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Philip W. Buchen Files
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The original documents are located in Box 16, folder "Federal Energy Administration -
General (2)" of the Philip Buchen 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 R. 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States of America his copyrights in all of his unpublished writings in National Archives collections.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.
[Avg. 1975?]
THE WHITE HOUSE
WASHINGTON
Robert Montgomery
Joe Bell
Mike Dozal
are here
FORD in LIBRARY
Digitized from Box 16 of the Philip Buchen Files
at the Gerald R. Ford Presidential Library
[Ang 1975?
ORDERAL ENERGY
FEDERAL ENERGY ADMINISTRATION
*
*
WASHINGTON, D.C. 20461
ADEA MION
OFFICE OF THE ADMINISTRATOR
MEMORANDUM FOR THE PRESIDENT
FROM:
FRANK G. ZARB
SUBJECT:
WINDFALL PROFITS TAX
BACKGROUND
In your January State of the Union Message you proposed
immediate decontrol coupled with a windfall profits tax
(WFPT). Since this original proposal, a number of events
have occurred which necessitates modifying your proposal.
- Congress repealed the depletion allowance.
- The Senate Finance Committee has reported a windfall
profits tax in the event of immediate decontrol.
ADMINISTRATION'S NEW WFPT
Your advisors have reviewed the current situation and have
developed a recommended WFPT which closely follows the
Senate Finance Committee bill. The basic features of the
deregulation tax are:
- Tax both old oil and uncontrolled oil (including oil-
from stripper wells), at 90% of difference between
base price of about $5.25 per barrel (increasing 0.5%
per month) and the sales price.
- Provide constructive base price for uncontrolled oil
equal to about $11.25 per barrel.
- Phase out the WFPT tax over 67 months by reducing the
amount of taxable oil by 1.5% per month.
FORD it LIBRARY OTHER
- 2 -
- A plowback credit which offsets up to 25% of the tax.
The credit is dollar for dollar for the amount of
qualified investments in excess of a threshold. The
threshold is 40% of the base price for old oil produced
during the taxable period (i.e., average of $2 per barrel).
There is no threshold for the credit with respect to
uncontrolled oil.
The recommended deregulation tax differs from the Finance
Committee bill by:
- Providing individualized base price for uncontrolled
oil depending on grade, quality and location rather
than flat $11.50 base price.
- Including stripper well production in uncontrolled oil
subject to tax.
Both of these modifications increase revenues from the tax
particularly in the later years.
CONSUMER COST INCREASES AND TAX REBATES
Your original State of the Union propósals would have increased
energy costs by approximately $30 billion and rebated to
energy consumers -- corporations, individuals and state and
local governments -- all of their increased costs.
Immediate decontrol, coupled with the removal of the import
fees of $2.00 and $.60 per barrel on crude oil and petroleum
products respectively will cause total energy costs to
increase by about $8.0 billion annually. Of these total costs,
individuals will pay approximately 5.1 billion directly and
the rest will be borne by industry and all levels of government.
The proposed windfall profits tax would collect $7.3 billion
directly and result in an additional $1.1 billion of corporate
income taxes from oil companies. However, deregulation in the
absence of a WFPT would also increase Federal taxes collected.
As a result of the Treasury estimates the net taxes collected
from the WFPT would be about $5.1 billion.
There is some disagreement over the level of consumer rebates.
From an energy perspective, maximum support of decontrol will
necessitate rebating the gross tax revenues i.e., $7.3 billion.
GERALD FORD LIBRAA
- 3 -
On the other hand this will have the maximum negative effect
on the budget deficit. Given the removal of the fees, the
greatest effect on keeping the deficit as close as possible
to $60 billion would argue for lesser rebates. However, any
decision to not fully rebate energy taxes is inconsistent
with your State of the Union energy proposals and the state-
ments of your advisors during the last several months.
The table below summarizes the budget deficit impact of these
alternatives.
Change in Budget Deficit in C.Y. 1976
No WFPT
WFPT with rebates of:
No rebates
$5 billion
$7 billion
Same monetary policy
+6.5B
+2.8B
$4.2B
Accommodating
monetary policy
+4.5B
+0.8B
$2.2B
The increased budget deficits are due in large part to the
loss of over $3 billion of expected Federal revenues when the
tariffs are removed. The larger deficits with no WFPT or
rebates are due to the adverse economic impact and resulting
loss of tax receipts if revenues are not recycled. The
deficit impacts in succeeding years may be somewhat larger.
The basic issue is the tradeoff between your basic energy
and economic policies.
- Raising energy prices, but maintaining consumer
purchasing power.
- Holding the line on the budget deficit.
The ERC recommends that all gross revenues collected from
the WFPT be rebated. Your other advisors will present their
views at the energy meeting later today.
STRUCTURE OF CONSUMER REBATES
If you decide to provide rebates of the WFPT, the structure
of such rebates should be modified. With the much lower levels
of total rebates, two basic questions should be asked.
FORD & LIBRARY GERALD
- 4 -
- Should the rebates for industry and S&L governments
be dropped?
- Should the rebates to individuals be on a per capita
basis or only for low and middle income individuals?
It is the consensus of your advisors that general rebates
to industry and state and local governments should be dropped
and only targeted rebates such as for farmers be included.
The issue of consumer rebate structure is still under review
and a decision paper will be prepared for you.
