At DOE’s 37th Birthday, Was it a Wise Creation?

Washington, D.C. — Congress enacted legislation creating the U.S. Department of Energy in August of 1977. The agency began operating in October of 1977. Was that wise legislation?

In the 37 years since its creation, much has changed in the U.S. energy economy. When Jimmy Carter pushed Congress to create the energy department, the U.S. was wringing its hands over the impact of foreign oil, the Arab oil embargo in the Nixon administration, and the decline of domestic energy resources. Oil imports were rising, gasoline prices were soaring, and the nation was losing confidence in its ability to manage the economy. The economy was facing low growth and high inflation, a condition that came to be known as “stagflation.”

It was a scary time.

Today, the situation has reversed dramatically. The U.S. is now the world’s largest producer of natural gas and a major oil producer looking to export oil and gas to the rest of the world. The U.S., according to the U.S. Energy Information Administration (a worthwhile creation of the legislation establishing the energy department), is now a net energy exporter.

Is that a triumph for the vision of the Carter administration and a win for the federal government in managing a major U.S. economic and strategic vulnerability? Has U.S. government energy policy been a success?

I would argue that it has not. As a corollary, I would suggest that federal government policy has slowed the response to developments in the world’s energy economy.

What has changed the direction of the U.S. energy economy? In my mind, the working of the private market and initiatives driven by private companies, not the Department of Energy, transformed the U.S. position in the world of energy. The rebound of the U.S. as an energy giant occurred without, and perhaps despite, the DOE.

This is not an argument that government had no role in the turnaround in the U.S. energy economy. Government research and development programs helped the oil and gas industries develop horizontal drilling and hydraulic fracturing technologies that have revolutionized the industry and returned the U.S. to energy dominance.

Those R&D advances would have come to pass without the existence of the energy agency (and certainly without, or even with, a federal “energy policy”). The government initiatives that created them were already housed in existing agencies at the Interior Department, the National Science Foundation, and the Energy Research and Development Agency (one of DOE’s predecessor sub-cabinet agencies). The 1977 law that created DOE was a legislative vacuum cleaner that sucked up existing, and largely well-run, programs from other agencies and deposited them under a new tent with the name DOE on the front. The quality of their management then deteriorated.

I worked at the National Institutes of Health when the White House – the Nixon administration – began the first steps toward creating DOE. In the wake of the 1973 Arab oil embargo, a clueless political administration began looking for a way to appear to be responding to the energy challenge. The result was the Federal Energy Administration, created by a 1974 law and an implementing executive order. That became one of the parents of the DOE.

All the established federal agencies were given orders from the White House to contribute a quota of personnel to the new agency. At NIH, where I was working in personnel management, we were happy to comply. As one of the NIH’s most savvy bureaucrats told me, a rookie at the time, this was a great opportunity. He said the new energy agency would become a “turkey farm,” where NIH and other agencies could unload their turkeys, employees who were, at best, marginally productive.

That happened. Those turkeys ended up being the crux of the management of the cabinet-level department when Congress created the energy department. DOE became a conglomerate of functions from already-existing federal programs, including the nuclear weapons establishment that had come to dominate the Atomic Energy Commission. As it happened, no surprise, the weapons function came to dominate the alleged energy agency.

In retrospect, creating this super-agency was a mistake. I’d say the same about the Department of Education, the Department of Transportation, and, most recently and most troubling, the Department of Homeland Security. Keeping federal agencies small, isolated, and limited in powers is probably a better model than concentrating power and economic clout.

When it comes to the energy department, I see no evidence that the agency has had a significant role in the revival of the U.S. oil and gas industry that now leads the country into a new economic paradigm. Nor do I see any evidence that the agency’s R&D agenda and its management of R&D has much promise for a future neither they nor we can see.