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1975/10/09 - Henry Cashen and Bill Seidman
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1975/10/09 - Henry Cashen and Bill Seidman
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The original documents are located in Box 52, folder "1975/10/09 - Henry Cashen and Bill
Seidman" of the James M. Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 52 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
MEETING WITH HENRY CASHEN AND
BILL SEIDMAN
Thursday, October 9, 1975
4:00 p.m.
Mr. Cannon's Office
p.m
DICKSTEIN, SHAPIRO & MORIN
CHARLES H. MORIN
THE OCTAGON BUILDING
DAVID 1. SHAPIRO
SIDNEY DICKSTEIN
NEW YORK OFFICE
WILLIAM J. O'HARA*
1735 NEW YORK AVENUE, N. W.
745 FIFTH AVENUE
ARTHUR J. GALLIGAN
JUDAH BEST
WASHINGTON, D. C. 20006
NEW YORK, N.Y. 10022
HENRY C. .CASHEN II
212 832-1900
JAMES VANR. SPRINGER
RICHARD LITTELL
202 785-9700
THOMAS W. MACK
GORDON P. RAMSEY
BOSTON OFFICE
ARTHUR D. MASON
September 17, 1975
ONE BOSTON PLACE
FREDERICK M. LOWTHER
ROBERT J. HIGGINS
BOSTON, MASS. 02108
SEYMOUR GLANZER
M. J. MINTZ
617 723-8100
IRA H. POLON
KENNETH L.ADAMS
ALAN B PICK
IRA R. MITZNER
WILLIAM SILVERMAN
RICHARD P. PERRIN
GEORGE T BOGGS
JOEL B. KLEINMAN
* (NOT ADM. IN D.C.)
Hon. James Cannon
Director
Domestic Council
The White House
Washington, D.C. 20500
Dear Jim:
Two of our clients, Tennessee Gas Transmission
(Tenneco) and Texas Eastern Transmission, are deeply
involved in a number of projects to supplement declin-
ing U.S. natural gas reserves. One focus of their
attention is LNG imports, as to which they are pursu-
ing projects in the Soviet Union, Nigeria, Trinidad and
Iran.
As are all members of the U.S. LNG industry,
Tenneco and Texas Eastern are greatly concerned over
the complete absence of a U.S. policy with regard to
LNG imports. At various points over the past nine
months, there have been informal proposals from FEA and
other agencies recommending policies pro and con on LNG
imports and particularly on Ex-Im Bank and Marad partici-
pation in LNG projects. It is now our understanding
that, within three to four weeks, these proposals will
culminate in a formal presentation of options to the
Energy Resources Council, on which you sit.
Messrs. Jack Ray and Nevil Proes, the respective
Presidents of Tennessee Gas and Texas Eastern LNG, would
very much appreciate the opportunity to discuss briefly
with you their views of the LNG industry and an appro-
priate LNG import policy. 15-30 minutes would be adequate
for their purposes. Their schedules would best accommodate
a meeting any time on October 9, or October 10, 1975.
Hon. James Cannon
Director
Domestic Council
The White House
September 17, 1975
Page 2
Our clients view the LNG issue as one of major
significance for them and for the country. They would
be most grateful for the opportunity to discuss it with
you.
Best personal regards,
ch Henry C. Cashen II
Tennessee Gas Transmission
TENNECO
A Tenneco Company
Jack H. Ray
Tenneco Building
President
P.O. Box 2511
Houston, Texas 77001
(713) 229-2811
NEVIL M. E. PROES
PRESIDENT
PHONE
TEXAS EASTERN LNG, INC.
AREA CODE 713
P.O BOX 2521 . HOUSTON, TEXAS 77001
224-7961
Tennessee Gas Transmission
TENNECO
A Tenneco Company
Ewell H. Muse III
1100 Milam Building
Director Economic Planning
P.O. Box 2511
Houston, Texas 77001
(713) 229 - 2883
October 7, 1975
LNG POLICY PAPER
1.00
GENERAL COMMENTS
1.01
The continuing apparent inability of the United
States to develop and implement a cohesive and
realistic overall energy policy increasingly plays
into the hands of the owners of exportable non-U.S.
energy resources making for their attaching no
credibility to "Project Independence."
