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FY 1977 - 11/26/75 - ERDA Background Book (1)
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1554477
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FY 1977 - 11/26/75 - ERDA Background Book (1)
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White House Special Files Unit Files
Budget Review Decision Papers
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Energy Research and Development Administration. 1/19/1975-10/1/1977
Federal budget
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1975-11-30
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1975
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1975-11-01
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The original documents are located in Box 10, folder "FY 1977 - 11/26/75, ERDA
Background Book (1)" of the White House Special Files Unit Files at the Gerald R. Ford
Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 10 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library
ERDA
FY 1977
Director's
Review
SUMMARY DATA
Energy Research and Development Administration
1977 Budget
Summary Data
(In millions)
Employment, end-of-year
Budget
Full-time
authority
Outlays
Permanent
Total
1975 actual
3588
3146
7458
7974
1976 February budget
as amended
4592
4089
8052
8592
enacted
*
*
XXX
XXX
OMB recommendation
5194
4089
8287
8917
OMB employment ceiling
XXX
xxx
8052
8592
TQ February budget
as amended
1271
1177
8052
8592
enacted
*
*
XXX
XXX
OMB recommendation
1271
1177
8287
8971
1977 July planning target
5490
5070
XXX
XXX
original agency request
7570
6222
9092
9903
revised planning target
N/A
5290
XXX
XXX
revised agency request
6948
5797
8659
9470
OMB recommendation
5971
5219
8543
9267
1978 OMB estimate
5693
5543
8543
9267
*not enacted as of 11/11/75
Summary of Issues
1977
1978
Agency req.
OMB rec.
OMB estimate
BA
0
BA
0
BA
0
Issues:
#1 Enhanced Recovery of Oil & Gas
59
41
37
32
to be determined
#2 Hydrogen Pilot Plant:
- Pilot Plant
37
29
-
6
15
31
- Coal R&D
336
321 307
307
427
365
#3 Solar Energy:
- Heating and Cooling
54
46
29
25
33
26
- Solar Electric
120
87
78
55
92
83
#4 Geothermal Energy
60
56
49
42
50
45
#5 Conservation Programs
224
150
99
78
120
90
GERALD
#6 Nuclear Fuel Reprocessing and Recycle
Support
135
69 22
20
9
10
- Contingency allowance
-
- 67
19
100
50
#7 Commercial Waste Management
120
91 85
66
FORD
75
70
#8 Light Water Reactor Technology Program
62
40
10
8
LIBRARY
9
9
#9 Employment Levels for ERDA
209
209 200
200
204
204
#10 Nuclear Weapons Research and
Testing (Classified)
582
582 507
507
507
507
#11 N-Reactor (Classified)
15
15 21
21
to be determined
Agency Objectives and Program Evaluation Efforts
ERDA Objectives
ERDA was established on January 19, 1975. The Federal Non-nuclear Energy R&D Act of 1974 required ERDA to
submit to Congress by June 30, 1975, a comprehensive plan for energy research, development, and demonstration.
Thus, from its inception, ERDA has been required to place priority on defining its objectives in energy R&D
and preparing a detailed planning document on an accelerated basis.
As discussed in the previous section on "R&D Strategy," OMB staff has been critical of the major conclusion
of ERDA's June 30 plan that all national energy R&D goals must be pursued together if we are to gain and
maintain energy independence by the year 2000. OMB staff's principal criticism is that ERDA has not been
sufficiently selective in establishing its major priorities for energy R&D (i.e., we disagree that all
technological approaches have to be pursued on a greatly accelerated basis). As outlined in the section on
"R&D Strategy," OMB staff has also disagreed with specific objectives in ERDA's plan.
ERDA has a statutory requirement to submit a new energy R&D plan to Congress each January. The timing of
these submissions is more favorable to OMB than was the timing of the June 30 plan (i.e., we will be able to
incorporate the results of the President's FY 1977 budgetary decisions in the January plan). Hopefully, this
new timing will introduce some additional discipline in the planning and resource allocation process and will
result in a more rigorous set of priorities for energy R&D.
As outlined in Mr. Fri's transmittal letter of September 30, ERDA is also in the process of reviewing its
agency objectives (all programs, not just energy R&D) and establishing a comprehensive Program Approval
Document (PAD) system. For each program, the PAD will include objectives, critical milestones, and
resources required. ERDA intends the PAD system to be its primary means of management control and measure-
ment of agency performance. The PAD system is scheduled to begin operations early in CY 1976.
Once ERDA and OMB have agreed upon major priorities and program objectives for the agency, the PAD system
appears to have excellent potential for being an effective program evaluation and control system for ERDA
management. This system, however, will not be effective unless there is sound "front end" planning of the
programs ERDA should pursue.
2
ERDA Program Planning and Evaluation Efforts
Effective program evaluation requires effective planning against which to evaluate. As indicated, OMB staff
has been disappointed in ERDA's program planning efforts to date. In particular, there does not yet appear
to be an overall capability within the ERDA organization to conduct penetrating analyses of program options
either within or across major technologies. This was reflected in the ERDA June 30 plan and in ERDA's
initial FY 1977 budget submission. Both documents were marked by a failure to identify costs and benefits
of pursuing alternative technological approaches. Thus, no real program tradeoffs were made and these
documents contained very high expectations for continued funding increases.
Until now ERDA has placed most of the real responsibility for program planning with each of the Program
Assistant Administrators. For example, the Assistant Administrator for Nuclear Energy has the task of
developing options for plutonium fuel reprocessing, commercial radioactive waste management, Liquid Metal
Fast Breeder Reactor (LMFBR) commercialization, and other areas. However, OMB staff does not believe that
a satisfactory analytic basis for decision-making (independent of the AA's) has been established by ERDA for
these and other programs, notwithstanding the fact that OMB has been working for months with ERDA to try to
have ERDA analyze specific alternatives.
ERDA does have an Assistant Administrator for Planning and Analysis who could provide a more critical review to
counter balance the inevitable desires of the Program AA's to promote their own programs. However, until
recently, the AA for Planning and Analysis has not generally challenged the Program AA's within their areas of
program responsibility. The Program Evaluation staff has largely been restricted to such tasks as coordinating
the preparation of the June 30 Plan (using substantive inputs from the Program AA's).
To some extent, the inadequacy of ERDA's program planning and analysis efforts results from the fact that ERDA
is so new and has so many new people in key roles. Under the circumstances, OMB's expectations for the rapid
achievement by ERDA of a satisfactory program evaluation capability may have been unrealistic.
With some OMB encouragement, top ERDA management has recently reached the conclusion that ERDA needs to establish
a more effective program planning, analysis and evaluation system. The AA for Planning & Analysis has been given
the task of formulating recommendations for such a system. An effective system would ensure that the AA for Planning
& Analysis, the Controller, and other key staff offices would participate in the program planning process and
thereby provide additional perspectives for top ERDA management. This is a key move to provide the basis for
meaningful evaluation in the sense of evaluating against sound program objectives.
Energy Research and Development Administration
1977 Budget
Distribution of Budget Authority
(In millions of dollars)
July 1 -
Sept. 30
1976
1976
1977
1975
Feb.
Agency Req/
Agency Req/
Original
Rev.
OMB
1978
Act.
Budget
ONB Recom.
OMB Recom.
Agency Req.
Agency Req.
Recom.
OMB Est.
Direct Energy R&D
(1322)
(1590 )
(1684)
(434)
(3209)
(2926 )
(2265)
(2575)
Non-nuclear R&D:
( 442)
( 540 )
(636)
(168)
(1342)
(1111)
( 765)
(1007)
Fossil
335
394
435
113
721
601
473
672
Solar
40
71
89
26
255
199
126
147
Geothermal
28
23
31
8
90
70
49
50
Conservation
31
42
71
18
235
223
99
120
Environmental Control
8
10
10
3
41
17
18
18
Nuclear R&D:
( 880)
(1050)
(1048)
(266)
(1867)
(1815)
(1500)
(1568)
Fusion-
Magnetic Confinement
125
156
176
56
384
321
289
307
Laser
64
74
91
23
127
110
95
101
Fission-
Fast Breeder
488
534
490
114
706
677
655
682
Other
87
145
124
28
195
188
119
100
Nuclear Fuel Cycle
20
22
38
11
161
174
62
150
Commercial Waste Management
13
14
16
5
58
120
85
75
Reactor Safety Facilities
--
--
--
--
35
33
33
5
Nuclear Safeguards
8
19
20
4
34
34
25
26
Laser Isotope Separation
22
32
33
10
53
44
44
40
Uranium Enrichment
Process Development
53
54
CO
15
114
114
93
82
Supporting Energy R&D
( 349)
( 392)
( 400)
( 96)
( 572)
( 462)
( 415)
(424)
Biomed & Environmental Effects
164
192
193
46
281
224
191
191
Basic Energy Sciences
185
200
207
50
291
238
224
233
GRAALD
FORD
1976
July 1 -
Sept. 30, 1976
1977
1978
1975
Feb.
Agency Req/
Agency Req/
Original
Rev. Agency
OMB
OMB
Actual
Budget
OMB Recom.
OMB Recom.
Agency Reg.
Request
Recom.
Estimate
Production of Enriched Uranium:
(31)
(258)
(390)
(161)
(756)
(728)
(706)
(115)
Production/Capacity Expansion
593
833
982
256
1336
1308
1336
1058
Revenues
-562
-575
-592
-95
-580
-580
-630
-943
Defense Related Programs
(1493)
(1666)
(1720)
(460)
(2209)
(2100)
(1914)
(1843)
Nuclear Weapons
(1006)
(1049)
(1103)
(283)
(1437)
(1328)
(1180)
(1177)
R&D
261
293
304
85
387
380
327
317
Testing
192
219
232
66
274
258
228
220
Production
384
379
387
103
499
468
436
501
Equipment
69
63
67
15
87
87
75
74
Construction
100
95
113
14
190
135
114
65
Other
Weapons Mat'ls Production
298
381
381
114
565
565
527
424
Naval Propulsion Reactor Dev.
189
236
236
63
207
207
207
242
All Other:
(393)
(373)
(1000)
(120)
(824)
(732)
(671)
(736)
Uranium Resource Assessment
8
19
19
6
46
46
36
40
Peaceful Nuclear Explosives
-
-
-
-
4
2
-
-
High Energy Physics
150
177
177
44
250
241
200
231
Spacecraft Power
29
38
39
9
50
40
34
33
Program Support
204
234
256
64
417
345
269
271
Operational Safety
4
6
6
1
10
11
8
6
Other Revenues
-85
-101
-101
18
-81
-81
-76
-76
Financial Adjustments
83
15
17
15
78
78
78
78
Nuclear Fuel Reprocessing Contingency
67
100
Synthetic Fuel Construction Grants
600
Legislative Proposal
-22
-22
- 4
Synthetic Fuels Loan Program
2
2
5
3
Synthetic Fuels Price Supports
Geothermal Dev'l. Fund Contingency
50
50
50
50
Special Foreign Currency
7
7
1
Total Budget Authority
3588
4279
5194
1271
7570
6948
5971
5693
The Loan Guaranty Program is expected to receive $1.5 billion in borrowing authority in FY 1976. Revenues are collected in proportion to the outstand-
ing guaranteed debt for the purpose of paying defaults and administrative expenses, consequently the BA and 0 statistics show revenues less administrative
expenses.
2/ The Price Guaranty Program is expected to receive $1.0 billion in borrowing authority in FY 1976.
Energy Research and Development Administration
1977 Budget
Distribution of Outlays
(In Millions of Dollars)
July 1-
1976
Sept. 30, 1976
1977
1978
1975
Feb
Agency Req/
Agency Req/
Original
Rev. Agency
OMB
OMB
Actual
Budget
OMB Recom.
OMB Recom.
Agency Req.
Request
Recom.
Estimate
Direct Energy R&D
(1012)
(1375)
(1417)
( 368)
(2514)
(2308)
(1931)
(2280)
Non-Nuclear R&D:
( 207)
( 467)
( 514)
( 105)
(1043)
( 872)
( 671)
( 837)
Fossil
148
335
352
67
571
499
444
563
Solar
15
55
65
17
202
152
91
123
Geothermal
20
29
32
4
71
56
42
45
Conservation
17
38
55
14
166
150
78
90
Environmental Control
7
10
10
3
33
15
16
16
Nuclear R&D:
(805)
( 908)
( 903)
( 263)
(1471)
(1436)
(1260)
(1443)
Fusion -
Magnetic Confinement
95
142
146
43
273
235
214
306
Laser
56
72
84
22
113
99
88
94
Fission -
Fast Breeder
462
472
429
117
609
585
575
643
Other
76
93
95
42
168
163
108
105
54
Nuclear Fuel Cycle
17
21
33
9
78
89
75
Commercial Waste Management
11
13
14
4
48
91
66
70
Reactor Safety Facilities
-
-
-
-
26
25
25
7
Nuclear Safeguards
7
14
15
4
31
31
25
26
Laser Isotope Separation
19
27
28
8
47
40
39
40
Uranium Enrichment
Process Development
62
54
59
14
78
78
66
77
Supporting Energy R&D
( 317)
( 361)
( 363)
( 96)
( 498)
( 425)
( 392)
( 410)
- omed and Environment. Effects
149
177
178
46
241
210
190
190
Basic Energy Sciences
168
184
185
50
257
215
202
220
July 1 -
Sept. 30
1976
1976
1977
1975
Feb.
Agency Req/
Agency Req/
Originial
Rev.
OMB
1978
Actual
Budget
OMB Recom.
