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Energy - Meeting on reorganization of energy activities, November 22, 1976
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Energy - Meeting on reorganization of energy activities, November 22, 1976
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The original documents are located in Box 13, folder "Energy - Meeting on reorganization
of energy activities, November 22, 1976" of the James M. Cannon 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States of America his copyrights in all of his unpublished writings in National Archives collections.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 13 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
ENERGY MEETING
Monday, November 22, 1976
5:15 p.m.
Roosevelt Room
(Principals Only)
11/22
Hold for next energy mtq.
SCHESTIC COUNCIL STAFF MEETING
Thursday, April 8, 1976
9:30 a.m.
Situation Room
11/17/76
Mr. Cannon:
You are invited to a meeting on Monday, November 212
at 5:15 in the Roosevelt Room. This is being set up by
Sec. Richardson and Jim Lynn. The subject is: to discuss
the Administration's proposals for re-organization of
energy and energy-related activities. This is for
PRINCIPALS ONLY. A separate package of materials will be
sent to you.
it
Thic
I WILL ATTEND
on have Tom this not
I WILL NOT ATTEND
3 3
OTHER
(Other invitees are: Zarb, Seamans, Kleppe, Greenspan,
McAvoy, Dunham, Kasputys, Richardson and Mitchell)
malkiel, Lynn
k
Gina 377-4951 (Kasputys' office)
FORD is LIBRARY GENALD
ORGANIZATION OF
FEDERAL ENERGY FUNCTIONS
GERALD
?
FOR
FEDERAL ROLE IN ENERGY: EXPANDED - BUT STILL SECONDARY
',
HISTORICALLY, THE PRIVATE SECTOR HAS BEEN THE PRIME ACTOR IN MEETING
THE NATION'S ENERGY NEEDS,
FEDERAL ROLE IS EXPANDED AND MORE PROMINENT THAN PRIOR TO EMBARGO:
THREATENED CURTAILMENT OF IMPORTS PUTS ENERGY ON WORLD STAGE --
CREATING A NEW ENERGY ROLE FOR NATIONAL GOVERNMENT.
MASSIVE INVESTMENT AND HIGH VENTURE RISK IN DEVELOPING NEW ENERGY
TECHNOLOGY AND FRONTIER RESOURCES CALLS FOR FEDERAL FINANCIAL
INDUCEMENTS.
I
CRITICALITY OF ENERGY FORCES NEED FOR NATIONAL ENERGY POLICY,
,
NEVERTHELESS, PROPER FEDERAL ROLE IN ENERGY REMAINS SUPPLEMENTAL TO
THAT OF PRIVATE SECTOR,
GERALD
FORD
-1-
FEDERAL ROLE CAN BE EXERCISED IN VARYING DEGREE
BUT GENERALLY INCLUDES THE GOVERNMENT AS:
PLANNER AND FORMULATOR OF NATIONAL ENERGY POLICY
COLLECTOR AND PUBLISHER OF DATA
ECONOMIC REGULATOR
HEALTH, SAFETY AND ENVIRONMENTAL REGULATOR
FINANCIER
O
OWNER OR MANAGER OF ENERGY RESOURCES
0
TECHNOLOGY PROMOTER AND INNOVATOR
ENERGY PRODUCER - UNDER SPECIAL CIRCUMSTANCES
REPRESENTATIVE OF NATIONAL INTERESTS IN WORLD ENERGY NEGOTIATIONS
-2-
As A MATTER OF POLICY, THE ADMINISTRATION FAVORS THE MINIMUM NECESSARY
LEVEL OF FEDERAL INTERVENTION AND INVOLVEMENT IN ENERGY AFFAIRS AND
A CORRESPONDING MAXIMUM RELIANCE ON PRIVATE INITIATIVE, INVESTMENT
AND DECISION-MAKING IN BOTH THE SUPPLY AND DEMAND SIDES OF ENERGY,
HOWEVER, THIS POLICY IS ONLY PARTIALLY DETERMINANT. THE FEDERAL ROLE
ACTUALLY IN EFFECT AT ANY GIVEN TIME, IS THAT WHICH IS PRESCRIBED
BY LAW.
AGREE OR NOT, THE PRESIDENT IS OBLIGED TO SEE THAT THE LAWS ARE
FAITHFULLY EXECUTED --- AND, THEREFORE, MUST PROVIDE EFFECTIVE
ORGANIZATION FOR ALL ENERGY FUNCTIONS PRESCRIBED BY LAW.
THOSE FUNCTIONS WHICH ARE SUB-MARGINAL IN THE LIGHT OF A POLICY OF
MINIMUM NECESSARY FEDERAL INVOLVEMENT SHOULD NOT BE ORGANIZED IN A
WAY THAT EFFECTIVELY INSULATES THEM FROM EXECUTIVE REAPPRAISAL.
-3-
WHAT IS THE OBJECTIVE IN
CONSIDERING ENERGY REORGANIZATION?
-
To ASSURE THAT THE FEDERAL ENERGY FUNCTIONS ARE EFFECTIVELY
ORGANIZED IN THE LIGHT OF THE EXPANDED AND ALTERED FEDERAL
ROLE. THAT IS: -----
- COMPONENT FUNCTIONS ARE COORDINATED WITH EACH OTHER
TO FORM A COHERENT FEDERAL ROLE IN ENERGY,
- CONFUSION AND WASTE DUE TO DUPLICATION IS AVOIDED.
- THE FEDERAL IMPACT ON ENERGY IS CONSISTENT WITH LEGISLATIVE
INTENT AND RESPONSIVE TO PRESIDENTIAL DIRECTION.
- ENERGY GOALS ARE PROPERLY BALANCED WITH NATIONAL GOALS
IN OTHER FIELDS,
-4-
THE IMPACT OF ENERGY IN OUR SOCIETY SAYS SOMETHING ABOUT HOW WE SHOULD
ORGANIZE TO PERFORM THE FEDERAL ENERGY ROLE
ENERGY Is:
0
CRITICAL TO:
THE ECONOMY, NATIONAL SECURITY, OUR LIFE-STYLE -- TO OUR SURVIVAL
PERVASIVE :
HOUSING, TRANSPORTATION, FARMING, DEFENSE, INDUSTRIAL PRODUCTION,
RECREATION
COMPRISED OF
COMPETING
SECTORS :
PETROLEUM, GAS, COAL, NUCLEAR, HYDRO, SOLAR, OTHER
OFTEN IN
CONFLICT
ENVIRONMENT, HEALTH AND SAFETY, RESOURCE CONSERVATION,
WITH OTHER
NATIONAL
PRICE STABILITY, FOREIGN POLICY
GOALS
:
A BLEND OF :
PRIVATE ENTERPRISE AND PUBLIC RESPONSIBILITY
#-#-#-#-#-#-#-#-#--#-#-#-#-#-#-#-#-#-#--#-#-#-#--#
IN SHORT, ENERGY IS A COMPLEX AND INTERRELATED SUBJECT AND THE FEDERAL INVOLVEMENT
REQUIRES CAREFULLY COORDINATED POLICIES AND DISCIPLINED IMPLEMENTATION IN
MEETING VITAL NATIONAL GOALS,
-5-
OUR PRESENT FEDERAL ENERGY ORGANIZATION INHIBITS COHERENT AND
EFFECTIVE ACCOMPLISHMENT OF THE FEDERAL ROLE IN ENERGY
No ONE -- UNDER THE PRESIDENT -- IS CLEARLY "IN CHARGE" AND ACCOUNTABLE.
- ERC LACKS STAFF OR AUTHORITY
- FEA HAS POLICY ROLE, BUT IS OPERATIONAL, SUB-CABINET, AND TEMPORARY
PRIMARY FEDERAL ENERGY PROGRAMS ARE FRAGMENTED AMONG FEA, ERDA AND OTHERS,
- COMPLICATES TASK OF PRESIDENTIAL CONTROL
- DIFFICULT TO ACHIEVE CONCERTED ACTION TOWARD SUPPLY DEVELOPMENT,
DEMAND REDUCTION OR OTHER BROAD GOALS
- SEPARATE ENERGY AGENCIES RESULT IN DIFFERING ENERGY PROJECTIONS --
PRODUCES CONFUSION
- RESOURCE TRADE-OFFS AMONG FEDERAL PROGRAMS ARE LESS LIKELY.
POLICY DEVELOPMENT IS DISCONNECTED FROM PROGRAM IMPLEMENTATION AND EVALUATION
-6-
AGENCIES TEND TO ENLARGE THEIR ROLES CAUSING INCREASING DUPLICATION
AND CONFUSION
- COMMERCIALIZATION OF NEW TECHNOLOGY - FEA, ERDA (EIA)
- CONSERVATION - FEA, ERDA AND DOT, COMMERCE, HUD
- MINE TECHNOLOGY RESEARCH AND DEVELOPMENT - INTERIOR AND ERDA
- DATA COLLECTION AND ANALYSIS - FEA, FPC, INTERIOR, ERDA AND OTHERS
- SUPPLY/DEMAND PROJECTIONS - FEA, ERDA, INTERIOR
REGULATORY POWERS OF FPC AND NRC ARE SUBSTANTIAL INFLUENCES -- BUT NOT
RATIONALIZED WITH NATIONAL ENERGY GOALS
-7-
TWO ISSUES, IN PARTICULAR, ARE COMPLEX AND CENTRAL TO ENERGY ORGANIZATION:
ISSUE 1 - ENERGY REGULATION: A. - BALANCE BETWEEN INDEPENDENCE AND RESPONSIVENESS
B. - POTENTIAL CONFLICT BETWEEN REGULATION AND PROMOTION
A. INDEPENDENCE vs, RESPONSIVENESS - THE SIGNIFICANT IMPACT OF REGULATION SHOULD BE
CONSISTENT WITH NATIONAL ENERGY NEEDS AND POLICY -- BUT ACTIONS MUST BE
IMPARTIAL AND CREDIBLE.
RESOLUTION - KEY IS DISCTINCTION BETWEEN RULE-MAKING AND CASE ADJUDICATIONS.
ATTEMPT TO MAXIMIZE RULE-MAKING. PLACE ECONOMIC REGULATORY
PROGRAMS IN ENERGY AGENCY TO ASSURE RESPONSIVENESS IN RULE-
MAKING, INTERNALLY ISOLATE ADJUDICATIONS - ALJ's AND
INDEPENDENT APPEALS BOARD.
B. REGULATION vs, PROMOTION - ENERGY DEVELOPMENT CAN CONFLICT WITH HEALTH, SAFETY
AND ENVIRONMENT. PROGRAMS LIKE NRC AND MESA NOT SUITABLE FOR INCLUSION IN
ENERGY AGENCY. ENERGY VIEWPOINT CAN BE COMMUNICATED OPENLY TO REGULATORS AND
SHOULD INFLUENCE DECISIONS. ECONOMIC REGULATION NOT IN CONFLICT TO SAME
DEGREE -- CAN BE INCORPORATED AND SHOULD BE FOR RESPONSIVENESS.
-3-
ISSUE 2 - ENERGY ADVOCACY AND LAND MANAGEMENT
OUR SHORT TO MID-TERM ENERGY NEEDS REQUIRE NEW AND ACCELERATED
RECOVERY FROM PUBLIC LANDS -- ESPECIALLY ALASKA AND OCS. MANAGING
THESE ASSETS INVOLVES JUDGMENTS BY INTERIOR BETWEEN COMPETING CLAIMS,
How IS THE PUBLIC INTEREST IN ENERGY DEVELOPMENT TO BE REPRESENTED
IN THIS PROCESS? WHAT ORGANIZATIONAL ARRANGEMENT IS NEEDED.
RESOLUTION - BROAD POLICY RE ENERGY AND OTHER USES OF NATURAL RESOURCES
INVOLVES INTERIOR AND OTHER AGENCIES AND, USUALLY,
PRESIDENT AND CONGRESS. ENERGY REPRESENTED IN THESE
BROAD DECISIONS BY FEA (OR PROSPECTIVE DoE) AS AN ADVOCATE.
SPECIFIC SITE DECISIONS HANDLED WITHIN INTERIOR WITH ENERGY
AS WELL AS ALL OTHER VIEWS CONSIDERED IN BALANCED WAY.
CONCLUSION IS THAT ENERGY ADVOCACY AND LAND MANAGEMENT
NEED NOT BE ORGANIZED TOGETHER, AND -- IN FACT --
CREDIBILITY IS GREATER IF KEPT SEPARATE.
-9-
USDA
FPC
FEA
REA only
INTERIOR
ERDA
DEPARTMENT OF ENERGY
Bureau of Mines
(Energy Functions)
Bonneville, Alaska, SE, & SW
Staff
Budget ($M)
Power Administrations
Bur. of Reclamation
From ERDA
8350
6097
(Power Marketing)
FEA
3200
598
FPC
1460
42
INTERIOR
6000
250
USDA
820
21
TOTAL DOE
19,830
$7,018
REA
DEPARTMENT OF ENERGY . A Special Purpose Department Comprised of Primary Federal Energy Functions.
PROS
CONS
Consolidates fragmented energy functions and fosters a more coherent Federal energy role.
Energy advocacy role of DOE requires extensive balance at the Presidential level.
Highlights energy as a long-term national issue by assigning it department status and a
011/gas leasing activities remain separate; continue to require Interagency coordination.
cabinet level accountable spokesperson.
Departmental status could be marginal based on small size and narrow focus.
Resolves FEA/ERDA jurisdiction issue.
Special internal arrangements required to assure autonomy and Integrity of regulatory. date
Appropriately raises major energy policy tradeoffs to Presidential level.
R&D, and weapons functions.
DOD
COMMERCE
OSDA
NPR only
NOAA only
REA only
DEPARTMENT OF
ENERGY & NATURAL RESOURCES
FEA
Staff
Budget ($M)
FPC
From ERDA
8350
6097
FEA
3200
598
FPC
1460
42
INTERIOR
61,380
4200
COMMERCE-NOAA
13,190
573
USDA REA
820
21
ERDA
INTERIOR
DOD - NPR
130
406
TOTALS DENR
88,530
$11,262 (M)
DEPARTMENT OF ENERGY & NATIONAL RESOURCES A Multi-Purpose Department Comprised of Primary Federal Energy Functions
GERALD
Together with Functions of the Department of Interior.
TORD
servers
PROS
CONS
Consolidates fragmented energy functions and fosters a more coherent Federal energy role.
Dilutes top level representation and accountability for energy.
Cabinet level representation for energy (with some natural and other functions).
Energy objectives could dominate other natural resource and land use requirements (or vise-versa).
Resolves FEA/ERDA jurisdiction disputes.
Difficulty of managing large conglomate type Department.
Permits resolution of many competing claims for resources within a single Department.
Buries major and critical programs (e.g. Energy R&D, Nuclear Weapons, NOAA, NPS, etc.)
Permits integration of related NOAA/USGS functions.
A large conglomerate - but still fails to consolidate major natural resource functions (e.g. Corps,
SCS, Forest Service).
DEPARTMENT OF ENERGY
DOE
REGULATORY
SECRETARY
TENTATIVE INTERNAL STRUCTURE
APPEALS
UNDER SECRETARY
BOARD
A/S
ENVIRONMENTAL
A/S NATIONAL
GENERAL
A/S ENERGY
A/S
& CONSUMER
ENERGY POLICY
COUNSEL
CONSERVATION
ADMINISTRATION
AFFAIRS
ENERGY RESEARCH AND
ENERGY REGULATORY
ENERGY DATA AND
ENERGY RESOURCES
DEVELOPMENT ADMIN.
ADMINISTRATION
ANALYSIS ADMIN.
DEVELOPMENT ADMIN.
ADMINISTRATOR
DEPUTY FOR MILITARY
ADMINISTRATOR
ADMINISTRATOR
ADMINISTRATOR
APPLICATIONS
LABS
Approx. Size
Budget - $7,018 (M)
Staff - 19,830
REGIONAL OFFICES
DEPARTMENT OF ENERGY & NATURAL RESOURCES
DENR
SECRETARY
TENTATIVE INTERNAL STRUCTURE
UNDER SECRETARY
A/S CONG &.
OFFICE OF
A/S ADMIN.
GENERAL COUNSEL
LEGISLATION
TERRITORIAL
AFFAIRS
UNDER SECRETARY
REGULATORY
UNDER SECRETARY FOR
COMMISSIONER
APPEALS
FOR ENERGY
NATURAL RESOURCES
OF INDIAN AFFAIRS
BOARD
A/S LAND AND WATER
A/S NATIONAL ENERGY POLICY
BIA
MANAGEMENT
BLM
ADMIN. ENERGY DATA
BU REC
A/S CONSERVATION &
ADMIN. ENERGY R&D
RECREATION
NPS
ADMIN. ENERGY REGULATION
FWS
BOR
ADMIN. ENERGY RESOURCE DEVELOP
A/S OCEANIC, ATMOSPHERIC
AND EARTH SCIENCES
ADMIN. ENERGY CONSERVATION
NOAA
USGS
Approximate Size
Budget - $11,927 (M)
Staff - - 88,530
REGIONAL OFFICES
WHAT ARE THE EXISTING ENERGY FUNCTIONS IN THE FEDERAL GOVERNMENT?
STAFFING
BUDGET ($1000's)
ERC
DRAFT
0
0
FEA
DEVELOP ENERGY POLICY (POLICY)
46
1,300
COLLECT AND ANALYZE ENERGY DATA (DATA)
356
27,300
REGULATE PETROLEUM PRICES (Econ. REG.)
1,395
34,000
PROMOTE ENERGY CONSERVATION PRACTICES (MIXED ROLES)
287
51,800
EXPAND DOMESTIC ENERGY PRODUCTION (MIXED ROLES)
294
12,700
PARTICIPATE IN INTERNATIONAL ENERGY AFFAIRS (INTERNATIONAL)
46
1,700
MANAGE STRATEGIC PETROLEUM RESERVES (PRODUCTION)
42
313,600
OTHER FEA
734
155,700
FEA SUBTOTAL
3,200
598,100
FPC
LICENSE NON-FEDERAL ||YDROELECTRIC PROJECTS (Econ.& ENVIRON.REG.) 220
6,470
REGULATE INTERSTATE ELECTRICITY RATES (Econ. REG.)
320
9,220
CERTIFY NATURAL GAS FACILITIES (Econ. & ENVIRON. REG.)
360
11,570
REGULATE INTERSTATE NATURAL GAS RATES (Econ. REG.)
290
7,720
OTHER FPC
268
6,620
FPC SUBTOTAL
1,458
41,600
2
ERDA
DRAFT
DEVELOP ENERGY R&D POLICY (POLICY)
167
11,000
CONDUCT FOSSIL, SOLAR, NUCLEAR, & GEOTHERMAL ENERGY
R&D (TECHNOLOGY)
1,487
2,687.190
CONDUCT ENVIRONMENTAL, HEALTH & SAFETY R&D (TECHNOLOGY)
271
21,500
DISSEMINATE ENERGY R&D INFORMATION (DATA)
80
500
CONDUCT ENERGY CONSERVATION R&D (TECHNOLOGY)
182
91,000
ENCOURAGE INTERNATIONAL ENERGY R&D (TECHNOLOGY)
80
7,770
SPONSOR ENERGY R&D TRAINING (TECHNOLOGY)
9
16,540
PERFORM URANIUM ENRICHMENT FUEL REPROCESSING (PRODUCTION)
100
574,000
ENCOURAGE PRIVATE DEVELOPMENT OF GEOTHERMAL RESOURCES
(FINANCIER)
36
4,400
CONDUCT RESEARCH, DEVELOPMENT, TEST, AND PRODUCTION OF
NUCLEAR WEAPONS AND MATERIALS (PRODUCTION)
319
1,599,300
DEVELOP NAVAL NUCLEAR PROPULSION PLANTS (PRODUCTION)
82
220,500
DEVELOP NUCLEAR POWER SOURCES FOR SPACE PROGRAM (PRODUCTION) 17
32,300
OTHER ERDA INCLUDING FIELD CONTRACT ADMINISTRATION
AND PROCUREMENT ACTIVITIES
5,520
831,300
ERDA SUBTOTAL
8,350
6,097,300
GERALD
3
NRC
DRAFT
REGULATE CONSTRUCTION AND OPERATION OF NUCLEAR REACTORS
(SAFETY REGULATOR)
1,012
50,025
REGULATE HANDLING OF NUCLEAR MATERIALS (SAFETY REGULATOR)
405
22,880
CONDUCT RESEARCH TO SUPPORT LICENSE AND REGULATORY
FUNCTIONS (MIXED ROLES)
135
121,550
DEVELOP EMERGENCY PREPAREDNESS PLANS (PLANNER)
128
5,015
COLLECT NUCLEAR REACTOR SAFETY DATA (DATA)
2
20
REGULATE IMPORT AND EXPORT OF NUCLEAR MATERIALS/
FACILITIES (MIXED ROLE)
3
205
OTHER NRC
844
49,735
NRC SUBTOTAL
2,529
249,430
DEPARTMENT OF INTERIOR
LEASING AND MANAGEMENT OF FEDERAL ENERGY RESOURCES
(OWNER/MANAGER)
2,490
170,000
MANAGEMENT OF ALASKAN PETROLEUM RESERVE (PRODUCTION)
105
106,700
COLLECT AND ANALYZE ENERGY RESOURCES DATA (DATA)
1,240
56,500
RESEARCH AND DEVELOP ENERGY MINING TECHNOLOGY
(TECHNOLOGY PROMOTER)
950
98,000
REGULATE HEALTH & SAFETY ASPECTS OF COAL MINING
(HEALTH & SAFETY REGULATIONS)
3,440
90,148
GENERATION & MARKETING OF ELECTRICITY (ENERGY PRODUCER)
6,160
269,600
DEPARTMENT OF AGRICULTURE
DRAFT
4
FINANCE RURAL ENERGY DEVELOPMENT AND MARKETING (FINANCIER)
820
21,600
DEPARTMENT OF DEFENSE
MANAGE OIL AND OIL SHALE RESERVES IN NPR (OWNER/MANAGER)
130
406,000
EPA
RESEARCH TO IMPROVE COAL COMBUSTION (MIXED ROLES)
32
21,800
DEPARTMENT OF TRANSPORTATION
REGULATE AUTO FUEL ECONOMY STANDARDS (ECONOMIC & ENVIRON.REG.)
