Costly, Complex

But Carter's ambitious fuel program could have been much tougher

The first casualty of Jimmy Carter's Cabinet shake-ups was the momentum that he had been building behind his staggeringly expensive, exceedingly complex and long overdue new energy program. That is doubly unfortunate, because the damage was self-inflicted, and even more because the plan makes a start on attacking a problem that will continue to menace the U.S. long after the switches in the Cabinet have faded in significance.

The President got off to a promising start. In a blizzard of speeches and briefings early last week, he described plans to spend a breathtaking $141 billion over the next decade ("one of the biggest figures you ever heard ... the unparalleled peacetime commitment"). The aim is to cut U.S. oil imports in half, and thus prevent the nation's economy from remaining in bondage to the price and production whims of OPEC. For about 40 hours, beginning with his TV talk Sunday night, Carter was winning popular and political support for this economic moon shot. On Monday, in tub-thumping speeches to county officials in Kansas City and communication workers in Detroit, he drew the loudest and longest cheers that he has heard in months.

But once news of the mass resignations in the President's official family broke Tuesday afternoon, talk of import quotas, synthetic fuels and energy independence was drowned out by a new buzz of puzzled speculation. Early in the week congressional Democrats were talking about whooping through key parts of the President's program, including the windfall-profits tax on oil companies that is supposed to provide all the money for Carter's plans, before the legislators recess on Aug. 3 for four weeks. But by week's end they were making plain that Carter, and the nation, will have to wait. Said Louisiana's canny Russell Long, chairman of the Senate Finance Committee, which must approve the tax: "I wouldn't bet on there being $141 billion to support Carter's whole program. I'm not going to force anything through the committee."

The loss of momentum imperils Carter's program, which was bound to be challenged and changed in Congress anyway. Only the public sense of crisis brought on by the exasperating gasoline lines gave the President the chance to win bold action on long-range plans. That sense of crisis is ebbing rapidly, and gasoline lines are shortening drastically as a result of Saudi Arabia's decision to increase crude production. The less the feeling of urgency, the greater the opportunity for quarreling special interest groups to pick the program apart.

Virtually nothing in the Carter program would immediately produce, or even save, a drop of oil. The only element that takes effect promptly is a presidential order limiting imports this year to an average 8.2 million bbl. a day. American oil companies almost surely could not find much more than that to bring in even if there were no quota; imports so far in 1979 have averaged only 8.145 million bbl. a day. For 1980 the daily limit will be set somewhere between 8.2 million and 8.5 million bbl. Because the recession in the U.S. economy has begun, imports probably would not exceed that level in any case. If the quota were to stay at roughly that point in 1981 and succeeding years (a decision that may have to be made by another President), it might begin to bite! The nation would be forced to conserve fuel, or produce more itself, to accommodate normal growth in the economy. But for the moment the quota's main, and not insignificant, value is to serve as a symbol of national determination to put some ceiling on foreign petroleum.

One part of the program that could have fairly quick impact, if Congress approves, is the creation of an Energy Mobilization Board patterned after the War Production Board of 1942-45. The energy board would consist of three members appointed by and responsible to the President. Their mission: cut red tape. The board would be empowered by Congress to select projects--the building of pipelines and refineries, the opening of coal mines--that it deemed essential to expand domestic fuel output. It then could waive procedural requirements for endless hearings imposed by a maze of environmental, safety and other laws, and set rigid deadlines for state and local authorities to give a yes-or-no answer on whether those projects would be allowed.

If the deadlines were not met, the board could make the decisions itself, and its rulings could be challenged judicially only in federal appeals courts. That would skip several levels of legal intervention; the lawsuits spawned by almost any energy project now often start out in local courts and migrate slowly from there to federal district courts. Almost any controversial decision made by the board would be challenged as un constitutional by back-home politicians and environmentalists, and several of the countless legal battles might drag up slowly to the U.S. Supreme Court. Administration aides hope that the high court would reject the assault. But there is another problem: many of the quick decisions that the board could compel from state and local authorities would be "no." The board would have no power to amend local clean-air and other environmental laws.

