The national security dimensions of U.S. energy policy have changed. As noted here before, access to imported crude oil is more secure now than it ever has been. To say so, however, does not reduce the importance of petroleum supply to U.S. security. There simply are indispensable ingredients to overall petroleum supply-and therefore U.S. security-that face far greater threats than does access to imported crude. One of them is sensible energy governance.
In the U.S., energy policy seems guided more and more by the attitude that anything is better than oil. That attitude is implicit in the silly word games of Hazel O'Leary's Department of Energy, where grown-up bureaucrats must precede "oil" with "natural gas" in all references to both vital fuels. And if the attitude were not instructing governance, the Environmental Protection Agency could not have savaged fuel consumers and plundered the U.S. Treasury the way it did at the end of June.
THE ETHANOL MANDATE
Against protests from Congress, environmental groups, and several industries, EPA issued a final rule mandating that 30% of the oxygenates required in reformulated gasoline eventually come from renewable sources. It is a mandate for ethanol from grain.
There is no environmental reason to favor ethanol over other sources of oxygen; in fact, there are environmental reasons not to. The mandate violates parts of the Clean Air Act amendments. And it certainly contradicts the regulation-negotiation agreement guiding development of new fuels. For these and other reasons, industry groups promise to sue EPA. Here's hoping they win.
But the issue must not end there.
Ethanol's biggest disadvantage is not that it doesn't live up to its supporters' "clean-fuel" propaganda. It is that the substance fails economically as a fuel. Were it not for a generous tax subsidy, ethanol would not be under discussion as a gasoline additive.
EPA is requiring gasoline consumers to use a commercially inferior fuel. Taxpayers will pay for the inefficiency. The money that the Government doesn't collect from gasoline taxes due to the ethanol subsidy will come from somewhere else.
Who benefits from all this? Only ethanol producers and grain growers, to whom President Clinton owes a political debt. And consumers and taxpayers will pay.
The expensive mischief swamps important energy policy and national security issues, among them the health of refiners. With Washington D.C., turning them into short-order fuel cooks, refiners face skyrocketing costs and crowing pressures to close facilities. Meanwhile, demand for petroleum products rises. This is one reason why access to imported crude has diminished as a national security question. What good is crude to a nation with shrinking capacity to refine it? Someone now should be examining security issues related to product imports. Refining capacity is rapidly falling behind demand for petroleum products.
DOE'S ROLE
In the past, DOE has professed concern for matters like these. Yet it acted with aggressive indifference in the ethanol issue, seemingly struck dumb by the anything-but-oil attitude.
EPA's ethanol mandate contradicts every conceivable interest except narrow commercial and political ones. It stomps on consumers and taxpayers, compromises energy interests, and breaches agreements with regulated groups. But it could not have happened if a significant number of voters and agencies that should know better didn't think anything-even ethanol-must be better than oil. That's the security issue about which U.S. oil and gas producers should worry most.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
