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    "ocrText": "The original documents are located in Box 13, folder \"Energy Independence Authority (4)\"\nof the James M. Cannon Files 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 Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain.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.\nDigitized from Box 13 of the James M. Cannon Files at the Gerald R. Ford Presidential Library\nMEMORANDUM\nJam Cannon\nOFFICE OF THE VICE PRESIDENT\nWASHINGTON\nFute\nJune 10, 1975\nMEMORANDUM FOR:\nTHE VICE PRESIDENT\nFROM:\nDICK ALLISON Did\nSUBJECT:\nReview Group Ideas from\nToday's Domestic Council\nMeeting\nHere are Review Group ideas which emerged from\ntoday's Domestic Council meeting and from our\nconversations in the car afterwards:\n1. \"Finite\":\n- To determine the extent to which our\nnatural resources really are finite;\n- The probable conclusion will be that,\nwith three or four exceptions, there\nare no effective limits to what our\nresources can yield, given the application\nof science and technology;\n- This could be the subject of a major\nspeech by the President;\n- Alan Greenspan, the Interior Department,\nand John Quarles of EPA are all interested\nand should be involved.\n2. Quality of life and of the human environment:\n- The interrelationship of energy, raw\nmaterials, and industrial development.\n3. The interrelationship of government and\nfree enterprise.\n1015 BW 2 10\nFORD i LIBRARY GERALD\n-2-\n4.\nOverall transportation policy.\n5.\nNew core industries:\n- What will be the new industrial\nsources of full employment (in\nplace of the automobile and housing\nindustries) :\n*Energy\n*Raw materials\n*Transportation\n*Urban development\n*Food production\n6. The role of planning in a free economy.\nTHE WHITE HOUSE\nWASHINGTON\nAugust 28, 1975\n76\nERFCO\nMEMO FOR\nJIM CANNON\nFROM:\nMIKE DUVAL\nI have doubts about this paper, but you\nhave every right to expect total candor\nfrom me -- SO here it is.\nIn terms of quality, I'm a bit embarrassed.\nI just got into this very complex subject\nyesterday. I'm sending the memo to you\nnow because you're on deadline, but it\ndoesn't meet my standards.\nTHE WHITE HOUSE\nWASHINGTON\nAugust 28, 1975\nMEMORANDUM FOR\nJIM CANNON\nFROM:\nMIKE DUVAL\nwhite\nSUBJECT:\nENERGY FINANCING\nI read a draft of the \"Energy Resources Finance Corporation\nAct of 1975\". My personal recommendation to you is that the\nPresident and Vice President not pursue the ERFCO idea any\nfurther.\nMy conclusions can be summarized as follows:\nThere is no need for a Federal financing capability to\nstimulate energy capital development at anywhere near\nthe level of $16 billion a year for seven years over\nthe level of capital investment which will occur anyway.\nERFCO will not significantly assist the Nation in achiev-\ning \"energy independence\" as defined by the President in\nhis State of the Union Address.\nTo the extent ERFCO doesn't stimulate additional invest-\nment then, philosophically, it must honestly be described\nas socializing a major segment of the U.S. energy industry.\nIt is diametrically counter to the President's stated\nenergy and economic principles and there is no compelling\nreason for this abrupt shift.\nViewed a year from now, the proposal contains far more\npolitical negatives than pluses.\nThere is an alternative which will permit the President\nand Vice President to achieve the basic political and\nsubstantive benefits of ERFCO without all the problems.\nThe following is a brief discussion of the above conclusions.\nI did not have an opportunity to sit in the meetings and discus-\nsions of the ERFCO proposal, and thus my analysis may very well\nbe incomplete and perhaps some of the objections I raise have\nalready been answered. Also, I am very conscious of the fact\n2\nthat a Duval should not be criticizing a Rockefeller financing\nproposal but, nevertheless, I believe strongly that ERFCO is\nfundamentally wrong economically and politically.\nERFCO. Stripped of all the rhetoric, ERFCO simply is a trans-\nfer of a very significant portion of the decision-making power\nover capital investment in energy-related projects from the\nprivate sector to government. This is not unique. Already\nthe government controls anywhere from 25-50% of the approxi-\nmately $200 billion in net funds currently raised in the U.S.\ncapital market. What is unique is that the decision-making\nis vested, not in the President or Executive agencies or\nthe Congress, but rather, in a flexible board of directors.\nImplicit in this proposal is the notion that the constraint\non achieving our energy objectives involves the investment\ndecision-making process, not other difficulties. I happen to\nthink this assumption is incorrect. If the constraint to\nachieving energy independence were financial, then a finance-\noriented decision mechanism makes sense. If not, the market-\nplace and the President are in a better position to make these\njudgments.