OMB Recom.
Agency Req.
Agency Req.
Recom.
OMB Est.
Production of Enriched Uranium
( -27)
(181)
(299)
(148)
(651)
(623)
(601)
(317)
Production/Capacity Expansion
536
756
891
243
1231
1203
1231
1260
Revenues
-562
-575
-592
-95
-580
-580
-630
-943
Defense Related Programs
(1501)
(1614)
(1647)
(447)
(1984)
(1924)
(1796)
(1911)
Nuclear Weapons:
(1010)
(1034)
(1067)
(284)
(1293)
(1238)
(1141)
(1179)
R&D
257
284
295
82
362
357
317
317
Testing
189
211
224
61
255
243
220
220
Production
377
378
379
99
466
443
419
495
Equipment
90
75
79
16
80
80
74
74
Construction
97
86
90
26
130
115
111
73
Other:
Weapons Mat'ls Production
276
341
341
99
465
460
429
494
Naval Propulsion Reactor Development
215
239
239
64
226
226
226
238
All Other:
(344)
(345)
(363)
(118 )
(575)
(517)
(499)
(625)
Uranium Resource Assessment
7
15
15
5
38
38
30
40
Peaceful Nuclear Explosives
-
-
-
-
3
2
-
-
High Energy Physics
172
178
178
44
215
201
191
195
Spacecraft Power
35
36
37
10
45
36
32
33
Program Support
206
227
245
64
328
295
266
272
Operational Safety
4
6
6
2
9
8
6
7
Other Revenues
-85
-101
-101
-17
-81
-81
-76
-76
Financial Adjustments
5
-16
--
11
13
13
13
58
Nuclear Fuel Reprocessing Contingency
19
50
Synthetic Fuels Construction Grants
7
23
Legislative Proposals
-22
-4
Synthetic Fuels Loan
2
2
5
3
Guaranty Program
Synthetic Fuels Price
Guaranty Program 2/
Geothermal Development Fund Contingency
4
4
4
19
Special Foreign Currency
3
3
1
2
2
2
1
Total Outlays
3146
3876
4089
1177
6222
5797
5219
5543
The Loan Guaranty Program is expected to receive $1.5 billion in borrowing authority in FY 1976. Revenues are collected in proportion to the outstand-
ing guaranteed debt for the purpose of paying defaults and administrative expenses, consequently the BA and 0 statistics show revenues less administrative
2/ The expenses. Price Guaranty Program is expected to receive $1.0 million in borrowing authority in FY 1976.
Energy Research and Development Administration
FY 1977 Budget
Five-Year Projections
(OMB Estimate in Millions of Dollars)
1977
1978
1979
1980
1981
Direct Energy R&D
BA
(2265)
(2575)
(2460)
(2410)
(2370)
B0
(1931)
(2280)
(2462)
(2473)
(2437)
Non-Nuclear R&D
BA
( 765)
(1007)
( 910)
( 909)
( 843)
B0
( 671)
( 837)
( 940)
( 977)
( 911)
Fossil
BA
473
672
563
601
535
B0
444
563
645
681
601
Solar
BA
126
147
149
100
100
B0
91
123
121
100
104
Geothermal
BA
49
50
50
50
50
B0
42
45
48
50
50
Conservation
BA
99
120
130
140
140
B0
78
90
110
130
140
Environmental
BA
18
18
18
18
18
Control
B0
16
16
16
16
16
1977
1978
1979
1980
1981
Nuclear R&D
BA
(1500)
(1568)
(1550)
(1501)
(1527)
BO
(1260)
(1443)
(1522)
(1496)
(1526)
Fusion
Magnetic Confinement
BA
289
307
310
312
403
B0
214
306
311
299
340
Laser Fusion
BA
95
101
106
106
86
BO
88
94
103
103
106
Fission
Fast Breeder
BA
655
682
645
617
572
Bo
575
643
676
650
610
Other
BA
119
100
100
90
90
BO
108
105
100
90
90
Nuclear Fuel Cycle
BA
62
150
150
150
150
B0
54
75
100
125
150
Commercial Waste Mgt.
BA
85
95
100
100
100
BO
66
70
80
90
100
Reactor Safety
BA
33
5
-
-
I
Facilities
B0
25
7
6
-
-
Nuclear Safeguards
BA
25
26
26
26
26
B0
25
26
26
26
26
Laser Isotope Separation
BA
44
40
40
40
40
B0
39
40
40
40
40
Uranium Enrichment
BA
93
82
73
60
60
Process Development
BC
66
77
80
73
64
1977
1978
1979
1980
1981
BA
(415)
(424)
(424)
(424)
(424)
Supporting Energy R&D
Bo
(392)
(410)
(420)
(412)
(412)
Biomed & Environmental
BA
191
191
191
191
191
Effects
B0
190
190
190
190
190
Basic Energy Sciences
BA
224
233
233
233
233
Bo
202
220
230
222
222
Production of Enriched
BA
(706 )
(115)
(-123)
(-220)
(-514)
Uranium
Bo
(601 )
(317)
( -9)
(-215)
(-513)
Production/Capacity
BA
1336
1058
998
980
986
Expansion
B0
1231
1260
1112
985
987
Revenues
BA
-630
-943
-1121
-1200
-1500
Bo
-630
-943
-1121
-1200
-1500
Defense Related Programs
BA
(1914)
(1843)
(1887)
(1838)
(1760)
Bo
(1796)
(1911)
(1932)
(1898)
(1822)
Nuclear Weapons:
BA
(1180)
(1177)
(1261)
(1266)
(1208)
Bo
(1141)
(1179)
(1277)
(1275)
(1236)
R&D
BA
327
317
317
317
317
BO
317
317
317
317
317
Testing
BA
228
220
220
220
220
Bo
220
220
220
220
220
Production
BA
436
501
617
634
576
BO
419
495
600
638
604
Equipment
BA
75
74
74
74
74
BO
74
74
74
74
74
Construction
BA
114
65
33
21
21
BO
111
73
66
26
21
4
1977
1978
1979
1980
1981
Other:
Weapons Mtl's Produc-
BA
527
424
380
371
346
tion
BO
429
494
428
404
366
Naval Propulsion Reactor
BA
207
242
246
201
206
Development
B0
226
238
227
219
220
All Other
BA
(671)
(736)
(682 )
(660 )
(654 )
BO
(499)
(625)
(692 )
(734 )
(759 )
Uranium Resource Assess-
BA
36
40
40
40
40
ment
BO
30
40
40
40
40
Peaceful Nuclear
BA
-
-
-
-
-
Explosives
BO
-
-
-
-
-
High Energy Physics
BA
200
231
230
208
202
Bo
191
195
217
230
212
Spacecraft Power
BA
34
33
33
33
33
BO
32
33
33
33
33
Program Support
BA
269
271
271
271
271
BO
266
272
271
271
271
Operational Safety
BA
8
6
6
6
6
BO
6
7
7
7
6
Other Revenues
BA
-76
-76
-76
-76
-76
BO
-76
-76
-76
-76
-76
Financial Adjustments
BA
78
78
78
78
78
BO
13
58
58
58
58
5
1977
1978
1979
1980
1981
Nuclear Fuel Reprocessing
BA
67
100
100
100
100
Contingency
B0
19
50
100
100
100
Synthetic Fuels Construc-
BA
tion Grants
B0
7
23
42
71
115
Synthetic Fuels Loan 1/
BA
5
3
Guaranty Program
B0
5
3
-5
-16
-24
Synthetic Fuels Price 2/
BA
Support Program
B0
Geothermal Development Fund
BA
50
50
50
50
50
Contingency
B0
4
19
19
22
23
Special Foreign Currency
BA
B0
2
1
TOTAL
BA
(5971)
(5693)
(5380)
(5162)
(4744)
B0
(5219)
(5543)
(5511)
(5308)
(4916)
1/ The Loan Guaranty Program is expected to receive $1.5 billion in borrowing authority in
FY 1976. Revenues are collected by proportion to the outstanding administrative expenses,
consequently the BA and 0 statistics show revenues less administrative expenses.
2/ The Price Guaranty Program is expected to receive $1.0 billion in borrowing authority
in FY 1976.
MAJOR ISSUES
Fossil Energy
The Issue papers on Oil and Gas Enhanced Recovery (Issue #1) and the Hydrogen Pilot Plant (Issue #2) cover only a
portion of the fossil energy activities in ERDA. The following overview table illustrates how these Major Issues
and Other Issues relate to the fossil energy budget described previously:
FY 1977
Total
1975
1976
T.Q.
Agency Req.
OMB Rec.
1978 - 1981
Fossil Energy Program
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
Coal:
Coal R&D (Issue #2)
256
128
301
282
83
46
336
321
307
307
1653
1696
Coal Demo. Plant (Other Issue)
26
3
62
27
17
8
130
84
100
80
400
422
Hydrogen Pilot Plant (Issue #2)
14
-
15
-
3
-
37
29
-
6
42
63
Total Coal
296
131
378
309
103
54
503
434
408
393
2095
2181
Petroleum & Natural Gas:
Enhanced Recovery Demo. (Issue #1)
23
5
28
19
6
8
44
26
28
23
112
136
Research (Issue #1)
5
5
9
9
1
1
15
15
9
9
36
36
Total PNG
28
10
37
28
7
9
59
41
37
32
148
172
In-situ Technology:
Oil Shale (Cther Issue)
4
4
14
10
2
3
21
12
21
12
99
109
Coal Gasification (Other Issue)
6
2
5
4
1
1
15
10
5
5
20
20
Research
1
1
1
1
-
-
3
2
2
2
8
8
Total In-Situ
11
7
20
15
3
4
39
24
28
19
127
137
Total Fossil Energy
335
148
435
352
113
67
601
499
473
444
2370
2490
GERALD
Issue Paper
Energy Research and Development Administration
1977 Budget
Issue #1 : Enhanced Recovery of Oil & Gas
Statement of Issue
Should ERDA accelerate its cost-shared program to demonstrate technologies for the enhanced recovery of oil
and gas?
Background
ERDA's "National Plan for Energy R,D&D" lists enhanced recovery technologies for oil and gas as one of
three highest priority R&D areas for increasing near-term energy supplies. This conclusion stems from
ERDA's projection that over the next 40 years up to one-fourth of all domestic oil and gas production could
be attained through the application of enhanced recovery. This might be possible because up to now, most
domestic oil fields have yielded only 30 to 50 percent of their oil.
Enhanced oil recovery techniques involve the injection of liquids or gases to push out some of the
remaining oil. Although it will never be practical to extract 100 percent of the oil, some methods and combina-
tions of procedures, could increase ultimate recovery by 10 to 20 percent. Enhanced gas recovery techniques
involve fracturing the reservoir rock in order to release gas fast enough to justify the cost of drilling and
distribution.
Current estimates of industry expenditures for enhanced recovery research and field demonstrations range
between $100 and $200 million per year. A two year old survey indicated 100 ongoing private sector oil field
projects and more recent indications are that these efforts have been greatly expanded. These projects
include conventional methods in widespread large-scale use as well as the more costly advanced techniques
also included in the Federal program.
By the end of FY 1976, the ERDA program is expected to involve (1) 35 to 40 cost-shared demonstration projects
each of 2 to 5 year duration; (2) a $9 million per year program of research in ERDA's Energy Research Centers and
National Laboratories; and (3) a small effort in gas and oil utilization research (e.g., engine testing of
fuels). The total ERDA effort in FY 1976 totals $37 million (BA).
2
ERDA's requested budget level of $59 million for FY 1977 with a five-year runout cost of over $500 million,
would provide for starting 29 new demonstration projects in FY 1977 (in addition to the 35-40 now funded) and
would lead, over the next five years, to the completion of over 150 demonstration projects as well as a six-
fold increase in the laboratory research program (over the current level of $9 million). Since current domestic
oil and gas production is derived, almost entirely, from only 260 major oil and gas reservoirs, ERDA's demonstra-
tion effort represents a very extensive program.
Alternatives
#1. Increase the size of the enhanced recovery program for both oil and gas by initiating 29 new demonstra-
tion projects and enlarging the laboratory research effort by 60%.
#2. Continue ongoing demonstration projects and research efforts while completing a definitive program
management plan before committing to new demonstration projects.
#3. Phase out demonstration program and restrict all future efforts to laboratory research.
Analysis
July 1 - Sept.
1975
1976
30, 1976
1977
1978
1979
1980
1981
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
($ Millions)
Alt. #1 (Agency req.)
28
10
37
28
7
9
59
41
109
85
127
126
118
119
118
118
Alt. #2 (OMB rec.)
28
10
37
28
7
9
37
32
(TO
BE
DETERMINED
)
Alt. #3
28
10
37
28
7
9
29
29
35
40
31
40
15
18
10
10
Number of Demo. Starts:
Alt. #1 (Agency req.)
16
22
0
29
36
37
26
5
Alt. #2 (OMB rec.)
16
22
0
(
TO BE DETERMINED
)
Alt. #3
16
22
0
0
0
0
0
0
CHOS
LIBBARY
3
ERDA argues that its cost-shared demonstration projects will:
- Accelerate private R&D efforts by sharing the cost with industry of high-risk field tests, each
costing $5-10 million;
- Increase dissemination of information about improved recovery technologies to both major companies and
independents thereby reducing unnecessary duplication of R&D; and
- Provide a credible assessment of the benefits of enhanced recovery R&D and the potential of full-scale
use to the public, to Government agencies, and to industrial management.
