U. S. energy demand and supply, 1976-1985

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Title:
U. S. energy demand and supply, 1976-1985 limited options, unlimited constraints ; final report
Physical Description:
viii, 146 p. : ; 23 cm.
Language:
English
Creator:
Library of Congress -- Congressional Research Service
United States -- Congress. -- House. -- Committee on Interstate and Foreign Commerce
United States -- Congress. -- House. -- Committee on Interstate and Foreign Commerce. -- Subcommittee on Energy and Power
Publisher:
U. S. Government Printing Office
Place of Publication:
Washington
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Subjects / Keywords:
Energy consumption -- United States   ( lcsh )
Power resources -- United States   ( lcsh )
Energy policy -- United States   ( lcsh )
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federal government publication   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )

Notes

Bibliography:
Includes bibliographical references.
Statement of Responsibility:
prepared by the Congressional Research Service for use by the Subcommittee on Energy and Power of the Committee on Interstate and Foreign Commerce, House of Representatives, Ninety-fifth Congress, first session.
General Note:
CIS Microfiche Accession Numbers: CIS 78 H502-13
General Note:
At head of title: 95th Congress, 2d session. Committee print. Committee print: 95-43.
General Note:
Issued Mar. 1978.
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Reuse of record except for individual research requires license from LexisNexis Academic & Library Solutions.
General Note:
At head of title : 95th Congress, 2d session. Committee print; 95-43.

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University of Florida
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
aleph - 024742236
oclc - 03793527
Classification:
lcc - KF49
System ID:
AA00024799:00001

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,95th Congress COMMITTEE PRINT CON fITE
2d Session PRN j19.5-43





U.S. ENERGY DEMAND AND SUPPLY 1976-1985
LIMITED OPTIONS, UNLIMITED CONSTRAINTS




FINAL REPORT

PREPARED BY TIHE

CONGRESSIONAL RESEARCH, SERVICE

FOR USE BY THE
SUBCOMMITTEE ON ENERGY AND POWER
OF THE

COMMITTEE ON INTERSTATE AND
FOREIGN COMMERCE
HOUSE OF REPRESENTATIVES
NINETY-FIFTH CONGRESS
FIRST SESSION









MARCH 1978




U.S. GOVERNMENT PRINTING OFFICE
21-6160 WASHINGTON :1978

For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402











COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE

HARLEY 0. STAGGERS, West Virginia, Chairman

JOHN E. MOSS, California SAMUEL L. D)EVINE, Ohio
JOHN 1). D)INGELL, Michigan JAMES T. BROYHLILL, North Carolina
PAUL G. ROGERS, Florida TIM LEE CARTER, Kentucky
LIONEL VAN DEERLIN, California CLARENCE J. BROWN, Ohio
FREI) B. ROONEY, Pennsylvania JOE SKUBITZ, Kansas
JOHN M. MURPHY, New York JAMES M. COLLINS, Texas
DAVI 1 E. SATTE RFIELI I I, Virginia LOUIS FREY, JR., Florida BOB ECKHIARDT, Texas NORMAN F. LENT, New York
RICIHARDSON PREYER, North Carolina EDWARD R. MADIGAN, Illinois
CHARLES J. CARNEY, Ohio CARLOS J. MOORHEAD, California
RALPH 1I. METCALFE, Illinois MATTHEW J. RINALDO, New Jersey
JAMES H1. SCIIEUER, New York W. HENSON MOORE, Louisiana
RICHARID L. OTTINGER, New York DAVE STOCKMAN, Michigan
HENRY A. WAXMAN, California MARC L. MARKS, Pennsylvania
ROBERT (BOB) KRUEGER, Texas TIMOTHY E. WIRTH, Colorado PHILIP R. SHARP, Indiana JAMES J. FLO RIO, New Jersey ANTHONY TOBY MOFFETT, Connecticut JIM SANTINI, Nevada ANDREW MAGUIRE, New Jersey MARTY RUSSO, Illinois ED WARD J. MA RKE Y, Massachusetts THOMAS A. LUKEN, Ohio DOUG WALGREN, Pennsylvania BOB GAMMAGE, Texas ALBERT GORE, JR., Tennessee BARBARA A. MIKULSKI, Maryland

WV. E. WILLIAMSON, Chief Clerk and Staff Director KENNETH J. PAINTER, First Assistant Clerk ELEANOR A. DINKINS, Assistant Clerk WILLIAM L. BURNS, Prin ting Editor

Professional Staff

ELIZABETH HARRISON CHRISTOPHER E. DUNNE
JEFFREY TI. SCHWARTZ WILLIAM M. KITZMILLER
BRIAN R. MOIR MARK J. RAABE
KAREN F. NELSON THOMAS M. RYAN
Ross DAVID AIm JAMES S. COWEN
LEWIS E. BERRY, Minority Counsel



SUBCOMMITTEE ON ENERGY AND POWER

JOHN D. DIN GELL, Michigan, C'hairman RICHARD L. OTTINGER, New York CLARENCE J. BROWN, Ohio
ROBERT (BOB) KRUEGER, Texas CARLOS J. MOORHEAD, California
PHILIP R. SHARP, Indiana JAMES M. COLLINS, Texas
ANTHIONY TOBY MOFFETT, Connecticut W. HENSON MOORE, Louisiana
BOB GAMMAGE, Texas DAVE STOCKMAN, Michigan
JOHIN M. MURPHY, New York SAMUEL L. DEVINE, Ohio (ex officio)
DAVID E. SATTERFIELD 111, Virginia TIMOTHY E. WIRTHT, Colorado ANDREW MAG UIRE, New Jersey MARTY RUSSO, Illinois E D WA RI) J. MA R KE Y, Massachusetts HARLEY 0. STAGGERS, West Virginia
(ex officio) I
FRANK M. POTTER, Jr., Staff Director and C'ounsel QV '









LETTER OF TRANSMITTAL


THE LIBRARY OF CONGRESS,
CONGRESSIONAL RESEARCH SERVICE, Washington, D.C., January 10, 1978.
Hon. JOHN D. DINGELL,
Chairman, Subcommittee on Energy and Power, Committee on Interstate
and Foreign Commerce, U.S. House of Representatives, Washington,
D.C.
DEAR CONGRESSMAN DINGELL: In response to your request, we are submitting the final report of a comparative analysis of U.S. energy demand and supply through the year 1985. The report is entitled: "U.S. Energy Demand and Supply 1976-1985: Limited Options, Unlimited Constraints."
The report provides a brief overview of domestic and international energy demand and supply and emphasizes energy supply constraints.
The following authors participated in the preparation of the report: Warren H. Donnelly, Senior Specialist in Nuclear Energy, Environment and Natural Resources Policy Division; Joseph P. Riva, Specialist in Earth Science, Science Policy Research Division; Herman T. Franssen, Specialist, Environmental Policy, Environment and Natural Resources Policy Division; Paul Rothberg, Analyst in Science and Technology, Science Policy Research Division; Robert Morrison, Specialist in Ocean Policy, Science Policy Research Division; David Hack, Analyst in Science and Technology, Science Policy Research Division; and, Howard Useem, Economic Analyst, Economics Division.
We hope that this report will serve the needs of your Subcommittee as well as those of other committees and Members of Congress.
Sincerely,
GILBERT GUDE,
Director, Congressional Research Service.
(III)




















Digitized by the Internet Archive
in 2013














http://archive.org/details/usenergsuOOlibr














CONTENTS

Page
Letter of transmittal ----------------------------------------------- III
Summary --------------------------------------------------------- 1
Methods of forecasting and planning --------------------------------- 13
Energy policy and energy technology ----------------------------- 13
Energy "demand" studies to 1975-limitations of models used ------ 13 A general policy planning framework ----------------------------- 14
The theory of economic policy ---------------------------------- 115
Elasticity of substitution of energy for other factors ---------------- 17
Gross national product change-, resulting from energy consumption
changes for different constant elasticities ---------------------- 18
Elasticity in the whole economy versus elasticity in detail ---------- 20
What are the means through which feasible substitution may be
eff ected? ---------------------------------------------------- 21
Forecasting and planning methods and the legislative process ------- 22 The demand for energy-an overview and summary of six studies ------- 24
Overview ----------------------------------------------------- 24
Summary of six studies of energy demand ------------------------ 24
The demand for energy in the United States, 1976-1990-CRS ------ 26 Energy review: Energy outlook-DRI --------------------------- 27
Energy outlook 1977-1990: Exxon ------------------------------- 28
The national energy outlook: Federal Energy Administration - - - 29 Energy demand studies: Major consuming countries: NIIT/WAES --- 30 U.S. energy through the year 2000: Bureau of Mines --------------- 31
Present and future domestic supply of oil and natural gas liquids- - - - - 35
Domestic petroleum reserves ------------------------------------ 35
Undiscovered domestic petroleum resources ----------------------- 38
Domestic petroleum production --------------------------------- 41
Present and future domestic supply of natural gas ---------------------- 44
Domestic natural gas reserves ----------------------------------- 44
Undiscovered domestic natural gas resources ---------------------- 46
Domestic natural gas production -------------------------------- 47
Coal demand and supply through 1985 ------------------------------- 49
Introduction -------------------------------------------------- 49
The national energy plan: Office of the President ------------------ 51
Conversion differences ------------------------------------- .52
NEP coal demand and supply: A comparison with NEO 1976- - 52
Future U.S. coal production and utilization: A comparative
analysis ------------------------------------------------ 55
GAO evaluation of NEP coal use ---------------------------- 15 6
OTA evaluation of NEP coal use ---------------------------- 56
GAO, U.S. coal development-Promises, uncertainties (1977) ____ - - 57
Congressional Research Service, Project Interdependence: U.S. and
World Energy Outlook Through 1990 (June 1977) --------------- 59
Allen F. Agnew, coal, Carter, and constraints (CRS, 1977) ---------- 6 0
Exxon, energy outlook, 61
Gerald C. Gambs, energy outlook-Alternative fuels and conversion
G 2
Institute for Energy Analysis, outlook for the coal industry in the
United States 6 3
Conclusions-_ 65
(V)






V1

Page
The supply of nuclear power in the United States 67
Purpose- 67
Overview----- 67
History and 68
The present state of nuclear 69
Forecasts for nuclear power ------------------------------------- 70
The range of 70
Sources of 72
Selected views on nuclear power ----------------------------- 73
Supply --------------------------------------------------- 73
Views of the Federal Energy Administration------------------ 74
The Project Independence Blueprint report--------------- 74
The FEA Nuclear Task Force 75
FE A's national energy outlook for 1976 76
Views of the Ford Foundation's energy policy project 77
Views of the Ford Foundation's nuclear energy policy study group- 79
The current status of nuclear 80
No need for 80
Plutonium reprocessing and recycle 80
Proliferation-resistant nuclear power 80
Uncertain economic advantage-------------------------- 81
Ample uranium 81
Alternative energy 81
The limited effect of nuclear power on energy costs 81
Health, environment and 82
The breeder reactor ------------------------------------ 82
Nuclear waste management ----------------------------- 83
Expansion of uranium enrichment capacity 83
The President's 83
GAO analysis of the President's energy plan -------------- 84
OTA analysis of the National energy plan 86
CRS analysis of the President's plan- 87
Present and future domestic supply of geothermal energy 89
Domestic geothermal energy reserves and resources---------------- 89
Domestic geothermal 91
Current status of synthetic fuels from coal- 93
Issue definition ------------------------------------------------ 93
Background and 93
Coal 93
Gasification based upon existing technology ------------------- 94
Gasification based upon advanced technology----------------- 94
High-Btu 94
Low-Btu gas ------------------------------------------ 95
Outlook f or a coal gasification industry- 95
Coal liquefaction ---------------------------------------------- 96
Demonstration plants and comme rcial plans 96
Concerns associated with development of a synthetic fuels industry 97
Technical 97
Socioeconomic and environmental concerns 97
Financial and economic concerns ------------------------ 98
Regulatory 98
Outlook and constraints for shale oil 99
Issue definition ------------------------------------------------ 99
Background and policy 99
Outlook and 99
Resource has( -------------------------------------------------- 101
Major activities ----------------------------------------------- 101
Energy fi-om the 104
Ocean thermal enci-gy conversion (OTEC) ------------------------ 104
Tidal 106
Wave 108
Power froni ocean 109
Salinity gradient 110






VII

page
Solar eeg---------------------------112
Introduction -------------------------------------------------- 112
Solar tcnlge-----------------------112
Solar impact stde----------------------114
The future utilization of solar eeg---------------116
Concusin---------------------------------------119
Appedix----------------------------------------119
International aspects of the U.S. energy crisis--------------125
The Carter viw-----------------------125
Is the Carter view cret-------------------126
The CIA std------------------------127
OECD: World energy outlook ----------------------------------- 129
Oil and gas production-------------------------------------- 129
Coal pioduction ------------------------------------------- 130
Nuclar--------------------------------------130
Oil iprs-----------------------131
Variations on a tee-------------------131
CRS: Project Itreeene-----------------132
Oil iprs-----------------------133
W. J. Levy Consultants Corp., an assessment of U.S. energy policy-- 134 Shell Oil Co., the national eneigy outlook, 1980-90 ------------------135
World oil production --------------------------------------- 136
Exxon: Woild energy oulo------------------136
World energy supply --------------------------------------- 137
Implcatons----------------------------------139
Energy: Global prospects 1985-2000 (MIT11WAES study)-------139
Major conclusions of the suy---------------139
Coal ----------------------------------------------------- 140
Consrvaion----------------------------------140
Demand for energy in the free woild --------------------------141
lDemand/supply balances ------------------------------------141
Oil-----------------------------------------142
Concusin---------------------------------------142

TABLES
1. U.S. energy demand and supply projections for 195---------7
2. Demand balanced scenario of free world supply and demand of oil and natural gas lqis----------------------10
3. Gross national product changes, resulting from energy consumption changes for different constant elasticities --------------------------19
4. U.S. net energy consumption 1y consuming scos- --------24
5. Summary table for six energy demand forecasts ----------------------33
6. Undiscovered domestic crude oil resources--------------40
7. Domestic liquid petroleumn production projections --------------------41
8. Undiscovered domestic natural gas resources-------------46
9. Domestic natural gas production projections -------------------------47
10. Coal consumption by sector-------------------------------------- 50
11. Coal production------------------------------------------------ 50
12. National energy plan: Coal use by 195--------------52
13. Coal production by region by 195----------------53
14. Production by type of inn19 ----------------54
15. U.S. product ion and utilization of bituminous coal andi lignite ---------59
16. Probable anti possible coal use estimates for 1985-----------66
17. Comparison of U. S. coal production estimates -- ------------66
18. Status of U.S. central station nuclear capacity-7---------------------- 69
19. Regional contribution of nuclear power to generation of electricity, 1976------------------------------------------70
20. Comparison of forecasts for nuclear energy, 1975-2000 ----------------71
21. List of factor's likely to affect the future supply of nuclear energy in
the United States-------------------------------------------- 72
22. FEA estimates of domestic fuel consumption, 1985 -------------------74
23. FLA Project Independence Blueprint Nuclear Task Force projected
nuclear generating caaiy------------------76





VIII

TABLES- COn~linueti
Page
24. Fuels for central station electric power-----,---------- 77
25. List of advantages and disadvantages of nuclear power from the energy
policy pI oject report of the Ford Foundation-------------------- 78
2(G. List of issues and questions about nuclear energy presented in the
OTA's assessment's analysis of the proposed national energy plan- 88 27. 1)omestic geothermal energy production . .. .. ... .. .91
28. Selected I majoi oil shale development activities 103
29. RecommenIed Federal solar energy research and development budgets 115 30. Estimiiates of U.S. energy consumption, total and by function, and of
solar energy contributions by technology, 1980-2020-------------- 119
31. ('omparison of five major recent studies on the international energy
outlook though 1985 ..146
FIGURES
1. Gross national product changes resulting from energy consumption
changes for diffe ent constant elasticities ------------------------- 19






SUMMARY

U.S.'ENERGY DEMAND AND SUPPLY, 1976-85: LIMITED
OPTIONS, UNLIMITED CONSTRAINTS
(By Dr. Herman T. Franssen, Specialist in Environmental
Policy, Congressional Research Service)
INTRODUCTION
At a time when Congress is considering the most dramatic step forward in- shaping the Nation's energy future, it may be useful to take another look atthe problems associated with increasing domestic energy supply, even if energy growth rates are experienced which are considerably below the historical experience of the. past few decades.
Only a few years ago, the National Petroleum Council (1972) and the Federal Energy Administration (1974) produced multivolume studies indicating that the United States could be energy self-sufficient by 1985 at energy growth rates which are now considered much too high by most energy analysts. These and a number of other studies provided optimistic supply pictures for all major sources of domestic energy sup-ply (oil, gas, coal and nuclear) and some nonconventional energy sources (such as synfuels) as well. Today, almost exactly 3 years after the publication of FEA's Project Independence, many of our earlier hopes havebeen shattered by the same agencies that only a few years ago showed us the way to the promised land. Most energy studies published in 1976 and 19 7 have been far less optimistic on domestic supply of almost all energy sources than earlier studies. What brought about this change of mind?
In the first place, revised estimates of oil and natural gas resources y the U.S. Geological Survey and several oil companies led to lowering future production expectations. This was later compounded by Government delays in leasing Federal lands for fossil fuel exploration and development. Earlier optimism about the future of nuclear power was replaced by pessimism as electric utilities canceled scores of power plants, ordered at a time when cost considerations were more favorable, and public opposition to nuclear power was still in its infancy. Careful analyses of the numerous constraints on the development of synfuels caused projections of the -future contribution of synfuels, to the National energy supply to be reduced by several orders of magnitude.
The area of most intense debate today is on the future coal use. Is it possible that the recent pessimistic coal use projections for the United States by the Congressional Research Service, the General Accounting Office, the Office. of Technology Assessment and others have been too pessimistic? Did these agencies and others overlook the economics of coal use and overemphasize the, environmental and other problems limiting demand and supply V It is probably too early to say whether the coal use figures, in the National Energy Plan are too high or not, but it may serve a purpose to examine carefully all con(1)




2


straints on coal demand and supply. That way Government might be in a position to change direction midcourse to prevent yet another supply shortfall in this area.
Energy demand
A number of rent U.S. energy forecasts by Government agencies, academic institutions, and private industries compared in this study have arrived at surprisingly similar energy demand projections for the United States in 1985.
Most of these studies project that U.S. primary energy consumption will rise from about 74 quadrillion Btu (Q) in 1976, to between 81 and 85 Q in 1980; between 91 and 104 Q in 1985; and, between 105 and 116 Q by 1990. Given different assumptions on economic growth rates and on energy demand elasticity, the difference between the high and low figures (5 percent in 1980; 13.5 percent in 1985; 11.1 percent in 1990) are very small. Many other studies on U.S. energy demand not analyzed in this report (OECD/IEA, World Energy Outlook 1977; W. J. Levy, An Assessment of U.S. Energy Policy, 1976, and others) confirm this general trend in rising U.S. energy demand. Oil and natural gaO supply
In response to a CRS questionnaire on oil production projections through the year 1990, 12 of the 15 largest integrated oil and natural gas companies operating in the United States provided valuable insight in industry views of future oil and gas production under a set of favorable economic and political assumptions. While individual companies within the industry differed in their outlook on future production, eight of the twelve were close to the mean 1985 production level of 10.9 million b/d or crude oil and natural gas liquids, and the 16.9 trillion cubic feet (TCF) per year of dry natural gas, used in the base case of CRS's Project Interdependence.
I'miderlying these production estimates are the following assumptions: (1) decontrol of oil by June, 1979 (EPCA expires); (2) no windfall profit taxes added after that date; (3) no changes in the 1954 OCS Lands Act: (4) average annual leasing of 1.5 to 2 million acres of OCS lands for exploration and development; and (5) no vertical divestiture.
The 10.9 million b/d of oil production and 16.9 TCF per year of natural gas production in the CRS base case are relatively close to other major energy sup )ly assessments by the Central Intelligence Agency, the Executive Office of the President (National Energy Plan), the Department of Commerce, the International Energy Agency (OECD), and many other estimates. The Federal Energy Administration projected significantly higher levels of oil and gas output in its 1974 and 1976 forecasts, but the draft version of the 1977 National Energy Outlook was more in line with the other studies quoted here. Most of the studies assumed no change in the real price of world oil through 1985 in their base case projections.
While it is clear that because of the complexity of the matter and the numerous unknowns, nobody can forecast 1985 oil and gas productioni with any degree of accuracy, it is important to consider the geological, technical, economical, and institutional barriers that must be overcome to achieve a l)roduction target of close to 11 million b/d by 1985 (CRS NEI amd other projections).





3


The resource base and drilling effort needed to support a U.S. oil production of 4 billion barrels per year in 1985 (about 11 million b/d) can be determined as follows: (1) assuming a gradual increase of production about 34 billion barrels of oil will need to be produced from 1977-85 to achieve the 1985 production target; (2) another 40 billion barrels of oil reserves will be needed to maintain the current reserve to production ratio of 10 years Lowering this ratio will cause more problems in the future. One should keep in mind that physical constraints generally limit annual withdrawal to an amount equal to a production-to-reserve ratio of approximately 1: 10. This is an aggregate ratio; individual fields will vary above and below that ratio. Hence we are currently producing about the maximum allowable from our proved reserves of about 30 billion barrels 3 billion barrels of oil per year (crude oil only ; NGL not included).
The total domestic petroleum needed by 1985 to attain a production of 4 billion barrels (about 11 million b/d) and maintain a desirable reserve-to-production ratio of 10: 1, would be about 74 billion barrels. Liquid petroleum reserves (crude oil and natural gas liquids) at the end of 1976 totaled 37.3 billion barrels, and another 3 billion barrels could be added for oil produced with advanced recovery techniques (estimate by the National Petroleum Council). Thus, another 36.5 billion barrels (74.1-37.6) will have to be added to reserves by 1985 to support the 4 billion barrels for that year, while maintaining a 10 to 1 reserve ratio.
A part of this will come from revisions and extensions of existing fields (inferred reserves), but by 1985 most of the oil will have to come from new fields. In order to meet the desired production of 4.0 billion barrels in 1985 (with a 40 billion reserve at the end of that year), it will be necessary to add about 4 -billion barrels per year for the next nine years. The maximum to be expected from enhanced recovery from old wells in 1985 is 0.6 billion barrels (high estimate by National Petroleum Council for 1985). Since 1948, there has only been one year that reserves have increased by more than 3 billion barrels (1971 Prudhoe Bay). In the absence of such fortunate finds of giant fields in the frontier areas, it will be very difficult, if not impossible, to reach the 4 billion barrels projection for 1985 production. In recent testimony before the Senate Committee on Finance, Charles D. Masters, Chief of the Office of Energy Resources of the U.S. Geological Survey, said that to keep production at current levels would be a prodigious task for industry, and to increase production over and above present rates would take Herculean efforts that in the end might not be successful. Several Prudhoe Bay type finds may be needed to reach a 1985 production of close to 11 million b/d.
Natural ga8
In a recent industry survey on natural gas production projections through 1990 conducted by the Congressional Research Service. the mean 1985 production figure bised on estimates of 12 of the 15 larost oil and eas producing companies in the United States amounted to 16.9 TCF The same production level was projected for 1990. AssumpIThe CRS protections of natural eas production for 1995 represent domestic drv rap to dop pstic nq%. a term used by the Bureau of Mines In lt annual natural fMR production Staftteg. It represents the dry natural ras after all the liquids have been taken out of the porauced wet gas, and transmission losses, storage, and exports are accounted for.




4

tions underlying the forecasts were largely similar to those for the oil output projections (see p. 3). In addition, early decontrol of new natural gas was assumed.
The 16.9 TCF of likely natural gas production in the CRS study is almost identical with earlier findings b ythe Bureau of Natural Gas of the Federal Power Commission (projections of 1985 output of 16.75 TCF by Gordon Zareski in 1977). Studies by the General Accounting Office, the Executive Office of the President (NEP), the CIA, and a number of studies by private industries and consultants are within 5 to 10 percent of the CRS estimates. The high natural gas supply case in the CRS study envisions a production of about 17.5 TCF in 1985, and the low supply scenario projects an output of 15.7 in 1985. The CRS high production estimate for 1985 is about 5 percent below the projected 1977 dry natural gas output of 18.6 TCF.
To arrive at a dry gas production of 17.5 TCF in 1985, the following resource base will be required: (1) about 160 TCF of gas must be produced between 1977 and 1985 to arrive at the projected 1985 output level of 17.5 TCF; and (2) about 210 TCF will be needed to maintain a 12 to 1 reserve-to-production ratio. Some of this gas will come from extensions and revisions of known fields and possibly from nonconventional sources of methane, but an average of 17.2 TCF will have to be added each year for the 1977-85 period. Not since the North Slope discoveries has more than 17.2 TCF been added to reserves in any one year. In fact, in the lower 48 States additions to reserves have averaged only 8.6 TCF per year in the 8 years between 1968 and 1976 (resulting in declining production since 1973/74).
It would appear that even with a marked increase in drilling, the drawing down of the gas reserves below the 12:1 reserve-to-production ratio, and some development of nonconventional sources of methane, maintaining a level of natural gas production of 17.5 TCF per year will be, very difficult. It is probable that discoveries of giant gas fields in frontier areas would be, nemssary to meet this projection. In order to meet the 1985 output of 17.5 TCF with a 12:1 reserve-to-production ratio, about one-third of the undiscovered recoverable resources of natural gas (USGS Circular 725) will have to be found between now and 1985.
(7oeZ
For at least the next 100 to 150 years, the United States will have enough coal to meet projected domestic and foreign demand. Domestic coal use grew rapidly through the 19th century. slowed down until the middle 1940's when it peaked. Coal use actually declined between 1945 and 1960 due to the availability of relatively cheap and clean liquid fossil fuels. Only in recent years has coal consumption again reached the high level of the middle 1940's.
Quadrupling of the price -of imported oil following the 1973/74 oil embargo; growing uncertainty about access to foreign oil; reduced domestic oil and gas prospects; higher prices of domestic oil and gas; serious constraints on nuclear power development; and, government policy to shift industrial users from oil and gas to coal, have all contributed to the renewed interest in and long-term prospects of coal use. in the United States.
While past efforts by the FA to force electric utilities to convert to coal wherever possible (ESECA, 1974) have failed, pending legis-








lation will 'make it exceedingly difficult for new electric utilities and large industrial plants to use gas or oil as a boiler fuel. The regulatory process will reinforce the ongoing industrial response to higher oil and gas prices and uncertainty of future oil and gas supply.
Few energy analysts will deny that coal use has a bright future in the United States, but most will agree that numerous, problems associated with both the demand for and supply of coal are likely to slow down domestic coal use to well below the 1,175 million tons projected in the National Energy Plan. In the first place, demand for electrical power could be substantially below the level projected in the NEP because electric demand may be lower and environmental constraints may slow down their development. Second, it way not be realistic to assume that major conversion of existing oil and gas burning facilities to coal will have taken place by 1985, unless industry is really forced to do so. Third, there are a number of important constraints on expanded coal use such as: (1) air quality standards; (2) stril m provisions; (3) trained manpower shortag~ces, for deep mining; 4 poor labor relations; (5) continued lowering of productivity, in part caused by new health and safety standards set by the Government;
(6) transportation bottlenecks; (7) potential shortages of some mining and- pollution abatement equipment; (8) delays in Federal leasing of coal lands; (9) water use problems in the West; (10) institutional problems, in particular in the West.
In view of these constraints, the GAO, the OTA, the Congressional Research Service, and several others, nongovernmental research organizations have projected that U.S. coal production is likely to fall short of the 1985 target of 1.265 million tons in the National Energy Plan by several hundred million tons (to below 1 billion tons per year). Nuclear power
Continuing controversy about the future of nuclear power for the generation of electricity clouds the future of this industry. At issue are the economics of nuclear power and the risks which some critics perceive to the public health, safety, environment, national security and world peace. The United States possesses the world's largest industrial base for civil use of nuclear power, but several parts necessary for the continued or expanded long-term use of nuclear power are still missing. Since proposals to impose a national moratorium nuclear power have yet to succeed, it appears that the principal policy questions for the future supply of nuclear power are how much more nuclear generating capacity should be provided, if any, where, and when.
Beginning with modest projections in 1962, succeeding forecasts rose quickly to peak estimates in 1973 and 1974, and then fell precipitously in the aftermath of the Arab oil embargo of 1973-74. The most optimistic forecast in 1973/74 anticipated as much as 2,000 gigawatts of nuclear power by the year 2000. Within 3 years these had dropped to Secretary Schlesinger's latest figure of 380 gigawatts b-y the turn of the century. The latter is slightly 'below the accelerated scenario of FEA's Project Independence report for 1985. In view of the past record of nuclear forecasting, projections of nuclear power capacity beyond a few years are by no means written in stone. Actual and potential constraints on nuclear power expansion include environmental and safety problems related to the nuclear fuel cycle, facility





6


siting, high cost of construction, public acceptance, and drawn-out licensing schedules.
The national Energy Plan has estimated that nuclear power under the plan would provide the energy equivalent of 3.8 million b/d of oil by 1985 (3.6 million b/d without the Plan), or the equivalent of 141 gigawatts operating with a capacity factor of 65 percent. In the plan, nuclear power serves as a supplement to coal to fill the gas between energy demand and a projected relatively stable production of oil and natural gas. Since April, 1977, the FEA, ERDA and NRC have further reduced probable nuclear power capacity in 1985 to 113 gigawatts with an energy equivalent of 3 million b/d of oil.
Other dome8 tic energy gource-3
Of the numerous alternative energy sources for the future, geothermal and in particular solar energy have good prospects of making a commercial contribution to energy supply between now and 1985. Solar energy has received a great deal of attention in recent years,, but in spite of its great promise for the future, the immediate payoff is not likely to be very large in the intermediate future. Even with substantial Government support, most analyses indicate that solar energy will contribute no more than 1 percent of total U.S. energy demand in 1985 and 2 percent by 1990.
Conventional hydropower now provides about 15 percent of the electric generating capacity in the contiguous United States. In view of the long le'adtirnes, hydropower plants being planned now are not likely to contribute to the 1985 supply of energy. Substantial capacity remains to be developed in the future. Project ion8 of U.S. energy demcw nd pply through 1986
In the base case of Project Interdependence, CRS assumed real annual economic growth rates of 3.5 percent for the period from 197690. This growth rate is necessary to reduce unemployment from the current 6.9 percent to about 5.5 percent (the average unemployment rate between 1965 and 1974 was 4.6 percent). Energy demand growth, estimated at 2.9 percent per year, is based on substantial increases in the real p rice of oil and natural gas (about 50 percent for oil and 100 percent for natural gas for the period through 1990). Total energy demand by 1985 under those price assumptions is projected at 94.7 quadlrillion Btu or 44.8 million b/d. The National Energy Plan, under different assumptions, projects total energy demand in 1985 at 46.4 million b/d oil equivalent. In table 1, both the CRS and NEP's demand projections are labeled "desired demand," suggesting that supply constraint-s may force world oil prices beyond the levels projected in the CRS and NEP analyses. If that happens, energy demand, GNP growth rates and employment are likely to be reduced.
On the supply side of the equation, a careful inventory of future oil and natural gas production suggests that in order to keep production at current levels, average annual additions to oil and gas reserves must increase by about 50 percent over the experience of the past 10 years (oil production averaged about 3 billion barrels per year and reserves added averaged only 2 billion barrels during the past decade. Natural gas production averaged 20.7 TCF per year, and reserve additions averaged only 11.5 TCF per year).






