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FY 1977 - 11/26/75 - FEA, ERDA, Justice, Civil Service, Regulatory Agencies (1)
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The original documents are located in Box 10, folder "FY 1977 - 11/26/75, FEA, ERDA,
Justice, Civil Service Regulatory Agencies (1)" of the White House Special Files Unit Files
at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 10 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library
NATIONAL ARCHIVES AND RECORDS SERVICE
WITHDRAWAL SHEET (PRESIDENTIAL LIBRARIES)
FORM OF
CORRESPONDENTS OR TITLE
DATE
RESTRICTION
DOCUMENT
1. paper
Issue #4, Nuclear Weapons research and testing
nd[11/75]
A
3 pages
FILE LOCATION
Special Files, Budget Decision Books
FY 1977, 11/26/78, FEA, etc... (Box 10)
plc 4/19/84
RESTRICTION CODES
(A) Closed by Executive Order 12065 governing access to national security information.
(B) Closed by statute or by the agency which originated the document.
(C) Closed in accordance with restrictions contained in the donor's deed of gift.
GENERAL SERVICES ADMINISTRATION
GSA FORM 7122 (REV. 1-81)
I
THE WHITE HOUSE
WASHINGTON
OMB
B
GERALD R. LIBRARY FORD
MEETING ON FY 1977
and
Wednesday, November 26, 1975
I
THE PRESIDENT HAS SEEN
....
2:00 P.M.
1977 PRESIDENTIAL
REVIEW
FEA, ERDA, Justice
CSC, Reg. Agencies
RESIDENT
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE
UNITED
OFFICE OF MANAGEMENT AND BUDGET
STATE
STATE
WASHINGTON, D.C. 20503
THE PRESIDENT HAS SEEN
MEETING ON FY 1977 BUDGET
Wednesday, November 26, 1975
2:00 to 5:00 p.m. (3 hours)
The Oval Office
From: James T. Lynn
I. PURPOSE
To make decisions on issues raised by the FY-77
budget for the Federal Energy Administration,
Energy Research and Development Administration,
Department of Justice, Civil Service Commission,
and certain regulatory agencies.
II. BACKGROUND, PARTICIPANTS AND PRESS PLAN
A. Background: The FY-77 Budget submissions of
GERALD FORD CIRPANY
the Federal Energy Administration, Energy
Research and Development Administration,
Department of Justice, Civil Service Commission,
and certain regulatory agencies have been
reviewed by the Office of Management and Budget
and members of the White House staff. This
meeting will focus on issues raised in these
budget submissions that require Presidential
consideration and determination.
B. Participants: James T. Lynn, James Cannon,
Paul O'Neill, Brent Scowcroft, Dale McOmber,
Jim Mitchell, and Cal Collier.
C. Press Plan: None
D. The attached material is classified and should
be treated accordingly.
III. TALKING POINTS
A. Jim Mitchell, what is the first energy issue we
should discuss today?
B. Cal Collier, what is the first Department of
Justice issue we should discuss today?
FEA
OF ThE
PRESIDENT
OFFICE
EXECUTIVE OFFICE OF THE PRESIDENT
UNITED
OFFICE OF MANAGEMENT AND BUDGET
RECUNIVE
SERVICE
WASHINGTON, D.C. 20503
3.75
ACTION
MEMORANDUM FOR:
THE PRESIDENT
GERALA FORD
FROM:
James X. Lynn
SUBJECT:
1977 Budget decisions: Federal
Energy Administration
The agency request and my recommendations with respect to 1977
budget amounts for the Federal Energy Administration (FEA) are
presented in the tabulation attached (Tab A). A summary of the
principal budget decisions reflected in my recommendation is
provided as background information (Tab B).
Although the final version of the omnibus energy bill now in
Conference Committee is not yet available, preliminary materials
indicate that the bill would have a significant impact on fiscal
years 1976 and 1977 budget revenues and outlays. The agency re-
quest and my recommendations, with the exception of the petroleum
storage program, do not provide for any part of the anticipated
requirements of the bill.
Both the agency request and my recommendations assume in particular
that petroleum allocation and price controls will not continue
beyond the present extension to December 15. For continued
controls my preliminary estimates for additional resources needed
in fiscal year 1977 are a minimum of 1186 permanent positions and
$32 million. Estimates for other requirements of the bill, such
as mandatory energy conservation programs, must await study of the
final print.
Six key issues have been identified for your consideration
(additional detail at Tab c).
1. Petroleum industry compliance audits
FEA requests that its compliance program be extended to
December 31, 1977, even though the Emergency Petroleum Allocation
Act may expire on December 15, 1975. FEA insists that the
Administration's credibility in regulating the oil industry can
2
best be established by a two-year wrap-up program to catch those
who violated price and allocation regulations while they were in
effect. FEA's request requires $32 million, and a field force
peaking at 1286 and decreasing to 800 permanent positions by the
end of FY 1977.
OMB recommends that the compliance program be extended only to
February 28, 1977, so that the bulk of the auditors, investigators,
and support personnel can be phased out of the FEA by the end of
FY 1977. This would allow FEA to complete audits of all the large
oil companies--those that account for over 90% of refinery output
and crude oil production--and to sample adequately firms in the
other less concentrated sectors. Criticism that FEA has been
ignoring "big oil" and concentrating too heavily on the smaller
independent companies would thus be quieted. The OMB recommendation
would require $10 million, and a field force peaking at 929 and
decreasing to only 24 permanent positions by the end of FY 1977.
Decision: Approve agency request
Approve OMB recommendation
2. FEA energy resource development program
FEA requests $34 million and 556 positions for FY 1977 to ex-
pand its "project management approach" to expediting the develop-
ment of energy resources. Under this program, which is about to
begin in FY 1976, FEA would mobilize project teams that would
attempt through administrative means to remove regulatory, environ-
mental, financial, and technical bottlenecks delaying completion
of about 40 energy projects of regional or national importance.
OMB recommends $13 million and 279 positions in FY 1977, a
slight increase over current on-board strength. This would allow
sufficient resources for FEA to concentrate on eliminating
unreasonable Federal, as well as state regulatory, barriers with-
out creating too large an administrative bureaucracy. The project
management program should be initiated by reprogramming existing
FEA resources and limited to about half the number of projects
proposed by FEA. Further increases cannot be justified for this
new program until a more detailed implementation plan has been
developed and the yet unproven concept has been evaluated more
thoroughly.
Decision: Approve agency request
FORD i LIBRARY GERALD
Approve OMB recommendation
3
3. Strategic petroleum storage
FEA requests $1.0 billion in FY 1977 to fund the accelerated
petroleum storage program (150 million barrels in three years;
550 million total in seven years) required by the omnibus energy
bill about to emerge from conference. Total cost for the seven-
year program would be $8.7 billion, with $711 million to be
requested as a supplemental in FY 1976. FEA agrees that a pro-
gram of this size and timing requires a national commitment to a
rapid storage program, with limited chance of meeting its targets,
but maintains that the commitment is warranted.
In the absence of an adequate program justification and
implementation plan, OMB recommends only $100 million in FY 1977.
This would be adequate to carry out limited site acquisition and
advanced engineering and design consistent with a normally-paced
program in accordance with existing law and sound management
practices. OMB believes that a rapid program involves significant
additional costs and environmental risks and, even if it is
successful, benefits the Nation little more than a somewhat slower
one.
Decision: Approve agency request
Approve OMB recommendation
4. Energy conservation initiatives
FEA requests $67 million in FY 1977 to continue a series of
special conservation initiatives undertaken this fiscal year:
GERALD 5020
industrial conservation seminars, utility rate demonstration pro-
jects, mass media advertising, school curriculum development, and
Project Conserve (for homeowners).
OMB recommends no further funding for these initiatives,
consistent with an earlier budget decision that they would
constitute a one-year program only. Additional funds for Project
Conserve could be allowed in the future, but only after evaluation
of the ongoing program.
Senate recently has approved only $32 million of $65 million
requested in FY 1976 for these initiatives, deleting all funds for
advertising and substantially reducing funds for the other
initiatives. House has yet to act.
Decision: Approve agency request
Approve OMB recommendation
4
5. Federal Energy Management Program
FEA proposes Presidential commitment to an overall 10-year
energy saving goal of 25%, to be supported by multiple, quantita-
tive, goals for nine new initiatives in a Multi-Year Action Plan
to cut Federal energy use. This would lock the Administration
into as yet uncertain funding levels for the nine initiatives
regardless of budget constraints and the cost-effectiveness of
specific projects that would contribute to achieving the goals
over the 10-year period. Preliminary estimates suggest government-
wide program costs of $300 million for FY 1977, cumulating to $4
billion through FY 1985.
OMB recommends the President announce a single, aggregate,
credible, government-wide goal for next year (e.g., 20% energy
savings over 1973 base), directing the agencies to implement the
most cost-effective projects among the new initiatives by re-
programming funds within approved FY 1976 and FY 1977 budget
levels. No detailed commitment to 10-year goals, overall or for
individual initiatives, or to funding levels would be involved.
Decision: Approve agency request
Approve OMB recommendation
6. Agency employment ceiling
FEA requests an increase over FY 1976 ceiling (3200) of 464
full-time permanent employees in FY 1977 for a total of 3664.
FEA maintains this increase is necessary in FY 1977 despite the
GERALD
fact that it assumes a December, 1975 expiration of the Emergency
Petroleum Allocation Act (EPAA). Major reasons cited for the
increase are an extended two-year "wrap-up" of its regulatory
compliance program (to December 31, 1977), expanded activities to
speed up development of energy resources at the project level,
and continuation of special energy conservation initiatives under-
taken in FY 1976. In addition, corresponding increases are sought
in support staff.
OMB recommends a reduction of 1496 positions from the FY 1976
ceiling, for a total employment level of 1704. Over 1000 of the
recommended decrease reflects OMB's view that, given a December,
1975 expiration of EPAA, the regulatory compliance program can be
terminated by February 28, 1977, earlier than FEA has assumed
(Issue #1). Moreover, the agency has the capability to shift
5
positions within its existing employment base to accommodate new
and expanded initiatives in energy resource development (Issue #2).