40
4,500
REGULATE OIL AND NATURAL GAS PIPELINE SAFETY
(HEALTH AND SAFETY REGULATOR)
40
4,000
DEPARTMENT OF TREASURY
CONDUCT FINANCIAL AND POLICY ANALYSIS OF DOMESTIC AND
INTERNATIONAL ISSUES (POLICY)
14
300
DEPARTMENT OF STATE
FORMULATE INTERNATIONAL ENERGY POLICY (POLICY)
34
800
DEPARTMENT OF COMMERCE
FOSTER IMPROVED ENERGY UTILIZATION (ECONOMIC REGULATOR)
60
2,244
ADMINISTER COASTAL ZONE ENERGY IMPACT AID (FINANCIER)
20
146,500
5
CEA
DRAFT
PARTICIPATE IN FORMULATING NATIONAL ENERGY POLICY (POLICY)
2
40
TOTAL DIRECT INVESTMENT IN FEDERAL ENERGY ROLE 1/ 2/
31,114
$8,385,162 ($1000)
1/ TVA's POWER PROGRAM IS ESTIMATED AT $1.6 BILLION IN FY 77 AND WILL REQUIRE A STAFF OF
SEVERAL THOUSAND. THIS PROGRAM WILL BE FINANCED FROM PROCEEDS FROM CURRENT POWER
OPERATIONS AND BORROWINGS, RATHER THAN APPROPRIATION AND ARE THEREFORE EXCLUDED
FROM THESE TOTALS,
2/ THERE ARE A NUMBER OF SMALL ENERGY ACTIVITIES (DATA, REGULATORY, RESEARCH, ETC.) THAT
ARE INCORPORATED IN PROGRAMS WITH NON-ENERGY PURPOSES WHICH ARE NOT READILY IDENTIFIABLE
AND HAVE BEEN EXCLUDED FROM THESE TOTALS.
DRAFT
SUMMARY - DOE
STAFFING
FUNDING (M)
TOTAL DIRECT FEDERAL INVESTMENT
31,114
$ 8,385
PROPOSED FOR CONSOLIDATION IN DoE OPTION
19,830
7,018
NOT PROPOSED FOR CONSOLIDATION
- NRC
2,529
249
- INTERIOR ENERGY
8,385
541
- OTHER
370
577
PERCENT OF TOTAL FEDERAL ENERGY FUNCTIONS
CONSOLIDATED IN A DoE
64%
84%
DRAFT
SUMMARY - DENR
STAFFING
FUNDING (M)
TOTAL DIRECT FEDERAL INVESTMENT
31,114
$ 8,385
ENERGY FUNCTIONS NOT IN A DENR OPTION
NRC
2,529
249
OTHER
222
34
ENERGY FUNCTIONS IN A DENR OPTION
28,363
8,102
PERCENT OF TOTAL FEDERAL ENERGY FUNCTIONS
CONSOLIDATED IN A DENR
91%
97%
PROPOSED FOR CONSOLIDATION IN DENR OPTION
88,530
11,262
PERCENT NON-ENERGY FUNCTIONS IN DENR
68%
28%
GERALD
R.
FORD
PRESIDENT
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE
UNITED
OFFICE OF MANAGEMENT AND BUDGET
STATES
WASHINGTON. D.C. 20503
EYES ONLY
NOV 17 1976
MEMORANDUM FOR: SEE DISTRIBUTION LIST
Kasputys
FROM:
James T. Mitchell
Joseph E. Kasputys
Co-Directors of Energy and Energy-Related
Organization Study
SUBJECT:
Energy Organization
This memo forwards for your personal review selected key papers
in draft form relating to a decision on energy organization.
The enclosed papers and basic content of each are:
TAB A - Draft Presidential Decision Memorandum
- States major assumptions underlying this study,
summarizes present energy organization, identifies
and describes primary energy organization alter-
natives, evaluates each alternative in terms of its
pros and cons, indicates the recommended alternative,
and provides for showing the President the position
taken by each affected agency head and other rele-
vant Administration policy officials.
- Attached to the Presidential Decision Memorandum
(TAB A) is an identification of some major sub-
issues regarding the exact composition of each
organizational alternative.
TAB B - Analysis of Organization for Energy Policy Formulation
Coordination and Monitoring
A staff analysis covering (1) the factors inherent
in the energy policy task which bear on the proper
design of organization to perform energy policy re-
sponsibilities; (2) relationship of energy policy
formulation to other energy functions; (3) evaluation
of the existing policy process; (4) comparison of the
major alternatives for energy organization in terms of
their ability to effectively perform the energy policy
task, and (5) the relative need for special Executive
Office machinery for energy policy versus reliance
on general purpose units such as OMB, Domestic Council,
CEA or other.
11/503
2
TAB C - Staff Paper on Organization of Energy Regulatory
Functions
An analysis of organizational issues in the field of
energy regulation generally and with particular
attention to the functions of FPC including the
relative merits of continuing the FPC functions in
the independent commission mode versus incorpora-
ting them in an executive energy agency.
Several other staff papers which have been developed as parts
of the overall analysis of energy organization were sent on
November 10, 1976 to your respective representatives for energy
organization for their review and any comment. These papers
are descriptive and analytical pieces rather than issue papers
designed for decision-making. While they all relate to the
energy organizational question, they are less sensitive than
the papers forwarded by this memo for your attention.
Obviously, they are available to you if you wish to see them.
These analyses, sent to your representatives are summarized
below for your information:
Energy Data Collection and Analysis. Numerous agencies play a
direct or collateral role in energy data collection and analysis
especially FEA, Interior (Mines), FPC and ERDA. This has caused
some problems, but duplication is becoming progressively better
controlled via interagency coordination. Elimination of dupli-
cation should therefore not be viewed as a compelling reason for
consolidation; however, consolidation could enhance the develop-
ment of a more integrated data system. Consolidation will also
help unify the voice of the Administration in energy supply and
demand projections. Credibility of energy data is enhanced
by separation of the data function from the policy function, as
prescribed within FEA by the recent extension act. This principle
of separating data and policy analysis should continue in any
reorganization planning.
Energy Resource Development. Assuming the policy objective of
increasing the domestic energy supply, this paper identifies
the numerous activities which play a part in implementing that
policy. Included are direct governmental operations such as
strategic petroleum reserve, uranium enrichment, and power
generation and marketing as well as indirect methods such as
financial incentives and assistance, resource leasing,
facility siting and technology transfer. These activities are
widely distributed among agencies and are susceptible to
influence by other factors such as tax policy, and regulatory
EYES ONLY
GERALG, FORD LIBRARY
3
actions both economic and safety or environmental. It is
difficult to achieve concerted action by the many programs
affecting the supply of energy in view of their degree of
fragmentation among agencies.
Energy Research, Development & Demonstration. The Federal
role in developing new and improved energy technology is
supplementary to that of the private sector and involves
establishment of a favorable climate, providing incentives
and sponsoring selected R&D work. Governmental regulatory
policy and action can also directly affect the rate of tech-
nology introduction. Because of these public/private inter-
actions in the energy technology field, the Federal energy R&D
work should be integrated with other aspects of our total energy
efforts, there are some special considerations for assuring its
optimum productivity - e.g., long-term perspective, continuity
in funding, support and direction and, at times, a controlled
amount of duplication among competing ideas.
Interior Energy Functions. This paper related only to a pros-
pective Department of Energy as one organization alternative.
Specifically, it addresses the question: "Assuming a DOE, what
energy functions from Department of Interior should it include?"
The analysis identifies and describes the energy functions of
Interior and determines which are separable without serious
disruption to the DOI mission or damage to the function itself
and, conversely, which are not separable. Findings: Readily
separable energy functions are power marketing and energy
related emergency responsibilities. In contrast, energy leasing
by BLM and assessment of physical availability of energy
resources by USGS are deeply integral to DOI land-management
and geological missions and not feasibly separable. Separable
with only moderate and acceptable disruption are the fossil
fuel mining research and data programs of Bureau of Mines.
Energy Conservation. Activities in this field are fragmented
among a number of agencies although FEA and ERDA together have
80% of conservation funding. There is no clear lead agency for
conservation and it is difficult to pull together a coherent
and coordinated policy for conservation and relate it effectively
to energy supply policy and programs. Some of the fragmenta-
tion takes advantage of clientele relationships and is therefore
logical, i.e., DOT, HUD, Commerce. There is a potential for
growing overlap and conflicting jurisdiction between ERDA and
FEA stemming from legislative assignments to each. This is
difficult to prevent or reconcile in the absence of common
direction over both programs.
FORD
EYES ONLY
GERALD
4
Energy Advocacy and Decision-Making in Federal Land-Management.
This paper reviews the organizational roles and the decision-
making process involved in developing energy resources located
on Federal lands. It was found that the need for energy
development is adequately represented or advocated in both broad
policy decisions at Presidential level (especially by FEA as
an energy advocate) and in site specific decisions (by internal
processes within Interior). Interior's total mission incor-
porates pressures for energy development, for other uses, and
for conservation, all of which are balanced in specific cases in
a reasonably open and impartial way. While there is adequate
responsiveness within BLM and Interior to national energy goals,
other competing interests are assured of being represented as
well by influences such as environmental impact statements,
openness, and the prospect of court review.
Following your review of the enclosed papers, we anticipate
a final decision memorandum going to the President toward the
end of this month. Based on the President's decision, we will
proceed to complete the report to the Congress and any related
legislative proposal by December 31, 1976 as required by the
FEA extension act. The final report as we visualize it will
cover:
A brief introductory discussion of the general
energy situation, our major policy positions and,
in particular, the Federal role in energy.
a summary description and evaluation of the
present structure and assignment of energy
functions among Federal agencies;
an identification of alternatives considered
and an evaluation of each;
summary analysis of pertinent issues, and
conclusions and a statement of the President's
proposed energy organization.
We will be in touch with each of you personally to confirm
arrangements for next steps leading to a Presidential decision.
EYES ONLY
FORD
GERALD
5
DISTRIBUTION LIST
CEA Chairman - Mr. Alan Greenspan
Assistant to the President for Domestic Affairs - Mr. James Cannon
FEA Administrator - Mr. Frank Zarb
ERDA Administrator - Dr. Robert E. Seamans
Secretary of Interior - Mr. Thomas Kleppe
FPC Chairman - Mr. Richard L. Dunham
Enclosures:
TAB A - Draft Presidential Decision Memorandum
TAB B - Analysis of Energy Policy Organization
TAB C - Staff paper on Organization of Energy Regulatory
Functions
CC:
Elliot L. Richardson
James T. Lynn
FORD
EYES ONLY
GERALD
THE SECRETARY OF COMMERCE
DRAFT
WASHINGTON, D.C. 20230
MEMORANDUM FOR THE PRESIDENT
FROM:
Elliot L. Richardson, Chairman, ERC
James T. Lynn, Director, OMB.
SUBJECT: Organization For Federal Energy And
Energy-Related Functions
I. Purpose
The purpose of this memorandum is to obtain
your decision on the results of the ERC/OMB study
on reorganizing the Federal Government to perform
energy and energy-related functions.
A joint ERC/OMB study was initiated in May to
determine the most effective organizational arrangement
for performing Federal energy and energy-related functions.
The study was first proposed by the Chairman, ERC,
to the Senate Government Operations Committee to counter
the Committee's intention not to recommend an extension
of the Federal Energy Administration beyond June 30, 1976.
The Committee not only accepted the study proposal, but,
in an amendment to the FEA extension which has been
enacted into law (P.L. 94-385), required that the
President transmit a reorganization plan covering
energy and natural resources to the Congress by
December 31, 1976. The ERC/OMB study was performed to
fulfill this requirement. More details on the circum-
stances giving rise to this study are outlined in Tab A.
While the study report has not been put in final
form, the supporting analyses, which have been prepared
with the assistance of the affected agencies, are
complete and have been reviewed by the principals involved.
The final report should be available for distribution
at the same time as the reorganization plan is transmitted
to the Congress. The balance of this memorandum contains
FORD
GERALD
2
the following sections:
II - Assumptions
III - Methodology
IV - Present Organization for Energy and
Energy-Related Functions
V - Organizational Problems
VI - Alternatives
VII - Conclusions and Recommendations
II. Assumptions
Major assumptions regarding broad energy policy
and particularly the Federal role in energy include:
Continued maximum possible reliance on
private sector decisions and actions;
reliance on a system of Federally created
incentives and disincentives to influence
and stimulate private decisions regarding
both energy supply and demand toward the
achievement of national energy goals of
lowered demand as well as assured and
adequate energy supply at a reasonable
price;
minimum necessary direct Federal involvement
in areas such as regulation, new technology
development, data collection and energy
resource development; and
assurance that energy development actions
are properly balanced with other goals such
as environment, health and safety, national
security and economic stability.
For the purposes of organizational planning, it was
assumed that the recommended structure should facilitate
the implementation of proposed legislative initiatives
of the Administration, while still accommodating the
execution of existing programs.
FORD
III. Methodology
RALD
The study began by collecting descriptive data
on all energy, energy-related and natural resource
3
functions, including mission, programs, resources
and critical interactions. This permitted the
identification of related programs, together with
any duplication and overlaps. Extensive interviews
were conducted at several levels in affected
organizations to identify operating problems. Outside
advice was obtained through a three-day seminar on
energy organization conducted by the Congressional
Research Service at the request of Senator Percy and
through a survey of the literature. As a result,
seven broad organizational alternatives were developed.
These were reviewed by the ERC and narrowed to the
three options presented later in this paper.
Once the three final options were identified,
a series of individual studies were performed to
examine how selected critical functions would be
performed under each option. These studies were in
the areas of:
Policy Formulation and Coordination
Data Collection and Analysis
Energy Resource Development
Research Development and Demonstration
Energy Conservation
Energy Regulation
Nuclear Weapons Production
In addition, several special studies were performed on
the functions of the Department of the Interior, an
in-depth review was made of the FPC and analyses were
completed on the appropriateness of including selected
agencies, e.g., NOAA, in certain options. The results
of the efforts have been synthesized into this options
paper and will be included in the final study report.
IV. Present Energy Organization
Practically all Federal agencies play some part
in energy matters, due to the pervasive nature of
energy issues. However, there are several agencies
which are solely related to energy and which may be
regarded as central to Federal energy involvement--the
ERC, FEA, ERDA and, taking in regulatory commissions,
the NRC and FPC.
4
Certain functions of the Interior Department are
equally critical even though the Department is not
solely concerned with energy. Specifically, the
increase of domestic energy supply over the near
and mid-term depends heavily on accelerated recovery
of oil, gas, coal and uranium from the public lands--
especially frontier areas such as Alaska and Outer
Continental Shelf.
Beyond the principal energy agencies, many other
organizational entities have a collateral energy
role, at times quite significant, especially in
formulation of energy policy--examples--Treasury,
CEA, State, Justice and EPA. Tab B is an organization
chart showing the considerable number of agencies
involved with energy, energy-related and natural
resource functions. Much of this fragmentation is
rational and desirable as in the case of Justice
representing the U.S. in energy-related litigation or
State participating in energy policy formulation from
the point of view of foreign relations.
In addition to energy responsibilities being
divided among many agencies, most of the component
energy functions are dispersed, i.e., data collection,
regulation, energy supply development and energy
conservation. The major exception is energy research
and development, which is consolidated in ERDA except
for mine technology R&D in Interior.
IV. Organizational Problems
There is evidence that organizational problems
are interfering with the execution of energy programs
and the accomplishment of energy objectives, or at
least are not facilitating positive results to the
FORD
degree possible. The following are among the more
significant problems identified during the course
of the study:
GERALD
A. Lack of a fully effective mechanism to
develop and oversee the implementation of energy policy.
The ERC has been reasonably successful in developing
a balanced Administration position on the major energy
5
7
issues. However, it has no staff and therefore no
independent analytical capability. What staff support
does exist is chiefly provided by the FEA, which itself is
one of the participants in the policy development
process. There is no mechanism to direct action, to
assure implementation of policy decisions or to evaluate
results. With the development of an independent ERDA,
the research and development planning process has not
received the attention it should from the operational
agencies and has tended to form its own goals.
Finally, because of the composition of the ERC, more
issues tend to be forced to the President for
resolution.
B. Lack of an effective structure to facilitate
resource trade-offs among competing energy programs.
?
While resource allocation to energy programs is done
by OMB within the ERC-developed policy framework, energy
programs are highly fragmented throughout the Federal
Government. Therefore, within the various Federal
agencies, these programs must frequently compete for
scarce resources with nonenergy programs and not with
each other. A more rational structure would permit
resource allocation to be made among similar programs
at a lower organizational level, facilitating the
assignment of resources to the more effective programs.
C. Need for the regulatory function to be
responsive to needed policy direction while maintaining
independence. Energy regulation is carried out across
a spectrum of mechanisms, from the independent regulatory
commissions of FPC and NRC to the executive actions of
FEA and Interior. The independent regulatory commissions
emphasize the mandates of their enabling legislation
and are often inhibited by these statutes from revising
FORD
their interpretation of the national interest, regardles
of the views of the Executive Branch on current needs
evolving from a changing international or domestic
situation. Energy regulation should be responsive to
overall policy direction. At the same time, individual
regulatory decisions made under this policy direction
should be fair, objective and free from outside influence.
This has often caused regulatory activities to be
separated from promotional activities, which is not
the case with FEA. Improvements need to be made in the
6
regulatory structure to strengthen objectivity and
independence while at the same time strengthening
the responsiveness to policy input. Finally, energy
regulation itself is fragmented among agencies, e.g.,
FPC, NRC, FEA, which makes the use of regulatory
power to optimize the use of various energy sources
very difficult.
D. There are duplicating and overlapping agency
responsibilities because of the fragmentation of energy
functions. Some duplication is legislatively sanctioned,
e.g., FEA and EPA in converting utilities from oil to
coal; FPC and Office of Pipeline Safety (DOT) in LNG
safety standards. Beyond specific legislative problems,
FEA has responsibility for energy planning and
development, while specific energy sources are the
responsibility of other agencies. The overlap has become
significant in conservation programs between FEA and
ERDA. While fragmentation does contribute to the
examples of duplication that have been cited, it also
can lead to difficulty in developing well-coordinated
broad programs, such as an emergency preparedness program
that can effectively respond to supply interruption.
E. There is the potential for greater duplication
between FEA and ERDA. Both FEA and ERDA originally were
founded with distinct missions, but both are collecting
functions, by legislation and otherwise, and expanding
into general purpose energy agencies. In this
evolution, both interact with the private sector and
have a growing number of incentives that can be
applied to business and industry to achieve energy
goals. These incentives should be directed through
a single channel to maximize their effectiveness
and to avoid undesirable effects on the private sector.
The present structure for energy functions is not
without some assets. For example, the ERC has provided
a useful forum for top-policy level dialogue across
agency lines concerning major policy issues; the
separate status of ERDA helps assure a stable environment
and the long-term continuity needed to manage a
program which is intended to emphasize long-range
technology development; the independent commission
status of FPC and NRC permits a separation
7
of promotional and regulatory functions and thereby
helps allay any public concern that regulatory
decisions could be politicized. However, these
benefits can be preserved under alternative
structures SO long as they are properly designed.
IV. Alternatives
While a wide range of feasible alternative structures
was considered, they were narrowed to the three most
promising options. Basically, these options represent
varying degrees to which the fragmented energy and
energy-related functions might advantageously be
consolidated. Each alternative has been presented
in the configuration judged to be best by the study
team. However, determining the exact composition
of each of the alternatives poses some controversial
decisions. The most significant and sensitive of
these decisions to include or exclude functions in
the alternative structures are listed below for your
information. More detail is contained in Tab C on
each item together with provision for you to make
the decision on each if you wish to do SO.
Nuclear Regulatory Commission (NRC) - exclude
Federal Power Commission (FPC) - include
Rural Electrification Administration
(REA) - include
Naval Petroleum Reserve (NPR) - include
(DENR only)
National Oceanic & Atmospheric Administration
(NOAA) - include (DENR only)
Under all options the ERC has been retained. Even
if a Department of Energy were formed with a strong
policy operation, the ERC would be a valuable vehicle
to coordinate with EPA, State, Treasury and other
agencies.
A. Department of Energy and Natural Resources (DENR)
Description
A grouping together into a new multi-purpose
department all primary energy functions
together with selected natural resource
programs. Composition of the DENR would
8
include:
Interior
FEA
ERDA
FPC
REA (Agriculture)
NOAA (Commerce)
Naval Petroleum Reserves (DOD)
Advantages
Maximum feasible consolidation of presently
fragmented energy functions.
Permits resolution of unclear jurisdiction
between FEA and ERDA in areas such as
energy forecasting, conservation and
technology commercialization.
Cabinet-level representation for energy--
together with some, but not all, natural
resource functions.
Provide resolution within one Cabinet
Department of many competing claims in the
management of public lands between energy
development and resource preservation
or other land uses.
Provides a stronger base for subsequent,
more complete, consolidation of natural
resource programs - e.g., Forest
Service, Army Corps of Engineers
Civil Works, etc.
Permit closer integration of earth sciences
of geological survey with atmospheric
and oceanic sciences of NOAA.
Disadvantages
Grouping energy with natural resources
in a large multi-purpose department
fails to put highest possible focus on
energy and does not provide a top level
dedicated energy advocate.
9
Results in a very large conglomerate-
type Department with a wide span of
concerns from energy and natural resources
to Indian and Territorial Affairs.
Experience indicates these conglomerate
arrangements are hard to manage and
hold accountable.
O Energy objectives could dominate land
management decisions at the expense
of other land use requirements.
O Grouping of so many diverse programs
could result in an internal DENR structure
that "layers in" some functions excessively,
e.g., the nuclear weapons work performed
by ERDA could be relegated to third
echelon status prompting strong pressure
to transfer it to DoD despite recognized
benefits of associating nuclear power
with nuclear weapons work.
O Despite broad span represented by this
alternative, it would still not encompass
all relevant concerns in energy policy
formulation (foreign affairs, environment
and others) necessitating Executive Office
balancing; nor would it incorporate all
major natural resource programs, (Corps
of Engineers, Forest Service, and others)
with the resulting prospect of still great
future consolidation.
B.
