FTN - 5/20/01

BOB SCHIEFFER: Today on Face the Nation, what to do about energy? We'll talk to Vice President Cheney and Senator Barbara Boxer.

Last week the Bush administration released its plan to combat the energy crisis. The plan stresses production over conservation. Is that a mistake? What will happen to gas prices this summer, and is this truly a crisis? Those are the questions for the architect of the plan, Vice President Dick Cheney. We'll get the Democrats' view from Senator Boxer of California.

Gloria Borger will be here, and I'll have a final word on these last 10 years.

But first, Vice President Cheney on Face the Nation.

And we welcome to the broadcast Vice President Cheney.

Mr. Cheney, thank you so much for coming. Let's start right at it. Your plan puts a priority on increasing production. It is by any definition, a long-term solution. Most people think a long-term solution is a very good idea.

But even in your own party there are people who saying, what are you going to do now? What kind of relief is there going to be for people paying these very high gasoline prices? What kind of relief is there going to be for people out in California with this energy situation, this electricity situation that they have?

VICE PRESIDENT RICHARD CHENEY: Well, it is a good report, Bob. And it's a lot on supply, but it's also got a lot on conservation, a lot on efficiency and renewables. Most of the financial incentives are for those purposes.

Long-term, yes, these are long-term problems. They didn't crop up overnight. And the problems we're having with respect to gasoline supplies and price spikes there relate to the fact that there was no new refineries built in this country in over 20 years, and the very complex set of regulations we now have, so that you got different blends of fuel for different communities. And that combination of things, 96, 97 percent capacity on our refineries has helped drive the price up. And we have much less flexibility than we used to have.

I think the price is going to come down this summer on gasoline. The biggest...

SCHIEFFER: You do?

CHENEY: I do. The bigger problem's going to be California, where not only, of course, is there a gasoline problem, but out there, of course, is the lack of power and the rolling blackouts they're faced with this summer.

California is 15 percent of the nation's economy, and when you start to shut down important parts of that, it can ripple across the country and have other effects.

Now what we have done in California to help in the short term, the president has ordered federal agencies to cut back on their energy consumption this summer by at least 10 percent. He's responded to all the governor's requests to expedite permits to bring new power plants on line as quickly as possible.

And so we stand ready to do everything we can to help. But ultimately, of course, they got into trouble in alifornia over a period of years, and it's going to take two or three years to get out of it.

SCHIEFFER: Well, why not just cap electricity prices, which is what some people say is the short-term solution?

CHENEY: Well, because it's not a solution. California's the classic...

SCHIEFFER: But it would be some help though.

CHENEY: Well, but California's a classic case of what happens when you cap prices. They capped prices. They did it out there initially at the consumer level.

And the combination of that plus the way they dealt with their utilities and their refusal to move when they knew they had a problem - they knew they had a problem over a year ago and wouldn't deal with it.

But now today you've gotten only blackouts, rapidly rising prices. You've got bankrupt utilities. Their credit rating of the state's been knocked way down, and they've squandered a significant portion of the state's financial surplus with their scheme that they're using to try to buy power for the state now.

SCHIEFFER: Well, should they...

CHENEY: Caps don't help because they don't increase supply or reduce demand.

Now, in terms of the short-term, your FERC has authority out there, the Federal Energy Regulatory Commission. They have moved in at least one case already to mandate a $125 million rebate on what they thought over charges. They put in place a formula that they hope will put a ceiling on prices out there this summer, but the FERC is the right place to start.

SCHIEFFER: Well, do you think that the people of California should just expect more of the same this summer?

CHENEY: No, I would hope that they'll recognize that, you know, everybody's doing everything we can. But that the combination of a flawed regulatory scheme, plus significant economic growth, plus no new power plants for 10 years in California, has gotten us to this state now where there are going to be blackouts this summer. And how severe they are will depend on weather and other factors.

