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    "id": "1534737",
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    "title": "1975/08/26 - Energy Resources Finance Corporation Meeting",
    "citationUrl": "https://catalog.archives.gov/id/1534737",
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        "James M. Cannon Files (Ford Administration)",
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    "seq": 1,
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    "type": "document",
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    "ocrText": "The original documents are located in Box 50, folder \"1975/08/26 - Energy Resources\nFinance Corporation Meeting\" of the James M. Cannon Files at the Gerald R. Ford\nPresidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nMEETING\n10:30 a.m.\nTUESDAY, August 26, 1975\nRoosevelt Room\nMR. CANNON:\nHere is the material on the 10:30 meeting\non the Energy Resources Finance Corp.\nto be held in the Roosevelt Room.\nWe had to have a messenger hand-carry a\nsecond copy of the papers to us as the\nfirst was either not sent out or lost in\nthe mail.\nj\nFORD & LIBRAR GERALD\nAugust 17, 1975\nA BILL\nTo establish the Energy Resources Finance Corporation, a\ncorporation with authority to make loans, guarantee loans,\nand otherwise provide financing and economic assistance for\nthose sectors of the national economy which are of critical\nimportance to the development of domestic sources of energy\nand the attainment of energy independence for the United\nStates; to assist in the expediting of regulatory procedures\naffecting energy development; and for other purposes.\nBe it enacted by the Senate and House of Representatives\nof the United States of America in Congress assembled, That\nthis Act may be cited as the \"Energy Resources Finance\nCorporation Act of 1975. =\nTitle I. Findings and Purposes\nSection 101. Findings. The Congress finds and declares\nthat:\n(1) The expeditious achievement of energy independence\nfor the United States is a goal which is essential to the\nhealth of the national economy, the well being of our\ncitizens and the maintenance of national security.\n(2) Energy independence for the United States is not\nlikely to be achieved without financial support and en-\ncouragement beyond that which is likely to be forthcoming\nfrom traditional private capital sources in the traditional\nmanner.\nFORD is LIBRARY CERALD\n'3) Achieving the goal of national energy independence\nin an expeditious manner can be facilitated through the\nestablishment of an independent entity of limited duration\nto provide additional capital to assist the development of\ndomestic energy resources, and by authorizing such entity to\nencourage the prompt resolution of questions coming before\ngovernmental regulatory or licensing entities.\nSection 102. Purposes. It is the purpose of the Congress,\nin this Act:\n(1) to encourage and assure the flow of capital funds\nto those sectors of the national economy which are of\ncritical importance to the development of domestic sources\nof energy, or which are otherwise important to the attain-\nment of energy independence by the United States, and to\nfacilitate regulatory and licensing decision-making;\n(2) to provide financial assistance, where possible by\nthe making of loans and the guaranteeing of loans, for those\nactivities which show the greatest potential of contributing\nto the development of domestic energy resources;\n(3) to hasten the commercial operation of new energy\ntechnologies subsequent to the research and development\nphase;\n(4) to supplement and encourage, and not compete with,\nprivate capital investment and activities in the development\nof domestic sources of energy; and\n- 3 -\n(5) to carry out the foregoing purposes through the\ncreation of the Energy Resources Finance Corporation, an\nentity of limited duration which will assert its best efforts\nto, on an aggregate basis, either realize profits or minimize\nlosses; and to provide for the timely and orderly liquida-\ntion of such corporation's investments and undertakings.\n- 4 -\nTitle II. Corporate Status and General Powers\nSection 201. Establishment.\n(1) There is hereby created a body corporate, to be\nknown as the Energy Resources Finance Corporation (hereinafter\nreferred to as the \"Corporation\").\n(2) The principal office of the Corporation shall be\nlocated in the District of Columbia, but there may be estab-\nlished agencies or branch offices in such other places as\nmay be determined by the Board of Directors of the Corporation.\nSection 202. General Powers.\nIn carrying out the purposes of this Act, the Corporation\nshall have the power:\n(1) To adopt, alter, and rescind bylaws and to adopt\nand alter a corporate seal, which shall be judicially\nnoted;\n(2) To make contracts with private or governmental\nentities;\n(3) To lease or purchase such real estate as may be\nnecessary for the transaction of its business;\n(4) To accept and dispose of real and intangible\nproperty (including money) ;\n(5) to sue and be sued and to complain and defend in\nany court of competent jurisdiction, State or Federal;\n- 5 -\n(6) To select, employ, and fix the compensation of\nsuch officers, employees, attorneys, and agents as shall be\nnecessary for the transaction of the business of the Corpora-\ntion (without regard to the provisions of other laws applicable\nto the employment and compensation of officers or employees\nof the United States) and to define their authority and\nduties, require bonds of them and fix the penalties thereof,\nand to dismiss at pleasure such officers, employees, attorneys\nand agents.\n(7) To make provision for and designate such committees,\nand the functions thereof, as the Board of Directors may\ndeem necessary or desirable;\n(8) To determine and prescribe the manner in which\nobligations of the Corporation shall be incurred and its\nexpenses allowed and paid;\n(9) To exercise all other lawful powers necessarily or\nreasonably related to the establishment and conduct of a\ncorporate entity and the exercise of its powers, purposes,\nfunctions, duties and authorized activities;\n(10) To use the United States mails on the same terms\nand conditions as the executive departments of the United\nStates Government, and\n(11) With the consent of any board, commission, independent\nestablishment, or executive department of the executive\nbranch to make use of services, facilities, officers, and\nemployees thereof, with or without reimbursement, in carrying\nout the provisions of this Act.\n- 6 -\nSection 203. Tax Status.\nThe Corporation and any Subsidiary (as hereinafter\ndefined), its franchise, capital, reserves, surplus, and\nincome shall be exempt from all taxation now or hereafter\nimposed by the United States, by any territory, dependency,\nor possession thereof, or by any State, county, municipality,\nor local taxing authority; except that (1) any real property\nowned in fee by the Corporation or any Subsidiary shall be\nsubject to State, territorial, county, municipal, or other\nlocal taxation to the same extent, according to its value,\nas other similarly situated and used real property, and (2)\nany entity acquired or established, or activity undertaken,\nby the Corporation or any Subsidiary (except financial\nassistance as that term is defined in Section 301 of this\nAct) which engages directly in the production, transportation,\nor sale of energy, fuels or energy-related commodities,\nfacilities or products, shall be subject to taxes imposed by\nthe United States and any State or subdivision thereof in the\nsame manner as if such entity or activity were not\nacquired, established or undertaken by the Corporation\nor a Subsidiary thereof.\n- 7 -\nTitle III. Functions of the Corporation\nSection 301. Financial Assistance.\n(1) The Corporation is authorized and empowered, upon\nsuch terms and conditions as it may determine, to provide\nfinancial assistance to any business concern which is engaged,\nor proposes to engage, in any activity which increases or\nwould increase the development, production, conservation or\ndistribution of domestic supplies of energy, including but\nwithout limitation to financial assistance which:\n(a) enables such business concern to finance\nthe ownership, construction, conversion, or expansion\nof productive facilities, or the acquisition of equip-\nment, plant, machinery, supplies, or materials or the\nacquisition or development of land, mineral rights and\nprocess services; or\n(b) provides such business concern with working\ncapital; or\n(c) aids such business concern in the payment of\ncurrent debts or obligations.