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The original documents are located in Box 13, folder "Energy (5)" of the James M. Cannon
Files at the Gerald R. Ford Presidential Library.
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[sept 1976]
SIGNING STATEMENT
Today I have signed H.R. 13655, a bill which
establishes within the Energy Research and Development
Administration, a program to develop alternatives to
existing automobiles which could operate with no adverse
impact on the environment and with greater fuel economy.
The program includes a five-year $100 million project
involving research and development of integrated test
vehicles, with emphasis on advanced propulsion systems.
The legislation also provides for a study of the feasibility
of Federal loan guarantees for advanced automobile R&D --
ERDA is required to report their findings and recommendations
for appropriate legislation within one year.
The program will augment programs already established
in ERDA and the Department of Transportation and will
accelerate ongoing efforts of ERDA to develop new energy
efficient and virtually pollution free propulsion systems
with industry.
I believe that there should not be Federal intervention
where there are incentives and willingess for the private
sector to assume responsibilities and this legislation
specifically provides that the research and development of
the integrated test vehicles are not to supplant or duplicate
efforts of the private industry.
FORD LIBRAR i GERALD
Digitized from Box 13 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
{Sept. 1976?]
Eurgy Wudson Instruction
#31 FORD
LIBRARY & GENALD
won Brown
name of Fature
100,000 Quods of Natad too?
That the
July 1469 / tot Pu
Jonel of
[sept at 1976?]
Energy
THE WHITE HOUSE
WASHINGTON
TO:
GLENN SCHLEEDE
FROM:
JIM CANNON
FORO LIBRARY + GERAL
Please talk to me about this.
Technology
Facing the Challenge of Nuclear Waste
By VICTOR K. McELHENY
The disposal of past and future nu-
gResumption by the Nuclear Regula-
clear reactor waste is moving to the
tory Commission of all authority, now
forefront of the nuclear industry's
partially delegated to the states, for
many technical, economic and social
licensing waste disposal.
problems.
gIncluding the waste-disposal issue
A report. on nuclear wastes by Dr.
in the much delayed N.R.C. proceeding
Mason Willrich, an independent expert
that is considering the safety of recy-
who moved this month to the Rockefel-
cling plutonium extracted from used
ler Foundation, revealed several
nuclear fuel back into existing power
dramatic proposals to resolve the ques-
plants.
tion of the wastes, which Dr. Willrich
GA nuclear waste commission under
calls a "permanent challenge to govern-
the International Atomic Energy Agen-
ment."
cy to pass on deep-sea disposal projects
Drafted for the United States Energy
and review national plans.
Research and Development Administa-
qa California law, passed in May
tion, and still circulating for comment,
just before the defeat of an initiation
the report indicates that the waste
nuclear power, ties resolution of the
issue is chiefly one of institutions rath-
waste problem to future approvals of
er than technology and that prompt
nuclear electric stations in that state.
action now would avoid collisions with
Moratorium on Licensing
vested interests-such as a large nu-
clear fuel reprocessing industry-that
Decisions in July by the United States
don't exist yet.
Court of Appeals in the District of
Columbia requiring deeper considera-
Waste Increase Expected
tion of waste disposal by the N.R.C.
Dr. Willrich proposed:
before issuing licenses for power plants
GA federally chartered national
has resulted In a de facto licensing
radioactive waste authority. This would
moratorium similar to one that lasted
take over from ERDA the large existing
17 mon 15 in 1971-72.
stock of military wastes and the civil-
Improvements in the light-transmit-
ian power-station waste expected to in-
ting power of hair-thin glass Roers and
crease rapidly in the years ahead. The
in the lifetime of the tiny semiconduc-
authority would handle both highly
tor lasers that can send infrared light
radioactive wastes and the lower-level
rays through such fibers, have been
wastes contaminated with such
so rapid that lightwave communica-
An engineer examines a cut-away of a cylinder of dark glass in which
"transuranic," man-made elements as
radioactive waste could be stored. This method of long-term storage is
plutonium.
Continued on Page 67, Column 4
being studied by the Governemnt. The wastes are dissolved in molten glass.
GERALD
d
FORD
LIBRARY
for Thels
THE WHITE HOUSE
WASHINGTON
September 8, 1976
FORD LIBRARY & CERALD
MEMORANDUM FOR: JIM CANNON
FROM:
JIM CAVANAUGH P
SUBJECT:
GAO Synthetic Fuels Report
Apparently GAO has a copy of a report on the
synthetic fuels program. Would you get one to
me as quickly as possible. I suspect Glenn Schleede
is on top of this. Thanks very much.
Called Schlude
Sent 9/10/76 to J.C.
090919
THE WHITE HOUSE
WASHINGTON
September 8, 1976
MEMORANDUM TO: JIM CANNON
and
FROM:
GEORGE W. HUMPHREYS
SUBJECT:
CEQ REPORT ON ERDA
As you requested, I am attaching the newest CEQ
draft after Schleede's comments were reviewed.
FORD LIBKARY
090818
THE WHITE HOUSE
WASHINGTON
September 7, 1976
MEMORANDUM TO: ART QUERN
and
FROM:
GEORGE W. HUMPHREYS
SUBJECT:
CEQ Report on ERDA
FORD LIBRARY & GERALD
You asked the status of the ongoing discussions.
Schleede is reviewing CEQ's newest draft to see to what
degree his original objections are being met. I do not
believe that Glenn will find the new draft completely
acceptable, based on my understanding of his original
problems.
I do not think that the overriding issue is whether the
report does or does not follow Administration policy.
I believe it to be a mistake for us to hold up the issuance
of this report. Its existence, and substance, is already
known and the charge of "heavy-handed White House pressure"
will create more problems than will the report.
Without arguing the merit of Glenn's objections, I strongly
recommend we do nothing further to delay CEQ's release.
SUMMARY
When the federal government began a major restructuring of energy
research, development, and demonstration programs in late 1974, a new
Energy Research and Development Administration was established --- with
a nonnuclear energy RD&D mandate to complement existing nuclear programs.
In the implementing legislation, the Nonnuclear Energy Research and
GERALD FORD LIBRARY
Development Act of 1974, the Congress paid particular attention to
two areas that had been largely neglected in nonnuclear energy technology
development: environmental protection and energy conservation.
The act gave the Council on Environmental Quality unique responsibilities
with respect to federal nonnuclear energy RD&D programs: to conduct an
ongoing analysis of the adequacy of attention to energy conservation
methods and to environmental protection and to report to the President,
the Congress, and the Administrator of ERDA on Council findings. This
report is our first under that mandate; it covers activity through March 1976.
Our principal focus here is the Energy Research and Development
Administration. We also examined related programs of the Environmental
Protection Agency. ERDA's far-reaching goals and strategies, with implications
for both the environment and energy conservation, are expressed in
A National Plan for Energy Research and Development (ERDA-48) in 1975 and
in the 1976 version (ERDA 76-1).
The many projects and people shifted to ERDA from other agencies
brought with them programs and approaches that may well change under
ERDA direction. The agency is still organizing its planning system and
programs. To say that substantial improvements are necessary does not detract
from ERDA's accomplishments. Moreover, some of the improvements which this
report recommends are planned, and others are underway.
2
In approaching our review of the extent to which ERDA is taking conservation
and environment into account, we first identified certain factors which we
believe should characterize program planning and implementation. We then
compared programs, interviewing officials in both ERDA and EPA, reviewing
relevant documents, and undertaking special studies. The CEQ public hearings
in September 1975 provided useful information and insights. Public hearings
are planned on this report and the National Plan late this year.
In addition to overall assessment of planning and implementation,
we analyzed two areas in depth in order to determine the extent to
which environmental and conservation considerations are built into ERDA
programs. This year's analyses focus on coal technology and end use
conservation. It should be noted that federal conservation RD&D is but
one aspect of the overall national energy conservation effort. The private
sector can and must play a critical role in developing energy conservation
alternatives in response to rapidly growing energy prices and associated
influences upon demand for energy supplies. Conservation efforts can often
be applied at state and local government levels as well. And even within
the federal structure, conservation programs take many forms and involve
many agencies.
FORD LIBRARY
3
Adequacy of Attention to
Energy Conservation
The Council defines "adequacy of attention to energy conservation"
in federal energy research, development, and demonstration as the
capability to identify a range of possible energy conservation RD&D
options, to create a factual basis for comparing them to other energy
RD&D choices, and to develop programs that will ensure availability of
the best options.
The National Plan
In April 1976, ERDA published its second National Plan. ERDA 76-1
singles out conservation technologies, ranking them along with several
different supply technologies as a highest national priority. This step
represents a major shift in emphasis from ERDA-48, the first National Plan.
It is based on further analysis of conservation opportunities, is responsive
to public comment on the initial plan, and reflects ERDA's conclusions that
only moderate progress is being made to date on development of supply
technologies. To give effect to this priority, ERDA 76-1 establishes an
immediate 5-year planning period during which energy conservation
opportunities ready for commercialization will receive special attention.
Further, the President's FY 1977 budget increases ERDA's energy conservation
RD&D resources by 64 percent.
The Council assessment focuses on the revised National Plan and its
underlying analyses and assumptions. We believe that ERDA 76-1 represents
a substantial accomplishment for such a new agency:
4 FORD LIBRARY
4
The revised plan is a major improvement in addressing energy
conservation and can serve as a benchmark from which to begin
a systematic and complete approach to conservation RD&D.
The plan -- and its agenda for the future -- illustrate ERDA's
commitment to a rational and analytical approach to energy
RD&D. It is moving toward the systematic and explicit
identification of energy problems and the development of
technology to resolve them.
ERDA is actively seeking wide review and comment on its
programs and appears responsive to comment.
These developments are most encouraging. However, our assessment
raised a number of other issues which we believe were not adequately addressed
in ERDA 76-1 but which are essential to building energy conservation into
ERDA programs. These issues should be given high-priority attention and
should be addressed specifically in the next revision of the National
Plan in order to provide the basis for public review and debate which
ERDA recognizes is important:
Is the near-term priority role established by ERDA for
new energy conservation technologies --- primarily
stressing demonstration and application of existing end use
products and processes --- the appropriate one?
Is the energy conservation program for the mid-term and the
long-term adequate when measured against the potential benefits
of conservation-intensive energy choices?
Are all potential conservation RD&D options fully considered,
and are the energy conservation technology programs designed
with adequate technical focus?
FORD LIBRARY & GENNID
5
Identifying and Implementing Conservation RD&D Opportunities
To address these issues and to provide for building conservation
into federal energy RD&D adequately will require the following:
A task-oriented, energy systems definition of energy choices,
one which looks first at the nature of the tasks which energy
is to perform and compares ways of doing the work, from the
basic resource to end use
A process for deciding what RD&D should be done based upon
ongoing comparisons of all potential RD&D options, whether
they are supply or conservation oriented
Comparisons based on comprehensive assessment of the energy,
economic, environmental, and social impacts of the options.
Without ongoing comparisons of RD&D opportunities based on a
task-oriented, systems definition of choices and comprehensive assessment
of impacts, ERDA's RD&D priorities may be misplaced.
Perhaps the most critical facet of building conservation into
energy RD&D is development of the research programs. Individual
program design must consider the energy needs that a technical option
can fulfill, anticipate RD&D uncertainties, determine whether federal
sponsorship is appropriate, and provide a likelihood of technical and
commercial success. To do this, conservation program planning should:
Develop and use search and screening techniques for
identification of high-payoff conservation RD&D opportunities
Establish a work planning procedure which focuses on individual
high-payoff opportunities and ensures the availability of
sufficient resources to resolve technical uncertainties.
FGRO LIBRARY & GENALD
6
Energy conservation offers substantial environmental benefits.
Special care should be taken to develop environmental and other impact
information on conservation technologies.
Principal Findings
Although the magnitude and technical direction of an adequate
conservation program are not easy to determine, CEQ has serious concerns
about the pace of improvement:
Although ERDA undertook systemwide analyses which
considered the possible benefits of end use efficiency
improvements in establishing priorities in the National
Plan, it has not yet performed a task-oriented, systemwide
evaluation of a full range of technological opportunities or
made explicit side-by-side comparisons of RD&D options.
Improvements in its planning and analysis systems, now being
implemented, could provide the basis for the necessary comparisons.
Many of the basic agency policies and capabilities necessary
to give conservation the same level of planning and management
attention as supply enhancement, particularly for the more advanced
technologies such as nuclear and coal, are still in a very
rudimentary stage. Plans for improvement are vague.
Social, economic, and environmental information should
be developed and made available. More important, sufficient
research to provide this information is not built into
the RD&D of the supply and conservation program offices.
The search for RD&D opportunities is ad hoc and is not uniformly
applied over all time periods. It lacks the context of a
long-term conservation strategy and does not employ innovative
techniques to identify potential efficiency improvements. The
method for screening RD&D options for inclusion in the program
is more sophisticated but it lacks benefit, cost, and risk
information.
ERDA's planning and budgeting are not effectively linked at
all important levels. Without such linkage, broad agencywide
decisions about what RD&D should be carried out cannot be
translated with confidence into specific research projects.
LLBRARY
7
Conservation planning resources are limited compared with
those for the supply programs, which are supported by ERDA's
extensive field laboratory structure.
Needed Improvements
Conservation RD&D is one of ERDA's high priority programs for the
near term. Delay in building the capability to analyze, plan, and implement
energy conservation RD&D options could jeopardize the national effort toward
energy self-sufficiency in this period.
Equally important, there are potentially significant conservation
RD&D opportunities over the mid- and long-terms. These opportunities must
be fully considered in the critical formative stages of ERDA planning.
There is a momentum behind a number of supply programs, backed up by a
relatively sophisticated planning capability. Failure to give adequate
attention to mid- and long-term energy conservation programs will make it
difficult to redress the balance later.
To ensure adequate attention to energy conservation, the following
general improvements must be made within the next 2 years:
ERDA's analytical capability for planning, which is quite
advanced, should fully incorporate conservation technology
options. Information on economic, environmental, and social
impacts must be considered.
Guidance to ensure the generation of necessary impact information
and consideration of all the impacts of public concern should be
formalized.
In the planning process specific conservation and supply RD&D
opportunities should be compared across all planning periods;
the comparisons should be used in establishing priorities and
allocating resources.
FORD LIBRARY & GERALD
8
The conservation RD&D programs must identify conservation
RD&D opportunities over all planning periods, generate
information to analyze the opportunities, and organize
the research in order to realize the benefits of the best
opportunities.
ERDA should carefully evaluate the extent to which the
private sector can be expected to undertake the RD&D
necessary to attain the potential national benefits of
energy conservation.
ERDA appears to recognize these needs and is committed to a number
of improvements. Included among these are a comprehensive planning
system which is task oriented, will add economic data to its analytical
capabilities, and will employ market analysis to gauge the likelihood
of commercial success of the technologies. These improvements could
provide the basis for adequate consideration of conservation.
ERDA should prepare a detailed action agenda for making needed
improvements. Until improved analytical planning methods are used
to consider conservation programs equally with all other options in
establishing RD&D priorities, ERDA's National Plan should make clear
that priorities will be closely reevaluated annually.
FORD
&
All
LIBRARY
3.9
9
Adequacy of Attention to Environment
The success of any technology ultimately depends upon its acceptance
for economic, environmental and social reasons as well as for energy
production. To ensure the production of environmentally acceptable
technologies, environmental concerns should permeate all phases of
energy research, development, and demonstration. They must be a major
consideration for those charged with overall planning and administration
of ERDA programs. Although ERDA has an Assistant Administrator for
Environment and Safety, the environment should also be a major concern
of the other program offices - fossil fuels, solar, geothermal, and
conservation.
The Environmental Protection Agency -- which must develop
regulatory standards for new technologies -- shares the responsibility
for ensuring the environmental acceptability of new technologies. EPA's
environmental research and standard-setting programs, therefore must be
closely coordinated with ERDA's technology development programs.
To build environment into the RD&D planning and decisionmaking
process, comprehensive environmental information should be generated
for all aspects of the energy technology systems in the RD& D program,
and the information should be fully applied in making decisions. This
information should be used in selecting the most environmentally
acceptable technologies from the entire range of possible RD&D options and
within a particular set of options (for example, coal conversion
technologies). To do this, all RD&D programs should demonstrate the
following characteristics:
FORD
LIBRARY
10
Environmental effects associated with developing energy
technologies should be systematically assessed and
environmental research addressed to priority problem
areas. The technology and environmental research
programs should provide the basis for setting environmental
regulatory standards.
Technology RD&D should be scheduled to reflect availability
of environmental research information; environmental
research should be keyed to guiding hardware development;
and facilities for development and demonstration should
be designed to produce needed environmental data.
Decisionmaking for RD&D should incorporate procedures
for ensuring that all necessary environmental information
is available and that it is weighed in making commitments
to technology development. Environmental assessments and
environmental impact statements should be a major basis
for these decisions.