1.02
The down-turn in the level of U.S. industrial
activity, and recent winters which have been warmer
than the norm have resulted in the U.S. energy consumer
being lulled into a false sense of energy security
unaware of the serious problems we face due to:
- Diminishing domestic oil and gas production;
- Failure to price such diminishing domestic production
at competitive market price levels; and
- The absence of adequate economic incentives for
exploration and development of additional energy
resources which increasingly have to be sought for
in the more expensive and difficult frontier areas
of the United States.
2.00
THE NEED FOR IMPORTS
2.01
The United States has the potential to meet its
energy needs from domestic resources. However, many
of the resources have yet to reach the economic feasi-
bility stage. U.S. oil and gas are likely to continue
to be large contributors to domestic supply for many
years, but rapid escalation of finding costs and the
recent reduction in the U.S. resource base, point to
an inability to depend on domestic oil and gas to
sustain their percentage of the market. Taken
together, these factors mean that supplemental imported
energy will be needed for at least the remainder of
this century to satisfy demand.
2.02
The need for supplemental imports has been clearly
recognized in the case of oil. Indeed, it is probable
that by 1980, we will be importing more than 9 million
barrels/day.
2.03
Other than for imports of gas from Canada, the
need for supplemental natural gas imports has not been
clearly recognized. The U.S. will have a shortfall of
domestic gas supplies for at least the remainder of
-2-
this century, and this will be aggravated due to
Canada's own supply problems which have resulted
in the Canadian Government indicating to the U.S.
that such exports will be phased out.
2.04
Some consider that the gas shortfall can and
should be made up by switching the market to
electricity and/or oil. A switch to electricty
would at least double the cost of energy to the
consumer and increase for the nation both the energy
input demand and its investment needs to provide the
necessary generating facilities. Switching to oil
is clearly inadvisable since it would increase our
already large vulnerability to oil exporting nations
whilst imposing enormous conversion costs (including
the idling of an existing large, efficient gas
distribution network) on the U.S. energy consumer.
Accordingly imports of LNG are essential to minimize
the adverse impact on the nation that will result
from a gas shortage.
-3-
3.00
ADVANTAGES OF LNG IMPORTS
3.01
The advantages of LNG imports can be summarized
as follows:
--- LNG provides access to proven world gas reserves
and so provides insurance against disappointments
encountered by U.S. efforts to find and develop in
a timely manner new domestic gas reserves;
LNG represents an alternative to additional oil
imports and thus permits increased diversification
of foreign energy supply sources;
--- LNG permits continued use of the major, efficient
U.S. gas distribution network which, in the absence
of gas supply, would fall increasingly into disuse
at great cost to gas consumers;
LNG avoids imposition of extraordinary fuel
conversion costs on residential and commercial
gas consumers;
LNG can be priced competitively with oil and
other supplemental energy resources;
--- LNG involves significantly less balance-of-
payments drain than oil imports;
-4-
--- LNG has enhanced security of supply because
LNG projects involve significant investment
and credit exposure by the source country in
capital facilities which have no short-term
alternative use.
4.00 MAJOR PROBLEMS HINDERING LNG IMPORTS INTO THE UNITED
STATES
4.01
LNG import projects have been hindered by the
lack of an integrated U.S. LNG policy governing both
the extent of permissible imports and the availability
of financing supports (viz., Ex-Im, Marad). The
energy exporting countries are aware that a U.S. LNG
import policy paper is under consideration. Leaks as
to its contents are contradictory with a result that
the exporting countries consider no useful purpose is
served by pursuing serious discussions with interested
U.S. gas importers while the present uncertainty exists.
4.02
LNG import projects are further hindered by the
inordinate time required to obtain FPC approval for
an import license. The process of review and final
decision seems to take a minimum of 3 years. The
U.S. is not the only market for LNG in the world
-5-
and it is unreasonable to expect any energy
exporting country to take its gas off the world
market for the long period of time required to
get a non-challengeable decision from the FPC,
and with no assurance that at the end a favorable
import decision will be forthcoming.
4.03
LNG import projects are also hindered by the
inordinate time required to obtain a final decision
from the FPC on the matter of LNG terminal siting.
The gas exporting countries accordingly prefer to
limit their business with U.S. companies that
already have approved LNG terminal sites (now
limited to Distrigas (Boston), Columbia/Consolidated
(Cove Point) and Southern Natural (Savannah) )
4.04
A large part of the FPC obstacle is attributable
to the absence of guidelines from Congress and the
Administration as to acceptable price and volume
for LNG imports. Because of this vacuum, the FPC
tends to focus on the examination of environmental
matters related to terminal siting SO imparting
-6-
some semblance of motion to an LNG import
application. The absence of Congressional and
Administration guidelines in the pricing and
volume areas are part of the larger problem
of realistic pricing of energy in the market
place.
