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The original documents are located in Box 13, folder "Energy Independence Authority (4)"
of the James M. Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 13 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
MEMORANDUM
Jam Cannon
OFFICE OF THE VICE PRESIDENT
WASHINGTON
Fute
June 10, 1975
MEMORANDUM FOR:
THE VICE PRESIDENT
FROM:
DICK ALLISON Did
SUBJECT:
Review Group Ideas from
Today's Domestic Council
Meeting
Here are Review Group ideas which emerged from
today's Domestic Council meeting and from our
conversations in the car afterwards:
1. "Finite":
- To determine the extent to which our
natural resources really are finite;
- The probable conclusion will be that,
with three or four exceptions, there
are no effective limits to what our
resources can yield, given the application
of science and technology;
- This could be the subject of a major
speech by the President;
- Alan Greenspan, the Interior Department,
and John Quarles of EPA are all interested
and should be involved.
2. Quality of life and of the human environment:
- The interrelationship of energy, raw
materials, and industrial development.
3. The interrelationship of government and
free enterprise.
1015 BW 2 10
FORD i LIBRARY GERALD
-2-
4.
Overall transportation policy.
5.
New core industries:
- What will be the new industrial
sources of full employment (in
place of the automobile and housing
industries) :
*Energy
*Raw materials
*Transportation
*Urban development
*Food production
6. The role of planning in a free economy.
THE WHITE HOUSE
WASHINGTON
August 28, 1975
76
ERFCO
MEMO FOR
JIM CANNON
FROM:
MIKE DUVAL
I have doubts about this paper, but you
have every right to expect total candor
from me -- SO here it is.
In terms of quality, I'm a bit embarrassed.
I just got into this very complex subject
yesterday. I'm sending the memo to you
now because you're on deadline, but it
doesn't meet my standards.
THE WHITE HOUSE
WASHINGTON
August 28, 1975
MEMORANDUM FOR
JIM CANNON
FROM:
MIKE DUVAL
white
SUBJECT:
ENERGY FINANCING
I read a draft of the "Energy Resources Finance Corporation
Act of 1975". My personal recommendation to you is that the
President and Vice President not pursue the ERFCO idea any
further.
My conclusions can be summarized as follows:
There is no need for a Federal financing capability to
stimulate energy capital development at anywhere near
the level of $16 billion a year for seven years over
the level of capital investment which will occur anyway.
ERFCO will not significantly assist the Nation in achiev-
ing "energy independence" as defined by the President in
his State of the Union Address.
To the extent ERFCO doesn't stimulate additional invest-
ment then, philosophically, it must honestly be described
as socializing a major segment of the U.S. energy industry.
It is diametrically counter to the President's stated
energy and economic principles and there is no compelling
reason for this abrupt shift.
Viewed a year from now, the proposal contains far more
political negatives than pluses.
There is an alternative which will permit the President
and Vice President to achieve the basic political and
substantive benefits of ERFCO without all the problems.
The following is a brief discussion of the above conclusions.
I did not have an opportunity to sit in the meetings and discus-
sions of the ERFCO proposal, and thus my analysis may very well
be incomplete and perhaps some of the objections I raise have
already been answered. Also, I am very conscious of the fact
2
that a Duval should not be criticizing a Rockefeller financing
proposal but, nevertheless, I believe strongly that ERFCO is
fundamentally wrong economically and politically.
ERFCO. Stripped of all the rhetoric, ERFCO simply is a trans-
fer of a very significant portion of the decision-making power
over capital investment in energy-related projects from the
private sector to government. This is not unique. Already
the government controls anywhere from 25-50% of the approxi-
mately $200 billion in net funds currently raised in the U.S.
capital market. What is unique is that the decision-making
is vested, not in the President or Executive agencies or
the Congress, but rather, in a flexible board of directors.
Implicit in this proposal is the notion that the constraint
on achieving our energy objectives involves the investment
decision-making process, not other difficulties. I happen to
think this assumption is incorrect. If the constraint to
achieving energy independence were financial, then a finance-
oriented decision mechanism makes sense. If not, the market-
place and the President are in a better position to make these
judgments.
The following are some background facts which I think should be
kept in mind as the ERFCO proposal is evaluated:
The Nation can achieve independence as defined by the
President, by 1985, by taking the conservation and supply
steps outlined in the State of the Union Address. This
goal is still achievable (even without Congressional
acceptance of the President's total plan) if Congress
does not override the President's veto of the oil price
control law, if some reasonable compromises are worked
out on the energy/environment issues, and if OPEC coop-
erates by keeping the price up. The important thing
to note here is that capital needs for energy develop-
ment, even without ERFCO, are likely to be within the
historical band, i.e., 23% of total business fixed
investment.
