FEDERAL REGISTER U.S. REGULATORY COUNCIL

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85-00988R000100110038-9
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 37
• Document Creation Date: December 9, 2016
• Document Release Date: June 28, 2000
• Sequence Number: 38
• Publication Date: November 24, 1980
• Content Type: REGULATION

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DOC-NOAA
Regulations on the Construction.
Location, Ownership, and Oper-
ation of Ocean Thermal Energy
Conversion (OTEC) Facilities and
Plantships .............................................. 77710
DOE-CS
Commercial and Apartment Con-
servation Service Program .................. 77712
DOE-CS
Emergency Building Temperature
Restrictions ............................................ 71714
DOE-CS
Energy Conservation Program for
Consumer Products Other Than
Automobiles .......................................... 77715
DOE-CS
Energy Performance Standards for
New Buildings ....................................... 77717
DOE-CS
Federal Price Support Loan Pro-
gram for Energy from Municipal
Waste Resource Recovery Facil-
ities ........................................................ 77718
DOE-CS
Standby Federal Emergency Con-
servation Plan ....................................... 77719
DOE-ERA
Amendments to Puerto Rican
Naphtha Entitlements Regula-
tions ....................................................... 77721
DOE-ERA
Crude Oil Resales Pricing Revi-
sions ...................................................... 77722
DOE-ERA
Domestic Crude Oil Entitlements ........... 77723
DOE-ERA
Gasohol Marketing Regulations ............. 77724
DOE-ERA
Maximum Lawful Price for Unlead-
ed Gasoline .......................................... 77726
DOE-ERA
Motor Gasoline Allocation Regula-
tions Revisions ..................................... 77727
DOE-ERA
Motor Gasoline-Downward Certifi-
cation ..................................................... 77729
DOE-ERA
Natural Gas Curtailment Priorities
for Interstate Pipelines ........................ 77730
DOE-ERA
Powetplant and Industrial Fuel Use
Act of 1978; Cogeneration Ex-
emption ................................................. 77 733
DOE-RA
Outer Continental Shelf (OCS) Se-
quential Bidding Regulations ............... 77734
DOE-RA
Proposed Regulations Establishing
Alternative Bidding Systems for
Coal Lease Sales ................................. 77736
HUD-OS
Solar Energy and Energy Conser-
vation Bank ............................................ 77737
Fuel Economy Standards for Model
Year 1983-65 Light Trucks ................. 77738
FERC
High-Cost Natural Gas Produced
from Wells Drilled in Deep
Waters .................................................... 77739
FERC
High-Cost Natural Gas: Production
Enhancement Procedures .................. 77740
FERC
Procedures Governing Applications
for Special Relief Under Sections
104, 106, and 109 of the Natural
Gas Policy Act of 1978 ....................... 77741
FERC
Rate of Return: Electric ........................... 77743
FERC
Regulations Governing Applica-
tions for Major Unconstructed
Projects ................................................. 77744
FERC
Regulations Implementing Section
110 of the Natural Gas Policy
Act of 1978 and Establishing
Policy Under the Natural Gas Act ........ 77745
National Oceanic and Atmospheric
Administration
Regulations on the Construction,
Location, Ownership, and Operation of
Ocean Thermal Energy Conversion
(OTEC) Facilities and Plantships (15
CFR Part 1001)
Legal Authority
Ocean Thermal Energy Conversion
Act of 1980, 42 U.S.C. 19101 et seq.
Reason for Including This Entry
These regulations are of significant
public interest and may create a major
impact on the economy by providing a
new legal system under which various
commercial Ocean Thermal Energy
Conversion (OTEC) operations may
proceed.
Statement of Problem
OTEC facilities and plantships (a
plantship is basically an OTEC facility
that floats unmoored or moves through
the water) will produce electric power
frorn the thermal differential between
warm ocean surface waters and cold,
deep (approximately 1,000 meters)
waters. The electricity generated could
be fed ashore by cable and distributed
via normal electric distribution grids, or
it could be used at sea to produce
ammonia or other chemical or
metallurgical products. The industry is
in a formative stage at present, because
although the basic principles of OTEC
power generation have been tested, the
hardware, engineering, and operation[ i
requirements of commercial-scale OTEC
operations are yet to be developed ':tong
will require very substantial capital
investments of tens or hundreds of
millions of dollars.
