Getting More Power to the People

WHAT ever became of the great energy shortage? Only a few months ago, headlines sprouted warnings that a pinch on fuel supplies might force winter power blackouts or brownouts, factory shutdowns, possible rationing of oil and natural gas. Now as spring sunshine warms the land, those dark forebodings have either been forgotten or consigned to the list of Great Crises That Never Happened.

In fact, the shortage was not so much averted as postponed. Fuel supplies were adequate only because the General Motors strike and the economic recession limited industrial demand for power, while relatively moderate weather over much of the nation held down home heating needs. In some future winter of business boom and bitter cold--or some future summer of blistering heat that balloons air-conditioning demand--the U.S. is almost sure to face the same threat again.

To escape a real crisis next time around, the Nixon Administration must begin now to draft a coherent national energy policy. It must measure the nation's real energy needs for the foreseeable future and determine what combination of Government price-regulating programs, import controls and conservation measures will be required to fill those needs.

Crossed Wires. At present, U.S. energy policy is a mix of uncoordinated, sometimes conflicting and occasionally inept programs carried out by half a dozen highly independent agencies. By administering oil import quotas, the Interior Department, for example, helps to keep domestic oil prices high; the Federal Power Commission tries to protect consumers by keeping natural gas prices low. The unintended result has been to discourage exploration for gas, a relatively nonpolluting fuel, because it is only one-third as profitable as oil when it is pumped out of the ground.

In a different way, the Atomic Energy Commission has retarded the development of coal supplies. A few years ago, the AEC was so carried away by the appealing prospects for atomic power that it predicted a vast expansion. Those hopes were thwarted by soaring construction costs, a nationwide squeeze on capital funds, shortages of trained personnel, delays in delivery of equipment, and environmentalists' objections to the thermal pollution of waterways, which can be caused by nuclear plants. The main result of the general euphoria, to which the AEC contributed, was that mining companies held back on developing coal reserves for fear of competition from nuclear plants that turned out to be phantoms.

Sine Qua Non. One reason for the confusion in policy is that Americans have been accustomed to act as if cheap and abundant energy were assured through eternity. Power--to heat and light buildings, propel cars and planes, keep computers and other machines purring--is the sine qua non of an industrial society. The U.S. has been consuming it far more greedily than any other nation. Americans make up 6% of the earth's population but use approximately 40% of its energy-producing fuels. According to a study by the Petroleum Industry Research Foundation, the nation's energy consumption since 1965 has been rising about 5% a year, or more than four times as fast as the U.S. population.

In their cars, for example, Americans have increasingly demanded power-operated windows, seats and other gadgets, which require oversize engines that gulp much more gas than would be needed merely to propel the auto. There are some indications that factories may also be wasting power. Energy consumed per unit of industrial output fell steadily from 1920 through 1966, but since then it has been rising. One consequence is that the nation's known reserves of easily recoverable fuel declined in the late 1960s, at least in relation to consumption. That situation was reversed in oil last year because of the big find on Alaska's North Slope; proved reserves rose 24% during 1970. Known reserves of natural gas, however, have gone down in each of the past three years.

In theory, this should not happen. Potential U.S. fuel reserves are so enormous that energy economists use an arbitrary measure, the Q,* to make the numbers less astronomical. The nation's total energy consumption in 1970 was 71 Q. The U.S. Geological Survey estimates that the country contains 5,162 Q of oil, 3,317 Q of natural gas and 32,000 Q of coal. In addition, Canada holds resources far exceeding its own energy needs (see map).

No Easy Job. The trouble is that much of this treasure is not recoverable with today's technology at today's prices. The Rocky Mountains of Wyoming and Colorado, for example, hold billions of barrels of oil imprisoned in shale. Estimates of the price that would have to be charged for oil crushed and burned out of that rock run as high as $5 a barrel v. $3.25 for crude oil pumped out of U.S. wells, and roughly $2 for Middle Eastern crude. In addition, the shale-extraction process piles up mountains of ash that would create environmental hazards. The Rockies also hold billions of tons of coal, but the deposits are too far from population centers to be of immediate economic use.

Other resources can be exploited more readily--but determining the most efficient and economic pattern of development is no easy job. Ideally, the goals of a national energy policy would be to ensure that power needs could be met from reliable sources at a reasonable price with a minimum of ecological damage. That ideal will be impossible to achieve because many of the goals are in conflict with one another. But the U.S. should begin now to face up to some difficult questions and answers. Among them:

WHAT ENERGY SOURCES SHOULD THE U.S. DEVELOP MOST INTENSIVELY?

The nation is consuming most rapidly the fuel of which it has least. It derives 43% of all energy from burning oil, but oil constitutes only 5% of domestic fuel reserves. What else should the U.S. use? Coal reserves are gigantic, and some coal men argue that Washington could profitably divert much of the money that it spends on nuclear-power research to study ways to take the sulfur out of coal smoke. But even if coal could be cleaned up, the cheapest method of digging it out of the earth is strip mining, which turns large expanses of natural beauty into scenes of lunar desolation. Gasifying coal underground so that it can be moved easily by pipeline offers one way to make fuller use of the nation's resources; the feat is technically possible, though at present it is expensive.

In the long run, the nation must rely more on nuclear power, if only because fissionable materials, unlike any other fuel, can be used over and over again. Breeder reactors, in fact, produce more fuel than they consume. So far, nuclear power has been a disappointment; the U.S. today gets only a tiny fraction of its power from nuclear energy, less than half as much as the AEC had been predicting a few years ago. One reason: coal-or oil-fired power plants are still 20% to 40% cheaper to build and operate than nuclear plants. But improvements in technology are bound to bring those costs down, and nuclear power will make more economic sense when the prices of fossil fuels rise--as they inevitably will. Though thermal pollution remains a problem, it is technologically easier to solve than the air pollution caused by oil and coal. Utility men estimate that by 1980 the U.S. will get 6% or more of its energy from nuclear power.

