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The Limits of State Building

Only the expert knowledge of private economic interest groups in the field of “business” is superior to the expert knowledge of the bureaucracy. This is so because the exact knowledge of facts in their field is vital to the economic existence of businessmen. Errors in official statistics do not have direct economic consequences for the guilty official, but errors in the calculation of a capitalist enterprise are paid for by losses, perhaps by its existence. The “secret,” as a means of power, is, after all, more safely hidden in the books of an enterpriser than it is in the files of public authorities. For this reason alone authorities are held within narrow barriers when they seek to influence economic life in the capitalist epoch. Very frequently the measures of the state in the field of capitalism take unforeseen and unintended courses, or they are made illusory by the superior expert knowledge of interest groups.

Max Weber, 1946

The initial American response to the 1973 price shocks was an attempt led by the State Department to forge a common front among Western industrial nations. As these international efforts increasingly were frustrated, executive officials sought a second avenue of adjustment that entailed redefining the responsibility of the state for domestic energy planning and production. In effect, various sets of executive officials and politicians attempted to break out of the institutional constraints that left the state with few instruments or capacities within the energy sector.

In this chapter I analyze the various attempts by government officials to redefine the state’s role in the energy sector. I look at the problem of information gathering and competence in the energy area; at the attempts to impose a government presence in the energy sector through a federal petroleum corporation; at attempts to create mechanisms for energy financing; and at the establishment of the synfuels corporation. These efforts were largely unsuccessful. At each juncture, and in ways reminiscent of failed state-building proposals of earlier historical periods, the proposals were blocked—by Congress, by interest groups, and by divisions within the executive branch itself.

The failure to build additional state capacity to cope with the energy dilemmas of the 1970s was not due to the absence of imaginative proposals. Initiatives to expand the state’s role quickly became part of the politics of energy adjustment. These initiatives sought both to create new realms of government planning capacity and to establish a direct state presence in the energy sector.

Three important proposals came from various sets of executive officials. The earliest effort, during the Nixon administration, sought to increase the energy information and expertise available to policy makers. This was Project Independence. Another was the Ford administration’s $100 billion Energy Resource Finance Corporation, which attempted to create a capacity for the direct financing of energy production and exploration. The final proposal, the Carter administration’s Synfuels Corporation, drew on similar initiatives advanced in earlier decades and had a legacy of congressional sponsorship. This earlier history helps explain why the Synfuels Corporation was the only proposal to be implemented. A final proposal, to create a state-owned petroleum corporation, came from several members of Congress.

The constraints on state building can be understood at several levels. These proposals provoked opposition from a wide variety of interest groups and officials. Executive officials and congressional politicians, maintaining a commitment to market mechanisms, resisted them, and groups within the energy industry itself actively registered their opposition as well. Opposition within the executive policy establishment undercut passage on several occasions. In the policy battles that were waged, the proponents of an expanded state role in energy planning, financing, and production consistently lost.

It is important to situate these policy stuggles within a broader historical and institutional setting. In the first place, the scarcity and fragmentation of bureaucratic expertise and operational capabilities provided few bases on which to build new government powers and responsibilities. Proponents of the various state-building designs were scattered across the federal establishment and only infrequently enjoyed strong presidential support. Moreover, the earliest state-building efforts centered on the development of analytic or informational capacities, without which ambitious programs that involved a direct government role in energy financing or production could not proceed. Indeed, the struggle over a greater state role within the energy sector hinged in many respects on disagreements over the nature of energy markets, particularly supply and demand elasticities.


On October 17, 1973, the Arab oil producers announced their boycott of American and Dutch markets. On November 7 President Richard Nixon addressed the nation on the subject of the emerging energy crisis. He announced immediate steps to help mitigate fuel shortages and stimulate domestic energy production. He also announced a large, long-range program. Project independence, drawing on the spirit of the Manhattan and Apollo projects, had the goal of developing “the potential to meet our own energy needs without depending on any foreign energy sources” by the end of the decade.1 Project Independence articulated a goal more than it set out concrete proposals. The program was to include both technological and non-technological initiatives, incorporating the proposals Nixon had made in June 1973 for a massive program of energy research and development. Short on specifics, the project held out the intention of a more inclusive energy policy, giving research and development a role in this larger strategy. The key proposal was a major, wide-ranging analytic study to guide national spending and allocative decisions.

The Project Independence Evaluation System

While statutory authority for the creation of a Federal Energy Administration was pending, and while the larger proposal for a Department of Energy and Natural Resources was blocked in Congress, Nixon established a small Federal Energy Office to begin initial policy analysis. Although organizational changes were constant, officials from executive agencies were brought together in the FEO, and later the Federal Energy Administration, to launch analytical studies. The major study, known as the Project Independence Evaluation System (PIES), was an attempt to create a broad-based and systematic model of energy demand and supply, with the intention of making projections of the nation’s energy future. Led by John Sawhill, recruited from the Office of Management and Budget, and Eric Zausner, recruited from the Department of Interior, the system became the first full-scale energy study undertaken within the American government. The task was to evaluate the nation’s energy problems and specify alternative policy options.2

The Project Independence study was set in motion under severe time constraints. Its analysis was to undergird a national energy program, and the pressure for such a program was very great. The report was to be completed by the fall of 1974. With a premium on time, the project gathered experts and specialists from all quarters of the federal establishment. Represented in the project, for example, were officials recruited from the Office of Management and Budget, the Environmental Protection Agency and the departments of Labor and Commerce. Altogether officials from over twenty-five agencies were involved, and their recruitment was seen as a move to increase both the coordination of the subsequent energy policy and the acceptance of analytic modeling within the bureaucracy.3

As model building proceeded, analysts began to play down the political goal of complete self-sufficiency. At the same time they attempted to broaden the project so as to provide projections on the implications of the wide array of possible presidential energy initiatives. Although their original mandate was to produce specific policy recommendations, the analysts soon redefined their mission more generally; as Sawhill remarked, “it was not the intent of this specific report to recommend a total national energy program. Energy policy is a complex issue and the formulation of appropriate Federal programs and policies can entail many paths and choices. The Project Independence report was intended to present a comprehensive framework within which the public, Congress, and the Executive Branch could evaluate individual issues.”4 Zausner notes that the shift in mission from policy recommendation to the creation of a general analytic framework resulted from a desire to protect the authoritative nature of the enterprise. His central objective was an “institutional upgrade” in energy information and analysis. If the project moved immediately to recommend policy, subsequent attacks could undermine its larger purpose.5

The PIES project snowballed into a massive administrative undertaking involving over five hundred analysts and numerous task forces. Project Independence staff conducted hearings across the country, attempting to find areas of consensus. Also attached to the project was an Advisory Committee, which drew its twenty-eight members from industry, labor, and state and local government, as well as public interest groups.6 The actual significance of the hearings and the committee is disputed. Nonetheless, these additional activities do reflect the centrality FEA officials understood their Project to possess for the eventual decision on a national energy policy.

The project involved many individuals, but the bulk of the report was generated by a core staff of several dozen. The task forces, Zausner notes, were designed to “bring other administrative officials into the tent.” The task forces were not crucial to the analytic work but rather were used for two purposes. One was to provide data resources. Even as late as 1976, after all, twenty-three executive departments and independent agencies operated 238 major energy data-gathering programs. Zausner notes, for example, that the Interior Department had important coal data but did not have the analytical sophistication to use them. The task forces mobilized this information. Second, the project staff sought to bring other administrative officials into the enterprise at an early stage so as to protect the subsequent analytical product. The typical method of bureaucratic attack is to challenge the assumptions of a study, and so project staff attempted to get other bureaucratic players to agree on assumptions early on, coopting them and thereby foreclosing potential conflict.7

The final report was produced in November 1974, one year after Nixon had declared Project Independence. It provided models of energy demand and supply, as well as larger models that related energy shifts to macroeconomic, environmental, and other variables.8 It generated both a massive substantive study of energy demand and supply and a complex, computer-based set of models to guide subsequent analysis of policy options. This analytical framework marked a new level of sophistication in energy policy analysis. As one FEA official argued, “the FEA model is an order of magnitude more sophisticated than anything done before. Whereas we had sweeping generalities before, we can now look at regional energy flows in detail. . . No matter what happens to the policy scenarios laid out in the blueprint, we’ve taken a major step forward in developing analytical tools for looking at energy problems.”9