A system of checks and balances should exist so that
environmental information is developed when needed and
that it is fully used as technologies proceed toward
commercialization.
ERDA's National Plan recognizes that environmental protection
and enhancement are concepts which "must be fully integrated into
energy production and use." The National Plan makes a commitment to
an environmental policy strategy which, while lacking detail, appears
to include most of the characteristics set forth above. It also
outlines the elements of an environmental planning system. These
are important steps on ERDA's part toward adequately building environment
into its technology programs.
This evaluation ends with the first quarter of 1976. As of that
time, the environmental strategy had not been implemented nor had
procedures been issued for the environmental planning system. Yet many
technologies are proceeding toward the later stages of development. In
our view, implementation is too slow.
11
Principal Findings
Until recent years, little attention was given to identifying the
environmental problems associated with developing nonnuclear energy
technologies. This situation has been changing gradually. Since 1974
the federal environmental research program has devoted much more effort
to the environmental problems and uncertainties of these technologies. But
a well-defined and coordinated federal program does not yet exist. In
particular:
There is not an effective, systematic approach to
identifying priority environmental problems and to
establishing a research program specifically related
to developing technologies.
Coal technologies now being developed contain many
hazardous substances in their process streams. The
presence of these substances is poorly understood, and
there is too little information on health and ecological
effects. Possible effects from the end use of synthetic
fuels is receiving only limited attention.
Individual coal technology RD&D programs lack a coherent
approach to environmental concerns. Research to characterize
pollutants from developing coal technologies and to identify
potential health and environmental problems is not adequate.
ERDA and EPA have not developed procedures for setting
environmental and occupational health standards for new
coal technologies. Overall interagency cooperation and
research coordination need major improvement.
12
These are difficult problems which require immediate, high-level
attention. ERDA has initiated a major environmental planning effort,
the Balanced Program Plan, which could remedy some of these shortcomings.
In addition, proposed Environmental Development Plans for each RD&D
program area could provide the needed technology-focused approach
to environmental assessment and research.
Scheduling Environmental Research - We have a number of concerns
with the relationship between the status of environmental research and
the schedules for development, demonstration, and commercialization of
ERDA technologies:
Environmental research is not systematically linked to
schedules for technology research, development, and
demonstration, and no procedures have been instituted to
ensure that environmental information is available when
it is needed for key decisions. Procedures have been
proposed to improve this situation.
The necessary environmental information for standard setting
and other decisions on commercialization of coal-based synthetic
fuels probably will not be available by the mid-1980's.
In the pivotal area of process characterization, research in
the early and middle stages of development has been
inadequate to identify potentially harmful substances associated
with developing coal-based technologies. Recently initiated
efforts could lead to a program to achieve this result.
There is an equally critical timing problem with health
effects research.
EPA's programs to establish environmental standards are tied
to commercialization schedules only in the near term.
These inadequacies result in part from the fact that, at least
for coal-based technologies, the federal environmental research effort
is barely underway
FORD
LIBRARY
13
The proposed environmental planning efforts are designed to link
environmental research with technology development. But these efforts
are in the early stages, and with current schedules, significant effects
on research timing are not likely to be felt before FY 1980. Given the
complexity of some of the research, and given a sequence -- process
characterization to health effects to control technology -- which under
the best of conditions will take a number of years, additional efforts
should be made to ensure that sufficient information will be available for
projected commercialization of developing coal-based technologies.
Considering Environment in Decisions - In examining the present
approach to decisionmaking within ERDA, we find progress in some areas,
but a number of significant problems still exist:
The National Plan was developed with only superficial
consideration of the environmental effects of its
alternative planning futures and did not discuss the
environmental consequences of the technologies proposed for
priority attention. The review process for the National
Plan is good, but environmental information is lacking.
ERDA has committed itself to using environmental impact
statements as major decision documents. This commitment
is highly desirable and should be backed by uniform
guidelines and procedures directed explicitly at the problems
of nonnuclear RD&D.
Some programs are progressing in developing impact statements.
However, at the program level, commitments to demonstration of
technologies have been made without sufficient consideration
of environmental impacts.
Environmental considerations are not yet being adequately
factored into individual project decisions. There has been
no public or general federal agency review of program or
project decisions through the NEPA process or by other means.
Procedures are evolving which could provide the basis for
internal environmental checks on the planning and decisionmaking
of the technology programs. They are not yet functioning, and
decisions are being made with insufficient review.
14
We believe that well-defined procedures for preparation of environmental
assessments and impact statements and for consideration of environmental
information in decisions will result in more environmentally sound technologies.
Needed Improvements
ERDA should accelerate its efforts to implement the components
of proposed environmental planning systems. It should also make clear
how the various components --- Environmental Development Plans, the
Balanced Program Plan, and environmental impact statements -- will
fit together into a coherent program. In the coming year ERDA and EPA
should emphasize coordination of their programs. The following areas
should receive particular attention:
Technology-Environment Relationship
o
The technology RD&D offices under oversight of the Office
of Environment and Safety should establish a complete
environmental program for each technology encompassing
assessment, coordination with environmental research and
standard-setting agencies, and monitoring and control at
RD&D facilities.
A central coordinating point should be designated to review
the plans for technology development and environmental
research to ascertain difficulties in scheduling and to make
sure schedules are adjusted accordingly.
ERDA must carefully reevaluate its schedules for all
nonnuclear energy technologies -- near-, mid- and long-term -
to ensure availability of adequate environmental information
for informed decisions on commercialization, environmental
standards, control technologies, and other mitigating measures.
Providing environmental guidance to contractors in all
technology development programs should receive immediate
attention. It may be in the form of detailed regulations,
manuals of practice which are incorporated into the
contract, or contract specifications.
-15-
Process Characterization
All process characterization work should be systematically
organized and coordinated to ensure the generation and sharing
of necessary data.
Comprehensive programs for characterization of pollutants,
(as well as definition of effects and development of control
technology) should be in process for all pilot plants.
They should not be downplayed until the demonstration stage
on the grounds that only technical feasibility matters up
until that point.
Standard Setting
EPA should propose standards for new technologies when there is
adequate information to do SO.
EPA should establish criteria for identification and control of
classes of substances which may require regulation in the future.
ERDA and EPA should jointly develop environmental performance
goals for proposed demonstration facilities to be used in
evaluating contract proposals. Both agencies should monitor
and characterize the process streams to provide the basis for
regulatory decisions.
National Plan
The analysis underlying ERDA's National Plan should
consider the environmental implications of
program priorities in order to reflect the broad
perspective that the Congress mandated.
Environmental issues should be specifically addressed
in future revisions of the National Plan. ERDA should prepare
a detailed environmental assessment of the National Plan
and include it as part of its public review and comment.
NEPA Procedures
Implementation of proposed environmental impact statement
procedures and environmental development plans should be
greatly accelerated.
ERDA's procedures should carefully address the timing of
environmental impact statements for all technology programs.
Measures should be taken immediately to identify the program
and project statements likely to be required, and preparation
should begin as soon as possible to provide input into the
decisions that will be made.
16
In the absence of comprehensive environmental information
and detailed impact statements, ERDA should take great care
not to make decisions which irrevocably commit to a course of
action. There must be formal procedures for periodically
reevaluating all significant commitments based on new
information.
Health Effects Research
Additional attention should be given to rapid, inexpensive
toxicological screening methods.
Efforts should be made to understand better the precise
relationship between laboratory animal metabolism or
cell cultures and human experience to allow quantitative
estimates of health risks.
Better epidemiological studies and improved capability to
isolate and identify past and present exposures to chemicals
should be developed.
Research Coordination
A jointly constituted group should be established with
responsibility for overall energy-environment research
planning and establishment of program objectives and time
tables. The entire federal energy-related environmental
research program should be reexamined periodically to ensure
coverage of the important issues associated with developing
technologies.
10L WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.: Synthels
Date:
September 10, 1976
Time:
FOR ACTION:
CC (for information):
Frank Zarb
Jim Cannon
FROM THE STAFF SECRETARY
DUE: Date:
Immediate Turnaround Pls. Time:
SUBJECT:
Recommended Telephone Call to
FORD
The Speaker and Representative Dick Boilling
re: H.R. 12112, the Synthetic Fuel Bills
ACTION REQUESTED:
For Necessary Action
X For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X For Your Comments
Draft Remarks
REMARKS:
9/10/26
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
Jim Connor
telephone the Staff Secretary immediately.
For the President
191011
CLEARANCE SHEET
DATE: 9/10
JMC ACTION
Required by:
IMMEDIATE
STAFF RESPONSIBILITY Schleede
SUBJECT:
Recommended telephone call fm President Ford to
Speaker & Congressman Bolling
RECEIVED FROM: Connor
DATE RECEIVED: 9/10
STAFF COMMENTS:
Schleede recommends approval.
QUERN MOORE RECOMMENDATION:
APPROVE
REVIEW & COMMENT
DISCUSS
FORD LIBRARY &
CANNON ACTION:
DATE:
Material Has Been:
Signed and forwarded
Changed and signed
Returned per conversation
Noted per phone conversation
TSJ to Connor offer
JIM JMC
Comment:
Rle
THE WHITE HOUSE
WASHINGTON
Energy
September 9, 1976
Jim:
Here is the document you asked for
from Glenn.
See Item #3, P. 1
FORD LIBRARY & GERALD
THE WHITE HOUSE
WASHINGTON
September 9, 1976
FORD
&
MEMORANDUM FOR:
JIM CANNON
078830
LIBRARY
FROM:
GLENN SCHLEEDE
SUBJECT:
RESPONSES TO COMMENTS ON LAST WEEK'S
BRIEFING REPORT
In response to your marginal notes on my weekly briefing
report of September 1:
1. Director for NSF. Sending up the nomination of
Atkinson is a viable option and it appears to have
considerable support. However, I understand that
the Vice President and Doug Bennett have discussed
this matter over the last few days and concluded
that: (a) the attempt to appoint Hans Mark to the
job should be continued, (b) Hans has taken himself
out of running until after the election, and
(c) therefore, the only way of maintaining the
option for Hans is to leave the job unfilled.
You should be aware that there is considerable
opposition in the scientific community to Hans,
apparently based primarily on his past associations
with Dr. Teller.
2. Space Shuttle - Roll Out Ceremony. NASA's arrangements
permit about the fastest possible round trip to
California (leave 3:30 pm on September 16 and
return at 11:00 am on September 17). Can you afford
to be away for this period? Attendance by senior
White House staff would help show the President's
interest in the space program which, of course, is
SO important in California. Dennis Barnes will be
going. I have "signed up," but I may drop out
due to the time involved. I will get you a list
of others who plan to attend.
3. Uranium Enrichment - Mansfield. My sources indicate
that neither Pastore nor Baker has urged Mansfield
to move the bill -- despite their commitments to the
President last week to do SO. I also understand
that calls from them to Mansfield are critical.
I recommend a call from the Vice President to
Mansfield. I also understand that Senators Allen
-2- -
and Sparkman will be contacting Mansfield but that
will not be a substitute for any of the above calls.
4. Uranium Enrichment - ERDA letters. A copy of the
letter to Senator Glenn is attached. Others are
still in preparation.
5. Nuclear Policy Study. A copy of Bob Fri's final
decision paper -- 35 pages including tabs -- is
being provided to you separately (it is classified).
In addition to the decision paper, Bob has submitted
a 36-page report accompanied by about 80 pages
of tabs and 30 pages of agency comments in the
form of memoranda to the President. I am now
plowing through all these documents and attempting
to haul them down to a logical decision paper.
Attachments
FORD LIBRARY & GERAÇO
UNITED STATES
ADMINISTR
ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION
WASHINGTON, D.C. 20545
STATE
USA
SEP
3
1976
Honorable John Glenn
United States Senate
Dear Senator Glenn:
The following are responses to the questions posed in your letter of
August 16:
1.Q.
"What is your estimate of the amount of domestic and foreign
nuclear capacity, based on plants now under construction or on
order, that will be on line by 1985 and 1990?"
Response
A. Domestic Nuclear Power Plant Capacity
The following tabulation represents our best estimate for
nuclear power plant capacity in the U.S. in the years 1985
and 1990:
Domestic Nuclear Power Plant Capacity
(Gigawatts Electric)
1985
1990
Plants on line, under construction or on order
145-165
200-210
Plants projected
50- 80
Total projected domestic nuclear capacity
145-165
250-290
Utilities are now having difficulty in making firm decisions to
build additional nuclear power plants because final commitments
have not yet been made to build the uranium enrichment facilities
needed to provide fuel for these additional plants. In many cases,
utilities now have the economic incentive to choose nuclear power
over other feasible alternative sources of electricity supply. The
lack of firm commitments to build new uranium enrichment plants is
preventing decisions to order nuclear power plants that could
capitalize on these economic advantages.
FORD LIBRARY & GENALD
EVOLUTION
BICENTENNIAL
&
1776-1976
Honorable John Glenn
-2-
B. Foreign Nuclear Power Plant Capacity
The following is our best estimate of foreign nuclear power
plant capacity:
1985
1990
Projected foreign nuclear capacity, (excluding
Eastern bloc countries), gigawatts electric
230-325
425-620
In our judgment, the lower part of the ranges cited now appears
the more realistic.
In the past the U.S. has supplied virtually all the worldwide
demand for enrichment services for nuclear power plants outside
the eastern bloc countries. We believe the U.S. could and
should continue to be a major supplier of enrichment services to
the world. The U.S. should be able to compete effectively for
this, worldwide market due to our years of experience as a reliable
supplier of enrichment services and our clear lead in enrichment
technologies.
C.
Uranium Enrichment Capacity Situation
Existing uranium enrichment capacity was fully committed by mid-
1974 for the lifetime of existing ERDA enrichment plants (including
the planned capacity expansion now underway). The add-on enrichment
plant at Portsmouth, Ohio will be used to fulfill existing ERDA
contracts in the most economically efficient manner and to conserve
uranium resources. New nuclear power plants scheduled to come on
line starting in the mid-1980's must obtain uranium enrichment
services from enrichment plants which are not now in existence.
These services will have to be provided through long-term contracts
served by new enrichment plants. Private firms wishing to build
these uranium enrichment facilities will not make firm commitments
to construct or own commercial plants unless they have sufficient
fim orders from new customers to assure project viability. Thus
commitments to new enrichment facilities will follow real customer
demands and there need not be concern about "over capacity" of
enrichment services as a consequence of the passage of the Nuclear
Fuel Assurance Act. Our best estimate is that we will have a
significant shortfall of assured enrichment services in the 1980's
FORD
is
GERNED
Honorable John Glenn
- 3 -
to meet new domestic and U.S. supplied foreign needs if we do
not have a diffusion project. Further, we believe that the
proposed private diffusion project and all three proposed centrifuge
projects can proceed in accordance with anticipated schedules on
the basis of present demand forecasts if about one-third of the
projected new foreign market is obtained. On this basis, still
additional domestic capacity would be required no later than about
1990.
D. Effect on Proliferation
Foreign nuclear power growth is not dependent upon the availability
of new U.S. enriching capacity and will proceed whether or not we
build new plants. Several foreign enrichment projects already have
been committed; others are in the planning stages. Potential foreign
suppliers will be discouraged from proceeding if the way is clear
for expansion of enrichment capacity in the U.S. and the U.S. can
assume its role as a reliable and competitive supplier. This will
permit the United States to maintain greater influence in its
objective of strengthening safeguards worldwide against nuclear
proliferation.
2.Q. "What will ERDA policy be in the event that its customers have
insufficient capacity to use all of the enriched uranium they have
contracted for?
-Will there be another "open season," when all customers will be
allowed to renegotiate contracts without penalty?
Will there be a "variable tails assay option," so that contracted
SWUs may be used to reduce the tails assay?"
Response
ERDA uranium enrichment contracts with utility customers are of the
take or pay variety often used by utilities in long-term fuel contracts.
In theory, utilities have to take delivery of enrichment services even
if these services are not needed. In practice, however, the utilities
would attempt to dispose of these valuable assets to other licensees who
may have, or project, an enrichment shortage. The open season of a year
Honorable John Glenn
- 4
ago was designed to provide a useful addition to the ERDA stockpile.
It also served the added purpose of providing utilities relief from
their firm contractual commitments for enrichment services from ERDA
in view of the unforeseen and unique situation of lower energy growth
in 1974 and 1975. As noted above, it is desirable that adjustments in
actual utility need for enriched uranium be accommodated without
involving the Government. We do not foresee a repetition of the unique
circumstances which prompted last year's "open season". Therefore,
while we do not see the need at this time for another "open season" we
do intend to watch the industry carefully to remain alert to any changes
in circumstances. It should be noted that after the very low growth
rates for electricity consumption in 1974 and 1975, these rates now
appear to be increasing significantly, e.g., for the first 32 weeks of
1976 the electricity growth rates was 5.2% (compared to essentially zero
in 1974 and about 2% in 1975).