One can argue that ERFCO will increase the percentage
of total capital investment that goes to energy develop-
ment. (This argument is probably fallacious because, of
the $16 billion a year which ERFCO would generate, only
a tiny fraction will probably be additive to what would
be spent by the private sector anyway.) The danger in
arguing that government should stimulate more energy
investment than would otherwise occur, obviously con-
cerns the danger of the government allocating credit.
FORD & LIBRARY DERALD
3
ERFCO will "manage" about 5 percent of total business
fixed investment and 20 to 45 percent of the annual
energy investment.
An inevitable result of drawing capital funds away from
one sector into another, is that the sectors which are
not favored tend to become financially weak and soon
become candidates for direct Federal aid. Since exper-
ience tells us (particularly Great Britain) that once
the government gets into the business of subsidizing a
given sector, it never gets out, this process simply
adds to the number of businesses that are recipient of
government support.
As I read the ERFCO proposal, a significant amount of the
financial support will be in the form of ten-year loans.
Under one analysis, these loans would only provide a ten
basis point advantage over the rates of AAA private firms.
If this is true, there is no doubt that these loans will
be of little assistance in meeting nuclear and synthetic
fuel goals.
In assessing the impact of ERFCO in reducing our reli-
ance on imported oil, one must compare the net differ-
ence in savings between a comprehensive energy program
with ERFCO to a comprehensive energy program without it.
I haven't seen any numbers which would indicate there
would be any savings at all, much less the 7 million
barrels per day that has been suggested.
It is likely that ERFCO will not stimulate the economy
(for other monetary and fiscal policy reasons, as well
as political reality -- the stimulant will come from
a tax cut, if anything) nor will it result in increased
savings. Accordingly, there really is no macroeconomic
benefit from ERFCO. Thus its utility must be measured
in terms of achieving energy goals.
I certainly recognize that there are national security
and foreign relation objectives which need to be achieved
and for which the private marketplace (so it is argued)
will not incur a near-term cost because there is no profit
motive. However, the President resolved this issue in
his State of the Union Address when he pointed out that
we would have to incur a near-term cost for our long-
term security, and that there were only two choices
available to us: direct government controls, e.g.,
rationing, or reliance on the marketplace, e.g., taxes
with rebates to consumers. The President's tax proposals
4
and currently decontrol, will accomplish our security
objectives and yet maintain the integrity of the
marketplace system. The problem with ERFCO is that
it destroys the integirty of the marketplace by social-
izing such a large chunk of our annual capital invest-
ment decisions. It should also be noted that most
observers would rate the strength of OPEC to control
oil supplies and prices as being the heart of our
security problem. In all likelihood, OPEC's strength
as a cartel will decline beginning in 1979 or 1980.
This is precisely the period when ERFCO would become
effective. Thus, I don't think ERFCO as a solution
matches the time frame of the national security problem.
The Need. There is no doubt that additional government action
is necessary to achieve our energy objectives in an economic,
foreign policy and national security sense.
It's important, however, to recognize that the constraint to
achieving the energy goals laid down in the President's State
of the Union Address are not as much financial as they are
regulatory, manpower, materials, technology and knowledge,
marketplace uncertainty (because of the cartel) and others.
The great danger with a "finance oriented" board of directors
making decisions on energy investment, is that they will draw
financial support away from other worthwhile research projects
which might have a better chance of success. Since our R&D
capability in the energy area (independent of financial con-
sideration) is limited (in terms of availability of scientists,
etc.) mistakes on where to put our research dollars could be
disastrous. The recent ERDA National R&D Report points out
how difficult it is to determine where the investment should
be, and the last thing we want are financially oriented govern-
ment people making these decisions. I fail to see how the ERFCO
board would better qualify in this area than the President and
the Executive departments and agencies.
The following are specific energy problems which must be solved
by government before we can hope to achieve the goals of Project
Independence.
Protection against cartel pricing policies designed to
undercut the domestic alternative fuels market.
Support for synthetic fuel development.
Support for high-risk development such as the nuclear
area.
Support for energy projects involving extremely large
financial support.
GERALD FORD LIBRARY
5
Assistance for utilities.
Authority to override governmental constraints for
energy projects.