Several U.S. shipyards, engineering
firms, makers of electrical generating
equipment, and electricity and ammonia
suppliers have expressed significant
interest in building and operating
demonstration-scale and commercial-
scale OTEC facilities. The U.S. national
.interest in OTEC grows out of its
potential as an alternative (non-fossil
fuel, non-nuclear) energy source. The
U.S. House of Representatives'
Committee on Merchant Marine and
Fisheries, Subcommittee on
Oceanography, estimates that OTEC
could produce as much as 10 percent of
the U.S. electrical generating capacity
by the year 2000, and up to 25 percent of
all new electrical generating capacity
coming on-line between now and the
year 2000, if the OPEC program is
successful and aggressively pursued
[see House Report No. 96--944. at page
25). The OTEC principle can be applied
most economically in areas where the
thermal differential between surface
and deep waters is about 20? C or more;
this constraint dictates that U.S. use (if
OTECs will be limited to the Gulf of
Mexico and the southeastern United
States and to U.S. island areas such as
Hawaii, Puerto Rico, the U.S. Virgin
Islands, and the U.S. Western Pacific
islands.
These proposed regulations will
implement the Ocean Thermal Energy
Conversion Act of 1980 (the Act), which
authorizes the Administrator of NOAA
to license (and requires persons to
obtain licenses prior to) the
construction, location, ownership, and
operation of: (1) OTEC facilities
connected to the United States by
pipeline or cable; (2) OTEC facilities
located in the territorial sea of the U.S.;
(3) OTEC plantships documented under
the laws of the United States: and (4)
OTEC plantships that are constructed.
owned or operated by U.S. citizens.
The Act requires NOAA to issue
regulations with respect to licensing of
these OTEC facilities and plantships.
Along with its licensing provisions.
the Act is intended to: (1) establish a
legal system to encourage the
development of OTEC as a commercial
energy technology; (2) protect the
marine and coastal environment and the
interests of other users of the territorial
sea, Continental Shelf, and high seas,
and foreign nations that may be affected
by a thermal plume (heated discharge)
from an OTEC; and (3) ensure that
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 Sectors Affected: Ocean thermal ammonia and other energy intensive
energy production; ship-building and products would suffer some market
repairing; manufacturing of electric displacement as OTEC power becomes
transmission and distribution available for ammonia production from
equipment and electric industrial air and seawater. To the e_'ctent that
apparatus; electric utilities; production availability of OTEC electric power in
of ammonia, fertilizer, aluminum, and affected areas of the U.S. results in
other energy intensive products; economic development which causes
inhabitants of the U.S. southeastern environmental or socioeconomic
and Gulf of Mexico stales, the U.S. problems, some costs may be incurred in.
Virgin Islands, Puerto Rico. I Iawaii, the areas where OTECs operate.
and the U.S. Pacific island Persons applying to construct, own or
possessions and territories; and the g
general public,. operate OTEC facilities or plantships
will incur costs in assembling the
Commercialization of the OTEC financial, technical, environmental, and
technology under the new legal system other information required for the
of the Ocean Thermal Energy license application, and in comply in
Conversion Act and the proposed $
with license conditions relating to
regulations could generate benefits to matters such as environmental
the ship-building and repairing industry protection and monitoring and non-
that would construct and maintain the interference with other users of the
OTEC facilities and plantships. ocean. The Regulatory Analysis will
Electrical equipment manufacturers address these costs in more detail.
would benefit from any additional
demand for electric generation and Related Regulations and Actions
transmission equipment. Energy lntcrnal.? None.
intensive industries such as production &ternaf.? Under the Act, the Coast
of amm
i
f
on
a, some
ertilizers, and Guard must issue regulations governing
the concepts in those regulations to the ? aluminum would benefit from dociumentation, design, construction,
specific facts and site characteristics availability of a competitively priced alteiation, equipment, mait:tenance,
associated with each license or permit, alternative source of electric power, repair, inspection, certification, and
relying more on individual terms, Areas of
conditions, and restrictions for detail. the United States adjacent to manning of O'I'EC facilities and
cEmp, a requirements ocean waters which contain thermal plantships. The Coast Guard also is to
(C)
in b(C)
oth the regulations less detail et and rthe equirements differentials sufficient to support OTT?,C issue, after consulting with the
power generation would benefit from Administrator of NOAH, regulations
conditions, and restrictions for each availability of a non-fossil, non-nuclear governing the movement and navigation
OTEC license, and rely on the energy supply and consequent reduction of OTEC plantships to insure that the
subsequent monitoring specified in the of costs or risks associated with fossil or thermal plume from the plantship
Act to ascertain whether additional nuclear fuel. The regulations will generally does not unreasonably
requirements were needed in the future. provide the framework for development impinge upon and degrade the thermal
In considering alternative approaches of a new OTEC industry, which will gradient (the net temperature
to these regulations, NOAA will assess benefit those owning and operating differential between warm surface
the feasibility of relying on certain OTEC facilities or plantships as a waters and cold deep waters) of another
innovative techniques which may allow business. The Regulatory Anoly:.is OTEC facility or plantship, or adversely
tatiore flexibility for OTEC builders, ATlI A A rr_ _ . .. . .. . .
