34 The Federal Government exercises some indirect regulatory functions through its control of the transportation industry and by virtue of its own purchase requirements. Truck transport is regulated through the Motor Carrier Act.32 Air transport is regulated through the Civil Aeronautics Act,33 the Federal Airport Act,34 and the Federal Aviation Act.35 Although barge and ship transport is not as closely regulated, the Federal government does have authority under the Merchant Marine Act as amended 36 to provide subsidy financing for construction of oil tankers and LNG transport vessels. Auto transportation is controlled through Federal aid to highway programs including the Highway Trust Fund and Interstate System 37 and the ABC Road Program.38 The Federal government itself utilizes energy purchased by the General Services Administration.39 This is obviously not an inclusive list but it serves to illustrate the point that indirectly the Federal Government has a major impact on energy consumption rates and patterns. It is significant that the policies governing these activities were adopted with little regard for energy policy. 32 Motor Carrier Act, 1935 (49 Stat. 543). 35 Federal Aviation Act, 1958 (72 Stat. 731). 36 Merchant Marine Act Amendments of 1970 (84 Stat. 1018). $7 Federal-Aid Highway Act, 1958 (72 Stat. 89). Federal Road Act, 1916 (39 Stat. 355). * Federal Property and Administrative Services Act, 1949 (63 Stat. 372). IV. NATIONAL SECURITY POLICY National Security Policy has had an impact on current energy policy in three major areas: oil policy, the Tennessee Valley Authority (TVA), and the Atomic Energy Commission (AEC). Security concerns have quite naturally been of major importance to Americans since the founding of the first colony. These considerations continued after American Independence. Early evidence of national security considerations related to the public domain and natural resources can be traced to the reservation of lead deposits used in munitions.' As more steam vessels came into Navy use, the Navy's demand for coal increased. Consequently the Federal Government gave preference to the Navy for coal mined on certain public lands. These policies eventually evolved into the Strategic and Critical Materials Stockpiling Program. Included among the minerals stockpiled is oil. The two World Wars and the Korean conflict dramatized the security needs for petroleum products. Today's mechanized armed forces are almost totally dependent on petroleum products. Security concerns about oil really began in 1904 when the U.S. Navy Fuel Oil Board recommended that all American war vessels be converted to fuel oil. The Navy was hesitant. It sponsored two major studies on the desirability of petroleum powered vessels. These studies point up the ease of handling, efficiency, and economy of petroleum powered vessels. By 1914 Secretary of the Navy Daniels reported that all American naval warships were converted to oil. The Navy's demand for oil increased from 360,000 barrels per year in 1912 to 6,000,000 barrels per year in 1919. In 1909 Secretary of the Interior Ballinger warned President Taft that dire consequences would befall national security should oil shortages occur and stated the need for Government (Navy) oil reserves. By 1914 it became apparent the naval reliance on oil was increasing and that supply was decreasing. Price also entered into the picture. The Navy's fuel oil bill had risen 50 percent between 19121913. The result was that President Taft and later President Wilson reserved more than 3 million acres of oil land and later oil shale. The most famous of these withdrawals were Elk Hills and Buena Vista Hills (1912) and the ill-fated Teapot Dome (1914). Congress officially authorized the Naval Petroleum Reserve Program in 1920.5 After the first reserves were established much consideration was given to the possibility of government production of these fields and also to the possible establishment of government refining capacity. The initial success of Federal regulatory efforts in the oil industry allayed the fears that prompted the discussion of Government production. Consequently no action was ever taken on the proposal. 1 Act of March 3, 1807 (2 Stat. 448). ? Preference of Army and Navy to Purchase Alaskan Coal, 1908 (35 Stat. 424). Strategic and Critical Materials Stockpiling Act of 1939 (53 Stat. 811), as amended 1946 (60 Stat. 596). 