The project’s list of various steps to promote domestic energy production tended to underline constraints on production. The report argued, for example, that the acceleration of nuclear power plant construction would not significantly reduce oil imports. Nor would a massive effort to produce synfuels, bypassing important research steps, be very practical or efficient. Although the report cast doubt on the possibility of significant short-term gains in energy independence, it stressed that increases in self-sufficiency would have an impact on world oil prices. The study concluded that with a reduction of U.S. imports, OPEC would find it hard to maintain a price of even $7 a barrel. But price reductions, it noted, would harm new domestic energy investment, perhaps requiring government price guarantees and supports.10

Project Independence and the Policy Process

The PIES analytical models had more than a modest impact in government during the Ford administration. As one study notes, “for the first time, the government appeared to have its own source of energy information and analysis—reasonably integrated, increasingly rationalized, and operated and maintained in-house.”11 The chief architect of the modeling project, FEA assistant administrator Zausner, also noted the importance of the massive study. “Until the blueprint,” Zausner claimed, “we really had a clean slate.”12 The implication was that the project reflected a dramatic departure in government capacity for planning and analysis. Zausner has since noted that there was a “tremendous lack of information and analysis” prior to Project Independence. Nixon’s project opened up the opportunity to “build a body of experts,” to build an analytical model, and “put some important facts on the table.”13

The models were used at various points to calculate the impact of oil decontrol on inflation and energy supply. In December 1974, while President Ford was preparing new energy proposals, the FEA modeling system was brought into the process. The FEA prepared briefing materials for a Camp David policy meeting during this period. “The Project Independence analysis,” one author argues, “was the major source of information consulted in preparing these briefing books. In retrospect the role it played was to point out that this historical policy package was not sufficient to meet the administration’s goal either in the immediate future or in the long run, if world prices were to fall.”14 Another account suggests that the Project Independence analysis played a less central role in those December policy deliberations. Some of the issues brought before Ford in December “specifically call[ed] for critiques of the Project Independence Report or for development of additional data.”15 Zausner indicates that the project analysis “dominated the process”; the project did not have all the information Ford needed for decisions, but the Camp David policy review “spoke to” the project findings.16 Indeed, as the Ford energy package took shape, initiatives came directly or indirectly from the PIES analysis, among them financial support for the electric utilities industry, the establishment of a strategic petroleum reserve, and tax measures and voluntary standards to promote conservation.

Yet the PIES analysis did not have a sustained impact on administrative decision making, thus falling short of the hopes of its authors. The influence of PIES analysis and its FEA sponsors did not extend far within the administration. The project had brought into its ranks specialists from all reaches of the executive bureaucracy, but the report’s analysis and methodology did not follow those officials back to their respective agencies. Because of the short period of time available to the project, the final report did not circulate widely within the administration before publication. Many agencies had only a week to review the document. Thus many administrative units may have had a substantive stake in the report’s findings, but they did not have an organizational stake in its production. As a result, the modeling project was not well received in the executive establishment.17

The problem of bureaucratic agreement was tied up with a variety of battles over turf. The Project Independence report was in effect a claim by the Federal Energy Administration to a dominant role in policy making. For the FEA to claim the preeminent role, it had to have the best analytical unit in the executive establishment. “He who has the data base and the analytic model,” Zausner argued, “has the bureaucratic muscle.”18

The influence of the model and analysis depended heavily on the status of Project Independence officials in the policy process, a status that changed frequently under the Ford administration. FEA officials, one author notes, “were not effective in integrating it [PIES] into the policy-making process.” During the formulation of President Ford’s first major speech on energy and the economy, in early October 1974, for example, the Federal Energy Administration submitted options based on Project Independence analysis, among them a proposal for a gas tax. However, the FEA’s chief, John Sawhill, was not well placed in the administration (and later that month was forced to resign). Consequently, FEA and the PIES analysis did not play a major role in Ford’s October energy proposals.19 Indeed, Project Independence officials did not present their November report directly to the president, as they had anticipated doing. Instead, top officials instructed FEA to submit the report to the Energy Resources Council. This executive council, under the direction of Rogers Morton, had maneuvered at FEA’s expense to become the chief body for policy recommendation. Morton’s unsympathetic attitude toward the Project Independence analysis removed that material and its officials from the direct formulation of policy. Later, with the appointment of Frank Zarb as FEA chief, the analysis was brought into high-level policy planning more frequently, but the influence came from Zarb, an administrative insider, not from the independent authority of the PIES analysis. During this period it was the FEA that “staffed” the Energy Resources Council, where Zarb was executive director. During Zarb’s tenure, as a result, all the important decision memoranda went through Zausner and the FEA.20

After Zarb’s departure, however, Rogers Morton again removed project officials from policy deliberations.21 Finally, with the departure of key FEA officials in 1976, the PIES operation began to lose what role it had achieved in the policy process. The analytical framework survived into the Carter administration, and PIES evaluation and forecasting models were used in the preparation of the first Carter energy program. By this time, however, the reputation of PIES as an authoritative device had diminished considerably.

The Elusiveness of Authoritative Information

Attempts to establish an authoritative body for energy analysis and information continued beyond the failure of Project Independence. In August 1976 Congress passed the Energy Conservation and Production Act, authorizing the establishment of a separate information and analysis unit within the FEA. Congress intended to separate analysis from the staff and policy-making units within the agency: the act called for the information bureau to be “insulated from FEA’s role in formulating and advocating national policy.”22 When the Department of Energy was established in 1978, this independent bureau became the Energy Information Administration.

The legacy of Project Independence, therefore, was an initially ambitious effort to bring new analytical capacities to the center of policy formation. The analysis concerned had its limitations, however. The data remained quite aggregated, and many policy participants found the direct relevance of the analysis to policy elusive. Project Independence was the first major effort to develop in-house expertise on energy supply and demand and other macroeconomic variables, yet the modeling effort and its experts were unable to remain at the center of policy. Challenges to the authority of PIES followed its initial report—challenges from Congress and from various quarters within the administration. When an agency—the Energy Information Administration—finally was established, its organizational mandate consigned it to the peripheries of the formulation of national energy policy.

The FEA controlled most phases of information and analysis prior to the establishment of the Department of Energy. Its three important divisions were data collection, analysis, and policy. The creation of the Energy Information Administration separated data collection and analysis from policy formulation. The EIA’s information responsibilities, one study notes, “included carrying out a unified program to collect, process, and publish data and information relevant to energy resource reserves, production, demand, and technology.”23 Using as its model the Bureau of Labor Statistics, Congress successfully established the information function independent of administrative policy making. In effect, executive and congressional officials alike had suspicions about energy information and analysis, and as a result created a new institution in such a way as to make it peripheral to the policy process.

The goal of an apparatus that would generate authoritative planning and analysis, and be located in a powerful and centralized administrative unit, remained elusive. Even basic information about energy supplies and flows was in dispute.24 This absence of authoritative knowledge was reflected in a sense of uncertainty on the part of officials within the policy process. One senator expressed this sentiment in the fall of 1974: “When we first started debating this problem, after the Middle East crisis, one of the most serious problems we encountered was a tremendous lack of information regarding the facts. There were figures quoted as to how much we were importing and, at that point in time, figures ranged from as little as 15 to as much as 40 percent. As far as true information to our future potential supplies, I understand that is difficult to come by, but it was almost impossible to even gather the basic facts to base a national policy on.”25

Administrative and congressional debate over energy policy after 1973 was manifestly political and centered on substantive policy options. But it was fed by great uncertainty both as to the availability of data and analysis and as to their source. At the very outset government was highly dependent on the energy industries themselves for information. One report in early 1974 noted: “By and large, the industry’s own figures—unverified by independent audit—are the only ones presently available to guide federal energy policy decisions.”26

The government’s ability to gather energy information had evolved piecemeal prior to the 1970s. At the moment of the 1973 embargo at least seventeen federal agencies were involved in compiling and reporting information, most of it obtained from industry on a voluntary basis.27 The Bureau of Mines in the Department of Interior, for instance, obtained much of its data from the annual reports of the American Petroleum Institute and the American Gas Association. This voluntary information was difficult to check because industry feared the release of proprietary information, and so what information was published tended to be very highly aggregated.28

The government’s problem in gathering information about energy matters was presaged in 1962 in a report by the Kennedy administration’s Petroleum Study Committee. The report argued that “satisfactory information concerning petroleum reserves, productive capacity, and deliverability, and their expansibility under normal conditions is seriously lacking. Suitable cost information is even more seriously lacking. A great deal of fragmentary and sometimes contradictory data is available.” The report concluded that “corresponding data and analytical shortcomings are to be found in regard to the interrelationships of different segments of the economy. There is, in addition, a related inadequacy in analytic studies. These undesirably limit the conclusiveness of any petroleum study under existing circumstances.”29