\nAs used in this Act: (i) the term \"business concern\" shall\nmean any individual, corporation, company, association,\nfirm, partnership, society, State or municipal governmenal t\nentity (including a public authority), interstate or regional\nbody (the membership whereof is comprised of governmental\nentities), or other entity which is engaged in the development,\n- 8 -\nmanufacture, supply, importation, exportation, procurement\nor production of goods or services in the United States and\nwhich is deemed by the Board of Directors to be essential,\nby itself or as part of a larger industrial grouping, to the\nachievement of energy independence by the United States, or\nthe long-term security of energy sources and supplies for\nthe United States, and (ii) the term \"financial assistance\"\nshall mean any form of advance, extension of credit, invest-\nment, participation or guarantee, including but without\nlimitation, loans, guarantees of obligations, guarantees\nof price, purchase and leaseback of facilities, and the\npurchase of convertible or equity securities.\n(2) No financial assistance may be provided under\nsubsection (1) unless an application therefor has been\nsubmitted to the Corporation in such manner and containing\nsuch information as the Corporation may require.\n(3) Prior to providing financial assistance under\nsubsection (1), the Board of Directors shall determine that:\n(a) the project to which the financial sssistance\nwould be devoted is in furtherance of the purposes of\nthis Act and will be likely to contribute significantly\nto the achievement of such purposes;\n(b) financing for the project, or a modification\nthereof that would maintain the essential character of\nthe project, is not available from any other source,\n- 9 -\nprivate or governmental, upon commercially reasonable\nterms with which the business concern could reasonably\nbe expected to comply; and\n(c) if such financial assistance is not provided\nby the Corporation, it is unlikely that the project, or\na modification thereof that would maintain the essential\ncharacter of the project, would be undertaken within a\nreasonable period of time.\n(4) Financial assistance provided by the Corporation\nunder subsection (1) may be made upon such terms, and subject\nto such restrictions, as shall seem to the Board of Directors\nto be commensurate with the needs of the recipient, and may\nbe renewed, modified, or extended by the Board of Directors\nas it may determine.\n(5) Each loan made under subsection (1) shall bear\ninterest at such rate as the Board of Directors of the\nCorporation may determine, giving consideration to the needs\nand capacities of the recipient as well as to the Corpora-\ntion's need to sustain continuing operations out of returns\non investment.\n(6) To the maximum extent practicable, financial\nassistance provided under subsection (1) shall be in the\nform of loans and loan guarantees, rather than equity investment,\nand except as provided in subsection (8) hereof, all loans\nprovided by the Corporation shall, in the opinion of the\nBoard of Directors, be made upon such terms or shall be\nSO secured, as to reasonably assure retirement or repayment,\n- 10 -\nas may be made or effected either directly or in cooperation\nwith banks or other lending institutions. Such loans may be\nmade directly upon promissory notes or by way of discount or\nrediscount of obligations tendered for the purpose. The\nCorporation, under such conditions as it shall prescribe,\nmay take over or provide for the administration and liquida-\ntion of any collateral accepted by it as security for such\nloans. In no case shall the aggregate amount of advances\nmade under this section to any one business concern or\naffiliated business concerns exceed at any one time 10 per\ncentum of (1) the authorized capital stock of the Corporation\nplus (2) the aggregate principal sum of the obligations of\nthe Corporation authorized to be outstanding.\n(7) The total amount of financial assistance by the\nCorporation, outstanding at any time, computed to include\nthe sum of (i) the face amount of all guarantees, (ii)\nreserves for all other contingent liabilities, and (iii) all\nloans and other forms of financial assistance authorized\nunder subsection (1) hereof, shall not exceed the sum of (i)\nthe authorized capital of the Corporation, (ii) the amount\nthe Corporation is authorized to borrow under Section\n402 of Title IV, (iii) all unrealized gains on the Corporation's\ninvestment, and (iv) the earned surplus of the Corporation,\nall as determined under generally accepted accounting\nprinciples.\n- 11 -\n(8) The Corporation may make high-risk loans or direct\ninvestments, or provide product price guarantees or other\ndirect financial assistance, which in the opinion of the\nBoard of Directors will further the purposes of this Act.\nThe Board of Directors shall create such reserves as may be\nnecessary to meet contingent liabilities which may be created\nunder this subsection (8) ; Provided, however, that notwith-\nstanding any other provision of this Act, the Corporation\nmay not provide any financial assistance or make any further\ncommitments for financial assistance if, after audit, the\nCorporation is required under generally accepted accounting\nprinciples to establish a reserve or reserves for bad debts,\nprice support commitments, contingent liabilities, or other\nunrealized losses, which reserves in the aggregate exceed\nthe sum of the Corporation's paid-in-equity capital plus its\nearned surplus, both of which shall be determined in accordance\nwith generally accepted accounting principles.\n(9) The Corporation may charge reasonable fees for\nissuing guarantees, and reasonable fees for making commitments\nfor other forms of financial assistance pursuant to subsection\n(1).\n(10) The Corporation shall be subrogated to the rights\nof any third party receiving payments of interest or principal\nout of funds provided by the Corporation under a loan guarantee\narrangement authorized hereunder. Guarantees issued by the\nCorporation shall contain such terms and conditions as the\n- 12 -\nCorporation may deem appropriate to carry out the purposes\nof this Act.\n(11) The Corporation is authorized, on such terms and\nconditions as it may prescribe, to guarantee any lender\nagainst loss of principal and interest on securities, obliga-\ntions, or loans (including refinancings thereof) issued to\nprovide funds to any business concern, as such term is\ndefined in this Act. All guarantees entered into by the\nCorporation under this section shall constitute general\nobligations of the United States of America backed by the\nfull faith and credit of the Government of the United\nStates of America. Any guarantee made by the Corporation\nunder this section shall not be terminated, canceled or\notherwise revoked, except in accordance with the terms\nthereof; shall be conclusive evidence that such guarantee\ncomplies fully with the provisions of this Act and of the\napproval and legality of the principal amount, interest\nrate, and all other terms of the securities, obligations, or\nloans and of the guarantee; and shall be valid and incontest-\nable in the hands of a holder of a guaranteed security,\nobligation, or loan, except for fraud or material misrepresen-\ntation on the part of such holder. Prior to issuing any such\nguarantee, the Corporation shall advise the Secretary of the\nTreasury of the terms and conditions thereof, in such detail\nas the Secretary may reasonably require. There are authorized\n- 13 -\nto be appropriated to the Corporation such amounts, to\nremain available until expended, as are necessary to discharge\nall its responsibilities under this subsection.\n(12) The Corporation may, in compliance with applicable\nlaws governing transactions in securities, sell in public or\nprivate transactions all or any part of the common or\npreferred stock, capital notes, bonds or any other evidences\nof indebtedness or ownership acquired by the Corporation\npursuant to this section.\nSection 302. Transactions with Certain Governmental Entities.\nIn order to further the purposes of this Act, the Corporation\nis authorized and empowered, under such terms, conditions,\nand restrictions as the Board of Directors may determine, to\nmake loans to or contracts with State or municipal govern-\nmental entities (including public authorities), and interstate\nor regional bodies (the membership whereof is comprised of\ngovernmental entities), to aid in financing projects authorized\nunder Federal, State or municipal law. Any such arrangements\nshall be deemed to be financial assistance for the purposes\nof Section 301 of this Title.\nSection 303. Access to Information.\nEvery applicant for financial assistance under this Act\nshall, as a condition precedent thereto, consent to such\n- 14 -\nexaminations as the Corporation may require for the purposes\nof this Act, and shall further consent that any reports of\nexaminations of the applicant by constituted authorities may\nbe furnished by such authorities to the Corporation upon\nrequest therefor. The Corporation shall require such\nreports as it deems necessary from any business concern\nreceiving financial assistance under this Act regarding\nactivities carried out pursuant to this Act. The Corporation\nis authorized to prescribe the keeping of records with\nrespect to funds provided by loan, grant or contract and\nshall have access to such records at all reasonable times\nfor the purpose of insuring compliance with the terms and\nconditions upon which financial assistance was provided.