory body attempts

to hear and to compromise the views of conflicting interests.

What results are a group of decisions being made from the
vantage point of each agencyls own narrow perspective.
While this may accommodate the desires of a particular
interest group, it is merely myopic decision-making which
often uoes not serve the broader "public interestu. Indeed,
unable to meet the demands of each group, some regulatory
agencies take the extreme reverse position that no action is
the best action (William Doub).

*
William Doub, citing a finding of the Presidential Study Commission
on Federal Energy Regulation, which he chaired (cf. Federal Energy
Regulation: An Organizational Study, April 1974, p. 11).







51



There are many forms of de facto regulation in addition to

the formal type in which an order is made or a license issued after

an extensive, formal hearing process. Administrative rule-making and

compliance procedures, the rules accompanying government grants and

contracts, rules setting forth health and safety standards and the

inspection systems enforcing them can have the same force and effect

as regulatory decrees. Thus, government regulation of the supply and

use of energy is widespread and growing. The extent to which it should

grow and the degree to which extensive and often inconsistent regulation

can prove effective is much debated.

Chauncey Starr cites government regulation of the energy industry

as laying the basis of bad management, since regulatory agencies constrain

the operations of industry without being responsible or accountable for

the effects of their constraint upon the industry's subsequent performance.

He suggests that regulation should concentrate mainly on "the large and

obviously undesirable effects" of energy plants on the public health and

safety and that excessive attention has been devoted to "marginal and

hypothetically-projected" dangers. Harold Finger asks the government to

let the free market work: but also recognizes the need for government

intervention in that market to provide financial incentives to stimulate

greater energy supply, to restrain or equalize the competition of foreign

firms subsidized by their governments, and in the interests of social equity.

William Doub offers several administrative suggestions to speed

up and improve the cumbersome and protracted process by which federal and

state agencies now make decisions governing the siting, planning, construc-

tion, and operation of energy facilities. These include the creation of







52


an office to coordinate and schedule the licensing functions of federal

and, if possible, state agencies; and the exchange and standardization

of data among regulatory agencies, to be facilitated by a central energy

data organization such as the GAO has proposed.

However, the fundamental problem posed by regulatory agencies

is not that of reconciling their schedules and data, but of reconciling

their independence of judgment with the government's energy policies.

Regulation is a fourth branch of government that occupies a politically

awkward position betwixt and between the three principal independent

branches. "Every Executive report on reorganization from that of the

Brownlow Commission of 1937 to the Ash Council of 1970 has severely
*
criticized the independent commissions." That is understandable,

because independent judgment is necessary to even-handed justice, and

yet observance of designated governmental policy is necessary to effective

administration.

The workshop grappled with this problem but did not resolve it.

The general opinion was that there is too much regulation and the scope of

regulation should be narrowed.** The growth of regulation often represents



Federal Energy Organization, A Staff Analysis, Committee on Interior and
Insular Affairs, United States Senate, 1973, p. 23. (Actually, it was
the Brownlow Committee or The President's Committee on Administrative
Management, chaired by Louis Brownlow.)

William Johnson describes "the regulatory morass that the FEA has now
become....On January 2, 1974 the government first published 27 pages of
allocation regulations for comment in the Federal Register. By January
1976 It had published over 5,000 additional pages....The Commerce Clearing
House tabulation of the FEA's regulations...is now a three volume compendium,
seven inches thick, of turgid, legalistic prose unintelligible even to many
of the FEA officials who must administer the controls. The Commerce Clearing
House has also published two additional volumes containing decisions by FEA's
Office of Exceptions and Appeals. Most recent regulations are intended to
plug loopholes and modify or otherwise correct errors in earlier regulations"
("Why U.S. Energy Policy Has Failed," op. cit.).







53



a temporizing measure, a failure of the Congress to make up its collective

mind and to legislate public policy clearly. "...the independent regulatory

commission was an expression of the Congress saying, 'We would have legis-

lated if we had the time, but we didn't'", Charles Bingman observes. Unfor-

tunately, there is no agreement on what functions are "truly" regulatory and

thus require independent adjudication. William Doub suggests that the main

emphasis in the last 20 years, exemplified by the Nuclear Regulatory Commission

and the Environmental Protection Agency, has been upon the regulation of new

technology to protect the public health and safety and that much economic

regulation in the energy arena can and should be absorbed into the normal

process of Executive policy-making and administration. However, economic regu-

lation--the adjudication of the prices and profits of monopolistic public

utilities and services--remains the philosophical basis of much government

regulation and even heavily technological regulation retains a strong economic

element, since varying degrees of technological safety or reliability cost

varying amounts of money.

Whatever may be the proper definition and scope of the regulatory

function, it should be segregated from policy promotion to ensure the in-

tegrity of regulatory actions. For this reason, the regulation of nuclear

plants and materials was separated from that of promoting their development,

and the General Accounting Office recoumends that the regulatory functions

of FEA be separated froa its policy functions and assigned to a new indepen-

dent agency or to the Federal Power Commission. The eventual affiliation of

two or more regulatory bodies--FPC, NRC, and the regulatory functions of FEA

are most frequently cited--into a federated energy regulatory agency can also
*
be envisaged.

* "In the [1974] Energy Reorganization Act, Congress invites the President to
submit further recommendations concerning energy organization, including the
option of 'consolidation in whole or part of regulatory functions concerning
energy.' We are convinced that national regulatory policies would benefit from
the perspective provided by a comprehensive agency embracing all energy forms
in a single, unified structure" (Achieving Energy Independence, Committee for
Economic Development, December 1974, p. 61)







54



How can energy regulation be both insulated from and yet influenced

by national energy policies? William Doub suggests that a National Energy

Council (designated earlier in this summary as "an Energy Policy Council in

the Executive Office of the President") give policy guidance openly.

Conveying policy guidance openly might include the submission of
position papers on the formal record or appearances by the National
Energy Council at public hearings. Policy information would not
substitute for every regulator's obligation to consider each case
on its merits, and whenever policy guidance was linked to a specific
case or rule-making proceeding, the guidance would have to relate
exclusively to effects on national energy objectives. With these
ground rules, the result should not be a less independent regulatory
process but a better informed one--with an enhancement of public
understanding.

Mason Willrlch further suggests that regulatory agencies, particularly the

Nuclear Regulatory Commission and the Federal Power Commission, be confined

to domestic regulation and be governed by Presidential policy in foreign

affairs such as the export of fuels and nuclear materials.


Concerting Federal and State Policy



State and local governments can facilitate or obstruct federal

energy policies and programs, and there is much recent evidence of obstruc-

tion due to the failure to concert federal and state policies and powers.

As Senator Percy observes, there are no federal police to enforce the federal

law setting a 55 mile per hour speed limit--"the one mandatory law that we

were able to pass ever since the oil embargo"--and state enforcement is often

weak or nonexistent. William Warne finds state and local energy officials

"increasingly resentful and suspicious of federal agency collaboration. The

federal agencies...are accused of cooperating only on their own terms....