While ERFCO, as conceived (but certainly not as will be enacted
by Congress), may permit us to resolve these problems, it does
so at an unacceptable price and in an overkill fashion.
Philosophical Problems. The most critical domestic problem
facing the Nation today, in my opinion, is the growing intrusion
by the Federal government into the free marketplace and over
the lives of individuals. Today, only two States in the Union --
California and New York -- have a population which exceeds the
total number of government employees. Government spending today
is a third of Gross National Product and will exceed 55% by the
end of this century if we simply continue existing government
programs.
To take a quantum jump forward into increasing government con-
trols over the marketplace, is the last thing I would expect
a Republican President to do, unless there was overriding
and clear evidence that no other alternative is available.
The obvious counter to this argument is that ERFCO simply is
a way of streamlining existing government control and it sup-
plants current government interference with a more efficient
mechanism. This simply isn't the case, however, because ERFCO
represents substantial increase in government control over the
free marketplace.
There must be a clearer indication of why specific energy
objectives cannot be accomplished without this intrusion. I
have been unable to construct such an analysis myself, and if
it exists, I certainly am unaware of it.
Political Considerations. ERFCO has some very attractive
political pluses, principally because it is an imaginative
and bold idea which might initially be sold as an example of
strong leadership. The problem is that, like most highly
complex ideas, it will be looked at very carefully over time
and must stand up on its merits. For the above reasons, I
believe that the substance of ERFCO will not withstand close
scrutiny, will be attacked philosophically by the conserva-
tives, and will ultimately fall on its face. To the extent
that it is successful in withstanding attack and therefore can
be perceived as an example of innovative thinking and leader-
ship, I doubt that the President will get the credit.
Obviously, this kind of a high visibility proposal must be
viewed from the perspective of a year from now. By that time
GERALD
LIBRARY
6
it will be picked over, and the substantive flaws (to the
extent they exist) will be fully exposed. Furthermore, it
will have gone through a year of the legislative mill and
this, of course, presents the greatest danger. The following
are the possible scenarios which ERFCO may follow over the
next year:
It if it substantively weak (as many internal Executive
Branch studies indicate -- all of which will undoubtedly
be leaked) then this is likely to be tagged the same
way as McGovern's $1,500 per person proposal.
If Congress does not enact ERFCO (because of bickering
among the Democrats who will try to load it up, or
because of conservative opposition) then this will be
billed as a major Presidential defeat because of the
advance publicity given the proposal. It is one thing
for various pieces of the President's State of the Union
Message not to get enacted because there is no visible
target which the Press can point to as having gone down
in flames, but we don't have this cushion with ERFCO.
Congress could load ERFCO up and send it to the President
for signature, thereby raising the problem of a veto and
the extraordinary embarrassing position that it would put
the President in. One of the key benefits of ERFCO is
the fact that it provides a mechanism for speedy deci-
sions concerning energy investment. This is generally
accomplished by limiting Congressional control and
avoiding existing governmental roadblocks, such as
environmental roadblocks. As you know, the President
targeted in on this problem specifically in his Energy
Independence Act proposal. Congress has refused to go
along with this, and I can't imagine that they would be
willing to do so in the context of ERFCO. Therefore,
what you're likely to get is an ERFCO without the over-
ride capability, with Federal exploration and development
authority, possibly with Davis-Bacon type provisions,
and who knows what else included.
To sum this thing up politically, I think it's fair to say that
the risks are very substantial and the benefits, to the extent
they exist, are not likely to be very helpful for the President.
The Alternative. Unfortunately, because of the leaks concerning
ERFCO (which do not help the President or the Vice President)
it will be very difficult to work out an alternative compromise.
The stories have all carried the $110 billion figure, and thus
anything that comes in under that, even though it might have
excellent substantive provisions, is likely to be dismissed
as a watered down compromise.
FORD
GERALD
LIBRARY
7
If an alternative is to be seriously considered, we're going
to have to start doing some spade work in the Press to counter
the damage that has occurred thus far. (I assume that the
leaks to date have come from anti-ERFCO forces, and that
should be an indication of what will happen if the proposal
goes forward in terms of in-house critiques that have already
been completed.)
I would propose a mechanism which is designed to strip away
government constraints which are preventing speedy energy
decisions in a manner which will impose minimum costs on the
economy, either in terms of tax burden or increased prices.
In short, a red tape expediter which imposes minimum costs
on the economy.