ERDA has stated that it will offer the "variable tails assay option" to
its customers. Under such an approach a customer might deliver less
uranium feed material and receive less enriched product for the same
number of SWUs specified in his contract with ERDA. ERDA plants would,
therefore, effectively operate at a somewhat lower tails assay. This
option likely would be acceptable to a customer only if any fuel deficit
that he might incur through exercise of the option could be satisfied
from a supplementary source.
3.Q. "How does ERDA determine the optimal stockpile level?
What percentage of the stockpile is desired for different purposes
(such as core loading)?
How much does it cost to keep this stockpile both in terms of SWU
and kilograms of enriched uranium?"
Response
The Government stockpile of enriched uranium will be used to assure that
ERDA can fully meet Government needs, meet its present contractual
commitments and provide backup assistance for the needed new domestic
enrichment plants by providing assurance to new customers that
commitments can be met during the early phases of new enrichment plant
projects.
Defining an "optimal" stockpile level is extremely complex. It requires
a management judgment which balances the probabilities of unexpected
Honorable John Glenn
-5-
needs, the consequences of not being able to meet those needs and
the costs of carrying the stockpile as "insurance" to protect against
them. We now base our consideration of the size of the desired enrich-
ment stockpile on the following factors 1) product inventory for routine
operation of our plants (about 3 months production, equal to about
7 million SWUs after the CIP-CUP expansion program has been completed);
2) the possibility that production expected from the CIP-CUP expansion
program might be delayed; 3) the possibility of natural disaster to
production or power supply facilities (power supply to Portsmouth from
the Clifty Creek station was interrupted by a tornado in 1974) ; 4) pos-
sibility of diversion of planned power from our plants (some of the
contracted power is "unfirm" power; in 1970 it was even necessary to
divert firm power to the northeast during the "brown-out" emergency);
5) maintaining capacity needed to "backup" new United States enriching
capacity (approximately the equivalent of a year's production for a
gaseous diffusion plant, and somewhat more for centrifuge plants, probably
should be available to protect against the contingency of delay in
achieving routine new plant operation).
It is not yet practicable to "allot", in effect, portions of a stockpile
to particular specified purposes. However, to the extent that particular
events which the stockpile is designed to protect against (e.g. delay in
scheduled new capacity) do not materialize, some portion of the stockpile
could then be sold. We should have much of this information in the mid-
1980's. However, even if none of the stockpile had been used to meet
contingencies by the mid-1980's, the available amount would still represent
less than one year's production from domestic enrichment plants.
ERDA now has a stockpile of 4700 metric tons of 3.2% enriched product
(about 18 million SWUs at 0.3 tails). We are now currently reevaluating
our long-range gaseous diffusion plant operating plans which will establish
ERDA's future stockpile objectives. For the purpose of addressing the
question of the costs associated with keeping a stockpile, we have made
the assumption that a stockpile of 6600 metric tons of 3.2% enriched
uranium (about 25 million SWUs at 0.3 tails assay) could be available
in the future.
The annual carrying charge associated with maintaining such a stockpile
is estimated to be about $140 million (in 1976 dollars). This includes
a separative work component of the inventory which has an estimated
annual carrying charge of slighly over $60 million (in 1976 dollars).
FORD
is
NERALD
LIBRARY
Honorable John Glenn
- 6 -
This carrying charge, which is borne by the customers, was calculated
assuming a 6.5% carrying charge rate as the average cost of money to
the Government. Maintaining a stockpile is relatively cheap insurance
to customers when the costs associated with a reactor not operating
due to lack of enriched uranium fuel are considered. For example, a
1000 MWe nuclear power reactor loses revenues of about $120 million per
year (at 20 mills per Kwh) if it does not operate. The ERDA enrichment
plants are under contract to supply the equivalent of about 325 such
reactors; a single new 9 million SWU enriching plant may support 75-85
such reactors.
4.Q. "What is the optimal tails assay in your view?
--How is the figure arrived at?
--How much does it cost to enrich tails as compared to the cost of
enriching natural uranium?"
Response
An economic "optimum" tails assay is the tails assay which results in
the minimum cost of enriched uranium product and is a function of the
cost of 1) enriching services and 2) uranium feed. Both of these costs
change with time. Therefore, the optimum tails assay is also time de-
pendent. The optimum tails assay to the customer would be a composite
determined over the period of the customer's contract with an enricher,
i.e., based upon future feed costs and future enriching service costs
over that period. The optimum tails assay as a function of separative
work and feed costs is illustrated in the enclosed chart. It is our
judgment that the average optimum long term tails assay for ERDA's
enrichment plants will probably be in the range of 0.20 to 0.25% U-235
for most customers. It should be noted, however, that each individual
utility could have a unique "optimum tails assay" that might or might
not fall within this range due to various circumstances. For example,
feed costs could differ since utilities have contracted for feed at a
multitude of prices.
The use of tails material instead of normal uranium as feed for a gaseous
diffusion plant would require the expenditure of more separative work
units (SWU) to produce a given quantity of enriched product. For example,
if a plant is operating at a tails assay of 0.25% U-235 and producing
enriched product at an assay of 3.2% U-235, it requires approximately
FORD LIBRARY &
Honorable John Glenn
-7-.
twice as many SWUs to produce a kilogram of product if 0.30% U-235
material is used as feed instead of normal uranium feed containing
0.71% U-235. Thus, recycling tails does result in the consumption of
more separative work. ERDA is currently recycling relatively small
amounts of 0.30% U-235 tails inventory to supplement the availability
of our limited normal uranium feed material. The operating costs
associated with using this 0.30% U-235 material are minimal, consisting
mainly of material handling costs. The feeding of our inventory of
this caterial should be completed in about 3 years.
5.Q. "How do you interpret Congressman Anderson's floor amendment to
H.R. 8401?
--Precisely how and when will technology be guaranteed?
--How does the amendment affect gas centrifuge as compared to
gaseous diffusion?
Response
It is assumed that you are referring to the following amendment -
"Provided, however, that the guarantees under any such cooperative
arrangement which would subject the Government to any future contingent
liabilities for which the Government would not be fully reimbursed shall
be limited to the assurance that the Governnent-furnished technology
and equipment will work as promised by the Government over a mutually-
agreed-to and reasonable period of initial commercial operation. Con-
sistent with the foregoing, such cooperative arrangements may include inter
alia, in
"
We understand that this amendment was intended to remove some ambiguities
concerning the scope of H.R. 8401 arising out of the legislative history
concerning the Bill. For example, we understand that the phrase
"mutually-agreed to and reasonable period of initial commercial operation"
was intended to reflect the possible need for technology guarantees to
extend for periods greater than a year after operation of an enrichment
project, which might be necessary for the gas centrifuge.
The scope of and duration of guarantees of technology are currently
under discussion with each of the four prospective private uranium
enrichment firms. Until the NFAA is enacted and negotiations are con-
cluded with these firms, we are unable to respond further to your questions
Honorable John Glenn
-8-
concerning this matter. However, the specific terms of these
guarantees would be spelled out in each contract, which cannot
be entered into without specific approval of the Congress.
The Bill as amended and as passed by the House does not distinguish
between the different processes for uranium enrichment. Instead,
it provides a framework which could accommodate arrangements covering
either gas centrifuge or gaseous diffusion projects. We expect,
however, that the scope and duration of guarantees of technology
will differ between centrifuge and diffusion (the centrifuge requiring
more) but that both processes can be accommodated under the amendment.
Sincerely,
/s/ Fri
Robert C. Seamans, Jr.
Administrator
Enclosure:
As stated
GERALD
FORDO LIBRARY 2 (6) TW
OPTIMUM TAILS ASSAY
0.40
$10
$15
0.35
$30
0.30
$50
0.25
OPTIMUM TAILS ASSAY, PERCENT U-235
0.20
$100
0.15
ORE COST, DOLLARS PER POUND U308
SERALD f. LEBRARY FORD
0.10
0.05
0
25
50
75
100
125
150
175
200
SEPARATIVE WORK COST, DOLLARS PER SWU
THE WHITE HOUSE
WASHINGTON
September 1, 1976
MEMORANDUM FOR:
JIM CANNON
FROM:
GLENN
SUBJECT:
WEEKLY BRIEFING -- ENERGY,
SCIENCE AND TECHNOLOGY
I.
Science and Technology
A.
Office of Science and Technology Policy. Guy Stever
is moving ahead with the organization and staffing of
the Office, but he has not made final decisions on
organization.
B. President's Committee on Science and Technology.
Doug Bennett is moving ahead with recommendations
for 13 members of the Committee. He expects the
memo to the President to go next week.
Director for NSF. Senator Kennedy has let it be
known that he would push through confirmation of
100 it
Dick Atkinson (currently the deputy) this session
if the President were to send up the nomination.
He would not push through anyone else.
National Science Board. Appointment of 7 new members
other
should be announced late this week or early next.
E. National Medal of Science. We are hoping to get a
tentative date for the awards ceremony within the
next few days. It probably will be in late September.
F. Space Shuttle. The "roll out" of the first orbiter
Claim
is scheduled to occur September 17 in Palmdale,
California. This should draw considerable attention
since it is symbolic of a return of manned space
flight activity.
SERALD E. LISARAY FORD
-2-
G. Earthquakes. House Science and Technology bill was
referred to the House Interior Committee until
September 8. Max Friedersdorf does not agree with
our opposition to the bill. Separate memo will be
forwarded on this subject.
H. Fletcher Meeting with the President. We are still
awaiting a favorable response to our proposal that
the President meet with Dr. Fletcher concerning
the space program, as Dr. Fletcher has requested.
II. Energy
A. Uranium Enrichment
Legislation.
President's letter to Senator Mansfield
been delivered by Bill Kendall.
Senator Mansfield indicated that he would
what he could do but would not make
promises.
can wonlin vi help House.
Senator Glenn seems to have lost some of his
enthusiasm for his amendment which is
identical to the Bingham amendment in the
good
&
Letters in support of legislation. Letters are
in preparation in ERDA: (a) to Senator Pastore
countering the "glut in capacity" argument, and
(b) to Senator Glenn answering a series of
questions that he has posed.
Budget Committee Action. The House Budget Committee
has voted to count the entire contingent liability
associated with contracts pursuant to NFAA as
"budget authority" for purposes of the budget
resolution. The Committee further cut the
$8 billion request back to $4 billion. On the
Senate side, the Administration position that none
of the contingent liability should be counted
as budget authority has been accepted. We will
have to watch this closely in conference.
Gleun
way these?
FORD LIBRARY & 076875
-3-
Blew Get w
B.
Nuclear Policy Study. Bob Fri is shooting for a
completed decision paper by this weekend. I
reviewed a draft issue paper earlier today and
I have doubts as to whether it will be in shape
Pls. a com
by this weekend.
C. Energy Conservation and Rationing Plans.
-- This item is due to come up on the ERC agenda
tomorrow morning. OMB has problems with the
four
rationing plan and are seeking some changes.
John Hill has indicated that he will agree not
Hight
to send up two of the plans (lighting and
weekend gasoline sales) if they can get
clearance on the other three.
-- You have received over 200 letters from the
hotel industry opposing the FEA contingency
The
plan which would restrict weedend fuel sales.
Boss.
We are developing a draft response which we
will forward for your approval.
D. Natural Gas Legislation. FEA is preparing draft
legislation that would provide some emergency
authority for use in the event of a severe
shortage this winter. This approach was
approved by the ERC last week. (Dick Dunham
concurs.)
E. State Nuclear Moratoria. Six more states will
have nuclear initial ives on their ballots in
November: Washington, Oregon, Colorado, Ohio,
Montana, and probably Arizona (though the
petitions will be challenged).
cc:
Art Quern
Attachment
Kn's note w w trip cont on dudule who dule
Pending
CLEARANCE SHEET
DATE: 9/11
JMC Required ACTION by: 9/14
STAFF RESPONSIBILITY A.Q
SUBJECT: Russ PETERSON LETTER
RECEIVED FROM:
DATE RECEIVED: 9/8
STAFF COMMENTS:
QUERN MOORE RECOMMENDATION:
APPROVE
REVIEW & COMMENT
We tath of then need about tath schledes Do this to of OMB Artor
DISCUSS
CANNON ACTION:
DATE:
Material Has Been:
Signed and forwarded
Changed and signed
Returned per conversation
FORD LIBRARY & DERALD
Noted
JIM CANNON
Comment:
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL ON ENVIRONMENTAL QUALITY
722 JACKSON PLACE, N. W.
WASHINGTON, D. C. 20006
September 8, 1976
Dear Jim:
Attached is a copy of the memorandum from Jim Mitchell
that you requested.
I understand that you plan to personally study the revised
summary of our report on non-nuclear energy R&D which I
previously submitted. This is the latest in a series of editorial
revisions which we have made in order to satisfy the concerns
of the many people in the Executive agencies who have reviewed
our draft. Wherever our draft required clarification or revision
because of improved understanding on our part, we have made
such revisions. However, when an agency requested that we
change our basic convictions that there was room for improve-
ment in the Federal energy R&D program from an environmental
and conservation standpoint, we have refused to do so. If appears
to us that OMB and Glenn Schleede want us to say that there is no
room for improvement in the Federal Government's program. I
am sure that Congress did not have in mind, when they gave us our
assignment, that we should just bless whatever the Administration
had previously decided to do. Nor do we have any intention to do SO.
When the Non-Nuclear Energy Research and Development
Act of 1974 was passed by Congress and signed into law by President
Ford, it was clear that the confrontation that we are now experiencing
was certain to occur. The statute directed CEQ to make this report,
not OMB or the Domestic Council. At this juncture, we have garnered
all the help and advice we need from other Federal agencies on this
report. Such advice has undoubtedly contributed to improving the
report.
Some agency almost certain other than CEQ leaked a copy of
our early draft to Jack Anderson. He has already had two columns
exaggerating our criticism of the energy program and forecasting
that the Administration will not let that report see the light of day.
At a recent hearing on the NNERD program, we testified - after OMB
clearance - that we would be making our report to Congress this Fall.
Incidentally, the two Democratic senators present at the hearing both
had copies of our draft report in front of them.
-2-
I recommend that the President plan a speech or press
release emphasizing the need for an all-out conservation effort
in our country and release it at the same time that he receives
our final report. He could thank CEQ for the report which they
prepared under the law he signed December 1974 and report that
he is asking his energy agencies to carefully review our recom-
mendations and reflect such review in their future plans for
energy R&D.
I am anxious, Jim, to discuss this with you at your earliest
convenience so we can go to press in the next few days.
Sincerely,
Russ
Russell W. Peterson
Chairman
FORD & LIBRARY CERALD
Mr. James Cannon
Assistant to the President
for Domestic Affairs
The White House
Washington, D.C. 20500
Attachment
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON. D.C. 20503
August 30, 1976
MEMORANDUM FOR RUSS PETERSON, CEQ
FROM:
JIM MITCHELL
Subject:
CEQ report evaluating ERDA's Environmental
and Conservation Programs
As you know, OMB and Domestic Council representatives have
been reviewing the subject CEQ report--working with
Steve Jellinek and others of your staff.
Although considerable OMB staff time has been devoted to
suggested changes in the proposed CEQ report--a number
of which have been incorporated in successive drafts--there
are still fundamental problems that go beyond editing and
which are of a fundamental policy nature, particularly
in the conservation section of the report.
These fundamental policy problems arise because the
report tends, by its tone and emphasis, to call for an
expanded Federal role in conservation R&D that is
inconsistent with:
-- the Administration's policy on Federal VS.
private role;
-- the President's 1977 budget decision which
reflects the above policy; and
-- the ERDA "National Plan" which was
modified to reflect more carefully
the Administration's position, particularly
on the premise of the private role and
responsibility in conservation and
conservation R&D.
It will, therefore, provide the basis for further criticism
of the President for not requesting more funds for energy
conservation and, particularly will inhibit his ability to
consider the possible deferral of some or all of the
additional funds added by Congress.
2
There is one other section of the report, namely, the
chapter dealing with fossil energy R&D that gives us
a problem. The report takes the position that fossil energy
R&D should be slowed down until more work is done on
environmental impact by the Environmental Division of
ERDA. This suggests that the President's budget is too
high in the fossil energy area and, therefore, undermines
the Administration's program. Our view is that analysis
of the environmental impact of fossil energy technologies
is important, but that such work should be undertaken by
both the Environmental Division of ERDA and the technology
program people involved and, furthermore, that present
deficiencies in dealing with environmental concerns are
not serious enough to warrant slowing down the program.
I want to add my strong support of the views that have
been expressed by my colleagues in OMB and urge that you
undertake an extensive rewrite that will be more in keeping
with a realistic assessment of the Federal responsibility,
particularly in conservation R&D as expressed by this
Administration.
THE WHITE HOUSE
WASHINGTON
September 14, 1976
GERALD FORD LIBRARY
MEMORANDUM TO: DICK CHENEY
FROM:
JIM CANNON Dain
SUBJECT:
CEQ VS. OMB and The Domestic Council
We have an internal dispute, with Russ Peterson opposed
to Jim Mitchell and Glenn Schleede.