Initiatives in California have indicated...that many millions of voters are

even more suspicious of big brother in Washington than are the state and

local governments." Federal agencies may have the final authority to license








55


nuclear facilities or to issue leases for coal mines on federal land and oil

drilling on the Outer Continental Shelf, but states can delay or stop the

operation, as the imposition by the state of a heavy use tax led to the closing

of a nuclear-waste burial site in Kentucky.

Opposition to energy plants can stem from their noxious character,

producing what Charles Hitch terms "the 'not in my backyard' syndrome." Or,

it can reflect a concern about the financial impact of major facilities upon

taxpayers and governments, which must build roads, schools, and playgrounds

and provide police, fire, and other services for the influx of workers and

their families. The National Governors' Conference has accepted as policy

that states should neither lose nor gain financially from the impact of new

energy facilities: enough lead time should be allowed for the necessary public

construction and the federal government should advance any sums needed for

capital and cash flow purposes.

Greater recognition of state interests and powers, greater coordi-

nation of federal and state plans and policies, and the fuller participation

of state representatives in the development of federal policies is plainly

needed. Though many state governments lack adequate energy staffs, others,

like California and New York, have exercised leadership in certain technical

areas (e.g., dam inspection) and those with major universities and energy

laboratories have ready access to expert advice. Lynn Brooks cites the parti-

cipation of state representatives in the Energy Resources Council's development

of coal policy and Interior's development of policy for the Northeast Outer

Continental Shelf as examples which should (and the Nuclear Regulatory

Commission, which "wants to exclude the states," as an example which should

not) be emulated by other federal agencies. According to one authority,

ERDA appears to be developing a good cooperative approach toward the states,

while FEA "leaves a lot to be desired."


76-673 0 76 5







56


The Federal Energy Regulation Study Team recommended

...that information exchanges and policy decisions take place
regularly between two new groups that would represent the
Federal and state levels respectively in all matters related
to energy. The first would be a Federal office devoted exclu-
sively to interchanges with the states and localities; the
second would be a permanent representative body consisting of
state-designated officials, who should be of sufficient stature
to reflect promptly and accurately the policies and intentions
of their governments (William Doub).

Informed decisions on the Alaska pipeline or Western oil shales cannot all

be taken in Washington and, as one state spokesman notes, "The Governors

cannot run to Washington for everything." Federal regional offices with

real authority would afford a good compromise between the concentration of

decision-making In Washington and individual negotiations with 50 states,

providing convenient sites where state and federal agencies can work out

policies adapted to the needs of each region. The Ford Energy Project also

recommended the development of regional energy planning (and one Project

study recommended that state regulatory commissions be replaced by a

federally chartered regional regulatory agency).



The Congress


Fifteen of 18 committees and 33 subcommittees of the Senate have

Jurisdiction over energy affairs; a similar situation exists in the House,



* "...planning at the state level is very limited. The states of Montana,
Wyoming and North Dakota are dotted with proposed projects on the drawing
boards of dozens of companies...Some plans would export coal from the
region, some would burn it there for electricity, others would convert
it to gas or liquids. Still others would do nothing with it for some
time, but hold it to speculate on its increasing value....
"No mechanism exists at the federal level to comprehensively examine
regional problems.... The energy planning that does take place is highly
fragmented. It is usually done by local offices of federal agencies,
or by state agencies which have limited ability to enforce their decisions
on federally owned resource areas" (A Time To Choose, Energy Policy Project
of the Ford Foundation, Ballinger, Cambridge, 1974, p. 284).







57


which rejected a 1974 recommendation of the Boiling Committee that responsi-

bility for legislation on the environment and energy conservation, regulation,

and power administration be concentrated in one committee. The 1,001 energy

bills that were introduced in 1974 were referred to over 35 committees and

subcommittees. "The president's omnibus energy program was split up and

referred to four different committees in the House and nine in the Senate.'*

This situation leads some observers to despair of attaining any

rationality or consistency in national energy policies and programs; the value

of any Executive energy reorganization will, they believe, be diminished until

the Congress rationalizes and simplifies its committee structure. Others are

more hopeful. "The Congress is a collegial body...and usually disposes

rather than proposes," Alan Dean observes. So long as the Executive knows

what it wants, the fractionation of committee authority is no overwhelming

obstacle'to obtaining it. "Energy" is, in any event, an all-pervasive

subject that can no more be assigned to a single committee than to a single

Executive department. That has not stopped energy legislation. In fact,

"there has been an amazing legislative response to a whole range of energy

issues...[due] in part to the President's initiative, but a good deal on their

own initiative" (Charles Bingman).

Senator Percy points to the organization of Congress and the

Executive to handle the space program as an indication that the government

can organize to do some things

extraordinarily well....It is straightforward. It is relatively
simple, and the way we organized at the federal level and inter-
related the private sector in establishing a goal and setting
out to accomplish it really is a miracle of organization and
accomplishment and a national will backed up by a national sense
of purpose and a clearly enunciated policy.


Andrew S. Carron, "Congress and Energy," Policy Analysis, Spring 1976,
p. 292.







58


Granted, energy policy is a more complicated matter than a moon landing

but some improvement in energy organization should be possible, in the

Congress as well as the Executive. The Congress responded to the crea-

tion of the Office of Management and Budget with the introduction of

its new budgetary system--"and it is working remarkably well"; it may

respond in similar fashion to a reorganization of Executive energy

affairs.

Staff agencies that serve the entire Congress can help to

provide common information and analyses to all committees, and thereby

to overcome the splintering effects of multiple committees. But these

agencies have themtives miqtiplied and, together with committee staffs,

have grown so greatly A tp constitute a growing bureaucracy of their

own. The General Accounting Office now has a budget of $140 million and

a staff of 5,000; the Congressional Research Service has a staff of

750; the Congressional Budget Office and the Office of Technology

Assessment, staffs of about 185 and 95, respectively. In addition,

perhaps 5,000 of the 17,000 persons on the staffs of individual Congress-

men and Congressional committees are engaged in legislative and policy

work (as against service to constituents). "Congress should be aware...
*" 8
that it is establishing a system of bure acies in the legislative

branch, and that these bureaucracies will have all the same bureaucratic

problems chat the executive agencies have and...they don't have the same
L
policing supervision that the Congress gives the Executive agencies"
a
(Wil liat Yarne).



See "A Look at the '19,467 People Who Keep Congress Running," National
Journal, July 10, 1976, pp. 960-1.











The growth of Congressional staff in the last seven years,

Alan Dean suggests, is at least partly a consequence of the division

in party control of the Executive and the Congress, of "rather tremen-

dous Congressional majorities...aligned against the President," and
"mistrust between the Executive and Legislative branch..." Congressional

mistrust was aggravated by the anonymity and unaccountability of Presidential

aides and the massive Presidential impoundment of Congressional appropriations.

Staff growth may abate when one party gains control of both branches and a

good working relation is restored between them.

A reorganization of Congressional committees to parallel the re-

organization of the Executive is necessary, Chester Cooper insists, if

energy reorganization is to work. "lf...Seamans has to talk to 37 parts of

of Congress, how many hunks of Congress would the new secretary of this

new department...have to report to...?" "...no more than he started

with," is the reply. Under the best of circumstances, any agency head

has to deal with at least three or four committees in each house. "It

is never going to get down to one, it is always going to be a minimum

of eight." One voice was raised for a joint committee on energy,

natural resources, and the environment, and a second voice for a select

committee on energy in each new Congress; but most participants seemed

to expect the Congress and the country to go on with only a moderate con-

centratlon of Congressional energy authority, if any.