I suggest that the existing (and statutory) Energy Resources
Council be used as the vehicle to implement specific, national
energy objectives. The new law could create an Executive
Committee consisting of the Secretaries of Treasury, Interior
and Commerce and Administrators of ERDA and FEA. This group
would act as a board of directors to:
- override government restraints on energy development
projects.
- approve limited and specifically identified financial
assistance for energy projects, e.g., synthetic fuel
and nuclear development. [This function would be
similar to ERFCO but limited in scope and existing
Executive agencies would be utilized.]
- protect U.S. private energy investment against foreign
cartel pricing actions by using a variety of powers
such as import tariffs and quotas. Actions under this
section would have to be implemented by Presidential
Proclamation.
SALD FORD LIBRARY
THE WHITE HOUSE
EFPC
WASHINGTON
THURSDAY, June 26, 1975
MEMORANDUM FOR :
JIM CANNON
JIM CAVANAUGH
FROM :
DICK ALLISON
SUBJECT:
Energy Finance Options Paper
for the President - Friday
Last night, on the way in from Butler, the Vice President
urged me to make sure of the following:
- That the options presented to the President
in the paper planned for tomorrow include
both
1. The original proposal which is currently
being staffed and is due into Connors'
office by close of business today, where
the capitalization is $10 billion and
the borrowing authority $100 billion,
as well as
2. What he and I understand to be the latest
Zarb/Morton version of the Energy Finance
Corporation, capitalized at $5 billion
dollars.
GEORLE R.FORD LIGRARY
ERFCO
Charter
PROPOSAL FOR A PROGRAM PLAN CETEP*
FOR THE
ENERGY RESOURCES FINANCE CORPORATION
BUREAU OF DOMESTIC COMMERCE
DOMESTIC : INTERNATIONAL BUSINESS
ADMINISTRATION
SEPTEMBER 17, 1975
FORD is LIBRARY GERALD
*CETEP - COMMERCIALIZATION OF EXISTING TECHNOLOGIES
FOR ENERGY PRODUCTION
I.
Purpose of Report
Consideration is in process to establish the Energy
Research Finance Corporation (ERFCO). The corporation will
have authority to make loans, guarantee loans and provide
financing and economic assistance for the development of
domestic sources of energy.
This proposal defines a specific charter for ERFCO and
points out where impacts can be most significant in developing
new sources of domestic energy rapidly.
Consequently, the program designated CETEP (Commercialization
of Existing Technology for Energy Production) is proposed.
In this program concept, the following programs currently
existing or under development in ERDA would not be eligible
for ERFCO loans until certified by ERDA for production.
Coal gasification (a near term possibility).
Solar energy.
Oil from shale.
Pyrolysis.
Electrolysis (eco-energy)
Molecular (requires high temperature and
pressure)
Four areas of domestic energy resources that are
commercially operational and could be considered for ERFCO loans
are as follows:
2
Conversion of oil and gas powered generating plants
to coal.
Processing of municipal waste to generate power and
recover materials in coal and oil fired biiler.
Development of geothermal energy.
Acceleration of nuclear energy development.
CETEP would also provide an appropriate mechanism for
transfer of technology from ERDA developments and Pilot Plant
operation to the commercial sector.
The sizes of the proposed programs are based on previous
studies. The number of power generating plants that can be
converted to coal burning was developed by the FEA. The
number of municipal waste prócessing plants is based on serving
62% of the population of the United States. The number of
geothermal plants was developed from the geothermal study
prepared for Project Independence as were the number of
nuclear plants proposed.
The majority of estimates on investment, energy production
and jobs generated were obtained from sources listed in
Section V. Refinement of these estimates through an extensive
study would produce some changes but these should not be
extensive. The labor estimates were coordinated with the
Department of Labor.
3
EXECUTIVE SUMMARY
CETEP PROGRAMS
This program is designed to
1) promote the accelerated use of coal for oil and gas
in electrical generating facilities.
2) promote the accelerated development and production
of energy from nuclear power, geothermal energy
and municipal wastes.
As a consequence of action to promote the use of these
sources the following economic benefits occur:
1) additional direct employment totaling 68,800 new
jobs will result by the end of the fifth year, with
an equivalent number of jobs being generated by the
"ripple effect."
2) completion of these new facilities will result in
the production of energy equivalent to 2 million
barrels of oil per day.