ERDA staff has asserted that private industry would eventually develop and apply these enhanced recovery
technologies but that the ERDA program would accelerate this process by five to ten years. If true, such a
situation would justify a substantial Federal program. However, ERDA admits that there is no hard analysis
or evidence to substantiate this assertion.
The OMB recommendation, Alternative #2 - to hold the program's funding at its current level, might eventually
involve starting some new demonstration projects but it presumes that further program expansion is based upon
a fully developed analyzed, and justified program plan.
The need for delaying new efforts until such a plan is developed is based upon the following observation:
- ERDA is only beginning to formulate a management plan that would address where demonstrations should
be conducted, what technologies should be used, and how the demonstration results should effect
further program planning. Based on the rate of progress during the last year, it seems unlikely that
such planning will be completed before the beginning of FY 1977.
- Based on ERDA's ongoing demonstration projects, there is some doubt whether Federal funds accelerate
the undertaking of an enhanced recovery project or enlarge its size. Evidence for this conclusion
comes from the history of these cost-shared projects, statements of the industry participants, and the
degree of private cost sharing (as high as 80 percent). In addition, there is serious question as to
whether or not there are enough qualified cost-sharing partners to utilize the FY 1977 funding request.
LIBRARY GERAL FORD
4
- All of the processes proposed for cost-shared demonstration in ERDA 1977 budget request have been
researched, developed, tested, and even marketed by private industry, but their utilization is very
limited. Some feel this is due to the wide range of uncertainty regarding applicability, effective-
ness, and economics of different methods. Whether or not these uncertainties can be resolved on
anything other than a field-by-field basis is unknown, but the Federal program presumes that an
overall predictive model can be developed without conducting research on each and every oil field.
- One of the major deterrents to both research and utilization on enhanced recovery techniques is their
cost. The current program only addresses the task of reducing uncertainty of enhanced recovery; there
is almost no research on reducing the cost of applying different techniques (e.g., improved preparation
or recycling of injected fluids). Similarly, the costs and uncertainties would not be so prohibitive
if the value of oil recovered were higher. FEA is studying what impact its regulations have on
enhanced recovery and this may lead to regulatory change with a much greater impact than the demonstra-
tion program.
Alternative #3, illustrates the funding that would be necessary if future program efforts were restricted to
laboratory research and ongoing demonstration projects are completed. Although it may be that this alternative
is consistent with the proper Federal role, it would be premature to select this alternative prior to comple-
tion of a full analysis by ERDA and OMB.
Agency Request: Alternative #1. ERDA perceives this area as having a very high near-term payoff and the
response of the private sector to R&D opportunities as being insufficient.
OMB Recommendation. Alternative #2. Hold program funding level until a more definitive program management
plan makes it clear as to whether or not additional funds can be effectively utilized.
GERALS
R.
FORD
Issue Paper
Energy Research and Development Administration
1977 Budget
Issue #2: Hydrogen Pilot Plant
Statement of Issue
In the context of Fossil Energy's Coal R&D Program, should ERDA fully fund a $100 million pilot plant to produce
high purity hydrogen from coal at a NASA facility?
Background
In the course of securing a source of liquid hydrogen to fuel the Space Shuttle, NASA examined a range of
options, including the use of coal, oil, or natural gas to produce hydrogen. A conventional process using
natural gas as a feedstock was selected, and in June 1975, NASA signed a twelve year contract under which the
contractor would construct an additional 30 tons per day of liquid hydrogen capacity at an existing facility.
The plant's vulnerability to natural gas curtailments was one of the reasons NASA investigated coal and other
feedstock alternatives.
Despite NASA's assured twelve year supply (1975-1987) of liquid hydrogen, the agency has supported an ERDA
proposal to construct a pilot plant to produce pure hydrogen gas (30 ton/day) from coal (200 ton/day). Tenative
plans provide that ERDA would fund construction, startup and one to three years of R&D operation at a total
estimated cost of $110 million; and that NASA would provide a fifty acre site adjacent to the existing plant,
would utilize its "fast-track" procurement and management capability to build the plant quickly, and possibly
fund the operation of the hydrogen plant as a backup source of hydrogen until 1987, and as on-line source of
hydrogen after NASA's existing contract expires in 1987.
The coal fed hydrogen pilot plant is of interest to ERDA for two reasons: (1) the facility involves
several coal gasification and and gas clean-up steps that are also utilized in producing low-BTU gas and high-
BTU gas from coal; and (2) hydrogen is an intermediate product in processes which convert coal to liquid fuel and
some relevant R&D could be conducted in this facility
The ERDA request involves reprogramming $32 million in funds appropriated to fossil energy for more general
and small scale R&D efforts in FY 1975 and FY 1976, and providing an additional $37 million in FY 1977. These
funds would cover pilot plant design and construction, but an additional $42 million would be needed
for start-up, operating, and associated R&D costs over the next four years
2
The ERDA Coal R&D program already contains the following efforts, totaling $62 million (BA) in FY 1976,
that produce some of the same information that would result from the proposed hydrogen pilot plant: four
low-BTU gasification pilot plants and process development units, five high-BTU gasification pilot plants,
and one pilot plant for the production of hydrogen (which uses a method different from that of the proposed
pilot plant).
The FY 1977 funding requested for the hydrogen pilot plant represents about 10% of the total Coal R&D
program request which is directed at improving many different technologies for the utilization of coal. The
overall program involves laboratory and pilot plant work on converting coal to liquid and gaseous fuels,
on using coal-gas to run gas turbines, on burning coal with greater efficiency and low sulfur emissions, as
well as basic research and system studies. This Coal R&D program is closely linked to a demonstration plant
program to demonstrate high-risk advanced technology (see Other Issue ) and will contribute substantially
to the operation of the proposed Synthetic Fuels Commercial Demonstration Program (see Other Issue
).
Alternatives
#1. Proceed with design and construction of a fully Federally funded ERDA/NASA hydrogen pilot plant
at a total estimated cost of $111 million. In addition, ERDA requests a $35 million increase, over
FY 1976, in the other Coal R&D program areas for a total of $336 million (BA) in FY 1977.
#2. Proceed with a cost-shared pilot plant designed and located to best complement ERDA's Coal R&D program;
use NASA site if it is still suitable. This alternative also recommends funding for the remaining
Coal R&D Program at a level which is $ 29 million below that requested, and $6 million above FY 1976 funding
Analysis
July 1- Sept.
1975
1976
30, 1976
1977
1978
1979
1980
1981
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
($ Millions)
Coal R&D:
Alt. #1 (Agency req.)
256
128
301
282
83
46
336
321
507
424
597
562
617
635
544
615
Alt. #2 (OMB Rec.)
256
128
301
282
83
46
307
307
427
365
433
416
437
481
356
434
Hydrogen Pilot Plant:
Alt. #1 (Agency req.)
14
--
15
--
3
--
37
29
12
36
12
28
9
9
Alt. #2 (OMB Rec.)
14
--
15
--
3
--
--
6
15
31
12
17
5
10
95
5
3
ERDA presents three arguments in support of its request:
- The hydrogen pilot plant will contribute to the Coal R&D Program's objectives by providing a large-scale
facility that utilizes an approach different than any currently in the Federal program. Outside of the
coal demonstration program, none of ERDA's pilot plants exceeds: 50 tons of coal per day in size.
- NASA procurement and management procedures are more established and could move more quickly than ERDA,
thus the requested approach may result in a facility with lower total costs than might otherwise be
possible.
- Beyond its R&D contribution, the hydrogen pilot plant may provide an alternate fuel supply for NASA's space
shuttle program.
However, there are several arguments against proceeding with this pilot plant:
- NASA's need for hydrogen from this facility appears marginal because (1) under the terms of the June
1975 contract, Air Products, Inc., has agreed to provide all of NASA's projected liquid hydrogen
requirements over the next twelve years; (2) the hydrogen pilot plant is likely to be very expensive
to maintain on a standby basis for use during possible mid-winter natural gas curtailments, because of
the staffing, maintenance, and inventorying (e.g., coal) costs; (3) even though pilot plant operating
costs are difficult to project, no one has argued that the pilot plant's product will be inexpensive
enough during the early 1980's to justify NASA abandoning its use of the natural gas-fed plant which
it must pay for, whether it uses it or not, (this is a provision of the June contract); and (4) the option
of using the pilot plant as an on-line source for hydrogen after 1987 must be weighed against the
possibility that a more economical version of the coal-fed process will become available as a result of
ERDA's other R&D efforts.
- The coal R&D objectives of this pilot plant might be better met if it were co-located with some other
coal R&D activities. This would expand the possible research opportunities, and may also reduce the costs
of construction and operation.
- The involvement of a private sector cost-sharing partner would not only reduce the Federal costs, but might
also result in an improved pilot plant design, and a product which is more marketable than high purity hydrogen
The same equipment, differently configured, can provide a variety of fuel gases or petrochemical feed-
stock gases. The coal gasifier system for the hydrogen pilot plant that ERDA tentatively selected has
already been extensively tested by the manufacturer (Shell-Texaco) at the 30-50 tcn-of-coal/day size, and
scaling up to 200 tons/day should not present a very large risk. One firm, DuPont, already appears eager
to test this system with or without a Federal partner.
4
-
The scheduling of this pilot plant is neither critical to the development of any larger device or vital
to gaining a fundamental understanding that might impact on future R&D decisions. In part, this is
due to the number of similar related efforts ongoing in this research area.
As a consequence of these observations, it is recommended that ERDA seek a private cost-sharing partner (at
least 1/3 private funding) and consider a pilot plant with a broader range of applications. It is expected
that this would obviate the need for additional funds in FY 1977 because of the funding ($32 million) provided
in FY 1975 and FY 1976, could reduce the eventual cost to the Federal Government, and would delay the project
by one year.
The $29 million reduction from the request in Coal R&D is recommended in order to reduce excessive pilot
plant operating funds, improve phasing of the gas turbine research program, and reduce the pace of development
in the low priority MHD (magnetohydrodynamics) research program. This latter area is of special concern to
Senator Mansfield and it may be expected that he will carefully scrutinize the denial of any requests in this
area, even though the program doubled in FY 1976 and the recommendation is for 32% growth in FY 1977. Generally,
the FY 1977 Coal R&D recommendation provides for decreases in coal liquid and gaseous fuel R&D as related pilot
plant construction ends, and provides for increases in gas turbines, direct combustion, and MHD.
Despite the small increase in funding that is recommended in FY 1977 over FY 1976, the Coal R&D program
is viewed by the Administration as having a very high priority, and substantial program "growth" is expected
to occur during FY 1977 and in subsequent years. This apparent contradiction with the funding level is due to
the fact that over the last three years funding decisions have been based on projected growth rates that did
not occur. Consequently, funds were unobligated in both FY 1974 and FY 1975, and the program now has over
$100 million available for obligation during FY 1976 in addition to the funds shown on page 2. It is likely
that some FY 1976 and transition quarter funding will be carried over into FY 1977, but this should be the last
year of sizeable carryovers.
Agency Request: Alternative #1. ERDA has stated that their current plan is the most cost effective approach to
providing NASA with an alternate hydrogen resource and at the same time aid in the development of new technology
for the generation of hydrogen and low-BTU industrial fuel gas.
OMB Recommendation. Alternative #2. ERDA should proceed with a pilot plant project with a primary purpose of
producing a hydrogen-enriched gas, but with a broader range of potential R&D applications. At least 1/3 private
cost-sharing should be sought, and NASA should be urged to continue to make its site available to the program.
Issue Paper
Energy Research and Development Administration
1977 Budget
Issue #3:
:
Solar Energy
Statement of Issue
What should be the pace of the solar energy program?
Background
The current ERDA solar energy program is largely the result of two acts passed by the 93rd Congress, the Solar
Energy Research, Development, and Demonstration Act (P.L. 93-473), and the Solar Heating and Cooling Demonstration
Act of 1974 (P.L. 93-409). These acts authorize a program of research, development, and demonstration with the
goal of providing the option for utilizing solar energy as a viable contributor to the Nation's future energy needs.
Energy from the sun may be converted into usable forms of energy by means of several conversion technologies
which may be grouped into three principal categories: (1) direct thermal applications, involving the collection of
sunlight through thermal collectors for uses such as the heating and cooling of buildings, (2) solar electric
applications, in which energy from the sun is transformed into electricity, and (3) fuels from biomass, involving
the production of fuels such as methane, alcohols, hydrogen, or other energy intensive products from organic
materials. ERDA has estimated that the future contribution of these solar energy technologies could be:
Energy Production (Quads)
CONVERSION TECHNOLOGY
1985
2000
2020
Direct Thermal Applications
.2
3
20
Solar Electric Applications
.07
5
15
Fuels from Biomass
.5
3
10
Total Projected U.S. Demand
100
150
180
Estimated % of National Demand
0.8%
7%
25%
1/
Q: Quadrillion (1015) Btu's or Quads
2/
The U.S. now uses 75Q/year
2
ERDA has requested $199 million for the FY 1977 solar energy program (as compared to $89 million in FY 1976).
Of this total, $177 million is for heating and cooling of buildings and solar electric applications. These two
activities are the subject of the following major subissues. Other solar programs, which include fuels from
biomass, agricultural and industrial process heating, and technology utilization and support, are described in
the Other Issues section (pages 7, 8, and 9, respectively).
Subissue #1
What should be the size and pace of the solar heating and cooling demonstration program?
