In proposing the national energy plan, the President has raised energy issues to the high level of national priority which we think these matters deserve. The President's staff is to be commended for drafting such comprehensive legislation in such a short time. But a truly com- prehensive energy plan can not be for- mulated in 90 days and it surely cannot be studied thoroughly and understood by the Congress and by the public in just a fevoshort months. The first ques- tion to be raised is whether the goals of the proposed energy policy are compat- ible with the goals of existing environ- mental policy. The most obvious con- flict revolves around the increased use of relatively high sulfur coal, as the pro- posed national energy plan calls for greatly expanded utilization of coal in stationary fuel-burning installations.

It is likely Clean Air Act Amend- ments of 1977 will require all new coal- fired power plants to control their sul- fur dioxide emissions by the use of scrub- bers evidencing a policy with which we disagree. This is not a requirement for tighter emission controls - it is only a requirement that we achieve the required emission limitations through the utiliza- tion of sulfur-removing machinery rath- er than by burning low sulfur coal in the first instance. A power plant which could burn low sulfur coal and comply, but which will now have to install a scrubber, will be penalized more than just the cost which the Environmental Protection Agency says for a 100 mega- watt plant would be approximately $10,000,000. It will also take 7% of the total energy output to run the scrubber, in other words, reducing by 7% the amount of electricity available for sale with no air quality benefit.

To this must be added the further cost of land acquisition for sludge dis- posal as well as the accompanying costs of complying with the Federal Water Pollution Control Act for this scrubber sludge. One relatively new power plant in western Pennsylvania, for example, which is fully equipped with scrubbers, is still unable to meet the sulfur dioxide emission standards even though it is the best technology. In addition, the scrub- bers produce a great deal of lime slurry and the cost of electricity from that plant includes the cost of a pleasant lit- tle steep-sided valley which was pur- chased simply to be filled up with the sludge from the scrubber - probably 1,000 tons a day of toothpasteJike material.

Environmental Policy and Law, 3 (1977)

Carter Energy Plan Criticized

Editor's note: Since US President Carter announced his energy plan (see EPL 3:2, page 82), many have been ex- tremely critical. Much criticism was voiced at the National Conference on Financing U.S. Energy Requirements held in August, 1977 by The Council for Energy Studies and The Bureau o f National Affairs, Inc. EPL presents an extraet o f remarks made by R. S. Wishart, a representative o f the Union Carbide Company.

Of the 2,100 acres the plant site covers, only 300 acres are required for facilities. The remaining 1,800 acres are required for the environmental con- trol system, the bulk of which is in the valley to be filled by the sludge.

Where to put the sludge is a serious question. The biggest danger in invest- ing heavily in unsatisfactory technolo- gies, even if they are the "best avail- able" is that it reduces our ability to invest in superior technologies as they become available. The lime slurry from scrubber systems is the source of vast uncertainty in the environmental area. The Solid Waste Disposal Act is now being implemented with regulations expected in 1978. Meanwhile, the in- dustry must try to outguess the EPA as to the definition of solid wastes and

Courtesy Rudi F~cke " I ' m all f o r energy-saving -- bu t I 'm no t so sure that this t ype o f street l ight ing will catch on" .

how it should be handled. This further complicates the use of coal.

It seems to us that a reassessment of the environmental hazards of sulfur di- oxide is in order. In Britain, for exam- ple, the coal-burning power plants today use tall stacks depending on the prevail- ing winds to disperse the output over a broad area. It seems a low cost strategy for the short term when combined with precipitators to take out much of the particular matter.

There is such a ferment of develop- ment of coal cleaning methods that one must believe that within the next half- decade, much more practical and better low-cost ways of utilizing coal with less impact on the environment will be made available.

Perhaps a bigger problem, however, is the impact on growth which will follow if industrial facilities in urban areas are required to convert to coal. In the Clean Air Act, clean air is actually treated as a finite resource to be allocated. The basic concept is that the air can only be allowed to get so dirty and that's it. When air quality reaches that point, new industry must, in effect, buy sufficient air resources from its competitors. In other words, the new business can clean up someone else's smokestacks or buy it up and shut it down. This "trade-off" concept was originated by the EPA in its regulations and is now on the verge of becoming law. If it does, industrial growth in many parts of the country will come to a standstill with conse- quent flattening out in new employ- ment opportunities. What can, in fact, happen is that all the remaining air re- sources which might have been used for growth are given instead to plants con- verting to coal. The community ends up with no new employment and a de- crease in net revenue.

A second question in the energy plan which remains unresolved is whether the utility rate reforms are intended as true "cost of services" rates or whether they are designed to serve as a vehicle for in- come redistribution.

The price of electricity has risen at about the same rate as the consumer price index over the last 10 years. How- ever, the average household now uses twice as much electricity as it did 10 years ago so that one both doubles the price and doubles the use, there are in- deed significant increases in the impact. As we read the national energy plan, the thrust of the electricity policy doesn't seem to be to control the cost, but rath-

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er to change the way in which the cost is allocated among users.