FORD is LIBRAR
FEDERAL
FEDERAL ENERGY ADMINISTRATION
WASHINGTON, D.C. 20461
INAV
RATION
OFFICE OF THE ADMINISTRATOR
September 17, 1975
MEMORANDUM FOR MEMBERS OF THE CABINET
FROM:
FRANK G. ZARB 21
Attached is a brief summary of the energy situation faced by
the Nation, with specific reference to various fuels. Also
attached is a review of the President's overall energy program
as proposed to Congress, and a status report on various
legislation pending in the House and Senate relating to the
several titles of the Energy Independence Act of 1975.
I hope that this information will be of use to you and your
Departments in preparing public presentations relating to the
energy situation and Administration energy policy.
Attachment
FORD i OFRALD LIBRARY
BACKGROUND
Vulnerability
*
In 1970, the average American householder spent approximately
$45 for foreign oil; last year, the bill was about $360.
In the first six months of 1975 direct Arab OPEC crude imports
accounted for 30% of total crude imports (1, 125 thousand barrels
per day) compared with a 1974 average of 20% (or 743 thousand
barrels per day). Our dependence on Arab crude oil has
increased since the days of the oil embargo.
Imported petroleum accounted for 17% of total energy use in 1974,
compared to less than 11% in 1970.
Natural Gas
*
Natural gas production in the U.S. peaked in 1973 at 22. 5 Tcf
and then declined by almost 6% in 1974 to 21. 2 Tcf -- the
equivalent of a decline of over 230 million barrels of oil.
*
Last year 2.0 trillion cubic feet (Tcf) of natural gas, or about
10% of total demand, was curtailed; this year a 45% increase
in curtailments is forecast, or about 2.9 Tcf of natural gas,
equalling about 15 percent of demand.
*
In North Carolina, for example, only 4 percent of industrial
natural gas requirements will be met.
Oil
*
Domestic oil production has been declining since 1970 (it is down
11 percent since early 1973) and has declined more than one-
half million barrels per day since last year.
Gasoline consumption has been about constant in the last two
years and would have been at least 500, 000 barrels per day
higher if it hadn't been for higher prices.
*
Billions of barrels of oil lie beneath the waters in the Atlantic,
Pacific, and Gulf of Alaska, but are as yet untapped.
Coal
Coal production is still at the levels of the 1920's.
We have more coal reserves than the Middle East has oil.
While coal is our most potentially abundant source of domestic
energy, coal output for domestic consumption fell in 1974 by 16
million tons, or almost 3 percent, compared to 1973 production.
FORD
FORD
LIBRAD
SARY
-2-
Electric Power
Last year, about three-quarters of all planned nuclear plants
and over one-fourth of all coal plants scheduled to be built
were either postponed or cancelled.
Costs for nuclear power plants continue to increase significantly;
a 1000 Mwe plant ordered today for delivery in the early 1980's
will cost close to one billion dollars, or $1000 per kilowatt.
A few years ago, the cost was about half.
LEGISLATION
Comprehensive national energy policy
The President's State of the Union message to Congress, January
15, 1975, was the basis for the Energy Independence Act of
1975 submitted to Congress. (See Tab B for outline of the
Act's 13 titles)
*
Status report on Administration proposals in Congress (Tab C)
Decontrol
*
The House rejected the President's 39-month compromise plan
to decontrol old oil prices in July, just before its August recess.
*
Immediate decontrol of old oil prices took effect on September
1, 1975, upon the statutory expiration of the Emergency Petroleum
Allocation Act.
*
The President vetoed a six-month extension of the Emergency
Petroleum Allocation Act on September 9, 1975.
*
The Senate sustained the President's veto on September 10, 1975,
effectively leaving oil prices uncontrolled.
*
The President has indicated his willingness to accept a 45 to
60-day extension of price controls on oil, if there are reasonable
assurances that such an extension would result in a compromise
plan to decontrol oil prices which meets the objectives of the
original 39-month proposal.
*
The House passed a bill on September 11, 1975, extending oil
price controls until October 31, 1975.
*
Action is still pending in the Senate on extension of oil price
controls.
FORD
LIBRARY
-3-
Protection for gasoline dealers under immediate decontrol
The "Gasoline Dealers' Protection Act of 1975" proposed to
Congress by the President on September 10, 1975 would prevent
oil refiners and distributors from terminating service station
leases or franchises for other than good cause, and would provide
station owners and dealers standing to seek treble damages and
injunctive relief in Federal courts if violations occur. The Act
is similar to the Automobile Dealers Day in Court Act of 1956.
Protection for small and independent refiners under immediate decontrol
Secretary of the Treasury Simon has asked the Senate Finance
Committee and the House Ways and Means Committeee to extend
provisions of the Old Oil Entitlements Program under the Emergency
Petroleum Allocation Act for one year, phasing them out over three
years, to provide an effective subsidy to small refiners and to
equalize access to domestic and imported crude oil for refining.
Protection for farmers under immediate decontrol
Secretary Simon has asked for legislation to provide rebates to
farmers to offset their higher energy cost. A direct tax rebate
would be provided to farmers based on their purchases of gasoline
and diesel fuel. A maximum rebate limitation or a gross income
ceiling for eligibility could direct rebates to smaller farmers.