FORD i LIBRARY GERALD
EXECUTIVE SUMMARY
CETEP PROGRAMS
Conversion
of Oil & Gas
Solid Waste
Power Plants
Processing
Geothermal
Nuclear
to Coal
for Energy
Power Plants
Power Plants
Total Loan Commitment
in Millions
$1,800
$6,300
$940
$35,000
Equivalent Annual Energy
Production Upon
Completion (Millions of
Barrels of Equivalent)
110
90
128
400
Cumulative New Work
Over 15 Years (1,000
Man-Years)*
102
370
42
650
Loan Dollars for Each
Man-Year of Work
Generated
$18,000
$17,000
$22,400
$54,000
*Department of Labor aggregate data indicates that these figures would double for
"ripple effect."
Number of Persons Employed At The End of Each of
The First Five Years of CETEP.
No. of persons employed
Coal
Municipal
at the end of the:
Conversion
Waste
Geothermal Nuclear Total CETEP
lst. Year
1,000
11,300
200
1,000
13,500
2nd. Year
2,000
18,100
500
4,000
24,600
3rd. Year
3,000
20,900
700
6,000
30,600
4th. Year
6,000
21,200
1,100
16,000
44,300
5
5th. Year
8,500
22,700
1,600
37,000
68,800
II. Description of CETEP Programs
A. Conversion of Power Plants to Coal
In 1973, about 45 percent of the installed capacity
used either oil or gas to generate electricity. The FEA
has indicated that some 54 plants with 105 generating units
totalling 14,452 megawatts of capacity can be converted to
the burning of coal.
It is estimated that all of these plants can be converted
to burning coal in a four year period and that loans or
guarantees would provide significant incentive to make the
conversions. This program represents a quick way to obtain
conservation of gas and oil.
In addition to conserving oil and gas, new jobs are
provided on a permanent basis to operate the plants and to
mine and transport coal. These are additional jobs that
are generated because coal burning plants require operating
and maintenance personnel for handling coal, disposal of
fly ash and for operating and maintaining air pollution
control equipment.
FORD & LIBRARY GERALD
B. Municipal Waste Processing
Resource recovery is concerned with the disposal of
municipal solid waste and has come to be viewed as an alter-
native to the conventional disposal of waste. This alternative
has resulted from environmental considerations and in part
from resource scarcity, and is a potential energy source.
For the most part, it is a mechanized process that separates
ferrous metal, aluminum, glass, paper and combustibles. The
combustible components are used to generate energy in electrical
generating plants, converting the energy into steam or in
pyrolysis plants, where the components are converted to oil
or gas.
The availability of this energy source has the same
geographical distribution as the population of the United
States. Building plants near population centers would reduce
transportation costs of solid waste and transmission costs
of power.
A resource recovery system consisting of 226 plants could
be built within ten years serving 62 percent of the population
in 150 metropolitan areas and process 58 percent of municipal
solid waste.
In addition to producing energy, solving much of the
solid waste disposal problem and providing jobs, the system
could after full development, recover annually 7.5 million
tons of ferrous scrap; 5 million tons of aluminum; 6.4 million
tons of glass; and 5.5 million tons of paper: The total value
of the product is $1.1 billion annually, including the energy
produced.
C. Geothermal Energy
FORD & 936870 LIBRARY
There are two geothermal facilities currently
operational in the United States, a dry steam plant generating
490 MWe at the Geysers in California, and a small facility
in the Imperial Valley. There are only a few other sources
of natural dry steam. Other types that have potential are
hot brine, hot dry rocks, and deep normal-gradient formations.
S
Although plants of the dry steam type and the hot brine
type are commercially exploitable, a program in which a large
number of plants are started simultaneously in the next year
or two is not feasible. The present state of knowledge
concerning the geographic location and extent of geothermal
sources is limited. Consequently, the generating capacity
is as of yet uncertain. Geothermal exploration on a massive
scale requires development of an industry infrastructure
to obtain rigs, train crews, and develop large scale generating
techniques, peculiar to geothermal processes. This phase
precedes planning and construction of plants.
Based on these considerations, a program in which four
new plants of 200 MWe each are on line at the end of six
years and 84 new plants are on line at the end of fifteen
years is analyzed in this paper.
It is our opinion that this development is not likely to
take place unless there is a new institutional mechanism
for making or guaranteeing loans since the risks associated
with geothermal exploration are high. Exploration, although
similar to those in oil exploration and production does not
provide the banking industry with adequate experience on which
to base credit decisions.
D. Nuclear Energy
The first commercially operated nuclear plant was
placed on line in 1957 and was 90 megawatts electrical (MWe)
capacity. In the past 15 years larger nuclear units have
9
been placed in service and are producing an increasing
proportion of domestic power demand. As of 1972, over 110
nuclear plants were operational, under construction, or under
order. Nuclear power reactors are currently supplying three
percent of the domestic power supply.
