BURN LAW AND BURN COAL

ONE OF THE MORE MEDDLESOME antidotes to the "energy crisis" should be dropped. Almost 10 years ago, the Carter administration and Congress found they couldn't repeal the laws of supply and demand, so - perhaps out of frustration - they instead enacted the Powerplant and Industrial Fuel Use Act.

Its objective was to phase out the use of natural gas and oil - one in short supply and the other frightfully expensive - in industrial and utility boilers. Gas use as a boiler fuel was to be prohibited by 1990, and any new boilers had to be capable of using coal.Generally overlooked was the fact that everyone who had a reasonable alternative to oil and gas was already seriously considering it, especially after the fall of the shah of Iran - an upheaval that precipitated the second oil supply crisis in four years.

In many cases, though, the economics for coal conversion still weren't right. In others, utilities tried to get off oil, but the environmental authorities wouldn't let them burn coal, even as the U.S. Department of Energy was demanding they convert.

But then Congress began phasing out price controls on natural gas - which had contributed mightily to the gas supply problem - and the Carter administration began phasing out price controls on oil, something that President Reagan finished.

Within a couple of years, reasonably unfettered markets began to work - supplies rose and prices fell. Spot markets evolved for natural gas, something unthinkable when PIFUA was written, and in another heresy, vigorous futures markets for crude oil and refined products sprang up.

The fuel use act's so-called off-gas provision for existing boilers was repealed about five years ago, mainly because the 1990 deadline was considered unrealistic. In addition, exemp tions to the law had been fairly easy to obtain with the proper level of influence. But chucking the whole act now is not a bad idea.

Our feeling is to let the markets work. The extreme run-ups in oil prices in the 1970s are proving, in the long run and after much pain, to have been beneficial. They improved efficiency in energy use and forced utility and industrial users to undertake wider utilization of non-petroleum fuels. They also led to increased oil exploration around the world, some of it in regions that most people would never associate with oil production such as India, Spain and even the suburbs of Paris. Fears from a national security standpoint that industrial consumers will rely too heavily on oil could be mitigated by removing roadblocks to domestic oil exploration and the use of coal and nuclear energy.

The National Coal Association generally supports repeal of the fuel use act, but wants to see a provision retained that would mandate that new utility boilers at least be capable of burning coal, in the event shortages of oil and natural gas occur again.

Such a requirement, in principle, makes sense. It is something utilities would rarely be able to do on their own without federal government insistence, given the usual reluctance of state regulatory commissions in allowing money for such long-term projects. And it also would provide the utilities with the potential operational flexibility to play one type of fuel source off against another to obtain the lowest possible price.

Naturally, exemptions to this coal-capability requirement should include those utilities located in areas that environmentally preclude the burning of coal or where coal transportation costs are prohibitive.

The House of Representatives already passed a bill to repeal PIFUA. Sen. Phil Gramm, R-Texas, introduced a Senate version of the bill, S. 2857. We recommend that the Senate pass this bill and the House and Senate get together and come up with a piece of legislation that can be approved before Congress adjourns for its electioneering.

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