coal can assume a demand limited posture. Initiatives to foster this essential economic climate are not addressed in your energy program. While I support the Administration's position on coal conversion, few national benefits will be realized if the coal delivery system is incapable of meeting the resultant increased demands. Under the Energy Supply and Environmental Coordination Act of 1974, the Federal Energy Administration now has authority to order the conversion of some oil and gas fired electric power plants and major industrial users to coal with minimum compromise of compliance schedules for clean air requirements. Thus I am disturbed that additional authority will be sought to ease environmental rules, when this Act has yet to be implemented. National policies to protect public health, as contained in the Clean Air Act, must not be compromised although our country is faced with energy supply problems. Because of my concern, a week ago on January 25, 1975, I wrote Administrator Zarb asking for a report on the status of this program. Since I have not received a reply to my letter, perhaps we can have a status report here today. If the American people-industry, government, and the consumer alike—are to cope with the energy problems facing our country, it is requisite that the Executive and Legislative branches of our government jointly formulate a Comprehensive National Fuels and Energy Policy that fosters regional as well as national energy self-sufficiency. I so advocated by legislation in 1969 that this be done. The administration opposed this plan. At issue is our capacity to work cooperatively toward simultaneous achievement of national environmental and energy goals-for both are now being jeopardized. The solution will come hard; long-term policies for the reconciliation of energy and environmental interests will be difficult to formulate. Toward this end I pledge complete cooperation. This will be a most difficult challenge not only for government but also for industry. What must not be overlooked is that the American consumers' needs will be there; if their requirements are not met by some fuel our economy will be disrupted even greater than now. As I stated in 1961, before the Senate Interior and Insular Affairs Committee, and I repeat here: "As every year passes . . . we become more and more dependent on foreign oil to buttress our national economy and security, perhaps we are brought one year nearer to disaster. We are gambling with our country's future." UNITED STATES SENATE, COMMITTEE ON PUBLIC WORKS, Washington, D.C., January 14, 1975. Hon. GERALD R. FORD, The White House DEAR MR. PRESIDENT: I fully support your efforts to formulate a definitive, aggressive, and comprehensive national energy program to cope with our country's economic and energy problems; however, I am disturbed over some of the options under consideration and the apparent lack of emphasis on initiatives to strengthen our national coal supply system. Your statement last night and press reports portray a Federal program that perpetuates present biases toward the preferential use of petroleum and natural gas over coal. The fallacy of such a national energy posture from both economic and national security perspectives has been cogently demonstrated in recent times. The capability for the United States to approach energy self-sufficiency will not materialize solely from economic initiatives; indeed, under such policies, at present rates of growth in consumption, we can expect to experience continuing energy supply deficits at least on a regioinal basis. Therefore I would urge you to advocate greater regional energy supply independence, in addition to increased national energy self-sufficiency. Each region must bear an equitable share of the social, economic, and environmental implications of energy supply development and use. For example, promotion of the development of Western coal resources to satisfy Eastern energy demands, when regional alternatives such as Appalachian coal are available, is counter-productive to a national posture to foster energy conservation. Present oil prices, without imposition of a tariff on imported crude oil and petroleum products, place coal in a competitive position with oil even when environmental requirements also are met. The energy program you summarized preference to increased coal production to satisfy existing energy demands. Reason dictates that if energy self-sufficiency is to be even approached, in the future coal-not oil-must serve as a cornerstone for a National Energy Policy. The United States has four times more energy available in domestic coal resources than the Middle East has in oil-one-half of the world's known coal reserves. This is enough to satisfy our energy needs for about 500 years. At stake is the capability for coal to perform a greater role than previously envisioned in the United States energy supply system. Coal production is a complex, machine-oriented mining technology with attendant safety, engineering, and geological restrictions. As such, coal mining no longer lends itself to rapid expansion. New technologies must be developed from the mine-face to the point of end-use. Present coal supplies, however, are constrained by economic uncertainty and are thus producer or supply