Twelve years later another major report echoed these findings. The General Accounting Office prepared a report, published in February 1974, for Senator Henry Jackson’s Interior Committee. The study listed such problems in the energy area as the voluntary reporting of industry information, which does not “provide the federal government with the assurance that needed data will be available,” and questions about its credibility. The report noted that the “federal government has been unable to demonstrate convincingly the nature and extent of the energy shortage, in large measure because of the lack of independently developed or independently verified data.” In addition, the adequacy of information also caused problems. The absence of basic data on petroleum inventories, as well as energy distribution and consumption patterns, impeded government planning. Finally, until the establishment of the Office of Energy Data and Analysis in the Interior Department, which was later moved to the Federal Energy Office, there existed no agency empowered to analyze data on a continuous basis. “Perhaps the most crucial need,” the report concluded, “is for analyses of energy data from the perspective of identified energy problems, rather than from the vastly different perspective of individual agencies and programs.”30

The administrative response to this information problem led directly to the data modeling and analysis of Project Independence. Project officials themselves aimed to bring authoritative information to the center of policy deliberations; as I have suggested, this enterprise was ultimately unsuccessful. Project officials were not well received within the executive bureaucracy, nor did they have regular, direct access to the president. Congressional politicians, wary of both executive and industry data and analysis, also sought to establish a source of authoritative information, but unlike that of Federal Energy Administration officials, congressional sentiment favored an independent agency sheltered from policy planning. This idea was embodied in a bill proposed by Senators Gaylord Nelson and Henry Jackson in 1974.

The bill’s approach was not welcomed by the Federal Energy Office (or later by the FEA). FEO assistant administrator Eric Zausner, in the midst of Project Independence preparations, argued: “We don’t want a separate information agency established. We need a lot of information for the operation of our programs and we want to collect it ourselves. We have the expertise to collect the information and we know what to collect and assess.”31

Project Independence sought to provide an authoritative body of experts and analysis, but it failed. In its place an independent body, separated from planning and policy deliberations, eventually became the government’s response to information shortcomings. The organization of government thus adapted to the call for new sources and forms of information and expertise, but it adapted in a way that left the specialists outside the core of the policy process.


Nixon’s energy independence proposal met with skepticism almost at the moment of its unveiling.32 In many respects the articulation of the goal was designed to support international efforts by the administration to get industrial consumer nations to cooperate in undercutting OPEC’s oil-pricing power. It also reflected the attempt of a president, under seige by the Watergate investigation, to rally the public and Congress to a major national cause. The project did, however, produce an ambitious modeling effort to develop the policy sophistication necessary to deploy state resources and stimulate domestic production. Yet the meager payoff revealed not only the limitations of policy competence within the administration but also the limitations on the government’s ability to gain that competence.

Nixon’s officials soon began to concede that the national economy would remain dependent on foreign sources of energy for some time to come. Energy research and development got under way as the newly established Energy Research and Development Administration (ERDA) geared up to propose projects and spend money on promising energy technologies for the long term. However, support persisted within the Nixon administration, and in the Ford administration to follow, for direct government sponsorship to stimulate the immediate production of domestic energy.

The Rockefeller Proposal

Within the Ford administration the most ambitious proposal for government involvement in energy production came from Vice-President Nelson Rockefeller. In the summer of 1975 Rockefeller proposed within administration councils a $100 billion Energy Resources Finance Corporation. This corporation would signal a major departure for the public role in the energy sector. At the heart of Rockefeller’s proposal was a new commitment by the federal government to underwrite, through loans and loan guarantees, energy projects that the market would not sustain on its own. As Rockefeller’s staff prepared the proposal, the vice-president began asking administration officials to identify energy projects that were being held back in the private sector because of financial problems.33

Although considerable opposition developed within the administration, Ford eventually agreed to the proposal. In a speech on September 22, 1975, to an AFL-CIO convention, Ford said: “You and I know we can produce our own energy. You and I know we can protect ourselves against increases in price by foreign nations. You and I know we can provide more jobs. And you and I know we can bring an end to the intolerable situation in which America exports more than $25 billion annually to pay for imported oil while plenty of energy is potentially available right here at home.” Noting that Congress had failed to act on earlier energy proposals, Ford proposed the $100 billion government corporation. The corporation would be empowered to “take any appropriate financial action” needed to stimulate energy production projects that could not be financed under prevailing circumstances. The corporation, Ford said, would engage in the “crash development” of domestic energy resources, including “new technologies to support or directly produce or transport American energy; technologies to support American nuclear development; and electrical power from American coal, nuclear, and geothermal sources.”34

Ford sent the Energy Independence Authority Act to the Congress on October 10, 1975. In submitting the act, Ford noted: “It is estimated that the capital requirements for energy independence will total about $600 billion over the next ten years. Risks are such in many of the projects necessary to develop domestic energy resources and reduce consumption that private capital markets will not provide necessary financing. The uncertainties associated with new technologies inhibit the flow of capital.” The purpose of the authority was to assure the flow of capital into domestic energy production and to provide financial assistance where private-sector financing was inadequate. To this end the Energy Independence Authority (ElA) was to be constituted as a corporate body and, therefore, function outside established administrative bodies. To ensure autonomy and political neutrality, the authority was to be guided by a presidentially appointed and congressionally approved five-member board of directors, composed of representatives from both national parties.35

The authority was to be self-liquidating, mandated to terminate its investing operations after seven years and its institutional operations after ten years. During this period the authority was to be authorized to provide $100 billion in financial assistance to approved energy projects. Assistance could take the form of loans, loan or price guarantees, purchase of equity securities, or construction of facilities for lease purposes. Funds would be raised by the sale of up to $25 billion in equity securities and the issuance of up to $75 billion in government guaranteed obligations. In addition to stimulating investment within the energy industry, the authority was to promote regulatory reform within government—it was empowered to simplify and coordinate federal licensing and regulatory decisions that affected energy development. So constituted, the new government corporate body was to act at the intersection of government and business, facilitating and encouraging investment in domestic energy production.

Hearings were held on the EIA Act in April 1976. Vice-President Rockefeller argued that OPEC price increases had been manifestly political and that the American response would have to take a similar form. Domestic energy production needed to be stimulated beyond what established market processes would sustain. Thus the proposed EIA should be judged, he argued, for its political intentions and cast as a response to the new realities in international energy. “We’ve got a situation in the Middle East right now,” Rockefeller argued, “that could blow up tomorrow and we could have another war. We could have another boycott. The east coast is now dependent 75 percent on energy from abroad. In 2 years we will be importing 25 percent of our energy from Arab countries because it’s low-sulfur oil. . . If that’s cut off, we’re going to have absolute economic and social chaos on the east coast because you can’t transport oil to the east coast from other parts of the country.”36 The EIA was a response not unlike earlier government responses to crisis. As examples he cited the Hoover administration’s Reconstruction Finance Corporation and American government financing of aluminum and rubber projects during World War II.

The Energy Independence Authority proposal gathered support from policy specialists interested in confronting OPEC directly. Walt Rostow, a former foreign policy official, for example, argued that “until something like [the] Authority is at work and the rate of American investment in energy and energy conservation is rising rapidly, I doubt that a fruitful negotiation between OPEC and the major oil importers will be possible.” The act was also supported by administration officials who saw it as necessary because Congress continued to insist on price controls. The message these officials gave was that if Congress failed to act on modest proposals for price decontrol and taxing, stronger measures, such as those embodied in the EIA, would be necessary. FEA chief Frank Zarb, for example, reminded critics that it was Congress which had failed to follow Ford’s 1975 plan to decontrol prices for domestic crude oil immediately. But he went on to claim that even with decontrol, “we have lost so much time because of our sell-out to cheap oil throughout the 1960s and early 1970s and [because we have] neglected so much our domestic technology and capability in the coal area and the nuclear area.”37

Senator Jacksons Plan

The Rockefeller proposal contained ideas that had earlier surfaced in Congress. Senator Henry Jackson, chairman of the Senate Interior and Insular Affairs Committee, had already proposed and held hearings on legislation to create a National Energy Production Board (NEPB). His bill also envisaged a rapid and massive mobilization of domestic energy production. The NEPB would be less concerned with capital investment than with the immediate development of energy resources on public lands. It was to centalize government regulatory and licensing procedures in “the public and private sectors for increasing the exploration, development, production, and transportation of domestic coal, oil, and natural gas.”38 The board was to be a central body coordinating government policy; it would propose additional legislation; and, with a trust fund with an annual appropriation of $1 billion, it would invest in public and private energy projects.

