The White House Fact Sheet
EMB? -.GoED rOf
UNTIL ilJ'5 A
JULY 16, 1979
(FiiVl)
Office of the White House Press Secretary
THE WHITE HOUSE
Fact Sheet on the
President's Import Reduction Program
HIGHLIGHTS
Actions which the Administration has taken since April 1977
have cut the nation's projected 1990 needs for imported oil by
about 4 million barrels per day (MMB/D).
The actions announced
by the President today will save an additional 4.5 MMB/D by
the end of the next decade, reducing estimated U.S. import
requirements by half. The President stated that the United
States will never again import more oil than it did in
1977. The President announced that import quotas for 1979
and 1980 will be set at levels below the ceilings agreed to
at the Tokyo Summit.
An overall strategy for reducing imports is essential to
secure the continuing economic strength and security of the
United States. In developing this program, the Administration
has examined all tools available to cut foreign oil dependence,
including synthetic fuels, conservation, production of uncon
ventional sources of oil and natural gas, direct use of coal,
and solar energy. The program the President is announcing
today draws on each of these sources to achieve our 1990
import reduction target.
The President's program would:
o
create an Energy Security Corporation to direct
the development of 2.5 MMB/D of oil substitutes
from coal liquids and gases, oil shale, biomass,
and unconventional gas by 1990.
o
establish a three-member Energy Mobilization
Board empowered to expedite permitting and
construction of critical energy facilities.
o
provide new incentives for development of heavy
oil resources, unconventional gas, and oil
shale.
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o
require utilities to cut current oil consumption
by 50%, saving 750,000 barrels of oil per day.
o
establish a major new residential and commercial
conservation program designed to save 500,000
barrels of oil per day by 1990.
o
provide $2.4 billion annually in assistance to
low-income families in the United States.
o
provide a total of $16.5 billion over the coming
decade for improvements in the nation's mass
transportation system and in automobile fuel
efficiency.
Combined with the initiatives announced in the President's
April 5 energy address and the Solar Bank, the program,
the President is announcing today will permit the United
States to cut its import requirements in half by 1990.
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I. ESTIMATED IMPACT OF
ADMINISTRATION INITIATIVES TO
REDUCE 1990 OIL IMPORTS
Savings (MMB/D)
IMPORT SAVINGS FROM PRESIDENTIAL PROGRAMS
o
Estimated Import Savings from
National Energy Act, including
—
2.5
Natural Gas Policy Act
Fuel Use Act
Energy Tax Act
Public Utilities Regulatory
--
Policy Act
National Energy Conservation
Policy Act
o
Estimated Import Savings from
April 5 Presidential program,
including
2 5
Phased Decontrol of Domestic
Crude Oil
-- June Solar Energy Message
Total Estimated Savings from
Actions to Da"te
o
'
4.00
Estimated Import Savings* from
July 16 Initiatives, including
Synthetic Fuels and
Unconventional Gas
Heavy Oil
—
—
Utility Reduction
Residential Conservation
Mass Transit and Auto Efficiency
, 50
, 50
,75
,50
25
Total Estimated Savings from
New Program
4.5
Total Estimated Savings from Past and Present
Programs
8.50
*Some small portxon of the projected savings from the July 16th
initiatives would occur anyway if future oil prices are
relatively high.
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1990 IMPORT LEVEL
■
Projecting total oil demand and imports in 1990 in the ^
absence of the President's-broad-ranging policy inxtiatives
is speculative. Under a continuation of the 1977 status
quo, however, import leveLs in the range of 13 million
barrels per day would not have been improbable.
Therefore, with successful;implementation of import reduc
tion programs of approximately 8.5 MBD, an estimate of
imports in 1990 might rang^ between 4 MMB/D and 5 MMB/D..
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TABLE I
TOTAL PROGRAM OBLIGATIONS-^
1980-1990
(Current $, Billions)
Energy Security Corporation
$3 Oil Shale Tax Credit
50<?/iiifc.
88.0
1.0
Tax credit for
unconventional natural gas
Heavy oil
1.0
Utility Oil Use Reduction
5.0
Residential/Commercial Conservation
Transportation Efficiency
Low-Income Assistance
Solar Bank and tax credits
Other April 5 programs
2.0
16.5^/
24.0-^/
3.5—
$141.0
1.2
$142.2
These initiatives will be funded solely out of the Energy
Security Trust Fund, which will receive proceeds of the
windfall profits tax. Actual funding for the ESTF will depend
on the final shape of the windfall profits tax and the future
direction of world oil prices. Estimates for the windfall
profits tax receipts range from $146 billion up to $270 billion
over the period 1980-1990, depending on oil price assumptions.
Any additional funds generated from the tax will be available
for additional energy expenditures or related actions.
Any reduction in the receipts from the windfall profits tax
will require reductions in these program levels. The
President's Advisory Committee on Energy Security will make
recommendations to the President on the use of any additional
funds.
2/
.
— This would be the cost of the Low-Income Assistance program
if it were extended for 10 years.
3/
— This would be the cost of the solar programs if the Solar
Bank is funded for ten years.
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II.
IMPORT QUOTAS AND TARGETS
The President announced that import quotas will
be established to hold net U.S. oil imports for 1979 and
1980 below the ceiling of 8.5 MMB/D agreed to at the
Tokyo Summit last June. For 1979 the quota level will be
set to limit net U.S. imports to 8.2 MMB/D, 300,000 B/D
below the level of the Tokyo ceiling. The import quota
for 1980 will also be below the Tokyo ceiling, but the
precise level will be determined later.
The quotas are to be set under the authority of
Sectiop 232 (b) of the Trade Expansion Act of 1953, which
permits the President, upon a finding of the Secretary of
Treasury, to limit any imports which threaten national
security. On March 14, 1979, the Secretary of the Treasury
made a finding that current levels of imports do constitute
such a threat.
The President may act to sot these quotas
without further legal or procedural requirements.
The President has directed the Secretaries of Energy
and Treasury to report back to him expeditiously with
recommendations on mechanisms for enforcement of these
quotas.
The President further announced his intent to continue
to use his quota authority to ensure that import targets for
the years beyond 1980 are met. These targets will be
established on a year-by-year basis.
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III.
THE ENERGY SECURITY CORPORATION
Structure and Organization
The President is asking Congress to enact legislation
creating an independent Energy Security Corporation which
will make investments in the production of synthetic fuels,
both liquids and gases, from coal, biomass, peat, and oil
shale, and in the development of our enormous reserves of
unconventional natural gas.
The Corporation will be an independent, government-
sponsored enterprise with a Congressional charter.
It will
be located outside the Executive Branch, independent of any
governmental agency.
The Corporation will be managed by a
7-person Board of Directors.
A Chairman and three other
outside directors will be appointed by the President and
confirmed by the Senate. In addition, the Secretaries of
Energy and Treasury and one other Department will sit on
the Board.
The officers and staff of the Corporation will be exempt
from Civil Service rules, and the Corporation itself will be
exempt from a number of rules which normally apply to govern
ment agencies.
The Corporation will have a 12-year charter which will
be sufficient to enable it to meet its 1990 production goal.
At the end of its life, its charter could be extended;
otherwise its liabilities and assets will be assumed by the
Treasury.
The Corporation's Mandate
The Energy Security Corporation will direct the
investment of $88 billion to produce 2.5 million barrels
per day of substitutes for imported oil by 1990. Funds
for the Corporation will come out of the receipts from the
President's proposed windfall profits tax. The Corporation's
exclusive objective will be the development of domestic
production capacity; it will not engage in tesearch and
development activities.
The Corporation will be authorized to invest in or
develop directly, production capacity from coal liquids, coal
gases, peat, biomass, shale oil, and unconventional natural
gas.
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The Corporation will determine the mix of the sources
and technologies which will be used to meet its 2.5 million
barrels per day mandate. The following table, however, shows
an illustrative division of sources for meeting the 1990
target:
o
coal liquids, coal gases;
1.0 to 1.5 MMB/D
o
oil shale;
.4 MMB/D
o
biomass; and
.1 MMB/D
o
unconventional gas
.5 to 1.0 MMB/D
Financing Tools
The Corporation will have a wide range of financing
devices available to it to maximize its leverage within the
private sector. These include: price guarantees, federal
purchase agreements, direct loans, loan guarantees, and a
limited number of government-owned and operated (GOGO) or
government-owned, company-operated (GOCO) plants. The
Energy Security Corporation will not have authority to
participate in joint ventures or other forms of equity
ownership, and its use of the budget authority granted to
it will be on a one-time basis.