SHOULD THE NATION TIGHTEN OR LOOSEN ITS LIMITS ON FOREIGN OIL?

The U.S. is becoming increasingly dependent on overseas sources. Imports, mostly from Venezuela, now supply 23% of the 14.7 million bbl. that the U.S. burns daily. Paul McCracken, President Nixon's chief economist, estimates that the share could rise to more than 40% of the nation's oil needs by 1980, even assuming that by then 2,000,000 or more bbl. a day will be coming in from Alaska's North Slope.

Venezuelan oil reserves are limited. Though new fields are being developed around the world from Indonesia to the North Sea, their production potential will not be known for some time. Thus, future U.S. imports would have to be bought largely from the politically unpredictable states of North Africa and the Middle East, which contain by far the world's greatest concentration of proven oil resources. That would make the U.S. vulnerable to strong-arm tactics, more so because the producing nations have lately begun to act in concert. In January six Middle Eastern countries won a 30% price increase by threatening a joint shutoff of oil, and Libya two weeks ago forced an even larger increase by raising a similar threat. Closer to home, Venezuela last month unilaterally decreed tax increases, which have raised the price of fuel oil as much as 20% in the U.S. Northeast.

At one extreme, the U.S. could bar all imports. The nation would then attain self-sufficiency, because prices would rise high enough to encourage the crushing of oil shale, mining of Rocky Mountain coal and larger-scale nuclear development. But consumers would be angered by the extra costs, which are impossible to measure but could easily run to tens of billions of dollars a year. At the other extreme, Washington could increase energy supplies and reduce costs at least temporarily by throwing the U.S. wide open to foreign oil. But that would make the U.S. dangerously dependent.

Clearly, the U.S. has to follow a middle course, seeking to work out a better balance between domestic fuel production and foreign supplies than is provided by the present oil-import program, which has neither kept costs down nor provided any guarantee against shortages. Washington should let in some more oil from the rest of the world. It should do this either by liberalizing quotas or replacing them with a less restrictive tariff system, as a Nixon-appointed task force recommended--to no avail--a year ago. Such a move would have to be coupled with the building of a domestic reserve supply to guard against a Mideast shutoff. To do that, the import task force suggested storing domestically produced oil in salt domes or steel tanks. Another alternative would be to develop fields in areas where production costs are high. The wells would be capped and kept in reserve, but reopened in event of a possible interruption of foreign supplies.

WHAT OTHER FOREIGN SOURCES CAN BE DEVELOPED?

The U.S. should open its markets to much more oil from Canada, its closest and most reliable ally. Washington has long infuriated Canadians by treating their country as a "surge tank": drawing on it for supplies when shortages threaten, cutting back again when the pinch eases. That policy is economically as well as politically shortsighted. Canada could offer much fuel at prices below U.S. quotes; Canadian crude now sells for $2.75 a bbl. In return the U.S. could offer Canada sales outlets for oil reserves, which Canadians at present have neither the capital nor the domestic markets to develop. Oil wells in Alberta, which could produce 1,700,000 bbl. daily, are now capped for lack of markets in either country. Assurance of a U.S. market also could speed development of the Athabasca tar sands, which hold an estimated 320 billion barrels of oil that could be extracted economically at prices only slightly higher than those prevailing now.

Economic Adviser McCracken has begun to talk privately of organizing a North American common market in energy. That fascinating idea frightens many Canadian politicians, who fear a Yankee grab for their nation's resources. The problem is at least partly one of semantics; the same politicians proclaim eagerness for unrestricted access to continent-wide fuel markets. A U.S. offer of long-term contracts to buy more Canadian oil, put forth as a straightforward business proposition, might meet a ready reception.

The U.S. also could route Alaskan oil to the Midwest by building a pipeline through Canada's Mackenzie River valley (TIME, March 29). This would encourage exploitation of Canadian oilfields that lie along the route. As a quid pro quo, the U.S. would have to make some guarantee to divert Venezuelan or domestically produced oil to Eastern Canada if Arab nations shut off Mideast oil. Eastern Canada is not connected by pipeline to the oilfields in the Canadian West and the Arctic, but buys Mideast crude because it is cheaper.

Higher Prices Ahead. For some time, letting in more oil from Canada and elsewhere should limit increases in energy costs. Nixon's import-quota task force estimated that the present controls cost consumers $5 billion a year that could be saved by buying more low-priced foreign petroleum.

In the long run, however, the U.S. will have to accept somewhat higher costs for energy. The recent Mideast and Venezuelan oil-price boosts indicate that foreign petroleum bargains will not last forever. Domestic oil prices, while high by world standards, still make it profitable to extract only about a third of the oil from each U.S. producing well; the rest is too difficult to reach at prevailing prices. If the uncertainty of foreign supply eventually makes it necessary to draw more oil from U.S. wells, higher prices or tax incentives would be needed to develop the necessary technology. As for natural gas, the U.S. should now permit the price to rise enough to encourage full-speed exploration and drilling--even if the boost required turns out to be 25%, as some energy experts anticipate. The nation needs more gas, and present prices are too low to coax it out of the ground.

Whatever the specifics, the prime essential of a national energy policy is that all pieces fit into a sensible pattern of fuel production and use. The present lack of policy is leading to a combination of intermittent shortages and soaring prices. If it continues, the nation may find itself starving for energy in the midst of potential plenty, and paying an exorbitant price as a result.

*One Q equals a quadrillion--1,000,000,000,000,000--BTUs.

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