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Energy (8)
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James M. Cannon Files (Ford Administration)
James Cannon's Issues Files
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U.S. Congress. (1789 - )
Federal Energy Administration. (06/27/1974 - 10/01/1977)
Energy Research and Development Administration. (01/19/1975 - 10/01/1977)
Presidential messages
Nuclear energy
Energy policy
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The original documents are located in Box 13, folder "Energy (8)" of the James M. Cannon
Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
energy
THE WHITE HOUSE
WASHINGTON
ACTION
December 13, 1976
File
MEMORANDUM FOR:
JIM CANNON
FROM:
GLERN Glann SCHLEEDE
Every
SUBJECT:
ENERGY WHITE PAPER, TESTIMONY, AND
MESSAGE
This memorandum is to review the matter of Administration
public statements on energy, in light of the plans which
Secretary Richardson and Frank Zarb described to us last
Thursday. Briefly, in light of their plans, you may want
to:
- Review the situation with Jim Lynn.
-- Inform the President in an information memo.
-- Re-think the desirability and/or content of a Presidential
energy statement.
ZARB/RICHARDSON PLANS
-- At the meeting on Thursday, Jim Mitchell and I were
informed that:
Richardson and Zarb are scheduled to testify before
John Dingell on an overview of energy policy.
Zarb intends to have ready to release to the committee
and the public, a lengthy "White Paper" on energy.
Richardson and Zarb plan on having a press conference
on the White Paper.
--- We were given an early draft of Richardson's and Zarb's
testimony and the White Paper.
FORD LIBRARY & 93RA70
Digitized from Box 13 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
-2-
COMMENTS
----- Copies of the testimony are attached at TAB A and TAB B.
Briefly, the two statements give a cursory summary of
the energy situation and suggest some new areas for
action.
- Taken together, the two statements contain all the
points that Frank Zarb had identified for a
Presidential statement when we met in your office on
December 3.
-- The draft White Paper needs a lot of work to make it
accurate. It is well over 100 pages in length, single-
spaced. It is clearly a view of the energy world
from the FEA vantage point.
-- We first received the conclusions that FEA plans to
include in the White Paper late Saturday. (Copy
attached at TAB C.) These include a number of
statements that are not now a part of Administration
policy.
-- FEA wants comments on the whole package by 3:00 PM
today. I will talk with Jim Mitchell before responding.
ALTERNATIVES
Alt. #1. Continue work on an energy statement. Largely
ignore the Richardson/Zarb exercise except where
there are major errors or it is clearly at
variance with Administration policy (e.g.,
gasoline tax). Keep as much distance as
possible between their statements and those
of the President.
Alt. #2. Continue working on the energy message and try
to turn the White Paper and the testimony into
Administration documents. This will require
considerable work that may not be possible in the
short time that Frank Zarb has allowed. If this
is attempted, others in the Administration
(e.g., Alan Greenspan) should be thoroughly
involved. Time that OMB staff and I spend on
the White Paper will mean less time available
to work on a Presidential message.
GERALD R. LIBRAST FORD
-3-
Alt. #3. Drop the idea of an energy message except for
the transmittal of the reorganization
recommendations. Work to clean up the
White Paper and the testimony.
NOTE:
I just received a call from FEA indicating
that they plan to begin final typing on the
White Paper this afternoon.
Attachments
FORD LIBRARY &
TAB A
DRAFT
RICHARDSON TESTIMONY
Mr. Chairman, Members of the Subcommittee:
It is a pleasure to be here today to discuss with
you one of the most critical issues facing the
Nation today --- our energy situation and the choices
available to us for improving it.
Three years ago, at this time, the United States
was in the midst of coping with a major national
crisis -- the Arab oil embargo. This six month
interruption of our oil imports cost the U. S.
economy $10 to $20 billion dollars in lost GNP and
helped trigger a recession that we have only recently
begun to turn around. As a result of quick and
decisive measures taken by the government, private
industry, and the general public, we were able to
weather the direct effects of the embargo, but not
without major inconveniences and adverse impacts on
employment. The indirect effects of that event three
years ago are still very much with us today in the
form of higher costs of fuel, and related goods
and services.
FORD LIBRARY & CERALO
But however unpleasant it may be to recall these
facts of the recent past, we must not forget the
lessons we learned and must address the possibility
of a future embargo. I am afraid that as a society,
we have not yet addressed adequately the basic underlying
issues which have created our energy problem. It
is clear to me that we must, as a Nation, resolve
these critical issues if we hope to stem our dependence
on insecure sources of fuel.
I was not directly involved in the early stages of
energy policy planning which began as a response to
the embargo. I do not presume to be as knowledgeable
about the details of the problem as perhaps many of you
are. But through my long and varied experience in the
Federal service, I have come to realize the enormous
influence energy has on our economy, on our industrial
capability and on our individual lifestyles -- it
is clearly the life-blood of this Nation.
