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FY 1977 - 11/26/75 - ERDA Background Book (1)

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The original documents are located in Box 10, folder "FY 1977 - 11/26/75, ERDA Background Book (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 Gerald Ford donated to the United States of America his copyrights in all of his unpublished writings in National Archives collections.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 ERDA FY 1977 Director's Review SUMMARY DATA Energy Research and Development Administration 1977 Budget 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 * * XXX XXX OMB recommendation 5194 4089 8287 8917 OMB employment ceiling XXX xxx 8052 8592 TQ February budget as amended 1271 1177 8052 8592 enacted * * XXX XXX OMB recommendation 1271 1177 8287 8971 1977 July planning target 5490 5070 XXX XXX original agency request 7570 6222 9092 9903 revised planning target N/A 5290 XXX XXX revised agency request 6948 5797 8659 9470 OMB recommendation 5971 5219 8543 9267 1978 OMB estimate 5693 5543 8543 9267 *not enacted as of 11/11/75 Summary of Issues 1977 1978 Agency req. OMB rec. OMB estimate BA 0 BA 0 BA 0 Issues: #1 Enhanced Recovery of Oil & Gas 59 41 37 32 to be determined #2 Hydrogen Pilot Plant: - Pilot Plant 37 29 - 6 15 31 - Coal R&D 336 321 307 307 427 365 #3 Solar Energy: - Heating and Cooling 54 46 29 25 33 26 - Solar Electric 120 87 78 55 92 83 #4 Geothermal Energy 60 56 49 42 50 45 #5 Conservation Programs 224 150 99 78 120 90 GERALD #6 Nuclear Fuel Reprocessing and Recycle Support 135 69 22 20 9 10 - Contingency allowance - - 67 19 100 50 #7 Commercial Waste Management 120 91 85 66 FORD 75 70 #8 Light Water Reactor Technology Program 62 40 10 8 LIBRARY 9 9 #9 Employment Levels for ERDA 209 209 200 200 204 204 #10 Nuclear Weapons Research and Testing (Classified) 582 582 507 507 507 507 #11 N-Reactor (Classified) 15 15 21 21 to be determined Agency Objectives and Program Evaluation Efforts ERDA Objectives ERDA was established on January 19, 1975. The Federal Non-nuclear Energy R&D Act of 1974 required ERDA to submit to Congress by June 30, 1975, a comprehensive plan for energy research, development, and demonstration. Thus, from its inception, ERDA has been required to place priority on defining its objectives in energy R&D and preparing a detailed planning document on an accelerated basis. As discussed in the previous section on "R&D Strategy," OMB staff has been critical of the major conclusion of ERDA's June 30 plan that all national energy R&D goals must be pursued together if we are to gain and maintain energy independence by the year 2000. OMB staff's principal criticism is that ERDA has not been sufficiently selective in establishing its major priorities for energy R&D (i.e., we disagree that all technological approaches have to be pursued on a greatly accelerated basis). As outlined in the section on "R&D Strategy," OMB staff has also disagreed with specific objectives in ERDA's plan. ERDA has a statutory requirement to submit a new energy R&D plan to Congress each January. The timing of these submissions is more favorable to OMB than was the timing of the June 30 plan (i.e., we will be able to incorporate the results of the President's FY 1977 budgetary decisions in the January plan). Hopefully, this new timing will introduce some additional discipline in the planning and resource allocation process and will result in a more rigorous set of priorities for energy R&D. As outlined in Mr. Fri's transmittal letter of September 30, ERDA is also in the process of reviewing its agency objectives (all programs, not just energy R&D) and establishing a comprehensive Program Approval Document (PAD) system. For each program, the PAD will include objectives, critical milestones, and resources required. ERDA intends the PAD system to be its primary means of management control and measure- ment of agency performance. The PAD system is scheduled to begin operations early in CY 1976. Once ERDA and OMB have agreed upon major priorities and program objectives for the agency, the PAD system appears to have excellent potential for being an effective program evaluation and control system for ERDA management. This system, however, will not be effective unless there is sound "front end" planning of the programs ERDA should pursue. 2 ERDA Program Planning and Evaluation Efforts Effective program evaluation requires effective planning against which to evaluate. As indicated, OMB staff has been disappointed in ERDA's program planning efforts to date. In particular, there does not yet appear to be an overall capability within the ERDA organization to conduct penetrating analyses of program options either within or across major technologies. This was reflected in the ERDA June 30 plan and in ERDA's initial FY 1977 budget submission. Both documents were marked by a failure to identify costs and benefits of pursuing alternative technological approaches. Thus, no real program tradeoffs were made and these documents contained very high expectations for continued funding increases. Until now ERDA has placed most of the real responsibility for program planning with each of the Program Assistant Administrators. For example, the Assistant Administrator for Nuclear Energy has the task of developing options for plutonium fuel reprocessing, commercial radioactive waste management, Liquid Metal Fast Breeder Reactor (LMFBR) commercialization, and other areas. However, OMB staff does not believe that a satisfactory analytic basis for decision-making (independent of the AA's) has been established by ERDA for these and other programs, notwithstanding the fact that OMB has been working for months with ERDA to try to have ERDA analyze specific alternatives. ERDA does have an Assistant Administrator for Planning and Analysis who could provide a more critical review to counter balance the inevitable desires of the Program AA's to promote their own programs. However, until recently, the AA for Planning and Analysis has not generally challenged the Program AA's within their areas of program responsibility. The Program Evaluation staff has largely been restricted to such tasks as coordinating the preparation of the June 30 Plan (using substantive inputs from the Program AA's). To some extent, the inadequacy of ERDA's program planning and analysis efforts results from the fact that ERDA is so new and has so many new people in key roles. Under the circumstances, OMB's expectations for the rapid achievement by ERDA of a satisfactory program evaluation capability may have been unrealistic. With some OMB encouragement, top ERDA management has recently reached the conclusion that ERDA needs to establish a more effective program planning, analysis and evaluation system. The AA for Planning & Analysis has been given the task of formulating recommendations for such a system. An effective system would ensure that the AA for Planning & Analysis, the Controller, and other key staff offices would participate in the program planning process and thereby provide additional perspectives for top ERDA management. This is a key move to provide the basis for meaningful evaluation in the sense of evaluating against sound program objectives. Energy Research and Development Administration 1977 Budget Distribution of Budget Authority (In millions of dollars) July 1 - Sept. 30 1976 1976 1977 1975 Feb. Agency Req/ Agency Req/ Original Rev. OMB 1978 Act. Budget ONB Recom. OMB Recom. Agency Req. Agency Req. Recom. OMB Est. Direct Energy R&D (1322) (1590 ) (1684) (434) (3209) (2926 ) (2265) (2575) Non-nuclear R&D: ( 442) ( 540 ) (636) (168) (1342) (1111) ( 765) (1007) Fossil 335 394 435 113 721 601 473 672 Solar 40 71 89 26 255 199 126 147 Geothermal 28 23 31 8 90 70 49 50 Conservation 31 42 71 18 235 223 99 120 Environmental Control 8 10 10 3 41 17 18 18 Nuclear R&D: ( 880) (1050) (1048) (266) (1867) (1815) (1500) (1568) Fusion- Magnetic Confinement 125 156 176 56 384 321 289 307 Laser 64 74 91 23 127 110 95 101 Fission- Fast Breeder 488 534 490 114 706 677 655 682 Other 87 145 124 28 195 188 119 100 Nuclear Fuel Cycle 20 22 38 11 161 174 62 150 Commercial Waste Management 13 14 16 5 58 120 85 75 Reactor Safety Facilities -- -- -- -- 35 33 33 5 Nuclear Safeguards 8 19 20 4 34 34 25 26 Laser Isotope Separation 22 32 33 10 53 44 44 40 Uranium Enrichment Process Development 53 54 CO 15 114 114 93 82 Supporting Energy R&D ( 349) ( 392) ( 400) ( 96) ( 572) ( 462) ( 415) (424) Biomed & Environmental Effects 164 192 193 46 281 224 191 191 Basic Energy Sciences 185 200 207 50 291 238 224 233 GRAALD FORD 1976 July 1 - Sept. 30, 1976 1977 1978 1975 Feb. Agency Req/ Agency Req/ Original Rev. Agency OMB OMB Actual Budget OMB Recom. OMB Recom. Agency Reg. Request Recom. Estimate Production of Enriched Uranium: (31) (258) (390) (161) (756) (728) (706) (115) Production/Capacity Expansion 593 833 982 256 1336 1308 1336 1058 Revenues -562 -575 -592 -95 -580 -580 -630 -943 Defense Related Programs (1493) (1666) (1720) (460) (2209) (2100) (1914) (1843) Nuclear Weapons (1006) (1049) (1103) (283) (1437) (1328) (1180) (1177) R&D 261 293 304 85 387 380 327 317 Testing 192 219 232 66 274 258 228 220 Production 384 379 387 103 499 468 436 501 Equipment 69 63 67 15 87 87 75 74 Construction 100 95 113 14 190 135 114 65 Other Weapons Mat'ls Production 298 381 381 114 565 565 527 424 Naval Propulsion Reactor Dev. 189 236 236 63 207 207 207 242 All Other: (393) (373) (1000) (120) (824) (732) (671) (736) Uranium Resource Assessment 8 19 19 6 46 46 36 40 Peaceful Nuclear Explosives - - - - 4 2 - - High Energy Physics 150 177 177 44 250 241 200 231 Spacecraft Power 29 38 39 9 50 40 34 33 Program Support 204 234 256 64 417 345 269 271 Operational Safety 4 6 6 1 10 11 8 6 Other Revenues -85 -101 -101 18 -81 -81 -76 -76 Financial Adjustments 83 15 17 15 78 78 78 78 Nuclear Fuel Reprocessing Contingency 67 100 Synthetic Fuel Construction Grants 600 Legislative Proposal -22 -22 - 4 Synthetic Fuels Loan Program 2 2 5 3 Synthetic Fuels Price Supports Geothermal Dev'l. Fund Contingency 50 50 50 50 Special Foreign Currency 7 7 1 Total Budget Authority 3588 4279 5194 1271 7570 6948 5971 5693 The Loan Guaranty Program is expected to receive $1.5 billion in borrowing authority in FY 1976. Revenues are collected in proportion to the outstand- ing guaranteed debt for the purpose of paying defaults and administrative expenses, consequently the BA and 0 statistics show revenues less administrative expenses. 2/ The Price Guaranty Program is expected to receive $1.0 billion in borrowing authority in FY 1976. Energy Research and Development Administration 1977 Budget Distribution of Outlays (In Millions of Dollars) July 1- 1976 Sept. 30, 1976 1977 1978 1975 Feb Agency Req/ Agency Req/ Original Rev. Agency OMB OMB Actual Budget OMB Recom. OMB Recom. Agency Req. Request Recom. Estimate Direct Energy R&D (1012) (1375) (1417) ( 368) (2514) (2308) (1931) (2280) Non-Nuclear R&D: ( 207) ( 467) ( 514) ( 105) (1043) ( 872) ( 671) ( 837) Fossil 148 335 352 67 571 499 444 563 Solar 15 55 65 17 202 152 91 123 Geothermal 20 29 32 4 71 56 42 45 Conservation 17 38 55 14 166 150 78 90 Environmental Control 7 10 10 3 33 15 16 16 Nuclear R&D: (805) ( 908) ( 903) ( 263) (1471) (1436) (1260) (1443) Fusion - Magnetic Confinement 95 142 146 43 273 235 214 306 Laser 56 72 84 22 113 99 88 94 Fission - Fast Breeder 462 472 429 117 609 585 575 643 Other 76 93 95 42 168 163 108 105 54 Nuclear Fuel Cycle 17 21 33 9 78 89 75 Commercial Waste Management 11 13 14 4 48 91 66 70 Reactor Safety Facilities - - - - 26 25 25 7 Nuclear Safeguards 7 14 15 4 31 31 25 26 Laser Isotope Separation 19 27 28 8 47 40 39 40 Uranium Enrichment Process Development 62 54 59 14 78 78 66 77 Supporting Energy R&D ( 317) ( 361) ( 363) ( 96) ( 498) ( 425) ( 392) ( 410) - omed and Environment. Effects 149 177 178 46 241 210 190 190 Basic Energy Sciences 168 184 185 50 257 215 202 220 July 1 - Sept. 30 1976 1976 1977 1975 Feb. Agency Req/ Agency Req/ Originial Rev. OMB 1978 Actual Budget OMB Recom. OMB Recom. Agency Req. Agency Req. Recom. OMB Est. Production of Enriched Uranium ( -27) (181) (299) (148) (651) (623) (601) (317) Production/Capacity Expansion 536 756 891 243 1231 1203 1231 1260 Revenues -562 -575 -592 -95 -580 -580 -630 -943 Defense Related Programs (1501) (1614) (1647) (447) (1984) (1924) (1796) (1911) Nuclear Weapons: (1010) (1034) (1067) (284) (1293) (1238) (1141) (1179) R&D 257 284 295 82 362 357 317 317 Testing 189 211 224 61 255 243 220 220 Production 377 378 379 99 466 443 419 495 Equipment 90 75 79 16 80 80 74 74 Construction 97 86 90 26 130 115 111 73 Other: Weapons Mat'ls Production 276 341 341 99 465 460 429 494 Naval Propulsion Reactor Development 215 239 239 64 226 226 226 238 All Other: (344) (345) (363) (118 ) (575) (517) (499) (625) Uranium Resource Assessment 7 15 15 5 38 38 30 40 Peaceful Nuclear Explosives - - - - 3 2 - - High Energy Physics 172 178 178 44 215 201 191 195 Spacecraft Power 35 36 37 10 45 36 32 33 Program Support 206 227 245 64 328 295 266 272 Operational Safety 4 6 6 2 9 8 6 7 Other Revenues -85 -101 -101 -17 -81 -81 -76 -76 Financial Adjustments 5 -16 -- 11 13 13 13 58 Nuclear Fuel Reprocessing Contingency 19 50 Synthetic Fuels Construction Grants 7 23 Legislative Proposals -22 -4 Synthetic Fuels Loan 2 2 5 3 Guaranty Program Synthetic Fuels Price Guaranty Program 2/ Geothermal Development Fund Contingency 4 4 4 19 Special Foreign Currency 3 3 1 2 2 2 1 Total Outlays 3146 3876 4089 1177 6222 5797 5219 5543 The Loan Guaranty Program is expected to receive $1.5 billion in borrowing authority in FY 1976. Revenues are collected in proportion to the outstand- ing guaranteed debt for the purpose of paying defaults and administrative expenses, consequently the BA and 0 statistics show revenues less administrative 2/ The expenses. Price Guaranty Program is expected to receive $1.0 million in borrowing authority in FY 1976. Energy Research and Development Administration FY 1977 Budget Five-Year Projections (OMB Estimate in Millions of Dollars) 1977 1978 1979 1980 1981 Direct Energy R&D BA (2265) (2575) (2460) (2410) (2370) B0 (1931) (2280) (2462) (2473) (2437) Non-Nuclear R&D BA ( 765) (1007) ( 910) ( 909) ( 843) B0 ( 671) ( 837) ( 940) ( 977) ( 911) Fossil BA 473 672 563 601 535 B0 444 563 645 681 601 Solar BA 126 147 149 100 100 B0 91 123 121 100 104 Geothermal BA 49 50 50 50 50 B0 42 45 48 50 50 Conservation BA 99 120 130 140 140 B0 78 90 110 130 140 Environmental BA 18 18 18 18 18 Control B0 16 16 16 16 16 1977 1978 1979 1980 1981 Nuclear R&D BA (1500) (1568) (1550) (1501) (1527) BO (1260) (1443) (1522) (1496) (1526) Fusion Magnetic Confinement BA 289 307 310 312 403 B0 214 306 311 299 340 Laser Fusion BA 95 101 106 106 86 BO 88 94 103 103 106 Fission Fast Breeder BA 655 682 645 617 572 Bo 575 643 676 650 610 Other BA 119 100 100 90 90 BO 108 105 100 90 90 Nuclear Fuel Cycle BA 62 150 150 150 150 B0 54 75 100 125 150 Commercial Waste Mgt. BA 85 95 100 100 100 BO 66 70 80 90 100 Reactor Safety BA 33 5 - - I Facilities B0 25 7 6 - - Nuclear Safeguards BA 25 26 26 26 26 B0 25 26 26 26 26 Laser Isotope Separation BA 44 40 40 40 40 B0 39 40 40 40 40 Uranium Enrichment BA 93 82 73 60 60 Process Development BC 66 77 80 73 64 1977 1978 1979 1980 1981 BA (415) (424) (424) (424) (424) Supporting Energy R&D Bo (392) (410) (420) (412) (412) Biomed & Environmental BA 191 191 191 191 191 Effects B0 190 190 190 190 190 Basic Energy Sciences BA 224 233 233 233 233 Bo 202 220 230 222 222 Production of Enriched BA (706 ) (115) (-123) (-220) (-514) Uranium Bo (601 ) (317) ( -9) (-215) (-513) Production/Capacity BA 1336 1058 998 980 986 Expansion B0 1231 1260 1112 985 987 Revenues BA -630 -943 -1121 -1200 -1500 Bo -630 -943 -1121 -1200 -1500 Defense Related Programs BA (1914) (1843) (1887) (1838) (1760) Bo (1796) (1911) (1932) (1898) (1822) Nuclear Weapons: BA (1180) (1177) (1261) (1266) (1208) Bo (1141) (1179) (1277) (1275) (1236) R&D BA 327 317 317 317 317 BO 317 317 317 317 317 Testing BA 228 220 220 220 220 Bo 220 220 220 220 220 Production BA 436 501 617 634 576 BO 419 495 600 638 604 Equipment BA 75 74 74 74 74 BO 74 74 74 74 74 Construction BA 114 65 33 21 21 BO 111 73 66 26 21 4 1977 1978 1979 1980 1981 Other: Weapons Mtl's Produc- BA 527 424 380 371 346 tion BO 429 494 428 404 366 Naval Propulsion Reactor BA 207 242 246 201 206 Development B0 226 238 227 219 220 All Other BA (671) (736) (682 ) (660 ) (654 ) BO (499) (625) (692 ) (734 ) (759 ) Uranium Resource Assess- BA 36 40 40 40 40 ment BO 30 40 40 40 40 Peaceful Nuclear BA - - - - - Explosives BO - - - - - High Energy Physics BA 200 231 230 208 202 Bo 191 195 217 230 212 Spacecraft Power BA 34 33 33 33 33 BO 32 33 33 33 33 Program Support BA 269 271 271 271 271 BO 266 272 271 271 271 Operational Safety BA 8 6 6 6 6 BO 6 7 7 7 6 Other Revenues BA -76 -76 -76 -76 -76 BO -76 -76 -76 -76 -76 Financial Adjustments BA 78 78 78 78 78 BO 13 58 58 58 58 5 1977 1978 1979 1980 1981 Nuclear Fuel Reprocessing BA 67 100 100 100 100 Contingency B0 19 50 100 100 100 Synthetic Fuels Construc- BA tion Grants B0 7 23 42 71 115 Synthetic Fuels Loan 1/ BA 5 3 Guaranty Program B0 5 3 -5 -16 -24 Synthetic Fuels Price 2/ BA Support Program B0 Geothermal Development Fund BA 50 50 50 50 50 Contingency B0 4 19 19 22 23 Special Foreign Currency BA B0 2 1 TOTAL BA (5971) (5693) (5380) (5162) (4744) B0 (5219) (5543) (5511) (5308) (4916) 1/ The Loan Guaranty Program is expected to receive $1.5 billion in borrowing authority in FY 1976. Revenues are collected by proportion to the outstanding administrative expenses, consequently the BA and 0 statistics show revenues less administrative expenses. 2/ The Price Guaranty Program is expected to receive $1.0 billion in borrowing authority in FY 1976. MAJOR ISSUES Fossil Energy The Issue papers on Oil and Gas Enhanced Recovery (Issue #1) and the Hydrogen Pilot Plant (Issue #2) cover only a portion of the fossil energy activities in ERDA. The following overview table illustrates how these Major Issues and Other Issues relate to the fossil energy budget described previously: FY 1977 Total 1975 1976 T.Q. Agency Req. OMB Rec. 1978 - 1981 Fossil Energy Program BA 0 BA 0 BA 0 BA 0 BA 0 BA 0 Coal: Coal R&D (Issue #2) 256 128 301 282 83 46 336 321 307 307 1653 1696 Coal Demo. Plant (Other Issue) 26 3 62 27 17 8 130 84 100 80 400 422 Hydrogen Pilot Plant (Issue #2) 14 - 15 - 3 - 37 29 - 6 42 63 Total Coal 296 131 378 309 103 54 503 434 408 393 2095 2181 Petroleum & Natural Gas: Enhanced Recovery Demo. (Issue #1) 23 5 28 19 6 8 44 26 28 23 112 136 Research (Issue #1) 5 5 9 9 1 1 15 15 9 9 36 36 Total PNG 28 10 37 28 7 9 59 41 37 32 148 172 In-situ Technology: Oil Shale (Cther Issue) 4 4 14 10 2 3 21 12 21 12 99 109 Coal Gasification (Other Issue) 6 2 5 4 1 1 15 10 5 5 20 20 Research 1 1 1 1 - - 3 2 2 2 8 8 Total In-Situ 11 7 20 15 3 4 39 24 28 19 127 137 Total Fossil Energy 335 148 435 352 113 67 601 499 473 444 2370 2490 GERALD Issue Paper Energy Research and Development Administration 1977 Budget Issue #1 : Enhanced Recovery of Oil & Gas Statement of Issue Should ERDA accelerate its cost-shared program to demonstrate technologies for the enhanced recovery of oil and gas? Background ERDA's "National Plan for Energy R,D&D" lists enhanced recovery technologies for oil and gas as one of three highest priority R&D areas for increasing near-term energy supplies. This conclusion stems from ERDA's projection that over the next 40 years up to one-fourth of all domestic oil and gas production could be attained through the application of enhanced recovery. This might be possible because up to now, most domestic oil fields have yielded only 30 to 50 percent of their oil. Enhanced oil recovery techniques involve the injection of liquids or gases to push out some of the remaining oil. Although it will never be practical to extract 100 percent of the oil, some methods and combina- tions of procedures, could increase ultimate recovery by 10 to 20 percent. Enhanced gas recovery techniques involve fracturing the reservoir rock in order to release gas fast enough to justify the cost of drilling and distribution. Current estimates of industry expenditures for enhanced recovery research and field demonstrations range between $100 and $200 million per year. A two year old survey indicated 100 ongoing private sector oil field projects and more recent indications are that these efforts have been greatly expanded. These projects include conventional methods in widespread large-scale use as well as the more costly advanced techniques also included in the Federal program. By the end of FY 1976, the ERDA program is expected to involve (1) 35 to 40 cost-shared demonstration projects each of 2 to 5 year duration; (2) a $9 million per year program of research in ERDA's Energy Research Centers and National Laboratories; and (3) a small effort in gas and oil utilization research (e.g., engine testing of fuels). The total ERDA effort in FY 1976 totals $37 million (BA). 2 ERDA's requested budget level of $59 million for FY 1977 with a five-year runout cost of over $500 million, would provide for starting 29 new demonstration projects in FY 1977 (in addition to the 35-40 now funded) and would lead, over the next five years, to the completion of over 150 demonstration projects as well as a six- fold increase in the laboratory research program (over the current level of $9 million). Since current domestic oil and gas production is derived, almost entirely, from only 260 major oil and gas reservoirs, ERDA's demonstra- tion effort represents a very extensive program. Alternatives #1. Increase the size of the enhanced recovery program for both oil and gas by initiating 29 new demonstra- tion projects and enlarging the laboratory research effort by 60%. #2. Continue ongoing demonstration projects and research efforts while completing a definitive program management plan before committing to new demonstration projects. #3. Phase out demonstration program and restrict all future efforts to laboratory research. Analysis July 1 - Sept. 1975 1976 30, 1976 1977 1978 1979 1980 1981 Budget Authority/Outlays BA 0 BA 0 BA 0 BA 0 BA 0 BA 0 BA 0 BA 0 ($ Millions) Alt. #1 (Agency req.) 28 10 37 28 7 9 59 41 109 85 127 126 118 119 118 118 Alt. #2 (OMB rec.) 28 10 37 28 7 9 37 32 (TO BE DETERMINED ) Alt. #3 28 10 37 28 7 9 29 29 35 40 31 40 15 18 10 10 Number of Demo. Starts: Alt. #1 (Agency req.) 16 22 0 29 36 37 26 5 Alt. #2 (OMB rec.) 16 22 0 ( TO BE DETERMINED ) Alt. #3 16 22 0 0 0 0 0 0 CHOS LIBBARY 3 ERDA argues that its cost-shared demonstration projects will: - Accelerate private R&D efforts by sharing the cost with industry of high-risk field tests, each costing $5-10 million; - Increase dissemination of information about improved recovery technologies to both major companies and independents thereby reducing unnecessary duplication of R&D; and - Provide a credible assessment of the benefits of enhanced recovery R&D and the potential of full-scale use to the public, to Government agencies, and to industrial management. ERDA staff has asserted that private industry would eventually develop and apply these enhanced recovery technologies but that the ERDA program would accelerate this process by five to ten years. If true, such a situation would justify a substantial Federal program. However, ERDA admits that there is no hard analysis or evidence to substantiate this assertion. The OMB recommendation, Alternative #2 - to hold the program's funding at its current level, might eventually involve starting some new demonstration projects but it presumes that further program expansion is based upon a fully developed analyzed, and justified program plan. The need for delaying new efforts until such a plan is developed is based upon the following observation: - ERDA is only beginning to formulate a management plan that would address where demonstrations should be conducted, what technologies should be used, and how the demonstration results should effect further program planning. Based on the rate of progress during the last year, it seems unlikely that such planning will be completed before the beginning of FY 1977. - Based on ERDA's ongoing demonstration projects, there is some doubt whether Federal funds accelerate the undertaking of an enhanced recovery project or enlarge its size. Evidence for this conclusion comes from the history of these cost-shared projects, statements of the industry participants, and the degree of private cost sharing (as high as 80 percent). In addition, there is serious question as to whether or not there are enough qualified cost-sharing partners to utilize the FY 1977 funding request. LIBRARY GERAL FORD 4 - All of the processes proposed for cost-shared demonstration in ERDA 1977 budget request have been researched, developed, tested, and even marketed by private industry, but their utilization is very limited. Some feel this is due to the wide range of uncertainty regarding applicability, effective- ness, and economics of different methods. Whether or not these uncertainties can be resolved on anything other than a field-by-field basis is unknown, but the Federal program presumes that an overall predictive model can be developed without conducting research on each and every oil field. - One of the major deterrents to both research and utilization on enhanced recovery techniques is their cost. The current program only addresses the task of reducing uncertainty of enhanced recovery; there is almost no research on reducing the cost of applying different techniques (e.g., improved preparation or recycling of injected fluids). Similarly, the costs and uncertainties would not be so prohibitive if the value of oil recovered were higher. FEA is studying what impact its regulations have on enhanced recovery and this may lead to regulatory change with a much greater impact than the demonstra- tion program. Alternative #3, illustrates the funding that would be necessary if future program efforts were restricted to laboratory research and ongoing demonstration projects are completed. Although it may be that this alternative is consistent with the proper Federal role, it would be premature to select this alternative prior to comple- tion of a full analysis by ERDA and OMB. Agency Request: Alternative #1. ERDA perceives this area as having a very high near-term payoff and the response of the private sector to R&D opportunities as being insufficient. OMB Recommendation. Alternative #2. Hold program funding level until a more definitive program management plan makes it clear as to whether or not additional funds can be effectively utilized. GERALS R. FORD Issue Paper Energy Research and Development Administration 1977 Budget Issue #2: Hydrogen Pilot Plant Statement of Issue In the context of Fossil Energy's Coal R&D Program, should ERDA fully fund a $100 million pilot plant to produce high purity hydrogen from coal at a NASA facility? Background In the course of securing a source of liquid hydrogen to fuel the Space Shuttle, NASA examined a range of options, including the use of coal, oil, or natural gas to produce hydrogen. A conventional process using natural gas as a feedstock was selected, and in June 1975, NASA signed a twelve year contract under which the contractor would construct an additional 30 tons per day of liquid hydrogen capacity at an existing facility. The plant's vulnerability to natural gas curtailments was one of the reasons NASA investigated coal and other feedstock alternatives. Despite NASA's assured twelve year supply (1975-1987) of liquid hydrogen, the agency has supported an ERDA proposal to construct a pilot plant to produce pure hydrogen gas (30 ton/day) from coal (200 ton/day). Tenative plans provide that ERDA would fund construction, startup and one to three years of R&D operation at a total estimated cost of $110 million; and that NASA would provide a fifty acre site adjacent to the existing plant, would utilize its "fast-track" procurement and management capability to build the plant quickly, and possibly fund the operation of the hydrogen plant as a backup source of hydrogen until 1987, and as on-line source of hydrogen after NASA's existing contract expires in 1987. The coal fed hydrogen pilot plant is of interest to ERDA for two reasons: (1) the facility involves several coal gasification and and gas clean-up steps that are also utilized in producing low-BTU gas and high- BTU gas from coal; and (2) hydrogen is an intermediate product in processes which convert coal to liquid fuel and some relevant R&D could be conducted in this facility The ERDA request involves reprogramming $32 million in funds appropriated to fossil energy for more general and small scale R&D efforts in FY 1975 and FY 1976, and providing an additional $37 million in FY 1977. These funds would cover pilot plant design and construction, but an additional $42 million would be needed for start-up, operating, and associated R&D costs over the next four years 2 The ERDA Coal R&D program already contains the following efforts, totaling $62 million (BA) in FY 1976, that produce some of the same information that would result from the proposed hydrogen pilot plant: four low-BTU gasification pilot plants and process development units, five high-BTU gasification pilot plants, and one pilot plant for the production of hydrogen (which uses a method different from that of the proposed pilot plant). The FY 1977 funding requested for