Background
The Solar Heating and Cooling Demonstration Act of 1974 provides for the demonstration, within a three year
period, of the practical use of solar heating technology, and for the development and demonstration, within a five
year period, of the practical use of combined heating and cooling technology. The Act further provides that such
systems be installed in a sufficient number of different geographic areas under varying climatic conditions to
constitute a realistic and effective demonstration. The legislative reports indicate that the number of installations
should be set administratively, but that residential installations should be in substantial numbers, and that 2000
or more units would meet the requirement.
The demonstrations are planned to be conducted in five yearly cycles through FY 1979, with the first three
cycles concentrating on solar heating and the later cycles concentrating on combined heating and cooling. The
cycle begun in FY 1976 will implement approximately 22 commercial installations covering seven regions and approximately
100 residential installations covering 12 climatic regions. ERDA is in the process of completing a study of the
optimum number of demonstration units considering such factors as climate, number of building starts, number of
types of hardware systems available, and different building types. Although the results of their study have not
been available for OMB analysis, preliminary indications are that ERDA may recommend a total program of 800-1000 total
demonstration projects within the five year period, of which about 600-800 would be residential and 200 would be
commercial. ERDA's FY 1977 request for the second cycle corresponds to approximately 275 demonstration units, most
of which will be residential installations for solar heating.
3
Solar heating and cooling systems are inherently a supplemental energy source and not a total substitute
for conventional heating and cooling systems because of the diffuse nature of the sun's energy, requiring large
collectors, and because of residential energy needs during periods of darkness or cloudy weather. Although
maintenance costs are typically low, current solar systems have an initial cost of several thousand dollars
and are not economic for the homeowner today, except in areas where solar radiation is excellent and the cost
of alternative energy sources is very high. ERDA has estimated that the heating and cooling program could
result in energy production of 0.2Q by the year 1985 and 2Q by the year 2000.
The demonstration projects to be developed in the later cycles are expected to have advanced energy storage
components as well as a cooling capacity. These systems, although probably more expensive than heating only systems,
may offer greater utilization by day, week and season and prove to be more viable for both the homeowner and utility.
Alternatives
#1.
Authorize a highly accelerated demonstration program of approximately 275 units for the cycle
beginning in FY 1977, with a total program of 800-1000 units expected through FY 1979.
#2.
Authorize an accelerated demonstration program of approximately 100 units for the cycle
beginning in FY 1977, with a total program of approximately 400-500 units expected through
FY 1979.
Analysis
July 1 - Sept.
1975
1976
30, 1976
1977
1978
1979
1980
1981
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
($ Millions)
Alt. #1 (Agency req. &
12
5
27
22
8
5
54
46
61
55
61
55
10
15
10
12
cutback)
Alt. #2 (OMB rec.)
12
5
27
22
8
5
29
25
33
26
33
26
5
6
5
6
4
Alternative #1, the Agency's request and ceiling solution, provides for highly accelerated demonstration
of current technology systems, and envisions a continuing high level program through FY 1979. This alternative
demonstrates uneconomic systems which may have a minimal, or even negative impact, on the far term production
of energy from this source. This approach provides for 800-1000 total installations through FY 1979.
Alternative #2, provides for an accelerated but more orderly program, recognizing the potentially positive impact
of successful demonstrations, but allowing for a slower pace more consistent with the economics of current technology.
Because the solar heating systems now being generated are not generally economic, OMB staff believes that the number
of demonstrations should be limited to that required to evaluate the technical effectiveness of candidate systems in
varying environments; additional demonstrations for the purpose of achieving greater visibility with the public would
not be appropriate at this time. This alternative would also place greater emphasis on research and development
which may lead to lower unit costs for later demonstrations. The total number of demonstrations with this alternative
may be no more than 400-500 through FY 1979.
Agency Recommendations: Alternative #1 and #2. Authorize a highly accelerated demonstration program which may
require 1000 demonstrations before 1980.
OMB Recommendation. Alternative #3. Authorize an accelerated but slower demonstration program, with more
emphasis on R&D and a total program of approximately 400-500 units.
Subissue #2
What should be the pace of the solar electric applications program?
Background
This subprogram involves four technological approaches to converting the sun's energy into electricity: solar
thermal electric, wind energy conversion, ocean thermal conversion, and photovoltaics.
In solar thermal electric, ERDA's principal thrust will be to focus the sun's energy on a central boiler with
a large field of mirrors. Though there appears to be no fundamental problems which restrict development of solar
thermal electric technology, neither the engineering nor economic feasibility of this technology has been established,
and its eventual application will probably be limited to intermediate load service in the Southwestern United States.
5
Wind conversion has been technically feasible for producing electricity for many years. However, because
of high capital costs and the requirement for strong steady winds to produce maximum output, wind systems are far
from economic today except in limited areas and isolated locations where strong winds are present and the cost
of alternative energy sources is high.
Ocean thermal conversion is a relatively low technology in which no breakthroughs are required to demonstrate
technical feasibility. In this technology, electricity is produced from a thermal gradient in the ocean. Ocean
thermal systems currently suffer the high capital costs of other solar systems and the resource is limited to the
United States Southeastern and Gulf Coasts, off the United States Pacific Coast, and around Hawaii and Guam.
Because of the cost and difficulty of transmitting electricity from an ocean thermal electric plant to land,
ocean thermal systems may not be feasible for large scale power delivery to the Continental United States
Photovoltaics involves the use of large arrays of semiconductor devices to convert the sun's energy directly
into electricity. These arrays have been built for space applications at costs in excess of $30,000/KW, but
large cost reductions on the order of 200:1 will be required for photovoltaics to be economic for large scale
applications. While scientific breakthroughs are thought possible, ERDA's thrust is to reduce costs through the
development of mass production methods. If economic, photovoltaic arrays could be widely applied in the United
States.
Alternatives
#1. Establish a highly accelerated program that seeks to realize the potential contributions of all the
major solar electric technologies at the earliest possible time.
#2. Continue an orderly but accelerated development of the potentially larger payoff solar thermal electric
and photovoltaic technologies where engineering and technical breakthroughs are thought possible. For
the wind and ocean thermal approaches, limit the program to assessing the accessible and recoverable
resource base and funding of critical component development.
Analysis
July 1 - Sept.
1975
1976
30, 1976
1977
1978
1979
1980
Budget Authority/Outlays
BA
1981
0
BA
0
BA
0
BA
0
BA
0
EA
0
BA
($ Millions)
0
BA
0
Alt. #1 (Agen.req.&cutback)
25
8
51
36
15
10
120
87
150
109
150
109
136
104
95
80
Alt. #2 (OMB rec.)
25
8
51
36
15
10
78
55
92
83
89
75
79
83
79
89
6
For alternative #1, ERDA believes that all major solar electric approaches must be greatly expanded to
achieve the potential contributions of solar electric technologies at the earliest possible date. ERDA also
believes that demonstration of each solar electric technology will be necessary to gain experience and generate
life cycle cost data. By ERDA's estimate, this alternative could lead to the following contributions:
Estimates of Energy Supplied by Solar Electric Techologies in Quads
Technology
1985
2000
2020
Solar Thermal
0.0
1.2
4.2
Wind
negl.
1.2
3.6
Ocean Thermal
negl.
.6
2.4
Photovoltaics
negl.
1.8
4.8
Totals
.07
4.8
15.0
OMB staff is skeptical of these resource estimates by ERDA, particularly for the wind and ocean thermal
approaches. However, marked improvements in the efficiency and cost-effectiveness of the solar electric technologies
may eventually prove the validity of some of these estimates.
Alternative #2 (OMB Recommendation) would permit an orderly but significant acceleration of solar thermal and
photovoltaic technologies, with an initial thrust towards determining the technical and engineering feasibility of
the technological approaches with higher long-term payoffs. This alternative would limit the wind and ocean
thermal approaches to advanced concepts that could lead to dramatic cost reductions, recognizing that costly
demonstrations of uneconomic near-term technologies are not likely to lead to any significant commercialization.
Agency Recommendation. Alternative #1. Authorize a program of highly accelerated development of all major solar
electric approaches leading to early, Federally-funded, demonstration of each approach.
OMB Recommendation. Alternative #2. Authorize an accelerated solar electric program in the higher long-term payoff
areas of solar thermal and photovoltaics. Redirect funding for wind and ocean thermal systems from early demon-
stration to advanced concepts.
Summary of All Solar Programs
(In Millions of Dollars)
Program
FY 1977
FY 1977
FY 1976
Request
OMB Rec.
BA
0
BA
0
BA
0
Direct Thermal Applications
(29)
(23)
(61)
(51)
(33)
(27)
- Heating & Cooling
27
22
54
46
29
25
- Agricultural & Industrial
Process Heat
2
1
7
5
4
2
Solar Electric Applications
(51)
(36)
(120)
(87)
(78)
(55)
- Solar Thermal
17
13
51
33
46
34
- Photovoltaics
19
13
38
27
23
14
- Wind
12
9
22
18
6
5
- Ocean Thermal
3
3
9
8
3
3
Fuels from Biomass
(6)
(3)
(8)
(6)
(6)
(4)
Technology Support & Utilization
(4)
(2)
(10)
(8)
(10)
(6)
Totals
89
65
199
152
126
91
Issue Paper
Energy Research and Development Administration
1977 Budget
Issue #4: Geothermal Energy
Statement of Issue
What is the appropriate strategy and pace for developing the potential of geothermal energy?
Background
ERDA's geothermal energy program is the result of the Geothermal Energy Research, Development and
Demonstration Act of 1974 (P.L. 93-410), which authorizes a program of research, development, demonstration,
and loan guarantees for geothermal energy development with a goal of establishing this energy source as a
viable potential contributor to the Nation's future energy needs.
Geothermal energy is the natural heat of the earth. Geothermal reservoirs have been found primarily
in the Western United States and along the Gulf Coast; more than half in the Western states are on Federal
land. The world's total production of electrical power from geothermal sources has reached only about
1000 MWₑ, or about the output of one large nuclear plant. The U.S. leads the world in such production,
generating 500 MWe from dry steam at the Geysers in California.
The primary geothermal resources are (a) hydrothermal reservoirs (hot mineralized water or dry
steam), (b) geopressured zones (zones of sand and clay saturated with methane gas and water at high
temperatures and pressures), and (c) hot dry rock (hot solid rock in earth's upper crust). The United
States Geological Survey has estimated the recoverable heat from these resources as follows:
Recoverable Energy (Quads)
Resource Type
Known
Inferred
Hydrothermal
- dry steam
2
2
- hot liquids
100
360
Geopressured
600
1730
Hot Dry Rock
80-600
240-1900
2
Currently, energy extracted from geothermal resources is used primarily to generate electrical power;
however, other potential energy uses include heating, refrigeration, and industrial processing requiring
heat. Unlike facilities using coal, oil, or other fuels, geothermal power plants and associated facilities
must be constructed at or near the well-head because transporting steam is difficult.
ERDA's current strategy is to encourage the present geothermal industry (about 20 companies) to develop
the more accessible but more limited hydrothermal resources, mostly for electric power generation, so that
the industry gains sufficient experience with geothermal utilization technologies to be able to adapt these
technologies to exploit the less accessible but more abundant geopressured and hot dry rock resources.
Development of the more abundant and geographically distributed geopressured and hot dry rocks resources has
not been undertaken by industry largely because the technologies for accurate reservoir assessment and
extraction have not been developed. ERDA has estimated that if their program is approved and successfully
implemented, the following energy production could be achieved:
Estimated Geothermal Energy Production Given Successful Program Implementation
(Quads)
Resource
1985
2000
2020
Hydrothermal
0.6
2.5
3.1
Geopressured
negl.
1.2
9.0
Hot Dry Rock
.0
.7
6.5
Total Energy
.6
4.4
18.6
Approximately 50% of the outlays in ERDA's request are devoted to hydrothermal applications and the
near-term demonstration of electric power generation. ERDA believes that much of the hydrothermal technology
that it would develop would be applicable to tapping the geopressured and hot dry rock resources.
Alternatives
#1. Continue current strategy to encourage the rapid development of hydrothermal resources, including
demonstration projects.
#2. Redirect the program by concentrating on the development of the much more abundant but longer-
term resources. Continue hydrothermal development at approximately the FY 1976 level in order
to develop key components which will have application to both hydrothermal and advanced resources.
3
Analysis
July 1 - - Sept.
1975
1976
30, 1976
1977
1978
1979
1980
1981
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
-
-
($ Millions)
Alt. #1 (Agency req. &
cutback)
28
20
31
32
8
4
60
56
141
114
117
121
95
112
54
30
Alt. #2 (OMB rec.)
28
20
31
32
8
4
49
42
50
45
50
48
50
50
50
50
Alternative #1 calls for rapid acceleration in the development of hydrothermal resources for initial
significant production in the 1985-2000 time period. The disadvantage of this alternative is that it
calls for initiation of costly demonstration projects in the next several years that will focus on developing
technology for tapping geothermal resources with limited potential.
Alternative #2 provides for orderly but accelerated growth in the R&D program and encourages development
of those technologies (i.e., those to tap geopressured and hot dry rock resources) holding the greatest payoff.
This alternative would continue some hydrothermal development in key component areas in order to stimulate
the expansion of the existing industry to yield an early contribution. However, this alternative does not
provide for early, federally-funded, commercial-scale demonstration of electric power generation from
hydrothermal resources, but rather relies primarily on the private sector to tap these nearer-term resources.
Agency Request: Alternative #1. The agency believes that accelerated production of geothermal energy should
be developed largely through the stimulation of the small existing industry towards the development of
hydrothermal resources.
OMB Recommendation. Alternative #2. While the- identified resources for geothermal are substantial, no
analysis has been done justifying a greatly accelerated effort for the development of hydrothermal resources.