limited. This situation must now be reversed so that coal assumes a demand limited posture. Initiatives to foster this essential economic climate were not addressed in the summary of your energy program. The whole coal delivery system must be streamlined and upgraded; however, current programs focus attention only on utilization-where just a fraction of industry's problems can be seen. Mr. President, I support your position on coal conversion but few national benefits will be realized if the coal delivery system is incapable of meeting the resultant increased demands. Under the Energy Supply and Environmental Coordination Act of 1974, the Federal Energy Administration now has authority to order the conversion of some oil and gas fired electric power plants and major industrial users to coal with minimum compromise of compliance schedules for clean air requirements. Thus I am disturbed by reports that additional authority will be sought to ease environmental rules, when this Act has yet to be implemented. National policies to protect public health, as contained in the Clean Air Act, must not be compromised although our country is faced with energy supply problems. I am encouraged by your decision to support early enactment of surface mining legislation provided it is "more precise"; however, the Surface Mining Control and Reclamation Act of 1974 represented four years of deliberations by the Congress. In my judgement the measure achieved a reasoned and equitable balance between future needs for secure energy supplies and national concerns for environmental quality. The legislation set forth a definitive Federal policy governing the reclamation of surface mined lands, predicated on implementation by reasonable government officials. As you stated, energy conservation must become integral to the American way of life; however, economic incentives alone will be insufficient. National interest requires that we optimize the efficient use of our non-renewable resourcesenvironmental as well as energy resources. Therefore, as I did publicly on September 27, 1974, I again urge you to proclaim a National Energy Conservation Crusade. Reports of your support for strict thermal efficiency standards for all new construction as well as a 15 percent investment tax credit-up to $1,000-for homeowners who improve their homes by adding insulation and other energy savings devices is encouraging. During the 93rd Congress the Federal Construction Energy Conservation Act of 1973, which I authored, was opposed by the Executive Branch. It is essential that the potential energy savings in buildings— some 40 percent for new construction and some 25 percent for existing facilities-be realized. I look forward to working with your Administration toward early enactment of appropriate legislation. If the American people-industry, government, and the consumer alike—are to cope with the energy problems facing our country, it is requisite that the Executive and the Legislative branches of our government jointly formulate a comprehensive National Fuels and Energy Policy that fosters regional as well as national energy self-sufficiency. I so advocated by legislation in 1969 that this be done. The Administration opposed this plan. At issue, Mr. President, is our capacity to work cooperatively toward simultaneous achievement of national environmental and energy goals-for both are now being jeopardized. The solutions will come hard; long-term policies for the reconciliation of energy and environmental interests will be difficult to formulate. Toward this end I pledge complete cooperation. With personal and official esteem, I am, Truly, U.S. SENATE, Hon. FRANK E. ZARB, COMMITTEE ON PUBLIC WORKS, Washington, D.C., January 23, 1975. Administrator, Federal Energy Administration, DEAR MR. ADMINISTRATOR: On June 26, 1974, the President signed the Energy Supply and Environmental Coordination Act of 1974 (P.L. 93-319). Although almost seven months have elapsed since its enactment, the coal conversion provisions of this Act have not been implemented. On several occasions I have been assured by representatives of the Executive Branch and your predecessor, John Sawhill, that these provisions of this Act would be implemented in a timely manner. Successful implementation of this program by the Federal Energy Administration in concert with the Environmental Protection Agency will represent a significant first step in our national quest for increased energy self-sufficiency; it will facilitate the use of domestic coal supplies while providing for the protection of public health with minimum modification of applicable Federal and State clean air compliance schedules. President Ford in his State of the Union Message proposed changes in this law despite the fact that there is no experience under it. This is disturbing. I urge you to expedite issuance of regulations to implement this Act. Only on the basis of actual experience will the Congress be able to judge the validity of any Executive Branch proposed amendments to the Clean Air Act or the Energy Supply and Environmental Coordination Act of 1974. An early indication of your plans in this regard would be appreciated. JENNINGS RANDOLPH, Chairman. The CHAIRMAN. We will ask Secretary Morton to proceed. In addition, Frank Zarb, the Administrator