Section 11 of the Non-Nuclear Energy Research and
Development Act requires CEQ to perform an independent
assessment of the adequacy of attention to environment
and conservation in Federal Energy Research, Development
and Demonstration. The Act does not set a specific
time requirement for submitting this assessment. CEQ's
report of this assessment, which is required to be submitted
to the President, the Congress and the ERDA Administrator,
has been in preparation for over a year and is ready for
publication.
Jim Mitchell of OMB and Glenn Schleede of The Domestic
Council feel that the report, in its criticism of ERDA's
energy conservation program, is contrary to Administration
policy and will be used by certain groups to support
attacks upon the Administration.
Russ Peterson argues that the report does not violate
Administration policy, and in any event, he has done all
he feels he can do to meet any substantive objections
that Schleede and Mitchell have put forth.
The content of the draft report is already widely known
as Press reports have surfaced indicating the basic thrust
and suggesting Administration pressure to squelch it.
We have three alternatives:
A. Take no further action, thus allowing CEQ
to publish the report without further revision.
This would eliminate any charge of "high-handed
White House pressure."
-2-
B. Direct Peterson to rewrite the report in
such a way as to accomodate the objections.
This option may result in a confrontation
with Peterson that cannot be resolved, and
could create a public backlash, if he so
desired. His resignation is effective
September 30.
C. Continue to negotiate the differences.
The same problem exists as in option B.
Peterson feels he has done all he can do,
and there may be no further "give" in his
position.
Recommendation:
I recommend that we allow the report to be
published without further revision. There is merit
in the Mitchell--Schleede objections, but the down-side
risk of further efforts to rewrite the report is greater
than the possibility of the report being used effectively
as a basis of attack on Administration policy.
Approve
A
B
C
FORD LIBRARY &
CLEARANCE SHEET
DATE: 9/13/76
JMC ACTION
Required by:
STAFF RESPONSIBILITY Humphreys
SUBJECT:
In effort to resolve the CEQ/ERDA controversy
over CEQ's assessment of the adequacy of attention
to environment & conservation in Federal energy RD&D.
RECEIVED FROM:
DATE RECEIVED: 9/13/76
STAFF COMMENTS:
QUERN MOORE RECOMMENDATION:
APPROVE
Thingines a quick
REVIEW & COMMENT
presentation but adequate
DISCUSS
AND
CANNON ACTION:
DATE:
Material Has Been:
Signed and forwarded
FORD LIBRARY & 07VW39
Changed and signed
Returned per conversation
Noted
Comment:
JIM Inc CANNON
moded that returned
9114 promutions
CLEARANCE SHEET
- Energyful
DATE: 9/13/76
JMC ACTION
Required by: Immediate
STAFF RESPONSIBILITY Schleede
Deregulation of Naptha-Based Jet Fuel
SUBJECT:
RECEIVED FROM: Frank Zarb
DATE RECEIVED: 9/11/76
STAFF COMMENTS:
Schleede recommends concurrence with FEA proposal to
send up the deregulation proposal immediately. It must
go by 15th to become effective this year (assuming Congress
closes up on Oct 2nd). Congress has 15 legislative days
to disapprove. The DOD arguments are reasonably good but
QUERN MOORE RECOMMENDATION: should not override the commitment
to deregulate.
APPROVE
can' D deregalate
REVIEW & COMMENT
Jim agree, we then duck when which
DISCUSS
for I 7 something (DaD). To recomend
it comes affect we concerrence Acter
CANNON ACTION:
DATE: 91
Material Has Been:
Signed and forwarded
Changed and signed
FORD LIBRARY & GENALD
Returned per conversation
Noted
JIM CANNON
Comment:
Schleede
called in
Concurt with Due FEA
9/13
FEDERAL
ENERGY
FEDERAL ENERGY ADMINISTRATION
WASHINGTON, D.C. 20461
ADMINISTRA
ATION
OFFICE OF THE ADMINISTRATOR
MEMORANDUM FOR THE PRESIDENT
FROM:
FRANK G. ZARB
GERALD FORD VERARY
SUBJECT:
DEREGULATION OF NAPHTHA-BASED JET FUEL
F ACKGROUND
Pursuant to your direction when you signed the Energy Policy
and Conservation Act (EPCA) last December, the Federal Energy
Administration (FEA) initiated the process of removing from
price and allocation controls as many petroleum products as
possible. Since then Congress has approved conversion of
price and allocation controls to standby status for petroleum
products accounting for 40 percent of the yield from a barrel
of crude oil. These include residual fuel oils, middle
distillates (heating oils and diesel fuels), lubricants,
greases, and a number of intermediate products. The sequence
of decontrol has been determined by the supply and demand
conditions for products, the requirement to hold public hearings
and the necessity to avoid having more than one decontrol
proposal at a time before the Congress.
Based on these considerations the next product FEA proposes
to submit for exemption is naphtha-based jet fuel. This is
military grade jet fuel (JP-4), and accounts for approximately
2 percent of total U.S. refinery production. The Defense
Department consumes 98 percent of such fuel and small refiners
account for nearly 40 percent of its total production.
The Department of Defense has objected to submitting the naphtha
jet fuel (JP-4) proposal for exemption at this time for reasons
outlined in this paper.
- 2 -
FEA has completed its study, held public hearings with full
knowledge of DOD's opposition, and made the findings required
by the Act: adequate supply exists and minimal price impacts
will be experienced in the event of decontrol. FEA proposes
to transmit this action to Congress for consideration on
September 15, 1976. This is the last day that will allow the
required time for congressional consideration prior to
adjournment.
The remaining major fuels not yet decontrolled are kerosene-
based jet fuel, used primarily by commercial airlines, and
gasoline. Studies of these fuels are underway and they are
scheduled to be proposed for exemption early in the next
session of Congress, or later this year should Congress
reconvene after the elections.
FORD GERALD LIBRARY 9ERALD
DOD POSITION
The proposed unilateral decontrol of military JP-4 jet fuel
suffers from the following disadvantages:
A price disparity will be created between
decontrolled military jet fuel and commercial
jet fuel which will remain under price control.
When, following the Arab boycott a similar
disparity occurred, there was a congressional
investigation and both DOD and FEA were
severely criticized and accused of wasting
millions of dollars in excessive jet fuel costs.
Small refiners, the intended principal bene- *
a
ficiaries of JP-4 decontrol, cannot in fact
obtain price benefits until their current
contracts expire. A few of those contracts
will expire by March 31, 1977, but most
(61 percent of the contracts, accounting for
60 percent of total supply) run through
September 30, 1977.
Of six refiners holding JP-4 contracts with
clauses that permit termination of renegotiation
upon decontrol, only one is small. The others
that can gain immediate price relief from
decontrol are all large firms (Union, Getty,
Cities Service, Sun, and Continental). Another
- 3 -
large firm (Exxon) stands to gain early benefit
from decontrol to a lesser degree. At least
part of the contracts held by most large refiners
will expire by mid-FY 77.
O There will be unprogrammed DOD FY 77 expenditures
of $20 million.
The foregoing considerations indicate that the proposed
expedited unilateral decontrol of military JP-4 jet fuel will
serve no useful purpose and is contrary to the best interests
of the government. It will increase military fuel costs.
It will provide only limited price relief for a few small
refiners until FY 78. It will benefit large refiners, some
immediately and most by mid-FY 77. It will expose DOD to
higher jet fuel prices while continuing to protect commercial
airlines. In summary it conveys an impression of government
collaboration with big oil - an impression which is not in the
interests of either government or industry.
DOD recommends that the action to decontrol JP-4 at this time
be terminated. DOD's primary recommendation is that JP-4
should be decontrolled at the end of FY 77, when all current
contracts will have expired. An alternative proposal by DOD
is that the recommendation for the decontrol of JP-4 be for-
warded to Congress in conjunction with either or both the
proposals for the decontrol of kerosene jet fuel and motor
gasoline.
FEA POSITION
FORD LIBRARY is
O FEA's findings and views required bv EPCA and
supported unanimously in testimony at public
hearings held on September 3, 1976, indicate
adequate supplies and minimal price impacts
resulting from decontrol. Specifically, FEA
expects price increases of no more than 1 cent
a gallon on the average, with a maximum upper
limit of 2 cents per gallon. Since DOD buys
98 percent of all domestic JP-4 production,
FEA believes that through its contractual
commitments DOD can maintain an appropriate
price relationship between JP-4 and commercial
jet fuel, which will remain under price controls.
- 4 -
The extent to which large refiners benefit and
small refiners do not will be a function of
existing contractual relationships between DOD
and its suppliers. Thus, any budgetarv impact
will be minimized. In any event, refiners,
both large and small, testified unanimously at
the public hearings in favor of decontrol.
Decontrol now will encourage investment in small
and independent refineries, even though the
benefits for some refiners may be postponed
until their existing contracts expire.
Failing to decontrol JP-4 despite the findings
and public testimony conveys an impression that
the government is willing to risk higher prices
for other consumers but is not willing itself to
face the implications of decontrol. This will
weaken our argument for decontrolling kerosene
jet fuel and gasoline.
Deferring decontrol of JP-4 until the end of
FY 77 would cause this to be the last of the
products to be decontrolled. Thus, direct cost
increases would be borne by the airlines and
motorists from the decontrol of kerosene jet fuel
and motor gasoline before the Federal government
accepted the cost increase of decontrolling JP-4.
Coupling the proposal for the decontrol of JP-4
with either or both motor gasoline or kerosene
jet fuel would increase the complexity and un-
certainty of obtaining congressional approval for
the decontrol of any of these products. FEA's
strategy of sequential decontrol has proven effec-
tive to date, at least in part, by minimizing the
constituencies opposed to any one action.
'O DOD's recommendation to terminate or delay the
JP-4 decontrol action at this time would create
uncertainty as to the Administration's commitment
to decontrol and minimize governmental interference
in private industry.
GERALD FORD LIBRARY
- 5 -
AGENCY COORDINATION
PRESIDENTIAL DECISION
Send decontrol proposal as scheduled.
Do not send decontrol proposal at this time.
FORD :- LIBRARY 774839
file
THE WHITE HOUSE
Energy
WASHINGTON
September 13, 1976
MEMORANDUM FOR:
GLEN SCHLEEDE
THRU:
MAX FRIEDERSDORF m.b
FROM:
BOB WOLTHUIS RKW
SUBJECT:
Syn Fuels Legislation
The House Rules Committee is scheduled to take up the
Syn Fuel bill on Wednesday. Our assessment is that it
will be reported and then go to the floor on Thursday
and Friday. To prepare for this debate it would be most
helpful to have a new Presidential letter strongly endorsing
the legislation. It should be addressed to Chairman Teague
and outline the President's support.
If possible we would like to have this letter by close of
business Wednesday evening.
FORD i LUBRARY QERALD
The and
FYI
THE WHITE HOUSE
WASHINGTON
Energy
Synthetic Fuels
RECOMMENDED TELEPHONE CALL
TO:
The Speaker and Representative Dick Bolling (D-MO)
DATE:
Before Wednesday, September 15, 1976
RECOMMENDED
BY:
Max L. Friedersdorf
my
PURPOSE:
To urge the Speaker and Representative Bolling to
support a rule for H.R. 12112, the Synthetic Fuels bill.
BACKGROUND:
The House Rules Committee postponed action yesterday
until next Wednesday on the Synthetic Fuels bill.
Chairman Olin "Tiger" Teague has requested the President
call the Speaker and Representative Bolling to urge
their support for a rule.
Our vote count on the Rules Committee yesterday showed:
YES
NO
UNDECIDED
OUT OF TOWN
Delaney
Madden
Bolling
Sisk
Young (Tex)
Young (GA) Long (LA)
Matsunaga
Pepper
Moakley
Murphy
Quillen
Anderson
Latta
Lott
Clawson
SUGGESTED TALKING POINTS:
See TAB A
DATE SUBMITTED: September 9, 1976
ACTION:
FORD LIBRARY & GERALD
1.
As you know, the Rules Committee did not complete
action yesterday on the Synthetic Fuels bill,
H.R. 12112. We need House passage as soon as
possible of the compromise bill that Tiger Teague
has put forward on behalf of his committee, Ways
and Means, and Banking and Currency.
2. We must develop the capability to tap our vast
resources of coal and oil shale in a way that
is economic and environmentally acceptable. We
need to have a synthetic fuels industry in place
in the early 1990's to fulfill a significant part
of our energy needs:
- In 1972, we were importing 29% of our oil.
Today we are importing over 40%.
- Domestic production of oil and natural gas
are continuing to decline.
- We will still need a major contribution from
synthetic fuels even with (a) increased energy
conservation, (b) deregulation and decontrol
of oil and natural gas, and (c) increased use
of nuclear energy.
- Newer energy sources such as the breeder, fusion,
solar and geothermal cannot possibly make a major
contribution in time.
3. The action that is needed now is the commercial scale
demonstration of synthetic fuels technology.
Industry will not proceed on its own because of the
risks, high costs, and regulatory uncertainties.
Loan guarantees will provide the limited sharing
of risks needed by industry to proceed.
4. More delay by the Congress will mean greater reliance
on imports in the 1990's, greater vulnerability to
disruption from any future embargo, and increased
out flow of dollars and jobs.