GLORIA BORGER, U.S. NEWS & WORLD REPORT: Sir, very quickly, are you saying that this administration has done everything it can for California?

CHENEY: We've done everything we've been asked to do, except price caps. Governor Davis has sent us a letter thanking us for our help and support. And we are doing everything we can think of in the short-term. There are other possibilities, for example, that the state requested. We're prepared to waive some of the Clean Air Act requirements with respect to the use of back-up generators at various facilities. So far they've not been willing to do that. So, but we've worked very closely with the state and will continue to do that.

BORGER: But before we get to the long term, let me just ask a couple of more short-term questions. Senator Trent Lott, your own leader in the Senate, has said that he would not rule out lowering the 18-cen-a-gallon gas tax. What do you say about that?

CHENEY: The last time that came up, I believe about a year ago in the Senate, it got 38 votes. That's not enough to pass it.

BORGER: It's not in your plan.

CHENEY: It's not in our plan, and it has other consequences. If you take down the gas tax, take that 18.5 cents out, then that doesn't go into the highway trust fund. So down the road you will have problems in terms of inadequate funds to support the transportation system.

The other thing that will happen, economists tell us, if we take the gasoline tax out, the price will still go back to the market-clearing level. But the revenue then will go to the companies and not come to the government.

BORGER: So you're opposed?

CHENEY: We don't think it is effective, and it doesn't make any sense.

BORGER: Would you veto it? Would you veto it?

CHENEY: I can't say that. The president hasn't made that judgment. And we've said, you know, we're willing to listen to ideas and arguments, but the basic notion that there is some kind of panacea here with respect to repealing the gas tax - really again, I understand the desire for short-term answers. Politicians are good at short-term answers. They're not very good lots of times at long-term answers.

And one of the reasons we're in trouble today is because in the past lots of times the government, if you will, has responded with short-term solutions that don't really get at the problem. For example, an emergency release last year from the Strategic Petroleum Reserve designed to deal with the heating oil problem that had absolutely no impact on the problem was really turned out just to be a band-aid that didn't address the issues.

SCHIEFFER: What leads to you say that you think gasoline prices are coming down?

CHENEY: Economists I talked with who track, for example, inventories in the business. Inventories have started to build a bit. And if you look at the futures prices with respect to gasoline, they appear to be headed down. So I think the expectation is that sometime, hopefully not too long after Memorial Day, we'll begin to see those inventories reflected in prices at the pump and the pressure will ease. It's what normally happens.

SCHIEFFER: Mr. Vice President, what do you think the price of gas ought to be? What is a fair price for Americans to pay?

CHENEY: Well, you know, it's a market out there like anything else. And as long as we haven't added any new refineries - we haven't built any new refineries in 25 years - and added the complex regulatory requirements now, which, you know, we need to do for clean air purposes, then what happens is even when the price goes up, you cannot import much product from overseas. That would be the safety valve is to go import refined product gasoline from Europe. But a lot of the gasoline manufactured in Europe is not consistent wth our standards here in terms of reformulated gas. It can only be used in certain parts of the country.

Our whole distribution system has gotten very complex. A pipeline manager I talked to the other day, 30 years ago, had six grades of fuel he had to run through the pipe system. Today it's 90.

And when you add all of this up and just-in-time inventory and the costs that's associated with all of this, what in the end happens, of course, is the price goes to some level that meets supply with demand, and that's the way markets ought to work.

SCHIEFFER: Well, I raise the question because some people say that we've gotten gasoline on the cheap for too many years. That maybe we ought to be paying $2 a gallon for gasoline. Do you think that's too much?

CHENEY: Well, again, I can't say that it ought to be $2 or a $1.50 or $2.50. I think the point is there is a marketplace out there that will in fact determine what the price is.

And what we want to do, what the president has recommended as an administration is to find ways to try to facilitate the construction of additional refineries, to clear away some of the regulatory underbrush there, to look for additional supplies of oil. And that is the best way for us, long term, to guarantee that the American people have adequate supplies at reasonable prices.