Budget authority for the Energy Security Corporation
will be provided at the time it is created. Direct funding
will be provided for operating expenses, and $83 billion
in budget authority will be provided for direct
obligations and debt guarantees. The Energy Security
Corporation will receive the proceeds from the sale of small
denomination Energy Bonds which will be sold by the Treasury
and which will bear the same interest rate as U.S. Savings
Bgnds. Up to $5 billion of Energy Bond sales will be
authorized to support the Corporation's activities.
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IV.
THE ENERGY MOBILIZATION BOARD
The Administration has already acted under existing
authority to reduce delays in the permitting of critical
energy facilities. These actions already taken include;
o
Procedures for setting decision schedules for
critical energy facilities were established in April 1979
under the direction of the Office of Management and Budget.
o
Regulations reforming and streamlining require
ments of the National Environmental Policy Act (NEPA) were
issued by the Council on Environmental Quality in November
1978.
o
A Cabinet-level Energy Coordinating Committee
chaired by the Secretary of Energy was established by
Executive Order in September 1978.
In order to meet the 1990 targets for Oil import reduc
tion, however, substantial additional authority is needed to
accelerate the development of the domestic energy production
capacity. The President will submit legislation to Congress
to create an Energy Mobilization Board (EMB). The EMB Will
have three members and will be located within the Executive
Office of the President. EMB members will serve at the
pleasure of the President and will be confirmed by the Senate.
The Board will be authorized to designate certain non-
nuclear facilities as critical to achieving the nation's import
reduction goals and to establish binding schedules for federal,
state, and local decision-making with respect to those projects,
Judicial review of EMB decisions will take place in the Court
of Appeals for the Circuit In which the facility, is located
on an expedited basis.
If a federal, state or local agency fails to act within
the specified time frame, the Board will be empowered to make
the decision in place of thp agency, applying the appropriate
f
^ stat© OJT local law. Th© Board also will hav© th©
authority to waive procedural requirements of federal, state,
or local laws in order to expedite the development and
construction of a critical energy facility. To avoid delays
once construction has begun, the Board could also waive the
application of new substantive or procedural requirements of
law which come into effect after the construction of a project
has commenced. These waivers would be granted on a case by
case basis. Any EMB exercise of its waiver authority would
be subject to Presidential veto.
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V.
HEAVY OIL
The United States has an estimated reserve of over 10
billion barrels of heavy oil/, a highly viscous, almost
crude which must be,heated to be produced.
Much
of this reserve is in California. Heavy oils are more
expensive than conventional crude oil sources both to
produce and to refine, though a range of good quality
refined products can be produced from this source.
The President is directing the Department of Energy to
decontrol heavy oil immediately. Heavy oil also would be exempt
from the Windfall Profits Tax, thus allowing it to receive the
full world oil price. In addition to this price incentive,
the Department of Energy will, take steps to assure that natural
gas will be available for th.e production of heavy oil within
current environmental constraints.
With these actions it is estimated that 500,000 B/D can
oe produced from this soured by 1990. This initiative will
have relatively little budget impact, since little heavy
oil would be produced if this source were covered by the
Windfall Profits Tax. While;the costs of producing heavy
oil varies depending on site-specific reservoir features
and recovery techniques used, the Administration estimates
significant recovery at or just above the current world
oil price. Heavy oil production is not included within the
scope of the corporation, since it is basically an extension
of existing oil production technology, since the location
of reserves is relatively well defined, and since decontrol
and the tax exemption are sufficient incentives for its
production.
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VI.
UNCONVENTIONAL GAS■INITIATIVES
Recognizing the extremely- large potential gas
resources in the U.S. that exist in unconventional
formations, such as tight sands, devonian shale, geo-
pressurized methane and coal seams, the President has
proposed the following initiatives, in addition to
activities which the Energy Security Corporation can
take, which will significantly accelerate large scale
production of these reserves:
,o
The President, through the Department of Energy
will seek action from the Federal Energy Regulatory
Commission (FERC) to establish a special incentive price
for. natural gas from tight sands comparable to the
deregulated oil price. Although the Natural Gas Policy Act
deregulated other sources of unconventional gas, tight sands
were not included.
o.
Should the FERC fail to act on this request, the
Administration will seek an amendment to the Natural Gas Policy
Act to deregulate such gas.
o
In order to accelerate more rapidly the production
of these resources, a $0.50/mcf tax credit is proposed for
all unconventional gas production. The tax credit will phase
out at a world oil price equivalent of $28 per barrel.
o
The Energy Security Corporation is authorized
to provide assistance for development of unconventional
gas reserves if it determines that additional incentives are
needed to meet 1990 targets.
Unconventional gas producers
receiving assistance from the Corporation would not,
however, be eligible for the 50C/mcf tax credit.
Production resulting from these incentives is estimated
at 1 tcf to 2 tcf, or .5 to 1 MMB/D oil equivalent.
The major sources of unconventional gas are:
o
Tight or low permeability gas basins in the
o
Devonian shales of the Appalachian Basin.
o
Methane from coal seams.
o
Methane from geopressurized aquifers in the
Rocky Mountains region.
Gulf of Mexico.
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The technology involved in the recovery of gas from
tight sands and Devonian sh^le expands natural fractures
in the gas holding formations. Methods of recovery include
explosive and hydraulic frapturing and the drilling of
deviated wells.
Even now tdese sources make a significant
contribution to domestic production (which totals about
20 TCF) of about 1 TCF per year. Although production
efforts appear to be accelerating, particularly in the
Western tight gas sands basins, uncertainty about deregula
tion of tight gas production and the inability of certain
potential users to enter into long term gas supply contracts
constrain expanded exploration and production. In general,
development of these reserves was discouraged by natural gas
pricing policies in effect prior to the enactment of the
Natural Gas Policy Act.
;■
Although estimates of the potential production of
geopressurized methane from'the Gulf of Mexico varies, most
experts agree that at least 150 to 220 trillion cubic feet
(TCF) of additional gas could be recovered from these sources
at costs between $15 to $30-per barrel of oil equivalent.
The recoverable resource could prove to be much larger.
The'
technology for producing this gas requires further develop
ment.
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VII.
REDUCTION OF OIL USE IN UTILITY BOILERS
The nation's utilitiesi currently consume 1.5 MMB/D of
oil in their boilers for generation of electric power. The
President is proposing legislation to Congress which would
require,utilities to reduce current usage by 50%. by 1990.
Incentives in the form of grants and/or loan guarantees
would be provided to encourage utilities to invest in new
non-oil fired generators, thereby retiring existing oilfired plants earlier than would otherwise occur. This
initiative covers oil burning plants which are capable of
burning coal as well as those which are not.
Under this program, utility oil consumption targets
will be set for 1990 at half of existing usage — 750,000
barrels per day.
"Tickets"', or rights to burn oil, will be
distributed to utilities.
No utility may use oil in excess
of the amount of "tickets" which it holds.
These tickets
may be traded between utilities according to their varying
abilities to substitute other fuels.
These transferable
rights to burn oil will pemit the utilities themselves to
determine where to make replacements for current oil fired
capacity.
For example, utilities in areas where environmental
constraints or long coal hapls make replacement capacity
uneconomic, would be permitted to buy tickets from other regions
where lower costs would be incurred in switching away from
coal. It is expected that these tickets will have a maximum
value to any utility company equivalent to the cost of
conversion or replacement of oil-fired capacity versus
continued use of oil.
Grants and loan guarantees of $5 billion over the period
1980-1990 will be made available to assist in financing this
switch away from oil to sources such as coal, nuclear, or
where possible, solar and conservation. 750,000 barrels
per day will be saved under- this program.
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VIII.
RESIDENTIAL/COMMERCIAL CONSERVATION
AND CONVERSION
In 1978 the residential/commercial sector accounted
for 37 percent of total U,.S. energy demand, of which
about one-half was consumed as oil and natural gas.
Direct oil use in residen-iial and commercial buildings,
primarily for space and hot water heating, was over 3 MMB/D,
and the gas use was the equivalent of an additional
3.3 ;MMB/D. Substantial opportunities for saving imported
oil at relatively low cost: can be realized through
accelerated conservation investments.
The President's program relies' on two complementary
approaches to this sector: the retrofit installation of
conservation measures in existing buildings and the
conversion of oil heated space to natural gas where
feasible. The program is";;designed to overcome the major
barrier to retrofit building conservation by providing
effective long-term finanging of conservation measures
through electric and gas utilities, and governmentsubsidized loans for oil heated homes and buildings. The
oil import reduction target for this program is estimated
at 3.6% of the total energy consumption of the existing,
building stock, or 500,00Q.B/D of oil.
Savings at this level represent about 20% of the
potential savings achievable by the retrofit installation
of conservation measures in buildings. Strong public
participation in this program can substantially increase
the level of saving achieved.