Increasingly, this Nation and the community of
developing world nations depend upon energy, particularly
crude oil and the vast range of products refined and
-3-
manufactured from it, for the basic functioning
and growth of our economies. Energy brings the
world closer together through advanced transportation
and communication networks; it builds our homes,
schools and factories; it can improve the
health and nutrition of people the world over;
it commands our defense systems; and most importantly,
it brings the prospect of a higher standard of
living to all of us. Petroleum and its by-products
have changed forever the products we utilize and
consume in every facet of our lives. It is not idle
chatter or narrow concerns that has raised the level
of the energy debate - we must ensure that this Nation
has adequate, secure and reasonably priced energy supplies
available, not just within the next ten years, but as
a long-term commitment to enhance the prospect for
continued peace and worldwide economic and social development.
We have made a start toward this goal -- a good start.
It is unfortunate that it took an embargo to make
us realize the seriousness of the energy situation.
Nevertheless, the embargo taught us a lesson. As a
result, we have taken great strides forward in defining
the problem more accurately, in analyzing the prospects
for and the roadblocks to solving it, in establishing
a framework for debate, in assessing our choices rationally,
and most importantly, in taking the first set of actions
-4-
to solve this dilemma.
I believe the Administration and the Congress are to
be commended on the high degree of emphasis which
has been afforded energy over the past two years.
At times, the debate became loud and forceful; and
at times, the direction we were moving in was unclear.
But, on reflection, the debate has been beneficial.
We have enacted several key pieces of legislation that
will have major impacts on conservation and preparing
us for the effects of another embargo. Less progress
has been made, however, in stimulating domestic resource
development and resolving key environmental issues.
Frank Zarb will discuss in more detail the progress
we've made and the specific issues left unresolved
to date.
I believe it is paramount for the government to agree
upon a set of clear objectives and principles from
which we can fashion and implement a comprehensive
domestic energy program. While I believe the current
Administration has tried to do this, I am concerned
that the Congress, as a body, has yet to endorse
an energy goal and to enact the legislation necessary
to achieve this goal in a coordinated, comprehensive
fashion.
-5-
It is imperative to remain aware of the fact that
the United States cannot and should not attempt
to achieve "energy independence" in an international
?
vacuum or attempt to reach a goal of zero imports.
This is an interdependent world. We will need some
energy imports in the years ahead. Just as the
export of food and capital goods is a necessity
to our balance of trade, importing goods, including
petroleum, from other nations "is good for business. "
What is not good for business, nor for national security,
however, is an over-reliance on a few countries for
a product that literally fuels our economy.
The linking of economies throughout the world through
trade has reinforced this mutual interdependence.
Thus, the impact of petroleum supplies and prices
on international economic stability within the next
few years is of the greatest concern to industrialized
and developing nations alike.
FORD LIBRARY &
-6-
With this in mind, we have successfully established
the International Energy Agency (IEA), providing
a welcome and effective vehicle for energy cooperation
among its nineteen member countries.
We have negotiated and placed in operational
readiness an integrated emergency program in the
IEA to enhance our ability to withstand the economic
impact of a future embargo on consuming nations and
we have successfully tested a program for managing
the international allocation of oil during supply
emergencies.
We have fostered a new cooperative dialogue between
oil producers and consumers. It is through dialogues
of this nature that we will form the basis for a
long term solution of our respective problems. We
must not take a "head in the sand" approach or
dismiss any reasonable avenues for cooperation in
this area.
Over time, consumer nation cooperation in con-
junction with a strong U. S. energy program can
eliminate our vulnerability to and dependence upon
OPEC oil.
We cannot relax and pat ourselves on the back for
the progress we've made domestically and internationally
in addressing our energy situation, however, because
we still have a long way to go. All of the programs
enacted into law to date, when fully operational
and without any other adverse developments, will only
serve to keep oil imports relatively constant
through 1985. That means that while we will have
reduced our rate of energy growth, we will have
done little to spur increased domestic resource
development. Basic commitments and painful decisions
in this area must be made by the 95th Congress.
Our situation today is, frankly, worse than it was
three years ago. The share of U. S. oil imports
from Arab countries is still increasing; from about
20 percent before the embargo to about 40 percent
today. And the Organization of Petroleum Exporting
Countries now provides 82 percent of our oil import
needs -- compared with 70 percent just prior to the
embargo. This trend will continue so long as these
nations have the capacity to meet growing world
petroleum demand.
-8-
This year's oil import levels are double those of
1970. This represents 43 percent of our daily
petroleum consumption -- at an annual cost of
almost 35 billion dollars.
We must not, therefore, be lulled into complacency.
The programs enacted into law to date are a start,
but tangible results will await effective implementation.
Legislation to increase the production and utilization
of our own resources, even if enacted today, necessitates
even longer lead times for implementation than our
conservation and emergency measures. For example,
the new facility lead time for nuclear electric plants
is 8 to 9 years; coal and oil-fired electric plants,
5 to 7 years; and even production from new onshore oil
fields takes from 1 to 3 years. Consequently, even
if the new Congress takes the strong actions necessary
to legislate policies and programs to increase domestic
energy supply, the Nation will not see results for
several years.