\nThe following are some background facts which I think should be\nkept in mind as the ERFCO proposal is evaluated:\nThe Nation can achieve independence as defined by the\nPresident, by 1985, by taking the conservation and supply\nsteps outlined in the State of the Union Address. This\ngoal is still achievable (even without Congressional\nacceptance of the President's total plan) if Congress\ndoes not override the President's veto of the oil price\ncontrol law, if some reasonable compromises are worked\nout on the energy/environment issues, and if OPEC coop-\nerates by keeping the price up. The important thing\nto note here is that capital needs for energy develop-\nment, even without ERFCO, are likely to be within the\nhistorical band, i.e., 23% of total business fixed\ninvestment.\nOne can argue that ERFCO will increase the percentage\nof total capital investment that goes to energy develop-\nment. (This argument is probably fallacious because, of\nthe $16 billion a year which ERFCO would generate, only\na tiny fraction will probably be additive to what would\nbe spent by the private sector anyway.) The danger in\narguing that government should stimulate more energy\ninvestment than would otherwise occur, obviously con-\ncerns the danger of the government allocating credit.\nFORD & LIBRARY DERALD\n3\nERFCO will \"manage\" about 5 percent of total business\nfixed investment and 20 to 45 percent of the annual\nenergy investment.\nAn inevitable result of drawing capital funds away from\none sector into another, is that the sectors which are\nnot favored tend to become financially weak and soon\nbecome candidates for direct Federal aid. Since exper-\nience tells us (particularly Great Britain) that once\nthe government gets into the business of subsidizing a\ngiven sector, it never gets out, this process simply\nadds to the number of businesses that are recipient of\ngovernment support.\nAs I read the ERFCO proposal, a significant amount of the\nfinancial support will be in the form of ten-year loans.\nUnder one analysis, these loans would only provide a ten\nbasis point advantage over the rates of AAA private firms.\nIf this is true, there is no doubt that these loans will\nbe of little assistance in meeting nuclear and synthetic\nfuel goals.\nIn assessing the impact of ERFCO in reducing our reli-\nance on imported oil, one must compare the net differ-\nence in savings between a comprehensive energy program\nwith ERFCO to a comprehensive energy program without it.\nI haven't seen any numbers which would indicate there\nwould be any savings at all, much less the 7 million\nbarrels per day that has been suggested.\nIt is likely that ERFCO will not stimulate the economy\n(for other monetary and fiscal policy reasons, as well\nas political reality -- the stimulant will come from\na tax cut, if anything) nor will it result in increased\nsavings. Accordingly, there really is no macroeconomic\nbenefit from ERFCO. Thus its utility must be measured\nin terms of achieving energy goals.\nI certainly recognize that there are national security\nand foreign relation objectives which need to be achieved\nand for which the private marketplace (so it is argued)\nwill not incur a near-term cost because there is no profit\nmotive. However, the President resolved this issue in\nhis State of the Union Address when he pointed out that\nwe would have to incur a near-term cost for our long-\nterm security, and that there were only two choices\navailable to us: direct government controls, e.g.,\nrationing, or reliance on the marketplace, e.g., taxes\nwith rebates to consumers. The President's tax proposals\n4\nand currently decontrol, will accomplish our security\nobjectives and yet maintain the integrity of the\nmarketplace system. The problem with ERFCO is that\nit destroys the integirty of the marketplace by social-\nizing such a large chunk of our annual capital invest-\nment decisions. It should also be noted that most\nobservers would rate the strength of OPEC to control\noil supplies and prices as being the heart of our\nsecurity problem. In all likelihood, OPEC's strength\nas a cartel will decline beginning in 1979 or 1980.\nThis is precisely the period when ERFCO would become\neffective. Thus, I don't think ERFCO as a solution\nmatches the time frame of the national security problem.\nThe Need. There is no doubt that additional government action\nis necessary to achieve our energy objectives in an economic,\nforeign policy and national security sense.\nIt's important, however, to recognize that the constraint to\nachieving the energy goals laid down in the President's State\nof the Union Address are not as much financial as they are\nregulatory, manpower, materials, technology and knowledge,\nmarketplace uncertainty (because of the cartel) and others.\nThe great danger with a \"finance oriented\" board of directors\nmaking decisions on energy investment, is that they will draw\nfinancial support away from other worthwhile research projects\nwhich might have a better chance of success. Since our R&D\ncapability in the energy area (independent of financial con-\nsideration) is limited (in terms of availability of scientists,\netc.) mistakes on where to put our research dollars could be\ndisastrous. The recent ERDA National R&D Report points out\nhow difficult it is to determine where the investment should\nbe, and the last thing we want are financially oriented govern-\nment people making these decisions. I fail to see how the ERFCO\nboard would better qualify in this area than the President and\nthe Executive departments and agencies.