The pace and strategy of the program should match the relative potential of the geothermal resources as long-
term energy sources.
Issue Paper
Energy Research and Development Administration
1977 Budget
Issue #5: Conservation Programs
Statement of Issue
What should be the funding level for R&D in conservation programs, particularly those programs aimed at
more efficient energy consumption in buildings, industry, and transportation?
Background
There are two paths for achieving energy conservation through improved technologies: (a) greater efficiency
of production, distribution, and storage of energy, and (b) reduced consumption of energy at the end-use.
-
Projects to achieve greater efficiency fall into the areas of electricity transmission and distribution,
storage of energy in more advanced batteries, creating energy from fuel cells, and utilization of
garbage and other organic wastes for energy.
-
Projects to achieve reduced consumption of energy at the end-use through improved technologies fall
into three categories: industry, buildings, and transportation. Examples of projects proposed by
ERDA include:
Industrial projects, such as 2/3 ERDA funding of $30 million for a more energy efficient
steel rolling mill and $1 million for a pilot plant to dry grain in a vacuum with microwave
heating.
Building projects such as development of data on energy consumption in residential and commercial
buildings. This is to support the President's legislative proposal for energy performance standards.
on residential and commercial buildings. Another project is similar to the HUD total energy
plant in Jersey City.
Transportation projects such as contracts with the auto industry to develop advanced engines
and grants to universities to study the use of methanol fuel mixtures as substitutes for gasoline.
2
Industry conducts R&D related to conservation of energy in all key program areas, although the levels of
effort and commitment vary from area to area.
- Electricity transmission and distribution: The Electric Power Research Institute, funded by elec-
tric utilities, is spending $12 million for electricity transmission and distribution for CY 1975,
which is the same amount to be outlayed by ERDA in FY 1976. ERDA works closely with the Institute
as evidenced by the 23 joint projects underway, with industry paying an average 75% of the costs.
- Energy storage: Industry-wide R&D in this area has been estimated by ERDA at $10 million annually.
-
Transportation: Automotive R&D by industry has been estimated at $54 million in CY 1974 as a result
of an NSF survey.
- Buildings and industry: The same HSF study indicated $56 million was spent in these end-use areas.
ERDA has requested a tripling in BA for conservation R&D from $72 million in 1976 to $224 million in
1977. The largest increases have been requested in the energy storage program and in the three programs
concerned with reducing energy consumption -- buildings, industry, and transportation. These increases
are consistent with strong congressional interest which views conservation programs as directly helping
consumers in contrast to other ERDA R&D which is perceived as helping big industry. Also end-use programs
tend to have short-term benefits relative to ERDA's other R&D programs.
ERDA's proposed strategy for Federal activity in conservation R&D implies a large Federal role in order
to ensure, in virtually all areas, that improved technology developments occur in a timely fashion.
Specifically, ERDA argues for a strong Federal role because:
-
Some potentially high payoff technology development activities are very expensive. For example in
R&D on advanced automobiles, a university research team has estimated that $1 billion should be
spent over the next 5-10 years. If an advanced automobile, such as one with a Stirling or turbine
9401
engine is mass produced, the payoff could be 2 million barrels of oil per day by the year 2000.
KUNDSIT
Some potentially high payoff technologies are far off. For example, improvements in battery tech-
nology are being sought through studies on electrochemistry and on materials. The payoff here would
be to eliminate dependence on oil for auto fuel, or store energy to meet peak power demands.
Some potentially high payoff research is high risk. For example, it has been estimated that 30% of
the electric power outages are caused by lightning. Yet the technology does not even exist to
measure lightning surges in power lines in order to develop equipment that could accommodate the
surge and prevent the outage.
3
The criteria for analyzing ERDA's individual R&D programs in conservation are:
-
Is the program adequately justified and sized in terms of its costs, benefits, and risks of technical and
commercial success?
-
What is the appropriate role of the Federal Government to perform the R&D relative to the
private sector?
-
Should ERDA or some other agency perform the Federal R&D?
-
Can ERDA effectively manage the requested program growth?
Alternatives
#1. Maintain a level program and take the chance that the private sector will perform more R&D?
#2. Allow some growth in high priority projects in transportation and energy storage.
#3. Same as #2, but with increases also in buildings and industry projects which might satisfy
the criteria if a better justification was available on costs, benefits, and the Federal role?
#4. Greatly accelerate energy conservation R&D programs in all major areas.
Analysis
July 1 - Sept.
1975
1976
30, 1976
1977
1978
1979
1980
1981
Budget Authority/Outlays
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
BA
0
($ Millions)
Alt. #1
31
17
72
55
18
14
72
65
72
72
72
72
72
72
72
72
Alt. #2 (OMB rec.)
31
17
72
55
18
14
99
78
120
90
130
110
140
130
140
140
Alt. #3
31
17
72
55
18
14
124
90
160
130
180
160
190
175
200
190
Alt. #4 (Agency req.)
31
17
72
55
18
14
224
150
345
257
392
305
400
324
395
336
Alternative #1, which is level in dollars, would result in a decrease in program level due to inflation. It
would signal a very limited Federal role. It would be interpreted as totally unrealistic by supporters in
Congress and elsewhere who believe there are substantial benefits available from conservation R&D, particularly
as compared to benefits from other energy R&D programs. While the level of benefits is open to discussion,
there is sufficient information about benefits to warrant modest increases on programmatic grounds in all key
areas. In the areas of transportation and energy storage, significant opportunities may be missed.
Concerning the agency request (Alternative #4) information is not sufficient either from ERDA or other
sources to justify a tripling of BA. The Federal role relative to industry would be significantly increased
tn all areas, particularly with demonstrations. ERDA would infringe on many other agency responsibilities.
Finally, ERDA's ability to effectively manage a tripling in BA is doubtful.
Alternative #2 best satisfies the criteria for R&D by providing for increases in transportation and
energy storage.
- Benefits from advanced autos include a 25-40% improvement in fuel economy, even after the 40%
improvement being promised by Detroit. Advanced engines would also meet the most stringent emission
standards and run on fuels other than gasoline, such as methanol and synthetic gas from oil shale or
coal. Battery advances whether applied to transportation, industry, homes, and even utilities can
smooth the fluctuations in energy demand during the day and week and as mentioned before in the case
of autos reduce petroleum demands. Energy saved in transportation and energy storage is potentially
more cost-effective in terms of oil and gas savings relative to energy savings in buildings and
industry, since the latter areas depend more heavily for energy from fuels other than oil and gas.
- The Federal role associated with Alternative #2 is more clear in an absolute sense and relative to
other conservation programs. While industry does R&D in energy storage and advanced automobiles,
its level of effort is below what is probably socially desirable. In advanced autos alone it is
estimated that the nation, including Government and industry, should be spending from three to five
times what it is currently spending. Industry would probably spend more on R&D in advanced autos
but does not because Federal requirements on auto emissions and safety divert R&D funds
in the industry to these purposes. For example, in the 1974 NSF survey private R&D spending by the
auto industry was reported as $139 million for environment and $54 million for conservation.
- The ERDA role is also clear relative to other Federal agencies for Alternative #2. The increase in
transportation R&D would go almost exclusively to advanced autos. NASA would retain the predominate
role in aviation conservation as evidenced by their 1977 budget mark of $29 million, up from $11
million in 1976. In energy storage no other agency is performing significant R&D.
- Finally there is little doubt ERDA could manage the increase associated with Alternative #2.
Alternative #3, provides further increases in buildings and conservation, because ERDA feels so strongly
about them. Yet these programs are not as well justified in terms of costs, benefits, risks, Federal
role, etc. But as a fallback position to appeals from the agency on Alternatives #1 and #2, this alternative
still does not provide for the most questionable projects in the agency request, such as in garbage recycling
(about which they also feel quite strongly) and demonstration projects, like the steel mill.
OVERVIEW
FY 1977 ERDA Budget - Overview
General
This Overview paper discusses:
- OMB's initial planning assumptions for ERDA (7/75).
- ERDA's original FY 1977 budget request (9/75).
- ERDA's response to the revised FY 1977 ceiling (10/75).
The primary differences between the OMB staff recommendations and
the ERDA approach to reaching the revised FY 1977 ceiling are high-
lighted and major issues are identified.
Following this Overview paper is a separate section on energy
R&D strategy.
In addition, possible further reductions are listed in priority order
at the end of this paper.
OMB Initial Planning Assumptions
In July 1975, ERDA was provided an FY 1977 Planning Ceiling of $5.1B (BO)
which was essentially a runout of the ongoing program levels with no
provision for major new initiatives. The $1B allowed over the FY 1976
spending total of $4.1B was required to cover three roughly equal amounts
of increase to carry out the approved program: (a) runout costs of
approved energy R&D facilities or demonstration projects; (b) additional
uranium enrichment production and capacity expansion; and (c) cost-of-
living increases for other programs.
ERDA Original FY 1977 Budget Request
On September 30 ERDA submitted its FY 1977 budget request of $6.2B ($1.1B
over ceiling). ERDA was unwilling to provide its recommended approach to
reach the Planning Ceiling. ERDA took the position that the Planning
Ceiling level was inadequate to provide for needed growth in high priority
energy R&D and defense programs (see attached letter of September 30
from Mr. Fri).
The original FY 1977 ERDA budget submission of $6.2B (outlays) assumes
a very ambitious growth rate for all program categories:
- Energy R&D - ERDA desires to press forward with an accelerated
program for all technologies (pursuant to their June 30 Plan).
- Uranium enrichment - The cost growth is the result of the planned
increase in production from existing Government plants (including
increased costs of electricity) and the ongoing capacity expansion
program for these three plants. These increases are required to
assure enriched fuel for civilian power plants and to provide in-
ventories to backstop private uranium enrichment.
2
- Defense-related programs - The increases primarily relate to the
desire of ERDA and DOD for ERDA's weapons design laboratories to
devote more effort to advanced R&D, including related underground
testing (this objective was recently supported by the President
in a FY 1976 budget amendment). In addition, ERDA projects sub-
stantial increases for weapons production and for storage of
radioactive wastes from plutonium production.
- Other programs - The increases cover a request for more than 1,000
additional Civil Servants (over a base of 8,052) and a plan to
initate a major construction program to rehabilitate and modernize
ERDA's laboratories.
ERDA Response to Revised (Cutback) FY 1977 Ceiling
FORD
Although the Division identified a number of potential cutbacks in
response to the President's $28B tax reduction program, the revised
LIBRARY
ERDA ceiling had to be raised from $5.1B to $5.3B in order to give
some recognition to the fact that the original ceiling did not provide
funds for major initiatives in the nuclear fuel cycle (e.g. plutonium
recycle and radioactive waste management).
In response to the revised ceiling, ERDA (after an intensive review)
reduced its FY 1977 request by $.4B to $5.8B. ERDA also identified
actions which could be taken to reach the $5.3B revised ceiling.
However, ERDA strongly recommended against going below the revised
request of $5.8B (see attached ERDA letter of October 29). Thus,
the gap between OMB and ERDA has been reduced from $1.1B (initial
request) to $.5B (revised request).
OMB Staff Assessment of Revised ERDA Request and Ceiling Case
The reductions made by ERDA to reach the $5.8B level have removed much
of the excessive funding contained in the original request. All programs
have been reduced and in a generally reasonable way.
In addition, despite ERDA's objections, we believe that many of the
specific reductions identified by ERDA to get to the revised ceiling
of $5.3B are acceptable. These include:
- A slight slowdown in energy R&D programs (particularly conservation
and fusion) which would still be 42% above FY 1976 spending levels.
- A reduction in the request for nuclear weapons R&D, testing, and
production (still almost 10% over FY 1976 spending levels).
- An 8% increase in the charge for uranium enrichment services, based
upon cost increases experienced.
- Across-the-board decreases in procurement of equipment, computers,
and facility improvements.
3
However, in some cases ERDA has suggested unacceptable reductions to
reach the $5.3B revised ceiling:
- We would recommend against the large reduction in the production of
enriched uranium which was identified by ERDA to reach the revised
ceiling. This would result in large penalty charges for cancelling
electric power already ordered for the production plants. Most
importantly, this would reduce the amount of enriched uranium avail-
able to backstop private enrichment ventures and handle contingenices.
- In addition, we would not recommend accepting ERDA's revised ceiling
action of deferring the initiation of new efforts to resolve critical
nuclear fuel cycle issues (See Issues #6-#7).
- We would also recommend against the shutdown in FY 1976 of the N-Reactor,
Richland, Washington, which we do not believe is a realistic option
(See Issue #11).
- Furthermore, we would also recommend against a non-programmatic
reduction suggested by ERDA which would only consist of deferring
the payment of $40M of bills to FY 1978.
OMB Staff Approach
Although OMB staff has not bought all of the reductions identified by
ERDA to reach the revised ceiling of $5.3B, we have been able to come
even lower ($5.2B) by:
- Decreasing non-nuclear energy R&D.
- Reducing supporting energy R&D.
- Decreasing weapons R&D, testing, and production.
- Applying other, relatively smaller, reductions throughout ERDA's
program.
The principal difference between the OMB staff approach and the ERDA
revised ceiling solution concerns the relative priority of certain non-
nuclear energy R&D programs (mainly solar and conservation) versus
uranium enrichment production.
- ERDA would protect a very large (65%) growth in non-nuclear energy
R&D by greatly reducing the production of enriched uranium.