Support for the board came from senators and other officials who conceived of the energy challenge in terms of national security.39 Testifying in favor of the Jackson program, for example, was former treasury secretary Henry Fowler, who likened the current energy crisis to earlier national energy emergencies. “There are some lessons of experience relevant to the energy problem to be learned,” Fowler argued, “from the two most recent historical efforts to organize massive national production and supply programs in conjunction with World War II and the so-called Korean war mobilization.” He went on to note the experiences of the War Production Board and the Petroleum Administration for War of the World War II and the Defense Production Act of 1950.40

Support for both the Rockefeller and the Jackson programs tended to come from the same government and private quarters. The investment banker Felix G. Rohatyn, for example, testified in favor of the Jackson proposal but stressed the need for an Energy Finance Corporation styled after the Hoover administration’s Reconstruction Finance Corporation. In all cases supporters looked to earlier historical experience. Noting that “history can be instructive,” Senator Jackson argued that “we need a single, specialized, mission-oriented action agency empowered to prepare and overcome bottlenecks, and marshal Governmentwide resources for a major domestic energy production program.”41

Opposition to the Program

The Rockefeller proposal, unlike the Jackson plan, had received support from President Ford. If the government was going to establish a new, centralized authority for energy production, the EIA was the most likely vehicle. Support for the Energy Independence Authority, however, did not run deep within the Ford administration. Even in the spring and summer of 1975, as the Rockefeller proposal was being formulated, opposition surfaced among administration officials. It centered within the Council of Economic Advisors. Council officials circulated memoranda in administration circles questioning the need for the government to encourage investment in energy production. CEA chairman Alan Greenspan and Treasury Secretary William Simon were vocal critics of the proposal. Energy officials in the Federal Energy Administration also opposed the plan, more for reasons of bureaucratic control. The EIA, it was reported, might pose a bureaucratic threat to their operations. Finally, opposition to the Rockefeller plan came from the director of the Office of Management and Budget, James T. Lynn, who argued that Congress could manipulate the Energy Resource Finance Corporation to extend its life and channel resources into favored energy projects.42

In Congress, opposition came from politicans of different political persuasions. Some Democrats had supported a new energy finance authority—indeed, a Democratic energy policy alternative to Ford’s January 1975 plan (which did not then include the Rockefeller proposal) had as its centerpiece Senator Jackson’s National Energy Production Board.43 Nonetheless, congressional liberals were suspicious of the proposed corporation’s ties to the big energy producers. Representative Henry Reuss, chairman of the House Banking, Currency, and Housing Committee, which had jurisdiction over the proposal, said the corporation would be “grossly inflated, fiscally irresponsible and susceptible to political manipulation.”44

Prevailing sentiment among liberal Democrats was expressed by Senator Edward Kennedy, who argued that the finance corporation would drain capital from other social projects and subsidize the big oil corporations. The program, he said, is “likely to create a sharp drain on capital toward energy and away from other sectors of the economy.” In addition, it “will be using public money to subsidize energy development projects. In turn, these projects are likely to bring high profits to private energy corporations—almost inevitably the major oil companies under the administration plan—without any evidence that these rich profits can be justified by benefits in other ways to the American economy and the American people.”45

The coalition of opponents also included environmentalists and conservatives from oil-producing states, who had already opposed the Jackson plan.46 Environmentalists were concerned with the prospects of added air and water pollution from large-scale coal and shale-oil plants. Conservatives saw in the corporation a competitive threat to existing energy producers.47

The Rockefeller proposal eventually failed because it did not have a well-established constituency to build congressional and executive support. Its proponents within the Ford administration were few and not well-positioned. One analyst has noted that the plan lacked what he calls an “operational and effective champion in the mainstream of the policy process.”48 Moreover, the rationale for the program was vulnerable to attack from both liberals and conservatives. Many liberals doubted the EIA would be anything more than a massive subsidy program for the energy industry. Some of these same politicians questioned the assumption that energy demand could not be substantially reduced through conservation. For conservatives, the threat was to the primacy of a private system of energy production. The national crisis of energy supply, which by 1975 had greatly diminished, was not sufficient to override this crosscutting opposition.

In February 1976 President Ford renewed his energy requests. Little of the earlier Ford proposals had passed Congress. Among the proposals the administration urged Congress to act upon was the government finance corporation. But with opposition inside the administration and vocal critics in Congress, the renewed request was no more than a formal statement of continued support. Little on the political horizon suggested that favorable congressional action would be forthcoming.49


One far-reaching proposal for institutional change came from the Senate. Senator Adlai Stevenson III led an effort to establish a government energy corporation that would engage in the purchase, exploration, and production of petroleum outside American borders. It would also have exclusive rights to develop resources on government-owned land, and it would take over planning functions from the Department of Energy. Thus it would be involved in formulating government plans to stimulate the development of alternative energy technologies. Congressional debate on this proposal came as early as December 1973 (a more elaborate proposal was made in 1979). The rationale for the energy corporation and the opposition to it both exposed the limits to government involvement in the energy area even at moments of crisis.

Rationale and Proposals

The rationale for a government energy corporation in the United States diverged little from what lay behind similar initiatives in Europe. First, the Stevenson bill sought to provide a government instrument to redirect production away from the Middle East. Whereas multinational oil production and marketing was driven by established commercial contracts and relationships, a government firm would attempt to alter these patterns. Second, a government corporation would be positioned to negotiate broader deals with producing nations for secure and long-term contracts. A major oil company primarily has narrowly commercial bargaining resources, but a government can bring technological, financial, and political resources to a deal. Finally, a government corporation would be able to develop the analytical expertise and information-gathering capacities needed to monitor change in the energy sector. The corporation would provide a “wedge” into the sector and thus mitigate the prevailing dependence of government on private companies for information on which to base decisions.50

In its first formulation, in 1973, the proposal took the shape of an amendment to a larger energy package, the Consumer Energy Act. One of Stevenson’s cosponsors, Senator Walter Mondale, gave an extended rationale for the corporation.51 First, the government corporation would aggressively explore and develop resources on federal lands. Second, the corporation would supply energy information to government. “We are forced to rely on industry statistics which may or may not be accurate,” Mondale said. “This corporation would go a long way toward giving those of us in Government a much better idea of the real cost of exploring and developing oil and natural gas resources.” Third, the corporation would sell its oil and natural gas resources in such a way as to promote competition within the energy industry. If it did market oil and natural gas, the corporation would be required to give preference to independent firms and to governments. Fourth, the corporation would be able to draw on the federal treasury for up to $50 million a year over ten years. But, Mondale argued, the corporation would likely realize a profit on the sale of resources from federal lands, profits that would go back into the national treasury. Finally, Mondale claimed, the corporation would “help restore competition to an industry badly in need of a stiff dose of the competitive spirit.”52

Although hearings were held on the Stevenson proposal, no committee action was taken on the amendment. The idea did not have enough support, and the plan would have to wait until developments provided a new opportunity for its debate.53

In 1979 Stevenson again brought the proposal to the attention of his congressional colleagues. President Jimmy Carter had left the annual economic summit of the industrial countries, in Toyko, with a pledge to reduce American oil imports. A second dramatic rise in the price of oil was just then shaking the industrial countries. The experience was making it clear to politicians and others that the United States had not adequately reduced its dependence on imported oil.

Hearings on the proposal, renamed the Energy Corporation of America, were held in July 1979 before the House Ways and Means Committee. A companion bill, the Energy Bank of America, was introduced in the Senate. Ways and Means entertained a variety of bills to create a government authority to regulate oil imports. Those representatives who proposed some form of a government importing company uniformly noted that the United States was the only major industrial country without a government apparatus to control oil imports. The sentiment for change was expressed by Representative Benjamin S. Rosenthal of New York: “If ever there was a time or a need for such a Federal responsibility via a Federal corporation, the time is now. If the President is going to lead the Nation toward a restriction on foreign oil imports, then the present Jerry-built system that has existed for 60 to 70 years permitting the major multinational oil companies to control the destiny of this country has to come to an abrupt, if not screeching, halt.”54

Proposals varied in the degree to which the government import authority would resemble a corporate entity. Several congressional representatives advocated an importing authority that would auction off a set quota of oil imports to domestic refiners and marketers. Representative Paul Findley from Ohio proposed an auction authority. “Public auction sales,” he argued, “would generate reliable public data on prices and volumes, both before and after refining. Such information would make it relatively easy to detect attempts by large oil companies to take advantage of any monopoly power.”55

Stevenson’s proposal envisaged an extensive mandate for a government energy corporation. His corporation would be not just an import authority but also authorized actually to engage in energy exploration and development both at home and abroad. It would even be able to consummate direct bilateral deals with producing countries.