The legislation the president will propose has three
components:
o
It builds upon the energy audit programs which
the National Energy Act requires utilities to provide to •
all residential customers I It will extend this audit
requirement to commercial^buildings.
o
Electric and gas utilities will be required to
offer long-term finaneing"-;to their residential and com
mercial customers for conservation improvements. These
loans would be included in the utility rate bases, just as
investments for new generating capacity would be, and
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the principal would be repaid when the house or building
is sold.
The requirement to offer loans to customers
would apply only to buildings heated or cooled by gas or
electricity; gas utilities could offer similar loans to
oil-heated homes to convert to natural gas, though they
will not be required to do so.
An amendment would be sought to the National Energy
Conservation Policy Act to provide an interest subsidy
for loans to the owners of oil—heated residential or
commercial buildings to install conservation measures or
to convert to natural gas.
this program over 10 years.
$2.0 billion is provided for
Improving the energy efficiency of buildings is the
cheapest means of reducing oil imports, with an average
cost,of savings estimated to be below $10 B/D.
This
program will remove the major remaining barrier to building
conservation by reducing immediate costs through long-term
utility financing or loans. All utility customers will
share in the benefits of energy conservation through the
savings achieved by avoiding purchase of expensive new
energy supplies or power generating capacity.
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IX.
LOW INCOME ASSISTANCE
Americans living in poverty will bear the heaviestburdens from higher energy prices and tighter supplies,
and they will be least able i'to bear those burdens.
Our nation's energy goals must not be pursued without
addressing these pressing human needs. The President will
ask the Congress to enact a program of Low Income Energy
Assistance which when fully ,effective,will use $2.4 billion
annually from the Energy Secjarity Trust Fund. A portion of
this will be available on a;matching-grant basis to encourage
and assist States in sharing' the fiscal burden of meeting
these needs of the poor.
Funds will be available? for various purposes, with
the great bulk to be used, for cash assistance to needy_
households. - The limited prq^rams of energy-related crisis
intervention and emergency assistance operated through the
Community Services Administration will be strengthened.
The Administration will-work with the Congress in an
effort to assure that substantial funds are available for
Low Income Assistance this winter.
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X.
TRANSPORTATION EFFICIENCY
Over the period 1980 to 1990, the President is
proposing expenditures of $ 16;5 billion for improvements
in the nation's mass transportation systems and in
automobile fuel efficiency. C^er $10 billion will.be
invested in existing mass transit systems to buy new,
buses and to upgrade existing/subway facilities. It
is estimated that this level of investment will produce
savings of 250,000 barrels per day of oil savings by 1990
The President has directed Secretary Adams to develop
expeditiously specific proposals for achieving this goal
in the mass transit and auto Efficiency areas.
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XI.
PRESIDENTIAL ADVISORY COMMITTEE ON ENERGY SECURITY
The President will estahlish an Advisory Committee on
Energy Security which will report to him and to the Secretary
of Energy on future direction^ for energy policy. The
Advisory Committee will have eleven members drawn from
outside the government. It will be chartered to give broadranging recommendations and advice on energy and related
economic matters.
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XII.
DESCRIPTION OF SPECIFIC COAL, SYNTHETIC,
BIOMASS, AND OIL SHALE RESOURCES AND TECHNOLOGIES TO BE
INCLUDED IN THE ENERGY SECURITY CORPORATION
The sections below describe the nature of the resources
or technologies which are proposed for Energy Security
Corporation investments. The Corporation will be
responsible for making individual decisions on the appropriate
incentives, and production targets for each of these categories.
A.
Coal Liquids
U.S. coal reserves are the largest in the world and
can supply a significant portion of U.S. liquid fuel needs far
into the future if modern technologies for the production of
synthetic fuels are successfully commercialized.
Processes for producing coal-derived liquid fuels may be
classified into two broad approaches — indirect and direct
processes.
o
In the case of the indirect liquefaction process,
coal is first gasified to produce a synthesis gas
(carbon monoxide and hydrogen) which in turn is
catalytically converted in one or more steps to liquid
fuels. Several commercially available technologies
for converting synthesis gas to liquids are avail
able. The Fischer-Tropsch process, currently in
commercial use in South Africa, is capable of
producing a wide range of liquid products including
gasoline and diesel fuels.
Methanol also can be
produced from coal synthesis gas using a number of
commercially licensed technologies. Methanol can
be used as a gasoline blend and as a turbine fuel.
In addition, a process for producing high octane
gasoline directly from methanol is in advanced
stages of development.
o
'
In the case of the direct liquefaction processes,
coal is suspended in a solvent and reacted with
hydrogen under high temperatures and pressures to
produce a range of liquid products. Several direct
liquefaction processes have been developed with
federal assistance and soon will be demonstrated
on a near commercial scale.
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Estimates of the costs of producing synthetic fuels
from coal vary from $27 to $45 per barrel depending on the
plant's products, i.e., liquid or gas, and its location.
A $38 per barrel average has been used for the purposes
of budget estimates for the corporation, although it is
hoped that costs will be lower.
B.
Coal Gasification
The production of a fuel gas from coal was a commonly
accepted technology earlier in th'is century before large
amounts of natural gas were available to consumers.
In
fact some countries still produce significant amounts of
gas from coal for use in chemical processes.
Although there are many different kinds of gasifiers,
most commercially available designs work best with
non-caking coals such as those found in the West. Newer
designs Vi^hich work efficiently on eastern coals are ready
for commercial demonstration.
A number of commercial coal gasification plants have
been designed and are ready for construction by the private
sector. Regulatory uncertainties and financing constraints
are preventing immediate commercialization. The EMB and
the Energy Security Corporation can help alleviate some
of these barriers.
C.
Shale Oil
The Nation's oil shale deposits, located principally
under a 16,500 square mile area of adjoining portions of
Colorado, Utah and Wyoming, represent one of the largest
potential energy sources in the U.S. Estimated to contain
more oil than Saudi Arabia — between 400 to 700 billion
barrels of recoverable oil — these reserves have long
been viewed as a potential source for crude oil substitutes.
Production of shale liquids will probably be less costly
than coal liquids, with an estimated cost of $25 to
$35 per barrel.
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Two different techniques for producing shale oil
are currently being developed. One requires mining with
surface retorting*; the other so-called "in situ" process
requires retorting — or heating — crushed shale rock
underground. Four major shale oil projects in the western
U.S. are currently in various stages of planning or
development. Oil shale production will require invest
ments of over $1.0 billion per plant. None of these oil
shale technologies have been demonstrated at scales near
commercial levels, and some federal assistance to these
projects is necessary. However, the expected costs of
oil shale, $25 to $35 per barrel, indicate that it will
be the first synthetic fuel to compete economically with
imported oil.
In addition to including oil shale within the mandate
of the Energy Security Corporation, the President has
proposed a $3/bbl tax credit to producers for each barrel
of shale oil produced. This credit, first announced by
the President in his April 5 energy message, would start
to phase out when oil prices reach $22/bbl and would
terminate at $28/bbl. It is expected that many companies
need only the encouragement provided by this tax credit
to begin the construction and operation of major oil
shale production facilities. Oil shale projects receiving
any assistance from the Corporation would not be eligible
for the oil shale tax credit.
D.
Biomass
Commercial production of alcohol fuels — ethanol
and methanol — from agricultural crops, residues, food
and wood processing wastes via fermentation and other
processes can make a contribution to our energy needs.
Blended with gasoline to produce gasohol, ethanol can
supplement U.S. oil supplies as a motor fuel extender
and octane improver. Production of ethanol is currently
relatively expensive when compared to petroleum on a
comparable Btu basis. However, the octane boosting
qualities allow subsidized gasohol to compete with unleaded
*Retorting is the process whereby the shale rock containing
the shale oil is heated to over 900°F in order to produce
the "kerogen", a precursor to the final useable shale product,
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premium gasoline.
Permanent elimination of the
federal
gasoline tax on gasohol —*a subsidy equivalent to $16.80
per barrel — will help gasohol compete with unleaded
regular grades. Improved techniques are expected to lead
to significant cost savings 4^d allow a wider range of
waste materials to be used.
Production of methanol from biomass is achieved in
a two-step process in which "synthesis gas" is first
produced and then catalytically converted to methanol by
commercially available processes. It is expected that
wood will be the principal biomass feedstock because of
its availability and relatively low cost. Other biomass
feedstocks such as crop residues and municipal solid
waste can also be used but at higher costs.
Producing alcohol fuels can help improve the environ
ment by converting waste materials to useful products.
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XIII.
A.
OTHER MEASURES
The Alaska Natural Gas Pipeline
Alaskan natural gas has the capability of replacirig
425,000 barrels per day of oil that the U.S. would
otherwise require by 1985, and larger amounts beyond that.