A,pOMftd*vr/R1e1e%W2
Federal OTEC-related actions are
consistent with approved State coastal
zone management plans. The Act
requires NOAA to issue final
implementing regulations by August 3,
1981.
Qfy.t614iPA5
or specified operating procedures.
NOAA also may provide generalized
guidance in its regulations for meeting
the requirements of the Act, but then
make it the responsibility of the
applicant to specify in detail in its
application how it will meet these
re uirements O A I'
n
9 301%V P t 19 77711
products; construction of land-based
electric power plants; inhabitants of
the U.S. southeastern and Gulf of
Mexico states, the U.S. Virgin Islands,
Puerto Rico, Hawaii, and the U.S.
Pacific Island possessions and
territories; and ocean thermal energy
production.
Some companies whose business is .
based on supplying fossil or nuclear fuel
for electric power production may lose
market opportunities to the extent OTEC
facilities or plantships are built on a
commercial scale and replace other .
sources of energy. Suppliers of natural
gas feedstocks for production of
ee we issue a icense,
NOAA is just beginning its rulemakin q ?
8 we would expect the OTEC builder,
process to implement the Act. The owner, or operator to conduct its
Agency has only begun to identify activities according to the terms of its
issues that we could treat in alternative application. NOAA will consider
ways. In developing these OTEC impacts on small business from the
regulations, NOAA will address issues regulations.
which may fall in several broad areas,
including: (1) the amount and type of Summary of Benefits
financial, technical, environmental, and
other information that an applicant must
submit with an application; (2) criteria
for selecting OTEC projects when there
are multiple applicants for the same
geographic area; (3) environmental
safeguards; (4) environmental
monitoring requirements; and (5) the
prevention of interference by one OTEC
facility or plantship with another, and
with other users of the territorial sea,
Continental Shelf, and high seas.
In identifying and evaluating
alternatives for the development of
OTEC regulations for each of these
general areas, NOAA first would define
the basic objectives for each, and then
evaluate alternative approaches. Three
general approaches are for NOAA to:
(A) Address these areas in substantial
detail in its regulations, providing
specific terms that would apply to all
t)T C operations. If experience later
revealed that such degree of detail and
extent of requirements were
unnecessary, we could reduce them.
(I3) Address an area in a more general
way in its regulations, and then apply
owners. or operators while still
sr.c..omplishing the purposes and
requirements of the Act. For instance,
NOAA may be able to rely on general
environmental performance standards
or parameters, rather than specifying
detailed requirements concerning use of
specified types or models of equipment
regulations will quantify these benefits.
Summary of Costs
Sectors Affected- Suppliers of fossil
and nuclear fuel for electric power
production; suppliers of natural gas
for production of ammonia, fertilizer
,
aluminum, and other energy intensive
resource jurisdiction zone of a foreign
nation. NOAA also must consult the
Coast Guard before deciding whether to
issue regulations governing site
evaluation and preconstruction
activities. NOAA and the C~>ast Guard
may "jointly or severally" issue
enforcement regulations. The
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 Environmental Protection Agency may
prepare regulations applicable to O'1"EC
facilities and plantships under the
National Pollutant Discharge
Elimination System program under the
Clean Water Act. The Secretary of
Energy may determine, after
consultation with the Administrator of
NOAA, which substantive requirements
of Title I of the Act will-apply to OTEC
demonstration projects. NOAA must
consult with "the Secretary of Energy
and the heads of other Federal
agencies" before issuing regulations to
carry out the Act.
Active Government Collaboration
NOAA already has initiated
discussions with the Department of
Energy, the Maritime Administration,
the Coast Guard, and the Environmental
Protection Agency concerning
implementation of the Act and the
respective programs and jurisdictions of
the other agencies. NOAA also will
discuss matters with the Departments of
State (with respect to non-interference
with other ocean users, and with other
nations) and justice (with respect to
OTEC antitrust issues). NOAA also
intends to initiate discussions with
components of the Department of the
Interior, such as the U.S. Geological
Survey and the Bureau of Land
Management, in order to benefit from
their experience in certain areas where
those agencies have faced similar
issues. Furthermore, NOAA intends to
coordinate with the Small Business
Administration in order to assess the
potential impact of these regulations on
small businesses.