the hydrogen pilot plant represents about 10% of the total Coal R&D program request which is directed at improving many different technologies for the utilization of coal. The overall program involves laboratory and pilot plant work on converting coal to liquid and gaseous fuels, on using coal-gas to run gas turbines, on burning coal with greater efficiency and low sulfur emissions, as well as basic research and system studies. This Coal R&D program is closely linked to a demonstration plant program to demonstrate high-risk advanced technology (see Other Issue ) and will contribute substantially to the operation of the proposed Synthetic Fuels Commercial Demonstration Program (see Other Issue ). Alternatives #1. Proceed with design and construction of a fully Federally funded ERDA/NASA hydrogen pilot plant at a total estimated cost of $111 million. In addition, ERDA requests a $35 million increase, over FY 1976, in the other Coal R&D program areas for a total of $336 million (BA) in FY 1977. #2. Proceed with a cost-shared pilot plant designed and located to best complement ERDA's Coal R&D program; use NASA site if it is still suitable. This alternative also recommends funding for the remaining Coal R&D Program at a level which is $ 29 million below that requested, and $6 million above FY 1976 funding Analysis July 1- Sept. 1975 1976 30, 1976 1977 1978 1979 1980 1981 Budget Authority/Outlays BA 0 BA 0 BA 0 BA 0 BA 0 BA 0 BA 0 BA 0 ($ Millions) Coal R&D: Alt. #1 (Agency req.) 256 128 301 282 83 46 336 321 507 424 597 562 617 635 544 615 Alt. #2 (OMB Rec.) 256 128 301 282 83 46 307 307 427 365 433 416 437 481 356 434 Hydrogen Pilot Plant: Alt. #1 (Agency req.) 14 -- 15 -- 3 -- 37 29 12 36 12 28 9 9 Alt. #2 (OMB Rec.) 14 -- 15 -- 3 -- -- 6 15 31 12 17 5 10 95 5 3 ERDA presents three arguments in support of its request: - The hydrogen pilot plant will contribute to the Coal R&D Program's objectives by providing a large-scale facility that utilizes an approach different than any currently in the Federal program. Outside of the coal demonstration program, none of ERDA's pilot plants exceeds: 50 tons of coal per day in size. - NASA procurement and management procedures are more established and could move more quickly than ERDA, thus the requested approach may result in a facility with lower total costs than might otherwise be possible. - Beyond its R&D contribution, the hydrogen pilot plant may provide an alternate fuel supply for NASA's space shuttle program. However, there are several arguments against proceeding with this pilot plant: - NASA's need for hydrogen from this facility appears marginal because (1) under the terms of the June 1975 contract, Air Products, Inc., has agreed to provide all of NASA's projected liquid hydrogen requirements over the next twelve years; (2) the hydrogen pilot plant is likely to be very expensive to maintain on a standby basis for use during possible mid-winter natural gas curtailments, because of the staffing, maintenance, and inventorying (e.g., coal) costs; (3) even though pilot plant operating costs are difficult to project, no one has argued that the pilot plant's product will be inexpensive enough during the early 1980's to justify NASA abandoning its use of the natural gas-fed plant which it must pay for, whether it uses it or not, (this is a provision of the June contract); and (4) the option of using the pilot plant as an on-line source for hydrogen after 1987 must be weighed against the possibility that a more economical version of the coal-fed process will become available as a result of ERDA's other R&D efforts. - The coal R&D objectives of this pilot plant might be better met if it were co-located with some other coal R&D activities. This would expand the possible research opportunities, and may also reduce the costs of construction and operation. - The involvement of a private sector cost-sharing partner would not only reduce the Federal costs, but might also result in an improved pilot plant design, and a product which is more marketable than high purity hydrogen The same equipment, differently configured, can provide a variety of fuel gases or petrochemical feed- stock gases. The coal gasifier system for the hydrogen pilot plant that ERDA tentatively selected has already been extensively tested by the manufacturer (Shell-Texaco) at the 30-50 tcn-of-coal/day size, and scaling up to 200 tons/day should not present a very large risk. One firm, DuPont, already appears eager to test this system with or without a Federal partner. 4 - The scheduling of this pilot plant is neither critical to the development of any larger device or vital to gaining a fundamental understanding that might impact on future R&D decisions. In part, this is due to the number of similar related efforts ongoing in this research area. As a consequence of these observations, it is recommended that ERDA seek a private cost-sharing partner (at least 1/3 private funding) and consider a pilot plant with a broader range of applications. It is expected that this would obviate the need for additional funds in FY 1977 because of the funding ($32 million) provided in FY 1975 and FY 1976, could reduce the eventual cost to the Federal Government, and would delay the project by one year. The $29 million reduction from the request in Coal R&D is recommended in order to reduce excessive pilot plant operating funds, improve phasing of the gas turbine research program, and reduce the pace of development in the low priority MHD (magnetohydrodynamics) research program. This latter area is of special concern to Senator Mansfield and it may be expected that he will carefully scrutinize the denial of any requests in this area, even though the program doubled in FY 1976 and the recommendation is for 32% growth in FY 1977. Generally, the FY 1977 Coal R&D recommendation provides for decreases in coal liquid and gaseous fuel R&D as related pilot plant construction ends, and provides for increases in gas turbines, direct combustion, and MHD. Despite the small increase in funding that is recommended in FY 1977 over FY 1976, the Coal R&D program is viewed by the Administration as having a very high priority, and substantial program "growth" is expected to occur during FY 1977 and in subsequent years. This apparent contradiction with the funding level is due to the fact that over the last three years funding decisions have been based on projected growth rates that did not occur. Consequently, funds were unobligated in both FY 1974 and FY 1975, and the program now has over $100 million available for obligation during FY 1976 in addition to the funds shown on page 2. It is likely that some FY 1976 and transition quarter funding will be carried over into FY 1977, but this should be the last year of sizeable carryovers. Agency Request: Alternative #1. ERDA has stated that their current plan is the most cost effective approach to providing NASA with an alternate hydrogen resource and at the same time aid in the development of new technology for the generation of hydrogen and low-BTU industrial fuel gas. OMB Recommendation. Alternative #2. ERDA should proceed with a pilot plant project with a primary purpose of producing a hydrogen-enriched gas, but with a broader range of potential R&D applications. At least 1/3 private cost-sharing should be sought, and NASA should be urged to continue to make its site available to the program. Issue Paper Energy Research and Development Administration 1977 Budget Issue #3: : Solar Energy Statement of Issue What should be the pace of the solar energy program? Background The current ERDA solar energy program is largely the result of two acts passed by the 93rd Congress, the Solar Energy Research, Development, and Demonstration Act (P.L. 93-473), and the Solar Heating and Cooling Demonstration Act of 1974 (P.L. 93-409). These acts authorize a program of research, development, and demonstration with the goal of providing the option for utilizing solar energy as a viable contributor to the Nation's future energy needs. Energy from the sun may be converted into usable forms of energy by means of several conversion technologies which may be grouped into three principal categories: (1) direct thermal applications, involving the collection of sunlight through thermal collectors for uses such as the 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 such as methane, alcohols, hydrogen, or other energy intensive products from organic materials. ERDA has estimated that the future contribution of these solar energy technologies could be: Energy Production (Quads) CONVERSION TECHNOLOGY 1985 2000 2020 Direct Thermal Applications .2 3 20 Solar Electric Applications .07 5 15 Fuels from Biomass .5 3 10 Total Projected U.S. Demand 100 150 180 Estimated % of National Demand 0.8% 7% 25% 1/ Q: Quadrillion (1015) Btu's or Quads 2/ The U.S. now uses 75Q/year 2 ERDA has requested $199 million for the FY 1977 solar energy program (as compared to $89 million in FY 1976). Of this total, $177 million is for heating and cooling of buildings and solar electric applications. These two activities are the subject of the following major subissues. Other solar programs, which include fuels from biomass, agricultural and industrial process heating, and technology utilization and support, are described in the Other Issues section (pages 7, 8, and 9, respectively). Subissue #1 What should be the size and pace of the solar heating and cooling demonstration program? Background The Solar Heating and Cooling Demonstration Act of 1974 provides for the demonstration, within a three year period, of the practical use of solar heating technology, and for the development and demonstration, within a five year period, of the practical use of combined heating and cooling technology. The Act further provides that such systems be installed in a sufficient number of different geographic areas under varying climatic conditions to constitute a realistic and effective demonstration. The legislative reports indicate that the number of installations should be set administratively, but that residential installations should be in substantial numbers, and that 2000 or more units would meet the requirement. The demonstrations are planned to be conducted in five yearly cycles through FY 1979, with the first three cycles concentrating on solar heating and the later cycles concentrating on combined heating and cooling. The cycle begun in FY 1976 will implement approximately 22 commercial installations covering seven regions and approximately 100 residential installations covering 12 climatic regions. ERDA is in the process of completing a study of the optimum number of demonstration units considering such factors as climate, number of building starts, number of types of hardware systems available, and different building types. Although the results of their study have not been available for OMB analysis, preliminary indications are that ERDA may recommend a total program of 800-1000 total demonstration projects within the five year period, of which about 600-800 would be residential and 200 would be commercial. ERDA's FY 1977 request for the second cycle corresponds to approximately 275 demonstration units, most of which will be residential installations for solar heating. 3 Solar heating and cooling systems are inherently a supplemental energy source and not a total substitute for conventional heating and cooling systems because of the diffuse nature of the sun's energy, requiring large collectors, and because of residential energy needs during periods of darkness or cloudy weather. Although maintenance costs are typically low, current solar systems have an initial cost of several thousand dollars and are not economic for the homeowner today, except in areas where solar radiation is excellent and the cost of alternative energy sources is very high. ERDA has estimated that the heating and cooling program could result in energy production of 0.2Q by the year 1985 and 2Q by the year 2000. The demonstration projects to be developed in the later cycles are expected to have advanced energy storage components as well as a cooling capacity. These systems, although probably more expensive than heating only systems, may offer greater utilization by day, week and season and prove to be more viable for both the homeowner and utility. Alternatives #1. Authorize a highly accelerated demonstration program of approximately 275 units for the cycle beginning in FY 1977, with a total program of 800-1000 units expected through FY 1979. #2. Authorize an accelerated demonstration program of approximately 100 units for the cycle beginning in FY 1977, with a total program of approximately 400-500 units expected through FY 1979. Analysis July 1 - 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 (Agency req. & 12 5 27 22 8 5 54 46 61 55 61 55 10 15 10 12 cutback) Alt. #2 (OMB rec.) 12 5 27 22 8 5 29 25 33 26 33 26 5 6 5 6 4 Alternative #1, the Agency's request and ceiling solution, provides for highly accelerated demonstration of current technology systems, and envisions a continuing high level program through FY 1979. This alternative demonstrates uneconomic systems which may have a minimal, or even negative impact, on the far term production of energy from this source. This approach provides for 800-1000 total installations through FY 1979. Alternative #2, provides for an accelerated but more orderly program, recognizing the potentially positive impact of successful demonstrations, but allowing for a slower pace more consistent with the economics of current technology. Because the solar heating systems now being generated are not generally economic, OMB staff believes that the number of demonstrations should be limited to that required to evaluate the technical effectiveness of candidate systems in varying environments; additional demonstrations for the purpose of achieving greater visibility with the public would not be appropriate at this time. This alternative would also place greater emphasis on research and development which may lead to lower unit costs for later demonstrations. The total number of demonstrations with this alternative may be no more than 400-500 through FY 1979. Agency Recommendations: Alternative #1 and #2. Authorize a highly accelerated demonstration program which may require 1000 demonstrations before 1980. OMB Recommendation. Alternative #3. Authorize an accelerated but slower demonstration program, with more emphasis on R&D and a total program of approximately 400-500 units. Subissue #2 What should be the pace of the solar electric applications program? Background This subprogram involves four technological approaches to converting the sun's energy into electricity: solar thermal electric, wind energy conversion, ocean thermal conversion, and photovoltaics. In solar thermal electric, ERDA's principal thrust will be to focus the sun's energy on a central boiler with a large field of mirrors. Though there appears to be no fundamental problems which restrict development of solar thermal electric technology, neither the engineering nor economic feasibility of this technology has been established, and its eventual application will probably be limited to intermediate load service in the Southwestern United States. 5 Wind conversion has been technically feasible for producing electricity for many years. However, because of high capital costs and the requirement for strong steady winds to produce maximum output, wind systems are far from economic today except in limited areas and isolated locations where strong winds are present and the cost of alternative energy sources is high. Ocean thermal conversion is a relatively low technology in which no breakthroughs are required to demonstrate technical feasibility. In this technology, electricity is produced from a thermal gradient in the ocean. Ocean thermal systems currently suffer the high capital costs of other solar systems and the resource is limited to the United States Southeastern and Gulf Coasts, off the United States Pacific Coast, and around Hawaii and Guam. Because of the cost and difficulty of transmitting electricity from an ocean thermal electric plant to land, ocean thermal systems may not be feasible for large scale power delivery to the Continental United States Photovoltaics involves the use of large arrays of semiconductor devices to convert the sun's energy directly into electricity. These arrays have been built for space applications at costs in excess of $30,000/KW, but large cost reductions on the order of 200:1 will be required for photovoltaics to be economic for large scale applications. While scientific breakthroughs are thought possible, ERDA's thrust is to reduce costs through the development of mass production methods. If economic, photovoltaic arrays could be widely applied in the United States. Alternatives #1. Establish a highly accelerated program that seeks to realize the potential contributions of all the major solar electric technologies at the earliest possible time. #2. Continue an orderly but accelerated development of the potentially larger payoff solar thermal electric and photovoltaic technologies where engineering and technical breakthroughs are thought possible. For the wind and ocean thermal approaches, limit the program to assessing the accessible and recoverable resource base and funding of critical component development. Analysis July 1 - Sept. 1975 1976 30, 1976 1977 1978 1979 1980 Budget Authority/Outlays BA 1981 0 BA 0 BA 0 BA 0 BA 0 EA 0 BA ($ Millions) 0 BA 0 Alt. #1 (Agen.req.&cutback) 25 8 51 36 15 10 120 87 150 109 150 109 136 104 95 80 Alt. #2 (OMB rec.) 25 8 51 36 15 10 78 55 92 83 89 75 79 83 79 89 6 For alternative #1, ERDA believes that all major solar electric approaches must be greatly expanded to achieve the potential contributions of solar electric technologies at the earliest possible date. ERDA also believes that demonstration of each solar electric technology will be necessary to gain experience and generate life cycle cost data. By ERDA's estimate, this alternative could lead to the following contributions: Estimates of Energy Supplied by Solar Electric Techologies in Quads Technology 1985 2000 2020 Solar Thermal 0.0 1.2 4.2 Wind negl. 1.2 3.6 Ocean Thermal negl. .6 2.4 Photovoltaics negl. 1.8 4.8 Totals .07 4.8 15.0 OMB staff is skeptical of these resource estimates by ERDA, particularly for the wind and ocean thermal approaches. However, marked improvements in the efficiency and cost-effectiveness of the solar electric technologies may eventually prove the validity of some of these estimates. Alternative #2 (OMB Recommendation) would permit an orderly but significant acceleration of solar thermal and photovoltaic technologies, with an initial thrust towards determining the technical and engineering feasibility of the technological approaches with higher long-term payoffs. This alternative would limit the wind and ocean thermal approaches to advanced concepts that could lead to dramatic cost reductions, recognizing that costly demonstrations of uneconomic near-term technologies are not likely to lead to any significant commercialization. Agency Recommendation. Alternative #1. Authorize a program of highly accelerated development of all major solar electric approaches leading to early, Federally-funded, demonstration of each approach. OMB Recommendation. Alternative #2. Authorize an accelerated solar electric program in the higher long-term payoff areas of solar thermal and photovoltaics. Redirect funding for wind and ocean thermal systems from early demon- stration to advanced concepts. Summary of All Solar Programs (In Millions of Dollars) Program FY 1977 FY 1977 FY 1976 Request OMB Rec. BA 0 BA 0 BA 0 Direct Thermal Applications (29) (23) (61) (51) (33) (27) - Heating & Cooling 27 22 54 46 29 25 - Agricultural & Industrial Process Heat 2 1 7 5 4 2 Solar Electric Applications (51) (36) (120) (87) (78) (55) - Solar Thermal 17 13 51 33 46 34 - Photovoltaics 19 13 38 27 23 14 - Wind 12 9 22 18 6 5 - Ocean Thermal 3 3 9 8 3 3 Fuels from Biomass (6) (3) (8) (6) (6) (4) Technology Support & Utilization (4) (2) (10) (8) (10) (6) Totals 89 65 199 152 126 91 Issue Paper Energy Research and Development Administration 1977 Budget Issue #4: Geothermal Energy Statement of Issue What is the appropriate strategy and pace for developing the potential of geothermal energy? Background ERDA's geothermal energy program is the result of the Geothermal Energy Research, Development and Demonstration Act of 1974 (P.L. 93-410), which authorizes a program of research, development, demonstration, and loan guarantees for geothermal energy development with a goal of establishing this energy source as a viable potential contributor to the Nation's future energy needs. Geothermal energy is the natural heat of the earth. Geothermal reservoirs have been found primarily in the Western United States and along the Gulf Coast; more than half in the Western states are on Federal land. The world's total production of electrical power from geothermal sources has reached only about 1000 MWₑ, or about the output of one large nuclear plant. The U.S. leads the world in such production, generating 500 MWe from dry steam at the Geysers in California. The primary geothermal resources are (a) hydrothermal reservoirs (hot mineralized water or dry steam), (b) geopressured zones (zones of sand and clay saturated with methane gas and water at high temperatures and pressures), and (c) hot dry rock (hot solid rock in earth's upper crust). The United States Geological Survey has estimated the recoverable heat from these resources as follows: Recoverable Energy (Quads) Resource Type Known Inferred Hydrothermal - dry steam 2 2 - hot liquids 100 360 Geopressured 600 1730 Hot Dry Rock 80-600 240-1900 2 Currently, energy extracted from geothermal resources is used primarily to generate electrical power; however, other potential energy uses include heating, refrigeration, and industrial processing requiring heat. Unlike facilities using coal, oil, or other fuels, geothermal power plants and associated facilities must be constructed at or near the well-head because transporting steam is difficult. ERDA's current strategy is to encourage the present geothermal industry (about 20 companies) to develop the more accessible but more limited hydrothermal resources, mostly for electric power generation, so that the industry gains sufficient experience with geothermal utilization technologies to be able to adapt these technologies to exploit the less accessible but more abundant geopressured and hot dry rock resources. Development of the more abundant and geographically distributed geopressured and hot dry rocks resources has not been undertaken by industry largely because the technologies for accurate reservoir assessment and extraction have not been developed. ERDA has estimated that if their program is approved and successfully implemented, the following energy production could be achieved: Estimated Geothermal Energy Production Given Successful Program Implementation (Quads) Resource 1985 2000 2020 Hydrothermal 0.6 2.5 3.1 Geopressured negl. 1.2 9.0 Hot Dry Rock .0 .7 6.5 Total Energy .6 4.4 18.6 Approximately 50% of the outlays in ERDA's request are devoted to hydrothermal applications and the near-term demonstration of electric power generation. ERDA believes that much of the hydrothermal technology that it would develop would be applicable to tapping the geopressured and hot dry rock resources. Alternatives #1. Continue current strategy to encourage the rapid development of hydrothermal resources, including demonstration projects. #2. Redirect the program by concentrating on the development of the much more abundant but longer- term resources. Continue hydrothermal development at approximately the FY 1976 level in order to develop key components which will have application to both hydrothermal and advanced resources. 3 Analysis July 1 - - 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 (Agency req. & cutback) 28 20 31 32 8 4 60 56 141 114 117 121 95 112 54 30 Alt. #2 (OMB rec.) 28 20 31 32 8 4 49 42 50 45 50 48 50 50 50 50 Alternative #1 calls for rapid acceleration in the development of hydrothermal resources for initial significant production in the 1985-2000 time period. The disadvantage of this alternative is that it calls for initiation of costly demonstration projects in the next several years that will focus on developing technology for tapping geothermal resources with limited potential. Alternative #2 provides for orderly but accelerated growth in the R&D program and encourages development of those technologies (i.e., those to tap geopressured and hot dry rock resources) holding the greatest payoff. This alternative would continue some hydrothermal development in key component areas in order to stimulate the expansion of the existing industry to yield an early contribution. However, this alternative does not provide for early, federally-funded, commercial-scale demonstration of electric power generation from hydrothermal resources, but rather relies primarily on the private sector to tap these nearer-term resources. Agency Request: Alternative #1. The agency believes that accelerated production of geothermal energy should be developed largely through the stimulation of the small existing industry towards the development of hydrothermal resources. OMB Recommendation. Alternative #2. While the- identified resources for geothermal are substantial, no analysis has been done justifying a greatly accelerated effort for the development of hydrothermal resources. The pace and strategy of the program should match the relative potential of the geothermal resources as long- term energy sources. Issue Paper Energy Research and Development Administration 1977 Budget Issue #5: Conservation Programs Statement of Issue What should be the funding level for R&D in conservation programs, particularly those programs aimed at more efficient energy consumption in buildings, industry, and transportation? Background There are two paths for achieving energy conservation through improved technologies: (a) greater efficiency of production, distribution, and storage of energy, and (b) reduced consumption of energy at the end-use. - Projects to achieve greater efficiency fall into the areas of electricity transmission and distribution, storage of energy in more advanced batteries, creating energy from fuel cells, and utilization of garbage and other organic wastes for energy. - Projects to achieve reduced consumption of energy at the end-use through improved technologies fall into three categories: industry, buildings, and transportation. Examples of projects proposed by ERDA include: Industrial projects, such as 2/3 ERDA funding of $30 million for a more energy efficient steel rolling mill and $1 million for a pilot plant to dry grain in a vacuum with microwave heating. Building projects such as development of data on energy consumption in residential and commercial buildings. This is to support the President's legislative proposal for energy performance standards. on residential and commercial buildings. Another project is similar to the HUD total energy plant in Jersey City. Transportation projects such as contracts with the auto industry to develop advanced engines and grants to universities to study the use of methanol fuel mixtures as substitutes for gasoline. 2 Industry conducts R&D related to conservation of energy in all key program areas, although the levels of effort and commitment vary from area to area. - Electricity transmission and distribution: The Electric Power Research Institute, funded by elec- tric utilities, is spending $12 million for electricity transmission and distribution for CY 1975, which is the same amount to be outlayed by ERDA in FY 1976. ERDA works closely with the Institute as evidenced by the 23 joint projects underway, with industry paying an average 75% of the costs. - Energy storage: Industry-wide R&D in this area has been estimated by ERDA at $10 million annually. - Transportation: Automotive R&D by industry has been estimated at $54 million in CY 1974 as a result of an NSF survey. - Buildings and industry: The same HSF study indicated $56 million was spent in these end-use areas. ERDA has requested a tripling in BA for conservation R&D from $72 million in 1976 to $224 million in 1977. The largest increases have been requested in the energy storage program and in the three programs concerned with reducing energy consumption -- buildings, industry, and transportation. These increases are consistent with strong congressional interest which views conservation programs as directly helping consumers in contrast to other ERDA R&D which is perceived as helping big industry. Also end-use programs tend to have short-term benefits relative to ERDA's other R&D programs. ERDA's proposed strategy for Federal activity in conservation R&D implies a large Federal role in order to ensure, in virtually all areas, that improved technology developments occur in a timely fashion. Specifically, ERDA argues for a strong Federal role because: - Some potentially high payoff technology development activities are very expensive. For example in R&D on advanced automobiles, a university research team has estimated that $1 billion should be spent over the next 5-10 years. If an advanced automobile, such as one with a Stirling or turbine 9401 engine is mass produced, the payoff could be 2 million barrels of oil per day by the year 2000. KUNDSIT Some potentially high payoff technologies are far off. For example, improvements in battery tech- nology are being sought through studies on electrochemistry and on materials. The payoff here would be to eliminate dependence on oil for auto fuel, or store energy to meet peak power demands. Some potentially high payoff research is high risk. For example, it has been estimated that 30% of the electric power outages are caused by lightning. Yet the technology does not even exist to measure lightning surges in power lines in order to develop equipment that could accommodate the surge and prevent the outage. 