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Go Big: Eliminate the Energy Department

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Go Big: Eliminate the Energy Department

December 1, 2016

The Department of Energy (DOE) traces its roots to the energy crisis of 1973, which was made worse by misguided government policy.  The Arab embargo of 1973 was short lived but it lead to a series of actions that distorted energy policy and created a bureaucracy that now, thanks to the oil and gas renaissance we are experiencing, is in search of a mission.  In addition to the effects of the embargo and price and allocation controls, there was, at the time, a firm belief that the world was going to run out of oil by the end of the century.

Not only does the world have plenty of oil, but the United States is now a net exporter of natural gas--and would be exporting more if DOE was faster with its approvals. 

When created in 1977, DOE was given the responsibility for “the design, constructing, and testing of nuclear weapons, and … a loosely knit amalgamation of energy-related programs scattered throughout the Federal Government.” 

Prior to DOE, the federal government played a very limited role in energy policy and development.  Presumed scarcity, excessive dependence on OPEC nations, distrust in markets, and the search for energy independence became the foundation for what is now a $32.5 billion bureaucracy in search for relevance.  A series of energy policies have done little to contribute to the abundance of affordable energy that fuels a growing economy. 

What DOE has done is squander money on the search for alternative energy sources. In the process, it enabled Bootlegger and Baptist schemes that enriched crony capitalists who are all too willing to support the flawed notion that government can pick winners and losers.  For 2017, a large chunk of DOE spending--$12.6 billion, or 39 percent—is earmarked to “support the President’s strategy to combat climate change.” This is not a justifiable use of taxpayer dollars.

Over 36 years, DOE’s mission has morphed from energy security to industrial policy, disguised as advanced energy research and innovation.  There is a long and failed history of industrial policy by the federal government.  It has failed because it has attempted to decide what energy consumers and industry should want and use. 

In contrast, government R&D that has proved successful is that carried out by the Pentagon’s Defense Advanced Research Projects Agency (DARPA).  It has been successful for one overriding reason.  It is focused on known clients, the military services, and their specific technology needs.  Lacking specific clients, DOE has become the Department of Pork.  The late Senator William Proxmire once observed that a characteristic of interventionist industrial policy is that “government money will go where the political power is, regardless of economic considerations.”

Energy firms do not need government subsidies to innovate and develop new technologies.  Horizontal drilling and fracking came from the private sector because the incentives to develop shale oil and gas were stronger than the illusions driving alternative energy sources.  Entrepreneurial firms that want to develop new energy technology can go to private markets, which can judge the chances of success.

Abolishing DOE would punish only the crony capitalists who have become addicted to its support.  The nuclear weapons role could be assigned to a new Atomic Energy Commission.  Research to the extent that government wants to fund it could go through the National Science Foundation to centers of excellence for basic research, creating new knowledge for the benefit of our economic and social well-being.  The Energy Information Administration to the extent that its continued existence can be justified could be transferred to the Commerce Department.

If the Trump administration and Congress can muster the courage of its convictions to end DOE, they would then have a basis for creating a new Hoover Commission to re-examine the justification for all government departments and programs.  With the last review in 1947, a top to bottom reorganization is long overdue. 

William O'Keefe is the President of Solutions Consulting. You can follow him on Twitter here.

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