\nThe following are specific energy problems which must be solved\nby government before we can hope to achieve the goals of Project\nIndependence.\nProtection against cartel pricing policies designed to\nundercut the domestic alternative fuels market.\nSupport for synthetic fuel development.\nSupport for high-risk development such as the nuclear\narea.\nSupport for energy projects involving extremely large\nfinancial support.\nGERALD FORD LIBRARY\n5\nAssistance for utilities.\nAuthority to override governmental constraints for\nenergy projects.\nWhile ERFCO, as conceived (but certainly not as will be enacted\nby Congress), may permit us to resolve these problems, it does\nso at an unacceptable price and in an overkill fashion.\nPhilosophical Problems. The most critical domestic problem\nfacing the Nation today, in my opinion, is the growing intrusion\nby the Federal government into the free marketplace and over\nthe lives of individuals. Today, only two States in the Union --\nCalifornia and New York -- have a population which exceeds the\ntotal number of government employees. Government spending today\nis a third of Gross National Product and will exceed 55% by the\nend of this century if we simply continue existing government\nprograms.\nTo take a quantum jump forward into increasing government con-\ntrols over the marketplace, is the last thing I would expect\na Republican President to do, unless there was overriding\nand clear evidence that no other alternative is available.\nThe obvious counter to this argument is that ERFCO simply is\na way of streamlining existing government control and it sup-\nplants current government interference with a more efficient\nmechanism. This simply isn't the case, however, because ERFCO\nrepresents substantial increase in government control over the\nfree marketplace.\nThere must be a clearer indication of why specific energy\nobjectives cannot be accomplished without this intrusion. I\nhave been unable to construct such an analysis myself, and if\nit exists, I certainly am unaware of it.\nPolitical Considerations. ERFCO has some very attractive\npolitical pluses, principally because it is an imaginative\nand bold idea which might initially be sold as an example of\nstrong leadership. The problem is that, like most highly\ncomplex ideas, it will be looked at very carefully over time\nand must stand up on its merits. For the above reasons, I\nbelieve that the substance of ERFCO will not withstand close\nscrutiny, will be attacked philosophically by the conserva-\ntives, and will ultimately fall on its face. To the extent\nthat it is successful in withstanding attack and therefore can\nbe perceived as an example of innovative thinking and leader-\nship, I doubt that the President will get the credit.\nObviously, this kind of a high visibility proposal must be\nviewed from the perspective of a year from now. By that time\nGERALD\nLIBRARY\n6\nit will be picked over, and the substantive flaws (to the\nextent they exist) will be fully exposed. Furthermore, it\nwill have gone through a year of the legislative mill and\nthis, of course, presents the greatest danger. The following\nare the possible scenarios which ERFCO may follow over the\nnext year:\nIt if it substantively weak (as many internal Executive\nBranch studies indicate -- all of which will undoubtedly\nbe leaked) then this is likely to be tagged the same\nway as McGovern's $1,500 per person proposal.\nIf Congress does not enact ERFCO (because of bickering\namong the Democrats who will try to load it up, or\nbecause of conservative opposition) then this will be\nbilled as a major Presidential defeat because of the\nadvance publicity given the proposal. It is one thing\nfor various pieces of the President's State of the Union\nMessage not to get enacted because there is no visible\ntarget which the Press can point to as having gone down\nin flames, but we don't have this cushion with ERFCO.\nCongress could load ERFCO up and send it to the President\nfor signature, thereby raising the problem of a veto and\nthe extraordinary embarrassing position that it would put\nthe President in. One of the key benefits of ERFCO is\nthe fact that it provides a mechanism for speedy deci-\nsions concerning energy investment. This is generally\naccomplished by limiting Congressional control and\navoiding existing governmental roadblocks, such as\nenvironmental roadblocks. As you know, the President\ntargeted in on this problem specifically in his Energy\nIndependence Act proposal. Congress has refused to go\nalong with this, and I can't imagine that they would be\nwilling to do so in the context of ERFCO. Therefore,\nwhat you're likely to get is an ERFCO without the over-\nride capability, with Federal exploration and development\nauthority, possibly with Davis-Bacon type provisions,\nand who knows what else included.\nTo sum this thing up politically, I think it's fair to say that\nthe risks are very substantial and the benefits, to the extent\nthey exist, are not likely to be very helpful for the President.\nThe Alternative. Unfortunately, because of the leaks concerning\nERFCO (which do not help the President or the Vice President)\nit will be very difficult to work out an alternative compromise.\nThe stories have all carried the $110 billion figure, and thus\nanything that comes in under that, even though it might have\nexcellent substantive provisions, is likely to be dismissed\nas a watered down compromise.