FORD LIBRARY & GERALD

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    "ocrText": "The original documents are located in Box 13, folder \"Energy (5)\" of the James M. Cannon\nFiles at the Gerald R. Ford Presidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\n[sept 1976]\nSIGNING STATEMENT\nToday I have signed H.R. 13655, a bill which\nestablishes within the Energy Research and Development\nAdministration, a program to develop alternatives to\nexisting automobiles which could operate with no adverse\nimpact on the environment and with greater fuel economy.\nThe program includes a five-year $100 million project\ninvolving research and development of integrated test\nvehicles, with emphasis on advanced propulsion systems.\nThe legislation also provides for a study of the feasibility\nof Federal loan guarantees for advanced automobile R&D --\nERDA is required to report their findings and recommendations\nfor appropriate legislation within one year.\nThe program will augment programs already established\nin ERDA and the Department of Transportation and will\naccelerate ongoing efforts of ERDA to develop new energy\nefficient and virtually pollution free propulsion systems\nwith industry.\nI believe that there should not be Federal intervention\nwhere there are incentives and willingess for the private\nsector to assume responsibilities and this legislation\nspecifically provides that the research and development of\nthe integrated test vehicles are not to supplant or duplicate\nefforts of the private industry.\nFORD LIBRAR i GERALD\nDigitized from Box 13 of the James M. Cannon Files at the Gerald R. Ford Presidential Library\n{Sept. 1976?]\nEurgy Wudson Instruction\n#31 FORD\nLIBRARY & GENALD\nwon Brown\nname of Fature\n100,000 Quods of Natad too?\nThat the\nJuly 1469 / tot Pu\nJonel of\n[sept at 1976?]\nEnergy\nTHE WHITE HOUSE\nWASHINGTON\nTO:\nGLENN SCHLEEDE\nFROM:\nJIM CANNON\nFORO LIBRARY + GERAL\nPlease talk to me about this.\nTechnology\nFacing the Challenge of Nuclear Waste\nBy VICTOR K. McELHENY\nThe disposal of past and future nu-\ngResumption by the Nuclear Regula-\nclear reactor waste is moving to the\ntory Commission of all authority, now\nforefront of the nuclear industry's\npartially delegated to the states, for\nmany technical, economic and social\nlicensing waste disposal.\nproblems.\ngIncluding the waste-disposal issue\nA report. on nuclear wastes by Dr.\nin the much delayed N.R.C. proceeding\nMason Willrich, an independent expert\nthat is considering the safety of recy-\nwho moved this month to the Rockefel-\ncling plutonium extracted from used\nler Foundation, revealed several\nnuclear fuel back into existing power\ndramatic proposals to resolve the ques-\nplants.\ntion of the wastes, which Dr. Willrich\nGA nuclear waste commission under\ncalls a \"permanent challenge to govern-\nthe International Atomic Energy Agen-\nment.\"\ncy to pass on deep-sea disposal projects\nDrafted for the United States Energy\nand review national plans.\nResearch and Development Administa-\nqa California law, passed in May\ntion, and still circulating for comment,\njust before the defeat of an initiation\nthe report indicates that the waste\nnuclear power, ties resolution of the\nissue is chiefly one of institutions rath-\nwaste problem to future approvals of\ner than technology and that prompt\nnuclear electric stations in that state.\naction now would avoid collisions with\nMoratorium on Licensing\nvested interests-such as a large nu-\nclear fuel reprocessing industry-that\nDecisions in July by the United States\ndon't exist yet.\nCourt of Appeals in the District of\nColumbia requiring deeper considera-\nWaste Increase Expected\ntion of waste disposal by the N.R.C.\nDr. Willrich proposed:\nbefore issuing licenses for power plants\nGA federally chartered national\nhas resulted In a de facto licensing\nradioactive waste authority. This would\nmoratorium similar to one that lasted\ntake over from ERDA the large existing\n17 mon 15 in 1971-72.\nstock of military wastes and the civil-\nImprovements in the light-transmit-\nian power-station waste expected to in-\nting power of hair-thin glass Roers and\ncrease rapidly in the years ahead. The\nin the lifetime of the tiny semiconduc-\nauthority would handle both highly\ntor lasers that can send infrared light\nradioactive wastes and the lower-level\nrays through such fibers, have been\nwastes contaminated with such\nso rapid that lightwave communica-\nAn engineer examines a cut-away of a cylinder of dark glass in which\n\"transuranic,\" man-made elements as\nradioactive waste could be stored. This method of long-term storage is\nplutonium.\nContinued on Page 67, Column 4\nbeing studied by the Governemnt. The wastes are dissolved in molten glass.\nGERALD\nd\nFORD\nLIBRARY\nfor Thels\nTHE WHITE HOUSE\nWASHINGTON\nSeptember 8, 1976\nFORD LIBRARY & CERALD\nMEMORANDUM FOR: JIM CANNON\nFROM:\nJIM CAVANAUGH P\nSUBJECT:\nGAO Synthetic Fuels Report\nApparently GAO has a copy of a report on the\nsynthetic fuels program. Would you get one to\nme as quickly as possible. I suspect Glenn Schleede\nis on top of this. Thanks very much.\nCalled Schlude\nSent 9/10/76 to J.C.\n090919\nTHE WHITE HOUSE\nWASHINGTON\nSeptember 8, 1976\nMEMORANDUM TO: JIM CANNON\nand\nFROM:\nGEORGE W. HUMPHREYS\nSUBJECT:\nCEQ REPORT ON ERDA\nAs you requested, I am attaching the newest CEQ\ndraft after Schleede's comments were reviewed.\nFORD LIBKARY\n090818\nTHE WHITE HOUSE\nWASHINGTON\nSeptember 7, 1976\nMEMORANDUM TO: ART QUERN\nand\nFROM:\nGEORGE W. HUMPHREYS\nSUBJECT:\nCEQ Report on ERDA\nFORD LIBRARY & GERALD\nYou asked the status of the ongoing discussions.\nSchleede is reviewing CEQ's newest draft to see to what\ndegree his original objections are being met. I do not\nbelieve that Glenn will find the new draft completely\nacceptable, based on my understanding of his original\nproblems.\nI do not think that the overriding issue is whether the\nreport does or does not follow Administration policy.\nI believe it to be a mistake for us to hold up the issuance\nof this report. Its existence, and substance, is already\nknown and the charge of \"heavy-handed White House pressure\"\nwill create more problems than will the report.\nWithout arguing the merit of Glenn's objections, I strongly\nrecommend we do nothing further to delay CEQ's release.\nSUMMARY\nWhen the federal government began a major restructuring of energy\nresearch, development, and demonstration programs in late 1974, a new\nEnergy Research and Development Administration was established --- with\na nonnuclear energy RD&D mandate to complement existing nuclear programs.\nIn the implementing legislation, the Nonnuclear Energy Research and\nGERALD FORD LIBRARY\nDevelopment Act of 1974, the Congress paid particular attention to\ntwo areas that had been largely neglected in nonnuclear energy technology\ndevelopment: environmental protection and energy conservation.\nThe act gave the Council on Environmental Quality unique responsibilities\nwith respect to federal nonnuclear energy RD&D programs: to conduct an\nongoing analysis of the adequacy of attention to energy conservation\nmethods and to environmental protection and to report to the President,\nthe Congress, and the Administrator of ERDA on Council findings. This\nreport is our first under that mandate; it covers activity through March 1976.\nOur principal focus here is the Energy Research and Development\nAdministration. We also examined related programs of the Environmental\nProtection Agency. ERDA's far-reaching goals and strategies, with implications\nfor both the environment and energy conservation, are expressed in\nA National Plan for Energy Research and Development (ERDA-48) in 1975 and\nin the 1976 version (ERDA 76-1).\nThe many projects and people shifted to ERDA from other agencies\nbrought with them programs and approaches that may well change under\nERDA direction. The agency is still organizing its planning system and\nprograms. To say that substantial improvements are necessary does not detract\nfrom ERDA's accomplishments. Moreover, some of the improvements which this\nreport recommends are planned, and others are underway.\n2\nIn approaching our review of the extent to which ERDA is taking conservation\nand environment into account, we first identified certain factors which we\nbelieve should characterize program planning and implementation. We then\ncompared programs, interviewing officials in both ERDA and EPA, reviewing\nrelevant documents, and undertaking special studies. The CEQ public hearings\nin September 1975 provided useful information and insights. Public hearings\nare planned on this report and the National Plan late this year.\nIn addition to overall assessment of planning and implementation,\nwe analyzed two areas in depth in order to determine the extent to\nwhich environmental and conservation considerations are built into ERDA\nprograms. This year's analyses focus on coal technology and end use\nconservation. It should be noted that federal conservation RD&D is but\none aspect of the overall national energy conservation effort. The private\nsector can and must play a critical role in developing energy conservation\nalternatives in response to rapidly growing energy prices and associated\ninfluences upon demand for energy supplies. Conservation efforts can often\nbe applied at state and local government levels as well. And even within\nthe federal structure, conservation programs take many forms and involve\nmany agencies.\nFORD LIBRARY\n3\nAdequacy of Attention to\nEnergy Conservation\nThe Council defines \"adequacy of attention to energy conservation\"\nin federal energy research, development, and demonstration as the\ncapability to identify a range of possible energy conservation RD&D\noptions, to create a factual basis for comparing them to other energy\nRD&D choices, and to develop programs that will ensure availability of\nthe best options.\nThe National Plan\nIn April 1976, ERDA published its second National Plan. ERDA 76-1\nsingles out conservation technologies, ranking them along with several\ndifferent supply technologies as a highest national priority. This step\nrepresents a major shift in emphasis from ERDA-48, the first National Plan.\nIt is based on further analysis of conservation opportunities, is responsive\nto public comment on the initial plan, and reflects ERDA's conclusions that\nonly moderate progress is being made to date on development of supply\ntechnologies. To give effect to this priority, ERDA 76-1 establishes an\nimmediate 5-year planning period during which energy conservation\nopportunities ready for commercialization will receive special attention.\nFurther, the President's FY 1977 budget increases ERDA's energy conservation\nRD&D resources by 64 percent.\nThe Council assessment focuses on the revised National Plan and its\nunderlying analyses and assumptions. We believe that ERDA 76-1 represents\na substantial accomplishment for such a new agency:\n4 FORD LIBRARY\n4\nThe revised plan is a major improvement in addressing energy\nconservation and can serve as a benchmark from which to begin\na systematic and complete approach to conservation RD&D.\nThe plan -- and its agenda for the future -- illustrate ERDA's\ncommitment to a rational and analytical approach to energy\nRD&D. It is moving toward the systematic and explicit\nidentification of energy problems and the development of\ntechnology to resolve them.\nERDA is actively seeking wide review and comment on its\nprograms and appears responsive to comment.\nThese developments are most encouraging. However, our assessment\nraised a number of other issues which we believe were not adequately addressed\nin ERDA 76-1 but which are essential to building energy conservation into\nERDA programs. These issues should be given high-priority attention and\nshould be addressed specifically in the next revision of the National\nPlan in order to provide the basis for public review and debate which\nERDA recognizes is important:\nIs the near-term priority role established by ERDA for\nnew energy conservation technologies --- primarily\nstressing demonstration and application of existing end use\nproducts and processes --- the appropriate one?\nIs the energy conservation program for the mid-term and the\nlong-term adequate when measured against the potential benefits\nof conservation-intensive energy choices?\nAre all potential conservation RD&D options fully considered,\nand are the energy conservation technology programs designed\nwith adequate technical focus?\nFORD LIBRARY & GENNID\n5\nIdentifying and Implementing Conservation RD&D Opportunities\nTo address these issues and to provide for building conservation\ninto federal energy RD&D adequately will require the following:\nA task-oriented, energy systems definition of energy choices,\none which looks first at the nature of the tasks which energy\nis to perform and compares ways of doing the work, from the\nbasic resource to end use\nA process for deciding what RD&D should be done based upon\nongoing comparisons of all potential RD&D options, whether\nthey are supply or conservation oriented\nComparisons based on comprehensive assessment of the energy,\neconomic, environmental, and social impacts of the options.\nWithout ongoing comparisons of RD&D opportunities based on a\ntask-oriented, systems definition of choices and comprehensive assessment\nof impacts, ERDA's RD&D priorities may be misplaced.\nPerhaps the most critical facet of building conservation into\nenergy RD&D is development of the research programs. Individual\nprogram design must consider the energy needs that a technical option\ncan fulfill, anticipate RD&D uncertainties, determine whether federal\nsponsorship is appropriate, and provide a likelihood of technical and\ncommercial success. To do this, conservation program planning should:\nDevelop and use search and screening techniques for\nidentification of high-payoff conservation RD&D opportunities\nEstablish a work planning procedure which focuses on individual\nhigh-payoff opportunities and ensures the availability of\nsufficient resources to resolve technical uncertainties.\nFGRO LIBRARY & GENALD\n6\nEnergy conservation offers substantial environmental benefits.\nSpecial care should be taken to develop environmental and other impact\ninformation on conservation technologies.\nPrincipal Findings\nAlthough the magnitude and technical direction of an adequate\nconservation program are not easy to determine, CEQ has serious concerns\nabout the pace of improvement:\nAlthough ERDA undertook systemwide analyses which\nconsidered the possible benefits of end use efficiency\nimprovements in establishing priorities in the National\nPlan, it has not yet performed a task-oriented, systemwide\nevaluation of a full range of technological opportunities or\nmade explicit side-by-side comparisons of RD&D options.\nImprovements in its planning and analysis systems, now being\nimplemented, could provide the basis for the necessary comparisons.\nMany of the basic agency policies and capabilities necessary\nto give conservation the same level of planning and management\nattention as supply enhancement, particularly for the more advanced\ntechnologies such as nuclear and coal, are still in a very\nrudimentary stage. Plans for improvement are vague.\nSocial, economic, and environmental information should\nbe developed and made available. More important, sufficient\nresearch to provide this information is not built into\nthe RD&D of the supply and conservation program offices.\nThe search for RD&D opportunities is ad hoc and is not uniformly\napplied over all time periods. It lacks the context of a\nlong-term conservation strategy and does not employ innovative\ntechniques to identify potential efficiency improvements. The\nmethod for screening RD&D options for inclusion in the program\nis more sophisticated but it lacks benefit, cost, and risk\ninformation.\nERDA's planning and budgeting are not effectively linked at\nall important levels. Without such linkage, broad agencywide\ndecisions about what RD&D should be carried out cannot be\ntranslated with confidence into specific research projects.\nLLBRARY\n7\nConservation planning resources are limited compared with\nthose for the supply programs, which are supported by ERDA's\nextensive field laboratory structure.\nNeeded Improvements\nConservation RD&D is one of ERDA's high priority programs for the\nnear term. Delay in building the capability to analyze, plan, and implement\nenergy conservation RD&D options could jeopardize the national effort toward\nenergy self-sufficiency in this period.\nEqually important, there are potentially significant conservation\nRD&D opportunities over the mid- and long-terms. These opportunities must\nbe fully considered in the critical formative stages of ERDA planning.\nThere is a momentum behind a number of supply programs, backed up by a\nrelatively sophisticated planning capability. Failure to give adequate\nattention to mid- and long-term energy conservation programs will make it\ndifficult to redress the balance later.\nTo ensure adequate attention to energy conservation, the following\ngeneral improvements must be made within the next 2 years:\nERDA's analytical capability for planning, which is quite\nadvanced, should fully incorporate conservation technology\noptions. Information on economic, environmental, and social\nimpacts must be considered.\nGuidance to ensure the generation of necessary impact information\nand consideration of all the impacts of public concern should be\nformalized.\nIn the planning process specific conservation and supply RD&D\nopportunities should be compared across all planning periods;\nthe comparisons should be used in establishing priorities and\nallocating resources.\nFORD LIBRARY & GERALD\n8\nThe conservation RD&D programs must identify conservation\nRD&D opportunities over all planning periods, generate\ninformation to analyze the opportunities, and organize\nthe research in order to realize the benefits of the best\nopportunities.\nERDA should carefully evaluate the extent to which the\nprivate sector can be expected to undertake the RD&D\nnecessary to attain the potential national benefits of\nenergy conservation.\nERDA appears to recognize these needs and is committed to a number\nof improvements. Included among these are a comprehensive planning\nsystem which is task oriented, will add economic data to its analytical\ncapabilities, and will employ market analysis to gauge the likelihood\nof commercial success of the technologies. These improvements could\nprovide the basis for adequate consideration of conservation.\nERDA should prepare a detailed action agenda for making needed\nimprovements. Until improved analytical planning methods are used\nto consider conservation programs equally with all other options in\nestablishing RD&D priorities, ERDA's National Plan should make clear\nthat priorities will be closely reevaluated annually.\nFORD\n&\nAll\nLIBRARY\n3.9\n9\nAdequacy of Attention to Environment\nThe success of any technology ultimately depends upon its acceptance\nfor economic, environmental and social reasons as well as for energy\nproduction. To ensure the production of environmentally acceptable\ntechnologies, environmental concerns should permeate all phases of\nenergy research, development, and demonstration. They must be a major\nconsideration for those charged with overall planning and administration\nof ERDA programs. Although ERDA has an Assistant Administrator for\nEnvironment and Safety, the environment should also be a major concern\nof the other program offices - fossil fuels, solar, geothermal, and\nconservation.