Finally, fewer positions will be required in the energy conserva-
tion area since the FY 1976 series of new conservation initiatives
would not be continued (Issue #4).
Decision: Approve agency request
Approve OMB recommendation
GERALD &
TAB A
Federal Energy Administration
1977 Budget
Summary Data
(In millions)
Employment, end-of-year
Budget
Full-time
authority
Outlays
Permanent
Total
1975 actual
130.0
120.7
2,978
3,245
1976 February budget (as amended)
260.1
265.7
3,200
3,200
agency request
260.1
265.7
3,200
3,200
OMB recommendation
260.1
265.7
3,200
3,200
OMB employment ceiling
XX
XX
3,200
3,200
TQ February budget (as amended)
50.8
61.9
XXX
XXX
OMB recommendation
50.8
53.6
XXX
XXX
1977 planning target
166.9
199.8
1,715
1,715
reduction target
XX
182.0
XXX
XXX
agency request
351.3
373.1
3,664
3,664
OMB recommendation
152.4
182.0
1,704
1,704
1978 OMB estimate
130.7
135.0
1,649
1,649
GERALD
A
FORD
9
TIERARY
Federal Energy Administration
1977 Budget
Legislative Program
Employment, end-of-year¹/
($ in thousands)
Full-time
Budget authority
Outlays
Permanent
Total
Strategic Petroleum Storage
Agency request
1,048,990
963,674
65
65
OMB recom.
100,000
36,000
0
0
Proposed legislation for this program is included in H.R. 7014, the "Omnibus Energy Policy
& Conservation Act of 1975." FEA's request anticipates enactment of this legislation. In
the absence of an adequate program justification and implementation plan, the OMB recommenda-
tion is to include only $100 million in budget authority in the FY 1977 budget. (See Issue #3.)
1/ Included in the 1977 employment request of 3664 FTP and total positions in Summary Data table
on previous page.
GERALD ? FORD
TAB B
Federal Energy Administration
1977 Budget
Summary and Background Information
A.
1977 Budget Summary (Budget Authority in Mil. $)
% of
FEA
OMB
Total
Request
Rec.
1976
1976
1977
1977
Regulatory Program
32.1
12
36.2
16.4
Issue #1
Energy Resource Development
15.5
6
34.4
13.4
Issue #2
Energy Conservation and Environment
141.7
54
173.9
66.3
Issue #4
Energy Policy and Analysis
25.7
10
35.4
28.5
International Energy Affairs
1.6
1
2.9
1.4
Executive Direction and Administration
43.5
17
68.4
26.3
Sub-total
260.0
100
351.3
152.4
Legislative Program - Strategic
Petroleum Storage
0.0
0
1,049.0
100.0
Issue #3
Total
260.0
100
1,400.3
252.4
GERALD
FORD
8
B. Summary of Issues
1977
BA
0
($ Millions)
1. Duration and field staffing level of wrap-up compliance program (audits
of petroleum firms for violations of price and allocation regulations):
Agency Request - extend program to December 31, 1977, peaking at
1286 and phasing down to 800 permanent positions by the end
of FY 1977
32
32
OMB Recommendation - extend program to February 28, 1977, peaking at
929 and decreasing to only 24 permanent positions at the end of
FY 1977
10
10
2. Energy resource development program:
Agency Request - expand "project management" effort substantially in
FY 1977 to cover 40 or more individual projects
34
30
OMB Recommendation - until this new FY 1976 program proves itself
workable, allow funds and positions for only a slight increase
over current level
13
13
3. Legislative proposal for strategic petroleum storage:
Agency Request - provide funds for accelerated storage program required
by omnibus energy bill now in conference
1,049
964
OMB Recommendation - in absence of adequate program justification and
plan, include only $100 million in budget
100
36
SFRALD P FORD
6
1977
BA
0
($ Millions)
4. Special energy conservation initiatives:
Agency Request - continue these initiatives, undertaken in
FY 1976, in FY 1977
67
75
OMB Recommendation - do not continue the initiatives, since they
were originally intended as a one-year program only
0
30
5. Federal Energy Management Program
Agency Request - commit Administration to multiple, quantitative,
10-year goals for 9 new initiatives to conserve energy in the
Federal government, resulting in $4 billion program over 10 years
(300) (250)¹/
OMB Recommendation - President should announce a single overall
government goal for next year, allowing more flexibility in
budgeting
0
0
6. Agency employment ceiling
Agency Request - expand permanent employment from 3200 in FY 1976 to
3664 in FY 1977
85
83
OMB Recommendation - reduce permanent employment to 1704 to reflect
quicker phaseout of compliance program, and realistic program
levels in energy conservation and energy resource development
48
47
GERALD
1/ these funds would be included in the budgets of the relevant agencies.
9803
10
C. Agency Overview
The Federal Energy Office (FEO), predecessor of the Federal Energy Administration (FEA),
was created shortly after the beginning of the Arab oil embargo in late 1973. The agency's
principal mission was reflected in the FEO budget (later the FEA budget) for FY 1975 that was
submitted to the Congress in January, 1974. 2710 (80%) of 3367 positions requested, and
$75M (60%) of the $118M request for budget authority, were to implement the Emergency Petro-
leum Allocation Act (EPAA).
By the end of FY 1975, however, the nature of the FEA had been substantially transformed.
The FEA Act of 1974 had strengthened the overall policy coordination and the information
collection, analysis and dissemination roles that the agency had been developing. The Energy
Supply and Environmental Coordination Act of 1974 had provided coal conversion authorities.
The President's 1975 State of the Union Address and proposed omnibus energy bill (Energy
Independence Act of 1975) sought broader authorities to deal with the energy situation. And
FEA's amended FY 1976 budget (3200 positions and $260. IM), though reflecting the then expected
expiration of petroleum allocation and price control activities on November 15, 1975, provided
for significant increases in other areas in order to carry out the evolving mission: to seek
and implement energy conservation, energy resource development, and energy emergency prepared-
ness authorities of the energy program proposed by the President.
D. FEA Budget Request
The FEA FY 1977 budget request of $351. 3M represents a 40% increase over the amended FY 1976
budget request of $260.1. In addition, FEA has submitted a request of $1.0B, pending authorizing
legislation for strategic petroleum storage. Expansions are proposed in all program areas
despite the fact that (1) new legislative authorities have not yet been conferred upon the agency,
and (2) the budget request assumes expiration of allocation authorities on December 15, 1975.
In regulatory programs, FEA requests higher staffing levels for a longer wrap-up compliance
effort (audits and investigations of petroleum firms) than that allowed in the recent FY 1976
budget amendment.
GERALD LIBRARY P. FORD
11
In energy conservation, FEA requests the continuation and expansion of the special
initiatives undertaken in FY 1976: industrial energy seminars, utility rate demonstration
projects, energy conservation advertising, curriculum development for schools, and Project
Conserve, a homeowner information program. In addition, a new initiative is proposed to
assist state and local governments collect data and design "voluntary" conservation programs.
In energy resource development, FEA proposes a "project management" approach. Forty or
more of the most critical energy projects from a national or regional standpoint would be
targeted by FEA, and project teams made up of technical, financial, and economic experts would
be assigned to expedite their development. FEA proposes drastic reorganization of resources
within the Office of Energy Resource Development around this project team approach, and more
than a doubling of staff size.
Finally, FEA has requested $1.0B for the implementation of an accelerated strategic
storage program in the event that H.R. 7014, the "Omnibus Energy Policy and Conservation Act
of 1975", becomes law.
E. OMB Recommendation
As shown in the Summary Data Table, Tab A, the OMB recommendation is slightly below the
planning ceiling, but significantly below the FY 1976 amended budget and FY 1977 request levels.
The OMB recommendation reflects four major constraints: (1) the tight fiscal situation
for FY 1977; (2) the need to restrain FEA from building a large program base which would have
to be expanded even further if and when Congress provides new authorities; (3) the Administration's
basic reliance on market forces to solve the Nation's energy problems; and (4) the FEA, by the
end of FY 1977, will be only one year from termination of its extended life as an agency.
Major cuts below the amended FY 1976 level have been made in the energy conservation area
primarily by not allowing FEA to continue in FY 1977 the initiatives proposed in the FY 1976
budget. OMB's recommendation is consistent with the original premise on which the initiatives were
proposed and approved--namely, that they would constitute a one-year program only, based pri-
marily on the need for a large and visible conservation thrust to balance energy supply initia-
tives and thus allay criticism of the Administration for neglect in this area.
12
In energy resource development, OMB recommendation takes a cautious approach to the "project
management" concept proposed by FEA. The recommendation would allow for a limited number of
projects (perhaps 20) to be expedited on a "proof of concept" basis.
In regulatory programs, the OMB recommendation maintains the same assumption on which the
FY 1976 budget amendment was based: a wrap-up compliance effort expiring on February 28, 1977,
rather than extension through the end of FY 1977.
And in strategic storage, the OMB recommendation would defer action pending the enactment
of legislation, and the development of an adequate, detailed program plan and budget justifica-
tion by FEA. Subsequent budget action, if any, would be in the form of an amendment or
supplemental to the FY 1977 budget.
FORD & LIBRARY GERALD
13
1977 Budget
Federal Energy Administration
Summary of Recommended Program Reductions
SERALD
R.
($ Millions)
FORD
1976
TO
1977
1978
LIBRARY
FTP
FTP
FTP
0
Employ.
0
BA
0
Employ.
0
Employ.