- OMB staff believes that the rate of spending growth in non-nuclear
energy R&D can and should be constrained. In particular, we believe
that solar, geothermal, and conservation R&D could not effectively
use the full amounts contained in ERDA's revised ceiling case and
that, in many areas, there should be greater reliance on the private
sector. Under the OMB staff approach, non-nuclear energy R&D would
still receive a 31% increase over FY 1976 (see separate section
following on Energy R&D strategy).
4
- In addition, for the reasons discussed previously, OMB staff would
protect the production of enriched uranium.
The OMB staff approach also provides for the initiation of major R&D
efforts on nuclear reprocessing and commercial radioactive waste manage-
ment. The ERDA revised ceiling solution assumes that these important
initatives could not be covered within the revised ceiling.
The OMB staff approach would substantially reduce the size of a new
initiative on improving the reliability of commercial nuclear power
plants which we believe should primarily be the responsibility of the
private sector.
Summary Table
The following table summaries ERDA's budget trends by major program
category (outlays $M):
FY 1977
ERDA
Rev.
ERDA
FY 1975
FY 1976
Req.
ERDA
Ceiling
OMB
Direct energy R&D
(1012)
(1417)
(2514)
(2308)
(2100)
(1931)
Non-nuclear
207
514
1043
872
847
671
Nuclear
805
903
1471
1436
1253
1260
Supporting energy R&D
( 317)
( 363)
( 498)
( 425)
( 424)
( 392)
Environmental
149
178
241
210
210
190
Basic sciences
168
185
257
215
214
202
Production of enriched
uranium (including off-
setting revenues)
- 27
300
651
623
498
601
Defense-related programs
(1501)
(1647)
(1984)
(1924)
(1793)
(1796)
Nuclear weapons
1010
1067
1293
1238
1168
1141
Weapons materials
production
276
341
466
460
399
429
Naval propulsion
reactor R&D
215
239
226
226
226
226
All Other
( 344)
( 382)
( 570)
( 511)
( 479)
( 488)
High energy physics
172
178
215
201
195
191
Program support (e.g.
personnel)
206
245
328
295
284
266
Misc. revenues
- 85
-101
- 81
- 81
- 53
- 76
Other/fin. adjustment
51
60
109
96
53
71
Subtotal
3146
4085
6216
5791
5291
5208
Other funds
:
5
6
6
6
11
Total Outlays
3146
4090
6222
5797
5297
5219
(BA)
(3588)
(5194)
(7570)
(6948)
(6343)
(5971)
5
Major Issues
At this time, the major issues between OMB and ERDA appear to be the
following:
- The rate of growth for non-nuclear energy R&D programs (Issues #1-#5).
- The scope and pace of initiatives in the nuclear fuel cycle (repro-
cessing and radioactive waste management) (Issues #6-#7).
- The initiation of a program to improve the reliability of commercial
nuclear power plants (Issue #8).
- The additional 1,040 personnel requested by ERDA (Issue #9).
- The level of weapons R&D and underground testing (Issue #10).
- Future plans for the N-Reactor, Richland, Washington, (Issue #11).
In addition, there are numerous other issues which involve less
significant differences between OMB and ERDA. These issues are
covered in the "Other Issues" section of this book.
Possible Further Reductions
If it were necessary to reduce ERDA spending below the $5,219M recommended
by OMB staff, the following actions could be taken (arranged in priority
order with the most attractive potential action listed first and the
least desirable action last).
(Outlays - $M)
1. Further increase the price charged for
uranium enrichment to the level likely
to be charged by a new commercial plant
- 72
2. Terminate the Molten Salt Breeder
Reactor (MSBR) civilian power
backup concept
- 4
3. Further slow the pace of develop-
ment of the controlled thermonuclear
fusion program
- 14
4. Terminate all R&D on gas-cooled civilian
power reactors
- 45
6
(Outlays - $M)
5. Shutdown the N-Reactor, Richland,
Washington, in FY 1976
- 9
6. Greatly reduce the production of
enriched uranium, as identified in
ERDA's Planning Ceiling solution
- 92
7. Cancel construction of the $2B
Clinch River Breeder Reactor (CRBR)
Liquid Metal Fast Breeder Reactor
demonstration plant
-100
TOTAL
-322
The pros and cons of these potential actions are discussed in the
last section of this book.
The Treatment of Inflation
Although ERDA has not formally requested an exception to the section
of Circular No. A-11 concerning price levels, ERDA has been frank to
state that future increases in cost-of-living have been assumed. ERDA
has projected an average cost-of-living increase of 9.8% over the price
levels assumed in the FY 1976 budget and the transition quarter (which
ERDA calculates is equivalent to an annual rate of 7.8% over the 15
month period).
It would be hard to argue that inflation has not had a severe impact
upon ERDA's budget and programs. Over 96% of ERDA's budget is spent
with contractors and suppliers. As a result, relative to other agencies,
ERDA does not benefit much from the semi-automatic inflation adjustment
made possible by periodic Civil Service pay raises.
ERDA must pay competitive market rates for highly skilled technical
staff, complex equipment and components, construction of facilities,
and electric power for uranium enrichment and high energy physics
accelerators.
7
In recent years, much of the funding increase allowed by OMB for ERDA
programs has in fact been consumed by inflation. Expressed another
way, if level funding had been provided there would have been about a
10% per year reduction in real program levels.
Inlevel-of-effort programs (e.g. weapons R&D, basic research), OMB
has not allowed sufficient funding growth to cover actual inflation.
As a result, there has been a gradual reduction in program activity
and in-house contractor employment levels.
We believe that it would be unrealistic to assume no inflation for
FY 1977. We have, therefore, generally assumed an inflation rate of
7.5%, which is about the amount of the GNP deflator for 15 months.
Conclusions
1. We believe that the $5,219M case recommended by OMB staff would provide
for a balanced and forward-moving program which covers all of ERDA's
high priority requirements.
2. ERDA will strongly resist a $5.2B allowance and will fight hard for
its $5.8M "Minimum Budget" (including amendments). ERDA will rely
upon the fact that its two main programs (energy and defense) have
been given high priority by the Administration. OMB and ERDA have the
most disagreements on the non-nuclear energy R&D programs other than
fossil (primarily solar and conservation) and the weapons programs.
3. At the $5,219M case, OMB can reply that all of ERDA's energy programs
are receiving significant increases--the only question is the rate of
increase. Moreover, we have not recommended wholesale program ter-
minations or drastic program stretchouts.
4. Depending upon the severity of the overall fiscal situation, some of
the possible further reductions may be attractive. However, these
reductions would require substantial changes in ERDA's ongoing program
which would be difficult to achieve.
& DEVELOPMENT
UNITED STATES
ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION
WASHINGTON, D.C. 20545
USA
September 30, 1975
Honorable James T. Lynn, Director
Office of Management and Budget
Dear Mr. Lynn:
Enclosed is a summary presentation of our 1977 Budget Estimates which
has been reviewed informally with your staff. Detailed justification
material prepared in accordance with OMB Circular No. A-11 is being
provided separately.
Our request for budget authority amounts to $7,520 million, of which
$5,487 million is for the Operating Expenses appropriation and $2,033
million is for the Plant and Capital Equipment appropriation. Estimated
net outlays amount to $6,219 million, of which $4,922 million is for
Operating Expenses and $1,297 million is for Plant and Capital Equipment.
In terms of outlays, our estimates are $1,149 million over the 1977
budget planning target of $5,070 million provided in your letter of
July 25, 1975. The OMB target leaves no room for growth in key energy
conservation and research, development and demonstration programs,
many of which are in their initial stages and require substantial
increases to develop into effective programs. In fact, the combined
effect of the inflation being experienced in the economy and current
"mortgages" in the ongoing energy R,D&D programs and uranium enriching
activities essentially absorb the entire increase reflected in the OMB
target. The target is also inadequate to provide needed additional
funding in 1977 in support of our national defense obligations and to
alleviate present unsatisfactory conditions in our facilities through
upgraded nuclear safeguards, improved fire and safety protection,
compliance with the Occupational Health and Safety Act and replacement
of general purpose facilities.
Nearly all ERDA programs involve high priority Presidential commitments
and objectives. This is particularly true of those programs directed
toward the reduction of energy demand through conservation and the
development of additional sources of clean energy, the production of
nuclear materials for civilian power plants, and national defense
activities. The timely accomplishment of these program objectives is
fundamental to the Nation's energy independence, economic well-being,
and national security. Thus, we feel a strong obligation to present our
best judgment of the resources required to carry out these programs
most effectively.
REVOLUTION
AMERICAN
BICENTENNIAL
1776-1976
Honorable James T. Lynn
-2-
We are, of course, keenly aware of and firmly dedicated to the
President's objectives of minimizing Federal spending to help
curb inflation. Our request reflects an intensive and painstaking
review by the Assistant Administrators and Senior staff to minimize
1977 funding while meeting the program objectives established in
the June 30, 1975 National Plan for Energy Research, Development
and Demonstration. While we recognize that any increase in OMB's
short-term budgetary planning may be difficult to accomodate, we
strongly believe that our programs will contribute significantly
to stablizing the economy in the future and to providing new
sources of energy essential for the Nation's continued development.
We also recognize that there are a large number of policy issues
to be considered in the 1977 budget cycle. Among these are the
support of the civilian nuclear fuel cycle including R&D to improve
the current generation of light water civilian reactors, the
Presidential initiative for commercial enriching, funding for
national security, peaceful uses of nuclear explosives, and
initiatives required by the Federal Nonnuclear Energy Research
and Development Act of 1974. In the next few weeks we will be
submitting the results of several internal studies and analytical
efforts dealing with these issues.
As you are aware, we are conducting a review of our laboratory and
field office utilization which may necessitate some modification
to our request. We also plan to provide OMB with a revised
estimate for the Weapons Production program following decisions
on the DOD budget, about December 1, 1975.
Finally, we are in the process of reviewing our Management by
Objectives (MBO) program to insure that current goals and objectives
are compatible with those outlined in the National Plan for Energy
R,D&D as well as other policy decisions made since the establishment
of ERDA. We are now in the process of establishing a Program Approval
Document (PAD) system. The PAD's will establish the baseline for
program evaluation and will include the definition and examination
of critical milestones and objectives necessary to program success.
It is anticipated that PAD's documenting all significant energy
programs will be completed by late January, 1976. We believe that
this system will provide the necessary framework for selection of
the key milestones and objectives essential to the effective measurement
of agency performance and progress.
Honorable James T. Lynn
-3-
We look forward to working closely with you and your staff in
the next few months in developing an optimum Administration
program for ERDA in the President's 1977 budget.
Sincerely,
Robatha
Robert W. Fri
FORD & LIBRAR 078338
Deputy Administrator
Enclosure:
As Stated
October 29, 1975
Nonorable James T. Lynn
Director
Office of Management and Budget
Dear Mr. Lynn:
As requested by your staff, we have made a further review of the 1977
budget request for ERDA to determine the programmatic inpacts of an
outlay constraint at $5,290 million instead of the $6,219 million we
requested. Our review indicates that a reduction to the $5,290 million
level would require a drastic curtailment of high national priority
efforts and initiatives essential to the nation's further energy inde-
pendence, economic well-being, and national security; would be inconsis-
tent with announced Presidential goals and objectives; and is, we believe,
an unacceptable level in the context of an overall budget for the Federal
Government. Specifically it would require, among other things, that we:
Defer for one year the initiation of new Federal initiatives
to close the nuclear fuel cycle, to resolve acceptable methods
of long-term storage of commercial nuclear wastes, and to
improve the availability of current light water reactors. Such
action could jeopardize the growth of nuclear power as a national
energy source and make us even more dependent upon foreign oil.
o Defer energy research and development programs to increase the
efficiency of electrical energy transmission and storage, and
delay the development of nuclear fusion and fission as inex-
haustible energy resources, thus prolonging our dependence on
others.
0 Drastically curtail our national defense activities by:
- Reducing production and stockpile maintenance
below levels considered acceptable by the Secretary
of Defense and the Joint Chiefs of Staff.
- Reducing laboratory R&D and advanced weapons
development programs which the President recently
approved for increased funding in 1976 based on
recormendations from ERDA, the Secretary of Defense,
and the National Security Council.
Honorable James T. Lynn
2
- Reducing testing below that necessary to support the
R&D program agreed upon by ERDA and the Secretary of
Defense.
Deferral of construction and reduced production from our
uranium enriching operations, resulting in the permanent loss
of 2,500,000 units of separative work valued at about
$190 million. This loss could jeopardize our ability to
support the introduction of private enrichment.
Across-the-board reductions resulting in elimination and
stretchout of new construction projects and equipment
purchases which will impact programs to upgrade our
facilities for fire and safety protection and compliance
with environmental standards and OSHA requirements.
We recognize, however, the severe problem in fashioning a budget which
holds overall Federal outlays to the level recently announced by the
President. We want to be fully supportive of this effort. Accordingly,
we have developed an alternate request for 1977 which would hold our
outlays to $5,734 million, which is about $500 million or 8 percent
less than our already "trimmed down" request of September 30th. This
alternate level still requires substantial cutbacks and deferrals,
which adversely affect our programs, and we believe it to be the
minimum level needed to meet our objectives in energy R&D, production
of nuclear materials for civilian nuclear power, and support of national
security programs. In the event OMB considers that this minimum level
cannot be accommodated, I would appreciate the opportunity to meet
personally with you and the President in order to resolve an acceptable
budget level for the programs we are to carry out.
We have provided to your staff detailed statements of the programmatic
impacts at these levels. A separate classified impact statement is
being forwarded for our national security programs.