\nSection 304. Subsidiaries.\n(1) The Corporation, by itself or acting in conjunction\nwith other private or public entities, may create or cause\nto be created wholly-owned subsidiary corporations with such\npowers, authorities, privileges and immunities, consistent\nwith the purposes of this Act, which may be required:\n(a) to produce, acquire, carry, sell or otherwise\ndeal in energy-related commodities and materials;\n(b) to purchase and lease land, purchase, lease,\nbuild, operate and expand plants, and purchase and\nproduce equipment, facilities, machinery, materials,\nand supplies;\n- 15 -\n(c) To lease, sell, or otherwise dispose of\nland, plants, facilities, and machinery in order to\ninduce business concerns to engage in the foregoing\nactivities.\n(2) The powers of every subsidiary corporation created\nor organized under this section shall be set out in a charter\nwhich shall be valid only when certified copies thereof are\nfiled with the Secretary of the Senate and the Clerk of the\nHouse of Representatives and published in the Federal Register,\nand all amendments to such charters shall be valid only when\nsimilarly filed and published. No subsidiary created here-\nunder shall have a term of existence beyond the authorized\nlife of the Corporation. A corporation organized pursuant\nto this Section shall be referred to herein as a \"Subsidiary\"\nNothing herein shall be deemed to prevent the Corporation\nfrom investing funds of the Corporation in corporations other\nthan Subsidiaries.\n- 16 -\nTitle IV. Capitalization and Finance\nSection 401. Capital Stock and Dividends.\nThe Corporation shall have capital stock of $10,000,000,000,\nsubscribed by the United States of America acting by -and through\nThe Secretary of the Treasury, payment for which shall be\nsubject to call in whole or in part by the Board of Directors\nof the Corporation. On the date that is 180 days after the\nclose of each fiscal year of the Corporation, the Corporation\nshall declare and thereafter pay a dividend on its outstanding\ncapital stock, in an amount determined in the discretion of\nthe Board of Directors, taking into account the current\nannual yield on marketable obligations of the United States\nat the time the dividend is declared; provided, however, that\nthe Corporation may waive or defer payment of any such\ndividend if (a) the Corporation has no earned surplus on the\ndate on which the dividend would otherwise be declared, or\n(b) the Board of Directors determines that the funds otherwise\navailable for payment of the dividend should, in furtherance\nof the purposes of this Act, be used to provide financial\nassistance pursuant to subsection (1) of Section 301 of\nTitle III.\nSection 402. Obligations of the Corporation.\nThe Corporation is authorized to issue and to have\noutstanding at any one time notes, debentures, bonds, or\n- 17 -\nother obligations in the aggregate principal amount of\n$100,000,000,000.\nprovided, however, that the Corporation ELIMINATE ?\nshall not, without the prior consent of the Secretary of the\nTreasury, issue in any 12-month period obligations having an\naggregate principal amount exceeding $20,000,000,000\nAll\nobligations of the Corporation issued under this Section\nshall be fully and unconditionally guaranteed as to principal\nand interest by the United States, with the same force and\neffect as a guarantee issued by the Corporation under\nsubsection (11) of Section 301 of Title III, and such\nguarantee shall be expressed on the face of all such obli-\ngations. The Secretary of the Treasury may direct that any\nsuch issuance by the Corporation be sold to the Department\nof the Treasury for its own account or to the Federal\nFinancing Bank.\nSection 403. Consultation with Secretary of the Treasury.\nThe Board of Directors of the Corporation shall determine,\nin consultation with the Secretary of the Treasury, the\nmethod principal amount, interest rate, maturity, timing of\nissuance and other terms and conditions of the Corporation's\nobligations issued under Section 402.\nw/ The appoar of\nFORD is LIBRARY DERALD\n- 18 -\nSection 404. Source of Funds for Purchases by Secretary\nof the Treasury.\n(1) For purposes of purchasing the capital stock and\nobligations of the Corporation pursuant to Sections 401 and\n402, respectively, the Secretary of the Treasury is authorized\nto use as a public debt transaction the proceeds from the\nsale of any securities hereafter issued under the Second\nLiberty Bond Act, and the purposes for which securities may\nbe issued under the Second Liberty Bond Act are extended to\ninclude such purchases. Each purchase of obligations by the\nSecretary of the Treasury under this subsection shall be\nupon such terms and conditions as to yield a return at a\nrate not less than a rate determined by the Secretary of the\nTreasury, taking into consideration the current average\nyield on outstanding marketable obligations of the United\nStates of comparable maturity. The Secretary of the Treasury\nmay sell, upon such terms and conditions and at such price\nor prices as he shall determine, any of the obligations\nacquired by him under this subsection. All redemptions,\npurchases and sales by the Secretary of the Treasury of such\nobligations under this Section shall be treated as public\ndebt transactions of the United States.\n(2) Obligations of the Corporation issued pursuant to\nthis Act shall be lawful investments, and may be accepted as\nsecurity for all fiduciary trust, and public funds the\n- 19 -\ninvestment or deposit of which shall be under the authority\nor control of the United States or any officer or officers\nthereof.\nSection 405. Forms of Notes, Bonds and Other Obligations.\nIn order that the Corporation may be supplied with such\nforms of notes, debentures, bonds, or other such obligations\nas it may need for issuance under this Act, the Secretary of\nthe Treasury is authorized to prepare such forms as shall be\nsuitable and approved by the Corporation, to be held in the\nTreasury subject to delivery, upon order of the Corporation.\nThe engraved plates, dies, bed pieces, and SO forth, executed\nin connection therewith. shall remain in the custody of the\nSecretary of the Treasury. The Corporation shall reimburse\nthe Secretary of the Treasury for any expenses incurred in\nthe preparation, custody, and delivery of such notes, debentures,\nbonds, or other obligations.\nSection 406. Moneys of the Corporation.\nAll moneys of the Corporation not otherwise employed\nmay be:\n(a) deposited with the Treasury of the United\nStates subject to check by authority of the Corporation,\ndrawn on the Treasury of the United States by a Treasury\ndisbursing officer, or\n- 20 -\n(b) with the approval of the Secretary of the\nTreasury, deposited in any Federal Reserve bank, or\n(c) with approval of the Secretary of the Treasury,\nand by authorization of the Board of Directors of the\nCorporation, used in the purchase for redemption and\nretirement of any notes, debentures, bonds, or other\nobligations issued by the Corporation.\n- 21 -\nTitle V. Management\nSection 501. Board of Directors.\nThe authority of the Corporation shall be vested in\nthe Board of Directors, except as to those functions, powers\nand duties specifically assigned to the Chairman of the\nBoard by other provisions of this Act and such matters as\nmay be delegated to officers of the Corporation pursuant to\nSection 504 of this Title. The Board of Directors shall\nconsist of five voting members appointed by the President by\nand with the advice and consent of the Senate, who shall\nhold office at the pleasure of the President. The President\nshall designate one of such members as Chairman of the\nBoard, and another member to serve as President of the\nCorporation, and shall have the power at any time and from\ntime to time to designate a new Chairman or new President of\nthe Corporation from among the members of the Board. Of the\nfive members of the Board, not more than three shall be\nmembers of any one political party. Each member shall\ndevote his full working time to the affairs of the Corporation\nand shall hold no other salaried position. Before entering\nupon the duties of his office, each member shall take an\noath faithfully to discharge the duties of his office.\nWhenever a vacancy shall occur on the Board of Directors,\nthe President shall, with the advice and consent of the\nSenate, appoint a person to fill such vacancy. All directors\nshall be citizens of the United States. A majority of the\n- 22 -\ndirectors shall constitute a quorum, and any action by the\nCorporation shall be effected by majority vote of a quorum of\nthe duly appointed and serving directors. The Board of Directors\nshall adopt, and from time to time amend, such bylaws as are\nnecessary for the proper management and functioning of the\nCorporation.