7



TABLE Ir-U..S ENERGY DEMAND AND SUPPLY PROJECTIONS FOR 1985
pn convention its admiii brels per day crude oil equivalent]

Scenario I: Plaasing base Scenario II: Possible supply
Million Million
barrels per barrels per
day oil day oil
Conventional units equivalent Conventional units equivalent

Total primary energy demand
(desired demand):
CRS, Project Interdependence, base case .................................. - 44.8 -------- 44.8
National energy plan -------...............-------.....- .......--. 46.4 ........-----------------------... 44.6
Domestic epergy supply:
Oil and NGL .............. 9.5 million barrels per day.. 9. 5 10.9 million barrels per
day. ................... 10. 9
Natural gas (dry gas to
domestic use).4 ........... 16.9 trillion cubic feet..... 8. 1 17.6 trillion cubic feet 5..... 8. 5
Coal (domestic use only) __ 855 million short tons ... 8. 9 965 million short tons 7..... 10. 0
Nuclear po~r ............. 113 giwas............. 3.0 126 gigawatts ............ 3.4
Hydr1.9o/s1ar- --. ..-----...1.9------------..........91.9
Toamestic suppi ------------------------...............................- 31.6 ------------------------- 34.8
Oil and natural gas imports:
Natural as---- .......--- 2.1 trillion cubic feet...... 1.0 2.5 trillion cubic feet o..... 1. 2
Oil (mndudiug 0.3 ilio 12.7 to 14.3 million barrels 12. 7-14.3 9.2 to 10.8 million barrels
barrels per day for per day. per day................ -------------9.2-10.8
storage).

I Assumes 3.5 percent average annual GNP growth rates and 2.9 percent energy growth rates; 50 percent increase of oil price throv 1990; douw i ns of natuM gas price through 1990. SCRS, Project Intardependence, low supply case. Requwires a 50-percent increase of finding rates through 1985 (compared with finding rates of past decade). See alse mmo by the Comptroler General of the GAO to the President of the Senate and the Speaker of the Hfousa of Representatives, dated Oct. 14, 1977. SAssumes that oil reserve additions will almost double between 1977 and 1986 compared with the previous decade. Based on CRS Project Intercependence, base case under optimistic m ic and political assumptions.
4 CRS, Project Interdependence, base case (based on mean figure of production estimates under favorable political and scomac criteria by 12 of the larpst oil and gs producing cmpaamis in the U.S.). See also GAO dand OTA critiques atof the national enrgy plan. Several oil companies, including Exxeo, Shell, and British Petroleum project lower volumes of natural gas output for 1985 In their base case scenarios. aAssumes slight hi natural gas finding rates than projected in scenario 1. Based on CRS Project Interdependence, high natural gas case.
*CRS, II sees, basecae (700,U0,01B tons for utilities, which is comparable to FEA's National Energy
Outlook of 176 for 1985; assumes industrial use by 1985 of only 160,000,000 tons, which would masn virtually no coal conversion in that sector). CRS base compares with the mean mal use Agure in the recent GAO coal study, with the MIT/ WAES likely scenario for '1985 and with a recent study on coal usi by the Institute for Energy Analysis at Oak Ridge. Assumes adherence to Clean Air Act provision for all new coal-burning facilities.
7 Assumes considerable exemptions of pWevisions in the Clean Air Act, and that several other constraints and demand and supply of coal will be removed.
July 1977 estimate of probable 1985 c by FEA/ERDA/tiRC.
Assumes speeding up of construction of neler powerpaents. 10 Assumes approval of additional LNG projects over and above those that have already been approved by the FPC.

In our probable energy supply scenario in table 1, 1985 oil production has been kept at current levels of 9.5 million b/d, and natural
gas production has been reduced to the base case scenario of CRS's
Project Interdependence, which projects a 1985 dry natural gas production of 16.9 TCF (less than 10 percent below current output).
Recent estimates by the General Accounting Office, the Office of
Technology Assessment, and some industrial sources, tend to confirm
the above projections of oil and natural gas output for planning
purposes.
Domestic coal use is not subject to reserve or resource constraints;
at least not for the next century or longer. Coal use is hampered by
environmental constraints on burning this fossil fuel in many parts of
the country. It is not unreasonable to expect lengthy litigation between
environmentalists and industrial coal users, which at best are likely to
slow down the expansion of coal use in electrical power plants and
industries below levels projected in the National Energy Plan (1.1
billion tons domestic coal use). This, in turn. will delay investments
in the coal mining industry. In view of these, and numerous other con-






straints on coal demand and supply, studies by the Congressional Research Service, the General Accounting Ofwe, the Office of Technology Assessment and several other sources, express serious -doubts that a coal production level of I billion tons (including about 75 to 85 million tons of exports) will be achieved in the United States by 1985. For planning purposes it is prudent to suggest that coal use in the United States will increase from about 600 million tons 1n 1976 to about 850 million tons by 1985 (CRS, Project Interdependence, base case; GAO, U.S. Coal Development, Promises, Uncertainties, between the low and high coal use scenarios), and that major efforts are needed to remove the numerous obstacles that stand in the way of achieving a higher level of coal use in the United States in 1985. Provisions in the NEP by themselves are no guarantee that projected coal use figures will indeed be achieved.
Nuclear power capacity projections in this study are based on the latest (July 1977) data by the former Federal Energy Administration, ERDA, and the Nuclear Regulatory Commission. Estimates of hydropower and other energy sources are based on the CRS "Project Interdependence" study.
Coal use projections: Rising expetations; a word of caution
Studies by the Congressional Research Service, the Office of Technology Assessment, and the General Accounting Office, on coal use projections in the United States, do not say that it is physically impossible to utilize one billion tons of coal or more by the middle 1980s. They do, however, clearly show the potential contradictions between implementation of environmental legislation and the desire to burn that much coal in the United States. They also caution that numerous other coal use constraints should not be casually brushed .aside, but instead, seriously studied and acted on if ecesary. There are too many recent precedents to question initially the validity of inflated energy supply projections. Exaggerated supply estimates for oil, natural gas, nuclear power, shale oil and some other energy source, made by vrious government agencies and private organizations during the past decade, have all been abandoned in favor of more realistic and lower forecasts.
Probable or possible domestic upply
Scenario I, the planning base, represents the volume of domestic energy supply the Nation can count on with a fair degree of certainty. One should realize, however, that the oil and natural gas output projected in this scenario still requires a major effort in terms of additions to reserves. This scenario also does not represent the lowest projected nuclear capacity and coal use figures. Nuclear capacity by 1985 could decline further due to additional plant cancellations or construction delays. The coal use figure of 855 million short tons in this scenario is still about 50 to 100 million tons higher than the low coal use scenarios in the GAO, CRS, and IEA (Oak Ridge) studies. Hence, scenario I represents across the board a little more than what one might call a "business-as-usual" case.
Scenario II, the possible supply case, represents an optimisticthough under certain conditions a probably attainable--domestic supply case. In addition to a favorable economic climate, it would require





9


,early successful exploration and development of frontier areas where most of the potentially remaining large oil and gas accumulations are likely to be. It would also require substantially higher coal use by both electric, utilities and industries. In order to achieve this high level of ,domestic coal use (comparable to FEA's National Energy Outlook of 1976 and the draft version of 1977), numerous constraints on coal use must be -removed, and litigation in the courts would hopefully be
-limited. As far as nuclear capacity is concerned, it would require .speeding up of construction of about 10 plants already under construction. Finally, this scenario is a little bit more optimistic on natural ,gas imports from Canada, and Mexico, which with LNG, could bring total natural gas imports to a level of 2.5 TCF in 1985. 4C08t of acgui8itwfl of oil and ga~ imports in com&tant 1976 dollars
Assuming the real price of oil does not change between 1976 and 1985, projected imports in scenario I would cost between $62.1 and $70.1 billion by 1985 (constant 1976 dollars). This assumes an average ,,cost of crude oil per barrel F.O.B. export terminal of $12.40. Natural gas is priced at its crude oil equivalent. Transportation costs would add an average of about $1 per barrel.
Under similar assumptions, oil and gsiprts projected in scenario II would coat the Nation between $47 and $54.2 billion per year by 1985. In comparison, U.S. imports of oil and natural gas in 1970 was
-about $3 billion. This rose to about $26 billion in 1975 and may be close 'to $40 billion this year.
What price and demand level wfll prevail?
Under domestic energy supply scenario, I, oil imports could rise to between 12.7 and 14.3 million b/d by 1985 (see table 1).- This would put heavy pressure on free world supply of oil, and in particular on Saudi Arabia. In Project Interdependence, CRS projected free world "demand for oil to rise from 40 million b/d in 1976 to 68.8 million b/d #(including oil storage) in 1985. U.S. oil imports in the base case of Project Interdependence were projected at 12.3 million b/d (including
stoag),or between 0.4 and 2 million b/d lower than the scenarios in 'this study. The difference is due mainly to more optimistic assumptions on domestic oil production.
Under the slightly more optimistic outlook on domestic U.S. supply of oil OPEC nations would be required to produce some 42.8 million b/d in 1985. Given limitation on production based on reserves, current prospects of reserve additions and existing government policy in some OPEC countries on production limits, CBS designed a demand balanced scenario of free world supply and demand of oil and natural gas liquids (table II). In this scenario, Saudi Arabia is counted on to meet much of the increased world demand for, oil by expanding pro 'duction from less than 10 million b/d in 1977 to 16.6 million b/d in 1985. At current levels of output, Saudi Arabia already runs a vast 'balance of trade surplus. The country would like to bring oil production more in line with its foreign exchange needs, but policy makers tare aware that limiting output would result in substantial world oil price increases which, in turn, may retard world economic growth and
-destabilize much of the free world.



21-616 0 78 2






10



TABLE II.- DEMAND BALANCED- SCENARIO OF FREE WORLD SUPPLY AND DEMAND OF OIL AND NATURAL GAS LIQUIDS

ism 1995 1990.

Demand:
Consumption ------------------------------------------------- 54.8 66.9 76.3
Oil storage --------------------------------------------------- 1.9 1.9 -----------Total demand ----------------------------------------------- 56.7 68.8 76.3
Supply:
United States ------------------------------------------------- 10.4 10.9 11.4
Canada ------------------------------------------------------ 1.5 1.4 1.7
United Kingdom ---------------------------------------------- 2.1 2.8 3.5
Norway ------------------------------------------------------ .9 1.3 1.6
Other OECD Europe ------------------------------------------- .3 .5 .5
Other developed countries -------------------------------------- .4 .4 .4
Subtotal, OECD and other developed countries ------------------ 15.6 17.3 19.1
Non-OPEC LDC's:
Mexico ------------------------------------------------------- 1.6 3.0 4.0
Latin America ------------------------------------------------ 1.4 1.4 1.2
Middle East -------------------------------------------------- .7 .9 .9
Africa ------------------------------------------------------- 1.2 1.4 1.2
Asia --------------------------------------------------------- .5 1.0 1.0
Subtotal, non-OPEC LDC's ----------------------------------- 5.4 7.7 &3
OPEC:
Venezuela ----------------------------------------------------- 2-2 2.1 2.0
Ecuador ------------------------------------------------------ .2 3 .3
1 ndonesia ---------------------------------------------------- 1.8 2.0 2.2
Algeria ------------------------------------------------------ 1.1 1.1 1.0
Libya -------------------------------------------------------- 2.2 -2 2.3
Nigeria ------------------------------------------------------ 2.2 2.4 2.5
Gabon ------------------------------------------------------- .2 .3 .5
Iran --------------------------------------------------------- .6.5 & 7 6.5
KauwaiL ----------------------------------------------------- 1.8 2.1 2.5
Iraq --------------------------------------------------------- 2.8 4.0 5.5
United Arab Emirates ------------------------------------------ 2.3 2-5 2.5.
Qatar -------------------------------------------------------- .5 .5 5
Saudi Arabia ------------------------------------------------- 11.8 16.6 20.6Subtotal, OPEC --------------------------------------------- 34.6 42.8 48.9,
Not exports, Soviet bloc -------------------------------------------- .6 0 0
Not exports, Peoples Republic of China ------------------------------ .5 1.0 0
Net exports, Communist bloc --------------------------------- 1.1 1.0 0


If the Saudis decide to increase production to meet world oil demand at current prices, the CRS study suggests that Saudi income from oil will rise rapidly throughout the 1980's. If, on the other hand, theSaudis will limit output, their actions likely to result in higher world oil prices. 'vvhile this action would have a negative effect on economic growth rates elsewhere in the free world, Saudi income would still continue to grow and at lower volumes of oil sales. Hence, the narrow national economic interest of Saudi Arabia might dictate only limited further oil production expansion (if aaiy at all). However, the level of Saudi Arabia oil production is not determined by internal economic needs only. Saudi Arabia is aware of its particular role in the world economy, and has acted in the past as a. moderator in the, OPEC oil price debate. Saudi officials have made it clear in public pronouncements that they are, not likely to limit oil production to domestic capital needs, and that oil output may continue to increase in the future. The country is in fact embarked on a program of adding additional capacity to meet oil production levels several million b/d higherthan they are Cu ITently producing. As a quid pro quo government spokesnien haN-e called for Western (in particular U.S.) assistance in briiicrin(r about an early settlement to the Middle East conflict, emtn t-)









ploying U.N. resolutions 238 and 242 as a basis of the negotiations. Furthermore, the Saudis want progress in the "North-South" debate on the New Economic Order, and U.S. and other developed country assistance in the modernization of their economy. A combination of domestic economic, national security, and foreign policy considerations will influence future oil output in Saudi Arabia. If the United States wants to maintain optimum independence in foreign policy making, the Nation cannot rely on other nations' decision-Ls to expand, maintain, or contract oil output.
However, if the United States does not succeed in limiting its dependence on imported oil to at least the 9.2 to 10.8 million b/d in scenario II, resulting OPEC pressures to increase the real price, of oil significantly above current levels, might be too difficult for the Saudis to resist. Substantially higher real world oil prices in the early 1980's, may retard economic growth to the extent that unemployment in the industrial countries could become a social and political problem of almost unmanageable proportions.
Hence, we are facing a world situation of growing uncertainties and growing disparity in short-term economic interests. It is in the narrow economic interest of OPEC to increase the price of oil to the level the market can bear in the long run (opportunity cost to find the marginal barrel of oil or to develop alternative energy sources. If OPEC nations were to follow this policy, significantly higher world oil prices (almost twice current world market price of oil) would retard economic recovery in the industrial nations, and make it more difficult to develop alternative energy systems and/or replace inefficient capital goods for more efficient, energy-saving capital goods. Depressed levels of economic activity in the industrial world will, in turn, slow down economic development around the world.
if on the other hand, prices of oil are kept at current levels for the foreseeable future, economic growth can continue at a higher lev el until world oil production peaks. At that point, prices would rise rapidly, making synfuels and other alternative energy sources comipetitive. Unfortunately, leadtimes are such, that close to a decade is needed for the development of most alternative energy sources. The industrial countries can ill afford to wait for the development of those energy sources until world oil prices have reached the price level of the substitutes. In f act, if they did, the price of synf uels and other alternative. energy sources would rise further, because of the higher cost of capital goods needed to develop the alternative energy sources.
Moreover, it would appear that while higher prices of energy will have the positive effect of short-term and long-term energy conserva.tion, another doubling of the price of world oil to reach the price level of some substitutes such as shale oil or oil f rom tar sands, may depress the economy to the extent that resulting uncertainty about. the future of the economy might impair the very investment in alternative energy sources needed to replace dwindling available conventional oil resources.
An agreement with OPEC nations to keep oil prices constant (in 1977 dollars, or allowing for small gradual real increases in the price of oil beginning in the early 1980's), coupled with an -aggressive policy of conservation and interfuel substitution. might buy enough time to develop alternative energy sources (synfuels, solar, etc..) provided sub-





12


stantial government assistance in one form or another will initially be. made available. Current world oil spare capacity will make it difficult (for political reasons) to implement such a policy now, but failure to, act soon would predictably exacerbate future transition away from oil to alternative energy sources. The Government is in a position somewhat similar to that of a physician with a seriously ill patient who, feels in fie shape and is in no mood for a major operation. The doctorcan administer some medicine in the hope that his diagnoses, is wrong,. but knowing that it will not work if his diagnoses is correct, he suggests surgery. He informs his patient that an early operation involves. some dangers, but if the illness is indeed as serious as he diagnosed, postponing the operation for several years will call for more drastic and dangerous action later. The physican can only inform his patient of his choices and can anistr minor treatment until the patient has consented to the operation.
It is difficult to foresee the extent, of OPEC oil price increases under the scenarios discussed here. Under the worst conditions, failure to design and implement an energy policy in the United States which will bring energy demand and supply more in balance, than is suggested in this analysis (scenario I), could ndinger the Nation's national security, the world's monetary systemworld economic growth, and could eventually shake the very social and political foundations of the nations of the free world.
As a nation, we may have to examine more carefully the actual and potential interrelationships and conflicts, between our economic, energy, environmental (in the broader sense of the word) and national security goals. Those targets have frequently been arrived at independent of each other. In the end we may find that the current balance (or inbalance) between those goals is not necessarily in the best long-term iterest of the country. In that case tradeoffs are called for which may lead to achieving less than the maximum targets we are currently aiming at in each one of these four areas of national interest.














METHODS OF FORECASTING AND PLANNING

(By David B. Hack *)

ENERGY POLICY AND ENERGY TECHNOLOGY

In establishing an energy policy, including a plan to develop new technologies which will use previously unused or underused energy resources, it is important first to understand fully the general energy policies that are available now, without development of new technology, and the full range of benefits or effects obtainable by more scientific selection of currently available general energy and economic policies. In the last two decades, policymakers have placed increasing reliance on a technique of analysis which permits direct use of quantifiable data, assembled and applied according to explicit assumptions, to indicate what will happen under varying conditions. This technique is variously called modeling, or mathematical modeling, or econometric modeling. Disregarding adjectives, modeling is more ubiquitous than casual use of the term discloses.
Nearly everything economists [or physicists, or engineers, or politicians] do involves some sort of "model." These models may be relatively undefined and not explicitly stated or they may be highly structured mathematical systems.'

ENERGY "iDEMAND") STUDIES TO 1975-LIMITATIONS OF 'MODELS USED

A Congressional Research Service report'2 prepared for the 94th Congress examined fifty energy forecasting and planning studies published between 1960 and 1975. The report concluded that, taken as a group, the so-called energy demandn" studies covered (and by implication the models used therein) suffered from certain inadequacies and inconsistencies:
Most studies do not clearly specify whether they intend to forecast what future energy consumption actually will be or what future energy consumption should be. The confusion which exists is best illustrated by studies interchangeably using the terms (a) energy consumption, (b) energy demand, (c) energy needs, and (d) energy requirements.

Most energy forecasts are based on projected historical rates of energy consumption, and accordingly can be criticised for not offering a comprehensive analysis of the equilibrating of energy supply and demand [by which quantities consumed are determined]. Among the exceptions are the 1974 Federal Energy Administration study and the 1975 Hudson and Jorgenson study.



*David B. Hack is an Analyst in Science and Technology at the Congressional Research Service.
I U.S. Library of Congress. Congressional Research Service. Some Strengths and Limitations of Using Economic Models for Policy Analysis [by Warren E. Farb, Specialist in Macroeconomics]. Multilith 77-118 E, May 18, 1977. p. 1.
2 Energy Demand Studies-An Analysis and Comparison [by the Congressionai Research Service, Science Policy Research Division]. In: U.S. Congress. House. Committee on Interstate and Foreign Commerce. Subcommittee on Energy and Power. Pt. 7-Middle- and Long-Term Energy Policies and Alternatives. Appendix to hearings, 94th Cong., 2d sess., Mar. 25 and 26, 1976. 82 p.
(13)






14

Forecasts of energy [consumption] levels required to sustain a prospering economy should be based on a well-reasoned analysis of the relationship between energy consumption and Gross National Product. Instead many studies simply use a correlation or ratio analysis of the historical relationship between energy consumption and GNP.

In order to be truly useful to policyrnakers, energy studies should attempt to appraise the benefits of future levels of energy consumption relative to the costs of providing those levels of energy consumption. This type of balancing analysis is essential to comprehensive policy determination. But regardless of the feasibility of developing such a subjective [or "planning"] form of analysis, studies must avoid the commonly found technique of mechanically projecting historical trends and indicating they are likely to be followed in the future.3
The 1976 CRS report cited above covered studies published through mid-1975. Since that time, several other studies have been published, and a selection of these recent studies is summarized below under the title "The Demand for Energy-An Overview of Six Studies." As the cited 1977 CRS report suggests, models [such as those used
in the above-described studies] may be relatively undefined and not explicitly stated or they may be highly structured mathematical systems. "
The remainder of this chapter attempts to construct a general policy planning framework in which such studies could be appraised, and defines a single characteristic-the elasticity of substitution of energy for other factors of production and consumption-by which the methods used in both past and future studies could be characterized, and by which the conclusions of such studies could be compared.'

A GENERAL POLICY PLANNING FRA',NIEWORK

Many energy planning or forecasting studies fail to describe the basic assumptions and models used to produce the study results. The result is that readers of such studies often find it difficult to distinguish between (1) the basic assumptions and methodology of the study and
(2) the results found by the study. In cases where such a shortcoming exists, it is impossible to assess whether the results of the study are truly applicable to any real problem. Furthermore, it is not uncommon for there to be no available documented record of the model or of the basic assumptions inherent in the model. A recent example of such a study is President Carter's National Energy Plan,' which gives neither documentation of, nor footnote references to, the model used in preparing the Plan. The President's Plan does, however, fortunately provide something else-a sketch of a general policy planning framework, an understanding of which is prerequisite to understanding of the
3 Energy Demand Studies-An Analysis and Comparison. p. 1-2.
4 We note that there is no contradiction between economic production and consumption theory, which are parts of the economic subdiscipline of microeconomics, and the laws of thermodynamics (a subdiscipline of physics). Much confusion has arisen from assertions that energy is both totally unique, and completely irreplaceable. Thermodynamic theory, expressed simply, says that energy once used for a given purpose, cannot be used again for the same purpose, but may be used for other less demanding purposes (it does not disappear). A fixed quantity of energy may have a wide and ordered range of qualities (usefulness for various purposes which are either less or more demanding). When economists consider the substitution of other factors of production for energy, they contradict no law of thermodynamics-rather they implicitly recognize, qualities or grades or forms of energy which for purposes of economic analysis are not explicitly labeled as energy. Thu.-, substitution of "capital," or "labor," or "materials" for "energy" in economic analysis is consistent with substitution of lesser quantities of greater quality energy for an alternative of greater quantity and lesser qtial,* ,
5 U.S. Executive Office of the Presiden, Oc _- of Energy Policy and Planning. The National Energy Plan. Washington, U.S. Govt. Print. Off., Apr. 29,1977. 1G3 p.





15

nature of models and their use. The policy planning framework is outlined in the ten principles set forth in Chapter III of the Plan.
It is there stated that the ten principles "provide a framework *- for present policies * also for development of future policies." The following grouping of the ten principles reveals a logical relationship among the principles, and suggests the nature of the implicit model underlying the President's proposals, as well as describing the framework required for rational energy consumption forecasting and planning.
Three of the ten principles, the first, fifth, and eighth, describe the Government's responsibility to be rational and equitable.
The first principle is that the energy problem can be effectively addressed only by a government that accepts responsibility for dealing with it comprehensively, and by a public that understands its seriousness and is ready to make necessary sacrifices. * The fifth principle is that the United States must solve its energy problems in a manner that is equitable t( all regions, sectors, and income groups. * The eighth principle is that both energy producers and consumers are entitled to reasonable certainty as to Government policy.
These three principles together articulate the Administration's acceptance of responsibility for dealing with energy problems comprehensively in all respects, and appeal to the public to recognize and approve the Government's acceptance of this responsibility.
THE THEORY OF ECONOMIC POLICY
The work of Jan Tinberg n provides a basis for understanding the role of modeling in economic and energy policy.
Tinbergen received the Noble Prize in Economics for his articulation of the general methodology with which any government must work if it is to deal with economic problems (of which the energy problem is an example) in a comprehensive fashion. The required framework has come to be called the Theory of Economic Policy.' The remainder of the President's ten principles of energy policy can be understood in terms of the Theory of Economic Policy, as follows.
The Theory of Economic Policy states that in order to deal with economic problems comprehensively, one must make a list of the economic or economically related goals one wishes to achieve. This the President has done in five other of his principles-the second, third, fourth, ninth, and tenth.
The second pi inciple is that healthy economic growth must continue. The third principle is that national policies for the protection of the environment must be maintained. * The fourth principle is that the United States must reduce its vulnerability to potentially devastating supply interruptions. * The ninth principle is that resources in plentiful supply must be used more widely, and that the nation must begin the processes of moderating its use of those in short supply. The tenth principle is that the use of non-conventional sources of energy must be vigorously expanded.
The Theory of Economic Policy states further that in addition to a list of the economic or economically related goals a government wishes to achieve, a list of the means at the Government's disposal (for the achievement of such goals) is required. Finally, a model-explicit or implicit-of the complex interrelationships between the set of goals,
'Jan Tinbergen. On The Theory of Economic Policy. Amsterdam, North Holland, 1952. 80 pp.
Economic Policy, Principles and Design. Chicago, Rand McNally, 1967. 267 pp.





16

andI the set of means, must be established and used. The President's remaining two principles reflect judgments about the nature of the model which best reflects the realities of the U.S. economy.
The sixth principle, an(1 the cornerstone of National Energy Policy, is that the growth of energy demnan1 must be re~ctrained through conservation and improvedl energy efficiency. * The seventh principle underlying the National Energy P~lan, is that energy prices should generally ieflect the true replacement cost of energy.
Thus, the President has established his basis for national energy Jpolicy-andl his judgmental view of the factual or structural relatio-nships between his five goals on one hand, and the few dozen administrative ani legislative means he proposes for achieving those goals on the other hand. The President's sixth principle expresses his view that the factual or structural relationship between his five broad goals an(1 his few (lozen specific means is one in which substantial reduction in the consumption of energy, relative to continued "healthy economic growth," is possible, The seventh principle expresses the President's view that his goals will be served by policies which raise the effective prices of resources now being used nearer to the cost of the resources which will be needed to replace them. Since the sixth and seventh principles seem to be the only two of the President's principles which appear to reveal views of economic structure, they seem to imply a belief on the President's part that his goals-which are (in adalition to healthy economic growth): protecting the environment, reducing energy supply vulnerability, substituting plentiful for scarce energy resources, and expanding the use of non-conventional sources of energy-will all be served by various means of raising the effective prices of the increasingly scarce conventional energy resources.
It is not the purpose of this general discussion of energy forecasting and planning methodology to appraise the President's few dozen specific proposed actions (means for achievement of goals) .' Neither is it here the purpose to appraise in detail the President's view, or any other view, of economic structure. Rather, the purpose here is to say that a generalized set of goals, andl a general apprehension of an appropriate model. for energy policy analysis, can be made more specific and quantitative, tested for validity, and finally applied to national policymaking-regard less of what or whose goals and views of economic structure are involved. Further, this can be done by the Congress. The readler is urgedl to review the following chapters of this document, and to consider how well the studies compared by CRS (and this CRS report itself) adhere to the soundly approach outlined in the Theory of Economic Policy, in presenting a portrayal of U.S. energy prospects and possibilities for the future.
The reader is further urged to think about the characteristic of economic structure (or model structure) definedI just below (the elasticity of substitution). Is the Theory of Economic Policy a suitable general framework for helping you link your list of goals, through your view of the U.S. economic structure, to the list of means controlled by the Congress, or by your part thereof? Is your view of
-Thiese easfor achievement are summarized in The National Energy Plan, pages xv hruugh xxiii, a ml are detailed in ( 'hapters IV through Vill of Tphe Plan. Trhe effectiveness of the Iulean in51 relation to the goals have previously beeni a sossod in documents of the Congressional Research Service, the General Accounting Office, and the Congressional I ldget O office.





17

economic structure encompassed by the concept of elasticity of substitution defined below-and can your view of that economic structure be represented by a low numerical estimate, or by a high or middlerange estimate, of that variable? Finally, could the Theory of Economic Policy as a general framework, together with some elaboration and measurement of the elasticity of substitution as a representation of specific economic structure, enable you to make energy policy decisions more easily?