As long as we do things or pursue policies that don't increase the supply, then what we'll find on the other end is inadequate supply and spiking prices.

BORGER: Mr. Vice President, let's talk about your energy plan a little bit. "The New York Times" this week called the plan, and I quote, "alarmingly unbalanced piece of work whose main objectives seem to be to satisfy the ambitions of the oil, gas and coal industries."

You got the same criticism from the right in your party; the Cato Institute said that the plan is a smorgasbord of handouts and subsidies for virtually every energy lobby in Washington. How do you respond to that?

CHENEY: They're wrong. They ought to read the report. Virtually all of the recommendations for financial incentives and assistance tax credits and so forth are for conservation and increased efficiency and renewables.

There are no new financial subsidies of any kind for the oil and gas industry.

Let me also make another point. The Sierra Club, for example, the environmentalists have come in and attacked aggressively the plan. The Sierra Club not long ago put out 12 proposals to increase energy production supplies in this country - 12. Eleven of those 12 are incorporated in our plan.

So I can only conclude from this that, one, they are not reading the report; two, they have some political agenda because they haven't been willing to engage.

To say it is only about increased supply simply isn't true. Look at the report. Conservation, renewables, et cetera.

BORGER: Well, give me an example of something the energy industry oppose in this plan.

CHENEY: Well, I think different pieces of it. What you'll find when you dig into the energy industry, is it is not monolithic by any means. Different utilities have different wants and needs in terms of their desires in terms on things they'd like to do.

You get into questions of competition. A lot of the utilities want to go forward, for example, with trying to cap carbon dioxide emissions earlier this year. We decided that didn't make sense in light of the 1995 vote in the Senate.

So it depends on which piece of the business you look at. Here we recommend going back and taking a look at cafe standards. That's probably not going to be well received by the automobile industry. We recommend studying that.

BORGER: Polls show, though, that voters in this country believe that this is a very pro-energy-development administration, because you come from the energy industry, the president of the United States comes from the energy industry. The energy industry gave 75 percent of its campaign donations to the Republican Party during this last election. How do you respond to that? Why shouldn't they feel that way?

CHENEY: Well, first of all, I think I take a certain amount of pride in my private sector career. I was successful in my ventures running an energy services company. That gives me I think a lot of experience that's relevant in this particular case.

With respect to the suggestion that somehow this is only about supplies, go read the report. There are more recommendations in the report that deal with conservation and increased efficiency and renewables than deal with increased supplies.

SCHIEFFER: Couldn't you have avoided some of that criticism, though, had you met with some of these environmental groups? Because I believe, by your own admission, you did not personally meet with any spokesman for the Greens?

CHENEY: I met with very, very few groups myself. I just didn't have time, Bob. There were 269 separate groups that were included in meetings with primarily staff that were working and putting this together. If I had done that, I wouldn't have been able to do anything else for the last six months.

SCHIEFFER: But you did meet with a lot of people in the oil business.

CHENEY: I met with a few. I met more with congressmen than anything else because that's one of my responsibilities in the administration. I spent a lot of time on the Hill for the president. And so, I met with a lot of member of Congress, both parties, both Houses. And that's probably the largest significant group I met with.

But I did not go out and spend a lot of time myself meeting with groups, because I simply didn't have time.

SCHIEFFER: Let me just ask you about the political fallout from this, because I must tell you, as you well know, and I'm sure they're telling you, people on the Hill are really worried about this, especially Republicns. I've had several Republican strategists say to me, "Look, if we can kind of bite the bullet and get through this summer, we'll be OK. But if we have $3 gasoline next summer, we're going to loose the House and the Senate."

CHENEY: Well, Bob, what George Bush and I came to down to do was to govern, to take on difficult issues. This is a difficult set of issues. The problems, if they were easy to resolve, they would have been resolved a long time ago.