\nSection 502. Officers, Employees, Attorneys and Agents.\nThe Chairman of the Board shall be the chief executive\nofficer of the Corporation, and as such shall be responsible\nfor the management and direction of the Corporation (in-\ncluding the making of expenditures associated with adminis-\ntration of the corporation). The President of the Corporation\nshall be the chief administrative officer of the Corporation,\nand shall perform such duties as the Chairman may assign him\nand shall serve as Chairman in the absence of the Chairman.\nThe Board of Directors shall fix the compensation of the\nChairman of the Board, the President of the Corporation, and\nthe directors of the Corporation, taking into account the\ncompensation paid to persons holding positions of comparable\nresponsibility in the private sector. The Chairman of the\nBoard shall appoint such other officers, employees, attorneys,\nand agents as are necessary for the transaction of the\nCorporation's business, fix their compensation, define their\nduties, and provide a system of organization to fix responsi-\nbility and promote efficiency. Any such person appointed by\n- 23 -\nthe Chairman may be removed in the discretion of the Chairman.\nNo officer of the Corporation may receive any salary or\nother compensation for services from any source other than\nthe Corporation during his period of employment, except as\nspecifically authorized by the Chairman.\nSection 503. Conflicts of Interest.\n(1) The provisions of Chapter 11 of Title 18, United\nStates Code, shall apply to the directors and all officers\nand employees of the Corporation; except that the provisions\nof section 208 of such title shall not apply to the procedure\nwhereby compensation of such directors, officers and employees\nis fixed under this Act.\n(2) No officer or director of the Corporation shall,\nduring the period of his service as such with the Corporation,\nmaintain any interest in a project for which financial\nassistance is committed or provided under this Act.\nSection 504. Delegation.\nThe Board of Directors may, by resolution, delegate to\nthe Chairman of the Board or other officers of the Corporation\nsuch functions, powers and duties as it deems appropriate,\nexcept that the Board may not delegate any function, power\nor duty specifically assigned to the Board by Titles III or\nIV of this Act. The Chairman of the Board may, by written\ninstrument, delegate such functions, powers and duties as\nare assigned to the Chairman by the provisions of this Act\nto such officers or employees of the Corporation as he deems\nappropriate.\n- 24 -\nSection 505. Audits.\nThe Corporation and its Subsidiaries shall retain a\nfirm or firms of nationally recognized public accountants\nwho shall prepare and report an annual audit of the accounts\nof the Corporation and its Subsidiaries, on a consolidated\nbasis, including those statements required by 31 U.S.C.\n$851. No other provision of the Government Corporation\nControl Act shall apply to the Corporation and its Subsidiaries.\nThe General Accounting Office is authorized to conduct such\naudits of the accounts, and to report upon the same to\nCongress, as such Office shall deem necessary or as Congress\nmay request. All books, accounts, financial records, reports,\nfiles, papers and property belonging to or in use by the\nCorporation or its Subsidiaries and necessary to facilitate\nan audit shall be made available to the person or persons\nconducting the audit and facilities for verifying transactions\nwith the balances or securities held by depositories, fiscal\nagents, and custodians shall be afforded to such person or\npersons.\nSection 506. Reports.\n(1) The Corporation shall make and deliver a quarterly\nreport to the Congress and the President. The report will\nstate the aggregate sums then outstanding or committed as\nloans, loan guarantees or other financial assistance and a\n- 25 -\nlisting of the business concerns so involved with the\nCorporation. The quarterly report in which any expenditure\nor commitment to a business concern or project is first\nnoted shall contain a brief description of the factors\nconsidered by the Board of Directors in making such expenditure\nor commitment. The report shall also show, on an unaudited\nbasis, the assets and liabilities of the Corporation as of\nthe end of the Corporation's fiscal quarter preceding the\ndate of the report and the number, functions and compen-\nsation of persons employed by the Corporation at salary\nrates exceeding $2,500 per month.\n(2) The Corporation shall make and deliver to the\nCongress and the President an annual report containing the\naudited financial statements and report prepared by the\nindependent public accountants pursuant to Section 505.\nThe annual report shall also contain, in addition to the\ninformation required in the quarterly report, a general\ndescription of the Corporation's operations during the year,\na specific description of each project or activity in which\nthe Corporation is involved, a status report on each such\nproject or activity, and an evaluation of the contribution\nwhich the project or activity has made and is expected to\nmake in fulfilling the purposes of this Act (including where\npossible, a precise statement of the amount of domestic\nenergy produced or to be produced thereby).\n- 26 -\n(3) On or before June 30, 1983, the Corporation shall\nmake and deliver to the Congress and the President a report\nevaluating the overall impact made by the Corporation and\ndescribing the status of each then current activity or\nprogram of financial assistance. This report shall contain\na Liquidation Plan. The Liquidiation Plan shall describe in\nthe greatest detail practicable how each activity, project\nor obligation involving financial assistance, and every\nsubstantial asset or liability of the Corporation will be\nliquidated, terminated, satisfied, sold, transferred or\notherwise disposed of. Each annual report thereafter made\nby the Corporation will describe what progress is being made\nin effecting such Liquidation Plan.\n(4) On or before January 31, 1986, the Corporation\nshall make and deliver to the President a report setting\nforth the Corporation's recommendation as to whether or not\nthe existence of the Corporation should be extended (for the\nlimited period and purpose described in Section 803).\n(5) Every audit and report required by this section\nshall relate to and report on Subsidiaries, if any, as well\nas the Corporation.\nSection 507. Advisory Committee.\nThere shall be an Advisory Committee of the Corporation\nconsisting of nine United States citizens who are especially\n- 27 -\nqualified to advise the Corporation with respect to its\nfunctions under this Act. The members of the Advisory\nCommittee shall be appointed by the President of the United\nStates. The Advisory Committee shall meet one or more times\nper year with the Board of Directors, pursuant to the call\nof the Chairman of the Board, to advise the Board of Directors\non the program of the Corporation. Members of the Advisory\nCommittee shall be paid no more than $200 for each day spent\naway from their residences or regular places of business for\nthe purpose of attending Advisory Committee meetings, and\nshall be compensated for reasonable travel and lodging\nexpenses related to attendance at such meetings, as docu-\nmented in statements filed with the Corporation. The\nprovisions of the Federal Advisory Committee Act (Public Law\n92-463, 86 Stat. 770) shall not apply to the Advisory Committee\nestablished by this section.\n- 28 -\nTitle VI. Federal Agency Proceedings\nSection 601. Definitions. As used in this title--,\n(1) The term \"Federal agency\" means an \"Executive\nagency\" as defined in 5 U.S.C. 105, including an independent\nregulatory commission.\n(2) The term \"proceedings\" means any action taken by a\nFederal agency initiating or in carrying out the process\nleading to approval or disapproval of any project.\n(3) The term \"project\" means any activity for which\nfinancial assistance has been provided or committed to a\nbusiness concern under this Act.\nSection 602. Certification by the Corporation.\n(1) The Corporation may, in connection with its extension\nof financial assistance under this Act, certify that the\nproject to which such financial assistance is committed or\nprovided, is of critical importance to the achievement of the\npurposes of this Act.\n(2) Such certification shall be issued by the Corporation\nonly upon application therefor and then only after a satisfactory\nshowing by the applicant that such certification is reasonably\nnecessary to assure the expeditious completion of the project\nto which it relates.\n(3) A business concern may submit a certification made\npursuant to subsection (1) above to any Federal agency which\n- 29 -\nis required by law to approve, disapprove, license, or\nreview all or any portion of the project including the\ninitiation, development or completion of the project.