In addition to this coordination with
affected Federal agencies, NOAA will
contact relevant State (and, as
appropriate, local) government officials
in potentially affected areas (for
example, the Gulf of Mexico area, the
U.S. Virgin Islands, Puerto Rico, Hawaii,
and the Commonwealth of the Northern
Mariana Islands).
Timetable
ANPRM-NOAA may publish one in
November/December 1980.
NPRM--March 1.981.
Regulatory or Other Analysis-NOAA
plans to issue a draft Regulatory
Analysis and a draft Environmental
Impact Statement (EIS) in March
1981.
Public I fearing-NOAA plans to hold
at least one public hearing on the
proposed rules and accompanying
draft EIS after NOAA issues the
NPRM and draft EIS. In addition,
NOAA intends to hold public
meetings concerning the proposed
rules and the draft EIS before
`2000Yd9 4d'ICIAADR8; ,0i so;"Q ~i~~o~9Q t tc~t
issuing those documents.
Public Conunient Period-A 60-day
public comment per'.ad will follow
he NPRM.
Final Rile-July 1981.
Final Rnle Effective-August 1981.
Available Documents
A Federal Register notice requesting
other Federal agencies having expertise
concerning, or jurisdiction over, any
aspect of the construction or operation
of O'l'EC facilities and plantships to
send NOAA written descriptions of their
expertise or statutory responsibilities
(45 FR 56857, August 26, 1980).
Notice of Environmental Impact
Statement (EIS) scoping meeting (45 FR
63543. September 25, 1980).
As other documents pertaining to this
rulemaking and development of the EIS
become publicly available, they may be
obtained from the Office of Ocean
Minerals and Energy, NOAA, Page
Building No. 1. Room 410. 2001
Wisconsin Ave. NW., Washington, DC
20.!.15 (Telephone: [phone]).
Agency Contact
Robert W. Knecht, Director
Office of Ocean Minerals and Energy,
Page Building No. 1, Room 410
2001 Wisconsin Ave., NW,
Washington, DC 20235
[phone] DEPARTMENT OF ENERGY
Conservation and Solar Applications
Commercial and Apartment
Conservation Service Program (10
CFR 458 ?)
Legal Authority
National Energy Conservation Policy
Act (NECPA), P.L. 95-619, 92 Stat. 3206;
Energy Security Act (ESA), P.L. 96-294,
794 Stat. 611.
Reason for Including This Entry
The Department of Energy (DOE)
believes this rulemaking Is important
because it will expand the Commercial
and Apartment Conservation Service
(CACS) program, which now encourages
the installation of energy-saving
measures and the adoption of energy
conserving operation and maintenance
practices in small multifamily dwellings.
Our rule would expand the CACS
program to also cover existing small
commercial buildings and large (five or
more units) multifamily dwellings. We
estimate that the rule will result in
savings of 130 million barrels of oil
equivalent through the year 2000.
Statement of Problem
The residential and commercial
building sectors consume about 38
percent of the Nation's total energy use.
In the residential sector. 90 percent of
energy usage occurs in single-family
liomis and multifamily c{wellingswith
conservation efforts within this sectotis
covered in the rules adopted by DOE In
November 1979, the Residential
Conservation Service (RCS) program
(part 1, Title lI of NECPA). RCS requires
approximately 350 larger gas and
electric utilities to provide information
on energy conservation practices and
measures appropriate by building type
to their residential customers in one- to
four-unit dwellings. RCS also requires
covered utilities to offer such customers
the opportunity to request various
services, including an on-site audit;
assistance in arranging for the purchase
and installation of recommended
conservation and renewable resource
measures; lists of suppliers, lenders, and
contractors agreeing to conform to RCS
Standards and program requirements;
the opportunity to include the costs of
such installations in monthly utility bills:
written one-year manufacturers' and
installers' warranties; and access to
consumer grievance procedures.
The remaining 10 percent of the
energy used by the residential sector is
in multifamily dwellings of five or more
units, representing 15 percent of the
residential sector. Energy saving
incentives traditionally have been fewer
for residents in such buildings,
especially in units which are master
metered. In order to help meet the
President's buildings weatherization
goals by 1999 as contained in the
National Energy Plan II, DOE is
proposing this rulemaking to cover both
multifamily buildings of five or more
units and that portion of the commercial
sector containing buildings that use less
than 1,000 therms of natural gas, 4,000
kilowatt hours of electricity per month,
or combined energy usage of all fuels
that is less than the equivalent of 114
million Btu's.
Under both the RCS program and its
expansion through CACS in the
proposed rulemaking, DOE invites
States to submit plans to DOE for
approval to administer and enforce
utility compliance with State programs.