Opposition to the Program

There was not a great deal of support for the energy corporation idea in either the Congress or the executive branch. Senator Jackson supported Stevenson, as did Senator George McGovern, and other liberal senators cosponsored the proposal. In the 1979 hearings, several House members testified in favor of the bill, and other members introduced legislation to provide for a similar government corporation.

Stevenson gives two major reasons for the failure of the ECA proposal. The first was the vigorous opposition of major and independent oil companies; their active attacks on the proposal, Stevenson later argued, were critical to the absence of congressional support. The bill attempted to split the oil industry and bring independent producers and marketers in line behind the proposal. To this end the ECA was mandated to develop American public lands and give favored access to small, independent oil refiners and marketers. This tactic was not successful. The anticipated government threat to industry operations was a stronger consideration than the promise of favored access, and the energy industry tended to stand together in opposition.

Second, Stevenson argues, the ideological attack of various opponents weighed heavily in the final outcome. The idea that this new government involvement transgressed traditional lines of public and private responsibility, that it was “radical” and “socialist” in inspiration, prevented active support from congressional members in spite of the suspicion among Democratic congressmen that the majors were operating in ways inimical to the national interest.56

In effect, the Stevenson proposal, and others like it, were attempting to transform the traditional relationship between government and industry. The government corporation would bring the state into the sector as a player, allowing the government to develop a competence to evaluate price and production patterns on a more equal basis with industry. At the same time the proposal envisaged this shift as resulting in less direct regulation of the oil and natural gas industry. Thus Stevenson and others anticipated that the government entity would actually promote competition. Furthermore, they understood their program as drawing upon earlier and successful government efforts in resource development. Experience with the Tennessee Valley Authority provided a historical precedent and a rationale for the new public corporation. Despite this rationale, however, the proposal was a departure that could not gather together a successful coalition of supporters.


In 1979 the U.S. economy was actually more dependent on foreign imported oil than it had been in October 1973. Much of President Carter’s energy legislation had not passed Congress. The Iranian revolution, which would trigger another dramatic sequence of OPEC oil price rises, was still several months away, but many analysts could hear the ticking of an oil price “time bomb.”57 On July 15, 1979, Carter delivered a national speech on his presidency. Part of that speech focused on energy, and a centerpiece of his new energy program was an ambitious proposal to develop American energy resources. He stated: “I propose the creation of an energy security corporation to lead this effort to replace 2.5 million barrels of imported oil per day by 1990. The corporation will issue up to $5 billion in energy bonds—in small denominations so that average Americans can invest directly in America’s energy security.”58 A week later Carter sent a message to Congress outlining his proposed Energy Security Corporation (ESC).

The Carter proposal was an attempt to bring the federal government into the development and commercialization of alternative energy technologies. After the political struggles finished, what the Carter administration actually got was a program to begin a difficult, and largely unsuccessful, process of encouraging commercial projects to develop synthetic fuels. The ambitiousness of the proposal and the modesty of the outcome tell us much about the limits on an American government presence in the energy sector.

Historical Antecedents

Proposals for a government synfuels program had circulated within Congress and the executive branch since the end of World War II. In 1948, in the midst of a scare over the availability of fuel, the secretaries of defense and interior proposed an $8–9 billion synthetic fuels program. Earlier research had been stimulated in 1944 when the Congress passed the Synthetic Liquid Fuels Act, appropriating $85 million for research and the construction of demonstration facilities. The law had authorized the Bureau of Mines and the Department of Agriculture to develop new technologies to produce gas from coal, oil from shale, and a variety of liquid fuels from coal, lignite, and agricultural wastes. These early initiatives were small and moved rather slowly, however, because of opposition from the oil industry and subsequent controversies over cost estimates and technologies.59 When the program was terminated in 1955, approximately $82 million had been spent on research and development.

Early proposals for synfuel subsidies were vigorously opposed by the petroleum industry. Between 1949 and 1953 bills to encourage synfuel projects were introduced in every session of Congress, backed by the White House, the Defense Department, the Council of Economic Advisers, and other key administrative bodies. However, a coalition of conservative Republicans and Southern Democrats successfully blocked the legislation.60

Much of the debate hinged on the comparative costs of oil and synfuels. The Bureau of Mines estimated in 1949 that gasoline synthesized from coal would cost 10 cents per gallon and from shale, 11.5 cents per gallon—virtually competitive with the prevailing costs of petroleum production. In 1951 the National Petroleum Council, the chief representative organization for the oil industry, estimated the costs of gasoline synthesized from coal as approaching 41.4 cents per gallon, and 16.2 cents per gallon for shale oil. A subsequent independent analysis, commissioned by the Department of Interior, estimated costs as somewhere between government and industry projections. This study also concluded that industry itself was not equipped to finance the start-up of a synfuels industry.61 Both sides claimed victory; the dispute escalated. On one side was the Bureau of Mines, which had more than half of its budget committed to synfuels development. Allied with the bureau were the coal industry and agencies and officials within the national security community. Opposing was the petroleum industry, and giving voice to its position the National Petroleum Council.

The dispute could not be settled on simple analytic grounds. Studies and estimates varied too widely. Indeed, as one analyst concludes, “what the situation lacked was a strong and effective third party able to judge among the competing claims and to make firm policy recommendations with the broad public interest at heart.”62 The dispute over costs continued into 1952, and this delay was enough to kill the program.

The fate of these early proposals suggests that their appeal peaked at the moment of crisis. Because of the massive commitment of resources involved, a synfuels program would be viable only if couched in national security terms. But the energy payoff would most likely come after the crisis had abated. By 1952, for instance, the perceived crisis over fuel supply brought on by the Korean War had diminished. By that time the national security imperative was no longer clearly sufficient, and support for the initiative could not justify further struggles with the petroleum industry.

Interest in synfuels reemerged in the 1960s, but not until 1971 was major new legislation proposed. Jennings Randolph, who as a congressman had been instrumental in the passage of the Synthetic Liquid Fuels Act of 1944, joined Henry Jackson in the Senate in sponsoring legislation to create a federal corporation for coal gasification. This proposal led to the inclusion of synthetic fuels in the federal Nonnuclear Energy Research and Development Act of 1974, which contained most of the principles and incentives for synfuel development that would reappear in Carter’s Energy Security Act of 1980.63

The Nonnuclear Act of 1974 authorized the creation of the Energy Research and Development Administration (ERDA), giving it the use of a variety of assistance mechanisms, including joint federal-private sector corporations, cooperative agreements, purchase agreements, price supports, direct loans, and grants. Such mechanisms had become standard tools of federal support in a wide range of public policy areas. Agricultural policy relied on price supports; nuclear power policy was based on cooperative agreements; defense contractors relied on purchase agreements; scientific research was supported by federal grants. The Nonnuclear Act authorized the use of these typical instruments to promote new energy technologies.64 Yet Congress did not authorize specific programs. It left those decisions to subsequent congressional budget allocations. Thus while Congress agreed in principle to promote the commercialization of new energy technologies, including synfuels, it postponed the legislative battle over synfuels.

The Ford administration endorsed the idea of a synthetic fuels program in the president’s 1975 State of the Union message. Ford urged the creation of a program to produce the equivalent of one million barrels of oil per day by 1985. Rockefeller’s Energy Resource Finance Corporation, which Ford publically proposed in October 1975, also would have been actively engaged in promoting synfuel projects.65 The administration anticipated folding the synfuels programs into the Energy Independence Authority once that larger administrative body was established.66 By September 1975, however, administration hopes for a massive synfuels industry had diminished. An interagency report prepared by the Natural Resources Council acknowledged that a series of problems stood in the way of large-scale production; chief among them were environmental problems and a shortage of water in key regions. Nonetheless, the report reaffirmed the desirability of establishing a vigorous, if reduced, program of synfuel production.67

The immediate obstacle to passage of a program was resistance within Congress, particularly in the House. During consideration of the Nonnuclear Act, the Senate had actually supported the idea of a joint public-private corporation to develop synthetic energy for ten years. It also supported funds for ERDA in the FY 1976 authorization bill, to promote synfuels commercialization. However, both measures were defeated in the House. Liberal House Democrats were concerned that the program was a subsidy for big business. “When we talk about loan guarantees . . . we are talking about subsidizing commercial ventures with the taxpayer’s money,” one congressman commented during hearings in October 1975. Others focused on the environmental and social impacts of a massive synfuels program. Representative Ken Hechler, chairman of the fossil fuels subcommittee, noted: “The entire emphasis of this program has been that industry has risks. These risks must be minimized by loan guarantees. The contention of this committee is that people have risks, communities have risks, taxpayers have risks. . . These . . . must be considered at the same time as the other legislation.”68

In late 1977, while the Congress was debating the legislation that would create the Department of Energy, the House agreed in principle to loan guarantees for a synfuels program, but the bill contained no funding provision.69 Later, the Department of Energy would request funds for synfuel commercialization projects, but at that juncture the Carter administration itself rejected the proposal. As late as 1979, support for a commercial synfuels industry could not be pieced together.