\n(4) Any Federal agency which receives a certification\nauthorized under subsection (1) above shall forthwith commence\nall necessary proceedings which may be required for the\napproval of disapproval of all or any portion of the project\nand shall give such proceedings preference over all other\nquestions pending before it, except other proceedings\ninvolving similar certifications, and shall complete all\nsuch proceedings and render a decision within 12 months (or\nsuch shorter period as the Corporation may for good cause\nspecify) from the date of submission of the certification to\nsuch Federal agency.\n(5) With the approval of the Corporation, any Federal\nagency which receives a certification provided under subsection\n(2) may for good cause shown extend for up to six additional\nmonths the time for completion of any proceeding specified\npursuant to subsection (4).\nSection 603. Judicial Review.\n(1) Judicial review of a Federal agency's final action\nconcerning a project which has been certified under Section\n602 of this Act shall be given priority over other matters\npending on the court's docket.\n(2) Should any relevant Federal agency fail to expedite\nits proceedings in regard to a project covered by this Act\n- 30 -\nwithin the period specified pursuant to Section 602 of this\nTitle, the Corporation may obtain from the appropriate\nUnited States district court an order directing compliance\nby the Federal agency with the provisions of Section 602.\nSection 604. Expediting Functions of the Corporation.\n(1) In order to coordinate, simplify and expedite the\nprocessing of applications to construct, license or review\nenergy projects, the Corporation, in cooperation with all\ninterested Federal agencies, shall oversee the entirety of\nthe Federal approval process concerning projects assisted\nunder this Act. The authority to approve or disapprove\napplications for energy projects shall remain in those\nFederal agencies required by law to consider such projects.\n(2) The Corporation shall have the following duties\nand authorities in the project approval process:\n(a) The Corporation shall develop, in cooperation\nwith all other Federal agencies with authority over any\naspect of energy projects, a single composite application\nwhich shall be the sole application required for Federal\napproval prior to the commencement of a project. Such\ncomposite application shall be composed of removable\nand insertable sections in order to accommodate the\ninformation necessary for all Federal approvals for\neach proposed project in one document of manageable\nsize.\n- 31 -\n(b) Immediately upon receipt of a composite\napplication the Corporation shall forward the application\nto the Federal agencies required by law to consider it.\n(c) In order to carry out the purposes of this\ntitle, the Corporation is authorized to coordinate and\nexpedite the review of applications for project approval\nundertaken by Federal agencies and, in consultation\nwith such agencies, may establish appropriate priorities\nand timetables for the completion of those agencies'\nreview processes; provided, however, that all such\ntimetables and priorities shall be consistent with the\nstatutory obligations of such agencies.\n(d) The Corporation shall keep apprised of the\nprocessing of energy project applications at the State\nand Regional level and, where appropriate and consistent\nwith applicable Federal and State law, suggest procedures\nfor consolidating State and Federal proceedings with a\nview to reducing duplication of effort and expediting\nthe overall review and approval process.\n(e) The Corporation may, within 20 days after\nreceipt of any Federal agency decision approving or\ndisapproving an application, petition that agency to\nreconsider its decision. Petitions for reconsideration\nfiled by the Corporation shall be granted or denied\nwithin 30 days of their receipt by the agency involved.\n- 32 -\nTitle VII. Unlawful Acts and Penalties\nSection 701. False Statements.\nWhoever makes any statement, knowing it to be false, or\nwillfully overvalues any security, for the purpose of-obtaining\nfor himself or for any applicant any loan or extension\nthereof by renewal, deferment of action, or otherwise, or\nthe acceptance, release, or substitution of security therefor,\nor for the purpose of influencing in any way the action of\nthe Corporation, or for the purpose of obtaining money,\nproperty, contract rights or anything of value, under this\nAct, shall be punished by a fine of not more than $5,000 or\nby imprisonment for not more than two years, or both.\nSection 702. Forgery.\nWhoever (1) falsely makes, forges, or counterfeits any\nnote, debenture, bond, or other obligation, or coupon, in\nimitation of or purporting to be a note, debenture, bond, or\nother obligation, coupon or thing of value issued by the\nCorporation, or (2) passes, utters or publishes, or attempts\nto pass, utter or publish, any false, forged or counterfeited\nnote, debenture, bond, or other obligation, coupon or thing\nof value purporting to have been issued by the Corporation,\nknowing the same to be false, forged or counterfeited, or\n(3) falsely alters any note, debenture, bond, or other\nobligation, or coupon, issued or purporting to have been\n- 33 -\nissued by the Corporation, or (4) passes, utters or publishes,\nor attempts to pass, utter or publish, as true any falsely\naltered or spurious note, debenture, bond, or other obligation\ncoupon or thing of value issued or purporting to have been\nissued by the Corporation, knowing the same to be falsely\naltered or spurious, shall be punished by a fine of not more\nthan $10,000 or by imprisonment for not more than five\nyears, or both.\nSection 703. Misappropriation of Funds and Unauthorized\nActivities.\nWhoever, being connected in any capacity with the\nCorporation, (1) embezzles, abstracts, purloins, or will-\nfully misapplies any moneys, funds, securities, or other\nthings of value, whether belonging to it or pledged or\notherwise entrusted to the Corporation, or (2) with intent\nto defraud the Corporation or any other body politic or\ncorporate, or any individual, or to deceive any officer,\nauditor, or examiner of the Corporation, makes any false\nentry in any book, report, or statement of or to the Corporation,\nor, without being duly authorized, draws any order or issues,\nputs forth or assigns any note, debenture, bond, or other\nobligation, or draft, bill of exchange, mortgage, judgment,\nor decree thereof, or (3) with intent to defraud, participates,\nshares, or receives directly or indirectly any money, profit,\nproperty or benefit through any transaction, loan, commission,\ncontract, or any other act of the Corporation, or (4) gives\n- 34 -\nany unauthorized information concerning any future action or\nplan of the Corporation which might affect the value of\nsecurities, or, having such knowledge, invests or speculates,\ndirectly or indirectly, in the securities or property of any\ncompany, bank, or corporation receiving loans or other\nassistance from the Corporation, shall be punished by a fine\nof not more than $10,000 or by imprisonment for not more\nthan five years, or both.\nSection 704. Infringement on Name.\nNo individual, association, partnership, corporation or\nbusiness entity shall use the words \"Energy Resources Finance\nCorporation\" or a combination of these words which a court\nof competent jurisdiction shall find reasonably likely to\nmislead or deceive, as the name or a part thereof under\nwhich he or it shall do business.\nSection 705. Unlawful Contracts.\nThe provisions of Sections 431 through 433, inclusive,\nof Title 18, United States Code, shall apply to contracts or\nagreements with the Corporation pursuant to this Act. Such\ncontracts or agreements include, but are not limited to\nloans, loan guarantees, purchase agreements, advances,\ndiscounts and rediscounts, acceptances, releases, and substi-\ntutions of security, together with extensions or renewals\nthereof.\n- 35 -\nSection /06. Additional Penalties.\nIn addition to any other penalties provided in this\nTitle, on conviction the defendant shall be liable ta the\nCorporation for any profit or gain acquired as a result of\nthe conduct constituting the offense for which he was -\nconvicted.\n- 36 -\nTitle VIII. General Provisions\nSection 801. Coordination with other Entities.\nThe Corporation shall be entitled to receive, and shall\nseek wherever appropriate, the advice and recommendations of\nthe Energy Resources Council, the Federal Energy Administration,\nthe Energy Research and Development Administration and the\nDepartment of the Interior in determining whether the provi-\nsion of financial assistance to a particular business\nconcern or to promote a particular activity will further the\npurposes of this Act.\nSection 802. Severability.