\nThe Environmental Protection Agency -- which must develop\nregulatory standards for new technologies -- shares the responsibility\nfor ensuring the environmental acceptability of new technologies. EPA's\nenvironmental research and standard-setting programs, therefore must be\nclosely coordinated with ERDA's technology development programs.\nTo build environment into the RD&D planning and decisionmaking\nprocess, comprehensive environmental information should be generated\nfor all aspects of the energy technology systems in the RD& D program,\nand the information should be fully applied in making decisions. This\ninformation should be used in selecting the most environmentally\nacceptable technologies from the entire range of possible RD&D options and\nwithin a particular set of options (for example, coal conversion\ntechnologies). To do this, all RD&D programs should demonstrate the\nfollowing characteristics:\nFORD\nLIBRARY\n10\nEnvironmental effects associated with developing energy\ntechnologies should be systematically assessed and\nenvironmental research addressed to priority problem\nareas. The technology and environmental research\nprograms should provide the basis for setting environmental\nregulatory standards.\nTechnology RD&D should be scheduled to reflect availability\nof environmental research information; environmental\nresearch should be keyed to guiding hardware development;\nand facilities for development and demonstration should\nbe designed to produce needed environmental data.\nDecisionmaking for RD&D should incorporate procedures\nfor ensuring that all necessary environmental information\nis available and that it is weighed in making commitments\nto technology development. Environmental assessments and\nenvironmental impact statements should be a major basis\nfor these decisions.\nA system of checks and balances should exist so that\nenvironmental information is developed when needed and\nthat it is fully used as technologies proceed toward\ncommercialization.\nERDA's National Plan recognizes that environmental protection\nand enhancement are concepts which \"must be fully integrated into\nenergy production and use.\" The National Plan makes a commitment to\nan environmental policy strategy which, while lacking detail, appears\nto include most of the characteristics set forth above. It also\noutlines the elements of an environmental planning system. These\nare important steps on ERDA's part toward adequately building environment\ninto its technology programs.\nThis evaluation ends with the first quarter of 1976. As of that\ntime, the environmental strategy had not been implemented nor had\nprocedures been issued for the environmental planning system. Yet many\ntechnologies are proceeding toward the later stages of development. In\nour view, implementation is too slow.\n11\nPrincipal Findings\nUntil recent years, little attention was given to identifying the\nenvironmental problems associated with developing nonnuclear energy\ntechnologies. This situation has been changing gradually. Since 1974\nthe federal environmental research program has devoted much more effort\nto the environmental problems and uncertainties of these technologies. But\na well-defined and coordinated federal program does not yet exist. In\nparticular:\nThere is not an effective, systematic approach to\nidentifying priority environmental problems and to\nestablishing a research program specifically related\nto developing technologies.\nCoal technologies now being developed contain many\nhazardous substances in their process streams. The\npresence of these substances is poorly understood, and\nthere is too little information on health and ecological\neffects. Possible effects from the end use of synthetic\nfuels is receiving only limited attention.\nIndividual coal technology RD&D programs lack a coherent\napproach to environmental concerns. Research to characterize\npollutants from developing coal technologies and to identify\npotential health and environmental problems is not adequate.\nERDA and EPA have not developed procedures for setting\nenvironmental and occupational health standards for new\ncoal technologies. Overall interagency cooperation and\nresearch coordination need major improvement.\n12\nThese are difficult problems which require immediate, high-level\nattention. ERDA has initiated a major environmental planning effort,\nthe Balanced Program Plan, which could remedy some of these shortcomings.\nIn addition, proposed Environmental Development Plans for each RD&D\nprogram area could provide the needed technology-focused approach\nto environmental assessment and research.\nScheduling Environmental Research - We have a number of concerns\nwith the relationship between the status of environmental research and\nthe schedules for development, demonstration, and commercialization of\nERDA technologies:\nEnvironmental research is not systematically linked to\nschedules for technology research, development, and\ndemonstration, and no procedures have been instituted to\nensure that environmental information is available when\nit is needed for key decisions. Procedures have been\nproposed to improve this situation.\nThe necessary environmental information for standard setting\nand other decisions on commercialization of coal-based synthetic\nfuels probably will not be available by the mid-1980's.\nIn the pivotal area of process characterization, research in\nthe early and middle stages of development has been\ninadequate to identify potentially harmful substances associated\nwith developing coal-based technologies. Recently initiated\nefforts could lead to a program to achieve this result.\nThere is an equally critical timing problem with health\neffects research.\nEPA's programs to establish environmental standards are tied\nto commercialization schedules only in the near term.\nThese inadequacies result in part from the fact that, at least\nfor coal-based technologies, the federal environmental research effort\nis barely underway\nFORD\nLIBRARY\n13\nThe proposed environmental planning efforts are designed to link\nenvironmental research with technology development. But these efforts\nare in the early stages, and with current schedules, significant effects\non research timing are not likely to be felt before FY 1980. Given the\ncomplexity of some of the research, and given a sequence -- process\ncharacterization to health effects to control technology -- which under\nthe best of conditions will take a number of years, additional efforts\nshould be made to ensure that sufficient information will be available for\nprojected commercialization of developing coal-based technologies.\nConsidering Environment in Decisions - In examining the present\napproach to decisionmaking within ERDA, we find progress in some areas,\nbut a number of significant problems still exist:\nThe National Plan was developed with only superficial\nconsideration of the environmental effects of its\nalternative planning futures and did not discuss the\nenvironmental consequences of the technologies proposed for\npriority attention. The review process for the National\nPlan is good, but environmental information is lacking.\nERDA has committed itself to using environmental impact\nstatements as major decision documents. This commitment\nis highly desirable and should be backed by uniform\nguidelines and procedures directed explicitly at the problems\nof nonnuclear RD&D.\nSome programs are progressing in developing impact statements.\nHowever, at the program level, commitments to demonstration of\ntechnologies have been made without sufficient consideration\nof environmental impacts.\nEnvironmental considerations are not yet being adequately\nfactored into individual project decisions. There has been\nno public or general federal agency review of program or\nproject decisions through the NEPA process or by other means.\nProcedures are evolving which could provide the basis for\ninternal environmental checks on the planning and decisionmaking\nof the technology programs. They are not yet functioning, and\ndecisions are being made with insufficient review.\n14\nWe believe that well-defined procedures for preparation of environmental\nassessments and impact statements and for consideration of environmental\ninformation in decisions will result in more environmentally sound technologies.\nNeeded Improvements\nERDA should accelerate its efforts to implement the components\nof proposed environmental planning systems. It should also make clear\nhow the various components --- Environmental Development Plans, the\nBalanced Program Plan, and environmental impact statements -- will\nfit together into a coherent program. In the coming year ERDA and EPA\nshould emphasize coordination of their programs. The following areas\nshould receive particular attention:\nTechnology-Environment Relationship\no\nThe technology RD&D offices under oversight of the Office\nof Environment and Safety should establish a complete\nenvironmental program for each technology encompassing\nassessment, coordination with environmental research and\nstandard-setting agencies, and monitoring and control at\nRD&D facilities.\nA central coordinating point should be designated to review\nthe plans for technology development and environmental\nresearch to ascertain difficulties in scheduling and to make\nsure schedules are adjusted accordingly.\nERDA must carefully reevaluate its schedules for all\nnonnuclear energy technologies -- near-, mid- and long-term -\nto ensure availability of adequate environmental information\nfor informed decisions on commercialization, environmental\nstandards, control technologies, and other mitigating measures.\nProviding environmental guidance to contractors in all\ntechnology development programs should receive immediate\nattention. It may be in the form of detailed regulations,\nmanuals of practice which are incorporated into the\ncontract, or contract specifications.\n-15-\nProcess Characterization\nAll process characterization work should be systematically\norganized and coordinated to ensure the generation and sharing\nof necessary data.\nComprehensive programs for characterization of pollutants,\n(as well as definition of effects and development of control\ntechnology) should be in process for all pilot plants.\nThey should not be downplayed until the demonstration stage\non the grounds that only technical feasibility matters up\nuntil that point.\nStandard Setting\nEPA should propose standards for new technologies when there is\nadequate information to do SO.\nEPA should establish criteria for identification and control of\nclasses of substances which may require regulation in the future.\nERDA and EPA should jointly develop environmental performance\ngoals for proposed demonstration facilities to be used in\nevaluating contract proposals. Both agencies should monitor\nand characterize the process streams to provide the basis for\nregulatory decisions.\nNational Plan\nThe analysis underlying ERDA's National Plan should\nconsider the environmental implications of\nprogram priorities in order to reflect the broad\nperspective that the Congress mandated.\nEnvironmental issues should be specifically addressed\nin future revisions of the National Plan. ERDA should prepare\na detailed environmental assessment of the National Plan\nand include it as part of its public review and comment.\nNEPA Procedures\nImplementation of proposed environmental impact statement\nprocedures and environmental development plans should be\ngreatly accelerated.\nERDA's procedures should carefully address the timing of\nenvironmental impact statements for all technology programs.\nMeasures should be taken immediately to identify the program\nand project statements likely to be required, and preparation\nshould begin as soon as possible to provide input into the\ndecisions that will be made.\n16\nIn the absence of comprehensive environmental information\nand detailed impact statements, ERDA should take great care\nnot to make decisions which irrevocably commit to a course of\naction. There must be formal procedures for periodically\nreevaluating all significant commitments based on new\ninformation.\nHealth Effects Research\nAdditional attention should be given to rapid, inexpensive\ntoxicological screening methods.\nEfforts should be made to understand better the precise\nrelationship between laboratory animal metabolism or\ncell cultures and human experience to allow quantitative\nestimates of health risks.\nBetter epidemiological studies and improved capability to\nisolate and identify past and present exposures to chemicals\nshould be developed.\nResearch Coordination\nA jointly constituted group should be established with\nresponsibility for overall energy-environment research\nplanning and establishment of program objectives and time\ntables. The entire federal energy-related environmental\nresearch program should be reexamined periodically to ensure\ncoverage of the important issues associated with developing\ntechnologies.\n10L WHITE HOUSE\nACTION MEMORANDUM\nWASHINGTON\nLOG NO.: Synthels\nDate:\nSeptember 10, 1976\nTime:\nFOR ACTION:\nCC (for information):\nFrank Zarb\nJim Cannon\nFROM THE STAFF SECRETARY\nDUE: Date:\nImmediate Turnaround Pls. Time:\nSUBJECT:\nRecommended Telephone Call to\nFORD\nThe Speaker and Representative Dick Boilling\nre: H.R. 12112, the Synthetic Fuel Bills\nACTION REQUESTED:\nFor Necessary Action\nX For Your Recommendations\nPrepare Agenda and Brief\nDraft Reply\nX For Your Comments\nDraft Remarks\nREMARKS:\n9/10/26\nPLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.\nIf you have any questions or if you anticipate a\ndelay in submitting the required material, please\nJim Connor\ntelephone the Staff Secretary immediately.\nFor the President\n191011\nCLEARANCE SHEET\nDATE: 9/10\nJMC ACTION\nRequired by:\nIMMEDIATE\nSTAFF RESPONSIBILITY Schleede\nSUBJECT:\nRecommended telephone call fm President Ford to\nSpeaker & Congressman Bolling\nRECEIVED FROM: Connor\nDATE RECEIVED: 9/10\nSTAFF COMMENTS:\nSchleede recommends approval.\nQUERN MOORE RECOMMENDATION:\nAPPROVE\nREVIEW & COMMENT\nDISCUSS\nFORD LIBRARY &\nCANNON ACTION:\nDATE:\nMaterial Has Been:\nSigned and forwarded\nChanged and signed\nReturned per conversation\nNoted per phone conversation\nTSJ to Connor offer\nJIM JMC\nComment:\nRle\nTHE WHITE HOUSE\nWASHINGTON\nEnergy\nSeptember 9, 1976\nJim:\nHere is the document you asked for\nfrom Glenn.\nSee Item #3, P. 1\nFORD LIBRARY & GERALD\nTHE WHITE HOUSE\nWASHINGTON\nSeptember 9, 1976\nFORD\n&\nMEMORANDUM FOR:\nJIM CANNON\n078830\nLIBRARY\nFROM:\nGLENN SCHLEEDE\nSUBJECT:\nRESPONSES TO COMMENTS ON LAST WEEK'S\nBRIEFING REPORT\nIn response to your marginal notes on my weekly briefing\nreport of September 1:\n1. Director for NSF. Sending up the nomination of\nAtkinson is a viable option and it appears to have\nconsiderable support. However, I understand that\nthe Vice President and Doug Bennett have discussed\nthis matter over the last few days and concluded\nthat: (a) the attempt to appoint Hans Mark to the\njob should be continued, (b) Hans has taken himself\nout of running until after the election, and\n(c) therefore, the only way of maintaining the\noption for Hans is to leave the job unfilled.\nYou should be aware that there is considerable\nopposition in the scientific community to Hans,\napparently based primarily on his past associations\nwith Dr. Teller.\n2. Space Shuttle - Roll Out Ceremony. NASA's arrangements\npermit about the fastest possible round trip to\nCalifornia (leave 3:30 pm on September 16 and\nreturn at 11:00 am on September 17). Can you afford\nto be away for this period? Attendance by senior\nWhite House staff would help show the President's\ninterest in the space program which, of course, is\nSO important in California. Dennis Barnes will be\ngoing. I have \"signed up,\" but I may drop out\ndue to the time involved. I will get you a list\nof others who plan to attend.\n3. Uranium Enrichment - Mansfield. My sources indicate\nthat neither Pastore nor Baker has urged Mansfield\nto move the bill -- despite their commitments to the\nPresident last week to do SO. I also understand\nthat calls from them to Mansfield are critical.\nI recommend a call from the Vice President to\nMansfield. I also understand that Senators Allen\n-2- -\nand Sparkman will be contacting Mansfield but that\nwill not be a substitute for any of the above calls.\n4. Uranium Enrichment - ERDA letters. A copy of the\nletter to Senator Glenn is attached. Others are\nstill in preparation.\n5. Nuclear Policy Study. A copy of Bob Fri's final\ndecision paper -- 35 pages including tabs -- is\nbeing provided to you separately (it is classified).\nIn addition to the decision paper, Bob has submitted\na 36-page report accompanied by about 80 pages\nof tabs and 30 pages of agency comments in the\nform of memoranda to the President. I am now\nplowing through all these documents and attempting\nto haul them down to a logical decision paper.\nAttachments\nFORD LIBRARY & GERAÇO\nUNITED STATES\nADMINISTR\nENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION\nWASHINGTON, D.C. 20545\nSTATE\nUSA\nSEP\n3\n1976\nHonorable John Glenn\nUnited States Senate\nDear Senator Glenn:\nThe following are responses to the questions posed in your letter of\nAugust 16:\n1.Q.\n\"What is your estimate of the amount of domestic and foreign\nnuclear capacity, based on plants now under construction or on\norder, that will be on line by 1985 and 1990?\"\nResponse\nA. Domestic Nuclear Power Plant Capacity\nThe following tabulation represents our best estimate for\nnuclear power plant capacity in the U.S. in the years 1985\nand 1990:\nDomestic Nuclear Power Plant Capacity\n(Gigawatts Electric)\n1985\n1990\nPlants on line, under construction or on order\n145-165\n200-210\nPlants projected\n50- 80\nTotal projected domestic nuclear capacity\n145-165\n250-290\nUtilities are now having difficulty in making firm decisions to\nbuild additional nuclear power plants because final commitments\nhave not yet been made to build the uranium enrichment facilities\nneeded to provide fuel for these additional plants. In many cases,\nutilities now have the economic incentive to choose nuclear power\nover other feasible alternative sources of electricity supply. The\nlack of firm commitments to build new uranium enrichment plants is\npreventing decisions to order nuclear power plants that could\ncapitalize on these economic advantages.\nFORD LIBRARY & GENALD\nEVOLUTION\nBICENTENNIAL\n&\n1776-1976\nHonorable John Glenn\n-2-\nB. Foreign Nuclear Power Plant Capacity\nThe following is our best estimate of foreign nuclear power\nplant capacity:\n1985\n1990\nProjected foreign nuclear capacity, (excluding\nEastern bloc countries), gigawatts electric\n230-325\n425-620\nIn our judgment, the lower part of the ranges cited now appears\nthe more realistic.\nIn the past the U.S. has supplied virtually all the worldwide\ndemand for enrichment services for nuclear power plants outside\nthe eastern bloc countries. We believe the U.S. could and\nshould continue to be a major supplier of enrichment services to\nthe world. The U.S. should be able to compete effectively for\nthis, worldwide market due to our years of experience as a reliable\nsupplier of enrichment services and our clear lead in enrichment\ntechnologies.