Department of Energy (DoE)
Description
A consolidation of primary Federal energy
GERAZO R. FORD
functions which are not integral and
inseparable aspects of the mission of other
agencies to form an advocate or special
purpose type of department. This consolidation
would include:
FEA
ERDA
FPC
REA (Agriculture)
10
Power Marketing (DOI)
Energy Functions of the Bureau
of Mines (DOI)
Other important energy functions of Interior,
e.g., oil and gas leasing by BLM and energy
resource assessment by USGS were found to be
deeply integral to the land management and
geological missions of Interior and not
susceptible to excision.
Advantages
Provides feasible consolidation of energy
functions thereby facilitating a unified
and coherent Federal role in the national
energy system with component parts subject to
common policy direction.
Permits resolution of unclear jurisdictions
between FEA and ERDA as in the case of DENR.
Highlights energy as a difficult, major and
long-term national issue area and gives it
a Cabinet-level spokesman and point of contact
who is "in charge" of energy in dealings
with other agencies, Congress, Governors,
industry and the public in keeping with this
status.
Provides that national energy policy will be
formulated by a single spokesman who
has his own policy analytical staff,
direct authority over major energy programs
and Cabinet status. The ERC will continue
to be used for interagency energy policy
coordination.
Narrower focus than DENR alternative would
make this alternative disturbing to fewer
interest groups and Congressional committees,
thus enhancing prospect for enactment.
Disadvantages
Would not take in some major Federal energy
functions, notably oil and gas leasing on
11
public lands, and as a result, continued
cross-agency coordination would be necessary
in important areas.
Concentrated focus on energy and consequent
advocacy orientation would mean that some
check and balance mechanism would be
needed especially in energy policy formulation
to assure that the President gets objective
advice and that conflicting interests are
represented.
Several of the projected components of the
DoE are very controversial and vulnerable
to being trimmed out in the legislative
process-most particularly FPC and REA.
Were this to occur, the proposed DoE would
be little more than a merged FEA and ERDA
giving rise to serious question of whether
Department status is warranted.
Several of the energy functions to be incorporated
in DOE would require a measure of autonomy
in order to avoid being overpowered, submerged
or lose credibility - these include:
energy regulation, data, R&D, weapons--
special internal arrangements would be
necessary to assure the integrity
or visibility of these functions within
the DoE/energy advocacy climate.
An alternative within this option would
consolidate the same functions as DOE, but
they would be organized at sub-cabinet
level in an expanded energy agency.
Advantages
This alternative would retain many of the
program cross-coordination advantages of the
DoE concept and provides a fall-back means
of achieving these advantages if the DOE
consolidation becomes marginal because too
many of the potential program consolidations,
i.e., FPC, REA, energy functions of the
12
Bureau of Mines, fail to materialize.
Disadvantages
O
Would continue the present problem of no
Cabinet rank energy policy spokesman.
Consequently, the energy policy formulation
machinery would continue to have some of
the institutional weakness of the present
ERC/FEA system, although to a lesser degree.
C. Retain the present structure - with improvements
Some of the problems inherent in the present
fragmented placement of energy functions can
be mitigated by relatively modest actions such
as improved coordination of policy formulation
by strengthening the ERC, recognizing FEA as
a permanent agency which has been expanded
beyond its original emergency role, and clarifying
some jurisdictional issues. The disruption
which comes from any organizational change would
be generally avoided. However, most of the
serious weaknesses inherent in the fragmented
and uncoordinated system described earlier would
not be addressed by this alternative. Energy as a
major problem area would continue to lack a top
level spokesman and there would continue to be
no one with direct authority over most energy
functions. Moreover, any action to strengthen
ERC in terms of staff or authority can engender
problems of its own, i.e., an advocate in the
Executive Office without operational
responsibility as in the case of the CEQ.
V. Conclusions and Recommendations
Based upon the findings of the study, reorganization
of Federal energy functions is well-warranted and, on
balance, the Department of Energy alternative will provide
the most effective long-term arrangement for coordinating
and performing Federal functions in this area. The
significance and difficulty of the energy situation will
persist well into the future and the coherency and
continuity needed to accomplish the Federal role can best
be provided by a Department dedicated to that purpose.
GERALD R. FORD
13
The critical need for balanced and credible
conflict resolution in the management of the public
lands can best be met by an arrangement which separates
energy advocacy from the responsibility for managing
the nation's natural resource assets - i.e., a DoE
separate from the Department of Interior (or ultimately
a Department of Natural Resources). This arrangement
will permit continued accelerated development of coal,
oil, gas and uranium resources while other values
such as environmental safeguarding, preservation and
alternate land uses are fully and fairly represented
as well. Retention of the CEQ/EPA system will also
force critical trade-offs between energy and environment
to the Presidential level, which is appropriate for
issues of this magnitude.
Careful consideration of all alternatives indicates
that:
The present fragmented structure is seriously
inadequate for the task and that any administrative
improvements of it will not basically alter
its ineffectiveness for the long-haul.
The disadvantages cited for the DoE plan
can be offset by proper design of its
structure and other management actions.
For example, existing regulatory functions
can be divided into two categories--general
rulemaking and adjudicatory responsibilities
associated with individual case decisions.
The rulemaking can become part of the
policy office of a new Department of Energy,
where this function can be effectively
coordinated with other policy decisions.
The adjudicatory decisions, e.g., granting
of licenses, etc., can be made in a
quasi-independent component of DOE, headed
by a Presidential appointee subject to Senate
confirmation. While this process would operate
within the overall policy framework established
by the Secretary, individual decisions
could be insulated by having them made by
Administrative Law Judges, with final review
FORD
by an Appeals Board. Subsequent challenge
would be in the courts, with no appeal to the
Secretary.
Conversely, the disadvantages of the DENR plan,
14
i.e., size and diversity and internal conflict,
appear to be more intractable with no effective
way to offset them.
Presidential Decision
Approve the Department of Energy (DOE) .
Approve the DoE concept, but create
as an agency in lieu of a cabinet
department.
Approve the Department of Energy
and Natural Resources (DENR). .
Continue with the present structure--
develop specific ways to improve
performance.
Other
(Note: The recommendations of administration officials
will be shown under the applicable alternative
in the final paper that is delivered to the
President.)
GERALD FORD
TAB A
Circumstances Leading to Current Study of Energy Organization
and Its Relationship to Recent (1974) Changes in Energy
Organization
When the Arab oil embargo struck in November of 1973
precipitating the energy crisis, the Administration had
energy organization legislation pending before Congress.
I.e., Split the former AEC into R&D work (ERDA) and regu-
latory work (NRC) and establish a Department of Energy
and Natural Resources (DENR)
In view of the crisis the Administration agreed to forego
the controversial DENR in order to expedite Congressional
consideration of ERDA and NRC. They were enacted in
October 1974 together with the Energy Resources Council (ERC).
Meanwhile, also in response to the energy crisis, the
Federal Energy Administration had been created first by
Executive order and then by law in June 1974.
These changes in energy organization soon after imposition
of the embargo were generally regarded both by the Adminis-
tration and Congress as only partial (ERDA and NRC) and
short-term (FEA and ERC) treatment of overall energy
organization.
However, the early time period following the embargo was
also a time of major reappraisal of national energy policy
including a reassessment of the Federal role in relation
to the private sector role. During this period of fundamental
reappraisal, it was untimely to determine the most effective
long-term organization for Federal energy activities which
clearly should rest on a well-developed concept of the
Federal policy and role. We now have these concepts in
hand, if not necessarily universally agreed upon.
It is, therefore, now timely to make this fundamental
organizational review and we have been so engaged for several
months working with the heads of affected agencies and their
staffs.
After this study was initiated and well underway, a require-
ment was inserted, with our concurrence, in the FEA extension
legislation, which you recently signed, that the President
shall direct a comprehensive study of energy and natural
resources and forward a report with his recommendations and
proposed legislation by December 31, 1976.
TAB
B
LOCATION OF ENERGY, ENERGY-RELATED, AND NATURAL RESOURCE
FUNCTIONS IN THE EXECUTIVE BRANCH
KEY:
ENERGY
THE PRESIDENT
ENERGY-RELATED
NATURAL RESOURCES
ERC:
NOTE:
OTHER EXECUTIVE
Other agencies may participate
AGENCIES SOLELY CONCERNED WITH
OFFICE UNITS
CEQ
in energy goals collateral to their
FUNCTIONS UNDER STUDY
basic missions.
DEPARTMENTS
AGRIC
COMM.
DEFENSE
HEW
HUD
INT.
JUST.
LABOR
STATE
TRANS.
TREAS.
X
AGENCIES
ACTION
CSA
EPA
EEOC
ERDA
FCA
FEA
FRS
GSA
NASA
NLRB
NSF
SBA
TVA
USCSC
USIA
USITC
VA
WRC
REGULATORY COMMISSIONS
CAB
CFTC
CPSC
FCC
FMC
FPC
FTC
ICC
NRC
SEC
TAB C
Major Inclusion or Exclusion Issues in Possible Consolidated
Energy Reorganizations
In determining the functional composition of either the Department
of Energy (DoE) alternative or the Department of Energy and Natural
Resources (DENR) a number of sub-issues occur as to whether various
existing programs should be included or excluded from one or both
concepts. Some of these are fairly small issues or non-
controversial -- others are more significant questions deserving
your attention.
The major inclusion or exclusion issues are described and evalu-
ated below with provision for an indication of your guidance.
I. The Nuclear Regulatory Commission
A. Background
The NRC was established by the Energy Reorganization Act
of 1974. It is responsible for all the regulatory and
licensing functions of the former Atomic Energy Commission
which was abolished by the 1974 legislation, and is the
Federal agency responsible for the regulation of nuclear
power generation.
B. Major NRC Program Functions are as Follows
Nuclear Reactor Regulation - Assures adequate safety,
environmental protection, and safeguards in the issuance
of reactor licenses.
Standards Development - Produces engineering standards
for siting, fuel cycle facilities, safeguards, trans-
portation and product safety standard development.
Inspection and Enforcement - Conducts nuclear powerplant
safety inspections including the issuance of construction
permits and operating licenses. Also conducts safety
inspections of fuel cycle facilities and nuclear materials.
Nuclear Material Safety & Safeguards - Performs a safe-
guard licensing program devoted to waste management and
the development of generic environmental impact statements
for consumer products which contain nuclear material.
3
May be difficult to demonstrate in advance
that abolishing NRC would improve the executive
branch capacity to achieve coordinated manage-
ment of national energy programs. Thus, in view
of the opposition which such a proposal would con-
front, the inclusion would be hard to win and
could jeopardize the whole energy reorganization
package.
Agency Position
Chairman Rowden has not been consulted on this issue.
Conclusion - Retain Functions in NRC
The disadvantage relating to further accelerating public concern
for nuclear safety and the consequent difficulty in winning public
acceptance of nuclear power overwhelms the potential advantages.
The real advantage relating to bringing nuclear export licensing
under Presidential control can just as well, or better, be achieved
through a change in law authorizing the President to make the
final decision in these cases, in keeping with his responsibility
for the conduct of foreign affairs (as with CAB ruling on overseas
route awards)
Presidential Decision
Agree to functions remaining in NRC
Disagree. Revise planning to include NRC functions
in energy agency.
FORD
RALD
4
II. The Federal Power Commission (FPC)
A. Background
The FPC's regulatory authority extends over portions of
the natural gas and electric power industries. The FPC
exercises its regulatory powers in four program areas:
(1) licensing of hydroelectric projects; (2) setting
rates for interstate wholesale sales of electric energy;
(3) certification of pipeline facilities for the trans-
portation of natural gas; and (4) setting rates for
interstate wholesale sales of natural gas. The purposes
of these programs are broader than economic or rate setting.
They aim also at conservation of energy resources,
promotion of hydroelectric development, safety, environ-
mental protection, assuring an abundant supply of electric
energy and emergency preparedness. Pursuit of these
objectives necessitates extensive coordination between
FPC and other agencies including particularly Interior
and EPA.
B. Advantages and Disadvantages of Inclusion
Advantages
Advantages apply generally to either the DOE or the
DENR alternative energy organization.
Inclusion of the FPC programs would help assure
their sensitivity to overall national energy policy
as formulated and coordinated by the Energy Agency.
Regulatory actions regarding natural gas and electric
power could be developed over time in relation to
regulation of petroleum resulting in a more rational
and even-handed treatment among these competing
energy sectors.
Inclusion would facilitate improvements and
simplification in Federal energy data gathering
and use, as well as better emergency preparedness
coordination across energy sectors. The DENR alter-
native affords an added advantage over the DoE alter-
native since the FPC functions would be housed with
related natural resource programs now in Interior.
Natural resource coordination would be significantly
improved and expedited.
5
Disadvantages
The independent commission form, while not very
responsive to national policy or changing conditions,
does have the merit of stability and avoidance of
undue political pressure, at least as a common
perception.
Abolishing FPC as an independent commission and
inclusion of its functions in an energy agency could
alarm the regulated industries as well as conserva-
tion and environmental groups.
Congress would probably react very negatively to dis-
establishing this, or any, independent commission
apart from the merits of the case because of an
implied threat to this "arm of Congress" mode of
governance.
If In DOE
The case would be weaker because inclusion in DOE
would fail to significantly mitigate present natural
resource coordination problems which would still
require cross-agency contacts.
C. Conclusion
A convincing case can be presented for abolishing FPC
and intorporating its functions in an energy agency.
This is particularly true if the DENR alternative is
selected.
The concern for the credibility and objectivity of
regulatory decisions, if placed in an executive agency,
can be mitigated by having adjudicatory proceedings heard
by an Administrative Law Judge, subject or review by an
Appeals Board, the members of which serve fixed terms,
and by having regulation functions insulated from develop-
ment functions. Therefore, on balance, we feel the FPC
functions should be incorporated in the DoE or DENR
planning since the objections can be partially offset
and in spite of anticipated strong Congressional opposition.
D. FPC Chairman Position
Variation in Disposition of FPC's Hydroelectric Licensing
Program if DOE is Selected as Alternative for Energy
Organization.
The siting of proposed hydroelectric facilities deeply
involves land and water planning and use. The hydro-
electric licensing work of FPC, of all its programs, is
therefore the most intimately associated with Interior's
6
mission and capabilities. Conversely, this FPC
program has less to gain by grouping it with DoE
programs. Consequently, if FPC is abolished, hydro-
electric licensing could be excluded from DOE even
though such an action would split Federal electric
energy regulation between two programs.
Hydroelectric licensing may be split off from the
other FPC programs and stay in the independent regulatory
commission structure.
Hydroelectric licensing can be transferred to an
executive agency (Interior) with natural resource
programs if the hydroelectric program is sufficiently
insulated to assure necessary independence of regulatory
actions.
Including hydroelectric licensing together with other FPC
programs in a DENR would be the most satisfactory disposition
for this function. In the event of a DOE selection, hydro-
electric licensing should be transferred to Interior, or next
best, left as an independent Commission.
E. Agency Position
"
on the subject of including the Federal Power
Commission
our minds are open to any proposal which
would place all of the Federal government's energy
policy-management in one agency." (Excerpt from a letter
to James L. Mitchell from Richard L. Dunham, dated
September 16, 1976.)
F.
Presidential Decision
Agree that functions of FPC be transferred
to either DOE or DENR, whichever is selected.
and that FPC be abolished.
Disagree. Leave FPC as is.
Agree to abolishing FPC but if DOE is selected,
hydroelectric regulation is to go to Interior
Department with other functions going to DoE.
Agree to abolishing FPC but if DoE is
selected, hydroelectric regulation disposition
should be studied further.
7
III. Rural Electrification Administration (REA)
A. Background
The Rural Electrification Administration (REA) in the
Department of Agriculture was created in 1935 to make
low cost loans to finance electric and telephone service
in rural areas and thereby expedite rural electrification
and phone service.
REA makes loans to qualified borrowers, with preference
to non-profit and cooperative associations and to public
bodies, normally at 5 percent interest. REA borrowers
can also finance their capital needs from non-REA
sources with the aid of REA loan guarantees.
In 1975, approximately 25 million Americans were being
provided service from electrical systems financed by REA.
Also in 1975, borrowers from the telephone loan program
provided service to 9 million people in 42 States. REA
does not own or operate facilities in either the electric
or telephone program.
While originally established to provide electricity for
America's farms, this job has been essentially completed.
Nearly 99% of all farms are electrified and virtually all
of the new customers are non-farm. Since 1961, more than
8,000 .commercial, industrial, and community facility
projects have been assisted by REA borrowers.
B. Advantages and Disadvantages of Inclusion
Advantages
REA electric programs are no longer agricultural in nature,
but are directly related energy development and marketing.
Consolidation of these programs with other similar programs
relating to power marketing and development would greatly
improve overall coordination and administration of these
efforts. Additionally, it would reduce significantly the
amount of energy organizational fragmentation which now
exists.
8
Disadvantages
The associations of REA borrowers constitute a broad
base and highly organized interest group which can be
expected to strongly oppose any change in status because
the loan programs have fared very well under the Agriculture
Committees of both Houses. The major concern of the REA
constituency would be that inclusion in an Energy Agency
would highlight the REA loan policies as out of date, no
longer needed, and perhaps even counter-productive from
an energy policy point of view. It could signal to
them, the beginning of the end of very favored treatment.
C. Conclusions
The REA electric programs clearly have their primary impact
in the energy area with secondary rural development impacts.
As such, these programs properly belong in a consolidated
energy organization where they can be rationalized with
other programs realting to power marketing and general
energy policy. The telephone loan programs are not directly
energy related and could, from a programmatic viewpoint,
just as well be left in USDA. However, the total adminis-
trative costs of both programs would probably increase if
they were separated.
Organizationally, REA divides cleanly and evenly between
the electric and telephone programs. Consolidation could
therefore be accomplished with little administrative
difficulty. This would result in about 400 REA employees
associated with the electric programs being transferred to
the proposed Energy Department and an equal number of REA
employees remaining with the telephone programs in USDA.
In summary, there is no sound reason to leave REA out of
the energy consolidation planning other than the strong
prospect of losing the case on political grounds. It is
recommended that it be included therefore. If it sub-
sequently is ruled out and retained in USDA, it would not
be a crucial loss to the viability of an energy consolidation.
D. Department of Agriculture Position
The Department of Agriculture prefers not to take an
official position concerning the potential consolidation
of REA into an Energy Agency.
FORD
9
E.
Presidential Decision
Agree to inclusion of REA in either a
DOE or DENR proposal
Agree to inclusion of REA electrification
programs in either a DOE or DENR proposal,
but rural telephone programs to remain in
USDA.
Disagree. Leave in USDA.
10
IV. Naval Petroleum Reserves Program
A. Program Description
The Naval Petroleum Reserves (NPS) were originally
established, in the early 1900's, to insure an adequate
supply of petroleum for national security purposes in
the event of wartime interruption of the supply of
petroleum. However, P.L. 94-258, enacted at the insti-
gation and support of the Administration in response to
the energy crisis altered the concept and status of the
original NPS by providing for the transfer of NRP No. 4
(Alaska) to the Department of Interior in 1977 and by
authorizing production of NPR's Nos. 1, 2, and 3 (in
continental U.S.) through 1982 by the Navy to facilitate
the development of the Strategic Petroleum Reserve
authorized by the Energy Policy and Conservation Act of
1975, P.L. 94-163.
In effect, P.L. 94-258 assumes that all national needs
for petroleum, military and civilian, can be critical in
time of emergency and all sources of petroleum are to be
pooled without prior earmarking. Similarly the strategic
storage of petroleum would be set aside for emergency
circumstances, but without prior earmarking as to end use.
In addition to the four petroleum reserve sites, the Navy
presently has administrative responsibility for three oil
shale reserves which are currently undeveloped.
B. Issue Relates to DENR only
The transfer of NPR responsibility from DoD as part of
a general energy reorganization relates to the DENR
alternative because of its comparable functions of fossil
fuel leasing on public lands. The DOE alternative would
not assume these functions from Interior where they are
now performed, and, consequently, NPR would not be a
candidate for transfer to a DoE.
However, if Interior remains in being because the DOE
alternative is chosen rather than DENR, serious consider-
ation should be given to transferring all of NPR to
Interior. Finally, if it is decided to retain the present
structure rather than other DOE or DENR, serious con-
sideration still should be given to transferring all of
NPR to Interior. These actions would be consistent with
the change in concept of the NPR from a military-only
emergency supply.
C. Advantages and Disadvantages of Inclusion in DENR
Advantages
To find an economically viable, yet environmentally
acceptable process to extract petroleum from oil shale
in the near future is going to require a coordinated
energy resource development effort by both private
and government concerns. To date, this has largely been
a fragmented effort which requires extensive, time
consuming interagency coordination. It makes sense,
both programmatically and administratively to consolidate
these oil shale resource development programs within a
single department or agency whose primary mission involves
energy resource management and leasing. Navy oil shale
reserves are only a small portion of the total national
reserves and, therefore, transferring the administration
of these reserves to a DENR could be accomplished with
relative ease.
DOD and Navy recently initiated an oil shale RD&D program
jointly with ERDA and a private company. Consolidation
of this oil shale program with other similar civilian
energy agency programs would provide a more distinct
separation of civilian and military functions.
With respect to the petroleum portion of the NPR, there
are several benefits that would be derived from con-
solidation into the agency responsible for energy
leasing and Federal land management.
It. provides a single clear cut picture of the total
national petroleum reserves, both in the ground and
in strategic storage.
It facilitates tradeoff analysis to determine how
much reserves should be maintained in each account
(i.e., military VS. civilian), as well as provide
a mechanism for shifting resource reserves from one
account to another as needed.
It simplifies total program administration.
In summary, our Nation's security includes not only a
strong national defense, but also a sound and stable
economic base. Obviously, the administration of our
national petroleum and oil shale reserve programs affects
both the country's defense and economic well-being.
Inasmuch as these programs are clearly energy oriented,
they could be best administered by a department or
agency with responsibility for energy resources develop-
ment on public lands. NPR programs also could more
12
readily obtain support in DENR than in DcD because
of closer affiliation with expertise of Geological
Survey, Bureau of Land Management, Bureau of Mines,
and others.
Disadvantages
Strong political resistance is likely from the Armed
Services Committees of both Houses.
D. Conclusion
Conceptually and for practical administrative efficiency,
all of NPR - not just the Alaskan portion - should be in
DENR if that alternative is selected.