60



Appendix:

Three Basic Legislative Alteratives
IT

Three immediate alternatives for the organization of Executive

energy functions may be summarily identified:

1. High Decentralization: The Status Quo

A continuatk of current programs and functions among existing

agencies: extension of FEA with its limited powers; ERDA; the natural

resource agencies in the Department of Interior; the independent regula-

tory functions of the Federal Power Commission, the Nuclear Regulatory

Commission, and FEA; and the coordinative functions of the Energy Re-

sources Council. Additional decentralization could be achieved by

dividing ERDA into three independent agencies devoted to nuclear energy,

fossil fuel, and advanced technical systems; an independent agency to

promote energy conservation might be established; and the regulatory

functions of FEA could be assigned to a new independent agency,

2. Moderate Centralization: A National Energy Organization

The scope of a moderately centralized energy organization has

been outlined by the General Accounting Office. It would consist of

ERDA; the non-regulatory functions of FEA; a data gathering agency with

special statutory powers and independence, whose head would report

directly to the Congress; and an agency to finance major new energy

supply and conservation undertakings. An energy conservation authority

might also be included. A staff in the administrator's office would help

to formulate and coordinate policies within the agency and to assist a

strengthened Energy Policy Council in the Executive Office of the President,

which would replace the present Energy Resources Council. The new Council

would have a staff of its own and primary responsibility for developing and







61



coordinating federal-state and government-wide energy policies and for

reconciling them with domestic and foreign policies.

3. Major Centralization: A Department of Energy and Natural

Resources

A Department of Energy and Natural Resources would incorporate

all of the agencies and functions noted in paragraph 2, as well as most

of the present Department of Interior and possibly the Environmental

Protection Agency. An effort would also be made to narrow the regulatory

functions of FPC and NRC and to attach the excised administrative functions

to the Department. The central regulatory functions of FPC, NRC, and FEA

might be regrouped into a federated energy regulatory agency which would

receive open policy guidance from the Energy Policy Council in the Execu-

tive Office of the President. The other functions of the Council would

be similar to those noted in 2. As a member of the cabinet, the DENR

Secretary would have more power and authority than the administrator of the

moderately centralized National Energy Organization; hence, the strong

central policy staff attached to his office, working closely with the

Energy Policy Council, would plaw an important role in the formulation and

coordination of government-wide energy policies.






62


HI. GOVERNMENT ORGANIZATION FOR ENERGY AFFAIRS








Statements submitted to a
June 22-23, 1976 Workshop in the
Whittall Pavilion of the Library of Congress







Arranged by the
National Academy of Public Administration Foundation
for the Congressional Research Service
in response to a request by
Senator Charles Percy of the
Senate Committee on Government Operations















4a-



National Academy of Public Administration Foundation
July 1976






63


OPENING REMARKS

Senator Charles H. Percy

Workshop on Government Organization for Energy Affairs

Tuesday, June 22, 1976


I am delighted to be here to open this 2-day workshop

on government organization for energy affairs. As you know,

this has been arranged at my request by the National Academy

of Public Administration and the Congressional Research

Service.

This workshop is being held on a timely topic. The

events of the past several years have made clear that there

are fundamental flaws in the way essential tasks are divided

among the many organizations and agencies responsible for

some facet of energy affairs. It is time that these flaws

be addressed and the present interim arrangements replaced

with a longer-lasting and more effective organizational

structure.

I would like to share with you my own thoughts on

what those faults are.

I would also like to lay out a number of fairly simple

but, I think, basic organizing concepts which I hope you will

take into consideration and examine critically as you discuss

the important energy issues which are on today's agenda.


I. SOME MAJOR SHORTCOMINGS

Some of the basic faults in the existing energy structure

in the executive branch are these:






64


(1) There is no satisfactory mechanism for authorita-

tive, high-level definition of energy policy and goals, or

for providing policy guidance to operating and regulating

agencies concerned with energy affairs. The Energy Resources

Council is simply a co-ordinating body which has no staff

and therefore does not adequately meet the need for goal

and policy definition.

(2) Federal energy regulatory agencies operate auto-

nomously within narrow task-oriented perspectives specified

in their statutes. The result is that, although there is

surprisingly little overlap of regulatory authority, in

practice their regulations may serve contradictory and con-

flicting ends. An example is the price controls on natural

gas. This type of situation is fostered by the lack of a

Federal mechanism to formulate energy policy goals and

priorities which can serve as the basis for program guidance,

and by the lack of a satisfactory co-ordinating and review

authority.

(3) Similarly, Federal agencies with operating energy

programs (as contrasted with regulation) often work at cross

purposes in the absence of a mechanism for policy guidance

and regular program review. An example is the Department

of Interior's coal leasing moratorium when announced policy

was to increase reliance on coal.

(4) Energy data collection, analysis and dissemination






65


is fragmented, outdated, overlapping, incomplete, and often

contradictory. Furthermore, these tasks are being carried

out in intellectual isolation from the collection and analy-

sis of other economic and social data reflecting domestic

and international developments with which energy has a

close relationship.

(5) State and local governments have a great impact

on energy facility siting and licensing, as well as on other

energy policies and programs, but their activities are not

integrated and coordinated with Federal energy activities.

(6) Energy goals and objectives are not systematically

integrated with other high priority national goals, objectives,

and programs. A conspicuous example is the conservation of

energy, which tends to be treated as an overlooked postscript

in agency budgets and operating programs.

(7) The vital task of energy research, development

and demonstration (R,D and D) efforts has been separated

from the market in which the results of these efforts will

be applied. Consequently, researchers tend to select tar-

gets of technical opportunity and technical approaches which

do not completely meet the needs of the users of new tech-

nology. I am well aware that collecting all energy R,D and

D under the single roof of the Energy Research and Develop-

ment Administration along with a very large financial trans-

fusion was intended to jolt the efforts of federal energy






66


R,D and D into increased effectiveness. I ask you to

consider carefully, however, whether this act represented

the severing of a vital artery.


Each of these deficiencies can be related to some

organizational weakness. In almost every case, the fault

can be traced to a failure to re-examine the traditional

organizational missions of established departments and

agencies, and to assign to each the appropriate task. In

addition, there has been a failure to recognize that we

need to take a much closer look at the pervasive influence

of energy on our economy.


II. ENERGY'S SPECIAL ROLE

Energy is so essential to our economic and social

structure that changes in its management affect the whole

nation. To a greater degree than for most other economic

activities, the authority to control its development, dis-

tribution or use is tantamount to the political power to

govern.

Federal energy organization must, therefore, consider

safeguards against deliberate or unwitting accumulation of

economic power in the federal establishment. This must be

done without sacrificing efficiency, flexibility or effective-


ness.






67


III. SOME ORGANIZING CONCEPTS

I suggest that any federal energy reorganization which

builds on the following organizing concepts could ensure

that responsibility for energy functions is placed in the

appropriate hands. The following principles would combine

not only an organizationally sound disposition of duties,

but would also build in the needed safeguards mentioned

earlier.