According to ? 211'of NECPA, utilities
covered by RCS and CACS included all
those which during the second preceding
year had sales (for purposes other than
resale) which 1) exceeded 10 billion
cubic feet for natural gas, or 2) exceeded
750 million kilowatt hours of electricity.
Participating Governors must decide
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whether or not to include non-regulated, this proposed rulemaking. However, in Summary of Costs
municipally owned utilities and some instances, elements of this
Sectors Affected. Federal
interested home heating suppliers in rulemaking that differ from the RCS
G
State plans. Non-regulated utilities not
above size criteria must prepare and
submit their own plans for DOE
approval. NECPA requires DOE to
prepare a Federal plan and order
covered investor owned utilities to
comply with it in cases where no
approved State plan exists; in such
circumstances non-regulated utilities
will prepare and submit plans.
The energy use in the sectors covered
regulations are indicative of the choice
of alternatives.
In contrast to RCS, the proposed
rulemaking requires covered utilities to
provide a building energy use
monitoring list to building managers and
a Tenant's Energy Conservation
Information Package to commercial and
apartment building tenants once an
audit has been requested. The audit
requirements in the proposed
rulem
ki
diff
f
R
a
ng
er
rom
CS due to the
by this rulemaking, wsmaller than
that of rulemaking, homes, while
s differences in buildings. Unlike the one-
to four-unit residential units covered by
nonetheless very significant in that it RCS, commercial and apartment
represents 30 percent of the energy buildings covered by CACS vary
equivalent of U.S. oil imports. Numerous substantially in size, structure, and
studies by DOE and others have energy use. Owners of such buildings
demonstrated that a major fraction of are mostly business persons, and the
l is energy use could be eliminated by measures appropriate to the various
cost effective investments in retrofitting structures are diverse, with equipment
of existing buildings. DOE's objective ,
small business and apartment owners
and tenants to achieve cost-effective
energy savings. DOE recognizes that
appropriate energy saving information is
costly to obtain, and there is much
inertia on the part of small business
personnel to spend the time and
resources needed to secure and analyze
such information. Therefore, the
Government will play a useful role in
requiring covered utilities (and home
heating suppliers willing to participate)
to make appropriate information
available to owners and tenants of
applicable buildings.
Unlike RCS, the CACS program is
principally an information program, and
participation is voluntary for building
owners and tenants. The proposed
program does not mandate specific
actions to save energy except to the
extent that it stimulates owners and
tenants of commercial and apartment
buildings to request the audit and adopt
conservation practices and install
conservation and renewable resource
measures. The success of the program
depends largely on the enthusiasm with
which covered utilities carry out the
intent of the program to encourage energy savings resulting from the
As a result of these differences, the
proposed regulations allow much greater
latitude to States and utilities; require
utilities to provide fewer services to
eligible customers; and Include a greater
use of estimates based on typical values
achieved in similar facilities than do the
RCS regulations.
Summary of Benefits
Sectors Affected' Federal
Government; State governments;
investor-owned and municipally
owned electric and gas utilities
meeting the sales criteria established
in >) 211 of NECPA; participating home
heating oil suppliers; tenants and
owners of eligible commercial
buildings and multifamily dwellings of
five or more units; and the general
public.
All sectors affected will benefit from
the energy savings achieved by the
program. The Federal Government will
benefit from having limited sources of
non-renewable fuels extended by the
conservation actions of building owners
and tenants. DOE estimates that total
customers to both respond to the offer of proposed regulation will be 130 million
un-site audits and actually make energy- barrels of oil equivalent through the
saving improvements in buildings. sectors covered through the year 2000.
f:lternrrtives tinder Consideration Building owners' and tenants' benefits
will be realized in terms of lower or
The statute sets specific criteria for controlled utility bills and greater
expansion of RCS to the commercial personal comfort. Utilities will benefit
building and multifamily dwelling by avoiding additional capital
.,actors and requires the Secretary to expenditures for increased generating
develop regulations to carry out the capacity. Home heating suppliers will
program. The highly prescriptive nature preserve good customer relations and
of the statute leaves relatively little may expand their base of operations as
discretion to the Secretary in developing a result.
overnment; State governments;
investor-owned and municipally
owned electric and gas utilities
covered by the regulations;
participating home heating oil
suppliers; tenants and owners of
eligible commercial buildings and
multifamily dwellings of five or more
units; and the general public.
Total cost of the programs are
estir ijted at $1,028 rnillion.(1980 dollars)
for the multifamily sector and $770
million for the commercial sector.. The
cost of energy saved on a discounted
basis is $11.50 per barrel of oil
equivalent for the multifamily sector and
$7.89 for the commercial sector. The cost
of developing, implementing, and
monitoring the proposed CACS program
to 1990 is expected to be $18 million.