Management of the NPR, both petroleum and shale, is now,
by law, viewed in a different light from its historic
concept of a military-only set aside. It is now part
of a more integrated energy approach for both military
and civil uses. Also, the management of these resources
is administratively closely related and analogous to
the Interior energy leasing and lease management functions
which would be in the DENR if that alternative is chosen.
These points seem compelling in judging the best placement
for NPR.
E. DoD Position
DoD opposes transfer of both oil shale and petroleum
reserves to a civilian Energy Agency, primarily on the
basis that further commercialization of NPR for non-DoD
purposes is unwarranted.
F. Presidential Decision
Agree that all of NPR 9both shale and petroleum)
should be included in the DENR concept, if that
alternative is chosen.
If basic energy organization decision is for
either DoE or the present structure, pursue
the transfer of all NPR (shale and petroleum)
to Interior.
Disagree. Leave NPR in Navy.
FORD
13
V.
National Oceanic & Atmospheric Administration (NOAA)
A. Background
NOAA, located in the Department of Commerce, has
responsibility for a wide range of scientific programs
in oceanic and atmospheric services and research,
in coastal zone management and in fisheries resource
management. The interaction of NOAA programs with
natural resource and, to a lesser degree, energy
matters, is considerable.
B. NOAA Relationship to DENR and DoE
NOAA, in total, would be a candidate for inclusion in
DENR but not in DoE. IF the DOE alternative is chosen,
NOAA functions should be studied further to determine
their best disposition including some possibly to the
DOE (e.g., impact aid), others possibly to Interior
or to remain in Commerce.
The following advantages and disadvantages relate only
to the inclusion of NOAA in DENR.
C. Advantages and Disadvantages of Inclusion in DENR
Advantages
1. It would facilitate the coordination of those
services which NOAA currently provides in support
of energy and energy-related programs in FEA, ERDA,
and Interior, particularly those related to Coastal
Zone Management (CZM) programs and CZM energy
impact funding.
2. It would consolidate almost all of the Federal
Government's knowledge, expertise and facilities
for the conduct of surveys, assessments and
investigations of the physical, chemical and bio-
logical characteristics of the oceans and the
lakes as well as the geological and geophysical
processes of the solid earth and its resources.
3. It would consolidate all Federal programs relating
to the conservation, restoration and management of
marine mammals and marine, fresh water and anadromous
fishery resources.
4. It would consolidate the Federal Government's
expertise and capability for monitoring streamflow
14
and water quality, determining the distribution and
character of sub-surface water, and assessing the
Nation's water supply. This centralized capability
would be particularly valuable in developing plans
for western coal development and for identifying
suitable sites for locating nuclear power plants.
5. It would consolidate, and make more effective and
responsive, those Federal programs which were
designed to reduce loss of life and property from
a broad spectrum of natural disasters, including
floods, tornadoes, severe storms, earthquakes,
tsunamis, volcanic eruptions and landslides.
6. It would provide a central source of almost all
of the environmental data essential for making
comprehensive assessments of the environmental
impact of various energy and natural resource
development activities.
7. It would consolidate much of the civilian production
of maps and charts for the earth, the oceans and
the national air space.
Disadvantages
From a program operational standpoint, there are a
few disadvantages to including NOAA in a Department of
Energy and Natural Resources. The disadvantages to
such inclusion basically focus on the reaction of
outside organizations.
1. NOAA is perceived as an environmental organization
not biased by resource utilization and development
interests. Placing NOAA in the department that is
charged with resource development could jeopardize
this relationship and the reaction of the environ-
mental community to consolidating NOAA into DENR
will probably be negative.
2. NOAA joining DENR runs contrary to other study
recommendations on how the Federal effort in
ocean and atmospheric affairs should be organized,
i.e., that, NOAA should be the central element in
a separate ocean organization at Cabinet level
FORD
D. Conclusions
In the event the decision is to form a Department of
Energy and Natural Resources, NOAA should be included
as a major and integral part of this Department,
primarily for natural resource management reasons.
On the other hand, if the DoE option is selected,
further study should be given to whether or not NOAA
15
functions should be dispersed to Interior, DOE, Commerce,
and other Federal agencies.
E.
Department of Commerce Position
NOAA programs in the fiscal 1977 budget comprise
approximately 30% of the Department's funds and
approximately 40% of its full time permanent employees.
Under these circumstances, it would be difficult to
say that the transfer of NOAA from Commerce to DENR
would be without impact. From an operational stand-
point, however, such a transfer would result in few
actual disadvantages. Although the Department would
have to make a greater effort to assure continued
coordination with the Economic Development Adminis-
tration and Maritime Administration programs.
The Department of Commerce may actually benefit from
transferring NOAA to DENR because such a transfer may
allow overall Departmental program managers and policy-
makers to focus more of their time and attention on
those programs which bear a more direct relationship
to the economic growth and development orientation of
the Department.
F.
Presidential Decision
Agree to inclusion of NOAA in the DENR,
if that alternative is chosen.
If DoE is selected, perform further
analysis to determine feasibility of
transferring parts of NOAA to DOE,
Interior, and other Federal agencies.
Disagree, leave in Department of Commerce
regardless of energy organization decision.
Organization For
Energy Policy Formulation, Coordination and Monitoring
Executive Summary
The question addressed in the attached paper is: Assuming each
of the major alternative organizations being considered for
Federal energy and energy-related functions --- what kind of
organization or system would be needed to formulate and coordinate
national energy policy and see that it is implemented? The scope
of the question takes in a composite energy policy system
comprised of:
The role of the lead energy agency or agencies;
input from other line agencies including such
"non-energy" agencies as State and Treasury, and
the coordinative function of Executive Office units
including those which are either general purpose or
special purpose.
This subject is not easily susceptible to analysis and clearcut
answers. The issue involves an interplay of numerous factors all
of which are judgmental in character and some of which require a
future projection of the energy situation and Federal organization
for energy matters. The balance of this summary itemizes and
describes briefly the governing factors in determining the
mechanism needed for national energy policy.
1. Understanding the nature of the energy policy task
is basic in determining how to organize for it.
Focus is on national policy from the perspective
of the President.
The whole policy cycle is involved: formulation,
coordination, decisionmaking, implementation
monitoring, evaluation and reformulation.
In many important areas of energy policy the course
has been charted and substantial progress made in
achieving agreement on basic directions. Some
implementation decisions have been reached as well.
But others remain unresolved. In succeeding years,
some new fundamental decisions will be required and
some already made will require reexamination. Even
when the energy agencies have themselves shifted
into a monitoring and implementation phase, the
- 2 -
broad variety of interfaces (i.e., international,
environmental, etc.) characteristic of energy
issues will require interagency policymaking.
Energy policy is a compound of domestic and
international considerations. The energy policy
group should have an international expertise.
Energy policy decisions must be balanced with
other goals whichare often the province of non-
energy agencies; e.g., general economy, environment,
resource management, foreign affairs, national
security and others.
Energy decisions and actions may have short or
long-term consequences, but since these interact,
they must be analyzed as one.
2. The function of energy policy formulation and
coordination has recognizable organizational
relationships with other energy functions.
Data collection and analysis. Credibility of data
is seen by many including Congress, to be
threatened if the data process is organized as a
subordinate unit of the policy group or directly
reporting to the same individual. Yet, the data
system must respond to needs of the policy
formulation process.
Research and development. R&D planning should be
sensitive to technology needs identified outside
itself including those surfaced as a product of the
policy process. At the same time, R&D is a long-
term investment requiring stability to reach maximum
productivity, and it should not be directly governed
by the dynamics of the policy process.
Energy regulation. Regulatory actions, especially
rulemaking should be compatible with carefully con-
structed and widely debated energy policy, so as not
to be counter-productive in terms of meeting national
objectives. On the other hand, regulatory decisions,
especially case actions, must be sufficiently free
of policy pressure to be seen and accepted as
credible and as satisfying due process requirements.
Energy development and conservation operations.
Should clearly be governed by program policies which
are specifically reconciled with overall energy policy.
- 3 -
3. It is instructive, with cautions, to evaluate the
existing policy process in determining how to best
organize for policy functions in the future.
The ERC/FEA system for energy policy formulation
and coordination has several structural flaws which
might be avoided with a DENR or DOE arrangement.
These include:
- In the absence of a Cabinet-level energy
agency, ERC is chaired by a Secretary who
does not otherwise have a basic energy
mission. This arrangement fragments the
already difuse energy policy process. There
is no single energy spokesman. Consolidation
of energy organization would clarify the
energy perspective.
- ERC must rely on FEA for backup. Some other
agencies tend to view the ERC/FEA system as
an FEA vehicle regardless of the quality of
the ERC's analysis. Consequently, they take
up energy policy issues through other channels.
- Energy policy formulation is not comprehensive:
ERC/FEA concentrates on short range and
legislative; other agencies have other primary
interests, i.e.: ERDA - long-range; State/NSC -
foreign aspects; Treasury/CEA/EPB - economic
aspects.
- In some cases ERC/FEA duplicates the general
purpose coordinative bodies of the Executive
Office, especially OMB's legislative review
process.
On the positive side, the ERC/FEA system has
provided a forum for high level interagency dis-
cussion of urgent energy issues over a tumultous
period. This forum might not have been available
through strictly convential mechanisms.
- More senior level attention has been given to
confronting problems than might otherwise have
been the case.
-4-
4. The major energy organization alternatives - i.e.,
DENR, DOE, and the present structure - have differing
capabilities and limitations in performing the energy
policy making task.
DENR and DoE would provide a Cabinet-level capability
to formulate policy. DENR would have a relatively wider
span of relevant concerns than DoE. Both would have a
Secretary to serve as a top level interagency spokesman
who is directly concerned and who has the policy capa-
bility directly at this command.
The DoE alternative, unlike DENR, would result in an
energy spokesman at Cabinet-level who is basically a
single-minded energy advocate. As the chief formulator
of energy policy, it would be necessary for the system
to provide some check and balance so that the necessary
reconciliation of energy with other concerns takes place.
An energy agency EA would be less able to clarify the
energy policy perspective in an interagency context.
A limitation is that neither DENR nor DoE would cover
all pertinent concerns such as economic, foreign
affairs, general environment, and others.
Either DENR or DoE would offer a more established policy
formulation and coordination capability than the present
ERC/FEA systems which has the limitations described
earlier. Providing the ERC with its own policy analysis
staff would retain some of the existing coordination
problems and either duplicate or replace existing
policy coordination capability.
5. Assuming DENR or DoE, the "normal" or conventional
arrangements for policy formulation and coordination could
be utilized, but also might be supplemented with more
exceptional policy coordination arrangements as needed to
perform the energy policy job.
The "normal" procedure would include staff analysis and
initial formulation of policy in the energy department.
Interagency consultation as appropriate would be performed.
Coordination of draft positions of the Department, such
as legislative material or Presidential decision papers
would go through usual Executive Office units including
OMB's legislative review process which formally involves
all affected agencies.
To supplement these usual processes, it may be useful to
have a top-level interagency forum to resolve the many
implications of energy policy. If so, as a first
- 5 -
increment of "exceptional" arrangements, an interagency
committee such as the ERC could be continued. It could
be chaired by the Secretary of the energy agency who would
utilize his regular policy staff. Several of the struct-
ural flaws in the present ERC/FEA system might be rem-
edied by such an institutional arrangement. Any agency
head not satisfied with the product of coordination
through this interagency committee process would be free
to carry his views forward to the President if necessary.
This would check any tendency for the Energy Secretary
from pushing unbalanced positions to the President.
Some further escalations could be considered - but do not
appear to be useful at this time. For example, a more
elaborate staffing mechanism could be established in the
Executive Office even if there were a consolidation of
energy functions. A general purpose Executive Office
agency such as the Domestic Council or OMB could be given
special responsibility for energy policy leadership.
Alternatively, a new organization such as the CEQ could be
created for the purpose of establishing an institutional
coordinating point. These forms of exceptional escalation
might be considered, if needed, at a later point.
6. Assuming no Cabinet consolidation of energy functions
and establishment of an Energy Agency or a continuation
of present organizations, more formal coordination of
policy should be considered.
Structural flaws in the present ERC arrangement suggest
that more comprehensive coordination of energy policy
issues should be established if there is no reorganiza-
tion of energy functions. A more "neutral" coordinating
arrangement might also be useful in reducing the concern
of some agencies that FEA dominates the policy process.
- In the case of an establishment of an Energy Agency
where there would not be the same level of energy
advocate as in a Cabinet-level energy department, it
may be useful to have a formal and full-time Energy
Advisor in the Executive Office chair the interagency
committee.
- In the case where the present organizational arrange-
ments are continued, it may be useful to establish an
even stronger policy coordination mechanism in the
Executive Office than the present ERC/FEA system. A
long-term need for an energy policy forum capable of
integrating points of view across agency lines is
evident. The ERC can do this. However, the addition
FORD
is
GERALD
- 6 -
of a small staff could help make the continuing
ERC more "neutral" with respect to FEA activities
and an improved forum for the full range of energy
policy matters as it affects all agencies. Once
the energy policy issues have been thrased out in
a broad way at the top policy and interagency basis,
the bulk of any legislative coordination should be
processed through the normal OMB legislative review
process.
Analysis of
Organization to Perform
Energy Policy Formulation and Coordination
I.
Scope and Purpose of Paper
This analysis is a component part of the overall organi-
zation study of Federal energy and energy-related functions.
Its purpose is to address the question of effective
organizational arrangements for formulation and coord-
inating national energy policy, subsequent monitoring
to assure implementation and, as necessary, reformulating
policy. The scope covers all national energy policy and
the part played by all affected agencies, existing or
potential, and any Executive Office role.
The focus of this paper is on the institutional arrange-
ments needed to perform the energy policy task. It does
not reexamine policy content as such, nor the process
by which policy issues are publicly debated or negotiated
with Congress.
Since this paper is part of a larger study, it is not
intended to recommend final answers but instead, to
analyze what is needed and derive guidelines regarding
policy-making arrangements which should be considered
in overall energy organization planning.
In terms of overall energy organization planning, this
paper assumes three alternative organizations as leading
contenders following Phase I of the general study:
consolidation of prime energy programs
together with some natural resource programs
to form a-Department of Energy and Natural
Resources.
Consolidation of prime energy programs to form
a - Department of Energy or an Energy Agency.
Continuation of essentially the present agency
structure for energy and related functions.
FORD & LIBRARY GERALD
2
This first two cases above involve a question of
whether or not an ERC or similar Executive Office
mechanism would still be required, and if so, what
form it should take. The third case involves the
question of whether or not the ERC should be strength-
ened, and, if so, how.
The remainder of this paper is sub-divided as follows:
II. Analysis as to the nature of the energy
policy task -- especially in the foreseeable
future.
III. Relationship of the policy function, to other
energy functions -- especially data, regula-
tion, and research and development.
IV. Description and evaluation of the existing
energy policy system.
V. The capability and limitation of each major
alternative energy organization in performing
energy policy formulation and coordination.
VI. Options for energy policy formulation and
coordination.
II. Nature of the Energy Policy Task
The task of formulating and coordinating national policy
and assuring its implementation differs among the various
fields of public affairs. This section of the report
identifies the major characteristics of the policy task
in the energy field in order to help assure that the
energy policy machinery is tailored to the task. Some
of the characteristics of the energy policy task cited
in this section are peculiar to the energy subject, others
are not.
A. National Policy Requiring Presidential Perspective.
Primary concern is with the major and overriding
policy issues which transcend specific programs or
agencies and can be thought of as national in character.
Decisions at this level clearly require Presidential
involvement and the integration of many points of
view. Broad energy policy at this level -- e.g.,
continued major reliance on private sector and
3
minimum feasible intervention in free market
decisionmaking -- sets directions for subordinate
and more program specific policy decisions --
e.g., transfer of uranium enrichment to private
sector and natural gas deregulation.
The policy machinery must serve the President's
need for balanced and objective advice which inte-
grates many points of view on the broad policy
issues and major subordinate level issues which,
while they may be program or energy-sector specific,
are instrumental in achieving national energy
objectives. In short, the energy policy mechanism
should be geared to serve the top-down perspective
of the President comprehending the broadest pos-
sible issues and reaching down to such levels of
greater specificity as is needed to assure that
major goals are being achieved.
B. Must Cover the Full Policy Cycle.
The energy policy task involves the full policy
cycle -- formulation, coordination, decision-
making and, subsequently, monitoring implementation,
evaluation and reformulation as necessary. Again
the emphasis is on the Presidential or national
perspective.
Both the steps leading up to decision (formulation
and coordination), and the post-decision steps
(monitoring and evaluation) contemplate a central
staff capability which has an established and recog-
nized relationship with major energy program officials
wherever they may be organizationally placed.
C. Future Mix of Policy Issues as to Formulation
and Implementation
The type of policy formulation and coordination
machinery needed in the years ahead should be governed
in large part by future trends that can be anticipated
in the energy policy task. There is some reasons to
believe that the unstructured nature of energy policy-
making over the last three years will not continue to
the same degree in the future and has
FORD
GERALD
4
already changed somewhat from that which
prevailed in the early post-embargo period.
The key question might be stated, - will future
policy issues continue to cover novel and un-
charted ground, or, will they increasingly fit
within the guidance offered by established,
broad policy? Another view of this same question
is whether or not energy policy issues in the
years to come will continue, in many cases, to
demand Presidential attention or can be resolved
at lower levels.
The picture is mixed. In many areas, decisions
have now been made. Policies have been set in
motion. In these situations, the energy policy
task is to monitor implementation of these agree-
ments rather than to formulate new policy. But
the picture also includes other areas in which
disagreement on the course that the government
should follow continues to persist. In these
instances, formulation of basic policy will still
be required.
1. Increasing focus on policy implementation
Many close observers of energy matters feel
that much of the policy ferment of recent years
has been resolved. Broad outlines of consensus
are beginning to emerge in important policy areas.
For the first time, key Congressional and executive
policy makers are in essential agreement on many
oil issues. There has emerged some semblance of
agreement on the role of regulations governing
most fuel products and the broad goal of national
energy policy -- self sufficiency and reducing
dependence. Some of the broad general principles
by which energy is to be developed and conserved
have been established. The central role of private
enterprise has been confirmed. The limited use to
which coersive regulations will be used to enforce
conservation has also emerged as an element of
consensus. Even the role of price in inducing
supply and limiting demand is becoming more widely
accepted.
5
Major policy decisions have been made as well
at the level of more specific programs or energy
sectors. For example, an oil pricing policy has
largely been established. The decision has been
made to construct a strategic storage system.
Decisions have been made to produce the naval
petroleum reserves; to build an Alaskan oil pipe-
line; to develop off-shore oil reserves; to provide
major new sources of energy efficiency information
to consumers in order to encourage conservation;
and to employ a variety of means to encourage
conservation in residential structures.
The energy policy task in these areas is to
monitor the implementation of the policy decisions,
and assess any need for modification to the policy.
2. Major policy formulation issues still remain
In important areas of energy policy, there is
no full consensus.
-- Natural gas is still regulated at artifici-
ally low levels. Supplies are decreasing.
Each winter the prospect of shortages becomes
a more pressing concern.
-- Nuclear issues are becoming more intensely
debated. Following the Nuclear Regulatory
Commission's recent ruling on waste disposal,
nuclear plant construction has, in effect,
been suspended. Major investments will be
required in the nuclear industry in order to
sustain growth. In the meantime, estimates
are cut back each year on the role that
nuclear power can play in generating electri-
city. Since Project Independence was heavily
dependent on nuclear power playing a major
role, these cutbacks could require major
policy reevaluations.
-- Coal production has increased since the
embargo. But Clean Air Act restrictions
continue to limit coal use. Proposed amend-
ments tightening restrictions may even increase
future difficulties in burning coal.
GERALD
6
Developmentof synthetic fuels and other
important substitutes for conventional fuel
will require government commitment to pro-
tecting early investors. But, without
Congressional agreement on the merits of such
guarantees, major legislative development
work will have to take place.
In addition to these clear policy issues left unre-
solved by years of debate, there are two other kinds
of problems. The first is that big issues exist even
in seemingly settled policy areas. Although the
essential policy framework may have been established,
the implementation of the major decisions may require
significant policy coordination on an interagency
basis. In other words, some issues of implementation
such as controversies over the Alaskan pipeline, or
the production of the naval petroleum reserves have
major interagency significance necessitating Executive
Office and very likely Presidential level attention
in the coming years.
The second kind of energy policy problem is the fund-
amental problem of issues which were not considered
or resolved in the past. For example, United States
policy toward OPEC has never been clearly articulated.
OPEC investment in the United States (particularly in
energy facilities) is another issue area in which there
has been little attention to date. Finally, the
government will some day have to cope with the funda-
mental short term issues of environmental and energy
significance concerning the continuing national
reliance on the automobile.
D. Careful blend of domestic and international considerations
It is, by now, well recognized that national energy
policy must take into consideration both domestic and
world-wide factors. The stage for projecting energy
supply and demand is global. Because of its signifi-
cance on world stability, energy - especially oil -
is a matter of high concern in conducting our foreign
affairs. Actions to strengthen our domestic position
must be weighed in the light of their effects on other
nations whose viability is important to us.
7
This intertwining of foreign and domestic energy
issues and policies says something further about
the kind of energy policy machinery we need. For
one thing, the State Department and the National
Security Council are, and will continue to be,
vitally concerned and will, therefore, want to
continue to have staff capability or expertise in
energy matters.
The State Department and NSC, however, are not,
and will not be, centrally charged with the develop-
ment or implementation of national energy policy.
They are participants and should have a clear voice,
selectively, in energy policy debates.
There is no way, however, of segregating energy
policy issues which are "domestic" from those which
are "international." As a consequence, the agency
and the group which has central responsibility for
energy matters must have a sufficient staff capability
which is well-informed and participating in inter-
national energy matters. The close coordination
needed for domestic and foreign aspects of energy
cannot be left to a "pass-over" system, but requires
mutual involvement of both kinds of agencies even
at the cost of some apparent overlap.
E. Energy policy decisions will continue to involve
heavy trade-offs with competing objectives and values
Both at the level of broad course charting policy
and, even more so, at subordinate or implementing
decisions, energy objectives tend to collide with
other values and objectives. The most apparent are
environmental, health, safety, conservation, national
security, consumer and national or regional economic
stability. Less evident but of potential great con-
cern are the impacts that energy decisions can have
on citizen life styles, freedom from excessive regula-
tion, privacy, and others.