\nC.\nUranium Enrichment Capacity Situation\nExisting uranium enrichment capacity was fully committed by mid-\n1974 for the lifetime of existing ERDA enrichment plants (including\nthe planned capacity expansion now underway). The add-on enrichment\nplant at Portsmouth, Ohio will be used to fulfill existing ERDA\ncontracts in the most economically efficient manner and to conserve\nuranium resources. New nuclear power plants scheduled to come on\nline starting in the mid-1980's must obtain uranium enrichment\nservices from enrichment plants which are not now in existence.\nThese services will have to be provided through long-term contracts\nserved by new enrichment plants. Private firms wishing to build\nthese uranium enrichment facilities will not make firm commitments\nto construct or own commercial plants unless they have sufficient\nfim orders from new customers to assure project viability. Thus\ncommitments to new enrichment facilities will follow real customer\ndemands and there need not be concern about \"over capacity\" of\nenrichment services as a consequence of the passage of the Nuclear\nFuel Assurance Act. Our best estimate is that we will have a\nsignificant shortfall of assured enrichment services in the 1980's\nFORD\nis\nGERNED\nHonorable John Glenn\n- 3 -\nto meet new domestic and U.S. supplied foreign needs if we do\nnot have a diffusion project. Further, we believe that the\nproposed private diffusion project and all three proposed centrifuge\nprojects can proceed in accordance with anticipated schedules on\nthe basis of present demand forecasts if about one-third of the\nprojected new foreign market is obtained. On this basis, still\nadditional domestic capacity would be required no later than about\n1990.\nD. Effect on Proliferation\nForeign nuclear power growth is not dependent upon the availability\nof new U.S. enriching capacity and will proceed whether or not we\nbuild new plants. Several foreign enrichment projects already have\nbeen committed; others are in the planning stages. Potential foreign\nsuppliers will be discouraged from proceeding if the way is clear\nfor expansion of enrichment capacity in the U.S. and the U.S. can\nassume its role as a reliable and competitive supplier. This will\npermit the United States to maintain greater influence in its\nobjective of strengthening safeguards worldwide against nuclear\nproliferation.\n2.Q. \"What will ERDA policy be in the event that its customers have\ninsufficient capacity to use all of the enriched uranium they have\ncontracted for?\n-Will there be another \"open season,\" when all customers will be\nallowed to renegotiate contracts without penalty?\nWill there be a \"variable tails assay option,\" so that contracted\nSWUs may be used to reduce the tails assay?\"\nResponse\nERDA uranium enrichment contracts with utility customers are of the\ntake or pay variety often used by utilities in long-term fuel contracts.\nIn theory, utilities have to take delivery of enrichment services even\nif these services are not needed. In practice, however, the utilities\nwould attempt to dispose of these valuable assets to other licensees who\nmay have, or project, an enrichment shortage. The open season of a year\nHonorable John Glenn\n- 4\nago was designed to provide a useful addition to the ERDA stockpile.\nIt also served the added purpose of providing utilities relief from\ntheir firm contractual commitments for enrichment services from ERDA\nin view of the unforeseen and unique situation of lower energy growth\nin 1974 and 1975. As noted above, it is desirable that adjustments in\nactual utility need for enriched uranium be accommodated without\ninvolving the Government. We do not foresee a repetition of the unique\ncircumstances which prompted last year's \"open season\". Therefore,\nwhile we do not see the need at this time for another \"open season\" we\ndo intend to watch the industry carefully to remain alert to any changes\nin circumstances. It should be noted that after the very low growth\nrates for electricity consumption in 1974 and 1975, these rates now\nappear to be increasing significantly, e.g., for the first 32 weeks of\n1976 the electricity growth rates was 5.2% (compared to essentially zero\nin 1974 and about 2% in 1975).\nERDA has stated that it will offer the \"variable tails assay option\" to\nits customers. Under such an approach a customer might deliver less\nuranium feed material and receive less enriched product for the same\nnumber of SWUs specified in his contract with ERDA. ERDA plants would,\ntherefore, effectively operate at a somewhat lower tails assay. This\noption likely would be acceptable to a customer only if any fuel deficit\nthat he might incur through exercise of the option could be satisfied\nfrom a supplementary source.\n3.Q. \"How does ERDA determine the optimal stockpile level?\nWhat percentage of the stockpile is desired for different purposes\n(such as core loading)?\nHow much does it cost to keep this stockpile both in terms of SWU\nand kilograms of enriched uranium?\"\nResponse\nThe Government stockpile of enriched uranium will be used to assure that\nERDA can fully meet Government needs, meet its present contractual\ncommitments and provide backup assistance for the needed new domestic\nenrichment plants by providing assurance to new customers that\ncommitments can be met during the early phases of new enrichment plant\nprojects.\nDefining an \"optimal\" stockpile level is extremely complex. It requires\na management judgment which balances the probabilities of unexpected\nHonorable John Glenn\n-5-\nneeds, the consequences of not being able to meet those needs and\nthe costs of carrying the stockpile as \"insurance\" to protect against\nthem. We now base our consideration of the size of the desired enrich-\nment stockpile on the following factors 1) product inventory for routine\noperation of our plants (about 3 months production, equal to about\n7 million SWUs after the CIP-CUP expansion program has been completed);\n2) the possibility that production expected from the CIP-CUP expansion\nprogram might be delayed; 3) the possibility of natural disaster to\nproduction or power supply facilities (power supply to Portsmouth from\nthe Clifty Creek station was interrupted by a tornado in 1974) ; 4) pos-\nsibility of diversion of planned power from our plants (some of the\ncontracted power is \"unfirm\" power; in 1970 it was even necessary to\ndivert firm power to the northeast during the \"brown-out\" emergency);\n5) maintaining capacity needed to \"backup\" new United States enriching\ncapacity (approximately the equivalent of a year's production for a\ngaseous diffusion plant, and somewhat more for centrifuge plants, probably\nshould be available to protect against the contingency of delay in\nachieving routine new plant operation).\nIt is not yet practicable to \"allot\", in effect, portions of a stockpile\nto particular specified purposes. However, to the extent that particular\nevents which the stockpile is designed to protect against (e.g. delay in\nscheduled new capacity) do not materialize, some portion of the stockpile\ncould then be sold. We should have much of this information in the mid-\n1980's. However, even if none of the stockpile had been used to meet\ncontingencies by the mid-1980's, the available amount would still represent\nless than one year's production from domestic enrichment plants.\nERDA now has a stockpile of 4700 metric tons of 3.2% enriched product\n(about 18 million SWUs at 0.3 tails). We are now currently reevaluating\nour long-range gaseous diffusion plant operating plans which will establish\nERDA's future stockpile objectives. For the purpose of addressing the\nquestion of the costs associated with keeping a stockpile, we have made\nthe assumption that a stockpile of 6600 metric tons of 3.2% enriched\nuranium (about 25 million SWUs at 0.3 tails assay) could be available\nin the future.\nThe annual carrying charge associated with maintaining such a stockpile\nis estimated to be about $140 million (in 1976 dollars). This includes\na separative work component of the inventory which has an estimated\nannual carrying charge of slighly over $60 million (in 1976 dollars).\nFORD\nis\nNERALD\nLIBRARY\nHonorable John Glenn\n- 6 -\nThis carrying charge, which is borne by the customers, was calculated\nassuming a 6.5% carrying charge rate as the average cost of money to\nthe Government. Maintaining a stockpile is relatively cheap insurance\nto customers when the costs associated with a reactor not operating\ndue to lack of enriched uranium fuel are considered. For example, a\n1000 MWe nuclear power reactor loses revenues of about $120 million per\nyear (at 20 mills per Kwh) if it does not operate. The ERDA enrichment\nplants are under contract to supply the equivalent of about 325 such\nreactors; a single new 9 million SWU enriching plant may support 75-85\nsuch reactors.\n4.Q. \"What is the optimal tails assay in your view?\n--How is the figure arrived at?\n--How much does it cost to enrich tails as compared to the cost of\nenriching natural uranium?\"\nResponse\nAn economic \"optimum\" tails assay is the tails assay which results in\nthe minimum cost of enriched uranium product and is a function of the\ncost of 1) enriching services and 2) uranium feed. Both of these costs\nchange with time. Therefore, the optimum tails assay is also time de-\npendent. The optimum tails assay to the customer would be a composite\ndetermined over the period of the customer's contract with an enricher,\ni.e., based upon future feed costs and future enriching service costs\nover that period. The optimum tails assay as a function of separative\nwork and feed costs is illustrated in the enclosed chart. It is our\njudgment that the average optimum long term tails assay for ERDA's\nenrichment plants will probably be in the range of 0.20 to 0.25% U-235\nfor most customers. It should be noted, however, that each individual\nutility could have a unique \"optimum tails assay\" that might or might\nnot fall within this range due to various circumstances. For example,\nfeed costs could differ since utilities have contracted for feed at a\nmultitude of prices.\nThe use of tails material instead of normal uranium as feed for a gaseous\ndiffusion plant would require the expenditure of more separative work\nunits (SWU) to produce a given quantity of enriched product. For example,\nif a plant is operating at a tails assay of 0.25% U-235 and producing\nenriched product at an assay of 3.2% U-235, it requires approximately\nFORD LIBRARY &\nHonorable John Glenn\n-7-.\ntwice as many SWUs to produce a kilogram of product if 0.30% U-235\nmaterial is used as feed instead of normal uranium feed containing\n0.71% U-235. Thus, recycling tails does result in the consumption of\nmore separative work. ERDA is currently recycling relatively small\namounts of 0.30% U-235 tails inventory to supplement the availability\nof our limited normal uranium feed material. The operating costs\nassociated with using this 0.30% U-235 material are minimal, consisting\nmainly of material handling costs. The feeding of our inventory of\nthis caterial should be completed in about 3 years.\n5.Q. \"How do you interpret Congressman Anderson's floor amendment to\nH.R. 8401?\n--Precisely how and when will technology be guaranteed?\n--How does the amendment affect gas centrifuge as compared to\ngaseous diffusion?\nResponse\nIt is assumed that you are referring to the following amendment -\n\"Provided, however, that the guarantees under any such cooperative\narrangement which would subject the Government to any future contingent\nliabilities for which the Government would not be fully reimbursed shall\nbe limited to the assurance that the Governnent-furnished technology\nand equipment will work as promised by the Government over a mutually-\nagreed-to and reasonable period of initial commercial operation. Con-\nsistent with the foregoing, such cooperative arrangements may include inter\nalia, in\n\"\nWe understand that this amendment was intended to remove some ambiguities\nconcerning the scope of H.R. 8401 arising out of the legislative history\nconcerning the Bill. For example, we understand that the phrase\n\"mutually-agreed to and reasonable period of initial commercial operation\"\nwas intended to reflect the possible need for technology guarantees to\nextend for periods greater than a year after operation of an enrichment\nproject, which might be necessary for the gas centrifuge.\nThe scope of and duration of guarantees of technology are currently\nunder discussion with each of the four prospective private uranium\nenrichment firms. Until the NFAA is enacted and negotiations are con-\ncluded with these firms, we are unable to respond further to your questions\nHonorable John Glenn\n-8-\nconcerning this matter. However, the specific terms of these\nguarantees would be spelled out in each contract, which cannot\nbe entered into without specific approval of the Congress.\nThe Bill as amended and as passed by the House does not distinguish\nbetween the different processes for uranium enrichment. Instead,\nit provides a framework which could accommodate arrangements covering\neither gas centrifuge or gaseous diffusion projects. We expect,\nhowever, that the scope and duration of guarantees of technology\nwill differ between centrifuge and diffusion (the centrifuge requiring\nmore) but that both processes can be accommodated under the amendment.\nSincerely,\n/s/ Fri\nRobert C. Seamans, Jr.\nAdministrator\nEnclosure:\nAs stated\nGERALD\nFORDO LIBRARY 2 (6) TW\nOPTIMUM TAILS ASSAY\n0.40\n$10\n$15\n0.35\n$30\n0.30\n$50\n0.25\nOPTIMUM TAILS ASSAY, PERCENT U-235\n0.20\n$100\n0.15\nORE COST, DOLLARS PER POUND U308\nSERALD f. LEBRARY FORD\n0.10\n0.05\n0\n25\n50\n75\n100\n125\n150\n175\n200\nSEPARATIVE WORK COST, DOLLARS PER SWU\nTHE WHITE HOUSE\nWASHINGTON\nSeptember 1, 1976\nMEMORANDUM FOR:\nJIM CANNON\nFROM:\nGLENN\nSUBJECT:\nWEEKLY BRIEFING -- ENERGY,\nSCIENCE AND TECHNOLOGY\nI.\nScience and Technology\nA.\nOffice of Science and Technology Policy. Guy Stever\nis moving ahead with the organization and staffing of\nthe Office, but he has not made final decisions on\norganization.\nB. President's Committee on Science and Technology.\nDoug Bennett is moving ahead with recommendations\nfor 13 members of the Committee. He expects the\nmemo to the President to go next week.\nDirector for NSF. Senator Kennedy has let it be\nknown that he would push through confirmation of\n100 it\nDick Atkinson (currently the deputy) this session\nif the President were to send up the nomination.\nHe would not push through anyone else.\nNational Science Board. Appointment of 7 new members\nother\nshould be announced late this week or early next.\nE. National Medal of Science. We are hoping to get a\ntentative date for the awards ceremony within the\nnext few days. It probably will be in late September.\nF. Space Shuttle. The \"roll out\" of the first orbiter\nClaim\nis scheduled to occur September 17 in Palmdale,\nCalifornia. This should draw considerable attention\nsince it is symbolic of a return of manned space\nflight activity.\nSERALD E. LISARAY FORD\n-2-\nG. Earthquakes. House Science and Technology bill was\nreferred to the House Interior Committee until\nSeptember 8. Max Friedersdorf does not agree with\nour opposition to the bill. Separate memo will be\nforwarded on this subject.\nH. Fletcher Meeting with the President. We are still\nawaiting a favorable response to our proposal that\nthe President meet with Dr. Fletcher concerning\nthe space program, as Dr. Fletcher has requested.\nII. Energy\nA. Uranium Enrichment\nLegislation.\nPresident's letter to Senator Mansfield\nbeen delivered by Bill Kendall.\nSenator Mansfield indicated that he would\nwhat he could do but would not make\npromises.\ncan wonlin vi help House.\nSenator Glenn seems to have lost some of his\nenthusiasm for his amendment which is\nidentical to the Bingham amendment in the\ngood\n&\nLetters in support of legislation. Letters are\nin preparation in ERDA: (a) to Senator Pastore\ncountering the \"glut in capacity\" argument, and\n(b) to Senator Glenn answering a series of\nquestions that he has posed.\nBudget Committee Action. The House Budget Committee\nhas voted to count the entire contingent liability\nassociated with contracts pursuant to NFAA as\n\"budget authority\" for purposes of the budget\nresolution. The Committee further cut the\n$8 billion request back to $4 billion. On the\nSenate side, the Administration position that none\nof the contingent liability should be counted\nas budget authority has been accepted. We will\nhave to watch this closely in conference.\nGleun\nway these?\nFORD LIBRARY & 076875\n-3-\nBlew Get w\nB.\nNuclear Policy Study. Bob Fri is shooting for a\ncompleted decision paper by this weekend. I\nreviewed a draft issue paper earlier today and\nI have doubts as to whether it will be in shape\nPls. a com\nby this weekend.\nC. Energy Conservation and Rationing Plans.\n-- This item is due to come up on the ERC agenda\ntomorrow morning. OMB has problems with the\nfour\nrationing plan and are seeking some changes.\nJohn Hill has indicated that he will agree not\nHight\nto send up two of the plans (lighting and\nweekend gasoline sales) if they can get\nclearance on the other three.\n-- You have received over 200 letters from the\nhotel industry opposing the FEA contingency\nThe\nplan which would restrict weedend fuel sales.\nBoss.\nWe are developing a draft response which we\nwill forward for your approval.\nD. Natural Gas Legislation. FEA is preparing draft\nlegislation that would provide some emergency\nauthority for use in the event of a severe\nshortage this winter. This approach was\napproved by the ERC last week. (Dick Dunham\nconcurs.)\nE. State Nuclear Moratoria. Six more states will\nhave nuclear initial ives on their ballots in\nNovember: Washington, Oregon, Colorado, Ohio,\nMontana, and probably Arizona (though the\npetitions will be challenged).\ncc:\nArt Quern\nAttachment\nKn's note w w trip cont on dudule who dule\nPending\nCLEARANCE SHEET\nDATE: 9/11\nJMC Required ACTION by: 9/14\nSTAFF RESPONSIBILITY A.Q\nSUBJECT: Russ PETERSON LETTER\nRECEIVED FROM:\nDATE RECEIVED: 9/8\nSTAFF COMMENTS:\nQUERN MOORE RECOMMENDATION:\nAPPROVE\nREVIEW & COMMENT\nWe tath of then need about tath schledes Do this to of OMB Artor\nDISCUSS\nCANNON ACTION:\nDATE:\nMaterial Has Been:\nSigned and forwarded\nChanged and signed\nReturned per conversation\nFORD LIBRARY & DERALD\nNoted\nJIM CANNON\nComment:\nEXECUTIVE OFFICE OF THE PRESIDENT\nCOUNCIL ON ENVIRONMENTAL QUALITY\n722 JACKSON PLACE, N. W.\nWASHINGTON, D. C. 20006\nSeptember 8, 1976\nDear Jim:\nAttached is a copy of the memorandum from Jim Mitchell\nthat you requested.\nI understand that you plan to personally study the revised\nsummary of our report on non-nuclear energy R&D which I\npreviously submitted. This is the latest in a series of editorial\nrevisions which we have made in order to satisfy the concerns\nof the many people in the Executive agencies who have reviewed\nour draft. Wherever our draft required clarification or revision\nbecause of improved understanding on our part, we have made\nsuch revisions. However, when an agency requested that we\nchange our basic convictions that there was room for improve-\nment in the Federal energy R&D program from an environmental\nand conservation standpoint, we have refused to do so. If appears\nto us that OMB and Glenn Schleede want us to say that there is no\nroom for improvement in the Federal Government's program. I\nam sure that Congress did not have in mind, when they gave us our\nassignment, that we should just bless whatever the Administration\nhad previously decided to do. Nor do we have any intention to do SO.