Current Base
263
3,200
54
264
267
3,500
267
3,500
Recommended level
263
3,200
54
152
182
1,704
135
1,649
Reduction
0
0
0
112
85
1,796
132
1,851
Program reductions (covered in Issues)
Terminate petroleum industry wrap-up compliance program by
February 28, 1977
-
-
-
14
14
905
20
905
Reprogram existing resources to carry out energy resource
development activities, including "project management"
program
-
-
-
2
2
47
2
47
No further funding for special one-time energy conservation
initiatives started in FY 1976
-
-
I
65
45
35
67
35
Program reductions (Other)
Terminate petroleum allocation activities December 15, 1975
-
-
-
6
6
300
6
300
Reduce legal and direct administrative support to regulatory
program, consistent with lower recommended level for compli-
ance and allocation activities
-
-
-
3
3
128
5
150
Keep energy conservation program at realistic level
-
-
-
11
6
130
18
130
Reduce general administrative and support costs, consistent
with above reductions
-
-
-
11
9
251
14
284
14
-
-
Total Reductions
0
0
0
112
85
1,796
132
1,851
D PAB
Issue Paper
Federal Energy Administration
1977 Budget
Issue #1: Petroleum Industry Compliance Program
Statement of Issue
What should be the duration and field staffing level of FEA's "wrap-up compliance program" if
the Emergency Petroleum Allocation Act (EPAA) expires December 15, 1975?
Background
- FEA audits petroleum firms for possible violations of allocation and pricing regulations.
Management problems in FEA have resulted in a backlog of cases. If the EPAA expires, audit
acitivities would need to continue to wrap-up violations that have occurred.
- The basic issue between OMB and FEA is over the duration and staffing level of FEA's field
compliance program.
- OMB staff believes that the program proposed in the President's FY 1976 budget, though reluc-
tantly agreed to by the FEA, would be very effective. This program would have FY 1976 and
FY 1977 field employment ceilings of 929 and 24 respectively, and would terminate on February 28,
1977.
- FEA proposes a program with a termination date of December 31, 1977, requiring FY 1976 and
FY 1977 field employment ceilings of 1286 and 800 respectively.
Alternatives
Permanent Positions
Duration of
Staff-yrs.
(yr.-end)
wrap-up program
required
1976
1977
#1. FEA Request
To Dec. 31, 1977
2251
1286
800
2. OMB Recom.
To Feb. 28, 1977
1226
929
24*
15
*
Compliance standby force
Analysis
Budget Authority/Outlays
1976 suppl.
1977
1978
($ Millions)
BA
0
BA
0
BA
0
Alternative #1 (FEA req.)
4
4
32
32
2
2
Alternative #2 (OMB recom.)
0
0
10
10
1
1
- Alternative #1
FEA holds the view that this alternative provides for the broad audit program necessary to
achieve credibility with the American public and the Congress, and to deter oil companies
from taking advantage of consumers under future price control program (see Attachment A for
data on audit coverage).
This alternative would require raising the current FY 1976 permanent position ceiling (end-
year) for the field compliance program from 929 to 1286. In addition, 800 compliance
personnel, plus an estimated 300 support personnel, would still be on the FEA rolls at the
end of FY 1977.
- Alternative #2
Targets FEA auditing on "big oil" in the refining, producing, and natural gas liquids sectors,
or that part of the industry most subject to public skepticism--those responsible for over
90% of crude oil production and refinery output. But also provides for audit sampling in
other sectors of the industry (wholesalers, retailers, small producers), which are made up of
a large number of small firms and are less concentrated in nature.
Would hold field compliance employment at present FY 1976 ceiling of 929; and, by wrapping
up on February 28, 1977, allows FEA to ease all but a standby force of compliance personnel
(24) off the rolls before the end of FY 1977 (see Attachment B).
GERALD
?
16
FORD
LIBRARY
In OMB's view, the increment in credibility gained by selecting Alternative #1 instead of
Alternative #2 is so small that it cannot justify the additional cost. Also, the potential
small increase in credibility must be weighed against the potential loss of credibility of
Presidential efforts to hold down Federal employment in regulatory programs if FEA's
resources are not seriously restrained in this area.
Agency request: Alternative #1.
OMB recommendation: Alternative #2.
HERALD FORD ?
17
Attachment A
Comparison of Alternatives: Audit Coverage
% of universe audited
1976
Alt. #1
Alt. #2
Universe
Pres. Bud.
(FEA)
(CMB)
Comment
Crude Producers
14,901
21%
79%
23%
- Nearly 90% of crude produc-
(major)
(21)
--
--
(100)
tion is highly concentrated
(other large)
(121)
--
--
(100)
in 142 firms. OMB recom.
(all other)
(14,759)
--
--
(20)
allows audits of all these
firms, plus 20% of the re-
maining small producers,
thus covering over 90% of
total production.
Major Refiners
30
100
100
100
- OMB recom. would cover at
least 90% of total refinery
Small Refiners
110
20
100
40
output (note: small refiners
account for only 15% of output)
NGL Firms/Plants
123/709
28
100
38
- 23 largest firms account for
70% of production.
Wholesalers
28,286
15
30
22
- Alt. #2 covers all 1200
(utility suppliers)
(1,200)
--
:
(100)
utility suppliers as per
Zarb commitment to Sen.
Kennedy, plus 16% of all
other wholesalers.
Retailers
276,244
2
2
2
- Low priority area. Violation
GERALD
rate lower than expected
(15%).
18
Attachment B
Issue #1
Comparison of Alternatives: Compliance Program
(SY's = Staff-years)
Positions
1500
1286
Alt. #1
FEA
1004
2251 SY's
1000
929
Alt. #2
500
OMB
1226 SY's
0
6/30/75
12/31/75
6/30/76
12/30/76
6/30/77
12/31/77
SERALD AMOUNT " 1
17
6L
Issue Paper
Federal Energy Administration
GERALD
1977 Budget
P.
Issue #2: Energy Resource Development Program
FORD
Statement of Issue
LIBRARY
What should be the role and staffing level for FEA's energy resource development program in
FY 1977?
Background
- In June, 1975, as the result of recommendations from the President's Labor-Management Committee
to improve tax treatment of electric utilities and to attack problems regarding construction of
new electric generating capacity, the Administration established a powerplant acceleration task
force within FEA. The task force assigned several small teams to investigate the causes of
electric utility construction delays at the project site level. A major new initiative in FEA's
FY 1977 budget involves a massive reorganization and expansion of the Office of Energy Resource
Development patterned after the powerplant task force model.
- Under its new Assistant Administrator, the activities of the Office would be redirected to go
beyond assessing causes and attempt to concentrate on expediting specific projects necessary to
the achievement of the resource development goals of the President's energy program. Specifically,
project management teams would be created to expedite the development of about 40 energy projects
that are critical from a national or regional standpoint. These teams would intervene in regulatory
hearings in favor of energy development and seek to resolve complex financial, environmental, and
technical impasses causing project delays. They would be supported by a large staff of specialists.
- As a result, TEA's FY 1577 staffing request for resource development (excluding staff for imple-
mentation of strategic petroleum storage) calls for considerably more than doubling of current staff.
- FEA's authorizing legislation provides limited authority to administratively "promote increased
utilization of known energy resources using available technologies." FEA does not have legal
authority to provide financial assistance or to require actions on the part of developers or
regulators. However, my pressing fur administrative solutions to project delays, FEA would, to
a considerable degree, duplicate services already performed in the private sector by investment
20
bankers, lawyers, and engineers. Over the past two years, reorganizations and high employee
turnover have impaired FEA's development of a strong, in-house expertise capable of effectively
expediting specific energy projects. As a result, FEA has had little direct experience in
solving specific problems of delay.
- FEA would not be the only Federal agency concerned about expediting energy projects. ERDA,
Interior, and the Energy Independence Authority, as proposed, have major responsibilities
to assure the Nation is moving to prevent future energy shortages.
No. of
Change from
Change from Current
Positions
FY 1976 Level of
On-Board Strength
(FY 1977)
326 Positions
of 222 Positions
Alternatives
#1. Rapid program expansion (FEA Request)
556
+230
+334
appcom.
#2. Keep at 1976 authorized level
326
+ 0
+104
#3. Reduce below 1976 authorized level
GERALD
R.
CN01
(OMB Recommendation)
279
- 47
+ 57
222
Analysis
Budget Authority/Outlays
1976
1977
1978
($ Millions)
BA
0
BA
0
BA
0
Alternative #1
15
14
34
30
34
34
Alternative #2
15
14
15
15
15
15
Alternative #3
15
14
13
13
13
13
- The rapid expansion alternative (#1) proposed by FEA would require an addition of 334 positions
to the current on-board strength of the Office of Energy Resource Development at a cost of
$34 million. The option understates the Office's capability to use its existing personnel to
move to a project management orientation and builds in an unnecessarily large staff of
21
specialists to support the project teams.
- In view of fiscal constraints, lack of a detailed implementation plan, limited legal authority,
and lack of any tangible results over the past two years, we believe that any expansion in the
energy resource development staff above the authorized FY 1976 level is unwarranted.
- Alternative #3 reflects OMB's view that FEA's monitoring and expediting role is unproven and
should be less ambitious than proposed. Some aspects of FEA's proposal are tantamount to
providing direct assistance to private energy developers, which we believe would be inappro-
priate from a public policy standpoint and might lead to further Federal assistance in the
form of subsidies. FEA should concentrate on breaking Federal bottlenecks, testifying in
favor of energy resource development at State regulatory commission hearings, and on improving
incentives for investment in regulated industries. Alternative #3 would constrain the growth
of the staff specialist group and keep the number of energy projects to be expedited to a
manageable number of about 20, allowing evaluation of the concept before any further expansion.
Agency Request: Alternative #1.
OMB Recommendation: Alternative #3.
22
Issue Paper
Federal Energy Administration
1977 Budget
Issue #3: Strategic Petroleum Storage
Statement of Issue
Should the Federal government begin a crash petroleum storage program which would require
(1) no less than 150 million barrels in storage in three years, and (2) approximately 550 million
barrels in seven years?
Background
- Administration's energy emergency preparedness strategy has consisted of flexible storage
program (10 to 15 years, up to 1 billion barrels) funded mainly by Naval Petroleum Reserve
proceeds, and authority to ration and allocate petroleum.
- Administration (at OMB's insistence) has consistently opposed mandatory, unreasonably short
time frame for storage to avoid inefficient program, and supported linking storage to NPR
production, to cushion budget impact.