\nIf any provision of this Act, or the application of any\nsuch provision to any person or circumstance, shall for any\nreason be adjudged by any court of competent jurisdiction to\nbe invalid, the remainder of this Act, or the application of\nsuch provision to persons or circumstances other than those\nto which it is held invalid, shall not be affected thereby.\nSection 803. Termination and Liquidation of the Corporation.\nNothwithstanding any other provision of this Act:\n(1) The Corporation shall make no commitments for\nfinancial assistance after June 30, 1983, and shall furnish\nno financial assistance after June 30, 1986.\n- 37 -\n(2) From and after June 30, 1983, the Board of Directors\nof the Corporation shall diligently commence all practical\nand reasonable steps to achieve an orderly liquidation of\nthe Corporation's affairs on or prior to June 30, 1986.\nSuch steps may include the sale or transfer to any agency of\nthe United States, or the sale directly to the public,\nincluding any business concern, of all or any portion of the\nCorporation's assets.\n(3) The Corporation shall terminate on June 30, 1986,\nor at such earlier date as the President of the United\nStates shall determine, and upon such termination, all\nassets or liabilities of the Corporation, to the extent not\notherwise disposed of, shall become assets and liabilities\nof the United States, provided, however, that if the President\nshall determine that the orderly liquidation of the Corpora-\ntion's affairs requires the continuation of the Corporation\nbeyond June 30, 1986, the President may, by Executive Order,\nextend the authorized life of the Corporation for not more\nthan three years after such date.\nSection 804. Relationship to Other Laws.\nExcept as may be provided elsewhere in this Act, neither\nthe Corporation nor any Subsidiary shall for any purpose\nbe considered an \"Executive agency\" as defined in 5 U.S.C.\n105 or an \"agency\" as defined in 5 U.S.C. 551. The provisions\n- 38 -\nof the United States Code relating to public contracts and\npublic buildings and works, including Federal Property and\nAdministrative Services Act of 1949, and the Davis-Bacon Act\n(40 U.S.C. 276a.), shall not apply to the functions of the\nCorporation and its Subsidiaries.\nSection 805. Reservation of right to amend or repeal.\nThe right to alter, amend, or repeal this Act is expressly\ndeclared and reserved, but no such amendment of repeal shall\noperate to impair the obligation of any contract made by the\nCorporation under any power conferred by this Act.\nFEDERAL\nFEDERAL ENERGY ADMINISTRATION\nSKIV\nNISTRATION\nWASHINGTON, D.C. 20461\nAUG 19 1975\nDEPUTY ADMINISTRATOR\nEYES ONLY\nMEMORANDUM FOR THE VICE PRESIDENT\nARTHUR BURNS\nALAN GREENSPAN\nJAMES T. LYNN\nROGERS C.B. MORTON\nWILLIAM SEIDMAN\nWILLIAM E. SIMON\nFRANK G. ZARB\nFROM:\nERIC R. ZAUSNER\nSUBJECT:\nENERGY RESOURCES FINANCE CORPORATION (ERFCO)\nAttached at Tab A is a description of the Energy Resources\nFinance Corporation. This description and the detailed\nlegislation at Tab B assume implementation of the $110\nbillion, autonomous organization. The description and\nlegislation are designed to conform as closely as possible\nwith these concepts. To the extent a completely autonomous\norganization is rejected or the scope and magnitude of ERFCO\nis reduced, there are many other issues which must be con-\nsidered but have been ignored in the current description and\nlegislation. However, the detailed staff review surfaced\nseveral issues which should be considered apart from the\noverall desirability of the proposal and are summarized below:\n- Focus of ERFCO and needed equity\nThe original ERFCO proposal and this legislation\nhave a $10 billion equity, because they assumed a\nmix of investments which would allow \"self-\nliquidation\" and breaking even or possibly making\na profit.\nIncluding synthetic fuels and other high risk\ntechnologies to the degree implied by the\nPresident's one million barrels per day synthetic\nfuels goal makes the risks and potential losses\nsubstantially greater and could wipe out the $10\nbillion equity.\nFORD is LIBRARY 076839\n25\n- 2 -\nIf the synthetic fuels goal is to be implemented\nby this corporation, it would appear that $25\nbillion may be more in keeping with the expected\nlevel of investment in high risk projects.\n- Requirement for ERFCO to be subject to the budget and\nmanagement requirements of the Government Corporation\nControl Act and the guidelines on credit program\nstructure set forth in OMB Circular A-70\nThese requirements were designed to prescribe\nminimum management standards and restrict the\ntypes of subsidies provided by Government credit\ninstitutions.\nCircumventing them runs counter to general\nAdministration philosophy, but is consistent with\nmaximum flexibility and autonomy for ERFCO.\nIn the current draft, none of these constraints\n(except GAO audit authority) is included.\n- Requirement for the Secretary of the Treasury to\napprove the terms and conditions of loan guarantees\nand other obligations on individual energy projects\nwhich are fully backed by the U.S. Government\nIn the draft legislation, ERFCO has complete\nflexibility in the timing, structure and size of\nindividual Government-backed obligations.\nHowever, obligations marketed by the private sector\nwhich are fully backed by the U.S. Government may\nhave the same impact on capital markets as ERFCO's\nown debt.\nTreasury control over these instruments would\nassure orderly markets, but would run counter to\nERFCO's autonomy by requiring a case-by-case review\nof energy projects.\n- Degree of off-budget financing\nIn the current draft, the process of financing\nindividual projects is considered to be off-budget,\nas is the Treasury provision of $100 billion in debt.\nFORD & LIBRARY\n-3-\nThe equity portion of the corporation could be\nconsidered its exposure to loss, and authorization\nand appropriation of this item through the normal\nbudget process may be desirable. This would be\nconsistent with the recent Congressional budget\nreforms.\nBecause of the \"self-liquidating\" concept of\nERFCO, the current legislation provides for the\nTreasury purchase of this equity as an off-budget\nitem also. This could be viewed as a thinly veiled\nattempt to avoid the budget implications of the\nproposal.\n- Control over structure and timing of issuance of\nERFCO debt\nIn the current draft, ERFCO has complete control\nover the timing and amount of debt issued, up to\n$20 billion annually. Above that level, con-\ncurrence of the Secretary of the Treasury is\nrequired. The Secretary also determines whether\nERFCO can issue debt directly, or if it will be\npurchased by the Federal Financing Bank.\nWhile this provides almost complete autonomy\nfor ERFCO, it provides only limited ability for\nTreasury to assure orderly capital markets.\n- Requirement for payment of dividends to the Government\non its equity investment\nAs now drafted, ERFCO must pay dividends at the\naverage cost of capital for the Treasury, but may\nwaive or defer these payments based on the Board's\ndecision on availability of funds or desirability\nof further energy investments. Ultimately, upon\nliquidation all remaining funds would revert to\nthe Treasury.\nThis provides maximum ERFCO flexibility but is\ninconsistent with traditional practices by similar\nGovernment corporations.\n- Availability of ERFCO guarantees on tax-exempt municipal\nbonds\nNo prohibition on ERFCO guarantees is now provided\nfor, because eligible projects might be municipally\nfinanced.\nFORD i LIBRARY DERALD\n- 4 -\nSuch guarantees would further stimulate the use\nof a debt instrument which is opposed by the\nTreasury Department on several grounds.\n- Tax status of ERFCO-owned commercial operations\nWhile ERFCO profits are not taxable in the current\ndraft, any majority-owned commercial operations or\nERFCO operational (as opposed to financing) sub-\nsidiaries would be treated as private corporations\nfor tax purposes.\nSuch treatment assures no undue advantage or\nincentive for Government competition with private\noperations, but does not provide all possible\neconomic benefits to ERFCO-sponsored projects.\nFORD is LIBRAR OFRALD\nA BRIEF DESCRIPTION OF THE\nENERGY RESOURCES FINANCE CORPORATION (ERFCO)\nOverview\nThe proposed Energy Resources Finance Corporation (ERFCO),\ndescribed in this paper, represents a major new Presidential\ninitiative to deal with the critical energy development\nproblems faced by this Nation. ERFCO would be established\nas an independent Federal Corporation to finance energy and\nenergy-related projects for the purpose of insuring that\nfinancing problems do not hinder this Nation's achievement\nof energy independence. The Corporation would have financial\nresources of up to $110 billion to provide the following\nenergy development incentives:\nFor the \"relatively riskless\" sector of its loan port-\nfolio, ERFCO would provide capital at an interest cost\nlower than even the best private credit, thereby improv-\ning the economics of projects that might have been\nsubmarginal at commercial rates.