\nFORD\nGERALD\nLIBRARY\n7\nIf an alternative is to be seriously considered, we're going\nto have to start doing some spade work in the Press to counter\nthe damage that has occurred thus far. (I assume that the\nleaks to date have come from anti-ERFCO forces, and that\nshould be an indication of what will happen if the proposal\ngoes forward in terms of in-house critiques that have already\nbeen completed.)\nI would propose a mechanism which is designed to strip away\ngovernment constraints which are preventing speedy energy\ndecisions in a manner which will impose minimum costs on the\neconomy, either in terms of tax burden or increased prices.\nIn short, a red tape expediter which imposes minimum costs\non the economy.\nI suggest that the existing (and statutory) Energy Resources\nCouncil be used as the vehicle to implement specific, national\nenergy objectives. The new law could create an Executive\nCommittee consisting of the Secretaries of Treasury, Interior\nand Commerce and Administrators of ERDA and FEA. This group\nwould act as a board of directors to:\n- override government restraints on energy development\nprojects.\n- approve limited and specifically identified financial\nassistance for energy projects, e.g., synthetic fuel\nand nuclear development. [This function would be\nsimilar to ERFCO but limited in scope and existing\nExecutive agencies would be utilized.]\n- protect U.S. private energy investment against foreign\ncartel pricing actions by using a variety of powers\nsuch as import tariffs and quotas. Actions under this\nsection would have to be implemented by Presidential\nProclamation.\nSALD FORD LIBRARY\nTHE WHITE HOUSE\nEFPC\nWASHINGTON\nTHURSDAY, June 26, 1975\nMEMORANDUM FOR :\nJIM CANNON\nJIM CAVANAUGH\nFROM :\nDICK ALLISON\nSUBJECT:\nEnergy Finance Options Paper\nfor the President - Friday\nLast night, on the way in from Butler, the Vice President\nurged me to make sure of the following:\n- That the options presented to the President\nin the paper planned for tomorrow include\nboth\n1. The original proposal which is currently\nbeing staffed and is due into Connors'\noffice by close of business today, where\nthe capitalization is $10 billion and\nthe borrowing authority $100 billion,\nas well as\n2. What he and I understand to be the latest\nZarb/Morton version of the Energy Finance\nCorporation, capitalized at $5 billion\ndollars.\nGEORLE R.FORD LIGRARY\nERFCO\nCharter\nPROPOSAL FOR A PROGRAM PLAN CETEP*\nFOR THE\nENERGY RESOURCES FINANCE CORPORATION\nBUREAU OF DOMESTIC COMMERCE\nDOMESTIC : INTERNATIONAL BUSINESS\nADMINISTRATION\nSEPTEMBER 17, 1975\nFORD is LIBRARY GERALD\n*CETEP - COMMERCIALIZATION OF EXISTING TECHNOLOGIES\nFOR ENERGY PRODUCTION\nI.\nPurpose of Report\nConsideration is in process to establish the Energy\nResearch Finance Corporation (ERFCO). The corporation will\nhave authority to make loans, guarantee loans and provide\nfinancing and economic assistance for the development of\ndomestic sources of energy.\nThis proposal defines a specific charter for ERFCO and\npoints out where impacts can be most significant in developing\nnew sources of domestic energy rapidly.\nConsequently, the program designated CETEP (Commercialization\nof Existing Technology for Energy Production) is proposed.\nIn this program concept, the following programs currently\nexisting or under development in ERDA would not be eligible\nfor ERFCO loans until certified by ERDA for production.\nCoal gasification (a near term possibility).\nSolar energy.\nOil from shale.\nPyrolysis.\nElectrolysis (eco-energy)\nMolecular (requires high temperature and\npressure)\nFour areas of domestic energy resources that are\ncommercially operational and could be considered for ERFCO loans\nare as follows:\n2\nConversion of oil and gas powered generating plants\nto coal.\nProcessing of municipal waste to generate power and\nrecover materials in coal and oil fired biiler.\nDevelopment of geothermal energy.\nAcceleration of nuclear energy development.\nCETEP would also provide an appropriate mechanism for\ntransfer of technology from ERDA developments and Pilot Plant\noperation to the commercial sector.\nThe sizes of the proposed programs are based on previous\nstudies. The number of power generating plants that can be\nconverted to coal burning was developed by the FEA. The\nnumber of municipal waste prócessing plants is based on serving\n62% of the population of the United States. The number of\ngeothermal plants was developed from the geothermal study\nprepared for Project Independence as were the number of\nnuclear plants proposed.\nThe majority of estimates on investment, energy production\nand jobs generated were obtained from sources listed in\nSection V. Refinement of these estimates through an extensive\nstudy would produce some changes but these should not be\nextensive. The labor estimates were coordinated with the\nDepartment of Labor.\n3\nEXECUTIVE SUMMARY\nCETEP PROGRAMS\nThis program is designed to\n1) promote the accelerated use of coal for oil and gas\nin electrical generating facilities.\n2) promote the accelerated development and production\nof energy from nuclear power, geothermal energy\nand municipal wastes.