Even more disturbing is the fact that our ability
to sustain an energy independence posture in the
post-1985 decade may be doubtful. Current projections
show the U. S. oil and gas reserve base declining
in this period, and a transition will be needed to
a greater reliance on coal, nuclear power and
Not
anlynl
renewable resources, such as solar energy.
The issues I have raised today are vital to our
future. Some have argued that reducing imports
is a desirable goal; others contend that it may
not be worth the costs and sacrifices it imposes.
The energy goals cannot be set independently of
economic and environmental goals. I believe it
is time for a re-assessment in all these areas and
I suggest that consideration be given to national or
regional energy forums to discuss and debate the
issues. I also urge the Congress to demonstrate its
commitment to the goal, perhaps by enacting a Joint
Resolution on the energy objectives for this country.
To assure that we can meet the threat of another
supply interruption, I believe that a government-wide
embargo management strategy should be prepared. Such
a strategy would fully integrate energy management
options with monetary, fiscal and other policies
that would be affected by a supply interruption
-10-
or steep price increase.
In addition, among the most effective measures to
reduce demand during a supply interruption would be
the imposition of emergency taxes or fees on
petroleum products. Such authority is not vested
with the President now. I recommend that the
Congress consider an amendment to the Energy
Conservation and Production Act allowing for a less
complex emergency system by removing prohibitions
on taxes, fees, tariffs, and other price-related
mechanisms for emergency use.
I have discussed so far, and Frank Zarb will do so
in greater detail, the many actions that must be
taken by the government to provide the guidance
and leadership necessary to reduce our vulnerability.
These, in themselves, represent an aggressive, committed
and far-reaching endeavor. The final ingredient,
however, is the process for establishing and implementing
a national energy program.
In my position as Chairman of the President's Energy
Resources Council, I have witnessed both organized
and imaginative management of energy policy and
programs, as well as inefficiencies and overlapping
-11-
responsibilities in the handling of energy issues
by the Executive and Legislative Branches of the
government.
I have been very pleased with the effectiveness
of the ERC in coordinating energy policy and programs
for President Ford, but the ERC cannot counterbalance
the inefficiencies inherent in the present Federal
energy organizational structure. As you know, the
President, early this year, directed the ERC to
undertake a thorough and comprehensive review of
the Federal energy organizational structure and report
to him on proposed changes. This review is about to
be completed.
There are a. wide variety of alternative approaches
that can be considered including a Department of
Energy and Natural Resources, a Department of
Energy, a smaller Energy Agency composed solely
of FEA and ERDA, and retaining the present system.
Each of these, of course, approaches the organization,
direction, and span of control differently. I urge
both the new Administration and the Congress to review
this plan and the President's recommendations very
carefully and to take appropriate action.
-12-
Unfortunately, the Congress has also suffered
from a similar dispersion of authorities in attempting
to address the Nation's energy problems. There
are over 100 Committees and Subcommittees of the
Congress involved in energy-related activities.
I would urge that while you consider reorganization
of the Executive Branch, you also consider the
Congressional structure and assess alternatives
seriously in this area.
I would like now to turn the program over to
Frank Zarb for a more detailed assessment of
energy policy issues. Their importance cannot
be diminished, their timely resolution cannot be
overstressed. As you yourself have stated, Mr. Chairman:
The way in which these issues are
resolved directly or by default, will
have powerful and permanent effects on
national priorities and social goals,
and upon the choices which we leave to
our descendants. "
I hope our legacy will be that we made a good start
and built the foundation for a permanent and
comprehensive national energy policy.
TAB B
DRAFT
ZARB TESTIMONY
Chairman Dingell and Members of this Sub-Committee:
I am particularly pleased to appear here today to discuss
the state of our nation's energy policy.
As I reflect upon the past few years, I am proud of what
has been achieved, although weary from the effort and
disappointed in some areas. I welcome this opportunity
to summarize my views on the big issues that remain.
Many people would find it hard to understand my statement
that I am proud of our achievements. They hear talk
of higher prices, higher imports, and no energy policy.
Yet, while it is true that our dependence is
worse today than before the embargo, we have enacted
significant legislation that will be the foundation
of an energy policy in years to come.
Current Energy Situation
Let me briefly summarize the current situation:
- Oil production continues to decline, but at
a slower rate than previously and there are
positive signs. Drilling activity is at a 14-
year high and Alaskan production should begin
to flow within a year.
-2-
- While the production trends are encouraging,
demand has increased this year along with the
economic recovery. Thus, petroleum imports
will be higher than ever before averaging
about seven million barrels per day this year.
We will spend about $34 billion for foreign oil
in 1976.
- Natural gas production is also declining and
shortages are growing in certain parts of the
country. If the cold weather we are experiencing
now continues throughout the winter, there could
be adverse economic impacts in some areas.
- Coal production is increasing and will approach
670 million tons in 1976--a record year.