\nWhen the Non-Nuclear Energy Research and Development\nAct of 1974 was passed by Congress and signed into law by President\nFord, it was clear that the confrontation that we are now experiencing\nwas certain to occur. The statute directed CEQ to make this report,\nnot OMB or the Domestic Council. At this juncture, we have garnered\nall the help and advice we need from other Federal agencies on this\nreport. Such advice has undoubtedly contributed to improving the\nreport.\nSome agency almost certain other than CEQ leaked a copy of\nour early draft to Jack Anderson. He has already had two columns\nexaggerating our criticism of the energy program and forecasting\nthat the Administration will not let that report see the light of day.\nAt a recent hearing on the NNERD program, we testified - after OMB\nclearance - that we would be making our report to Congress this Fall.\nIncidentally, the two Democratic senators present at the hearing both\nhad copies of our draft report in front of them.\n-2-\nI recommend that the President plan a speech or press\nrelease emphasizing the need for an all-out conservation effort\nin our country and release it at the same time that he receives\nour final report. He could thank CEQ for the report which they\nprepared under the law he signed December 1974 and report that\nhe is asking his energy agencies to carefully review our recom-\nmendations and reflect such review in their future plans for\nenergy R&D.\nI am anxious, Jim, to discuss this with you at your earliest\nconvenience so we can go to press in the next few days.\nSincerely,\nRuss\nRussell W. Peterson\nChairman\nFORD & LIBRARY CERALD\nMr. James Cannon\nAssistant to the President\nfor Domestic Affairs\nThe White House\nWashington, D.C. 20500\nAttachment\nEXECUTIVE OFFICE OF THE PRESIDENT\nOFFICE OF MANAGEMENT AND BUDGET\nWASHINGTON. D.C. 20503\nAugust 30, 1976\nMEMORANDUM FOR RUSS PETERSON, CEQ\nFROM:\nJIM MITCHELL\nSubject:\nCEQ report evaluating ERDA's Environmental\nand Conservation Programs\nAs you know, OMB and Domestic Council representatives have\nbeen reviewing the subject CEQ report--working with\nSteve Jellinek and others of your staff.\nAlthough considerable OMB staff time has been devoted to\nsuggested changes in the proposed CEQ report--a number\nof which have been incorporated in successive drafts--there\nare still fundamental problems that go beyond editing and\nwhich are of a fundamental policy nature, particularly\nin the conservation section of the report.\nThese fundamental policy problems arise because the\nreport tends, by its tone and emphasis, to call for an\nexpanded Federal role in conservation R&D that is\ninconsistent with:\n-- the Administration's policy on Federal VS.\nprivate role;\n-- the President's 1977 budget decision which\nreflects the above policy; and\n-- the ERDA \"National Plan\" which was\nmodified to reflect more carefully\nthe Administration's position, particularly\non the premise of the private role and\nresponsibility in conservation and\nconservation R&D.\nIt will, therefore, provide the basis for further criticism\nof the President for not requesting more funds for energy\nconservation and, particularly will inhibit his ability to\nconsider the possible deferral of some or all of the\nadditional funds added by Congress.\n2\nThere is one other section of the report, namely, the\nchapter dealing with fossil energy R&D that gives us\na problem. The report takes the position that fossil energy\nR&D should be slowed down until more work is done on\nenvironmental impact by the Environmental Division of\nERDA. This suggests that the President's budget is too\nhigh in the fossil energy area and, therefore, undermines\nthe Administration's program. Our view is that analysis\nof the environmental impact of fossil energy technologies\nis important, but that such work should be undertaken by\nboth the Environmental Division of ERDA and the technology\nprogram people involved and, furthermore, that present\ndeficiencies in dealing with environmental concerns are\nnot serious enough to warrant slowing down the program.\nI want to add my strong support of the views that have\nbeen expressed by my colleagues in OMB and urge that you\nundertake an extensive rewrite that will be more in keeping\nwith a realistic assessment of the Federal responsibility,\nparticularly in conservation R&D as expressed by this\nAdministration.\nTHE WHITE HOUSE\nWASHINGTON\nSeptember 14, 1976\nGERALD FORD LIBRARY\nMEMORANDUM TO: DICK CHENEY\nFROM:\nJIM CANNON Dain\nSUBJECT:\nCEQ VS. OMB and The Domestic Council\nWe have an internal dispute, with Russ Peterson opposed\nto Jim Mitchell and Glenn Schleede.\nSection 11 of the Non-Nuclear Energy Research and\nDevelopment Act requires CEQ to perform an independent\nassessment of the adequacy of attention to environment\nand conservation in Federal Energy Research, Development\nand Demonstration. The Act does not set a specific\ntime requirement for submitting this assessment. CEQ's\nreport of this assessment, which is required to be submitted\nto the President, the Congress and the ERDA Administrator,\nhas been in preparation for over a year and is ready for\npublication.\nJim Mitchell of OMB and Glenn Schleede of The Domestic\nCouncil feel that the report, in its criticism of ERDA's\nenergy conservation program, is contrary to Administration\npolicy and will be used by certain groups to support\nattacks upon the Administration.\nRuss Peterson argues that the report does not violate\nAdministration policy, and in any event, he has done all\nhe feels he can do to meet any substantive objections\nthat Schleede and Mitchell have put forth.\nThe content of the draft report is already widely known\nas Press reports have surfaced indicating the basic thrust\nand suggesting Administration pressure to squelch it.\nWe have three alternatives:\nA. Take no further action, thus allowing CEQ\nto publish the report without further revision.\nThis would eliminate any charge of \"high-handed\nWhite House pressure.\"\n-2-\nB. Direct Peterson to rewrite the report in\nsuch a way as to accomodate the objections.\nThis option may result in a confrontation\nwith Peterson that cannot be resolved, and\ncould create a public backlash, if he so\ndesired. His resignation is effective\nSeptember 30.\nC. Continue to negotiate the differences.\nThe same problem exists as in option B.\nPeterson feels he has done all he can do,\nand there may be no further \"give\" in his\nposition.\nRecommendation:\nI recommend that we allow the report to be\npublished without further revision. There is merit\nin the Mitchell--Schleede objections, but the down-side\nrisk of further efforts to rewrite the report is greater\nthan the possibility of the report being used effectively\nas a basis of attack on Administration policy.\nApprove\nA\nB\nC\nFORD LIBRARY &\nCLEARANCE SHEET\nDATE: 9/13/76\nJMC ACTION\nRequired by:\nSTAFF RESPONSIBILITY Humphreys\nSUBJECT:\nIn effort to resolve the CEQ/ERDA controversy\nover CEQ's assessment of the adequacy of attention\nto environment & conservation in Federal energy RD&D.\nRECEIVED FROM:\nDATE RECEIVED: 9/13/76\nSTAFF COMMENTS:\nQUERN MOORE RECOMMENDATION:\nAPPROVE\nThingines a quick\nREVIEW & COMMENT\npresentation but adequate\nDISCUSS\nAND\nCANNON ACTION:\nDATE:\nMaterial Has Been:\nSigned and forwarded\nFORD LIBRARY & 07VW39\nChanged and signed\nReturned per conversation\nNoted\nComment:\nJIM Inc CANNON\nmoded that returned\n9114 promutions\nCLEARANCE SHEET\n- Energyful\nDATE: 9/13/76\nJMC ACTION\nRequired by: Immediate\nSTAFF RESPONSIBILITY Schleede\nDeregulation of Naptha-Based Jet Fuel\nSUBJECT:\nRECEIVED FROM: Frank Zarb\nDATE RECEIVED: 9/11/76\nSTAFF COMMENTS:\nSchleede recommends concurrence with FEA proposal to\nsend up the deregulation proposal immediately. It must\ngo by 15th to become effective this year (assuming Congress\ncloses up on Oct 2nd). Congress has 15 legislative days\nto disapprove. The DOD arguments are reasonably good but\nQUERN MOORE RECOMMENDATION: should not override the commitment\nto deregulate.\nAPPROVE\ncan' D deregalate\nREVIEW & COMMENT\nJim agree, we then duck when which\nDISCUSS\nfor I 7 something (DaD). To recomend\nit comes affect we concerrence Acter\nCANNON ACTION:\nDATE: 91\nMaterial Has Been:\nSigned and forwarded\nChanged and signed\nFORD LIBRARY & GENALD\nReturned per conversation\nNoted\nJIM CANNON\nComment:\nSchleede\ncalled in\nConcurt with Due FEA\n9/13\nFEDERAL\nENERGY\nFEDERAL ENERGY ADMINISTRATION\nWASHINGTON, D.C. 20461\nADMINISTRA\nATION\nOFFICE OF THE ADMINISTRATOR\nMEMORANDUM FOR THE PRESIDENT\nFROM:\nFRANK G. ZARB\nGERALD FORD VERARY\nSUBJECT:\nDEREGULATION OF NAPHTHA-BASED JET FUEL\nF ACKGROUND\nPursuant to your direction when you signed the Energy Policy\nand Conservation Act (EPCA) last December, the Federal Energy\nAdministration (FEA) initiated the process of removing from\nprice and allocation controls as many petroleum products as\npossible. Since then Congress has approved conversion of\nprice and allocation controls to standby status for petroleum\nproducts accounting for 40 percent of the yield from a barrel\nof crude oil. These include residual fuel oils, middle\ndistillates (heating oils and diesel fuels), lubricants,\ngreases, and a number of intermediate products. The sequence\nof decontrol has been determined by the supply and demand\nconditions for products, the requirement to hold public hearings\nand the necessity to avoid having more than one decontrol\nproposal at a time before the Congress.\nBased on these considerations the next product FEA proposes\nto submit for exemption is naphtha-based jet fuel. This is\nmilitary grade jet fuel (JP-4), and accounts for approximately\n2 percent of total U.S. refinery production. The Defense\nDepartment consumes 98 percent of such fuel and small refiners\naccount for nearly 40 percent of its total production.\nThe Department of Defense has objected to submitting the naphtha\njet fuel (JP-4) proposal for exemption at this time for reasons\noutlined in this paper.\n- 2 -\nFEA has completed its study, held public hearings with full\nknowledge of DOD's opposition, and made the findings required\nby the Act: adequate supply exists and minimal price impacts\nwill be experienced in the event of decontrol. FEA proposes\nto transmit this action to Congress for consideration on\nSeptember 15, 1976. This is the last day that will allow the\nrequired time for congressional consideration prior to\nadjournment.\nThe remaining major fuels not yet decontrolled are kerosene-\nbased jet fuel, used primarily by commercial airlines, and\ngasoline. Studies of these fuels are underway and they are\nscheduled to be proposed for exemption early in the next\nsession of Congress, or later this year should Congress\nreconvene after the elections.\nFORD GERALD LIBRARY 9ERALD\nDOD POSITION\nThe proposed unilateral decontrol of military JP-4 jet fuel\nsuffers from the following disadvantages:\nA price disparity will be created between\ndecontrolled military jet fuel and commercial\njet fuel which will remain under price control.\nWhen, following the Arab boycott a similar\ndisparity occurred, there was a congressional\ninvestigation and both DOD and FEA were\nseverely criticized and accused of wasting\nmillions of dollars in excessive jet fuel costs.\nSmall refiners, the intended principal bene- *\na\nficiaries of JP-4 decontrol, cannot in fact\nobtain price benefits until their current\ncontracts expire. A few of those contracts\nwill expire by March 31, 1977, but most\n(61 percent of the contracts, accounting for\n60 percent of total supply) run through\nSeptember 30, 1977.\nOf six refiners holding JP-4 contracts with\nclauses that permit termination of renegotiation\nupon decontrol, only one is small. The others\nthat can gain immediate price relief from\ndecontrol are all large firms (Union, Getty,\nCities Service, Sun, and Continental). Another\n- 3 -\nlarge firm (Exxon) stands to gain early benefit\nfrom decontrol to a lesser degree. At least\npart of the contracts held by most large refiners\nwill expire by mid-FY 77.\nO There will be unprogrammed DOD FY 77 expenditures\nof $20 million.\nThe foregoing considerations indicate that the proposed\nexpedited unilateral decontrol of military JP-4 jet fuel will\nserve no useful purpose and is contrary to the best interests\nof the government. It will increase military fuel costs.\nIt will provide only limited price relief for a few small\nrefiners until FY 78. It will benefit large refiners, some\nimmediately and most by mid-FY 77. It will expose DOD to\nhigher jet fuel prices while continuing to protect commercial\nairlines. In summary it conveys an impression of government\ncollaboration with big oil - an impression which is not in the\ninterests of either government or industry.\nDOD recommends that the action to decontrol JP-4 at this time\nbe terminated. DOD's primary recommendation is that JP-4\nshould be decontrolled at the end of FY 77, when all current\ncontracts will have expired. An alternative proposal by DOD\nis that the recommendation for the decontrol of JP-4 be for-\nwarded to Congress in conjunction with either or both the\nproposals for the decontrol of kerosene jet fuel and motor\ngasoline.\nFEA POSITION\nFORD LIBRARY is\nO FEA's findings and views required bv EPCA and\nsupported unanimously in testimony at public\nhearings held on September 3, 1976, indicate\nadequate supplies and minimal price impacts\nresulting from decontrol. Specifically, FEA\nexpects price increases of no more than 1 cent\na gallon on the average, with a maximum upper\nlimit of 2 cents per gallon. Since DOD buys\n98 percent of all domestic JP-4 production,\nFEA believes that through its contractual\ncommitments DOD can maintain an appropriate\nprice relationship between JP-4 and commercial\njet fuel, which will remain under price controls.\n- 4 -\nThe extent to which large refiners benefit and\nsmall refiners do not will be a function of\nexisting contractual relationships between DOD\nand its suppliers. Thus, any budgetarv impact\nwill be minimized. In any event, refiners,\nboth large and small, testified unanimously at\nthe public hearings in favor of decontrol.\nDecontrol now will encourage investment in small\nand independent refineries, even though the\nbenefits for some refiners may be postponed\nuntil their existing contracts expire.\nFailing to decontrol JP-4 despite the findings\nand public testimony conveys an impression that\nthe government is willing to risk higher prices\nfor other consumers but is not willing itself to\nface the implications of decontrol. This will\nweaken our argument for decontrolling kerosene\njet fuel and gasoline.\nDeferring decontrol of JP-4 until the end of\nFY 77 would cause this to be the last of the\nproducts to be decontrolled. Thus, direct cost\nincreases would be borne by the airlines and\nmotorists from the decontrol of kerosene jet fuel\nand motor gasoline before the Federal government\naccepted the cost increase of decontrolling JP-4.\nCoupling the proposal for the decontrol of JP-4\nwith either or both motor gasoline or kerosene\njet fuel would increase the complexity and un-\ncertainty of obtaining congressional approval for\nthe decontrol of any of these products. FEA's\nstrategy of sequential decontrol has proven effec-\ntive to date, at least in part, by minimizing the\nconstituencies opposed to any one action.\n'O DOD's recommendation to terminate or delay the\nJP-4 decontrol action at this time would create\nuncertainty as to the Administration's commitment\nto decontrol and minimize governmental interference\nin private industry.\nGERALD FORD LIBRARY\n- 5 -\nAGENCY COORDINATION\nPRESIDENTIAL DECISION\nSend decontrol proposal as scheduled.\nDo not send decontrol proposal at this time.\nFORD :- LIBRARY 774839\nfile\nTHE WHITE HOUSE\nEnergy\nWASHINGTON\nSeptember 13, 1976\nMEMORANDUM FOR:\nGLEN SCHLEEDE\nTHRU:\nMAX FRIEDERSDORF m.b\nFROM:\nBOB WOLTHUIS RKW\nSUBJECT:\nSyn Fuels Legislation\nThe House Rules Committee is scheduled to take up the\nSyn Fuel bill on Wednesday. Our assessment is that it\nwill be reported and then go to the floor on Thursday\nand Friday. To prepare for this debate it would be most\nhelpful to have a new Presidential letter strongly endorsing\nthe legislation. It should be addressed to Chairman Teague\nand outline the President's support.\nIf possible we would like to have this letter by close of\nbusiness Wednesday evening.\nFORD i LUBRARY QERALD\nThe and\nFYI\nTHE WHITE HOUSE\nWASHINGTON\nEnergy\nSynthetic Fuels\nRECOMMENDED TELEPHONE CALL\nTO:\nThe Speaker and Representative Dick Bolling (D-MO)\nDATE:\nBefore Wednesday, September 15, 1976\nRECOMMENDED\nBY:\nMax L. Friedersdorf\nmy\nPURPOSE:\nTo urge the Speaker and Representative Bolling to\nsupport a rule for H.R. 12112, the Synthetic Fuels bill.\nBACKGROUND:\nThe House Rules Committee postponed action yesterday\nuntil next Wednesday on the Synthetic Fuels bill.\nChairman Olin \"Tiger\" Teague has requested the President\ncall the Speaker and Representative Bolling to urge\ntheir support for a rule.\nOur vote count on the Rules Committee yesterday showed:\nYES\nNO\nUNDECIDED\nOUT OF TOWN\nDelaney\nMadden\nBolling\nSisk\nYoung (Tex)\nYoung (GA) Long (LA)\nMatsunaga\nPepper\nMoakley\nMurphy\nQuillen\nAnderson\nLatta\nLott\nClawson\nSUGGESTED TALKING POINTS:\nSee TAB A\nDATE SUBMITTED: September 9, 1976\nACTION:\nFORD LIBRARY & GERALD\n1.\nAs you know, the Rules Committee did not complete\naction yesterday on the Synthetic Fuels bill,\nH.R. 12112. We need House passage as soon as\npossible of the compromise bill that Tiger Teague\nhas put forward on behalf of his committee, Ways\nand Means, and Banking and Currency.\n2. We must develop the capability to tap our vast\nresources of coal and oil shale in a way that\nis economic and environmentally acceptable. We\nneed to have a synthetic fuels industry in place\nin the early 1990's to fulfill a significant part\nof our energy needs:\n- In 1972, we were importing 29% of our oil.\nToday we are importing over 40%.\n- Domestic production of oil and natural gas\nare continuing to decline.\n- We will still need a major contribution from\nsynthetic fuels even with (a) increased energy\nconservation, (b) deregulation and decontrol\nof oil and natural gas, and (c) increased use\nof nuclear energy.\n- Newer energy sources such as the breeder, fusion,\nsolar and geothermal cannot possibly make a major\ncontribution in time.\n3. The action that is needed now is the commercial scale\ndemonstration of synthetic fuels technology.\nIndustry will not proceed on its own because of the\nrisks, high costs, and regulatory uncertainties.\nLoan guarantees will provide the limited sharing\nof risks needed by industry to proceed.\n4. More delay by the Congress will mean greater reliance\non imports in the 1990's, greater vulnerability to\ndisruption from any future embargo, and increased\nout flow of dollars and jobs.\nFORD LIBRARY & GERALD"
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