\nAs a consequence of action to promote the use of these\nsources the following economic benefits occur:\n1) additional direct employment totaling 68,800 new\njobs will result by the end of the fifth year, with\nan equivalent number of jobs being generated by the\n\"ripple effect.\"\n2) completion of these new facilities will result in\nthe production of energy equivalent to 2 million\nbarrels of oil per day.\nFORD i LIBRARY GERALD\nEXECUTIVE SUMMARY\nCETEP PROGRAMS\nConversion\nof Oil & Gas\nSolid Waste\nPower Plants\nProcessing\nGeothermal\nNuclear\nto Coal\nfor Energy\nPower Plants\nPower Plants\nTotal Loan Commitment\nin Millions\n$1,800\n$6,300\n$940\n$35,000\nEquivalent Annual Energy\nProduction Upon\nCompletion (Millions of\nBarrels of Equivalent)\n110\n90\n128\n400\nCumulative New Work\nOver 15 Years (1,000\nMan-Years)*\n102\n370\n42\n650\nLoan Dollars for Each\nMan-Year of Work\nGenerated\n$18,000\n$17,000\n$22,400\n$54,000\n*Department of Labor aggregate data indicates that these figures would double for\n\"ripple effect.\"\nNumber of Persons Employed At The End of Each of\nThe First Five Years of CETEP.\nNo. of persons employed\nCoal\nMunicipal\nat the end of the:\nConversion\nWaste\nGeothermal Nuclear Total CETEP\nlst. Year\n1,000\n11,300\n200\n1,000\n13,500\n2nd. Year\n2,000\n18,100\n500\n4,000\n24,600\n3rd. Year\n3,000\n20,900\n700\n6,000\n30,600\n4th. Year\n6,000\n21,200\n1,100\n16,000\n44,300\n5\n5th. Year\n8,500\n22,700\n1,600\n37,000\n68,800\nII. Description of CETEP Programs\nA. Conversion of Power Plants to Coal\nIn 1973, about 45 percent of the installed capacity\nused either oil or gas to generate electricity. The FEA\nhas indicated that some 54 plants with 105 generating units\ntotalling 14,452 megawatts of capacity can be converted to\nthe burning of coal.\nIt is estimated that all of these plants can be converted\nto burning coal in a four year period and that loans or\nguarantees would provide significant incentive to make the\nconversions. This program represents a quick way to obtain\nconservation of gas and oil.\nIn addition to conserving oil and gas, new jobs are\nprovided on a permanent basis to operate the plants and to\nmine and transport coal. These are additional jobs that\nare generated because coal burning plants require operating\nand maintenance personnel for handling coal, disposal of\nfly ash and for operating and maintaining air pollution\ncontrol equipment.\nFORD & LIBRARY GERALD\nB. Municipal Waste Processing\nResource recovery is concerned with the disposal of\nmunicipal solid waste and has come to be viewed as an alter-\nnative to the conventional disposal of waste. This alternative\nhas resulted from environmental considerations and in part\nfrom resource scarcity, and is a potential energy source.\nFor the most part, it is a mechanized process that separates\nferrous metal, aluminum, glass, paper and combustibles. The\ncombustible components are used to generate energy in electrical\ngenerating plants, converting the energy into steam or in\npyrolysis plants, where the components are converted to oil\nor gas.\nThe availability of this energy source has the same\ngeographical distribution as the population of the United\nStates. Building plants near population centers would reduce\ntransportation costs of solid waste and transmission costs\nof power.\nA resource recovery system consisting of 226 plants could\nbe built within ten years serving 62 percent of the population\nin 150 metropolitan areas and process 58 percent of municipal\nsolid waste.\nIn addition to producing energy, solving much of the\nsolid waste disposal problem and providing jobs, the system\ncould after full development, recover annually 7.5 million\ntons of ferrous scrap; 5 million tons of aluminum; 6.4 million\ntons of glass; and 5.5 million tons of paper: The total value\nof the product is $1.1 billion annually, including the energy\nproduced.\nC. Geothermal Energy\nFORD & 936870 LIBRARY\nThere are two geothermal facilities currently\noperational in the United States, a dry steam plant generating\n490 MWe at the Geysers in California, and a small facility\nin the Imperial Valley. There are only a few other sources\nof natural dry steam. Other types that have potential are\nhot brine, hot dry rocks, and deep normal-gradient formations.\nS\nAlthough plants of the dry steam type and the hot brine\ntype are commercially exploitable, a program in which a large\nnumber of plants are started simultaneously in the next year\nor two is not feasible. The present state of knowledge\nconcerning the geographic location and extent of geothermal\nsources is limited. Consequently, the generating capacity\nis as of yet uncertain. Geothermal exploration on a massive\nscale requires development of an industry infrastructure\nto obtain rigs, train crews, and develop large scale generating\ntechniques, peculiar to geothermal processes. This phase\nprecedes planning and construction of plants.\nBased on these considerations, a program in which four\nnew plants of 200 MWe each are on line at the end of six\nyears and 84 new plants are on line at the end of fifteen\nyears is analyzed in this paper.\nIt is our opinion that this development is not likely to\ntake place unless there is a new institutional mechanism\nfor making or guaranteeing loans since the risks associated\nwith geothermal exploration are high. Exploration, although\nsimilar to those in oil exploration and production does not\nprovide the banking industry with adequate experience on which\nto base credit decisions.