Honorable Jennings Randolph

Chairman, Committee on Public Works

United States Senate

Washington, D. C. 20510

Dear Mr. Chairman:

As you know, since last year my staff has been developing
the program necessary to carry out the coal utilization
provisions of the Energy Supply and Environmental
Coordination Act of 1974. Much of the effort to date
has involved factual inquiries and analyses necessary to
lay the foundation for a sound and equitable program that
meets the procedural requirements of a rather complex
statute.

!

In light of your interest in this program, you may find
useful the enclosed brief staff report which summarizes
the efforts to date to implement the coal utilization
program. The Federal Energy Administration is currently
in the final stages of processing the necessary procedural
notices that will precede prohibition orders, and is
scheduling the public hearings required by law before
issuing some 30 prohibition orders by June 30.

On behalf of FEA, I would like to take this opportunity
to thank you personally for co-sponsoring, on April 9,
the floor amendment to S. 622 which would expand the
ESECA authorities for coal utilization to December 31, 1975.
This would provide FEA the opportunity to examine additional
utilities and other major fuel burning installations for
potential conversions to coal firing and to issue the
necessary orders where warranted.

I hope you find this report helpful, and should you have
any questions please do not hesitate to contact me.

Sincerely,

Judy Bail

Frank G. Zarb
Administrator

Enclosure

IMPLEMENTING COAL UTILIZATION PROVISIONS OF ENERGY SUPPLY AND ENVIRONMENTAL COORDINATION ACT

55-305 75 pt. 3 45

APRIL, 1975

OFFICE OF FUEL UTILIZATION
FEDERAL ENERGY ADMINISTRATION

IMPLEMENTING COAL UTILIZATION PROVISIONS OF
ENERGY SUPPLY AND ENVIRONMENTAL COORDINATION ACT

The purpose of this report is to review the status and current strategy of FEA's program for implementing the coal utilization provisions of the Energy Supply and Environmental Coordination Act (ESECA). Further, this report summarizes the Administration's proposed amendments to ESECA.

As a result of extensive analyses, FEA knows a great deal more about conversion of plants to coal and requirements concerning coal burning capacity for new plants than when the Act was passed. FEA's strategy for implementing the Act and proposed amendments to the Act are based on these analyses. This report is intended to put the strategy and proposed amandments into the perspective of these findings.

In summary, FEA has found that the potential oil savings from the program authorized by ESECA are substantial:

However, there may be significant constraints to realizing this potential. These include air pollution requirements, coal supply (in the short-run), and practicability considerations. In general, FEA judges that a substantial portion

*These savings are for direct substitution of oil by coal. Coal for gas substitution has not been calculated in oil equivalency.

**ESECA grants FEA authority to require power plants in the "early planning process" to be built with the capability to burn coal, but not the authority to require them to burn coal. This figure assumes that such plants will voluntarily burn coal.

of these savings can be realized, but while some savings will be realized in the 1975-1976 period, most will be realized in the 1977-1978 period due to the time required to install (or upgrade) air pollution control equipment and to develop additional coal supplies. Further, air pollution requirements may determine to a considerable extent the magnitude of the savings realized, due to the impact of air pollution requirements on practicability.

FEA's objective is to achieve as many of the oil savings realized under the provisions of ESECA as possible, with immediate emphasis on converting existing oil and gas powerplants to coal. We have proposed certain amendments to extend FEA's authorities to ensure that these savings are in fact realized.

This report is organized into three parts. The first summarizes the activities and findings of FEA's program under ESECA to date. The second presents FEA's strategy for implementing the Act. The third discusses the implementation problems FEA is facing and the amendments to the Act the Administration has proposed to deal with these problems. Also, a summary of the key provisions of the Act is presented in Appendix I.

ACTIVITIES AND FINDINGS TO DATE

Since ESECA was enacted, FEA has done a great deal in preparation for implementing its coal utilization provisions.

ESECA authorizes issuance of both long-term and shortterm prohibition orders. FEA's strategy from the outset has been to focus on long-term oil savings and long-term orders rather than on short-term orders expiring in June 1975. This stragegy was adopted because the coal supply situation was extremely tight through 1974, due to Arab embargo in the beginning of the year.

FEA's ESECA activities to date can be organized into three basic areas. The first was to begin conducting the background engineering, environmental, and economic analyses required to implement the Act. To conduct these, FEA relied both on expert contractors and inhouse efforts. The second was to develop requlations. The third was to publish an environmental impact statement. The regulations proposed by FEA were published in the Federal Register on February 5, 1975. The draft impact statement was published on January 31, 1975 and the final statement was published on April 25, 1975.

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The background analyses were organized into the four kinds of oil savings that could be achieved: (1) converting existing powerplants from oil and gas to coal, (2) ensuring that existing powerplants do not convert from coal to oil,

(3) requiring powerplants in the early planning process to have the capability to burn coal as their primary energy source, and (4) converting other major fuel burning installations to coal. For each of the four areas, the background analyses focused on (a) the potential oil savings, (b) the findings FÉA would have to make to issue an order (e.g., practicability, reliability, coal supply), and (c) an assessment of the environmental effects of such orders. The key findings of these background analyses in each of the four areas are summarized below.

1. Converting Existing Powerplants From Oil and Gas to Coal

The potential oil savings from converting existing powerplants from oil and gas to coal is significant. Eight (80) powerplants have been identified that currently burn oil and gas and that have coal burning capability. These eighty plants were identified, by a lengthy review and verification process from a list of 725 plants which responded to the Federal Power Commission's Emergency Fuel Convertibility Questionnaire. If all of these plants were converted, oil savings would be about 500,000-550,000 barrels per day.

However, the realization of these potential savings is constrained by several factors--air pollution requirements, coal supply, practicability, and perhaps reliability.

ESECA provides that plants that convert to coal as a result of FEA orders, and that cannot otherwise meet all air pollution requirements, may obtain extensions of compliance deadlines for the State Implementation Plan (SIP) emission limitations up until January 1, 1979. They must meet "primary standard" conditions, however, and any applicable "regional limitations." In addition, EPA must suspend an order if it finds the burning of coal by the source may cause or contribute to a "significant risk to public health" from pollutants for which national ambient air quality standards have not been promulgated. Section 303 of the Clean Air Act, relating to EPA's emergency powers, is also applicable.