- The omnibus energy bill about to emerge from conference requires the program at issue. In
anticipation of this legislation, FEA requests $1 billion for strategic petroleum storage
in FY 1977. Total cost for the seven-year program would be $8.7 billion, with $711 million
to be requested as a supplemental in FY 1976.
- Storage is a major undertaking. At present FEA is proposing to begin this $8.7 billion
program with only preliminary site identification completed and without a convincing imple-
mentation plan or even draft environmental impact statement.
- Naval petroleum reserves yield only $3 to 5 billion for storage in next seven years, assuming
passage of current bills. Conference on NPR bills has not yet met; authorization of production
is not assured.
GERALD
23
FORD
LIBRARY
Alternatives
#1. Assume crash petroleum storage program, provide FY 1977 contingency funds of $1 billion,
and approve FY 1976 Supplemental at appropriate level when submitted. (Agency request)
#2. In the absence of adequate program justification and implementation plan, provide only
$100 million in the FY 1977 budget for later transmittal under proposed legislation.
Continue to press for enactment of NPR bill with storage linkage.
Analysis
- Estimates of the cost of an embargo range from $10 to $100 billion, with most estimates in
the $20 to $30 billion range (neglecting distributional consequences and political and foreign
policy costs). This justifies continued interest in flexible storage program on insurance
grounds but fails to justify accelerated program proposed by FEA.
- Favoring some acceleration of the storage program is Senator Jackson's support for a more
rapid program. Otherwise, factors are unchanged from a year ago where flexible strategy
was adopted. Administration initiatives in the Middle East have bought us some time but
situation remains volatile and unpredictable, with embargo a near certainty if hostilities
break out.
- FEA's proposed accelerated program is extremely optimistic and does not appear feasible, based
on current status of implementation planning. It fails to provide adequate environmental re-
view (although the risks are high because of the use of salt domes and mines), involves signi-
ficantly higher cost storage facilities than necessary, may require a new regulatory program,
and may involve unproven technology.
- Proposed accelerated program is not linked to NPR production, which was to provide resources
for storage and assure defense interests that NPR oil would not be squandered.
- FEA agrees that a program of this size and timing requires a national commitment to storage
targets which we may not be able to meet. OMB is concerned that proceeding in this manner
may jeopardize the entire program. A less hectic approach will avoid premature commitment
to storage and provide comparable benefits in the 1980 time frame at lower risk and cost.
24
FEA Request: Alternative #1.
OMB Recommendation: Alternative =2.
GERALD 9. - FORD GRAPHY
25
Issue Paper
Federal Energy Administration
1977 Budget
Issue #4: Energy Conservation
Statement of Issue
Should FEA's FY 1976 special energy conservation initiatives be continued in FY 1977?
Background
Recently, FEA transmitted a budget amendment to the Congress which included $65 million for
a one-year only program of special energy conservation initiatives:
- Industrial Conservation Seminars: a series of two-week seminars in different cities
covering industrial and buildings conservation, and vanpooling.
- Utility Rate Demonstration Projects: demonstration projects on the energy conservation
effects of different utility rate or pricing structures.
- Mass Media Advertising, and School Curriculum Development: programs to increase the American
public's awareness of the need for energy conservation.
- Project Conserve: distribution of do-it-yourself guidebooks, and a limited number of
computerized questionnaires to homeowners to assist them in installing energy conserving
measures.
Alternatives
#1. Continue the special conservation initiatives in FY 1977. (FEA Request)
#2. Do not extend the initiatives in FY 1977. (OMB Recom.)
26
i FORDS GERALD LIDRARY
Analysis
Budget Authority/Outlays
1976
1977
1978
($ Millions)
BA
0
BA
0
BA
0
Alternative =1 (FEA Req.)
65
35
67
75
0
22
Alternative #2 (OMB Recom. )
65
35
0
30
0
0
- A basic premise of the FY 1976 budget amendment recently approved for the FEA was that the
special conservation initiatives would constitute a one-year program only, based primarily
on the need for a large and visible conservation thrust to balance energy supply initiatives
being proposed by the Administration.
- FEA now believes it necessary to request continuation of the initiatives in order to maintain
a high level of effort in encouraging energy conservation.
- OMB believes that continuation of these special initiatives in FY 1977 would be unjustified
because:
all of them are unproven as to effectiveness;
adequate funds were provided in FY 1976 to complete the industrial conservation seminars
program;
FY 1976 funds will have already extended utility rate demonstration projects to 30 repre-
sentative states; and
rising energy prices provide adequate incentives to conserve energy in industry, businesses,
and homes.
Agency Request: Alternative #1.
OMB Recommendation: Alternative #2.
GERALD
27
LIBRARY
Issue Paper
Federal Energy Administration
1977 Budget
Issue #5: Federal Energy Management Program
Statement of Issue
Should the President be committed to a government-wide, 10-year, energy-saving goal of 250,
supported by highly specific goals for 9 new initiatives in the Federal Energy Management Program
(FEMP) when it cannot be known now whether the individual projects that would add up to those
goals can be justified and approved through the budget process?
Background
- FEA has circulated for agency review a draft Presidential statement on the "Multi-Year Action
Plan" of the Federal Energy Management Program. The statement would announce 9 new FEMP ini-
tiatives and goals that would be undertaken to increase the efficiency of energy use by the
Federal government in response to a Presidential directive.
- FEA estimates that FY 1977 costs government-wide would total nearly $300 million, with costs
through FY 1985 totalling $4 billion. The goals of the program and preliminary FEA cost esti
mates of individual initiatives are shown in the attachment.
GERALD
P.
Alternatives
CHOL
#1. Commit the President publicly to specific, quantitative, 10-year, energy-saving goals for
LIBRARY
the Multi-Year Action Plan of the Federal Energy Management Program. This might result in
incremental funding requests, government-wide, as shown in the attachment. (FEA position)
#2. Announce only a single, aggregate, credible FEMP goal for the next year (e.g., energy con-
sumption 20% below base year of 1973). Agencies would be directed by the President to con-
sider the new initiatives and to propose the most cost-effective ones to be funded entirely
by reprogramming within approved FY 1976 and FY 1977 budget levels. (OMB recommendation)
28
Analysis
- Alternative #1
FEA holds that a highly specific and public commitment by the President would dramatically
emphasize the President's serious concern for energy conservation and insure tangible results
for the program over a 10-year period.
OMB believes that the Presidential announcement would be acceptable only if the specific,
quantitative goals and the program as a whole could be costed out and justified within the
President's policy of fiscal restraint. We do not believe this to be feasible at this time.
Presidentially-announced energy-saving goals which are detailed, quantitative and long-range
would lock the Administration into funding levels for the new energy-saving initiatives re-
gardless of budget constraints and the cost-effectiveness of specific projects. Moreover,
OMB questions the assumptions underlying the 10-year projections upon which the program is
based as well as the effectiveness of some of the individual initiatives such as solar energy
for buildings.
Incremental funding, at least for FY 1977 if not FY 1976, would give agencies substantial
incentive to move ahead with the program quickly but would create agency pressures for size-
able funding requests.
- Alternative #2
Protects Presidential credibility with respect to commitments.
Respects the integrity of the program and budget review process.
Eases additional budget pressures in a period of severe fiscal restraint.
FEA Request: Alternative #1.
OMB Recommendation: Alternative #2.
GERALD FORD R.
29
Multi-Year ;
on Plan Costs
Federal Energy Management Program
Est. Funds Required by Fiscal Year
($ Millions)
Initiative
Proposed energy saving goal
1976
1977
1978
Total thru 1985
I. Aircraft/Ship Operations
Make optimum use of similators
and other capital equipment
to save energy
DOD
(NOT AVAILABLE)
Civil Agencies
0.4
1.2
1.4
3.9
II. New Buildings Standards
Minimum 50% reduction in energy
consumption in new buildings
1.2
8.9
0
10.1
III. Buildings Retrofit
Reduce energy consumption in
existing buildings by 25%
DOD
(NOT AVAILABLE)
Civil Agencies
5.0
100.1
514.0
2582.3
IV. Building Load Management
--
1.3
9.0
8.3
24.6
V. New Vehicle Efficiency
Achieve an average of 20MPG in
2.1
2.7
3.3
13.3
sedan/station wagon fleet by
1980, and truck efficiency of
11MPG by 1985
VI. Energy Efficient Commuting
--
(POSTPONED FOR FURTHER STUDY)
VII. Education and Motivation
--
1.7
2.5
2.3
13.9
VIII. Life Cycle Costing
GERALD FORD
:
2.1
4.4
5.0
11.5
IX. Solar Energy-Buildings
--
5.8
42.3
51.6
245.5
- Over -
30
Est. Funds Required by Fiscal Year
($ Millions)
Initiative
Proposed energy saving goal
1976
1977
1978
Total thru 1985
X. Natural Gas
Reduce Federal government use of
natural gas by 50% by 1985
44.4
74.4
103.4
276.1
Related Activities
A. Program Management (FEA)
1.4
2.5
2.9
19.2
B. Planning & Analysis (FEA)
2.1
2.9
2.8
17.1
C. New Initiative Implementa-
tion
2.0
40.0
110.0
792.0
TOTALS
69.4
290.8
805.8
4009.5
Note: Numbers may not add to totals exactly because of rounding.
GERA
to
31
Change: 1977 compared to:
1976
Current Ceiling
FTP
Alt. #1 (Agency req.)
+ 464
Alt. #2 (OMB Rec.)
-1496
- FEA has been transformed from a predominantly regulatory agency to one whose primary concern
is policy planning. In assessing FEA's FY 1977 request for large employment increases in non-
regulatory programs, a prime question arises: To what extent are the new or expanded initia-
tives justified on a cost-benefit basis and reasonably certain to have a significant impact?