(1) Organizationally discrete energy functions

So far as possible, four major energy functions regu-

larly carried out during non-emergency situations should

be kept institutionally separate. I do not mean to imply

that new agencies need to be set up to house each of these

functions. Existing agencies could be used. The four

functions are:

--Energy policy generation and review

--Energy data collection and analysis

--Energy regulation

--Operating programs, including those which deal with

energy supply and use.

By far, the largest of these functions is the last.

Since the category includes the applied research, develop-

ment and demonstration (R,D and D) of energy supply tech-

nologies, it is fairly similar to what in the past we have

called a Department of Energy and Natural Resources (DENR).






68


I believe the vital function of research, development and

demonstration ought to be carried out within, or at least

under the authority of, the organization or department

which deals with the market in which the results will be

applied. Such an arrangement would facilitate the com-

mercialization of new technologies.

(2) Conservation of Energy

Far from being a function which ought to be organi-

zationally discrete, conservation of energy -- as both a

goal and an activity ought to be ubiquitous, being

practiced wherever energy is used. Accordingly, conserva-

tion of energy during non-emergency situations ought to

be administratively integrated within every organized

Federal entity, whether or not involved in energy.


(3) Energy Emergencies

An energy emergency -- whether from natural causes or

man-made -- is by definition an event which in the past has

virtually always required violation of the organizational

separation of the key functions listed above.
During wars, as during the recent energy shortages, the

consequence has been to concentrate both the policy-making

decisions and the authority to exercise additional energy

action programs.

As noted earlier, the pervasive power in the government






69


accruing to any exercise of energy control ought to be

kept in check wherever possible. A third organizing

concept, therefore, could be to provide within the regular

Departments of government sufficient administrative flexi-

bility and readiness to activate such standby authorities

as needed, without requiring creation of new agencies.

Existing agencies should be made strong enough to withstand

the popular tendency to create new agencies to meet new

crises.


IV. THE CONTRIBUTION OF THE WORKSHOP

In suggesting these concepts, I do not mean to imply

that they are the only organizing ideas we should examine

or that there is only one reorganized federal energy con-

figuration that would see them realized.

I do feel, however, that it is essential that we con-

sider here not just what energy functions need to be per-

formed, or how the federal government can best be organized

to carry them out, but also why we believe a different

structure can better serve the public. Once we understand -

and can agree -- why we need to change, it should be some-

what easier to discover and decide on how and where and

when the necessary changes should be made.

I look forward to the contribution that this workshop

will make towards solving these energy problems dealing

with policy and programs.






70


Let me just say in closing that the workshop partici-

pants have a very comprehensive agenda and a very limited

time within which to cover it. In the interest of providing

them the greatest possible flexibility and to facilitate

a candid exchange of ideas, I understand that attendance

at the actual workshop sessions will be limited solely to

those invited by the National Academy of Public Administra-

tion. I do not wish the results of this workshop to be

confidential, however, and shall personally take the necessary

steps to assure that the full proceedings of the workshop

and the National Academy of Public Administration summary
t
of it are made public as soon as it is physically possible.

I would be happy to answer any questions now.







71


IMPROVING FEDERAL ENERGY ORGANIZATION

Presented by Monte Canfield, Jr.
Director, Energy and Minerals Division
U.S. General Accounting Office

Before

Workshop on Government Organization for Energy Affairs
Washington, D.C.
June 23, 1976


The letter inviting me to this workshop asked that I briefly

address three broad questions relating to weaknesses in govern-

ment organization and arrangements for formulating and administer-

ing national goals, as well as one or more subsidiary questions.

Essentially, we believe many of the problems in formulating

a coherent national energy policy stem from the diffusion of

responsibility for major energy programs among several Federal

agencies. For example, the Energy Research and Development

Administration is responsible for research, development, and

demonstration of energy technologies, the Federal Energy Ad-

ministration for energy policy formulation, and the Department

of the Interior for decisions regarding the leasing and develop-

ment of the energy resources on Federal lands. There are two

national energy planning systems: ERDA's which produced the

ERDA-48 national plan for research, development and demonstra-

tion, and FEA's, which produced the original Project Independence

report and the more recent National Energy Outlook. Moreover,

collection and analysis of energy data is done by numerous

agencies.

My observations today will focus on

-the broader question of Federal energy organization


76-673 0 76 6







72


and steps GAO believes should be taken to improve
the Federal Government's approach to energy problems

--the more specific problem of how the organization
of the Government's energy data activities can
be strengthened.

Both these issues have'been of interest to GAO for some time,

and over the past two years we have testified before the

Congress on these matters on numerous occasions.

this past April we testified before the Senate Government

Operations Committee regarding the extension of FEA. Since FEA

is scheduled to expire on June 30, 1976, we. suggested a temporary

extension of FEA's authorities. We stated however, that the

best long-term organizational approach to the solution of energy

problems would be to establish a Department of Energy and

Natural Resources (DENR). In the past we have consistently

supported the creation of a DENR, consisting initially of three

key entitites-the Department of the Interior, the Federal Energy

Administration, and the Energy Research and Development

Administration. The President would be directed to propose

additional organization changes he deemed necessary to further

consolidate energy activities.

Pending the establishment of a full DENR, however, we

suggested some organizational changes be made in the Executive

Branch which begin to move in the direction of creating such a

department. The changes involve combining all energy policy

activities into a single new agency apart from energy regulation.

FEA currently has responsibilities for both energy policy

development and energy regulation. A desirable division of FEA's







73


responsibilities would be to separate FEA's policy, planning,

and program development activities from its regulatory

activities, combining the two functions with related functions

of other energy agencies. The problems inherent in having'a

single agency responsible for policy and regulatory programs

were recognized by the Congress in the old Atomic Energy

Commission which was reorganized into the Energy Research

and Development Administration (ERDA) and the Nuclear Regulatory

Commission.

The drawbacks of such a combination have again been

demonstrated by FEA. For example, last fall, during debate over

the extension of oil price controls, FEA was the chief adminis-

tration spokesman in favor of phasing out such controls while

at the same time having responsibility for administering the

oil price control program--a situation not conducive to the most

vigorous enforcement policy.

We proposed combining FEA's permanent energy policy

responsibilities with ERDA's energy research and development

policy responsibilities into a new NATIONAL ENERGY ADMINISTRATION.

The most critical need in solving the Nation's energy problems is

to have a unified and concentrated effort for developing national

energy policies, plans, and programs. We stated our belief that

this new agency can bring about this effort, and its creation

is a logical first step toward the longer term creation of a

Department of Energy and Natural Resources.







74


In addition, there is now proposed another new Federal

organization-the Energy Independence Authority (EIA)--which

would help finance and encourage the commercialization of a

variety of more advanced energy technologies such

as synthetic fuels.

If created with financial assets of $100 billion, EIA

would inevitably become a major factor in energy policy

development. Its relationship to ERDA and FEA is unclear.