3 The criteria for analyzing ERDA's individual R&D programs in conservation are: - Is the program adequately justified and sized in terms of its costs, benefits, and risks of technical and commercial success? - What is the appropriate role of the Federal Government to perform the R&D relative to the private sector? - Should ERDA or some other agency perform the Federal R&D? - Can ERDA effectively manage the requested program growth? Alternatives #1. Maintain a level program and take the chance that the private sector will perform more R&D? #2. Allow some growth in high priority projects in transportation and energy storage. #3. Same as #2, but with increases also in buildings and industry projects which might satisfy the criteria if a better justification was available on costs, benefits, and the Federal role? #4. Greatly accelerate energy conservation R&D programs in all major areas. Analysis July 1 - Sept. 1975 1976 30, 1976 1977 1978 1979 1980 1981 Budget Authority/Outlays BA 0 BA 0 BA 0 BA 0 BA 0 BA 0 BA 0 BA 0 ($ Millions) Alt. #1 31 17 72 55 18 14 72 65 72 72 72 72 72 72 72 72 Alt. #2 (OMB rec.) 31 17 72 55 18 14 99 78 120 90 130 110 140 130 140 140 Alt. #3 31 17 72 55 18 14 124 90 160 130 180 160 190 175 200 190 Alt. #4 (Agency req.) 31 17 72 55 18 14 224 150 345 257 392 305 400 324 395 336 Alternative #1, which is level in dollars, would result in a decrease in program level due to inflation. It would signal a very limited Federal role. It would be interpreted as totally unrealistic by supporters in Congress and elsewhere who believe there are substantial benefits available from conservation R&D, particularly as compared to benefits from other energy R&D programs. While the level of benefits is open to discussion, there is sufficient information about benefits to warrant modest increases on programmatic grounds in all key areas. In the areas of transportation and energy storage, significant opportunities may be missed. Concerning the agency request (Alternative #4) information is not sufficient either from ERDA or other sources to justify a tripling of BA. The Federal role relative to industry would be significantly increased tn all areas, particularly with demonstrations. ERDA would infringe on many other agency responsibilities. Finally, ERDA's ability to effectively manage a tripling in BA is doubtful. Alternative #2 best satisfies the criteria for R&D by providing for increases in transportation and energy storage. - Benefits from advanced autos include a 25-40% improvement in fuel economy, even after the 40% improvement being promised by Detroit. Advanced engines would also meet the most stringent emission standards and run on fuels other than gasoline, such as methanol and synthetic gas from oil shale or coal. Battery advances whether applied to transportation, industry, homes, and even utilities can smooth the fluctuations in energy demand during the day and week and as mentioned before in the case of autos reduce petroleum demands. Energy saved in transportation and energy storage is potentially more cost-effective in terms of oil and gas savings relative to energy savings in buildings and industry, since the latter areas depend more heavily for energy from fuels other than oil and gas. - The Federal role associated with Alternative #2 is more clear in an absolute sense and relative to other conservation programs. While industry does R&D in energy storage and advanced automobiles, its level of effort is below what is probably socially desirable. In advanced autos alone it is estimated that the nation, including Government and industry, should be spending from three to five times what it is currently spending. Industry would probably spend more on R&D in advanced autos but does not because Federal requirements on auto emissions and safety divert R&D funds in the industry to these purposes. For example, in the 1974 NSF survey private R&D spending by the auto industry was reported as $139 million for environment and $54 million for conservation. - The ERDA role is also clear relative to other Federal agencies for Alternative #2. The increase in transportation R&D would go almost exclusively to advanced autos. NASA would retain the predominate role in aviation conservation as evidenced by their 1977 budget mark of $29 million, up from $11 million in 1976. In energy storage no other agency is performing significant R&D. - Finally there is little doubt ERDA could manage the increase associated with Alternative #2. Alternative #3, provides further increases in buildings and conservation, because ERDA feels so strongly about them. Yet these programs are not as well justified in terms of costs, benefits, risks, Federal role, etc. But as a fallback position to appeals from the agency on Alternatives #1 and #2, this alternative still does not provide for the most questionable projects in the agency request, such as in garbage recycling (about which they also feel quite strongly) and demonstration projects, like the steel mill. OVERVIEW FY 1977 ERDA Budget - Overview General This Overview paper discusses: - OMB's initial planning assumptions for ERDA (7/75). - ERDA's original FY 1977 budget request (9/75). - ERDA's response to the revised FY 1977 ceiling (10/75). The primary differences between the OMB staff recommendations and the ERDA approach to reaching the revised FY 1977 ceiling are high- lighted and major issues are identified. Following this Overview paper is a separate section on energy R&D strategy. In addition, possible further reductions are listed in priority order at the end of this paper. OMB Initial Planning Assumptions In July 1975, ERDA was provided an FY 1977 Planning Ceiling of $5.1B (BO) which was essentially a runout of the ongoing program levels with no provision for major new initiatives. The $1B allowed over the FY 1976 spending total of $4.1B was required to cover three roughly equal amounts of increase to carry out the approved program: (a) runout costs of approved energy R&D facilities or demonstration projects; (b) additional uranium enrichment production and capacity expansion; and (c) cost-of- living increases for other programs. ERDA Original FY 1977 Budget Request On September 30 ERDA submitted its FY 1977 budget request of $6.2B ($1.1B over ceiling). ERDA was unwilling to provide its recommended approach to reach the Planning Ceiling. ERDA took the position that the Planning Ceiling level was inadequate to provide for needed growth in high priority energy R&D and defense programs (see attached letter of September 30 from Mr. Fri). The original FY 1977 ERDA budget submission of $6.2B (outlays) assumes a very ambitious growth rate for all program categories: - Energy R&D - ERDA desires to press forward with an accelerated program for all technologies (pursuant to their June 30 Plan). - Uranium enrichment - The cost growth is the result of the planned increase in production from existing Government plants (including increased costs of electricity) and the ongoing capacity expansion program for these three plants. These increases are required to assure enriched fuel for civilian power plants and to provide in- ventories to backstop private uranium enrichment. 2 - Defense-related programs - The increases primarily relate to the desire of ERDA and DOD for ERDA's weapons design laboratories to devote more effort to advanced R&D, including related underground testing (this objective was recently supported by the President in a FY 1976 budget amendment). In addition, ERDA projects sub- stantial increases for weapons production and for storage of radioactive wastes from plutonium production. - Other programs - The increases cover a request for more than 1,000 additional Civil Servants (over a base of 8,052) and a plan to initate a major construction program to rehabilitate and modernize ERDA's laboratories. ERDA Response to Revised (Cutback) FY 1977 Ceiling FORD Although the Division identified a number of potential cutbacks in response to the President's $28B tax reduction program, the revised LIBRARY ERDA ceiling had to be raised from $5.1B to $5.3B in order to give some recognition to the fact that the original ceiling did not provide funds for major initiatives in the nuclear fuel cycle (e.g. plutonium recycle and radioactive waste management). In response to the revised ceiling, ERDA (after an intensive review) reduced its FY 1977 request by $.4B to $5.8B. ERDA also identified actions which could be taken to reach the $5.3B revised ceiling. However, ERDA strongly recommended against going below the revised request of $5.8B (see attached ERDA letter of October 29). Thus, the gap between OMB and ERDA has been reduced from $1.1B (initial request) to $.5B (revised request). OMB Staff Assessment of Revised ERDA Request and Ceiling Case The reductions made by ERDA to reach the $5.8B level have removed much of the excessive funding contained in the original request. All programs have been reduced and in a generally reasonable way. In addition, despite ERDA's objections, we believe that many of the specific reductions identified by ERDA to get to the revised ceiling of $5.3B are acceptable. These include: - A slight slowdown in energy R&D programs (particularly conservation and fusion) which would still be 42% above FY 1976 spending levels. - A reduction in the request for nuclear weapons R&D, testing, and production (still almost 10% over FY 1976 spending levels). - An 8% increase in the charge for uranium enrichment services, based upon cost increases experienced. - Across-the-board decreases in procurement of equipment, computers, and facility improvements. 3 However, in some cases ERDA has suggested unacceptable reductions to reach the $5.3B revised ceiling: - We would recommend against the large reduction in the production of enriched uranium which was identified by ERDA to reach the revised ceiling. This would result in large penalty charges for cancelling electric power already ordered for the production plants. Most importantly, this would reduce the amount of enriched uranium avail- able to backstop private enrichment ventures and handle contingenices. - In addition, we would not recommend accepting ERDA's revised ceiling action of deferring the initiation of new efforts to resolve critical nuclear fuel cycle issues (See Issues #6-#7). - We would also recommend against the shutdown in FY 1976 of the N-Reactor, Richland, Washington, which we do not believe is a realistic option (See Issue #11). - Furthermore, we would also recommend against a non-programmatic reduction suggested by ERDA which would only consist of deferring the payment of $40M of bills to FY 1978. OMB Staff Approach Although OMB staff has not bought all of the reductions identified by ERDA to reach the revised ceiling of $5.3B, we have been able to come even lower ($5.2B) by: - Decreasing non-nuclear energy R&D. - Reducing supporting energy R&D. - Decreasing weapons R&D, testing, and production. - Applying other, relatively smaller, reductions throughout ERDA's program. The principal difference between the OMB staff approach and the ERDA revised ceiling solution concerns the relative priority of certain non- nuclear energy R&D programs (mainly solar and conservation) versus uranium enrichment production. - ERDA would protect a very large (65%) growth in non-nuclear energy R&D by greatly reducing the production of enriched uranium. - OMB staff believes that the rate of spending growth in non-nuclear energy R&D can and should be constrained. In particular, we believe that solar, geothermal, and conservation R&D could not effectively use the full amounts contained in ERDA's revised ceiling case and that, in many areas, there should be greater reliance on the private sector. Under the OMB staff approach, non-nuclear energy R&D would still receive a 31% increase over FY 1976 (see separate section following on Energy R&D strategy). 4 - In addition, for the reasons discussed previously, OMB staff would protect the production of enriched uranium. The OMB staff approach also provides for the initiation of major R&D efforts on nuclear reprocessing and commercial radioactive waste manage- ment. The ERDA revised ceiling solution assumes that these important initatives could not be covered within the revised ceiling. The OMB staff approach would substantially reduce the size of a new initiative on improving the reliability of commercial nuclear power plants which we believe should primarily be the responsibility of the private sector. Summary Table The following table summaries ERDA's budget trends by major program category (outlays $M): FY 1977 ERDA Rev. ERDA FY 1975 FY 1976 Req. ERDA Ceiling OMB Direct energy R&D (1012) (1417) (2514) (2308) (2100) (1931) Non-nuclear 207 514 1043 872 847 671 Nuclear 805 903 1471 1436 1253 1260 Supporting energy R&D ( 317) ( 363) ( 498) ( 425) ( 424) ( 392) Environmental 149 178 241 210 210 190 Basic sciences 168 185 257 215 214 202 Production of enriched uranium (including off- setting revenues) - 27 300 651 623 498 601 Defense-related programs (1501) (1647) (1984) (1924) (1793) (1796) Nuclear weapons 1010 1067 1293 1238 1168 1141 Weapons materials production 276 341 466 460 399 429 Naval propulsion reactor R&D 215 239 226 226 226 226 All Other ( 344) ( 382) ( 570) ( 511) ( 479) ( 488) High energy physics 172 178 215 201 195 191 Program support (e.g. personnel) 206 245 328 295 284 266 Misc. revenues - 85 -101 - 81 - 81 - 53 - 76 Other/fin. adjustment 51 60 109 96 53 71 Subtotal 3146 4085 6216 5791 5291 5208 Other funds : 5 6 6 6 11 Total Outlays 3146 4090 6222 5797 5297 5219 (BA) (3588) (5194) (7570) (6948) (6343) (5971) 5 Major Issues At this time, the major issues between OMB and ERDA appear to be the following: - The rate of growth for non-nuclear energy R&D programs (Issues #1-#5). - The scope and pace of initiatives in the nuclear fuel cycle (repro- cessing and radioactive waste management) (Issues #6-#7). - The initiation of a program to improve the reliability of commercial nuclear power plants (Issue #8). - The additional 1,040 personnel requested by ERDA (Issue #9). - The level of weapons R&D and underground testing (Issue #10). - Future plans for the N-Reactor, Richland, Washington, (Issue #11). In addition, there are numerous other issues which involve less significant differences between OMB and ERDA. These issues are covered in the "Other Issues" section of this book. Possible Further Reductions If it were necessary to reduce ERDA spending below the $5,219M recommended by OMB staff, the following actions could be taken (arranged in priority order with the most attractive potential action listed first and the least desirable action last). (Outlays - $M) 1. Further increase the price charged for uranium enrichment to the level likely to be charged by a new commercial plant - 72 2. Terminate the Molten Salt Breeder Reactor (MSBR) civilian power backup concept - 4 3. Further slow the pace of develop- ment of the controlled thermonuclear fusion program - 14 4. Terminate all R&D on gas-cooled civilian power reactors - 45 6 (Outlays - $M) 5. Shutdown the N-Reactor, Richland, Washington, in FY 1976 - 9 6. Greatly reduce the production of enriched uranium, as identified in ERDA's Planning Ceiling solution - 92 7. Cancel construction of the $2B Clinch River Breeder Reactor (CRBR) Liquid Metal Fast Breeder Reactor demonstration plant -100 TOTAL -322 The pros and cons of these potential actions are discussed in the last section of this book. The Treatment of Inflation Although ERDA has not formally requested an exception to the section of Circular No. A-11 concerning price levels, ERDA has been frank to state that future increases in cost-of-living have been assumed. ERDA has projected an average cost-of-living increase of 9.8% over the price levels assumed in the FY 1976 budget and the transition quarter (which ERDA calculates is equivalent to an annual rate of 7.8% over the 15 month period). It would be hard to argue that inflation has not had a severe impact upon ERDA's budget and programs. Over 96% of ERDA's budget is spent with contractors and suppliers. As a result, relative to other agencies, ERDA does not benefit much from the semi-automatic inflation adjustment made possible by periodic Civil Service pay raises. ERDA must pay competitive market rates for highly skilled technical staff, complex equipment and components, construction of facilities, and electric power for uranium enrichment and high energy physics accelerators. 7 In recent years, much of the funding increase allowed by OMB for ERDA programs has in fact been consumed by inflation. Expressed another way, if level funding had been provided there would have been about a 10% per year reduction in real program levels. Inlevel-of-effort programs (e.g. weapons R&D, basic research), OMB has not allowed sufficient funding growth to cover actual inflation. As a result, there has been a gradual reduction in program activity and in-house contractor employment levels. We believe that it would be unrealistic to assume no inflation for FY 1977. We have, therefore, generally assumed an inflation rate of 7.5%, which is about the amount of the GNP deflator for 15 months. Conclusions 1. We believe that the $5,219M case recommended by OMB staff would provide for a balanced and forward-moving program which covers all of ERDA's high priority requirements. 2. ERDA will strongly resist a $5.2B allowance and will fight hard for its $5.8M "Minimum Budget" (including amendments). ERDA will rely upon the fact that its two main programs (energy and defense) have been given high priority by the Administration. OMB and ERDA have the most disagreements on the non-nuclear energy R&D programs other than fossil (primarily solar and conservation) and the weapons programs. 3. At the $5,219M case, OMB can reply that all of ERDA's energy programs are receiving significant increases--the only question is the rate of increase. Moreover, we have not recommended wholesale program ter- minations or drastic program stretchouts. 4. Depending upon the severity of the overall fiscal situation, some of the possible further reductions may be attractive. However, these reductions would require substantial changes in ERDA's ongoing program which would be difficult to achieve. & DEVELOPMENT UNITED STATES ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION WASHINGTON, D.C. 20545 USA September 30, 1975 Honorable James T. Lynn, Director Office of Management and Budget Dear Mr. Lynn: Enclosed is a summary presentation of our 1977 Budget Estimates which has been reviewed informally with your staff. Detailed justification material prepared in accordance with OMB Circular No. A-11 is being provided separately. Our request for budget authority amounts to $7,520 million, of which $5,487 million is for the Operating Expenses appropriation and $2,033 million is for the Plant and Capital Equipment appropriation. Estimated net outlays amount to $6,219 million, of which $4,922 million is for Operating Expenses and $1,297 million is for Plant and Capital Equipment. In terms of outlays, our estimates are $1,149 million over the 1977 budget planning target of $5,070 million provided in your letter of July 25, 1975. The OMB target leaves no room for growth in key energy conservation and research, development and demonstration programs, many of which are in their initial stages and require substantial increases to develop into effective programs. In fact, the combined effect of the inflation being experienced in the economy and current "mortgages" in the ongoing energy R,D&D programs and uranium enriching activities essentially absorb the entire increase reflected in the OMB target. The target is also inadequate to provide needed additional funding in 1977 in support of our national defense obligations and to alleviate present unsatisfactory conditions in our facilities through upgraded nuclear safeguards, improved fire and safety protection, compliance with the Occupational Health and Safety Act and replacement of general purpose facilities. Nearly all ERDA programs involve high priority Presidential commitments and objectives. This is particularly true of those programs directed toward the reduction of energy demand through conservation and the development of additional sources of clean energy, the production of nuclear materials for civilian power plants, and national defense activities. The timely accomplishment of these program objectives is fundamental to the Nation's energy independence, economic well-being, and national security. Thus, we feel a strong obligation to present our best judgment of the resources required to carry out these programs most effectively. REVOLUTION AMERICAN BICENTENNIAL 1776-1976 Honorable James T. Lynn -2- We are, of course, keenly aware of and firmly dedicated to the President's objectives of minimizing Federal spending to help curb inflation. Our request reflects an intensive and painstaking review by the Assistant Administrators and Senior staff to minimize 1977 funding while meeting the program objectives established in the June 30, 1975 National Plan for Energy Research, Development and Demonstration. While we recognize that any increase in OMB's short-term budgetary planning may be difficult to accomodate, we strongly believe that our programs will contribute significantly to stablizing the economy in the future and to providing new sources of energy essential for the Nation's continued development. We also recognize that there are a large number of policy issues to be considered in the 1977 budget cycle. Among these are the support of the civilian nuclear fuel cycle including R&D to improve the current generation of light water civilian reactors, the Presidential initiative for commercial enriching, funding for national security, peaceful uses of nuclear explosives, and initiatives required by the Federal Nonnuclear Energy Research and Development Act of 1974. In the next few weeks we will be submitting the results of several internal studies and analytical efforts dealing with these issues. As you are aware, we are conducting a review of our laboratory and field office utilization which may necessitate some modification to our request. We also plan to provide OMB with a revised estimate for the Weapons Production program following decisions on the DOD budget, about December 1, 1975. Finally, we are in the process of reviewing our Management by Objectives (MBO) program to insure that current goals and objectives are compatible with those outlined in the National Plan for Energy R,D&D as well as other policy decisions made since the establishment of ERDA. We are now in the process of establishing a Program Approval Document (PAD) system. The PAD's will establish the baseline for program evaluation and will include the definition and examination of critical milestones and objectives necessary to program success. It is anticipated that PAD's documenting all significant energy programs will be completed by late January, 1976. We believe that this system will provide the necessary framework for selection of the key milestones and objectives essential to the effective measurement of agency performance and progress. Honorable James T. Lynn -3- We look forward to working closely with you and your staff in the next few months in developing an optimum Administration program for ERDA in the President's 1977 budget. Sincerely, Robatha Robert W. Fri FORD & LIBRAR 078338 Deputy Administrator Enclosure: As Stated October 29, 1975 Nonorable James T. Lynn Director Office of Management and Budget Dear Mr. Lynn: As requested by your staff, we have made a further review of the 1977 budget request for ERDA to determine the programmatic inpacts of an outlay constraint at $5,290 million instead of the $6,219 million we requested. Our review indicates that a reduction to the $5,290 million level would require a drastic curtailment of high national priority efforts and initiatives essential to the nation's further energy inde- pendence, economic well-being, and national security; would be inconsis- tent with announced Presidential goals and objectives; and is, we believe, an unacceptable level in the context of an overall budget for the Federal Government. Specifically it would require, among other things, that we: Defer for one year the initiation of new Federal initiatives to close the nuclear fuel cycle, to resolve acceptable methods of long-term storage of commercial nuclear wastes, and to improve the availability of current light water reactors. Such action could jeopardize the growth of nuclear power as a national energy source and make us even more dependent upon foreign oil. o Defer energy research and development programs to increase the efficiency of electrical energy transmission and storage, and delay the development of nuclear fusion and fission as inex- haustible energy resources, thus prolonging our dependence on others. 0 Drastically curtail our national defense activities by: - Reducing production and stockpile maintenance below levels considered acceptable by the Secretary of Defense and the Joint Chiefs of Staff. - Reducing laboratory R&D and advanced weapons development programs which the President recently approved for increased funding in 1976 based on recormendations from ERDA, the Secretary of Defense, and the National Security Council. Honorable James T. Lynn 2 - Reducing testing below that necessary to support the R&D program agreed upon by ERDA and the Secretary of Defense. Deferral of construction and reduced production from our uranium enriching operations, resulting in the permanent loss of 2,500,000 units of separative work valued at about $190 million. This loss could jeopardize our ability to support the introduction of private enrichment. Across-the-board reductions resulting in elimination and stretchout of new construction projects and equipment purchases which will impact programs to upgrade our facilities for fire and safety protection and compliance with environmental standards and OSHA requirements. We recognize, however, the severe problem in fashioning a budget which holds overall Federal outlays to the level recently announced by the President. We want to be fully supportive of this effort. Accordingly, we have developed an alternate request for 1977 which would hold our outlays to $5,734 million, which is about $500 million or 8 percent less than our already "trimmed down" request of September 30th. This alternate level still requires substantial cutbacks and deferrals, which adversely affect our programs, and we believe it to be the minimum level needed to meet our objectives in energy R&D, production of nuclear materials for civilian nuclear power, and support of national security programs. In the event OMB considers that this minimum level cannot be accommodated, I would appreciate the opportunity to meet personally with you and the President in order to resolve an acceptable budget level for the programs we are to carry out. We have provided to your staff detailed statements of the programmatic impacts at these levels. A separate classified impact statement is being forwarded for our national security programs. Sincerely, Robert C. Seamans, Jr. Administrator R&D STRATEGY Overview Paper 1977 Budget for Energy R&D GERAL FOND I. Introduction A. Role of R&D in Overall Energy Policy Although the specifics of a national energy policy have not yet been agreed upon, it is generally accepted that, for reasons of national security as well as economic stability, the U.S. must move to become less dependent on foreign energy supplies. R&D, although by no means the only potential contributor to achieving U.S. energy inde- pendence, can provide important new energy supply and utilization options for the future as well as improving or assuring the viability of current technologies. Thus, the overall goal of an energy R&D program is to assure development of a range of commercially viable and environmentally acceptable technological options to provide the capability to use extensive U.S. domestic energy resources more fully. This will, in many cases, require Federal support to bring technologies to the commercial demonstration stage. Due to long development lead times, major pay- offs from new technology will come after 1985. However, because domestic oil and gas supplies currently in widespread use are declining and because of an expected increase of 50% in total U.S. energy demand by 1985, it is important to have new energy technologies available for possible commercialization in this time frame. 2 B. Energy Resource Considerations Table 1 Domestic Energy Consumption and Supplies 15 (in 10 Btu or Quads) Fuel Consumption Recoverable Source 1974 Reserves* Resources* Coal 13.8 5,200-10,400 33,000- Oil 33.8 250- 410 590-1,920 Gas 22.3 230- 430 1,040-1,700 Shale 0.0 460- 1,160 1,050 Hydro 2.9 N/A N/A Nuclear 1.2 29,200- ? 