\nD. Nuclear Energy\nThe first commercially operated nuclear plant was\nplaced on line in 1957 and was 90 megawatts electrical (MWe)\ncapacity. In the past 15 years larger nuclear units have\n9\nbeen placed in service and are producing an increasing\nproportion of domestic power demand. As of 1972, over 110\nnuclear plants were operational, under construction, or under\norder. Nuclear power reactors are currently supplying three\npercent of the domestic power supply.\nThe factors most likely to delay the commercial installation\nof nuclear power are 1) environmental constraints; 2) siting\nproblems, 3) nuclear waste disposal, 4) skilled labor\navailability, 5) fuel availability and cost. Nuclear power\nplants are typically capital intensive, require long construction\nand institutional delays in obtaining operating permits, and\ninvolve very long pay-back periods.\nFor these reasons, a program of loans and loan guarantees\nwould expedite bringing nuclear plants on line.\nWhile capital investment required to build capacity\ncomparable to energy now provided by coal, gas or oil by 1990\n(for purposes of comparison, 12 million barrels of oil per\nday equivalent) would require $350 billion in investment, a\nsmaller program which could be part of the total nuclear\nprogram could benefit from ERFCO.\nAccordingly, the program chosen for analysis consists\nof fifty plants of 1100 MWe capacity each to be built by 1990.\n10\nIII. Summary of Program Results\nA. Conversion of Power Plants to Coal\n54 plants, consisting of 105 generating units, with a\ntotal of 14,452 megawatts can be converted to coal.\nThis will annually substitute 32 million tons of coal\nfor oil and gas, an equivalent of 110 million barrels of\noil. Cumulative oil savings over fifteen years from start\nwill be 1400 million barrels of oil.\n$1.8 billion in investments will be required to make the\nconversions over a four-year period.\n8,000 man years will be required over four years to\nbuild new equipment, make plant conversions, and build rail-\nroad cars and barges.\n3,500 additional jobs will be generated to operate the\nplants.\n6,000 jobs will be generated to mine and transport coal.\nThis is 5,000 more than those needed for gas and oil distri-\nbution.\nThese new labor requirements amount to 102,000 man-years\nover a fifteen-year period.\n$18,000 of investment is needed for each man-year of work\ngenerated.\nB. Municipal Waste Processing\n226 plants covering 62 percent of the population of the\nU.S. and processing 57.6 percent of municipal solid waste\ncan be built in ten years.\n90 million barrels of oil equivalent annually in fuels and\nenergy will be produced when the recovery system is in place.\nOver a fifteen-year period, cumulative energy production will\nbe the equivalent of 930 million barrels of oil.\n$6.3 billion in investment is required over ten years.\n1/ The Bureau of Labor Statistics estimates that for each job\nthat is created directly in industry, the overall impact of the\nripple effect throughout the economy results in the creation of\nabout one additional job. Therefore, the total number of jobs\ncreated is approximately double the number of direct jobs esti-\nmated for each activity in this paper.\n11\n106,000 man-years are required over ten years for con-\nstruction of plants.\n51,000 man-years of labor are required over ten years\nto build equipment.\nGenerate 25,600 permanent jobs when all plants are on line.\nThese requirements in labor total to 370,000 man-years\nover fifteen years.\n$17,000 of investment generate one man-year of labor.\nAfter full installment, the plants will produce materials,\nfuels, and energy valued at $1 billion annually.\nSystem will appreciably reduce land-use requirements for\nwaste disposal.\nC. Geothermal Energy\nConstruction of 84 geothermal power plants, 200 MWe each\ncan be in operation by the year 1990.\nEnergy produced would be the equivalent of 128 million\nbarrels of oil annually when all plants are in place.\nCumulative energy production over the fifteen-year period\nis 600 million barrels of oil.\n940 million in investment is required over the fifteen-\nyear period.\n:-\n32,800 man-years of labor would be required to construct\nplants and manufacture equipment.\n1,900 jobs would be created in operating and maintaining\nthe plants and gathering fields when all plants are on line.\nTotal labor requirements over fifteen years are 42,000\nman-years.\n48\n$22,400 investment is required for each man-year of work\ngenerated.\nD. Nuclear Energy\ny\n50 nuclear plants of 1,100 MWe each can be built over\nfifteen years.\n12\n0 Energy produced would be the equivalent of 400 million\nbarrels of oil annually. Over the fifteen-year period,\ncumulative energy production is equivalent to 850 million\nbarrels of oil.\n400,000 man-years of labor would be required to construct\nplants and manufacture equipment.\nP.\nTotal man-years of labor over fifteen years would be\n650,000 man-years.\n$54,000 of investment is needed for each man-year of work\ngenerated.