Windfall profits tax
Rebates to farmers and refiners, as well as to low - and middle-
income taxpayers, would be financed by a windfall profits tax on
oil company earnings resulting from decontrol. The tax proposed
would be similar to the one worked out by the Senate Finance
Committee in July.
Natural gas legislation
*
"The Natural Gas Emergency Standby Act of 1975" was proposed
to Congress by the President on September 10, 1975, to deal
with expected shortages of natural gas this winter. The act:
-- authorizes the Federal Power Commission to approve pur-
chases of natural gas by interstate pipelines at unregulated
free-market prices when those pipelines have had to curtail
their high-priority end-use customers. These sales excepted
from regulation would be limited to 180-days duration.
FORD
&
-4-
-- allows high-priority end-users of natural gas to purchase
natural gas in producing states at unregulated intrastate
prices, then contract with interstate pipelines as common
carriers to deliver the gas to the point-of-use. This
provision would clarify and give legislative force to an
existing FPC rulemaking.
-- extends FEA's authority to require electric utility and industrial
boiler conversions from natural gas or oil to coal, and provides
standby authority to require conversions from gas to oil where
coal is not feasible.
-- provides authority to allocate and establish price controls for
propane in order to assure equitable distribution and reasonable
prices as demand for propane increases with growing unavailability
of natural gas.
FORD LIBRARY &
TAB A
FORD LIBRARY
is
GERALD
CHART I
DOMESTIC PRODUCTION OF CRUDE OIL
10.00
9.75
9.50
9.4
MILLIONS OF BARRELS PER DAY
9.25
9.00
1.0
MILLION
B/D
8.75
8.50
8.4
8.25
GERALD
4.
FORD
6.00
LIBRARY
JFMAMJJASOND J F M A M J J ASONDJFMAMJJASOND
1973
1974
1975
CHART II
IMPORTS OF CRUDE OIL AND PETROLEUM PRODUCTS
6.5
6.0
TOTAL IMPORTS
5.5
MILLIONS OF BARRELS PER DAY
5.0
4.5
IMPORTS FROM OPEC
4.0
3.5
3.0
2.5
OPEC % 49.7
OPEC % 55.5
OPEC % 65.8
LIBRARY GLRALD FORD
0
1st QTR 2nd QTR 3rd QTR 4th QTR
1st QTR 2nd QTR 3rd QTR 4th QTR
1st QTR 2nd QTR 3rd QTR 4th QTR
1973
1974
1975
CHART III
IMPORTS BY SOURCE 1960 - 1985
14
13
ARAB
12
CONTINUED
REGULATION
11
10
PRESIDENT'S
PROGRAM
9
8
MILLION B/D
7
6
5
4
3
GERALD
A.
2
FORD
1
LIBRARY
1960
1970
1974
1977
1980
1985
CHART IV
PETROLEUM IMPORTS
BASE
15
CASE
14
13
MILLIONS OF BARRELS PER DAY
12
11
10
9
8
PRESIDENT'S
7
PROGRAM
6
5
4
3
2
FORD in 978878 LIBRARY
1
1960
1965
1970
1975
1980
1985
CHART V
COST OF FUTURE EMBARGOS
120
NO PROGRAM
100
BILLIONS OF DOLLARS
80
60
40
NO PROGRAM
20
PRESIDENT'S
PRESIDENT'S
PROGRAM
PROGRAM
GERALD
is
1973/1974
1977
1985
FORD
LISSANY
CHART VI
IMPACT OF AN EMBARGO ON GNP
GNP
[$58]
PRESIDENT'S PROGRAM
1000
NO PROGRAM
500
FORD ?
1975
1976
1977
CHART VII
IMPACT OF AN EMBARGO
ON UNEMPLOYMENT
UNEMPLOYMENT RATE
10
/
NO PROGRAM
5
PRESIDENT'S PROGRAM
GERALD
R.
0
LIBRARY FORD
1975
1976
1977
CHART VIII
25
23
BASE CASE DEMAND
DOMESTIC PETROLEUM SUPPLY & DEMAND
21
19
PRESIDENT'S
[MILLION BBL/D]
PROGRAM
DEMAND
17
15
PRESIDENT'S PROGRAM SUPPLY
13
11
BASE CASE SUPPLY
5
9
?
FORD
1975
1977
1979
1981
1983
1985
LIDRANY
ENERGY INDEPENDENCE ACT OF 1975
TITLE I
- Naval Petroleum Reserves
TITLE II
- National Strategic Petroleum Reserve
(Civilian) Act of 1975
TITLE III
- New Natural Gas Deregulation
TITLE IV
- 1975 Legislative Proposals to Amend
the Energy Supply and Environmental
Coordination Act of 1975
TITLE V and VI
- 1975 Legislative Proposals to Amend the
Clean Air Act of 1970
TITLE VII
- Utilities Act of 1975
TITLE VIII
- Energy Facilities Planning and Development
Act of 1975
TITLE IX
- Energy Development Security Act of 1975
TITLE X
- Building Energy Conservation Standards
Act of 1975
TITLE XI
- Winterization Assistance Act of 1975
TITLE XII
- National Appliance and Motor Vehicle
Energy Labeling Act of 1975
TITLE XIII
- Standby Energy Authorities Act of 1975
:
FORD
GERALD
TITLE I of the Energy Independence Act of 1975 would authorize
the production of petroleum from the Naval Petroleum Reserves to
top off Defense Department storage tanks, with the remainder sold
at auction or exchanged for refined petroleum products used by the
military or used to fill a National Strategic Petroleum Reserve.