of the Federal Energy Administration, is here along with Charles W. Robinson, Under Secretary for Economic Affairs, Department of State, and Gerald Parsky. Assistant Secretary of the Treasury, handling trade, energy and financial resources. Secretary MORTON. Let me identify the witnesses at the table. On my right is Under Secretary Robinson. To my immediate left is Mr. Zarb, and Mr. Parsky, Assistant Secretary of the Treasury. I have a statement that I would like to put into the record, but not read, because I think it is redundant in many respects to testimony that has already been put before this committee. I would like to highlight certain features of it, and I think this would save the committee some time. The CHAIRMAN. If there is no objection, I will enter into the record at this point, the statements of Secretary Morton, Administrator Zarb, Under Secretary Robinson, and Assistant Secretary Parsky in their entireties. [The statements follow:] STATEMENT OF HON. ROGERS C. B. MORTON, SECRETARY OF THE INTERIOR Mr. Chairman and members of the committee, I appreciate the opportunity to appear before this committee today to discuss the nation's energy situation and the President's program for solving our energy problems. In his State of the Union message, President Ford set forth a broad, but specific, program to regain this nation's oil and energy self-sufficiency. There are two key facets of this program-first, the program's goals and, second, specific measures to achieve them. Different specific energy measures from those we have chosen could be adopted by both the Executive Branch and the Congress, but they will either fail to achieve the goals or disrupt our way of now before the Congress as the "Energy Independence Act of 1975," defines a set of national energy goals, and initiates a comprehensive plan of action to accomplish those goals. Before FEA Administrator, Mr. Zarb discusses in detail the President's specific program, I would like to sketch, very briefly, the situation as it exists today and our response: CURRENT ENERGY PROBLEMS As you know, the domestic energy demand in the last decade has been growing at a far greatest rate than our ability to produce energy. In 1950, the United States was self-sufficient in energy but the situation has deteriorated considerably since that time. In the period from 1950 to 1970 our energy consumption increased at a rate of approximately 4 to 5 percent per year while production rates have been stabilizing and in some cases declining. Domestic production of petroleum has been declining since 1970; coal use remains at the levels of the 1930's and production itself is actually less than in the 1920's; since 1968 we have been consuming natural gas faster than we have discovered it; and nuclear power and other alternative energy sources have not yet begun to attain the promise of their potential. Natural gas shortages are forcing curtailment of supplies to many industrial firms and denial of service to new residential customers. (14 percent expected this winter versus 7 percent last year.) This is resulting in widespread unemployment, reductions in the production of fertilizer needed to increase food supplies and increased demand for alternative fuels-primarily imported oil. We now rely on coal for 17 percent of our energy and on oil and gas for most of the rest. Yet, we have at least 400 years of coal reserves left and only enough oil and gas to last a generation at the current levels of use. Petroleum imports have provided an ever-increasing share of America's domestic consumption rising from about 20 percent in 1970 to the present 37 percent; and by 1985 we estimate that imports would amount to a half, or as much as 60 percent, of our domestic oil consumption at historic rates of usage. Petroleum is readily available from foreign sources-but at arbitrarily high prices, causing massive outflow of dollars, and at the risk of increasing our Nation's vulnerability to severe economic disruption should another embargo be imposed. We paid $3 billion for imported oil in 1970, and $24 billion in 1974. If we do nothing to reverse this trend, our bill will reach an estimated $32 billion in 1977. The continuing outflow of our petrodollars will reduce the nation's savings pool, which is the mainspring of our economic system, causing further erosion of our Gross National Product and the inevitable loss of jobs that follows such reduction of our productive capacity. Already, the Embargo that began in October of 1973 has resulted in a 2% drop in our Gross National Product, and the unemployment of perhaps one-half million members of our labor force. Yet today, as the memory of the embargo fades, our imports have become even more concentrated in those nations of Africa and the Middle East. We have reached the point now that over half of our petroleum imports come from non-Western hemisphere sources. And, unless we do something, this reliance will continue to grow. Given these facts, I see no reason to expect that those nation's that have combined to quadruple petroleum prices should lower them. Overseas, we see major industrialized nations-many are our traditional friends and allies with limited or virtually non-existent domestic energy sources accumulating staggering deficits because of high oil