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Energy - Meeting with the President and Frank Zarb, January 4, 1977
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The original documents are located in Box 13, folder "Energy - Meeting with the President
and Frank Zarb, January 4, 1977" 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States of America his copyrights in all of his unpublished writings in National Archives collections.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
MEETING WITH PRESIDENT AND
FRANK ZARB
Tuesday, January 4, 1977
3:00 p.m.
Oval Office
Re: Energy Reorganization
7n /
wm
Nut
/
JOE
GERALD
FORD is LIBRARY
THE WHITE HOUSE
WASHINGTON
For 3:00 mtg.
w/ Zarb and
President.
FORD LIBRARY & GERALD
THE WHITE HOUSE
WASHINGTON
January 4, 1977
MEMORANDUM FOR:
FROM:
GLENN JIM Germa CANNON SCHLEEDE
SUBJECT:
ENERGY ORGANIZATION
Here are the papers on energy organization.
- TAB A is a copy of the memo you signed.
- TAB B is a copy of the Richardson/Lynn decision
memo.
- TAB C is a flip chart type presentation put
together by Jim Mitchell several weeks ago.
In case the question comes up, it is incorrect
to say that Dick Dunham favors putting FPC in the
new energy agency. You might want to talk with
him about the subject before the meeting.
Attachments
P.S. The page immediately following this cover note
is a copy of the statutory requirement for the
President's recommendations on energy reorganization --
in case someone wants to see that requirement
at the 3:00 meeting.
TAB A
THE WHITE HOUSE
WASHINGTON
MEMORANDUM FOR THE PRESIDENT
FROM:
JIM CANNON
SUBJECT:
Organization of Federal Energy and Energy
Related Functions
I have reviewed. the memorandum from Elliot Richardson
and Jim Lynn and do not support any of the options proposed.
Instead, I recommend that you propose creating a new agency
consisting only of the functions now assigned to ERDA and
FEA.
I would be inclined to call the new agency a Department
of Energy but there are arguments against it that should be
noted. Briefly, the principal argument for departmental
status is the recognition that would be accorded to Federal
energy functions. On the other hand, it is neither feasible
nor desirable to consolidate all Federal energy functions
in a single agency so it would be somewhat misleading to
call the new agency a Department of Energy. Furthermore,
I believe we should do all we can to keep energy functions
in the private sector. Taking steps to enhance the Federal
role and status would work against this objective.
I oppose the Richardson/Lynn recommendation for a Department
of Energy (option B) for the following reasons:
-- The FEA petroleum regulatory functions should be
phased out as soon as possible. Allowing them to
become associated with other energy economic regulatory
functions, such as those of the FPC, would increase the
chances that the FEA regulatory functions would
continue. Keeping them "isolated" in an agency consisting
of the other FEA and ERDA functions would increase the
chances of phasing out the FEA oil price and allocation
functions.
-2-
-- The merits of combining ERDA and FEA are very strong
and this should occur as soon as possible. Attempting
to include elements from other departments or agencies
and under other committee jurisdictions would tend to
delay action on the step that is now most important.
-- I do not believe it is desirable, practicable or
politically feasible to place the economic regulatory
functions of the FPC in an agency that does not have
independent regulatory status.
-- Including REA and the power marketing functions of
Interior would not add significantly to the improved
functioning of the Government. In view of the
opposition that would almost certainly result from
the areas served and from the Congressional Committees
involved, such a proposal would detract from the recom-
mendation.
TAB B
THE SECRETARY OF COMMERCE:
WASHINGTON, D.C. 20230
DEC 14 1976
MEMORANDUM FOR THE PRESIDENT
FROM:
Elliot L.
James Lynn
Chairman, ERC
Director, OMB
SUBJECT: Organization for Federal Energy and
Energy-Related Functions
I. Purpose
The purpose of this memorandum is to obtain your
decision on the results of the ERC/OMB study on.
reorganizing the Federal Government to perform energy
and energy-related functions.
A joint ERC/OMB study was initiated in May to
determine the most effective organizational arrangement
for performing Federal energy and energy-related functions.
The study was proposed by the Chairman, ERC, to the
Senate Government Operations Committee to counter
the Committee's intention not to recommend an extension
of the Federal Energy Administration beyond June 30, 1976.
The Committee accepted the study proposal, and, in fact,
incorporated it as a requirement in an amendment to the
FEA extension which has been enacted into law (P.L. 94-385) -
Specifically, the law requires that the President, through
the ERC, prepare a plan and study to reorganize energy
and natural resource activities, and submit, no later
than December 31, 1976, a report containing recommendations
for reorganization and implementing legislation. The
ERC/OMB study was performed to fulfill this requirement.
Further background on the circumstances giving rise to
this study are outlined in TAB A.
While the study report has not been put in final form,
the supporting analyses, which have been prepared with the
assistance of the affected agencies, are complete and
have been reviewed by the principals involved. The final
report will become a public document and should be
available for distribution at the same time that it is
transmitted to the Congress. The balance of this
2
memorandum contains the following sections:
II
- Assumptions
III
- Methodology
IV
- Present Organization for Energy and
Energy-Related Functions
V
- Organizational Problems
VI
- Alternatives
VII
- Conclusions and Recommendations
II.
Assumptions
The following major assumptions regarding broad energy
policy and particularly the Federal role in energy underlie
the study:
Federal role in meeting national energy needs
is somewhat expanded, and is now considerably
more critical than it has been historically.
However, we should have:
Continued maximum possible reliance on private
sector decisions and actions within the framework of: -
A system of Federally created incentives and
disincentives to influence and stimulate private
decisions regarding both energy supply and demand
toward the achievement of national energy goals of
lowered demand as well as assured and adequate
energy supply at a reasonable price.
Minimum necessary direct Federal involvement in
areas such as regulation, new technology development,
data collection and energy resource development;
and
Assurance that energy policies and actions are
properly balanced with other goals such as
environment, health and safety, national security
and economic stability.
For the purposes of organizational planning, it was assumed
that the recommended structure should facilitate the
implementation of existing programs as well as proposed
legislative initiatives of the Administration.
III. Methodology
The study began by identifying all energy, energy-
related and natural resource functions and collecting
3
descriptive data for each including mission, legal basis,
resources and critical interactions. This inventory
permitted the identification of areas needing coordination
together with any duplication and overlaps. Extensive
interviews were conducted at several levels in affected
organizations to identify operating problems. Outside
advice was obtained through a three-day seminar on energy
organization conducted by the Congressional Research
Service at the request of Senator Percy and through a
survey of the literature. From this broad survey seven
preliminary organizational alternatives were developed
and evaluated These were reviewed by the ERC in July
and narrowed for further study to the three options
presented later in this paper. Among the preliminary
alternatives considered in July was an arrangement to
consolidate energy and environmental programs. This
alternative was rejected because the two subjects interact
only partially (e.g., EPA water programs relate mostly to
municipal and non-energy industrial waste) and because
the mutual conflict between energy and the environment is
better resolved on an inter-agency rather than intra-agency
basis and including Executive Office or Presidential
involvement where necessary.
Once the three final options were identified, a
series of individual studies were performed to examine how
selected critical functions would be performed under each
option. These studies were in the areas of:
Policy Formulation and Coordination
Data Collection and Analysis
Energy Resource Development
Research Development and Demonstration
Energy Conservation
Energy Regulation
Nuclear Weapons Production
In addition, several special studies were performed on the
functions of the Department of the Interior, an in-depth
review was made of the FPC and analyses were completed
on the appropriateness of including selected agencies,
(e.g., NRC, NOAA,) in certain options. The results of
these efforts have been synthesized into this options
paper and will be included in the final study report.
IV. Present Energy Organization
Practically all Federal agencies play some part in
energy matters, due to the pervasive nature of energy.
However, there are several agencies which are solely
4
related to energy and which may be regarded as central to
Federal energy involvement: the ERC, FEA, ERDA and, taking
in regulatory commissions, the MRC and FPC.
Certain functions of the Interior Department are
equally critical even though the Department is not solely
concerned with energy. Specifically, the increase of
domestic energy supply over the near and mid-term depends
heavily on accelerated recovery of oil, gas, coal and
uranium from the public lands--especially frontier areas
such as Alaska and Outer Continental Shelf.
Beyond the principal energy agencies, many other
organizational entities have a collateral energy role, at
times quite significant, especially in formulation of energy
policy--examples--Treasury, CEA, State, DOT and EPA.
TAB B is an organization chart showing the considerable
number of agencies involved with energy, energy-related and
natural resource functions. Much of this fragmentation is
rational and desirable as in the case of DOT working
with the states on the 55 mph speed limit or State Department
participating in energy policy formulation from the point
of view of foreign relations.
V. Organizational Problems
There is evidence that organizational problems are
interfering with the execution of energy programs and the
accomplishment of energy objectives, or at least are not
facilitating positive results to the degree possible.