- Nuclear power expansion has slowed as a result
of public concerns and private sector
difficulties in building new plants, but we
now have over 60 plants operational.
- There are encouraging signs for solar energy
and some emerging technologies, but there is
a long way to go before these sources
contribute significantly to our energy supply.
-3-
Energy Outlook
It is clear that the United States has the capability
to make itself "embargo-proof" in the future. To keep
our dependence upon foreign oil manageable, we will
need an aggressive program to increase domestic supply,
reduce the rate of growth of demand, provide standby
authorities for use in the event of another embargo,
and develop new technologies. In particular, we will
have to:
Increase coal production from current
levels of about 670 million tons annually
to over one billion tons per year by the
mid-1980's.
Expand oil production in frontier areas of
Alaska and the Outer Continental Shelf (OCS),
as well as encourage enhanced recovery from
existing fields to replace declining supply.
Increase the share of nuclear energy in the
generation of electric power from about 9
percent to over 20 percent in the next ten
years.
Develop supplemental sources of oil and gas
such as coal gasification and liquefaction
and shale oil to meet shortages of liquid and
gaseious fuels.
-4-
Expand dramatically the use of renewable
resources, such as solar energy.
Build a strategic petroleum reserve of at least
500 million barrels.
Reduce the rate of growth of energy demand to
about 2.5 percent annually.
Legislative Scorecard
This is a tall order and as Secretary Richardson has pointed
out, we have made substantial progress in conservation
and standby measures, but much less in providing for new
supply. There are many reasons why our progress has come
in these areas and not in supply incentives:
- Conservation has been a popular issue, because it
is generally cost-effective, saves money, is relatively
easy to effectuate, and protects the environment.
- Standby measures make common sense if the nation
is to prepare itself for another cutoff of supply.
- Most resource development issues involve large-
scale change for local communities, often with
environmental effects, and public distrust of
the energy industry and government is high.
- Among the key measures to incentivize new
production are those which involve raising
the price of oil or natural gas. These price
questions arose at a bad time--during a recession
and soon after large increases in the world price
had occurred--and, as a result, were not received
favorably.
-5-
As I indicated earlier, I do believe that progress has
been made. Seven of the thirteen original titles of
the President's Energy Independence Act are now law
in largely the same form as originally proposed. The
following major bills have been enacted:
- Energy Reorganization Act
- Energy Policy and Conservation Act (EPCA)
- Naval Petroleum Reserves Production Act
- Energy Conservation and Production Act (ECPA)
- Alaskan Natural Gas Transportation Act
As a result of these laws, the Federal Government now
has the authority and has begun to:
In Domestic Supply
- Exempt the first sale of domestic stripper well
crude oil from price controls.
- Implement the 40 month crude oil decontrol plan,
under which domestic crude prices are allowed to
escalate by no more than 10 percent annually to
provide production incentives.
- Provide added pricing flexibility to tertiary
FORD LIBRARY &
recovery and California heavy gravity crude.
- Develop at the maximum efficient rate the three
Naval Petroleum Reserves in the Lower-48 States;
continue exploration of NPR-4 in Alaska, leading
to its eventual development.
-6-
- Implement an expedited selection process
for a transportation route to deliver Alaskan
natural gas to the lower-48 States.
- Dismantle as much of the current crude product
regulatory system as feasible.
In Conservation
- Direct a $2 billion obligation guarantee
program for conservation investments by
industry, small business, and non-profit
institutions.
- Provide conservation grants to States to
assist in the development and implementation
of energy conservation programs.
- Implement appliance energy efficiency labeling.
- Set mandatory automobile efficiency standards
for 1980 and 1985.
- Establish industrial energy conservation
targets for the ten leading energy consuming
industries, and mandating reporting of progress.
- Develop thermal efficiency standards for
all new residential and commercial buildings,
subject to Congressional approval of
sanctions.
- Implement a three year, $200 million
weatherization grant program for the
-7-
insulation of homes of low-income,
elderly, and handicapped persons.
- Establish a demonstration program to test
various mechanisms for encouraging energy
conservation improvements or use of renewable
resources, such as solar heating or cooling,
in existing residential buildings.
- Provide grants to States for testing
innovative utility rate structure designs
to achieve a higher degree of conservation.
Standby
- Build a strategic petroleum reserve
of at least 150 million barrels of
petroleum by 1978 and up to a billion
barrels by 1982.
- Establish standby measures to deal
with severe energy emergencies that
may arise in the future.
- Develop cooperative contingency and
planning programs with the International
Energy Agency (IEA) .
This list is long, because the accomplishments are varied.
Yet we should not be lulled into complacency. Much more
-8-
remains to be done if we hope to maintain our international
leadership role and domestic security. I believe the new
Administration and Congress must address the issues squarely
and move forward quickly.
I have today submitted to the Sub-Committee a detailed
paper describing the major energy achievements, failures,
and issues facing this country. I recommend that you
review its contents thoroughly, for it is an attempt to
present the issues clearly and objectively.