If energy policy decisions involve a balancing of
so wide a range of considerations, the question occurs
as to how these points of view are to be represented
in the decisionmaking process or in the advice coming
8
to the President where the decision is at that
level. A part of the answer related to the span
of responsibilities of the principal energy agency.
The wider the span, the less the need to externally
counterbalance the energy agency. However, no matter
how comprehensively the energy mission is structured
to include moderating responsibilities -- natural
resources for example -- it will not include all
pertinent points of view such as overall functioning
of the economy or protection of air and water quality.
The consequence of this is that the total energy
policy making apparatus will need to provide for
hearing from and reconciling
points of view
which are not primarily focussed on energy. The
relative ability or shortfall of the several alter-
natives for energy organization to take in the whole
range of pertinent factors is discussed further in
Section V.
F. Short-term and Long-term considerations must be
viewed together
Some policy issues in the energy field have a very
immediate time factor. Others involve gradually
evolving problems and solutions which are long-term
in paying off. The analysis of short-term actions
and long-term investments must be carefully inte-
grated for maximum results.
III. Organizational Relationship of the Policy Function to
other Energy Functions
The organizational placement, authority and structure of
the energy policy function can be defined in part by looking
at other energy functions and seeing their relationship
with policy-making.
Data collection and analysis. Obviously, data is
needed to formulate and analyze policy options. The data
system, therefore, has an obligation to respond with data
that is valid and pertinent to real policy issues. However,
if the relationship is too close in a hierarchial sense,
there is a problem of credibility in the data gathered or
analyses made. The concern is that the data system will
be more motivated to produce answers that are hoped for
9
rather than those which are objectively straightforward.
Data which is lacking in credibility is of limited value
to anyone.
To counteract this concern, the data system should not
be subordinate to the policy analysis function. It
should support the data needs of the policy group, but
not its policy positions. This relationship is analyzed
further in the critical issue paper on Data Collection
and Analysis including treatment of the newly legislated
"separate" office in FEA.
Research, Development and Demonstration. To what
degree should th RD&D program address technology needs
identified by the policy-makers versus independently assess
what is needed? This relationship of policy-maker and
scientist is very critical in the long-range productivity
from the R&D investment. A simple answer categorically
supporting an extreme position either way is not indicated.
In any case, the team which prepared the critical-issue
paper on RD&D concluded, among other things, that the R&D
capability should be governed in part by technology needs
identified external to themselves with certain cautions
to assure the continuity, integrity, and flexibility
of the R&D function and its constituent projects.
Regulation. A fundamental question to be worked out
in the planning of energy organization is the proper
relationship between policy formulation and implementation
on the one hand, and regulation on the other. Many feel
that they are inherently conflicting and that they should,
therefore, not be located together lest one - presumably
regulation - be compromised in the conflict with the other.
Conversely, others point out that it can be counter-
productive for the regulatory power to be applied in
complete isolation from balanced and rational policy
objectives. This matter is extensively addressed in the
critical issue paper on Energy Regulation. There is some
validity in both points of view, but it is felt that the
integrity of regulatory decisionmaking does not compel
complete separateness, and the achievement of regulatory
responsiveness does not depend upon its specific sub-
ordination to policy-making.
GERALD R. FORD
10
Resource development and conservation operations. A
number of Federal activities are underway in pursuit of
the policy goals of increasing domestic energy supply and
limiting energy demand. The operating programs for these
purposes are not now consolidated and, as indicated in
critical issue papers on each of these subjects, are not
likely to be entirely consolidated in any possible alter-
native. Regardless of where they may be located, the
energy policy function should have a continuing relation-
ship with them to obtain policy decisions, when applicable,
and to monitor their continued operation to assure that
basic policy is being adhered to.
IV. Description and Evaluation of the Present Energy Policy
System.
A. Description
The central unit in the development and coordination
of energy policy under present arrangements is the ERC.
To describe the ERC further, it is a statutory, inter-
agency body comprised of the heads of Departments,
agencies and Executive Office units which are con-
cerned with energy matters. The ERC is chaired by
the Secretary of Commerce, although the Department of
Commerce, as such, does not have major energy functions.
The Federal Energy Administration plays the leading
role in ERC affairs other than serving as Chairman.
For example, the FEA Administrator serves as Executive
Director of ERC, and the FEA policy staff is, in
effect, the principal analytical staff for the ERC.
FEA also provides the ERC Secretariat role of keeping
records, preparing agenda items, etc. Frequently
the ERC functions through its Executive Committee
rather than the entire body. This Executive Committee
includes, in addition to the ERC Chairman and Executive
Director, the heads of Treasury, Interior, OMB, ERDA,
CEA, EPA, the Assistant to the President for Economic
Affairs and the Undersecretary of State. Over the
past eight months, 23 of 26 meetings of the ERC have
actually been of the Executive Committee, not the full
ERC. The full ERC generally meets bi-monthly for
informational presentations, but not generally to
debate policy issues.
11
Energy issues and economic issues inevitably con-
verge. Consequently, the Executive Committee of ERC
and the Economic Policy Board frequently meet jointly.
In fact, the membership of these two groups tends to
be the same persons in any case.
The ERC initially provided the vehicle for the
comprhensive Cabinet-level review of detailed energy
policy options which led to the President's 1974
Energy Message. More recently, the ERC has reviewed
and analyzed discrete policy proposals such as those
involving LNG imports and Alaskan natural gas trans-
port. The ERC also has assessed major issues which
relate more to implementation of existing policies
(at least in the sense that new legislation is not
required). Examples include review of EPCA implementa-
tion, and natural gas curtailments.
In these cases, the ERC typically has reviewed papers
prepared by the lead agency on a given issue, has
formed a task force or study group to analyze the
issue, has used a permanent ERC subcommittee, or has
formed a new one. Temporary task forces have been
formed on the Federal energy organization, west coast
oil transport, synthetic fuels commercialization, and
other issues. Ongoing subcommittees include (a) the
Intergovernmental Coordinating Committee (ICC), which
in turn has established subcommittees on conservation,
synthetic fuels, impact assistance, and coal programs;
(b) the Task Force on Thermal Standards; (c) the Task
Force on Motor Vehicle Goals Beyond 1980; (d) the
Nuclear Subcommittee and (e) the International Sub-
group, among others.
The ERC also serves as a forum to update positions
on pending legislation resulting from Administration
policy proposals and at times to discuss tactics
relating to such legislation. Again, the ERC relies
primarily on lead agencies (e.g., Clear Air Act
Amendments Task Force) for its analysis. The ERC
employs the same process to develop Administration
positions on and tack other energy-related legislation,
such as that on oil company divestiture or the
Kennedy conservation bill.
With the exception of the initial efforts leading
to the President's Energy Message, the ERC, which
12
has no permanent staff, has acted more as a
policy coordination body than as an organization
which initiates the formulation of policy. On the
other hand, there are obvious exceptions (e.g.,
Alaskan gas transport and LNG import policy). Since
the FEA has initiated many recommendations which the
ERC then has taken up, the ERC Executive Director,
who is also the Administrator of FEA, in fact, has
been able to initiate policy development.
As a coordinating body, the ERC, besides producing
discrete outputs such as decision memoranda, also
provides a forum for top-level decision-makers to
meet periodically to discuss energy policy.
B. Evaluation
Since its creation in 1974, the ERC mechanism has
been confronted with a situation of major policy
innovations going to such basics as a reexamination
of the relative role of the public and private sectors.
Policy issues have been large in number as well as
often fundamental in character. The fact of having
an exceptional mechanism such as ERC has served us
well in the light of these events, especially in the
absence of a Cabinet-level Department and Secretary
with a clear lead role. In situations where there
were fundamental disagreements, even within the
Administration, the ERC provided a point of focus
for senior policy makers with a broad interest in
energy topics. These individuals might otherwise
have been too disassociated with the day-to-day
energy issues to be well informed and see the need
for dramatic steps. Without being informed, such
senior officials might have been more likely to oppose
controversial energy actions which impacted on their
areas. The ERC became a vehicle for permitting
positive action. But there have been criticisms of
the ERC as well which should not be overlooked.
An analysis was made of ERC actions taken on agenda
items over a year's time indicating the subject
matter, the lead responsibility, and the action taken.
(See Attachment A). Summary is then given of issues
handled by lead agency with FEA predominating by a
substantial margin. Over the year, policy/legislative
items occurred 35 times, while implementation issues
came up for discussion 13 times.
13
While much good work has been performed under
intense pressure, the structural arrangements for
energy policy formulation and coordination as
described above is not well suited to all aspects
of the continuing energy policy task.
A critical evaluation of ERC/FEA policy mechanism
includes the following points:
1. Comprehensive overview is missing. FEA has a
short-term view, ERDA concentrates on policy decisions
that would pay off in the long-term. State Depart-
ment takes a foreign-policy oriented look at energy
while the FPC and the NRC quite independently regulate
their respective sectors. The ERC has not performed
the role of integrating these fragmented views.
2. May be duplicative of normal coordinative machinery.
The ERC at times represents an alternative track for
policy development which duplicates the more conven-
tional staffing process of OMB budget and legislative
review and the Domestic Council's coordination role.
3. ERC as an FEA device. Some feel that the analysis
developed by the ERC has been limited in value. In
some cases, the critics charge, the ERC has played an
advocacy role. In others, it has represented FEA's
point of view to such an extent that some agencies
try not to bring issues to the ERC. Agencies tend
to use ERC if it is likely to be to their advantage,
but can easily go an alternate route if the chance
for controlling the action appears better - i.e., OMB,
NSC, EPB, etc.
4. Implementation monitoring is weak. The ERC can
engage in secondary policy issues to the degree that
time permits, but this is not the same as system-
atically following major decisions to see that they
are being implemented. ERC, as noted, has no
analytical capability of its own. The FEA staff is
a non-Cabinet agency and has direct jurisdiction
itself over only a fraction of the implementation
actions of the government. Its ability to track
broad decisions to the implementation and feed-back
stage is limited.
GLRALD FORD
14
V.
Energy Policy Capability and Limitations of Major
Energy Organization Alternatives
The major alternatives to the present energy and
related structure are (1) a Department of Energy and
Natural Resources, (2) a Department of Energy or (3) an
Energy Agency as described in the interim report on
Energy Organization. The possible consolidations are not
equal to each other in terms of their respective ability
to handle the energy policy task or their limitations
in doing SO.
The machinery for formulating, coordinating, and monitor-
ing implementation of energy (or any other kind) policy
includes, in fact begins with, one or more line agencies
and includes whatever Executive Office role may be neces-
sary to assure balanced and objective support to the
President. At present there is no one agency that has
clear lead responsibility for energy. FEA perhaps comes
closest, but it has clearly less than a full range and it
is non-Cabinet in rank. Consequently, a heavy share of
the load falls on the Executive Office including ERC.
In contrast, the possible alternatives of DENR and DOE
would be in a much more comprehensive position, especially
DENR, than is FEA. In addition, they would be at Cabinet-
level. The dependence on Executive Office machinery
would be less.
DENR would constitute a Department and a Secretary charged
with energy and also with conservation and management of
natural resources and, therby, would take into its sights
one of the major continuing energy trade-offs. Energy
policy initially formulated in such a Department would be
expected to incorporate some balance in this regard.
DOE, especially if it did not have Interior's energy-
related land management functions, would have a lesser span
of concerns than DENR, and energy policy formulated in such
a Department might need more extensive coordination above
departmental level before it was ready for Presidential
attention.
Either DENR or DoE, however, would require external coord-
ination to assure other considerations were adequately
given -- national economy, national security and foreign
affairs and environmental protection.
15
The prospect of an Energy Agency in lieu of a
Department of Energy would result in the same span as
the DOE, but the agency would have a serious handicap
in effecting interagency coordination by virtue of
being sub-Cabinet.
VI.
Alternative Arrangements for Energy Policy Formulation,
Coordination and Monitoring - Normal or Exceptional
Under the conditions of the last several years, i.e.,
turmoil in the energy policy field together with the
lack of a Cabinet-level spokesman with wide-ranging
energy responsibilities - exceptional arrangements for
formulation and coordination of energy policy has been
warranted, i.e., the ERC/FEA arrangement.
A. Assuming a DENR or a DOE
The prospect of a consolidation of most prime energy
functions in a Cabinet Department together with a
more stabilized energy policy framework raises the
question of whether exceptional arrangements would
continue to be warranted or whether more normal
arrangements would be sufficient.
Normal in this context would include:
- formulation of national energy policy in
the energy department based on analysis by
a properly staffed policy group. Consultation
across agency lines at staff level would take
place as necessary.
- Interagency formal coordination under the
auspices of the lead agency itself - or -
- Interagency coordination through regular
Executive Office processes such as legislative
review by OMB or staffing of Presidential
decision papers with general purpose Executive
Office and White House units such as CEA,
OMB and Domestic Council.
Exceptional
If it appears that exceptional arrangements are still
warranted to cope with the energy policy task and to
assure adequate coordination and balancing of views,
16
the first level of escalation might be a formally
established interagency committee or council similar
to the ERC - but chaired by the energy department
secretary and utilizing policy analysis support from
his own department. Energy policy making involves many
points of view and consequently there is an important need
for checks and balances so that the energy secretary
will not be in a position to completely stifle dissenting
views. Any other member on such an interagency committee
who felt that his view was not adequately reflected in
a policy position could make his dissent known to the
President through normal channels.
A second possible exceptional arrangement for energy
might be to follow the normal channels of involving
regular Executive Office units such as OMB, CEA and
Domestic Council but to augment the staffing of one or
more of these to deepen their expertise and workload
handling capacity in energy matters.
A final and more extreme exceptional arrangement would
be a separate Executive Office body for energy chaired
by a separate Assistant to the President and with a
policy analysis staff separate from that of the Secretary.
This would be along the lines of the CEQ or the NSC.
Again, assuming a consolidation of energy functions
under a Cabinet Department and Secretary, it seems
logical to unify the energy task there to the greatest
extent possible and to go up the scale of supplementary
and exceptional policy coordinating machinery only as
needed.
B. Assuming consolidation of energy functions in a
non-Cabinet Energy Agency
The chief difference here is the lesser ability of the
top energy official to coordinate his agency's policy
initiatives with the concerns of Cabinet officials
representing foreign affairs, natural resources, tax
policy, etc., or Executive Office officials representing
budgetary concerns, economic policy or, national
security. Correspondingly, if this alternative for
general energy organization were adopted, it would
require a higher degree of exceptional arrangement
outside of the agency to coordinate energy policy
17
probably along the lines of the present ERC without
staff or even possibly with some small staff. Such
a body might be chaired by a Cabinet Secretary, as
at present, or by an Executive Office Energy official.
C. Assuming the present structure for energy functions
Actually, the weakness and illogic in the energy policy
system is one of the primary faults with the present energy
organization. Nevertheless, if we assume no change in
organization for energy functions, the present system of
an unstaffed ERC would probably be required as a minimum
to elevate the ERC to a level that it provide formal
leadership at the Executive Office level for energy matters.
The alternatives would be to (a) augment OMB's staff in
the energy field and thus unify the development of energy
legislation with its interagnecy coordination - or -
(b) to provide the ERC with a portion of the policy staff
now vested in FEA and thereby continue to provide an
interagency and top policy level forum for shaping energy
policy. As a variation of the present arrangement, it
might be desirable to have a full-time Executive Office
official to chair the continuing ERC. In any case, once
policy decisions have been reached, any legislative
coordination that results should be processed through the
established OMB legislative review procedure.
ATTACHMENT A
Analysis of ERC Action on Agenda Items
ABBREVIATIONS/CODES IN SUMMARY OF ERC AGENDA ITEMS
Group Meeting
EC
ERC Executive Committee
ERC
Full ERC
EPB/EC
Economic Policy Board/Energy Resources Council
Executive Committee
GOVS
Governors on Energy Subcommittee of the National
Governors Conference
Type of Actions
DM
Decision Memo for the President
IM
Information Memo for the President
RP/RC
Statutory Report to the President/Congress
R
Report for a future ERC meeting
TF
Task Force formed (long term)
L
Legislative liaison action
C
Interagency coordination (ad hoc, short term task
force, interagency issue paper, or comments to specific
lead agency)
B
Briefing/status report
O
Other
--
No action
R.FORD
GERALD
SUMMARY OF ERC AGENDA ITEMS
Group
Date
Meeting
Issue
Lead Agency
Action
7/20/76
EC, ERC
Alaska pipeline welds study
DOT, DOI
IM
7/14/76
EC, EPB/EC
Clean Air Act amendments
OMB, FEA, EPA
DM
Energy Organization Study--
OMB, DOC
R
status
EPCA Implementation--6-month
FEA
RP
review
Draft Presidential Energy Brief
FEA
B
FEA Extension- status
FEA
B
Position on Mineral Leasing Act
DOI
--
7/14/76
EC, ERC
Clean Air Act amendments
OMB, FEA, EPA
C
Natural gas curtailments--FPC
FPC
C
draft paper
Bailey powerplant decision
DOI, NRC
:
7/8/76
EC, ERC
Alaska pipeline welds--status
DOC, DOI
R
Post- 1980 auto efficency
DOI
R
standards- - ERC task force status
report
7/7/76
EC, EPB, EC
LNG import policy--options paper
FEA
DM
Alaskan gas (S. 3521),
FEA
C
6/25/76
EC, ERC
Coastal Zone Management Bill
OMB
C
FEA Act Extension
FEA
B
Mineral Leasing Act amendment
OMB, DOI
C
6/9/76
EC, ERC
Scrubber technology options
EPA
R
Synthetic fuels commercialization
ERDA
B
legislative status
Group
Date
Meeting
Issue
Lead Agency
Action
5/28/76
EC,ERC
Proposed ERC statement on uranium
ERC
C
reserves
Kennedy Conservation Bill (S.3422)
ERC
TF/L
Randolph Coal Bill (S.1777)
FEA
L
Senate Natural Gas Bill
FEA
L
5/19/76
EC,EPB/EC
Federal Energy Organization
DOC, OMB
TF
Study Outline and Work Plan
Legislation to protect retail
FEA
C
gasoline dealers
Natural Gas Bill (S.3422)
FEA
C
5/18/76
ERC
National Energy Outlook discussion
FEA
B
5/12/76
EC,ERC
Private sector technology role
ERDA
B/R
Federal Energy Organization
DOC, OMB
R
Legislation to protect retail gasoline
FEA
C
dealers
5/4/76
EC,EPB/EC
Nuclear Waste Management Statement
ERC
C
Federal Energy Organization request
DOC, OMB
TF
to start
OCS Leasing (H.R. 6218)
DOI
DM
4/26/76
EC,EPB/EC
Clean Air Act amendments
EPB
C
4/19/76
EC,EPB/EC
Clean Air Act amendments
ERC
C
4/13/76
EC,EPB/EC
Conservation Contingency Plans
FEA
C
International Energy Negotiations--
Status Report
State
B/C
OCS Lands Act amendments (H.R. 6218)
DOI, DOC
C
GER
Strategic Storage briefing
FEA
B
Group
Date
Meeting
Issue
Lead Agency
Action
4/7/76
EC,EPB/EC
Clean Air Act amendments
EPB
TF
Vertical divestiture bill
ERC
O
Natural gas legislative alterna-
FEA
C
tives
3/16/76
EC,EPB/EC
Surface Mining Legislation (H.R. 9725)
DOI
L
Divestiture Legislation
FEA
TF
West-East oil transport
FEA
TF
FEMP whether to raise again to
FEA, OMB, GSA
DM
President
Misc. legislative update
ERC
B
3/2/76
EC,EPB/EC
Surface Mining Legislation
DOI
C
Impact Aid Legislation
DOC
C/L
2/23/76
EC,ERC/GOVS
Impact Air Legislative Proposal
DOI
O
State Energy Conservation Programs
FEA
B
Synthetic Fuels (and other issues)
ERDA
O
2/10/76
EC,EPB/EC
Alaskan OCS
DOI
L
Clean Air Act amendments
FEA
L
Project Independence Update
FEA
B
1/21/76
ERC
Status of Energy Program
FEA
B/C
Agency responsibilities under EPCA
FEA
C
1/13/76
EC,EPB/EC
Agency EPCA responsibilities
FEA
C
Alaskan Gas
FEA
DM
LNGS Import POlicy
FEA
DM
Review of Administration Energy
FEA
B
Policy Positions
1/5/76
EC,EPB/EC
Alaskan Gas Transport
FEA
C
LNG Import Policy
FEA
C
Group
Date
Meeting
Issue
Lead Agency
Action
12/12/75
EC, ERC
EPCA status
FEA
B
IEA Long-term Cooperative Program
State
B
12/4/75
EC, ERC
Alaskan Gas
DOI
B/O
Synthetic Fuels/Governors
ERDA, FEA
O
11/14/75
EC, ERC
Current Status of Congressional
FEA
B
Omnibus Energy Bill
11/14/75
ERC
EIA
ERC
B
11/3/75
EC, ERC
Coal Mining and Leasing
DOI
B
Uranium Enrichment (Administration
ERDA
B
legislative proposal)
10/23/75
ER,ERC/GOVS
Synthetic Fuels Commericialization
ERC
C/O
Program
10/9/75
EC, ERC
Outer Continental Shelf Leasing
FEA, OMB, DOI
DM
LNG Import Policy
C
9/29/75
EC, ERC
OCS Legislation
FEA, OMB, DOI
C
Legislative Update
FEA
B
9/10/75
EC, ERC
FEMP Multi-year Action Plan
FEA
C
8/26/75
EC, ERC
OCS Development
(no summary of meeting
Decontrol Strategy
was prepared)
7/22/75
EC, ERC
Indexation
Treasury
O
Synthetic Fuels Commercialization
ERC
C
Sharing U.S. energy resources with
State
B
other countries
Group
Date
Meeting
Issue
Lead Agency
Action
7/16/75
EC, ERC
President's Decontrol Action
FEA
B
Canadian Natural Gas Situation
FEA, State
7/9/75
EC,ERC
IEA Negotiations
State
B
Legislative Update
FEA
B
6/26/75
EC, ERC
Chapter V, IEA Negotiations
FEA, State
-
Strip Mining Follow-up
FEA, DOI
IM
Natural Gas Deregulation
FEA
House Commerce Committee Energy Bill
FEA
O
Uranium Enrichment
Domestic
O
Council
ERDA Report to Congress, Vol. I
ERDA
C
Gasoline Shortages
FEA
B
Consumer Advisory Committees
ERC
C
6/20/75
EC,ERC
IEA Negotiations Objectives
FEA, State
DM
ERDA R&D Plan
ERDA, OMB
C
Legislative Status
ERC
B
5/21/75
ERC
Natural Gas Policy and Contingency
FEA
O
Task Force Participation
5/8/75
EC,ERC
Auto emissions/fuel economy
OMB
C
Electric Utility financing
FEA
DM
Energy Legislation Status
FEA
B
4/17/75
EC,ERC
Deepwater Port Licensing Policy
DOT
O
Electric Utilities Policy
FEA
O
International Agreements
State
C
GERALD
Auto Emission Standards
FEA, DOT, EPA
C/O
A
Auto Fuel Efficiency Tax
Treasury, FEA
C/DM
cuos
Rebates to Fishing Industry
FEA
C
Rebates to Nonprofit Institutions
OMB
0
Utilities Policy Development
FEA
C
Airlines Situation
Domestic Council
C
Congressional Tax Package
FEA
C/IM
ERC ISSUES, BY LEAD AGENCY
1975
1976
Total
FEA
29 (54%)
30 (37%)
59
ERC
6 (11%)
12 (15%)
18
DOI
4 (7%)
13 (16%)
17
OMB
3
6
9
ERDA
4
4
8
DOC
0
5
5
STATE
3
1
4
TREASURY
3
1
4
DOT
1
2
3
EPA
0
3
3
DOC
0
2
2
NRC
1
1
2
FPC
0
1
1
54
81
135
Totals differ from other computations and text because some
issues involve more than one Agency and some issues, where
lead Agency was not clear, have been omitted.