Revenues generated from the sale of oil produced from the Naval
Petroleum Reserves would be used to finance the further exploration,
development and production of the Reserves, including NPR #4 in
Alaska, as well as to create the National Strategic Petroleum Reserve.
At least 20%, or such other amount as determined by the President,
of the oil eventually produced from NPR #4 would be earmarked for
military needs and for the National Strategic Petroleum Reserve
and the remainder made available to the domestic economy. Although
the oil reserves contained in NPR #4 are largely unexplored and
significant production is not expected before 1982, it is anticipated that
NPR #4 will provide a minimum of 2 million barrels of oil per day by
1985. Title I would also grant the Department of the Navy authority
to acquire, construct, fill and maintain a military strategic petroleum
reserve of 300 million barrels as part of the National Strategic
Petroleum Reserve.
Title II would authorize the establishment of a civilian national
strategic petroleum reserve of up to 1 billion barrels of petroleum.
Once created, this strategic reserve, together with the exercise
of certain standby authorities provided for in Title XIII, will minimize
disruption from future embargoes or other energy emergencies. This
Title would authorize the Federal government to acquire, construct
and maintain petroleum storage facilities, to purchase petroleum or
require industrial set-asides for a strategic reserve, and to utilize
petroleum from the reserve to offset disruptions in foreign imports.
Most of the funds required to finance this program, as well as a
large amount of the oil to be stored would come from the production
of NPR #1 in Elk Hills, California. Within one year of enactment,
a report would be prepared and submitted to the Congress detailing
actions taken and proposed plans for developing a strategic petroleum
reserve system.
in
FORD
LIBRARY
Title III is designed to reverse the declining natural gas supply trend
as quickly as possible and to insure increased supplies of natural gas
at reasonable prices to the consumer. Under the proposal, wellhead
price controls over new natural gas sold in interstate commerce
would be removed. This action will enable interstate pipelines to compete
for new onshore gas and encourage drilling for gas onshore and in
offshore areas. In order to discourage further conversions to natural
gas and to encourage greater natural gas conservation, the President
is also proposing an excise tax of 37 cents per thousand cubic feet
on natural gas which is equivalent to the proposed $2 tax on oil.
Titles IV and V contain amendments to the Clean Air Act and the
Energy Supply and Environmental Coordination Act of 1974 (ESECA).
The amendments are needed to pursue a vigorous program, consistent
with appropriate environmental safeguards, to make greater use of domestic
coal, and thus to reduce the need for natural gas and imported oil.
The proposed amendments would serve to reduce the need for oil imports
by 100, 000 barrels per day in 1975 and 300, 000 barrels by 1977.
The amendments to ESECA would expand and extend the Federal
Energy Administration's authority to issue and enforce orders
prohibiting power plants and other major installations from burning
petroleum products and natural gas. One of the amendments to the
Clean Air Act would eliminate the regional requirement which prohibits
major fuel burning sources from burning coal where the violation of
health-related standards is caused by other sources. Another amendment
would permit certain isolated plants to use intermittent control systems
on an interim basis where they do not pose a threat to public health.
In addition, the amendments seek a better balance between automobile
fuel economy and air quality by stabilizing auto emission requirements
for five years at the level of California's 1975 standards for hydro-
carbons and carbon monoxide emissions, and holding at national 1975
standards for oxides of nitrogen.
Title VI would delete the "significant deterioration" requirement from
the Clean Air Act. There may be more appropriate ways to deal
with the issues associated with significant deterioration than through
the Clean Air Act, and Congress should undertake a prompt and
comprehensive review of this issue.
CERRIER.
FORD
LIBRARY
Title VII is designed to restore the financial health of public
utilities. It would eliminate undue regulatory lags involved in
approving proposed rate changes, assure that rates adequately
reflect the full cost of generating and transmitting electricity,
and remove prohibitions that now prevent lower prices from being
charged to consumers during off peak hours. Though many states
have already adopted similar programs, enactment of Title VII
will establish certain standard regulatory procedures across the
Nation, resulting in more equitable treatment of utilities.
Treasury Secretary Simon has presented to the House Ways and
Means Committee proposals for tax changes including increased
investment tax credits for public utilities. Presently only a 4%
tax credit is available to utilities while a 7% tax credit is available
to other industries. The proposed legislation would raise the tax
credit to a level of 12% for one year with the 12% rate being
retained for two additional years for all electric generating
facilities not fired by oil or gas. Utilities would also be allowed
to increase from 50% to 75% the portion of their 1975 tax liabilities
that can be offset by the investment tax credit. The percentage
would phase back down to 50% by 1980. Corporate tax deductions
would also be allowed for preferred stock dividends issued by utilities
and other industries. These legislative proposals would reduce the
cost of capital for needed utility expansions and stimulate equity
rather than debt financing.
Title VIII is designed to expedite the development of energy
facilities. The Federal Energy Administration would be required
to develop a National Energy Site and Facility Report with
appropriate Federal, State, industry and public input. Information
in this report would be utilized by the Federal government, the States
and industry in developing and implementing plans to insure that
needed energy facilities are sited, approved and constructed on a
timely basis. At the Federal level, FEA would be responsible for
coordinating and expediting the processing of applications to construct
energy facilities.