36 Subsequent to World War I, the United States believed that eventually the bulk of this country's petroleum requirements would have to be furnished through imports. By 1921, imports accounted for 28 percent of domestic demand. The discovery of large reserves (most notably the huge East Texas oil field) during the late 1920's resulted in a net domestic surplus; and, in order to protect domestic production, import duties were imposed in 1932 on imported crude oil, residual fuel oil, gasoline, motor oil, and lubricating oil. "Conservation laws" were also enacted by the major oil-producing States restricting the maximum rate of production from each well. The United States, during the 1930's, imposed mandatory quantitative restrictions on imports limiting these to approximately 41⁄2 percent of 1932 levels. The United States reached a peak as an exporter in 1938. Large discoveries of crude oil in the Persian Gulf countries during the 1930's, coupled with increases in domestic demand, resulted in a reversal of this trend until in 1948 the United States again became an importer. After World War II economic considerations at home and important foreign political considerations stemming from the Cold War were contributing factors to this situation. Security policy also played a substantial role in Truman's fight to secure the tidelands and Outer Continental Shelf lands for the Federal Government. In July 1954 President Eisenhower created an Advisory Committee on Energy Supplies and Resources Policy which reported that using imports threatened the national security and recommended incentives for new domestic exploration. Section 7 of the Trade Agreements Extension Act of 1955, required the Director of the Office of Defense Mobilization (ODM) to advise the President whenever the Director had "reason to believe that any article is being imported into the United States in such quantities as to threaten to impair the national security." Pursuant to this section, the Director of ODM requested companies to limit their imports in August 1955. Following the 1956 Suez Crisis, a Voluntary Oil Import Program was initiated following the recommendation of a special Presidential Committee to Investigate Crude Oil Imports. The Department of the Interior administered the program until early 1959, when it had become evident that the program was not effective. On March 10, 1959, the President issued Proclamation 32797 carrying into effect a recommendation of the Special Committee to Establish a Mandatory Oil Import Program. 8 The authority under which the President acted was section 7(b) of the Trade Agreements Extension Act of 1955 which authorized restrictions on imports threatening to impair the national security after an opinion by the Director of the Office of Defense Mobilization (later the Director of the Office of Emergency Planning (OEP)) that national security was threatened and a finding of fact by the President. The provision, as amended, is presently section 232 of the Trade Expansion Act of 1962.9 The Mandatory Oil Import Program has two primary functions: to regulate the degree of import restrictions by means of various quota levels and to allocate permitted imports among domestic claimants. Section 7, Trade Agreements Extension Act of 1955 (69 Stat. 162). 7 Adjusting Imports of Petroleum and Petroleum Products (Presidential Proclamation No. 3279). Section 7(b), Trade Agreements Extension Act of 1955 (69 Stat. 162). Trade Expansion Act of 1962 (76 Stat. 877). 37 The Proclamation created an Oil Import Appeals Board in the Department of the Interior with power to modify or grant allocations and to review any revocation or suspension of an import license. The Mandatory Oil Import Program is administered by the Office of Oil and Gas which reports to the Assistant Secretary for Mineral Resources, Department of the Interior. Following Reorganization Plan No. 1 of 1973,10 which abolished the OEP, the oil import policy functions of OEP were transferred to the Department of the Treasury, with the Deputy Secretary of the Treasury becoming Chairman of the Oil Policy Committee. Management of the import program remained within the Department of the Interior. 11 The Department of Commerce under the authority of the Trading With the Enemy Act of 1917 " and under Executive Order Number 11387 (1968),12 acting through the Office of Foreign Direct Investments has jurisdiction over and can regulate U.S. companies engaged in seeking energy sources outside of the United States. Atomic Energy The history of the World War II development of nuclear energy is well known. In 1939 a conference of theoretical physicists led by Niels Bohr and Enrico Fermi discussed the possibility of nuclear fission. Later that year, motivated by the fear that Germany would achieve success in developing a new superweapon, Dr. Albert Einstein wrote President Franklin D. Roosevelt and informed him that such a weapon was possible. Subsequently in 1940 the Manhattan Engineer District, a supersecret organization