prices. We hear grim warnings of their bankruptcy and imminent economic collapse. We see oilproducing nations accumulating surplus cash, more than they can productively use at home, at an estimated annual rate of about $60 billion-and we hear predictions of the monetary chaos these accumulations portend. The undeveloped and impoverished nations of the world must struggle for their economic survival even in the best of times. Now they have been bent to the breaking point under the weight of the increasing high cost of energy. They are faced with exclusion from the world market place, isolation, and starvation. In summarizing the situation, our nation's grip on its energy independence loosened as past policies exposed our economy to unprecedented supply disruptions and price increases of essential energy materials. In turn, this weakened our ability to guarantee our national security. And today reliance on foreign sources of oil and other imported energy resources is contributing to both inflationary and and several industrialized nations dependent upon imported oil are facing severe economic disruption. MAJOR FEDERAL RESPONSE This is the situation as it has been, is now and as it will continue to be unless we take firm and somewhat painful action to reverse the trend. The President's program will reverse this trend. We have done our homework. The program results from a planned series of Federal actions which, over the past year, have involved the full resources of the Executive. We have collectively assessed our energy problems and shaped a careful, comprehensive and decisive course of action. You will recall that in November, after many months of detailed study, the Administration released the Project Independence Report which analyzed the options we had to consider in order to achieve a balance of the supply and demand for domestic sources of energy with an acceptable low level of reliance on foreign energy sources. That effort, the first of its kind in our history, gave us the analytical framework with which to develop energy policy. The Energy Resources Council then worked with the other Federal agencies to outline and coordinate a series of specific energy goals for the United States and a number of detailed proposals to improve our short- and long-term energy situation. Each agency was asked to review the Project Independence Report and to provide suggested policy proposals. The energy package before you was developed using the best resources and judgment of these Federal agencies after extensive consultation with representatives of all sectors of the economy. Not only the energy implications of various proposals, but their economic, social and environmental impacts as well, were analyzed to determine the feasibility and impact of each. NATIONAL ENERGY GOALS As a first step in reviewing the President's program, it is important to understand the goals. They are three in number, and are parts of a time-phased program: First, we must act immediately to cut energy consumption and increase our domestic supply-and, thereby, to reduce imports by 1 million barrels per day by the end of this year and by 2 million barrels per day by the end of 1977. Second, by 1985, we must eliminate our nation's vulnerability to economic disruption by foreign suppliers. This will mean that by 1985 we should import no more than 15 percent of our total petroleum consumption. This is roughly 3 to 5 million barrels of oil per day and we should have the capability to immediately replace this amount from storage and standby measures in the event of a supply disruption. And third, we must strive to develop our energy technology and resources so that the United States has the ability to help supply the energy needs of the rest of the Free World by the end of this century. Any successful program will require cutting our demand for energy and stimulating supplies from our domestic energy sources. No single one of these approaches will suffice. All must be pursued. All involve economic and political costs, largely because they cannot be fully achieved through natural market forces operating within current national and international policies. To attain them, therefore, will take a massive and far reaching program that must include: Reducing imports immediately; Increasing our oil and gas supplies and our capability to use coal and nuclear power; Initiating a new mandatory energy conservation program; Storing energy reserves for use in domestic and national security emergencies, including up to one billion or more barrels of petroleum storage; Gaining commitments from the various States and regions of our nation to do their fair share toward solving the nation's energy problems; and Committing the Federal Government, which the President has done, to policies which insure that no one city, State or region will be asked to do more than its share for the good of the nation. Already the Energy Resources Council has received pledges from seven of the largest energy-using industries to reduce their energy consumption by 15 percent per unit of production by 1980. The auto industry also agreed to the Energy Resources Council request that it achieves a 40 percent improvement in efficiency by 1980. This translates roughly into a weighted average of 19.6 miles per gallon |