\nERFCO would be able to offer special terms such as\ndeferral of interest, balloon maturities, and loan\nconversion features which a traditional private sector\nlender could not provide.\nThe magnitude of ERFCO's resources, $110 billion, would\nprovide a \"one stop\" financing institution for large-\nscale projects - eliminating the need for time-consuming\nand difficult-to-accomplish commercial syndication.\nERFCO would be able, to a greater degree than the private\nsector, to accept timing risks, proceeding with commit-\nments before regulatory approvals are complete.\nERFCO would be able to commercialize high risk new\ntechnologies because it would be a self-liquidating\nventure, not obligated to obtain commercial rates of\nreturn on its investments.\nThe Long-Term Energy Problem\nLast year's Arab oil-embargo concentrated national attention\non our growing dependence on imported oil. This reliance\nhas resulted from declining domestic crude oil production,\nand from growing consumption of energy. Crude production\npeaked in 1970 and has declined by one million barrels per\nday over the last five years (a 13 percent reduction). Energy\nGERALD FORD LIBRARY\n-2-\nuse continued to grow at 4-5 percent per year until 1974.\nWhen the embargo was imposed, our dependence on foreign oil\nhad risen to 35 percent of domestic oil consumption; imports\nwill soon reach 40 percent of consumption.\nDespite the increased awareness of our energy problems, the\noutlook for rapid implementation of a national energy policy\nis not favorable. No major new actions to increase domestic\nsupply in the next several years have been taken; there are\nindications that the Congress may legislate price rollbacks\nwhich would have the doubly adverse effect of stimulating\nconsumption and discouraging production. Natural gas\nshortages continue to worsen, and gas curtailments could\ncause factory shutdowns in many areas. Electric utility\nfinancial problems and regulatory delays have resulted in\nthe cancellation or postponement of large numbers of nuclear\nand coal plants. And major demonstrations of emerging tech-\nnologies, such as coal gasification, synthetic crude, and\noil shale, have not been forthcoming because of high cost,\ntechnological uncertainties, downside risks if world prices\nbreak, and environmental and consumer group opposition.\nMeanwhile, demand growth has been slowed temporarily, but\nwill increase in the near future as the economic recovery\ngains momentum.\nIn his January State of the Union Message, the President\nestablished the goal of energy independence by 1985, and\nproposed many actions to help meet this goal including:\nDecontrol of oil prices, and deregulation of new natural\ngas prices;\nProduction from the Naval Petroleum Reserves;\nAmendments to the Clean Air Act and the Energy Supply\nand Environmental Coordination Act to allow greater use\nof coal;\nAn expanded Outer Continental Shelf leasing policy;\nAcceleration of nuclear power through expedited licensing\nand siting, and other measures;\nRegulatory rate-making reforms to encourage the expansion\nof electric power;\nA National Synthetic Fuels Commercialization Program with\na goal of one million barrels per day oil equivalent of\nsynthetic fuels capacity by 1985;\nGERALD FORD LIGRARY\n-3-\nA number of energy conservation measures including\nthermal efficiency standards, insulation tax credits,\nautomobile efficiency goals, and appliance efficiency\ngoals.\nNone of the President's domestic supply or energy conserva-\ntion proposals has been enacted by the Congress. While some\nare likely to be enacted in the coming months, many proposals\nremain unpopular and will not be approved. Each month or\nyear of delay not only increases our vulnerability, but in-\ncreases the cost of developing new supply.\nCapital Needs and Problems\nIn its Project Independence Report last year, the Federal\nEnergy Administration estimated that investment for\ndomestic energy supplies could total about $600 billion'\n(in 1975 dollars) over the next ten years to reach energy\nindependence. Some sectors of the energy industry, such\nas oil, should be able to finance conventional projects;\nothers, such as the electric utility industry, will find\nfinancing more difficult; new and emerging technologies\nand some conservation projects may also be hard to finance\nbecause their economics are marginal, and uncertainties\nand risks are large. Furthermore, many new projects such\nas uranium enrichment plants or new pipelines for Alaskan\noil and gas may be too large to be financed by the private\nsector alone.\nRegulatory and environmental problems make financing even\nmore difficult. By adding uncertainty about a project's\nultimate fate and timing and by delaying construction,\ninflationary pressures increase.\nIn response to these financing problems which prolong or\nincrease vulnerability to foreign supply and price dis-\nruptions, and as a major commitment to our energy inde-\npendence goals, the President is now proposing an Energy\nResources Finance Corporation.\nA Federal role in initiating, financing, supporting, or\nowning projects vital to the national interest is not\nunprecedented, or unique. In relatively recent times,\nthe Federal Government .has taken an activist role in such\nareas as electric power generation through TVA and nuclear\npower demonstration programs, the space program, and crash\ncommercialization of new technologies such as synthetic\nrubber plants in World War II, and uranium enrichment.\nThe ERFCO proposal could deliver major benefits to the\ndomestic economy that would be in every way comparable\nto the benefits to the public from the above programs.\nFORD is LIBRAR\n-4-\nERFCO Organization\nERFCO would be established as an independent Federal Corpo-\nration with authority to provide financial support of up to\n$110 billion for energy or energy-related projects. The\nBoard of Directors, consisting of five members, would be\nappointed by the President and be confirmed by the Senate,\nwould serve at the President's pleasure and would include\nno more than three members of one political party. The\nChairman and the President of ERFCO would be two of the\nBoard members.\nThe Chairman of ERFCO would be a member of the President's\nEnergy Resources Council (ERC) and the Economic Policy Board\n(EPB), and would consult with the ERC and the EPB on broad\ndirection and specific projects. The Chairman of ERFCO would\nbe the Corporation's Chief Executive Officer; he would report\ndirectly to the President of the United States.\nThe President of ERFCO would be the Chief Operating Officer,\nwith support from the following officers (as indicated in\nChart 1) :\nSenior Vice President for Planning - has broad analytical\nfunctions to determine overall investment strategy and to\nensure compatibility with national energy objectives.\nSenior Vice President for Investment - the senior invest-\nmentiofficer of ERFCO; generates and completes all invest-\nment packages; assisted by Vice Presidents in four major\nprogram areas: electric power; oil, gas and coal; new\ntechnologies; conservation and environment.\nSenior Vice President for Finance, Control, and Audit -\nresponsible for management of ERFCO's debt and investment\nportfolio.\nSenior Vice President and General Counsel - has responsi-\nbility for all legal affairs and directs ERFCO's regulatory\nfunctions.\nVice President for Administration - manages all budget,\nadministration, and personnel matters.\nVice President for Communications - liaison with media,\nthe Congress, industry and the public.\nThe staff of ERFCO would probably be about 600 employees,\nwith most of them in the finance and investment àreas. It\nis expected that the ERFCO Chairman and other staff would\nnot be compensated at executive agency rates, but would be\npaid at rates comparable to other Government corporations\nERFCO's total annual operating budget could be about $75\nmillion, including personnel, overhead, and contract and\nBERALD FORD VIBRARY\ndata processing support.\n- 5 -\nThe projected size of the ERFCO staff is consistent with\nthat of the Ex-Im Bank which employs about 400 people and\nauthorized about $9 billion in loans, guarantees, and insur-\nance in FY-74. ERFCO would need a larger planning and analysis\nstaff in order to develop policies consistent with national\nenergy objectives. Further, where Ex-Im Bank has developed\nits strategy and operational plans over a long period of time,\nERFCO would have to begin fresh. Nevertheless, the ERFCO\nstaff would not be much larger than Ex-Im Bank's staff, since\non the average its projects would be much larger. For example,\nERFCO could approve as many as 150 projects each year at about\n$100 million per project, or as few as 50 projects at $300\nmillion per project.\nERFCO would be self-liquidating and have a specified, limited\nlife of ten years, with new commitments only in the first\nseven years of its existence. After the seventh year, ERFCO\nwould develop a liquidation plan for all of its investments.