TOAL
&
GERALD
ERC ISSUES, 1976 (January to mid-July)
PROGRAM IMPLEMENTATION ISSUES
1. Alaska pipeline welds
2. EPCA implementation issues
3. Natural gas curtailments
4. Nuclear waste management
POLICY/LEGISLATIVE ISSUES
1. Clear Air Act amendments
2. FEA Act Extension
3. Post-1980 auto efficiency standards
4. LNG import policy
5. Alaskan gas transport
6. OCS/coastal zone management bills
7. Mineral Leasing Act amendments
8. Synthetic fuels commercialization
9. Administration position on minimum wage legislation
10. Kennedy Conservation Bill
11. Randolph Coal Bill
12. Senate Natural Gas Bill
13. Legislation to protect retail gasoline dealers
14. Private sector role in energy technology development
15. Vertical divestiture bill
16. Surface minining legislation
17. International energy policy issues
18. West-East oil transport
ERC ISSUES, 1975
PROGRAM IMPLEMENTATION ISSUES
1. FEMP Multi-Year Action Plan
2. Petroleum and natural gas shortage issues
3. Strip mining regulations
4. Coal mining and leasing
5. Gasoline shortages
6. Consumer Advisory Committees
7. Conservation public education
8. DOT fuel economy improvement program
9. NRC order to inspect 23 nuclear powerplants
POLICY/LEGISLATIVE ISSUES
1. EPCA/Omnibus energy bills
2. International energy policy issues
3. Alaskan gas
4. Synthetic fuels legislation
5. EIA legislation
6. Uranium enrichment legislation
7. OCS legislation
8. Oil decontrol strategy
9. Indeflation
10. Natural gas deregulation
11. Auto emission/fuel economy policies
12. Electric utility financing
13. Energy rebates policy
14. Congressional tax package
15. Socioeconomic impacts
16. LNG policy
17. Oil import floor price
FORD LIBRAL & EENALD
ORGANIZATION OF
ENERGY REGULATORY
FUNCTIONS
Prepared as part of the
larger study of organization
for Federal energy functions
October 1976
GETALD d. FORD LIB NERRA.
TABLE OF CONTENTS
I. Scope and Purpose
1
II. Issues in the Organization of Energy Regulation
2
III. Regulation in Relation to Other Energy Functions
6
IV. Federal Power Commission
11
V. Regulation by the Federal Energy Administration
17
VI. Other Energy Regulatory Programs
21
VII. Organizational Guidelines and Conclusions
23
A. Co-location of Regulation and Promotion
23
B. Consolidation of Energy Regulation
25
C. Placement of Energy Regulation
26
D. Relation to Other Energy Activities
27
E. Federal Power Commission
27
-i-
EXECUTIVE SUMMARY
Analysis of the Organization of Energy Regulatory Functions
Introduction
This report, within the context of the larger study of energy
organization, deals with the energy regulatory functions of
the Federal government and how they can be most effectively
organized. It was prepared in recognition that energy regulatory
organization is a complex matter in its own right as well as
being a critical factor in total energy organization decisions.
As a subsidiary part of the overall energy organization study,
this report does not develop final recommendations on
organization of regulatory functions. It does, however, analyze
and reach numerous conclusions about regulatory organization to
be fitted into total energy organiztion recommendations
General Findings and Conclusions
An overriding issue was identified that permeates energy
regulatory functions regardless of what agency currently performs
it or the private sector activity to which it relates. That is,
how to resolve the dilemma of achieving adequate coordination
or responsiveness of regulatory decisions with national energy
goals, without improperly compromising the impartiality of
regulatory decisions. A corollary question is to examine the
validity and applicability of the prevalent injunction that
"regulatory responsibility shall not be combined with promotional
responsibilities" because they inherently conflict. In
organizational terms this overriding issue can be expressed as
one of finding the proper balance between independence and
accountability of energy regulation in relation to political
leadership.
The study concludes that it is both possible and proper to
distinguish those aspects of energy regulatory programs which
inherently need to be sensitive to and reconciled with broad
national policy and goals, from those aspects which require
apolitical impartiality. Specifically, the rulemaking aspect
is closely related to policy and, within the tolerance of
legislative mandates, should be subject to coordination by
political leadership (as well as developed with full observance
of openness requirements of due notice, public hearings, etc.)
In contrast, the regulatory aspect of adjudicative decisions
concerns the determination of property rights or privileges in
specific cases, and should be decided in an impartial due
process context free of political influence or even the
possible appearance thereof. The functioning of this
distinction of what to coordinate and what to isolate works
-ii-
best when in actual practice reasonably comprehensive and
detailed rulemaking is relied upon and case adjudications,
therefore, need not become de facto policymaking in the
absence of sufficient established policy in the form of
publically debated and openly arrived at rules.
While rulemaking and adjudication can and should be distinguished,
they are dynamically related within a single regulatory program
and not readily susceptible to splitting apart into totally
separate agencies. (viz.-one independent and the other
accountable). The report concludes that any regulatory program
which directly impacts major national energy goals, such as
those of FPC and FEA, should be politically accountable but
should also provide internal arrangements to assure independence
of adjudicative actions. The converse does not work. That is,
to assign such a regulatory program to an independent
commission, and expect that its rulemaking can be held
accountable.
The report finds that there is valid reason, at this time, to
treat NRC as an exception. That is, while it is an energy
regulatory program significantly impacting national energy goals,
it should not be incorporated into an executive accountable
framework, at this time, because such an action could exacerbate,
justly or not, the public concern for nuclear safety, and its
willingness to accept nuclear power as a major energy alternative.
While speaking of NRC, it may be timely here to return to the
collateral injunction about joining regulation and promotion
under the same administrative hierarchy. The leading example
of such a conflict was the old AEC. The conflict in that
situation was the chief rationale for separating NRC from
ERDA. However, this study finds that AEC was a peculiarly,
perhaps uniquely, severe instance of conflict in which a single
agency had both roles with respect to a single industry and
without balancing responsibility for other matters. Where a
wider range of responsibilities is present in terms of competing
industries and functions other than regulation, this injunction
is far less compelling. In fact, when regulation (rulemaking
FORD
aspect) is viewed as a tool for implementing broad policy
goals, the value of its cross-coordination is evident.
On another plane, this review surveyed all Federal regulatory
programs which strongly affect the production and marketing of
energy, to determine which of them should be considered for
organizational consolidation. It was found, partly by reference
to an earlier study of energy regulation in 1973, that there
are a large number of regulatory programs which affect the
energy industry. They range in organizational format from
independent commissions (FPC, NRC), to discrete units within
-iii-
executive agencies (MESA, Pipeline Safety) to incidental
concerns of programs whose mission is not directly energy-
related per se, (EPA, OSHA, BLM/Interior, ICC). In general,
it was concluded that regulatory programs which are alligned
directly with a sector of the energy industry as their
purpose-for-being should be considered for consolidation in
order to permit a less parochial treatment; among other
reasons (FPC-gas and electric, FEA-petroleum and NRC-nuclear).
Conversely, regulatory programs which are aimed at such non-
energy purposes as environment, health and safety and are
concerned with energy together with other industries should not
be seriously considered for consolidation.
Federal Power Commission (FPC)
Finally, major attention was given in this study to the question
of whether or not the functions of FPC should be incorporated
in any prospective consolidated energy agency. Treatment of
this issue obviously drew heavily on the analyses reported
above. In addition, it is recognized that the issue of
continuing or abolishing FPC transcends the field of energy
regulation as such, and enters into the historical debate in
the American governmental system concerning the role and status
of independent regulatory commissions. Any proposal to abolish
FPC would inevitably be viewed in this historical and
institutional perspective over and above the narrower particulars
of the Federal role in energy.
It is implicit that the prospect of reassigning FPC's functions
(or their residue following deregulation) assumes as a pre-
requisite the establishment of some form of consolidated
energy agency or Department to which they would be assigned.
The report discusses the FPC organizational issue in terms of
four propositions as follows:
Can FPC be abolished without serious harm? No compelling
reason was found, legally or operationally, to preclude
its disestablishment. The commission form lends some
stability and predictability to the regulated areas, but
to the extent these are virtues, they can be achieved
without reliance on the commission form, while at the
same time, getting away from the well documented
difficulties associated with it.
Are there positive gains to be achieved by reassigning
FPC's functions to an energy agency? It would be
difficult to draw up an indictment showing tangible harm
to the public interest resulting from FPC's independent
status. Too many variables would enter into such a
calculation as well as ambiguity in defining the public
interest. However, a case can be made as to how actions
-iv-
and decisions of FPC interact with other Federal energy
activities and impact on national goals. Under the
present isolated and non-accountable arrangement it
is difficult to effect coordination or trade-off
assessments where they are legitimately needed.
There are also some administrative advantages to
incorporating FPC such as the facilitation of a more
integrated, non-duplicative Federal energy data system.
Are there real alternatives to organizational change in
achieving needed improvements? There are possibilities
for process improvements within the present arrangement
of an independent FPC. Some improvement can be done by
administrative action, and others would require
legislation. An example is the expediting of actions
in process by setting time limits for comments by
Executive agencies, or, through legislation, from State
and private bodies. However, all these system
improvements have only limited potential if, indeed,
they can be achieved at all under the present structure.
They should be viewed as supplements to organizational
change and not as an alternative.
If FPC's functions are to be incorporated, how would it
be arranged to avoid loss of impartiality where this
is important? A separate Administration under a
Presidentially appointed, Senate confirmed, Administrator
to administer energy regulation and coordinate with
related functions and goals. This Administrator
would promulgate rules which would be developed to a
reasonably comprehensive and detailed state. Case
adjudications, however, would be decided initially by
Administrative Law Judges who are independent by law.
Appeals for administrative relief could be heard by an
Appeals panel which similarly is insulated.
The foregoing summarizes the main findings and conclusions of
this study. Considerably more detailed information and
rationale is contained in the full report which follows.
Analysis of the
Organization of Energy-Regulatory Functions
I.
SCOPE & PURPOSE OF STUDY
This study and staff paper is a sub-part of the general
study of the organization of Federal energy and energy-
related functions. More specifically, it examines the
placement and organizational relationships of energy
regulatory functions within the framework of current and
major alternative organization for energy and related
functions.
It was recognized, based in part on earlier analyses,
that many Federal programs exercise a regulatory impact
on energy actions and decisions by the private sector.
For purposes of this study an inventory of all energy
regulatory programs was compiled and is shown at TAB A.
For convenience, this inventory has been divided into
the following three categories:
energy regulation performed by independent
regulatory commissions;
energy regulation performed as a major mission of
an executive agency;
energy regulation performed as an incident to a
mission other than energy.
Section II of this paper identifies and briefly describes
the principal issues identified and examined in this study
of organization for energy regulation.
Section III relates energy regulation to the other chief
energy functions and describes their mutual interactions
in order to identify any pertinent organizational guide-
lines for energy regulatory functions vis a vis the other
functions. The other functions discussed in relation to
regulation are policy formulation, data collection and
analysis, energy resource development, and research and
development.
Sections IV and V take up the regulatory functions of FPC
and FEA respectively. The issue of whether or not FPC
should be incorporated in any proposed energy agency is a
particularly complex and controversial subject. For this
-2-
reason, an in-depth separate study of FPC was done and
its findings and conclusions are incorporated in summary
form in this general paper on energy regulatory organization.
Section VI surveys the numerous Federal programs which
impact private sector energy actions as an incident to a
mission which is not primarily energy-oriented. The pur-
pose of doing so is to determine whether these programs
might be affected by change in energy organization.
Finally, Section VII draws from the preceeding sections
and recaps any organizational guidelines which may be
applicable to the energy regulatory functions. This
section is, in general, a response to the issues raised in
Section II.
II. ISSUES IN THE ORGANIZATION OF ENERGY REGULATION
The overriding issue in the analysis of energy regulatory
organization is the problem of rationalizing the impact of
energy regulatory decisions with national energy goals, while,
at the same time, avoiding compromise to the real and
apparent impartiality and objectivity of regulatory decisions
where this is a valid requirement. In other terms, this
issue can be expressed as a search for the proper degree
of regulatory independence on the one hand versus regula-
tory responsiveness to external coordination on the other
hand.
Total independence and consequent lack of accountability
of regulators who are making significant decisions regard-
ing our energy future is not good government. Conversely,
complete subservience of regulatory decisionmaking to
elective or appointed officials -- legislative or executive --
is also unsound at least in terms of public credibility.
The art form is to find that balance or combination in
the structural arrangements for energy regulation which will
provide accountability and rationalization with general
energy goals where that is important and also assure apolitical
impartiality where that is important.
Numerous subsidiary issues and findings go into the analysis
of the overriding issue described above. Some of these
component issues which are addressed in the remainder of
this paper are:
FORD
CERALOR
-3-
1. Fragmented placement of energy regulation in
very different types of organizational settings
including: sole purpose of an independent commis-
sion, (FPC and NRC) limited part of an independent
commission (ICC, SEC), major purpose of an executive
agency (EPA, FEA), separate unit within an executive
agency (Pipeline Safety in DOT, MESA in Interior) and
incident to a major mission other than energy (BLM in
Interior). Is there a rational basis for this variety
of organizational placements? Is there validity in
bringing some or even all energy regulatory programs
together.
2. Is regulation inherently and invariably incompati-
ble with promotion, prompting a need for organizational
separation? If so, what degree of separation is called
for? Conversely, is this injunction to "separate" regu-
lation and promotion a situational thing that has validity
or not depending on circumstances? This issue immediately
invokes the old AEC situation in which a single Federal
agency was charged with fostering and, at the same time,
regulating a single industry. Both the President and
Congress recognized that this was unsound, and it has
been changed with the creation of ERDA and NRC. In the
process the regulate/promote conflict of interest within
one agency received very prominent attention and has
achieved status as a virtual principle of governmental
organization. The findings, however, tend to reveal this
"principle" as an over-simplification which has validity
only when applied selectively.
3. It is striking to note the unevenness with which
sectors of the energy industry are subject to regulation.
Gas, hydro-electric generation, interstate electric trans-
mission are all subject to rate regulation and to licensing
and permitting of facilities (and, therefore, to health,
environment and land-use prior approvals). Nuclear power
is subject to Federal permitting of sites and other
restraints with major concern given to health, safety and
environmental factors, but is not subject to rate regula-
tion. Petroleum is subject to price control and some
control of the internal structure of the industry but is
not subject to Federal prior approval of facility siting,
except as it may affect public lands. Coal is subject to
neither price control nor facility siting approvals,
again except as it involves public lands.
-4-
These varying levels or degrees of regulation among
competing energy industries is governed in the first
instance, of course, by statutes. However, it does
not appear to be rational. Whether or not this dis-
parity is a problem, in fact, and the relationship to
deregulation is touched on later although this tends to
go beyond the scope of this study. Of more direct interest
is whether or not this "unevenness" of regulation among the
energy sectors which is charged to a range of separated
agencies has a clear organizational implication..
4. Regulatory programs, like any other Federal program,
should meet the highest possible standard of efficiency
and effectiveness. While the system has factors built
in which complicate this objective, e.g., openness, due
process, impact statements, etc., these factors are part
of the process for good reasons and must be accommodated.
Efficient and timely regulatory actions are important
beyond the internal bureaucracy because they affect the
willingness and ability of the private sector to play its
role in the national energy system. For example, excess-
ively long processing time for completing action on an
application adds to the cost of industry performance and
increases the risk of capital investment.
This paper cannot thoroughly address the problem of
regulatory efficiency, but that subject is viewed gener-
ally to ascertain what, if any, organizational implica-
tions it may contain. There is some question, for example,
whether management process improvements as an alternative
to organizational change can rectify problems in energy
regulation. Conversely, it may be that present organiza-
tional arrangements make real process improvements very un-
likely to occur.
5. Both the efficiency aspect and the lack of jurisdiction
of any one regulator in the present arrangement to look
across competing energy sectors give rise to the concept
of a single energy regulatory body. Such a body has been
thought of by various observers as either, in theexecutive
mode or, organized as an independent regulatory commission.
This super energy regulator concept was analyzed quite
thoroughly in 1973 and found to be neither feasible,
desirable nor politically saleable. However, in the light
of the current analysis of overall energy organization,
this concept is again explored.
6. Should the FPC be continued as an independent commission
or should its functions be reassigned to an executive
agency responsible for Federal energy programs in order to
assure greater consistency of gas and electric regulation
with other Federal energy objectives. The same question
-5-
applies also to the NRC. This issue unavoidably invokes
historical and theoretical questions of general government
organization and legislative/executive relationships that
go beyond the specifics of FPC, NRC and their functions.
However, while general historical and theoretical issues
become involved, the answer with respect to FPC and NRC
must ultimately be resolved in terms of those respective
programs and the energy situation to which they relate.
Lessons learned in reviewing the alternatives of continuing
or discontinuing FPC and NRC cannot be directly transposed
to other regulatory program areas such as communications
or transportation.
In resolving the FPC and NRC issue, there are a number
of sub-issues to examine:
Are there any tangible needs in the regula-
tion of natural gas, electricity, or nuclear
power which intrinsically require the commis-
sion form with its multi-member, fixed-term,
bi-partisan form?
Do FPC or NRC actions impact on the attainment
of the nation's energy goals and, if so, is this
impact adequately weighed?
What actions or decisions do FPC and NRC take
which, by their nature, require independent
judgment which is uninfluenced by political
factors and is seen as such by the public?
Are there any clear instances in which serious
damage to the public interest has occurred
because decisions of the FPC or NRC were either
contrary to openly and responsibly arrived at
nation policy or goals - or were inappropriately
influenced by partisan politics, or special interests.
Are there any activities performed by FPC or
NRC which are essentially executive functions
and which relate closely to or duplicate comp-
arable activities in executive agencies?
Possible examples: the FPC data collection work
and the NRC radiation standards work.
-6-
If the FPC functions were reassigned to an
executive agency it would tend to increase
coordination between regulatory actions and
national energy policy. What steps could be
taken to offset the possible disadvantage of
such a transfer and particularly the prospect
of politicizing regulatory decisions improperly?
These steps would relate, among other things, to
organizational placement, authority delegation
patterns, appointmen t and removal of regulatory
decision-makers, and the separation of rulemaking
and adjudication.
III. REGULATION IN RELATION TO OTHER ENERGY FUNCTIONS
Regulation of the energy industry affects, and is
affected by, other governmental approaches to energy
matters such as energy policy formulation, data collect-
ion and analysis, energy resource development, research
and technology development, and energy conservation. In
some cases, these mutual effects of regulation and other
functional approaches to the Federal energy role are
supplementary and may go toward the same objectives. In
other cases, the effect of regulation may be in conflict
with other governmental efforts. Either way, whether regu-
latory actions are compatible or incompatible with other
Federal energy policies and actions, these mutual effects
tend to be somewhat obscure or not self-evident. For this
reason and because they are often not subject to common
direction or guidance, these important interactions are
not fully recognized and addressed. This is particularly
true when the regulatory power is vested in an independent
commission.
Many observers would state that this isolation of regula-
tion from interacting programs is normal and proper - i.e.,
that the regulatory power should be exercised independent
of any coordinative hierarchy and that only in this way can
regulators be free to evaluate equities and impartially
decide issues in a due process atmosphere.
Without commenting for the moment on this issue of the
need and desirability of regulatory independence, the pur-
poses of this section of the report are to reveal in summary
form the ways in which energy regulation can and does
mutually interact with other energy functions, and to
identify any organizational consequences which follow from
these interactions.
-7-
Regulation in relation to policy formulation and
coordination
The power to regulate is, de facto, the power to make,
or at least strongly influence policy. This applies
both to regulatory rulemaking and to the aggregate effect
of regulatory adjudications which are made in an area
ungoverned or little governed by general rules. Examples
in the energy field include the power of the NRC to
influence the rate of introduction of nuclear power gener-
ation based on the standards they set or their handling
of specific plant siting applications. Again, the FPC
influences the rate of exploration and development of
natural gas by the energy industry through the rulings
they make on gas prices under their jurisdiction.
Thus the power to make policy through regulation coupled
with the idea of regulatory independence constitutes an
organizational dilemma. From the point of view of
Presidential leadership and accountability, there is a
strong motivation to reduce the independence barrier so
that regulatory impacts on overall trends in the production
and distribution of energy are compatible with national
policy goals and non-regulatory program actions of the
incumbent Administration.