ERDA, for example, has authority, and is now seeking funds

to assist industry in financing demonstration projects in

synthetic fuels. The concept embodied in the EIA Act currently

before the Congress should also be included in the NATIONAL

ENERGY ADMINISTRATION. Such an agency could then exercise

control and coordination of four basic energy policy components:

(1) policy formulation, presently in FEA, (2) allocation of

research, development, and demonstration funds, currently in ERDA

(3) allocation of commercial financing monies or guarantees,

currently proposed for EIA, and (4) energy data collection and

dissemination, which I will discuss in more detail in a couple

of minutes.

We also believe that such a consolidation could have a

significant benefit for energy conservation--an area where in

our view, there have been problems of priorities and lack of

coordination. FEA has not given conservation the emphasis we

believe it deserves; ERDA, until recently has not emphasized it

in allocatinq funds for research and development, and the proposed







75


Energy Independence Authority could actually hamper rather

than simply fail to promote conservation efforts, since it could

siphon off available capital from conservation programs to

those which increase energy supply.

The creation of NATIONAL ENERGY ADMINISTRATION and later

a DENR could go far toward improving the Government's fragmented

approach toward conservation as well as other energy policy issues.

On the regulatory side, and in conjunction with the

proposal to combine PEA's and ERDA's policy responsibilities

into a new agency, we proposed a consolidation of Federal

energy regulatory responsibilities. There are several ways

to accomplish this. Perhaps the simplest would be to initially

transfer PEA's residual regulatory responsibilities to the

Federal Power Commission (FPC). An alternative would be to

create a new Energy Regulatory Agency composed initially of

FEA's residual regulatory responsibilities. Eventually, other

Federal energy regulatory responsibilities, such as those of

the Nuclear Regulatory Commission, would also be incorporated

into a single agency. We believe it desirable to have energy

regulatory functions in an agency having energy responsibility,

rather than transfer them to an agency with no energy responsi-

bility. This would ensure that the energy functions received

proper priority within the agency.

Neither of our proposals would preclude the continuation of

the existing Energy Resources Council. We suggested that the







76


Congress consider providing the Council with a statutory basis.

This, in our view, would not substitute, however, for a DENR,

rather it should serve as a mechanism for coordinating Federal

energy activities..

I would now like to move on to a brief discussion of one

of the subsidiary problems facing this workshop--how the

organization of the Government's energy data activities can

be strengthened. Over two years ago, GAO testified before the

Senate Interior Committee on a study done at the request of

the Chairman of that Committee which described Federal energy

data efforts and identified and discussed problem areas which

needed addressing if the Federal Government's capability for

collecting and analyzing energy data was to be improved.

Because the adequacy of Federal energy data continues to be a

controversial subject, GAO updated its earlier report and

presented the results at hearings once again before the Senate

Interior Committee thi3 past March.

We pointed out that many basic problems of energy data

continue to persist. New energy data collection efforts for

the most part have been piled on top of old efforts, and

efforts for improved coordination have yet to show much success.

We concluded that the establishment of a Department of Energy

and Natural Resources with an independent data collection com-

ponent insulated from policy analysis and formulation offers the

best long-term organizational solution to energy problems, including







77


energy data problems. In the interim, we suggested that, with

with proper legislative safeguards, PEA, or whatever agency

should assume its responsibilities, could be strengthened to

make it a more credible and objective focal point for Federal

energy data efforts. A'list of suggested actions to insulate

energy data collection and analysis from policy analysis

and development is included as an attachment to this statement.

Questions still could be raised regarding FEA's ability

to establish itself as a credible source of objective energy

data in view of its responsibility for energy policy analysis

and development. FEA's problem, however, is similar to the

problem which would have to be faced if a Department of Energy

and Natural Resources were created. As with that department,

the Congress could enact explicit statutory provisions to ensure

the necessary independence of the data unit.

I would like to add that because of the concern of the

Congress over the accuracy and credibility of energy data, the

Energy Policy and Conservation Act (P.L. 94-163) gave GAO new

responsibilities in the energy data area. Specifically, Title V

of that Act authorizes us to independently verify energy data

and we are currently involved in efforts related to this new

responsibility. The enactment of the EPCA and increased Federal

involvement in solving the nation's energy problems has prompted

my own organization to reexamine its approach toward investigating







78


energy problems. As a result we recently consolidated the

energy work being performed by several GAO divisions

into a new Energy and Minerals Division, which I head.

In closing, I would like to briefly mention a job we have

underway which is directly related to the subject of this workshop.

Senator Percy, in addition to providing the impetus for

organizing this workshop, together with Senator Ribicoff, has

asked GAO to assist the Senate Government Operations Committee

in relating current energy policy decision-making and national

energy goals. Specifically, he is interested in the consistency

of current decisions in contributing to achieving longer-term

goals, along with any gaps that can be identified in the decision-

making process. We have been requested, where possible, to
*
determine if any gaps we identify are related to flaws in the

current energy organizational setup.

I can only hope that such Congressional interest in this

problem can be translated into constructive changes in the

Government's organizational approach toward -solving energy

problems.


.t9







79


SUGGESTED ACTIONS TO
INSULATE ENERGY DATA COLLECTION
AND ANALYSIS FROM POLICY ANALYSIS
AND DEVELOPMENT


-Give the head of the data agency (who would be appointed by
the President and confirmed by the Senate) a specified
term of office. The term of office should be at least 5
years or possibly 9 years so that it would exceed the
Presidential term of office.

--Give the deputy head of the data agency the same term of
office as the head of the data agency.

--Establish the data component as a professional agency by
requiring that the head of such component, and his deputy,
be professionally qualified, be a person of competency in
the energy area, and be chosen on a merit basis.

-Require that the head of the data agency report directly to
the head of the agency in which the data agency is located.

--Do not provide the data agency with any regulatory or policy
functions.

--Stipulate by specific legislative provisions the responsi-
bilities of the energy data agency emphasizing its independence,
objectivity, and credibility as a source of energy data. In
this regard, provide through legislative history the intent
of the Congress that the head of the data agency independently
speak to all matters relative to energy data, including
testimony before the Congress.

-Provide for close congressional monitoring and oversight of
the data agency's activities, including calling for the
exercise of GAO's new responsibilities under the Energy
Policy and Conservation Act to verify energy data.






80


REMARKS BY WILLIAM 0. DOUB*
BEFORE "A WORKSHOP ON GOVERNMENT ORGANIZATION
FOR ENERGY AFFAIRS"

ARRANGED BY THE NATIONAL ACADEMY
OF PUBLIC ADMINISTRATION FOR THE CONGRESSIONAL
RESEARCH SERVICE, AT THE LIBRARY OF CONGRESS
WASHINGTON, DC, JUNE 23 1976



REGULATORY REFORM


IN THE UNITED STATES, THERE SEEMS TO BE A PRE-
OCCUPATION WITH REFORM OF BOTH TAXES AND ADMINISTRATIVE
AGENCIES. PERHAPS MY EXPERIENCE HAS MADE ME A BIT OF A
CYNICj BUT WHENEVER I HEAR PROSELYTIZERS FOR EITHER RE-
FORM, THAT FRENCH APHORISM LEAPS TO MIND -- "THE MORE
THINGS CHANGE, THE MORE THEY REMAIN THE SAME." NO MATTER
WHAT REFORM TAKES PLACE, PEOPLE WILL CONTINUE TO PAY TAXES,
TO BE REGULATED AND TO ADVOCATE REFORM.

