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    "localId": "1534839",
    "label": "1975/10/09 - Henry Cashen and Bill Seidman",
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{
    "id": "1534839",
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    "contentType": "document",
    "title": "1975/10/09 - Henry Cashen and Bill Seidman",
    "description": "This file contains information pertaining to liquefied natural gas.",
    "citationUrl": "https://catalog.archives.gov/id/1534839",
    "collections": [
        "James M. Cannon Files (Ford Administration)",
        "James Cannon's Meetings Files"
    ],
    "subjects": [
        "Imports",
        "Natural gas"
    ],
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{
    "seq": 1,
    "pageIndex": 0,
    "type": "document",
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    "ocrText": "The original documents are located in Box 52, folder \"1975/10/09 - Henry Cashen and Bill\nSeidman\" of the James M. Cannon Files at the Gerald R. Ford Presidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nDigitized from Box 52 of the James M. Cannon Files at the Gerald R. Ford Presidential Library\nMEETING WITH HENRY CASHEN AND\nBILL SEIDMAN\nThursday, October 9, 1975\n4:00 p.m.\nMr. Cannon's Office\np.m\nDICKSTEIN, SHAPIRO & MORIN\nCHARLES H. MORIN\nTHE OCTAGON BUILDING\nDAVID 1. SHAPIRO\nSIDNEY DICKSTEIN\nNEW YORK OFFICE\nWILLIAM J. O'HARA*\n1735 NEW YORK AVENUE, N. W.\n745 FIFTH AVENUE\nARTHUR J. GALLIGAN\nJUDAH BEST\nWASHINGTON, D. C. 20006\nNEW YORK, N.Y. 10022\nHENRY C. .CASHEN II\n212 832-1900\nJAMES VANR. SPRINGER\nRICHARD LITTELL\n202 785-9700\nTHOMAS W. MACK\nGORDON P. RAMSEY\nBOSTON OFFICE\nARTHUR D. MASON\nSeptember 17, 1975\nONE BOSTON PLACE\nFREDERICK M. LOWTHER\nROBERT J. HIGGINS\nBOSTON, MASS. 02108\nSEYMOUR GLANZER\nM. J. MINTZ\n617 723-8100\nIRA H. POLON\nKENNETH L.ADAMS\nALAN B PICK\nIRA R. MITZNER\nWILLIAM SILVERMAN\nRICHARD P. PERRIN\nGEORGE T BOGGS\nJOEL B. KLEINMAN\n* (NOT ADM. IN D.C.)\nHon. James Cannon\nDirector\nDomestic Council\nThe White House\nWashington, D.C. 20500\nDear Jim:\nTwo of our clients, Tennessee Gas Transmission\n(Tenneco) and Texas Eastern Transmission, are deeply\ninvolved in a number of projects to supplement declin-\ning U.S. natural gas reserves. One focus of their\nattention is LNG imports, as to which they are pursu-\ning projects in the Soviet Union, Nigeria, Trinidad and\nIran.\nAs are all members of the U.S. LNG industry,\nTenneco and Texas Eastern are greatly concerned over\nthe complete absence of a U.S. policy with regard to\nLNG imports. At various points over the past nine\nmonths, there have been informal proposals from FEA and\nother agencies recommending policies pro and con on LNG\nimports and particularly on Ex-Im Bank and Marad partici-\npation in LNG projects. It is now our understanding\nthat, within three to four weeks, these proposals will\nculminate in a formal presentation of options to the\nEnergy Resources Council, on which you sit.\nMessrs. Jack Ray and Nevil Proes, the respective\nPresidents of Tennessee Gas and Texas Eastern LNG, would\nvery much appreciate the opportunity to discuss briefly\nwith you their views of the LNG industry and an appro-\npriate LNG import policy. 15-30 minutes would be adequate\nfor their purposes. Their schedules would best accommodate\na meeting any time on October 9, or October 10, 1975.\nHon. James Cannon\nDirector\nDomestic Council\nThe White House\nSeptember 17, 1975\nPage 2\nOur clients view the LNG issue as one of major\nsignificance for them and for the country. They would\nbe most grateful for the opportunity to discuss it with\nyou.\nBest personal regards,\nch Henry C. Cashen II\nTennessee Gas Transmission\nTENNECO\nA Tenneco Company\nJack H. Ray\nTenneco Building\nPresident\nP.O. Box 2511\nHouston, Texas 77001\n(713) 229-2811\nNEVIL M. E. PROES\nPRESIDENT\nPHONE\nTEXAS EASTERN LNG, INC.\nAREA CODE 713\nP.O BOX 2521 . HOUSTON, TEXAS 77001\n224-7961\nTennessee Gas Transmission\nTENNECO\nA Tenneco Company\nEwell H. Muse III\n1100 Milam Building\nDirector Economic Planning\nP.O. Box 2511\nHouston, Texas 77001\n(713) 229 - 2883\nOctober 7, 1975\nLNG POLICY PAPER\n1.00\nGENERAL COMMENTS\n1.01\nThe continuing apparent inability of the United\nStates to develop and implement a cohesive and\nrealistic overall energy policy increasingly plays\ninto the hands of the owners of exportable non-U.S.\nenergy resources making for their attaching no\ncredibility to \"Project Independence.