In the remaining time today, I would like to address
some of the key areas where progress is possible.
Natural Gas
Federal regulatory policy towards natural gas is one
of the most crucial issues facing the nation today. Natural
gas is consumed by over 40 million residences, over 3 million
commercial establishments, and almost 200,000 industrial
users. If new natural gas prices remain regulated, market
distortions will persist and shortages in the interstate
market will continue to grow. Federal price regulation
has not been in the best interest of the nation and I urge
the Congress to deregulate new. gas prices.
-9-
With curtailments still on the rise, I also suggest en-
actment of the emergency legislation proposed twice by
the Administration to alleviate short-term problems.
Once the pricing and emergency legislation are enacted,
the Congress should address the entire regulatory structure
of the Federal Power Commission and its enabling legislation.
Crude Oil Regulation
The crude oil pricing debate occupied much of our time
during 1975 and again this year. The composite price
formula in the EPCA has proven difficult to administer
and changes should be considered. The new Administration
and the Congress should take a careful look at phasing
out price controls gradually but without use of composite
prices.
It is also important to remove any Federal regulations
that prove unnecessary. FEA and the Congress have re-
cognized that product decontrol is sensible with respect
to residual fuel oil, middle distillates, and other fuels;
regulations on gasoline and other remaining controlled
products should be reviewed carefully and similarly re-
moved if criteria in the law are satisfied.
-10-
Energy Taxes
The debate over energy taxes last year attracted considerable
attention. The Administration proposed an excise tax on
domestic petroleum along with increased import fees, while
Congress considered a gasoline tax and other measures.
After starting with gasoline tax proposals of over 30
cents per gallong, the House failed to pass even a 3 cent
gasoline tax. This experience with energy taxes points
out the difficulty in raising energy prices to effect
demand reductions, but I believe that the desirability of
such taxes (either in the form of Btu taxes or on specific
fuels, such as gasoline or natural gas) should be explored
again by the Congress.
Conservation
The achievements in energy conservation have resulted in
a number of exciting new programs that must now be im-
plemented. The funding, staffing, design, and operation
of these programs will be critical to our future. Most
of the tough regulatory approaches to conservation have
been enacted or were rejected for good reasons. Nevertheless,
our work is not completed and there are still some measures
to be considered.
Once, again, I urge the Congress to enact a tax credit
for residential insulation. This bill, which can save
over 100,000 barrels per day, has twice been deleted in
Conference Committees. I also remain convinced that the
thermal efficiency standards proposed by the Administration
-11-
should have been passed with tougher sanctions than agreed
to by the Congress. The buildings sector provides great
opportunities for savings, which should not be lost because
of interest group pressure.
Further I recommend that the ERC establish a task force on
energy conservation to deal with implementation of these
existing programs and preparation of a thorough analytical
report to Congress as required by the ECPA.
While there are other conservation regulations in the buildings,
industry, and transportation sectors that should be considered,
most would have little effect. The key measure to induce
conservation, especially in the near-term, would be the
pricing of energy at its market value. Only when artificial
controls are removed from energy prices can the marketplace
receive the proper signals.
Energy Development
Irrespective of the progress we make in reducing the rate
of growth of energy demand, the Nation's use of energy
will continue to expand. We will need large-scale increases
in coal production, nuclear power, and use of renewable
resources, and will have to reverse the declines in domestic
oil and gas production. We have made mistakes, but hope-
fully have learned from our errors.
The role of State and local governments and interest groups
cannot be underestimated. The Federal government must work
in harmony with these entities before, not after, final
resource development decisions are made. National interests
-12-
do not always coincide with local interests, but wide-
spread Federal overrides are doomed to failure. I propose
that the new Administration assess more thoroughly ways to
involve local interests in Federal decision-making.
The balance between energy, economic, and environmental
objectives is delicate, but must be maintained. Careful
planning can avoid most of the impacts of energy projects
sometimes feared by local residents. The Congress should
enact legislation to provide impact assistance funds for
inland areas (such as potential coal producing states),
just as it has done for coastal states.
In addition, the uncertainties facing investors must be
overcome. These include policy uncertainties with respect
to environmental standards (such as Clean Air Act and surface
mining) and price controls, as well as geologic uncertainties
(such as frontier OCS reserves and leasing schedules). The
Congress has an obligation to reduce these uncertainties
and provide a stable investment climate.
Utilities
One of the key resource development questions relates to
the building of new powerplants. In the last few years,
utilities experienced a dramatic change in their profitability,
financing capacilities, growth estimates, and public acceptance.
The United States needs new coal-fired and nuclear capacity
if it is to avoid power shortages or greater reliance on
oil- or gas-fired power. Assistance to utilities, especially
in the face of higher rates already in effect, has not been
-13-
popular, and most of the Administration's initiatives have
not been successful.
I urge Congress to review the utility situation carefully
and to consider legislation to improve the siting process
(without encumbering it with added Federal bureaucracy);
to consider new approaches (such as S. 1777) to the coal
conversion process; but to weigh the results of FEA's
utility rate structure studies before pressing ahead with
new legislation.