In August 1977 the President approved construction of a
pipeline from the Alaska North Slope to the midwest and
the west with the condition that it be privately financed.
Participation from the producers of that natural gas in
the form
required
however,
share to
of debt guarantees against cost overruns is
to make private financing possible. To date#
these oil companies have been unwilling to do their
make progress on this pipesline possible. The
President has directed the Secretary of Energy to urge the
heads of these companies to proceed with the financial
assistance needed to build the pipelipe.
B.
Standby gasoline rationing
This country must be fully prepared to withstand substantial
supply interruptions. The Presiderit has asked the Congress
to-join with him, on a priority badis, to ensure that he has
the authority to develop a standby !rationing plan which will
enable us to manage an emergency fairly.
C.
State conservation plans and targets
\
The President is urging Congress to enact legislation
which will permit him to set state-j-by-state targets for
conservation of gasoline and other )fuels.
Each state will
then develop and implement a plan to meet that target,
if a state fails to reach its.assigned conservation goal,
the federal government will be peri|iitted to impose a plan
for that State.
This authority islneeded to assure that
we can deal with a continuation of'the current shortfall and
any future supply interruptions.
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24
D.
Solar Bank
In his Message to the Congress on Solar Energy on
June 28, 1979, the President proposed the creation of
a Solar Bank to encourage the use' of solar energy by
means of subsidized loans, and thereby lessen the Nation's
dependence on foreign oil.
t
Legislation to establish the" Solar Bank which will
be transmitted to the Congress sKprtly, will provide for
the following essential elements;-:
o
It would be authorized to provide interest
subsidies for home improvement loans and mortgages
to finance the purchas^ and installation of
approved solar energy systems. The Bank would
pay upfront subsidies tp banks and other lending
institutions which would in turn permit them to
make home improvement 4hd mortgage loans for
solar investments at interest rates below the
prevailing market rate^
o
Solar energy systems wquld be defined to mean
any equipment which uses either active or passive
solar design and construction technologies, for
example, solar hot watpr heating, solar heating
and cooling, passive splar design, or some com
bination of these. The-Secretary of Housing and
Urban Development in consultation with the
Secretary of Energy Woi|id define the specifications
for these systems. |
o
The interest subsidy would be provided only for
that part of the home improvement or mortgage
loan which directly finances the solar investment.
The interest rate subsidy would be calculated to
compensate the lender fpr the difference in yield
between the subsidized|loan and a similar loan
made at the prevailing jnarket rate.
o
The interest subsidy wpuld be set from time to
time by the Board of Directors of the Bank (composed
of the Secretaries of HUD, doE, and Treasury) at
the level which will best serve the purposes of
accelerating the use of solar energy systems in
residential and commercial buildings.
o
The availability of the subsidy would be condi
tioned on an appropria^p warranty against defects.
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25
o
A commensurate portion of the subsidy would be
recovered by the Solar Bank whenever a solar loan
goes into default.
o
The following ceilings would be set on the size
of the loan or portion of the loan which would
be subsidized: $10,000 for a single-family
residence; $5,000 for each unit in a multi-
family residence (not to exceed $500,000 per
loan); and $200,000 for a commercial structure.
o
The Bank would be funded at $150 million per yearIt would be financed with monies to be provided
from the Energy Security Trust Fund.
Depending on the level of subsidy and the allocation
of the Solar Bank's resources among home mortgages, home
improvement loans and loans for commercial structures,
the Bank could assist well over 150,000 solar installations
per year, at this funding level.
E.
Solar Energy Tax Credits
In addition to the Solar Bank, the President also has
proposed major new tax credit initiatives for solar energy.
These credits will cover residential, commercial, agricultural,
and industrial sectors, and include active and passive solar
systems, process heat, wood stoves, as well as exemptions from
federal taxes on gasohol. These proposals will provide a
significant stimulus for the use of solar energy and_at the
same time contribute to our goals of reducing the amount of
oil used for heating and transportation. Legislation will
soon be submitted to the Congress which will provide for:
o
Tax Credits for Residential and Commercial Passive
Solar Construction
Builders of new passive solar multi-family and
commercial buildings will be provided with a tax
credit of $20 per million Btu estimated design
savings per annum for a thermal performance at
a specified level above the Building Energy
Performance Standard baseline established pursuant
to the Energy Conservation and Production Act (P.L.
94-385). The maximum amount of this tax credit
is $10,000 per building.
This tax credit will be
financed from revenues from the Energy Security
Trust Fund.
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26
:
A tax credit is proposed to be provided to
builders of new passive^'solar residences.
Builders would be allowed a tax credit of 20
percent of the cost of solar energy equipment
for each unit (up to four residential units per
building) in qualifying-designs, up to a maximum
tax credit of $2,000 per unit.
Starting in 1983,
eligibility for the residential tax credit will
be provided to builders:'who exceed the Federal
Building Energy Performance Standards by more
than 50%.
Tax credits for both residential and commercial
buildings will be effective through December 31, 1985.
Tax Credits for Solar Process Heat
An additional tax credit of 15% (for a total of
25%) is proposed to be provided from the Energy
Security Trust Fund on fhe cost of solar thermal
energy equipment to produce process heat in
agricultural and industrial applications. The
credit would be allowed|for the installed cost of
eligible equipment.
The credit is to be effective
through December 31, 1989.
Tax Credits for Wood Stoves
A new 15% tax credit has been proposed for the
purchase and installation of airtight woodburning
stoves in principal residences. This credit will
permit greater use of our wood resources for home
heating, and should permit consumers to save
significantly on their heating bills.
Tax Exemption for Gasohpl
A permanent exemption.fpr gasoline/alcohol mixtures
from the current 4<: federal gasoline excise tax to
encourage the use of ga^ohol has been.proposed.
Gasohol provides a usefpl supplement for fueling
our existing automobile} fleet and can help in
reducing our needs for iimported crude oil.
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27
XIV.
CURRENT PETROLEUM SUPPLY PICTURE
Increased crude oil imports in the past month, and
projections for further increases in July and August,
have resulted in an improved oil supply picture.
Gross
crude oil imports have averaged nearly 6.4- million barrels
per day during the past 5 weeks, confirming the Adminis
tration's judgment that imports had reached a low in the
month of May at levels below n 6, million barrels per day.
Projections for the remainder of July and August indicate
that the level of gross crude'oil imports will remain at
about 6.5 million barrels per'day. (Product imports which are
included within the quota, are estimated at 1.9 MMB/D.) This
projected level of gross crude and product imports will permit the
U.S. to meet the import quota the President has set.. The
improved supply picture has resulted in an increase in
refinery processing of crude oil by over 1 million barrels
per day since the end of may (14.2 to 15.4 million barrels
per day).
Production of gasoline, diesel fuel, and home
heating oil has in turn increased.
Distillate stocks for hqme heating next winter have grown
by more than 27 million barrels since the end of May, and
stocks have increased at a rate of almost 1 million barrels
per day in the past 2 weeks. That rate is adequate to meet
the target of 240 million barrels in storage in.October.
Stocks at 240 million barrels will assure that adequate
home heating oil supplies are available next winter, even
if the weather is colder than normal.
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:.2 8
XV.
WINDFALL PROFITS TAX AND THE USE OF THE
. ENERGY SECURITY TRUST FUND
The President's April 5 - energy message outlined his
plans for the phased decontrol of oil prices and the
proposal of a windfall profits tax that would prevent
excessive new revenues from flowing to oil producers asa result of the decontrol of;prices. The message also
proposed the creation of the\Energy Security Trust Fund
into which the receipts from/the windfall profits tax
would be deposited, as would;the first three years of oil
producers income tax increases that result from decontrol.
This fund would be used for |) helping low-income families
cope with increased energy cpsts; 2) new mass transit
initiatives; and 3) new energy related investments.
It is critical that the;.Congress enact the proposed
windfall profits /tax and the; Energy Security Trust Fund
in order to prevent the flow of excess revenues to oil
producers and to provide the source pf funds needed to
vigorously address the broad range, of this nation's energy
problems.
The oil reduction initiatives announced by the
President today are the energy-related investments first
proposed'on April 5. They cannot be carried out without
the funds provided by the windfall profits tax and
contained in the Energy Security,Trust Fund.
k.
The Energy Security Trust Fund will be the sole
source of funds for all the expenditures proposed in the
President's announcement.
To the extent that the windfall
profits tax fails to provided adequate revenues, downward
adjustments to programs will;have to be made.. Otherwise,
new burdens will be placed on what likely will be a
strained base federal budget.
# # # #
UNTIL ilJ'5 A
JULY 16, 1979
(FiiVl)
Office of the White House Press Secretary
THE WHITE HOUSE
Fact Sheet on the
President's Import Reduction Program
HIGHLIGHTS
Actions which the Administration has taken since April 1977
have cut the nation's projected 1990 needs for imported oil by
about 4 million barrels per day (MMB/D).