\nFORD B. GERALD LIBRARY\n13\nIV. Comparison of Proposed Programs\nA. Energy Output\nConversion of power plants from burning oil and gas\nto burning coal yields earliest results, reaching a level of\n110 million barrels of oil equivalent annually in four years\nand yfelding a cumulative savings of 1,400 million barrels of\noil equivalent in fifteen years.\nEnergy from solid waste is obtained by the third year,\nbuilding to a maximum of 90 million barrels of oil equivalent\nin ten years. Cumulative production is 930 million barrels of\noil equivalent in fifteen years.\nGeothermal energy will be produced in small amounts after\nfive years building rapidly to 130 million barrels of oil\nequivalent annually at the end of ten years. Cumulative\nproduction in fifteen years is 600 million barrels of oil\nequivalent.\nAdditional nuclear energy will first be produced eleven\nyears after program initiation but will build rapidly since\nall plants will be completed after fifteen years. After\ncompletion, yearly production of energy will be 400 million\nbarrels of oil equivalent annually and cumulative energy\nproduced over the fifteen year period will be 850 million\nbarrels of oil equivalent in fifteen years.\n2/ Figures 1 thru 4 at the end of this section illustrates the\nmanner in which labor, investment and energy output build\nup over fifteen years for the programs chosen for analysis.\n14\nB. Labor Requirements\nConversion of power plants will require 500 man-years\nin the first year, climbing to 3,500 man-years in the fourth\nyear. From the fifth year onward, 8,500 man-years per year\nwill be required for a cumulative total of 102,000 man-years\nin fifteen years.\nLabor requirements for solid waste processing will begin\nto rise sharply after two years. The delay is caused by the\nneed for coordinated planning by industry and municipal govern-\nments. After two years, a level of around 7,000 man-years per\nyear for construction and operation is reached and maintained\nthroughout the fifteen-year period. Cumulative employment\nover fifteen years is 350,000 man-years.\nLabor requirements for geothermal energy production rise\nslowly reaching a level of about 1,800 man-years per year after\nfive years and 2,500 man-years per year after ten yeats.\nCumulative employment over fifteen years is 25,000 man-years.\nLabor requirements for additional nuclear energy will be\ninsignificant in the first three years due to the requirement\nfor licensing and environmental impact analysis. After the\nfirst three years, labor requirements will build uniformly\nthrough the fifteen year period. The average level will be\n43,000 man-years per year.\n15\nC. Investment Schedules\nInvestment for coal conversion and for municipal\nwaste processing will achieve significant levels in the first\ntwo years. In the case of conversion, all of the investment\ncan be made in four years and all of the investments in\nmunicipal waste processing can be made in ten years.\nInvestment for geothermal energy production cannot proceed\nas quickly. Of the total investment of $940 million, less than\n$150 million is expended by the end of the first five years.\nInvestment in nuclear energy will be relatively insigni-\nficant in the first three years but will build uniformly and\nrapidly. At the end of five years cumulative investment will\nbe $3 billion accumulating to $35 billion at the end of\nfifteen years.\nComplative Employment (theasands of man-years)\nci\n20\n00\n40\n50\nto\n0\nU\n02\n01\nand\n011\ntimpret.\n5\nyears\nof\n15\nComel as\n1.0\n1.5\n20\nConversion of Oild Gas First Power Plants to Gal\n5\n\"?\nA\nvisits\nis\n10\nSI\nComulative Energy Production (MBOE)\n110\n200\n300\n4:0\nas\n600\n700\n072\n9:0\n1000\n1102\n1200\n13***\nS\nYears\n01\n,\nS1\ni\nYears\nis\n1.0\nCummulative Investment 1436 (mithions of to dollars)\n20\no\n3.6\n4.0\n5.0\n6.0\n:0\nExtracting Fuels and Energi From Solid Waste\n6\nSJO\n01\n15\nCumulative Energy Production (MBOE)\n100\n200\n300\n400\n500\n600\n700\n800-\n900\n1000\n1100\n1200\n5\nYears\nE\nis\nFigure 3.\nGeothermal Power Flan's\nFORD & 071835 LIBRAR,\n10\n1.5\n72\n700\nCumulative Energy Production (MBOE)\n600\n5\n50\n1.0\n500\nto\n400\n30\n300\n05\n200\n10\n100\n5\n10\n15\nâ\n10\n15\n5\n10\n15\nYears\nis\nYears\nFigure 4.\nNinela Pht F\n30\n1000\n20\n500\n600\nto\n10\nC Cu. JC, Camalative E 71\n400\n200\nN\nin\n!\n:-\n20\nA. Conversion of Power Plants to Coal Methodology\nThe primary methodology employed to arrive at the values\npresented was through the use of engineering estimates made\nby the Bureau of Domestic Commerce staff. Investment was\nestimated at $125 per kilowatt of capacity. This conversion\ncapacity data were obtained from FEA. Estimates of manpower\nrequirements for the coal sector were obtained through personal\ncommunication with the firm of Peat, Marwick and Mitchell,\nthe consulting firm which performed earlier energy studies.