FEDERAL POWER COMMISSION WASHINGTON, D.C. 20426 November 17, 1975 Honorable Ken Hechler, Chairman Committee on Science and Technology Suite 2331 Rayburn House Office Building Dear Mr. Chairman: Attached to this letter are responses to several questions and requests for drafting assistance which were advanced by members of your Subcommittee and its staff during my October 22, 1975 appearance on synthetic fuels. The first two attached items contain draft language to effectuate legislative recommendations made by me concerning Commission certification of synthetic gas plants and the review process contained in the proposed amendment to the Federal Nonnuclear Energy Research and Development Act of 1974 which appears in H.R. 9723. Item (3) concerns the comparative pricing of coal for the Wesco and ANG synthetic gas plants. Item (4) concerns the current status of three Interior Department approvals needed for the Wesco plant. Item (5) contains my personal views on the certification provisions contained in Sec. 603(a) of the proposed Energy Independence Authority Act. The last item, (6), details Commission participation on various interagency working groups, especially in regard to studies of synthetic fuels. I hope these responses will be satisfactory, and I am always available to provide additional information on these matters or any other subject which the Subcommittee requires. Sincerely, Jean & Kimeth Don S. Smith Vice Chairman Attachments 62-089 0 76 Vol. 2-8 (1) Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, Section 1. That section 2 of the Natural Gas Act is amended by redesignating subsections 2(6) through 2(9) therein as subsections 2(7) through 2(10), and inserting a new subsection 2(6) as follows: "Synthetic gas" means artificial gas, produced by any means, which in the judgment of the Commission has properties which render it suitable for use as a substitute for or supplement to natural gas. Section 2. That section 7 of the Natural Gas Act is amended by redesignating subsections 7 (d) through 7 (h) therein as subsections 7(e) through 7(i), and inserting a new subsection 7(d) as follows: No person shall undertake the construction or extension of any facilities for the production, transportation or sale of synthetic gas intended for sale or transportation in interstate commerce, or acquire or operate any such facilities or extensions thereof, or engage in the transportation or sale of synthetic natural gas in interstate commerce, unless there is in force with respect to such person a certificate of public convenience and necessity issued by the Commission authorizing such acts or operations. Section 3. That section 7 of the Natural Gas Act is amended by changing the reference to "subsection (e)" which appears in the first proviso in subsection (c) of that section to read "subsection (f)". Intended to be proposed to H.R. 9723, a bill to provide additional assistance to the Energy Research and Development Administration for the advancement of non-nuclear energy research, development, and demonstration, viz: The proposed new section 7(e) (7) (B) to be added to the Federal Nonnuclear Energy Research and Development Act of 1974 (42 U.S.C. 5906) by H.R. 9723 is amended to read as follows: (B) review and approve the proposed plans of the borrower for the construction and operation of such plant; provided however, that the Administrator may, in lieu of making an independent review of such plans, approve a review undertaken by the Federal Power Commission in cases involving the certification of synthetic gas plants. The construction plans and actual construction of the demonstration facility, together with all related facilities, shall be monitored by the Environmental Protection Agency. (3) During the course of questioning, Mr. Ketcham asked if the Commission could explain the difference between the 56.7¢/mcf coal cost anticipated for the ANG facility, and the 30.934/mcf figure projected for the Wesco plant. First, I would note that the apparent discrepancy is not as great as it seems if coal costs are considered as a percentage of the indicated SNG price at the tailgate of the plant: The actual difference in the level of coal costs (as well as total project costs) between the two proposals is attributable in part to the effects of inflation on the estimated cost of facilities (Wesco's cost estimates were essentially 1973 based, while ANG used 1974 dollars). More significantly, as far as coal pricing is concerned, is the fact that Wesco will purchase its coal from an existing, established mining operation (Utah International being the supplier of both coal and water for the project), at the lower costs attributable to equipment, labor, etc., at the time Utah International's operation was started. ANG, on the other hand, will be paying for coal from a "start from scratch" operation, with the attendant inflated costs for equipment, labor, etc. |