88,200- ? Solar 0.0 0.0 N/A Geothermal 0.0 Negligible 900-2,000 TOTAL 73.2** 35,000+ 120,000+ Although oil and gas, including imports, account for about 80% of domestic energy consumption, they represent less than 2% of U.S. domestic proved recoverable energy reserves and about 1% of recoverable resources. - At $11/barrel (in 1974 dollars), domestic production of oil and gas is expected to peak in the middle to late 1980's and decline thereafter, even with extensive use of advanced recovery technologies and aggressive exploration of OCS and Alaska. By contrast, coal and nuclear fuel supplies-- which currently provide for only 18% of domestic consumption--account for almost all of the remaining 98% of energy reserves and 99% of recoverable resources. *Entries correspond to full energy content of resource and do not take account of efficiencies of utilization. **1985 demand is estimated to be between 103 and 118 Quads, depending on the prevailing world price of oil. 3 - Although domestic coal supplies are extensive and accessible, their use is severely limited by environmental constraints. Widespread use of coal without relaxing environmental standards will require new clean conversion technologies (e.g., gasification, liquefaction) or those permitting direct use of coal (e.g., flue gas desulphurization) - Current projections of nuclear plant capacity indicate that in 20 to 30 years, all economically recoverable supplies of uranium (U235) to fuel current generation of reactors would be fully committed. Tapping the remaining 98% of known U.S. nuclear resources, represented by U238 and thorium, will require development of breeder reactors. - Recovery of potentially significant solar and geothermal resources is currently limited by technological and economic uncertainties. Their economical use will require development of new or improved technologies. C. Criteria for Federal Involvement Rationale for Federal involvement in energy R&D is to compensate for inability of market system to meet adequately, or in a timely fashion, certain important U.S. goals related to national security, environmental protection, and economic growth and stability. More specifically, Federal R&D efforts are needed: - To increase the probability of success of the Nation's energy R&D effort by assuring adequate National investment despite short- term fluctuations in market incentives; - To accelerate significantly the achievement of U.S. capability to make use of the full range of its domestic energy resources; 4 - To ensure that the U.S. energy R&D effort is balanced and gives appropriate emphasis to all relevant national goals, particularly those which cannot be readily internalized into market incentives by other forms of Federal intervention (e.g., environmental protection) ; - To supplement private sector investment at stages of R&D where appropriable benefits are not commensurate with the costs and risks (e.g., basic research, first demonstra- tion plants) ; - To compensate for structural imperfections in the market such as excessive fragmenta- tion and undercapitalization, and including those which may result from Federal inter- vention justified on other public policy grounds (e.g., antitrust laws, utility price regulations, etc.) ; and - To support Federal regulatory activities of certain Federal agencies, e.g., NRC, EPA. Though the need for Federal support in energy R&D is indicated, the Federal effort should encourage private investment and to avoid unnecessary govern- ment expenditures which merely replace private efforts. - Private sector participation in planning, financing, and executing the R&D program will reduce requirements for Federal support and will increase the likelihood that technologies will be commercially viable and rapidly introduced. II. Status of U.S. Energy R&D Effort A. Status and Potential Payoff of Major Energy Technologies Table 2 summarizes the status and potential energy contribution of the major new energy technologies under development. 5 Table 2 STATUS AND POTENTIAL PAYOFF OF MAJOR NEW ENERGY TECHPOLOGIES 1 Date of First 2 Current Stage Potential Energy Technology Area of Development Comm. Demonst. Contribution 1985 2000 Nuclear 3 Quads Light Water Reactors Commercial in service 5.5 20.0 Gas Cooled Demonstration 1976 nez. 1.5 Liquid Metal Breeder Pilot Devel. 1983 neg. 2.5 Other Breeders Applied Res, unknown 0 neg. Fusion (CTR + Laser) Basic Res. post-2000 0 neg. 5.5 25.0 Coal Low Btu Gasification Pilot Devel. 1975 .3 5.0 High Btu Gasification Pilot Devel. 1980 .5 6.0 Liquefaction Pilot Devel. 1980 .2 5.0 Clean Combustion Applied Res. mid-1980 neg. 5.0 Limestone SGC Demonstration 1974 5.0 15.0 Advanced SGC Pilot Devel. late 1970's neg. 5.0 6.0 41.0 Geothermal Dry Steam Commercial in service neg. neg. Wet Steam & Liquids Applied Res. 1983 .4 1.1 Hot Dry Rock & Basic Res. 1987 .2 1.1 Geopressured .6 2.2 Solar Heating of Buildings Demonstration 1974 .1 .75 Cooling of Buildings Pilot Devel. late 1970's .1 .75 Solar Electric Applications Applied Res. early 1980's neg. 1.5 Fuels from Biomass Applied Res. early 1980's .5 0.9 .7 3.9 0il, Gas and Shale Advanced Oil Recovery Pilot Devel. late 1970's 3.0 6.0 Surface Shale Retort Demonstration late 1970's .3 5.0 In-Situ Shale Retort Pilot Devel. mid-1980's neg. 2.0 3.3 13.0 New Conservation Technologies Industrial Processes Pilot Devel. 1980 .5 2.0 Commercial & Residential Buildings Demonstration 1977 .3 1.5 Transportation Pilot Devel. 1980 .3 4.0 1.1 7.5 1/ Definitions: Basic Research: Fundamental scientfic problems have not been overcome. Applied Research: Laboratory experiments have verified that no fundamental scientific problems remain to be solved. -- Pilot Development: Pilot plant (approximately 1/100 scale) operations or prototype assembly have verified that major engineering problems associated with integrated systems have been solved. -- Demonstration: First near-commercial scale demonstration has successfully operated, although perhaps not in an economically competitive way because of first-of-a-kind costs. Commercial: Technology is commercially available and presently competitive with existing alternatives 2/ Rapid commercial introduction could follow by 5-10 years, depending on relative economics. 3/ Units in Quads or 10¹⁵ B.t.u. U.S. consumption in 1974 in 75 Quads. 6 B. Recent Trends in Federal and Private Energy R&D Expenditures On June 29, 1973, a major acceleration of the Federal energy R&D program was announced. Supplemental funds were appropriated for FY 1974 and further major increases were approved for FY 1975 and are also expected for FY 1976. Obligations ($ Billion) 1974 1975 1976 Area Actual Estimate Estimate Direct Energy R&D Nuclear 0.8 0.9 1.1 Fossil 0.1 0.4 0.5 Other Non-Nuclear 0.1 0.3 0.3 Total 1.0 1.6 1.9 Support Program Environmental Effects 0.1 0.3 0.3 Basic Research 0.2 0.2 0.2 Total 0.3 0.5 0.5 Total Energy R&D 1.3 2.1 2.4 (ERDA) 1.1 1.7 2.1 (Other agencies) .2 .4 .3 Though difficult to estimate accurately, private sector funding for energy R&D currently appears to be over $1 billion annually and increasing. - A survey of 1,400 firms indicates annual increases in private spending on energy R&D of over 20% in both 1973 and 1974. 7 III. Energy R&D Program Strategy A. Criteria for Determining Federal Energy R&D Priorities Priorities among specific energy R&D programs (e.g., nuclear, coal, solar, etc.) should be determined by: - Potential contribution of new technology to increasing usable energy supplies. - Probability R&D will be technically successful. - Likelihood that technology will be economically competitive when environmental costs are considered. - Timing of potential contribution considering any non-technical constraints to commercializa- tion. - Cost of R&D. - Extent of private sector investment. B. General Elements of Pre-ERDA Federal Energy R&D Strategy Minimum Federal involvement in R&D projects with good potential for early commercial application and where substantial private sector resources and capability exist (e.g., oil and gas recovery, conservation, automotive, etc.). 8 Strong Federal support, on a cost-shared basis, for longer-term (10 years +) R&D programs aimed at making use of vast U.S. coal and nuclear resources (e.g., breeder nuclear reactor, coal liquefaction and gasification, etc.). - This includes partial Federal support of expensive, high-risk, first-of-a- kind demonstration plants, e.g., synthetic fuels, nuclear fuel reprocessing, etc. Continuing Federal support, even without substantial industry cost-sharing, of very long-range, high-risk R&D programs which have potential for great payoff (e.g., fusion, central station solar electric). Continuing Federal support of programs in basic research, environmental and health effects research, and safety where there is no strong incentive for private sector investment. C. ERDA's Recently Proposed Energy R&D Strategy As required by statute, ERDA has prepared its first version of a comprehensive National Energy Research, Development and Demonstration Plan. This plan must be updated annually in January, and thus it coincides with the submission of the President's Budget. The major conclusions of ERDA's Energy R, D and D Plan (ERDA Report No. 48) are: - To achieve our National energy policy goals including reducing our reliance on imports, the U.S. "must have the flexibility of a broad range of energy choices." - "To generate the necessary options,' the Nation's energy R&D program must "facilitate the changeover from dependence on a narrow base of diminishing domestic resources to reliance on a broader range of less limited or unlimited alternatives." 9 - And finally, "all the national energy technology goals must be pursued together. Concentration on only one or a few technological avenues is not likely to solve the energy problem." ERDA's priorities among major energy R&D program areas have been generally established through a National Ranking of Energy R,D and D Technologies, shown in Table 4. As will be discussed further, ERDA's priority ranking does not correspond totally with its budget requests that greatly accelerate smaller pay- off programs. As a result of its analyses, ERDA concluded that "five major changes are needed in the nature and scope of the Nation's energy R&D program" (although the first and to some extent the second were already reflected in the President's 1976 Budget Request to Congress and his State of the Union Message). 1. "Acceleration of commercial capability to extract liquid and gaseous fuels from coal and shale." 2. "Emphasis on overcoming the technical problems inhibiting expansion of high leverage existing systems - notably coal and light water reactors." 3. "An immediate focus on conservation efforts." " 4. "Inclusion of the solar electric approach among the inexhaustible resource technologies be given high priority." 5. "Increased attention to under-used new technologies that can be rapidly developed." (e.g., geothermal, solar, heating and cooling) As a result of ERDA's view of energy R&D strategy and its recommendations to alter the President's 1976 Budget, some further increases were requested from the Congress in: - conservation R&D; - solar R&D; - advanced oil and gas recovery R&D; - coal R&D; - oil shale R&D; and - nuclear fusion. 10 Table 3 ERDA'S NATIONAL RANKING OF R,D, &D TECHNOLOGIES Highest Priority Supply Near-Term Major Energy Systems Coal-Direct Utilization in Utility/Industry Nuclear-Converter Reactors Oil & Gas-Enhanced Recovery New Sources of Liquids and Gases Gaseous & Liquid Fuels from Coal for the Mid-Term Oil Shale "Inexhaustible" Sources for the Breeder Reactors Long-Term Fusion Solar Electric Highest Priority Demand Near-Term Efficiency (Conservation) Conservation in Buildings & Technologies Consumer Products Industrial Energy Efficiency Transportation Efficiency Waste Materials to Energy Other Important Technologies Under Used Mid-Term Technologies Geothermal Solar Heating and Cooling Waste Heat Utilization Technologies Supporting Intensive Electric Conversion Efficiency Electrification Electric Power Transmission and Distribution Electric Transport Energy Storage Technologies Being Explored for Fuels from Biomass the Long-Term Hydrogen in Energy Systems 11 D. Critique of Major Aspects of ERDA's Energy R&D Strategy The most fundamental conclusion of ERDA's analysis, and the major premise underlying its National Energy R&D Plan is in error - that is, that "all the national energy technology goals must be pursued together, and that concentration on only one or a few technological avenues is not likely to solve the problem." - As can be seen from considering Tables 1 and 2, all technological approaches do not have to be pursued. If Light Water Nuclear Reactors continue to provide an increasing fraction of electric generation capacity, if breeder reactors are developed for future electric power generation and if synthetic gaseous and liquid fuels are produced from coal and oil shale, then the U.S. can achieve and maintain substantial energy independence by the year 2000 from a relatively few technologies. - Solar and geothermal utilization technologies are expected to provide only a small contribu- tion to domestic energy supplies before the year 2000. - Improved conservation technologies, as opposed to wide application of existing technologies, while providing some reductions in demand, are not likely to result in large savings. Another major change in ERDA's proposed energy R&D strategy, and also reflected in its budget request for FY 1977, is the inclusion of fusion power and solar electric technology in the same priority category as the Liquid Metal Fast Breeder Reactor (LMFBR). This does not appear warranted on the basis of the current status of the technologies and the likely timing of their payoff. - The LMFBR is a proven technological concept. Although substantial engineering develop- ments remain and there are concerns about environmental and safety problems, there is little doubt it will work and can be made safe. (The French have been operating a 250 MWe. plant for one year). Furthermore, its economics are likely to be favorable. 12 - Although fusion offers the potential of virtually unlimited energy supplies with fewer and less severe environmental and safety problems, fusion has not even reached the point of proven scientific feasibility, and years remain before the engineering feasibility is established, much less a workable reactor system. - Generation of electricity from the sun, although technically feasible now, is far from being economically competitive. Major technological advances will be needed to reduce the high capital costs of this option. Finally, the last major element of ERDA's proposed revised Energy R&D strategy is to emphasize shorter-term and potentially high payoff technologies to ensure substantial energy production from conventional nuclear power and conventional oil and gas. The major issue here is the need for and extent of Federal involvement. E. OMB Staff's Recommended Strategy Continued strong emphasis on R&D programs that will assure the U.S. a capability to use its vast coal and nuclear energy resources. Specifically: - R&D and demonstration of technologies for fuel reprocessing and waste management so that the growth in the generating capacity from the current generation of Light Water Nuclear Reactors can be assured. The OMB staff recommendation for FY 1977 provides for a major acceleration in ERDA's research and development programs for nuclear fuel reprocessing and commercial radioactive waste management. - R&D and demonstration of the Liquid Metal Fast Breeder Reactor to provide a technology to tap the 98% of uranium resources which cannot now be used. The FY 1977 OMB staff recommendation provides for the continuation of the design and construction of the $1.95B Clinch River Breeder Reactor LMFBR demonstra- tion plant, with initial operations scheduled for 1983 (the same schedule and funding level as requested by ERDA). 13 - R&D and demonstration of advanced coal gasification and liquefaction and other technologies that can greatly increase usable coal supplies. The OMB staff recommendation for FY 1977 would continue an aggressive R&D program related to coal including gasification, liquefaction and direct combustion and would also include funds for demonstration plant design in gasification and for construction of a clean boiler fuels demonstration plant. - A Synthetic Fuels Commercialization Program to gain early information on economic, environmental, regulatory and other uncertainties inhibiting early commercializa- tion. The FY 1977 budget would provide mainly for administrative costs. A more orderly pace for development of very long-term options of solar electric and nuclear fusion, which are not likely to be determined to be commercially feasible for 10-20 years. The OMB staff recommendation for FY 1977 provides for a 50% growth in fusion over 1976 (as opposed to ERDA's requested 100% increase) which would slip the next large fusion experimental reactor by perhaps 3 months and the overall schedule for commercial demonstration by 2-3 years in the mid-1990's. The FY 1977 solar electric program would grow substantially in the potentially high payoff area of solar thermal and photovoltaics, but would be sharply reduced in the lower payoff area of wind energy and ocean thermal energy conversion. Low priority on highly popular (with the Congress and the public) but lower payoff programs in solar heating and cooling and geothermal energy. The OMB staff recommenda- tion for FY 1977 would be to hold these programs at their FY 1976 level pending completion of cost/benefit analyses justifying a larger effort. 14 Low Federal priority on nearer-term, higher payoff program, such as advanced oil and gas recovery, nuclear plant reliability, and certain conservation R&D programs, where industry has both the resources and the incentives due to higher energy costs to fund such R&D. The OMB staff recommendation for FY 1977 would essentially hold these programs to their current low levels. A limited and highly selective approach to Federal funding in other end-use conservation R&D areas in order to ensure maximum private sector response to market forces. The OMB staff recommendation for FY 1977 would provide some increase in potentially high payoff areas of energy storage and transportation. Continued Federal support of basic and environ- mental effects research where industry has little or no incentive for investing. The OMB staff recommendation for FY 1977 would provide increases sufficient to cover inflation of the past year. Table 4 summarizes the impact of the OMB staff strategy on the trend of direct energy R&D funding, and its relation to estimates of private sector R&D investments. - The OMB recommended level of Federal funding for FY 1977 continues the recent trend of $500 million (BA) per year increases. The Federal non-nuclear R&D remains in FY 1977 about 40% of the total direct energy R&D budget. - The total national energy R&D effort, federal plus private, is estimated to be about 60% non- nuclear R&D activity over the 1974-1981 time period, but with most of the nuclear R&D being undertaken with Federal funds. Table 4 also indicates the major amount ($8.6 billion) of private funds that will be spent on commercial- scale demonstrations due to federal financial incentives programs, as well as the almost $3 billion to be expended in joint private-federal R&D. 15 TABLE 4 Private and Federal Energy R&D Funding ($Millions, Budget Authority) 1/ 3/ Federal Funding Private Funding TOTAL 1974-198T 2/ TOTAL Participation in In-house Program Area 1974 1975 1976 1977 1974-1981 1974 Federal R&D R&D Direct Energy R&D: Non-nuclear R&D: (253) (619) (795) (910) (7248) (877) (2040) (10440) Fossil 4/ 111 393 413 538 4261 506 1400 6000 Solar 24 51 94 126 840 2 140 20 Geothermal 13 34 34 49 355 2 -- 20 Conservation 39 48 78 99 852 150 400 1800 Environmental Control 66 93 84 98 940 217 100 2600 Nuclear R&D: (756) (938) (1147) 1617 (11353) (128) (800) (1540) Fission 644 749 880 1223 8670 125 800 1500 Fusion 112 189 267 384 2683 3 -- 40 TOTAL, DIRECT ENERGY R&D 1009 1557 1942 2527 18601 1005 2840 11980 Synthetic Fuels Commercial Demonstration Program 600 -- 600 -- 8000 Geothermal Development Fund 4 4 24 -- 600 1/ Includes R&D in ERDA and other agencies such as EPA, NSF, DOI, NASA, and NRC. 2/ OMB recommended level of funding. 3/ 1974 is the most recent available data. Statistics are based on two NSF surveys, and because of inevitable non-respondents figures are presumed to represent a lower limit. The 1974-1981 in-house R&D figures are extrapolated from 1974 data. 4/ The Federal funding is only about 8% for oil and gas, whereas, the private funds are 95% for oil and gas. POSSIBLE REDUCTIONS FY 1977 ERDA Budget Possible Further Reductions Savings (Outlays-$M) PRO CON FY 1977 FY 1978 1. Further increase uranium Economically justifiable (new enrichment May jeopardize the Administration's enrichment charge (to $100 plants will probably charge this amount). current legislative proposal to allow per unit) 72 70 ERDA to recover more than just the Government's costs (ERDA has estimated to GAO and Congress that the new "commercial charge" proposed in the FY 1976 budget would be about $76 per unit). The increase to $81 per unit included in ERDA's Planning Ceiling Case may be all that is politically feasible now. 2. Terminate the Molten Salt The MSBR concept is not now a viable The MSBR has some potential attractive- Breeder Reactor (MSBR) 5 5 backup effort in case the Liquid Metal ness from the standpoint of resource Fast Breeder Reactor (LMFBR) is un- utilization (uses thorium) and repro- successful (a much higher funding level cessing (continuous on-line). would be required). The LMFBR program is likely to be success- Has strong support from Tennessee ful and not need the MSBR as a backup. delegation (R&D done at Oak Ridge). The MSBR has difficult technical problems. 3. Slow the pace of controlled Although potentially very attractive in ERDA has prepared and is following a thermonuclear fusion the long-term (beyond year 2000) fusion detailed plan for development of fusion program. 14 22 has not yet been proven to be scientifi- which, if successful, could lead to the cally feasible. The program is now realization of the benefits of fusion entering a phase which requires high in the shortest reasonable time. cost large scale experimental devices and large investments to solve the The fusion program is very popular in engineering problems. An alternative Congress because of its potential would be to conduct a basic technology environmental and safety advantages program which will emphasize the use of over fission reactors. smaller experimental devices while deferring major test reactors until more results are available from experiments. FY 1977 ERDA Budget Possible Further Reductions (cont'd.) Savings (Outlays-$M) PRO CON FY 1977 FY 1978 4. Terminate R&D on gas-cooled The commercial support for the High The HTGR has potential advantages over civilian power reactors 45 50 Temperature Gas Reactor (HTGR) has light water reactors (in addition to virtually collapsed as a result of utility uranium, uses thorium which is a re- HTGR (36) (41) contract terminations. The parent firms latively abundant resources; higher GCFBR ( 9) ( 9) of Gulf Atomic Corporation appear to be thermal efficiency means less thermal cutting losses and offloading the company. pollution; possible utilization for process heat applications). Even if commercial support can be recon- stituted, it would probably require at The Government should not take the least $18 of Government funds to make the initiative to cancel ongoing HTGR an economically attractive venture research on the HTGR until it (primarily requires solving difficult becomes clear that the concept is reprocessing and waste management pro- unable to attract new commercial blems). support. If the HTGR is terminated, gas-cooled The gas-cooled fast breeder reactor fast breeder R&D could also be ter- (GCFBR) appears to have a higher breeding minated because of lack of commercial ratio than the LMFBR (which means that support and the likely succes of the it could produce plutonium fuel at a LMFBR. The GCFBR also has a serious faster rate than the LMFBR). safety problem. 5. Shutdown the N-Reactor, 9 30 Richland, Washington in FY 1976 (net) Discussed in Issue #11. GERALD EURO FY 1977 Budget Possible Further Reductions (cont'd.) Savings (Outlays-$M) PRO CON FY 1977 FY 1978 6. Reduce the production of Due to the slippage in the construction The effects of the reactor schedule slip- enriched uranium 92 -- schedules of many power reactors, near- page are offset by other factors: term requirements for enriched uranium fuel have been deferred and ERDA's pre- - plutonium recycle will at least be produced inventory will thereby be in- delayed, increasing requirements for creased. uranium fuel. The 10% reduction in future inventory - utilities are experiencing difficulties from this action may not be critically obtaining uranium feed needed for the required. enrichment process, which means that more of ERDA's inventory may have to be used. Since the inventory covers many contin- gencies (e.g., backstop private enrich- ment ventures, meet emergency require- ments), the prudent course would be to maintain a stockpile adequate to ensure a reliable fuel supply for nuclear power plants. The lost inventory would have a value of $200M. FY 1977 Budget Possible Further Reductions (cont'd.) Savings (Outlays-$M) PRO CON FY 1977 FY 1978 7. Cancel construction of The $2B CRBR has experienced a huge cost The CRBR will demonstrate licensability, the Clinch River Breeder overrun (original estimate was $.7B) maintainability, and operability of Reactor (CRBR) LMFBR which raises questions as to whether the LMFBRs. demonstration plant 100 220 benefits of the project are worth the cost. ERDA maintains that going directly to a full-scale plant would be technically The CRBR will be based upon a relatively risky. conservative design, which, together with its small size (350 MWe), ensures that The CRBR project has momentum with a the CRBR will not demonstrate potentially Government-industry team in place and favorable economics. components being ordered. An alternative would be to cancel the The CRBR has become symbolic of the CRBR and initiate design of a larger entire LMFBR program which the Admini- plant with full-scale components which stration strongly supports. Any move would be much closer to a commercial to cancel the CRBR (even with the intent power plant. of going to a larger project later) would be interpreted as a major blow by Administration against the LMFBR program and nuclear power in general.