Nearly all of the President's other plans are targeted on the year 1990. The goal for then is ambitious: to reduce imports by 4.5 million bbl. a day below present levels by a combination of production and conservation measures. Among the main proposals, ranked by estimated import savings:

> Production of synthetic fuels, primarily oil and gas obtained from coal, and oil squeezed out of shale rock. This is the heart of the program, and by far the most expensive item; it would swallow $88 billion of the $141 billion that Carter proposes to spend by 1990. The money would be ladled out by an Energy Security Corp. headed by seven directors: three Cabinet members, plus four people chosen by the President. The corporation would operate outside the regular federal establishment and be run like a business. It would choose which projects to encourage and could buy the output of synthetic-fuels plants at guaranteed prices, lend money directly, guarantee loans to producers and build synfuel plants itself. Goal: 2.5 million bbl. of synfuel a day by 1990.

> Forced savings by electric utilities. They would be required to cut their oil use in half by 1990. The Department of Energy would issue "tickets" permitting utilities to burn so much oil, and no more. If they wanted more oil, they could trade the tickets among themselves. Thus, a power company that managed to save particularly large amounts of oil could sell its tickets, at a nice profit, to utilities that desperately needed petroleum. The utilities would be expected to convert oil-burning plants primarily to coal or nuclear fuel, and would get Government loans or loan guarantees totaling $5 billion to help them. Estimated savings: 750,000 bbl. a day.

> Reduced oil use in buildings. Utilities would be required to install insulation and other conservation gear for then" customers and offer them longterm, low-interest loans on which the principal would be repaid only when the borrower sold the building. To cover their costs, the utilities could charge more for electricity. In addition, the Government would subsidize low-interest loans to coax owners of oil-heated homes into converting to natural gas or to install conservation equipment. Cost to the Treasury: $2 billion. Estimated savings: 500,000 bbl. a day.

> Improvement of mass transit. Over the next ten years, the Government would give $10 billion to local mass-transit systems to buy or improve bus, subway, streetcar and other facilities. Another $6.5 billion would be spent to help Detroit build cars that are more fuel-efficient. Expected total savings: 250,000 bbl. a day.

One of the biggest savings would come from a part of the program that would cost the Government nothing. The President proposes to encourage the output of heavy oil, a gummy, tarlike liquid that is abundant in California but must be heated before it can be pumped to the surface. Output would be stimulated by exempting heavy oil from price controls and from the windfall-profits tax. Estimated increase in production: 500,000 bbl. a day.

Conversely, the second most expensive item in the program, next only to synfuel production, would neither expand output nor save on imports, but is thought to be socially necessary. To cushion the shock of the higher prices that would result from his plans (synfuel, especially, probably would cost much more even than OPEC oil), Carter would have the Government pay to poor people no less than $24 billion, mostly in direct cash grants, over the next ten years. Just who would qualify for aid has not yet been defined.

The program was drafted by a task force of 80 to 100 people drawn from several Government departments, and headed by two little-known figures: Katherine Schirmer, a White House assistant for domestic affairs, and Eliot Cutler, an associate director of the Office of Management and Budget. Overall director was Domestic Affairs Adviser Stuart Eizenstat; just ousted Secretary of Energy James Schlesinger also contributed heavily. The plan was mostly knocked together in the two weeks between Carter's return from the Tokyo economic summit and his July 15 TV speech, although most of the ideas in it have been around for months, and one or two have even been advocated by Carter before. Notable example: a $3.5 billion "bank" to finance development of solar energy. The haste shows; some parts of the program are still ill defined.

On Sunday night the President said nothing at all about nuclear energy. On Monday he declared in Kansas City that "nuclear power must play an important role in the United States to ensure our energy future." But he left most unclear how many plants he wants, how soon, and what the Government might do to encourage their construction. Carter's tactics in selling the program have been erratic. On Sunday night he appealed for national unity. On Monday morning he once again voiced deep suspicion of the oil companies, asserting that the Government would investigate "to see if the current shortage involves any improper or illegal activity." That blast won cheers from the county officials but angered the oilmen who will have to produce most of the synfuel.