Sincerely,
Robert C. Seamans, Jr.
Administrator
R&D STRATEGY
Overview Paper
1977 Budget for Energy R&D
GERAL FOND
I. Introduction
A. Role of R&D in Overall Energy Policy
Although the specifics of a national energy
policy have not yet been agreed upon, it is
generally accepted that, for reasons of national
security as well as economic stability, the
U.S. must move to become less dependent on
foreign energy supplies.
R&D, although by no means the only potential
contributor to achieving U.S. energy inde-
pendence, can provide important new energy
supply and utilization options for the future
as well as improving or assuring the viability
of current technologies.
Thus, the overall goal of an energy R&D program
is to assure development of a range of commercially
viable and environmentally acceptable technological
options to provide the capability to use extensive
U.S. domestic energy resources more fully. This
will, in many cases, require Federal support to
bring technologies to the commercial demonstration
stage.
Due to long development lead times, major pay-
offs from new technology will come after 1985.
However, because domestic oil and gas supplies
currently in widespread use are declining and
because of an expected increase of 50% in total
U.S. energy demand by 1985, it is important to
have new energy technologies available for
possible commercialization in this time frame.
2
B.
Energy Resource Considerations
Table 1
Domestic Energy Consumption and Supplies
15
(in 10
Btu or Quads)
Fuel
Consumption
Recoverable
Source
1974
Reserves*
Resources*
Coal
13.8
5,200-10,400
33,000-
Oil
33.8
250-
410
590-1,920
Gas
22.3
230-
430
1,040-1,700
Shale
0.0
460- 1,160
1,050
Hydro
2.9
N/A
N/A
Nuclear
1.2
29,200-
?
88,200-
?
Solar
0.0
0.0
N/A
Geothermal
0.0
Negligible
900-2,000
TOTAL
73.2**
35,000+
120,000+
Although oil and gas, including imports, account
for about 80% of domestic energy consumption,
they represent less than 2% of U.S. domestic
proved recoverable energy reserves and about
1% of recoverable resources.
- At $11/barrel (in 1974 dollars),
domestic production of oil and gas
is expected to peak in the middle to
late 1980's and decline thereafter,
even with extensive use of advanced
recovery technologies and aggressive
exploration of OCS and Alaska.
By contrast, coal and nuclear fuel supplies--
which currently provide for only 18% of domestic
consumption--account for almost all of the
remaining 98% of energy reserves and 99% of
recoverable resources.
*Entries correspond to full energy content of resource
and do not take account of efficiencies of utilization.
**1985 demand is estimated to be between 103 and 118
Quads, depending on the prevailing world price of oil.
3
- Although domestic coal supplies are
extensive and accessible, their use
is severely limited by environmental
constraints. Widespread use of coal
without relaxing environmental standards
will require new clean conversion
technologies (e.g., gasification,
liquefaction) or those permitting
direct use of coal (e.g., flue gas
desulphurization)
- Current projections of nuclear plant
capacity indicate that in 20 to 30 years,
all economically recoverable supplies of
uranium (U235) to fuel current generation
of reactors would be fully committed.
Tapping the remaining 98% of known U.S.
nuclear resources, represented by U238
and thorium, will require development
of breeder reactors.
- Recovery of potentially significant solar
and geothermal resources is currently
limited by technological and economic
uncertainties. Their economical use
will require development of new or
improved technologies.
C. Criteria for Federal Involvement
Rationale for Federal involvement in energy R&D
is to compensate for inability of market system
to meet adequately, or in a timely fashion,
certain important U.S. goals related to national
security, environmental protection, and economic
growth and stability. More specifically, Federal
R&D efforts are needed:
- To increase the probability of success of
the Nation's energy R&D effort by assuring
adequate National investment despite short-
term fluctuations in market incentives;
- To accelerate significantly the achievement
of U.S. capability to make use of the full
range of its domestic energy resources;
4
- To ensure that the U.S. energy R&D effort
is balanced and gives appropriate emphasis
to all relevant national goals, particularly
those which cannot be readily internalized
into market incentives by other forms of
Federal intervention (e.g., environmental
protection) ;
- To supplement private sector investment at
stages of R&D where appropriable benefits
are not commensurate with the costs and
risks (e.g., basic research, first demonstra-
tion plants) ;
- To compensate for structural imperfections
in the market such as excessive fragmenta-
tion and undercapitalization, and including
those which may result from Federal inter-
vention justified on other public policy
grounds (e.g., antitrust laws, utility price
regulations, etc.) ; and
- To support Federal regulatory activities of
certain Federal agencies, e.g., NRC, EPA.
Though the need for Federal support in energy R&D
is indicated, the Federal effort should encourage
private investment and to avoid unnecessary govern-
ment expenditures which merely replace private
efforts.
- Private sector participation in planning,
financing, and executing the R&D program
will reduce requirements for Federal
support and will increase the likelihood
that technologies will be commercially
viable and rapidly introduced.
II. Status of U.S. Energy R&D Effort
A. Status and Potential Payoff of Major Energy
Technologies
Table 2 summarizes the status and potential
energy contribution of the major new energy
technologies under development.
5
Table 2
STATUS AND POTENTIAL PAYOFF OF MAJOR NEW ENERGY TECHPOLOGIES
1
Date of First
2
Current Stage
Potential Energy
Technology Area
of Development
Comm. Demonst.
Contribution
1985
2000
Nuclear
3
Quads
Light Water Reactors
Commercial
in service
5.5
20.0
Gas Cooled
Demonstration
1976
nez.
1.5
Liquid Metal Breeder
Pilot Devel.
1983
neg.
2.5
Other Breeders
Applied Res,
unknown
0
neg.
Fusion (CTR + Laser)
Basic Res.
post-2000
0
neg.
5.5
25.0
Coal
Low Btu Gasification
Pilot Devel.
1975
.3
5.0
High Btu Gasification
Pilot Devel.
1980
.5
6.0
Liquefaction
Pilot Devel.
1980
.2
5.0
Clean Combustion
Applied Res.
mid-1980
neg.
5.0
Limestone SGC
Demonstration
1974
5.0
15.0
Advanced SGC
Pilot Devel.
late 1970's
neg.
5.0
6.0
41.0
Geothermal
Dry Steam
Commercial
in service
neg.
neg.
Wet Steam & Liquids
Applied Res.
1983
.4
1.1
Hot Dry Rock &
Basic Res.
1987
.2
1.1
Geopressured
.6
2.2
Solar
Heating of Buildings
Demonstration
1974
.1
.75
Cooling of Buildings
Pilot Devel.
late 1970's
.1
.75
Solar Electric Applications
Applied Res.
early 1980's
neg.
1.5
Fuels from Biomass
Applied Res.
early 1980's
.5
0.9
.7
3.9
0il, Gas and Shale
Advanced Oil Recovery
Pilot Devel.
late 1970's
3.0
6.0
Surface Shale Retort
Demonstration
late 1970's
.3
5.0
In-Situ Shale Retort
Pilot Devel.
mid-1980's
neg.
2.0
3.3
13.0
New Conservation Technologies
Industrial Processes
Pilot Devel.
1980
.5
2.0
Commercial & Residential
Buildings
Demonstration
1977
.3
1.5
Transportation
Pilot Devel.
1980
.3
4.0
1.1
7.5
1/ Definitions:
Basic Research: Fundamental scientfic problems have not been overcome.
Applied Research: Laboratory experiments have verified that no fundamental
scientific problems remain to be solved.
-- Pilot Development: Pilot plant (approximately 1/100 scale) operations or
prototype assembly have verified that major engineering problems associated
with integrated systems have been solved.
-- Demonstration: First near-commercial scale demonstration has successfully
operated, although perhaps not in an economically competitive way because
of first-of-a-kind costs.
Commercial: Technology is commercially available and presently competitive
with existing alternatives
2/ Rapid commercial introduction could follow by 5-10 years, depending on relative
economics.
3/ Units in Quads or 10¹⁵ B.t.u. U.S. consumption in 1974 in 75 Quads.
6
B.
Recent Trends in Federal and Private Energy R&D
Expenditures
On June 29, 1973, a major acceleration of
the Federal energy R&D program was announced.
Supplemental funds were appropriated for
FY 1974 and further major increases were
approved for FY 1975 and are also expected
for FY 1976.
Obligations ($ Billion)
1974
1975
1976
Area
Actual
Estimate
Estimate
Direct Energy R&D
Nuclear
0.8
0.9
1.1
Fossil
0.1
0.4
0.5
Other Non-Nuclear
0.1
0.3
0.3
Total
1.0
1.6
1.9
Support Program
Environmental Effects 0.1
0.3
0.3
Basic Research
0.2
0.2
0.2
Total
0.3
0.5
0.5
Total Energy R&D
1.3
2.1
2.4
(ERDA)
1.1
1.7
2.1
(Other agencies)
.2
.4
.3
Though difficult to estimate accurately,
private sector funding for energy R&D
currently appears to be over $1 billion
annually and increasing.
- A survey of 1,400 firms indicates annual
increases in private spending on energy
R&D of over 20% in both 1973 and 1974.
7
III. Energy R&D Program Strategy
A. Criteria for Determining Federal Energy R&D Priorities
Priorities among specific energy R&D programs
(e.g., nuclear, coal, solar, etc.) should be
determined by:
- Potential contribution of new technology
to increasing usable energy supplies.
- Probability R&D will be technically successful.
- Likelihood that technology will be economically
competitive when environmental costs are
considered.
- Timing of potential contribution considering
any non-technical constraints to commercializa-
tion.
- Cost of R&D.
- Extent of private sector investment.
B. General Elements of Pre-ERDA Federal Energy
R&D Strategy
Minimum Federal involvement in R&D projects
with good potential for early commercial
application and where substantial private
sector resources and capability exist (e.g.,
oil and gas recovery, conservation, automotive,
etc.).
8
Strong Federal support, on a cost-shared
basis, for longer-term (10 years +) R&D
programs aimed at making use of vast U.S.
coal and nuclear resources (e.g., breeder
nuclear reactor, coal liquefaction and
gasification, etc.).
- This includes partial Federal support
of expensive, high-risk, first-of-a-
kind demonstration plants, e.g., synthetic
fuels, nuclear fuel reprocessing, etc.
Continuing Federal support, even without
substantial industry cost-sharing, of
very long-range, high-risk R&D programs
which have potential for great payoff
(e.g., fusion, central station solar
electric).
Continuing Federal support of programs in
basic research, environmental and health
effects research, and safety where there is
no strong incentive for private sector
investment.
C. ERDA's Recently Proposed Energy R&D Strategy
As required by statute, ERDA has prepared
its first version of a comprehensive National
Energy Research, Development and Demonstration
Plan. This plan must be updated annually in
January, and thus it coincides with the
submission of the President's Budget.
The major conclusions of ERDA's Energy R, D
and D Plan (ERDA Report No. 48) are:
- To achieve our National energy policy
goals including reducing our reliance
on imports, the U.S. "must have the
flexibility of a broad range of energy
choices."
- "To generate the necessary options,' the
Nation's energy R&D program must "facilitate
the changeover from dependence on a narrow
base of diminishing domestic resources to
reliance on a broader range of less limited
or unlimited alternatives."
9
- And finally, "all the national energy
technology goals must be pursued
together. Concentration on only one
or a few technological avenues is not
likely to solve the energy problem."
ERDA's priorities among major energy R&D
program areas have been generally established
through a National Ranking of Energy R,D and D
Technologies, shown in Table 4. As will be
discussed further, ERDA's priority ranking
does not correspond totally with its budget
requests that greatly accelerate smaller pay-
off programs.
As a result of its analyses, ERDA concluded
that "five major changes are needed in the
nature and scope of the Nation's energy R&D
program" (although the first and to some extent
the second were already reflected in the
President's 1976 Budget Request to Congress
and his State of the Union Message).
1. "Acceleration of commercial capability
to extract liquid and gaseous fuels
from coal and shale."
2. "Emphasis on overcoming the technical
problems inhibiting expansion of high
leverage existing systems - notably coal
and light water reactors."
3. "An immediate focus on conservation efforts." "
4. "Inclusion of the solar electric approach
among the inexhaustible resource technologies
be given high priority."
5. "Increased attention to under-used new
technologies that can be rapidly developed."
(e.g., geothermal, solar, heating and cooling)
As a result of ERDA's view of energy R&D strategy
and its recommendations to alter the President's
1976 Budget, some further increases were requested
from the Congress in:
- conservation R&D;
- solar R&D;
- advanced oil and gas recovery R&D;
- coal R&D;
- oil shale R&D; and
- nuclear fusion.
10
Table 3
ERDA'S NATIONAL RANKING OF R,D, &D TECHNOLOGIES
Highest Priority Supply
Near-Term Major Energy Systems
Coal-Direct Utilization in
Utility/Industry
Nuclear-Converter Reactors
Oil & Gas-Enhanced Recovery
New Sources of Liquids and Gases
Gaseous & Liquid Fuels from Coal
for the Mid-Term
Oil Shale
"Inexhaustible" Sources for the
Breeder Reactors
Long-Term
Fusion
Solar Electric
Highest Priority Demand
Near-Term Efficiency (Conservation)
Conservation in Buildings &
Technologies
Consumer Products
Industrial Energy Efficiency
Transportation Efficiency
Waste Materials to Energy
Other Important Technologies
Under Used Mid-Term Technologies
Geothermal
Solar Heating and Cooling
Waste Heat Utilization
Technologies Supporting Intensive
Electric Conversion Efficiency
Electrification
Electric Power Transmission
and Distribution
Electric Transport
Energy Storage
Technologies Being Explored for
Fuels from Biomass
the Long-Term
Hydrogen in Energy Systems
11
D. Critique of Major Aspects of ERDA's Energy
R&D Strategy
The most fundamental conclusion of ERDA's
analysis, and the major premise underlying
its National Energy R&D Plan is in error -
that is, that "all the national energy
technology goals must be pursued together,
and that concentration on only one or a
few technological avenues is not likely to
solve the problem."