ELASTICITY OF SUBSTITUTION OF ENERGY FOR OTHER FACTORS
Is Energy Substitatable?-A key point at issue in energy consumption forecasting and planning studies-and in, the President's National Energy Plan in particular-is the degree of substitutability of other factors of production (chiefly labor, physical capital and materials) for energy. In certain situations, or over certain time horizons, energy may be either a substitute for and a competitor with labor, or it may be a complementary factor of prod uction-meanin g that as more energy is used, more labor is required also. In the latter case only, the limitation of energy may limit employment. Thus, the exact role of energy in the whole economy is complex, and remains to be scientifically resolved. When knowledge of these relationships becomes more certain, then the "relatively undefined and not explicitly stated" mcdels, together with some very explicitly defined but relatively elementary models (see footnote 4) may be replaced by models which are both explicit and theoretically complete.'
How Substitutable is Erieray?-Hogan and Manne 9 have used the economists' standard textbook definition of the elasticity of substitution '0 to illustrate the range of effects of energy conservation on the level of Gross National Product (G.NP). For the 'purpose of illustration they avoid entanglement. in uncertainty as to the correct numerical magnitude of the elasticity of substitution. Instead, they base their computations only on the definition of elasticity of substitution between energy and all other goods, and on the assumption that the elasticity as defined may be assumed constant over a substantial rangre."1 They
Technically, energy and labor could he found to be substitutes at every point along an "expansion path," and also be found to increase in fairly close proportion as one moves outward along a given expansion path (moves to a larger aggregate GNP). Typically, discussions of positive correlation of both energy consumiption and GNP with time, and therefore with each other, use data points taken essentially from a single expansion path. The feasibility of alternative expansion paths as defined in niathemiatic-al economics and. more importantly, of transitions from one expansion path to another, has received less attention.
0 Hogan, William W., and Alan S. MAanne. Energy-Economy Interactions: The Fable of the Elephant and the Rabbit? [Energy -Modeling Forum Working Paper E.ME 1.3, Draft 41. Jan. 12, 1977. 10 p. and mathematical appendix.
10 Elasticity of substitution is a measure of the effect of a change in the relative prices of production factors A and B on the least-cost proportions of A and B. It is defined as the percentage change in the quantity ratio B/A, divided by the percentage change in the price ratio P./Pb. This measure of substitutability under cost-minimizing behavior varies in magnitude from zero to positive (-t) infinity, but for practical purposes any magnitude greater than 1.0 may be considered very large. 11 Such assumptions have a long history of use, as well as a large professional literature addressed to testing their validity. This literature can be regarded as having begun with the, early work (1927) of economist and former U.S. Senator Paul Douglas, with Charles Cobb. The early work of Cobb and Douglas was published in 1927 under the title "A Theory of Production." Cobb and Douglas proposed a specific form of mathematical function as an expression of the relationship between and among various inputs to economic production. This function became known as the Cobb-Douglas production function, and is characterized by an elasticity of substitution having the constant value 1.0. Later, a more gene-ral form of production function was proposed as a basis for research and testing. This production functions ass umes that the elasticity of substitution is a constant, but does not assume a numerical figure for 'that -constant. Instead, it leaves the numerical fig-are to be determined by statistical data taken from the ltistory of actual economic behavior. It is the function last described which forms the basis of the Hogan-.Manne paper. This function is known as the Constant-E lasticit y-of-Substi tut ion Production function (CES production function).-





18

then compute the effects implied by different values for that constant. The "model" they use is therefore not a single model, but a range of 11models" of substitution, ranging from no substitutability at all, to infinite substitutability.
They summarize reports of attempts to measure the correct, real world magnitude of the elasticity of substitution, and tell us that the bulk of the evidence urges rejection of both the zero substitutability view and the infinite substitutability view. They then argue that attention should be closely focused on intensive effort to narrow the range of uncertainty in which estimates of the true elasticity of substitution lie, for they find large uncertainties in, but measurable possibilities for, energy substitution. This implies very substantial potential savings of energy consumption with relatively small losses of GNP (other things being constant) or actual increases of GNP with decreased energy consumption, provided other input factors and other policy variables are suitably adjusted, and provided that the correct estimate for the elasticity of substitution turns out to lie in the favorable range.
Suppose that for reasons of resource conservation, environmental protection or national security, there is a need for reduced energy consumption. Suppose further that there is no reduction [and no increase] in the economic inputs other than energy. * What is the resulting impact on GNP? * According to this simple model, the long run elasticity can have a startling effect. A 50 percent reduction in energy utilization would produce a 28 percent, reduction in GNP if the elasticity is 0.1, but only a I percent reduction in GNP if the elasticity is 0.7.
* * Most existing estimates of the price elasticity of demand fall within the range of 0.3 to 0.7. This issue has certainly not been resolved, and there is some evidence for both higher and lower values. It is essential, therefore, that any improved analysis of the energy-economy link provide a careful specification of the elasticity of demand/substitution. Most modeling efforts can be characterized in terms of their treatment of this important concept.12

GROSS NATIONAL PRODUCT CHANGES RESULTING FROM ENERGY CONSUMPTION CHANGES FOR DIFFERENT CONSTANT ELASTICITIES
Table 3 and Figure 1 Explained.-The relation of GNP and energy postulated by Hogan and Manne is shown in Table 3 and Figure 1. Note that in Table 3, and in Figure 1 which is plotted from t& data of Table 3, there are cases which imply great losses of GNP resulting from reductions in energy consumption, and cases which imply very small losses of GNP resulting from reductions in energy consumption. The difference between the pessimistic cases and the optimistic cases arises wholly from the true numerical magnitude of the elasticity of substitution,. which ranges in principle from zero to positive (+) infinity, but which is shown numerically and plotted for the values 0. 71 0.51 0.31 0.2, and 0. 1. In essence, this table and figure show what would be expected for various assumptions of elasticity.
The arrangement of data in Table 3, and the arrangement of axes in Figure 1, are chosen to complement each other. The most pessimistic case, elasticity (e) 0. 1 in the bottom row of Table 3, emphasizes the rapidly sinking GNP which arises from increased energy savings at such a small elasticity. (The percent change in GNP is written AGNP or "delta GNP," and the percent change in energy consumption is written AE or "delta E.") The sinking GNP for this case is illustrated
12 Hogan and Manne, op. cit., p. 4-5.






19


Table .. GROSS NATIONAL PRODUCT CHANGES RESULTING
FROM ENERGY CONSUMPTION CHANGES FOR
DIFFERENT CONSTANT ELASTICITIES

Percent Reduction in Energy Consumption
0 13.6 27.3 50.0 68.0

Elasticity of Dem.nand/ Percent Reduction in GNP
Substitution (e)
0.7 0 0.1 0.3 1.2 3.0
0.5 0 0.1 0.4 1.9 5.2
0.3 0 0.2 0.8 4.3 14.3
0.2 0 0.3 1.3 9.2 30.8
0.1 0 0.6 4.5 27.7 53.8


Figure 1. GROSS NATIONAL PRODUCT CHANGES RESULTING
FROM ENERGY CONSUMPTION CHANGES FOR
DIFFERENT CONSTANT ELASTICITIES

A E = -13.6% A E =-27.3% A E =-50% AE -6 8%
LAGNP =-0.6% ~IGNP =-13% GNP =-1.9%/ AGNP =-3.0%

-~ Z 7 -'0-e=
e .7
e =.5


e = .3


z .
e =.2

z

-.50
0
e =.1









.1001

0 50 -100
Percent Reduction in Energy Consumption (A E) Note; All data from Hogan and Manne. op. cit., p. 10.





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grap)hically in Figure 1 by the curve for e=0.1, which drops precipitously from AGNP=0 for AE=O, to AGNP=-53.8 percent for AE-z-68 percent. However for the most optimistic case, the curve for Which e=0.7, the GNP is hardly affected-dropping only from AGNP-0 for AE-0, to AGNP -3.0 percent for AE=-68 percent. Each of the four points marked by darts in Figure 1 is on a different curve, the first on e=O.1, and the fourth on e=O.7.
Tfie lower axis of Figure 1, the Percent Reduction in Energy Consumption (AE), is chosen to suggest implicitly a passage of time from left to right,, as well as a greater saving of energy consumption. One may interp~ret the smaller andl more pessimistic values of e, therefore, as short-ruin elasticities (about one year) and the larger and more optimistic values of e as long -run elasticities (30-40 years or more). Thus, Figure 1 suggests that in a short run for which e=0.1, energy savings could be as great as 13.6 percent with a GNP loss of only 0.6 percent In a very long run in which the entire U.S. capital stock might be replaced, the energy consumption could be reduced by as much as 68 percent with a GNP loss of only 3.0 percent, if the longrun elasticity (e) turned out in reality to be the very optimistic figure of 0.7. In any case, having the best possible estimates of the true elasticity (e) for different time horizons appears to be crucial, because for horizons less than a year, e might be even less than 0.1, and for horizons of 50 years or more, e might fall short of 0.7. If, on the other hand1, e for a horizon of, say, 20 years proved to be as large as e=0.3, then energy savings (AE) could be as large as 27.3 percent with only a 0.8 percent, loss of GNP, other input factors being constant. Accurate estimates of the elasticity (e) for different time horizons therefore appear to be very important.

ELASTICITY IN THE WHOLE ECONOMY VERSUS ELASTICITY IN DETAIL
The President's sixth p)rincip~le, "the cornerstone of National Energy Policy," is that, the growth of energy demand must be restrained through conservation and improved energy efficiency. In view of the goal embodied in the second principle, "that healthy economic growth must continue, "it is clear that the President and his advisors believe that the elasticity of demand for energy 13 is relatively high. Certainly it must be higher in their view than the figure of 0.1 upon which the most pessimistic curve is based, but it need not be as high as the 0.7 upon which the most optimistic curve is based. Since Hogan and Manne summarize available estimates of the elasticity of substitution as lying probably between the figures 0.3 and 0.7, the reader may choose to ignore the case favored by dliehard pessimists that the elasticity of substitution is 0.0 (no substitution whatever between energy and other factors of production) as well as the case favored by incurable optimists that the elasticity of substitution is so large (1.0 or greater) that practically any reduction in the level of energy consump~tion can be accommodated with trivial discomfort.
13 Hogan and Manne observe that for the aggregate U.S. economy the elasticity of substitution of other factors of production and consumption for energy is essentially the same a-, the elasticity of demand for energy, since all of the possible substitutions for energy are encompassed in "other factors."





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A two-part problem for energy policy analysts, and elected officials alike, is (1) to determine to a fair approximation the true elasticity of substitution in the U.S. economy as a whole or in its separate parts, and (2) to identify a single set of policy measures (there may be several such sets) which will cause the desired reductions of energy use and increases in the use of other factors (including labor) to be accomplished. In principle, this involves considering a bill which includes in its list of available policy actions all of the policy actions considered potentially relevant, and in its list of goals all of the economic, environmental, social, and political goals which are thought potentially to be affected by any of the considered means. This legislative process need not be entirely different from the process of building a "model" which would encompass all of these considerations."

WHAT ARE THE MEANS THROUGH WHICH FEASIBLE SUBSTITUTION MAY BE EFFECTED?
Tinbergen's Theory of Economic Policy tells us that for any number of separate goals, there must be an equal (or greater) number of separate means for achievement of goals. 15 Thus, if it is desired (1) to increase total employment of labor while (2) simultaneously reducing the per capita consumption of energy, at least two distinct policy variables must be adjusted. For example, one might have to (1) increase taxes on the consumption of energy, thereby raising its effective price to the user, while (2) simultaneously arranging to maintain the level of national income, or the growth rate thereof, by restoring private sector purchasing power through reductions of taxes imposed on other consumer or producer goods and services. Among the alternatives which have been suggested (for restoration of private 'rchasing power) are reduction of taxes on the employment of laVor, and tax credits for investment in energy production capital or resource exploration.
If there are only two goals desired, and more than two available and effective means, there may be more than one feasible combination of means which can accomplish the stated set of goals. Having an excess of means implies that additional goals (needs) might be identified and accomplished in the future, as desired. For example, the President's five ambitious and separate goals listed earlier will of course require the coordinated exercise of at least five powerful and independent means. Since the President proposed not just five, but several dozen specific legislative and administrative actions, careful consideration may be required to see if the five broad goals implicitly contain unidentified component goals, and whether each of the few dozen means are indeed independent of each other. If the means to be used are still of greater number than the listed goals, one may ask whether the President holds unstated goals in addition to those stated, and whether there are additional goals which are unstated because they
14 For a professional economist-engineer's view of a starting point for a model encompassing all of these considerations see: William W. Hogan. Capital-Energy Complementarity in Aggregate Energy-Economic Analysis. Energy Modeling Forum [working paper]. (Stanford) Institute for Energy Studies. August 1977. 27 p.
15 In the dynamic corollary to Tinbergen's Theory of Economic Policy-the Theory of Optimal Controls similar principle applies.





22

are not held and not identified, which could be identified and accomplished with the means at hand. 16

FORECASTING AND PLANNING METHODS AND THE LEGISLATIVE PROCESS
Scientific results, such as a reliable estimate of the elasticity of substitution for energy, computed from good statistical and engineerinLy data can be a help in molding and passing a bill representing a congressional "model" of energy use. In considering individual portions of such a bill, some amendments will be proposed which, in effect, require a vote by a subcommittee, committee, chamber, or committee of conference, on a particular aspect of national or interregional economic structure. In a vote on such an amendment, Congress or one of its parts may be regarded in effect as rendering a judgment as to whether the weight of evidence gained from science and/or from personal experience favors one or another view of how a portion of the economic world operates."
While some aspects of economic structure are constants of physical or behavioral science, there are additional aspects of economic structure which are determined as a direct result of congressional legislation. Professional model builders recognize this kind of structural constant with the term "statutory coefficient," of which particularly clear examples are numerical percentage tax rates.
In many cases, however, votes in Congress and in its parts are not neatly divided into (1) rendering judgment as to the weight of evidence favoring a particular estimate of scientific law, and (2) laying down statutory coefficients which themselves become part of our economic structure. Often the amendments offered are less clear-cut and more ambiguous, combining both judgment of scientific law, and creating statutory economic structure (and in addition affecting the flow of Federal expenditures).
It may be helpful, however, occasionally to view the Congress as a model builder which (in effect) makes its own estimate of economic structure as embodied in scientific law, and specifies additional economic structure by creating statutory coefficients such as tax tables.
18 Peer review elicited the comment that-whereas the Theory of Economic Policy states that the number of means must be at least equal to the number of goals-in legislative politics a vote may be cast not from a single motive but from a combination of motives. This allows the legislator to accomplish several political "goals" with the means of a single vote. The argument was made that the Theory of Economic Policy is rendered impotent or inapplicable by presentation of this example which seems to contradict it, and thus disproves its generality. The cominent confuses the definitions of both means and goals. Specifically, the comment does not recognize that goals are quantitative in nature, not just qualitative. Similarly, the manipulation of means involves quantitative, not just qualitative adjustments. A goal in economics is not just any change in a given direction of an economic variable. Rather a goal is attainment of a specific numerical target value (or milestone) for that variable. Similarly, it is not just in politics, but also in the mathematical world of economic models, that a numerical change in a single means (or policy variable) may effect numerical changes in more than one goal (or target variable). In fact, a numerical change in a single policy variable will almost always effect changes in multiple target variables. The point that the peer review comment misses is that such multiple changes are not independent of each other when a single policy variable is used. If an adjustment in a single means or policy variable causes one goal to be fulfilled 1000/, and a second goal to be overfulfilled to the extent of 150% of the goal, a second means must be identified and manipulated so that the action of the two means in concert results in fulfillment of the first goal 100(7 with simultaneous fulfillment of the second goal 1000/,, instead of the second target or goal being missed by +50 percent.
17 Peer review elicited the comment that the above paragraph expressed a naive and idealistic view of how the Congress functions. To wit: votes in Congress may be affected by many more factors than by personal views, however derived, of how the economic world operates. Among such additional determinants may be parochial views of the interests of a particular State, ccngrmional district, industry, or other constituent group. Notwithstanding this peer-review comment, we believe such discussion irrelevant here. This chapter is not intended to be an academic political science treatise on how the Congress functions. This chapter is written for Members of Congress, not for graduate students in legislative affairs. As such, the information presented is intended to represent an accurate expression of what science has to offer legislators involved in national decisions. It is not the role of this report to instruct Members of Congress in the process of the Congress. However, scientific information (as one of the information inputs entering that process) is one of the sources of authority which individual legislators may choose to use for legislative advantage.





23

To the extent that Congress institutionalizes, in its own staff analytical apparatus, the results of its own economic engineering, 18 it is in a stronger position to accept, modify, or reject the Executive's belief that a particular new policy modification-workino through the economic structure that Congress has in part apprehended from science, and in part created through statutory law-will accomplish particular goals.
A professional modeling technique-a methodology of forecasting and planning-which could be helpful to the Congress in evaluating Executive-proposed spending and taxing scenarios, is that of making conditional forecasts. That is, arranging to compute on progressively shorter schedules (in the ideal case just before relevant votes are taken) alternative paths, over several decades, of important variables such as income and employment by region or State, conditional upon the result of the vote to be taken. Neither a single path forecast (point forecasts for each of several future years) nor multiple energy production and consumption capacities assembled into a complex array of energy balances (with supposed surpluses or shortages) will quite fit this problem.
History suggests that new technologies may arise which will increase the alternatives available to Congress and the Nation. When this happens, the multiple paths computed based on earlier available technologies may be rendered obsolete by new, more desirable paths (perhaps based on an extended range of feasible elasticities). But there is hardly any substitute for the best possible knowledge of the paths available based on the technologies available now. A problem for Congress may be, acting in response to all of the usual influences and all of the available scientific information, to legislate a program of sufficient breadth, sufficiently well-coordinated, to forestall future energy problems. In considering substantive actions of current energy and economic policy, and substantive actions to fund research and development on energy production technology and hardware, the Congress may simultaneously appraise whether its computational tools and institutional arrangements for using such tools (as well as the degree of comprehensiveness of its research programs in basic and applied economic science) are fully capable of exploiting the possibilities of an internally-consis tent approach to policyniaking such as outlined in the Theory of Economic Policy.
Is The process by which congressional estimates of physical or behavioral constants of economic structure (and congressional specification of statutory economic structure) might become plugged into Congress' computer(s) is left unelaborated here.











THEDEMAND FOR ENERGY-AN OVERVIEW AND SUMMARY OF SIX STUDIES
(By Howard Useem*)
OVERVIEW
Since 1955 domestic energy consumption has been increasing at a 3.0 percent annual rate on average, while domestic energy production has been expanding at a 2.2 percent annual rate. This small, but significant, gap between the growth of domestic energy i consumption and production has led the United States from a position of energy self-sufficiency in the late 1950's to its current position of heavy dependence on foreign energy supplies. In 1975 the United States relied on foreign sources for one-sixth of its total energy needs, and for nearly 40 percent of its petroleum supply.
Between 1955 and 1975 U.S. net energy consumption rose from 35.0 quadrillion Btu's (called "quads") to 57.5 quads, a 64 percent increase. While every sector has exhibited a significant growth in energy consumption (see Table I below), energy consumption by the transportation sector has grown the most-about 8.7 quads. This is an annual growth rate of more than 3.2 percent.
However, in recent years it appears that increasing energy prices have led to some moderation in the growth of energy consumption and, in some cases, a net decline in energy consumption. In the case of the industrial sector, net energy consumption has fallen almost continuously from a peak of 24.0 quads in 1973 to 21.6 quads in 1975.
TABLE 4.-TOTAL U.S. NET ENERGY CONSUMPTION BY CONSUMING SECTORS [Quadrillion Btu's)
Household and
Year commercial Industrial Transportation
9.5 15.0 9.8
1960 ------------------------------------------------------------- 11.4 15.9 10.8
1965 ------------------------------------------------------------- 13.8 18.8 12.7
1970 ------------------------------------------------------------- 17.0 22.4 16.5
1975 ------------------------------------------------------------- 17.3 21.6 18.5
Source: American Petroleum Institute. Basic Petroleum Data Book. Cites various Department of the Interior publications as sources.
SUMMARIES OF SIX STUDIES OF ENERGY DEMAND
The following is an overview and individual summaries of six recent studies of energy demand. The six studies reviewed are: "The Demand for Energy in the United States," by Alvin Kaufman, Warren Farb,
*11oward Useern is an economic analyst at the Congressional Research Service. I Most econometric models assume that price will adjust such that supply equals demand, and demand will equal consumption: in other words, the market "clears." If a model does not provide for price adjustments then markets will not necessarily "clear" and it would then be possible for consumption not to be equal to demand.
(24)





25

and Barbara Daly, Congressional Research Service, The Library of Congress (April 21, 1977); Energy Review: "Energy Outlook," by lvinCook Data Resources Incorporated (1977); "Energy Outlook 1977-1990y" by Exxon Company U.S.A. (January 1977); "National Energy Outlook," by the Federal Energy Administration (February 1976); "Energy Demand Studies: Major Consuming Countries," by Paul Basil (ed), Caroll Wilson (project director), etal., Workshop on Alternative Energy Strategies (1976) ; and "United States Energy Through the Year 2000" (Revised), by Walter Dupree, and John S. Carse.ntino, Bureau of Mines, U.S. Department of the Interior (197 5).
Despite the different assumptions and methodologies used in these various energy deiiiand studies, their conclusions with respect to future energy demand are surprisingly similar. The energy demand projections for the year 1980 range from 80.22 quads to 87.1 quads; if the highest and lowest projections are discarded then the array of projections closes to 81.3 quads to S5.4 quads, a 4.1 quad (5 percent) range.
For 1985 there is slightly more divergence in the demand projections. Discarding the highest and lowest projections, the demand projections for 1985 range from 91.2 quads to 103.5 quads, a 12.3 quad (13.5 percent) difference. It should be noted that these projections are not significantly different from those contained in the President's National Energy Plan, which forecasts energy demand in 1985 without conservation measures to be 102.3 quads, and 98.3 quads with the conservation measures contained in the plan:
In 1990 the difference between the various projections narrow. Again disregarding the highest and lowest projections, the remaining forecasts of energy demand for 1990 range from 104.5 quads to 116.1 quads, a 11.6 quad (11.1 percent) difference.
Four of the six demand studies contain alternative scenarios based on alternate assumptions. Three of these four studies find industrial energy demand relatively unaffected by changes in energy prices and energy policy. In the CRS study, "Demand for Energy in the United States, 1976-1990," the difference between industrial energy demand in 1985 between the optimistic and pessimistic cases is only 2.3 quads. In the four alternative cases forecast in "Energy Review: Energy Outlook," by D.R.I., industrial demand in 1985 ranges from 57.8 ,quads to 60.1 quads. Similarly, in the reference case scenario contained in the Federal Energy Administration's "National Energy Outlook," industrial energy demand in 1990 ranges from 74.1 to 74.3 quads despite significantly different assumptions concerning world oil prices. Only the WAES study, "Energy Demand Studies: Major Consuming Countries projects a significant change in industrial energy demand (7.7 quads) g -" iven different assumptions.
These same four studies find that different assumptions concerning energy policy and prides lead to a moderate to significant impact on household/commercial energy consumption. At the low end of the range, the D.R.I. study finds that alternative energy policies can ,change household/commercial demand by only 7 percent (1.1 quads) in 1985. At the other end of the range, the WAES study finds that household/commercial energy demand can be altered by as much as 41 percent (6.1 quads) in 1980.

21-616-78-3




26

The findings on transportation energy demand are mix'-d. At the low end of the scale, the D.R.I. and CRS studies find that transportation energy demand can be altered in 1985 by at most 2 percent (.5 quads). At the high end the WAES study finds that transportation energy demand can be affected in 1985 by as much as 20 percent (3.5 q u ads)
The following are individual summaries of the energy demand forecasts contained in the six studies previously cited and discussed. At the end of the summaries there is an overall summary table.

THE DEMAND FOR ENERGY IN THE UNITED STATES, 1976-1990
Author, date: Kaufman, Alvin, Warren Farb and Barbara Daly. Congressional Research Service The Library of Congress. April 21, 1977.
Range of study: 1976 through 1990. ,Methodology
Using the Data Resource Inc. (DRI) long-term macroeconomic model of the U.S. economy and the DRI energy model, CRS produced three energy demand forecasts: an optimistic case, a pessimistic case, and a reference case. The reference case was an average of the optimistic and pessimistic cases and therefore will not be discussed. Assumptions
The optimistic case assumes relatively steady U.S. economic growth through 1990. Real GNP grows at a 3.5 percent annual rate from 1976 through 1990. Inflation, as measured by the implicit price deflator, averages 4.3 percent, and unemployment averages 5.4 percent. The forecast assumes decontrol of new gas prices (but old gas will continue under controls), early availability of natural gas from Alaska, and generally increasing energy prices. Crude oil is assumed to increase from $10.60 per barrel in 1976 to $13.30 in 1990 in real terms. Natural gas prices are assumed to increase more sharply, with average real industrial prices increasing from 10.8 cents per therm. in 1976 to 18.3 cents in 1990. The delivered real price of coal is assumed to go from about $17 per ton to $19.40 per ton by 1990. However, electricity, in real terms, is assumed to decline from 3.6 cents per kilowatt hour to 3.3 cents.
The pessimistic case assumes that the economy will experience periodic recessions throughout the forecast period and that real GNP will grow at an annual rate of 3.4 percent. Inflation is expected to average 5.1 percent, and unemployment 5.7 percent throughout the forecast p riod. The pessimistic forecast assumes that total energy demand will be lower than under the optimistic forecast, but energy prices will be higher. The crucial energy assumptions in this forecast are a decontrol of crude oil prices by 1979, decontrol of new natural gas prices at the end of 1977, and the cessation of new nuclear construction after 1985. By 1990, in real terms, the price of energy is expected to be: $18 per barrel for petroleum, $.26 per therm, of natural gas, and $19.40 per ton of coal.
Findings
In the optimistic case, net energy demand rises from 59.3 quads in 1976, to 83.5 quads in 1990, a compound annual growth rate of 2.5





27

percent. Household ,And commercial demand grows during this period by only 1.6 percent per year, while industrial demand will 0row by 4.1 percent. During the 1976-1990 period energy use by the transportation sector is proje4ed to grow by only 3.4 quads-a compound annual growth rate of only 1.2 percent. Energy conversion losses, stemming mainly from the generation of electricity, are anticipated to rise from 14.7 quads in 1976, to 29.9 quads in 1990.
In the pessimistic case, net energy demand is expected to rise from 59.3 quads in 1976 to 75.5 quads in 1990-a compound annual growth rate of 1.4 percent. Household and commercial demand is expected to grow at an annual rate of 1.4 percent, industrial demand by 2 percent, and transportation energ demand by 0.6 percent. In this forecast total demand for electricity is expected to remain relatively stable as compared with the optimistic forecast.
ENERGY REVIEW: ENERGY OUTLOOK
Author, date: Cook, Alvin. Data Resources Incorporated. 1977.
Range of study: 1977 through 1990. Methodology
Using the DRI macroeconomic models of the U.S. economy and the energy sector, the study makes a rancre of forecasts based on different, assumptions.
Assumptions
The control case is the base ciase for comparison, and assumes that past Federal energy policy will not be altered. Crude oil price controls are assumed to continue through 1979. Through 1980 the composite price of old and new oil is assumed to increase at a 10 percent annual rate. Thereafter, new oil Will increase at a 10 percent annual rate and old oil at a 15 percent rate until they both reach the level of world oil prices in 1986. Thereafter, both domestic and foreign oil is assumed to increase in price by 7.5 percent per year.
In 1980 new natural gas in the interstate market from onshore sources is assumed to be deregulated, and in 1985 deregulation is extended to new gas from offshore sources. Due to deregulation, gas gas production in 1980 is assumed to be 17.9 trillion cubic feet and oil production 9.4 million barrels per day. The price of coal rises by $-50 per ton as a result of labor unrest in the coal industry and additional land reclamation costs.
In the Carter case forecast, it is assumed the President Carter's energy proposals are accepted by Congress. As a result of the taxes on crude oil, refiner acquisition costs increases at a rate of 14 to 17 percent per year from 1978 through 1980, and a 6.5 percent rate thereafter. Natural gas prices will increase 9 percent per year through 1980, and 10 percent per year thereafter. Industrial natural gas prices are assumed to increase by 21 percent per year through 1980, 12.5 percent per year from 1980 to 1985, and 6.,5 percent thereafter. Electrical prices are expected to increase by only 5 percent per year through 1980.
The pessimistic case assumes that the price of domestic petroleum will increase at the same rate as in the control case, but that OPEC petroleum prices will increase at 10 percent per year. At the same time,





28

tight controls on domestic natural gas prices will keep domestic pro(hlction depressed and force industrial users to turn to high priced imported gas. Furthermore, it, is assumed that there will be less capacity in the coal industry than in the control case.
The opt-irnistic case assumes that OPEC will increase crude oil prices at the same rate as domestic price increases assumed in the control case, but that domestic crtde oil price regulations will be eliminated. It is lsstumed that decontrol of new natural gas will create additional domestic supplies of natural gas. This case also assumes that there will be more capacity for producing strip mined coal than in the control case.
Findings
In the control case total consumption of energy increases from 78.0 quads in 1976 to 110.9 quads in 1990. From 1975 through 1980, the overall average annual increase in energy demand is 4.2 percent; from 1976 through 1990 the average annual increase is 3.0 percent. Household and commercial demand increases from 14.7 quads in
1976 to 18.4 quads in 1990-an annual growth rate of 1.6 percent. Industrial demand for energy grows at a 4.2 percent annual rate from 39.6 quads in 1976 to 70.8 quads in 1990.
As compared to the control case, the Carter case reduces the growth in energy demand by less than .3 percentage points. Household/commercial energy demand is 1.7 quads lower in 1990 in the Carter case than it would have been in the control case, and industrial demand is 3 quads less; transportation demand for energy is projected to rise slightly under the Carter case.
Similarly, the assumptions of the pessimistic and optimistic cases lead to a moderation of overall energy demand, reducing demand in 1990 as compared to the control case by 6.9 quads and 3.3 quads, respectively. Most of these savings come from the industrial sector whose demand in 1990 in the pessimistic case is 5.6 quads lower than in the control case and 2.3 quads lower in the optimistic case.

ENERGY OUTLOOK 1977-1990
Author, date: Exxon Company, U.S.A. January 1977.
Range of study: 1977 through 1990. Methodology
Although the report provides no indication of the methodology Exxon used in making its forecasts, it appears that they derived their projections from econometric models. Assumptions
The forecast assumes that policies relating to energy consumption
are consistent with the need for national economic growth. Outer Continental Shelf oil and gas acreage as well as Federal oil shale and coal acreage will be leased in a timely manner. There will be a realistic balance between energy, economic, and environmental goals. Federal policiess will not reduce or restrict the petroleum industry's ability to raise capital funds and air quality standards will be delayed ternporarily in order to permit greater use of coal.






29

Between 1977 and 1990, it is assumed that the econoniv will continue to grow toward full employment. GNP will grow at an annual average rate of 3.5 percent which is slightly lower than the 4 percent growth rate over the 1960-73 period.
Energy prices are assumed to increase at the maximum allowable rate under the Energy Policy and Conservation Act of 1975 and the Energy Conservation and Production Act of 1976. After the 1980 expiration of the price control authority contained in these acts, energy prices are then assumed to grow at about the rate of inflation. Findings
Total energy demand is projected to increase from 76.4 quads in 1977, to 109.9 quads in 1990-an annual growth rate of about 2.8 percent per year.
Due to rapid improvements in energy-use efliciencv and slower economic growth, the growth of energy demand by the industrial sector is expected to decline sharply from historic rates. Energy demand is expected to increase from 31.0 quads in 1977 to 44.8 quads in 1990-an annual average growth rate of 2.9 percent. Due primarily to increased mileage efficiency of new automobiles, transportation energy demand growth will also dlrop significantly below historic rates. TrIansportation energy demand will increase from 19.6 quads in 1977, to 24.7 quads in 1990-an annual average rate of growth of 1.8 percent.
Similarly, the residential and commercial demand for energy will grow at less than the historic rate. Demand will increase at 3.5 percent annual rate from 25.8 quads in 1977, to 40.4 quads in 1990.

THE -NATIONAL ENERGY OUTLOOK
Author, date: Federal Energv Administration. February 1976.
Range of study: 1976 through 1990. Mliethodology
The F.E.A. forecast is based on projections made by its macroeconomic model of the U.S. energy system, the Project. Independence Evaluation System (PIES). According to the National Energy Outlook (NEO), PIES is a model of the technologies, leadtimes, costs, and geographical locations which affect energy supplies from the point of discovery, through production, transportation, conversion to useable form, and final consumption demand by the various sectors of the economy. Although the NEO makes ten different projections based on ten different scenarios (e.g., reference case; conservation case; acceleration case; $7.50 regulation case; $9 regulation case, etc.) only projections for the base case, the "reference case," will be discussed. This case makes three different demand forecasts by assuming three different prices for world oil, $8 per barrel, $13 per barrel, and $16 per barrel.
Assumptions
The PIES model projections are made within the framework of a Data Resources Inc. (DRI) macroeconomic model of the U.S. economy. This model expects GNP to grow at a 5.5 percent annual rate during earlier years of the projections, and then to fall to less than






30

3 percent during the latter years. Personal income is assumed to grow by 4.3 percent during the 1975-1980 period, but is expected to deICline to a 2.8 percent growth rate in the 1985-1990 period. The population is expected to grow at about 1 percent per year. During the 1975-1990 period inflation, as measured by the consumer price index, is expected to decline from 5.2 percent per year to 3.9 percent. In the reference case, fuel prices for the residential, commercial, and industrial sectors are projected to increase an average by 1.5 percent per year from 1974 through 1985. Coal prices are expected to increase an average of 2.2 percent per year, oil prices by 0.7 percent per year, natural gas prices by 6.2 percent per year, and electricity prices by 2.1 percent per year. For electric utility sector, fuel prices are projected to grrow at an annual average rate of 2.1 percent between 1974 and 1985.
Ifin di~n gs
In the $13 reference case, energy demand is projected to increase from 73.1 quads in 1974 to 116.1 quads in 1990. This is a 2.9 percent growth rate, as compared to the historical rate of .3.6 percent. During this period, household/commercial demand grows by about 1.1 percent per year, industrial electrical demand by 3.8 percent per year, and transportation demand by 2.0 percent per year.
In the $8 reference case, total energy demand increases by 3.2 percent per year, and in the $16 preference case demand increases by 2.8 percent per year. Higher oil prices mainly affect household/commercial energyN7 demand, reducing it from a 1.9 percent per year growth rate (1974-1990) in the $8 reference case, to 0.7 percent in the $16 reference case. Similarly, energy demand in the transportation sector drops from a 2.8 percent annual increase in the $8 reference case to a 1.7 percent annual increase in the $16 reference case. However, in the industrial sector rising prices have little effect on reducing energy demand which reaches in all three cases 74 quads in 1990.