The major obstacle to legislation in the House was an unlikely coalition of liberal and conservative congressmen. Liberals favored conservation, smaller-scale technologies, and less environmentally disruptive approaches to energy policy. They were also skeptical about subsidizing projects that would likely remain in the hands of big energy companies. Conservatives opposed further interventions in energy markets, and they did not want any enlargement of the executive bureaucracy. As it had with the Rockefeller proposal, this coalition successfully blocked legislation for a synfuels program. Not until 1979, as a second oil shortage and massive OPEC price rise created a new political call for action, did the Carter administration and liberal House members move to support legislation.

The Carter Plan

Although Carter embraced and promoted the synfuel idea in 1979, the shape of the program and its modest success depended as much upon initiatives taken in Congress as upon the president. Within the House, Representative William Moorehead was instrumental in crafting a proposal that could eventually gain House passage. In his initial proposal in 1976, Moorehead shifted the rationale for a synfuels program from domestic energy policy to national security, styling his proposal along the lines of the 1950 Defense Production Act. That act had authorized the federal government to mobilize industry for national defense purposes. Moorehead drew up legislation that amended the Defense Production Act, authorizing the government to encourage the development of synfuels.

Moorehead was thus able to draw on support from the Defense Department. In presenting his proposal to the Economic Stabilization Subcommittee of the House Banking Committee, in 1979, he received favorable testimony from Defense officials. The undersecretary of defense for research and engineering, Ruth Davis, provided a defense rationale for the program: “the continued dependence of our forces on liquid hydrocarbon fuels, when combined with the Nation’s growing dependence on vulnerable sources of foreign oil supplies, now approaching 50 percent of total U.S. requirements, gives cause for grave concern about our ability to adequately provide for national security. We must find energy alternatives . . . alternatives that are insensitive to capricious economic and geopolitical actions.”70

In addition to changing the political debate with a national security rationale, Moorehead was able to move his legislation through a less hostile committee. The bill was channeled through the House Banking Committee rather than the House Interstate and Foreign Commerce Committee, which had defeated earlier synfuels proposals. Supported by House leaders, Moorehead had the bill move directly to the Rules Committee and to the House floor. On June 26, 1979, the House of Representatives passed his proposal by a vote of 368 to 25. Moorehead’s tactical maneuvers were important, but the new energy emergency of 1979 also generated support previously lacking. The Iranian revolution had resulted in partial cutoff of Persian Gulf oil, and this shortfall led to gasoline shortages in the United States. Somewhat later on, OPEC again raised oil prices dramatically.

The Moorehead bill was a rather simple proposal, relying primarily on purchase agreements and price supports to encourage synfuel production. The government could buy the synthetic fuel and use it or resell it. If the government did not buy the fuel, it would pay the difference between an agreed upon price and the prevailing market price. The bill contained other mechanisms, among them loan guarantees, direct loans, and government-owned and contractor-operated production facilities. But these other tools generally required further congressional action.

The guaranteed price arrangement appealed to a variety of groups. The Committee for Economic Development (CED), a private business organization, in a study released in July 1979, argued that this method was the least obtrusive of the various government proposals. “It does not add to government interference with market prices and the extent of the subsidy, if any, is clearly apparent,” the CED noted. “Also, the government does not get involved in the internal operations of energy facilities or in the actual design of the facility.”71 The Department of Defense, familiar with this form of cooperation, also supported the Moorehead approach.

The Senate was debating two proposals in early 1979. One was Senator Jackson’s bill, which built on the Nonnuclear Act authority, with funding requests for synfuel projects channeled through the Department of Energy. The bill also contained provisions for a wide variety of energy technologies, such as solar, geothermal, and conservation. Senator Pete Domenici, of the Energy and Natural Resources Committee, proposed a different approach: to create a government corporation mandated to develop synfuels and other alternative energy technologies. The corporation would have $75 billion at its disposal.

At this point President Carter entered the debate. Support for synfuels legislation was already widespread in Congress, and Carter’s participation affected less the final passage of the legislation than its shape. On July 15, Carter publicly committed his administration to the proposal to found a synfuels corporation.72

In addition to the Energy Security Corporation, Carter proposed a new administrative board, the Energy Mobilization Board. This board, styled after wartime arrangements and situated within the Executive Office of the President, would be empowered to expedite energy production by breaking through regulatory tangles. On July 15, 1979, Carter announced: “I will urge Congress to create an energy mobilization board which, like the War Production Board in World War II, will have the responsibility and authority to cut through the redtape, the delays, and the endless roadblocks to completing key energy projects.”73 The board would have authority to overturn state and local land use, health, and safety laws. Procedural challenges to the board’s decisions, furthermore, were to be limited to judicial review by federal courts of appeal. In a document prepared by the Justice Department’s Office of Legal Council, John M. Harmon argued that the proposed federal preemptions of state and local authorities were permissible under the Commerce Clause of the Constitution, because the board’s actions would promote “the important national interests of reducing oil imports and increasing domestic energy production.”74 The proposed board began almost immediately to run into opposition, however, particularly (and not surprisingly) among state and local officials.

The Energy Security Corporation would be authorized to borrow up to $88 billion from the Treasury between 1980 and 1990. It would, in Carter’s words, “be an independent, government-sponsored enterprise with Federal charter.” He went on to say:

It will be located outside the executive branch, independent of any government agency. As such, the ESC should be able to staff, operate and take action unlike agencies of the executive branch. It should be able to act quickly and decisively consistent with its broad charter and goals. It must work with private industry and should not be hobbled by time-consuming and burdensome provisions of law which might increase the reluctance of business to become insnared with another Federal agency. Accordingly, the Corporation would not be subject to those provisions of law which govern the administration and operation of government agencies and government employment.75

The Senate was receptive to the Carter proposal and incorporated its provisions into the Domenici plan. Yet even before debate began, a House appropriations subcommittee approved a $19 billion Energy Security Reserve in the Treasury Department. From this reserve, Congress appropriated just over $2 billion for the Department of Energy to begin start-up studies and programs for synfuel development.76 The funding package, contained in the Interior Appropriations Act of Fiscal Year 1980, was a breakthrough: for the first time funds had been appropriated for a major synfuels effort. And it had happened even before Congress finished considering Carter’s Energy Security Act.

Final congressional passage of the Energy Security Act required a number of compromises. The Senate proposal included most of Carter’s requests. The program would take the form of a government corporation, initially receiving $20 billion to finance various projects. At its disposal would be authority to provide purchase agreements, price supports, loan guarantees, joint ventures, and, if necessary, government-owned and contractor-operated production facilities. Also, the corporation could come back to Congress for an additional $68 billion in funds.77

The House bill involved Representative Moorehead’s more modest $3 billion program organized around Department of Defense purchase agreements. A new administrative organization would not be involved. Unlike the Senate bill, the House version gave the president wide scope for discretion. The compromise eventually achieved made the House bill, which amended the Defense Production Act of 1950, an interim measure while the Synfuels Corporation was organizing itself; thereafter the defense production authority would exist on a stand-by basis.

Carter signed this legislation on June 30, 1980, declaring that the new program “gives us the weapons to wage and win the energy war.”78 However, the companion bill, to create an Energy Mobilization Board, did not survive House vote and was sent back to the House-Senate conference committee. The Congress had created a new funding agency with powers to promote synfuel production, but it would not grant extraordinary powers to the president to bypass administrative and regulatory processes in the licensing and approval of energy projects. Carter’s victory actually signaled the limits of executive discretion and authority. These mixed results bear further discussion.

Explaining the Outcome

The Synfuels Corporation was established, and by the end of the decade it embodied the only significant new role for government within the energy sector. Why did it succeed where other proposals failed? The straightforward explanation is that it did not step on important people’s toes. The Synfuels Corporation was, in essence, a government spending program. It funded experimental and demonstration synfuels projects that would remain in private hands—in effect, it provided a financial subsidy to private business. This was by no means a radical departure in government-industry relations.

