Reagan budget team maps deep cuts at Energy

By , Business and financial correspondent of The Christian Science Monitor

Solar may suffer a partial eclipse. Support for small dams would slow to a trickle. Gasohol might lose its government subsidies, and coal gasification could have its money snatched away.

Documents obtained by the Monitor show that the Office of Management and Budget (OMB) is making plans to slash many Department of Energy (DOE) programs, leaving much of America's energy future in the hands of the private market.

The federal government doesn't need to tinker with the energy business, say the documents, because of the conservation and development incentives provided by rising costs.

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Specific changes -- which still haven't gotten final Reagan approval according to administration officials -- include:

* Cutting solar energy budget outlays by $79 million in 1981 and $365 million in 1982. Construction of a permanent facility for the Solar Energy Research Institute would be endangered, as would DOE contributions to the Solar International Program -- a cross- cultural commitment with Saudi Arabia and Italy to develop solar systems.

Federal support would shine only on long-term research and development that promises big paybacks. In general, the development of commercial applications would be left to the private market. For fiscal year 1982, the total solar budget would be $224 million, instead of the $589 million Carter had proposed.

* DOE's hydropower program would be stuffed in a barrel and sent floating down- stream. Budget outlays in 1981 would be reduced from $23 million to $7 million; in 1982, from $16 million to a mere trickle of $2 million. Demonstration programs would end and feasibility study loans would be terminated.

* Federal aid to alcohol fuels would be eliminated -- a saving of $114 million in 1981 and $29 million in 1982. Such fuels now receive, in effect, a government subsidy of $18 a barrel. But the OMB says it believes they have little potential to displace Arab oil imports or siphon money away from more important investments, and could in the long run mean forgoing food for fuel.

* A Carter request to take back money already set aside for four coal gasification plants meets with OMB's approval. A Tennessee Valley Authority project and three DOE plants face the knife. None has been built yet, though designs are complete and some site preparation has begun. As a whole, coal research and development would be cut $145 million in 1981 and $298 million in 1982.

* The Synthetic Fuels Corporation would be revamped. SFC would be granted sovereignty over all government synfuel projects, and it would be declared "operational" -- thereby keeping DOE from budgeting more money for its own Alternative Fuels Program. In short, the federal government would help develop synfuel technology but would not subsidize production capacity. The OMB estimates this move could save $5.3 billion.

* Government nagging about conservation would be scaled back. The documents claim much federal activity in this area is superfluous. Rising prices, they say, are a more effective prod toward conservation than innumerable government slogans. Total conservation funds would be reduced $42 million in '81 and $453 million in '82.

* The government would use the Strategic Petroleum Reserve to enter the futures business. Under the Carter administration, the pumping of oil into salt-dome stockpiles had fallen 40 percent behind schedule by January of last year. To step up the savings, the Reagan administration has proposed issuing securities backed by the oil. They would be bought by private speculators -- thus providing the government with instant income for further oil purchases.

This last proposal -- first floated at a Senate hearing last April by Dr. Alice Rivlin, head of the Congressional Budget Office -- has already drawn squeals of protest. Theoretically, the government wouldn't have to put any of its own money to fill the reserve. Security sales would cover the whole cost.

But critics contend that when the securities mature, in 20 or 30 years, the government will have to dig money out of the Treasury to buy them back.

"If the oil is not sold, the securities will be redeemed with federal funds," says Irving Auerbach, an economist and government bond specialist for Aubrey Lanston, a bond house.

Mr. Auerbach says the oil-backed securities are just fancy footwork that push expenditures off-budget and don't increase the paper deficit.

Another administration energy proposal, outlined in the documents and confirmed by other sources, has already sparked meetings along the K Street lobbyist corridor. The White House is considering doing away with the Solar Energy Conservation Bank, an institution that floats low-interest loans to homeowners for solar conversion.

"It was a coming together," says one lobbyist, laughing through her anxiety as she describes the efforts that went into forming the bank. "Now it might be a coming part."

"After several years of struggle to create this bank," says William Bergman, executive vice-president of the Solar Energy Industries Association, "it would seem contrary to good public policy not to let it get started and see what it might do."

The documents obtained by the Monitor also repeated administration support for the decontrol of natural gas by Sept. 30, 1981, proposed eliminating the standby gasoline rationing program, and proposed ending "international energy planning activity" currently carried out by the DOE.

The report claims that, overall, the proposed cuts simply reflect the fact that the government doesn't have to encourage "desirable energy activities," because the shock of rising prices will do it anyway.

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