The factors most likely to delay the commercial installation
of nuclear power are 1) environmental constraints; 2) siting
problems, 3) nuclear waste disposal, 4) skilled labor
availability, 5) fuel availability and cost. Nuclear power
plants are typically capital intensive, require long construction
and institutional delays in obtaining operating permits, and
involve very long pay-back periods.
For these reasons, a program of loans and loan guarantees
would expedite bringing nuclear plants on line.
While capital investment required to build capacity
comparable to energy now provided by coal, gas or oil by 1990
(for purposes of comparison, 12 million barrels of oil per
day equivalent) would require $350 billion in investment, a
smaller program which could be part of the total nuclear
program could benefit from ERFCO.
Accordingly, the program chosen for analysis consists
of fifty plants of 1100 MWe capacity each to be built by 1990.
10
III. Summary of Program Results
A. Conversion of Power Plants to Coal
54 plants, consisting of 105 generating units, with a
total of 14,452 megawatts can be converted to coal.
This will annually substitute 32 million tons of coal
for oil and gas, an equivalent of 110 million barrels of
oil. Cumulative oil savings over fifteen years from start
will be 1400 million barrels of oil.
$1.8 billion in investments will be required to make the
conversions over a four-year period.
8,000 man years will be required over four years to
build new equipment, make plant conversions, and build rail-
road cars and barges.
3,500 additional jobs will be generated to operate the
plants.
6,000 jobs will be generated to mine and transport coal.
This is 5,000 more than those needed for gas and oil distri-
bution.
These new labor requirements amount to 102,000 man-years
over a fifteen-year period.
$18,000 of investment is needed for each man-year of work
generated.
B. Municipal Waste Processing
226 plants covering 62 percent of the population of the
U.S. and processing 57.6 percent of municipal solid waste
can be built in ten years.
90 million barrels of oil equivalent annually in fuels and
energy will be produced when the recovery system is in place.
Over a fifteen-year period, cumulative energy production will
be the equivalent of 930 million barrels of oil.
$6.3 billion in investment is required over ten years.
1/ The Bureau of Labor Statistics estimates that for each job
that is created directly in industry, the overall impact of the
ripple effect throughout the economy results in the creation of
about one additional job. Therefore, the total number of jobs
created is approximately double the number of direct jobs esti-
mated for each activity in this paper.
11
106,000 man-years are required over ten years for con-
struction of plants.
51,000 man-years of labor are required over ten years
to build equipment.
Generate 25,600 permanent jobs when all plants are on line.
These requirements in labor total to 370,000 man-years
over fifteen years.
$17,000 of investment generate one man-year of labor.
After full installment, the plants will produce materials,
fuels, and energy valued at $1 billion annually.
System will appreciably reduce land-use requirements for
waste disposal.
C. Geothermal Energy
Construction of 84 geothermal power plants, 200 MWe each
can be in operation by the year 1990.
Energy produced would be the equivalent of 128 million
barrels of oil annually when all plants are in place.
Cumulative energy production over the fifteen-year period
is 600 million barrels of oil.
940 million in investment is required over the fifteen-
year period.
:-
32,800 man-years of labor would be required to construct
plants and manufacture equipment.
1,900 jobs would be created in operating and maintaining
the plants and gathering fields when all plants are on line.
Total labor requirements over fifteen years are 42,000
man-years.
48
$22,400 investment is required for each man-year of work
generated.
D. Nuclear Energy
y
50 nuclear plants of 1,100 MWe each can be built over
fifteen years.
12
0 Energy produced would be the equivalent of 400 million
barrels of oil annually. Over the fifteen-year period,
cumulative energy production is equivalent to 850 million
barrels of oil.
400,000 man-years of labor would be required to construct
plants and manufacture equipment.
P.
Total man-years of labor over fifteen years would be
650,000 man-years.
$54,000 of investment is needed for each man-year of work
generated.
FORD B. GERALD LIBRARY
13
IV. Comparison of Proposed Programs
A. Energy Output
Conversion of power plants from burning oil and gas
to burning coal yields earliest results, reaching a level of
110 million barrels of oil equivalent annually in four years
and yfelding a cumulative savings of 1,400 million barrels of
oil equivalent in fifteen years.
Energy from solid waste is obtained by the third year,
building to a maximum of 90 million barrels of oil equivalent
in ten years. Cumulative production is 930 million barrels of
oil equivalent in fifteen years.