State governments will encounter costs
for similar activities, including State
plan development, implementation, and
enforcement. The costs are considerably
less than for the same responsibilities
under RCS. It is expected that the test
cost to States to the year 1990 will be
$52.5 million. Covered utilities will be
able to charge eligible customers up to
$15 per dwelling unit for providing the
prescribed on-site audit. The method to
recover the remainder of such costs will
be determined by the rate-making
authority in the case of investor-owned
utilities and by the utility directly in the
case of non-regulated utilities. The
statute requires that the utility take into
account the customer's ability to pay in
determining charges. DOE estimates that
the total program costs to utilities to the
year 1990 will be $251.7 million (19110
dollars), while the projected cost to
building tenants and owners for the
audit and selected building
modifications will be $705.9 million. It
should be stressed that the program is
entirely voluntary for eligible building
owners and tenants.
Related Regulations and Actions
Internal: DOE has or is cooperating in
several on-going programs which also
provide energy conservation assistance
to homeowners. These programs include
(1) existing RCS program for single-
family residences, (2) Low-Income
Weatherization Assistance Program, (3)
Energy Extension Service, and (4) State
Energy Conservation Grant Program.
External: Existing State laws or
regulations.
Active Government Collaboration
DOE will work closely with interested
States to prepare, implement, and
monitor State Plans for this program.
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 77714 ASAP)(PAf1ffr~eJRWaQ~~491~ fitda~i $ ~? E ~0? Or~c ~Q > 9(
NNW=
Timetable
NPRM-Novemhri 1980.
Final Rule-March 1981,
Regulatory Analysis--Being prepared.
Available Documents
None.
Agency Contact
James R. Tanck, Acting Director
Building Conservation Services
Division
Office of Solar Energy and
Conservation
Department of Energy
1000 Independence Avenue, S.W.
Mail Stop 6H068
Washington. DC 20583
[phone]
Emergency Building Temperature
Restrictions (10 CFR Part 490)
Legal Authority
The Energy Policy and Conservation
Act, ft 7y0t(a) and (b), 42 U.S.C.
? 6261(b) et seq.
Reason for Including This Entry
This entry is included because of its
widespread impact on the non-
residential building sector and its
importance as a nationwide mandatory
conservation measure.
Statement of Problem
The Emergency Building Temperature
Restrictions (EHrR) were implemented
July 164 1979, after the President
determined that the United States was
unable to rely upon imports of crude oil
to meet normal demand due to
international instability. Worldwide
production of crude oil is now at levels
below those of the comparable period
last year. As the President pointed out in
the proclamation extending the Building
Temperature Restrictions on April 15,
1980, the United States has had to
terminate crude oil imports from Iran
and is experiencing increased
uncertainty about the level of continued
crude oil supplies from other producing
r:ountries. Actions by the Soviet Union
in Afghanistan and the tensions
between Iraq and Iran further increase
the threat to the stability of commerce in
the Persian Gulf.
United States dependence on insecure
crude oil imports, which have rapidly
increased in price, has substantially
increased our inflation rate and created
a major adverse impact on the national
economy. Because these effects are
likely to be of significant scope and
duration, it is necessary to take action
which will help forestall additional
shortages.
The Energy Policy and Conservation
Act (SPCA) contains provisions
permitting the president to develop and
submit to Congress standby emergency
energy conservation contingency plans.
Standby Conservation Plan No. 2,
Emergency Building Temperature
Restrictions, was transmitted to
Congress on March 1, 1979, and
approved by both Houses. The plan was
implemented by Presidential
proclamation on July 16, 1979, due to a
.Severe energy supply disruption caused
by events in Iran. and renewed for an
additional 9 months on April 15, 1980.
Savings are estimated between
200,000 to 400,000 barrels per day oil
equivalent, about 25 percent of which
can be translated directly into barrels of
oil saved, principally middle distillates.
11v saving this amount of energy, 1 B'IR
may help to alleviate the severity of the
continuing energy crisis faced by the
Nation. Additionally, EB R has helped
complying building owners and
operators to develop new energy-saving
to cha of building operation.
F,B 1'12 accomplishes this goal by
generally requiring that thermostats in
must nonresidential buildings be set no
lower than 78? F. for cooling, no higher
than 65' F. for heating, and no higher
than 105' F. for general purpose hot
water. The regulations also require
building temperature setbacks during
unoccupied hours.