The actions announced
by the President today will save an additional 4.5 MMB/D by
the end of the next decade, reducing estimated U.S. import
requirements by half. The President stated that the United
States will never again import more oil than it did in
1977. The President announced that import quotas for 1979
and 1980 will be set at levels below the ceilings agreed to
at the Tokyo Summit.
An overall strategy for reducing imports is essential to
secure the continuing economic strength and security of the
United States. In developing this program, the Administration
has examined all tools available to cut foreign oil dependence,
including synthetic fuels, conservation, production of uncon
ventional sources of oil and natural gas, direct use of coal,
and solar energy. The program the President is announcing
today draws on each of these sources to achieve our 1990
import reduction target.
The President's program would:
o
create an Energy Security Corporation to direct
the development of 2.5 MMB/D of oil substitutes
from coal liquids and gases, oil shale, biomass,
and unconventional gas by 1990.
o
establish a three-member Energy Mobilization
Board empowered to expedite permitting and
construction of critical energy facilities.
o
provide new incentives for development of heavy
oil resources, unconventional gas, and oil
shale.
more
o
require utilities to cut current oil consumption
by 50%, saving 750,000 barrels of oil per day.
o
establish a major new residential and commercial
conservation program designed to save 500,000
barrels of oil per day by 1990.
o
provide $2.4 billion annually in assistance to
low-income families in the United States.
o
provide a total of $16.5 billion over the coming
decade for improvements in the nation's mass
transportation system and in automobile fuel
efficiency.
Combined with the initiatives announced in the President's
April 5 energy address and the Solar Bank, the program,
the President is announcing today will permit the United
States to cut its import requirements in half by 1990.
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I. ESTIMATED IMPACT OF
ADMINISTRATION INITIATIVES TO
REDUCE 1990 OIL IMPORTS
Savings (MMB/D)
IMPORT SAVINGS FROM PRESIDENTIAL PROGRAMS
o
Estimated Import Savings from
National Energy Act, including
—
2.5
Natural Gas Policy Act
Fuel Use Act
Energy Tax Act
Public Utilities Regulatory
--
Policy Act
National Energy Conservation
Policy Act
o
Estimated Import Savings from
April 5 Presidential program,
including
2 5
Phased Decontrol of Domestic
Crude Oil
-- June Solar Energy Message
Total Estimated Savings from
Actions to Da"te
o
'
4.00
Estimated Import Savings* from
July 16 Initiatives, including
Synthetic Fuels and
Unconventional Gas
Heavy Oil
—
—
Utility Reduction
Residential Conservation
Mass Transit and Auto Efficiency
, 50
, 50
,75
,50
25
Total Estimated Savings from
New Program
4.5
Total Estimated Savings from Past and Present
Programs
8.50
*Some small portxon of the projected savings from the July 16th
initiatives would occur anyway if future oil prices are
relatively high.
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1990 IMPORT LEVEL
■
Projecting total oil demand and imports in 1990 in the ^
absence of the President's-broad-ranging policy inxtiatives
is speculative. Under a continuation of the 1977 status
quo, however, import leveLs in the range of 13 million
barrels per day would not have been improbable.
Therefore, with successful;implementation of import reduc
tion programs of approximately 8.5 MBD, an estimate of
imports in 1990 might rang^ between 4 MMB/D and 5 MMB/D..
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TABLE I
TOTAL PROGRAM OBLIGATIONS-^
1980-1990
(Current $, Billions)
Energy Security Corporation
$3 Oil Shale Tax Credit
50<?/iiifc.
88.0
1.0
Tax credit for
unconventional natural gas
Heavy oil
1.0
Utility Oil Use Reduction
5.0
Residential/Commercial Conservation
Transportation Efficiency
Low-Income Assistance
Solar Bank and tax credits
Other April 5 programs
2.0
16.5^/
24.0-^/
3.5—
$141.0
1.2
$142.2
These initiatives will be funded solely out of the Energy
Security Trust Fund, which will receive proceeds of the
windfall profits tax. Actual funding for the ESTF will depend
on the final shape of the windfall profits tax and the future
direction of world oil prices. Estimates for the windfall
profits tax receipts range from $146 billion up to $270 billion
over the period 1980-1990, depending on oil price assumptions.
Any additional funds generated from the tax will be available
for additional energy expenditures or related actions.
Any reduction in the receipts from the windfall profits tax
will require reductions in these program levels. The
President's Advisory Committee on Energy Security will make
recommendations to the President on the use of any additional
funds.
2/
.
— This would be the cost of the Low-Income Assistance program
if it were extended for 10 years.
3/
— This would be the cost of the solar programs if the Solar
Bank is funded for ten years.
more
II.
IMPORT QUOTAS AND TARGETS
The President announced that import quotas will
be established to hold net U.S. oil imports for 1979 and
1980 below the ceiling of 8.5 MMB/D agreed to at the
Tokyo Summit last June. For 1979 the quota level will be
set to limit net U.S. imports to 8.2 MMB/D, 300,000 B/D
below the level of the Tokyo ceiling. The import quota
for 1980 will also be below the Tokyo ceiling, but the
precise level will be determined later.
The quotas are to be set under the authority of
Sectiop 232 (b) of the Trade Expansion Act of 1953, which
permits the President, upon a finding of the Secretary of
Treasury, to limit any imports which threaten national
security. On March 14, 1979, the Secretary of the Treasury
made a finding that current levels of imports do constitute
such a threat.
The President may act to sot these quotas
without further legal or procedural requirements.
The President has directed the Secretaries of Energy
and Treasury to report back to him expeditiously with
recommendations on mechanisms for enforcement of these
quotas.
The President further announced his intent to continue
to use his quota authority to ensure that import targets for
the years beyond 1980 are met. These targets will be
established on a year-by-year basis.
more
III.
THE ENERGY SECURITY CORPORATION
Structure and Organization
The President is asking Congress to enact legislation
creating an independent Energy Security Corporation which
will make investments in the production of synthetic fuels,
both liquids and gases, from coal, biomass, peat, and oil
shale, and in the development of our enormous reserves of
unconventional natural gas.
The Corporation will be an independent, government-
sponsored enterprise with a Congressional charter.
It will
be located outside the Executive Branch, independent of any
governmental agency.
The Corporation will be managed by a
7-person Board of Directors.
A Chairman and three other
outside directors will be appointed by the President and
confirmed by the Senate. In addition, the Secretaries of
Energy and Treasury and one other Department will sit on
the Board.
The officers and staff of the Corporation will be exempt
from Civil Service rules, and the Corporation itself will be
exempt from a number of rules which normally apply to govern
ment agencies.
The Corporation will have a 12-year charter which will
be sufficient to enable it to meet its 1990 production goal.
At the end of its life, its charter could be extended;
otherwise its liabilities and assets will be assumed by the
Treasury.
The Corporation's Mandate
The Energy Security Corporation will direct the
investment of $88 billion to produce 2.5 million barrels
per day of substitutes for imported oil by 1990. Funds
for the Corporation will come out of the receipts from the
President's proposed windfall profits tax. The Corporation's
exclusive objective will be the development of domestic
production capacity; it will not engage in tesearch and
development activities.
The Corporation will be authorized to invest in or
develop directly, production capacity from coal liquids, coal
gases, peat, biomass, shale oil, and unconventional natural
gas.
more
The Corporation will determine the mix of the sources
and technologies which will be used to meet its 2.5 million
barrels per day mandate. The following table, however, shows
an illustrative division of sources for meeting the 1990
target:
o
coal liquids, coal gases;
1.0 to 1.5 MMB/D
o
oil shale;
.4 MMB/D
o
biomass; and
.1 MMB/D
o
unconventional gas
.5 to 1.0 MMB/D
Financing Tools
The Corporation will have a wide range of financing
devices available to it to maximize its leverage within the
private sector. These include: price guarantees, federal
purchase agreements, direct loans, loan guarantees, and a
limited number of government-owned and operated (GOGO) or
government-owned, company-operated (GOCO) plants. The
Energy Security Corporation will not have authority to
participate in joint ventures or other forms of equity
ownership, and its use of the budget authority granted to
it will be on a one-time basis.
Budget authority for the Energy Security Corporation
will be provided at the time it is created. Direct funding
will be provided for operating expenses, and $83 billion
in budget authority will be provided for direct
obligations and debt guarantees. The Energy Security
Corporation will receive the proceeds from the sale of small
denomination Energy Bonds which will be sold by the Treasury
and which will bear the same interest rate as U.S. Savings
Bgnds. Up to $5 billion of Energy Bond sales will be
authorized to support the Corporation's activities.