Geothermal energy will be produced in small amounts after
five years building rapidly to 130 million barrels of oil
equivalent annually at the end of ten years. Cumulative
production in fifteen years is 600 million barrels of oil
equivalent.
Additional nuclear energy will first be produced eleven
years after program initiation but will build rapidly since
all plants will be completed after fifteen years. After
completion, yearly production of energy will be 400 million
barrels of oil equivalent annually and cumulative energy
produced over the fifteen year period will be 850 million
barrels of oil equivalent in fifteen years.
2/ Figures 1 thru 4 at the end of this section illustrates the
manner in which labor, investment and energy output build
up over fifteen years for the programs chosen for analysis.
14
B. Labor Requirements
Conversion of power plants will require 500 man-years
in the first year, climbing to 3,500 man-years in the fourth
year. From the fifth year onward, 8,500 man-years per year
will be required for a cumulative total of 102,000 man-years
in fifteen years.
Labor requirements for solid waste processing will begin
to rise sharply after two years. The delay is caused by the
need for coordinated planning by industry and municipal govern-
ments. After two years, a level of around 7,000 man-years per
year for construction and operation is reached and maintained
throughout the fifteen-year period. Cumulative employment
over fifteen years is 350,000 man-years.
Labor requirements for geothermal energy production rise
slowly reaching a level of about 1,800 man-years per year after
five years and 2,500 man-years per year after ten yeats.
Cumulative employment over fifteen years is 25,000 man-years.
Labor requirements for additional nuclear energy will be
insignificant in the first three years due to the requirement
for licensing and environmental impact analysis. After the
first three years, labor requirements will build uniformly
through the fifteen year period. The average level will be
43,000 man-years per year.
15
C. Investment Schedules
Investment for coal conversion and for municipal
waste processing will achieve significant levels in the first
two years. In the case of conversion, all of the investment
can be made in four years and all of the investments in
municipal waste processing can be made in ten years.
Investment for geothermal energy production cannot proceed
as quickly. Of the total investment of $940 million, less than
$150 million is expended by the end of the first five years.
Investment in nuclear energy will be relatively insigni-
ficant in the first three years but will build uniformly and
rapidly. At the end of five years cumulative investment will
be $3 billion accumulating to $35 billion at the end of
fifteen years.
Complative Employment (theasands of man-years)
ci
20
00
40
50
to
0
U
02
01
and
011
timpret.
5
years
of
15
Comel as
1.0
1.5
20
Conversion of Oild Gas First Power Plants to Gal
5
"?
A
visits
is
10
SI
Comulative Energy Production (MBOE)
110
200
300
4:0
as
600
700
072
9:0
1000
1102
1200
13***
S
Years
01
,
S1
i
Years
is
1.0
Cummulative Investment 1436 (mithions of to dollars)
20
o
3.6
4.0
5.0
6.0
:0
Extracting Fuels and Energi From Solid Waste
6
SJO
01
15
Cumulative Energy Production (MBOE)
100
200
300
400
500
600
700
800-
900
1000
1100
1200
5
Years
E
is
Figure 3.
Geothermal Power Flan's
FORD & 071835 LIBRAR,
10
1.5
72
700
Cumulative Energy Production (MBOE)
600
5
50
1.0
500
to
400
30
300
05
200
10
100
5
10
15
â
10
15
5
10
15
Years
is
Years
Figure 4.
Ninela Pht F
30
1000
20
500
600
to
10
C Cu. JC, Camalative E 71
400
200
N
in
!
:-
20
A. Conversion of Power Plants to Coal Methodology
The primary methodology employed to arrive at the values
presented was through the use of engineering estimates made
by the Bureau of Domestic Commerce staff. Investment was
estimated at $125 per kilowatt of capacity. This conversion
capacity data were obtained from FEA. Estimates of manpower
requirements for the coal sector were obtained through personal
communication with the firm of Peat, Marwick and Mitchell,
the consulting firm which performed earlier energy studies.