States would be required to develop management programs to
expedite the process by which energy facility applications are reviewed
and approved at the State level, to insure that adequate consideration
is given to national and regional energy requirements in the State's
siting and approval processes, and to provide that decisions of State
regulatory authorities on energy facility applications are not over-
ruled by actions of local governments. FEA would provide grants
and technical assistance to the States in developing their programs.
If a State does not develop an acceptable management program, FEA
would promulgate an appropriate management program for it. State FORD
Federal Government would not be authorized to override any
decision on a particular site of facility application.
LIBRARY
Title IX would provide needed authority to prevent foreign oil
producing countries from undercutting U.S. efforts to develop
domestic petroleum energy resources or achieve energy
independence. The Federal Energy Administration would monitor
the effect of oil price fluctuations on the economic viability
of conventional petroleum development and production projects.
Upon the finding that this viability is being threatened, tariffs,
quotas, or variable import fees would be imposed.
Two other measures are being developed that will affect domestic
energy supplies. One proposal would assure more rapid siting and
licensing of nuclear facilities while retaining sufficient safeguards
to protect the environment and public health and safety. The
other proposal, to regulate surface mining, would provide the
appropriate balance between the urgent need to increase coal
production and the need to protect the environment.
DEMAND RESTRAINT MEASURES
Each of the demand restraint measures contained in Titles X-XII
is an essential element in achieving our overall goal of reducing
oil imports and lowering the demand for coal, natural gas and
electricity. These proposals will serve to reduce wasteful
energy use, create jobs, and lessen economic hardships, while
not impeding economic output.
Title X would establish mandatory thermal (heating and cooling)
efficiency standards for all new homes and commercial buildings.
It is anticipated that this program will save the equivalent of
500, 000 barrels of oil per day in 1985. The Secretary of Housing
and Urban Development in consultation with engineering,
architectural, consumer, labor and industry representatives
would be responsible for developing thermal efficiency standards.
Standards for residential dwellings would be promulgated and
implemented within one year, and performance standards for
commercial and other residential buildings developed and
implemented as soon thereafter as practicable. State and local
governments would assume primary responsibility for enforcing
standards through local building codes.
Fund
03
Title XI would establish, within the Federal Energy Administration
a grant program for States to assist low income persons,
particularly the elderly, in winterizing their homes. Title
XI is modeled after a successful pilot project that was conducted
in the State of Maine during 1974. Annual appropriations of
$55 million would be authorized to fund the three year grant
program, and enable States to purchase winterization materials
for dwellings of low-income persons.
Title XII would authorize the President to require energy
efficiency labels on all new major appliances and motor vehicles.
This title would insure that consumers are fully apprised of the
efficiency of various appliances and motor vehicles and would
encourage the manufacture and greater utilization of more
efficient products.
EMERGENCY PREPAREDNESS PROGRAMS
In addition to taking measures to increase domestic supplies,
reduce demand and create a strategic reserve system, we must
be in a position to take immediate and decisive actions to
counteract any future energy emergency.
Title XIII would provide the President with certain standby
authorities to deal with future embargoes or other energy
emergencies and to carry out the International Energy Program
agreement, including provisions for international oil sharing,
mutual energy conservation programs, and international
cooperation on various energy initiatives. This title would include
authority to allocate and control the price of petroleum and
petroleum products, promulgate and enforce mandatory energy
conservation programs, ration petroleum products, order
increases in domestic oil production, and allocate critical
materials needed for the maintenance, construction and
operation of critical energy facilities. All or a portion of
these authorities would be invoked upon a determination that
emergency conditions exist.
FORD
LIBRARY
FORD : RELD LIBR
LIBRARY
LIBRA
GERALD
FORD / .8
STATUS OF ONGOING ENERGY LEGISLATION PERTINENT TO PRESIDENT'S
PROGRAM
Title I
Naval Petroleum Reserves
S. 2173
(Cannon) authorizes production from Naval
Petroleum Reserves 1, 2, 3. Passed the
Senate, July 29, with Jackson amendment
establishing national strategic petroleum
reserve as in S. 677.
H.R. 49
(Melcher) Authorizes transfer of control of
military petroleum reserves to the Department
of Interior and production of Naval Petroleum
Reserves 1-3. Passed the House, July 8, by a
vote of 391-20. Conference on S. 2173 and
H.R. 49 expected among Senate and House
Interior and Armed Services Committees, and
House Commerce Committee.
Title II
National Strategic Petroleum
Reserve Act of 1975
S. 677
(Jackson) Establishes a civilian strategic
petroleum reserve. Passed the Senate on July
8 by a unanimous vote of 91-0.
H.R. 7014 (Dingell) As part of Omnibus Bill, authorizes
study of establishment of national strategic
petroleum reserve.
Title III
New Natural Gas Deregulation
S. 692
(Hollings, Stevenson) Now pending on the
Senate Calendar. It is unlikely that the
bill will survive as reported without extensive
modification in the direction of higher
prices. Substitute offered by Senator Pearson
represents acceptable Administration fall-
back from Title III.
The House Commerce Committee will act on
natural gas after the Senate completes action
on S. 692, but probably not before November.
