Richard L. Haney,jr. Melvin R. Crask Hans R. Isakson Hidden Cost of Federal Energy Legislation The gasoline shortage of Fall 1973, the natural gas shortage during Winter 1977, the mount- ing balance of payments deficit due to our de- pendence on foreign oil, and the Carter Ad- ministration's emphasis on energy policies have brought to the forefront the magnitude of the energy problem facing our nation. While as- sessments of the existing energy supply vary widely, 1 the Federal Energy Administration (FEA), now incorporated into the newly created Department of Energy (DOE), has es- timated that the domestic total of known plus undiscovered reserves of petroleum and natural gas will last for only two more decades at current consumption levels.? Although an abundant supply of coal exists, mining and gas- ification are both expensive and fraught with environmental considerations. Even if the U.S. were to become totally dependent on foreign sources for energy, the FEA estimates only fifty years of energy supplies exist abroad. Recently, articles dealing with several aspects of the energy situation have appeared in business and economics journals. Expository articles on the need for "advanced energy sources" call for increased research in this area. Industry de- mand forecasts and policy implications are two of the areas under investigation.:' Even though FALL / 1979 / VOL. XXII / NO. 1 many would argue that the federal government has created most of our problems through past intervention in the marketplace, some of the authors of these articles seem to be looking once again to the government sector to find a solution to the energy problem. The Washington bureaucracy appears particu- larly adept in imposing complex rules and reg- ulations in such situations. Ostensibly designed with good intentions, these regulations have often interfered with our economic machine, making it less efficient while increasing the un- certainties of doing business. Even though much of the federal energy policy is just now evolving, there already exists a substantial amount of energy legislation, which is having a profound effect on this new policy and upon the way business will operate in the future. Specifically, this legislation includes the Energy Policy and Conservation Act of 1975 and the Energy Conservation and Production Act of 1976. 4 The stated purpose of the 1975 and 1976 acts is to increase domestic energy supplies avail- ability and restrain energy demand through greater conservation. The production incen- tive section of the 1975 act rolled back the maximum price for newly discovered oil to 13