Estimates of the rate of plant conversion are based on the
assumption that all plants converted to coal will burn high
sulfur coal and thus require stack-gas SO₂ scrubbers. SOCTAP
data and projections for vendor availability and utility off-
line site availability (restrained by reserve generating
capacity requirements) were basic factors in estimating the
conversion schedules. SOCTAP scrubber installation projections
were modified by several assumptions for the mandatory oil
to coal conversion plants: 2) mandatory conversions would
be given some priority over projected scrubber installations
on existing coal fired units, both for scrubber availability
and planned off-line site availability; b) apparent and
expected rate at which EPA approves individual oil/coal
conversion cases, and; c) the assumption that EPA eventually
approves all O.F.U. oil/gas burning prohibitions. The volume
of conversions in the 1976-78 period is restrained by the
21
above considerations; 1979 conversions are the remainder,
with the potential in that year for additional conversions
over the 14,500 MW assumed to be under prohibition order
during the period.
Bibliography
The sources used were:
FEA Factsheet dated May 9, 1975.
This factsheet provided capacity ratings for each plant
selected for early conversion.
Personal communication with Peat, Marwick and Mitchell, Inc.
This conversation provided data for the coal sector.
Report of Sulfur Oxide Control Technology Assessment Panel -
1973.
22
B. Waste Methodology
Utilizing the Franklin Associates report entitled "A Cost/
Benefit Analysis of Resource Recovery in the Major Metropolitan
Areas," ratios of operating employees per plant, construction
employees per plant, and average tonnage per plant were
derived by the BDC staff. A ratio of .9 barrel of oil per
ton of waste was assumed to allow energy savings per year to
be calculated. Investment was prorated over a ten year period
to obtain an average fixed investment per plant. A ratio
of value of shipments per employee was used to determine the
associated employment to produce the materials and equipment
installed in the CETEP facilities.
A construction schedule of two years prior to a plant
becomes operational was assumed. One half of the 226 recovery
facilities was estimated to be on line by the fifth year,
the first one beginning operation by the third year.
Employment
of operating personnel is first scheduled in the third year
also. All construction and manufacture of equipment was
assumed to be completed by the end of the ninth year.
23
Bibliography
Potential for Resource Recovery In the United States
--A Cost Benefit Analyses of Resource Recovery in the Major
Metropolican Areas.
Prepared for Aluminum Company of America by William E. Franklin,
Franklin Associates Ltd. Prarie Village, Kansas, May 1975 (revised)
Industry Profile. U. S. Department of Commerce
24
C.
Geothernal Methodology
Exploitation of geothermal sources of energy will provide
some electric power within the next decade. This is due in
part to less severe environmental restrictions than are
applicable to other sources. The example investment schedule
used for this report provides a payoff period starting in
1982, increasing in output until 1990. Employment within
the sector will increase as soon as investment begins, with
additional labor support required in manufacturing and geo-
thermal prospecting sectors.
Total investment for the program outlined will be $940
million, with a half of the requirement used by 1983.
Cumulative employment to 1990 will be 25 thousand man-years,
including permanent employees as well as construction and
indirect manpower inputs from other sectors.
Bibliography
Assessment of Construction Equipment Availability, Energy
Requirement, and Construction Industry Capacity to Support
Project Independence Contract TT-A-412-75-011, FEA February
1975.
Bowen, Richard G., and Edward H. Groh, "Geothermal-Earth's
Primordial Energy," TEchnology Review, Vol. 74, number 1,
October/November 1971.
National Geothermal Energy Program -
A Report to the Federal Energy Administration by the
Geothermal Energy Task Force, July 25, 1979.
25
(3) Exploring Energy Choices, Energy Policy Project of
the Ford Foundation, 1974.
(4) Survey of Nuclear Power Supply Prospects, Hittman,
Associates, Inc., February 1972. for Environmental Pro-
tection Agency, Contract No. EUSD 71-43.
FORO LIBRARY
D. Nuclear Methodology
The construction and financing of nuclear power plants
is differentiated from other power sources due to long
time lags which must be considered within the investment
period before the plant can be brought on line. The example
investment schedule takes these considerations into account,
allowing a three-year lag in initial investment expenditures,
and a nine-year construction and testing period for plant
completion after initial expenditures.
Total labor inputs include an allowance for labor
expended in manufactured goods installed in power plants.
Some permanent labor is involved early in the period in fuel
exploration and processing, but larger labor inputs occur
later in the period as generating plants come on line.
Due to the inherently long construction period, dumulative
power supplied during the period will be low. Most of the
energy output from the investment will occur in the subsequent
period 1990-2020.
Bibliography
(1) Assessment of Construction Equipment Availability,
Energy Requirements, and Construction Industry Capacity to
Support Project Independence Contract No. 14-01-0001-1664,
Tetra-Tech., Inc. for FEA, February 1975.
(2) United States Energy through the Year 2000, U.S.
Department of the Interior, December 1972.