\nAny remaining obligations after the ten-year life would be\ntransferred to the Department of the Treasury for, liquidation;\nthese activities would consist principally of servicing loan\nand investment portfolios, and price-support commitments. The\nlife of ERFCO could be extended for three more years at the\ndiseretion of the President. Because of its relatively short\nlife) the need to attract extremely high caliber personnel,\nand to allow for quick action, ERFCO would be staffed outside\nof the Civil Service System and would not be subject to other\ngovernment regulations.\nA Statutory Advisory Committee would be appointed by the\nPresident to assist the Board and could consist of outstanding\nrepresentatives from consumer, environmental, banking, labor,\nand business organizations who are especially qualified to\nadvise ERFCO with respect to its statutory functions.\nERFCO Financial Structure\nERFCO's sources of financial capital would be off-budget; it\nwould have authorized equity capital of $10 billion, and the\nability to borrow up to $100 billion. The total amount of\nfinancial assistance by the Corporation outstanding at any\ntime would be computed as the sum of the face amount of all\nguarantees, reserves for all other contingent liabilities,\nand all loans or other forms of capital assistance. The total\nfinancial assistance could not exceed the sum of the Corporation's\npaid-in equity capital, its authorized borrowing, unrealized\ngains from its investments, and its earned surplus.\nFORD & LIBRARY\n-6-\nERFCO would not be allowed to provide additional financial\nassistance, or make any further commitments for financial\nassistance if it were determined by audit that the total of\nits reserves for bad debts, price support commitments, con-\ntingent liabilities and other unrealized losses exceeded the\nCorporation's paid-in equity capital and earned surplus.\nERFCO would have complete control over the timing and amount\nof debt issued up to an annual total of $20 billion. Above\nthis level, concurrence of the Secretary of the Treasury\nwould be required. The Secretary could also determine\nwhether ERFCO could issue debt obligations directly, or\nmarket them via the Federal Financing Bank. ERFCO would pay\ninterest and dividends at the average cost of capital for\nthe Treasury, but ERFCO's Board could waive or defer dividend\npayments if it decided that the general availability of funds,\nor the desirability of further investments, warranted such\naction.\nScope of ERFCO Investments,\nERFCO would concentrate on the financing of large-scale energy\nprojects deemed critical to our national energy objectives.\nIt would have broad discretionary authority to support the\nprojects approved by the Board without case-by-case outside\nreview.\nGenerally, ERFCO would evaluate proposals against the following\ncriteria:\nCredit Elsewhere Test - Is the proposed project unable to\nbe financed elsewhere under terms and conditions which\nwould allow other entities, private or public, to undertake\nit economically?\nEnergy Impact Test - Is the proposed project consistent\nwith, and does it advance, national energy goals and\npolicies; and does its energy impact justify financial\nassistance from ERFCO?\nThe projects that could be supported by ERFCO range across\nthe full spectrum of energy development and conservation\nprograms. Among the broad categories covered by ERFCO are:\n1. Synthetic Fuel Technology Commercialization\nThe emphasis here would be upon the application of technology,\nwhich has been proven at the R&D phase, to plentiful energy\nresources such as coal and oil shale, and to the conversion\nGERALD FORD LIBRARY\n-7-\nof solid waste materials into liquid fuels. The projects\nto be supported would be high risk ventures, which could not\nbe undertaken without Government support, and are vital to\nthe achievement of the President's synthetic fuels goal. In\nall likelihood, however, at the $10 billion equity level the\none million barrel per day synthetic fuel goal could not be\nfinanced. Major processes would include:\nSynthetic gas from coal\nSynthetic crude oil from coal\nCrude oil from Western shale\nSynthetic gas and liquids from solid waste\n2. Other Emerging Technologies\nSuitable projects in this area would include other high tech-\nnology processes, also proven at the R&D phase, which are ready\nfor full-scale commercial development. Major projects would\nconsist of:\nGeothermal energy\nProduction of energy from Devonian shale and tight gas\nformations\nSolar, energy applications\nConservation equipment such as heat recovery processes and\nenergy storage units\n3. Conventional Energy Technologies\nWithin this category the focus would be on the application of\nnew technology to improve the efficiency of conventional energy\ndevelopment, and use of financing as a lever to accelerate\nsignificantly the development of conventional energy supply\nand conservation technologies. Specific projects could consist\nof:\nConservation technology to improve efficiency of energy\nprocesses\nFloating nuclear power plants\nUranium enrichment and spent-fuel reprocessing\nFORD is LIBRARY 07V830\n-8-\nMass production of conservation equipment such as\ninsulation or time-of-day electric meters.\nEnergy parks\n4. Related Projects to Reduce Energy Development Constraints\nThis would include support of major categories of infra-\nstructure and equipment that might otherwise severely\nconstrain energy development. For example, the production\npotential of Alaskan oil and gas is of no benefit unless\ncostly pipelines and logistical systems are put in place\nrapidly. Exploration and development of resources in the\nOuter Continental Shelf may be delayed by a shortage of mobile\ndrilling rigs. Consequently, ERFCO could support projects\naimed at relieving major bottlenecks such as these.\nERFCO Authorities\nERFCO would be authorized to use all conceivable financial\nincentives, including loan guarantees, direct loans, price-\nsupport commitments, sale-leaseback arrangements, royalty\nparticipation, and direct equity investments, to support\nprojects from private or public sponsors, including corpo-\nrations, private consortia, State and local government units,\nand others.\nIn addition to its financial authorities, ERFCO would have\na significant role in Federal regulatory proceedings that\naffect its projects. Although ERFCO would have no power to\noverride regulatory decisions at the Federal level, or other\nlevels of Government, its commitment of financial support to\na project would strengthen the venture during the regulatory\nreview phase, and would provide evidence of economic viability,\nwhich is frequently a key aspect of regulatory decision-making.\nERFCO would be empowered to certify projects as essential\nto national energy goals; this certification would have the\neffect of requiring final regulatory determinations by Federal\nagencies within 12 months of submission of applications or\nwithin an appropriate shorter time, with an extension of up\nto six months for good cause granted by ERFCO at the regula-\ntory agency's request. ERFCO could enforce these time limits\nfor expedited processing by seeking a court order.\nERFCO would also act as a clearing house for Federal permit\napplications for the purpose of obtaining expedited final\nregulatory determinations.\nFORD is LIBRARY 078830\n-9-\nImpact on Energy Independence\nIt is expected that by 1985, ERFCO-supported projects would\nbe capable of delivering a direct energy contribution in the\nrange of five to ten million barrels per day of oil equiva-\nlent, potentially enough to displace current and future levels\nof oil imports. In addition, ERFCO-supported projects would\nprovide the infrastructure and physical resources to assist\nin the delivery of ten million barrels per day of oil equiva-\nlent. The combined effect of direct and indirect energy\ncontribution from ERFCO-supported projects would yield energy\nindependence.\nCHART 1 - ERFCO ORGANIZATION\nBoard of Directors\nChairman of the Board\n(Chief Executive Officer)\nPresident\n(Chief Operating Officer and Board Member)\nVice President -\nVice President -\nCommunications\nAdministration\nSenior Vice President\nSenior Vice President\nSenior Vice President\nSenior Vice President\nPlanning\nInvestments\nFinance, Control\nand General Counsel\nand Audit\nSupply/demand and\nRegulatory inter-\neconomic forecasts\nV.P. for Electric\nDebt/Portfolio\nvention\nPower\nManagement\nPriority definition\nConsolidation of\nand long-range\nV.P. for Oil, Gas,\nAudits\npermit filing\nplanning\nand Coal\nContracts\nV.P. for New\nGERALD\nTechnology\nR.\nV.P. for Conservation\nFORD\nand Environment\nLIBRARY\nTUESDAY\nAugust 26, 1975\nMeeting (Called by Zarb) for 10:30 a.m. on Energy Resources\nFinance Corporation in Roosevelt Room.\nVice President will chair meeting. Also attending:\nArthur Burns, Greenspan, Mitchell (for Lynn) of OMB, Morton,\nSeidman, Cannon, Simon, Zausner, Parsky.\nJudy (Frank Zarb's Office)\n6450"
}