of scientists and engineers was formed to work on the project. By 1942 they had achieved the world's first sustained chain reaction. Facilities were constructed at Oak Ridge (to provide fissionable material), Hanford (for conversion to plutonium), and at Los Alamos (to construct weapons). On July 16, 1945, the first bomb was exploded. August 6 and 8 saw the use of the weapon on Hiroshima and Nagasaki. Almost immediately after the use of the atomic bomb in 1945, the question of the appropriate post-war control of nuclear energy was raised. Only two months after the Hiroshima bombing, President Truman urged Congress to establish an Atomic Energy Commission and to state an atomic energy policy. The principal issue in the subsequent debate concerned the extent of continued military control over atomic energy. The Atomic Energy Act of 1946 13 established a civilian Atomic Energy Commission (AEC) with control over the policy aspects of atomic energy development. The policy statement of the act recognized a Federal role in supporting nuclear research and development and continued Federal control over production, ownership, and use of fissionable materials. The fissionable mineral resources of the public lands were reserved for the use of the United States and the Commission was authorized to arrange for the purchase and processing of nuclear fuels. President's Re-Organization Plan No. 1 of 1973. 11 Trading with the Enemy Act (40 Stat. 411). Executive Order 11387 (1968). Atomic Energy Act of 1946 (60 Stat. 755). 38 The initial AEC policy toward civilian programs was intended to stimulate private partnership in the development of the nuclear industry. The AEC set up a special reactor development program in 1948 and announced a 5-year development program for civilian applications in 1953. However, until the mid-fifties the concerns of the Cold War overrode civilian considerations of the program. The first electric power generated by a nuclear reactor was achieved at the National Reactor Test Site in Idaho in 1951. The first commercial reactor was started in 1953 at Shippingport, Pa. The rapid growth planned in the nuclear power industry by the private power companies pointed up the need for a new law governing licensing and regulation of private power reactors. The old private power vs. public power debate sprung up in 1953-54. The struggle was resolved by compromise with the public power advocates winning regulation by the Federal Power Commission of power produced, retention of patent rights by the Federal Government, and the public power preference clause. The private power interests won the right to develop nuclear energy for civilian uses. These compromises were enbodied in the 1954 Atomic Energy Act 4 which provided major impetus for private power development. The AEC was vested with the licensing and regulatory power over the new industry. In 1955 the A.E.C. set up the Cooperative Power Reactor Demonstration Program to help spur private investment. In 1964 the Federal Government sought to remove the AEC from the costly requirement of having to stockpile fuels for all domestic purposes and to speed up development by private industry by increasing the industries' profitability. This was accomplished by the Private Ownership Act 15 which allowed private ownership of uranium and curbed unrealistic low prices by ending the Federal subsidy program for reactor fuels. A strong measure of Federal dominance over the production of nuclear fuels and of research was retained for obvious security reasons, and the dominance and leadership of the Atomic Energy Commission over the nuclear industry remain pervasive in every aspect of planning and management. Safety controls over nuclear powerplants were among the earliest manifestations of a Federal responsibility for the environmental impacts of the energy system. TVA During the emergency of World War I, concerns over the Nation's dependence upon foreign nitrates for explosives resolved a monumental political struggle between the advocates of public and private power and let to the construction of a federally-owned hydropower and nitrate production complex at Muscle Shoals on the Tennessee River. The project was initiated under the authority of the National Defense Act of 1916,16 although the major power producing feature, the Wilson Dam, clearly would not be in operation in time for war production. The potential advantages of cheap public power and post-war production of nitrogen fertilizers were more or less overt motives for the development. The appropriateness of such public ownership remained in controversy, but in 1933 the depression sentiment and the strength of the 14 Atomic Energy Act of 1954 (68 Stat. 919). |