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9
IV.
THE ENERGY MOBILIZATION BOARD
The Administration has already acted under existing
authority to reduce delays in the permitting of critical
energy facilities. These actions already taken include;
o
Procedures for setting decision schedules for
critical energy facilities were established in April 1979
under the direction of the Office of Management and Budget.
o
Regulations reforming and streamlining require
ments of the National Environmental Policy Act (NEPA) were
issued by the Council on Environmental Quality in November
1978.
o
A Cabinet-level Energy Coordinating Committee
chaired by the Secretary of Energy was established by
Executive Order in September 1978.
In order to meet the 1990 targets for Oil import reduc
tion, however, substantial additional authority is needed to
accelerate the development of the domestic energy production
capacity. The President will submit legislation to Congress
to create an Energy Mobilization Board (EMB). The EMB Will
have three members and will be located within the Executive
Office of the President. EMB members will serve at the
pleasure of the President and will be confirmed by the Senate.
The Board will be authorized to designate certain non-
nuclear facilities as critical to achieving the nation's import
reduction goals and to establish binding schedules for federal,
state, and local decision-making with respect to those projects,
Judicial review of EMB decisions will take place in the Court
of Appeals for the Circuit In which the facility, is located
on an expedited basis.
If a federal, state or local agency fails to act within
the specified time frame, the Board will be empowered to make
the decision in place of thp agency, applying the appropriate
f
^ stat© OJT local law. Th© Board also will hav© th©
authority to waive procedural requirements of federal, state,
or local laws in order to expedite the development and
construction of a critical energy facility. To avoid delays
once construction has begun, the Board could also waive the
application of new substantive or procedural requirements of
law which come into effect after the construction of a project
has commenced. These waivers would be granted on a case by
case basis. Any EMB exercise of its waiver authority would
be subject to Presidential veto.
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.10
V.
HEAVY OIL
The United States has an estimated reserve of over 10
billion barrels of heavy oil/, a highly viscous, almost
crude which must be,heated to be produced.
Much
of this reserve is in California. Heavy oils are more
expensive than conventional crude oil sources both to
produce and to refine, though a range of good quality
refined products can be produced from this source.
The President is directing the Department of Energy to
decontrol heavy oil immediately. Heavy oil also would be exempt
from the Windfall Profits Tax, thus allowing it to receive the
full world oil price. In addition to this price incentive,
the Department of Energy will, take steps to assure that natural
gas will be available for th.e production of heavy oil within
current environmental constraints.
With these actions it is estimated that 500,000 B/D can
oe produced from this soured by 1990. This initiative will
have relatively little budget impact, since little heavy
oil would be produced if this source were covered by the
Windfall Profits Tax. While;the costs of producing heavy
oil varies depending on site-specific reservoir features
and recovery techniques used, the Administration estimates
significant recovery at or just above the current world
oil price. Heavy oil production is not included within the
scope of the corporation, since it is basically an extension
of existing oil production technology, since the location
of reserves is relatively well defined, and since decontrol
and the tax exemption are sufficient incentives for its
production.
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11
VI.
UNCONVENTIONAL GAS■INITIATIVES
Recognizing the extremely- large potential gas
resources in the U.S. that exist in unconventional
formations, such as tight sands, devonian shale, geo-
pressurized methane and coal seams, the President has
proposed the following initiatives, in addition to
activities which the Energy Security Corporation can
take, which will significantly accelerate large scale
production of these reserves:
,o
The President, through the Department of Energy
will seek action from the Federal Energy Regulatory
Commission (FERC) to establish a special incentive price
for. natural gas from tight sands comparable to the
deregulated oil price. Although the Natural Gas Policy Act
deregulated other sources of unconventional gas, tight sands
were not included.
o.
Should the FERC fail to act on this request, the
Administration will seek an amendment to the Natural Gas Policy
Act to deregulate such gas.
o
In order to accelerate more rapidly the production
of these resources, a $0.50/mcf tax credit is proposed for
all unconventional gas production. The tax credit will phase
out at a world oil price equivalent of $28 per barrel.
o
The Energy Security Corporation is authorized
to provide assistance for development of unconventional
gas reserves if it determines that additional incentives are
needed to meet 1990 targets.
Unconventional gas producers
receiving assistance from the Corporation would not,
however, be eligible for the 50C/mcf tax credit.
Production resulting from these incentives is estimated
at 1 tcf to 2 tcf, or .5 to 1 MMB/D oil equivalent.
The major sources of unconventional gas are:
o
Tight or low permeability gas basins in the
o
Devonian shales of the Appalachian Basin.
o
Methane from coal seams.
o
Methane from geopressurized aquifers in the
Rocky Mountains region.
Gulf of Mexico.
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: 12
The technology involved in the recovery of gas from
tight sands and Devonian sh^le expands natural fractures
in the gas holding formations. Methods of recovery include
explosive and hydraulic frapturing and the drilling of
deviated wells.
Even now tdese sources make a significant
contribution to domestic production (which totals about
20 TCF) of about 1 TCF per year. Although production
efforts appear to be accelerating, particularly in the
Western tight gas sands basins, uncertainty about deregula
tion of tight gas production and the inability of certain
potential users to enter into long term gas supply contracts
constrain expanded exploration and production. In general,
development of these reserves was discouraged by natural gas
pricing policies in effect prior to the enactment of the
Natural Gas Policy Act.
;■
Although estimates of the potential production of
geopressurized methane from'the Gulf of Mexico varies, most
experts agree that at least 150 to 220 trillion cubic feet
(TCF) of additional gas could be recovered from these sources
at costs between $15 to $30-per barrel of oil equivalent.
The recoverable resource could prove to be much larger.
The'
technology for producing this gas requires further develop
ment.
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13
VII.
REDUCTION OF OIL USE IN UTILITY BOILERS
The nation's utilitiesi currently consume 1.5 MMB/D of
oil in their boilers for generation of electric power. The
President is proposing legislation to Congress which would
require,utilities to reduce current usage by 50%. by 1990.
Incentives in the form of grants and/or loan guarantees
would be provided to encourage utilities to invest in new
non-oil fired generators, thereby retiring existing oilfired plants earlier than would otherwise occur. This
initiative covers oil burning plants which are capable of
burning coal as well as those which are not.
Under this program, utility oil consumption targets
will be set for 1990 at half of existing usage — 750,000
barrels per day.
"Tickets"', or rights to burn oil, will be
distributed to utilities.
No utility may use oil in excess
of the amount of "tickets" which it holds.
These tickets
may be traded between utilities according to their varying
abilities to substitute other fuels.
These transferable
rights to burn oil will pemit the utilities themselves to
determine where to make replacements for current oil fired
capacity.
For example, utilities in areas where environmental
constraints or long coal hapls make replacement capacity
uneconomic, would be permitted to buy tickets from other regions
where lower costs would be incurred in switching away from
coal. It is expected that these tickets will have a maximum
value to any utility company equivalent to the cost of
conversion or replacement of oil-fired capacity versus
continued use of oil.
Grants and loan guarantees of $5 billion over the period
1980-1990 will be made available to assist in financing this
switch away from oil to sources such as coal, nuclear, or
where possible, solar and conservation. 750,000 barrels
per day will be saved under- this program.
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14
VIII.
RESIDENTIAL/COMMERCIAL CONSERVATION
AND CONVERSION
In 1978 the residential/commercial sector accounted
for 37 percent of total U,.S. energy demand, of which
about one-half was consumed as oil and natural gas.
Direct oil use in residen-iial and commercial buildings,
primarily for space and hot water heating, was over 3 MMB/D,
and the gas use was the equivalent of an additional
3.3 ;MMB/D. Substantial opportunities for saving imported
oil at relatively low cost: can be realized through
accelerated conservation investments.
The President's program relies' on two complementary
approaches to this sector: the retrofit installation of
conservation measures in existing buildings and the
conversion of oil heated space to natural gas where
feasible. The program is";;designed to overcome the major
barrier to retrofit building conservation by providing
effective long-term finanging of conservation measures
through electric and gas utilities, and governmentsubsidized loans for oil heated homes and buildings. The
oil import reduction target for this program is estimated
at 3.6% of the total energy consumption of the existing,
building stock, or 500,00Q.B/D of oil.
Savings at this level represent about 20% of the
potential savings achievable by the retrofit installation
of conservation measures in buildings. Strong public
participation in this program can substantially increase
the level of saving achieved.
The legislation the president will propose has three
components:
o
It builds upon the energy audit programs which
the National Energy Act requires utilities to provide to •
all residential customers I It will extend this audit
requirement to commercial^buildings.
o
Electric and gas utilities will be required to
offer long-term finaneing"-;to their residential and com
mercial customers for conservation improvements. These
loans would be included in the utility rate bases, just as
investments for new generating capacity would be, and
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15
the principal would be repaid when the house or building
is sold.