ALTHOUGH OFTEN CYNICAL, I DO BELIEVE THAT THE FEDERAL
REGULATORY AGENCIES HAVE A NECESSARY AND VITAL PART TO
PLAY IN OUR GOVERNMENTAL SCHEME. I THINK WE HAVE A REASON-
ABLY SOUND FEDERAL REGULATORY SYSTEM. BY "SOUND" I MEAN


*PARTNER IN THE NEW YORK AND WASHINGTON, D.C. LAW FIRM OF
LEBOEUF, LAMB, LEIBY & MACRAE,






81


THAT IT WORKS, BUT ALSO THAT IT CAN BE IMPROVED TO WORK MORE
EFFECTIVELY. I BELIEVE, HOWEVER, THAT THE ULTIMATE SUCCESS
OF OUR FEDERAL REGULATORY SYSTEM DEPENDS ON THE ACCURACY OF
THE PUBLIC PERCEPTION OF THE PURPOSES AND GOALS OF THE INDI-
VIDUAL AGENCIES. THAT PUBLIC PERCEPTION, OF COURSE, REFLECTS

THE SUCCESS, COMPETENCE AND VITALITY OF THE REGULATORY "PRO-
CESS ITSELF.

I HAVE BEEN A MEMBER OF A FEDERAL REGULATORY
AGENCY, CHAIRMAN OF A STATE PUBLIC SERVICE COMMISSION AND
VICE-CHAIRMAN OF AN INTERSTATE REGULATORY AGENCY -- AS WELL
AS AN ATTORNEY IN PRIVATE PRACTICE. BASED ON THAT EXPERIENCE

I HAVE CONCLUDED THAT THE MOST MISUNDERSTOOD ASPECT OF REGU-
LATION IS THE PHILOSOPHY BEHIND IT AND THAT MISUNDERSTANDING
IS OFTEN AT THE ROOT OF CRITICISM OF THE FEDERAL REGULATORY
SYSTEM.

UNCERTAINTY, DELAY, CONTRADICTION AND DUPLICATION
TOO OFTEN HAVE BEEN THE HALLMARKS OF THE REGULATORY SYSTEM,
WHEN COUPLED WITH RISING CONSUMER PRICES AND ENVIRONMENTAL

CONCERNS, THESE PATTERNS RESULT IN PUBLIC APPREHENSION AND
FURTHER CRY FOR CHANGE. CURRENT CRITICISM OF THE FAILURE OF
ADMINISTRATIVE AGENCIES TO SERVE THE PUBLIC INTEREST OR

AT LEAST THE CRITICS' VERSION OF THE PUBLIC INTEREST -
IS EXACERBATED BY THE RECENT TENSIONS WHICH HAVE RACKED OUR
GOVERNMENT OVER THE PAST FEW YEARS. THE PREEMINENT MANI-

FESTATION OF ALL OF THESE FACTORS IS A GENERAL LOSS OF






82


CONFIDENCE IN GOVERNMENT INSTITUTIONS AND PUBLIC SERVANTS.
GIVEN THE PRESENT POLITICAL CLIMATE AND LACK OF PUBLIC CONFI-
DENCE, REGULATORY REFORM MUST FOCUS AT LEAST INITIALLY ON:
THIS LOSS OF CONFIDENCE IN GOVERNMENTAL INSTITUTIONS. BEFORE
PROGRESS ON THE REAL, SUBSTANTIVE ISSUES CAN BE MADE, PUBLIC
CONFIDENCE MUST BE ESTABLISHED.

THE EFFECTS OF THE REGULATORY PROCESS ON THE AVERAGE
PERSON ARE PERVASIVE. FOR EXAMPLE, FEDERAL AGENCIES REGULATE
IN WHOLE OR IN PART THE FOLLOWING ITEMS: AIR AND WATER POL-
LUTION, ELECTRICITY, GAS, TELEPHONE AND OTHER UTILITY SERVICES;
RATES, SCHEDULES AND SERVICES OF COMMON CARRIERS; RADIO AND
TELEVISION BROADCASTING; FOOD PURITY; UNFAIR OR DECEPTIVE
ADVERTISING; AND UNFAIR LABOR PRACTICES. THE PRESIDENTIAL
STUDY COMMISSION ON FEDERAL ENERGY REGULATION, AN INTERAGENCY
STUDY TEAM OF WHICH I WAS CHAIRMAN, DISCOVERED THAT MORE THAN
40 FEDERAL AGENCIES, BUREAUS AND COMMISSIONS PARTICIPATED IN
MAKING REGULATORY DECISIONS ON ENERGY MATTERS. ALTHOUGH THE
STUDY REVEALED REMARKABLY LITTLE DUPLICATION OF STATUTORY
AUTHORITY AMONG THOSE DIVERSE REGULATORY GROUPS, THE KALEIDO-
SCOPIC VIEW THEY PRESENT IS CONFUSING, DISARMING AND FRUS-
TRATING.

UNFORTUNATELY, THESE 40 AGENCIES DO NOT ALWAYS WORK
TOGETHER. REGULATORY AGENCIES GENERALLY PROCEED ON A CASE-
BY-CASE BASIS. CONSIDERATION OF INDIVIDUAL REQUESTS FOR
LICENSES, LEASES, RATES, OR OTHER SPECIFIC ACTIONS RELIES
HEAVILY ON PRECEDENT. THIS APPROACH OFTEN FOCUSES ATTENTION






83


ON A SPECIFIC PROBLEM OFTENTIMES INSTITUTIONALIZING INFLEXI-
BILITY AND IGNORING CHANGING NATIONAL OBJECTIVES. THIS TYPE
OF REGULATION RESULTS IN FRAGMENTATION RATHER THAN ORGANI-
ZATION. IT RELIES ON THE PIECEMEAL APPRAOCH TO DECISION-
MAKING, LEADING TO INCONSISTENT AND INCOMPATIBLE DECISIONS
WHICH COULD BE COUNTERPRODUCTIVE TO NATIONAL NEEDS AND
PRIORITIES.

IN ORDER TO COUNTERACT INCONSISTENCY, THE TREND
HAS BEEN TO DEVELOP "REGULATION BY CONSENSUS". THIS APPROACH
f
IS TO RECONCILE COMPETING GOALS OF VARIOUS AGENCIES PRIOR TO
AGENCY ACTION. THE APPROACH HAS BEEN NURTURED BY LEGISLATIVE
AND JUDICIAL DETERMINATIONS WHICH HAVE INCREASED BOTH THE
NUMBER OF REGULATORY AGENCIES INVOLVED IN A PARTICULAR CASE
OR PROJECT AND THE NUMBER OF FACTORS THAT A MAJOR OR LEAD
AGENCY MUST CONSIDER IN MAKING ITS DECISION.