The following are among the more significant problems
identified during the course of the study:
A. Lack of a fully effective mechanism to develop
and oversee the implementation of energy policy. The
ERC has been reasonably successful in developing a balanced
Administration position on the major energy issues.
However, it has no staff and therefore no independent
analytical capability. What staff support does exist
is chiefly provided by the FEA, which itself is one of the
participants in the policy development process. There is
no mechanism to direct action, to assure implementation of
policy decisions or to evaluate results. With the develop-
ment of an independent ERDA, the research and development
planning process has not received the attention it should
from the operational agencies and has tended to form its
own goals.
5
B. The fragmentation of major energy responsibilities
among several agencies complicates the task of putting
together a coherent and consistent Federal energy program.
The numerous programs which comprise the total Federal role
in energy affairs directly affect each other; e.g.,
regulation affects investment in technology development
or data collection supports both policy formulation and
regulation. However, as noted earlier, these inter-
acting parts are assigned to different agencies making
it difficult to coordinate them effectively to form a
unified program aimed at national energy goals.
C. Lack of an effective structure to facilitate
resource trade-offs among competing energy programs.
While resource allocation to energy programs is done
by OMB within the ERC-developed policy framework, energy
programs are highly fragmented throughout the Federal
Government. Therefore, within the various Federal
agencies, these programs must frequently compete for
scarce resources with non-energy programs and not with
each other. A more rational structure would permit
resource allocation to be made among similar programs
at a lower organizational level, facilitating the
assignment of resources to the more effective programs.
D. Need for the regulatory function to be
responsive to needed policy direction while maintaining
independence. Energy regulation is carried out across
a spectrum of mechanisms, from the independent regulatory
commissions of FPC and NRC to the regulatory actions of
FEA and Interior. The independent regulatory commissions
emphasize the mandates of their enabling legislation
and are often inhibited by these statutes from revising
their interpretation of the national interest, regardless
of the views of the Executive Branch on current needs
evolving from a changing international or domestic situation.
Energy regulations should reflect overall policy direction.
At the same time, individual regulatory case decisions
made under general regulations should be fair, objective
and free from outside influence. Improvements need to
be made in the regulatory structure to strengthen respon-
siveness to policy directions and national needs while
at the same time assuring objectivity and independence
FORD LIBRARY "I GERALD
6
where that is important. Finally, the regulation of the
various energy industries is fragmented among agencies,
e.g., FPC, NRC, FEA making it difficult to optimize their
use.
E. The fragmentation of energy functions also
causes duplicating and overlapping agency responsibilities.
Some duplication is legislatively sanctioned, e.g., FEA
and EPA in converting utilities from oil to coal; FPC and
Office of Pipeline Safety (DOT) in LNG safety standards.
Beyond specific legislative problems, FEA has responsibility
for energy planning and development, while specific
energy sources are the responsibility of other agencies.
The overlap has become significant in conservation programs
between FEA and ERDA.
F. There is growing potential for FEA and ERDA to
evolve into competing general purpose energy agencies.
Both FEA and ERDA originally were founded with distinct
missions, but both are collecting functions, by legislation
and otherwise, and expanding into general purpose energy
agencies. In this evolution, both interact with the
private sector and have a growing number of incentives that
can be applied to business and industry to achieve energy
goals. These incentives should be directed through a
single channel to maximize their effectiveness and to avoid
undesirable effects on the private sector.
The present structure for energy functions is not
without some assets. For example, the ERC has provided
a useful forum for top-policy level dialogue across
agency lines concerning major policy issues; the separate
status of ERDA helps assure a stable environment and the
long-term continuity needed to manage a program which is
intended to emphasize long-range technology development;
the independent commission status of FPC and NRC permits
a separation of promotional and regulatory functions and
thereby helps allay any public concern that regulatory
decisions could be politicized. However, these benefits
can be preserved under alternative structures so long as
they are properly designed.
VI.
Alternatives
While a wide range of feasible alternative structures
was considered, it was narrowed to the three most
promising. Basically, these options represent varying
degrees to which the fragmented energy and energy-related
functions might advantageously be consolidated.
7
Under each option it was felt that an interagency
coordinating body similar to the ERC would continue to
be a valuable vehicle to help formulate energy policy by
relating it to the concerns of other agencies such as
EPA, State, Treasury and others. Such a body would preferably
be non-statutory to permit flexibility in White House organi-
zation. The chairmanship and staff support would be provided by
the Secretary or Administrator of the consolidated energy agency.
Option A. Department of Energy and Natural Resources
(DENR)
Description
A grouping together into a new multi-purpose
department all primary energy functions
together with selected natural resource
programs. Composition of the DENR would
include, as a minimum, functions of:
Interior
FEA
ERDA
and should also include functions of:
FPC
REA (Agriculture)
NOAA (Commerce)
Naval Petroleum Reserve (Defense)
Such a Department would have resources of approximately
88,500 staff and $11.9 billion funding. It would consolidate
approximately 91% of the manpower and 97% of the funding
which are committed to the Federal role in energy. However,
68% of its staff and 34% of its funds would be devoted
to non-energy programs such as the National Parks and
Indian Affairs programs.
Advantages of Option A - DENR
Provides maximum feasible consolidation of presently
fragmented energy functions.
Permits resolution of unclear jurisdiction between
FEA and ERDA in areas such as energy forecasting,
conservation and technology commercialization.
Gives cabinet-level representation for energy--
together with some, but not all, natural resource
functions.
8
Provides for resolution within one Cabinet
Department of many competing claims in the management
of public lands between energy development and
resource preservation or other land uses.
Provides a strong base for subsequent, more complete,
consolidation of natural resource programs - e.g.,
Forest Service, Army Corps of Engineers Civil Works,
etc.
Permits a better basis for rationalizing FPC
regulatory policy and actions with national needs
and policies in energy.
Permits closer integration of earth sciences of
geological survey with atmospheric and oceanic
sciences of NOAA.
Disadvantages of Option A - DENR
Dilutes representation and accountability for
energy by grouping it with natural resources
in a large multi-purpose department.
Results in a very large and complicated
department with a wide span of concerns from
energy and natural resources to Indian and Terri-
torial Affairs. Experience indicates these
conglomerate arrangements are hard to manage and
hold accountable.
Energy objectives could dominate land management
decisions at the expense of environmental or other
land use requirements; at least environmental and
related groups would have this concern.
Grouping of so many diverse programs could result
in an internal DENR structure that "layers in" some
functions excessively, e.g., the nuclear weapons
work performed by ERDA could be relegated to third
echelon status prompting strong pressure to
transfer it to DOD despite recognized benefits of
associating nuclear power with nuclear weapons
work.
9
Despite the broad span represented by this alternative,
it would still not encompass all relevant concerns
in energy policy formulation (foreign affairs,
environment and others) necessitating Executive
Office balancing; nor would it incorporate all
major natural resource programs, (Corps of Engineers,
Forest Service, and others) with the resulting
prospect of still greater future consolidation in
an even larger and more complicated Department.
Some concern would exist regarding the termination
of independent commission status for FPC functions
and the consequent prospect of improperly influencing
regulatory judgments.
Option B. Department of Energy (DoE)
Description
A consolidation of primary Federal energy
functions which are not integral and
inseparable aspects of the mission of other
agencies to form an advocate or special
purpose type of department. This con-
solidation would include, as a minimum,
functions of:
FEA
ERDA
and should also include functions of:
FPC
REA (Agriculture)
Power Marketing (DOI)
Energy Functions of the Bureau
of Mines (DOI)
NOTE: Other important energy functions of Interior,
e.g., oil and gas leasing by BLM and energy resource
assessment by USGS were found to be deeply integral
to the land management and geological missions of
Interior and not susceptible to excision.
Such a Department would have resources of approximately
22,860 staff and $7.2 billion funding. It would
consolidate about 68% of the manpower and 86% of the
funding currently committed to the Federal role in energy.
Advantages of Option B - DoE
Provides maximum feasible consolidation of energy
functions by themselves thereby facilitating a
10
unified and coherent Federal role in the national
energy system with component parts subject to
common policy direction by a single Secretary.
Permits resolution of unclear jurisdictions between
FEA and ERDA, as does the DENR option.
Highlights energy as a difficult, major and
long-term national issue area and, in keeping with
this status, gives it a cabinet-level spokesman
and point of contact who is "in charge" of energy
in dealings with other agencies, Congress,
Governors, industry and the public.
Provides that national energy policy will be
formulated by a single cabinet-level spokesman
with his own policy analytical staff, and direct
authority over major energy programs.
Projects to other nations, both allied and adversary,
a strong long-term commitment to resolving energy
issues through a top-level mechanism.
Permits better basis for rationalizing FPC policy
and actions with national energy policy and needs.
Narrower focus than DENR alternative would make
this alternative disturbing to fewer interest
groups and Congressional committees, thus enhancing
prospect for enactment.