In many FEA programs, evidence of substantial, positive impact has yet to be evaluated. For
example, in resource development and energy conservation programs, OMB is skeptical about how
much tangible progress the agency can make in convincing private parties, environmental inter-
venors, or state regulatory authorities to expedite development of energy projects or to adopt
new conservation methods. We expect private companies will continue to make such decisions
based on internal cost and investment criteria, not so much on the basis of outside advice or
persuasion from the Government.
- OMB recommends a reduction of 1496 positions from the FY 1976 ceiling for a total employment
level of 1704. Over 1000 of the recommended decrease reflects our view that, given a December,
1975 expiration of EPAA, the regulatory compliance program can be terminated February 28, 1977,
earlier than FEA has assumed (Issue #1). Moreover, FEA has the capability to shift positions
within its existing employment base to accommodate new and expanded initiatives in energy re-
source development (Issue #2). Finally, fewer personnel will be required in the energy conser-
vation area since the FY 1976 series of new conservation initiatives would not be continued.
(Issue #4)
Agency request: Alternative #1.
OMB recommendation: Alternative #2.
32
Issue Paper
Federal Energy Administration
1977 Budget
Issue #6: Agency Employment Totals
Statement of Issue
What is the appropriate employment level for FEA by the end of FY 1977?
Background
- FEA's 1975 base employment level was 3245 full-time permanent positions (FTP's). The current
1976 ceiling is 3200. FEA has requested an additional 464 positions in 1977 for an extended
two-year "wrap-up" of its regulatory compliance program (to December 31, 1977), expanded acti-
vities to speed up development of energy resources at the project level, and continuation of
special energy conservation initiatives undertaken in 1976. Corresponding increases have been
requested in policy analysis and in executive direction and administration to support these
programs.
Alternatives
#1. Allow increased employment level sufficient to support new and expanded energy initiatives.
(Agency request: 3664 positions)
#2. Reduce agency employment in accord with a December, 1975 expiration of EPAA and FEA's capacity
to reprogram personnel resources within its employment base (OMB rec.: 1704 positions)
Analysis
1976
End-of-year
1975
Current Ceiling
1977
employment
FTP
FTP
FTP
BERALD
Alt. #1
FORD
(Agency req.)
3,245
3,200
3,664
33
Alt. #2
(OMB rec.)
3,245
3,200
1,704
EMPLOYMENT SUMMARY
(Positions)
1975
1976
1977
Actual
Ceiling
Current On-Bd.
FEA Req.
OMB Recom.
HEADQUARTERS
Regulatory Programs
298
196
303
185
88
(Compliance)
(59)
(110)
(75)
(70)
(20)
Energy Resource Development
227
256
212
470
231
Energy Conservation & Environment
196
216
200
290
200
Policy & Analysis
401
400
386
454
370
International Energy Affairs
41
42
45
54
30
Administrator's Office
30
32
41
33
30
Management & Administration
293
300
291
318
197
General Counsel
92
90
86
97
72
Public Affairs
134
117
114
142
92
Congressional Affairs
46
43
43
46.
40
Intergov., , Regional, & Spec. Prog.
36
33
35
40
30
Private Grievances & Redress
51
41
47
64
25
Subtotal -- Headquarters
1,845
1,766
1,803
2,193
1,405
REGIONAL OFFICES
Regulatory Programs
934
929
1,112
800
24
(Compliance)
(718)
(929)
(895)
(800)
(24)
Energy Resource Development
13
70
25
151
48
Energy Conservation & Environment
36
100
53
103
28
Administrators
40
40
40
40
40
Management & Administration
136
221
136
80
General Counsel
62
50
88
38
Public Affairs
356
10
10
24
8
Congressional Affairs
10
10
10
5
0401
Intergov. , Regional, & Spec. Prog.
64
52
75
15
Private Grievances & Redress
21
13
29
44
13
Subtotal -- Regional Offices
1,400
1,434
1,602
1,471
299
GRAND TOTAL -- FEA
3,245
3,200
3,405
3,664
1,704
34
ERDA
1977 Presidential Review
Energy Research and Development Administration
Table of Contents
TAB A
Summary tabulation of the 1977 Budget
amounts requested and recommended and
Background/Strategy paper.
TAB B
Summary of the principal budget decisions
reflected in the OMB recommendation.
TAB C
Issue Papers
Effect of issue on outlays
Issue
(dollars in millions)
1977
1978
1. Solar Energy R&D
- 76
-193
2. Conservation R&D
- 74
-167
3. Nuclear Fuel Reprocessing
- 39
- 90
4. Nuclear Weapons Research
and Development
- 60
- 78
FORD CIRRARY
Tab A
Energy Research and Development Administration
1977
Summary Data
(In millions)
Employment, end-of-year
Budget
Full-time
Authority
Outlays
Permanent
Total
1975 actual
3588
3146
7458
7974
1976 February budget
as amended
4592
4089
8052
8592
enacted
*
*
XXXX
XXXX
OMB recommendation 1/
7694
4089
8245
8875
OMB employment ceiling
XXXX
XXXX
8052
8592
TQ February budget
as amended
1271
1177
8052
8592
enacted
*
*
XXXX
XXXX
OMB recommendation
1271
1177
8245
8875
1977 planning target
5490
5070
XXXX
XXXX
original agency request
7570
6222
9092
9903
reduction target
N/A
5290
XXXX
XXXX
revised agency request
6948
5797
8659
9470
OMB recommendation
5927
5183
8425
9149
1978 OMB estimate
5621
5499
8425
9149
*
not enacted as of 11/22/75
1/
$2500 million is borrowing authority for the synthetic fuels commercial
demonstration program's loan and price guarantee incentives.
FY 1977 Budget
Energy Research and Development Administartion
Background/Strategy Paper
Background
In response to the initial FY 1977 planning ceiling of $5.1 billion
in outlays, ERDA originally submitted a budget request of $6.2 billion
($1.1 billion over ceiling and $2.1 billion over FY 1976).
In the context of the review of agency ceilings to meet the $395 billion
target for FY 1977, ERDA's ceiling was increased to a revised total of
$5.3 billion in order to provide for additional requirements in the
nuclear fuel cycle not included in the initial ceiling.
In response to the revised ceiling, ERDA reduced its FY 1977 request
from $6.2 billion to $5.8 billion. Although ERDA identified actions
which could be taken to reach the $5.3 billion revised ceiling, ERDA
strongly recommended against going below the $5.8 billion level. ERDA
maintains that further reductions would require a curtailment of high
priority efforts essential to the nation's energy independence and
national security.
Summary of ERDA and OMB Recommendations
The following table compares ERDA's revised FY 1977 budget request with
the OMB recommended level by major program category (outlays - $M):
FY 1977
ERDA
OMB
FY 1975
FY 1976
Req.
Rec.
Diff.
Direct Energy R&D
(1012)
(1417)
(2308)
(1896)
(-412)
Non-nuclear
207
514
872
648
-224
Nuclear
805
903
1436
1248
-188
Supporting energy R&D (e.g. envir-
onmental and materials
research
317
363
425
397
- 28
Production of enriched uranium
(including revenues)
- 27
299
623
601
- 22
Defense-related programs
1501
1647
1924
1790
-134
All other
343
363
517
499
- 18
Total outlays
3146
4089
5797
5183
-614
FORD
CAALO FORD
2
Energy R&D - ERDA's FY 1977 budget request reflects the ERDA strategy
of accelerating R&D on all potential energy technologies. OMB believes
that ERDA should concentrate its major budgetary resources on technologies
with high potential payoff (i.e. the breeder nuclear reactor and R&D on
fossil fuels) and spend less on programs which will provide relatively
smaller energy contributions by the year 2000 (i.e. solar, geothermal, and
energy conservation). (See the last section of this paper and Issues 1
and 2 for additional analysis.)
Supporting energy R&D - ERDA requests a 17% increase for environmental
effects research and supporting physical research. OMB believes that
these programs can be held to a 9% increase considering the substantial
funding increases provided in recent years.
Production of enriched uranium - In order to provide a stockpile of
enriched uranium large enough to backstop the entry of private industry,
ERDA supports continuing the previously planned expansion of production
at the existing ERDA uranium enrichment facilities. OMB agrees, but
also recommends an 8% increase in the price charged by ERDA in order to
recover increased production costs.
Defense-related programs - ERDA requests a significant increase in the
level of activity on weapons R&D and underground testing, as well as
substantial pricing increases in weapons production, weapons materials
production, and naval propulsion reactor R&D. OMB recommends continuation
of the level of activity approved by you in the recent FY 1976 budget
amendment for nuclear weapons R&D and testing and tighter pricing for
other defense-related programs (e.g. assume 7.5%, vice 12% price
escalation).
All other - OMB recommends reductions in ERDA's requests for additional
Government personnel, upgrading of Government-owned facilities, and a
high energy physics construction project.
Overall OMB Assessment
Although OMB agrees that ERDA's energy and defense-related programs should
have relatively high priority, OMB believes that it is time for ERDA to
become more selective in setting priorities and more disciplined in its
approach to the budget.
OMB believes that the 27% increase over FY 1976 outlays (65% over FY 1975)
provided by the FY 1977 OMB recommendation should be sufficient for ERDA's
highest priority programs and is adequate to support the Administration's
commitments to national security; more nuclear power from present commercial
light water reactors; the privatization of uranium enrichment; a
strengthened national energy R&D effort, (as further described in the
section that follows); and the commercialization of synthetic fuels.
3
Strategy for ERDA's Energy R&D Program
The basis for the major difference between ERDA and OMB on the overall
level and distribution of energy R&D funds for FY 1977 stems from a
disagreement concerning ERDA's long-term energy R&D strategy.
As required by statute, ERDA published last June a comprehensive
national energy research, development and demonstration plan. This
plan incorporated ERDA's strategy that "all the national energy
technology goals must be pursued together." ERDA's FY 1977 budget
request reflects this overall strategy by accelerating development
and demonstration of technologies across and within all major energy
R&D areas including nuclear, coal, conservation, solar and geothermal.