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    "ocrText": "The original documents are located in Box 10, folder \"FY 1977 - 11/26/75, ERDA\nBackground Book (1)\" of the White House Special Files Unit Files at the Gerald R. Ford\nPresidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nDigitized from Box 10 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library\nERDA\nFY 1977\nDirector's\nReview\nSUMMARY DATA\nEnergy Research and Development Administration\n1977 Budget\nSummary Data\n(In millions)\nEmployment, end-of-year\nBudget\nFull-time\nauthority\nOutlays\nPermanent\nTotal\n1975 actual\n3588\n3146\n7458\n7974\n1976 February budget\nas amended\n4592\n4089\n8052\n8592\nenacted\n*\n*\nXXX\nXXX\nOMB recommendation\n5194\n4089\n8287\n8917\nOMB employment ceiling\nXXX\nxxx\n8052\n8592\nTQ February budget\nas amended\n1271\n1177\n8052\n8592\nenacted\n*\n*\nXXX\nXXX\nOMB recommendation\n1271\n1177\n8287\n8971\n1977 July planning target\n5490\n5070\nXXX\nXXX\noriginal agency request\n7570\n6222\n9092\n9903\nrevised planning target\nN/A\n5290\nXXX\nXXX\nrevised agency request\n6948\n5797\n8659\n9470\nOMB recommendation\n5971\n5219\n8543\n9267\n1978 OMB estimate\n5693\n5543\n8543\n9267\n*not enacted as of 11/11/75\nSummary of Issues\n1977\n1978\nAgency req.\nOMB rec.\nOMB estimate\nBA\n0\nBA\n0\nBA\n0\nIssues:\n#1 Enhanced Recovery of Oil & Gas\n59\n41\n37\n32\nto be determined\n#2 Hydrogen Pilot Plant:\n- Pilot Plant\n37\n29\n-\n6\n15\n31\n- Coal R&D\n336\n321 307\n307\n427\n365\n#3 Solar Energy:\n- Heating and Cooling\n54\n46\n29\n25\n33\n26\n- Solar Electric\n120\n87\n78\n55\n92\n83\n#4 Geothermal Energy\n60\n56\n49\n42\n50\n45\n#5 Conservation Programs\n224\n150\n99\n78\n120\n90\nGERALD\n#6 Nuclear Fuel Reprocessing and Recycle\nSupport\n135\n69 22\n20\n9\n10\n- Contingency allowance\n-\n- 67\n19\n100\n50\n#7 Commercial Waste Management\n120\n91 85\n66\nFORD\n75\n70\n#8 Light Water Reactor Technology Program\n62\n40\n10\n8\nLIBRARY\n9\n9\n#9 Employment Levels for ERDA\n209\n209 200\n200\n204\n204\n#10 Nuclear Weapons Research and\nTesting (Classified)\n582\n582 507\n507\n507\n507\n#11 N-Reactor (Classified)\n15\n15 21\n21\nto be determined\nAgency Objectives and Program Evaluation Efforts\nERDA Objectives\nERDA was established on January 19, 1975. The Federal Non-nuclear Energy R&D Act of 1974 required ERDA to\nsubmit to Congress by June 30, 1975, a comprehensive plan for energy research, development, and demonstration.\nThus, from its inception, ERDA has been required to place priority on defining its objectives in energy R&D\nand preparing a detailed planning document on an accelerated basis.\nAs discussed in the previous section on \"R&D Strategy,\" OMB staff has been critical of the major conclusion\nof ERDA's June 30 plan that all national energy R&D goals must be pursued together if we are to gain and\nmaintain energy independence by the year 2000. OMB staff's principal criticism is that ERDA has not been\nsufficiently selective in establishing its major priorities for energy R&D (i.e., we disagree that all\ntechnological approaches have to be pursued on a greatly accelerated basis). As outlined in the section on\n\"R&D Strategy,\" OMB staff has also disagreed with specific objectives in ERDA's plan.\nERDA has a statutory requirement to submit a new energy R&D plan to Congress each January. The timing of\nthese submissions is more favorable to OMB than was the timing of the June 30 plan (i.e., we will be able to\nincorporate the results of the President's FY 1977 budgetary decisions in the January plan). Hopefully, this\nnew timing will introduce some additional discipline in the planning and resource allocation process and will\nresult in a more rigorous set of priorities for energy R&D.\nAs outlined in Mr. Fri's transmittal letter of September 30, ERDA is also in the process of reviewing its\nagency objectives (all programs, not just energy R&D) and establishing a comprehensive Program Approval\nDocument (PAD) system. For each program, the PAD will include objectives, critical milestones, and\nresources required. ERDA intends the PAD system to be its primary means of management control and measure-\nment of agency performance. The PAD system is scheduled to begin operations early in CY 1976.\nOnce ERDA and OMB have agreed upon major priorities and program objectives for the agency, the PAD system\nappears to have excellent potential for being an effective program evaluation and control system for ERDA\nmanagement. This system, however, will not be effective unless there is sound \"front end\" planning of the\nprograms ERDA should pursue.\n2\nERDA Program Planning and Evaluation Efforts\nEffective program evaluation requires effective planning against which to evaluate. As indicated, OMB staff\nhas been disappointed in ERDA's program planning efforts to date. In particular, there does not yet appear\nto be an overall capability within the ERDA organization to conduct penetrating analyses of program options\neither within or across major technologies. This was reflected in the ERDA June 30 plan and in ERDA's\ninitial FY 1977 budget submission. Both documents were marked by a failure to identify costs and benefits\nof pursuing alternative technological approaches. Thus, no real program tradeoffs were made and these\ndocuments contained very high expectations for continued funding increases.\nUntil now ERDA has placed most of the real responsibility for program planning with each of the Program\nAssistant Administrators. For example, the Assistant Administrator for Nuclear Energy has the task of\ndeveloping options for plutonium fuel reprocessing, commercial radioactive waste management, Liquid Metal\nFast Breeder Reactor (LMFBR) commercialization, and other areas. However, OMB staff does not believe that\na satisfactory analytic basis for decision-making (independent of the AA's) has been established by ERDA for\nthese and other programs, notwithstanding the fact that OMB has been working for months with ERDA to try to\nhave ERDA analyze specific alternatives.\nERDA does have an Assistant Administrator for Planning and Analysis who could provide a more critical review to\ncounter balance the inevitable desires of the Program AA's to promote their own programs. However, until\nrecently, the AA for Planning and Analysis has not generally challenged the Program AA's within their areas of\nprogram responsibility. The Program Evaluation staff has largely been restricted to such tasks as coordinating\nthe preparation of the June 30 Plan (using substantive inputs from the Program AA's).\nTo some extent, the inadequacy of ERDA's program planning and analysis efforts results from the fact that ERDA\nis so new and has so many new people in key roles. Under the circumstances, OMB's expectations for the rapid\nachievement by ERDA of a satisfactory program evaluation capability may have been unrealistic.\nWith some OMB encouragement, top ERDA management has recently reached the conclusion that ERDA needs to establish\na more effective program planning, analysis and evaluation system. The AA for Planning & Analysis has been given\nthe task of formulating recommendations for such a system. An effective system would ensure that the AA for Planning\n& Analysis, the Controller, and other key staff offices would participate in the program planning process and\nthereby provide additional perspectives for top ERDA management. This is a key move to provide the basis for\nmeaningful evaluation in the sense of evaluating against sound program objectives.\nEnergy Research and Development Administration\n1977 Budget\nDistribution of Budget Authority\n(In millions of dollars)\nJuly 1 -\nSept. 30\n1976\n1976\n1977\n1975\nFeb.\nAgency Req/\nAgency Req/\nOriginal\nRev.\nOMB\n1978\nAct.\nBudget\nONB Recom.\nOMB Recom.\nAgency Req.\nAgency Req.\nRecom.\nOMB Est.\nDirect Energy R&D\n(1322)\n(1590 )\n(1684)\n(434)\n(3209)\n(2926 )\n(2265)\n(2575)\nNon-nuclear R&D:\n( 442)\n( 540 )\n(636)\n(168)\n(1342)\n(1111)\n( 765)\n(1007)\nFossil\n335\n394\n435\n113\n721\n601\n473\n672\nSolar\n40\n71\n89\n26\n255\n199\n126\n147\nGeothermal\n28\n23\n31\n8\n90\n70\n49\n50\nConservation\n31\n42\n71\n18\n235\n223\n99\n120\nEnvironmental Control\n8\n10\n10\n3\n41\n17\n18\n18\nNuclear R&D:\n( 880)\n(1050)\n(1048)\n(266)\n(1867)\n(1815)\n(1500)\n(1568)\nFusion-\nMagnetic Confinement\n125\n156\n176\n56\n384\n321\n289\n307\nLaser\n64\n74\n91\n23\n127\n110\n95\n101\nFission-\nFast Breeder\n488\n534\n490\n114\n706\n677\n655\n682\nOther\n87\n145\n124\n28\n195\n188\n119\n100\nNuclear Fuel Cycle\n20\n22\n38\n11\n161\n174\n62\n150\nCommercial Waste Management\n13\n14\n16\n5\n58\n120\n85\n75\nReactor Safety Facilities\n--\n--\n--\n--\n35\n33\n33\n5\nNuclear Safeguards\n8\n19\n20\n4\n34\n34\n25\n26\nLaser Isotope Separation\n22\n32\n33\n10\n53\n44\n44\n40\nUranium Enrichment\nProcess Development\n53\n54\nCO\n15\n114\n114\n93\n82\nSupporting Energy R&D\n( 349)\n( 392)\n( 400)\n( 96)\n( 572)\n( 462)\n( 415)\n(424)\nBiomed & Environmental Effects\n164\n192\n193\n46\n281\n224\n191\n191\nBasic Energy Sciences\n185\n200\n207\n50\n291\n238\n224\n233\nGRAALD\nFORD\n1976\nJuly 1 -\nSept. 30, 1976\n1977\n1978\n1975\nFeb.\nAgency Req/\nAgency Req/\nOriginal\nRev. Agency\nOMB\nOMB\nActual\nBudget\nOMB Recom.\nOMB Recom.\nAgency Reg.\nRequest\nRecom.\nEstimate\nProduction of Enriched Uranium:\n(31)\n(258)\n(390)\n(161)\n(756)\n(728)\n(706)\n(115)\nProduction/Capacity Expansion\n593\n833\n982\n256\n1336\n1308\n1336\n1058\nRevenues\n-562\n-575\n-592\n-95\n-580\n-580\n-630\n-943\nDefense Related Programs\n(1493)\n(1666)\n(1720)\n(460)\n(2209)\n(2100)\n(1914)\n(1843)\nNuclear Weapons\n(1006)\n(1049)\n(1103)\n(283)\n(1437)\n(1328)\n(1180)\n(1177)\nR&D\n261\n293\n304\n85\n387\n380\n327\n317\nTesting\n192\n219\n232\n66\n274\n258\n228\n220\nProduction\n384\n379\n387\n103\n499\n468\n436\n501\nEquipment\n69\n63\n67\n15\n87\n87\n75\n74\nConstruction\n100\n95\n113\n14\n190\n135\n114\n65\nOther\nWeapons Mat'ls Production\n298\n381\n381\n114\n565\n565\n527\n424\nNaval Propulsion Reactor Dev.\n189\n236\n236\n63\n207\n207\n207\n242\nAll Other:\n(393)\n(373)\n(1000)\n(120)\n(824)\n(732)\n(671)\n(736)\nUranium Resource Assessment\n8\n19\n19\n6\n46\n46\n36\n40\nPeaceful Nuclear Explosives\n-\n-\n-\n-\n4\n2\n-\n-\nHigh Energy Physics\n150\n177\n177\n44\n250\n241\n200\n231\nSpacecraft Power\n29\n38\n39\n9\n50\n40\n34\n33\nProgram Support\n204\n234\n256\n64\n417\n345\n269\n271\nOperational Safety\n4\n6\n6\n1\n10\n11\n8\n6\nOther Revenues\n-85\n-101\n-101\n18\n-81\n-81\n-76\n-76\nFinancial Adjustments\n83\n15\n17\n15\n78\n78\n78\n78\nNuclear Fuel Reprocessing Contingency\n67\n100\nSynthetic Fuel Construction Grants\n600\nLegislative Proposal\n-22\n-22\n- 4\nSynthetic Fuels Loan Program\n2\n2\n5\n3\nSynthetic Fuels Price Supports\nGeothermal Dev'l. Fund Contingency\n50\n50\n50\n50\nSpecial Foreign Currency\n7\n7\n1\nTotal Budget Authority\n3588\n4279\n5194\n1271\n7570\n6948\n5971\n5693\nThe Loan Guaranty Program is expected to receive $1.5 billion in borrowing authority in FY 1976. Revenues are collected in proportion to the outstand-\ning guaranteed debt for the purpose of paying defaults and administrative expenses, consequently the BA and 0 statistics show revenues less administrative\nexpenses.\n2/ The Price Guaranty Program is expected to receive $1.0 billion in borrowing authority in FY 1976.\nEnergy Research and Development Administration\n1977 Budget\nDistribution of Outlays\n(In Millions of Dollars)\nJuly 1-\n1976\nSept. 30, 1976\n1977\n1978\n1975\nFeb\nAgency Req/\nAgency Req/\nOriginal\nRev. Agency\nOMB\nOMB\nActual\nBudget\nOMB Recom.\nOMB Recom.\nAgency Req.\nRequest\nRecom.\nEstimate\nDirect Energy R&D\n(1012)\n(1375)\n(1417)\n( 368)\n(2514)\n(2308)\n(1931)\n(2280)\nNon-Nuclear R&D:\n( 207)\n( 467)\n( 514)\n( 105)\n(1043)\n( 872)\n( 671)\n( 837)\nFossil\n148\n335\n352\n67\n571\n499\n444\n563\nSolar\n15\n55\n65\n17\n202\n152\n91\n123\nGeothermal\n20\n29\n32\n4\n71\n56\n42\n45\nConservation\n17\n38\n55\n14\n166\n150\n78\n90\nEnvironmental Control\n7\n10\n10\n3\n33\n15\n16\n16\nNuclear R&D:\n(805)\n( 908)\n( 903)\n( 263)\n(1471)\n(1436)\n(1260)\n(1443)\nFusion -\nMagnetic Confinement\n95\n142\n146\n43\n273\n235\n214\n306\nLaser\n56\n72\n84\n22\n113\n99\n88\n94\nFission -\nFast Breeder\n462\n472\n429\n117\n609\n585\n575\n643\nOther\n76\n93\n95\n42\n168\n163\n108\n105\n54\nNuclear Fuel Cycle\n17\n21\n33\n9\n78\n89\n75\nCommercial Waste Management\n11\n13\n14\n4\n48\n91\n66\n70\nReactor Safety Facilities\n-\n-\n-\n-\n26\n25\n25\n7\nNuclear Safeguards\n7\n14\n15\n4\n31\n31\n25\n26\nLaser Isotope Separation\n19\n27\n28\n8\n47\n40\n39\n40\nUranium Enrichment\nProcess Development\n62\n54\n59\n14\n78\n78\n66\n77\nSupporting Energy R&D\n( 317)\n( 361)\n( 363)\n( 96)\n( 498)\n( 425)\n( 392)\n( 410)\n- omed and Environment. Effects\n149\n177\n178\n46\n241\n210\n190\n190\nBasic Energy Sciences\n168\n184\n185\n50\n257\n215\n202\n220\nJuly 1 -\nSept. 30\n1976\n1976\n1977\n1975\nFeb.\nAgency Req/\nAgency Req/\nOriginial\nRev.\nOMB\n1978\nActual\nBudget\nOMB Recom.\nOMB Recom.\nAgency Req.\nAgency Req.\nRecom.\nOMB Est.\nProduction of Enriched Uranium\n( -27)\n(181)\n(299)\n(148)\n(651)\n(623)\n(601)\n(317)\nProduction/Capacity Expansion\n536\n756\n891\n243\n1231\n1203\n1231\n1260\nRevenues\n-562\n-575\n-592\n-95\n-580\n-580\n-630\n-943\nDefense Related Programs\n(1501)\n(1614)\n(1647)\n(447)\n(1984)\n(1924)\n(1796)\n(1911)\nNuclear Weapons:\n(1010)\n(1034)\n(1067)\n(284)\n(1293)\n(1238)\n(1141)\n(1179)\nR&D\n257\n284\n295\n82\n362\n357\n317\n317\nTesting\n189\n211\n224\n61\n255\n243\n220\n220\nProduction\n377\n378\n379\n99\n466\n443\n419\n495\nEquipment\n90\n75\n79\n16\n80\n80\n74\n74\nConstruction\n97\n86\n90\n26\n130\n115\n111\n73\nOther:\nWeapons Mat'ls Production\n276\n341\n341\n99\n465\n460\n429\n494\nNaval Propulsion Reactor Development\n215\n239\n239\n64\n226\n226\n226\n238\nAll Other:\n(344)\n(345)\n(363)\n(118 )\n(575)\n(517)\n(499)\n(625)\nUranium Resource Assessment\n7\n15\n15\n5\n38\n38\n30\n40\nPeaceful Nuclear Explosives\n-\n-\n-\n-\n3\n2\n-\n-\nHigh Energy Physics\n172\n178\n178\n44\n215\n201\n191\n195\nSpacecraft Power\n35\n36\n37\n10\n45\n36\n32\n33\nProgram Support\n206\n227\n245\n64\n328\n295\n266\n272\nOperational Safety\n4\n6\n6\n2\n9\n8\n6\n7\nOther Revenues\n-85\n-101\n-101\n-17\n-81\n-81\n-76\n-76\nFinancial Adjustments\n5\n-16\n--\n11\n13\n13\n13\n58\nNuclear Fuel Reprocessing Contingency\n19\n50\nSynthetic Fuels Construction Grants\n7\n23\nLegislative Proposals\n-22\n-4\nSynthetic Fuels Loan\n2\n2\n5\n3\nGuaranty Program\nSynthetic Fuels Price\nGuaranty Program 2/\nGeothermal Development Fund Contingency\n4\n4\n4\n19\nSpecial Foreign Currency\n3\n3\n1\n2\n2\n2\n1\nTotal Outlays\n3146\n3876\n4089\n1177\n6222\n5797\n5219\n5543\nThe Loan Guaranty Program is expected to receive $1.5 billion in borrowing authority in FY 1976. Revenues are collected in proportion to the outstand-\ning guaranteed debt for the purpose of paying defaults and administrative expenses, consequently the BA and 0 statistics show revenues less administrative\n2/ The expenses. Price Guaranty Program is expected to receive $1.0 million in borrowing authority in FY 1976.\nEnergy Research and Development Administration\nFY 1977 Budget\nFive-Year Projections\n(OMB Estimate in Millions of Dollars)\n1977\n1978\n1979\n1980\n1981\nDirect Energy R&D\nBA\n(2265)\n(2575)\n(2460)\n(2410)\n(2370)\nB0\n(1931)\n(2280)\n(2462)\n(2473)\n(2437)\nNon-Nuclear R&D\nBA\n( 765)\n(1007)\n( 910)\n( 909)\n( 843)\nB0\n( 671)\n( 837)\n( 940)\n( 977)\n( 911)\nFossil\nBA\n473\n672\n563\n601\n535\nB0\n444\n563\n645\n681\n601\nSolar\nBA\n126\n147\n149\n100\n100\nB0\n91\n123\n121\n100\n104\nGeothermal\nBA\n49\n50\n50\n50\n50\nB0\n42\n45\n48\n50\n50\nConservation\nBA\n99\n120\n130\n140\n140\nB0\n78\n90\n110\n130\n140\nEnvironmental\nBA\n18\n18\n18\n18\n18\nControl\nB0\n16\n16\n16\n16\n16\n1977\n1978\n1979\n1980\n1981\nNuclear R&D\nBA\n(1500)\n(1568)\n(1550)\n(1501)\n(1527)\nBO\n(1260)\n(1443)\n(1522)\n(1496)\n(1526)\nFusion\nMagnetic Confinement\nBA\n289\n307\n310\n312\n403\nB0\n214\n306\n311\n299\n340\nLaser Fusion\nBA\n95\n101\n106\n106\n86\nBO\n88\n94\n103\n103\n106\nFission\nFast Breeder\nBA\n655\n682\n645\n617\n572\nBo\n575\n643\n676\n650\n610\nOther\nBA\n119\n100\n100\n90\n90\nBO\n108\n105\n100\n90\n90\nNuclear Fuel Cycle\nBA\n62\n150\n150\n150\n150\nB0\n54\n75\n100\n125\n150\nCommercial Waste Mgt.\nBA\n85\n95\n100\n100\n100\nBO\n66\n70\n80\n90\n100\nReactor Safety\nBA\n33\n5\n-\n-\nI\nFacilities\nB0\n25\n7\n6\n-\n-\nNuclear Safeguards\nBA\n25\n26\n26\n26\n26\nB0\n25\n26\n26\n26\n26\nLaser Isotope Separation\nBA\n44\n40\n40\n40\n40\nB0\n39\n40\n40\n40\n40\nUranium Enrichment\nBA\n93\n82\n73\n60\n60\nProcess Development\nBC\n66\n77\n80\n73\n64\n1977\n1978\n1979\n1980\n1981\nBA\n(415)\n(424)\n(424)\n(424)\n(424)\nSupporting Energy R&D\nBo\n(392)\n(410)\n(420)\n(412)\n(412)\nBiomed & Environmental\nBA\n191\n191\n191\n191\n191\nEffects\nB0\n190\n190\n190\n190\n190\nBasic Energy Sciences\nBA\n224\n233\n233\n233\n233\nBo\n202\n220\n230\n222\n222\nProduction of Enriched\nBA\n(706 )\n(115)\n(-123)\n(-220)\n(-514)\nUranium\nBo\n(601 )\n(317)\n( -9)\n(-215)\n(-513)\nProduction/Capacity\nBA\n1336\n1058\n998\n980\n986\nExpansion\nB0\n1231\n1260\n1112\n985\n987\nRevenues\nBA\n-630\n-943\n-1121\n-1200\n-1500\nBo\n-630\n-943\n-1121\n-1200\n-1500\nDefense Related Programs\nBA\n(1914)\n(1843)\n(1887)\n(1838)\n(1760)\nBo\n(1796)\n(1911)\n(1932)\n(1898)\n(1822)\nNuclear Weapons:\nBA\n(1180)\n(1177)\n(1261)\n(1266)\n(1208)\nBo\n(1141)\n(1179)\n(1277)\n(1275)\n(1236)\nR&D\nBA\n327\n317\n317\n317\n317\nBO\n317\n317\n317\n317\n317\nTesting\nBA\n228\n220\n220\n220\n220\nBo\n220\n220\n220\n220\n220\nProduction\nBA\n436\n501\n617\n634\n576\nBO\n419\n495\n600\n638\n604\nEquipment\nBA\n75\n74\n74\n74\n74\nBO\n74\n74\n74\n74\n74\nConstruction\nBA\n114\n65\n33\n21\n21\nBO\n111\n73\n66\n26\n21\n4\n1977\n1978\n1979\n1980\n1981\nOther:\nWeapons Mtl's Produc-\nBA\n527\n424\n380\n371\n346\ntion\nBO\n429\n494\n428\n404\n366\nNaval Propulsion Reactor\nBA\n207\n242\n246\n201\n206\nDevelopment\nB0\n226\n238\n227\n219\n220\nAll Other\nBA\n(671)\n(736)\n(682 )\n(660 )\n(654 )\nBO\n(499)\n(625)\n(692 )\n(734 )\n(759 )\nUranium Resource Assess-\nBA\n36\n40\n40\n40\n40\nment\nBO\n30\n40\n40\n40\n40\nPeaceful Nuclear\nBA\n-\n-\n-\n-\n-\nExplosives\nBO\n-\n-\n-\n-\n-\nHigh Energy Physics\nBA\n200\n231\n230\n208\n202\nBo\n191\n195\n217\n230\n212\nSpacecraft Power\nBA\n34\n33\n33\n33\n33\nBO\n32\n33\n33\n33\n33\nProgram Support\nBA\n269\n271\n271\n271\n271\nBO\n266\n272\n271\n271\n271\nOperational Safety\nBA\n8\n6\n6\n6\n6\nBO\n6\n7\n7\n7\n6\nOther Revenues\nBA\n-76\n-76\n-76\n-76\n-76\nBO\n-76\n-76\n-76\n-76\n-76\nFinancial Adjustments\nBA\n78\n78\n78\n78\n78\nBO\n13\n58\n58\n58\n58\n5\n1977\n1978\n1979\n1980\n1981\nNuclear Fuel Reprocessing\nBA\n67\n100\n100\n100\n100\nContingency\nB0\n19\n50\n100\n100\n100\nSynthetic Fuels Construc-\nBA\ntion Grants\nB0\n7\n23\n42\n71\n115\nSynthetic Fuels Loan 1/\nBA\n5\n3\nGuaranty Program\nB0\n5\n3\n-5\n-16\n-24\nSynthetic Fuels Price 2/\nBA\nSupport Program\nB0\nGeothermal Development Fund\nBA\n50\n50\n50\n50\n50\nContingency\nB0\n4\n19\n19\n22\n23\nSpecial Foreign Currency\nBA\nB0\n2\n1\nTOTAL\nBA\n(5971)\n(5693)\n(5380)\n(5162)\n(4744)\nB0\n(5219)\n(5543)\n(5511)\n(5308)\n(4916)\n1/ The Loan Guaranty Program is expected to receive $1.5 billion in borrowing authority in\nFY 1976. Revenues are collected by proportion to the outstanding administrative expenses,\nconsequently the BA and 0 statistics show revenues less administrative expenses.\n2/ The Price Guaranty Program is expected to receive $1.0 billion in borrowing authority\nin FY 1976.\nMAJOR ISSUES\nFossil Energy\nThe Issue papers on Oil and Gas Enhanced Recovery (Issue #1) and the Hydrogen Pilot Plant (Issue #2) cover only a\nportion of the fossil energy activities in ERDA. The following overview table illustrates how these Major Issues\nand Other Issues relate to the fossil energy budget described previously:\nFY 1977\nTotal\n1975\n1976\nT.Q.\nAgency Req.\nOMB Rec.\n1978 - 1981\nFossil Energy Program\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nCoal:\nCoal R&D (Issue #2)\n256\n128\n301\n282\n83\n46\n336\n321\n307\n307\n1653\n1696\nCoal Demo. Plant (Other Issue)\n26\n3\n62\n27\n17\n8\n130\n84\n100\n80\n400\n422\nHydrogen Pilot Plant (Issue #2)\n14\n-\n15\n-\n3\n-\n37\n29\n-\n6\n42\n63\nTotal Coal\n296\n131\n378\n309\n103\n54\n503\n434\n408\n393\n2095\n2181\nPetroleum & Natural Gas:\nEnhanced Recovery Demo. (Issue #1)\n23\n5\n28\n19\n6\n8\n44\n26\n28\n23\n112\n136\nResearch (Issue #1)\n5\n5\n9\n9\n1\n1\n15\n15\n9\n9\n36\n36\nTotal PNG\n28\n10\n37\n28\n7\n9\n59\n41\n37\n32\n148\n172\nIn-situ Technology:\nOil Shale (Cther Issue)\n4\n4\n14\n10\n2\n3\n21\n12\n21\n12\n99\n109\nCoal Gasification (Other Issue)\n6\n2\n5\n4\n1\n1\n15\n10\n5\n5\n20\n20\nResearch\n1\n1\n1\n1\n-\n-\n3\n2\n2\n2\n8\n8\nTotal In-Situ\n11\n7\n20\n15\n3\n4\n39\n24\n28\n19\n127\n137\nTotal Fossil Energy\n335\n148\n435\n352\n113\n67\n601\n499\n473\n444\n2370\n2490\nGERALD\nIssue Paper\nEnergy Research and Development Administration\n1977 Budget\nIssue #1 : Enhanced Recovery of Oil & Gas\nStatement of Issue\nShould ERDA accelerate its cost-shared program to demonstrate technologies for the enhanced recovery of oil\nand gas?\nBackground\nERDA's \"National Plan for Energy R,D&D\" lists enhanced recovery technologies for oil and gas as one of\nthree highest priority R&D areas for increasing near-term energy supplies. This conclusion stems from\nERDA's projection that over the next 40 years up to one-fourth of all domestic oil and gas production could\nbe attained through the application of enhanced recovery. This might be possible because up to now, most\ndomestic oil fields have yielded only 30 to 50 percent of their oil.\nEnhanced oil recovery techniques involve the injection of liquids or gases to push out some of the\nremaining oil. Although it will never be practical to extract 100 percent of the oil, some methods and combina-\ntions of procedures, could increase ultimate recovery by 10 to 20 percent. Enhanced gas recovery techniques\ninvolve fracturing the reservoir rock in order to release gas fast enough to justify the cost of drilling and\ndistribution.\nCurrent estimates of industry expenditures for enhanced recovery research and field demonstrations range\nbetween $100 and $200 million per year. A two year old survey indicated 100 ongoing private sector oil field\nprojects and more recent indications are that these efforts have been greatly expanded. These projects\ninclude conventional methods in widespread large-scale use as well as the more costly advanced techniques\nalso included in the Federal program.\nBy the end of FY 1976, the ERDA program is expected to involve (1) 35 to 40 cost-shared demonstration projects\neach of 2 to 5 year duration; (2) a $9 million per year program of research in ERDA's Energy Research Centers and\nNational Laboratories; and (3) a small effort in gas and oil utilization research (e.g., engine testing of\nfuels). The total ERDA effort in FY 1976 totals $37 million (BA).\n2\nERDA's requested budget level of $59 million for FY 1977 with a five-year runout cost of over $500 million,\nwould provide for starting 29 new demonstration projects in FY 1977 (in addition to the 35-40 now funded) and\nwould lead, over the next five years, to the completion of over 150 demonstration projects as well as a six-\nfold increase in the laboratory research program (over the current level of $9 million). Since current domestic\noil and gas production is derived, almost entirely, from only 260 major oil and gas reservoirs, ERDA's demonstra-\ntion effort represents a very extensive program.\nAlternatives\n#1. Increase the size of the enhanced recovery program for both oil and gas by initiating 29 new demonstra-\ntion projects and enlarging the laboratory research effort by 60%.\n#2. Continue ongoing demonstration projects and research efforts while completing a definitive program\nmanagement plan before committing to new demonstration projects.\n#3. Phase out demonstration program and restrict all future efforts to laboratory research.\nAnalysis\nJuly 1 - Sept.\n1975\n1976\n30, 1976\n1977\n1978\n1979\n1980\n1981\nBudget Authority/Outlays\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\n($ Millions)\nAlt. #1 (Agency req.)\n28\n10\n37\n28\n7\n9\n59\n41\n109\n85\n127\n126\n118\n119\n118\n118\nAlt. #2 (OMB rec.)\n28\n10\n37\n28\n7\n9\n37\n32\n(TO\nBE\nDETERMINED\n)\nAlt. #3\n28\n10\n37\n28\n7\n9\n29\n29\n35\n40\n31\n40\n15\n18\n10\n10\nNumber of Demo. Starts:\nAlt. #1 (Agency req.)\n16\n22\n0\n29\n36\n37\n26\n5\nAlt. #2 (OMB rec.)\n16\n22\n0\n(\nTO BE DETERMINED\n)\nAlt. #3\n16\n22\n0\n0\n0\n0\n0\n0\nCHOS\nLIBBARY\n3\nERDA argues that its cost-shared demonstration projects will:\n- Accelerate private R&D efforts by sharing the cost with industry of high-risk field tests, each\ncosting $5-10 million;\n- Increase dissemination of information about improved recovery technologies to both major companies and\nindependents thereby reducing unnecessary duplication of R&D; and\n- Provide a credible assessment of the benefits of enhanced recovery R&D and the potential of full-scale\nuse to the public, to Government agencies, and to industrial management.\nERDA staff has asserted that private industry would eventually develop and apply these enhanced recovery\ntechnologies but that the ERDA program would accelerate this process by five to ten years. If true, such a\nsituation would justify a substantial Federal program. However, ERDA admits that there is no hard analysis\nor evidence to substantiate this assertion.\nThe OMB recommendation, Alternative #2 - to hold the program's funding at its current level, might eventually\ninvolve starting some new demonstration projects but it presumes that further program expansion is based upon\na fully developed analyzed, and justified program plan.\nThe need for delaying new efforts until such a plan is developed is based upon the following observation:\n- ERDA is only beginning to formulate a management plan that would address where demonstrations should\nbe conducted, what technologies should be used, and how the demonstration results should effect\nfurther program planning. Based on the rate of progress during the last year, it seems unlikely that\nsuch planning will be completed before the beginning of FY 1977.\n- Based on ERDA's ongoing demonstration projects, there is some doubt whether Federal funds accelerate\nthe undertaking of an enhanced recovery project or enlarge its size. Evidence for this conclusion\ncomes from the history of these cost-shared projects, statements of the industry participants, and the\ndegree of private cost sharing (as high as 80 percent). In addition, there is serious question as to\nwhether or not there are enough qualified cost-sharing partners to utilize the FY 1977 funding request.\nLIBRARY GERAL FORD\n4\n- All of the processes proposed for cost-shared demonstration in ERDA 1977 budget request have been\nresearched, developed, tested, and even marketed by private industry, but their utilization is very\nlimited. Some feel this is due to the wide range of uncertainty regarding applicability, effective-\nness, and economics of different methods. Whether or not these uncertainties can be resolved on\nanything other than a field-by-field basis is unknown, but the Federal program presumes that an\noverall predictive model can be developed without conducting research on each and every oil field.\n- One of the major deterrents to both research and utilization on enhanced recovery techniques is their\ncost. The current program only addresses the task of reducing uncertainty of enhanced recovery; there\nis almost no research on reducing the cost of applying different techniques (e.g., improved preparation\nor recycling of injected fluids). Similarly, the costs and uncertainties would not be so prohibitive\nif the value of oil recovered were higher. FEA is studying what impact its regulations have on\nenhanced recovery and this may lead to regulatory change with a much greater impact than the demonstra-\ntion program.\nAlternative #3, illustrates the funding that would be necessary if future program efforts were restricted to\nlaboratory research and ongoing demonstration projects are completed. Although it may be that this alternative\nis consistent with the proper Federal role, it would be premature to select this alternative prior to comple-\ntion of a full analysis by ERDA and OMB.\nAgency Request: Alternative #1. ERDA perceives this area as having a very high near-term payoff and the\nresponse of the private sector to R&D opportunities as being insufficient.\nOMB Recommendation. Alternative #2. Hold program funding level until a more definitive program management\nplan makes it clear as to whether or not additional funds can be effectively utilized.\nGERALS\nR.\nFORD\nIssue Paper\nEnergy Research and Development Administration\n1977 Budget\nIssue #2: Hydrogen Pilot Plant\nStatement of Issue\nIn the context of Fossil Energy's Coal R&D Program, should ERDA fully fund a $100 million pilot plant to produce\nhigh purity hydrogen from coal at a NASA facility?\nBackground\nIn the course of securing a source of liquid hydrogen to fuel the Space Shuttle, NASA examined a range of\noptions, including the use of coal, oil, or natural gas to produce hydrogen. A conventional process using\nnatural gas as a feedstock was selected, and in June 1975, NASA signed a twelve year contract under which the\ncontractor would construct an additional 30 tons per day of liquid hydrogen capacity at an existing facility.\nThe plant's vulnerability to natural gas curtailments was one of the reasons NASA investigated coal and other\nfeedstock alternatives.\nDespite NASA's assured twelve year supply (1975-1987) of liquid hydrogen, the agency has supported an ERDA\nproposal to construct a pilot plant to produce pure hydrogen gas (30 ton/day) from coal (200 ton/day). Tenative\nplans provide that ERDA would fund construction, startup and one to three years of R&D operation at a total\nestimated cost of $110 million; and that NASA would provide a fifty acre site adjacent to the existing plant,\nwould utilize its \"fast-track\" procurement and management capability to build the plant quickly, and possibly\nfund the operation of the hydrogen plant as a backup source of hydrogen until 1987, and as on-line source of\nhydrogen after NASA's existing contract expires in 1987.\nThe coal fed hydrogen pilot plant is of interest to ERDA for two reasons: (1) the facility involves\nseveral coal gasification and and gas clean-up steps that are also utilized in producing low-BTU gas and high-\nBTU gas from coal; and (2) hydrogen is an intermediate product in processes which convert coal to liquid fuel and\nsome relevant R&D could be conducted in this facility\nThe ERDA request involves reprogramming $32 million in funds appropriated to fossil energy for more general\nand small scale R&D efforts in FY 1975 and FY 1976, and providing an additional $37 million in FY 1977. These\nfunds would cover pilot plant design and construction, but an additional $42 million would be needed\nfor start-up, operating, and associated R&D costs over the next four years\n2\nThe ERDA Coal R&D program already contains the following efforts, totaling $62 million (BA) in FY 1976,\nthat produce some of the same information that would result from the proposed hydrogen pilot plant: four\nlow-BTU gasification pilot plants and process development units, five high-BTU gasification pilot plants,\nand one pilot plant for the production of hydrogen (which uses a method different from that of the proposed\npilot plant).