Disadvantages of Option B - DoE
Would not take in some major Federal energy
functions, notably oil and gas leasing on public
lands, and as a result, continued cross-agency
coordination would be necessary in important areas.
Concentrated focus on energy and consequent
advocacy orientation would mean that some check
and balance mechanism would be needed especially
in energy policy formulation to assure that the
President gets objective advice and that conflicting
interests are represented.
Several of the projected components of the DoE
are very controversial and vulnerable to being
trimmed out in the legislative process - most
11
particularly FPC and REA. Were this to occur, the
proposed DoE would be little more than a merger
of FEA, ERDA, and certain Interior functions
giving rise to serious question of whether
department status is warranted.
Several of the energy functions to be incorporated
in DoE would require a measure of autonomy in order
to avoid being overpowered and submerged or losing
credibility - these include:
energy regulation, data, R&D, weapons -
special internal arrangements would be
necessary to assure the integrity or
visibility of these functions within the
DoE/energy advocacy climate.
Some concern would exist regarding the termination
of independent commission status for FPC functions.
Variation of Option B - National Energy Agency (NEA)
A variation of the Department of Energy option is to con-
solidate the same functions as in the DoE case but to organize
them at sub-cabinet level in an expanded energy agency.
Advantages of Sub-Cabinet Variation
This variation retains most of the advantages of
Option B, the DoE concept, and provides a fall-back
means of achieving these advantages if the DoE
consolidation becomes marginal because too many of
the potential program consolidations such as FPC and
REA fail to materialize.
Disadvantages of Sub-Cabinet Variation
Could signal to observers both foreign and domestic,
a less than full commitment to the resolution of
energy issues.
7
Would continue the present problem of no Cabinet
rank energy policy spokesman. Consequently, the
energy policy formulation machinery would continue
to have some of the institutional weakness of the
present ERC/FEA system, although to a lesser degree.
12
Option C. Retain the Present Structure - with Improvements
Some of the problems inherent in the present fragmented
placement of energy functions can be mitigated by relatively
modest actions such as improved coordination of policy
formulation by strengthening the ERC, recognizing
FEA as a permanent agency which has been expanded
beyond its original emergency role, and clarifying some
jurisdictional issues.
Advantages in Retaining Present Structure
Generally avoids the disruption that comes with
major organizational change.
Some progress can be expected in controlling dupli-
cation including overlapping expansion of FEA and
ERDA missions.
Disadvantages in Retaining Present Structure
Most of the serious weaknesses inherent in the
fragmented and uncoordinated system would not be
addressed.
Energy would continue to lack a single top level
spokesman with comprehensive authority over both
energy policy and operating programs.
Strengthening ERC by giving it full-time direction
and staff of its own can cause problems of its own,
i.e., an advocate in the Executive Office which is
unable to produce objective advice and which has
no moderating influence in the form of operating
responsibility; analog - CEQ.
Making FEA permanent with little other change
would tend to confer unintended permanence on
petroleum regulation.
VII. Conclusions and Recommendations
Based upon the findings of the study, reorganization of
Federal energy functions is well-warranted and, on balance,
the Department of Energy alternative will provide the most
effective long-term arrangement for coordinating and performing
Federal functions in this area. The significance and difficulty
of the energy situation will persist well into the future and
13
the coherence and continuity needed to accomplish the Federal
role can best be provided by a Department dedicated to that
purpose.
Some present energy functions should not be continued
into the indefinite future --- e.g., economic regulation of
petroleum and gas. Shifting this work to an established
Cabinet Department could have the undesired effect of
lending permanence to these programs which actually should be
phased out. This potential ill-effect of either the DoE or
DENR options can be avoided by continued legislative effort
to terminate these or other outmoded programs.
The critical need for balanced and credible conflict
resolution in the management of the public lands can best
be met by an arrangement which separates energy advocacy from
the responsibility for managing the nation's natural resource
assets - i.e., a DoE separate from the Department of Interior
(or ultimately a Department of Natural Resources). This
arrangement will permit continued accelerated development of
coal, oil, gas and uranium resources while other values such
as environmental safeguarding, preservation and alternate land
uses are fully and fairly represented as well. Retention of
the CEQ/EPA system will also force critical and major trade-
offs between energy and environment to the Presidential level,
which is appropriate for issues of this magnitude.
We propose that the nuclear weapons program of ERDA be
assigned to DoE along with the rest of ERDA's functions, and
that the legislation creating DoE provide for a joint
DoE/DoD study and report to the President and the Congress in
one year as to the feasibility or desirability of alternatives
to that assignment. This approach of providing for a study
was successfully used when ERDA was created to deal with
concerns expressed at that time that nuclear weapons develop-
ment and production and energy technology development might
pose conflicts in priority that cannot be reconciled within
a single agency. Providing for a one year study following
the creation of DoE is also consistent with your recent
instruction during the FY'78 ERDA budget review that ERDA
and DoE restudy ways to obtain appropriate funding competition
between the nuclear weapons program and other defense
requirements, without providing ERDA a separate budget plan-
ning ceiling for the weapons program.
Careful consideration of all alternatives indicates that:
14
The present fragmented structure is seriously
inadequate for the task and that any administra-
tive improvements of it will not basically alter
its ineffectiveness for the long-haul.
Most of the disadvantages cited for the DoE plan
can be offset by proper design of its internal
structure and other management actions. For
example, existing regulatory functions can be
divided into two categories -- general rulemaking
and adjudicatory responsibilities associated with
individual case decisions. The rulemaking can be
effectively and legitimately coordinated with related
policy decisions under direction of a Presidential
appointee subject to Senate confirmation. Individual
adjudicative decisions could be insulated by having
them made by Administrative Law Judges, with final
review available by an Appeals Board. Any subsequent
challenge would be in the courts, with no appeal to
the Secretary.
Conversely, the disadvantages of the DENR plan,
i.e., excessive size and diversity and internal
conflict, appear to be more intractable with no
effective way to offset them.
Functional Composition of the Department of Energy
A second level of analyses was performed in the course
of the study as to the exact composition of the DoE and the
DENR alternatives. That is, what functions should be included
or excluded from each concept. This question introduces some
controversial issues of its own. The most sensitive and
important of these decisions to include or exclude functions
from the recommended Department of Energy are listed below
for your information. More detail is contained in TAB C on
each item together with provision for you to make the decision
on each if you wish to do so. (If you decide on the DENR
option, we will furnish you the comparable information relating
to that option.)
The major exclude or include issues for DoE and
our conclusions regarding each are:
Nuclear Regulatory Commission (NRC) - exclude
Federal Power Commission (FPC) - include
FORD LIBRARY & GERALD
15
Rural Electrification Administration (REA) - include
Bureau of Mines (BOM) - include
(Proposed) Energy Independence Agency (EIA) - exclude
Position of Agency Head and Others
All relevant Agency Heads and other Administration
officials concur in the recommendation that you propose a
Department of Energy to the Congress. Any concerns or
reservations have been reflected in this memorandum.
Secretary Kleppe concurs in the basic decision, but does not
concur that the Interior Department's Bureau of Mines should
be transferred to the proposed DoE. His reasons for this
position are stated in TAB c, Section IV.
Further, the Agency Heads and other energy advisors all
agree that they would like to have an opportunity to discuss
this important decision with you after you have had a chance
to read this memo, if you feel it would be useful to do so.
Presidential Decision
Approve the Department of Energy (DoE)
Approve the DoE concept, but create as an agency
in lieu of a Cabinet Department
Approve the Department of Energy and Natural
Resources (DENR)
Continue with the present structure -- develop
specific ways to improve performance.
Other
TAB A
Circumstances Leading to Current Study of Energy Organization
and Its Relationship to Recent (1974) Changes in Energy
Organization
When the Arab oil embargo struck in November of 1973 precipi-
tating the energy crisis, the Administration had energy
organization legislation pending before Congress to split the
former AEC into R&D work (ERDA) and regulatory work (NRC) and
establish a Department of Energy and Natural Resources (DENR)
In view of the crisis, the Administration agreed to forego the
controversial DENR in order to expedite Congressional consider-
ation of ERDA and NRC. They were enacted in October 1974
together with the Energy Resources Council (ERC).
Meanwhile, also in response to the energy crisis, the Federal
Energy Administration had been created first by Executive Order
and then by law in June 1974.
These changes in energy organization soon after imposition of
the embargo were generally regarded both by the Administration
and Congress as only partial (ERDA and NRC) and short-term
(FEA and ERC) treatment of overall energy organization.
However, the early time period following the embargo was also a
time of major reappraisal of national energy policy including
a reassessment of the Federal role in relation to the private
sector role. During this period of fundamental reappraisal,
it was untimely to determine the most effective long-term organi-
zation for Federal energy activities which clearly should rest
on a well-developed concept of the Federal policy and role. We
now have these concepts in hand, if not necessarily universally
agreed upon.
It is, therefore, now timely to make this fundamental organiza-
tional review, and we have been so engaged for several months
working with the heads of affected agencies and their staffs.