Second, the program was attractive to elements in Congress. Because it would support projects located in specific states, the program offered congressmen the chance to gather constitutent support. Unlike the other programs, it allowed for “credit claiming” by representatives.79 In the implementation phase the program was particularly prone to efforts by legislators to service their local constituencies. One senator noted that during the budgeting phase, several congressmen actively sought and gained funding for synfuel projects that used such regional resources as shale, coal, and wood chips. And, he notes, this budgeting was conducted without even the appearance of staff analysis by which to rank promising fuel types and apportion resources accordingly.80

Beyond this, the Energy Security Corporation contained provisions with a wide appeal. The original Senate bill had eleven titles. The first created the synfuel corporation, the other ten provided incentives for alcohol fuels, biomass, geothermal energy, solar energy, and conservation. The bill was clearly designed to appeal to a coalition—it contained something for everyone.

Third, the Synfuels Corporation, at least at the level of program design, had been around for many years. It had support in some quarters of Congress that had been pushing the idea since World War II. A record of study and debate lay behind the idea, and unlike the other proposals examined in this chapter, this program had had time to take shape and develop support.

Finally, funding was made possible by the revenue to be extracted from the Windfall Profits Tax. The money could be put in the hands of an independent synfuels board, and so the executive branch would not be involved directly in energy production. The program was designed to allow a meshing with private industry.

At the same time the failure of Carter’s request for a broad set of administative powers—the Energy Mobilization Board—exposed the limits of the delegation of power. Congress was hesitant to give the executive any authority that could not be circumscribed by annual budget reviews. And where new administrative authority was necessary, as in the synfuel corporation, Congress made sure that its corporate board would be independent of executive control.


To cope with problems of energy adjustment in the 1970s, U.S. government officials made various attempts to build additional state capacities. In effect, these proposals—ranging from the strengthening of the analytic competence of energy planners to direct government participation in energy finance and production—sought to redefine the state’s role in the energy sector. They fit into a larger sequence of energy adjustment policies. Initial state-building proposals sought to increase the information and expertise on energy available to policy makers and to facilitate the ongoing international initiatives of the Nixon administration. As American diplomatic efforts were frustrated, executive and congressional officials advanced other proposals that envisaged even greater state involvement in the energy sector. These proposals, as we have seen, met with substantial opposition and (apart from the synfuels program) were easily defeated. Thus constrained, the search for a workable adjustment policy continued.

The defeat of these state-building initiatives has been explained in terms of the immediate opposition of various groups and individuals, but also in terms of the larger institutional setting in which policy struggles took place. Each proposal ran afoul of interest groups and public officials. Indeed, these state-building efforts generated a curious mixture of detractors. Vice-President Rockefeller’s energy finance proposal and Senator Stevenson’s government energy corporation each attracted the opposition of conservative and market-oriented officials both in Congress and in the executive branch. Yet many liberals were also troubled by their proposals. The emphasis on government involvement in a massive push to expand domestic production of energy attracted the opposition of environmentalists and those who wanted more attention to be paid to energy conservation. Other liberal Democrats opposed the state-building initiatives because they feared they were only new mechanisms by which government would subsidize the large energy firms.81 A crossfire of opposition developed: conservatives feared the encroachment of state, liberals feared the new state capacities would be put to the wrong purposes or subverted by private interests.

The limited success of state-building efforts in the 1970s was foreshadowed by the fate of similar efforts at earlier moments of crisis. Resolution of these earlier struggles had left an institutional legacy that affected the later crisis. In particular, the scarcity and fragmentation of bureaucratic expertise and operational capabilities provided few bases on which to build new government powers and responsibilities. Precedents for direct state involvement in the financing and production of energy, and constituencies in support of these activities, had not been forged in earlier historical periods. In the absence of such precedents, state-building efforts were overwhelmed by opposition.

By the end of the decade, executive officials had not greatly expanded their institutional capabilities to shape the course of energy adjustment. In ways that are explicable in historical and comparative perspective, state building would not be a viable response to the energy upheavals of the period. For executive officials concerned with energy adjustment, policy necessarily had to turn to more readily available capabilities.

1President Richard M. Nixon, “Address on the Energy Emergency,” November 7, 1973, in Presidential Energy Statements, Committee Print, Committee on Interior and Insular Affairs, U.S. Senate (Washington, D.C., 1973), p. 86.

2See Federal Energy Administration, Project Independence: A Summary (Washington, D.C.: GPO, November 1974); Martin Greenberger, Caught Unawares: The Energy Decade in Retrospect (Cambridge, Mass.: Ballinger, 1983), p. 110.

3See Thomas H. Tietenberg, Energy Planning and Policy: The Political Economy of Project Independence (Lexington, Mass.: Lexington Books, 1975), p. 46.

4John Sawhill, “Project Independence,” Hearings before the Committee on Interior and Insular Affairs, U.S. Senate, 93d Cong., 2d sess., November 21, 1974, p. 164.

5Interview, Eric Zausner, June 26, 1984.

6See Neil De Marchi, “Energy Policy under Nixon: Mainly Putting Out Fires,” in Craufurd D. Goodwin, ed., Energy Policy in Perspective: Today’s Problems, Yesterday’s Solutions (Washington: Brookings, 1981), pp. 458–66; Greenberger, Caught Unawares, p. 111; and Joel Havemann and James G. Phillips, “Energy Report/Independence Blueprint Weighs Various Options,” National Journal Reports, November 2, 1974, p. 1636.

7Interview, Eric Zausner, June 26, 1984. The count of data-gathering programs is from General Accounting Office, Report to the President and the Congress: Performance Evaluation of the Energy Information Administration (Washington, D.C., June 15, 1984), p. 1–1.

8Federal Energy Administration, Project Independence Report (Washington: GPO, November 1974).

9Unidentified official quoted in Havemann and Phillips, “Energy Report,” November 2, 1974, p. 1640.

10Project Independence Report, November 1974, pp. 8, 15.

11Greenberger, Caught Unawares, p. 112.

12Quoted in Havemann and Phillips, “Energy Report,” November 2, 1974, p. 1636.

13Interview, Eric Zausner, June 26, 1984.

14Tietenberg, Energy Planning and Policy, p. 88.

15Joel Havemann, “Energy Report/Federal Planners Study Ways to Cut Reliance on Imports,” National Journal Reports, December 14, 1974, p. 1863.

16Interview, Eric Zausner, June 26, 1984.

17Havemann and Phillips, “Energy Report,” November 2, 1974, p. 1653; Tietenberg, Energy Planning and Policy, pp. 46–47.

18Interview, Eric Zausner, June 26, 1984.

19Tietenberg, Energy Planning and Policy, pp. 63, 87.

20Edward Cowan, “Zarb Is Praised as Man in Middle on Oil Price Dispute,” New York Times, July 23, 1975; interview, Eric Zausner, June 26, 1984.

21Edward Cowan, “Ford Calls Aides to Weigh Energy and Economy,” New York Times, December 26, 1974, p. 45.

22Energy Conservation and Production Act, U.S. Public Law 94–385, enacted August 14, 1976, secs. 51a, 142; discussed in Greenberger, Caught Unawares, p. 116.

23General Accounting Office, Report to the President and the Congress: Performance Evaluation of the Energy Information Administration (Washington, D.C., June 15, 1984), p. 1–1.

24Basic information was not available on oil flows in the midst of the October 1973 embargo. For example, after the embargo William Simon asked Eric Zausner, in charge of data and analysis in the Interior Department, for figures on current oil import levels. The one agency with energy information was the Bureau of Mines, in the Interior Department. That bureau reportedly told Simon it would have available data on import levels for 1971 in another six months. Interview, Eric Zausner, June 26, 1984.

25Statement by Senator Pete V. Domenici, “Project Independence,” Hearings before the Committee on Interior and Insular Affairs, U.S. Senate, 93d Cong., 2d sess., November 21, 1974, p. 5.

26Bruce F. Freed, “Energy Report/Government Seeks Ways to Verify Energy Data,” National Journal Reports, February 2, 1974, p. 278.

27The problem of government dependence on industry information runs through many congressional hearings on energy. In testimony before the Church Subcommittee on Multinational Corporations and American Foreign Policy, James E. Akins, from the Office of Fuels and Energy, Department of State, prefaced his remarks on U.S. oil company negotiations with Libya: “We were relying on the companies for information and we still are. We possibly are going to be in a position sometime to require them to give us information but we have not been in that position in the past and we are not there now and I can be excused from talking about specific company positions inside these negotiations.” Senator Church asked: “Why is it that the U.S. Government is in this position with respect to the oil companies? Why can’t we obtain information as a matter of right?” Atkins retorted: “Well, I think is it probably the way the Government works.” “Multinational Petroleum Companies and Foreign Policy,” Hearings before the Subcommittee on Multinational Corporations, Committee on Foreign Relations, U.S. Senate, 93d Cong., 1st sess., Vol. 5, October 11, 1973, p. 9.