The Administration has submitted emergency
legislation (S. 2330) to deal with expected
natural gas shortage for the next two winters.
A "one winter" emergency gas bill has been
introduced in the Senate (S. 2310) by Senatorso
Hollings, Glenn and Talmadge, and in the
House by Congressman Dingell (H. R. 9464
Senate floor action is expected this week,
and House hearings will be held the 3rd week
in September.
- 2 -
Title IV
1975 Legislative Proposals to
Amend the Clean Air Act of 1970
S. 1996
(Randolph) Energy Supply and Environmental
Coordination Act Extension, which would
extend ESECA until December 31, 1975 is
pending in Senate Interior Committee.
S. 1777
(Randolph, Jackson) Coal Conversion. The
Senate Public Works and Senate Interior
Committees held hearings. Public Works has
prepared a committee print for markup purposes
in September. Senator Randolph is pushing for
final committee action by October 1.
Titles V & VI
1975 Legislative Proposals
to Amend the Clean Air Act of 1970
Hearings on the Clean Air Act Amendments have
been held by Senate Public Works, which began
a series of markups on June 18. The subcommittee
should complete markup early in September,
with a bill reaching the Senate floor by
November. House Commerce Subcommittee on
Health and Environment has scheduled further
markups of its draft bill for the entire
month of September.
Title VIII
Energy Facilities Planning and
Development Act of 1975
S. 984
(Jackson) Land use. Hearings were held
before the Environment and Land Resources
subcommittee of the Senate Interior Committee
(April 23, 24, 29, and May 2.) Full Committee
markup of the bill is anticipated to occur in
late September or early October.
Title IX
Energy Development Security Act of 1975
No action since introduction.
Title X
Building Energy Conservation Standards
Act of 1975
Energy Efficiency Standards for Buildings. On
September 8, House passed H.R. 8650 which
would facilitate but does not require, adoption
by State and local governments of energy
conservation standards for new buildings
is
FORD
LIBRARY
- 3 -
Title X cont'd.
Senate Commerce Committee has held hearings
on Senator Tunney's bills S. 1392 and S.
1908, and Title X of the President's energy
package. An August 4 committee print of S.
1908 will see markup sometime in September.
Senate Public Works has also scheduled hearings
on Title X.
Title XI
Winterization Assistance Act of 1975
H.R. 8650 would provide assistance to low
income persons to insulate their homes.
Title XII
National Appliance and Motor
Vehicle Energy Labeling Act of 1975
S. 1883
Mandatory Fuel Economy Standards for Motor
Vehicles. Passed the Senate or: July 15.
Similar provisions are included in H.R. 7014
(Dingell) and H. R. 6860 (Ullman) which
passed and is now being marked up by Senate
Finance.
S. 349
(Tunney) Motor Vehicle and Appliance Labeling.
Passed the Senate July 11.
H.R. 7014 Includes appliance labeling program administered
by the Department of Commerce. Floor action
pending.
Title XIII
Standby Energy Authorities
Act of 1975
S. 622
(Jackson) Standby Energy Authorities.
Passed the Senate April 10. Contains mandatory
conservation authorities which the Administration
opposes.
H.R. 7014 Contains a standby authorities title, under
which the President may order cutbacks in
energy use, direct production of oil fields
at MER, and institute gasoline rationing.
Requires multiple congressional approvals of
emergency actions.
&
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LIBRARY
OTHER PERTINENT LEGISLATION
Energy Conservation and Oil Policy Act.
H.R. 7014 (Dingell). The Dingell energy bill has
seen several days of debate on the House
floor but agreement has not yet been reached.
An amendment provides for ceilings of $5.25 a
barrel for old oil; $7.50 for new oil; and
$10 a barrel for high cost oil. Further
action has been slowed by the recent recess
and the decontrol fight.
Energy Conservation and Conversion Act
H.R. 6860 (Ullman). This bill passed the House on June
19 without a windfall profits tax provision.
The Senate Finance Committee has held hearings
and markups, but has not yet reported out the
bill. Before the recess it reported out a
windfall profits tax amendment which was
filibustered on the floor on August 1.
OCS Leasing
S. 521
(Jackson) Passed the Senate on July 30 by a
vote of 67-19.
H.R. 6218 (Murphy, N. Y.) Ad Hoc Committee on OCS will
hold final hearings in September and proceed
to markup in October. Chairman Murphy requested
that Speaker Albert have S. 521 referred to
the Ad Hoc Committee instead of using H.R.
6218 as a vehicle. There appears to be
general opposition on the committee to the
Bumpers Amendment on proprietary data, and to
earmarking federal OCS revenues for the
coastal states.
Nuclear Facility Licensing
S. 1717 and H.R. 7002. The Joint Committee on Atomic
Energy has begun hearings on this legislation,
which is intended to improve the licensing
process for nuclear facilities. The Administration
supports such legislation strongly.
FORD
GENALD
LISEARY
THE WHITE HOUSE
FEA
WASHINGTON
December 6, 1975
MEMORANDUM FOR
THE HONORABLE FRANK ZARB
ADMINISTRATOR
FEDERAL ENERGY ADMINISTRATION
In the event the President determines to meet
with any representatives of the petroleum
industry prior to acting on the new energy
bill, I have had a request that he meet with
Mr. C. John Miller of Allegan, Michigan.