ENERGY DEMAND STUDIES: 'MAJOR CO'NSUMAING COUNTRIES
Author, (late: Basile, Paul (ed.) and Carroll L. Wilson (project director). Workshop on Alternative Energy Strategies (WAES). 1977.
Range of study: 1972 through 1985. Methodology
The WAES study uses the Wharton Annual and Industry Forecasting macroeconomic model of the U.S. economy to make its projections concerning energy demand. Six forecasts are made (A, B, C, C' D, and E) using various assumptions about Federal energy policy, oil prices, and economic growth, Since cases B and E represent the low and high extremum in the range of energe demand forecasts, only these two cases will be summarized. Assumptions
Case B assumes a slow rate of economic growth coupled with rising oil prices and a vigorous national energy policy to conserve energy. GNP is assumed to grow by an average of 3.2 percent per year over the 1976-1985 period. During the 1977-1979 period, it is assumed that the Federal Reserve Board would pursue a very tight monetary policy






31

and a moderately tight policy thereafter. World trade is assumedl to decline during this period. The world price of oil is assumed to increase to $17.50 per barrel (in real terms) by 1985.
Case EB assumes high economic growth coupled with falling oil price and restrained national energy conservation policies. GNP is assumed to grow at an annual rate of 4.4 percent in the 1976-1985 period. The scenario assumes that world trade will increase during the 1976-1985 period, that there will be a $10 billion tax cut in 1982, and a $20 billion tax cut in 1983. The world price of crude oil is assumed to fall to $7.66 a barrel by 1985.
Find inlgs
In Case B total energy demand is forecasted to rise from 71.6 quads in 1972 to 80.7 quads by 1985-an annual growth rate of less than 1
perent Riingenegy prices induce consumers to shift from automobiles to public transportation, causing automobile energy usa ge to drop by 1.1 quads and public transportation energy usage to increase by 0.6 quads. Energy demand in the household 'commerical sector is forecasted to decrease by 0.9 quads, caused mainly by significant reductions in fossil fuel space heating and air conditioning. However, industrial energy (demand is forecasted to increase at the same time from 20.5 quads to 26.8 quads-an annual growth rate of 2.1 percent.
In Case EB total energy dlemandl is forecasted to rise from 71.6 quads in 1972 to 106.9 quads in 1985-an annual growth rate of :3.1 percent. Demandi in the household anti commercial sector grows from 15.6 quads to 20.8 quads mainly as a result of increased use of fossil fuels for space heating andi air conditioning. Industrial diemandl grows by 4.1 percent per year from 20.5 quasd to 34.5 quads. Transportation demand is forecasted to grow by only 1.7 percent per year, from 17.0 quads in 1972 to 21.2 quads in 1985. Most of this growth comes as a result of increased air travel, anti increased use of freight. Automobile energy demand is projected to grow by only 0.1 percent per year, for a total increase of .17 quadls.

UNITED STATES ENERGY THROUGH THE YEAR 2000 (REVISED)
Author, date: Dupree, Walter G. andl John S. Coi'sentino. Bureau of Mines, U.S. Department of the Interior. December 1975.
Range of study: 1974 through 2000. Methodology
The report gives little indication of t 'he methodology used but states that the projections are based on historical trends where such trends were foundt by the authors to be significant and consistent. However, the report' stresses that while the projections are made using a variety of forecasting techniques, they are essentially judgmental and rely upon the "personal judgments of energy specialists in the Bureau of 'Mines." (Report, p. 26)
Assuptions.
Between 1974 and 2000, the report assumes that GNP will grow in real terms at an average compounds rate of 3.3 percent per year. During the same period, the population is projected to grow by an average compound rate of 0.8 percent per year.





32

In terms of Federal energy policies, the report assumes that: (1) strip mining will not be so restrictive that it precludes surface mining of coal; (2) leasing of Outer Continental Shelf (OCS) lands would continue at an accelerated pace; (3) Federal coal, oil shale, and geothermal lands would continue to be leased; (4) there would be continued Federal support of energy research and development; (5) the Federal Power Commission would allow natural gas prices to rise fairly rapidly; (6) domestic crude oil price controls would be eliminated; and (7) moves would be made to rationalize the world petroleum market.

The rel)ort concludes that total gross energy inputs into the economy will rise from 73.1 quads in 1974 to 163.4 quads in 2000-a compound average annual growth rate of 3.2 percent. Net energy use is projected to rise from 59.9 quads in 1974 to 110.2 quads in 2000-a compound average annual growth rate of 2.4 percent. The rising difference between gross and net energy inputs will stem mainly from energy conversion losses which increase from 18.1 percent of total energy use in 1974 to 32.5 percent in 2000. Most of these losses will occur as a consequence of increased electrification which has high conversion losses.
Assuming a, 3.3 percent growth rate in real GNP, the energy to GNP ratio will fall from 89,000 Btu per dollar in 1974 to a little under 78,000 Btu per dollar in 2000. Given the 0.8 percent growth rate in population, the energy consumption per capita will rise dramatically from 345 million Btu per person in 1974 to 619 million Btu per person in 2000.
During the 1974 to 2000 period, household and commercial consumption of energy will rise by 98 percent, industrial consumption will rise by 80 percent and transportation uses will rise by 76 percentannual compound growth rates of 2.7 percent, 2.3 percent, and 2.2 percent, respectively.







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PRESENT AND FUTURE Do-MESTIC SUPPLY OF OIL AND NATURAL GAS LiQUIDS
(By Joseph P. Riva, Jr. *)
The vital role played by oil in modern industrial society justifies the characterization of this century as the oil age. Although other forms of energy can largely replace oil, at a price, its importance to our current economy and way of life make an understanding of its availability in the future essential. Oil is a resource that is not being formed or replaced at a rate that has any significance relative to its rate of consumption and, it is appropriate to consider how much is left and how much may be produced.

DOMESTIC PETROLEUM RESERVES
Proved petroleum reserves are those quantities of in-place oil (measured in terms of stock tank barrels of 42 U.S. gallons at atmospheric pressure, and corrected to 60 degrees Fahrenheit) that have been identified and are considered, on the basis of greological and engineering knowledge, to be recoverable under the current economic conditions with existing technology. Thus, either higher prices or imp~roved1 recovery technology (or both) will increase petroleum reserves. It has been estimated that the crude oil price rises from Mlarch 1973 to the end of 1974 increased domestic reserves from five to six percent (or about 1.8 to 2.2 billion barrels).' This was due to the longer life of producing oil wells made possible by an average price rise from $3.39 to $6.85 per barrel, and also to increased infill drilling, more rapid development of previously marginal deposits, and wider use of enhanced recovery operations, all triggered by the higher prices.2
However, in spite of increasin g prices and a sharp increase in drillingo activity, total proved reserves have continued to decline during 174 1975, and 1976. This decline, which began in 1971, is the result of new discoveries not keeping' pace with domestic productions. The December 31, 1976, reserve estimates, released by the American Petroleum Institute, indicate a domestic proved crude oil reserve of 30.9 billion barrels, down 1.7 billion barrels from the previous year, which can be compared to a decrease of 1.6 billion barrels in 1975. Almost 1.1 billion barrels of oil were added to proved reserves in 1976 through the discovery of new fields, the extension and development of known fields, and the revision of earlier estimates. However, during the year about, 2.8 billion barrels of crude oil were produced, leaving a net reduction of 1.7 billion barrels.
Proved reserves of natural gas liquids (hydrocarbons pr'esen~t in gaseous form or in solution with reservoir oil that are recoverable as
*Josephi P. Riva is a specialist in earth sciences at the Congressional Research Service. 'HIigher Crude Prices Add Sharply to U.S. Reserves. The Oil and Gas Journal, Jan. 20, 1975, p. 31.
2 Ibid.
(35)





36

liqIl Is 1() coideliiatioi or absorption processes) were estimated by the American Gas Association to have ljICreased from 6.267 (in 1975) to 6.402 billion barrels (in 1976), a two percent increase. Natural gas liqlfils pio)luction of 0.701 billion barrels in 1976 was unchanged from the )previous year.
n'ie American Petroleum Institute also estimated that it may be Possible to produce an additional 4.3 billion barrels of oil by successi'ull ) itilizin.. speeialized recovery techniques in all known reservoirs. This estimate is nearly 0.7 billion barrels less than last year mostly because of the transfer of some reservoirs into the "proved" category following the application of such techniques.
The drop in proved reserves of crlde oil continued a steady decline which has been evident over the past several years and which has been broken only by the Alaskan North Slope discoveries. The later delines, moreover, have been registered in spite of sizable increases in the number of wells drilled. Drilling activity in 1976 totaled 39,765 completed wells, the highest level since 1964, but considerably short of the peak drilling year of 1956 when 57,111 wells were drilled. Another gpage of the pace of domestic drilling activity is that in 1975, 81.3 percent of the total Free Worhl well completions were in the United States. In Saudi Arabia only 210 wells were drilled (0.4 percent).
The reliability of estimates of the proved productive volumes of new discoveries or of pe:rtially developed reservoirs varies according to the amount of geological information that is available at the time the estimte is being made. Such necessary factors as the areal extent of the geological structure, the average thickness of the producing reservoir, the oil column within the reservoir, and the continuity of the reservoir characteristics cannot be determined accurately without sufficient subsurface information. The ultimate size of newly discovered reservoirs (in old or new fields) is seldom determined in the vea," of discovery. Thus, first-year estimates of proved reserves in new reservoirs are often smaller than the total that will eventually be assig-ne resulting in estimates of ultimate recovery and of original signed, re tng in and oforgia
in-place oil for recently discovered fields often being revised substantially upward in subsequent years on the basis of information provided by additional drilling, production performance, and the use of improved enhanced recovery techniques.
Inferred reserves are those reserves, in addition to proved reserves, which should eventually be added to proved reserves through extensions, revisions, and new pays in known fields. Inferred reserves are estimated by extrapolating the rate of growth of discovered petroleum volumes for each region of the United States by use of correction factors based upon the time lapse since the initial year of discovery. The wide variability in the data used to determine rate of growth of petroleum discoveries and the fact that proved reserves are also estimates causes a significont degree of uncertainty in the calculation of inferred reserves. Inferred oil reserves in the United States were calculated by the U.S. Geological Survey at 23.1 billion barrels at the end of 1 974. Current figures are put between 14 and 20 billion barrels. Thus, if inferred reserves of oil are added to proved reserves (30.9 billion barrels), as much as 51 billion barrels of discovered domestic oil may curr'en~tly- await loduction.





37

The reserve figure compiled by the American Petroleum Institute and the American Gas Association are generally accepted by industry and government as being reliable estimates of domestic oil and gas liquid reserves. These figures are used by the U.S. Geological Survey to derive their statistics for measured and indicated hydrocarbon reserves.3 The Federal Energ3\ Administration estimated U.S. proved reserves at the end of 1974 in a report to the President issued on October 31, 1975. Based on a survey of all oil and gas field operators in the United States, the report estimated the domestic proved crude oil reserves at about ten percent above the American Petroleum Institute's 1974 estimate. The two estimates were considered by the Federal Energy Administration to vary by no more than a factor which may be expected when comparing estimates from different sources.4 About half of the difference between the crude oil reserve figures of the Federal Energy Administration and those of the American Petroleum Institute can be attributed to the Federal Energy Administration's inclusion of two billion barrels of heavy crude oil which the American Petroleum Institute did not count because it was not recoverable without the use of enhanced recovery methods.5
The Federal Government is being urged by the oil and gas industries to assume the task of collecting and reporting hydrocarbon reserve information. Oil industry spokesmen have informed the Office of Management and Budget that collecting reserves information, analyzing it, and preparing reports is properly a Government function and that both the American Petroleum Institute and the American Gas Association would like to work their way out of the job.' Both organizations have recommended that a single lead Federal agency be designated to collect and disseminate proved reserves information. No agency was endorsed, but one with the technical expertise to understand reserves information (such as the U.S. Geological Survey) was favored. It was also recommended that the data be gathered annually from the operators rather than from the owners, as the operators have the most complete information, and also that the data be limited to proved reserves. A further recommendation is that the data should be verified for each field by independent consultants.
The President's National Energy Plan contains a proposal for a three-part energy information program. It would include a Petroleum Production and Reserve Information System. Under this proposal, the Federal Government would assume the data collection responsibilities now performed by the American Petroleum Institute and the American Gas Association. Federal officials would supervise the collection and preparation of reserve data with the information collected and submitted to the Federal Government verified and randomly audited at the company level. Existing law regarding the protection of confidential proprietary information would not be changed.'
3 Miller, Betty M. et. al. Geological Estimates of Undiscovered Recoverable Oil and Gas Resources in the United Staiez. Geological Survey Circular 725, Reston, Virginia. 1975, p. 2.
4 Oil and Gas Resources, Reserves, and Productive Capacities. Federal'Energy Administration, Final Report, Volume 1, Washington, D.C., October 1975, p. 1.
5 PEA Lists Higher U.S. Reserve Figures. The Oil and Gas Journal, July 7, 1976, p. 32.
6 Industry Urges U.S. to Collect Reserves Data. The Oil and Gas Journal. Aug. 2, 1976. p. 53.
7 The National Energy Plan. Executive Office of the President, Energy Policy and Planning, Apr. 29, 1977, p. 85-86.







UNDISCOVERED DOXIESTIC PETROLEUM RESOURCES
To put oil production into perspective, half of all of the oil that lias ever been produce(], has been taken from the Earth in the past ten years. Even in OPEC countries, and especially in the United 'States, most of the oil has already been found. So great is the acceleratincy demand for energy that the years of abundant petroleum supply at supportable prices will be relatively few, causing, among ,other things, an increased urgency in estimating the amount of remaining undiscovered hydrocarbon resources in order to better formulate energy policy.
The amount of petroleum recoverable from a sedimentary basin is determined by the volume originally generated from the indigenous organic matter and by the geologic history of the basin. The amount of oil theoretically formed may be estimated from the volume and quality of the source rock and then all available lithologic, tectonic, hydrodynamic, and physical data can be employed to arrive at a projection of the quantities which may be expected to be reservoired and ultimately recovered. However, any such volumetric estimates necessarily have a low reliability and should be regarded as a dated assessment based on the state of existing knowledge. All such estimates depend upon geologic projections in which great and unappraised uncertainty is involved such that a relatively small and unexpected change in the thickness of a source bed or in the continuity of a reservoir horizon can affect a resource estimate in a partly explored region by a very large factor. Another reason for the generally low reliability of estimates of potential hydrocarbon resources is that not enough is currently known about the Earth's crust or the frequency of hydrocarbon distribution or concentration to estimate all that may geologically be available. Also, it is not possible to forecast with much confidence either the technological advances or the economic and legislative changes that may determine eventual production. However imperfect, projections of undiscovered petroleum resources are of importance in understanding present conditions and are necessary for the formulation of future energy policy.
There are three methods of hydrocarbon resource estimation. These are the sediment volumetric method, the combined ge'ologic-analogy and statistical model method, and the past performance or behavior extrapolation method. The sediment-volumetric method is a projection of the amount of oil known to exist in a developed region to an unknown region of apparently similar geologic character. Even thoup'll very unfavorable rocks are not included in the projection, this method frequently leads to overly optimistic hydrocarbon resource estimates, especially when it is assumed that undrilled rock volumes in little known areas may contain the same amount of oil as an equal volume of rock which has already been drilled in a producing area. This assumption does not recognize that much of the exploration potential of undrilled areas, especially onshore in the lower 48 States, has already been geologically discounted by the industry. These one-to-one comparisons have sometimes been reduced by one-half in more recent estimates, but even the one-half value may lead to resource projections that are too high.






39

The most recent U.S. Geological Survey method includes the extrapolation of known producibility into untested sediments of similar geology. However, it also includes volumetric techniques using geologic analogs with the setting of upper and lower yield limits through comparisons with a number of known areas; volumetric estimates with an arbitrary general yield factor, used when direct analogs are not known; a graded series of potential-area categories; and a comprehensive comparison of all published estimates for each
8
area to all estimates generated by the above methods. Individual and collective appraisals are made for each region and Monte Carlo approximation techniques are applied to derive the probability function for the amount of undiscovered petroleum in each region and for the summation of subtotals of the regions of the United States.9 The estimates for undiscovered recoverable hydrocarbons in this most recent Geological Survey effort are given as a range, the low value of which is the quantity associated with a 95 percent probability (a 19 in 20 chance) that there is at least this amount of hydrocarbons. The high value is the quantity with a five percent probability (a 1 in 20 chance) that there is the higher amount.
The Survey procedure described above is an example of a combined geologic analogy and statistical model estimation method as is the Mobil Oil Company method which employs a probabilistic explorationengineering analysis in areas where sufficient data are available. Computer input for Mobil's hydrocarbon resource estimation uses a Delphi-like approach in which input estimates are challenged to bring out the basis of the estimates and to improve their quality. Many possible combinations of the various geological inputs are obtained and the result is a probability distribution of the hydrocarbon potential of a given area.'O
Past performance or behavioristic extrapolation methods are based on the extrapolation of past experience with such indicators as discovery rates; cumulative production or productive capacity curves; and the fitting of past performances, by the use of mathematical derivations, into logistic curves which can be projected into the future. A decline in any of the chosen parameters could signal a declining resource base, however, these techniques are less valid in frontier regions where little history exists or in areas that are not geologic or economic replicas of the historical model." In general, these methods are most applicable in the later stages of hydrocarbon exploration in mature areas such as the lower 48 States. The M. King Hubbert growth curve projections have proven relatively accurate in the forecasting of the domestic crude oil production peak. In the mid-1950's the domestic petroleum industry had been in operation for just under 100 years and cumulative oil production had amounted to about 52 billion barrels. If future production were to total two or three times past production, it was felt that there was little to worry about for many years. However, at that time Hubbert, by use of his oil production curves with a figure of from 150 to 200 billion barrels for ultimate domestic crude oil production,
8 Miller, Betty M. et. al., op. cit., p. 20.
9 Ibid., p. 25.
10 World Crude Resource May Exceed 1,500 Billion Barrels, World Oil, September 1975, p. 56; 11 Miller, Betty M. et. al., op. cit., P. 18.





40

arrived at a projection for domestic production to peak between 1966 and 1971 (depending upon whether the 150 or 200 billion barrel figure was usedd. Domestic oil production peaked in 1970, about as Hubbert predicted.
In any projection of undiscovered petroleum resources, however, the practical consideration is how much oil and gas can be found, rather than how much is left to be found. An uncaptured resource provides no benefits. It may be that more undiscovered domestic oil exists onshore than offshore, but the chances of finding large fields onshore in the lower 48 States are small. Only five fields of over 100 million barrels were found onshore in the lower 48 States by the 38,000 exploratory wells drilled in the first half of this decade.12 The attractiveness of the offshore is that it may yield oil in large accumulations and thus the oil may be found and translated into large volume production sooner and with less drilling effort than in the picked over onshore oil regions.
There are a number of recent estimates of undiscovered domestic crude oil resources. The following table contains a selection of these which have been chosen to illustrate the methods of estimation previously discussed and the evolution of more conservative projections which can be accounted for by better methods and also by the realization of the importance of such estimates in energy policy decisions.
TABLE 6.-Undiscovered domestic crude oil resources
Estimate
U.S. Geological Survey: Billion barrels
Zapp (1962)-590 MeKelvey (1974)_-200-400 Miller (1973)-50-127 Hubbert (1974)-72 National Academy of Seiencs (1975)- 113
Mobil (1974)_-88 Exxon (1976)-118
The 1962 and 1974 Geological Survey estimates were made on the basis of volumetric and geological province analysis which assumed that an equal volume of oil would be found in equal amounts of drilled and undrilled sediments. Even if this assumption is halved, the results of such an analysis would tend to be relatively high because the most promising areas are drilled first and the sediments in the lower 48 States (onshore) which remain undrilled (after 100 years and 2Y2 million wells) are those which, for a number of geologic and economic reasons, do not appear very promising. Also, since 80 percent of current world oil production comes from giant fields, it does not take very many dry holes to determine that a given sedimentary basin will not, be an outstanding oil producer. Small field production is always welcome, but cannot be expected to substantially increase the energy position of as large a consumer state as the United States. The large resource figures of Zapp (1962) were the result of volumetric analysis made at a time when few were interested in undiscovered oil resource projections. The 1975 figures of the Geological Survey and the figures of 'Mobil and Exxon were derived by more sophisticated combined geological and statistical models. These and the projections of Hubbert (which result from extrapolations of past
12 Drummond, Jim. The JADC rMeeting in Dallas. The Oil Daily, Sept. 22, 1975.






41

production performance) and the National Academny of Sciences are more conservative and, thus, safer projections on which to base energy policy. In the presence of exponential growth in consumption, even a doubling of the lower domestic oil resource figures would only put off the period of transition from petroleum to other sources of energy, but the transition must come rather soon in a relative sense.
What is still unknown is the offshore. Oniy about three percent of the Nation's continental shelf has been drilled. This area could help to change the conservative resource figures if giant fields were found. There is no way at present to know how much or how little )etroleum exists offshore, but a few hundred wells drilled there will reveal more information pertaining to our petroleum resource base (or lack thereof) than thousands more drilled onshore.

DOMESTIC PETROLEUM PRODUCTION
Production of petroleum liquids in the United States steadily increased until it peaked in 1970 at 4.1 billion barrels. From 1970 annual production has gradually declined to about 3.5 billion barrels both in 1975 and 1976. Production of oil and natural gas liquids in the traditional producing areas of the lower 48 states is expected to continue its decline, but Alaskan and offshore production is expected to increase. There have been a number of projections of expected domestic oil production, some of which are given in the table below.
TABLE 7.-DOM'ESTIC LIQUID PETROLEUM PRODUCTION PROJECTIONS [Billion barrels per year]
1980 1985 1990
CRS Industry Survey (1977)-------------------------------------3.8 4.0 4.2
The National Energy Plan (1977)-3.3-4.0 CBO Critique of National Energy Plan (1977) ------------------------- 3.7
CIA (1977) ------------------------------------------------ 3.6 3.6-4.0
OECD (1977) ---------------------------------------------------- 3.9 4.2-5.1 -------------Exxon (1977) ---------------------------------------------- 3.6 -------------- 4.3
Shell (1976) ----------------------------------------------- 3.8 4.0 4.4
FEA (1976) ------------------------------------------------ 5.0 5.4-5.9 15.0
U.S. Bureau of Mines (1975) ------------------------------------ 4.3 5. 3 25.0
Department of Commerce (1975) -----------------------------------------4. 0-4. 9
1 1989.
22000.

The above projections, of course, h-ve been made under various assumptions. The CRS petroleum industry survey asked the responding companies to make their projections under the following political assumptions: (1) decontrol of the price of all domestic oil after May 1979, with no new windfall profits taxes added: (2) decontrol of new natural gas; (3) continuation of the current outer continental shelf leasing system; (4) an annual average of 1.5 to 2 million acres of the outer continental shelf leased to the industry; (5" no vertical Jlvestiture; and (6) Naval Petroleum Reserve No. 4 to be leased by the
Department of the Interior on terms similar to the offshore leasing. The National Energy Plan model projects a total U.). production of around 4.0 billion barrels per year in 1985, but states that the actual production could be as low as 3.3 billion barrels. The higher FEA figures for 1985 are based on a price of $16 per barrel, while ihe lower figures are based on a $13 per barre! price.
21-616--78------4






42

Whiile most oil production projections present a base case, there is often also( incluidedI in the study an accelerated case, a business as
usul as, l~x estate, or a rancre of projections. While it is obviois, that it is not possible to estimate future oil production with certainty, given~f the complexity of the matter and the numerous unknowns, and it is also obvious that economics and especially Federal governmentt al decision,-- will play an important role in determining g
futuire oil production levels; it is important to consider the geological 'Ind technological constraints, if any, that are connected with the current proj ections.
Thew pI'ojectionls given in the table for 1980 petroleum production, with the exception of the older FEA and Bureau of Mines estimates,
arin general, very close to the CRS industry survey figure of 3.8 b illion barrels per -year (10.4 million barrels per clay). The 1985 figures for the more recent, studies are in the area of 4.0 billion barrels per year (11I million barrels per day) which also is the estimate of thle National Energyv Plan as well as the result of the CRS Industry Survey. The estimates of the older studies tend to be higher, perhaps because the domestic petroleum resource base was considered to be larger a few years ago and also because a generally more optimistic view of the Nation's energy future may have prevailed then.
To determine the resource base and drilling effort needed to support a domestic production of 3.8 billion barrels of oil per year in 1980, the following considerations are necessary: (1) 14.6 billion barrels of oil will be produced from 1977 to 10.80, and (2) 38.0 billion barrels of reserves will be needed to maintain a 10 to 1 reserve/production ratio in 1980. (Physical constraints generally limit annual withdrawal to an amount equal to a production-to-reserve ratio of approximately 1 : 10). Tfhus, total petroleum needed by 1980 to attain a production of 3.8 billion barrels would be 52.6 billion barrels (14.6 + 38.0). The liquid petroleum reserve as of tbe end of 1976 was 37.3 billion barrels and to this can be added 0.1 billion barrels which are estimated by the National Petroleum Council to be added to recovery by use of enhanced recovery methods in 1980. Thus 15.2 billion barrels [52.6(3 7.3 + 0. 1) ] will have to be added to reserves by 1980 to support the 3.8 billion barrel per year production estimate while maintaining a 10 to 1 reserve ratio. A part of this petroleum will come from revisions and extensions of existing fields (inferred reserves), but by the 1980's a greater part must come from new field discoveries.
In 1976, 39,765 wells were necessary to add 1.9 billion barrels to reserves. To meet a domestic production of 3.8 billion barrels in 1980 while maintaining a 10 to 1 reserves ratio, it will be necessary to add about 3.8 billion barrels of petroleum liquid reserves per year during each of the next four years. While a portion of this will come from extensions and revisions of known fields (inferred reserves) it would appear that a record amount of drilling would be required to increase reserves at such rates, especially from onshore in the lower 48 states. According to the U.S. Geological Survey between 29 and 64 billion barrels of oil remain to be discovered in the lower 48 States onshore. If the lower figure proves correct, it would be necessary to discover a very substantial portion of all the remaining onshore lower 48 state oil in the next four years. This would almost certainly prove






43

to be impossible. The offshore and Alaska, however, offer areas in which undiscovered criant fields may still exist. It is tl I larze fields that offer the possibility of rapid and more efficient development which may meet the project ions given above, however, this development must begin at once driven the lead times involved. What could happen between now and 1980 is that domestic drilling would continue to increase, though not at a rate nor in the proper locations (the frontier areas) to result in discoveries sufficient to support a 1980 production of 3.8 billion barrels. However, some reserves would be added through revisions and new discoveries and, with North Slope Alaska production added, the result could be increased domestic production. Also, should prices rise sig-aLificantly, a small amount of additional oil (over the 0.1 billion barrels per year cit%--d) may be realized from enhanced oil recovery methods. However, the lead times of enhanced recovery projects are such that very little can be done in so short a time.
The resource base and drilling effort needed to support a projection of a production of 4.0 billion barrels of oil in 1985 can be determined as follows: (1) 34.1 billion barrels of oil will need to be produced from 1977 to 1985; and (2) 40.0 billion barrels of oil reserves will be needed to maintain a 10 to I reserve /production ratio in 1985. Thus, the total domestic petroleum needed by 1985 to attain a production of 4.0 billion barrels would be 74.1 billion barrels (34.1 + 40.0). Current liquid petroleum reserves at the end of 1976 totaled 37.3 billion barrels and to this fiopures 0.3 billion barrels could be added to recovery by 1985 by advanced enhanced recovery methods (as estimated by the National Petroleum Council). Thus, 36.5 billion barrels [74.1 (37.3 + 0.3)] will have to be added to reserves by 1985 to support the 4.0 billion barrel per year production estimate for that year while at the same time maintaining a 10 to I reserve ratio. A part of this petroleum will come from revisions and extensions of existing fields (inferred reserves), but by 1980 most will have to come from new field discoveries. In order to meet the production projection of 4.0 billion barrels in 1985, with a 40 billion barrel reserve, it will be necessary to add 4.1 billion barrels per year for the next nine years. Some of this additional oil mav come from enhanced recovery (the National Petroleum Council's high estimate for 198' is 0.6 billion barrels), but even this figure will not make up the entire shortfall. Since 1948, there has only been one year that reserves have increased more than three billion barrels. This was the 9.6 billion barrel increase in 1971, caused by the inclusion of the Prudhoe Bay, Alaska, reserves. In the absence of such fortunate finds of giant fields in the frontier areas, it will be very difficult, if not impossible, to reach the
4.0 billion barrel projection for 1985 production.












PRESENT AND FUTURE DOMESTIC SUPPLY OF NATURAL GAS
(By Joseph P. Riva, Jr.)
Nat iral gas is closely related to crude oil and is formed under similar geological conditions. The decomposition of organic matter, with the aid of bacteria, in an oxygen poor environment results in the formation of methliane and other hydrocarbons. Chemically, natural gas is mostly methane, but it may also contain small amounts of other hydrocarbons along with a few other gases. Natural gas is often dissolved in oil at the high pressures existing in the reservoir and is separated from the oil after extraction from the well. It also can be obtained from gas wells drilled into reservoirs which contain natural gas but no oil; and from reservoirs in which it occurs above the oil, but is not dissolved in it.
For many years the United States had a surplus of natural gas. This surplus resulted from the discovery of many gas fields during the search for oil. Initially, local gas markets were not able to utilize all of the available gas supply; but the rapid expansion of long-distance interstate pipelines after World War II, consumer preference for this fuel, price controls on natural gas, and the recent downward trend of reserves developed in relation to production have combined to produce the present natural gas shortage.
The production of natural gas is of a much higher efficiency than the production of oil. Depending upon the permeability of the reservoir, recovery can be as high as 75 to 80 percent of the original in-place gas (compared to an average one-third of the oil). There are, however, appre(ciable amounts of natural gas in formations with permeabilities so low that the gas cannot be produced economically. The Energy Research and Development Administration has estimated that 600 trillion cubic feet of natural gas is known to exist which cannot now be recovered commercially, but that as much as 250 trillion cubic feet of this gas might eventually be recovered with enhanced recovery techniques.' This gas is not, of course, counted in compilations of proved natural gas reserves.