The requirement to offer loans to customers
would apply only to buildings heated or cooled by gas or
electricity; gas utilities could offer similar loans to
oil-heated homes to convert to natural gas, though they
will not be required to do so.
An amendment would be sought to the National Energy
Conservation Policy Act to provide an interest subsidy
for loans to the owners of oil—heated residential or
commercial buildings to install conservation measures or
to convert to natural gas.
this program over 10 years.
$2.0 billion is provided for
Improving the energy efficiency of buildings is the
cheapest means of reducing oil imports, with an average
cost,of savings estimated to be below $10 B/D.
This
program will remove the major remaining barrier to building
conservation by reducing immediate costs through long-term
utility financing or loans. All utility customers will
share in the benefits of energy conservation through the
savings achieved by avoiding purchase of expensive new
energy supplies or power generating capacity.
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16
IX.
LOW INCOME ASSISTANCE
Americans living in poverty will bear the heaviestburdens from higher energy prices and tighter supplies,
and they will be least able i'to bear those burdens.
Our nation's energy goals must not be pursued without
addressing these pressing human needs. The President will
ask the Congress to enact a program of Low Income Energy
Assistance which when fully ,effective,will use $2.4 billion
annually from the Energy Secjarity Trust Fund. A portion of
this will be available on a;matching-grant basis to encourage
and assist States in sharing' the fiscal burden of meeting
these needs of the poor.
Funds will be available? for various purposes, with
the great bulk to be used, for cash assistance to needy_
households. - The limited prq^rams of energy-related crisis
intervention and emergency assistance operated through the
Community Services Administration will be strengthened.
The Administration will-work with the Congress in an
effort to assure that substantial funds are available for
Low Income Assistance this winter.
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17
X.
TRANSPORTATION EFFICIENCY
Over the period 1980 to 1990, the President is
proposing expenditures of $ 16;5 billion for improvements
in the nation's mass transportation systems and in
automobile fuel efficiency. C^er $10 billion will.be
invested in existing mass transit systems to buy new,
buses and to upgrade existing/subway facilities. It
is estimated that this level of investment will produce
savings of 250,000 barrels per day of oil savings by 1990
The President has directed Secretary Adams to develop
expeditiously specific proposals for achieving this goal
in the mass transit and auto Efficiency areas.
18
XI.
PRESIDENTIAL ADVISORY COMMITTEE ON ENERGY SECURITY
The President will estahlish an Advisory Committee on
Energy Security which will report to him and to the Secretary
of Energy on future direction^ for energy policy. The
Advisory Committee will have eleven members drawn from
outside the government. It will be chartered to give broadranging recommendations and advice on energy and related
economic matters.
19
XII.
DESCRIPTION OF SPECIFIC COAL, SYNTHETIC,
BIOMASS, AND OIL SHALE RESOURCES AND TECHNOLOGIES TO BE
INCLUDED IN THE ENERGY SECURITY CORPORATION
The sections below describe the nature of the resources
or technologies which are proposed for Energy Security
Corporation investments. The Corporation will be
responsible for making individual decisions on the appropriate
incentives, and production targets for each of these categories.
A.
Coal Liquids
U.S. coal reserves are the largest in the world and
can supply a significant portion of U.S. liquid fuel needs far
into the future if modern technologies for the production of
synthetic fuels are successfully commercialized.
Processes for producing coal-derived liquid fuels may be
classified into two broad approaches — indirect and direct
processes.
o
In the case of the indirect liquefaction process,
coal is first gasified to produce a synthesis gas
(carbon monoxide and hydrogen) which in turn is
catalytically converted in one or more steps to liquid
fuels. Several commercially available technologies
for converting synthesis gas to liquids are avail
able. The Fischer-Tropsch process, currently in
commercial use in South Africa, is capable of
producing a wide range of liquid products including
gasoline and diesel fuels.
Methanol also can be
produced from coal synthesis gas using a number of
commercially licensed technologies. Methanol can
be used as a gasoline blend and as a turbine fuel.
In addition, a process for producing high octane
gasoline directly from methanol is in advanced
stages of development.
o
'
In the case of the direct liquefaction processes,
coal is suspended in a solvent and reacted with
hydrogen under high temperatures and pressures to
produce a range of liquid products. Several direct
liquefaction processes have been developed with
federal assistance and soon will be demonstrated
on a near commercial scale.
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20
Estimates of the costs of producing synthetic fuels
from coal vary from $27 to $45 per barrel depending on the
plant's products, i.e., liquid or gas, and its location.
A $38 per barrel average has been used for the purposes
of budget estimates for the corporation, although it is
hoped that costs will be lower.
B.
Coal Gasification
The production of a fuel gas from coal was a commonly
accepted technology earlier in th'is century before large
amounts of natural gas were available to consumers.
In
fact some countries still produce significant amounts of
gas from coal for use in chemical processes.
Although there are many different kinds of gasifiers,
most commercially available designs work best with
non-caking coals such as those found in the West. Newer
designs Vi^hich work efficiently on eastern coals are ready
for commercial demonstration.
A number of commercial coal gasification plants have
been designed and are ready for construction by the private
sector. Regulatory uncertainties and financing constraints
are preventing immediate commercialization. The EMB and
the Energy Security Corporation can help alleviate some
of these barriers.
C.
Shale Oil
The Nation's oil shale deposits, located principally
under a 16,500 square mile area of adjoining portions of
Colorado, Utah and Wyoming, represent one of the largest
potential energy sources in the U.S. Estimated to contain
more oil than Saudi Arabia — between 400 to 700 billion
barrels of recoverable oil — these reserves have long
been viewed as a potential source for crude oil substitutes.
Production of shale liquids will probably be less costly
than coal liquids, with an estimated cost of $25 to
$35 per barrel.
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21
Two different techniques for producing shale oil
are currently being developed. One requires mining with
surface retorting*; the other so-called "in situ" process
requires retorting — or heating — crushed shale rock
underground. Four major shale oil projects in the western
U.S. are currently in various stages of planning or
development. Oil shale production will require invest
ments of over $1.0 billion per plant. None of these oil
shale technologies have been demonstrated at scales near
commercial levels, and some federal assistance to these
projects is necessary. However, the expected costs of
oil shale, $25 to $35 per barrel, indicate that it will
be the first synthetic fuel to compete economically with
imported oil.
In addition to including oil shale within the mandate
of the Energy Security Corporation, the President has
proposed a $3/bbl tax credit to producers for each barrel
of shale oil produced. This credit, first announced by
the President in his April 5 energy message, would start
to phase out when oil prices reach $22/bbl and would
terminate at $28/bbl. It is expected that many companies
need only the encouragement provided by this tax credit
to begin the construction and operation of major oil
shale production facilities. Oil shale projects receiving
any assistance from the Corporation would not be eligible
for the oil shale tax credit.
D.
Biomass
Commercial production of alcohol fuels — ethanol
and methanol — from agricultural crops, residues, food
and wood processing wastes via fermentation and other
processes can make a contribution to our energy needs.
Blended with gasoline to produce gasohol, ethanol can
supplement U.S. oil supplies as a motor fuel extender
and octane improver. Production of ethanol is currently
relatively expensive when compared to petroleum on a
comparable Btu basis. However, the octane boosting
qualities allow subsidized gasohol to compete with unleaded
*Retorting is the process whereby the shale rock containing
the shale oil is heated to over 900°F in order to produce
the "kerogen", a precursor to the final useable shale product,
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22
premium gasoline.
Permanent elimination of the
federal
gasoline tax on gasohol —*a subsidy equivalent to $16.80
per barrel — will help gasohol compete with unleaded
regular grades. Improved techniques are expected to lead
to significant cost savings 4^d allow a wider range of
waste materials to be used.
Production of methanol from biomass is achieved in
a two-step process in which "synthesis gas" is first
produced and then catalytically converted to methanol by
commercially available processes. It is expected that
wood will be the principal biomass feedstock because of
its availability and relatively low cost. Other biomass
feedstocks such as crop residues and municipal solid
waste can also be used but at higher costs.
Producing alcohol fuels can help improve the environ
ment by converting waste materials to useful products.
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23
XIII.
A.
OTHER MEASURES
The Alaska Natural Gas Pipeline
Alaskan natural gas has the capability of replacirig
425,000 barrels per day of oil that the U.S. would
otherwise require by 1985, and larger amounts beyond that.
In August 1977 the President approved construction of a
pipeline from the Alaska North Slope to the midwest and
the west with the condition that it be privately financed.