\"\n1.02\nThe down-turn in the level of U.S. industrial\nactivity, and recent winters which have been warmer\nthan the norm have resulted in the U.S. energy consumer\nbeing lulled into a false sense of energy security\nunaware of the serious problems we face due to:\n- Diminishing domestic oil and gas production;\n- Failure to price such diminishing domestic production\nat competitive market price levels; and\n- The absence of adequate economic incentives for\nexploration and development of additional energy\nresources which increasingly have to be sought for\nin the more expensive and difficult frontier areas\nof the United States.\n2.00\nTHE NEED FOR IMPORTS\n2.01\nThe United States has the potential to meet its\nenergy needs from domestic resources. However, many\nof the resources have yet to reach the economic feasi-\nbility stage. U.S. oil and gas are likely to continue\nto be large contributors to domestic supply for many\nyears, but rapid escalation of finding costs and the\nrecent reduction in the U.S. resource base, point to\nan inability to depend on domestic oil and gas to\nsustain their percentage of the market. Taken\ntogether, these factors mean that supplemental imported\nenergy will be needed for at least the remainder of\nthis century to satisfy demand.\n2.02\nThe need for supplemental imports has been clearly\nrecognized in the case of oil. Indeed, it is probable\nthat by 1980, we will be importing more than 9 million\nbarrels/day.\n2.03\nOther than for imports of gas from Canada, the\nneed for supplemental natural gas imports has not been\nclearly recognized. The U.S. will have a shortfall of\ndomestic gas supplies for at least the remainder of\n-2-\nthis century, and this will be aggravated due to\nCanada's own supply problems which have resulted\nin the Canadian Government indicating to the U.S.\nthat such exports will be phased out.\n2.04\nSome consider that the gas shortfall can and\nshould be made up by switching the market to\nelectricity and/or oil. A switch to electricty\nwould at least double the cost of energy to the\nconsumer and increase for the nation both the energy\ninput demand and its investment needs to provide the\nnecessary generating facilities. Switching to oil\nis clearly inadvisable since it would increase our\nalready large vulnerability to oil exporting nations\nwhilst imposing enormous conversion costs (including\nthe idling of an existing large, efficient gas\ndistribution network) on the U.S. energy consumer.\nAccordingly imports of LNG are essential to minimize\nthe adverse impact on the nation that will result\nfrom a gas shortage.\n-3-\n3.00\nADVANTAGES OF LNG IMPORTS\n3.01\nThe advantages of LNG imports can be summarized\nas follows:\n--- LNG provides access to proven world gas reserves\nand so provides insurance against disappointments\nencountered by U.S. efforts to find and develop in\na timely manner new domestic gas reserves;\nLNG represents an alternative to additional oil\nimports and thus permits increased diversification\nof foreign energy supply sources;\n--- LNG permits continued use of the major, efficient\nU.S. gas distribution network which, in the absence\nof gas supply, would fall increasingly into disuse\nat great cost to gas consumers;\nLNG avoids imposition of extraordinary fuel\nconversion costs on residential and commercial\ngas consumers;\nLNG can be priced competitively with oil and\nother supplemental energy resources;\n--- LNG involves significantly less balance-of-\npayments drain than oil imports;\n-4-\n--- LNG has enhanced security of supply because\nLNG projects involve significant investment\nand credit exposure by the source country in\ncapital facilities which have no short-term\nalternative use.\n4.00 MAJOR PROBLEMS HINDERING LNG IMPORTS INTO THE UNITED\nSTATES\n4.01\nLNG import projects have been hindered by the\nlack of an integrated U.S. LNG policy governing both\nthe extent of permissible imports and the availability\nof financing supports (viz., Ex-Im, Marad). The\nenergy exporting countries are aware that a U.S. LNG\nimport policy paper is under consideration. Leaks as\nto its contents are contradictory with a result that\nthe exporting countries consider no useful purpose is\nserved by pursuing serious discussions with interested\nU.S. gas importers while the present uncertainty exists.