\nThe FY 1977 funding requested for the hydrogen pilot plant represents about 10% of the total Coal R&D\nprogram request which is directed at improving many different technologies for the utilization of coal. The\noverall program involves laboratory and pilot plant work on converting coal to liquid and gaseous fuels,\non using coal-gas to run gas turbines, on burning coal with greater efficiency and low sulfur emissions, as\nwell as basic research and system studies. This Coal R&D program is closely linked to a demonstration plant\nprogram to demonstrate high-risk advanced technology (see Other Issue ) and will contribute substantially\nto the operation of the proposed Synthetic Fuels Commercial Demonstration Program (see Other Issue\n).\nAlternatives\n#1. Proceed with design and construction of a fully Federally funded ERDA/NASA hydrogen pilot plant\nat a total estimated cost of $111 million. In addition, ERDA requests a $35 million increase, over\nFY 1976, in the other Coal R&D program areas for a total of $336 million (BA) in FY 1977.\n#2. Proceed with a cost-shared pilot plant designed and located to best complement ERDA's Coal R&D program;\nuse NASA site if it is still suitable. This alternative also recommends funding for the remaining\nCoal R&D Program at a level which is $ 29 million below that requested, and $6 million above FY 1976 funding\nAnalysis\nJuly 1- Sept.\n1975\n1976\n30, 1976\n1977\n1978\n1979\n1980\n1981\nBudget Authority/Outlays\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\n($ Millions)\nCoal R&D:\nAlt. #1 (Agency req.)\n256\n128\n301\n282\n83\n46\n336\n321\n507\n424\n597\n562\n617\n635\n544\n615\nAlt. #2 (OMB Rec.)\n256\n128\n301\n282\n83\n46\n307\n307\n427\n365\n433\n416\n437\n481\n356\n434\nHydrogen Pilot Plant:\nAlt. #1 (Agency req.)\n14\n--\n15\n--\n3\n--\n37\n29\n12\n36\n12\n28\n9\n9\nAlt. #2 (OMB Rec.)\n14\n--\n15\n--\n3\n--\n--\n6\n15\n31\n12\n17\n5\n10\n95\n5\n3\nERDA presents three arguments in support of its request:\n- The hydrogen pilot plant will contribute to the Coal R&D Program's objectives by providing a large-scale\nfacility that utilizes an approach different than any currently in the Federal program. Outside of the\ncoal demonstration program, none of ERDA's pilot plants exceeds: 50 tons of coal per day in size.\n- NASA procurement and management procedures are more established and could move more quickly than ERDA,\nthus the requested approach may result in a facility with lower total costs than might otherwise be\npossible.\n- Beyond its R&D contribution, the hydrogen pilot plant may provide an alternate fuel supply for NASA's space\nshuttle program.\nHowever, there are several arguments against proceeding with this pilot plant:\n- NASA's need for hydrogen from this facility appears marginal because (1) under the terms of the June\n1975 contract, Air Products, Inc., has agreed to provide all of NASA's projected liquid hydrogen\nrequirements over the next twelve years; (2) the hydrogen pilot plant is likely to be very expensive\nto maintain on a standby basis for use during possible mid-winter natural gas curtailments, because of\nthe staffing, maintenance, and inventorying (e.g., coal) costs; (3) even though pilot plant operating\ncosts are difficult to project, no one has argued that the pilot plant's product will be inexpensive\nenough during the early 1980's to justify NASA abandoning its use of the natural gas-fed plant which\nit must pay for, whether it uses it or not, (this is a provision of the June contract); and (4) the option\nof using the pilot plant as an on-line source for hydrogen after 1987 must be weighed against the\npossibility that a more economical version of the coal-fed process will become available as a result of\nERDA's other R&D efforts.\n- The coal R&D objectives of this pilot plant might be better met if it were co-located with some other\ncoal R&D activities. This would expand the possible research opportunities, and may also reduce the costs\nof construction and operation.\n- The involvement of a private sector cost-sharing partner would not only reduce the Federal costs, but might\nalso result in an improved pilot plant design, and a product which is more marketable than high purity hydrogen\nThe same equipment, differently configured, can provide a variety of fuel gases or petrochemical feed-\nstock gases. The coal gasifier system for the hydrogen pilot plant that ERDA tentatively selected has\nalready been extensively tested by the manufacturer (Shell-Texaco) at the 30-50 tcn-of-coal/day size, and\nscaling up to 200 tons/day should not present a very large risk. One firm, DuPont, already appears eager\nto test this system with or without a Federal partner.\n4\n-\nThe scheduling of this pilot plant is neither critical to the development of any larger device or vital\nto gaining a fundamental understanding that might impact on future R&D decisions. In part, this is\ndue to the number of similar related efforts ongoing in this research area.\nAs a consequence of these observations, it is recommended that ERDA seek a private cost-sharing partner (at\nleast 1/3 private funding) and consider a pilot plant with a broader range of applications. It is expected\nthat this would obviate the need for additional funds in FY 1977 because of the funding ($32 million) provided\nin FY 1975 and FY 1976, could reduce the eventual cost to the Federal Government, and would delay the project\nby one year.\nThe $29 million reduction from the request in Coal R&D is recommended in order to reduce excessive pilot\nplant operating funds, improve phasing of the gas turbine research program, and reduce the pace of development\nin the low priority MHD (magnetohydrodynamics) research program. This latter area is of special concern to\nSenator Mansfield and it may be expected that he will carefully scrutinize the denial of any requests in this\narea, even though the program doubled in FY 1976 and the recommendation is for 32% growth in FY 1977. Generally,\nthe FY 1977 Coal R&D recommendation provides for decreases in coal liquid and gaseous fuel R&D as related pilot\nplant construction ends, and provides for increases in gas turbines, direct combustion, and MHD.\nDespite the small increase in funding that is recommended in FY 1977 over FY 1976, the Coal R&D program\nis viewed by the Administration as having a very high priority, and substantial program \"growth\" is expected\nto occur during FY 1977 and in subsequent years. This apparent contradiction with the funding level is due to\nthe fact that over the last three years funding decisions have been based on projected growth rates that did\nnot occur. Consequently, funds were unobligated in both FY 1974 and FY 1975, and the program now has over\n$100 million available for obligation during FY 1976 in addition to the funds shown on page 2. It is likely\nthat some FY 1976 and transition quarter funding will be carried over into FY 1977, but this should be the last\nyear of sizeable carryovers.\nAgency Request: Alternative #1. ERDA has stated that their current plan is the most cost effective approach to\nproviding NASA with an alternate hydrogen resource and at the same time aid in the development of new technology\nfor the generation of hydrogen and low-BTU industrial fuel gas.\nOMB Recommendation. Alternative #2. ERDA should proceed with a pilot plant project with a primary purpose of\nproducing a hydrogen-enriched gas, but with a broader range of potential R&D applications. At least 1/3 private\ncost-sharing should be sought, and NASA should be urged to continue to make its site available to the program.\nIssue Paper\nEnergy Research and Development Administration\n1977 Budget\nIssue #3:\n:\nSolar Energy\nStatement of Issue\nWhat should be the pace of the solar energy program?\nBackground\nThe current ERDA solar energy program is largely the result of two acts passed by the 93rd Congress, the Solar\nEnergy Research, Development, and Demonstration Act (P.L. 93-473), and the Solar Heating and Cooling Demonstration\nAct of 1974 (P.L. 93-409). These acts authorize a program of research, development, and demonstration with the\ngoal of providing the option for utilizing solar energy as a viable contributor to the Nation's future energy needs.\nEnergy from the sun may be converted into usable forms of energy by means of several conversion technologies\nwhich may be grouped into three principal categories: (1) direct thermal applications, involving the collection of\nsunlight through thermal collectors for uses such as the heating and cooling of buildings, (2) solar electric\napplications, in which energy from the sun is transformed into electricity, and (3) fuels from biomass, involving\nthe production of fuels such as methane, alcohols, hydrogen, or other energy intensive products from organic\nmaterials. ERDA has estimated that the future contribution of these solar energy technologies could be:\nEnergy Production (Quads)\nCONVERSION TECHNOLOGY\n1985\n2000\n2020\nDirect Thermal Applications\n.2\n3\n20\nSolar Electric Applications\n.07\n5\n15\nFuels from Biomass\n.5\n3\n10\nTotal Projected U.S. Demand\n100\n150\n180\nEstimated % of National Demand\n0.8%\n7%\n25%\n1/\nQ: Quadrillion (1015) Btu's or Quads\n2/\nThe U.S. now uses 75Q/year\n2\nERDA has requested $199 million for the FY 1977 solar energy program (as compared to $89 million in FY 1976).\nOf this total, $177 million is for heating and cooling of buildings and solar electric applications. These two\nactivities are the subject of the following major subissues. Other solar programs, which include fuels from\nbiomass, agricultural and industrial process heating, and technology utilization and support, are described in\nthe Other Issues section (pages 7, 8, and 9, respectively).\nSubissue #1\nWhat should be the size and pace of the solar heating and cooling demonstration program?\nBackground\nThe Solar Heating and Cooling Demonstration Act of 1974 provides for the demonstration, within a three year\nperiod, of the practical use of solar heating technology, and for the development and demonstration, within a five\nyear period, of the practical use of combined heating and cooling technology. The Act further provides that such\nsystems be installed in a sufficient number of different geographic areas under varying climatic conditions to\nconstitute a realistic and effective demonstration. The legislative reports indicate that the number of installations\nshould be set administratively, but that residential installations should be in substantial numbers, and that 2000\nor more units would meet the requirement.\nThe demonstrations are planned to be conducted in five yearly cycles through FY 1979, with the first three\ncycles concentrating on solar heating and the later cycles concentrating on combined heating and cooling. The\ncycle begun in FY 1976 will implement approximately 22 commercial installations covering seven regions and approximately\n100 residential installations covering 12 climatic regions. ERDA is in the process of completing a study of the\noptimum number of demonstration units considering such factors as climate, number of building starts, number of\ntypes of hardware systems available, and different building types. Although the results of their study have not\nbeen available for OMB analysis, preliminary indications are that ERDA may recommend a total program of 800-1000 total\ndemonstration projects within the five year period, of which about 600-800 would be residential and 200 would be\ncommercial. ERDA's FY 1977 request for the second cycle corresponds to approximately 275 demonstration units, most\nof which will be residential installations for solar heating.\n3\nSolar heating and cooling systems are inherently a supplemental energy source and not a total substitute\nfor conventional heating and cooling systems because of the diffuse nature of the sun's energy, requiring large\ncollectors, and because of residential energy needs during periods of darkness or cloudy weather. Although\nmaintenance costs are typically low, current solar systems have an initial cost of several thousand dollars\nand are not economic for the homeowner today, except in areas where solar radiation is excellent and the cost\nof alternative energy sources is very high. ERDA has estimated that the heating and cooling program could\nresult in energy production of 0.2Q by the year 1985 and 2Q by the year 2000.\nThe demonstration projects to be developed in the later cycles are expected to have advanced energy storage\ncomponents as well as a cooling capacity. These systems, although probably more expensive than heating only systems,\nmay offer greater utilization by day, week and season and prove to be more viable for both the homeowner and utility.\nAlternatives\n#1.\nAuthorize a highly accelerated demonstration program of approximately 275 units for the cycle\nbeginning in FY 1977, with a total program of 800-1000 units expected through FY 1979.\n#2.\nAuthorize an accelerated demonstration program of approximately 100 units for the cycle\nbeginning in FY 1977, with a total program of approximately 400-500 units expected through\nFY 1979.\nAnalysis\nJuly 1 - Sept.\n1975\n1976\n30, 1976\n1977\n1978\n1979\n1980\n1981\nBudget Authority/Outlays\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\n($ Millions)\nAlt. #1 (Agency req. &\n12\n5\n27\n22\n8\n5\n54\n46\n61\n55\n61\n55\n10\n15\n10\n12\ncutback)\nAlt. #2 (OMB rec.)\n12\n5\n27\n22\n8\n5\n29\n25\n33\n26\n33\n26\n5\n6\n5\n6\n4\nAlternative #1, the Agency's request and ceiling solution, provides for highly accelerated demonstration\nof current technology systems, and envisions a continuing high level program through FY 1979. This alternative\ndemonstrates uneconomic systems which may have a minimal, or even negative impact, on the far term production\nof energy from this source. This approach provides for 800-1000 total installations through FY 1979.\nAlternative #2, provides for an accelerated but more orderly program, recognizing the potentially positive impact\nof successful demonstrations, but allowing for a slower pace more consistent with the economics of current technology.\nBecause the solar heating systems now being generated are not generally economic, OMB staff believes that the number\nof demonstrations should be limited to that required to evaluate the technical effectiveness of candidate systems in\nvarying environments; additional demonstrations for the purpose of achieving greater visibility with the public would\nnot be appropriate at this time. This alternative would also place greater emphasis on research and development\nwhich may lead to lower unit costs for later demonstrations. The total number of demonstrations with this alternative\nmay be no more than 400-500 through FY 1979.\nAgency Recommendations: Alternative #1 and #2. Authorize a highly accelerated demonstration program which may\nrequire 1000 demonstrations before 1980.\nOMB Recommendation. Alternative #3. Authorize an accelerated but slower demonstration program, with more\nemphasis on R&D and a total program of approximately 400-500 units.\nSubissue #2\nWhat should be the pace of the solar electric applications program?\nBackground\nThis subprogram involves four technological approaches to converting the sun's energy into electricity: solar\nthermal electric, wind energy conversion, ocean thermal conversion, and photovoltaics.\nIn solar thermal electric, ERDA's principal thrust will be to focus the sun's energy on a central boiler with\na large field of mirrors. Though there appears to be no fundamental problems which restrict development of solar\nthermal electric technology, neither the engineering nor economic feasibility of this technology has been established,\nand its eventual application will probably be limited to intermediate load service in the Southwestern United States.\n5\nWind conversion has been technically feasible for producing electricity for many years. However, because\nof high capital costs and the requirement for strong steady winds to produce maximum output, wind systems are far\nfrom economic today except in limited areas and isolated locations where strong winds are present and the cost\nof alternative energy sources is high.\nOcean thermal conversion is a relatively low technology in which no breakthroughs are required to demonstrate\ntechnical feasibility. In this technology, electricity is produced from a thermal gradient in the ocean. Ocean\nthermal systems currently suffer the high capital costs of other solar systems and the resource is limited to the\nUnited States Southeastern and Gulf Coasts, off the United States Pacific Coast, and around Hawaii and Guam.\nBecause of the cost and difficulty of transmitting electricity from an ocean thermal electric plant to land,\nocean thermal systems may not be feasible for large scale power delivery to the Continental United States\nPhotovoltaics involves the use of large arrays of semiconductor devices to convert the sun's energy directly\ninto electricity. These arrays have been built for space applications at costs in excess of $30,000/KW, but\nlarge cost reductions on the order of 200:1 will be required for photovoltaics to be economic for large scale\napplications. While scientific breakthroughs are thought possible, ERDA's thrust is to reduce costs through the\ndevelopment of mass production methods. If economic, photovoltaic arrays could be widely applied in the United\nStates.\nAlternatives\n#1. Establish a highly accelerated program that seeks to realize the potential contributions of all the\nmajor solar electric technologies at the earliest possible time.\n#2. Continue an orderly but accelerated development of the potentially larger payoff solar thermal electric\nand photovoltaic technologies where engineering and technical breakthroughs are thought possible. For\nthe wind and ocean thermal approaches, limit the program to assessing the accessible and recoverable\nresource base and funding of critical component development.\nAnalysis\nJuly 1 - Sept.\n1975\n1976\n30, 1976\n1977\n1978\n1979\n1980\nBudget Authority/Outlays\nBA\n1981\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nEA\n0\nBA\n($ Millions)\n0\nBA\n0\nAlt. #1 (Agen.req.&cutback)\n25\n8\n51\n36\n15\n10\n120\n87\n150\n109\n150\n109\n136\n104\n95\n80\nAlt. #2 (OMB rec.)\n25\n8\n51\n36\n15\n10\n78\n55\n92\n83\n89\n75\n79\n83\n79\n89\n6\nFor alternative #1, ERDA believes that all major solar electric approaches must be greatly expanded to\nachieve the potential contributions of solar electric technologies at the earliest possible date. ERDA also\nbelieves that demonstration of each solar electric technology will be necessary to gain experience and generate\nlife cycle cost data. By ERDA's estimate, this alternative could lead to the following contributions:\nEstimates of Energy Supplied by Solar Electric Techologies in Quads\nTechnology\n1985\n2000\n2020\nSolar Thermal\n0.0\n1.2\n4.2\nWind\nnegl.\n1.2\n3.6\nOcean Thermal\nnegl.\n.6\n2.4\nPhotovoltaics\nnegl.\n1.8\n4.8\nTotals\n.07\n4.8\n15.0\nOMB staff is skeptical of these resource estimates by ERDA, particularly for the wind and ocean thermal\napproaches. However, marked improvements in the efficiency and cost-effectiveness of the solar electric technologies\nmay eventually prove the validity of some of these estimates.\nAlternative #2 (OMB Recommendation) would permit an orderly but significant acceleration of solar thermal and\nphotovoltaic technologies, with an initial thrust towards determining the technical and engineering feasibility of\nthe technological approaches with higher long-term payoffs. This alternative would limit the wind and ocean\nthermal approaches to advanced concepts that could lead to dramatic cost reductions, recognizing that costly\ndemonstrations of uneconomic near-term technologies are not likely to lead to any significant commercialization.\nAgency Recommendation. Alternative #1. Authorize a program of highly accelerated development of all major solar\nelectric approaches leading to early, Federally-funded, demonstration of each approach.\nOMB Recommendation. Alternative #2. Authorize an accelerated solar electric program in the higher long-term payoff\nareas of solar thermal and photovoltaics. Redirect funding for wind and ocean thermal systems from early demon-\nstration to advanced concepts.\nSummary of All Solar Programs\n(In Millions of Dollars)\nProgram\nFY 1977\nFY 1977\nFY 1976\nRequest\nOMB Rec.\nBA\n0\nBA\n0\nBA\n0\nDirect Thermal Applications\n(29)\n(23)\n(61)\n(51)\n(33)\n(27)\n- Heating & Cooling\n27\n22\n54\n46\n29\n25\n- Agricultural & Industrial\nProcess Heat\n2\n1\n7\n5\n4\n2\nSolar Electric Applications\n(51)\n(36)\n(120)\n(87)\n(78)\n(55)\n- Solar Thermal\n17\n13\n51\n33\n46\n34\n- Photovoltaics\n19\n13\n38\n27\n23\n14\n- Wind\n12\n9\n22\n18\n6\n5\n- Ocean Thermal\n3\n3\n9\n8\n3\n3\nFuels from Biomass\n(6)\n(3)\n(8)\n(6)\n(6)\n(4)\nTechnology Support & Utilization\n(4)\n(2)\n(10)\n(8)\n(10)\n(6)\nTotals\n89\n65\n199\n152\n126\n91\nIssue Paper\nEnergy Research and Development Administration\n1977 Budget\nIssue #4: Geothermal Energy\nStatement of Issue\nWhat is the appropriate strategy and pace for developing the potential of geothermal energy?\nBackground\nERDA's geothermal energy program is the result of the Geothermal Energy Research, Development and\nDemonstration Act of 1974 (P.L. 93-410), which authorizes a program of research, development, demonstration,\nand loan guarantees for geothermal energy development with a goal of establishing this energy source as a\nviable potential contributor to the Nation's future energy needs.\nGeothermal energy is the natural heat of the earth. Geothermal reservoirs have been found primarily\nin the Western United States and along the Gulf Coast; more than half in the Western states are on Federal\nland. The world's total production of electrical power from geothermal sources has reached only about\n1000 MWₑ, or about the output of one large nuclear plant. The U.S. leads the world in such production,\ngenerating 500 MWe from dry steam at the Geysers in California.\nThe primary geothermal resources are (a) hydrothermal reservoirs (hot mineralized water or dry\nsteam), (b) geopressured zones (zones of sand and clay saturated with methane gas and water at high\ntemperatures and pressures), and (c) hot dry rock (hot solid rock in earth's upper crust). The United\nStates Geological Survey has estimated the recoverable heat from these resources as follows:\nRecoverable Energy (Quads)\nResource Type\nKnown\nInferred\nHydrothermal\n- dry steam\n2\n2\n- hot liquids\n100\n360\nGeopressured\n600\n1730\nHot Dry Rock\n80-600\n240-1900\n2\nCurrently, energy extracted from geothermal resources is used primarily to generate electrical power;\nhowever, other potential energy uses include heating, refrigeration, and industrial processing requiring\nheat. Unlike facilities using coal, oil, or other fuels, geothermal power plants and associated facilities\nmust be constructed at or near the well-head because transporting steam is difficult.\nERDA's current strategy is to encourage the present geothermal industry (about 20 companies) to develop\nthe more accessible but more limited hydrothermal resources, mostly for electric power generation, so that\nthe industry gains sufficient experience with geothermal utilization technologies to be able to adapt these\ntechnologies to exploit the less accessible but more abundant geopressured and hot dry rock resources.\nDevelopment of the more abundant and geographically distributed geopressured and hot dry rocks resources has\nnot been undertaken by industry largely because the technologies for accurate reservoir assessment and\nextraction have not been developed. ERDA has estimated that if their program is approved and successfully\nimplemented, the following energy production could be achieved:\nEstimated Geothermal Energy Production Given Successful Program Implementation\n(Quads)\nResource\n1985\n2000\n2020\nHydrothermal\n0.6\n2.5\n3.1\nGeopressured\nnegl.\n1.2\n9.0\nHot Dry Rock\n.0\n.7\n6.5\nTotal Energy\n.6\n4.4\n18.6\nApproximately 50% of the outlays in ERDA's request are devoted to hydrothermal applications and the\nnear-term demonstration of electric power generation. ERDA believes that much of the hydrothermal technology\nthat it would develop would be applicable to tapping the geopressured and hot dry rock resources.\nAlternatives\n#1. Continue current strategy to encourage the rapid development of hydrothermal resources, including\ndemonstration projects.\n#2. Redirect the program by concentrating on the development of the much more abundant but longer-\nterm resources. Continue hydrothermal development at approximately the FY 1976 level in order\nto develop key components which will have application to both hydrothermal and advanced resources.\n3\nAnalysis\nJuly 1 - - Sept.\n1975\n1976\n30, 1976\n1977\n1978\n1979\n1980\n1981\nBudget Authority/Outlays\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\n-\n-\n($ Millions)\nAlt. #1 (Agency req. &\ncutback)\n28\n20\n31\n32\n8\n4\n60\n56\n141\n114\n117\n121\n95\n112\n54\n30\nAlt. #2 (OMB rec.)\n28\n20\n31\n32\n8\n4\n49\n42\n50\n45\n50\n48\n50\n50\n50\n50\nAlternative #1 calls for rapid acceleration in the development of hydrothermal resources for initial\nsignificant production in the 1985-2000 time period. The disadvantage of this alternative is that it\ncalls for initiation of costly demonstration projects in the next several years that will focus on developing\ntechnology for tapping geothermal resources with limited potential.\nAlternative #2 provides for orderly but accelerated growth in the R&D program and encourages development\nof those technologies (i.e., those to tap geopressured and hot dry rock resources) holding the greatest payoff.\nThis alternative would continue some hydrothermal development in key component areas in order to stimulate\nthe expansion of the existing industry to yield an early contribution. However, this alternative does not\nprovide for early, federally-funded, commercial-scale demonstration of electric power generation from\nhydrothermal resources, but rather relies primarily on the private sector to tap these nearer-term resources.\nAgency Request: Alternative #1. The agency believes that accelerated production of geothermal energy should\nbe developed largely through the stimulation of the small existing industry towards the development of\nhydrothermal resources.\nOMB Recommendation. Alternative #2. While the- identified resources for geothermal are substantial, no\nanalysis has been done justifying a greatly accelerated effort for the development of hydrothermal resources.\nThe pace and strategy of the program should match the relative potential of the geothermal resources as long-\nterm energy sources.\nIssue Paper\nEnergy Research and Development Administration\n1977 Budget\nIssue #5: Conservation Programs\nStatement of Issue\nWhat should be the funding level for R&D in conservation programs, particularly those programs aimed at\nmore efficient energy consumption in buildings, industry, and transportation?\nBackground\nThere are two paths for achieving energy conservation through improved technologies: (a) greater efficiency\nof production, distribution, and storage of energy, and (b) reduced consumption of energy at the end-use.\n-\nProjects to achieve greater efficiency fall into the areas of electricity transmission and distribution,\nstorage of energy in more advanced batteries, creating energy from fuel cells, and utilization of\ngarbage and other organic wastes for energy.\n-\nProjects to achieve reduced consumption of energy at the end-use through improved technologies fall\ninto three categories: industry, buildings, and transportation. Examples of projects proposed by\nERDA include:\nIndustrial projects, such as 2/3 ERDA funding of $30 million for a more energy efficient\nsteel rolling mill and $1 million for a pilot plant to dry grain in a vacuum with microwave\nheating.\nBuilding projects such as development of data on energy consumption in residential and commercial\nbuildings. This is to support the President's legislative proposal for energy performance standards.\non residential and commercial buildings. Another project is similar to the HUD total energy\nplant in Jersey City.\nTransportation projects such as contracts with the auto industry to develop advanced engines\nand grants to universities to study the use of methanol fuel mixtures as substitutes for gasoline.\n2\nIndustry conducts R&D related to conservation of energy in all key program areas, although the levels of\neffort and commitment vary from area to area.\n- Electricity transmission and distribution: The Electric Power Research Institute, funded by elec-\ntric utilities, is spending $12 million for electricity transmission and distribution for CY 1975,\nwhich is the same amount to be outlayed by ERDA in FY 1976. ERDA works closely with the Institute\nas evidenced by the 23 joint projects underway, with industry paying an average 75% of the costs.\n- Energy storage: Industry-wide R&D in this area has been estimated by ERDA at $10 million annually.\n-\nTransportation: Automotive R&D by industry has been estimated at $54 million in CY 1974 as a result\nof an NSF survey.\n- Buildings and industry: The same HSF study indicated $56 million was spent in these end-use areas.\nERDA has requested a tripling in BA for conservation R&D from $72 million in 1976 to $224 million in\n1977. The largest increases have been requested in the energy storage program and in the three programs\nconcerned with reducing energy consumption -- buildings, industry, and transportation. These increases\nare consistent with strong congressional interest which views conservation programs as directly helping\nconsumers in contrast to other ERDA R&D which is perceived as helping big industry. Also end-use programs\ntend to have short-term benefits relative to ERDA's other R&D programs.