While it is generally agreed that the potential of all promising
technological approaches must be investigated, OMB does not agree
with ERDA that commitments to costly Federal development and demon-
stration programs are justified in technology areas where:
- the potential contribution to U.S. energy supplies is
expected to be small (compared to total U.S. energy
consumption); and
GERALD
- there is no clear evidence that the R&D would not be done
in the private sector.
In view of the fact that over 95% of all U.S. energy reserves (i.e.,
coal, oil shale and uranium) can be utilized by developing the breeder
nuclear reactor, by improved direct combustion of coal, and by developing
synthetic fuels technologies, OMB believes that considerably less budget
empahsis should be given to further acceleration of programs in solar
and geothermal energy and in conservation R&D programs which will provide
relatively smaller energy contributions even by the year 2000.
It should be noted that, politically, there are strong Congressional
pressures for excessive budgetary increases for the more exotic
technologies (e.g., solar, geothermal) and for conservation R&D.
This Congressional interest arises from perceptions:
- that the exotic technologies are more environmentally
desirable (even though this is not generally the case);
- that large energy companies may benefit more from nuclear
and synthetic fuels developement, whereas small companies
would benefit from development of the more exotic technologies
(which require relatively lower capital investments in R&D
projects); and
4
- that somehow the consumer will benefit more directly from
Federal R&D on conservation, (e.g., better insulation) than
on R&D to increase usable energy supplies (even though there
are substantial incentives in the private sector to conduct
conservation R&D).
ERDA is tending to respond to Congressional pressures and has not,
to date, conducted sufficient critical analyses that would result
in establishing program priorities to counter these Congressional
pressures.
The key issue for your consideration in examining the specific issues
that follow is whether ERDA's R&D strategy should be
- to pursue an accelerated energy R&D program across and within
all technological areas (as Dr. Seamans is recommending) or
- to pursue a more selective strategy of concentrating heavily
on the high payoff technologies in nuclear and fossil fuels
and continuing more limited efforts to explore technological
approaches which are now considered to have lower potential
in contributing to energy supplies (as OMB is recommending).
The issues which follow on solar and conservation R&D typify the
differences between OMB and ERDA on overall energy R&D program
strategy.
The net result of the OMB strategy - with necessary increases in
certain nuclearpower programs - is reflected in the following table:
Direct ERDA Energy R&D Funding
Outlays ($ millions)
1977
Program Area
1975
1976
Agency Req.
OMB Rec.
Nuclear
Nuclear Fission:
538
524
748
671
(breeder reactor)
(462)
(429)
(585)
(575)
(other fission)
( 76)
( 95)
(163)
( 96)
Nuclear Fusion
151
230
334
302
Non-nuclear
Fossil
148
352
499
439
Other (e.g. solar
geothermal, con-
servation)
175
311
727
484
Total
1012
1417
2308
1896
% Nuclear
68%
53%
35%
61%
5
As noted above, the OMB strategy from an outlays standpoint results
in increased emphasis on nuclear over non-nuclear programs. The
"nuclear bias" that is sometimes perceived in Federal R&D program
is, however, dispelled when one takes into account both Federal and
private energy R&D expenditures.
- During the 1974-1981 period, the non-nuclear industry's R&D
investments are expected to total over $20 billion. While
about one-fourth of this is expected in oil and gas R&D, where
there is relatively little Federal funding, the balance of
anticipated private investment will depend greatly on Federal
R&D assistance and incentives programs. These programs involve
loan guarantees, price guarantees, and construction grants for
synthetic fuels and the cost-shared R&D efforts.
- During the same 1974-1981 period, the nuclear industry's R&D
investments are expected to be about $2 billion. Private
sector R&D is expected to be much smaller in nuclear than non-
nuclear technologies because of: the long-term nature of the
potential payoff; the higher technical risks; the massive size
of the investment required; regulatory uncertainties; and the
traditional role of the Government in nuclear technology. It is
likely, however, that there may be larger industry investments
in nuclear R&D and demonstrations in the period beyond 1981 in
such areas as the fast breeder reactor.
- Overall it appears, therefore, that the national energy R&D
investment does not contain nuclear bias, as illustrated in
the following table.
National Energy R&D Funding 1974-1981
CRALO
($ in billions)
Federal
Private
Total
Non-nuclear
7.2
21.1
28.3
Fossil
( 4.2)
(15.4)
(19.6)
Other
( 3.0)
( 5.7)
( 8.7)
Nuclear
11.4
2.3
13.7
Total
18.6
23.4
42.0
Tab B
1977 Budget
Energy Research and Development Administration
Summary of Principal Budget Decisions
1976
TQ
1977
1978
0
0
BA
0
0
Funding Summary ($M)
Revised agency request
4089
1177
6948
5797
6800
Recommended level
4089
1177
5927
5183
5499
Reduction
--
--
1021
614
1301
Personnel Summary (FTP)
Revised agency request
8557
8557
8659
9092
Recommended level
8245
8245
8425
8425
Reduction
312
312
234
667
1/
Number of full-time permanent employees
This section provides a summary discussion of the principal decisions
for the FY 1977 ERDA budget (except for the four issues attached at Tab C).
1976
TQ
1977
1978
Fossil Energy
0
0
BA
0
0
Revised agency request
352
67
601
499
725
FORD
Recommended level
352
67
473
439
563
Reduction
--
--
128
60
162
ERDA has requested major increases in its petroleum and natural gas
enhanced recovery demonstration program, in its coal gasification and
liquefaction demonstration plant program, and in research on in-situ
coal and oil shale gasification technologies. The OMB recommendation
would (a) delay any new oil and gas enhanced recovery demonstration
projects until a definitive program plan has been developed by ERDA;
(b) delay for one year a proposed coal gasification pilot plant to
manufacture hydrogen (an intermediate step in converting coal to a
clean fuel) by requiring a re-evaluation of the project and private
sector involvement; and (c) delay design efforts on four coal lique-
faction and gasification demonstration plants in order to improve
coordination with the new Synthetic Fuels Commercial Demonstration
Program.
OMB agrees to an expanded effort on in-situ gasification
of oil shale but restricted research on the less promising coal gasif-
ication processes.
2
The long-term technological options that ERDA is developing are comple-
mented by the efforts of the Bureau of Mines and EPA which are expected
to have nearer-term benefits. The Bureau of Mines has a $60 million
(outlays) coal mining R&D program, and EPA has a $75 million research
program on energy pollutant control technologies (particularly flue-
gas desulfurization).
1976
TQ
1977
1978
Geothermal Energy
0
0
BA
0
0
Revised agency request
32
4
70
56
157
Recommended level
32
4
44
41
45
Reduction
--
-
26
15
112
The ERDA request calls for rapid acceleration in the development of geo-
thermal energy technology, with particular emphasis on that development
leading to demonstration of technology for the more accessible, but much
less abundant, hydrothermal resources. These resources include, for
example, the hot brines found in Southern California's Imperial Valley.
OMB recommends an accelerated development of geothermal technology, but
without costly demonstrations of near-term technology such as hydrothermal,
because of its low potential as a resource. Within funds recommended by OMB,
greater emphasis can be given to the longer-term program of developing
technologies for tapping the more abundant but less accessible geopressured
and hot dry rock resources.
1976
TQ
1977
1978
0
0
BA
0
0
Fusion Power
GERALD
Revised agency request
230
65
431
334
499
Recommended level
230
65
384
302
400
Reduction
--
--
47
32
99
ERDA requested an expansion of its two fusion power programs (magnetic
confinement and laser fusion) which are directed toward determining
scientific feasibility and which path ultimately to pursue. In the
magnetic confinement program, ERDA would spend additional funds now
required as the approved Tokamak Fusion Test Reactor (TFTR) begins
construction and expand the effort to solve the engineering problems of
future fusion power reactors. In the laser fusion program, ERDA has
requested increases to permit development of a large laser facility
(Los Alamos, N.M.) and a general expansion of its contractual support
program. OMB recommends a slight slowdown in the pace of both fusion
programs which have grown very rapidly in the past few years ( the OMB
FY 1977 recommendation would still allow a doubling of the FY 1975
outlay level).
3
1976
TQ
1977
1978
0
0
BA
0
0
Fast Breeder Reactor R&D
Revised agency request
429
117
677
585
655
Recommended level
429
117
655
575
643
Reduction
--
--
22
10
12
The ERDA requestassigns high priority to increasing the momentum of the
Liquid Metal Fast Breeder Reactor (LMFBR) development program by proceeding
with the construction of the $2 billion Clinch River Breeder Reactor
(Tennessee) demonstration plant for completion by 1983. OMB agrees with
the high priority of the LMFBR program which will assure the availability
of nuclear power after reserves of moderately priced uranium ore for
current light water reactors are exhausted late in this century. OMB has
made only relatively minor reductions to supporting technology programs
where the rate of growth over FY 1976 appears excessive.
1976
TQ
1977
1978
Other Fission Reactor R&D
0
0
BA
0
0
Revised agency request
95
42
188
163
142
Recommended level
95
42
106
96
92
Reduction
--
--
82
67
50
The ERDA request would (a) continue development of four advanced reactor
concepts (primarily as possible backups to the LMFBR discussed above) and
(b) initiate a major new Government program ($300 million over 5 years) to
improve the operating reliability and shorten the construction time for
commercial light water reactors. The OMB recommendation would terminate
support for the Molten Salt Breeder Reactor (which has serious technical
uncertainties) require any funds for the proposed new initiative for light
water reactors to be absorbed within the Conservation R&D budget; and
reduce other lower priority programs.
1976
TQ
1977
1978
Commercial Radioactive Waste
0
0
BA
0
0
CORD
Management
Revised agency request
14
4
120
91
96
Recommended level
14
4
85
66
70
Reduction
--
-
35
25
26
The ERDA request would greatly accelerate the commercial radioactive waste
management program by expanding research and development and by investigating
many geologic formations as possible long-term storage sites for these wastes.
Although the OMB recommondation would reduce the number of alternative
geologic formations to be surveyed by ERDA, the large increase recommended
by OMB will support a major new program initiative and accelerate the process
for solving this crucial problem (which is the major public concern about
nuclear power).