DOMESTIC NATURAL GAS RESERVES
Proved natural gas reserves are the total volume of natural gas estimated to be recoverable from known reservoirs under the economic and operating conditions existing at the time of the estimate. Such volumes of gas are expressed in cubic feet at an absolute pressure of 14.73 pounds per square inch and a temperature of 60 degrees Fahrenheit.
I A National Plm for Energy Research, Development, and Demonstration: Creating Energy Choices for th' Future. Volume 1: The Plan, E RDA 76-1, U.S. Government Printing Otlice, Washington, D.C., Apr. 15, liT p. 51.
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45

Proved reserves of natural gas were estimated at 216 trillion cubic feet as of December 31, 1976, by the American Gas Association. Tlhe 1976 figure was lower than the estimate of the previous year by 12.2 trillion cubic feet (5 percent), and marked the sixth straight Year of natural gas reserves decline. Only the discovery of 26 trillion cubic feet of gas in Alaska (Prudhoe Bay), first reported in 1970, kept last year's decline from being the ninth consecutive drop in reserves. For the lower 48 States, the 1976 gas reserve figure of 184.1 trillion cubic feet is the lowest reserve level since 19419, when gas production was only 32 percent of current levels. Total reserve additions of 7.56 trillion cubic feet in 1976 were the second lowest additions to reserves since 1946. For six years, 1969 to 1974, natural gas product ion exceeded 20 trillion cubic feet per year while reaching a peak of 22.7 trillion cubic feet in 1972. Natural gas production in 1976 was 19.5 trillion cubic feet, 16 percent below the 1972 high and 0.2 trillion cubic feet below 1975 production.
Estimates of proved natural gas reserves as compiled by the American Gas Association are considered to be those which an analysis of geologic and engineering dlata demonstrates, wNith reasonable certainty, to be recoverable in the future from known reservoirs under existing econoic andl operating conditions. Reservoirs are considered proved if they have demonstrated the ability to produced gas either by actual p~rodulction or by conclusive formation testing. The area of a reservoir considered proved is the portion delineated by drilling and further defined by gas-oil or gas-water contacts or limited by structural or stratigraphic features.
The proved reserve estimates made by the American Gas Association are generally accepted throughout the industry and thc Government as being reliable estimates of domestic oil and gas reserves.The Federal Energy Administration estimated U.S. ol and gas reserves as of December 31, 1974, i11 a report to the President issued on October 31, 1975. Based on a survey of all oil and gas field operators in the United States, it was estimated in the report that domestic proved natural gas reserves totaled 240.2 trillion cubic feet. This estimate of the Federal Energy Administration varied from that of the American Gas Association (for the samne late) by 2.9 percent, less than may be expected wvhen comparing estimates from different sources.
Because the results of the Federal Energy Adrrnni'stratioii stidlv showed that a government assessment of industry data can provide "a, reliable estimate of reserves, the Federal Government is being urged by the oil and gas industry to take on the task of collecting and reporting hydrocarbon reserve data; and the President's National Energy Plan contains a proposal to assume the dlata, collection responsibilities now performed by the American Gas Association and the American Petroleum Institute.
Inferred gas reserves are those reserves, in addition to proved reserves, which should eventually be added to proved reserves through extensions, revisions, and new production zones in known gas fields. Inferred reserves are estimated by extrapolating the rate of growth
2 Miller, Betty M. et. al. Geological Esi imal es of Undiscovere d Recoverable Oil and Gas Resources in the United States. Geological Survey Circular 725, Reston, Va., 1975. p. 2.
3 Oil and Gas Resources, Reserves, and Productive Capacities. Federal Energy Administration, Final Report, Volume i, Washington, D.C., October 1975, p. i.





46

of discoveredl gas volumes on a regional basis by use of correction factors based uponl the time lalpse since the initial year of discovery. The wide variability in the data uisedl to determine rate of growth of gas discoveries and the fact that proved gas reserves are also estimates, causes a significant degree of uncertainty in the calculation of inferred reser-ves. The U.S. Geological Survey estimated domestic inferred gas reserves at 201.6 trillion cubic feet at the end of 1974. The current figure would be wNell under 200 trillion cubic feet. Thus, if current inferred reserves are added to current proved reserves, about 400 trillion cubic feet of discovered domestic gas may currently await produic tioni.

UNDISCOVERED DOMESTIC NATURAL GAS RESOURCES
The three basic methods of hydrocarbon estimation used for oil and described in the chapter "Current Views of the Present and Future Domestic Supply of Oil and Natural Gas Liquids" are also used for projections of undiscovered natural gas resources. As is the case with oil resource estimates, undiscovered natural gas resource estimates necessarily have a low reliability for they depend upon geologic projections in which great uncertainty is involved. Another reason for the generally low reliability of the estimates is that it is not possible to forecast with surety either the technological advances or the economic changes that may determine eventual production. However, imperfect as they are, projections of undiscovered oil and gas resources are of importance in understanding present conditions and are necessary for the formulation of f uture. energy policy.
There are a number of recent estimates of undiscovered domestic natural gas resources. The following table contains a selection of estimates that have been chosen to illustrate differing methods of projection and the evolution of more conservative figures, which can be accounted for by better methods and also by the realization of the importance of such estimates in energy policy decisions.
TABLE S.- Undiscovered domestic natu~iral1 gas resources
Estim ate
U.S. Geological Survey: Trillion cubic feet
McKelvey (94---------------------990-2000
Miller (9)-----------------------322-655
Ilubbert (94--------------------------540
National Acadlemy- of Sciences (17)-------------- ----30
Mobil (94---------------------------443
Exxon (96---------------------------582
The 1974 Geological Survey estimate wNas made on the basis of-an assumption that an equal volume of gas would be found in equal amounts of drilled and undrilled sediments (with areas judged unsuitable for gas excluded). Even if this assumption is halved, the results would still tend to be highi because the most geologically promising areas are drilled first, esp ecially in the lower 48 States which have been explored with some 2 illion wells in the past 100 years. The 1975 figures of the Survey and those of Mfobil and Exxon were derived 1y a more sophisticatedl combination of geological and statistical models. These and the projections of Hubbert (which result from extrapolation of past production performance) and the National Academy of Sciences are more conservative and, as such, are safer projections on which to base energy policy.





47

DO-AIESTIC NATURAL GAS PRODUCTION
Production of natural gas in the United States, after reaebincr a peak of 22.7 trillion cubic feet in 1972, has declined steadily to 19.5 trillion cubic feet in 1976. There have been a number of projections of expected domestic natural gas production, some of which are listed in the table below.
TABLE 9.-DOMESTIC NATURAL GAS PRODUCTION PROJECTIONS [Trillion cubic feet per year]
1980 1985 1990
CRS Industry Survey 17.4 16.9 16.9
The National Energy Plan 18.0 17.0 16.0
CIA (1977) ------------------------------------------------------- 17.2-18.4 16.3-18.2
OECD 17.5 19.2-22.2 -------------Exxon 15.6 15.4 15.0
Shell 17.5 16.5 14.0
FEA 17.0-22.3
U.S. Bureau of Mines (1975) --------------------------------------- 19.0 18.2 116.5
Department of Commerce 21-24
12000.
The above projections have been made under a variety of assumptions. The CRS industry survey asked the responding companies to make projections under the following political assumptions: (1) decontrol of the price of all domestic oil after May 1979, with no new windfall profits taxes added; (2) decontrol of new natural gas; (3) continuation of the current outer continental shelf leasing system; (4) an annual average of 1.5 to 2 million acres of the outer continental shelf leased to the industry; (5) no vertical divestiture; and (6) Naval Petroleum Reserve No. 4 to be leased by the Department of the Interior on terms similar to the offshore leasing. Under the National Energy Plan, new gas would be priced at approximately $1.75 per thousand cubic feet by 1978 with the possibility 7- in the mid-1980's of establishing full market price. The FEA figures are based on a gas price ceiling of $1.00 per thousand cubic feet (lower figure) to a reference case (with conservation) of $2.13 per thousand cubic feet (higher figure). Most projections of natural gas production present a base case along with other cases such as accelerated, business as usual, and/or a low estimate. It is not possible to estimate future natural gas production with certainty, given the many unknown factors that will enter into the final production levels. Economics and Federal governmental decisions will, of course, play an important role, but it is also necessary to consider the geological and technological constraints, if any, that may be connected with the above projections.
The projections in the table for 1980 average 17.5 trillion cubic feet per year. To determine the resource base and the drilling effort needed to support a domestic natural gas production of 17.5 trillion cubic feet in 1980 the following considerations are necessary: (1) 73 trillion cubic feet of natural gas will be produced from 1977 to 1980, and (2) 210 trillion cubic feet of reserves will be needed to maintain a 12 to 1 reserve/production ratio in 1980. The total amount of natural gas needed by 1980 to sustain a declining production to 17.5 trillion cubic feet would be 283 trillion cubic feet (73 + 210). The natural gas reserve at the end of 1976 was 216 trillion cubic feet. Thus 67





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1rillion cujbic feet (28.) 216) of gras would have to be added to rIser1veS lby 1980 to support a 17.5 trillion cubic feet per year gas p-odluction estimate, while maintaining a 12 to 1 reserve ratio. Much Oif this gas will come from revisions and extensions of known gas fields, but an average of 1-6.75 trillion cubic feet of gas still must be added to reserves, every year for the next four years. rrhis can be contrasted to total additions of onily 7.56 trillion cubic feet last year and 10.7 trillion cubic feet in 197 5 (the best figure since 1970). Increased drilling wil probably be of some help), but the last two years were years of relatively hio: dl'n1atviy It is difficult to envision a 1980
production level of 17.5 trillion feet in the absence of the discovery of giant gas fields or the drawings of reserves below the 12 to 1 ratio. Thei additional 67 trillion cubic feet needed represents about 20 percent of the undiscovered, recoverable, onshore lower 48, State, natural gras resource as estimated by the U.S. Geological Survey.
The resource base and drilling effort needed to support the 1980 estimated] production at a level 17.5 trillion cubic feet per year to 1985 can be examined as follows: (1) 160.5 trillion cubic feet of natural gas will be produced from 1977 to 1985, and (2) 210 trillion cubic feet will still be needed to maintain a 12 to 1 reserve/ production ratio In 1985'. Thus, the total amount of gas required to meet the projection would be e370.5 trillion cubic feet (160.5210). The natural gas reserve at the end of 1976 was 216 trillion cubic feet, thus 154.5 trillion cubic feet of natural gas (370.5 -216) would have to be added to reserves by 1985 to support the 17.5 trillion cubic feet per year producltion estimate, while maintaining a. 12 to 1 reserve ratio. Again, some of this gas will come from extensions and revisions of known fields (inferred reserves) and perhaps by 1985 some also may come from enhanced recovery of gas from tight formations or from geopressured waters that can not now be commercially produced, but an average of 17.2 trillion cubic feet of gras will have to be added each year for the nine year period. Not since the North slope discoveries has more than 17.2 trillion cubic feet of natural gas been added to reserve figures (1976 additions were 7.56 trillion cubic feet). Also, the 154.5 trillion cubic feet of gas required represents almost half of the undiscovered recoverable natural gas resource estimated by the Geological Survey to be present in the lower 48 States, onshore. It would appear that even with a~ marked increase in drilling, the dIrawing down of gas reserves below the 12 to 1 ratio, and some exploitation of tight gas sands or geopressured deposits, the maintaining of a level 17.5 trillion cubic feet natural gas production to 1985 will be very (difficult. It is probable that discoveries of giant gas fields in frontier areas would be necessary to meet this projection. Actually, the average of all estimates given in the table for 1985 gas production is 18.2 trillion cubic feet per~ year. However, since most estimates projected a, decrease in production by 1985, the level figure of 17.5 was chosen for the example. Should the higher figure be used, obviously more gas would have to be found. z












COAL DEMA-ND AND SUPPLY THROUGH 1985
(By Herman T. Fransseni*)

INTRODUCTIO-N
Coal is the most abundant energy resource in the U.S. (constituting 90% of current total U.S. fossil fuel reserves). At current demand levels, we have enough coal reserves to last at least :300 years and, at FEA's projected 198.5 production levels in the National Energy Outlook of 1976, coal reserves could last 150 or more years.
Throughout the 19th century coal production increased gradually, and by the turn of the century, coal suppliedl 90 percent of the U.S. energy consumption. During the first half of the 20th century, coal consumption grew less rapidlyv than total energy consumption because more convenient and competitively priced domestic oil and natural gas became available, and new uses of oil expanded rapidly. By 1950, coal dropped to 38 percent of the N ation's energyv consumption, and the decline continued throughout the 1950's, 196' n al 90s The advent of nuclear power, the elimination of oil import quotas beginning in 1966, and later in the early 1970's the imp~lementationl of the 1970 Clean Air Act., resulted in a further decline in coal utilization. Bry 1972, coal consumption was reduced to onlyI 17 percent of total U IS. energy consumption. The actual volume of coal mined-as opposed to the percentage of total energy consumption-peaked first in 1945, reached a low level in 1960 of 435 million tons, rose thereafter and leveled off in 1970/71 at 525 million tons and since risen to 670 million tons in 1976.
Sectorial use of coal has changed since 1945'. At that time the largest consumer of coal was the railroads, burning 125 million tons per year. Today, coal use by railroads is negligible. Retail consumption dropped from 19 million tons in 1945 to only 9 million tons in 1972. Industrial coal use declined from 14S to 72 -million tons in the same 27 -vear period. Only demand in the electric utilities sector grew throughout the period, increasing from 72 million tons in 1945 to 349 million tons in 1972.'
The same trends have continued after 1972. The electric utilities consumed 446 million tons of coal in 1976, an increase of almost 35 million tons over the previous year and of almost 100 million tons over 1972. Coal demand from other sectors did not undergo much change: of the total 1976 increase in demand for bituminous coal and lignite of 41 million tons, only 8 million tons was from sectors other than electric utilities.
The high cost of oil, projected higher costs of oil and natural g-as in the future, potential shortages of natural gas in the U.S., oil import,
Hlerrnan Franssen is a specialist in environmental policy at the Congressional Research Service. 1Federal Energy Administration, National Energy Outlook 1976, Washingtoii, D.C., 1977, p. 16-5.
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50


iriteriqtltions caused by war or political actions abroad, and governmient policy to discourage the use of oil and gas by electric utilities and soine industrial uses, provide a bright future for the coal industry. Exp~ansion of coal use ini the United States is, however, subject to mnm (ous constraints on demand and supply.

TABLE 10.-COAL CONSUMPTION BY SECTOR

tIn million tons!

Electric Metallurgical Residential!
utilities use Industry commercial Exports

1945--------------------------------- 72-----------148 119
1965--------------------------------- 245 95 104 22 52
1970--------------------------------- 319 96 88 12 71
1971--------------------------------- 326 93 74 11 57
1972 ---------------------------- 349 87 72 9 56
1973--------------------------------- 337 94 67 8 53
194--------------------338 90 64 9 60
1975-------------------403 82 64 7 66
1976--------------------------------- 448 83 61 9 60
19851-------------------------------- 715 73 151 5 80

1FEA projection in NEC 1976 (includes 1,600,000 tons for synthetics). Source: Bureau of Mines.

Coal production has also undergone significant changes since 1945. Production has shifted from East to West and from deep to surface mining, In 1945, as much as 75 percent of U.S. coal production came from the Appalachian basin, 20 percent from the Interior basin, and 5 percent from the Far West. By 1972, Appalachian production had
dropped to 65 percent, with Interior and Western production growing to 26 arnd 8 percent, respectively, of total production. Surface mining has in(Teased from 19 percent in 1945 to 49 percent in 1972, and this new emphasis on surf ace mining occurred in ever y region of the country.2

TABLE 11.-COAL PRODUCTION

[Million tons]

East 2 West
___________________________________________________- National Year Surface Deep Total Surface Deep Total total

1960-------------------- 119 275 394 12 10 22 416
1970-------------------- 221 328 549 34 10 54 603
1971-------------------- 235 266 501 41 10 51 552
1972-------------------- 236 294 530 55 10 65 595
1973-------------------- 227 289 516 66 10 76 592
1974-------------------- 245 267 512 80 11 91 603
1975-------------------- 257 281 53 8 98 12 110 648
197 6-----------251 279 530 122 13 135 665

Excludes anthracite.
2East of the Mississippi River.
Source: Bureau of Mines.

A continuation of the shift iii coal production expansion from Eastern to WXXestern sources anld from (deep to surf ace mining, is projected in the
1976 National Energy Outlook (NEO). Of the 1,040 million tons of national production in 1985 (base case), 661 million tons (or 64%) is
2 Ib id, p. 165.








projected to come from EastIern sources, anad 379 million toils (or 36%) from Western sources. Surface milling is projected to grow from 37:3 million tons in 1976 to 655 million tons in 1985; deep mining is projected to produce 3S5 million tons in 1985, compared with 292 million tons in 1976
THE NATIONALL ENERGY PLANX
The National Energy Plan (-NEP) holds that even with vigorous conservation measures, U.S. demand for energy will continue to grow. To avoid shortages and unacceptable oil imports, the U.S. will nleedl increased domestic energy production. The authors of the NEP believe that for the remainder of the century the N ation will have to rely for the bulk of its energy supply on the conventional sources now at hand: oil, natural gYas, coal, nuclear, and hydropower. The NEP authors call for a Federal policy to stimulate the expanded use of coal, supplemented by nuclear power and renewable resources, to fill the growing gap crea ted by rising energ-y demand and relatively stable production of oil and gas.'
The Plan aims at reducingr the use of oil and natural gas in the industrial sector (including electric utilities), by converting industry and facilities to the more abundant fuel, coal. Coal constitutes 90% of the Nation's conventional energy reserves, but supplies only 18% of energy consumption. The Plan aims at removing what it considers the pmicipal constraint on coal utilization, lack of demand. To stimulate coal demand, the Plan proposes a coal conversion program consisting of taxes and regulatory measures. The tax measures ar-e designed to raise the price of oil and gas to industrial users, and to provide incentives for conversion to coal. Industry would generally be eligible, at its election, for either an additional 10% investment tax credit for conversion expenditures or a rebate of any natural gas or petroleum taxes paid, up to the amount of any expeiditures incurred for conversion to coal or other fuels. The regulatory part of the Plan would prohibit industry and utilities from burning natural gas anid petroleum products in new boilers, with limited environmental and economic exceptions. Industrial firms could also be prohibited from burning gas or petroleum in new major fuel-burningo installations other than boilers, by regulations applicable to categories of installations, or on a case-by-case basis (again subject to limited environmental and economic exceptions). Existing facilities with coal-bur'iing capability could be prohibited from burning gas or oil, where the turning of substitute fuels would be economic ally feasible and environment ally acceptable. Facilities burning coal would be required to obtain a permit in order to shift to petroleum or gas. Utilities burning gas would require a permit to shift to petroleum instead of coal. By 1990, virtually no utility would be permitted to burn natural gas.
The effect of the Plan would be to increase the use of coal in 1985 by the equivalent of 2.4 million barrels of oil per clay, or 200 million tons above the level projected -without, the Plan, and 6.4 million b/d (565 million tons) above the 1976 level.

3 Executive Office of the President, Energy Policy and Planning, The -National Energy Plan, Washinggon, D.C., 1977, p. 63.







TABLE 12.-NATIONAL ENERGY PLAN: COAL USE BY 1985 [In million barrels per day oil equivalent]
1985
Without the With the
Sector plan plan 1976
Industry -------------------------------------------------------- 2.7 5.0 1.9
Electricity --------------------------------------------------------- 8.2 8.3 4.9
Residential and commercial ------------------------------------------------------------------. 1
Total ----------------------------------------------------- 10.9 13.3 6.9

Cow.,erion Differences
The NEP document does not provide coal production figures other than the above quoted conversions in millions of barrels a day oil equivalent. The Bureau of Mines (BOM) figure for domestic utilization of coal in the U.S. is approximately 600 million tons, or 13.6 quadrillion Btu. The crude oil equivalent of 13.6 quadrillion Btu of coal is 6.4 million b/d. The NEP must have used a different conversion factor to arrive at 6.9 million b/d. The BOM in the 1976 edition of its annual report on U.S. energy demand and supply, used an energy conversion factor of 22.8 million Btu per ton of coal consumed in the U.S. in 1976. Assuming no change at all in the average Btu value of all coal consumed in the U.S. in 19S.5, the official BOM conversion factors would alter the coal use data in the NEP. The Plan calls for U.S. coal consumption of 1,175 million tons in 1985 or 976 million tons without the Plan. At 22.8 million btu/ton of coal consumed, coal use in the U.S. in 1985 would be 26.8 quads with the Plan and 22.2 quads without the Plan. Converted to a crude oil equivalent, coal use in 1985 would be 12.6 million b/d with the Plan and 10.5 million b/d without the Plan. NEP Coal Demand and Supply: A Comparison With NEO 1976
The NEP depends in part on projections in the NEO 1976 (PIES model), but assumptions changed regarding the mix of Eastern and Western coal as a percentage of total national coal production.
In the reference scenario of the NEO 1976, a large part of the increased production of coal would come from the Northern Great Plains (16 million tons in 1974 to 305.1 million tons in 1985) and Central Appalachia (from. 184 million tons in 1974 to 297.3 million tons in 1985), the two major areas with low-sulfur coal reserves. Social, environmental and institutional problems would compound and are recognized as a limiting factor.
NEO 1976 also projects a significant increase in surface mine production; from 54% in 1974 to 63% in 1985. Surface mining is projected to almost double by 1985; deep mining is projected to grow by about 39% during that time. The increase in surface mining is largely a function of the substantially increased Western coal prod ttction from reserves which can be mined relatively cheaply, but only with surface mining techniques. Inexp I)ensive Eastern strippable reserves are being depleted: hence the emphasis on Western strippable coal.4
4 Federal Energy Agency, National Energy Outlook 1976, o). cit., p. 3t.






53

TABLE 13.-COAL PRODUCTION BY REGION, 1985: A COMPARISON BETWEEN NATIONAL ENERGY OUTLOOK OF 1976 AND THE NATIONAL ENERGY PLAN OF 1977
tin millions of short tons]

1985
NEO, 1976 NEP, 1977
Without With
Region 1974 Low Base case High the plan the pl'an

Northern Appalachia----------------- 171 174. 9 182.6 201.9 189.0 257. 4
Central Appalachia------------------ 184 287.0 297. 3 305.9 319.3 348. 5
Southern Appalachia----------20 25.3 25.3 25.8 20. 2 21. 1
Midwest--------------------------- 135 175. 2 155.8 190.4 177.0 203.4
Total, East------------------- 510 662.4 661.0 724.0 705.5 830.4
Central West----------------------- 9 5. 3 9. 3 11.8 12. 1 17. 5
Guf------------------8 16.8 20.6 25.3 56.5 61.1
Eastern Northern Great Plains----- 8 14.0 31. 3 35. 1 8.6 2. 2
Western Northern Great Plains ----8 234. 9 273. 9 402. 6 220. 2 225. 6
Rockies---------------------------- 14 8.0 18. 8 20.8 20.5 53.4
Southwest-------------------------- 14 15.0 20.6 28.9 35.8 65.0
Northwest--------------4 1.0 4.0 8.9 6.0 6.7
Alaska----------------------------- 1 1 .1 .8 .8 .8
Total, West------------------- 93 295.6 378. 5 534.2 360.3 434.3
Total, national---------------- 603 958.0 1, 039. 5 1, 258.0 1,065.7 __ 1, 264. 7
Exports---------------------------- 60 80.0 80.0 80.0 90.0 90.0
Domestic consumption:
Rounded fgr---------551 880.0 961. 0 1,183. 0 976.0 1,175. 0
In quadrillion Btu -------------------------- 19.1 20.6 24.9 21.9 26.4


The high coal utilization scenario in -NEO 1976 calls for production of 1,258 million short tons, and a consumption of 1, 18:3 million tons. To achieve this high volume, TNEO 1976 project,; that expansion will mainly have to come from the Northern Great Plains (1974 production of 43 million tons; 1985 high coal use scenario; 4.37.7 million toils). Total coal production fromnAppalachian and 'Midwest basins would only increase from 661 million tons in the base case, to 724 million tons in the high coal use scenario. The increase in the Western region occurs because it is the only region that has relatively inexpensive additional reserves to meet the greater demand for low-sulfur coal. Very significant potential socio-economic and environmental problems are foremen if such action is taken .5
In a "Regional Limitation Scenario" which includes a 30% severance tax applied to all coal in the West, total coal production by 1983 is limited to 985 million tons, with much of the expansion in Eastern coal (from 510 million tons in 1974 to 662 million tons in 1983; Western coal would grow from 93 million tons in 1974 to 296 million tons in 1985).6
The NEP 1977 puts a great (Teal more emphasis on coal use as part of the total U.S. domestic energy supply than the base case scenario in the NEO 1976. In total projected 1985 volumes (in million short tons), the NEP is very close to the high coal use or electrification scenario in the 1976 NLEO (see Table 13). There is, however, one considerable difference. The NEP requires that "best possible tech5 Ibid, p. 35.
6 Ibid, p. 35.





54

nolog-y" be used in all facilities burning coal. Manx- experts al-ree that such a requirement will make Western coal use l-ess competitive, and that subsequently demand for Eastern and M\id-western coal will rise because they are closeir to the market.
The NEP projects Appalachian and Midwestern coal production to reach a volume of 830.4 million tons In 1985. The NEO 1976 projected Appalachian and Midwestern coal to contribute 724 million tons in 1985'. Without the Plan, the Administration projected in 1977 that by 1985, Appalachian and Midwestern coal production would be 705.5 million tons. Thle NEO 1976 projected 661.0 million tons in its base case scenario.
Thle NEP projects Western coal to expand to 434.3 million tons by 1985. Thle NEO 1976 high coal use scenario projected 534.2 million tons for that part of the country. Without the Plan, the Administration projected in April 1977 that by 1985, Western coal production would reach a volume of 360.3 million tons. The NEO 1976 projected 378.5 million tons in its base case scenario.
Tjphe difference in total projected coal consumption converted from short tons into Btu's reflects the differences in regional distribution of coal supply in the NEP and NEO 1976. The NEP puts more emphasis on higher Btu Eastern coal, and therefore arrives at a higher total Btu figure by 1985 than the NEO 1976. The conversion factor used in the National Energy Plan is 22.5 million Btu/ton of coal; the conversion factor for the base case in NEO 1976 is 21.5 million Btu/ton, and for the high coal use case it is 21.0 million Btu/ton higherr mix of Western low-Btu coal than in the base case).
The NEP also differs slightly from the NEO 1976 in projecting surface and deep coal mining activities through 1985.
TABLE 14.-PRODUCTION BY TYPE OF MINING, 1985
[Million tons]
Surface as
percent of
Surface Deep Total total
1974:
East --------------------------------------- 244.8 266.7 511.5 47.9
Wet-------------------------81.3 10.6 91.9 88.5
National------------------326.1 277.3 603.4 54.0
1985 (base case, NEO 1976):
Eas--------------------------292.8 368.2 661.0 44.3
West---------------------------------------- 362.2 16.3 387.5 95.7
National ---------------------------------- 627.2 438.6 1,039.5 63.0
1985 (base case, without NEP 1977):
East --------------------------------------- 283.0 422.5 705.5 40.0
West---------------------------------------- 344.2 16.1 360.3 95.0
National ---------------------------------- 627.2 438.6 1,065.8(?
1985 (NEP):
Eas--------------------------292.0 538.0 830.0 135.0
Wes-------------------------372.0 62.0 434.0 86.0
National ---------------------------------- 664.0 600.0 1,264.0 53.0
1 Rounded figure.





55

Eu ture U.S. Coal Product on a ind Ut U izatio n: A Gomlpa rat ive A ,ialysis
Following the Arab oil embargo of 1973/74, the newly created Federal Energy Administration (PEA) embarked on a maj or study to determine whether and when the United States could reduce its dependence on imported oil. In November, 1974, the Project Independence blueprint was published. It projected that coal production in the United States could reach between 754.9 and 926.5 million tons per year as early as 1977 (base case arid accelerated case). The shortterm production forecast for 1977 in the NEO 1976 was more pessimistic. It projected a total U.S. coal production in 1977 of 715 million tons. The most recent information from PEA and BOM indicates that actual U.S. coal production in 1977 is more likely to be similar to-if not slightly less than-the 1976 production of 671 million tons. Hence, compared with the Project Independence and NEO forecasts, coal production in 1977 is likely to be between 44 and 84 million tons below the 1976 and 1974 FEA base case forecasts. The Project Independence accelerated scenario for 1977 is not likely to be achieved until the early 1980's, or, according to some forecasts, the middle 1980's.
Domestic oil and natural gyas production declines, the Federal Power Commission (FPC) policy to allocate natural gas away from electric utilities, the fear of another disruption of imported oil, and the high cost of oil have all caused many consumers to explore ways to substitute coal for oil and gas. Moreover, the operating cost of nuclear power plants and a number of other concerns related to the nuclear fuel cycle have already led to numerous cancellations of projected nuclear power plants since 1974. The uncertainty of the nuclear power option, coupled with the high cost and uncertainty of supply of oil and natural gas, have made the coal option for electrical power generation increasingly interesting to electric utilities.
The FEA, under the Energy Supply and Environmental Coordination Act (ESECA) of 1974, has attempted to convert many power plants from oil and gas to coal, but the agency has met with little success. Few power plants have actually converted to coal, and construction orders to build coal-fired power plants were not needed, because the utilities were already planning to build them. ESECA has been extended twice and strengthened to permit FEA to order new power plants and major fuel burning installations (MFBI) to burn coal. The National Energy Plan would replace ESECA with a new regulatory program in which oil and gas use in utility boilers would be prohibited. Temporary exemptions could be granted under certain conditions, but the burden of proof would be on the boiler operator rather than on the government as is the case under ESECA. The NEP's oil and gas use taxes and a proposed mechanism to rebate the the tax to boiler operators converting to coal, are designed to ease the financial burden of new coal-related investments.
This chapter will not discuss the costs of the proposed shift from oil and gas to coal, but will only address the effects of that shift on coal demand and supply, and examine whether the projected domesticc coal utilization figure of 1,175 million tons by 1985 is likely to be achieved (total production is estimated at 1,265 million tons).