\n4.02\nLNG import projects are further hindered by the\ninordinate time required to obtain FPC approval for\nan import license. The process of review and final\ndecision seems to take a minimum of 3 years. The\nU.S. is not the only market for LNG in the world\n-5-\nand it is unreasonable to expect any energy\nexporting country to take its gas off the world\nmarket for the long period of time required to\nget a non-challengeable decision from the FPC,\nand with no assurance that at the end a favorable\nimport decision will be forthcoming.\n4.03\nLNG import projects are also hindered by the\ninordinate time required to obtain a final decision\nfrom the FPC on the matter of LNG terminal siting.\nThe gas exporting countries accordingly prefer to\nlimit their business with U.S. companies that\nalready have approved LNG terminal sites (now\nlimited to Distrigas (Boston), Columbia/Consolidated\n(Cove Point) and Southern Natural (Savannah) )\n4.04\nA large part of the FPC obstacle is attributable\nto the absence of guidelines from Congress and the\nAdministration as to acceptable price and volume\nfor LNG imports. Because of this vacuum, the FPC\ntends to focus on the examination of environmental\nmatters related to terminal siting SO imparting\n-6-\nsome semblance of motion to an LNG import\napplication. The absence of Congressional and\nAdministration guidelines in the pricing and\nvolume areas are part of the larger problem\nof realistic pricing of energy in the market\nplace.\n-7- -\nAttachment I.\nCONSUMPTION OF PRIMARY ENERGY IN\nTHE UNITED STATES\n( trillions of Btu's )\n1974\n1980 (est.)\n1985 (est.)\nOIL\n34,511\n42,200\n46,900\nGAS*\n22,533\n18,400\n19,000\nCOAL\n12,866\n18,000\n21,000\nHYDROELECTRIC\n3,285\n3,400\n3,700\nNUCLEAR\n1,015\n4,600\n10,600\nTOTAL\n74,210\n86,600\n101,200\nA selection of recent forecasts of estimated U.S. energy\nconsumption is given for comparative purposes:\nSource and Date\n1980\n1985\n(in trillions of BTUS)\nS. Clark (1975)\n86,400\n97,700\nFirst National City Bank (1974)\n91,200\n-\nShell (1974)\n88,900\n104,200\nO E C D (1974) ($9 oil)\n85,800\n100,100\nExxon (1975)\n87,400\n102,300\nFEA (1974) ($11 oil)\nW.O. conservation\n86,200\n103,000\nwith conservation\n82,100\n94,000\n*\nThe markets gas served in 1974 were as follows:\nMarket\nTrillions of BTU's\nPercent\nResidential\n5,016.5\n22.3\nCommercial\n2,639.6\n11.7\nIndustrial\n8,165.9\n36.2\nPower Plants\n3,356.0\n14.9\nTransportation\n945.0\n4.2\nRaw Materials\n710.0\n3.2\nMiscellaneous\n1,700.0\n7.5\nTOTAL\n22,533.0\n100.0\nAttachment II.\nESTIMATED U.S. ENERGY SUPPLY\n(trillions of Btu's)\n1980\n1985\nOIL\nProduction - Lower 48\n18,900\n19,100\n- Arctic\n4,000\n6,000\nSub Total\n22,900\n25,100\n(million barrels/day) (11.4)\n(12.5)\nImports\n19,300\n21,800\n(million barrels/day)\n(\n9.6)\n(10.8)\nTotal Supply\n42,200\n46,900\n(million barrels/day) (21.0)\n(23.3)\nPossible\nPossible\nGAS\nRange\nRange\nProduction - Lower 48\n17,100\n(16,500-18,500)\n15,500\n(15,000-18,000)\n- Arctic\n-\n1,500\n( 1,000- 1,500)\nSub Total\n17,100\n(16,500-18,500)\n17,000\n(16,000-19,500)\nImports - Canada\n600\n(\n500-\n750)\n500\n(\n350-\n500)\n- LNG\n400\n(\n400-\n450)\n1,000\n(\n950- 1,450)\nSNG\n300\n(\n300-\n400)\n500\n(\n400-\n850)\nTotal Supply\n18,400 (17,700-20,100)\n19,000\n(17,700-22,300)\nCOAL\n18,000\n21,000\n(million tons)\n( 780)\n( 950)\nNUCLEAR\n4,600\n10,600\nHYDROELECTRIC\n3,400\n3,700\nTOTAL ENERGY SUPPLY\n86,600\n101,200\nAttachment III.\nPOTENTIAL LNG IMPORT PROJECTS\nProject\nGas Source\nVolume\nEst. Start\n(trillions\nof Btu's)\nAPPROVED\nDistrigas\nAlgeria\n60\noperating\nEl Paso I\nAlgeria\n360\n1977\nSub Total\n420\nPENDING\nEascogas\nAlgeria\n240\n1980\nTrunkline\nAlgeria\n180\n1980\nEl Paso II\nAlgeria\n360\nearly 1980's\nPacific Lighting\nIndonesia\n200\n1980\nSub Total\n980\nPOSSIBLE\nUnnamed\nNigeria\n360\nearly 1980's\nNorth Star\nUSSR\n720\nearly 1980's\nYakutsk\nUSSR\n360\nearly 1980's\nVarious Unnamed\nPersian Gulf\n950\nmid 1980's\nSub Total\n2,390\nTOTAL ALL CATEGORIES\n3,790\nNot all of the pending and possible projects listed will\nmaterialize. However, now that imported crude and fuel oil prices\nlanded on the U.S. East Coast are in the range of $12.50 to $13.50\nper barrel, LNG imports from any of the above sources can be expected\nto be priced competitively at U.S. port with low sulphur fuel oils\n(about $13.10 per barrel or $2.10 per million BTU's).\nThe question of\nprice is therefore no longer the prime consideration.\nThe opportunity\nto get a reliable supply source of imported energy, be it fuel oil or\nLNG is now the major factor. Given a reasonable U.S. policy on LNG\nimports, LNG projects competitively priced and sufficient to provide\ngas imports indicated in Attachment II will materialize."
}