Alternatives Under Consideration
The E.BTR regulations permit any
State or political subdivision to submit
to the Department of Energy (DOE) for
approval a comparable plan which
could include temperature limits other
than those provided for in the EBTR
regulations, in addition to other building
energy conservation measures. Such
plans have already been approved for
New Jersey, Massachusetts, and
I louston, Texas.
Section 231 of Title II of the
Emergency Energy Conservation Act of
1979 (EECA) (P.L. 96-102, 93 Stat. 757, to
be codified at 42 U.S.C. 8501) requires
that EBTR must permit a State or
political subdivision to include in any
comparable plans procedures permitting
individual building owners to propose
alternative conservation means that will
achieve at least as much energy savings
in their buildings as would the
temperature restrictions plan. DOE has
published an amendment to the EBTR
regulations bringing them into
compliance with this provision of EECA
(10 CFR Part 490).
DOE is also considering publication of
an amendment which would permit all
building owners or operators to complY
with the regulations through alternate
plans which would conserve as much
energy as would adherence to the
temperature restrictions alone. Alternate
means would not be restricted to
adjustments in heating, ventilating and
air-conditioning systems, but might
include any changes in the design.
construction, or operation of the
building such as lighting reduction,
insulation, weatherstripping, installation
of control systems, hours of operation,
etc. This will afford maximum flexibility
to building owners and operators and
give retailers, restauranteurs, and others
the chance to implement strategies
which they have indicated may be more
appropriate to their particular
circumstances. This amendement would
be designed to help foster creative and
innovative approaches to energy-
efficient building operation.
Administration of the program would,
however, grow more complex and
costly, and the alternate plan approach
may not be appropriate to short-term
emergency implementation of the EB'I't2
regulations as they now exist.
Thu emphasis of the EIITR program is
on voluntary public compliance.
Although over 40,000 building
inspections have been conducted by
DOE and participating States
(demonstrating approximately an 80
percent compliance rate), inspectors
have concerned themselves primarily
with educating the public and assisting
building owners In bringing their
buildings into compliance, rather than
stressing enforcement and punitive
action.
Summary of Benefits
Sectors Affected: The general public;
and owners, operators. and users of
approximately 2.8 million
nonresidential buildings, including
industrial /manufacturing buildings.
schools, restaurants, retail stores,
offices, hotel/lodging nonsleepir}g
areas, shopping centers. wareiotrses.
and retail food stores, and excluding
the sleeping areas of hotels and other
lodging facilities, health care facilities,
elementary schools, nursery schools.
and day care centers.
Compliance with the EBTR
regulations can save an average of 6
percent of total building energy use
(with consequent reductions in utility
bills), although this figure will naturally
vary from building to building.
In estimating potential fuel savings,
computer simulations of building energy
usage before and after EBTR were used.
These building models were based on
sensitivity analyses of key
characteristics affecting energy savinga,
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such as infiltration and building HVAC
(heating, ventilating, air-conditioning)
system type. Building owners and
managers will become more conscious
of energy conservation.
Summary of Costs
Sectors Affected., DOE; and State
energy offices.
The costs of EBTR are primarily
administrative. Eight million dollars
were expended over the first 9 months
of the program to cover grants to States
for inspections and public education,
and. DOE regional and headquarters
support. This included funding for
program analysis, administrative costs.
printing and mailing of program
manuals, and operation of a toll-free
EBTR information hotline.
Related Regulations and Actions
Internal.- The Standby Federal
Emergency Energy Conservation Plan
(10 CFR Part 477, February 7, 1980)
developed under the authority of EECA,
contains a building temperature
measure similar to EBTR.
External- Some State energy offices
are considering the inclusion of building
temperature measures in State
emergency energy conservation plans
being developed to meet the
requirements of EECA.
Active Government Collaboration
DOE has been working with over 75
Federal agencies to ensure that all
Federal buildings are in compliance with
F.BTR. The energy conservation
directors of each of these agencies have
maintained contact with DOE and have
inspected any buildings against which
public complaints have been lodged.
The General Services Administration,
Departrinent of Defense, and U.S. Post
Office, the three Federal agencies with
the largest building populations, are in
almost daily contact with DOE
regarding EB7R enforcement within
their jurisdictions. DOE, with over
122,000 buildings covered by EBTR, has
conducted inspections of 64,000
buildings since the program was
implemented in July 1979.
Timetable
Final Rule--November 1980.
Available Documents
NIIRM--45 FR 35788, May 27, 1980.
Emergency Building Temperature
Restrictions Regulations, 10 CFR Part
490, July 5, 1979.
"How to Compy with Emergency
Building Temperature Restrictions."