CL40 Ecaluation of -NED, Coal Use
The General Accounting Office (GAO) (loes not believe that the NEP coal use figure of 1,175 million tons and production of 1,265 million tons'wil be a chieved by 1985. The GAO doubts that even the base case without the Plan-i billion tons by 1985-is likely to be achieved. GAO maintains that the expanded use of coal even to 1 billion tons in 1985 will not take place if all air quality regulations are strictly enforced. Ljess costly and reliable technology to control pollution is needed, according to GAO. Without it, GAO believes, a significant increase in coal use ill lead to further environmental degradation, (despite the strong pollution control measures in the plan. In -the longer term, assuming an aggressive and successful coal R & D program, the need trade-offs may be substantially diminished.
GAO lists a number' of other constraints on higher coal use. The most important of these aire: the state of the railroads required to transport the coal to where it will be burned; the unresolved problem of coal slurry pipelines; poor labor relations; manpower and training requirements, in particular for deep mining; health and safety regulations; and, gradually eroding labor productivity since 1969. GAO maintains that the NEP does little to solve these problems, which are likely to hinder achievement of the coal use targets set in the Plan.
While GAO doubts that, a coal -use target of 1 billion tons can be achieved, reaching- it would still be 2 million tons or 2.4 million b/d oil equivalent belowv the level projected in the NEP. 0711 Ecvaluat ion of ATEP Coal Use
The analysis of NEP's coal use projections by the Office of Technology Assessment (OTA) is in general agreement with the evaluation by GAO.
OTA maintains that the levels of supply projected by the Plan represent the upper limits of capacity, and supplies of all fuels are likely to fall below the Plan's goals. There is little-if any-margin of error in the production schedules of the NEP.
OTA estimates that coal production could fall short by as much as 200 million tons (or 2.4 million b/d oil equivalent) because of the following constraints: (a) manpower and capital shortages could delay opening of new underground coal mines; (b) additional coal production facilities will be constructed by the coal industry only if new markets for coal are assured, which may require some short-term t radle-offs between environment al objectives and production targets, since the new boilers and pollution control devices may not be available for the rapid conversion to coal use; (c) transportation bottlenecks could prevent coal from being delivered where it can be used, particularly in the East; and (d) strip mining legislation may foreclose development of large reserves in the West where leases already have been signed and long-range mining plans have been completed, hindering production of Western coal.
The timinco factor and environmental trade-offs are very important. OTA maintains that hundreds of industries must reactivate coalbiirnino- facilities or buy new equipment before the demand for coal will expand. The h i gh cost of equipment and inability to meet demand for boilers and lpollution-control equipment, could retard growth in





57

the demand for coal. Delays in demand growth will in turn affect expansion of future supply.
The OTA report also states that the Plan fails to acknowledge that there will be inevitable conflicts between environmental protection and increased energy production and use, and recommends that the Administration should face that possibility squarely and propose mechanisms for resolving the conflicts. OTA suggests that if energy production falls short of the Plan's forecast, it is more likely to be caused by environmental and regulatory conflicts than by the lack of available resources, capital or manpower.
The Plan, according to OTA, provides no direct incentives for new coal production, but relies entirely on creating higher demand. OTA is worried that the Plan does not contain any contingency plans for stimulating production of energy or further reducing consumption in the event of slippage in one or more sources.

GAO, U.S. COAL DEVELOPMENT-PROMISES, UNCERTAINTIES (1977)
This report was published on September 22, 1977; too late for a careful analysis in the present study. However, the GAO report makes an important contribution to our knowledge, and some general observations from the study deserve to be quoted.
GAO points out that while coal reserves are vast-estimates of BOM identified 250 billion tons-they are by no means unlimited. At the BOM rate of goal consumption of 1,586 million tons, identified reserves would last about 74 years. The BOM demand forecast is by no means the highest (see Table 16). When coal prices increase, mineable reserves are likely to increase and extend the life of U.S. coal reserves.
The distribution of reserves is important, particularly because much of the low-sulfur coal is located in the West, far removed from the major markets. The sulfur content of coal is of great importance because of the provisions in the Clean Air Act, limiting consumers to using coal. with a low-sulfur content. About 89% of all coal in the Nation that, according to BOM estimates, can be used for direct combustion and meet Clean Air Act standards is located in the West.
On domestic supply and demand of coal, the most important conclusions of the GAO report are summarized in the report as follows:
* We have doubts about the possibility of achieving the administration's plan of producing and using 1.2 billion tons of coal by 1985 or, for that matter, even the level of one billion tons the administration assumes will be achieved without its plan. Given all the physical, economic, environmental, and public health considerations, it appears that producing and using even a billion tons by 1985 will be difficult. Assuming, however, that the difference is 200 million tons, the shortfall on the domestic energy supply side in terms of oil equivalent would be 2.3 million barrels per day. In addition, GAO does not agree with the administration's formula for computing the oil equivalents of coal. The magnitude in the difference in the administration's calculations as compared to GAO calculations, as far as coal is concerned, is about 1.1 million barrels of oil equivalent per day * *.
GAO did not undertake a quantitative analysis of U.S. coal supply and domestic demand, but instead compared what it considered a high supply estimate by BOM with a low estimate of the Edison

21-616-78-5







Electric In titut e. The cenarios ranoied from a low total demand iiUre Of 779 to t high (f 988 million tons by 1985, and from 942 to
,586 million tonsby the year 2000.
The GAO report inlicaied that discussions with 11 major coal pro(luters showe( that all believed that U.S. coal production could be doubled by 1985, but GAO believed that a number of factors, includino' long' lead times required to open mines, environmental constraints, delivery t ie ipment, capital problems, labor and proI y ti me of heavy eqim
(luctivit problems will delay beyond 1985 the achievement of a production level of 1 billion tons, let alone the 1.2 billion tons reflected in the National Energy Plan. GAO agrees that a production level of
1.5 billion tons can be achieved by the year 2000.
Other constraints on achieving a 1985 production level of 1 billion tons are according" to GAO:
The 1969 Federal Coal Mines Health and Safety Act which
increased the number of personnel in the mines, and lowered
prod activity;
Changes in mining conditions such as width of coal seams,
distance from entrances of mines to the operation faces, and
amount of overburden;
Introduction of large numbers of inexperienced workers into
the mines;
Requirements for additional personnel in accordance with
union agreements;
Unscheduled interruption in production caused by wildcat
strikes.
Capital availability is to a large extent dependent on firm demand for coal. The recent trend toward fewer and larger companies may ease capital problems. Manpower, but in particular trained manpower, is a significant problem, which deserves more attention. Most mining equipment should be available if there is adequate planning by the industry. Large draglines for surface mining may be in short supply. OSHA has improved health and safety standards, but the GAO report still projects a large increase in total number of dead and disabled mineworkers as a result of production expansion. In some States, State taxes on coal mining may reduce production, but State taxes have the advantage of internalizing external socio-economic and environmental costs.
GAO believes that transportation problems related to increased coal production can be solved, but Federal action may be needed. The study agrees that in the West, increased traffic, noise and air pollution are trade-offs for increased coal production.
GAO estimates that environmental costs associated with increased coal production-the degradation of the environment-are perhaps the most important of all costs. GAO estimates capital costs for emission control to be about $19.1 billion in 1985 and $26.4 billion by the year 2000. This could add an additional 9 to 10 percent to the average residential consumer's electric bill. Many regard this as a reasonable price to pay in exchange for a guaranteed fuel supply. Disposing of the sludge collected in pollution control devices such as scrubbers is likely to be a problem. The volume of sludge generated annually by 1985 is estimated to be equal to the municipal waste generated in the U.S. duringg the course of one year. The GAO study points out that with best-avilable-technology in use today, a great many 1)ollutants







dangerous to human health or harniful to plant an(I animal life, cannot be prevented from escaping in the atmosphere. Moreover, the carbon dioxide build-up (CO, cannot be controlled with current scrubber technology) may have adverse effects on climatic conditions during the next 50 years.
Other environmental problems related to coal production cited in the GAO study are: acid mine drainage, land subsidence, denuded lands, soil erosion, and sedimentation. In the Western part of the U.S., coal development may adversely affect, the hydrology of certain regions. One question that will arise in such cases is related to the transfer of water ricylits from existing use to coal production and conversion.
Socio-economic problems are similar to those felt in the coastal zone whenever major offshore oil and gas deN-elopinents take place, or when new large mining developments are undertaken in new areas. Infrastructure costs in local communities rise rapidly due to the influx of people, and these bigh front-end costs may be be ond the immediate capability of many communities. Some States have enacted legislation intended to mitigate those costs, and limited Federal assistance is available. Other social problems are related to those
-ka. Increased rates of
felt in "boom towns" such as Fairbanks, klas inflation, services breaking down, crime rate increases, prostitution, alcoholism, and other vices tend to increase rapidly in previously quiet communities.
A number of other recent studies have projected coal use in the United States, and while few of these studies are a response to the National Energy Plan, all show the promises and constraints associated with higher coal use in the United States.

CONGRESSIONAL RESEARCH SERVICE, PROJECT INTERDEPENDENCE: U.S.
AND WORLD ENERGY OUTLOOK THROUGH 1990 (JUNE 1977)
The CRS study made much the same comment as the recent GAO report on revised coal reserve estimates, indicating that coal reserves are indeed vast, but at projected rates of growth of production, reserves would not last much more than a century (still very large, but not as large as projected in most earlier studies).
CRS projected the following coal use scenario for the next fifteen years:
TABLE 15.-U.S. PRODUCTION AND UTILIZATION OF BITUMINOUS COAL AND LIGNITE
Million tons Quadrillion Btu
Domestic Domestic
utilization Exports utilization Exports
Low:
1977 ------------------------------------------- 610 65 13.2 1.7
1980 ------------------------------------------- 640 80 13.2 2.1
1985 ------------------------------------------- 760 90 14.9 2.4
1,020 90 19.9 2.4
Median:
1977 ------------------------------------------- 630 65 14.0 1.7
1980 ------------------------------------------- 695 80 14.3 2.1
1985 ------------------------------------------- 850 90 16.3 2.4
1990 ------------------------------------------- 1,135 90 22.2 2.4
High:
1977 -------------------------------------------- 660 65 14.4 1.71
1980 ------------------------------------------- 730 80 15.1 2.1
1985 ------------------------------------------- 940 90 18.5 2.4
1990 ------------------------------------------- 1,250 90 24.5 2.4





60

In the CRS forecast, coal production measured in short tons will increase more rapidly than that measured in Btu's. This is due to the fact that, using BOM's data, the average Btu content of coal is projected to decrease when the percentage of low-Btu Western coal increases as a percentage of total production. Estimated Btu's per short ton of product in the CRS report were 11,100 in 1977; 10,600 in 1980; 10,100 in 1985; and 10,000 in 1990. Average Btu content of domestically used coal by 1980, 1985, and 1990 would be lower, because exported coal consists almost exclusively of high-Btu metallurgical coal.
In its base case, CRS projected medium coal use of 850 million short tons and exports of 90 million tons, but domestic coal use could be as low as 760 million tons or as high as 940 million tons.
The CRS forecast is a qualitative estimate based on demand and supply projections taking into account the following constraints: environmental enhancement efforts, their kinds, severity and rigor, timing and capital requirements; trained manpower and labor productivity; transportation facilities; Federal leases; demand uncertainty caused by environmental restrictions; labor problems; water problems in the West; and, potential shortages of equipment.
ALLEN F. AGNEW, COAL, CARTER, AND CONSTRAINTS (CRS, 1977)
Dr. Agnew (senior specialist at the CRS) maintains that U.S. demand for coal will probably not be satisfied in the quantities and at the times needed, because much of it has low heat value, and because of a number of other constraints-such as environmental restrictions, unavailability of capital, inadequate transportation network, labor problems and low worker productivity, delays in access to the huge coal reserves on public lands in the West, and other factors such as unexpected weather conditions-unless a number of costly actions are taken by the Congress and the Administration to lessen their effect.
Without such measures, according to Agnew, it would seem that President Carter's goal of increasing coal production to more than 1.1 billion tons by 1985, although salutary, is not likely to be attained. Rather, coal production in 1985 may fall perhaps 100 million tons or more short of that goal. A mix of demand and supply constraints on coal use will Iiiinit coal use targets set by the government. Agnew lists the following constraints: (a) environment; (b) workers and productivity; (c) transportation; (d) capital availability; and, (6) access to Federal coal.
Many of these issues are interrelated, Which makes a piecemeal approach to solving the problems difficult.
Environmental regulations, together with uncertainties concerning their degree, cost, and rigor of enforcement, constitute a rather uinportant set of constraints. The surface mining law of 1977 is likely to remove a substantial factor of uncertainty, but the degree of inhibition to current and proposed mining will probably be difficult to assess for some years to come. Future EPA action against violators of the Clean Air Act are also not easy to project, because the EPA has granted numerous variances in the recent past. This and nonenforcement have together resulted in a situation whereby quantities of coal being burned that are not in compliance with the law are very high. But, will





61

EPA continue this policy in the future for new power plants in view of the fact that the electric power industry maintains that the technology to build highly reliable sulfur-dioxide removal systems is not expected to be fully developed for several years?
On worker productivity, Dr. Agnew quotes BOM's statistics showing a one-third drop in coal mining productivity since 1969. The drop in productivity is said to be primarily caused by attempts of operators to comply with the requirements of the Coal Mine Health and Safety Act of 1969. FEA in its Project Independence study projected increasing growth in productivity to meet the 1985 production target of 1.1 billion tons of coal. But, FEA projections to the contrar labor productivity has continued to drop since the publication of the study. Labor-management relations and availability of trained labor, in particular for deep coal mining, also count among the major constraints on coal production.
While the railroads maintain that by 1985 they can handle twice as much coal as they transport today, availability of larger rail cars and the capability of tracks to withstand the heavier loads caused by larger cars, may not be counted on. Moreover, the enormous increase in rail and truck traffic needed to move the increased coal produced, is likely to meet public opposition. Coal slurry pipelines may be constrained by water use issues and by the lack of eminent domain required to cross railroad right-of-way. Timely availability of capital to open up new coal mines is also questioned by Dr. Agnew. Finally, it is feared that access to Federal coal (85 percent of the Nation's lowsulfur coal and 70 percent of its strippable coal) is likely to be delayed by Federal regulations, despite the removal of several roadblocks to the resumption of the Federal coal-leasing program.
Dr. Agnew projected three coal use scenarios for 1985 and 19000 for the Project Interdependence study (see Table 16). He believes that the low production numbers (850 million tons in 1985 and 1,150 million tons in 1990) seem most likely to be achieved without costly and complex governmental intervention on a scale with little precedent in the United States.

EXXON, ENERGY OUTLOOK, 1977-1990
Exxon projected coal supply in the United States to increase to 709 million short tons in 1977, 814 million tons in 1980, and 1,070 and 1,477 tons, respectively, in 1985 and 1990. The largest growth was projected for the Western States, where production would increase from 110 million tons in 1975 to 142 million tons in 1977, 195 million tons in 1980, 340 in 1985 and 597 million tons in 1990. Exports of primarily metallurgical coal were estimated to remain at about 60 million tons through 1980, rising to 95 million tons annually by 1990.
Eastern coal production was projected to expand at a rate of 3.4 percent annually between 1977 and 1990; Western coal output would expand at a rate of 11.7 percent per year. Most of the future production from the East would come from deep mining. Higher costs of mining were said to be somewhat offset by the fact that Eastern coal production is close to established markets and existing transportation systems.





62

The Exxon study, which was made prior to the publication of the NEP, estimated that much of the expanded production must come from Western fields as a result of environmental regulations requiring low-sulfur fuels. In total, Western coal is projected to increase from 20 percent of U.S. coal production in 1977 to 40 percent by 1990.
About 82 million tons of coal per year was estimated to be used for producing gas and liquids from coal by 1990.
GERALD C. GAMBS, ENERGY OUTLOOK-ALTERNATIVE FUELS AND CONVERSION OUTLOOK
Coal industry spokesmen generally agree that the National Energy Plan's supply projections of 1.265 million short tons by 1985 can be achieve(], but most industrial sources also maintain that several of the constraints mentioned elsewhere will have to be removed. Nonofficial supply estimates from analysts in the coal industry tend to be lower than official projections, and range between 1 billion and 1.1 billion tons (including about 75 million tons of metallurgical coal for the export market).
One outspoken critic of the high coal use estimates by industry and some government agencies is Gerald Gambs, vice-president of Ford, Bacon & Davis in New York. Gambs has taken a careful look at the constraints on coal use, and has concluded that without removal of those constraints the Nation is not likely to produce more coal than between 774 and 853 million short tons by 1985.
Gambs maintains that it will be impossible for U.S. coal production to reach the NEP's projecte(d level of 1,265 million tons by 1985. It would require a total of 750 million tons of new mine capacity between 1977 and 1985 (including 150 million tons to offset depletion). This would mean that in the next eight years we would have to add 94 million tons of new capacity every vear. This is about ten times the new capacity added each year during the past twenty years.7
Gambs hold the view that if we exerted a superhuman effort and we removed all the roadblocks ahd obstacles to developing all the new coal mines which we would need, we would probably still fall short of 1 billion tons per year by 1985.8
Coal reserves in the U.S. are such that coal could contribute between 20 and 25 percent of total U.S. energy supply for the near and interme(liate term. Gambs listed the same constraints on coal use discussed earlier elsewhere in this chapter, and maintained that these constraints will keel) coal use below 1 billion tons per year by 1985.
Even a coal production of 1 billion tons per year would require new capacity of 515 million tons by 1985 (including 150 million tons for depletion). Assuming that 300 million tons will be Western coal, this will require 60 new 5 million tons per year mines in the Western States. The balance of 215 million tons could be obtained by developingg 80 new 2 million tons per year undergroun(l mines and 28 new 2 million tons per year surface mines in the East. This schedule calls for constructing 168 new large mines in the next 8 yeais, to 1985. In 1976, there were only 22 coal mines with a production capacity of 2 million tons or more which had started up since 1965, and only two of these

7 Gerald C. Gambs, Energy Outlook Alternative Fuels and Conversion issues, New York, 1977. s 1bid, p. 22.





63

produce more than 5 million tons per year. Comparing the )rojected additions to mining capacity for the next ten years (to reach a production of I billion tons) with the experience of the past ten years, provides a measure of the hiuge effort required.
While Gambs is known to be pessimistic about coal use under current Federal and State regulations, his analysis provides an interesting comparison with the National Energy Plan, which is generally considered to be overly optimistic in its coal use projections. The NEP is likely to have overlooked many of the serious constraints on coal demand and supply in the U.S. for the next decade.

INSTITUTE FOR ENERGY ANALYSIS, OAK RIDGE ASSOCIATED UNIVERSITIES, OUTLOOK FOR THE COAL INDUSTRY IN THE UNITED
STATES (1977)
This study foresees a bright long-term, but modest short-term future for coal. Almost all regions in the United States are expected to add coal-burning facilities. The study, which was completed prior to the release of the National Energy Plan, is an economic analysis which compares the use of low-cost, low-sulfur coal in the West with nuclear power. The requirement in NEP to use best-available-technology is likely to change the cost-benefit analysis of coal.
The study agrees with most other studies compared in this chapter, in that most of the uncertainty with respect to coal's future up the end of the century seems to rest on the demand side rather than on the supply side. It differs with several of these studies by minimizing the potential effects of capital and manpower shortages on supply. The outcome of the coal-nuclear cost and environmental impact controversy, and the rate of substitution of readily available coal for less available natural gas for utilities and industrial boilers, are listed as the key issues affecting future coal use.
Utilities are the largest potential market for coal, and the impact of stiff environmental standards has led to some replacement of existing coal-burning plants (as in New England), and a reluctance to build new ones. Utilities must be convinced that they can burn higher sulfur coals without violating environmental standards; this will require effective technological improvements (such as fluidized beds) to keep coal-fired plants in a competitive position with nuclear plants in regions where low-sulfur coal is not a practical alternative.
The passage of air-pollution control regulations by States, later accelerated by the passage of the Federal Air Quality Act in 1967 and the Clean Air Act in 1970, adversely affected utility planning for coal use in the future. As a boiler fuel, oil produces far less nitrogen oxide and particulates than does coal. The Clean Air Act requires conformance to State regulations for six potential pollutants: sulfur dioxide, particulates, nitrogen oxides, carbon monoxide, hydrocarbons, and photochemicals oxidants. Sulfur dioxide is the most important for coal burning. Many State Implementation Plans set the permissible sulfur content of emissions at levels far more stringent than would be needed to comply with Federal standards. This condition has made compliance difficult because of supply shortages and the higher prices of low sulfur coal. Notwithstanding some easing of air pollution regulations, in fiscal year 1975 nearly half (49 percent) of the coal





64

burned by utilities and other consumers did not conform to emission requirements. More stringent enforcement of environmental standards can be expected in the future. The Oak Ridge study is fully aware of the problems associated with nuclear power plant developments. In spite of this, the study concluded that if technological developments are not forthcoming to overcome the environmental drawbacks to coal burning, then decisions to rely more heavily on nuclear plants are almost a certainty. (p. 31).
The study was concerned about the drop in productivity in coal mining since 1969 (about 30 percent in underground mines), and wondered if the present period is one of.readjustment only, to be followed by a resumption of the long-term rising trend in productivity.
Reclamation policy was said to be a serious problem in some'surface mining areas in Appalachia, where reclamation costs could be up to fifteen times higher than average reclamation costs in the West.
Leasing of Federal lands for coal production in the West, where the government influences up to 80 percent of development, was also considered very important to meet future production goals. While production of Western coal has increased rapidly, only 5 percent of federallyowned coal resources were under lease by 1974. A policy of delay and indecisiveness can retard, if it has not already done so, the availability of low-cost, low-sulfur coal, according to the TEA study. The resumption of leasing is a favorable development says TEA, but long delays are currently being experienced before final approval is received, partially due to stiff environmental impact requirements. Therefore, the TEA study concludes, coal supply avail abili ties are retarded.
The Oak Ridge study quoted a BOM survey of 1976, which indicated that the industry plans to open new mines or expand existing mines with a total and final capacity of about 715 million tons. Twothirds of the total-472 million tons-is planned to originate in Western coal fields. In view of the higher depletion rate in the East, the TEA study considers the planned expansion of output in the East243 million tons-rather low. However, the planned expansion did agree with planned expansion of coal-fired power plants in the East at that time. NEP's emphasis of Eastern over Western coal and the coal conversion program could change those expansion plans,
The TEA forecasts a 2 to 3 percent annual growth rate in domestic demand for coal in the United States. Assuming a similar growth rate for the export market, 1985 coal production would be between 775 and 850 million tons. The study projects a maximum domestic demand for coal of 1,370 million tons by the year 2000. Assuming coal exports of about 100 million tons in that year, the TEA analysis for the year 2000 is close to quoted GAO estimates for that year. The TEA coal use data for 1985 are similar to those projected by Gerald Gambs, and the TEA high coal use scenario lies between the high and low cases of GAO.
The study anticipated that most of the growth will take place in the Western States, which will raise the proportion of low-sulfur coal mined. The study estimated price increases averaging 2 percent per year in constant 1975 dollars. The forecast of modest price and production increases would be raised significantly if the States were to opt for a moratorium on the construction of nuclear-powered generating plants.





6, OF'

Compared to 1976 output of 665 million tons, the average of the two IEA projected domestic consumption trends (high and low) would represent an increase of 410 million tons, with a maximum growth of 705 million tons by 2000. This would be a compound annual growth rate of 2 to 3 percent, not very different from the moderate expansion of actual production from 1975 to 1976.
CONCLUSIONS
On the basis of the studies analyzed in this chapter, the following conclusions may be drawn:
Coal reserves in the United States are adequate to meet projected expansion of demand for at least 75 to 150 years (depending
on the growth rate of demand and actual reserve estimates).
There are substantial differences in coal demand and supply
projections in the studies analyzed here. The three congressional research centers-CRS, GAO, and OTA tend to agree that production of coal is likely to be below the one billion ton mark in 1985; the Administration projects U.S. coal production to reach 1.2 billion tons by 1985. All of the various studies discussed in this chapter do not differ very much on coal use projections for 1990
and the year 2000.
Most studies have reached the conclusion that uncertainty with
respect to the future use of coal, at least initially, rests on the demand side of the equation. Environmental and regulatory policies are likely to limit coal demand. The high cost of coal conversion and the inability of industry to meet potential demand for boilers and pollution control equipment, could also retard demand for
coal.
Without assured markets, the coal industry is not likely to expand production capacity significantly. The following constraints are likely to have an adverse affect on future coal supply: inadequate transportation systems; manpower, and especially trained manpower; declining productivity, in part caused by government regulations; labor-management relations and trade union problems; potential equipment shortages; certain stripmining regulations, in particular in Appalachia; potential capital formation problems; institutional problems, in particular in
Western States; and, environmental and water use problems.
Most studies project the need for very substantial expansion
of Western coal production to achieve a 1985 total coal production level of one billion short tons. The percentage of Western coal, which can be strip-mined, may have to increase from 15% of total production in 1974 to between 350 and 401Y of total production by 1985. The projected shift in production expansion from highBtu Eastern to lower-Btu Western coal will require a much larger volume of coal production (calculated in short tons) than the current mix of Eastern and Western coal output in order to arrive at the desired demand in Btu s (heat value of coal expressed in
British thermal units).
The following probable and possible coal use scenarios are based on a qualitative analysis of the studies discussed in this chapter.







66

TABLE 16.-PROBABLE AND POSSIBLE COAL USE ESTIMATES FOR 1985
Iln million short tons and quadrillion Btu)

Probable Possible
Million Million
Sector short tons Quads Sector short tons Quads

Electric utilities --------------- 700 14.7 Electric utilities -------------- 776 16.3
Industrial uses ---------------- 160 4.2 Industrial uses --------------- 180 4.7
Other 5 1 Other uses ------------------- 9 .2
Total, domestic coal use--- 855 19.0 Total, domestic coal use-- 965 21.2
Coal exports ------------------- 75 Coal exports ----------------- 75 ---------Total, coal production----- 930 ---------- Total, coal production ----- 1,040 ---------Conversion factors: Coal for electric utilities 1985: 21,000,000 Btu;ton (21,600,000 Btu/ton in 1976). Industrial and other uses 1985: 26,300,000 Btu,"ton in 1976. Changes in Btu/ton for steam coal represent a shift from the current mix of east/ west coal for electric utility use to more emphasis on lower-Btu western coal.

TABLE 17.-COMPARISON OF U.S. COAL PRODUCTION ESTIMATES
[Million tons]

Study 1980 1985 1990 2000

Federal Energy Agency: Project Independence (1974):
Business as usual ------------------------------- 895 1,100 1,300 -------------Accelerated case-- 1,376 2,063 2,803 -------------FEA, National Energy Outlook (1976):
Base case ($13 oi I) ------------------------------ 799 1,040 1,307 -------------Electrification scenario ----------------------------------------- 1,258 ---------------------------National energK plan (1977) ---------------------------------------- 1,265 ---------------------------Congressional research Service (1977):
Project Interdependence, base case--------------- 775 940 1,225
Project Interdependence, high supply -------------- 810 1,030 1,340 -------------International Energy Agency/OECD (1977): Reference
case --------------------------------------------- 799 1,039 ---------------------------Exxon (1977) --------------------------------------- 814 1,070 1,477 -------------M IT/WAES (1977):
C case (hoped for future) -------------------------------------- 950 -------------- (CI) 2, 009
A case (highest) ---------------------------------------------- 1,040 -------------- (C2) 1, 452
D case (lowest) ----------------------------------------------- 800 (D8) 1, 104
General Accounting Office (1977):
Low coal use scenario ----------------------------------------- 799 -------------- 1,500
High coal use scenario ----------------------------------------- 998 ---------------------------Office of Technology Assessment (U.S. Congress):
Probably coal use ----------------------------------------------- < 1, 000
Bureau of Mines (1976) ------------------------------ 806 998 -------------- 1,660
Gerald Gambs (Ford, Bacon & Davis) (with current
constraints) -------------------------------------- 735 853 ---------------------------Institute for Energy Analysis (Oak Ridge):
Low coal use case-2 percent annual 775 -------------- 1,370
High coal use case-3 percent annual increase -------------------- 850 ---------------------------Excluding exports.











THE SUPPLY OF -.NUCLEAR POAVER IN THE UNITED STATES
(By Warren H. Donnelly*)
PURPOSE
For some people and organizations, especially those dedicated to protection of the environment and gravely concerned with what they see as the excesses of present U.S. society, the future use of nuclear power is abhorrent, excessively dangerous to health, safety and national security, and likely to cause unacceptable curtailment of civil liberties. For others, especially those connected with the nuclear power and electricity industries, the future use of nuclear power is necessary and desirable to relieve dependence upon imported fuels, to reduce the environmental effects of burning coal to generate electricity, and as an economical source of power. It is not evident that the majority of citizens are wholly convinced one way or the other. Nonetheless, continuing and, in some places, growing, opposition to nuclear power has kept questions about the future of nuclear energy continually before Congress.
The future supply of electricity from nuclear energy is an important consideration in national energy policy. Government action to increase nuclear power would bring some benefits and attendant costs. Government action to decrease its use would redtice some risks but bring some undesirable consequences. The purpose of this section is to sketch briefly the history of nuclear power in the United States; summarize the present situation; present forecasts, with reasons for uncertainty in these forecasts; and outline constraints upon its future supply. Several landmark analyses of nuclear power are also examined as is the role assigned to nuclear power in the President's national energy plan.
PART I. BACKGROUND
Overview
The use of nuclear power is t e chnologic ally feasible. Nuclear power is now in commercial use throughout the world. 'Many nuclear powerplants are operating in the United States, more are under construction and still more are on order. On the other hand, continuing controversy clouds the future supply of nuclear power. At issue are the economics of nuclear power and the risks which some critics perceive to the public health and safety, environment, national security and world peace. The United States possesses the world's largest industrial base for civil use of nuclear power, but several parts necessary for the continued or expanded long-term use of nuclear power are still missing Since proposals to impose a national moratorium upon nuclear power have yet to succeed, it appears that the principal policy questions for the future supply of nuclear power are how much more nuclear gen*Warren H. Donnelly is a senior specialist in energy policy at the Congressional Research Service.
(67)





618

orating capacity should be provided, if any, where, and when. Experience with forecasts for future nuclear power during the past 15 years strongly indicates they ,Ire unreliable as the basis for future public and( pi)ivate dlecisions about additional nuclear powerplants. The existing U.S. nuclear powerplant industry is underemployed because of a fall-oflf in new orders over recent years and may face consolidation, or exit by some manufacturers if the market does riot improve. Th~1e availability of uranium to provide nuclear fuel for nuclear power plants while probably sufficient to support those now in operation, being~ built, or on order, may not be sufficient to fuel substantial additional expansion if present type nuclear powerplants are used. The further development and demonstration of nuclear powerplants capable of producing much more electricity per pound of uranium has become intensely controversial and President Carter has laid down policies to postpone indefinitely one type of powerplat-the plutonium breeder reactor-until certain criteria can be met. Meanwhile, other technological options to get more kilowatt-hours of electricity per pound of uranium are to be intensively reexamined. History and background
Since the discovery of nuclear fission in uranium in 1939, and especially since government research and development for nuclear power began to expand in the early 1950s, it has been expected that nuclear power would f urnish an increasing p~art of the expanding supply of electricity forecast for the United States. Since the 1960s, however, critics increasingly have questioned what they perceived to be the risks of nuclear energy to the public health and safety, to the environinent, to the rate payer, and to national security and world peace.
The first nuclear powei'plant to be operated by a public utility in the United States wNas the Shippingport Atomic Power Station, in Pennsylvania, which achieved its initial design poINvei output in December 1957. The first commercially designed and built nuclear powerplant, the Dresden Unit 1 of the Commonwealth Edison Company in Illinlois, achieved initial design power in June 1960 and went into commercial operation in August of that year.
Research and development for nuclear power by the U.S. Atomic Energy Commission (.AEC) in its early days led to the testing and demonstration of several types of nuclear power reactors, with the nuclear power industry finally settling upon two types, the pressurized water reactor which is manufactured by three U.S. companies, and the boiling water reactor, which is made by a fourth. Another type, the high temperature gas -cooled reactor, was privately developed but failed to attract buyers and is no longer available in the U.S. market. The two types of commercial reactors now used in the United States are known as light water reactors (LWRs) because of their use of normal water both as a coolant to carry the heat energy out of the reactor for conversion into electrical energy, and as a moderator for the nuclear react ion.'
For more than the past decade, Federal research and development for nuclear power has focused on one particular breeder reactor system,

I in light water reactors, the function of the moderator is to slow down the neutrons that are emitted by fi ssioning atoms of uranium-235 enough to maximize the probability that they will be able to cause another atom of U-235 to fission in a chain reacting system. Graphite can also be used as a moderator, as is the case for some nuclear power reactors in the United Kingdom and in the Soviet Union. "Light water" is specified because in another type reactor, developed in Canada, heavy water or deuteriumn is used as the moderator.