\nERDA's proposed strategy for Federal activity in conservation R&D implies a large Federal role in order\nto ensure, in virtually all areas, that improved technology developments occur in a timely fashion.\nSpecifically, ERDA argues for a strong Federal role because:\n-\nSome potentially high payoff technology development activities are very expensive. For example in\nR&D on advanced automobiles, a university research team has estimated that $1 billion should be\nspent over the next 5-10 years. If an advanced automobile, such as one with a Stirling or turbine\n9401\nengine is mass produced, the payoff could be 2 million barrels of oil per day by the year 2000.\nKUNDSIT\nSome potentially high payoff technologies are far off. For example, improvements in battery tech-\nnology are being sought through studies on electrochemistry and on materials. The payoff here would\nbe to eliminate dependence on oil for auto fuel, or store energy to meet peak power demands.\nSome potentially high payoff research is high risk. For example, it has been estimated that 30% of\nthe electric power outages are caused by lightning. Yet the technology does not even exist to\nmeasure lightning surges in power lines in order to develop equipment that could accommodate the\nsurge and prevent the outage.\n3\nThe criteria for analyzing ERDA's individual R&D programs in conservation are:\n-\nIs the program adequately justified and sized in terms of its costs, benefits, and risks of technical and\ncommercial success?\n-\nWhat is the appropriate role of the Federal Government to perform the R&D relative to the\nprivate sector?\n-\nShould ERDA or some other agency perform the Federal R&D?\n-\nCan ERDA effectively manage the requested program growth?\nAlternatives\n#1. Maintain a level program and take the chance that the private sector will perform more R&D?\n#2. Allow some growth in high priority projects in transportation and energy storage.\n#3. Same as #2, but with increases also in buildings and industry projects which might satisfy\nthe criteria if a better justification was available on costs, benefits, and the Federal role?\n#4. Greatly accelerate energy conservation R&D programs in all major areas.\nAnalysis\nJuly 1 - Sept.\n1975\n1976\n30, 1976\n1977\n1978\n1979\n1980\n1981\nBudget Authority/Outlays\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\n($ Millions)\nAlt. #1\n31\n17\n72\n55\n18\n14\n72\n65\n72\n72\n72\n72\n72\n72\n72\n72\nAlt. #2 (OMB rec.)\n31\n17\n72\n55\n18\n14\n99\n78\n120\n90\n130\n110\n140\n130\n140\n140\nAlt. #3\n31\n17\n72\n55\n18\n14\n124\n90\n160\n130\n180\n160\n190\n175\n200\n190\nAlt. #4 (Agency req.)\n31\n17\n72\n55\n18\n14\n224\n150\n345\n257\n392\n305\n400\n324\n395\n336\nAlternative #1, which is level in dollars, would result in a decrease in program level due to inflation. It\nwould signal a very limited Federal role. It would be interpreted as totally unrealistic by supporters in\nCongress and elsewhere who believe there are substantial benefits available from conservation R&D, particularly\nas compared to benefits from other energy R&D programs. While the level of benefits is open to discussion,\nthere is sufficient information about benefits to warrant modest increases on programmatic grounds in all key\nareas. In the areas of transportation and energy storage, significant opportunities may be missed.\nConcerning the agency request (Alternative #4) information is not sufficient either from ERDA or other\nsources to justify a tripling of BA. The Federal role relative to industry would be significantly increased\ntn all areas, particularly with demonstrations. ERDA would infringe on many other agency responsibilities.\nFinally, ERDA's ability to effectively manage a tripling in BA is doubtful.\nAlternative #2 best satisfies the criteria for R&D by providing for increases in transportation and\nenergy storage.\n- Benefits from advanced autos include a 25-40% improvement in fuel economy, even after the 40%\nimprovement being promised by Detroit. Advanced engines would also meet the most stringent emission\nstandards and run on fuels other than gasoline, such as methanol and synthetic gas from oil shale or\ncoal. Battery advances whether applied to transportation, industry, homes, and even utilities can\nsmooth the fluctuations in energy demand during the day and week and as mentioned before in the case\nof autos reduce petroleum demands. Energy saved in transportation and energy storage is potentially\nmore cost-effective in terms of oil and gas savings relative to energy savings in buildings and\nindustry, since the latter areas depend more heavily for energy from fuels other than oil and gas.\n- The Federal role associated with Alternative #2 is more clear in an absolute sense and relative to\nother conservation programs. While industry does R&D in energy storage and advanced automobiles,\nits level of effort is below what is probably socially desirable. In advanced autos alone it is\nestimated that the nation, including Government and industry, should be spending from three to five\ntimes what it is currently spending. Industry would probably spend more on R&D in advanced autos\nbut does not because Federal requirements on auto emissions and safety divert R&D funds\nin the industry to these purposes. For example, in the 1974 NSF survey private R&D spending by the\nauto industry was reported as $139 million for environment and $54 million for conservation.\n- The ERDA role is also clear relative to other Federal agencies for Alternative #2. The increase in\ntransportation R&D would go almost exclusively to advanced autos. NASA would retain the predominate\nrole in aviation conservation as evidenced by their 1977 budget mark of $29 million, up from $11\nmillion in 1976. In energy storage no other agency is performing significant R&D.\n- Finally there is little doubt ERDA could manage the increase associated with Alternative #2.\nAlternative #3, provides further increases in buildings and conservation, because ERDA feels so strongly\nabout them. Yet these programs are not as well justified in terms of costs, benefits, risks, Federal\nrole, etc. But as a fallback position to appeals from the agency on Alternatives #1 and #2, this alternative\nstill does not provide for the most questionable projects in the agency request, such as in garbage recycling\n(about which they also feel quite strongly) and demonstration projects, like the steel mill.\nOVERVIEW\nFY 1977 ERDA Budget - Overview\nGeneral\nThis Overview paper discusses:\n- OMB's initial planning assumptions for ERDA (7/75).\n- ERDA's original FY 1977 budget request (9/75).\n- ERDA's response to the revised FY 1977 ceiling (10/75).\nThe primary differences between the OMB staff recommendations and\nthe ERDA approach to reaching the revised FY 1977 ceiling are high-\nlighted and major issues are identified.\nFollowing this Overview paper is a separate section on energy\nR&D strategy.\nIn addition, possible further reductions are listed in priority order\nat the end of this paper.\nOMB Initial Planning Assumptions\nIn July 1975, ERDA was provided an FY 1977 Planning Ceiling of $5.1B (BO)\nwhich was essentially a runout of the ongoing program levels with no\nprovision for major new initiatives. The $1B allowed over the FY 1976\nspending total of $4.1B was required to cover three roughly equal amounts\nof increase to carry out the approved program: (a) runout costs of\napproved energy R&D facilities or demonstration projects; (b) additional\nuranium enrichment production and capacity expansion; and (c) cost-of-\nliving increases for other programs.\nERDA Original FY 1977 Budget Request\nOn September 30 ERDA submitted its FY 1977 budget request of $6.2B ($1.1B\nover ceiling). ERDA was unwilling to provide its recommended approach to\nreach the Planning Ceiling. ERDA took the position that the Planning\nCeiling level was inadequate to provide for needed growth in high priority\nenergy R&D and defense programs (see attached letter of September 30\nfrom Mr. Fri).\nThe original FY 1977 ERDA budget submission of $6.2B (outlays) assumes\na very ambitious growth rate for all program categories:\n- Energy R&D - ERDA desires to press forward with an accelerated\nprogram for all technologies (pursuant to their June 30 Plan).\n- Uranium enrichment - The cost growth is the result of the planned\nincrease in production from existing Government plants (including\nincreased costs of electricity) and the ongoing capacity expansion\nprogram for these three plants. These increases are required to\nassure enriched fuel for civilian power plants and to provide in-\nventories to backstop private uranium enrichment.\n2\n- Defense-related programs - The increases primarily relate to the\ndesire of ERDA and DOD for ERDA's weapons design laboratories to\ndevote more effort to advanced R&D, including related underground\ntesting (this objective was recently supported by the President\nin a FY 1976 budget amendment). In addition, ERDA projects sub-\nstantial increases for weapons production and for storage of\nradioactive wastes from plutonium production.\n- Other programs - The increases cover a request for more than 1,000\nadditional Civil Servants (over a base of 8,052) and a plan to\ninitate a major construction program to rehabilitate and modernize\nERDA's laboratories.\nERDA Response to Revised (Cutback) FY 1977 Ceiling\nFORD\nAlthough the Division identified a number of potential cutbacks in\nresponse to the President's $28B tax reduction program, the revised\nLIBRARY\nERDA ceiling had to be raised from $5.1B to $5.3B in order to give\nsome recognition to the fact that the original ceiling did not provide\nfunds for major initiatives in the nuclear fuel cycle (e.g. plutonium\nrecycle and radioactive waste management).\nIn response to the revised ceiling, ERDA (after an intensive review)\nreduced its FY 1977 request by $.4B to $5.8B. ERDA also identified\nactions which could be taken to reach the $5.3B revised ceiling.\nHowever, ERDA strongly recommended against going below the revised\nrequest of $5.8B (see attached ERDA letter of October 29). Thus,\nthe gap between OMB and ERDA has been reduced from $1.1B (initial\nrequest) to $.5B (revised request).\nOMB Staff Assessment of Revised ERDA Request and Ceiling Case\nThe reductions made by ERDA to reach the $5.8B level have removed much\nof the excessive funding contained in the original request. All programs\nhave been reduced and in a generally reasonable way.\nIn addition, despite ERDA's objections, we believe that many of the\nspecific reductions identified by ERDA to get to the revised ceiling\nof $5.3B are acceptable. These include:\n- A slight slowdown in energy R&D programs (particularly conservation\nand fusion) which would still be 42% above FY 1976 spending levels.\n- A reduction in the request for nuclear weapons R&D, testing, and\nproduction (still almost 10% over FY 1976 spending levels).\n- An 8% increase in the charge for uranium enrichment services, based\nupon cost increases experienced.\n- Across-the-board decreases in procurement of equipment, computers,\nand facility improvements.\n3\nHowever, in some cases ERDA has suggested unacceptable reductions to\nreach the $5.3B revised ceiling:\n- We would recommend against the large reduction in the production of\nenriched uranium which was identified by ERDA to reach the revised\nceiling. This would result in large penalty charges for cancelling\nelectric power already ordered for the production plants. Most\nimportantly, this would reduce the amount of enriched uranium avail-\nable to backstop private enrichment ventures and handle contingenices.\n- In addition, we would not recommend accepting ERDA's revised ceiling\naction of deferring the initiation of new efforts to resolve critical\nnuclear fuel cycle issues (See Issues #6-#7).\n- We would also recommend against the shutdown in FY 1976 of the N-Reactor,\nRichland, Washington, which we do not believe is a realistic option\n(See Issue #11).\n- Furthermore, we would also recommend against a non-programmatic\nreduction suggested by ERDA which would only consist of deferring\nthe payment of $40M of bills to FY 1978.\nOMB Staff Approach\nAlthough OMB staff has not bought all of the reductions identified by\nERDA to reach the revised ceiling of $5.3B, we have been able to come\neven lower ($5.2B) by:\n- Decreasing non-nuclear energy R&D.\n- Reducing supporting energy R&D.\n- Decreasing weapons R&D, testing, and production.\n- Applying other, relatively smaller, reductions throughout ERDA's\nprogram.\nThe principal difference between the OMB staff approach and the ERDA\nrevised ceiling solution concerns the relative priority of certain non-\nnuclear energy R&D programs (mainly solar and conservation) versus\nuranium enrichment production.\n- ERDA would protect a very large (65%) growth in non-nuclear energy\nR&D by greatly reducing the production of enriched uranium.\n- OMB staff believes that the rate of spending growth in non-nuclear\nenergy R&D can and should be constrained. In particular, we believe\nthat solar, geothermal, and conservation R&D could not effectively\nuse the full amounts contained in ERDA's revised ceiling case and\nthat, in many areas, there should be greater reliance on the private\nsector. Under the OMB staff approach, non-nuclear energy R&D would\nstill receive a 31% increase over FY 1976 (see separate section\nfollowing on Energy R&D strategy).\n4\n- In addition, for the reasons discussed previously, OMB staff would\nprotect the production of enriched uranium.\nThe OMB staff approach also provides for the initiation of major R&D\nefforts on nuclear reprocessing and commercial radioactive waste manage-\nment. The ERDA revised ceiling solution assumes that these important\ninitatives could not be covered within the revised ceiling.\nThe OMB staff approach would substantially reduce the size of a new\ninitiative on improving the reliability of commercial nuclear power\nplants which we believe should primarily be the responsibility of the\nprivate sector.\nSummary Table\nThe following table summaries ERDA's budget trends by major program\ncategory (outlays $M):\nFY 1977\nERDA\nRev.\nERDA\nFY 1975\nFY 1976\nReq.\nERDA\nCeiling\nOMB\nDirect energy R&D\n(1012)\n(1417)\n(2514)\n(2308)\n(2100)\n(1931)\nNon-nuclear\n207\n514\n1043\n872\n847\n671\nNuclear\n805\n903\n1471\n1436\n1253\n1260\nSupporting energy R&D\n( 317)\n( 363)\n( 498)\n( 425)\n( 424)\n( 392)\nEnvironmental\n149\n178\n241\n210\n210\n190\nBasic sciences\n168\n185\n257\n215\n214\n202\nProduction of enriched\nuranium (including off-\nsetting revenues)\n- 27\n300\n651\n623\n498\n601\nDefense-related programs\n(1501)\n(1647)\n(1984)\n(1924)\n(1793)\n(1796)\nNuclear weapons\n1010\n1067\n1293\n1238\n1168\n1141\nWeapons materials\nproduction\n276\n341\n466\n460\n399\n429\nNaval propulsion\nreactor R&D\n215\n239\n226\n226\n226\n226\nAll Other\n( 344)\n( 382)\n( 570)\n( 511)\n( 479)\n( 488)\nHigh energy physics\n172\n178\n215\n201\n195\n191\nProgram support (e.g.\npersonnel)\n206\n245\n328\n295\n284\n266\nMisc. revenues\n- 85\n-101\n- 81\n- 81\n- 53\n- 76\nOther/fin. adjustment\n51\n60\n109\n96\n53\n71\nSubtotal\n3146\n4085\n6216\n5791\n5291\n5208\nOther funds\n:\n5\n6\n6\n6\n11\nTotal Outlays\n3146\n4090\n6222\n5797\n5297\n5219\n(BA)\n(3588)\n(5194)\n(7570)\n(6948)\n(6343)\n(5971)\n5\nMajor Issues\nAt this time, the major issues between OMB and ERDA appear to be the\nfollowing:\n- The rate of growth for non-nuclear energy R&D programs (Issues #1-#5).\n- The scope and pace of initiatives in the nuclear fuel cycle (repro-\ncessing and radioactive waste management) (Issues #6-#7).\n- The initiation of a program to improve the reliability of commercial\nnuclear power plants (Issue #8).\n- The additional 1,040 personnel requested by ERDA (Issue #9).\n- The level of weapons R&D and underground testing (Issue #10).\n- Future plans for the N-Reactor, Richland, Washington, (Issue #11).\nIn addition, there are numerous other issues which involve less\nsignificant differences between OMB and ERDA. These issues are\ncovered in the \"Other Issues\" section of this book.\nPossible Further Reductions\nIf it were necessary to reduce ERDA spending below the $5,219M recommended\nby OMB staff, the following actions could be taken (arranged in priority\norder with the most attractive potential action listed first and the\nleast desirable action last).\n(Outlays - $M)\n1. Further increase the price charged for\nuranium enrichment to the level likely\nto be charged by a new commercial plant\n- 72\n2. Terminate the Molten Salt Breeder\nReactor (MSBR) civilian power\nbackup concept\n- 4\n3. Further slow the pace of develop-\nment of the controlled thermonuclear\nfusion program\n- 14\n4. Terminate all R&D on gas-cooled civilian\npower reactors\n- 45\n6\n(Outlays - $M)\n5. Shutdown the N-Reactor, Richland,\nWashington, in FY 1976\n- 9\n6. Greatly reduce the production of\nenriched uranium, as identified in\nERDA's Planning Ceiling solution\n- 92\n7. Cancel construction of the $2B\nClinch River Breeder Reactor (CRBR)\nLiquid Metal Fast Breeder Reactor\ndemonstration plant\n-100\nTOTAL\n-322\nThe pros and cons of these potential actions are discussed in the\nlast section of this book.\nThe Treatment of Inflation\nAlthough ERDA has not formally requested an exception to the section\nof Circular No. A-11 concerning price levels, ERDA has been frank to\nstate that future increases in cost-of-living have been assumed. ERDA\nhas projected an average cost-of-living increase of 9.8% over the price\nlevels assumed in the FY 1976 budget and the transition quarter (which\nERDA calculates is equivalent to an annual rate of 7.8% over the 15\nmonth period).\nIt would be hard to argue that inflation has not had a severe impact\nupon ERDA's budget and programs. Over 96% of ERDA's budget is spent\nwith contractors and suppliers. As a result, relative to other agencies,\nERDA does not benefit much from the semi-automatic inflation adjustment\nmade possible by periodic Civil Service pay raises.\nERDA must pay competitive market rates for highly skilled technical\nstaff, complex equipment and components, construction of facilities,\nand electric power for uranium enrichment and high energy physics\naccelerators.\n7\nIn recent years, much of the funding increase allowed by OMB for ERDA\nprograms has in fact been consumed by inflation. Expressed another\nway, if level funding had been provided there would have been about a\n10% per year reduction in real program levels.\nInlevel-of-effort programs (e.g. weapons R&D, basic research), OMB\nhas not allowed sufficient funding growth to cover actual inflation.\nAs a result, there has been a gradual reduction in program activity\nand in-house contractor employment levels.\nWe believe that it would be unrealistic to assume no inflation for\nFY 1977. We have, therefore, generally assumed an inflation rate of\n7.5%, which is about the amount of the GNP deflator for 15 months.\nConclusions\n1. We believe that the $5,219M case recommended by OMB staff would provide\nfor a balanced and forward-moving program which covers all of ERDA's\nhigh priority requirements.\n2. ERDA will strongly resist a $5.2B allowance and will fight hard for\nits $5.8M \"Minimum Budget\" (including amendments). ERDA will rely\nupon the fact that its two main programs (energy and defense) have\nbeen given high priority by the Administration. OMB and ERDA have the\nmost disagreements on the non-nuclear energy R&D programs other than\nfossil (primarily solar and conservation) and the weapons programs.\n3. At the $5,219M case, OMB can reply that all of ERDA's energy programs\nare receiving significant increases--the only question is the rate of\nincrease. Moreover, we have not recommended wholesale program ter-\nminations or drastic program stretchouts.\n4. Depending upon the severity of the overall fiscal situation, some of\nthe possible further reductions may be attractive. However, these\nreductions would require substantial changes in ERDA's ongoing program\nwhich would be difficult to achieve.\n& DEVELOPMENT\nUNITED STATES\nENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION\nWASHINGTON, D.C. 20545\nUSA\nSeptember 30, 1975\nHonorable James T. Lynn, Director\nOffice of Management and Budget\nDear Mr. Lynn:\nEnclosed is a summary presentation of our 1977 Budget Estimates which\nhas been reviewed informally with your staff. Detailed justification\nmaterial prepared in accordance with OMB Circular No. A-11 is being\nprovided separately.\nOur request for budget authority amounts to $7,520 million, of which\n$5,487 million is for the Operating Expenses appropriation and $2,033\nmillion is for the Plant and Capital Equipment appropriation. Estimated\nnet outlays amount to $6,219 million, of which $4,922 million is for\nOperating Expenses and $1,297 million is for Plant and Capital Equipment.\nIn terms of outlays, our estimates are $1,149 million over the 1977\nbudget planning target of $5,070 million provided in your letter of\nJuly 25, 1975. The OMB target leaves no room for growth in key energy\nconservation and research, development and demonstration programs,\nmany of which are in their initial stages and require substantial\nincreases to develop into effective programs. In fact, the combined\neffect of the inflation being experienced in the economy and current\n\"mortgages\" in the ongoing energy R,D&D programs and uranium enriching\nactivities essentially absorb the entire increase reflected in the OMB\ntarget. The target is also inadequate to provide needed additional\nfunding in 1977 in support of our national defense obligations and to\nalleviate present unsatisfactory conditions in our facilities through\nupgraded nuclear safeguards, improved fire and safety protection,\ncompliance with the Occupational Health and Safety Act and replacement\nof general purpose facilities.\nNearly all ERDA programs involve high priority Presidential commitments\nand objectives. This is particularly true of those programs directed\ntoward the reduction of energy demand through conservation and the\ndevelopment of additional sources of clean energy, the production of\nnuclear materials for civilian power plants, and national defense\nactivities. The timely accomplishment of these program objectives is\nfundamental to the Nation's energy independence, economic well-being,\nand national security. Thus, we feel a strong obligation to present our\nbest judgment of the resources required to carry out these programs\nmost effectively.\nREVOLUTION\nAMERICAN\nBICENTENNIAL\n1776-1976\nHonorable James T. Lynn\n-2-\nWe are, of course, keenly aware of and firmly dedicated to the\nPresident's objectives of minimizing Federal spending to help\ncurb inflation. Our request reflects an intensive and painstaking\nreview by the Assistant Administrators and Senior staff to minimize\n1977 funding while meeting the program objectives established in\nthe June 30, 1975 National Plan for Energy Research, Development\nand Demonstration. While we recognize that any increase in OMB's\nshort-term budgetary planning may be difficult to accomodate, we\nstrongly believe that our programs will contribute significantly\nto stablizing the economy in the future and to providing new\nsources of energy essential for the Nation's continued development.\nWe also recognize that there are a large number of policy issues\nto be considered in the 1977 budget cycle. Among these are the\nsupport of the civilian nuclear fuel cycle including R&D to improve\nthe current generation of light water civilian reactors, the\nPresidential initiative for commercial enriching, funding for\nnational security, peaceful uses of nuclear explosives, and\ninitiatives required by the Federal Nonnuclear Energy Research\nand Development Act of 1974. In the next few weeks we will be\nsubmitting the results of several internal studies and analytical\nefforts dealing with these issues.\nAs you are aware, we are conducting a review of our laboratory and\nfield office utilization which may necessitate some modification\nto our request. We also plan to provide OMB with a revised\nestimate for the Weapons Production program following decisions\non the DOD budget, about December 1, 1975.\nFinally, we are in the process of reviewing our Management by\nObjectives (MBO) program to insure that current goals and objectives\nare compatible with those outlined in the National Plan for Energy\nR,D&D as well as other policy decisions made since the establishment\nof ERDA. We are now in the process of establishing a Program Approval\nDocument (PAD) system. The PAD's will establish the baseline for\nprogram evaluation and will include the definition and examination\nof critical milestones and objectives necessary to program success.\nIt is anticipated that PAD's documenting all significant energy\nprograms will be completed by late January, 1976. We believe that\nthis system will provide the necessary framework for selection of\nthe key milestones and objectives essential to the effective measurement\nof agency performance and progress.\nHonorable James T. Lynn\n-3-\nWe look forward to working closely with you and your staff in\nthe next few months in developing an optimum Administration\nprogram for ERDA in the President's 1977 budget.\nSincerely,\nRobatha\nRobert W. Fri\nFORD & LIBRAR 078338\nDeputy Administrator\nEnclosure:\nAs Stated\nOctober 29, 1975\nNonorable James T. Lynn\nDirector\nOffice of Management and Budget\nDear Mr. Lynn:\nAs requested by your staff, we have made a further review of the 1977\nbudget request for ERDA to determine the programmatic inpacts of an\noutlay constraint at $5,290 million instead of the $6,219 million we\nrequested. Our review indicates that a reduction to the $5,290 million\nlevel would require a drastic curtailment of high national priority\nefforts and initiatives essential to the nation's further energy inde-\npendence, economic well-being, and national security; would be inconsis-\ntent with announced Presidential goals and objectives; and is, we believe,\nan unacceptable level in the context of an overall budget for the Federal\nGovernment. Specifically it would require, among other things, that we:\nDefer for one year the initiation of new Federal initiatives\nto close the nuclear fuel cycle, to resolve acceptable methods\nof long-term storage of commercial nuclear wastes, and to\nimprove the availability of current light water reactors. Such\naction could jeopardize the growth of nuclear power as a national\nenergy source and make us even more dependent upon foreign oil.\no Defer energy research and development programs to increase the\nefficiency of electrical energy transmission and storage, and\ndelay the development of nuclear fusion and fission as inex-\nhaustible energy resources, thus prolonging our dependence on\nothers.\n0 Drastically curtail our national defense activities by:\n- Reducing production and stockpile maintenance\nbelow levels considered acceptable by the Secretary\nof Defense and the Joint Chiefs of Staff.\n- Reducing laboratory R&D and advanced weapons\ndevelopment programs which the President recently\napproved for increased funding in 1976 based on\nrecormendations from ERDA, the Secretary of Defense,\nand the National Security Council.\nHonorable James T. Lynn\n2\n- Reducing testing below that necessary to support the\nR&D program agreed upon by ERDA and the Secretary of\nDefense.\nDeferral of construction and reduced production from our\nuranium enriching operations, resulting in the permanent loss\nof 2,500,000 units of separative work valued at about\n$190 million. This loss could jeopardize our ability to\nsupport the introduction of private enrichment.\nAcross-the-board reductions resulting in elimination and\nstretchout of new construction projects and equipment\npurchases which will impact programs to upgrade our\nfacilities for fire and safety protection and compliance\nwith environmental standards and OSHA requirements.\nWe recognize, however, the severe problem in fashioning a budget which\nholds overall Federal outlays to the level recently announced by the\nPresident. We want to be fully supportive of this effort. Accordingly,\nwe have developed an alternate request for 1977 which would hold our\noutlays to $5,734 million, which is about $500 million or 8 percent\nless than our already \"trimmed down\" request of September 30th. This\nalternate level still requires substantial cutbacks and deferrals,\nwhich adversely affect our programs, and we believe it to be the\nminimum level needed to meet our objectives in energy R&D, production\nof nuclear materials for civilian nuclear power, and support of national\nsecurity programs. In the event OMB considers that this minimum level\ncannot be accommodated, I would appreciate the opportunity to meet\npersonally with you and the President in order to resolve an acceptable\nbudget level for the programs we are to carry out.\nWe have provided to your staff detailed statements of the programmatic\nimpacts at these levels. A separate classified impact statement is\nbeing forwarded for our national security programs.\nSincerely,\nRobert C. Seamans, Jr.