In what was billed as his major energy policy speech of the campaign, Ronald Reagan told a September rally in Cleveland, "One of my first duties as president will be to implement a balanced energy policy of both production and conservation, including a strong domestic energy production program that utilizes all of our nation's energy resources to the fullest extent possible."
But the emphasis, Reagan made clear time and again, will be on production, not conservation.
To that end, the president-elect is committed to immediate decontrol of gasoline and crude oil prices when he takes office. He will be able to take both steps without congressional approval, and they are exactly the sort of actions aides say he will be taking to demonstrate that he is taking charge.
Reagan also can be expected to make more federal land available for energy exploration, to take a hard look at the Department of Energy but probably decide to leave it intact, and to face the same difficult choices as President Carter in deciding how to cope with an unexpected interruption of U.S. oil imports.
He will take office at a time when oil consumption is down sharply because of rising prices and the recession. Although inventories are at record levels, the search for oil and gas will see more wells drilled this year than at any time in the nation's history.
There is such a large surplus of gasoline that ending price controls on that product probably will make little difference in the prices consumers pay at the pump. Most refiners -- and retailers, too -- these days are charging considerably less than their legally permitted maximums.
Refiners probably will be in no position to pass along all of the sudden $2.75-a-barrel increase in crude oil prices, an increase that initially will add about $47 million a day to their crude oil costs.
By inauguration day on Jan. 20, all but about 23 percent of U.S. crude oil will have been decontrolled anyway under a plan set in motion in April 1979 by Carter, under which all controls will end on Sept. 31, 1981.
Immediate decontrol, however, will bring Reagan face to face with some unpleasant realities of the oil industry. For instance, many small refiners who have enjoyed a substantial subsidy under the present entitlement program, which is supposed to equalize crude oil costs among refiners, suddenly will be stripped of their advantage.
These small refiners, who have already mounted a strong campaign in Congress, will be pressing hard for some type of continued protection, with ideas ranging from tariffs on imported refined products to special tax breaks for refinery modernization to continuation of outright subsidies.
Along with immediate price decontrol, also to go will be the allocation requirements under which refiners have been obligated to continue to supply jobbers and retailers because they did so in the past. The big oil companies would love to see these requirements dropped, while groups such as the National Oil Jobbers Council fear what will happen when they are.
The allocation requirements, for example, so far have kept Texaco from being able to withdraw from some marketing areas, and it would surely do so once they are lifted.
Immediate decontrol will help reduce the fiscal 1981 budget deficit by increasing the take from the "windfall profits" tax on crude oil. During most of his campaign, Reagan said he would repeal this tax.
But last month, in a defense of the feasibility of Reagan's overall economic program, a key aide said that, while Reagan still opposed the tax, he would not seek its repeal.
Most oil industry officials expect Reagan to take steps to make more federal land available for energy production especially offshore and in western states where land is under study for possible inclusion in wilderness areas.
Shell Oil President John Bookout argues that land should not be "locked up" unless and until the nation knows how much energy production might be lost in the process. Bookout is particularly concerned that pending legislation on disposition of federal land in Alaska could put the Artic National Wildlife Refuge, a 2.9-million-acre area on the state's northeastern coast, out of bounds.
The U.S. Geological Survey estimated this year that there is a 50-50 chance that the area contains about 4.85 billion barrels of oil and ll.9 trillion cubic feet of gas.
Also, Shell and other companies would like a sharp speedup of the schedule for leasing offshore areas, again particularly in Alaska. They also will be seeking a much simpler process for getting drilling permits once the areas are leased, something Reagan is likely to provide.
At best, none of these actions will add much to U.S. production for several years, even industry officials agree. In the meantime, Reagan will face the same possibility Carter has that U.S. oil imports will be curtailed by some incident over which the United States has no control.
"We will get America producing again," Reagan told that audience in Cleveland. "Coal, oil, natural gas, shale oil, solar, geothermal and safe nuclear power. Every available resource we have must be used to free us from OPEC oil domination."
At the earliest, the first commerical scale production of oil from shale will come in late 1985. Solar and geothermal energy are being developed far too slowly to make any dent in OPEC dependency for many years. Coal production capacity already has far outstripped demand for it in the United States, and even if pollution-control requirements were eased considerably after next year's extension of the Clean Air Act, logistical barriers would prevent any sudden leap in coal use.
At the same time, rapid expansion of nuclear power also seems an unlikely occurrence, given regulatory requirements that cannot be scrapped even by a Reagan administration.
And, finally, there already is such feverish activity in the search for oil and gas that more wells will be drilled this year in the United States than ever before. Decontrol of crude oil prices will do little to spur this to greater heights.
Thus, Reagan will have to decide what kind of standby mechanisms he wants to have in place to deal with a sudden oil shortage, since U.S. production is unlikely to leap. Congress reluctantly has okayed -- by not vetoing -- a standby gasoline rationing scheme put together by the Carter administration under a congressional mandate. But almost no one believes the scheme, which would take months to put into effect, would work very well.
Reagan has opposed energy taxes intended to reduce consumption, but he might be willing to consider their use under emergency conditions as much more market-oriented and as preferable to rationing and price controls.
The new president also will have to decide how fast he wants to fill the the Strategic Petroleum Reserve, which is now getting oil at the rate of about 100,000 barrels a day.
And then there is the Department of Energy, the $12.5 billion "monstrosity" Reagan repeatedly has said he would abolish. The question is whether much would be different if he did. After the election, Reagan said he would retain all the "legitimate" functions of government performed by the department. Here is a list of the functions the $12.5 billion will support this fiscal year:
Defense activities: $3.5 billion -- for naval reactors, nuclear warheads, defense nuclear waste management and so forth.
Strategic Petroleum Reserve: $2.4 billion -- for preparation of storage facilities and purchase of oil.
Research development and applications: $4 billion -- including $1 billion for coal use, $900 million for nuclear fission, $400 million for fusion and $840 million for solar and other renewable energy sources.
Conservation: $1 billion -- for a wide range of programs, with grants to state and local governments taking half of this total.
Regulation and information: $450 million -- for running oil and natural gas price controls and the Energy Information Administration.
General science: $515 million -- mostly for nuclear and high energy physics research.
Direct energy production: $300 million -- for the cost of operating the naval petroleum reserves and agencies such as the Bonneville Power Administration.
Department adminstration: $350 million.
So what would Reagan eliminate? Some of the regulatory costs will disappear along with controls in any event. So would some of the administrative costs if the department were broken up.
But unless Reagan were prepared to slash all govenment support for energy research -- and since much of it goes for nuclear and coal, which he favors, that seems unlikely -- and chop money for conservation, dismembering the Department of Energy probably would not cut spending by as much as $1 billion.
This is the sort of federal budget reality a new president often encounters when he must shift from easy campaign phrases to the hard programmatic choices -- while actually running the government.