G9

the liquid metal, fast breeder reactor (LMFBR). In April 1977, Presi(lent Carter announced his decision to redirect the LMFBR program of the Energy Research and Development Administration (ERDA) and to cancel construction of a demonstration LMFBR at Clinch River in Tennessee. This type of breeder reactor would produce heat for generation of electricity, and also convert enough non-fissionable uranium (uranium-238) into fissionable plutonium to more than offset nuclear fuel consumed in its operation. Since most of the uranium found in nature is U-238 (some 99.3 percent), the idea of transforming this U-238 into useful nuclear fuel has intrigued scientists and engineers, since development of the atom bomb during World War II. Unfortunately for the advocates of nuclear power, p~lutonlium can be used to make weapons, even in the somewhat contaminated form produced in breeder reactor operaticn.2
The President's nuclear policy decisions also would prevent the reprocessing of spent fuel from commercial light water reactors to recover residual plutonium, and the use, or recycling, of that plutonium as fuel in other reactors.
The present state, of nuclear power
During 1976, U.S. nuclear powerplants produced 191 billion kilo-watt-hours of electricity, which was, about 9.4 percent of the 2,037 billion kilowatt-hours produced by all utilities. By comparison, water power supplied 14 percent of the electricity generated in 1976, coal 46 percent, oil almost 16 percent, and gas somewhat more than 14 percent .3 The primary energy resources consumed to produce this electricity included 448 million tons of coal, 556 million barrels of oil, .0 trillion cubic feet of natural gas, and 8,132 short tons of uranium oxide (U308) .4
As of April 1, 1977, some 232 nuclear powerplants were authorized to operate, or were being built, on order or announced, with a total electrical generating capacity of 231,437 megawatts.' Table 18 gives the details. Z
TABLE 18.-STATUS OF U.S. CENTRAL STATION NUCLEAR CAPACITY
Capacity,
N umber of megawatts
Status I units electrical (net)
Authorized to operate:
Licensed by NRC------------------------------------------------------- 63 45,454;A
Authorized by ERDA 2-......................... ....................-------2 940
Being built:
Construction permit----------------------------------------------------- 71 74, 873
Limited work authorized ------------------------------------------------- 18 19, 772
Ordered------------------------------------------------------------------ 56 63,738
Subtotal ----------------------------------------------------------- 210 204,' 777
Announced (but not ordered)------------------------------------------------- 22 26, 660
Total------------------------------232 231,437
'As of Apr. 1, 1977.
3Shippingport (90 MWe) and N reactor (850 MWe).
Source: ERDA, U.S. Central Station Nuclear Generating Units. Op. cit.
2 Until recently, it was argued that the presence of comparatively high concentrations of the plutonium isotope-240 in the plutonium-239 produced in breeder reactors made this material unsuitable for nuclear explosives.
3 U.S. Federal Energy Administration. Energy information. Quarterly report: first quarter 1977, p. 95.
4 Ibid., p. 99.
5 U.S. Energy Research and Development Administration. 'U.S. central station nuclear electric generating units: significa nt milestones. Apr. 1, 1977. Report No. E RDA 77-30J2, p. 12.






0


As of April 1, 19 77, nuclear capacity accounted for 54 percent of the aggyreg-ate of the indutry's scheduled expansion. During the last nine months of 1977, eight nuclear power units are scheduled for commercial operation, w\ith a. total capacity of 7,700 megawatts .6
Although for the nation as a whole, nuclear energy supplied about 10 percent of the electricity in 1976, in three electrical reliability council regions, nuclear provided more than 20 percent, a~s shown in Table 19.

PART HI. FORECASTS FOR NUCLEAR POWER

Quantitative views on the present and future situation for nuclear supply are to be found in forecasts and projections, qualitative views in reports, and analyses.
Some insight into the quantitative aspects of views on nuclear power is to be found in 16 forecasts of government agencies, industrial associations and academic studies, made during the period 1962 to 1977. Table 20 summarizes these forecasts while Figure 1 compares them in terms of publication dates. The range of forecasts
Beginning with modest projections in 1962, succeeding forecasts
rose quickly to peak estimates in 1973 and 1974 and then fell precipitously in the aftermath of the Arab Oil embargo of 1973-1974.
The most optimistic forecasts in 1973 and 1974 anticipated as much as 2,000 gigawatts of nuclear electrical generating capacity by the year 2000. Within three years, these had dropped to Secretary Schlesinger's latest figure of 380 gigmaw atts by the turn of the century.

TABLE 19.-REGIONAL CONTRIBUTION OF NUCLEAR POWER TO GENERATION OF ELECTRICITY, 1976 [Billions of kilowatt-hours]

Region Nuclear Total Nucleai
(percent)

NPCC ------------------------------------------------------ 40.8 187.0 21.8
MAAC------------------------------------------------------ 26.2 148.0 17.7
ECAR ------------------------------------------------------ 13.2 352.8 3.7
SERC ------------------------------------------------------ 43.8 404.9 10.8
MAIN------------------------------------------------------ 35.0 156.1 22.4
SPP-------------------------------------------------------- 3.8 161.7 2.3
ERCOT ----------------------------------------------------------------- 122.0 0
MARCA------------------------------------------------------ 22.0 86.7 25.4
WSCC ------------------------------------------------------ 9.3 383.9 2.4
Total-------------------------------------------------- 194.5 2,003.7 9.7

Abbreviations:
NPCC: Northeast Power Coordinating Council; New York and New England.
MAAC: Mid-Atlantic Area Council; New Jersey, Delaware, and parts of Pennsylvania.
ECAR: East Central Area Reliabiltiy Coordination Agreement; West Virginia, Kentucky, Ohio, Illinois, Michigan,
and part of Virginia.
SERC: Southeastern Electrical Reliability Council; North Carolina, South Carolina, Georgia, Florida, Alabama.
Tennessee, and parts of Virginia and Mississippi.
MAIN: Mid-America Interpool Network: Indiana and parts of Wisconsin and Missouri.
SPP: Southwest Power Pool: Kansas, Oklahoma, and Darts of Texas and Arizona.
ERCOT: Electric Reliability Council of Texas; most of Texas.
MARCA: Mid-Continent Area Reliability Coordination Agreement; Minnesota, Iowa, North Dakota, most of South
Dakota, about half of Nebraska, and part of Montana.
WSCC: Western Systems Coordinating Council; Wyoming, Colorado, New Mexico, Utah, Nevada, Idaho, California,
Oregon, Washington, and parts of Montana and Arizona.
Source: Edison Electric Institute. 1977 annual electric power survey, 1977, pp. 18-19.

6 Edison Electric Tistitute. Y,77 aiinual electric power survey. A report of the Electric rower Survey Committee. 1977, p. 25.






71

TABLE 20.-k"OYPARISON OF FORECASTS FOR NUCLEAR ENERGY 1975-2000
[Gigawatts of electrical generating capacity]

Year-Source 1974 1975 1977 1980 1985 1990 1995 2000

1962-AEC I ---------------------------------------- 16.0 -------- 40.0 -------------------------------1964-AEC 2 . . . . . . . . . . . . . . . . . . . . 29.0 75.0
1965--AEC 3 ---------------------------------------- 40.0 -------- 95.0 -------------------------------1967-AEC 4 ---------------------------------------- 61.0 -------- 145.0 255 -----------------------1969-AEC 5 ---------------------------------------- 62.0 -------- 149.0 277 -----------------------1970-AEC 6____ __ __ __ __ __ __ __ __ __ __ __ __ 59.0 -------- 150.0 300 -----------------------1972-AEC: 7
Low ------------------------------------------- 52.0 127.0 256 412 825
Most likely ------------------------------------- 54.0 -------- 132.0 280 508 -------- 1,200
High ------------------------------------------- 57.0 -------- 144.0 332 602 -------- 1,500
1974-AEC: &
A-Lowest ----------------------------------------------------- 85.0 231 410 -------- 850
B-Continued improvement -------------------------------------- 102.0 260 500 1,200
C-Highest ----------------------------------------------------- 112.0 275 575 1,500
1974-FEA:
Project Independence Blueprint Report 93.0 240 -----------------------Nuclear Task Force Report:
Busi ness-as -usual scenario 10 --------------------------------- 120.0 275 500 ---------------Accelerated scenario It --------------------------------------- 150.0 400 750 ---------------1976-ERDA: 12
Low 39.0 -------- 60.0 127 195 380
Medium estimate ------------------------------- 39.0 -------- 67.0 145 250 510
High 39.0 -------- 71.0 166 290 620
1976-NRC (Gesmo Report) 13 ------------------------- 37.0 -------- 71.0 156 269 400 507
1976-EEI: 14
Low estimate --------------------------------------------------- 73.0 157 213 -------- 507
Moderate estimate ------------------------------ 39.5 78.0 185 340 -------- 8105
High estimate --------------------------------------------------- 85.0 204 389 1,005
1977-FEA Is ----------------------------------------------- rl. 0
J 75.0 135 NA ---------------1977-WAES: 16
Installed 404 -------------------------------------------------------Minimum likely --------------------------------------------------------- 127 ---------------- 380
Maximum likely --------------------------------------------------------- 166 ---------------- 620
1977-ERDA: Base case 43.0 47.9 61.1 127 195 283 380

1 U.S. Atomic Energy Commission. Report to the President on Civilian Nuclear Power. 1962. Table 16, app. IV. 2 U.S. Atomic Energy Commission. Estimated growth of civilian nuclear power. 1965. AEC Report, WASH-1055.
3 U.S. Atomic Energy Press Release S-20-66 of June 7, 1966, and table I of AEC Press Release S-23-66, Sept. 8, 1966.
4 U.S. Atomic Energy Commission. Forecast of growth of nuclear power. 1967. AEC Report, WASH-1084.
5 U*S. Atomic Energy Commission. Unpublished forecast. May 1969.
6 U.S. Atomic Energy Commission. Forecast of growth of nuclear power. January 1971. AEC Repor WASH -1139.
7 U.S. Atomic Energy Commission. Nuclear power, 1973-2000. Dec. 1, 1972. AEC Report, WASH-1139 (72). 9 U.S. Atomic Energy Commission. Nuclear power, 1974-2000. February 1974. AEC Report, WASH-1139 (72).
9 U.S. Federal Energy Administration. Project Independence Report. November 1974, p. 113. 10 U.S. Federal Energy Administration. Project Independence Blueprint. Final task force report on nuclear energy. November 1974, p. 3.1-1.
11 Ibid., p. 3.1-2.
12 Edward J. Hanrahan, Richard H. Williamson, and Robert W. Brown. U.S. uranium requirements. In U.S. Energy Research and Development Administration. Uranium industry seminar. October 1976. AEC Report, GJO-108 (76) vol., p. 55. 13 U.S. Nuclear Regulatory Commission. Final generic environmental statement on the use of recycle plutonium in mixed oxide fuel in light water-cooled reactors. August 1976. NRC Report, NUREG-0002, vol. 2, p. 111-3. (Gesmo Report.) 14 Edison Electric Institute. Nuclear fuels supply. Appendixes to the report of the Edison Electric Institute on nuclear fuels supply. 1976, p. 63.
is U.S. Federal Energy Administration. Energy information. Quarterly Report: Ist Quarter 1977. 1977, p. 77. 16 Carroll L. Wilson. Energy: global prospects 1985-2000. Report of the Workshop on Alternative Energy Strategies. New York: McGraw-Hill Book Co., 1977. p. 203.
17 U.S. Energy Research and Development Administration. Unpublished information. April 1977.
Notes: AEC = U.S. Atomic Energy Commission; FEA = U.S. Federal Energy Administration; ERDA = U.S. Energy Research and Development; NRC=U.S. Nuclear Regulatory Commission; EEI=Edison Electric Institute; WAES=Workshop on Alternative Energy Strategies.

The great variation among these 16 forecasts gives good reason
to be wary of current, projections as guides to the future or as the principal basis for decisions about the future of nuclear power. Forecasts
are useful to test the possible effects of optimism or pessimism for
the future of nuclear energy. They may even suggest short-term
changes in nuclear power plans of the Government and industry. But
they cannot be trusted to give a reliable picture of the future beyond
a few years.






72


Sources of variations
The variations in these 16 forecasts result from many influences. Somec come from within the nuclear power industry, others are external to it. Trhe Nuclear Fuels Supply Study Program of the Edison Electric Institute in 1975 commented on uncertainties it had seen in nuclear forecasting. It observed that while relatively low fuel cost experience and projections favor nuclear power, high and escalating initial costs (due in part to long lead times and imposed regulatory criteria), nuclear fuel supply uncertainties and public acceptance problems tend to be encumbering, especially in the United States.8
From the viewpoint of national energy policy, many factors in addition to those noted by the Institute contribute to the uncertainty of forecasts for nuclear power and to the ability of the nuclear industry to respond rapidly should national policy opt for more nuclear power in the future. A list of these factors and constraints appears in Table 21. For the future of nuclear power projected by the Administration, the nuclear power in 1985 will provide 20 percent of the
electricity generation, the social, political and regulatory factors appear more influential than resource and technological factors. It should be kept in mind that the present U.S. nuclear power industry will need a minimum number of new orders from year to year if it is to retain its present production capacity. If the present industrial base for nuclear power is reduced by attrition as manufacturers drop out or combine with others, then the future option to enlarge the presently projected expansion of nuclear power will be constrained, at least for the time needed to reestablish lost capacity.

TABLE 21.-LIST OF FACTORS LIKELY TO AFFECT THE FUTURE SUPPLY OF NUCLEAR ENERGY IN THE UNITED STATES

Factors 1977-85 1986-2000 2000+

Public policy:
National actions by the President and Congress --------------------- X X X
State government actions-------------------------------------- X X X
Economic trends:
Future growth in demand for electricity-------------X X X
Comparative costs of alternatives to nuclear power------------------- X X X
Resources:
Supplies of uranium -----------------------------------------X X X
Supplies of thorium--------------------------------------------------------------- X
Supplies of coal, oil and natural gas------------------------------ X X X
Industrial capacity:
Uranium mining and milling------------------------------------ X X
Uranium enrichment---------------------------------------------------- X
Storage of spent fuel ----------------------------------------- X X
Reprocessing of spent fuel ------------------------------------------ X X
Management of high-level wastes----------------------------------------- X
Technological devlopments:
Development of the plutonium breeder----------------------X
Development of acceptable plutonium reyl---------------X X
Development of other ways to get more energy out of uranium which are also
proliferation resistant--------------------------------------------------- X
Regulation of burning of coal to generate electricity-by EPA and States -----?X X Regulation of nuclear energy:
Economic-by State utility commissions-------------X X
Environmental-by NRC, EPA and States ---------------------- X X
Public health and safety-by NRC and EPA------------------------X X X
National security (nonproliferation) by NRC------------------------ X X X
Siting-by NRC and States------------------------------------- X X X
Public opposition ----------------------------------------------- X

X=expected effect.
?=possible but uncertain effect.

8 Edison Electric Institute. Appendices to the Report of the Edison Electric Institute on Nuclear Fuels Supply. December 1975, Appendix 1, p. 14.





73

Forecasts for nuclear power also are susceptible to external events. A catastrophic accident with a nuclear power plant at home or abroad could spark intense pressure for a full or partial shutdown of other nuclear powerplants. On the other hand, failure of coal to supply required generation of electricity, or extension to conventional powerplants of regulations comparable in effect to those now required of nuclear powerplants, or a ceiling or cutoff for foreign oil supply, all could create pressures for acceleration and expansion of nuclear power. Another factor not yet at work could be government policy on whether or not a specified production capacity for nuclear powerplants should be maintained, in the U.S. nuclear industry. If it were deemed hecessaxy, for example, that the present four suppliers of nuclear p werplants preserve their present production capacity, then perhaps six large powerplants would have to be ordered annually. If such new orders are not forthcoming, it is reasonable to expect some companies will leave the nuclear industry or combine their operations with others, which would have important implications for future competition and possible monopoly in the surviv*g industry.
PART III. SELECTED VIEWS ON NUCLEAR POWER supply
Four landmark reports of the last three years provide substantial insights on the future supply of nuclear power. The selected reports include two published soon after the Arab oil embargo of 1973-1974, and two published this year. Two were government and two private. For the immediate post-embargo era, the reports are the Project Independence report of the Federal Energy Agency,' and the Energy Policy Project report of the Ford Foundation." For 1977, the reports were the report of the Nuclear Energy Policy Study Group of the Ford Foundation" and President Carter's report on his national energy plan. 12
All of the reports expect there will be nuclear power m the future, but not as much as its proponents expect. The chances that it will supply as much as half of the nation's electrical energy supply by the end of the century are dim. All see many barriers to nuclear supply much greater than present conservative projection. All presume the choices among energy sources will be made by the electric utilities. None inquires whether projections for growth in nuclear power would sustain the present production capacity of the U.S. nuclear industry. None anticipates a nuclear industry independent of government for research and development and for vital services. The U.S. nuclear industry for years to come will depend upon the Department of Energy for uranium enrichment services and probably upon government for long-term storage of spent nuclear fuels and nuclear wastes.
The two latest reports would substantially redirect technological trends in nuclear power by discouraging or prohibiting those nuclear fuel cycles which involve separation of nuclear fuel materials directly usable in weapons, namely plutonium, uranium highly enriched in
RU.S. Federal Energy Administration Project Independence report. Washington, D.C.: U.S. Govt. Print. Off., November 1974, 443 pp.
10 The Ford Foundation. A time to choose. Report of the Energy Policy Project. Cambridge, Mass.: Ballinger Publishing Co., 1974, 511 pp.
It The Ford Foundation. Nuclear power. Issues and choices. Report of the Nuclear Energy Study Group. Cambridge, Mass.: Ballinger Publishing Co., 1977,418 pp. 12 U.S. Executive Office of the President. The national energy plan. Washington, D.C.: U.S. Govt. Print. Off., 1977,105 pp.
21-616-78-6





74

U-235 and uraniurn-2-33. The immediate change planned is to defer repr-ocessing of spent fuel to recover plutonium and recycle of that material in fuel for conventional nuclear powerplants. For the longer term, both reports would also redirect nuclear research and developmn ~t to emphasize "proliferation-resistant fuel cycles," to deemp~hasize the liquid metal, fast breeder reactor (LMFBR) and to (.cancel the Department of Energy's construction of a demonstration 1,MFBR at Clinch River, Tennessee. The second Ford Foundation report~ also would impose new conditions on exports of the U.S. nuclear industry to make sure these do not contribute to the further si)reaxl, or proliferation of nuclear weapons, but gives no idea of the effect of such restrictions on the production capacity of the U.S. nuclear industry.
On the whole, the reports present a curious mixture of pessimism about expected future use, with an implied assumption that nuclear power can be expanded quickly if needed, an assumption that is not tested.
V iews of the Federal Energy Administration
Project Independence was a major response of President Nixon's administration to the Arab oil embargo of 1973-1974. The Federal Energy Administration had the task of evaluating the Nation's energy problem and the broad strategic options available to the United States. More recently FEA has been publishing an annual energy outlook. All of these reports include PEA's views on nuclear power, with the later ones reducing the estimates for nuclear power.
The Project Independence Blue print report .-T he PEA, in its Project Independence Blueprint report of November 1974, forecast base-case nuclear power would grow from 4.5 percent to 30 percent of total electric power generation, an increase from 36,000 megawatts in 1974 to 204,000 megawatts by 1985.13 FEA's estimate was notably lower than other forecasts at this time because of its assessment of construction schedule deferments and delays and operating problems. PEA's projections for nuclear power and other energy sources for the base case and for an accelerated case appear in Table 22. Note
TABLE 22.-FEA ESTIMATES OF DOMESTIC FUEL CONSUMPTION, 1985 [Quadrillion Btu]
$7 oil $11 oil
Accelerated Percent Accelerated Percent
Fuel source 1972 actual Base case supply case change Base case supply case change
Coal ------------------- 12.5 19.9 17.7 -11.0 22.9 20.7 -9.6
Oil -------------------- 22.4 23.1 30.5 +32.0 31.3 38.0 21.4
Gas ------------------- 22.1 23.9 24.7 +13.3 24.8 25.5 +2.8
Hydro and geothermal---. 2.9 4.8 4.8 0 4.8 4.8 0
N uclear---------------- .6 12.5 14.7 +17.6 12.5 14.7 +17.6
Synthetics ---------------------------------- 0-------------------------- .4 -----Imports--------------- 11.7 24.8 17.1 -31.0 6.5 0 -100.0
Total------------- 72.1 109.1 109.6 +.4 102.9 104.2 +1.2
Source: U.S. Federal Ene rgy Administration. Project Independence. A Summary. Washington, D.C.: U.S. Government Printing Office, 1974, p. 46.
13 U.S. Feidera1 Energ y Administ ration. Project Independence report. Op. cit., p. 6.







FEA's anticipation that nuclear power generation could be expanded by 18 percent from the base case to the accelerated case figure. This expansion, said FEA, would have no impact on imported oil, but rather would reduce the growth of new coal-fired capacity."1
The FEA expected that increasing oiprcswudntasen
increase in nuclear energy in 1985, and that projected exploration, mining and milling for uranium would fail to meet nuclear fuel requirements for its accelerated case unless uranium production could be more than doubled between 1980 and 1985. PEA was pessimistic about the ability of the nuclear industry to achieve even its low estimate. Of this it said:
To achieve even the low estimates of nuclear growth would necessitate a reversal of recent trends in the ability of utilities to raise investment funds and in equipment delivery and construction schedules, as well as a reduction in licensing delays. Achievement of high levels of nuclear power could require a national commitment of manpower and other resources. The long lead time required to achieve nuclear capacity additions severely limits the possibility of increasing the number of nuclear plants which could become operational before the early 1980's.
The PEA's estimates assumed reprocessing of nuclear fuel and recycling of recovered plutonium, noting that this could reduce new uranium requirements by about 15 percent and enrichment services by about 20 percent. However, the reprocessing capacity expected to be in service by 1977-78 would be adequate only through 1980 and would meet only half of the 1985 requirements.16
For the FEA, public acceptance of nuclear power was an important constraint. "Utility planning, site availability, licensing schedules, and implementation of measures to shorten the construction period are allinfluenced by public acceptance." 17
Looking to the post-1985 era, the FEA expected light-water reactors to increase their contribution to electric power generation from about 30 percent in 1985 to as much as 70 percent by the year 2000. However, some problems remained to be solved:
* Some i1emaining issues in the fuel cycle (e.g., plutonium recycle, enrichment and high-level waste disposal) require continued research. These issues ought to be resolved as soon as possible so that the projected growth of nuclear power can be realized. In addition, R & D aimed at improving performance and reliability, and s-peeding construction could have lai ge short-term benefits.'8
The FEA's Nuclear Task Force report.-FEA's Nuclear Task Force for Project Independence was more optimistic about nuclear power than the Agency itself.'9 The Task Force expected substantial growth for nuclear energy through 1990, projecting 500 gigawatts of electrical generating capacity for a business- as- usual scenario and 730 GWe for accelerated development. Table 23 gives the deta ils.20
14Ibid., p. 49.
15 Ibid., p. 115.
16 Ibid., p. 114.
17 Ibid., p. 115.
Ibid., p. 427.
12 U.S. Federal Energy Administration. Project Independence Blueprint. Final Task Force Report. Nuclear Energy. Washington, D.C.: U.S. Govt. Print. Off.,.Novem-,ber 1974, various pagings.





76
TABLE 23.-FEA PROJECT INDEPENDENCE BLUEPRINT NUCLEAR TASK FORCE PROJECTED NUCLEAR GENERATING CAPACITY
Nuclear task force projections
gigawattss electrical)
Business as usual Accelerated case
1977 --------------------------------------------------------------- 61 72
1980 --------------------------------------------------------------- 120 150
1985 --------------------------------------------------------------- 275 400
1990 --------------------------------------------------------------- 500 730

The Task Force concluded that use of nuclear power in the electricity industry is characterized by specific resource limitations and is influenced by regulation and control. Excerpts from its eleven principal findings follow: 21
1. There are significant economic, fuel resource and environmental benefits to be derived from the increased use of nuclear power systems.
2. The ability to increase rapidly the generation of electrical energy by nuclear systems is severely limited.
3. The current difficulties in the Nation's electric utilities in financing generating, transmission and distribution system expansions is having a serious impact on the plans to provide nuclear capacity additions.
4. In the light of the current and projected frame of reference, the accelerated program laid out by the Task Force cannot be met in the near term and could be approached in the long term only through a maj or national commitment approaching a crash program.
5. There is a moderate-to-high risk that the lower projections considered reasonable by the Task Force will not be met unless immediate attention is given to existing problems and recent trends are reversed.
6. Public acceptance of nuclear power is an important factor in the ability to bring about a timely correction of many of the current problems constraining the increased use of nuclear power.
7. Action is needed now, or within the next several months, to assure that the availability of domestic nuclear fuel supplies and fuel cycle facilities will not limit the increased use of nuclear power in the 1980s.
8. Action is needed to remove uncertainties currently complicating long-range utility planning.
9. Greater attention needs to be given to the operational reliability of nuclear plants and the contained systems and components. At the same time, more effective measures, requiring less time and labor, are needed to assure high quality in the design, manufacture and installation of components, and the construction of nuclear powerplants.
10. Improved labor productivity is essential if escalation of powerplant construction costs is to be brought under control.
11. Resource problems other than fuel supply and financing could constrain the rate of increase in the use of nuclear power. Potentially serious problems exist with respect to materials and equipment, manpower and the availability of powerplant sites.
FEA's national energy outlook for 1976.-In its national energy
22
outlook for 1976, FEA cut back its forecast for nuclear energy. As
21 Ibid., pp. 2. 0-1. 2. 0-9.
22 U.S. Federal Energy Administration. National energy outlook, 1976. WaShirigton, D.C. U.S. Govt Print. Off ., 1976, 323 p.







of February 1976, FE,1 expected nuclear generating capacity to increase to 152 GWe by 1985, in comparison with the 204 GWe of the Blueprint report .21 The reason was deferral or cancellation of about 105 GNVe of new nuclear capacity during the 18 months preceding the new report, which affected almost 70 percent of planned nuclear additions and occurred, according to FEA, because of lower projections of electricity demand, financial problems experienced by utilities, uncertainty about government policy and continued siting
and nuclear licensing problems. Even w-ith this reduced forecast, nuclear power would still provide almost 26 percent of electric power generation in 1985, in comparison with 8.6 percent in 1975. Etaborating on this revision and its implications, FEA said: 14
Although nuclear power e-timates in the Reference Scenario are consi"Jerably lower than last year's forecast, policy and regulatory decisions could dramatically change these estimates. For example, if the lead time from the inception to operation of a nuclear powerplant could be reduced from 10-12 years to 5-7 years, the effects of inflation would be reduced, capital costs would decline, and more nuclear plants would be built. FEA estimates that under such an accelerated nuclear strategy, about 142,000 MWe of new nuclear capacity could be added by the end of 1984 * *.
Views of the Ford Foundablon's Energy Policy Project
In 1974, shortly after the Arab oil embargo, the Energy Policy Project of the Ford Foundation published its final report: A Time to Choose. The report is notable both because of the heated discussion it generated over concepts such as zero energy growth and the decoupling of energy from the economy, and because the project director was S. David Freeman who until recently was a principal participant in the drafting of President Carter's energy plan and now is a commissioner of the Tennessee Valley Authority.
The Energy Policy Project, after contrasting advantages and disadvantages of nuclear power, took a dim view of this energy source. Table 24 summarizes the role it assigned to nuclear power for generation of electricity in the three scenarios developed by the project. After postulating a scenario for high energy growth that had nuclear power supplying more than half the electricity by the year 2000, the project rejected this approach and instead opted for its zero-growth scenario in which by the year 2000 nuclear energy would supply about
TABLE 24.-FUELS FOR CENTRAL STATION ELECTRIC POWER [Quadrillion Btu]
1973 1985 2000
Nuclear Total Nuclear Total Nuclear Total
High-growth scenario: I
Case I ------------------------- 0.9 19.8 10 37 40 74
Case 2 ------------------------- .9 19.8 12 37 50 80
Case 3 ------------------------- .9 19.8 10 37 40 74
Technical fix scenario:
Case I ------------------------- .9 19.8 8 24 11 31
Case 2 ------------------------- .9 19.8 5 24 3 31
Zero-growth scenario: .9 19.8 5 23 3 31
Ford Foundation. A time to choose. Op. cit., p. 28.
2 Ibid., p. 76.
3 Ibid., p. 111.
13 Ibid., p. 36.
24 Ibid., p. 38.






78

10 l)eI'cent of the electricity, scarcely three times the amount it sup1)lied in 1973. Table 25 lists the advantages and disadvantages mentioned by the report.
In analyzing the high-growth scenario, in which energy use incr,.se,"( each year at a rate of 3.4 percent, the project noted that the main obstacles to expansion of nuclear power were the limited uranium enrichment capacity, the shortage of skilled labor to meet construction schedules, and the poor reliability of operating plants. These problems would have to be solved quickly. The project noted that in the long run, the breeder reactor, if it passes the tests of safety and economics, would greatly extend the energy potential of the uranium resource
b,-e25
TABLE 25.-List of advantages and disadvantages of nuclear power from the energy
policy project report of the Ford Foundation
ADVANTAGES
The potential for meeting a significant fraction of U.S. energy needs far into the future. If the breeder reactor is successfully developed, low-cost U.S. uranium resources could meet electric energy needs for thousands of years.
A potential alternative to U.S. heavy reliance on oil and gas.
Over the longer term, nuclear power might displace liquid fossil fuels in transportation, through electified transportation or through manufacture of hydrogen fuel.
Foreign policy benefits since nuclear power can make up much of the growth in electric power that otherwise might require increased oil imports.
Significant advantages in terms of air pollution and land use. "The clean air )enefit of nuclear power is especially important while we learn to burn coal in an environmentally acceptable manner."
DISADVANTAGES
The risk of a catastrophic releases of radioactive materials.
The risk of release of radioactive materials from spent fuel in transport accidents.
The possibility that quality control standards for nuclear power may not )e achievable.
The difficulty of permanent management of radioactive wastes from nuclear power.
The unknown costs and problems of decommissioning and disposal of obsolete nuclear facilities.
The risks of acts of nuclear violence.
The proliferation of nuclear weapons.
The risk of theft of nuclear materials by terrorist groups. Source: The Ford Foundation. A time to choose. Op. cit., pp. 203-215.