28See Freed, “Energy Report,” February 2, 1974, p. 279, and more generally Neil De Marchi, “The Ford Administration: Energy as a Political Good,” in Goodwin, Energy in Perspective, p. 292.

29Quoted in Bruce F. Freed, “Energy Report/Government Seeks Ways to Verify Energy Data,” National Journal Reports, February 23, 1974, p. 282.

30“Energy Information Needs—Study by the General Accounting Office,” Prepared at the request of the Committee on Interior and Insular Affairs, U.S. Senate, February 6, 1974, pp. 4–6.

31Quoted in Freed, “Energy Report,” February 23, 1974, p. 282.

32E.g., Ernest Holsendorph, “Oil Independence—It Seems Unlikely,” New York Times, December 2, 1973, sec. II, pp. 1, 15.

33De Marchi, “The Ford Administration,” p. 518.

34Gerald Ford, “Remarks in San Francisco at the Annual Convention of the AFLCIO Building and Construction Trade Department,” September 22, 1975, in Public Papers of the Presidents of the United States, Gerald Ford, 1975, vol. II (Washington: GPO, 1977), pp. 1493, 1495–96.

35U.S. Congress, Documents and Report, House Documents, 94th Cong., 1st sess., vol. 4 (1975), pp. 1, 13–14.

36“Energy Independence Authority Act of 1975,” Hearings before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, 94th Cong., 2d sess., April 12, 1976, pp. 2–9.

37Walt W. Rostow, “Energy Independence Authority Act of 1975,” Hearings before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, 94th Cong., 2d sess., April 12, 1976, p. 88.

38“National Energy Production Board,” Hearings before the Committee on Interior and Insular Affairs, U.S. Senate, 94th Cong., 1st sess., March 20, 1975, p. 28.

39Jackson’s proposal was cosponsored by Senators Magnuson, Bayh, Leahy, and Stevenson.

40“National Energy Production Board,” Hearings, March 20, 1975, p. 49. Fowler’s argument reflected the conclusions of a private study he had chaired for the Atlantic Council of the United States, a private study group. The report argued: “The Administration and Congress should arrange urgently to concentrate in a single all powerful agency reporting directly to the President, all of the government’s authority to act on production of energy, whether through changes in the economic and legal climate to accelerate investment, expedited regulatory decisionmaking, or direct action by government to assure the availability of enough energy to satisfy our national needs and our national interest in international energy cooperation and avoid inadequacy of energy supply whether threatened by the pluralistic processes of the marketplace, divided authority in public regulation, or action by the producer’s cartel.” Atlantic Council of the United States, “World Energy and U.S. Leadership,” Policy Papers, January 1975.

41Hearings, “National Energy Production Board”; for Rohatyn, March 20, 1975, p. 131; for Jackson, April 14, 1975, pp. 141–42.

42De Marchi, “The Ford Administration,” pp. 518–20. On FEA opposition see David S. Broder, “Ford Asks Creation of Energy Corporation,” Washington Post, September 23, 1975, p. A11.

43The Congressional Program of Economic Recovery and Energy Sufficiency (Washington: GPO, 1975); De Marchi, “The Ford Administration,” p. 491.

44“$100 Billion Energy Agency Formally Proposed,” Congressional Quarterly, October 18, 1975, p. 2238.

45Congressional Record, Senate, October 8, 1975, pp. 32175–77.

46See comments by Senators Packwood, Proxmire, and Metzenbaum in “Energy Independence Authority Act of 1975,” Hearings before the Banking, Housing, and Urban Affairs Committee, U.S. Senate, 94th Cong., 2d sess., April 12, 1976.

47David Burnham, “Environmentalists and Oil-State Conservatives Likely to Fight Plan for Energy Agency,” New York Times, September 23, 1975, p. 15.

48Mel Horwitch, “The Convergence Factor for Large-Scale Programs: The American Synfuels Experience as a Case in Point,” MIT Energy Laboratory Working Paper, December 8, 1982, p. 23.

49Congressional Quarterly, March 6, 1976, p. 525.

50Interview, Senator Adlai Stevenson, III, June 13, 1984.

51Congressional Quarterly, January 26, 1974, pp. 174–75. The cosponsors were Senators Abourezk, Philip Hart, McGovern, McIntyre, Metcalf, Mondale, and Moss.

52“Consumer Energy Act of 1974,” Hearings before the Committee on Commerce, U.S. Senate, 93d Cong., 1st and 2d sess., December 12, 1973, pp. 1000, 1001.

53Despite support from committee chairman Magnuson, the Consumer Energy Act did not gain a majority vote within the Commerce Committee. The bill was reintroduced in 1975. Congressional Quarterly, February 22, 1975, p. 364.

54“Oil Import Policy Issues,” Hearings before the Subcommittee on Trade on the Committee on Ways and Means, U.S. House, 96th Cong., 1st sess., July 16, 1979. p. 50.

55Ibid„ July 17, 1979, p. 69.

56Interview, June 13, 1984.

57Richard Corrigan, “The Oil Price Revolution Is Alive,” National Journal, March 3, 1979, p. 360; Robert J. Samuelson, “The Oil Price Time Bomb,” National Journal 11 (June 2, 1979), 916.

58President Jimmy Carter, “Energy and National Goals: Address to the Nation, July 15, 1979’” in Weekly Compilation of Presidential Documents 15, no. 29 (Washington, D.C.: Office of the Federal Register, July 23, 1979), p. 1239.

59Craufurd Goodwin, “The Truman Administration: Toward a National Energy Policy,” in Goodwin, Energy Policy in Perspective; Richard E. Vietor, “The Synthetic Liquid Fuels Program: Energy Politics in the Truman Era,” Business History Review 54 (Spring 1980), 1–34.

60Vietor, “Synthetic Liquid Fuels Program,” pp. 14–15.

61Goodwin, “Truman Energy Policies toward Particular Energy Sources,” in Goodwin, Energy Policy in Perspective, pp. 161–67; Horwitch, “The Convergence Factor,” p. 15.

62Craufurd D. Goodwin, “Truman Administration Policies toward Particular Energy Sources,” in Goodwin, Energy Policy in Perspective, p. 159.

63Carroll E. Watts, “The U.S. Synthetic Fuels Program: An Overview,” Government Research Corporation, May 4, 1981, p. 1.

64Ibid., pp. 2–3.

65See “Energy Independence Authority Act of 1975,” Hearings, Committee on Banking, Housing and Urban Affairs, U.S. Senate, 94th Cong., 2d sess., April and May 1976.

66“Congress Debates Synthetic Fuel Proposals,” Congressional Quarterly, November 8, 1975, p. 2398.

67Thomas O’Toole, “U.S. Reduces 1985 Goal for Oil Substitute,” Washington Post, September 21, 1975, pp. 1, 8.

68Both quoted in “Congress Debates Synthetic Fuels Proposals,” Congressional Quarterly, November 8, 1975, p. 2398.

69Department of Energy Act of 1978, Civilian Applications, Public Law 95–238.

70Ruth Davis, “To Extend and Amend the Defense Production Act of 1950,” Hearings before the Subcommittee on Economic Stabilization of the Committee on Banking, Finance and Urban Affairs, 96th Cong., 1st Sess., March 13, 1979, p. 23.

71Quoted in ibid., p. 10.

72See Richard Corrigan, “Congress Has Synfuels Fever,” National Journal, June 23, 1979, p. 1050, and Dick Kirschten and Robert J. Samuelson, “Carter’s Newest Energy Goals—Can We Get from Here to There?” National Journal, July 7, 1979, pp. 1192–1202.

73Jimmy Carter, “Energy and National Goals,” July 15, 1979, Presidential Documents, p. 1240.

74Quoted in Dick Kirschten, “Cutting Energy Project Red Tape Raises Legal, Practical Questions,” National Journal, September 9, 1979, p. 1449.

75Carter, Message to Congress, July 20, 1979.

76Harry Perry and Hans H. Landsberg, “Factors in the Development of a Major U.S. Synthetic Fuels Industry,” Annual Review of Energy 6 (1981), 237–38.

77Watts, “U.S. Synthetic Fuels Program,” p. 12.

78New York Times, July 1, 1980, pp. D1, D4.

79See David Mayhew, Congress: The Electoral Connection (New Haven: Yale University Press, 1974).

80Interview, Adlai Stevenson, III, June 13, 1984.

81See Edward Cowan, “Washington’s Role in Oil Industry Stirs Controversy,” New York Times, February 5, 1979, pp. 47, 57.

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