After this study was initiated and well underway, a requirement
was inserted, with our concurrence, in the FEA extension-legis-
lation, which you signed in August, that the President shall
direct a comprehensive study of energy and natural resources and
forward a report with his recommendations and proposed legisla-
tion by December 31, 1976.
LOCATION OF ENERGY, ENERGY-RELATED, AND NATURAL RESOURCE
B
FUNCTIONS IN THE EXECUTIVE BRANCH
KEY:
ENERGY
THE PRESIDENT
ENERGY-RELATED
NATURAL RESOURCES
ERC
NOTE:
OTHER EXECUTIVE
Other agencies may participate
AGENCIES SOLELY CONCERNED WITH
OFFICE UNITS
CEQ
in energy goals collateral to their
FUNCTIONS UNDER STUDY
basic missions.
DEPARTMENTS
AGRIC
COMM.
DEFENSE
HEW
HUD
INT.
JUST.
LABOR
STATE
TRANS.
TREAS.
JB
RE:
N
AGENCIES
ACTION
CSA
EPA
EEOC
ERDA
FCA
FEA
FRS
GSA
NASA
X
NLRB
NSF
SBA
TVA
USCSC
USIA
USITC
VA
WRC
REGULATORY COMMISSIONS
CAB
CFTC
CPSC
FCC
FMC
FPC
FTC
ICC
NRC
SEC
me
TAE C
Major Inclusion or Exclusion Issues in Department of Energy Option
In determining the functional composition of a possible Department
of Energy (DoE), a number of sub-issues occur as to whether various
existing programs should be included or excluded from the DoE con-
cept. Some of these are fairly small issues or non-controversial --
others are more significant questions deserving your attention.
The major inclusion or exclusion issues are described and evaluated
below with provision for an indication of your guidance in each
case if you wish to do SO.
I. The Nuclear Regulatory Commission
A. Background
The NRC was established by the Energy Reorganization Act
of 1974. It is responsible for all the regulatory and
licensing functions of the former Atomic Energy Commission
which was abolished by the 1974 legislation, and is the
Federal agency responsible for the regulation of nuclear
power generation.
B. Major NRC Program Functions are as Follows
Nuclear Reactor Regulation - Assures adequate safety,
environmental protection, and safeguards in the issuance
of reactor licenses.
Standards Development - Produces engineering standards
for siting, fuel cycle facilities, safeguards, trans-
portation and product safety standard development.
Inspection and Enforcement - Conducts nuclear powerplant
safety inspections including the issuance of construction
permits and operating licenses. Also conducts safety
inspections of fuel cycle facilities and nuclear materials.
Nuclear Material Safety & Safeguards - Performs a safe-
guard licensing program devoted to waste management and
the development of generic environmental impact statements
for consumer products which contain nuclear material.
FORD i LIBRARY GERALD
2
Nuclear Regulatory Research - Conducts research on
light water reactors; commercial advance breeder reactors;
liquid metal fast breeder reactors, and research in such
areas as the development of techniques to determine
potential effects on nuclear facilities of earthquakes
and tornadoes, as well as research into health, environ-
ment, fuel cycle and safeguards areas.
C. Advantages and Disadvantages of Inclusion
All these are advantages and disadvantages of including
NRC or leaving it out. A summary follows:
Advantages of Transferring NRC Functions to a New
Energy Agency
Nuclear regulatory decisions could be made on a
more comparable basis with regulatory decisions
concerning the competing fossil fuel, and hydro-
electric power industries. This would broaden
the basis for more equitable decisions across
different and competing parts of the total energy
system.
Decisions on nuclear plant siting could be expedited
and related more directly to national energy policy.
Would facilitate Presidential control of final
nuclear export decisions which have strong inter-
national implications, instead of continuing to
place this control in an independent commission.
(Even so some amendments to law would likely be
needed.).
Permit resolution of existing duplication between
NRC and EPA in setting nuclear safety standards.
Disadvantages
Public concern over nuclear safety is so great
that tampering with the independence of nuclear
regulatory decisions would seriously undermine
public acceptance of nuclear power at this time.
Transfer to an executive agency advocating energy
development would be perceived by many as a delib-
erate attempt to weaken governmental concern for
nuclear health and safety in favor of energy develop-
ment, thus potentially eroding public confidence
in nuclear power and further exacerbating anti-
nuclear sentiment.
May be difficult to demonstrate in advance
that abolishing NRC would improve the executive
branch capacity to achieve coordinated manage-
ment of national energy programs. Thus, in view
of the opposition which such a proposal would con-
front, the inclusion would be hard to win and
could jeopardize the whole energy reorganization
package.
Agency Position
Chairman Rowden has not been consulted on this issue.
Conclusion - Retain Functions in NRC
The disadvantage relating to further accelerating public concern
for nuclear safety and the consequent difficulty in winning public
acceptance of nuclear power overwhelms the potential advantages.
The real advantage relating to bringing nuclear export licensing
under Presidential control can just as well, or better, be achieved
through a change in law authorizing the President to make the
final decision in these cases, in keeping with his responsibility
for the conduct of foreign affairs (as with CAB ruling on overseas
route awards).
Presidential Decision
Agree to functions remaining in NRC
Disagree. Revise planning to include NRC functions
in energy agency.
4
II. The Federal Power Commission (FPC)
A. Background
The FPC's regulatory authority extends over portions of
the natural gas and electric power industries. The FPC
exercises its regulatory powers in four program areas:
(1) licensing of hydroelectric projects; (2) setting
rates for interstate wholesale sales of electric energy;
(3) certification of pipeline facilities for the trans-
portation of natural gas; and (4) setting rates for
interstate wholesale sales of natural gas. The purposes
of these programs are broader than economic or rate
setting. They aim also at conservation of energy
resources, promotion of hydroelectric development, safety,
environmental protection, assuring an abundant supply
of electric energy and emergency preparedness. Pursuit
of these objectives necessitates extensive coordination
between FPC and other agencies including particularly
Interior and EPA.
B. Advantages and Disadvantages of Inclusion
Advantages
Inclusion of the FPC programs would help assure
their sensitivity to overall national energy policy
as formulated and coordinated by the DoE.
Regulatory actions regarding natural gas and
electric power could be developed over time in
relation to regulation of petroleum resulting in
a more rational and even-handed treatment among
these competing energy sectors for so long as they
remain under regulation.
Inclusion would facilitate improvements and
simplification in Federal energy data gathering
and use, as well as better emergency preparedness
coordination across energy sectors.
Affords an opportunity to give the functions of
FPC a better base from which to withstand pressure
or undue influence from the regulated industries.
Permits a trial run in the conversion of an
independent multi-member commission form to a
more streamlined Executive Agency plan.
5
Disadvantages
The independent comission form, while not very
responsive to national policy or changing condi-
tions, does have the merit of stability and
avoidance of undue political pressure, at least
as a common perception.
Abolishing FPC as an independent commission and
inclusion of its functions in an energy agency
could alarm the regulated industries as well as
conservation, environmental and consumer groups.
Congress would probably react very negatively to
dis-establishing this, or any, independent commission
apart from the merits of the case because of an
implied threat to this "arm of Congress" mode of
governance.
C.
Conclusion
A convincing case can be presented for abolishing FPC and
incorporating its functions in an energy agency.
The concern for the credibility and objectivity of regulatory
decisions, if placed in an executive agency, can be mitigated
by having adjudicatory proceedings heard by an Administrative
Law Judge, subject to review by an Appeals Board, the members
of which serve fixed terms, and by having regulatory functions
insulated from development functions. Therefore, on balance,
we feel the FPC functions should be incorporated in the DoE
planning since the objections can be partially offset and in
spite of anticipated strong Congressional opposition.
D.
FPC Chairman Position
Chairman Dunham expresses concern as to maintenance of
appropriate regulatory independence. However, " on the
subject of including the Federal Power Commission
our
minds are open to any proposal which would place all of the
Federal government's energy policy-management in one agency." "
(Excerpt from a letter to James L. Mitchell from Richard L.
Dunham, dated September 16, 1976.)
E.
Presidential Decision
/
/
Agree that functions of FPC be transferred to
DoE and that FPC be abolished.
/
Disagree. Leave FPC as is.
FORD is LIBRARY CERALD
III. Rural Electrification Administration (REA)
A. Background
The Rural Electrification Administration (REA) in the
Department of Agriculture was created in 1935 to make
low cost loans to finance electric and telephone service
in rural areas and thereby expedite rural electrification
and phone service.
REA makes loans to qualified borrowers, with preference
to non-profit and cooperative associations and to public
bodies, normally at 5 percent interest. REA borrowers
can also finance their capital needs from non-REA
sources with the aid of REA loan guarantees.
In 1975, approximately 25 million Americans were being
provided service from electrical systems financed by
REA. Also in 1975, borrowers from the telephone loan
program provided service to 9 million people in 42
States. REA does not own or operate facilities in either
the electric or telephone program.