It appears to be a proposal for mas- sive intervention from the federal level into the states which regulate electricity through public utility commissions. It appears to be a set of public guidelines which would force those public utility commissions to be involved in major in- come redistribution schemes. Use of the utility system as a substitute for the tax and welfare system may well appear to be politically expedient.

One myth that has been advanced is that the price of electricity is promo- tional and is designed to favor the indus- trial user (who pays less per kilowatt hour) at the expense of the residential user. In the vast majority of public util- ity pricing cases, the rate of return to the utility from its industrial business is substantially higher than is the rate of return from the residential business. This is true because the industrial user both takes electricity at a higher voltage which requires less expensive transmis- sion systems and takes it in a more uni- form way.

Looking at the pattern of electricity usage, one finds that it is air condi- tioners, not industrial plants, which have both increased the use and increased the peak load of the systems. In or- der for the pricing schemes advocated to be effective, they would have to be ap- plied to every household and the house- holders would have to run their air con- ditioning at night when it is cool and turn them off in the day when it is hot.

Utility rate restructuring is a key ele- ment of the Carter Energy Program. The motives for such realignment are mixed, with some conservation and some social income redistribution fac- tors clearly involved. The historical record, however, does not support the notion that the declining block rates promote excessive consumption. Thus we conclude that the utility rate restruc- turing proposed in the national energy plan is more an attempt to use utility rates as an instrument of income redis- tribution than an attempt to make more efficient use of our electricity generat- ing capacities.

A third serious question about the energy plan is whether the United States can afford an energy bureaucracy to administer the program. The new Department of Energy, which pulls to- gether various regulatory bodies, will cost $ 10.6 billion. That $ 10.6 billion is somewhat higher than the profits of the entire oil industry. It amounts to

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about $ 3.50 per barrel of oil produced in the US. This figure does not include the cost of the oil industry reporting re- quirements to the federal government, which are sizable. The Commission on Federal Paper Work indicates that the cost to all US industry of keeping up with federal paper work is between $ 25 and 32 billion a year.

Here we are with a federal regulatory agency which costs each year more than the entire profits of the industry it set up to regulate. We are looking at man- dated investments in protecting the en- vironment and mandated investments in technology which not only doesn't work, but which creates environmental problems of its own. We see industries across the country putting together costly organizations to cope with federal

government regulations, all of which adds to the cost of our products and is inflationary in nature.

Thus, we conclude that the U.S. probably cannot afford the type of re- gulation proposed in the national energy plan. Not only are the direct costs stag- gering, but the indirect costs in terms of reduced flexibility in private decision making will be substantial as well. As the Wall Street Journal pointed out ". .... speed, at the expense of sanity, has characterized the energy program from the start."

We should be careful not to pay one penny more for energy than we need to. We should let a competitive market do its work and not try to substitute regu- lation from the center for the regula- tion implicit in competition. []

The Power of the Lobbies The United States time-table for the

reduction of the toxic levels in automo- bile exhaust fumes has yet again been prolonged. As a result of massive pres- sure exercised by the automobile indus- try and the United Automobile Workers, Congress has approved an amendment to the law, delaying application of the stricter 1978 levels from one to seven years. From the technical and econom- ic point of view this postponement was not necessary. Several foreign produc- ers have already shown how, with rela- tively small additional costs, cleaner and cheaper cars can be brought onto the market.

The recent deferment of this time- table followed immense activity on the part of conservationists and the auto-

American Motors Corporation will pay California $ 1.1 million in settle- ment of a law suit which charged the company with selling smog producing cars and with submitting false test reports to California. The fine is the largest ever collected in California for violation of the air pollution laws.

HMD

mobile industry. Senator Edmund Muskie, President of the Senate's Com- mission on the Environment, described the pre-congressional battle as the most vehement in all his years in Congress. The automobile industry had not con- tented itself with mere lobbying, and the presidents of the industry had them- selves personally appeared in the offices of Congressmembers and in the congres-

sional lobbies. On the opposing side, the conservationists had managed effectively to activate their grass roots, who had bombarded with letters and telephone calls from all over the country; they also had the support of President Carter who had very clearly stated his interest in a strict regulation for automobile exhaust.

This tough approach from the side of the automobile industry is in strange contradiction to the keen background activity of some U.S. producers who have long acknowledged that the days of the big American car are numbered, and who have shown a marked interest in future cooperation with foreign producers in the production of smal- ler, more economical automobiles. They now show, however, that their present interests can best be served by forcing a delay in the time-table.

The amendment allows the industry until 1981 to meet the limits set for hydro-carbon and carbon monoxide emissions. The level for nitrogen oxide, in general regarded as being the most dangerous component of exhaust fumes, will not again be reduced until 1981. All the more disappointing, as in com- parison with non-detoxicated motors, the existing 1977 limits already mean an improvement of about 80% in the case of hydro-carbon and carbon monoxide, and of approximately 20% in the case of nitrogen oxide.

During the dispute fundamental questions were raised which went far beyond the aspect of clean air alone. For example, why should the American Congress not be able to force the indus-

Environmental Policy and Law, 3 (1977)