At the same time, there is a well-recognized need to assure
and to visibly demonstrate that regulatory actions,
especially case adjudications, are not unduly influenced
by the political process even in the general sense and
certainly in the partisan sense. It is largely for this
reason that regulatory powers, as in the case of NRC and
FPC, have often been assigned to independent bi-partisan
commissions.
There may well be some organizational arrangement that can
better serve the need to integrate regulatory effects which
are de facto policy with politically responsible policy-
making (Congressional and executive) without impairing the
impartiality needed in specific regulatory actions which
center on determination of equities and assurance of due
process.
This dilemma - i.e., reconciling the need for regulatory
independence with the need for consistent governmental
policy is examined further elsewhere in this paper as a
major issue.
-8-
Regulation in relation to data collection and analysis
Regulators need data on two levels. First, they need
broad data and analyses to understand as well as possible
the industry segment they relate to, and its place in the
total economy both currently and as projected. FPC regu-
lators in the natural gas field and FEA regulators in the
petroleum field, for example, must understand the dynamics
of their respective industries, how each can contribute
now and in the future to our total energy needs, and how
alternative actions on their part are likely to effect
the picture. This involves a need for both basic data and
analyses.
Secondly, on a different level, regulators often need
more company-specific data as one of their principal tools
of enforcement. Regulatory programs, such as the FEA
petroleum programs, which are enforcement-oriented and are
deeply involved in the internal functioning of the petroleum
industry have a major need for data at the level of trans-
actions occurring within specific companies.
Organizationally, the broad analytical data needed by
regulators including information on the nation's energy
system and the general economy clearly should be shared,
with major parts of it provided through an integrated, if
not consolidated, data system outside of the regulatory
structure. This avoids duplication, excessive reporting
burden and promotes consistency and comparability of data.
The more specific enforcement related data, where needed,
is an area in which regulatory managers, as in FEA, express
a need to have close contact with the data collection process
and to participate in its planning so that their needs will
be understood and served. However, it would appear logical
that the data collection planning and operation should not
be directly under control of the regulators since their
assessment of need could easily become excessive. It would
appear that placement of data collection and regulation in
the same agency, but under separate direction would serve
both needs, i.e., close access to assure responsiveness of
the data system but separation to avoid having the regulators
(or other users) dominate data collection decisions.
-9-
Regulation in relation to research, development and
demonstration
The Federal role in energy RD&D is essentially catalytic.
That is, the Federal effort is aimed at perceiving the
need for new or improved energy technology and assuring
that it is developed and introduced into the market-place
by private initiative. The role is to do what must be done
and will not occur through natural forces, but to leave
off as early as possible in favor of the private sector
with technical assistance and financial incentives as
needed to help effect the hand-off.
The regulatory process can be quite influential in this
RD&D stimulation by affecting the point at which private
sector initiative "takes over.' This is true most partic-
ularly in regard to price setting which can have a depress-
ing affect on the introduction of new technology. Excess-
ively tight limits on price, for example, can reduce the
incentive for private risk taking in the form of investing
in unproven technology. Another way of looking at regula-
tory powers in relation to technology development and
commercialization is to see the price mechanism as an alter-
native to either tax policy or direct financial assistance.
These theoretical alternatives cannot be realistically
evaluated against each other unless there is some coordina-
tive authority which spans all of them.
Another relationship between regulation and R&D became
clear in the course of this analysis. That is, R&D managers
in the government energy programs attribute great importance
to the fostering of cooperative relations with their private
sector counterparts. This is consistent with the idea of
pooling information and diffusion of emerging technology
subject to the usual rules of competition. The R&D managers
fear that any organizational merging of regulatory responsi-
bilities with technology development responsibilities will
cause their private counterparts to withdraw from the mutual
cooperation mode. They do not want to participate in the
development of something which will be used against them.
This injunction probably has most meaning in relation to
regulatory programs which are aimed at protecting health,
safety and the environment rather than at economic regulation.
The historical association of nuclear development and
nuclear regulation in the old AEC is an example and the
one that occurs most frequently and strongly to the R&D
managers.
-10-
Regulation in relation to energy resource development
This is an important relationship in which opposing
interests are likely to occur, and the effects of these
programs can be mutually contrary. The goal of energy
resource development is clear -- increasing the domestic
supply of energy. Regulatory power applied to the energy
industry is usually aimed at other purposes such as
restraining prices, controlling entry, protecting health,
safety or the environment. These other purposes quite
consistently have the effect of holding down increases
in energy supply. (Coal conversion by regulatory order
is an exception - it shifts demand from petroleum to coal
and thus has the effect of increasing domestic supply.)
It is not the purpose of this paper to choose between the
conflicting goals of energy supply development and those
of FPC, NRC, EPA, MESA or others. Each of these regulatory
programs have statutory mandates to be observed. The point
is to show how pursuit of narrow mandates, especially if
done in the relative isolation of independent status, can
make it difficult to balance regulatory decisions aimed in
that particular direction with all of its collateral
effect on other goals, including energy supply development.
The fact of basic conflict between energy supply develop-
ment and the several purposes of energy regulatory programs
lead some observers to conclude that these responsibilities
should not be assigned to the same agency for fear the
regulatory purposes will be given short shrift (or perhaps
the drive to increased energy supply will be muted)
Certainly both cannot be merged into a single program.
There is, however, a credible possibility of assigning
both to the same agency but separated therein for individual
attention to each. This would require that the balancing
be performed at some higher level, most likely the agency
head. Each would be modified by the other and regulatory
actions would be more sensitive to energy supply consider-
ations without being dominated by them.
Whether or not the regulatory functions are in the same
agency as supply development, several actions can be taken
to narrow the gap.
The ERD staff can appear as intervenors in
selected proceedings of the FPC, NRC, ICC and
State regulators to introduce views on how the
pending action affects energy supply for the
-11-
nation, region, or a particular market area --
and how the decision relates to other specific
Federal actions.
Submit comment on proposed regulatory rule-
makings from the point of view of supply
development.
IV. FEDERAL POWER COMMISSION
This section of the report describes briefly the functions
and programs assigned to FPC and discusses the merits of
their alternative possible organizational placement in an
executive agency. Since this issue is of unusual importance
and complexity, a separate in-depth report on FPC has been
developed. This section draws upon that report substantially
and adds other considerations particularly bearing on the
organizational status of FPC and its functions.
1. Description of FPC programs
FPC's responsibilities under the Natural Gas Act give it
important influence over natural gas production, distri-
bution and pricing. Its responsibilities under the
Federal Power Act give it important influence over the
generation of hydro-electric power (non-Federal) and the
interstate distribution and pricing of wholesale electric
power. FPC's responsibilities in both natural gas and
electric power has distinct limits as described below,
but its position at the national level tends to give its
action influence beyond its formal charter.
For information purposes, the FPC programs are divided
into three areas and described below: (1) hydro-electric
licensing, (2) interstate wholesale electric rate setting,
and (3) natural gas regulation.
A. Hydro-electric Licensing
1. Program
The Federal Power Act requires the FPC to issue
preliminary permits to study and grant licenses
to construct, operate and maintain non-Federal
hydro-electric projects on waters or lands of the
United States or otherwise subject to the Com-
mission's jurisdiction. (Federal hydro-electric
projects are not licensed by FPC: - e.g., TVA,
Corps of Engineers, Bureau of Reclamation.)
FOR
GERALD
-12-
The Federal Power Act prescribes a maximum
license term of 50 years, at which time a new
license must be issued, possibly to a competing
applicant, or the project may be taken over by
a Federal agency other than the FPC, such as
Bureau of Reclamation or Corps of Engineers.
During the entire physical life of the project,
the FPC is required to continue to exercise
jurisdiction over proposed changes in project
facilities, project operations, project land
holdings, project land and water uses, public
access, transfers of licenses, surrenders of
licenses, collection of headwater benefits pay-
ments, and inspection of projects for safety
and adequacy.
The ultimate decision includes making a
final decision in areas where the Commission
has requested comments from other Federal,
State and local agencies, generally relative
to siting, emissions, and effluents, and
safety. Interior, EPA, and Agriculture are
major Federal coordinants.
The FPC decides if a proposed project is
the best adapted (use) for the portion of
the waterway proposed to be affected.
The FPC decides if the development should
be made by the Federal government, i.e.,
Bureau of Reclamation or Corps of Engineers.
The FPC must find that the applicant is able
to finance the project, that there is an exist-
ing market for the power, that the applicant's
(utility) system needs the type of generation
being proposed, and that the project is econ-
omically feasible (will recover its costs).
These findings require consideration of con-
tinued economic viability of the applicant;
limitation of costs to those necessary, there-
by giving the consumer the best available
service at the lowest possible price; the need
for the use of the resource; and the use of
the resource in the most efficient and effective
manner.
-13-
The FPC must decide whether the mechanical
and structural proposals are engineeringly
sound and safe.
The FPC must find provision for sufficient
public recreational use of project lands
and waters.
The FPC must find sufficient mitigation for
environmental damage done by construction,
maintenance and operation of the project,
thereby balancing environmental concerns and
the need for power.
The findings or determinations of the Com-
mission are a prerequisite to the location,
entry or selection of lands of the United
States which have been withdrawn for water
power purposes.
2. Status
The hydro-electric licensing program (Part I of
the Federal Power Act) is staffed by 200 people.
This number includes all support staff Commission-
wide such as technical experts, attorneys, clerks,
administrative programs staff, etc. The total
direct cost of the program in 1975 was $5,360,134.
The FY 1975 on hand applications covering all areas
of jurisdiction under this program were 520; 118
applications were received during the year and 143
completed, leaving 495 pending at year end including
a mix of problems including incomplete applications,
applications awaiting comments from other agencies,
applications assigned a low processing priority
due to staff limitations, and cases in which it
became necessary to order a hearing.
Reviews and comments by other agencies along with
applicant reluctance, legislative requirements
imposed by statutes other than the Commission's
enabling legislation (e.g., Endangered Species
Act, the various Rivers and Harbors Acts,
Environmental Policy Act), and, in some instances,
substantial resistance to the proposal by inter-
venors representing special interest groups,
combine to create extensive delays on may applica-
tions. This is partly because there is an absence
of legislation or regulations which place a time
limit on reviews by agencies other than the
licensing agency.
-14-
3. Federal and State Relationship
The Commission has extensive coordination
mechanisms with Federal, State and local
agencies. This coordination has come about
due to requirements of the statute FPC Regu-
lations under the Federal Power Act, or informal
coordination agreement at the staff level. It
has been the FPC experience that processing of
applications is often slowed due to delays by
commenting agencies.
It should be noted that even if not required
to obtain agency comments, the FPC is desirous
of receiving comments from the agencies as to
how the particular proposal may affect their
overall program. This information, representing
part of the public interest, is then balanced
against information from other agencies managing
other programs. FPC technical staff gives the
Commission its independent technical assessment
of the application and the views of the comment-
ing agencies and then the Commission makes its
decision based on full and complete information
as to how all the aspects of the proposal interact.
B. Interstate Wholesale Electric Rates and Corporation
Regulation
1. Program Description
The Federal Power Act requires the FPC to regulate
rates and services of public utilities selling electri-
city in interstate commerce at wholesale. The FPC
prescribes accounting systems and reporting procedures
for interstate power companies. The FPC impacts 15-20
percent of the interstate electric sales. (The other
80-85 percent includes retail and statutorily exempt
sales, which may be in whole or in part regulated by
a State agency, depending upon the State agency's
legislative mandate.)
The FPC impacts State ratemaking bodies through its
having been recognized as a leader in the area by
the National Association of Regulatory Utility
Commissioners, an association of national (FPC, FCC,
ICC, etc.) and State ratemaking bodies.
-15-
The FPC coordinates with the Department of
Justice and as applicable the Nuclear Regula-
tory Commission in matters of anti-trust.
The FPC regulates certain issuances and sales
of securities by electric public utilities and
the merger or consolidation of such utilities.
In this connection, it coordinates with the
Securities and Exchange Commission.
The FPC regulates the holding of interlocking
directorates between electric public utilities
and electric supply companies or companies
authorized to underwrite securities.
The FPC, in coordination with the Department of
State and Department of Defense, authorizes
exportation of electricity into a foreign country
and issues permits for maintaining facilities at
international borders for transmission of
electric energy between the United States and a
foreign country.
2. Status
The regulation of interstate wholesale electric
sales and corporate regulation program required
289 people in FY 1975. This number includes all
support staff Commission-wide such as field
auditors, technical experts, attorneys, and
supporting personnel. The total direct cost
of the program in 1975 was $8,194,444.
FY 1975 on-hand applications covering all areas
of jurisdiction under this program were 1,027;
3,580 applications were received during the year,
and 3,848 completed, leaving 759 pending at year
end. The cases pending at year end include a
mix of problems including incomplete applications,
applications assigned a low processing priority
due to staff limitations, cases in which it became
necessary to order a hearing, etc.
3. Federal and State Relationships
Under this program, the FPC coordinates with the
Department of Justice and NRC on questions of anti-
trust. Further, the FPC's expertise is heavily
relied on by the State ratemaking bodies both in
the individual cases and through its leadership in
the National Association of Regulatory Utility
Commissioners.
-16-
C. Natural Gas Regulation
1. Program Description
Contrary to the common perception, FPC is
responsible, under the Natural Gas Act, for
more than rate setting for natural gas. The
FPC is required to issue certificates of public
convenience and necessity for the construction
and operation of interstate pipelines and storage
facilities including Liquified Natural Gas and
Synthetic Natural Gas. The FPC passes on pro-
posals for allocation of limited supplies of
natural gas, for both curtailment of service and
special relief to a particular user or group of
users. The FPC's permission must be obtained
before service through a certificated pipeline
can be discontinued and the facilities can be
discontinued and the facilities abandoned.
The Natural Gas Act also requires the FPC to
regulate the price of gas bought and sold in
interstate commerce. The FPC, through certifi-
cate and price regulation, regulates sales of
natural gas from the producers to the interstate
pipeline companies to local distributors. The
FPC may direct interstate pipeline companies to
sell gas to local distributors.
The FPC authorizes the import and export of
natural gas and issues permits for maintaining
facilities at international borders for import
and export.
2. Status
(1). The certification activities of the
Commission under the Natural Gas Act required
330 people in FY 1975. This number includes all
staff such as field auditors, gas supply analysts,
attorneys, and supporting personnel. The total
cost of the program in 1975 was $8,851,924.
FY 1975 on-hand applications were 3,484. 2,453
were received during the year, and 1,217 completed,
leaving 4,720 pending at year end.
The cases pending at year end include a mix of
problems including incomplete applications,
applications assigned a low processing priority
due to staff limitations, and cases in which it
became necessary to order a hearing.
-17-
(2). The regulation of interstate wholesale
gas rates program required 265 people in FY 1975.
This number includes Commission-wise support
staff such as field auditors, attorneys, clerical,
etc. The total direct cost of the program in 1975
was $6,378,709.
FY 1975 on-hand applications in this area were
5,017, 14,722 applications were received during
the year, and 15,292 completed leaving 4,447
pending at year end. The cases pending at year
end include a mix of problems including incomplete
applications, applications assigned a low proces-
sing priority due to staff limitations, and cases
in which it became necessary to order a hearing.
3. Federal and State Relationships
The gas facility certification responsibilities
of the FPC, like the hydro-electric cases, require
coordination with other Federal agencies. Primary
agencies are Interior, Forest Service, and DOT.
Those contacts are generally related to siting,
emissions and effluents, and public safety. As
the agency with certification responsibility, the
FPC may accept or make more stringent the recom-
mendations of DOT/Pipeline Safety with regard to
a particular natural gas pipeline.
The rate regulation portion of the FPC's juris-
diction under the Natural Gas Act does not require
coordination with Federal or State agencies,
although State ratemaking bodies are notified of
a proposed rate increase affecting their State, and
the FPC is a leader in the National Association of
Regulatory Utility Commissioners.
V.
REGULATION BY FEDERAL ENERGY ADMINISTRATION
FEA was born out of the oil embargo -- energy crisis of 1973,
and largely involved the exercise of regulatory power on an
emergency basis, to cope with the sudden curtailment in the
supply of crude oil and petroleum products. In effect, FEA
started as a regulatory agency. While regulatory programs
are still important functions, they have been supplemented by
numerous other energy functions assigned by law and aimed
at longer-term objectives.
-18-
The FEA regulatory programs in the area of petroleum
were hastily implemented at the time of the shortage in
order to (a) assure equitable and priority distribution
of the limited available supply; (b) control inflation
and prevent excessive profit, and (c) assure the continued
competitiveness and economic viability of small and
independent refiners and suppliers.
FEA regulatory programs for petroleum price control and
allocation is sub-divided into the following programs:
1. Mandatory Petroleum Price Controls
Producers: The first-sale price of all domestic-
ally produced crude oil (except crude oil from
stripper wells) is computed in accordance with FEA
regulations. This sale price cannot exceed the
maximum allowable price per barrel of crude, that
was established in the authorizing legislation.
Refiners: FEA regulates the unit prices refiners
charge their customers for certain petroleum products
to assure it does not exceed the lawful May 15, 1973
unit price levels (except for certain allowable pass-
through cost increases, such as rent, insurance, etc.).
Resellers/Retailers: This program is essentially
the same as described above for refiners, except of
course at a different level in the petroleum distri-
bution chain.
Natural Gas Liquids (Propane, Butane, and Natural
Gasoline) : This program is designed to reduce the
disparity between the controlled prices of natural gas
liquids derived from petroleum. FEA authorized a price
increase for propane, butane, and natural gasoline
produced from natural gas thereby encouraging greater
production of these products from non-petroleum sources.
2. Mandatory Petroleum Allocation
Buy-Sell: Small and independent refiners, which
historically depended on the large oil companies for
crude oil feedstocks, are assured access to a supply
of crude oil through the requirement that each month
specified quantities of crude oil must be made avail-
able by the major oil companies for sale to non-majors.
-19-
Domestic Crude Oil Entitlements: As a direct result
of the embargo and subsequent price increases for
imported oil, certain refiners (usually majors) gained
a competitive advantage by having access to large
quantities of lower cost (price controlled) domestic
crude. Rather than the physical redistribution of
crude among refiners, the program requires payment of
money from those refiners with the domestic feedstock
advantage to the small, independent firms who are
heavily dependent on imported supplies.
Refined Products: This program is designed to assure
equitable distribution of decreasing supplies of
refined products between wholesale purchaser resellers.
wholesale purchaser consumer, and users. The pro rata
distribution share is based on the quantity of such
products historically purchased from suppliers.
Canadian Crude Oil: Domestic refiners heavily or
totally dependent on the decreasing quantities of crude
oil being exported to the United States by Canada are
allocated an amount of such crude oil determined by
evaluating the refiner's capability to replace the oil
and the extent of his dependence on this oil as a source
of supply. (Full phase-out of crude oil exports by
Canada is expected around 1981.)
None of FEA's enabling petroleum regulatory legislation
requires on-the-record formal rulemaking or adjudicatory
proceedings, as such proceedings would be at variance
with the emergency nature of FEA's regulatory programs.
Its regulations are promulgated after informal rulemakings
are administered.
A variety of orders can be issued under the petroleum
regulations, but most of the orders are in response to
applications for exception to the regulations. The
exceptions process is FEA's primary instrument for
administering the mandatory, self-enforcing petroleum
price and allocation regulations. However, none of FEA's
orders are issued through formal adjudicatory proceedings.
The petroleum programs, as noted, were instituted to
help the nation and the petroleum industry cope with
the oil shortage suddenly imposed in 1973. However we
no longer have this situation and the Administration has
attempted to end these controls ahead of the statutory
FORD
schedule by which they become non-mandatory in 1979.
ANLO
-20-
In spite of the transition from a condition of product
shortage to one of surplus, Congress has blocked most
amendments proposed by FEA to decontrol petroleum and
petroleum products.
In addition to the above emergency-oriented regulatory
programs dealing with petroleum pricing and
allocation, FEA now has some other regulatory programs
which are broader in purpose and longer-term.
These are:
Mandatory Oil Imports: This program was implemented
in 1959 by the Department of Interior to promote
domestic exploration and refinement of petroleum.
It requires that any person importing petroleum or
petroleum products purchase a license and pay fees of
21 cents per barrel for crude oil and 63 cents per
barrel for finished or unfinished petroleum products
to the U.S. Treasury.
Strategic Petroleum Reserve: The purpsoe of this
program, which is not truly a regulatory program at
this stage, is to minimize the economic impact of
curtailed oil imports, and also to deter the use of
such curtailments as political weapons in the future.
An initial reserve of 150 million barrels by December
1978 is scheduled, with longer range plans for stock-
piling up to 1 billion barrels. Although the program
presently is not regulatory, it would become regula-
tory under an embargo or other shortage situation which
would require emergency distribution of the reserve.
Coal Utilization (Coal Conversion): This program has
long term implications, associated with both energy
resource development and energy resource conservation
matters. The program will conserve natural gas and
petroleum products by prohibiting certain existing
and proposed powerplants/major fuel burning installa-
tions from using such products as their primary energy
source. Instead, these powerplants and facilities
will be modified (existing) or designed (proposed) to
utilize coal. The resulting increase in the demand for
domestic coal supplies will help accelerate development
of domestic coal reserves.
Finally, FEA employs regulatory power to a degree in some of
its energy conservation. These programs are discussed in the
issue paper dealing with Federal conservation of energy
programs.
-21-
Organizational Placement of FEA Regulatory Programs
FEA's regulatory programs can be seen as means to achieve
energy goals much more so than activities aimed at assuring
equity, due process, and non-partisan objectivity in the
awarding of rights and privileges or imposing of conditions
on the exercise of those rights. They are tools for the
achievement of policy objectives, and attempts to move the
industry in certain directions (or prevent movement in
undesired directions) more so than efforts to restrain the
industry from producing side effects such as unacceptable
pollution or health and safety hazards. These perceptions
of the FEA regulatory programs argue for their placement in
a way that enhances their responsiveness to overall energy
goals.
The informal, non-adjudicatory approach of FEA regulatory
programs, as well as their placement in an executive agency
concerned with overall energy policy, allows for them to
be more readily adjusted (within the omits allowed by law)
to meet ever changing energy supply and demand shifts.