Nuclear Energy
A key part of the utility problem is the growth of nuclear
energy. The United States will need to increase nuclear
power's role in its economy or see oil imports grow even
more in the future. Many nuclear plants have been cancelled
or delayed because of financing, siting, or load growth
difficulties. There has been greater public concern over
the safety of such plants, yet referenda in seven States
this year and a recent public opinion survey showed consider-
able public support for nuclear power.
This Administration has proposed a comprehensive and innovative
set of programs to expand nuclear-development with careful
consideration of safety. Bills to improve the licensing
process, transfer enrichment facilities to the private
sector, and others failed to receive positive Congressional
action. The President increased safety and waste management
budgets dramatically, and proposed, in October, a detailed
policy on proliferation and safeguards. The measures he
-14-
announced could go a long way to establishing a safe and
reliable international nuclear program and should be acted
upon favorably by the new Administration and Congress.
Financing
While I would hope and expect that most new energy projects
could be developed and financed privately, there may be
a need for Federal financial assistance in some areas. The
Congress has already enacted several programs to provide
financial support for coal, geothermal power, conservation,
and coastal zone development. Nevertheless, the establishment
of a viable commercialization program for synthetic fuels,
the need for impact assistance to cope with inland resource
development, and other financial assistance measures should
be re-assessed to assure that first and second generation
plants are built. More Federal money should not be the
answer to all problems, but could be important in some
selected cases.
R&D Priorities
GERALD FORD LIBRARY
I am not an expert in research and development problems
and thus cannot speak authoritatively on various technologies.
I can, however, talk about priorities. It is my belief
that the R&D funds authorized readily today by government
will someday begin to wane. We should therefore set our
energy R&D priorities carefully. We must look first towards
those technologies with the greatest likelihood of being
significant contributors and economic in this century. We
must also be prepared for failure and have contingency plans
-15-
available in case some of our research efforts do not pay
off.
Conclusion
I would like to conclude by saying that I am optimistic
about America's future. I have lived with the difficulties
of developing and implementing controversial policies, and
have seen how easily the process can be frustrated. Yet,
the political system can work and has shown its resiliency
repeatedly. This country has the know-how, and, if it has
the will, can free itself from the economic and political
blackmail of a few countries. I intend to continue to be
a voice in seeing that we make that commitment.
Secretary Richardson and I would be happy to answer your
questions at this time.
TAB C
Glen
First diaft at
condutions sictions
RawLith Paper" replaces
Natural Gas
recommend atumis).
Need comments by
3AM Monday.
Come
Conclusions
- Natural gas pricing and regulation may be the most
crucial energy legislative issues facing the Congress.
If the decline in domestic gas production is not
reversed, shortages will grow and there will be
adverse economic and social impacts. To improve our
natural gas picture, several key actions are needed:
-- Congress, as a high priority, should enact
legislation to deregulate the price of new
natural gas either immediately or phased-in
/ change
over a few years.
-- Congress should adopt the emergency legislation
proposed by this Administration to mitigate the
short-term curtailments problem.
--- The new Administration and the Congress should
review the issues and possible initiatives
associated with "conservation gas;" pricing
of supplemental gas; and siting of LNG import
projects.
- The new Administration and the Congress should
expedite consideration of Alaskan natural gas
transportation systems.
Crude Oil
Conclusions
- There will continue to be serious issues associated
with the petroleum regulatory system. While resolution
of most of these issues should await completion of
the appropriate regulatory proceedings, it is clear
that there is a need to remove any regulations that
are not necessary (such as controls over gasoline).
Further, the composite pricing system for crude oil
has proved to be complex to administer; thus, it is
recommended that Congress adopt a simpler system that
would phase-out crude price controls gradually, but
without use of composite prices.
Energy Taxes
inst resnting
Conclusions
- The debate over energy taxes should be reopened.
Taxes can be an effective way to cut consumption
or modify investment behavior. n Ideally, the best
way to provide the correct market signals would be
to remove artificial price controls. However, since
controls are now in effect, the Congress should
review the need for broad (e.g., BTU) or specific
chase
(e.g., gasoline or natural gas) energy taxes. In
addition, investment incentives for business
(e.g., tax credit for purchase of coal-fired
equipment) or homeowners (e.g., insulation tax
credit) should be adopted.
Fuels Policy
Conclusions
- On the surface, it may seem attractive to manipulate
the use of various fuels in order to derive the
greatest end-use efficiencies and to minimize environ-
mental impacts. Further, given the current regulatory
environment, the appropriate market signals are not
being communicated. The Federal Government should
continue to pursue opportunities to reduce the use of
oil and gas in power plants and major industrial
7
facilities in order to expand the use of coal. A
concept like that in S.1777 (with modifications)
should be adopted.