THE NATIONAL ENVIRONMENTAL POLICY ACT OR NEPA HAS
ENCOURAGED THE CONCEPT OF "REGULATION BY CONSENSUS". NEPA
REQUIRES AN ENVIRONMENTAL IMPACT STATEMENT TO BE PREPARED BY
THE RESPONSIBLE AGENCY AND TO BE CIRCULATED TO OTHER FEDERAL
AGENCIES FOR COMMENT. NEPA HAS BEEN CONSIDERED PRIMARILY A
PROCEDURAL STATUTE AND THUS SATISFIED IF A FEDERAL AGENCY HAS
FULLY AND IN GOOD FAITH CONDUCTED THE REQUIRED ENVIRONMENTAL
ANALYSIS. MOST AGENCIES, HOWEVER, ARE HESITANT TO SANTION AN
ACTIVITY WHICH ANOTHER AGENCY SUCH AS EPA OR THE COUNCIL ON
ENVIRONMENTAL QUALITY HAS SUGGESTED MIGHT BE ENVIRONMENTALLY
QUESTIONABLE. WHEN COMMENTING ON A PROPOSED ACTION, THOSE






84


AGENCIES, I.E., EPA OR THE COUNCIL ON ENVIRONMENTAL QUALITY,
FREQUENTLY FAIL TO CONSIDER THE UNDERLYING MISSION OF THE
AGENCY PROPOSING THE ACTION. WHAT RESULTS ARE A GROUP OF
DECISIONS BEING MADE FROM THE VANTAGE POINT OF EACH AGENCY'S
OWN NARROW PERSPECTIVE. WHILE THIS MAY ACCOMMODATE THE
DESIRES OF A PARTICULAR INTEREST GROUP, IT IS MERELY MYOPIC
DECISION-MAKING WHICH OFTEN DOES NOT SERVE THE BROADER "PUBLIC
INTEREST". INDEED, UNABLE TO MEET THE DEMANDS OF EACH GROUP,
SOME REGULATORY AGENCIES TAKE THE EXTREME REVERSE POSITION

THAT NO ACTION IS THE BEST ACTION.

IN OUR REPORT, FEDERAL ENERGY REGULATION: AN
ORGANIZATIONAL STUDY RELEASED IN APRIL 1974, THE PRESIDENTIAL
STUDY TEAM ON FEDERAL ENERGY REGULATION DISCERNED FIVE MAJOR
DEFICIENCIES IN THE EXISTING STRUCTURE. THOSE DEFICIENCIES
AND THEIR SUGGESTED RESOLVE ARE AS FOLLOWS:

1. THE TENDENCY FOR FEDERAL REGULATORY AGENCIES
TO CONFINE THEMSELVES TO NARROW PERSPECTIVES
IN REACHING DECISIONS WHETHER THESE BE
IN THE FIELDS OF RULE-MAKING AND STANDARD-
SETTING, LICENSING, OR MONITORING AND EN-
FORCEMENT, WITHOUT COMPROMISING THE PRESENT

INDEPENDENCE OF REGULATORY BODIES, THE TEAM
CONCLUDED THAT COMPREHENSIVE NATIONAL POLICY
GUIDANCE ABOUT ENERGY NEEDS AND PRIORITIES
COULD AND SHOULD BE PROVIDED OPENLY BY THE






85


EXECUTIVE BRANCH. THE MECHANISM THAT SEEMS
MOST PRACTICAL AND APPROPRIATE IS THAT OF A
NATIONAL ENERGY COUNCIL, DISTINCT FROM ANY
DEPARTMENT OR AGENCY WITH PROGRAMMATIC
OBLIGATIONS.

2. FEDERAL ENERGY REGULATION HAS BEEN MORE
RESPONSIVE TO PRACTICES OF THE PAST THAN IT
HAS TO PRESENT CONDITIONS AND FUTURE PROSPECTS
IN TECHNOLOGY, THE ECONOMY, INTERNATIONAL
RELATIONS, AND OTHER ENERGY-RELATED FACTORS.
TO A CONSIDERABLE EXTENT THIS DEFICIENCY
MIGHT ALSO BE OVERCOME BY THE CLEAR AND CON-
TINUING FORMULATION OF A NATIONAL ENERGY
POLICY. BESIDES, THE SAME NATIONAL ENERGY
COUNCIL COULD HIGHLIGHT POTENTIAL INTER-
AGENCY CONFLICTS AT THE FEDERAL LEVEL AND
ENCOURAGE EXECUTIVE AND LEGISLATIVE SOLUTIONS
TO EMERGING ENERGY POLICY PROBLEMS.

3. REGULATORY OFFICIALS DO NOT MAKE INFORMED
AND TIMELY DECISIONS IN CASES IN WHICH SOME
ENERGY DATA ARE INCOMPLETE, UNRELIABLE,
INACCURATE, OR SIMPLY UNAVAILABLE. A CEN-
TRALIZED ENERGY DATA OFFICE, WHICH WOULD
SUPPLEMENT RATHER THAN SUPPLANT THE MORE






86


PARTICULARIZED DATA-GATHERING ACTIVITIES OF

THE RESPECTIVE REGULATORY BODIES AND PROMOTE
INTERCHANGE OF INFORMATION THROUGH A UNIFIED
RETRIEVAL SYSTEM WOULD BE HELPFUL. THE FEDERAL
ENERGY ADMINISTRATION HAS TAKEN STEPS TOWARD
THAT GOAL,

4. THE OPPORTUNITIES FOR DELAY AND LEGITIMATE
CONFLICTS OF REGULATORY INTEREST ARISE CON-
STANTLY BECAUSE MANY AGENCIES CUSTOMARILY
ARE INVOLVED IN THE REGULATORY DECISIONS
AFFECTING SIGNIFICANT ENERGY PROJECTS. OPPOR-
TUNITIES FOR DELAY AND CONFLICTS MIGHT BE
ELIMINATED BY THE CREATION OF A LICENSING
COORDINATION OFFICE PERHAPS ALSO WITHIN THE

FEA -- WHICH WOULD ESTABLISH TIMETABLES,
EMPLOY THE LEAD-AGENCY TECHNIQUE WHEN APPRO-
PRIATE, AND GENERALLY TAKE WHATEVER COORDINAT-
ING STEPS ARE NECESSARY TO ENSURE THAT THE
VARIOUS SAFEGUARDS OF PUBLIC WELFARE WITHIN
THE FEDERAL LICENSING PROCESS DO NOT BECOME
BOTTLENECKS.

5. SUFFICIENT MEANS OF INTEGRATING AND COORDINAT-
ING EITHER ENERGY OBJECTIVES OR ACTIONS AT
THE FEDERAL AND STATE LEVELS HAVE NOT BEEN
DEVELOPED. IN ADDITION TO ACTIONS THAT MIGHT






87


BE TAKEN BY AN ENERGY LICENSING OFFICE TO

COORDINATE EFFORTS IN SPECIFIC PROJECTS,

THE STUDY TEAM RECOMMENDED THAT INFORMATION

EXCHANGES AND POLICY DISCUSSIONS TAKE PLACE
REGULARLY BETWEEN TWO NEW GROUPS THAT WOULD

REPRESENT THE FEDERAL AND STATE LEVELS

RESPECTIVELY IN ALL MATTERS RELATED TO ENERGY.
THE FIRST WOULD BE A FEDERAL OFFICE DEVOTED

EXCLUSIVELY TO INTERCHANGES WITH THE STATES
AND LOCALITIES; THE SECOND WOULD BE A PERMA-

NENT REPRESENTATIVE BODY CONSISTING OF STATE-

DESIGNATED OFFICIALS, WHO SHOULD BE OF SUFFI-

CIENT STATURE TO REFLECT PROMPTLY AND
ACCURATELY THE POLICIES AND INTENTIONS OF

THEIR GOVERNMENTS.

