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Archive for Saturday, February 10, 2001

Critics decry military law used to power California

February 10, 2001

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— Senators are debating whether to change or possibly kill a Korean War-era law used recently to keep natural gas flowing into power-starved California.

Sen. Phil Gramm, R-Tex., chairman of the Banking Committee, criticized use of the 1950 Defense Production Act to order natural-gas producers to continue supplying California despite concerns about utilities being unable to pay their bills.

Gramm argued at a hearing Friday that the law should be used only to supply military and aerospace facilities, not fix a credit crunch that utilities such as Pacific Gas and Electric Co. were experiencing.

"We're not going to extend the Defense Production Act as it's now written. It's either going to die or it's going to be dramatically rewritten," Gramm said. "It ought to be an extraordinary action, in my opinion, for the government to be taking people's property and dictating prices."

Eric Fygi, acting general counsel of the Energy Department, said the Clinton and Bush administrations issued orders from Jan. 19 to Feb. 6 because natural gas is used to generate electricity.

Without the orders, electricity would have become even scarcer. And if suppliers cut off PG&E, the utility would have seized natural gas flowing through its pipes toward military bases and NASA facilities to supply its residential and small-business customers, Fygi said.

"It's all interwoven," Fygi said. "This was truly an extraordinary circumstance."

The law is the same one President Nixon used to impose wage and price controls in the 1970s. Other times it has helped construction of the Alaska oil pipeline and expansion of the Strategic Petroleum Reserve in Texas and Louisiana, Fygi said.

Critics want it rewritten, contending it gives presidents too much authority over private companies under the guise of national security.

The day before he left office last month, Clinton signed a memorandum declaring a "natural gas supply emergency" in central and northern California. His energy secretary, Bill Richardson, in turn ordered companies to continue shipping natural gas to Pacific Gas and Electric Co. for four days, until Jan. 23, even though the utility no longer could pay its bills.

The new energy secretary, Spencer Abraham, extended the order, but Bush allowed the authorization to expire Wednesday. In doing so, Bush administration officials noted that Oregon and Washington suffered reduced energy reserves and higher prices because dwindling supplies were funneled to California.

Clinton, Nixon and Bush all invoked the Defense Production Act of 1950, which gives the president authority to compel companies to put aside their own financial interests in the name of national security.

A longtime critic of the law, Gramm questions whether any president should be able to interfere with the financial interests of private companies when there is no war. Some of the energy suppliers affected in its latest invocation are based in Texas.

In the 50 years since it was signed by Harry Truman during the Korean War, the law has been used several times by presidents in wartime and at peace, said Alan Gropman, chairman of the department of grand strategy and mobilization at the Industrial College of the Armed Forces.

Some examples:

Nixon used it to try to control spiraling costs during the energy-starved 1970s.

Bush's father invoked it during the buildup to the Persian Gulf War to procure atropine, an antidote to poison gas, as well as desert boots and uniforms.

Ronald Reagan used it to keep afloat a company that made filament radon for rocket engines.

Clinton used the act to procure communications and computer equipment for military actions in Bosnia and Kosovo.

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