\nAdministrator\nR&D STRATEGY\nOverview Paper\n1977 Budget for Energy R&D\nGERAL FOND\nI. Introduction\nA. Role of R&D in Overall Energy Policy\nAlthough the specifics of a national energy\npolicy have not yet been agreed upon, it is\ngenerally accepted that, for reasons of national\nsecurity as well as economic stability, the\nU.S. must move to become less dependent on\nforeign energy supplies.\nR&D, although by no means the only potential\ncontributor to achieving U.S. energy inde-\npendence, can provide important new energy\nsupply and utilization options for the future\nas well as improving or assuring the viability\nof current technologies.\nThus, the overall goal of an energy R&D program\nis to assure development of a range of commercially\nviable and environmentally acceptable technological\noptions to provide the capability to use extensive\nU.S. domestic energy resources more fully. This\nwill, in many cases, require Federal support to\nbring technologies to the commercial demonstration\nstage.\nDue to long development lead times, major pay-\noffs from new technology will come after 1985.\nHowever, because domestic oil and gas supplies\ncurrently in widespread use are declining and\nbecause of an expected increase of 50% in total\nU.S. energy demand by 1985, it is important to\nhave new energy technologies available for\npossible commercialization in this time frame.\n2\nB.\nEnergy Resource Considerations\nTable 1\nDomestic Energy Consumption and Supplies\n15\n(in 10\nBtu or Quads)\nFuel\nConsumption\nRecoverable\nSource\n1974\nReserves*\nResources*\nCoal\n13.8\n5,200-10,400\n33,000-\nOil\n33.8\n250-\n410\n590-1,920\nGas\n22.3\n230-\n430\n1,040-1,700\nShale\n0.0\n460- 1,160\n1,050\nHydro\n2.9\nN/A\nN/A\nNuclear\n1.2\n29,200-\n?\n88,200-\n?\nSolar\n0.0\n0.0\nN/A\nGeothermal\n0.0\nNegligible\n900-2,000\nTOTAL\n73.2**\n35,000+\n120,000+\nAlthough oil and gas, including imports, account\nfor about 80% of domestic energy consumption,\nthey represent less than 2% of U.S. domestic\nproved recoverable energy reserves and about\n1% of recoverable resources.\n- At $11/barrel (in 1974 dollars),\ndomestic production of oil and gas\nis expected to peak in the middle to\nlate 1980's and decline thereafter,\neven with extensive use of advanced\nrecovery technologies and aggressive\nexploration of OCS and Alaska.\nBy contrast, coal and nuclear fuel supplies--\nwhich currently provide for only 18% of domestic\nconsumption--account for almost all of the\nremaining 98% of energy reserves and 99% of\nrecoverable resources.\n*Entries correspond to full energy content of resource\nand do not take account of efficiencies of utilization.\n**1985 demand is estimated to be between 103 and 118\nQuads, depending on the prevailing world price of oil.\n3\n- Although domestic coal supplies are\nextensive and accessible, their use\nis severely limited by environmental\nconstraints. Widespread use of coal\nwithout relaxing environmental standards\nwill require new clean conversion\ntechnologies (e.g., gasification,\nliquefaction) or those permitting\ndirect use of coal (e.g., flue gas\ndesulphurization)\n- Current projections of nuclear plant\ncapacity indicate that in 20 to 30 years,\nall economically recoverable supplies of\nuranium (U235) to fuel current generation\nof reactors would be fully committed.\nTapping the remaining 98% of known U.S.\nnuclear resources, represented by U238\nand thorium, will require development\nof breeder reactors.\n- Recovery of potentially significant solar\nand geothermal resources is currently\nlimited by technological and economic\nuncertainties. Their economical use\nwill require development of new or\nimproved technologies.\nC. Criteria for Federal Involvement\nRationale for Federal involvement in energy R&D\nis to compensate for inability of market system\nto meet adequately, or in a timely fashion,\ncertain important U.S. goals related to national\nsecurity, environmental protection, and economic\ngrowth and stability. More specifically, Federal\nR&D efforts are needed:\n- To increase the probability of success of\nthe Nation's energy R&D effort by assuring\nadequate National investment despite short-\nterm fluctuations in market incentives;\n- To accelerate significantly the achievement\nof U.S. capability to make use of the full\nrange of its domestic energy resources;\n4\n- To ensure that the U.S. energy R&D effort\nis balanced and gives appropriate emphasis\nto all relevant national goals, particularly\nthose which cannot be readily internalized\ninto market incentives by other forms of\nFederal intervention (e.g., environmental\nprotection) ;\n- To supplement private sector investment at\nstages of R&D where appropriable benefits\nare not commensurate with the costs and\nrisks (e.g., basic research, first demonstra-\ntion plants) ;\n- To compensate for structural imperfections\nin the market such as excessive fragmenta-\ntion and undercapitalization, and including\nthose which may result from Federal inter-\nvention justified on other public policy\ngrounds (e.g., antitrust laws, utility price\nregulations, etc.) ; and\n- To support Federal regulatory activities of\ncertain Federal agencies, e.g., NRC, EPA.\nThough the need for Federal support in energy R&D\nis indicated, the Federal effort should encourage\nprivate investment and to avoid unnecessary govern-\nment expenditures which merely replace private\nefforts.\n- Private sector participation in planning,\nfinancing, and executing the R&D program\nwill reduce requirements for Federal\nsupport and will increase the likelihood\nthat technologies will be commercially\nviable and rapidly introduced.\nII. Status of U.S. Energy R&D Effort\nA. Status and Potential Payoff of Major Energy\nTechnologies\nTable 2 summarizes the status and potential\nenergy contribution of the major new energy\ntechnologies under development.\n5\nTable 2\nSTATUS AND POTENTIAL PAYOFF OF MAJOR NEW ENERGY TECHPOLOGIES\n1\nDate of First\n2\nCurrent Stage\nPotential Energy\nTechnology Area\nof Development\nComm. Demonst.\nContribution\n1985\n2000\nNuclear\n3\nQuads\nLight Water Reactors\nCommercial\nin service\n5.5\n20.0\nGas Cooled\nDemonstration\n1976\nnez.\n1.5\nLiquid Metal Breeder\nPilot Devel.\n1983\nneg.\n2.5\nOther Breeders\nApplied Res,\nunknown\n0\nneg.\nFusion (CTR + Laser)\nBasic Res.\npost-2000\n0\nneg.\n5.5\n25.0\nCoal\nLow Btu Gasification\nPilot Devel.\n1975\n.3\n5.0\nHigh Btu Gasification\nPilot Devel.\n1980\n.5\n6.0\nLiquefaction\nPilot Devel.\n1980\n.2\n5.0\nClean Combustion\nApplied Res.\nmid-1980\nneg.\n5.0\nLimestone SGC\nDemonstration\n1974\n5.0\n15.0\nAdvanced SGC\nPilot Devel.\nlate 1970's\nneg.\n5.0\n6.0\n41.0\nGeothermal\nDry Steam\nCommercial\nin service\nneg.\nneg.\nWet Steam & Liquids\nApplied Res.\n1983\n.4\n1.1\nHot Dry Rock &\nBasic Res.\n1987\n.2\n1.1\nGeopressured\n.6\n2.2\nSolar\nHeating of Buildings\nDemonstration\n1974\n.1\n.75\nCooling of Buildings\nPilot Devel.\nlate 1970's\n.1\n.75\nSolar Electric Applications\nApplied Res.\nearly 1980's\nneg.\n1.5\nFuels from Biomass\nApplied Res.\nearly 1980's\n.5\n0.9\n.7\n3.9\n0il, Gas and Shale\nAdvanced Oil Recovery\nPilot Devel.\nlate 1970's\n3.0\n6.0\nSurface Shale Retort\nDemonstration\nlate 1970's\n.3\n5.0\nIn-Situ Shale Retort\nPilot Devel.\nmid-1980's\nneg.\n2.0\n3.3\n13.0\nNew Conservation Technologies\nIndustrial Processes\nPilot Devel.\n1980\n.5\n2.0\nCommercial & Residential\nBuildings\nDemonstration\n1977\n.3\n1.5\nTransportation\nPilot Devel.\n1980\n.3\n4.0\n1.1\n7.5\n1/ Definitions:\nBasic Research: Fundamental scientfic problems have not been overcome.\nApplied Research: Laboratory experiments have verified that no fundamental\nscientific problems remain to be solved.\n-- Pilot Development: Pilot plant (approximately 1/100 scale) operations or\nprototype assembly have verified that major engineering problems associated\nwith integrated systems have been solved.\n-- Demonstration: First near-commercial scale demonstration has successfully\noperated, although perhaps not in an economically competitive way because\nof first-of-a-kind costs.\nCommercial: Technology is commercially available and presently competitive\nwith existing alternatives\n2/ Rapid commercial introduction could follow by 5-10 years, depending on relative\neconomics.\n3/ Units in Quads or 10¹⁵ B.t.u. U.S. consumption in 1974 in 75 Quads.\n6\nB.\nRecent Trends in Federal and Private Energy R&D\nExpenditures\nOn June 29, 1973, a major acceleration of\nthe Federal energy R&D program was announced.\nSupplemental funds were appropriated for\nFY 1974 and further major increases were\napproved for FY 1975 and are also expected\nfor FY 1976.\nObligations ($ Billion)\n1974\n1975\n1976\nArea\nActual\nEstimate\nEstimate\nDirect Energy R&D\nNuclear\n0.8\n0.9\n1.1\nFossil\n0.1\n0.4\n0.5\nOther Non-Nuclear\n0.1\n0.3\n0.3\nTotal\n1.0\n1.6\n1.9\nSupport Program\nEnvironmental Effects 0.1\n0.3\n0.3\nBasic Research\n0.2\n0.2\n0.2\nTotal\n0.3\n0.5\n0.5\nTotal Energy R&D\n1.3\n2.1\n2.4\n(ERDA)\n1.1\n1.7\n2.1\n(Other agencies)\n.2\n.4\n.3\nThough difficult to estimate accurately,\nprivate sector funding for energy R&D\ncurrently appears to be over $1 billion\nannually and increasing.\n- A survey of 1,400 firms indicates annual\nincreases in private spending on energy\nR&D of over 20% in both 1973 and 1974.\n7\nIII. Energy R&D Program Strategy\nA. Criteria for Determining Federal Energy R&D Priorities\nPriorities among specific energy R&D programs\n(e.g., nuclear, coal, solar, etc.) should be\ndetermined by:\n- Potential contribution of new technology\nto increasing usable energy supplies.\n- Probability R&D will be technically successful.\n- Likelihood that technology will be economically\ncompetitive when environmental costs are\nconsidered.\n- Timing of potential contribution considering\nany non-technical constraints to commercializa-\ntion.\n- Cost of R&D.\n- Extent of private sector investment.\nB. General Elements of Pre-ERDA Federal Energy\nR&D Strategy\nMinimum Federal involvement in R&D projects\nwith good potential for early commercial\napplication and where substantial private\nsector resources and capability exist (e.g.,\noil and gas recovery, conservation, automotive,\netc.).\n8\nStrong Federal support, on a cost-shared\nbasis, for longer-term (10 years +) R&D\nprograms aimed at making use of vast U.S.\ncoal and nuclear resources (e.g., breeder\nnuclear reactor, coal liquefaction and\ngasification, etc.).\n- This includes partial Federal support\nof expensive, high-risk, first-of-a-\nkind demonstration plants, e.g., synthetic\nfuels, nuclear fuel reprocessing, etc.\nContinuing Federal support, even without\nsubstantial industry cost-sharing, of\nvery long-range, high-risk R&D programs\nwhich have potential for great payoff\n(e.g., fusion, central station solar\nelectric).\nContinuing Federal support of programs in\nbasic research, environmental and health\neffects research, and safety where there is\nno strong incentive for private sector\ninvestment.\nC. ERDA's Recently Proposed Energy R&D Strategy\nAs required by statute, ERDA has prepared\nits first version of a comprehensive National\nEnergy Research, Development and Demonstration\nPlan. This plan must be updated annually in\nJanuary, and thus it coincides with the\nsubmission of the President's Budget.\nThe major conclusions of ERDA's Energy R, D\nand D Plan (ERDA Report No. 48) are:\n- To achieve our National energy policy\ngoals including reducing our reliance\non imports, the U.S. \"must have the\nflexibility of a broad range of energy\nchoices.\"\n- \"To generate the necessary options,' the\nNation's energy R&D program must \"facilitate\nthe changeover from dependence on a narrow\nbase of diminishing domestic resources to\nreliance on a broader range of less limited\nor unlimited alternatives.\"\n9\n- And finally, \"all the national energy\ntechnology goals must be pursued\ntogether. Concentration on only one\nor a few technological avenues is not\nlikely to solve the energy problem.\"\nERDA's priorities among major energy R&D\nprogram areas have been generally established\nthrough a National Ranking of Energy R,D and D\nTechnologies, shown in Table 4. As will be\ndiscussed further, ERDA's priority ranking\ndoes not correspond totally with its budget\nrequests that greatly accelerate smaller pay-\noff programs.\nAs a result of its analyses, ERDA concluded\nthat \"five major changes are needed in the\nnature and scope of the Nation's energy R&D\nprogram\" (although the first and to some extent\nthe second were already reflected in the\nPresident's 1976 Budget Request to Congress\nand his State of the Union Message).\n1. \"Acceleration of commercial capability\nto extract liquid and gaseous fuels\nfrom coal and shale.\"\n2. \"Emphasis on overcoming the technical\nproblems inhibiting expansion of high\nleverage existing systems - notably coal\nand light water reactors.\"\n3. \"An immediate focus on conservation efforts.\" \"\n4. \"Inclusion of the solar electric approach\namong the inexhaustible resource technologies\nbe given high priority.\"\n5. \"Increased attention to under-used new\ntechnologies that can be rapidly developed.\"\n(e.g., geothermal, solar, heating and cooling)\nAs a result of ERDA's view of energy R&D strategy\nand its recommendations to alter the President's\n1976 Budget, some further increases were requested\nfrom the Congress in:\n- conservation R&D;\n- solar R&D;\n- advanced oil and gas recovery R&D;\n- coal R&D;\n- oil shale R&D; and\n- nuclear fusion.\n10\nTable 3\nERDA'S NATIONAL RANKING OF R,D, &D TECHNOLOGIES\nHighest Priority Supply\nNear-Term Major Energy Systems\nCoal-Direct Utilization in\nUtility/Industry\nNuclear-Converter Reactors\nOil & Gas-Enhanced Recovery\nNew Sources of Liquids and Gases\nGaseous & Liquid Fuels from Coal\nfor the Mid-Term\nOil Shale\n\"Inexhaustible\" Sources for the\nBreeder Reactors\nLong-Term\nFusion\nSolar Electric\nHighest Priority Demand\nNear-Term Efficiency (Conservation)\nConservation in Buildings &\nTechnologies\nConsumer Products\nIndustrial Energy Efficiency\nTransportation Efficiency\nWaste Materials to Energy\nOther Important Technologies\nUnder Used Mid-Term Technologies\nGeothermal\nSolar Heating and Cooling\nWaste Heat Utilization\nTechnologies Supporting Intensive\nElectric Conversion Efficiency\nElectrification\nElectric Power Transmission\nand Distribution\nElectric Transport\nEnergy Storage\nTechnologies Being Explored for\nFuels from Biomass\nthe Long-Term\nHydrogen in Energy Systems\n11\nD. Critique of Major Aspects of ERDA's Energy\nR&D Strategy\nThe most fundamental conclusion of ERDA's\nanalysis, and the major premise underlying\nits National Energy R&D Plan is in error -\nthat is, that \"all the national energy\ntechnology goals must be pursued together,\nand that concentration on only one or a\nfew technological avenues is not likely to\nsolve the problem.\"\n- As can be seen from considering Tables\n1 and 2, all technological approaches do\nnot have to be pursued. If Light Water\nNuclear Reactors continue to provide an\nincreasing fraction of electric generation\ncapacity, if breeder reactors are developed\nfor future electric power generation and\nif synthetic gaseous and liquid fuels are\nproduced from coal and oil shale, then the\nU.S. can achieve and maintain substantial\nenergy independence by the year 2000 from\na relatively few technologies.\n- Solar and geothermal utilization technologies\nare expected to provide only a small contribu-\ntion to domestic energy supplies before the\nyear 2000.\n- Improved conservation technologies, as opposed\nto wide application of existing technologies,\nwhile providing some reductions in demand, are\nnot likely to result in large savings.\nAnother major change in ERDA's proposed energy\nR&D strategy, and also reflected in its budget\nrequest for FY 1977, is the inclusion of fusion\npower and solar electric technology in the same\npriority category as the Liquid Metal Fast\nBreeder Reactor (LMFBR). This does not appear\nwarranted on the basis of the current status of\nthe technologies and the likely timing of their\npayoff.\n- The LMFBR is a proven technological concept.\nAlthough substantial engineering develop-\nments remain and there are concerns about\nenvironmental and safety problems, there is\nlittle doubt it will work and can be made\nsafe. (The French have been operating a\n250 MWe. plant for one year). Furthermore,\nits economics are likely to be favorable.\n12\n- Although fusion offers the potential of\nvirtually unlimited energy supplies with\nfewer and less severe environmental and\nsafety problems, fusion has not even\nreached the point of proven scientific\nfeasibility, and years remain before the\nengineering feasibility is established,\nmuch less a workable reactor system.\n- Generation of electricity from the sun,\nalthough technically feasible now, is far\nfrom being economically competitive.\nMajor technological advances will be\nneeded to reduce the high capital costs\nof this option.\nFinally, the last major element of ERDA's\nproposed revised Energy R&D strategy is to\nemphasize shorter-term and potentially high\npayoff technologies to ensure substantial\nenergy production from conventional nuclear\npower and conventional oil and gas. The major\nissue here is the need for and extent of\nFederal involvement.\nE. OMB Staff's Recommended Strategy\nContinued strong emphasis on R&D programs\nthat will assure the U.S. a capability to\nuse its vast coal and nuclear energy resources.\nSpecifically:\n- R&D and demonstration of technologies for\nfuel reprocessing and waste management so\nthat the growth in the generating capacity\nfrom the current generation of Light Water\nNuclear Reactors can be assured. The OMB\nstaff recommendation for FY 1977 provides\nfor a major acceleration in ERDA's research\nand development programs for nuclear fuel\nreprocessing and commercial radioactive\nwaste management.\n- R&D and demonstration of the Liquid Metal\nFast Breeder Reactor to provide a technology\nto tap the 98% of uranium resources which\ncannot now be used. The FY 1977 OMB staff\nrecommendation provides for the continuation\nof the design and construction of the $1.95B\nClinch River Breeder Reactor LMFBR demonstra-\ntion plant, with initial operations scheduled\nfor 1983 (the same schedule and funding level\nas requested by ERDA).\n13\n- R&D and demonstration of advanced coal\ngasification and liquefaction and other\ntechnologies that can greatly increase\nusable coal supplies. The OMB staff\nrecommendation for FY 1977 would continue\nan aggressive R&D program related to coal\nincluding gasification, liquefaction and\ndirect combustion and would also include\nfunds for demonstration plant design in\ngasification and for construction of a\nclean boiler fuels demonstration plant.\n- A Synthetic Fuels Commercialization Program\nto gain early information on economic,\nenvironmental, regulatory and other\nuncertainties inhibiting early commercializa-\ntion. The FY 1977 budget would provide\nmainly for administrative costs.\nA more orderly pace for development of very\nlong-term options of solar electric and\nnuclear fusion, which are not likely to be\ndetermined to be commercially feasible for\n10-20 years. The OMB staff recommendation\nfor FY 1977 provides for a 50% growth in\nfusion over 1976 (as opposed to ERDA's requested\n100% increase) which would slip the next large\nfusion experimental reactor by perhaps 3 months\nand the overall schedule for commercial\ndemonstration by 2-3 years in the mid-1990's.\nThe FY 1977 solar electric program would grow\nsubstantially in the potentially high payoff\narea of solar thermal and photovoltaics, but\nwould be sharply reduced in the lower payoff\narea of wind energy and ocean thermal energy\nconversion.\nLow priority on highly popular (with the\nCongress and the public) but lower payoff\nprograms in solar heating and cooling and\ngeothermal energy. The OMB staff recommenda-\ntion for FY 1977 would be to hold these\nprograms at their FY 1976 level pending\ncompletion of cost/benefit analyses justifying\na larger effort.\n14\nLow Federal priority on nearer-term, higher\npayoff program, such as advanced oil and gas\nrecovery, nuclear plant reliability, and certain\nconservation R&D programs, where industry has\nboth the resources and the incentives due to\nhigher energy costs to fund such R&D. The OMB\nstaff recommendation for FY 1977 would essentially\nhold these programs to their current low levels.\nA limited and highly selective approach to\nFederal funding in other end-use conservation\nR&D areas in order to ensure maximum private\nsector response to market forces. The OMB staff\nrecommendation for FY 1977 would provide some\nincrease in potentially high payoff areas of\nenergy storage and transportation.\nContinued Federal support of basic and environ-\nmental effects research where industry has little\nor no incentive for investing. The OMB staff\nrecommendation for FY 1977 would provide increases\nsufficient to cover inflation of the past year.\nTable 4 summarizes the impact of the OMB staff\nstrategy on the trend of direct energy R&D\nfunding, and its relation to estimates of private\nsector R&D investments.\n- The OMB recommended level of Federal funding\nfor FY 1977 continues the recent trend of\n$500 million (BA) per year increases. The\nFederal non-nuclear R&D remains in FY 1977\nabout 40% of the total direct energy R&D\nbudget.\n- The total national energy R&D effort, federal\nplus private, is estimated to be about 60% non-\nnuclear R&D activity over the 1974-1981 time\nperiod, but with most of the nuclear R&D being\nundertaken with Federal funds. Table 4 also\nindicates the major amount ($8.6 billion) of\nprivate funds that will be spent on commercial-\nscale demonstrations due to federal financial\nincentives programs, as well as the almost $3\nbillion to be expended in joint private-federal\nR&D.\n15\nTABLE 4\nPrivate and Federal Energy R&D Funding\n($Millions, Budget Authority)\n1/\n3/\nFederal Funding\nPrivate Funding\nTOTAL 1974-198T\n2/\nTOTAL\nParticipation in\nIn-house\nProgram Area\n1974\n1975\n1976\n1977\n1974-1981\n1974\nFederal R&D\nR&D\nDirect Energy R&D:\nNon-nuclear R&D:\n(253)\n(619)\n(795)\n(910)\n(7248)\n(877)\n(2040)\n(10440)\nFossil 4/\n111\n393\n413\n538\n4261\n506\n1400\n6000\nSolar\n24\n51\n94\n126\n840\n2\n140\n20\nGeothermal\n13\n34\n34\n49\n355\n2\n--\n20\nConservation\n39\n48\n78\n99\n852\n150\n400\n1800\nEnvironmental\nControl\n66\n93\n84\n98\n940\n217\n100\n2600\nNuclear R&D:\n(756)\n(938)\n(1147)\n1617\n(11353)\n(128)\n(800)\n(1540)\nFission\n644\n749\n880\n1223\n8670\n125\n800\n1500\nFusion\n112\n189\n267\n384\n2683\n3\n--\n40\nTOTAL, DIRECT ENERGY\nR&D\n1009\n1557\n1942\n2527\n18601\n1005\n2840\n11980\nSynthetic Fuels Commercial\nDemonstration Program\n600\n--\n600\n--\n8000\nGeothermal Development Fund\n4\n4\n24\n--\n600\n1/\nIncludes R&D in ERDA and other agencies such as EPA, NSF, DOI, NASA, and NRC.\n2/\nOMB recommended level of funding.\n3/\n1974 is the most recent available data. Statistics are based on two NSF surveys, and because of inevitable\nnon-respondents figures are presumed to represent a lower limit. The 1974-1981 in-house R&D figures are\nextrapolated from 1974 data.\n4/\nThe Federal funding is only about 8% for oil and gas, whereas, the private funds are 95% for oil and gas.\nPOSSIBLE REDUCTIONS\nFY 1977 ERDA Budget\nPossible Further Reductions\nSavings (Outlays-$M)\nPRO\nCON\nFY 1977\nFY 1978\n1. Further increase uranium\nEconomically justifiable (new enrichment\nMay jeopardize the Administration's\nenrichment charge (to $100\nplants will probably charge this amount).\ncurrent legislative proposal to allow\nper unit)\n72\n70\nERDA to recover more than just the\nGovernment's costs (ERDA has estimated\nto GAO and Congress that the new\n\"commercial charge\" proposed in the\nFY 1976 budget would be about $76 per\nunit). The increase to $81 per unit\nincluded in ERDA's Planning Ceiling\nCase may be all that is politically\nfeasible now.\n2. Terminate the Molten Salt\nThe MSBR concept is not now a viable\nThe MSBR has some potential attractive-\nBreeder Reactor (MSBR)\n5\n5\nbackup effort in case the Liquid Metal\nness from the standpoint of resource\nFast Breeder Reactor (LMFBR) is un-\nutilization (uses thorium) and repro-\nsuccessful (a much higher funding level\ncessing (continuous on-line).\nwould be required).\nThe LMFBR program is likely to be success-\nHas strong support from Tennessee\nful and not need the MSBR as a backup.\ndelegation (R&D done at Oak Ridge).\nThe MSBR has difficult technical problems.\n3. Slow the pace of controlled\nAlthough potentially very attractive in\nERDA has prepared and is following a\nthermonuclear fusion\nthe long-term (beyond year 2000) fusion\ndetailed plan for development of fusion\nprogram.\n14\n22\nhas not yet been proven to be scientifi-\nwhich, if successful, could lead to the\ncally feasible. The program is now\nrealization of the benefits of fusion\nentering a phase which requires high\nin the shortest reasonable time.\ncost large scale experimental devices\nand large investments to solve the\nThe fusion program is very popular in\nengineering problems. An alternative\nCongress because of its potential\nwould be to conduct a basic technology\nenvironmental and safety advantages\nprogram which will emphasize the use of\nover fission reactors.\nsmaller experimental devices while\ndeferring major test reactors until more\nresults are available from experiments.\nFY 1977 ERDA Budget\nPossible Further Reductions (cont'd.)\nSavings (Outlays-$M)\nPRO\nCON\nFY 1977\nFY 1978\n4. Terminate R&D on gas-cooled\nThe commercial support for the High\nThe HTGR has potential advantages over\ncivilian power reactors\n45\n50\nTemperature Gas Reactor (HTGR) has\nlight water reactors (in addition to\nvirtually collapsed as a result of utility\nuranium, uses thorium which is a re-\nHTGR\n(36)\n(41)\ncontract terminations. The parent firms\nlatively abundant resources; higher\nGCFBR\n( 9)\n( 9)\nof Gulf Atomic Corporation appear to be\nthermal efficiency means less thermal\ncutting losses and offloading the company.\npollution; possible utilization for\nprocess heat applications).\nEven if commercial support can be recon-\nstituted, it would probably require at\nThe Government should not take the\nleast $18 of Government funds to make the\ninitiative to cancel ongoing\nHTGR an economically attractive venture\nresearch on the HTGR until it\n(primarily requires solving difficult\nbecomes clear that the concept is\nreprocessing and waste management pro-\nunable to attract new commercial\nblems).\nsupport.\nIf the HTGR is terminated, gas-cooled\nThe gas-cooled fast breeder reactor\nfast breeder R&D could also be ter-\n(GCFBR) appears to have a higher breeding\nminated because of lack of commercial\nratio than the LMFBR (which means that\nsupport and the likely succes of the\nit could produce plutonium fuel at a\nLMFBR. The GCFBR also has a serious\nfaster rate than the LMFBR).\nsafety problem.\n5. Shutdown the N-Reactor,\n9\n30\nRichland, Washington in\nFY 1976 (net)\nDiscussed in Issue #11.\nGERALD\nEURO\nFY 1977 Budget\nPossible Further Reductions (cont'd.)\nSavings (Outlays-$M)\nPRO\nCON\nFY 1977\nFY 1978\n6. Reduce the production of\nDue to the slippage in the construction\nThe effects of the reactor schedule slip-\nenriched uranium\n92\n--\nschedules of many power reactors, near-\npage are offset by other factors:\nterm requirements for enriched uranium\nfuel have been deferred and ERDA's pre-\n- plutonium recycle will at least be\nproduced inventory will thereby be in-\ndelayed, increasing requirements for\ncreased.\nuranium fuel.\nThe 10% reduction in future inventory\n- utilities are experiencing difficulties\nfrom this action may not be critically\nobtaining uranium feed needed for the\nrequired.\nenrichment process, which means that\nmore of ERDA's inventory may have to be\nused.\nSince the inventory covers many contin-\ngencies (e.g., backstop private enrich-\nment ventures, meet emergency require-\nments), the prudent course would be to\nmaintain a stockpile adequate to ensure\na reliable fuel supply for nuclear power\nplants.\nThe lost inventory would have a value of\n$200M.\nFY 1977 Budget\nPossible Further Reductions (cont'd.)\nSavings (Outlays-$M)\nPRO\nCON\nFY 1977\nFY 1978\n7. Cancel construction of\nThe $2B CRBR has experienced a huge cost\nThe CRBR will demonstrate licensability,\nthe Clinch River Breeder\noverrun (original estimate was $.7B)\nmaintainability, and operability of\nReactor (CRBR) LMFBR\nwhich raises questions as to whether the\nLMFBRs.\ndemonstration plant\n100\n220\nbenefits of the project are worth the\ncost.\nERDA maintains that going directly to a\nfull-scale plant would be technically\nThe CRBR will be based upon a relatively\nrisky.\nconservative design, which, together with\nits small size (350 MWe), ensures that\nThe CRBR project has momentum with a\nthe CRBR will not demonstrate potentially\nGovernment-industry team in place and\nfavorable economics.\ncomponents being ordered.\nAn alternative would be to cancel the\nThe CRBR has become symbolic of the\nCRBR and initiate design of a larger\nentire LMFBR program which the Admini-\nplant with full-scale components which\nstration strongly supports. Any move\nwould be much closer to a commercial\nto cancel the CRBR (even with the intent\npower plant.\nof going to a larger project later)\nwould be interpreted as a major blow by\nAdministration against the LMFBR\nprogram and nuclear power in general."
}