The last administration didn't have the courage to even address them. Many of my friends in the Congress, frankly, haven't had the courage to address them. They only get concerned at election time when prices go up and they're hearing from their constituents.

But they consistently over time have refused to use the positions they hold in the Congress, Dick Gephardt right at the head of the list, for example, to come out and address these issues. Now all I've heard from Mr. Gephardt so far is, you know, name calling, I guess, more than anything else. He really hasn't engaged us on the substance at all.

SCHIEFFER: But what I'm hearing is from Republicans who are worried about this.

CHENEY: From Republicans in the Congress, I've met with virtually all of them who have wanted to meet with us. I think most of them applaud this plan, like the fact that we've taken a good hard look at it. We've taken a long-term view here.

This is, in fact, what we came to town to do. The president has done it on energy.

He's done it on tax policies. He's doing it on education. He's doing it on Social Security. We're doing it on ballistic missile defense. These are big issues, important issues that are going to fundamentally affect the future of the nation. And these are the directions that we're moving in and that we need to be focused on.

And the key for us in the energy area if you want to avoid outrageously high prices in the future with respect to gasoline, for example, two, three and four years down the road, then look at our approach, our recommendations and enact them. And that will help ensure that we don't have these kinds of problems in the future. If somebody had done what we are doing now three or four years ago, we wouldn't have these problems today.

SCHIEFFER: All right. Mr. Vice President, we'll leave it there.

When we come back, we'll get an entirely different point of view from California Senator Barbara Boxer.

Mr. Vice President, thank you.

CHENEY: Thank you.

(COMMERCIAL BREAK)

SCHIEFFER: And with us now from Marin County, just across the Golden Gate Bridge from San Francisco, Senator Barbara Boxer of California.

Senator Boxer, I think you heard the vice president. If I understood what he was saying, it was: There's not a lot that can be done for California. What is your response to that?

SEN. BARBARA BOXER, D-CA: It's really rather stunning because those of is who arliving through this have suggested many things.

Let's take it back to when President Kennedy was the president and the steel companies were gouging. He called them in and at least talked to them. Let's take it back to when Clinton was president and the Republicans urged Secretary Of Energy Richardson to go and jawbone the Arab nations. We've seen none of that.

You know, I have to say, after listening very carefully, I understand a couple of things. One, why James Watt - and we all remember he declared war on the environment back in the '80s - says this plan is just dusted off, you know, from the '80s. It's a 20-year-old plan because the central focus is burn, burn. I mean, drill and burn. And also going back to nuclear, and leading many of us to say GOP now stands for gas, oil and plutonium.

They are doing nothing that they could do right now to ease the pain.

SCHIEFFER: Well, you know, the vice president said that if you go back to it, he said that a lot of this is California's fault, because he says the California governor knew there was a problem a year ago and basically just refused to move on it.

BOXER: Well, let's talk about the problem. The problem was that Pete Wilson, when he was governor before Gray Davis, said that deregulation was important because the business people were complaining about the then-high cost of energy.

He sold this plan to the legislature, Democrats and Republicans alike, and everybody went blindly down the path.

Having said that, there are things that we can do now to make things better. One phone call by President Bush or Vice President Cheney to the Federal Energy Regulatory Commission, telling them that it is obscene that power companies are making - and hold onto your hat on this one - some of them, 1,600 percent more profit. It is unbelievable. The average increase in the profit for the electricity generators is over 500 percent.

If you applied that to milk, the price of milk would be $190 a gallon. And the vice president sits very calmly and says, "Oh, those people in California aren't trying."

You know, there's only one more state that is more energy conserving than we are, and that's one of the Dakotas. We are not in any way luxuriating ourselves with energy. We're very, very careful.

And we can expect the FERC to do something. That is their job. They are charged with making sure that prices are just and reasonable. They themselves have said they are not, and this president absolutely does nothing.

BORGER: Senator, I know you've talked about former Governor Pete Wilson who is, of course, a Republican. Your current governor Gray Davis is a Democrat. You're a Democrat. Does Gray Davis bear any part of the blame for this?