-7- -
Attachment I.
CONSUMPTION OF PRIMARY ENERGY IN
THE UNITED STATES
( trillions of Btu's )
1974
1980 (est.)
1985 (est.)
OIL
34,511
42,200
46,900
GAS*
22,533
18,400
19,000
COAL
12,866
18,000
21,000
HYDROELECTRIC
3,285
3,400
3,700
NUCLEAR
1,015
4,600
10,600
TOTAL
74,210
86,600
101,200
A selection of recent forecasts of estimated U.S. energy
consumption is given for comparative purposes:
Source and Date
1980
1985
(in trillions of BTUS)
S. Clark (1975)
86,400
97,700
First National City Bank (1974)
91,200
-
Shell (1974)
88,900
104,200
O E C D (1974) ($9 oil)
85,800
100,100
Exxon (1975)
87,400
102,300
FEA (1974) ($11 oil)
W.O. conservation
86,200
103,000
with conservation
82,100
94,000
*
The markets gas served in 1974 were as follows:
Market
Trillions of BTU's
Percent
Residential
5,016.5
22.3
Commercial
2,639.6
11.7
Industrial
8,165.9
36.2
Power Plants
3,356.0
14.9
Transportation
945.0
4.2
Raw Materials
710.0
3.2
Miscellaneous
1,700.0
7.5
TOTAL
22,533.0
100.0
Attachment II.
ESTIMATED U.S. ENERGY SUPPLY
(trillions of Btu's)
1980
1985
OIL
Production - Lower 48
18,900
19,100
- Arctic
4,000
6,000
Sub Total
22,900
25,100
(million barrels/day) (11.4)
(12.5)
Imports
19,300
21,800
(million barrels/day)
(
9.6)
(10.8)
Total Supply
42,200
46,900
(million barrels/day) (21.0)
(23.3)
Possible
Possible
GAS
Range
Range
Production - Lower 48
17,100
(16,500-18,500)
15,500
(15,000-18,000)
- Arctic
-
1,500
( 1,000- 1,500)
Sub Total
17,100
(16,500-18,500)
17,000
(16,000-19,500)
Imports - Canada
600
(
500-
750)
500
(
350-
500)
- LNG
400
(
400-
450)
1,000
(
950- 1,450)
SNG
300
(
300-
400)
500
(
400-
850)
Total Supply
18,400 (17,700-20,100)
19,000
(17,700-22,300)
COAL
18,000
21,000
(million tons)
( 780)
( 950)
NUCLEAR
4,600
10,600
HYDROELECTRIC
3,400
3,700
TOTAL ENERGY SUPPLY
86,600
101,200
Attachment III.
POTENTIAL LNG IMPORT PROJECTS
Project
Gas Source
Volume
Est. Start
(trillions
of Btu's)
APPROVED
Distrigas
Algeria
60
operating
El Paso I
Algeria
360
1977
Sub Total
420
PENDING
Eascogas
Algeria
240
1980
Trunkline
Algeria
180
1980
El Paso II
Algeria
360
early 1980's
Pacific Lighting
Indonesia
200
1980
Sub Total
980
POSSIBLE
Unnamed
Nigeria
360
early 1980's
North Star
USSR
720
early 1980's
Yakutsk
USSR
360
early 1980's
Various Unnamed
Persian Gulf
950
mid 1980's
Sub Total
2,390
TOTAL ALL CATEGORIES
3,790
Not all of the pending and possible projects listed will
materialize. However, now that imported crude and fuel oil prices
landed on the U.S. East Coast are in the range of $12.50 to $13.50
per barrel, LNG imports from any of the above sources can be expected
to be priced competitively at U.S. port with low sulphur fuel oils
(about $13.10 per barrel or $2.10 per million BTU's).
The question of
price is therefore no longer the prime consideration.
The opportunity
to get a reliable supply source of imported energy, be it fuel oil or
LNG is now the major factor. Given a reasonable U.S. policy on LNG
imports, LNG projects competitively priced and sufficient to provide
gas imports indicated in Attachment II will materialize.