-- However, the Federal Government must also be
careful to avoid massive intervention in the
energy marketplace. The regulatory structure
that would arise from a comprehensive fuels
management policy would be virtually unadminis-
terable costly, and probably inequitable. Indeed,
a much more desirable approach would be to remove
price controls and allow the marketplace to
allocate fuels.
Energy Conservation
(a.g. individual Munket andical Individe synic; with inde becime
Conclusions
- The United States' energy policy must include both
a strong conservation effort and an aggressive
program to develop domestic supply. The legislative
achievements in energy conservation over the past
two years will result in significant reductions in
demand and improved efficiencies. Yet, with the
exception of conservation induced by higher prices
and some limited regulatory measures, there is
little that can be done to reduce demand in the next
few years. The benefits of all conservation measures
should be weighed against the cost of implication.
and regulatory burdens they impose. The following
actions should occur:
&
-- Congress should enact the Administration's
proposed tax credit for insulation.
-- The Congress and Executive Branch should monitor
closely the implementation of existing programs,
especially the thermal efficiency standards for
new buildings. Tough sanctions are needed to
make the buildings program work.
-- The ERC should form a task force on energy
Tell
conservation to deal with implementation of
existing programs and to prepare a thorough
analytical report to Congress as required by
the ECPA.
Energy Development
Conclusions
- The United States will have to continue expansion
of domestic energy development in order to preserve
its economic and national security. But such
development will not take place unless the Federal
Government takes the appropriate steps to ensure
that environmental standards are met, and that State
bid?
and local interest groups are involved in the
decision-making process. Further, the following
actions are proposed:
-- The Congress should enact legislation to provide
/chr
impact assistance for inland Federal energy
resource development.
7
-- The Congress should review the entire regulatory
process involved in siting new energy facilities
and propose methods to improve the process where
feasible.
-- The Congress should attempt to reduce uncertainty
concerning the ground-rules for environmental
standards and development on Federal lands.
Electric Utility Regulatory Reform
new new? greater appeal? whit?
Conclusions
- Electricity consumption is expected to continue
to grow at about twice the rate of energy demand.
If coal and nuclear electric generation capacity
is not started now, it is possible that power
shortages would result after 1980 and utilities
would turn to oil and gas as a source of power.
To reduce the possibility of such a result, the
following actions are needed:
how!
--- The Congress should broaden, through amendment
and extension, FEA's existing coal conversion
authorities.
The Congress should consider additional
investment tax credits for utilities to encourage
greater use of coal and nuclear power in the
generation of electricity.
However
any Congressional action on electric
utility rate reform should await completion
of the FEA report to Congress mandated under
the ECPA.
Nuclear Energy
?
Conclusions
- The use of nuclear power must continue to expand.
Nuclear energy has demonstrated that it is safe,
economic, and has little environmental impact.
Yet public concern over its safety and reliability
exists and must be considered. Major decisions will
have to be made regarding the role of nuclear power
and the extent and nature of reprocessing, enrichment,
waste disposal, proliferation, and funding of the
breeder reactor. In addition, the Federal agencies
and the Congress should adopt the measures recommended
by the President in October to evaluate reprocessing
and reduce proliferation.
Energy Financing
Conclusions
- The energy industry will have to make substantial
capital investments in the next 10-15 years.
Some sectors, such as the oil industry, should
have sufficient capital as long as unfavorable
regulatory actions are not taken. Other sectors,
such as electric utilities and synthetic fuels,
may need some form of Federal financial assistance.
As a central element of our policy, maximum reliance
should be placed on private sector financing of energy
projects. Many of the barriers to private financing
are a result of government regulation. However,
Federal financial assistance may be needed for projects
which will contribute significantly to energy
independence, but would not be undertaken in a timely
fashion without such assistance.
-- The new Administration and the Congress should
7
review the entire financing issue, but should
assure that those first generation plants that
are needed, can be built.
R&D Priorities
Conclusions
- Since energy research and development funding cannot
continue to expand at its current rate, it will be
necessary to make difficult choices about priorities.
The Federal Government should support most heavily
those technologies that have the greatest likelihood
of being able to contribute significantly by the end of
?
the century and of being economic.
Remute
Energy Independence and Economic Interdependence
Conclusions
- Energy will remain a critical factor in world
economic and political affairs. The issues of
supply security; oil prices; consumer nation
cooperation; producer-consumer relations; long-run
transition from oil and gas to coal, nuclear,
and renewable resources; and the value of and
7
approach to energy independence should be reassessed
continually. The following are suggested courses
D
of action:
-- Continue producer-consumer dialogue;
Singlistic
-- Involve Congress in setting reduced dependency
objectives, perhaps through a Joint Resolution;
-- Encourage incremental oil and gas production
throughout the world and pursue creation of an
International Energy Institute; and
-- Initiate a national and regional debate on our
energy goals.
