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Energy subsidies feel the heat

By Business and financial correspondent of The Christian Science Monitor / February 26, 1981



Washington

You had a nice spot picked out on the banks of the Housatonic River. You were going to quit the rat race, get a grant from the US Department of Energy, and make a living selling electricity from your very own small hydroelectric dam. But now President Reagan has proposed an end to federal aid for small hydro -- and the rat race is looking better all the time.

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Or maybe you live in the corn belt and wanted to build a gasohol manufacturing plant. Perhaps you were going to tap the hot spring on your son-in-law's property, and sell geothermal-generated power. Or you direct a university research project aimed at cutting the cost of the silicon used in photovoltaic cells.

Uncle Sam subsidized your energy- related plans. But now President Reagan is proposing that many Department of Energy (DOE) programs be dropped or scaled back. Energy special-interest groups appear to be in disarray, so the chances are good that you are going to lose your federal sugar daddy.

"The reduction in subsidies seems to be spread evenly," says Adam Sieminski, an energy analyst at the Washington Analysis Corporation. "They went after gasohol, solar, even appliance labeling. There's not much in the way of cuts for big oil -- but they don't get many subsidies from DOE, anyway."

Specific cuts would include:

* Obliteration of alcohol fuel subsidies. As estimated $114 million would be saved in 1951; $29 million in 1982. Tax credits for gasohol would continue, but all new production capacity would have to be funded totally by the private sector.

* Trimming $79 million off solar development for this year, and $365 million off for next year. Active and passive solar will lose relatively little this year -- only $1 million each -- then get slapped with cuts of $20 million in '82 . Photovoltaics would suffer unexpectedly heavy losses under the Reagan plan --

* A $3.2 billion cut, spread out over five years, for the Synthetic Fuels Corporation. At one time, Office of Management and Budget Director David A. Stockman proposed whacking a hefty $9.2 billion out of its budget. Instead, several DOE synfuel projects were switched to the corporation, and the cuts were made less Draconian.

* The Solar and Conservation Bank would go out of business. Fiscal 1981 funds are to be rescinded, and no appropriation is requested for 1982.

* Turning down the volume on government use of the media to urge conservation. Some $66 million would be cut from the program this year; $210 million next.

* The de-employment of civil servants made superfluous by the deregulation of petroleum. This would save $33 million in 1981 and $127 million in 1982.

"I think there will be pretty much opposition," says Jon Clark, an energy analyst for the Northeast-Midwest Congressional Coalition. "To a certain extent , we're going to fight a lot of these cuts."

But observers close to energy special- interest groups say they have not heard the outcry they expected. "It's more like stunned silence," said one.