The overall plan is far from the toughest that the President could have chosen. Unfortunately, he failed to remove price controls from gasoline. He failed also to speed up decontrol of the prices of domestically produced oil; gradual decontrol began in June and will not be complete until 1981. Carter turned down quick decontrol on the ground that it would painfully push up prices, perhaps to $1.25 per gal. for gasoline.

So it might, but it also would have forced Americans to conserve, by making them face the reality that oil has become a precious, limited and most expensive fuel. Furthermore, decontrol would have permitted the nation to scrap the messed-up allocation system that directs gasoline supplies to the wrong places and seriously aggravates shortages. Decontrol is favored by advocates of free-market economics, including Schlesinger, former Treasury Secretary Michael Blumenthal and his replacement, Federal Reserve Chairman G. William Miller. Because it stimulates conservation, decontrol is also advocated by some environmentalists who usually are on the side of Government intervention. Says Ernst Habicht, a New York energy expert for the Environmental Defense Fund: "Both the environment and the economy would be better served if we relied more on market mechanisms. We have subsidized energy for decades, and more of the same is not going to help."

Carter also could have gone much further in advocating mandatory conservation. He would have been wise, for example, to urge federal taxes on big, gas-thirsty cars and taxes on the commercial use of electricity. Another flaw is that the program is uncomfortably dependent on chancy estimates of the size of the windfall-profits tax that Congress may impose. To prevent a bulge in the budget deficit, Carter is determined to finance his energy plans almost entirely from that tax, which would be drawn from the extra money that oil companies would earn from the phased decontrol of domestic oil prices. He warned that if Congress fails to pass a tax as stringent as he wants --or if revenues from it fall below expectations--the whole program would have to be cut back. The House has already passed a tax that meets the President's goals, but how strong a bill the Senate will approve probably will not be known until this fall.

Carter and his aides have not yet faced up to some unpleasant, politically sensitive and perhaps ultimatelyly delaying implications of their program. Both the effort to compel utilities to use less oil and the ambitious plan to encourage synthetic-fuel production may require the digging and burning of more coal than present clean-air, strip-mining and other environmental laws permit. One Administration official was asked whether the Government plans "to relax environmental standards at all to help the utilities switch from oil to coal or nuclear." He replied lamely: "That issue is still under consideration."

On balance, the program is both valuable and necessary; its flaws are almost entirely sins of omission. It begins a many-pronged attack on the energy problem, recognizing that no single proposed solution--conservation, higher production, synthetic fuels, mass transit--is sufficient, but that all are essential. It proposes to make use of the nation's nonoil energy reserves that either are costly to get at or require technological breakthroughs to use fully.

Most of all, the program recognizes that the nation must make a long-lasting commitment, enduring many years and costing hundreds of billions of dollars in public and private money, to assure itself adequate energy supplies. That will entail burdensome Government intervention in the market. But free markets might not make synthetic-fuel production profitable until OPEC raised the price of oil high enough to bring the U.S. to the brink of bankruptcy and leave it at the mercy of the cartel's political dictates. Much money will be wasted, as it always is in crash programs. Some synfuel projects will prove to be technically unfeasible or to cause unacceptable environmental damages. Yet the nation must be prepared to go down some blind alleys before it finds the road to energy independence.

What are the chances that Congress will go along? Initially, they seemed bright. House leaders last week prepared no fewer than twelve bills embodying the key parts of Carter's program. Some had begun moving even before the President spoke. The House has passed a synthetic-fuels bill aiming at 1990 output close to Carter's goals, though without an Energy Security Corp. The Senate Energy Committee is working on an omnibus bill containing many of Carter's measures.

Public reaction also seemed favorable. Carter proposed having the Energy Security Corp. issue $5 billion in bonds to the public to help finance synfuel development. In one of those bits of self-conscious flag-waving that nonetheless may illustrate the popular mood, the city council of Ga. (pop. 200), Ga., voted to invest half the town's accumulated savings of $20,000 in those bonds.

All that, alas, was before Carter again distracted the nation's attention with his bewildering Cabinet shifts and gave Congress the added problem of trying to figure out who will be speaking for the Administration on energy. The distraction should not be allowed to last long. The energy question will remain urgent, and will demand solutions, long after Carter's formation of his new Cabinet--and after both he and the Congressmen who will be voting on his plans have left office.

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