This man is an independent oil operator and
a friend of the President.
T.W.B.
Philip W. Buchen
Counsel to the President
FORD & LIBRARY
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
FEA
Date: December 12, 1975
Time:
FOR ACTION: Phil Buchen
CC (for information):
FROM THE STAFF SECRETARY
DUE: Date:
DECEMBER 12 (TODAY)
Time: 2:00 P.M.
SUBJECT:
Zarb memo (12/11) re: Statement regarding removal
of tariff
ACTION REQUESTED:
For Necessary Action
X For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X For Your Comments
Draft Remarks
REMARKS:
Could we please have your comments as soon
as possible. Note especially the retroactive
provision.
FORD is LIBRARY
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
James E. Connor
telephone the Staff Secretary immediately.
For the President
FEDERAL
ENERGY
FEDERAL ENERGY ADMINISTRATION
ADMINISTRATION
WASHINGTON, D.C. 20461
OFFICE OF THE ADMINISTRATOR
December 11, 1975
MEMORANDUM FOR THE PRESIDENT
FROM:
FRANK G. ZARB of.
SUBJECT:
STATEMENT REGARDING REMOVAL OF TARIFF
You recall we had a discussion earlier on the need to make some kind
of statement regarding our intention to make a decision concerning the
tariff removal effective December 1.
Alan Greenspan felt that we should place certain caveats in such a
statement. We have, therefore, worked one out which has the approval
of Lynn, Greenspan, Seidman and Morton. A copy is attached.
With your approval we will make a low key announcement this week.
Attachment
FORD & GERALD LIBRARY
STATEMENT REGARDING CIRCUMSTANCES AND TIMING
RELATED TO POSSIBILITY OF TARIFF REMOVAL
Price controls under the Emergency Petroleum Allocation Act expire at
midnight December 15, 1975. However, the Congress has under consider-
ation the Energy Policy and Conservation Act which, if enacted, will
extend this authority.
Under certain circumstances, the $2 import fee on crude oil might be
removed as part of the final resolution of this situation. First, if
price control authority expires, the President has previously indicated
that the $2 import fee would be lifted to cushion the economic impact of
immediate decontrol. Second, if the President were to decide to sign
the Energy Policy and Conservation Act, the $2 import fee would also be
removed in conjunction with the new pricing policy incorporated in that
bill.
Under other circumstances, it is possible that the import fee could be
retained.
Because such different results may occur, importers must operate in an
environment of uncertainty which, in turn, causes economic distortions.
For example, prudent importers may curtail imports of crude oil in order
to avoid possible inventory losses if prices subsequently fall due to
the removal of the import fee.
Therefore, to eliminate possible market distortions from developing, the
President has decided to make any removal of the crude oil import fee,
whether as a result of immediate decontrol or a decision to sign the
Energy Policy and Conservation Act, effective retroactively as of December 1,
1975.
FORD : LIBRAK DERALD
Energy
THE WHITE HOUSE
WASHINGTON
December 17, 1975
MEMORANDUM FOR:
JIM CONNOR
THROUGH:
PHIL BUCHEN P.
FROM:
DUDLEY CHAPMAN
DC
SUBJECT:
Frank G. Zarb's memo 12/16/75
re: S.622 The Energy Policy and
Conservation Act -- If you
Decide to Veto
Politically, Option 4 would appear preferable to Option 2. Reproposing
the same thing that was submitted in August and rejected could be
criticized as futile and unrealistic. Option 4 is politically realistic,
and involves no sacrifice of principle. It simply acknowledges the
impasse between the President and Congress and the fact that there
is no prospect of its being resolved before the election.
Note: In the third line on page 3, "effected" should be "affected".
FORD : LIBRARY 038870
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.: Energy
Date:
December 17, 1975
Time:
FOR ACTION:
CC (for information):
Phil Buchen
Bob Hartmann
Jim Cannon
Jim Lynn
Bill Seidman
Max Friedersdorf
Jack Marsh
Brwnt Scowcroft
Alan Greenspan
FROM THE STAFF SECRETARY
DUE: Date:
December 17, 1975
Time:
c.o.b.
SUBJECT:
Frank G. Zarb's memo 12/16/75 re S. 622
The Energy Policy and Conservation Act --
If you Decide to Veto
ACTION REQUESTED:
For Necessary Action
X For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X For Your Comments
Draft Remarks
REMARKS:
I am sure you will appreciate the necessity of
having your comments by the close of business today.
Thank you.
FORD i LIBRARY QERALD
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
TE you have any questions or if you anticipate a
delay in submitting the required material, please
James E. Connor
telephone the Staff Secretary immediately.
For the President
FEDERAL
ENERGY
FEDERAL ENERGY ADMINISTRATION
WASHINGTON, D.C. 20461
ADMINISTRATION
December 16, 1975
OFFICE OF THE ADMINISTRATOR
MEMORANDUM FOR THE PRESIDENT
FROM:
FRANK G. ZARB 21
SUBJECT: S. 622, The Energy Policy and Conservation
Act -- If You Decide to Veto
Controls on oil prices expired at midnight, Monday,
December 15. If you decide to veto the Energy Policy
and Conservation Act (S. 622), decontrol will occur and
a number of previously identified problems will result
over a relatively short period of time -- probably before
Congress comes back into session in January. These
problems include:
- 6¢ per gallon price increases after the import
fee is removed
- Propane price and supply problems
- Independent refiner and service station impacts
- Windfall profits in the petroleum industry
- Problems for farmers, fishermen, airlines,
petrochemical companies, asphalt contractors
and other special impact groups.