While originally established to provide electricity for
America's farms, this job has been essentially completed.
Nearly 99% of all farms are electrified and virtually
all of the new customers are non-farm. Since 1961, more
than 8,000 commercial, industrial, and community
facility projects have been assisted by REA borrowers.
The REA is divided nearly equally between electric and
telephone programs with about 400 employees associated
with each.
B. Advantages and Disadvantages of Inclusion
Advantages
REA electric programs are no longer agricultural in
nature, but are directly related to energy development
and marketing. Consolidation of these programs with
other similar programs relating to power marketing and
development would greatly improve overall coordination
and administration of these efforts. Additionally, it
would reduce significantly the amount of energy organi-
zational fragmentation which now exists.
7
Disadvantages
The associations of REA borrowers constitute a broad
base and highly organized interest group which can be
expected to strongly oppose any change in status
because the loan programs have fared very well under
the Agriculture Committees of both Houses. The major
concern of the REA constituency would be. that inclusion
in an Energy Agency would highlight the REA loan
policies as out of date, no longer needed, and perhaps
even counter-productive from an energy policy point of
view. It could signal to them the beginning of the
end of very favored treatment.
C. Conclusions
The REA electric programs clearly have their primary
impact in the energy area with secondary rural develop-
ment impacts. As such, these programs properly belong
in a consolidated energy organization where they can be
rationalized with other programs relating to power
marketing and general energy policy. The telephone
loan programs are not directly energy related and could,
from a programmatic viewpoint, just as well be left in
USDA. However, the total administrative costs of both
programs would probably increase if they were separated.
In summary, there is no sound reason to leave REA out
of the energy consolidation planning other than the
strong prospect of losing the case on political grounds.
It is recommended that it be included therefore. If it
subsequently is ruled out and retained in USDA, it would
not be a crucial loss to the viability of an energy
consolidation.
D. Department of Agriculture Position
The Department of Agriculture prefers not to take an
official position concerning the potential consolidation
of REA into an Energy Agency.
E. Presidential Decision
Agree to inclusion of REA in a DoE
/
/
Agree to inclusion of REA electrification
programs in DoE proposal, but rural
telephone programs to remain in USDA.
/
/
Disagree, leave REA in USDA
FORD i LIBRARY 938870
8
IV.
Bureau of Mines
A. Background. The Bureau of Mines, established in 1910
in the Department of Interior, is primarily a mining/
minerals research and factfinding agency. As such,
its two major functions are (1) research and develop-
ment, and (2) data collection and analysis. Both
functions apply largely to coal and to a lesser degree
to other energy resources and non-energy minerals.
FY 1977 BOM appropriations were allocated as follows:
Funding ($M) Staffing
Research and Development
Metallurgy R&D
$ 25.7
840
-Energy-Related R&D
( 2.6)
( 72)
-Non-Energy R&D
(23.1)
(768)
Mining R&D
117.4
956
-Energy Related R&D
-Coal Extraction & Preparation
(59.7)
(321)
Oil Shale Mining
( 5.6)
( 22)
Coal Health & Safety
(30.2)
(363)
-Non-Energy Mining R&D
-Health & Safety
( 5.7)
( 77)
Other
( 6.1)
(131)
-Engineering Demos (Public Works)
(10.1)
( 42)
Data Collection and Analysis
15.6
550
-Energy
( 4.8)
(171)
-Non-Energy
(10.8)
(379)
Mineral Assessments
4.2
123
Administration & Executive Direction
1.5
66
Total FY 1977 - Mines & Minerals
$ 164.5
2,535
Working funds, trust funds,
helium, etc.
.6
304
TOTAL FY 1977 BUREAU OF MINES
$ 165.1
2,839
B. Issue and Options. Assuming the establishment of
a DoE, what should be done with the Bureau of Mines
functions?
The options are:
1. Transfer all of BOM to the DOE.
2. Retain all of BOM in Interior.
3. Transfer BOM's energy related functions to
DoE - but retain its non-energy functions in
Interior.
C.
Analysis
Option 1 - All in DoE
Advantages
The majority of BOM's resources are devoted to
energy (about 70% of funding), and the BOM
functions would therefore contribute significantly
to the consolidation of energy functions represented
by DoE.
BOM's energy and non-energy functions are not easily
separated. Some of the energy functions such as coal
R&D are easily identified. Others are not, but are
intertwined with non-energy functions in areas such
as data analysis in a way that would require arbitrary
decisions and serious disruption to split them apart.
Consolidating BOM's mining R&D with that performed
by ERDA in a DoE would overcome a growing area of
overlap and permit more effective resource competition
in R&D planning.
Consolidation of BOM's energy data collection,
analysis and forecasting functions with comparable
functions of other agencies proposed for inclusion
in DoE (FEA, FPC and ERDA) would facilitate develop-
ment of an integrated energy data system which elim-
inates existing duplication, inconsistencies and
inefficiencies.
10
Disadvantages
Would put DoE in the non-energy metallurgy
business ($23 million annually) including non-
energy domestic and international supply/demand
assessment and thereby dilute DoE's single-
purpose dedication to energy.
The Secretary of Interior would have to rely
on DOE for domestic and international energy
and non-energy mineral assessment reports and
for expertise in mining technology. The
Secretary maintains this would impair his ability
to manage the public lands, particularly with
respect to the leasing of their mineral resources.
Option 2 - All in Interior
Advantages
This option is supported by Secretary Kleppe, in his
memo to Mr. Lynn, attached. Generally, he feels the
Interior Secretary needs to have a capability in
extractive technology and mineral assessment to support
his land management and mineral leasing responsibilities.
This option also involves no disruption of Bureau of
Mines activities.
Disadvantages
Would continue the fragmentation of energy organization
in two key areas: coal preparation and mining tech-
nology, and energy data collection, analysis and
forecasting.
Option 3 - Split BOM between DoE and Interior
Advantages and Disadvantages
The evaluation of this option rests with its feasibility.
In other words, if the energy versus. non-energy split can
be made, this option may be best all around. However,
indications are that achieving the split would be very
difficult because the BOM mining technology work as well
as data collection, and particularly analysis is
extensively integrated at headquarters and field level.
Splitting energy functions out would also create
a problem at both headquarters and field level of
residual units that are sub-marginal.
D. Conclusion and Recommendation
Splitting the BOM work along energy and non-energy
lines is not practical because of the extent to which
the work has developed over the years as an integrated
operation and the dilemma posed by what to do with the
skeletal functions that would remain with Interior.
An R&D project relating to mine illumination, for
example, could benefit either a coal mine or a silver
mine. On the data side, the analysis of inter-
national data is done on a country-by-country basis
for all minerals and segregating out energy from non-
energy would be arbitrary and disruptive.
Consequently, the practical choice is between keeping
BOM functions together either in DoE or in Interior.
On balance, it appears that the better choice is to
transfer all of BOM functions to the proposed DoE as
the only way to effectively achieve the advantages of
integrating the R&D activities with those now assigned
to ERDA and building a central energy data collection
and analysis system to support national energy policy
development in an efficient and effective manner
including BOM data work. Conversely, the disadvantages
involved in lifting BOM functions out of Interior can,
with proper interagency planning, be overcome.
E. Presidential Decision
Agree; transfer all of BOM functions to DOE
Retain BOM functions in Interior as recommended
by Secretary Kleppe
Transfer BOM energy activities to DOE; retain
non-energy activities in Interior
TAB C
ORGANIZATION OF
FEDERAL ENERGY FUNCTIONS
LIBRARY
FORD i
GERALD
FEDERAL ROLE IN ENERGY: EXPANDED - - BUT STILL SECONDARY
0
HISTORICALLY, THE PRIVATE SECTOR HAS BEEN THE PRIME ACTOR IN MEETING
THE NATION'S ENERGY NEEDS,
-
FEDERAL ROLE IS EXPANDED AND MORE PROMINENT THAN PRIOR TO EMBARGO:
THREATENED CURTAILMENT OF IMPORTS PUTS ENERGY ON WORLD STAGE --
CREATING A NEW ENERGY ROLE FOR NATIONAL GOVERNMENT,
MASSIVE INVESTMENT AND HIGH VENTURE RISK IN DEVELOPING NEW ENERGY
TECHNOLOGY AND FRONTIER RESOURCES CALLS FOR FEDERAL FINANCIAL
INDUCEMENTS.