BOXER: I have to honestly tell you that he is doing the best with a very tough situation. All these things are crashing down around him. And it's interesting, today on our local news shows, they'r starting to say that people are appreciating the fact that he is looking in the camera, he is saying, "This a problem. I inherited it. I'm not going to point fingers."

But, you know, you have to look to the federal government. The job there in Washington, where I'll be tomorrow, is to look at prices if they're unjust and unreasonable, and act.

How about the tax bill that's right before us? Do you know there isn't one thing in there to give any kinds of credit for energy efficiency, and this is the president's priority. It's in his report, by the way.

The budget cuts - I'll just finish here. The budget cuts are unbelievable. He cuts research on renewables by 50 percent; on energy efficiency research by 20 percent. He totally eliminates the research on the super car that's going to get 80 miles per gallon. And while he says we're going to help poor people pay for energy costs, he cuts the Lihey (ph) program that does that by 20 percent.

So the vice president sits very coolly, and I admire his cool. But he really sounds like an oil man, not a vice president charged with helping the people.

BORGER: Senator, one of the things the vice president said this morning that he would like to do to help California is to look into waiving some Clean Air regulations for more production. What do you - what's your response to that? Would you like to do that?

BOXER: It could be very dangerous if you do too much of that. But I will say right here, Governor Davis and the legislature are waiving certain requirements that will not lead to dirtier air. What they're doing is, they're speeding up the approval of power plants to just a few months, and we have nine of these plants coming on-line.

But Gloria, let me point out what is happening. Our attorney general has found out that these power companies are pulling power off-line. So we build new power plants; they're pulling power off-line to artificially raise the cost of energy. Our state legislature is suing FERC, and our lieutenant governor is suing some of these power companies, again, some of whom are making a 1,000 percent more.

And again you have the vice president sitting there sounding like an oil man. The energy companies are blameless here, he says. And the truth is, the facts belie that. He's doing nothing in the budget to help us at all, not even a phone call to FERC, not even a jawboning of some of the executives.

And I have to make one more point to the American people. We Americans are really a good people, and we have a very good quality of life, and we want everyone in the world to have it. But we are using 25 percent of the world's energy, and we are 5 percent of the world's population. What does that tell us? In a way, it's good news because we can really make this better.

If we just were smart about energy efficiency in our cars, in our homes - and yet President Bush has canceled, canceled the new energy efficiency standardfor air conditioners. It doesn't make sense.

SCHIEFFER: Senator, thank you very much. I think we've really got both sides this morning.

We'll be back in just a minute with a final word.

(COMMERCIAL BREAK)

SCHIEFFER: We close today on a personal note. Today marks my tenth anniversary as moderator of Face the Nation. Way back then, George Bush was president, and Bill Clinton was governor and thinking about running for something else.

We've had three presidential elections, and what do you know? There's still a George Bush in the White House, and Bill Clinton - well, everybody says he's thinking of running for something else. And there's a Clinton in the Senate, too.

My guest that long-ago Sunday was Dan Rostenkowski, the powerful Chairman of the House Ways and Means Committee. He's a TV news analyst these days with a bad patch in between. Ten years is a long time.

We've seen the House and the Senate go from Democrat to Republican and then watched the Senate go to equal parts of both. We said good-bye to Newt, hello to little Elian. Got to know Ken Starr, and got to know Monica and Paula better than maybe we wanted to know them. What about a don't-ask-don't-tell policy for straight folks?

Then there was the nightmare election night and hanging chads. Good grief, it has been a while.

But looking back, it has reinforced what I have always believed: You cannot predict the news. But if you tell it straight to people, they'll figure out what to do about it, because Americans are a people of great resilience, patience. And, yes, they have a saving sense of humor.

Thanks for having us all these Sundays. It's a pleasure to share the news with you.

That's it this for week. We'll see you next week right here on Face the Nation.

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