Whether these fluctuations are the result of changes in
technology, the general economy, international affairs, new
statutes or other causes, the regulatory aspect of Federal
energy programs must have the flexibility to adjust accord-
ingly, and to do so in harmony with overall policy assess-
ments.
VI. OTHER ENERGY REGULATORY PROGRAMS
Many other Federal programs and agencies exercise a regula-
tory impact on the energy industry besides FPC and FEA which
was dealt with in the preceding chapters. Some of these have
an explicit and obvious energy relationship such as the NRC.
Others are less evident, but may have a considerable influence
on energy matters. Examples of less evident regulatory
impacts on energy are those exercised by EPA in pursuing its
responsibilities for clean air, or Bureau of Land Management/
Interior as an incident to administering the public lands.
Nuclear Regulatory Commission
The NRC was established by the Energy Reorganization Act
of 1974. It is responsible for all the regulatory and
licensing functions of the former Atomic Energy Commission
which was abolished by the 1974 legislation, and is the
Federal agency responsible for the regulation of nuclear
power generation.
-22-
Major NRC Program Functions are as Follows:
Nuclear Reactor Regulation. Assures adequate safety,
environmental protection, and safeguards in the issuance
of reactor licenses.
Standards Development. Produces engineering standards
for siting, fuel cycle facilities, safeguards, trans-
portation and product safety standard development.
Inspection and Enforcement. Conducts nuclear powerplant
safety inspections including the issuance of construct-
ion permits and operating licenses. Also conducts
safety inspections of fuel cycle facilities and nuclear
materials.
Nuclear Material Safety & Safeguards. Performs a safe-
guard licensing program devoted to waste management and
the development of generic environmental impact statements
for consumer products which contain nuclear material.
Nuclear Regulatory Research.. Conducts research on
reactor technology and in nuclear related health,
environment, fuel cycle and safeguard areas.
There are some significant reasons to consider incorporating
the NRC functions in an executive branch energy agency if
such an entity is formed. Doing so would broaden the basis
for nuclear regulatory decisions by permitting them to be
weighed competitively with fossil fuel, hydro-electric or
other energy forms. In addition, nuclear export decisions
with their strong international implications would be
appropriately subject to Presidential control.
On the other hand, there are very compelling reasons for
leaving NRC in its present status as an independent commission
at this time, regardless of any consolidation of energy
functions that may take place. Public concern over nuclear
safety is so great that tampering with the independence of
nuclear regulatory decisions would seriously undermine
public acceptance of nuclear power at this time. Transfer
to an executive agency advocating energy development would
be perceived by many as a deliberate attempt to weaken govern-
mental concern for nuclear health and safety in favor of
energy development, thus potentially eroding public confidence
in nuclear power and further exacerbating anti-nuclear sentiment.
-23-
The critical need to have Presidential control of
export decisions for nuclear material and hardware as
part of his constitutional responsibility need not depend
on organizational merger of NRC. Instead, it can be
achieved by change in the existing law in any of several
ways such as giving the President ultimate authority to
approve or disapprove of nuclear export decisions similar
to his authority over CAB decision on overseas air routes.
A number of other regulatory programs which have an influence
on energy are inherent parts of other missions. Examples
are: (1) pipeline safety which is related to the transporta-
tion safety mission of DOT, (2) worker safety at OCS drilling
sites which are part of the OSHA mission within Labor Depart-
ment, (3) miner safety as part of MESA, (4) pipeline rates
set by ICC as part of its rate regulation of interstate
commerce and (5) right-of-way permits for electric trans-
mission lines across public lands as an incident to BLM's
trust management responsibility, and (6) environmental review
of energy facilities by EPA.
It is difficult to see how these regulatory tasks which are
aspects of non-energy missions, but which affect energy in
part, can be excised from their present placement to any
advantage. This conclusion is reinforced when the program
in question has an objective which may operate contrary to
energy development, as in the case of programs aimed at
safeguarding health, safety and the environment.
VII. ORGANIZATIONAL GUIDELINES AND CONCLUSIONS
This section attempts to respond to the issues in energy
regulatory organization which were identified in Section II.
To do so, it draws on information developed and summarized
in Sections III, IV, V, and VI.
A. Can Regulation and Promotion be Placedin the Same Agency?
Yes. If the right circumstances exist, it is not only
acceptable, but positively desirable to do so.
Undoubtedly, serious internal conflict existed in the
assignment of nuclear safety regulation as well as nuclear
development and promotion in the old AEC. If that arrange-
ment had not been broken up in 1974, it would be even
-24-
more urgent business today in the light of heightened
public concern for nuclear safety.
However, the same combination of ingredients which
existed with AEC is by no means present in each current
or potential combination of regulation and development
within a single agency. The AEC combination or circum-
stances involved the following features:
A single agency relating to
a single industry which was and is trying to
become competitive with other energy industries.
The single agency for nuclear affairs had no off-
setting concern for other subjects or industries
thus creating an unmitigated advocacy relationship
between the regulator and the regulated industry.
The agency in this narrowly focussed advocacy
relationship was subject to minimal accountability
in view of its multi-member, bi-partisan, fixed
term format. (Although it is true that AEC was
less independent than other regulatory commissions
then and now.)
The aim of the regulatory program, i.e., assurance
of nuclear safety, tended to conflict with the aim
of the development program, i.e., make nuclear power
competitive as rapidly as possible.
While the two major purposes of AEC were internally
organized quite discretely from each other, both
were governed by the same decision-makers. In the
case of the regulatory program, this applied to both
rule-making and major adjudications.
In contrast to the AEC situation in which naturally conflicting
interests were unlikely to receive balanced consideration,
other potential combinations of regulatory power with develop-
mental responsibilities can be fully acceptable and, in fact,
highly desirable. This would apply when:
They are placed in an agency which has responsibilities
ranging over several or all energy sectors thus
removing the potential bias over any one, i.e., not
a one-for-one relationship.
-25-
The agency has a range of responsibilities in the
energy and perhaps natural resources fields going
beyond regulation and development. Data, policy,
R&D, conservation, etc. In this way, top manage-
ment of the agency has a multiple perspective on
the energy subject, can see the interations among
these approaches and can provide balance in their
usage toward achievement of national goals.
The regulatory responsibilities themselves are not
directly in conflict with development goals.
Generally, as noted earlier, regulatory power aimed
at health safety and environmental safeguarding con-
flicts with development and can appear to outside
observers to be biased. Other regulatory programs,
however, can involve a use of regulatory power in
ways that are compatible with energy goals. To do
this effectively requires coordination not separation.
The regulatory program is internally placed within
the agency in such a way that the adjudicative
decisions are protected from undue influences while
the regulators are brought into the overall policy
formulation and implementation process. How this
can best be done is discussed further in the sub-
section dealing with FPC.
B. To What Extent Should the Many Programs that Regulate
Energy be Consolidated?
The fagmentation of energy regulation and the uneveness
with which the various energy sectors are subject to
regulation suggests the desirability of organizationally
merging some or all such programs. Doing SO would
permit a better opportunity to deal equitably across
all sectors and remove any tendency for regulators
over a single sector to favor that sector. Of course,
this leveling effect would require changes in the
present laws in order to be fully effective, but the
need for legislation could be analyzed better and
presented more convincingly if the various sectors
were subject to the same regulatory program. This
unification of regulation, according to Administration
policy, would be in the direction of deregulation so
that regulation of oil, gas, hydro, coal, etc. would
be subject to an equitable but lower common denominator
of regulation.
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The potential advantage in bringing together regulatory
programs applicable to the various energy sectors does not
involve what were described earlier as mission-related
regulatory programs. These latter are not set up to
relate to a given energy sector, but pursue other
objectives such as minor safety, environmental
protection, or interstate transportation.
Taking those regulatory programs which are directly
related to energy industries as such, there is strong
reason to consider consolidation of oil regulation - FEA,
gas - FPC, and hydro - FPC. Coal is subject to very
little direct regulation. While there is significant
reasons to include nuclear regulation, the counter-
vailing reasons to leave NRC undisturbed at the present
time is very compelling as discussed in Section VI.
C. To the Extent Energy Regulation is Consolidated, How
Should it Placed Organizationally
The prime energy regulatory programs, if they were to
be consolidated, could theoretically be organized any
of several ways. (1) as an independent energy regulatory
commission essentially outside the Executive Branch,
(2) as an Executive Branch, single administrator
energy regulatory agency, or (3) as an energy regulatory
unit within an overall energy department or agency.
Overall it appears that the last of these has the
greatest merit if done properly. The independent
commission approach would have all the difficulties
inherent in the multiple-headed commission format
which are well documented. In addition, the independence
feature is a weakness to the extent that regulation of
energy needs to be effectively coordinated with other
federal approaches to the same subject. This factor
is discussed in various ways elsewhere in this report.
The separate energy regulatory agency within the
Executive Branch and with a single administrator would
avoid the major weakenesses of the independent commission
format. However, it would appear logical that
coordination can be most effectively realized if
energy regulation is performed within the same agency
and subject to common policy review by the same agency
head. Appropriate steps should be taken in such an
event to protect the objectivity of adjudicative actions
as discussed in the forthcoming sub-section relating
to FPC.
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D. Relating Energy Regulation to Other Federal Activities
in the Energy Field
Section III of this report pointed out some of the many
interactions between Federal programs which regulate
the energy industry and those which effect energy in
other ways. Their impacts can be supplementary, or,
at times, contrary and perhaps counterproductive. e.g.
prices held to a regulated level which inhibits the
commerical introduction of new technology because of
lack of margin for risk taking.
These interrelationships of the regulatory function can
be surfaced and consciously dealt with if both functions
are located in the same agency as in the case of petroleum
regulation by FEA. However, when regulation is
separated in a separate agency, especially where there
is little accountability as in the case of FPC or NRC,
there is little prospect that these interactions will
be recognized or dealt with.
This analysis, therefore, supports the conclusion that it
is disadvantageous for energy regulatory functions to
be completely disconnected from other functions in the
energy field.
E. Should FPC be Disestablished and its Functions Reassigned
to a Consolidated Energy Agency such as the Department
of Energy or Department of Energy and Natural Resources
Concept?
This very important question can be rephrased for analyt-
ical purposes into four questions:
Can FPC be abolished without giving up too much?
Is there real gain in doing so?
Are there any reasonable alternatives that
would be better than reorganization?
How could functions best be organized if FPC
were abolished?
Note: The discussion of transferring FPC functions
and abolishing FPC assumes an organization to which they
would be sent. While present day FEA could be a
recipient agency, a stronger base would be the
prospective energy agency represented by either the
DOE or DENR alternative.
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Can FPC be Abolished Without Harm?
No compelling reason, either legally or operationally,
was identified for continuing the FPC as an institution.
Assignment of functions to FPC, beginning in 1921 with
the hydroelectric work, has been more historical than
rational. The multi-member leadership feature helps
provide a degree of stability which, from another
perspective, might be described as rigidity. It is
probably true that the commission form lends something
to the adjudicative decisions, if not the rule-making,
of FPC. However, other arrangements can be made for
adjudications with minimum loss in balancing and with
substantial gain in expediting decisions. Moreover, use
of the adjudicative method can and probably should be
reduced through a higher degree of reliance on rule-
making to implement policy (subject to deregulation).
In doing this, there would be fewer adjudications and
those which occur would deal with narrower issues within
the framework of more fully developed rules. In this
way any validity in the use of the commission form
would be diminished.
Is there Potential for Real Gain?
It would be difficult to prove in specific terms any
harm done to the public interest as a result of the
FPC's commission form. For one thing, observers would
not agree on how to define the public interest, whether
prior decisions were good or bad or what would have
ensued from another decision. In any case, this
analysis has not come up with a documentation of
positive harm attributable to the present organizational
form.
However, the answer to this question of net gain is
more of a management issue than a case in the Court of
Claims where one has to show damage. There is a very
credible case as to the inability to balance FPC's
regulatory decisions with overall energy considerations
under its present independent status. Cases also are
slowed down as a result of difficulty in getting prompt
comment and assistance from other Federal agencies,
State governments or even from applicants in some
instances. An executive agency would have more means
available to it in applying leverage to get timely
responses.
FORD
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The data needs of FPC are not fully integrated with
comparable needs of other agencies. While cross-agency
coordination can in time perhaps overcome much of
the resulting duplication, it is harder to resolve
these matters when an independent commission is involved
since they are not subject to OMB's clearance function
under the Federal Reports Act.
Are there Non-Organizational Alternatives?
No doubt FPC's performance can be improved by some
process changes short of abolishing FPC and reassigning
its functions. Improved performance might involve more
timely actions and greater sensitivity in the substance
of decisions to the nations total energy needs.
They might be within FPC itself or--more usefully--they
might involve FPC in relation to others. Improvements
might include:
Expediting of actions in process by establishing a
production management system to assure more timely
response by Federal agencies or others. This may
require legislative backing.
A stronger intervenor role by FEA or the energy
agency, if created, in taking a position or
furnishing on-the-record information in formal
proceedings. The purpose would be to help assure
that the FPC considers pending actions in the light
of its impact on national or regional energy
situations.
Abolishing the exemption of FPC (and other regulatory
commissions) from the OMB review under the Federal
Reports Act.
Relatively greater use of rule-making rather than
adjudications.
A final judgement is necessary as to whether these
process improvements, fully realized, would preclude the
need for major reorganization in the form of abolishing
FPC. In this connection, it appears that the several
process changes listed above are either unlikely to
occur or of limited effect. Accordingly, while they
are worth pursuing on their various merits, they should
be viewed as supplementary to any possible reorganization
rather than in lieu of it. In other words, the
soundness of abolishing FPC should be weighed and
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decided up or down without strong reference to the
propsect for major improvement under the present
arrangement. Any improvement within the existing
structure would be marginal and does not strongly
impact the decision of seeking to abolish FPC or not.
If FPC's Functions are to be Incorporated in an
Energy Agency How Should They be Organized and Managed?
This question of "how" goes to the heart of the dilemma
in organizing energy regulation between achieving
responsiveness to policy goals, where needed, and
avoiding politization where that is important.
The resolution to this dilemma gives the ultimate
meaning to the earlier questions of "can FPC be
abolished" and "is there advantage in doing so."
The key to resolving this issue is to distinguish
general rule-making from adjudication. The former
involves rules of general application which implement
broad policy. They may be developed to the point of
comprehensive and quite detailed coverage of the
area under regulation, or they may be broad expressions
of policy. The latter, adjudication, involves the
application of governing rules to the specifics of
a particular case. There is a dynamic relationship
between the two in which the more detailed and
comprehensive the general rules, the more narrowly
confined the adjudicative decisions will be.
Conversely, in the event that only broad rules exist,
the greater the reliance which must be placed on
de facto policy-making by case law in which the body
of precedents set by the aggregate of case decisions
becomes the expression of policy.
General rule-making is very closely parallel to policy.
It is, in effect, policy formulation in the regulatory
context. Consequently, it is the rule-making aspect
of regulation that should be sensitive to overall
energy policy and should be mutually related.
Adjudication, on the other hand, involves determination
of property rights and equities in specific situations.
This aspect of regulation should be insulated from
politization and coordination of these decisions with
policy objectives is not appropriate or completely
relevant usually.
A problem of conflict develops when a regulatory area
is characterized by little specificity in its general
rules and, consequently, by de facto policy-making
through case decisions. In such a case the objective
of harmonizing regulation with overall policy can only
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occur through an effort to coordinate or influence
specific case adjudication which are intended to be
judicially impartial.
The solution, in the event of transferring FPC's
functions to an energy agency where they would be
joined by FEA's regulatory functions, would contain
the features listed below in order to obtain policy
coordination where necessary and a political
impartiality where necessary.
Separate Regulatory Administration within the
Department to perform all primary energy
regulatory responsibilities assigned to the
Department. This Administration to be headed by
a single Regulatory Administrator appointed by
the President, subject to Senate confirmation,
and serving at the pleasure of the President.
This Administrator would be clearly and openly a
member of the Secretary's team and would
participate fully in policy dialogues and issue
resolution.
Rule-making by this Administration would be
consciously related to national policy and would
have the benefit of all information developed by
the Department. At the same time, rule-making
would be performed with maximum feasible openness
including advance notice, issuance of proposed
rule for comment, hearings, and publication of the
basis for the final decision.
Rule-making would be maximized in order to enlarge
the extent to which the direction and thrust of
the regulatory programs are compatible with
energy policy without risk of compromise in
individual case decisions which would be
correspondingly narrowed in scope if not reduced
in number. (It should be noted that highly
developed general rules can result in an apparent
higher degree of Federal intervention in day-to-day
business operations. Rules can become voluminous
and detailed and thereby onerous. A further
advantage, however, to rule-making is the greater
degree to which regulated firms can predict the
impact of regulation on their decisions.)
-32-
Cases would be adjudicated, within the rules, by
Administrative Law Judges (ALJ's) who, by law,
are not subject to agency direction. The ALJ's
would have little or no need to create law in
any significant way because of the availability
of sufficiently specific rules for them to apply.
Possibly, there would be a value in having an
Appeals Board or panel to hear appeals and
consider relief from initial rulings of the ALJ's
short of a court appeal. Such an Appeals Board,
if established, would be appointed and structured
in a way to assure its impartiality and
invulnerability to pressure. This is consistent
with its non-policy character and its emphasis
on assurance of procedural due process in property
decisions. The need for such a Board should be
studied further, if it becomes relevant to do so,
including its composition, appointment, and tenure
of members, and its operating rules.
INVENTORY OF FEDERAL ENERGY, AND NON-ENERGY-RELATED REGULATORY PROGRAMS
I. Energy Agency
ENERGY
AGENCY
PROGRAM
PURPOSE
SECTOR AFFECTED
NRC
License nuclear materials and technology
Health and safety
Nuclear power
exports
License and regulate use and transportation
Health and safety
Nuclear power
of all nuclear materials
Licensing of construction and operations of
Health and safety
Nuclear power
all facilities using or producing
radioactive materials
FPC
Regulate private hydroelectric power on
Economic
Electricity (hydro)
navigable rivers
Regulate rates for interstate wholesale
Economic
Electricity
electric power
Set rates for interstate sales of natural
Economic
Natural gas
gas
Regulate construction and operation of
Economic
Natural gas
interstate natural gas pipeline and
storage facilities
Regulate natural gas allocation during
Emergency preparedness
Natural gas
shortages (stand-by)
Department of
Interior
BLM
Issues licenses and permits for exploration
Public land management
All sectors
and development of oil, gas, oil shale,
GERALD R. FORD
coal, geothermal and other resources on
Federal lands
LIBRARY
INVENTORY OF FEDERAL ENERGY, AND NON-ENERGY-RELATED REGULATORY PROGRAMS
I. ENERGY AGENCIES
ENERGY
AGENCY
PROGRAM
PURPOSE
SECTOR AFFECTED
Sport
Reviews license or permit for exploration
Environmental protection
Various sectors
Fisheries
for non-Federal hydroelectric projects
& Wildlife
MESA
Mine health and safety promotion and
Health and safety
Coal (other minerals)
regulation
FEA
Regulate price of petroleum
Economic
Petroleum
Regulate distribution of crude oil and
Economic
Petroleum and
petroleum products
petroleum products
Stategic Petroleum Reserve
Economic
Petroleum
Coal conversion
Conservation
Coal, petroleum and gas
Industrial efficiency standards
Conservation
All sectors
Appliance efficiency standards
Conservation
All sectors
INVENTORY OF FEDERAL ENERGY, AND NON-ENERGY-RELATED REGULATORY PROGRAMS
II. NON-ENERGY AGENCIES
ENERGY
AGENCY
PROGRAM
PURPOSE
SECTOR AFFECTED
Agriculture
Forest
Permits or easements for electric transmission
Public land management
All oil, gas, coal
Service
lines, oil or gas pipelines or other energy
and electricity
facilities across National Forest lands
Commerce
Industry efficiency standards
Energy conservation
All sectors
(DIBA)
Export controls for energy, energy-related
National security
All sectors
Export
equipment/products/materials
Control
Office
Appliance efficiency standards
Energy conservation
All sectors
NOAA
Reviews license permit requests for floating
Environmental protection
Various sectors
power plants, offshore oil and gas
facilities
DOD
Issues regulations, permits, enforces
Economic
Various sectors
Corps of
standards for construction of various
Engineers
facilities on or near navigable waters;
discharge of dredged or fill material
Labor
Develops, promulgates and enforces
Health and safety
Various sectors including
occupational health and safety standards
oil and gas drilling
(OSHA)
and regulations of all energy facilities
facilities
except those situations where health and
safety vested in all other Federal agencies
ICC
Issues permits for RR's or abandon service
Economic
Coal and petroleum
CERALD
FORD
INVENTORY OF FEDERAL ENERGY, AND NON-ENERGY-RELATED REGULATORY PROGRAMS
II. NON-ENERGY AGENCIES
ENERGY
AGENCY
PROGRAM
PURPOSE
SECTOR AFFECTED
HUD
Building conservation standards
Conservation
All sectors
JUSTICE
Enforces anti-trust laws
Economic
All sectors
DOT
Hazardous
Issues regulations concerned with loading,
Health and safety
All sectors
Materials
handling, transportation and storage of
Board
hazardous materials including energy-
related
Auto fuel company
Conservation
Petroleum
Natural gas and liquid pipeline safety
Health and safety
Natural gas and
petroleum
Coast
Establishes and enforces regulations
Health and safety
Various sectors
Guard
pertaining to the safety of vessels and
port facilities; including design,
construction and maintenance of vessels
transporting petroleum and other
potentially hazardous material
EPA
Air quality standards
Health and environment
All sectors
-auto emissions
-performance standards on major fuel
burning installations
Water quality standards
Health and environment
Various sectors
-Thermal efficiency guidelines
-treatment requirements for major fuel
burning sources
INVENTORY OF FEDERAL ENERGY, AND NON-ENERGY-RELATED REGULATORY PROGRAMS
II. NON-ENERGY AGENCIES
ENERGY
AGENCY
PROGRAM
PURPOSE
SECTOR AFFECTED
FTC
Appliance efficiency standards
Conservation
All sectors
SEC
Insures acquisitions or mergers of electric
Economic
Gas and electric
and/or gas companies produce economies and
are not anti-competitive also regulates
issuance of securities holding co-systems
and assures that no single holding
company owns more than one gas or electric
company
GERALD
R.