0
CRITICALITY OF ENERGY FORCES NEED FOR NATIONAL ENERGY POLICY,
0
NEVERTHELESS, PROPER FEDERAL ROLE IN ENERGY REMAINS SUPPLEMENTAL TO
THAT OF PRIVATE SECTOR,
-1-
LIBRARY
FEDERAL ROLE CAN BE EXERCISED IN VARYING DEGREE
FORD
BUT GENERALLY INCLUDES THE GOVERNMENT AS:
&
=
PLANNER AND FORMULATOR OF NATIONAL ENERGY POLICY
COLLECTOR AND PUBLISHER OF DATA
ECONOMIC REGULATOR
HEALTH, SAFETY AND ENVIRONMENTAL REGULATOR
FINANCIER
0
OWNER OR MANAGER OF ENERGY RESOURCES
0
TECHNOLOGY PROMOTER AND INNOVATOR
ENERGY PRODUCER - UNDER SPECIAL CIRCUMSTANCES
0
REPRESENTATIVE OF NATIONAL INTERESTS IN WORLD ENERGY NEGOTIATIONS
-2-
As A MATTER OF POLICY, THE ADMINISTRATION FAVORS THE MINIMUM NECESSARY
LEVEL OF FEDERAL INTERVENTION AND INVOLVEMENT IN ENERGY AFFAIRS AND
A CORRESPONDING MAXIMUM RELIANCE ON PRIVATE INITIATIVE, INVESTMENT
AND DECISION-MAKING IN BOTH THE SUPPLY AND DEMAND SIDES OF ENERGY.
HOWEVER, THIS POLICY IS ONLY PARTIALLY DETERMINANT. THE FEDERAL ROLE
ACTUALLY IN EFFECT AT ANY GIVEN TIME, IS THAT WHICH IS PRESCRIBED
BY LAW.
AGREE OR NOT, THE PRESIDENT IS OBLIGED TO SEE THAT THE LAWS ARE
FAITHFULLY EXECUTED -- AND, THEREFORE, MUST PROVIDE EFFECTIVE
ORGANIZATION FOR ALL ENERGY FUNCTIONS PRESCRIBED BY LAW.
THOSE FUNCTIONS WHICH ARE SUB-MARGINAL IN THE LIGHT OF A POLICY OF
MINIMUM NECESSARY FEDERAL INVOLVEMENT SHOULD NOT BE ORGANIZED IN A
WAY THAT EFFECTIVELY INSULATES THEM FROM EXECUTIVE REAPPRAISAL.
-3-
WHAT IS THE OBJECTIVE IN
FORD is LIBRARY GERALD
CONSIDERING ENERGY REORGANIZATION?
0
To ASSURE THAT THE FEDERAL ENERGY FUNCTIONS ARE EFFECTIVELY
ORGANIZED IN THE LIGHT OF THE EXPANDED AND ALTERED FEDERAL
ROLE. THAT IS: ---
- COMPONENT FUNCTIONS ARE COORDINATED WITH EACH OTHER
TO FORM A COHERENT FEDERAL ROLE IN ENERGY,
- CONFUSION AND WASTE DUE TO DUPLICATION IS AVOIDED.
- THE FEDERAL IMPACT ON ENERGY IS CONSISTENT WITH LEGISLATIVE
INTENT AND RESPONSIVE TO PRESIDENTIAL DIRECTION,
- ENERGY GOALS ARE PROPERLY BALANCED WITH NATIONAL GOALS
IN OTHER FIELDS,
-4-
THE IMPACT OF ENERGY IN OUR SOCIETY SAYS SOMETHING ABOUT HOW WE SHOULD
ORGANIZE TO PERFORM THE FEDERAL ENERGY ROLE
ENERGY Is:
0
CRITICAL TO:
THE ECONOMY, NATIONAL SECURITY, OUR LIFE-STYLE -- TO OUR SURVIVAL
PERVASIVE :
HOUSING, TRANSPORTATION, FARMING, DEFENSE, INDUSTRIAL PRODUCTION,
RECREATION
0
COMPRISED OF
COMPETING
SECTORS :
PETROLEUM, GAS, COAL, NUCLEAR, HYDRO, SOLAR, OTHER
0
OFTEN IN
CONFLICT
ENVIRONMENT, HEALTH AND SAFETY, RESOURCE CONSERVATION,
WITH OTHER
NATIONAL
PRICE STABILITY, FOREIGN POLICY
GOALS
:
0
A BLEND OF :
PRIVATE ENTERPRISE AND PUBLIC RESPONSIBILITY
#-##-#-#-#-#-#-#-#-#-#-#-#-#-#-#-#-#-#-#-#-#-#-#-#-#
IN SHORT, ENERGY IS A COMPLEX AND INTERRELATED SUBJECT AND THE FEDERAL INVOLVEMENT
REQUIRES CAREFULLY COORDINATED POLICIES AND DISCIPLINED IMPLEMENTATION IN
MEETING VITAL NATIONAL GOALS,
-5-
OUR PRESENT FEDERAL ENERGY ORGANIZATION INHIBITS COHERENT AND
EFFECTIVE ACCOMPLISHMENT OF THE FEDERAL ROLE IN ENERGY
No ONE -- UNDER THE PRESIDENT -- IS CLEARLY "IN CHARGE" AND ACCOUNTABLE.
- ERC LACKS STAFF OR AUTHORITY
- FEA HAS POLICY ROLE, BUT IS OPERATIONAL, SUB-CABINET, AND TEMPORARY
PRIMARY FEDERAL ENERGY PROGRAMS ARE FRAGMENTED AMONG FEA, ERDA AND OTHERS,
- COMPLICATES TASK OF PRESIDENTIAL CONTROL
- DIFFICULT TO ACHIEVE CONCERTED ACTION TOWARD SUPPLY DEVELOPMENT,
DEMAND REDUCTION OR OTHER BROAD GOALS
- SEPARATE ENERGY AGENCIES RESULT IN DIFFERING ENERGY PROJECTIONS --
PRODUCES CONFUSION
- RESOURCE TRADE-OFFS AMONG FEDERAL PROGRAMS ARE LESS LIKELY.
i
POLICY DEVELOPMENT IS DISCONNECTED FROM PROGRAM IMPLEMENTATION AND EVALUATION
-6-
0
AGENCIES TEND TO ENLARGE THEIR ROLES CAUSING INCREASING DUPLICATION
AND CONFUSION
- COMMERCIALIZATION OF NEW TECHNOLOGY - FEA, ERDA (EIA)
- CONSERVATION - FEA, ERDA AND DOT, COMMERCE, HUD
- MINE TECHNOLOGY RESEARCH AND DEVELOPMENT - INTERIOR AND ERDA
- DATA COLLECTION AND ANALYSIS - FEA, FPC, INTERIOR, ERDA AND OTHERS
- SUPPLY/DEMAND PROJECTIONS : - FEA, ERDA, INTERIOR
0
REGULATORY POWERS OF FPC AND NRC ARE SUBSTANTIAL INFLUENCES -- BUT NOT
RATIONALIZED WITH NATIONAL ENERGY GOALS
-7-
TWO ISSUES, IN PARTICULAR, ARE COMPLEX AND CENTRAL TO ENERGY ORGANIZATION:
ISSUE 1 - ENERGY REGULATION: A. - BALANCE BETWEEN INDEPENDENCE AND RESPONSIVENESS
B. - POTENTIAL CONFLICT BETWEEN REGULATION AND PROMOTION
A. INDEPENDENCE vs, RESPONSIVENESS - THE SIGNIFICANT IMPACT OF REGULATION SHOULD BE
CONSISTENT WITH NATIONAL ENERGY NEEDS AND POLICY -- BUT ACTIONS MUST BE
IMPARTIAL AND CREDIBLE.
?
RESOLUTION - KEY IS DISCTINCTION BETWEEN RULE-MAKING AND CASE ADJUDICATIONS,
ATTEMPT TO MAXIMIZE RULE-MAKING, PLACE ECONOMIC REGULATORY
PROGRAMS IN ENERGY AGENCY TO ASSURE RESPONSIVENESS IN RULE-
MAKING. INTERNALLY ISOLATE ADJUDICATIONS - ALJ's AND
INDEPENDENT APPEALS BOARD.
B. REGULATION vs, PROMOTION - ENERGY DEVELOPMENT CAN CONFLICT WITH HEALTH, SAFETY
AND ENVIRONMENT. PROGRAMS LIKE NRC AND MESA NOT SUITABLE FOR INCLUSION IN
ENERGY AGENCY. ENERGY VIEWPOINT CAN BE COMMUNICATED OPENLY TO REGULATORS AND
SHOULD INFLUENCE DECISIONS. ECONOMIC REGULATION NOT IN CONFLICT TO SAME
DEGREE -- CAN BE INCORPORATED AND SHOULD BE FOR RESPONSIVENESS .
-3-
ISSUE 2 - ENERGY ADVOCACY AND LAND MANAGEMENT
OUR SHORT TO MID-TERM ENERGY NEEDS REQUIRE NEW AND ACCELERATED
RECOVERY FROM PUBLIC LANDS -- ESPECIALLY ALASKA AND OCS, MANAGING
THESE ASSETS INVOLVES JUDGMENTS BY INTERIOR BETWEEN COMPETING CLAIMS,
How IS THE PUBLIC INTEREST IN ENERGY DEVELOPMENT TO BE REPRESENTED
IN THIS PROCESS? WHAT ORGANIZATIONAL ARRANGEMENT IS NEEDED.