Multinational Oil Companies
Conclusions
geither
The multinational oil companies will remain an
important force in domestic and international
energy affairs. Rather than act hastily to break
up these firms, the Congress should consider
carefully the impacts of both verticle and
horizontal divestiture. Neither form of divestiture
should be supported unless it would increase
domestic production, improve the reliability of
supply, and reduce prices. With the nation foeing
a crucial energy period, this is not the time to
disrupt the existing system so dramatically.
However, there may be a need for some change in the
government/industry relationship and possible
changes should be explored.
I?
Light?
Standby Measures
Conclusions
- The United States must be prepared to deal with any
future interruption of oil supply. We have already
made considerable progress in legislating and
beginning implementation of a strategic petroleum
reserve. In addition to the SPR, we will need standby
allocation, demand restraints, and rationing measures.
It would be desirable to simplify standby plans
and Congress should consider amending the EPCA to
allow imposition of fees, tariffs, taxes, etc
,
during an emergency. Further, the Federal government
should prepare a government-wide embargo management
strategy, fully integrating energy management options
with monetary, fiscal, and other policies.
Federal Energy Organization
Conclusions
- There are very good reasons to consider reorganizing
the energy functions of the Federal government. In
both the Executive and Legislative Branches, there
is a need for consolidation to eliminate fragmented
responsibilities. The basic issues that need to be
addressed in an Executive Branch reorganization
include the degree of separation of natural resources
management and economic regulation from broad energy
conservation, research, development, and policy
functions. However, reorganization only makes the
process of government easier; it will not produce
more oil and should not be viewed as an answer to our
energy problem.
FORD in LIBRARY 079839
Energy
THE WHITE HOUSE
WASHINGTON
December 17, 1976
MEMORANDUM FOR:
JIM CANNON
FROM:
GLENN SCHLEEDE
SUBJECT:
Energy Organization
I recommend that you sign the attached
memorandum to the President that comments
on the Richardson-Lyun energy organization
options paper.
I believe the proposed memorandum from you
to the President is consistent with our
conversation earlier today.
FORD LIBRARY & 07VH39
THE WHITE HOUSE
WASHINGTON
THE
WHI
December 20 '76
WASH
Decemb
TO:
JIM CANNON
FROM:
RUSS ROURKE
MEMORANDUM
FOR
JACK
After checking with
Walter Mote, I have JIM CAN
learned that what he
actually meant was
Call
tn
the "Solar Study", which
had been hung up at
ERDA for awhile. the Domes
heard
of
the
"Silver
Hope this information
helps. Would you want to as
file handled verbally
Mote and get more de
be
12/21 AM
Energy
THE WHITE HOUSE
WASHINGTON
December 17, 1976
976 DEC 20 PM 4 22
MEMORANDUM FOR JACK MARSH
FROM:
SUBJECT:
Call from Walter Mote on "Silver Study"
JIM CANNON Jm
No one on the Domestic Council or EPB has ever
heard of the "Silver Study".
Would you want to ask Russ Rourke to telephone
Mote and get more details. For a number of
reasons it would be best if I did not telephone
Mote.
FORD LIBRARY i DERAID
R- cuel
Mote
for now into
Energy
THE WHITE HOUSE
WASHINGTON
December 29, 1976
MEMORANDUM FOR:
JACK MARSH
FROM:
ART QUERN HrD Bern
SUBJECT:
News Report Regarding ERDA Submission
for the State of the Union
This morning's Jack Anderson column reported on material
submitted by Bob Seamans regarding ERDA's accomplishments
for possible inclusion in the State of the Union message.
ERDA's material was requested, along with material from
all member agencies of the Domestic Council, as background
for developing a draft State of the Union to be conveyed
to Bob Hartmann. ERDA, as with every agency, attempted
to put the best possible light on its accomplishments
over the last two years.
We reviewed ERDA's submission, and indeed every submission,
most carefully. The draft SOTU which was conveyed to Bob
Hartmann reflected in our judgment the best and most
factually accurate presentation of the various agency
accomplishments.
With specific regard to ERDA's material, I believe that
the draft SOTU most effectively screens out any material
which might have raised a question.
FORD LIBRARY is GERALD
THE WHITE HOUSE
WASHINGTON
December 29
Chris:
This is the article.
Mr. Marsh would like to
dex a report to Vail
ASAP.
Thanks.
Donna
Washington Post
Wednesday, December 29, 1976
Jack Anderson and Les Whitten
Ford Gets Misleading Energy Data
---- - --
Some items in this folder were not digitized because it contains copyrighted
materials. Please contact the Gerald R. Ford Presidential Library for access to
these materials.
ACTION
IMMEDIATE
THE WHITE HOUSE
WASHINGTON
January 4, 1977
(yes Thank
MEMORANDUM TO:
JIM CANNON
FROM:
GEORGE W. HUMPHREYS
SUBJECT:
Russ Train's Meeting With
The President
The attached briefing paper is for your signature.
You will note I included a talking point and Russ'
letter on Oil Spill Task Force. You may want to
drop all that out.
The meeting is simply to say good-bye, I am told, and
Russ says he is not looking for a substantive conversation.
GERALO, FORD LIBRARY