- As can be seen from considering Tables
1 and 2, all technological approaches do
not have to be pursued. If Light Water
Nuclear Reactors continue to provide an
increasing fraction of electric generation
capacity, if breeder reactors are developed
for future electric power generation and
if synthetic gaseous and liquid fuels are
produced from coal and oil shale, then the
U.S. can achieve and maintain substantial
energy independence by the year 2000 from
a relatively few technologies.
- Solar and geothermal utilization technologies
are expected to provide only a small contribu-
tion to domestic energy supplies before the
year 2000.
- Improved conservation technologies, as opposed
to wide application of existing technologies,
while providing some reductions in demand, are
not likely to result in large savings.
Another major change in ERDA's proposed energy
R&D strategy, and also reflected in its budget
request for FY 1977, is the inclusion of fusion
power and solar electric technology in the same
priority category as the Liquid Metal Fast
Breeder Reactor (LMFBR). This does not appear
warranted on the basis of the current status of
the technologies and the likely timing of their
payoff.
- The LMFBR is a proven technological concept.
Although substantial engineering develop-
ments remain and there are concerns about
environmental and safety problems, there is
little doubt it will work and can be made
safe. (The French have been operating a
250 MWe. plant for one year). Furthermore,
its economics are likely to be favorable.
12
- Although fusion offers the potential of
virtually unlimited energy supplies with
fewer and less severe environmental and
safety problems, fusion has not even
reached the point of proven scientific
feasibility, and years remain before the
engineering feasibility is established,
much less a workable reactor system.
- Generation of electricity from the sun,
although technically feasible now, is far
from being economically competitive.
Major technological advances will be
needed to reduce the high capital costs
of this option.
Finally, the last major element of ERDA's
proposed revised Energy R&D strategy is to
emphasize shorter-term and potentially high
payoff technologies to ensure substantial
energy production from conventional nuclear
power and conventional oil and gas. The major
issue here is the need for and extent of
Federal involvement.
E. OMB Staff's Recommended Strategy
Continued strong emphasis on R&D programs
that will assure the U.S. a capability to
use its vast coal and nuclear energy resources.
Specifically:
- R&D and demonstration of technologies for
fuel reprocessing and waste management so
that the growth in the generating capacity
from the current generation of Light Water
Nuclear Reactors can be assured. The OMB
staff recommendation for FY 1977 provides
for a major acceleration in ERDA's research
and development programs for nuclear fuel
reprocessing and commercial radioactive
waste management.
- R&D and demonstration of the Liquid Metal
Fast Breeder Reactor to provide a technology
to tap the 98% of uranium resources which
cannot now be used. The FY 1977 OMB staff
recommendation provides for the continuation
of the design and construction of the $1.95B
Clinch River Breeder Reactor LMFBR demonstra-
tion plant, with initial operations scheduled
for 1983 (the same schedule and funding level
as requested by ERDA).
13
- R&D and demonstration of advanced coal
gasification and liquefaction and other
technologies that can greatly increase
usable coal supplies. The OMB staff
recommendation for FY 1977 would continue
an aggressive R&D program related to coal
including gasification, liquefaction and
direct combustion and would also include
funds for demonstration plant design in
gasification and for construction of a
clean boiler fuels demonstration plant.
- A Synthetic Fuels Commercialization Program
to gain early information on economic,
environmental, regulatory and other
uncertainties inhibiting early commercializa-
tion. The FY 1977 budget would provide
mainly for administrative costs.
A more orderly pace for development of very
long-term options of solar electric and
nuclear fusion, which are not likely to be
determined to be commercially feasible for
10-20 years. The OMB staff recommendation
for FY 1977 provides for a 50% growth in
fusion over 1976 (as opposed to ERDA's requested
100% increase) which would slip the next large
fusion experimental reactor by perhaps 3 months
and the overall schedule for commercial
demonstration by 2-3 years in the mid-1990's.
The FY 1977 solar electric program would grow
substantially in the potentially high payoff
area of solar thermal and photovoltaics, but
would be sharply reduced in the lower payoff
area of wind energy and ocean thermal energy
conversion.
Low priority on highly popular (with the
Congress and the public) but lower payoff
programs in solar heating and cooling and
geothermal energy. The OMB staff recommenda-
tion for FY 1977 would be to hold these
programs at their FY 1976 level pending
completion of cost/benefit analyses justifying
a larger effort.
14
Low Federal priority on nearer-term, higher
payoff program, such as advanced oil and gas
recovery, nuclear plant reliability, and certain
conservation R&D programs, where industry has
both the resources and the incentives due to
higher energy costs to fund such R&D. The OMB
staff recommendation for FY 1977 would essentially
hold these programs to their current low levels.
A limited and highly selective approach to
Federal funding in other end-use conservation
R&D areas in order to ensure maximum private
sector response to market forces. The OMB staff
recommendation for FY 1977 would provide some
increase in potentially high payoff areas of
energy storage and transportation.
Continued Federal support of basic and environ-
mental effects research where industry has little
or no incentive for investing. The OMB staff
recommendation for FY 1977 would provide increases
sufficient to cover inflation of the past year.
Table 4 summarizes the impact of the OMB staff
strategy on the trend of direct energy R&D
funding, and its relation to estimates of private
sector R&D investments.
- The OMB recommended level of Federal funding
for FY 1977 continues the recent trend of
$500 million (BA) per year increases. The
Federal non-nuclear R&D remains in FY 1977
about 40% of the total direct energy R&D
budget.
- The total national energy R&D effort, federal
plus private, is estimated to be about 60% non-
nuclear R&D activity over the 1974-1981 time
period, but with most of the nuclear R&D being
undertaken with Federal funds. Table 4 also
indicates the major amount ($8.6 billion) of
private funds that will be spent on commercial-
scale demonstrations due to federal financial
incentives programs, as well as the almost $3
billion to be expended in joint private-federal
R&D.
15
TABLE 4
Private and Federal Energy R&D Funding
($Millions, Budget Authority)
1/
3/
Federal Funding
Private Funding
TOTAL 1974-198T
2/
TOTAL
Participation in
In-house
Program Area
1974
1975
1976
1977
1974-1981
1974
Federal R&D
R&D
Direct Energy R&D:
Non-nuclear R&D:
(253)
(619)
(795)
(910)
(7248)
(877)
(2040)
(10440)
Fossil 4/
111
393
413
538
4261
506
1400
6000
Solar
24
51
94
126
840
2
140
20
Geothermal
13
34
34
49
355
2
--
20
Conservation
39
48
78
99
852
150
400
1800
Environmental
Control
66
93
84
98
940
217
100
2600
Nuclear R&D:
(756)
(938)
(1147)
1617
(11353)
(128)
(800)
(1540)
Fission
644
749
880
1223
8670
125
800
1500
Fusion
112
189
267
384
2683
3
--
40
TOTAL, DIRECT ENERGY
R&D
1009
1557
1942
2527
18601
1005
2840
11980
Synthetic Fuels Commercial
Demonstration Program
600
--
600
--
8000
Geothermal Development Fund
4
4
24
--
600
1/
Includes R&D in ERDA and other agencies such as EPA, NSF, DOI, NASA, and NRC.
2/
OMB recommended level of funding.
3/
1974 is the most recent available data. Statistics are based on two NSF surveys, and because of inevitable
non-respondents figures are presumed to represent a lower limit. The 1974-1981 in-house R&D figures are
extrapolated from 1974 data.
4/
The Federal funding is only about 8% for oil and gas, whereas, the private funds are 95% for oil and gas.
POSSIBLE REDUCTIONS
FY 1977 ERDA Budget
Possible Further Reductions
Savings (Outlays-$M)
PRO
CON
FY 1977
FY 1978
1. Further increase uranium
Economically justifiable (new enrichment
May jeopardize the Administration's
enrichment charge (to $100
plants will probably charge this amount).
current legislative proposal to allow
per unit)
72
70
ERDA to recover more than just the
Government's costs (ERDA has estimated
to GAO and Congress that the new
"commercial charge" proposed in the
FY 1976 budget would be about $76 per
unit). The increase to $81 per unit
included in ERDA's Planning Ceiling
Case may be all that is politically
feasible now.
2. Terminate the Molten Salt
The MSBR concept is not now a viable
The MSBR has some potential attractive-
Breeder Reactor (MSBR)
5
5
backup effort in case the Liquid Metal
ness from the standpoint of resource
Fast Breeder Reactor (LMFBR) is un-
utilization (uses thorium) and repro-
successful (a much higher funding level
cessing (continuous on-line).
would be required).
The LMFBR program is likely to be success-
Has strong support from Tennessee
ful and not need the MSBR as a backup.
delegation (R&D done at Oak Ridge).
The MSBR has difficult technical problems.
3. Slow the pace of controlled
Although potentially very attractive in
ERDA has prepared and is following a
thermonuclear fusion
the long-term (beyond year 2000) fusion
detailed plan for development of fusion
program.
14
22
has not yet been proven to be scientifi-
which, if successful, could lead to the
cally feasible. The program is now
realization of the benefits of fusion
entering a phase which requires high
in the shortest reasonable time.
cost large scale experimental devices
and large investments to solve the
The fusion program is very popular in
engineering problems. An alternative
Congress because of its potential
would be to conduct a basic technology
environmental and safety advantages
program which will emphasize the use of
over fission reactors.
smaller experimental devices while
deferring major test reactors until more
results are available from experiments.
FY 1977 ERDA Budget
Possible Further Reductions (cont'd.)
Savings (Outlays-$M)
PRO
CON
FY 1977
FY 1978
4. Terminate R&D on gas-cooled
The commercial support for the High
The HTGR has potential advantages over
civilian power reactors
45
50
Temperature Gas Reactor (HTGR) has
light water reactors (in addition to
virtually collapsed as a result of utility
uranium, uses thorium which is a re-
HTGR
(36)
(41)
contract terminations. The parent firms
latively abundant resources; higher
GCFBR
( 9)
( 9)
of Gulf Atomic Corporation appear to be
thermal efficiency means less thermal
cutting losses and offloading the company.
pollution; possible utilization for
process heat applications).
Even if commercial support can be recon-
stituted, it would probably require at
The Government should not take the
least $18 of Government funds to make the
initiative to cancel ongoing
HTGR an economically attractive venture
research on the HTGR until it
(primarily requires solving difficult
becomes clear that the concept is
reprocessing and waste management pro-
unable to attract new commercial
blems).
support.
If the HTGR is terminated, gas-cooled
The gas-cooled fast breeder reactor
fast breeder R&D could also be ter-
(GCFBR) appears to have a higher breeding
minated because of lack of commercial
ratio than the LMFBR (which means that
support and the likely succes of the
it could produce plutonium fuel at a
LMFBR. The GCFBR also has a serious
faster rate than the LMFBR).
safety problem.
5. Shutdown the N-Reactor,
9
30
Richland, Washington in
FY 1976 (net)
Discussed in Issue #11.
GERALD
EURO
FY 1977 Budget
Possible Further Reductions (cont'd.)
Savings (Outlays-$M)
PRO
CON
FY 1977
FY 1978
6. Reduce the production of
Due to the slippage in the construction
The effects of the reactor schedule slip-
enriched uranium
92
--
schedules of many power reactors, near-
page are offset by other factors:
term requirements for enriched uranium
fuel have been deferred and ERDA's pre-
- plutonium recycle will at least be
produced inventory will thereby be in-
delayed, increasing requirements for
creased.
uranium fuel.
The 10% reduction in future inventory
- utilities are experiencing difficulties
from this action may not be critically
obtaining uranium feed needed for the
required.
enrichment process, which means that
more of ERDA's inventory may have to be
used.
Since the inventory covers many contin-
gencies (e.g., backstop private enrich-
ment ventures, meet emergency require-
ments), the prudent course would be to
maintain a stockpile adequate to ensure
a reliable fuel supply for nuclear power
plants.
The lost inventory would have a value of
$200M.
FY 1977 Budget
Possible Further Reductions (cont'd.)
Savings (Outlays-$M)
PRO
CON
FY 1977
FY 1978
7. Cancel construction of
The $2B CRBR has experienced a huge cost
The CRBR will demonstrate licensability,
the Clinch River Breeder
overrun (original estimate was $.7B)
maintainability, and operability of
Reactor (CRBR) LMFBR
which raises questions as to whether the
LMFBRs.
demonstration plant
100
220
benefits of the project are worth the
cost.
ERDA maintains that going directly to a
full-scale plant would be technically
The CRBR will be based upon a relatively
risky.
conservative design, which, together with
its small size (350 MWe), ensures that
The CRBR project has momentum with a
the CRBR will not demonstrate potentially
Government-industry team in place and
favorable economics.
components being ordered.
An alternative would be to cancel the
The CRBR has become symbolic of the
CRBR and initiate design of a larger
entire LMFBR program which the Admini-
plant with full-scale components which
stration strongly supports. Any move
would be much closer to a commercial
to cancel the CRBR (even with the intent
power plant.
of going to a larger project later)
would be interpreted as a major blow by
Administration against the LMFBR
program and nuclear power in general.