\nEstimates of the rate of plant conversion are based on the\nassumption that all plants converted to coal will burn high\nsulfur coal and thus require stack-gas SO₂ scrubbers. SOCTAP\ndata and projections for vendor availability and utility off-\nline site availability (restrained by reserve generating\ncapacity requirements) were basic factors in estimating the\nconversion schedules. SOCTAP scrubber installation projections\nwere modified by several assumptions for the mandatory oil\nto coal conversion plants: 2) mandatory conversions would\nbe given some priority over projected scrubber installations\non existing coal fired units, both for scrubber availability\nand planned off-line site availability; b) apparent and\nexpected rate at which EPA approves individual oil/coal\nconversion cases, and; c) the assumption that EPA eventually\napproves all O.F.U. oil/gas burning prohibitions. The volume\nof conversions in the 1976-78 period is restrained by the\n21\nabove considerations; 1979 conversions are the remainder,\nwith the potential in that year for additional conversions\nover the 14,500 MW assumed to be under prohibition order\nduring the period.\nBibliography\nThe sources used were:\nFEA Factsheet dated May 9, 1975.\nThis factsheet provided capacity ratings for each plant\nselected for early conversion.\nPersonal communication with Peat, Marwick and Mitchell, Inc.\nThis conversation provided data for the coal sector.\nReport of Sulfur Oxide Control Technology Assessment Panel -\n1973.\n22\nB. Waste Methodology\nUtilizing the Franklin Associates report entitled \"A Cost/\nBenefit Analysis of Resource Recovery in the Major Metropolitan\nAreas,\" ratios of operating employees per plant, construction\nemployees per plant, and average tonnage per plant were\nderived by the BDC staff. A ratio of .9 barrel of oil per\nton of waste was assumed to allow energy savings per year to\nbe calculated. Investment was prorated over a ten year period\nto obtain an average fixed investment per plant. A ratio\nof value of shipments per employee was used to determine the\nassociated employment to produce the materials and equipment\ninstalled in the CETEP facilities.\nA construction schedule of two years prior to a plant\nbecomes operational was assumed. One half of the 226 recovery\nfacilities was estimated to be on line by the fifth year,\nthe first one beginning operation by the third year.\nEmployment\nof operating personnel is first scheduled in the third year\nalso. All construction and manufacture of equipment was\nassumed to be completed by the end of the ninth year.\n23\nBibliography\nPotential for Resource Recovery In the United States\n--A Cost Benefit Analyses of Resource Recovery in the Major\nMetropolican Areas.\nPrepared for Aluminum Company of America by William E. Franklin,\nFranklin Associates Ltd. Prarie Village, Kansas, May 1975 (revised)\nIndustry Profile. U. S. Department of Commerce\n24\nC.\nGeothernal Methodology\nExploitation of geothermal sources of energy will provide\nsome electric power within the next decade. This is due in\npart to less severe environmental restrictions than are\napplicable to other sources. The example investment schedule\nused for this report provides a payoff period starting in\n1982, increasing in output until 1990. Employment within\nthe sector will increase as soon as investment begins, with\nadditional labor support required in manufacturing and geo-\nthermal prospecting sectors.\nTotal investment for the program outlined will be $940\nmillion, with a half of the requirement used by 1983.\nCumulative employment to 1990 will be 25 thousand man-years,\nincluding permanent employees as well as construction and\nindirect manpower inputs from other sectors.\nBibliography\nAssessment of Construction Equipment Availability, Energy\nRequirement, and Construction Industry Capacity to Support\nProject Independence Contract TT-A-412-75-011, FEA February\n1975.\nBowen, Richard G., and Edward H. Groh, \"Geothermal-Earth's\nPrimordial Energy,\" TEchnology Review, Vol. 74, number 1,\nOctober/November 1971.\nNational Geothermal Energy Program -\nA Report to the Federal Energy Administration by the\nGeothermal Energy Task Force, July 25, 1979.\n25\n(3) Exploring Energy Choices, Energy Policy Project of\nthe Ford Foundation, 1974.\n(4) Survey of Nuclear Power Supply Prospects, Hittman,\nAssociates, Inc., February 1972. for Environmental Pro-\ntection Agency, Contract No. EUSD 71-43.\nFORO LIBRARY\nD. Nuclear Methodology\nThe construction and financing of nuclear power plants\nis differentiated from other power sources due to long\ntime lags which must be considered within the investment\nperiod before the plant can be brought on line. The example\ninvestment schedule takes these considerations into account,\nallowing a three-year lag in initial investment expenditures,\nand a nine-year construction and testing period for plant\ncompletion after initial expenditures.\nTotal labor inputs include an allowance for labor\nexpended in manufactured goods installed in power plants.\nSome permanent labor is involved early in the period in fuel\nexploration and processing, but larger labor inputs occur\nlater in the period as generating plants come on line.\nDue to the inherently long construction period, dumulative\npower supplied during the period will be low. Most of the\nenergy output from the investment will occur in the subsequent\nperiod 1990-2020.\nBibliography\n(1) Assessment of Construction Equipment Availability,\nEnergy Requirements, and Construction Industry Capacity to\nSupport Project Independence Contract No. 14-01-0001-1664,\nTetra-Tech., Inc. for FEA, February 1975.\n(2) United States Energy through the Year 2000, U.S.\nDepartment of the Interior, December 1972."
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