The Project concluded that current projections of the then AEC for expansion of the 1973 nuclear generating capacity of 25 gigawatts by more than tenfold by 1985 and twentyfold by 1990 would make it nearly impossible to resolve all of its concerns with nuclear power in time to avoid catastrol)he if these fears were well founded. If energy conservation were pIursued as a"sserious national objective, the country could get a breathing period to reassess its entire nuclear program, without foreclosing any of the options regarding nuclear power development.6
On the whole, the Project expected that total U.S. energy requirements, even at lower growth rates, would require continued expansion

25 The Ford Foundation. A time to choose. O). cit., p. 332. 2c Ibid., p. 223.








of conventional supplies. Cons-equently, there must be either major commitments to at least two of the four troublesome energy source- oil imports, nuclear power, coal and shale, or drilling in the Gulf of Alaska and off the East and 'West coasts-or the United States must go ahead with all four on a, more moderate scale.2
Summing up its views, the Report said.)28
Nuclear fission is potentially a very large source of energy. Nuclear energy i's free of air pollution, generally requires less landl~ in providing energy and, in the long run, allows us to avoidl some of the global climatic problems that may h e associated with the burning of fossil fuels. But the problems of reactor safety, nuclear theft, the proliferation of nuclear weapons through diversion of fissionab~le materials, and ultimate (disposal of nuclear wastes are as yet unresolved. Moreover, the problems; of our institutional capabilities~ for dealing with these issues have not yet been squarely faced. Resolution of these problems should come before, not after~, a high-level of nuclear capacity is installed.
Nuclear power is currently growing at a tremendous rate. But the current projections are based on the historical rate of growth in energy, which is high. Our studies show that a much slower rate for nuclear power is adequate to meet energy needs, if the conservation-oriented policy we recommend is implemented. 'We (10 not adIvocate an absolute ban on new nuclear plants because the problems posedl by using fossil fuels instead are also serious. But a conservation-oriented growth policy will provide breathing room so that we can gain a better understanding of nuclear power problems, and reach some better judgments before major new expansions of nuclear power are made.
As for the breeder, the Project found the Government's development T~ormto be an otanigeamp~le of the neglect of
1)ublic participation as well as independent assessment, and of failure to protect the public treasury." It recommended an end to open-ended government funding of the liquid metal fast breeder demonstration. Also, it called for an independent assessment of the state of reactor technology and its associated health, safety and environmental problems, to be undertaken by the N ational Academy of Science on an urgent basis so that the public may have the opportunity of debating the desirability of proceeding with the demonstration plant. When that desirability is established, the demonstration project should be funded with much more participation from the nuclear industry.2 Views of the Ford Foundation's Nuclear Energy Policy Study Group
Early in 1977 the report of the Ford Foundation's Nuclear Energy Policy Study Group was hurried into print. It is widely believed to have provided much of the foundation for the President's policy statements in April dealing with preventing the spread or proliferation of nuclear weapons. These policies have chancred the future of nuclear power in the United States. One member of the Study Group, Dr. Joseph S. Nye, Jr., is now a. leading official in the State Department concerned with nonproliferation. The chairman of the Study Group, Spurgeon M4. Keeny, Jr., has since been appointed deputy director of the U.S. Arms Control and Disarmament Agency.
Because of the current impact of this report, its conclusions and recommendations will be described in detail.
The Study Group's piimai'y task was to develop) a framework for decision-making about nuclear power. To do so, it described and analyzed alternatives and offered its best judgment on a number of
2 7 Ibid., p. 331.
23 Ibid., p. 338.
2Ibid., p. 313.





s0

decisions including: (1) the reprocessing and recycle of plutonium,
(2) the bi-eedler reactor program, (3) the management of nuclear wastes, (4) the expansion of uranium enrichment capacity, and (5) the export of nuclear technology and materials. The first four bear directlyy upon the future of U.S. nuclear energy supply, and the last, indirectly th rough its implications, bears upon the future health of the U.S. nuclear power industry.
The ciirent status of nuclear power.-Nuclear power is a present reat, not a future prospect. Although there has been a substantial cutback in plans for both U.S. and foreign nuclear power since 1974, this reduction appears to result primarily from economic recession rather than from a rejection of nuclear power."'
Voneed for plutonium .-The common thread in these de cisions is the question of whether plutonium should be introduced into the nuclear fuel cycle. The Study Group concluded that there is no compelling reason iat this tine to introduce it or to anticipate its introduction in this century. Elaborating on this point, the Study Group said: 3
***Plutonium could do little to improve nuclear fuel economics or assurance here or Throad. This conclusion rests on our analysis of uranium supply, the e.-onomnics of plutonium recycle in current reactors, and the prospects of breeder reactors. In th(. longer term, beginning in the next century, there is at least the
J)Osii~tVthat the world can bypass substantial reliance on plutonium. If this is not the easel the time bought by delay may permit political and technical developments that will reduce the nuclear proliferation risks involved in the introduction of plutonium.
Plutoniumn reprocessing and recycle.-The principal immediate issue for the Study Group was whether the United States should proceed with the reprocessing and recycle of plutonium. It concluded that the international and social costs involved far outweighed economic benefits, which would be very small even under optimistic assumptions.
We believe, therefore, that a clear-cut decision should be made by the U.S. Governmen t to defer indefinitely commercial reprocessing of plutonium.33
Proliferation-resistant nuiiclear power.-By far the most serious danger associated with nuclear power is that it provides additional countries a path for access to equipment, materials, and technology necessary for the manufacture of nuclear weapons. "We believe the consequences of the proliferation of nuclear weapons are so serious compared to the limited economic benefits of nuclear energy that we would be prepared to recommend stopping nuclear power in the United States if we thought this would prevent further proliferation."314 However, the Study Group did not go that far because there are direct routes to nuclear weapons in the absence of nuclear power, and the future of world nuclear power is not under the unilateral control of the United States. So abandonment of nuclear power in the United States could increase the likelihood of proliferation through United States' loss of influence over nuclear power development abroad.
With* this in mind, the Study Group argued for postponing plutoniunm recycle and the plutonium breeder, and for assured supplies of slightly enriched uranium at reasonable prices to reduce the economic rationale abroad for indigenous enrichment plants. "Within such a
31 Ibid., p. 5.
32 Ford Foundation. Nuclear power, issues and choices. Op. cit., p. 29. 33 Ibid., p. 31.
3' Loc. cit.





81

framework of national and international constraints on the nuclear fuel cycle, we believe that, with concerted efforts by the United States and the international community to meet national security concerns and to reduce international tensions, the risk that nuclear'power NN-111 lead to proliferation can be substantially reduced."
Uncertain economic advantage.-The Study Group's analysis indicated that nuclear power has and will probably continue to have a small economic advantage over coal. Moreover, the ranges of possible social costs, including health and environmental impacts associated with coal and nuclear power, also overlap to such an extent that neither has a clear advantage. "We find such large uncertainties and unknowns in both the economic and social costs that the averaQ:e comparative advantage could shift either way in the future." 15
The Study Group concluded that nuclear power on the average probably will be somewhat less costly than coal-generated power. However, coal will continue to be competitive or preferable in many regions. The advantage for nuclear power is likely to be most signifi16
cant in New England and in parts of the South.
Ample uranium supplies.-The Study Group was convinced that official estimates of uranium reserves and resources substantially underestimated the amounts of uranium that will be available at competitive costs. "We believe that there will be enough uranium 'at costs of $40 (1976 dollars) per pound to fuel light-water reactors through this century and, at costs of $40 to $70 per pound, well into the next century." 17
Alternative sources of energy.-It is frequently argued, the Study Group noted, that solar, geothermal, or fusion energ would be viable alternatives to nuclear power if they received a fair share of research and development funds. The Study Group disagreed. "It is our judgment that these forms of energy cannot compete with nuclear, coal, or other fossil fuels as major sources of electric power until well into the next century." 18 Vigorous research and develop inent, however, should be carried out for these alternatives to develop the longrange options and to provide a hedge against possible unforeseen problems with fossil or nuclear power.
The limited effect of nuclear power on energy costs.-Wh a tever is done about nuclear power over the coming decades real enercr costs will continue to increase into the next century. Whatever the income loss due to higher energy costs, nuclear power can do little to reduce it since nuclear power at best will have only a small cost advantage over coal. Even with assumptions favorable to nuclear power, the benefits from the continued growth of light-water reactors and the early introduction of the breeder are very small in this century, much less than one percent of gross national product, and only one or two percent in the next century. Nuclear power will have little to do with the cause, severity, or duration of sudden stoppages or sharp price increases for other energy supplies. The choice between coal and nuclear power will have little or no effect in insulating the
35 Ibid., p. 4.
35 Ibid., pp. 7, 8.
37 Ibid., p. 9.
38 Ibid., p. 12.





82

United States from the short-term effects of sudden changes in oil prices and availability.O"
Health, (-t/'iromneit ald safety.-Nuclear power is seen as a threat to human health by critics primarily concerned about the possibility of catastrophic reactor accidents and risks associated with nuclear wastes and plutonium "These risks are real and must be considered iu any assessment of nuclear power." 40 The uncertainties in estimates of SoCial costs for coal and nuclear power are so great that the balance between them could be tipped in either direction. It is unlikely, however, that the principal uncertainties soon will be resolved. "We (1o not believe, therefore, that consideration of social costs provides a basis for overriding our conclusions, based on economic analysis, of the comparative attractiveness of the two technologies and the desirability of maintaining a mix." 4
Having examined nuclear accidents with very pessimistic assumptions, the Study Group concluded that even when their possibility is included, 'the adverse health effects of nuclear power are less than or within the range of health effects from coal." 42 This analysis underscored the importance of continuing efforts to reduce the probability and consequences of accidents by improved safety designs and siting policies for nuclear powerplants.
The breeder reactor.-The Group's analysis indicates that the early economic potential of the breeder was significantly overstated. As planned, LMFBR would have higher capital costs than conventional power reactors and therefore would have to operate at significantly lower fuel cvcle costs to be economically competitive. The Study Group found little prospect that these fuel cycle costs could be reduced enough to give the LMFBR a significant economic advantage over the light water reactors in this century or in the early decades of the next. Also, the current assessment of uranium reserves probably substantially understated the supplies that would be available. Uranium at prices makingLWRs competitive with breeders will be available for a. considerably longer time than previously estimated. New enrichment technologies may also extend these supplies. Moreover, coal available at roughly current costs will look increasingly attractive if the costs of nuclear power rise. Finally, demand projections on which breeder economic assessment have been made in the past were unrealistically hioh. For these reasons, the Study Group concluded that the economic incentive to introduce breeders will develop much more slowly than previously assumed in government planning
Despite this negative assessment, the Study Group believed that a breeder program with restructured goals should be pursued as insurance against very high energy costs in the future.44 Thik situation could develop if additional uranium reserves do not become availa)le, environmental problems place limits on the utilization of coal, and other alternative energy soiuces do not become commercially vial)le at reasonable prices in the first decade, of the next century.
V Ihid., pp. 14-15.
40 1 )id., p. 16.
44 N di(., ).17.
42 I1id., 1.
43 ) i d., 2 .
44 Ibid., .





83

However, the present U.S. program for early commercialization of the LMFBR is not necessary. The Group believed that the breeder should deemphasize such early commercialization and emphasize a more flexible approach to the basic technology. The Clinch River project was unnecessary and could be canceled without harming the long-term prospects of breeders. The time for decision on commercialization of the breeder can safely be postponed beyond the end of the century. "The cost, if any, of such postponement will be small, and there is a strong possibility that postponement will help in restraining large-scale, worldwide commerce in plutonium and buy time to develop institutions to deal with this problem."'45
Nuclear waste management.-The Study Group called for improved management of nuclear wastes and a prompt decision on the strategy for its disposal. It was convinced that nuclear wastes can be disposed of permanently with acceptable safety by deep burial in salt and other stable geological formations isolated from ground water. As for spent fuel, for the immediate future it can be kept in cooling ponds at nuclear powerplants, which can be easily expanded. For the longer term, there should be both permanent and retrievable and irretrievable storage for spent fuel. While security of storage will have to be balanced against ease of retrieval, the emphasis should be on security since retrieval may be long-delayed or perhaps unnecessary. The United States also should be willing to take back spent fuel from countries lacking storage or disposal facilities if this would reduce risks to international health or of proliferation.
Expansion of uranium enrichment capacity.-According to the Study Group, the United States must have a clear policy on its long-term role in providing enriched uranium to both domestic and foreign nuclear power programs. Present facilities will eventually have to be expanded. The timing and magnitude of this expansion depends not only on the anticipated growth of domestic demand for enriched uranium but also on the extent to which the United States wishes to be able to assure fuel for others.46 An assured supply of uranium fuel would be a major factor in limiting worldwide proliferation capabilities.
The assured availability of fuel at reasonable prices limits- the pressure on other countries to seek indigenous enrichment facilities that would provide a capability leading to weapons. An assured fuel supply also reduces the incentive to recycle plutonium or develop I reedeis.47
The Study Group believed the United States should maintain adequate uranium enrichment capacity to meet worldwide nuclear power requirements. However, in view of rapidly changing demand projections and the possibility of radical technological developments, decisions should not be made hastily.45 The President's plan
On April 29, 1977, President Carter published the report on his National Energy Plan. The Plan contemplated a growing but still last-resort use of nuclear power. It would indefinitely defer development and use of those nuclear power technologies that produce or require plutonium or highly enriched uranium for nuclear fuel because
tLoc. cit.
41 Ibid., p. 35.
47 Loc. cit.
43 Ibid., p. 36.





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these materials can be used directly to make atom bombs. Reprocessing of spent fuel and recycling of recovered plutonium would not be permitted. Permissible nuclear power technology would be confined to the present light-water-type reactors which are fueled with slightly enriched uranium, and, if they can be successfully developed, other types of reactors that (10 not use or produce weapons-grade materials. Trhe Plan contains four measures to prevent or defer commercial production and use of plutonium, including cancellation of the Clinch River breeder demonstration; one to restore the United States' reputation as a reliable supplier of uranium enrichment services; one to provide better information about U.S. uranium resources; three additional to assure safety of nuclear powerplants; and finally one each to expedite licensing of nuclear powerplants, provide techniques for storage of spent nuclear fuel and review ERDA's radioactive waste management program. These measures are summarized below.
The Plan estimated that nuclear power under the Plan would provide energy equivalent to 3.8 million barrels of oil per day by 1985, in comparison with the equivalent of 3.6 million without the Plan.49 This corresponds to a nuclear generating capacity of 141 gigawatts operating with a capacity factor of 65 percent.
The Plan notes that the currently projected growth rate of nuclear energy is substantially below prior expectations, due mainly to the recent drop in demand for electricity, labor problems, equipment delays, health and safety problems, lack of a publicly accepted waste disposal program and concern over nuclear proliferation.50 Federal policy should stimulate the expanded use of coal, supplemented by nuclear power, to fill the gap between energy demand and a relatively stable production of oil and gas .5' So the Plan counts on nuclear power to meet a share of the energy deficit "2 and says that because there is no practicable alternative, the United States will need to use more light water reactors to meet its energy needs.5
GAO analysis of the President's Energy Plan.-The General Accounting7 Office in its evaluation of the National Energy Plan 14disagreed with the Administration's proposals to reduce funding of the LMFBR program and to cancel the Clinch River breeder reactor, but agreed with the deferral of nuclear fuel reprocessing. Of these it said:
As stated above, GAO disagrees with the Administration's proposal to drastically reduce funding for the LMFBR program and, in particular, its decision to cancel the Clinch River Breeder Reactor. GAO sees these actions as reducing the Nation's ability to influence breeder safety and safeguards concerns worldwide.
GAO recommends that the Congress continue the LMFBR program on a schedule which recognizes that it is still a research and development effort, and that the Clinch River project 1)e continued.
GAO agrees with the decision to defer, at least temporarily, nuclear fuel reprocessing. GAO's recent work indicates that the economic benefits of reprocessing do not now outweigh the proliferation and domestic safeguards concerns.55
'4 U.S. Executive Office oft he President. The National Energy Plan. Op. cit., p. 95. 50 Ibid., p. 31.
51 Ibid., p. 63.
52 Ibid., p. 70.
63 Ibid., p. 71.
54 U.S. Comptroller General. An evaluation of the National Energy Plan. Report to the Congress. July 25, 1977, report EMD-777-48, various pagings.






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Excerpts from national energy plan for nuclear power
1. CONTROL OF PROLIFERATION- OF THE ABILITY TO MAKE NUCLEAR WEAPONS
Non-proliferating technologies.-The United States should develop advanced nuclear technologies that minimize the risk of nuclear proliferation, but with the knowledge that no advanced nuclear technology is entirely free from proliferation risks.
Plutonium as a nuclear fuel.-It is the President's policy to defer any U.S. commitment to advanced nuclear technologies that are based on the use of plutonium while the United States seeks a. better approach to the next generation of nuclear power than is provided by plutonium recycle and the plutonium breeder.
Commercial plutonium reprocessing and the breeder.-The United States 'Will defer indefinitely commercial reprocessing and recycling of plutonium, as well as the commercial introduction of the plutonium breeder.
The President is proposing to reduce the funding for the existing breeder program and to redirect it toward evaluation of alternative breeders, advanced converter reactors, and other fuel cycles, with emphasis on non-proliferation and safety concerns.
The Clinch River Breeder Reactor Demonstration.-The President is proposing to cancel construction of the CRBR Demonstration Project and all component construction, licensing, and coin mercialization efforts. The design work would be completed, and a base-level program would be maintained, including the Fast Flux Test Facility.
U.S. supply of enrichment services.-The -United States must restore confidence in its willingness and ability to supply enrichment services. The Administration, therefore, is prepared, in cooperation with the Congress, to take three steps that will substantially improve confidence in the U.S. position:
(1) to reopen the order books for U.S. uranium enrichment services;
(2) to adopt legislation to guarantee the delivery of enrichment services
to any country that shares U.S. non-proliferation objectives and accepts
conditions con intent with these objectives; and
(3) to expand U.S. enrichment capacity.
The next U.S. enrichment plant, for which funds are already in the proposed fiscal 1978 budget, will be a centrifuge plant.
Uranium supply.-ERDA will reorient its National Uranium Resources Evaluation Program to improve uranium resources assessment, and to include thorium. The program will be a cooperative effort with industry.

11. ASSURING THE SAFETY OF NUCLEAR POWER
INTRC inspection.-The President is requesting the NRC to expand its audit and inspection staff to increase the number of unannounced inspections and to assign one permanent Federal inspector to each nuclear power plant.
Reporting of minor mishaps.-The President is requesting that the NRC make mandatory current voluntary reporting of minor mishaps and component failures at operating reactors, in ord r to develop the reliable data base needed to improve reactor design and operating practice.
NRC siting criteria.-The President has directed that a study be made of the entire nuclear licensing process. He has proposed that reasonable and objective criteria be established for licensing and that plants that are based on a standard design not require extensive individual licensing.
Spent fuel storage.-ERDA's waste management program has been expanded to include development of techniques for long-term storage of spent fuel.
Radioactive waste management.-A task force under the direction of the Assistant to the President for Energy N U review the entire ERDA waste management program.
Source: The National Energy Plan, pp. 69-73.






86

The Comptroller General agreed generally with five specific proposals of the Plan aimed( at improving nuclear power, but noted numerous problems in the way of attempts to streamline licensing of nuclear poNwerplants.5'
OTA1 analysis of the NAational Eiergy Plan .-The Office of Technology Assessment published its analysis of the National Energy Plan in June 1977." The OTA thought nuclear power could fall short of the Plan's goal for 1985 by about 18 gigawatts.58 The policy advisory panel to the OTA generally endorsed the Plan's challenge to the wisdom of relying solely on plutonium breeders for the next generation of nuclear reactors and its redirection of research and development to seek more satisfactory solutions to the problems of nuclear-weapon proliferation. 9
The OTFA identified and analyzed three issues concerning nuclear supply and one concerning the environmental and societal impacts of nuclear proposals.
The OTA concluded it is quite feasible for the nuclear industry to install about 141 gigawatts of nuclear capacity by 1985, which, at a capacity factor of 65 percent, would provide the energy equivalent of 3.8 million barrels of oil per day with the plan, or 3.6 million barrels per day without the plan.60 Production capacity of the industry is adequate for all components, according to OTA, and uranium ore and enrichment (demamns are well within present capacity projections. A continuation of financial pressures on utilities and regulatory changes could introduce some slippage into the schedule and reduce available veneration capacity. OTA noted that the source of the small increase in nuclear generation projected by the plan was not explained.
OTA also noted that the de facto moratorium on new orders for nuclear powerplants showed no sign of ending and mentioned public acceptance as a critical factor. Of the latter, it said: 61
* Opposition has been increasing over the years and a significant fraction of the general putblie adamantly rejects the technology. Some arguments, particularly those centered on technological issues, can he effectively answered or shown to be subject to eventual resolution. Others, however, raise philosophical questions concerning the ability of our present institutions, or even of society in general, to cope with nuclear power. This opposition, especially as manifested in lawsuits and intervention in the licensing process, has become an important consideration for utilities planning on nuclear powerplants.
5 The five proposals GAO agreed to were: (1) increased surprise inspections and resident inspectors at each nuclear site, (2) mandatory reporting of minor mishaps and component failure at powerplant sites,
(3) improved powerplant siting criteria, (4) improved powerplant licensing procedures, and (5) detailed review of the nuclear waste disposal program.
57 U.S. Office of Technology Assessment. Analysis of the proposed National Energy Plan. June 1977, 281 p. (Prepublication draft).
53 Ibid., p. 5.
5 Ibid., p. 143.
60 Ibid., p. G5.
61 Ibid., p. 66.





87

As for the Plan's proposals for breeder development, ()TA noted considerable concern has been expre-sse(l over the lack of re'dilv available substitute. "Without some sort of breeder, nu cle:t r Ce)Icity will be limited to several hundred reactors, (dep)ndling on th,.- extent and extractability of as vet undiscovered ores." '2 ()thr L reeder concepts less vulnerable to proliferation are les advanced than the LMFBR.
Summarizing, the OT"'A said the Plan provides 01only vague s'ge.tions for increasing nuclear energy use and at the same time it virtually eliminates the long-term expectations of the industry. "if (_'nyre-s decides that nuclear power is to be an integral part of th Nation's energy future, more positive steps than those proposed in tlhe Plan may be required to help the industry overcome problem-."
Table 26 lists four issues identified by OTA that relate to nucleIr power and the specific questions these pose.
('RS analysis of the Presideit's Plan.-In June 1977, the (ongressional Research Service delivered to the House Committee on Interior and Insular Affairs a draft analysis of the President's National Energy Plan.4 The CRS analy sis observed that the Plan reflected the Pre1dent's view that nuclear energy should be the energy source of last resort. While the Plan expected nuclear power generation to increase almost fourfold by 1985, this expansion could be filled simply by construction in progress and nuclear plants on order or announced. The Plan implied a lean market for new orders.- for the nuclear industry and the prospect that by 1985 the industry would be weaker and le-' able to respond to a future decision to expand nuclear power.
Preventing the domestic production and use of plutonium could put the U.S. nuclear industry at a competitive disadvantage in the world market if other nations do not follow the U.S. example. Of course, if foreign ventures should prove uneconomic, then the U.S. nuclear industry would be better off.
62 Ibid., p. 66.
a Loc. cit.
4 At the time of writing, arrangements were being made by the House Comrmi tees on Interior and Insular Affairs and on Interstate and Foreign Commerce to have the C RS report priuted.






Q10
00

TABLI,-, 2G.-List of issues and questions about nuclear energy. Presented in the Office
of Technology Assessment's analysis of the proposed national energy plan
ISSUE NO. 1: LICENSING REACTORS 1
If nuclear power is to prox-ide a significant fraction of new energy sources after 1985, constraints that have led to a virtual moratorium on contracts for new plants will have to be removed in an acceptable manner. Qziestions
(1) How will the study of the licensing process be conducted?
(2) How i, the licensing process to be streamlined while maintaining the highest degree of safety and the legal rights of the intervenors?
(3) How will plant capacity factors be increased?
ISSUE NO. 2: PUBLIC ACCEPTANCE 2
Aie growing public attitudes of skepticism and hostility toward nuclear power irreversible?
Questions
(1) What are the plans for addressing the causes of opposition?
(2) How is the general public to be supplied with credible information on nuclear energy?
(3) Will light water reactor safety research be augmented?
ISSUE NO. 3: BREEDER REACTORS 3
Nuclear generation of electricity can be virtually freed from resource constraints, but the technologies that will allow this (breeders and plutonium recycle) increase the opportunities for proliferation of nuclear weapons among nations and terrorists.
Questions
(1) What will be U.S. policy toward plutonium recycle and the liquid fast breeder if other nations continue to refuse to defer development of the technologies?
(2) What would be the mid-term and long-term strategies for nuclear energy if reserves prove to be lower than expected?
(3) If alternative fuel cycles prove more attractive with nonproliferation as a major parameter, how will they be implemented both in this country and abroad?
Issue No. 4: Impacts of nuclear power 4
The National Energy Plan's proposal to increase nuclear electricity generation raises environmental and social questions. Questions
(1) If a standardized nuclear plant design were to be developed in the next several years, how would this affect the development of safer light water reactor designs in later year,-,?
(2) What new or increased light water reactor safety research programs are proposed?
(3) Should a cutoff date be established for settling on an acceptable method for disposing of nuclear fission wastes?
(4) In what ways might the protection of nuclear reactors from sabotage abridge the civil liberties of the American people?
(5) What is the potential for nuclear power generation to be done on a small scale (e.g., the "nonproliferation reactor" design concept recently investigated by the Energy Research and Development Administration?)
(6) Are there plans to undertake a systematic comparison of nuclear power generation with other supply alternatives? To what extent and how closely would representatives of the public participate in this comparative assessment?

t U.S. Office of Technology Assessment. Op. cit., p. 67.
2 Ibid., p. 72.
3 Ibid., p. 76.
4 Ibid., p. 224.









PRESENT ANDFUTUREDOMESTIC SUPPLY OFGEOTHERMALENERGY
(By Joseph P. Riva, Jr.*)
In the broadest context, geothermal energy is the natural heat of the earth. The Earth's interior temperature increases inward toward the core, primarily due to natural nuclear decay and the frictional heat of large moving rock masses. Most geothermal energy is too diffuse to be recovered economically, but does have potential economic significance where it is concentrated into restricted volumes which can be considered as somewhat analogous to the concentration of metals into ore deposits or oil into petroleum reservoirs.
The existence of geothermal energy has been known for thousands of years through such phenomena as volcanoes, geysers, and warm springs. Warm springs have been utilized for many centuries as medicinal spas. Geothermal energy was first used to produce electricity in 1904 in Italy, and has been used since the 1930's for space heating in a number of countries of the world. In the United States, it has been utilized for the past 20 years in northern California to produce electric power.

DOMESTIC GEOTHERMAL ENERGY RESERVES AND RESOURCES
The heat of the Earth's interior is one of the largest energy resources available. However, more important than sheer resource size is the extent to which it can be developed with current technology at an acceptable cost and the impact upon its use of institutional and environmental constraints.
There have been a number of estimates of domestic geothermal resource base which differed from each other by several orders of magnitude. This wide variation has been due to a lack of, or differing, assumptions regarding geothermal technology and general economic conditions and also sometimes to an inadequate understanding of the nature and the extent of the geothermal resource itself. Although it is always difficult to predict future technology and economic conditions, progress has been made in the past several years toward a better understanding of the nature of the geothermal resource and thus the basis for an assessment of the magnitude, distribution, and recoverability of the various kinds of domestic geothermal resources is now available. This basic geothermal information was used by the U.S. Geological Survey in 1975 in an assessment of the geothermal resources of the United States. Although the 1975 Survey estimates rest on amuch improved scientific base, they cannot be considered as final or as valid indefinitely into the future. They are limited by the data available in 1975 and will need to be revised as more data and better methods of evaluation become known.
"Joseph P. Riva is a specialist in Earth Sciences at the Congressional Research Service.
(89)



21-616 0 78 7







The resources of the most attractive identified hydrothermal convection systems (excluding national parks) with predicted reservoir temperatures above 150 degrees centigrade are estimated by the Survey to have an electrical production potential of about 8,000 megawatt -century, or about 26,400 megawatts for 30 years. A megawatt-~century of electricity is a unit of energy equivalent to 1,000 kilowatts being produced for 100 years or 3,333 kilowatts being produced for 30 years. Nearly one-half of the above estimation (3,500 meg awatt .century or about 11,550 megawatts for 30 years) is considleredl by the Survey to be recoverable with present prices and technology.' These reserves are located in the Western United States and in Alaska and Hawaii. In addition, high temperature resources in undliscovered convection systems are estimated by the Survey to be about five times greater than identified resources and undiscovered vapor-dominated geothermal systems may be as extensive as identified vapor dominated systems. The total energy recoverable with current technology from such undiscovered resources is estimated by the Survey to be about 38,000 megawatt -century (about 125,400 megawatts, for 30 years).
All of the intermediate temperature systems (90 to 150 degrees centigrade) are submarginal for the generation of electricity, but under favorable circumstances can be utilized for space heating and industrial purposes. The efficiency of direct use of geothermal energy for heating is greater than for generation of electricity for the same purposes. The heat that can be recovered for local utilization from identified intermediate temperature geothermal resources is estimated by the Geological Survey to total 27,500 megawatt. century (about 90,750 megawatts for 30 years). Undiscovered intermediate temperature geothermal resources are projected to be about three times as large.
The geopressured deposits of the Gulf Coast region are considered by the Survey to have a very large geothermal potential. The mechanical and thermal energy deliverable at the wellhead from geopressured systems in the onshore portion of the Gulf of Mexico assessed by the U.S. Geological Survey varies according to production plan, but is considered likely to range from 9,000 to 35,000 megawatt -century (29,700 to 115,500 megawatts for 30 years). This range does not include the energy from recoverable methane, which may be equal in value, because reliable data are lacking. Other greopressured sections of the Gulf Coast are estimated by the Survey to probably contain at least three times more potential energy than the evaluated part, but recoverable energy could be less because of lower permeabilities expected in the older and more deeply buried sediments. For any one kind of energy considered alone, the geopressured fluids are likely to be marginal, but when all kinds of potential energy are recovered, a small but significant part of the total resource may be considered as reserves, particularly in areas where the adverse environmental impact from exploitation would be low. The unanswered technical questions that remain are whether the geopressured brines contain sufficient natural gas to allow gas production; whether a significant number of individual reservoirs are capable of supporting high-volume hot brine
IWhite, D. E. and William, D. L. Assessment of Geothermal Resources of the United States-1975. Geological Survey Circular 726, Reston, Va., p. 154.