Since it is likely that Congress will let these problems
FORD
develop for some period of time for political reasons, fist
may. be appropriate to couple any veto of S. 622 with one
or more legislative recommendations as a way of shifting
LIBRARY
part of the liabilities of immediate decontrol to the
Congress. Such proposals would also assist efforts to
sustain a veto.
There are basically four options if you decide to veto
S. 622 and agree that we should follow the veto with
alternative legislative proposals. These options and an
evaluation of each option is provided below.
- 2 -
OPTION 1: Propose a limited number of changes to the bill
which would permit Presidential acceptance,
including higher guaranteed escalators, automatic
removal of Alaska from the composite, and the
elimination of both the coal loan guarantee
program and the GAO audit provisions.
Pros:
- If accepted, would improve pricing provision
while insuring that other desirable provisions
in bill are enacted.
Cons:
- It is unlikely that Congress would make any
of the desired changes, particularly in the
pricing section; in fact, the pricing provision
could be made even more restrictive.
- Even if changes are possible, it is unlikely
that industry or producing state delegations
would support the overall bill with any of the
modifications that would be accepted by this
Congress.
OPTION 2: Go for immediate decontrol and repropose the
initiatives we submitted in August to mitigate
the effects of decontrol, including a windfall
profits tax, propane allocation, and price
control authorities, subsidies for independent
refiners, and tax rebates for farmers and
fishermen.
Pros:
- Optimum program for energy self-sufficiency
and deregulation of the industry.
FORD i LIBRARY 038870
- Best posture if complete decontrol is near-
term objective.
Cons:
- Congress is not likely to approve the major
components of the legislative initiative,
particularly windfall profits tax and price
controls on propane -- at least until problems
have begun to occur.
- 3 -
- Major price increases will result almost
immediately.
- Economic recovery could be effected.
OPTION 3: Propose a phased decontrol plan (i.e., 39 month)
and continuation of allocation act.
Pros:
- If accepted, would result in gradual decontrol,
but at a more certain rate than S. 622.
- No major one-time price increase would occur.
- Congress is familiar with program.
Cons:
- Would likely be rejected; House rejected plan
once before and Conferees were strongly
opposed to the structure of the program.
- Given Congressional work on this issue,
resubmittal of 39 month plan could result in
considerable acrimony and hostility.
OPTION 4: Propose simple extension of allocation act through
the election:
Pros:
- Industry prefers current controls, at least
the producing component of industry; most
would like to avoid the consequences of
decontrol, however.
FORD is LIBRARY 07VJ3D
- Simple extension would probably be easiest
to achieve in near term.
Cons:
- Congress will delay a simple extension until
problems develop, and will probably amend
with a cap on new oil and allow no escalators
as in current bill.
- With exception of initial price of new oil,
S. 622 is a better bill in that it does provide
for escalation in prices and the dismantling of
- 4 -
FEA's regulatory apparatus on wholesalers
and retailers (with the exception of crude
producers, the industry is clearly better
off with S. 622 than with current controls).
- Would put us back to January 1975; no progress
would have been made.
- Oil prices would be a major issue of the
campaign.
SUMMARY AND RECOMMENDATIONS
It is clear that all of the options have their drawbacks,
primarily because of the difficulty we will have in getting
Congress to approve any of the alternatives without major
changes if they agree to act at all. Consequently, each of
the alternatives should be evaluated largely in terms of the
political posture they would allow us to adopt during the
next four to eight months.
If you decide to veto S. 622, I would recommend Option 2 --
go for immediate decontrol and resubmit initiatives we
submitted in August to mitigate effects of decontrol.
BERALB FORD LIBRARY
FEA
THE WHITE HOUSE
WASHINGTON
December 18, 1975
MEMORANDUM FOR:
JIM CONNOR
FROM:
PHIL BUCHEN T.
SUBJECT:
Frank G. Zarb's memo re: H.R. 7014/
S.622: The Energy Policy and
Conservation Act
I concur with Bill Seidman's recommendations as stated in his
memorandum of December 6, 1975, (Tab K).
FORD : LIBRARY GERALD
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
Date: December 17, 1975
Time:
FOR ACTION: Phil Buchen
Jim Cannon
Jim Lynn
Max Friedersdorf
Jack Marsh
Alan Greenspan
Bill Seidman
Bob Hartmann
Brent Scowcroft
FROM THE STAFF SECRETARY
Dave Gergen
DUE: Date:
DECEMBER 18, 1975
Time:
11:00 A. M.
SUBJECT:
Frank G. Zarb's memo re: H.R. 7014/S. 622: The
Energy Policy and Conservation Act
ACTION REQUESTED:
For Necessary Action
X For Your Recommendations
Prepare Agenda and Brief
Draft Reply
x For Your Comments
Draft Remarks
REMARKS:
COMMENTS MUST BE IN THIS OFFICE BY
11:00 A.M. TOMORROW
THANK YOU.
FORD : LIBRARY GERALD
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
James E. Connor
delay in submitting the required material, please
telephone the Staff Secretary immediately.
For. the President