Laws and regulations concerning the production and distribution of energy have existed for over one hundred years in the United States. Energy law became recognized as a specialty following the energy crises of the 1970s. It focuses on the production, distribution, conservation, and development of energy resources like coal, oil, natural gas, NUCLEAR POWER, and hydroelectric power.
In 1876, the U.S. Supreme Court, in Munn v. Illinois, 94 U.S. (Otto) 113, 24 L. Ed. 77, held that "natural monopolies" could be regulated by the government. Munn concerned grain elevators but stood more generally for the principle that the public must be allowed to control private property committed to a use in which the public has an interest. This legal recognition of natural monopolies provides the basis for much of the legal and regulatory control the government exercises over utility companies.
The regulation of energy in the late 1800s was on a local and regional level, and was primarily market driven. The transition from using wood as a primary source of energy to using coal was almost complete, and a second transition from coal to natural gas and oil was beginning.
In 1900, Standard Oil Company controlled 90 percent of the oil market; within a few years, antitrust litigation had reduced its market share to 64 percent. Aside from antitrust enforcement, the federal government was content to let the market control the energy industry. Oil, coal, and natural gas found their greatest structural impediment in the "bottleneck" of distribution—pipelines for oil and natural gas, and railways for coal. The dominant model of energy policy that emerged from this period and existed unchanged until the 1970s was one of support for conventional resources and regulation of industries whose natural monopolies required some government oversight to ensure that their public purpose served a public interest.
On October 17, 1973, the Organization of Petroleum Exporting Countries (OPEC) announced an embargo of oil exports to all countries, including the United States, that were supporting Israel in the Yom Kippur War. Only approximately 10 percent of the United States' oil imports were affected, but the perception of a major oil shortage motivated the next three presidential administrations to exert a strong federal influence over energy.
President Richard M. Nixon created the Federal Energy Office (Exec. Order No. 11,930, 41 Fed. Reg. 32, 399) and appointed an "energy czar" to oversee oil supplies. President Gerald R. Ford's administration saw the passage of the Strategic Petroleum Reserve (42 U.S.C.A. § 6234) and the promulgation of minimum efficiency regulations for automobiles. In 1977, Jimmy Carter's administration created the DEPARTMENT OF ENERGY (42 U.S.C.A. § 7101), which was the framework for the coordination, administration, and execution of a comprehensive national energy program.
The goal of a comprehensive national energy program was achieved with the passage of the National Energy Act of 1978, which consisted of five distinct pieces of legislation. The National Energy Conservation Policy Act (42 U.S.C.A. § 8201 et seq.) set standards and provided financing for conservation in buildings. The Powerplant and Industrial Fuel Use Act (42 U.S.C.A. § 8301 et seq.) encouraged the transition from oil
and gas to coal in boilers. The PUBLIC UTILITIES Regulatory Policies Act (15 U.S.C.A. § 2601) granted Congress authority over the interstate transmission of electric power. The Natural Gas Policy Act (15 U.S.C.A. § 3301) unified the gas market and promoted the deregulation of the natural gas industry. The Energy Tax Act (26 U.S.C.A. § 1 et seq.) approved tax credits to promote conservation.
The administration of RONALD REAGAN set policies that marked a significant change in the national energy policy, away from the Carter administration's centralized, governmentally regulated energy plan, which set ambitious goals for market stabilization and energy conservation through government intervention. The Reagan administration favored a more market-driven approach to achieve these goals. Although unsuccessful in its goal to abolish the Department of Energy, the Reagan administration was able to deregulate the natural gas industry through administrative initiatives (under the Federal Energy Regulatory Commission) and the Wellhead Decontrol Act of 1989 (15 U.S.C.A. § 3301).
The administration of GEORGE H. W. BUSH also favored a market-driven approach to the regulation of energy, but the Persian Gulf War against Iraq in 1991 required Congress to respond to volatile conditions in the oil-exporting Middle East. The National Energy Policy Act of 1992 (42 U.S.C.A. § 13201) addressed issues such as competition among electric power generators and tax credits for wind and biomass energy production systems.
The National Energy Policy Plan, issued in 1995 during Bill Clinton's administration, continued the market-focused approach of the Reagan and Bush administrations. Citing as its primary goal a "sustainable energy policy," the plan states that the "administration's energy policy supports and reinforces the dominant role of the private sector" in achieving this goal.
The mid-1990s focus of market-driven, private sector regulation of energy development, conservation, and distribution may have to change in the years ahead. The energy needs of industrialized nations are intensifying, and the developing countries of the world are increasing their energy demands at a rate of 4.5 percent a year. Oil demand in Asia alone grew 50 percent from 1985 to 1995.
Energy policies in the future are likely to include emphasis on the development of more efficient, sustainable sources of energy. Many countries are already exploring the energy potential of biomass, wind, hydroelectric, and solar power.
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