RESOLUTION - BROAD POLICY RE ENERGY AND OTHER USES OF NATURAL RESOURCES
INVOLVES INTERIOR AND OTHER AGENCIES AND, USUALLY,
PRESIDENT AND CONGRESS. ENERGY REPRESENTED IN THESE
BROAD DECISIONS BY FEA (OR PROSPECTIVE DoE) AS AN ADVOCATE.
SPECIFIC SITE DECISIONS HANDLED WITHIN INTERIOR WITH ENERGY
AS WELL AS ALL OTHER VIEWS CONSIDERED IN BALANCED WAY,
CONCLUSION IS THAT ENERGY ADVOCACY AND LAND MANAGEMENT
NEED NOT BE ORGANIZED TOGETHER, AND -- IN FACT --
CREDIBILITY IS GREATER IF KEPT SEPARATE.
-9-
USDA
FPC
FEA
FORD LIBRARY GERALD
REA only
INTERIOR
ERDA
DEPARTMENT OF ENERGY
Bureau of Mines
(Energy Functions)
Bonneville, Alaska, SE, & SW
Staff
Budget ($M)
Power Administrations
Bur. of Reclamation
From ERDA
8350
6097
(Power Marketing)
FEA
3200
598
FPC
1460
42
INTERIOR
6000
250
USDA
820
21
TOTAL DOE
19,830
$7,018
DEPARTMENT OF ENERGY A Special Purpose Department Comprised of Primary Federal Energy Functions.
CONS
PROS
Consolidates fragmented energy functions and fosters a more coherent Federal energy role.
Energy advocacy role of DOE requires extensive balance at the Presidential level.
Highlights energy as a long-term national issue by assigning it department status and a
011/gas leasing activities remain separate; continue to require interagency coordination.
cabinet level accountable spokesperson.
Departmental status could be marginal based on small size and narrow focus.
Resolves FEA/ERDA jurisdiction issue.
Special internal arrangements required to assure autonomy and integrity of regulatory, data
R&D, and weapons functions.
Appropriately raises major energy policy tradeoffs to Presidential level,
DOD
COMMERCE
OSDA
NPR only
NOAA only
REA only
DEPARTMENT OF
ENERGY & NATURAL RESOURCES
FEA
Staff
Budget ($M)
FPC
From
ERDA
8350
6097
FEA
3200
598
FPC
1460
42
INTERIOR
61,380
4200
COMMERCE:NOAA
13,190
573
USDA REA
820
21
ERDA
INTERIOR
DOD NPR
130
406
TOTALS DENR
88,530
$11,262 (M)
DEPARTMENT OF ENERGY & NATIONAL RESOURCES . A Multi-Purpose Department Comprised of Primary Federal Energy Functions
Together with Functions of the Department of Interior.
PROS
CONS
Consolidates fragmented energy functions and fosters a more coherent Federal energy role.
Dilutes top level representation and accountability for energy.
Cabinet level representation for energy (with some natural and other functions).
Energy objectives could dominate other natural resource and land use requirements (or vise-versa).
Resolves FEA/ERDA jurisdiction disputes.
Difficulty of managing large conglomate type Department.
Permits resolution of many competing claims for resources within a single Department.
Buries major and critical programs (e.g. Energy R&D. Nuclear Weapons, NOAA, NPS, etc.)
Permits integration of related NOAA/USGS functions.
A large conglomerate . but still fails to consolidate major natural resource functions (e.g. Corps,
SCS, Forest Service).
DEPARTMENT OF ENERGY
DOE
REGULATORY
SECRETARY
TENTATIVE INTERNAL STRUCTURE
LIBRARY
APPEALS
UNDER SECRETARY
FORD
BOARD
is
QERALD
A/S
ENVIRONMENTAL
A/S NATIONAL
GENERAL
A/S ENERGY
A/S
& CONSUMER
ENERGY POLICY
COUNSEL
CONSERVATION
ADMINISTRATION
AFFAIRS
ENERGY RESEARCH AND
ENERGY REGULATORY
ENERGY DATA AND
ENERGY RESOURCES
DEVELOPMENT ADMIN.
ADMINISTRATION
ANALYSIS ADMIN.
DEVELOPMENT ADMIN.
ADMINISTRATOR
DEPUTY FOR MILITARY
ADMINISTRATOR
ADMINISTRATOR
ADMINISTRATOR
APPLICATIONS
LABS
Approx. Size
Budget . - $7,018 (M)
Staff - 19,830
REGIONAL OFFICES
DEPARTMENT OF ENERGY & NATURAL RESOURCES
DENR
SECRETARY
TENTATIVE INTERNAL STRUCTURE
UNDER SECRETARY
A/S ADMIN.
A/S CONG &.
OFFICE OF
GENERAL COUNSEL
LEGISLATION
TERRITORIAL
AFFAIRS
UNDER SECRETARY
REGULATORY
UNDER SECRETARY FOR
COMMISSIONER
APPEALS
FOR ENERGY
NATURAL RESOURCES
OF INDIAN AFFAIRS
BOARD
A/S LAND AND WATER
A/S NATIONAL ENERGY POLICY
BIA
MANAGEMENT
BLM
ADMIN. ENERGY DATA
BU REC
A/S CONSERVATION &
ADMIN. ENERGY R&D
RECREATION
NPS
ADMIN. ENERGY REGULATION
FWS
BOR
ADMIN. ENERGY RESOURCE DEVELOP
A/S OCEANIC, ATMOSPHERIC
AND EARTH SCIENCES
ADMIN. ENERGY CONSERVATION
NOAA
USGS
Approximate Size
Budget - $11,027 (M)
Staff - 88,530
REGIONAL OFFICES
WHAT ARE THE EXISTING ENERGY FUNCTIONS IN THE FEDERAL GOVERNMENT?
STAFFING
BUDGET ($1000's)
ERC
DRAFT
0
0
FEA
DEVELOP ENERGY POLICY (POLICY)
46
1,300
COLLECT AND ANALYZE ENERGY DATA (DATA)
356
27,300
REGULATE PETROLEUM PRICES (Econ. REG.)
1,395
34,000
PROMOTE ENERGY CONSERVATION PRACTICES (MIXED ROLES)
287
51,800
EXPAND DOMESTIC ENERGY PRODUCTION (MIXED ROLES)
294
12,700
PARTICIPATE IN INTERNATIONAL ENERGY AFFAIRS (INTERNATIONAL)
46
1,700
MANAGE STRATEGIC PETROLEUM RESERVES (PRODUCTION)
42
313,600
OTHER FEA
734
155,700
FEA SUBTOTAL
3,200
598,100
FPC
LICENSE NON-FEDERAL ||YDROELECTRIC PROJECTS (Econ.& ENVIRON.REG.)220
6,470
REGULATE INTERSTATE ELECTRICITY RATES (Econ, REG.)
320
9,220
CERTIFY NATURAL GAS FACILITIES (Econ, & ENVIRON. REG.)
360
11,570
REGULATE INTERSTATE NATURAL GAS RATES (Econ. REG.)