Participation from the producers of that natural gas in
the form
required
however,
share to
of debt guarantees against cost overruns is
to make private financing possible. To date#
these oil companies have been unwilling to do their
make progress on this pipesline possible. The
President has directed the Secretary of Energy to urge the
heads of these companies to proceed with the financial
assistance needed to build the pipelipe.
B.
Standby gasoline rationing
This country must be fully prepared to withstand substantial
supply interruptions. The Presiderit has asked the Congress
to-join with him, on a priority badis, to ensure that he has
the authority to develop a standby !rationing plan which will
enable us to manage an emergency fairly.
C.
State conservation plans and targets
\
The President is urging Congress to enact legislation
which will permit him to set state-j-by-state targets for
conservation of gasoline and other )fuels.
Each state will
then develop and implement a plan to meet that target,
if a state fails to reach its.assigned conservation goal,
the federal government will be peri|iitted to impose a plan
for that State.
This authority islneeded to assure that
we can deal with a continuation of'the current shortfall and
any future supply interruptions.
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24
D.
Solar Bank
In his Message to the Congress on Solar Energy on
June 28, 1979, the President proposed the creation of
a Solar Bank to encourage the use' of solar energy by
means of subsidized loans, and thereby lessen the Nation's
dependence on foreign oil.
t
Legislation to establish the" Solar Bank which will
be transmitted to the Congress sKprtly, will provide for
the following essential elements;-:
o
It would be authorized to provide interest
subsidies for home improvement loans and mortgages
to finance the purchas^ and installation of
approved solar energy systems. The Bank would
pay upfront subsidies tp banks and other lending
institutions which would in turn permit them to
make home improvement 4hd mortgage loans for
solar investments at interest rates below the
prevailing market rate^
o
Solar energy systems wquld be defined to mean
any equipment which uses either active or passive
solar design and construction technologies, for
example, solar hot watpr heating, solar heating
and cooling, passive splar design, or some com
bination of these. The-Secretary of Housing and
Urban Development in consultation with the
Secretary of Energy Woi|id define the specifications
for these systems. |
o
The interest subsidy would be provided only for
that part of the home improvement or mortgage
loan which directly finances the solar investment.
The interest rate subsidy would be calculated to
compensate the lender fpr the difference in yield
between the subsidized|loan and a similar loan
made at the prevailing jnarket rate.
o
The interest subsidy wpuld be set from time to
time by the Board of Directors of the Bank (composed
of the Secretaries of HUD, doE, and Treasury) at
the level which will best serve the purposes of
accelerating the use of solar energy systems in
residential and commercial buildings.
o
The availability of the subsidy would be condi
tioned on an appropria^p warranty against defects.
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25
o
A commensurate portion of the subsidy would be
recovered by the Solar Bank whenever a solar loan
goes into default.
o
The following ceilings would be set on the size
of the loan or portion of the loan which would
be subsidized: $10,000 for a single-family
residence; $5,000 for each unit in a multi-
family residence (not to exceed $500,000 per
loan); and $200,000 for a commercial structure.
o
The Bank would be funded at $150 million per yearIt would be financed with monies to be provided
from the Energy Security Trust Fund.
Depending on the level of subsidy and the allocation
of the Solar Bank's resources among home mortgages, home
improvement loans and loans for commercial structures,
the Bank could assist well over 150,000 solar installations
per year, at this funding level.
E.
Solar Energy Tax Credits
In addition to the Solar Bank, the President also has
proposed major new tax credit initiatives for solar energy.
These credits will cover residential, commercial, agricultural,
and industrial sectors, and include active and passive solar
systems, process heat, wood stoves, as well as exemptions from
federal taxes on gasohol. These proposals will provide a
significant stimulus for the use of solar energy and_at the
same time contribute to our goals of reducing the amount of
oil used for heating and transportation. Legislation will
soon be submitted to the Congress which will provide for:
o
Tax Credits for Residential and Commercial Passive
Solar Construction
Builders of new passive solar multi-family and
commercial buildings will be provided with a tax
credit of $20 per million Btu estimated design
savings per annum for a thermal performance at
a specified level above the Building Energy
Performance Standard baseline established pursuant
to the Energy Conservation and Production Act (P.L.
94-385). The maximum amount of this tax credit
is $10,000 per building.
This tax credit will be
financed from revenues from the Energy Security
Trust Fund.
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26
:
A tax credit is proposed to be provided to
builders of new passive^'solar residences.
Builders would be allowed a tax credit of 20
percent of the cost of solar energy equipment
for each unit (up to four residential units per
building) in qualifying-designs, up to a maximum
tax credit of $2,000 per unit.
Starting in 1983,
eligibility for the residential tax credit will
be provided to builders:'who exceed the Federal
Building Energy Performance Standards by more
than 50%.
Tax credits for both residential and commercial
buildings will be effective through December 31, 1985.
Tax Credits for Solar Process Heat
An additional tax credit of 15% (for a total of
25%) is proposed to be provided from the Energy
Security Trust Fund on fhe cost of solar thermal
energy equipment to produce process heat in
agricultural and industrial applications. The
credit would be allowed|for the installed cost of
eligible equipment.
The credit is to be effective
through December 31, 1989.
Tax Credits for Wood Stoves
A new 15% tax credit has been proposed for the
purchase and installation of airtight woodburning
stoves in principal residences. This credit will
permit greater use of our wood resources for home
heating, and should permit consumers to save
significantly on their heating bills.
Tax Exemption for Gasohpl
A permanent exemption.fpr gasoline/alcohol mixtures
from the current 4<: federal gasoline excise tax to
encourage the use of ga^ohol has been.proposed.
Gasohol provides a usefpl supplement for fueling
our existing automobile} fleet and can help in
reducing our needs for iimported crude oil.
more
27
XIV.
CURRENT PETROLEUM SUPPLY PICTURE
Increased crude oil imports in the past month, and
projections for further increases in July and August,
have resulted in an improved oil supply picture.
Gross
crude oil imports have averaged nearly 6.4- million barrels
per day during the past 5 weeks, confirming the Adminis
tration's judgment that imports had reached a low in the
month of May at levels below n 6, million barrels per day.
Projections for the remainder of July and August indicate
that the level of gross crude'oil imports will remain at
about 6.5 million barrels per'day. (Product imports which are
included within the quota, are estimated at 1.9 MMB/D.) This
projected level of gross crude and product imports will permit the
U.S. to meet the import quota the President has set.. The
improved supply picture has resulted in an increase in
refinery processing of crude oil by over 1 million barrels
per day since the end of may (14.2 to 15.4 million barrels
per day).
Production of gasoline, diesel fuel, and home
heating oil has in turn increased.
Distillate stocks for hqme heating next winter have grown
by more than 27 million barrels since the end of May, and
stocks have increased at a rate of almost 1 million barrels
per day in the past 2 weeks. That rate is adequate to meet
the target of 240 million barrels in storage in.October.
Stocks at 240 million barrels will assure that adequate
home heating oil supplies are available next winter, even
if the weather is colder than normal.
more
:.2 8
XV.
WINDFALL PROFITS TAX AND THE USE OF THE
. ENERGY SECURITY TRUST FUND
The President's April 5 - energy message outlined his
plans for the phased decontrol of oil prices and the
proposal of a windfall profits tax that would prevent
excessive new revenues from flowing to oil producers asa result of the decontrol of;prices. The message also
proposed the creation of the\Energy Security Trust Fund
into which the receipts from/the windfall profits tax
would be deposited, as would;the first three years of oil
producers income tax increases that result from decontrol.
This fund would be used for |) helping low-income families
cope with increased energy cpsts; 2) new mass transit
initiatives; and 3) new energy related investments.
It is critical that the;.Congress enact the proposed
windfall profits /tax and the; Energy Security Trust Fund
in order to prevent the flow of excess revenues to oil
producers and to provide the source pf funds needed to
vigorously address the broad range, of this nation's energy
problems.
The oil reduction initiatives announced by the
President today are the energy-related investments first
proposed'on April 5. They cannot be carried out without
the funds provided by the windfall profits tax and
contained in the Energy Security,Trust Fund.
k.
The Energy Security Trust Fund will be the sole
source of funds for all the expenditures proposed in the
President's announcement.
To the extent that the windfall
profits tax fails to provided adequate revenues, downward
adjustments to programs will;have to be made.. Otherwise,
new burdens will be placed on what likely will be a
strained base federal budget.
# # # #
Document
Office of the White House Press Secretary released this document for "Fact Sheet on the President's Import Reduction Program" regarding President Carter's administration decided to reduce the oil imports.
Initiative
Collection
Dominic L. Cortese
Content Type
Fact Sheet
Resource Type
Document
Date
07/16/1979
Decade
1970
District
District 2
Language
English
City
Washington
Rights
No Copyright: http://rightsstatements.org/vocab/NoC-US/1.0/