4
1976
TQ
1977
1978
Uranium Enrichment R&D
0
0
BA
0
0
Revised agency request
87
22
158
118
142
Recommended level
87
22
137
105
117
Reduction
--
--
21
13
25
The ERDA request would provide funds for (a) a major increase in R&D on gas
centrifuges and construction of a $100 million facility for testing and pro-
duction of improved gas centrifuge machines and (b) the acceleration of
development of a longer-range technology of using lasers to perform uranium
enrichment. The OMB recommendation would provide for a $50 million facility
limited to testing centrifuges which the private sector plans to use in near-
term commercial uranium enrichment ventures (as part of the Administration's
proposal to transfer uranium enrichment into the private sector). OMB expects
the private sector to fund the longer-term development and testing of more
advanced machines. Because laser uranium enrichment (if successful) offers
high potential benefits in the form of reduced costs and more efficient use
of uranium fuel resources, OMB recommends approval of the revised ERDA request
for this program.
1976
TQ
1977
1978
Production of Enriched Uranium
0
0
BA
0
0
Revised agency request
891
243
1308
1203
1260
Related revenues
-592
- 95
- 580 -580
- 873
Recommended level
891
243
1336
1231
1260
Related revenues
-592
- 95
- 630
-630
- 943
Reduction
--
--
22
22
70
The ERDA request provides for a substantial increase in the production of
enriched uranium and for continuation of the previously approved upgrading
of the output of the current ERDA uranium enrichment production facilities.
In order to produce a large enough stockpile to backstop private enrichment
ventures, OMB recommends that the full amount of ERDA's original request be
approved. To recover production cost increases, OMB recommends an 8%
increase in the price charged to utilities by ERDA for enriching uranium,
which will increase all nuclear electricity costs by less than two thirds of
one percent.
FORD
5
1976
TQ
1977
1978
Biomedical and Environmental
0
0
BA
0
0
Effects
Revised agency request
178
46
224
210
245
Recommended level
178
46
198
195
195
Reduction
--
26
15
50
ERDA has requested a large expansion of its research program to determine
the biomedical and environmental effects of effluents from nuclear and non-
nuclear energy sources. The OMB recommendationa allows a 32% expansion of
non-nuclear effects research which has been underfunded in the past (e.g.
environmental effects of pollutants from fossil power plants and synthetic
fuels). The OMB recommendation holds level nuclear related effects research,
which has been adequately funded in the past.
1976
TQ
1977
1978
Basic Energy Sciences
0
0
BA
0
0
Revised agency request
185
50
238
215
266
Recommended level
185
50
224
202
220
Reduction
--
14
13
46
ERDA has requested a 16% increase for research on fundamental scientific
and engineering problems that constrain the development of energy tech-
nologies such as fossil, geothermal, and solar (e.g. research on the effects
of high temperature environments on materials and on corrosion processes).
OMB believes that the change in emphasis to non-nuclear technologies can
be partially accomplished by shifting funds from nuclear-related research
which has been well funded in the past. OMB therefore recommends that the
program be held to the FY 1976 level of activity adjusted for price increases
and a fuel conversion facility project (from gas to coal).
1976
TQ
1977
1978
Weapons Production, Capital
0
0
BA
0
0
Equipment and Construction
Revised agency request
548
142
691
638
695
Recommended level
548
142
644
603
637
Reduction
--
47
35
58
ERDA has requested production levels responding to DOD guidance on required
nuclearweapons stockpile deliveries and retirements. The level requested
represents a minimum under discussion with DOD and is subject to possible
upward revision. OMB recommends that the revised production levels requested
by ERDA generally be approved with the addition of $2 million to maintain
the previous production schedule for one strategic system. However, OMB
recommends reductions for production overhead, a Los Alamos computer (which
can be leased), general purpose equipment and construction, and a lower level
of price escalation.
6
1976
TQ
1977
1978
High Energy Physics
0
0
BA
0
0
Revised agency request
178
44
241
201
239
Recommended level
178
44
195
191
195
Reduction
--
--
46
10
44
The revised ERDA request allows for continuation of the FY 1976 level of
operations at ERDA's four major high energy physics accelerators taking
into account increases in electric power and other operating costs and a
new central computer for the Fermi Laboratory in Illinois. In addition,
ERDA requests initiation of construction of a $78 million facility project
at the Stanford Linear Accelerator (the Positron-Electron Project which
has been assigned high scientific priority). Because of the present fiscal
climate OMB recommends deferring the new construction project and the new
computer while allowing additional funds to maintain a constant level of
operation for the existing accelerators.
1976
TQ
1977
1978
Program Support
0
0
BA
0
0
Funding ($M)
Revised agency request
232
61
325
277
330
Recommended level
232
61
249
248
254
Reduction
--
76
29
76
Full-Time Permanent Employees
Revised agency request
8557
8557
8659
9092
Recommended level
8245 8245
8425
8425
Reduction
312
312
234
667
Relative to the current FY 1976 employment ceiling, ERDA has requested a
7.5% increase in staffing for 1976/1977 to respond to a planned program
growth of over 40% (outlays) and to strengthen overall agency management
of its programs.
ERDA has also requested $54 million of budget authority
to initiate a major program for upgrading Government-owned research laboratories
and production facilities.
OMB recognizes that there has been a very large growth in ERDA program
responsibilities (e.g. energy R&D, synthetic fuels commercialization) with
relatively few additional personnel provided to direct a greatly expanded
contractor effort. But, in view of the overall need for stringency in
Government personnel, OMB recommends restricting the ERDA personnel increase
to 2% in FY 1976 and a further 2% in FY 1977 which responds to only the most
urgent workload and management problems. None of ERDA's general purpose
facility upgrading program is recommended for approval because of the current
fiscal situation.
7
1976
TQ
1977
1978
Peaceful Nuclear Explosives (PNE)
0
0
BA
0
0
-
Revised agency reques
1
-
4
3
3
Recommended level
1
-
1
1
1
-
-
Reduction
-
-
3
2
2
ERDA has requested funds to (a) continue evaluation of the Rio Blanco gas
stimulation PNE test ($1.3M) and (b) initiate a new program for use of PNE's
in radioactive waste disposal and for research on physical and environmental
effects of PNE's ($1.7M). OMB recommends no more funds for Rio Blanco
because the most important evaluations have been completed and because the
use of this technology appears very unlikely because of public opposition
and economic problems. OMB recommends $1M for radioactive waste manage-
ment and for continued research. OMB also recommends this program be
funded under control technology SO that it can compete for future
funding with other waste disposal alternatives.
D
Issue Paper
Energy Research and Development Administration
1977 Budget
Issue #1: Solar Energy
Statement of Issue
Should expansion in ERDA's solar program be limited to the highest potential options?
Background
The ERDA solar program is largely the result of two acts passed by the 93rd Congress, the Solar
Energy Research, Development, and Demonstration, and the Solar Heating and Cooling Demonstration Act
of 1974. These acts authorize a program of research, development, and demonstration to provide the
option of utilizing solar energy as a viable contributor to the Nation's future energy needs.
Technology for converting the sun's energy into usable forms may be grouped into three categories:
(1) direct thermal applications, involving the collection of sunlight through thermal collectors for
uses such as heating and cooling of buildings, (2) solar electric applications, in which energy from
the sun is transformed into electricity, and (3) fuels from biomass, involving the production of fuels
from organic material, such as the production of methane from animal wastes.
ERDA has requested $199 million (BA) for the FY 1977 solar energy program (as compared to $89
million in FY 1976). Of this total, $174 million is for heating and cooling of buildings and solar
electric applications (as compared to $77 million in FY 1976). Lesser amounts have been requested for
agricultural and industrial process heat applications, fuels from biomass, and a technology support
program that would initiate a Solar Energy Research Institute, provide for solar information dissem-
ination, and assess solar resources.
Alternatives
#1. Authorize a solar energy program that would provide accelerated development of all major solar
technologies and a highly accelerated solar heating and cooling demonstration program. (ERDA
request).
#2. Authorize a solar energy program that would continue an accelerated but more orderly develop-
ment of solar technology, with development funding limited to the higher potential payoff
areas and a heating and cooling demonstration program continued at the 1976 level. (OMB
recommendation).
Analysis
July 1 -
1975
1975
Sept. 30, 1976
1977
1978
1979
1980
1981
Budget Authority/Outlays
BA 0
BA 0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
($ Millions)
Solar Energy
Alt. #1 (Agency req.)
40
15
89
65
26
17
199
152
328
281
290
253
188
188
179
161
Alt. #2 (OMB rec.)
40
15
89
65
26
17
103
76
123
88
115
97
86
87
86
96
Agency Request
160
(Difference from Alt. #1 (Agency request)
1977 Outlays
1978 Outlays)
Alt. #2 (OMB recommendation)
-76
-193
)
Agency Request. Alternative #1. Gives solar energy a priority comparable to the Liquid Metal Fast
Breeder Reactor. This does not appear justified by the relatively low potential contribution of solar
energy to energy supplies. ERDA's request would greatly accelerate all solar technologies to encourage
energy production which, by ERDA's estimates, may be no more than 7% of the Nation's projected energy
demand by the year 2000.
OMB Recommendation. Alternative #2. Would allow growth in the solar electric options (photovoltaics
and solar thermal electric) where the potential energy contribution is significant but major technical
and engineering breakthroughs are required. Options with potentially low energy contributions or high
energy resource uncertainty (e.g., wind, ocean thermal, and biomass) would be sharply reduced below
the FY 1976 level. The OMB recommendation would also continue the heating and cooling demonstration
program at the 1976 level pending completion of ERDA's program design effort; allow continued develop-
ment of agricultural applications to reduce the use of propane; and allow a limited technology support
program to assess environmental and resource uncertainties and initiate a Solar Energy Research
Institute.
Issue Paper
Energy Research and Development Administration
1977 Budget
Issue #2: Conservation R&D Program
Statement of Issue
Should Federal efforts in conservation R&D be limited to selected programs in which the potential
for energy savings are large and where the rationale for Federal involvement is clear?