290
7,720
OTHER FPC
268
6,620
FPC SUBTOTAL
1,458
41,600
2
ERDA
DRAFT
DEVELOP ENERGY R&D POLICY (POLICY)
167
11,000
CONDUCT Fossil, SOLAR, NUCLEAR, & GEOTHERMAL ENERGY
R&D (TECHNOLOGY)
1,487
2,687.190
CONDUCT ENVIRONMENTAL, HEALTH & SAFETY R&D (TECHNOLOGY)
271
21,500
DISSEMINATE ENERGY R&D INFORMATION (DATA)
80
500
CONDUCT ENERGY CONSERVATION R&D (TECHNOLOGY)
182
91,000
ENCOURAGE INTERNATIONAL ENERGY R&D (TECHNOLOGY)
80
7,770
SPONSOR ENERGY R&D TRAINING (TECHNOLOGY)
9
16,540
PERFORM URANIUM ENRICHMENT FUEL REPROCESSING (PRODUCTION)
100
574,000
ENCOURAGE PRIVATE DEVELOPMENT OF GEOTHERMAL RESOURCES
(FINANCIER)
36
4,400
CONDUCT RESEARCH, DEVELOPMENT, TEST, AND PRODUCTION OF
NUCLEAR WEAPONS AND MATERIALS (PRODUCTION)
319
1,599,300
DEVELOP NAVAL NUCLEAR PROPULSION PLANTS (PRODUCTION)
82
220,500
DEVELOP NUCLEAR POWER SOURCES FOR SPACE PROGRAM (PRODUCTION) 17
32,300
OTHER ERDA INCLUDING FIELD CONTRACT ADMINISTRATION
AND PROCUREMENT ACTIVITIES
5,520
831,300
ERDA SUBTOTAL
8,350
6,097,300
3
NRC
DRAFT
REGULATE CONSTRUCTION AND OPERATION OF NUCLEAR REACTORS
(SAFETY REGULATOR)
1,012
50,025
REGULATE HANDLING OF NUCLEAR MATERIALS (SAFETY REGULATOR)
405
22,880
CONDUCT RESEARCH TO SUPPORT LICENSE AND REGULATORY
FUNCTIONS (MIXED ROLES)
135
121,550
DEVELOP EMERGENCY PREPAREDNESS PLANS (PLANNER)
128
5,015
COLLECT NUCLEAR REACTOR SAFETY DATA (DATA)
2
20
REGULATE IMPORT AND EXPORT OF NUCLEAR MATERIALS/
FACILITIES (MIXED ROLE)
3
205
OTHER NRC
844
49,735
NRC SUBTOTAL
2,529
249,430
DEPARTMENT OF INTERIOR
LEASING AND MANAGEMENT OF FEDERAL ENERGY RESOURCES
(OWNER/MANAGER)
2,490
170,000
MANAGEMENT OF ALASKAN PETROLEUM RESERVE (PRODUCTION)
105
106,700
COLLECT AND ANALYZE ENERGY RESOURCES DATA (DATA)
1,240
56,500
RESEARCH AND DEVELOP ENERGY MINING TECHNOLOGY
(TECHNOLOGY PROMOTER)
950
98,000
REGULATE HEALTH & SAFETY ASPECTS OF COAL MINING
(HEALTH & SAFETY REGULATIONS)
3,440
90,148
GENERATION & MARKETING OF ELECTRICITY (ENERGY PRODUCER)
6,160
269,600
DEPARTMENT OF AGRICULTURE
DRAFT
4
FINANCE RURAL ENERGY DEVELOPMENT AND MARKETING (FINANCIER)
820
21,600
DEPARTMENT OF DEFENSE
MANAGE OIL AND OIL SHALE RESERVES IN NPR (OWNER/MANAGER)
130
406,000
EPA
RESEARCH TO IMPROVE COAL COMBUSTION (MIXED ROLES)
32
21,800
DEPARTMENT OF TRANSPORTATION
REGULATE AUTO FUEL ECONOMY STANDARDS (ECONOMIC & ENVIRON.REG.)
40
4,500
REGULATE OIL AND NATURAL GAS PIPELINE SAFETY
(HEALTH AND SAFETY REGULATOR)
40
4,000
DEPARTMENT OF TREASURY
CONDUCT FINANCIAL AND POLICY ANALYSIS OF DOMESTIC AND
INTERNATIONAL ISSUES (POLICY)
14
300
DEPARTMENT OF STATE
FORMULATE INTERNATIONAL ENERGY POLICY (POLICY)
34
800
DEPARTMENT OF COMMERCE
FOSTER IMPROVED ENERGY UTILIZATION (ECONOMIC REGULATOR)
60
2,244
ADMINISTER COASTAL ZONE ENERGY IMPACT AID (FINANCIER)
20
146,500
5
CEA
DRAFT
PARTICIPATE IN FORMULATING NATIONAL ENERGY POLICY (POLICY)
2
40
TOTAL DIRECT INVESTMENT IN FEDERAL ENERGY ROLE 1/ 2/
31,114
$8,385,162 ($1000)
1/ TVA's POWER PROGRAM IS ESTIMATED AT $1.6 BILLION IN FY 77 AND WILL REQUIRE A STAFF OF
SEVERAL THOUSAND, THIS PROGRAM WILL BE FINANCED FROM PROCEEDS FROM CURRENT POWER
OPERATIONS AND BORROWINGS, RATHER THAN APPROPRIATION AND ARE THEREFORE EXCLUDED
FROM THESE TOTALS,
2/ THERE ARE A NUMBER OF SMALL ENERGY ACTIVITIES (DATA, REGULATORY, RESEARCH, ETC.) THAT
ARE INCORPORATED IN PROGRAMS WITH NON-ENERGY PURPOSES WHICH ARE NOT READILY IDENTIFIABLE
AND HAVE BEEN EXCLUDED FROM THESE TOTALS,
DRAFT
SUMMARY - DOE
STAFFING
FUNDING (M)
I
TOTAL DIRECT FEDERAL INVESTMENT
31,114
$ 8,385
'
PROPOSED FOR CONSOLIDATION IN DoE OPTION
19,830
7,018
I
NOT PROPOSED FOR CONSOLIDATION
- NRC
2,529
249
- INTERIOR ENERGY
8,385
541
- OTHER
370
577
,
PERCENT OF TOTAL FEDERAL ENERGY FUNCTIONS
CONSOLIDATED IN A DoE
64%
84%
DRAFT
SUMMARY - DENR
STAFFING
FUNDING (M)
TOTAL DIRECT FEDERAL INVESTMENT
31,114
$ 8,385
ENERGY FUNCTIONS NOT IN A DENR OPTION
NRC
2,529
249
OTHER
222
34
ENERGY FUNCTIONS IN A DENR OPTION
28,363
8,102
PERCENT OF TOTAL FEDERAL ENERGY FUNCTIONS
CONSOLIDATED IN A DENR
91%
97%
PROPOSED FOR CONSOLIDATION IN DENR OPTION
88,530
11,262
PERCENT NON-ENERGY FUNCTIONS IN DENR
68%
28%
FY 1976
FY 1977
FY 1978
FY 1979
Jan
ERDA
OMB
ERDA
ERDA
OMB
ERDA
OMB
ERDA Budget Authority ($ M)
Actual
Budget*
Req.
Recom.
Req.
Min.
Recom.
Req.
Recom.
Direct Energy R&D
Non-nuclear
( 636)
( 807)
( 989)
( 881)
(1726)
(1522)
(1056)
(2122)
(1268)
Fossil
414
477
483
483
911
815
585
1260
705
Solar
115
160
290
205
413
337
237
417
312
Geothermal
31
50
55
55
129
103
88
135
100
Conservation R&D
76
120
153
138
265
259
146
280
151
Energy Extension Service
---
8
---
8
8
---
30
Nuclear
(1048)
(1573)
(1609)
(1597)
(2374)
(2107)
(1967)
(2714)
(2276)
Fusion
251
392
428
416
578
525
513
687
579
Fuel cycle R&D
71
179
185
185
370
325
277
446
293
Liquid Metal Fast Breeder
519
688
686
686
965
865
815
1062
993
Nuclear fission applications
94
113
113
113
174
138
110
232
150
Uranium enrichment R&D
96
140
138
138
218
185
186
241
226
Nuclear Safeguards
17
28
31
31
38
38
38
38
35
Nuclear Safety facilities
33
28
28
31
31
28
8
Supporting Energy R&D
( 334)
( 364)
( 389)
( 381)
( 515)
( 476)
( 419)
( 468)
( 430)
Environmental/Biomedical
201
215
233
225
314
291
248
272
254
Supporting energy technology
133
149
156
156
201
185
17)
196
176
Production of enriched uranium
( 955)
(1495)
(1489)
(1489)
(1747)
(1687)
(1181)
(1703)
(1159)
Cascade power
512
689
689
689
806
765
793
898
885
Other
430
627
623
623
424
405
388
292
274
Add-on plant
13
179
177
177
517
517
( 512)**
513
( 513)**
Defense-related programs
(1640)
(1943)
(1952)
(1952)
(2638)
(2499)
(2295)
(2488)
(2282)
Weapons R&D/prod
1019
1203
1182
1182
1605
1545
1392
1510
1411
Weapons materials prod
387
540
554
554
785
707
662
675
569
Naval reactor R&D
234
200
216
216
248
247
241
302
302
A11 Other programs
( 553)
( 622)
( 639)
( 635)
( 890)
( 864)
( 715)
( 875)
( 715)
Spacecraft power R&D
25
23
23
23
37
37
28
41
26
High energy physics
180
220
224
224
281
278
269
278
240
Nuclear physics
74
74
81
81
86
86
86
87
87
Nuclear explosives applications
1
1
1
5
3
1
10
1
Program support
274
304
310
306
481
460
331
459
361
Subtotal
5166
6804
7067
6935
9890
9155
7633
10370
8130
Financial adjustments
52
78
-
9
-
9
134
121
112
142
117
390
FY 1979 inflation
Other Federal Funds
7
2
2
2
1
1
Foreign currency
Geothermal resource dev. fund
50
30
30
50
30
30
50
30
Synthetic fuels commercial demon
---
516
532
532
178
32
328
8996
Subtotal
5225
6932
7604
6956
10608
9840
7955
10595
Revenues
- 628
- 630
- 662
- 662
- 966
- 966
- 966
-1373
-1373
Uranium enrichment
Other
78
- 76
- 76
- 76
- 96
- 96
- 98
- 96
- 103
4519
6226
6866
6218
9546
8778
6891
9126
7520
Total BA
(Outlays)
(3743)
(5369)
(5411)
(5335)
(7234)
(6851)
(6032)
(8708)
(7069)
*
As amended
** Funds are included in allowance for contingencies.
19