THE RECOMMENDATIONS OF THE STUDY TEAM INCLUDED A
COMPOSITE OF RELATIVELY SIMPLE CHANGES PROVIDING THE BASIC

PRINCIPLES OF COORDINATION, COOPERATION, AND CANDOR. ALL

RECOMMENDATIONS CAN BE IMPLEMENTED PROMPTLY, AND SEVERAL

ARE FLEXIBLE ENOUGH TO PERMIT READY MODIFICATION IN RESPONSE

TO NATIONAL REACTION.

FOR EXAMPLE, IT WOULD NOT MATTER SUBSTANTIALLY IF
THE GUIDANCE ON NATIONAL ENERGY POLICY CAME FROM SOME ENTITY
OTHER THAN THE NATIONAL ENERGY COUNCIL SPECIFICALLY PROPOSED.

CONCEIVABLY, IT MIGHT COME FROM A COUNCIL IN THE WHITE HOUSE,

MADE UP OF AGENCY AND DEPARTMENT HEADS. THE IMPORTANT






88


REQUIREMENT IS THAT FEDERAL REGULATORS MUST UNDERSTAND

THE BROAD IMPACT THEIR DECISIONS ARE LIKELY TO HAVE IN THE
CONTEXT OF A NATIONAL PROGRAM WHICH ACKNOWLEDGES CERTAIN

END-USE PRIORITIES, SPECIFIC COMMITMENTS TO ENVIRONMENTAL
PROTECTION, LAND USE AND RESOURCE DEVELOPMENT, THE DEVELOP-

MENT OF NEW TECHNOLOGIES, AND THE REQUIREMENTS OF NATIONAL

SECURITY AND INTERNATIONAL FINANCIAL STABILITY.

OF COURSE, IN ORDER TO ADVANCE PUBLIC CONFIDENCE,

THERE SHOULD BE SERIOUS RESERVATIONS ABOUT ASSIGNING THE
DEVELOPMENT OF POLICY TO ANY GROUP WHICH ITSELF HAS ITS OWN

PROGRAMMATIC RESPONSIBILITIES BECAUSE THAT COULD PRODUCE

EITHER A REAL OR A SUSPECTED BIAS. SIMILARLY, EVEN THE

APPEARANCE OF ERODING THE APPROPRIATE INDEPENDENCE OF
REGULATORY COMMISSIONS COULD BE COUNTERPRODUCTIVE. CONVEY-

ING POLICY GUIDANCE OPENLY MIGHT INCLUDE THE SUBMISSION OF
POSITION PAPERS ON THE FORMAL RECORD OR APPEARANCES BY THE

NATIONAL ENERGY COUNCIL AT PUBLIC HEARINGS. POLICY INFORMA-

TION WOULD NOT SUBSTITUTE FOR EVERY REGULATOR'S OBLIGATION

TO CONSIDER EACH CASE ON ITS MERITS, AND WHENEVER POLICY
GUIDANCE WAS LINKED TO A SPECIFIC CASE OR RULE-MAKING PRO-

CEEDING, THE GUIDANCE WOULD HAVE TO RELATE EXCLUSIVELY TO
EFFECTS ON NATIONAL ENERGY OBJECTIVES. WITH THESE GROUND
RULES, THE RESULT SHOULD NOT BE A LESS INDEPENDENT REGULA-

TORY PROCESS BUT A BETTER INFORMED ONE -- WITH AN EN HAN7-

MENT OF PUBLIC UNDERSTANDING.






89


IF THE GENERAL PUBLIC HAS BEEN BEWILDERED BY THE

ARCANE INTRICACIES OF DEVELOPING ELECTRIC UTILITY RATES,

THE AVERAGE CITIZEN IS EVEN MORE AT A LOSS TO WEIGH CON-
FLICTING TESTIMONY OFFERED ROUTINELY BEFORE TECHNOLOGICAL

REGULATORS. PUBLIC TRUST IN THE SYSTEM, HOWEVER, IS

INDISPENSABLE. SUCH TRUST PRESUPPOSES PUBLIC ACCESS TO
THE FACTS AND PUBLIC PARTICIPATION IN THE PROCESS. THAT
PRINCIPLE MUST REMAIN FIRM.

REGULATION IS A MEANS OF PROTECTING THE TOTAL

PUBLIC INTEREST WHILE ASSURING THAT ESSENTIAL SERVICES ARE

PROVIDED AS NEEDED. IT WORKS BECAUSE IT IS SUPPORTED BY

THE PUBLIC; IT WORKS BECAUSE IT IS DYNAMIC AND RESPONSIVE

TO THE NEEDS OF THE PUBLIC. OUR GOAL MUST BE TO KEEP THAT
REGULATION DYNAMIC. THAT CAN BE MAINTAINED ONLY IF WE ARE


CONSTANTLY WILLING TO CHANGE.






90


NATIONAL COMMISSION ON SUPPLIES AND SHORTAGES
1750 K Street. N W. Suite 800
Washington. D C 20006
S June 11, 1976



Mr. Erasmus H. Kloman
Senior Research Associate
National Academy of Public
Administration
1225 Connecticut Avenue, N.W.
Washington, D.C. 20036

Dear Mr. Kloman:

The purpose of this letter is to provide answers to the three questions
included with your letter of June 3. Before doing this, however, I
must make two things clear: (1) any opinions I state either in this
letter or at the conference are my own and not necessarily those of the
Commission, and (2) I am not and do not purport to be an expert on
energy or energy policy. I have agreed to become involved in your
conference because of the close similarity between the questions you
are addressing and those we face here at the Commission. Indeed, if
you were to substitute the word "materials" for the word "energy" in
your three "broad questions," you would have the same questions that we
have been wrestling with since we began operation last October. What
we are increasingly finding -- and what your conference no doubt will
confirm -- is that there is a common set of interrelated problems
affecting energy and materials, and that analyzing them as separate
entities makes little sense.

Let me answer your questions indirectly by relating to you what I believe
our work to date shows about materials problems and about the ability of
the government as it is currently organized to deal with them.
Our Commission was set up in the aftermath of the most pervasive period
of shortages since the Korean War. In an economy used to abundant
supplies of materials, particularly during peacetime, these shortages
were traumatic. Coming as they did soon after the Club of Rome had
issued Its famous report, "Limits to Growth," these shortages set off
fears that the Age of Scarcity was at hand, and that the shortages were
but the first manifestation of it. Indeed, it would not be unfair to
characterize the time from early 1974 until the end of the first quarter
of 1975 as a period of panic. Much of the behavior that was observed
during that time can only be explained in that way. Purchasing agents
acquired materials in quantities they could not possibly use because of
fears that they would be unable to get what they did need. A casual
remark by Johnny Carson on the Tonight Show about a possible toilet