Background
There are two paths for achieving energy savings through improved technologies: (a) greater
efficiency in the production, distribution, and storage of energy (e.g., advanced battery
concepts), and (b) reduced end-use consumption of energy (e.g., improved technologies for industrial
processes, buildings, and transportation).
Industry conducts energy conservation R&D in all key program areas, although the level of effort
in a given area depends on the technical risk, timing of the payoff, and the size of the R&D investment
needed. For example, industry R&D on transportation and energy storage for CY 1974 has been estimated
at over $50 million for conservation and about $140 million for environment.
ERDA requests a tripling in BA for conservation R&D, from $72 million in 1976 to $223 million in
1977. Largest increases have been requested in energy storage and in the three programs concerned with
reducing end-use consumption -- buildings, industry, and transportation. These increases are consistent
with ERDA's proposed strategy to assume national technical leadership in all major conservation programs,
with strong support from the Congress which views conservation programs favorably because of their direct
help to consumers.
Federal R&D appears appropriate in transportation (advanced engine concepts) and energy storage
(both for autos and other uses) since there is a significant conservation potential, specifically in oil,
and there is underinvestment by the private sector due to the large costs, high risks, and long-term
payoffs. As noted above, industry spends more on R&D to meet near-term Federally imposed regulations,
such as for the environment, than on conservation.
GERALD
R.FORD
FORD
LIBRARY
At least two million barrels of oil per day could be saved by the year 2000, from transportation
R&D, largely from vehicles with 25% to 40% more efficient engines. Furthermore, electric vehicles,
using greatly improved battery technology, can result in large reductions in U.S. dependence on oil.
Alternatives
#1. Triple the program level over that of FY 1976 to allow major expansions in all areas. (ERDA
request)
#2. Greatly accelerate (about double) programs in energy storage, transporation, buildings, and
industry.
#3. Provide significant increases only in transportation and energy storage. (OMB recommendation)
Analysis
July 1 - Sept.
Budget Authority/Outlays
1975
1976
30, 1975
1977
1978
1979
1980
1981
($ Millions)
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
Alt. #1 (ERDA req.)
31
17
72
55
18
14
223
150
345
257
392
305
400
324
395
336
Alt. #2
31
17
72
55
18
14
120
91
120
110
120
120 120
120
120
120
Alt. #3 (OMB rec.)
31
17
72
55
18
14
90
76
90
90
90
95.90
90
90
90
Agency Request
(Difference from Alt. #1 (Agency request)
1977 Outlays
1978 Outlays)
(
Alt. #3 (OMB recommendation)
-74
-167
)
(
Alt. #2
-59
-147
)
Agency Request. Alternative #1. Would dramatically increase, in all areas, the Federal role in conser-
vation R&D. It would provide for costly Federal demonstrations of both new and existing technology --
many in areas where the private sector is already showing evidence of responding to higher energy prices
(e.g., building conservation, industrial processes).
OMB Recommendation. Alternative #3. Provides significant increases only in energy storage and trans-
portation, programs likely to be most effective in reducing oil use and where there is little evidence
that the private sector will significantly accelerate R&D investments.
Alternative #2. Represents an intermediate level between OMB and ERDA. In addition to providing
increases in storage and transportation, it would provide some increase for programs aimed at reducing
energy use in buildings and industry -- areas that are clearly high payoff but where the need for
Federal involvement is not clear.
GERALD LIBRARY P FORD
Issue Paper
Energy Research and Development Administration
1977 Budget
Issue #3: Nuclear Fuel Reprocessing
Statement of Issue
What steps, if any, should the Federal Government take, through ERDA, to assure the future
availability of a private industry to reprocess nuclear fuel?
Background
Reprocessing of spent fuel from nuclear power plants is needed (a) to recover valuable uranium
and plutonium which can be reused ("recycled") as fuel and (b) to process radioactive waste material
into a form suitable for safe disposal. Having reprocessing available by 1985 will relieve some of
the demand of new uranium mines, mills and enrichment plants and reduce the cost of nuclear power.
Furthermore, reprocessing nuclear fuel will help provide a method for environmentally sound waste
disposal and for this reason alone ought to be developed.
Using Government technologies for reprocessing materials for nuclear weapons, a commercial
reprocessing industry began to develop in the 1960's. One small private plant has operated and two
other private efforts have been undertaken. But, due to regulatory and technical problems, all
three plants are now shutdown.
-
Allied General Nuclear Fuel Services (AGNS) has almost completed the first stage of a
large reprocessing complex in Barnwell, S.C., at a cost of $250 million. However, there
are two needed additional stages which cannot be built until the Nuclear Regulatory
Commission (NRC) decides whether - and how - to permit plutonium fuel to be recycled. NRC
will not make its decision on permitting plutonium recycle until CY 1977 after completion
of a generic environmental impact statement concerning the use of plutonium as fuel,
supplemented by an analysis of the problems of safeguarding recycled plutonium against
FORD
theft. The operation of the AGNS complex will be delayed until 1983, at the earliest.
Completion of the complex will probably cost about an additional $750 million.
The Nuclear Fuel Services Plant in West Valley, New York, which operated from 1966 to 1977
and then closed for an expansion, must comply with all current and future NRC standards,
which delays this plant's operation until after 1983.
2
-
The General Electric company completed a small reprocessing plant at Morris, Illinois,
in 1974 at a cost of $80 million. However, the plant cannot be operated due to technical
problems.
Thus, development of a competitive reprocessing industry is stalled due to (a) the lack of a
decision by NRC to permit plutonium recycle (b) the uncertain costs associated with meeting any new
NRC safeguards regulations and (c) some technical uncertainties involved in reprocessing nuclear
fuel. All these uncertainties preclude private investment in billion dollar reprocessing facilities.
In order to attain timely benefits of reprocessing, the U.S. Government could stimulate the private
sector by attempting to alleviate uncertainties. Possible Government actions include funded
Government/industry ventures to build demonstration plants, purchase of plutonium produced by
industry (for potential resale as fuel after NRC completes its regulatory actions) and guarantees
to industry against future regulatory actions which could prevent plant operation.
Alternatives
#1. Let private industry resolve the nuclear reprocessing problems itself on its own time
schedule. Provide a small ERDA program in reprocessing R&D to assist the regulatory
process and solve technical problems.
#2. Initiate a potential $1 billion cost-shared ERDA/industry program (with $97 million in
1977 BA and $38 million in supporting R&D) to demonstrate complete nuclear fuel
reprocessing capability in commercial-scale facilities. ERDA would issue requests for
proposals in FY 1976 which would allow industry to identify, on a competitive basis, the
support it needs to proceed. (ERDA request).
#3. Similar to Option #2 except that instead of $97 million BA being included in the ERDA
budget for the joint ERDA/industry program, $67 million BA ($19 million in outlays) would
be included in the overall budget contingency for 1977. Depending upon evaluation of the
industry responses, a decision would later be made on whether to submit an amendment to
ERDA's FY 1977 budget for an ERDA/industry joint program. (OMB recommendation).
Analysis
July 1 to Sept.
1975
1976
30, 1976
1977
1978
1979
1980
1981
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
($ Millions)
Alt. #1
--
--
16.5
12.5
3.8
3.8
29
25
18
20
14
15
9
10
5
6
Alt. #2 (Agency req.)
--
:
16.5
12.5
3.8
3.8
135
69
200
100
200
200
200
300
200
200
Alt. #3(OMB rec.)
--
16.5
12.5
3.8
3.8
35
30
9
10
9
0
8
8
7
7
(Contingency Allow.)
:
--
:
--
( 67)
(
19)
(100)
(
50)
(100)
(100)
(100)
(150)
(100)
(100)
3
Agency Request
(Difference from Alt. #2 (Agency request)
1977 Outlays
1978 Outlays)
(
Alt. #1
-44
-80
Alt. =3 (OMB recommendation)
-39
-90
Alt. #3 (OMB recommendation if
contingency is used)
-20
-40
Alternative =1 would likely result in a substantial delay in achieving the benefits of plutonium
recycle, and does not, therefore, appear to be a viable alternative.
Agency Request. Alternative =2. To demonstrate that the Government is serious about solving nuclear
fuel reprocessing problems and to be able to sign agreements immediately after evaluating industry
proposals, ERDA wants funds for a cooperative program in its FY 1977 budget.
OMB Recommendation. Alternative #3. In order to take full advantage of the potential benefits of
nuclear fuel reprocessing, this country should have reprocessing capacity developed by the mid-1980's.
The capacity should be owned, built and operated by the private sector. To assure this objective,
the uncertainties (regulatory, economic, or technical) now impeding industry must be removed in a
timely manner and at the least cost to the U.S. Government. However, the nature of the support
required has not yet been adequately defined by ERDA. Furthermore, by not including a specific
dollar level we can maintain our flexibility, and also help prevent industry, in developing its
proposals, from over or underestimating the size of the possible Federal commitment. ERDA should
proceed to solicit expressions of interest from industry to find out the specific level and type of
Government support required. Following a review of the industry response, the Administration can
decide whether to announce a specific new Government program in this area and submit an FY 1977 budget
amendment.
In the meantime, the Administration can reflect its concern about having the nuclear fuel reycle and
waste problems solved in the national interest by citing (a) increased R&D funds provided and (b)
GERALD
the plan to solicit ideas from industry-in the Budget or State of the Union Messages.
R.
Recently the Administration has informed the nuclear industry that if it fails to support private
FORD
uranium enrichment. the Nuclear Fuel Assurance Act may net pass and ERDA would be forced to divert
LIBRARY
funds to expanding the Government's uranium enrichment plants. By refraining from commiting now to
3 definitive dollar level of assistance for reprocessing demonstration plans, we would be exerting con-
tinued pressure on the nuclear industry to support the Administration's private uranium enrichment plan,
GERALD R. FORD LIBRARY
This form marks the file location of item number
1
as listed on the pink form (GSA Form 7122, Withdrawal Sheet)
at the front of the folder.
Justice