Copies may be obtained by writing to
the Agency Contact listed below or
calling the toll-free Emergency
Conservation Seryice Hotline: (800) 424-
9122 or 252-4950 (Washington, DC).
Emergency Building Temperature
Restrictions Docket No. CAS-RM-79-
109. Transcripts of all public hearings
and supporting documents are available
for review in the Freedom of Information
Office. Correspondence should be
addressed to: Milton Jordan, Director,
Freedom of Information Office,
Department of Energy, 1000
Independence Avenue, S.W., Room 58-
138, Washington, DC 20585.
Agency Contact
Henry G. Bartholomew, Acting
Director
Office of Emergency Conservation
Programs
Conservation and Solar Energy
Department of Energy
1000 Independence Avenue, S.W.
Washington, DC 20585
[phone]
Energy Conservation Program for
Consumer Products Other Than
Automobiles (10 CFR Part 430*)
Legal Authority
Energy Policy and Conservation Act,
Title III, Part B P.L. 94-163, 89 Stat. 917,
as amended by the National Energy
Conservation Policy Act, P.L. 95-619, 92
Stat. 3257.
Reason for Including This Entry
The Department of Energy (DOE)
includes this entry because the proposed
rule imposes substantial costs on the
home appliance industry, increases the
cost of appliances, and involves energy
conservation issues of great public
interest.
Statement of Problem
Major consumer products now being
manufactured are less energy efficient
than they could be. DOE's Conservation
Program for Consumer Products Other
Than Automobiles seeks to reduce
energy consumption of major household
consumer products. The legal authority
establishes 13 product categories for
review. There product categories are:
refrigerators and refrigerator/freezers,
dishwashers, clothes dryers, water
heaters. room air conditioners, home
heating equipment (not including
furnaces), television sets, kitchen ranges
and ovens, clothes washers, humidifiers
and dehumidifiers, central air
conditioners, and furnaces.
The legal authority also allows for a
14th product category for any other type
of consumer product classified as a
covered product in accordance with
? 322(b) of the Act.
DOE has developed test procedures
measuring efficiency levels of products
covered by the proposed energy
efficiency standards. These standards
will establish the minimum level of
energy efficiency that the manufacturer
of the covered product must achieve, but
will not prescribe the methods, designs,
processes, or materials to he used to
achievx> the particular efficiency level.
The Energy Policy and Conservation Act
(SPCA) further directs that DOE design
any standard it issues to achieve the
maximum improvement in energy
efficiency which is technologically
feasible and economically justified.
Manufacturers will he required to certify
that their products are on conformance
with the standards by testing them In
accordance with DOE test procedures
before they can place such products on
the market.
Alternatives Under Consideration
The major alternatives considered for
each covered product were labeling,
rebates, tax incentives, consumer
education, prescriptive standards,
voluntary programs, and no regulation.
Each of these alternatives has been
evaluated relative to achieving the
mandate of Congress, and other related
policy objectives.
We considered the alternative of
labeling as the primary action of DOE to
be Inappropriate because Congress has,
in the Act, mandated the establishment
of a labeling program by the Federal
Trade Commission (FTC). FCC's labeling
program requires that eight of the 13
covered. products be labeled to reflect
average annual operating costs or
energy efficiency ratings. These costs
are based on Federal test procedures
developed by DOE.
We determined that the alternative of
providing consumer rebates for
purchase of more energy efficient
products would involve unnecessary
expenditure of Feder?tl funds. Since the
consumer is the ultimate benefactor
with regard to net co!a savings resulting
from increased energy efficiency, a
rebate to the consumer would servo only
to further increase the consumer's
economic benefit. In addition, a rebate
would be provided to consumers who
would have purchased more efficient
products without further stimulus as
well as to those whose behavior would
be altered by the incentive. The length
of time over which the rebate would be
extended was also a factor in rejecting
this alternative, A long-term program
could be very costly, while a short-term
program may not achieve lasting
benefits.
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b
ecause .?_ r
DOE also considered the alternative covered products
of providing tax incentives for regulations, and labeling programs, Government to maximize benefits while
purchasing or manufacturing energy voluntary industry certification, and minimizing burdens in a more judicious
efficient products. Many of-the same increasing interest by consumers in manner.
problems that we anticipated in the energy efficiency as energy costs rise. Strong, more technologically
rebate alternative are also pertinent to however, these increases would be sophisticated firms are not expected to
this alternative. In both programs, the much less than the levels that would be be severely burdened. The greatest
majority of the associated costs would obtained with minimum energy potential for near-terra adverse impacts
be borne by the Federal Government, efficiency standards. Thus, relative to to manufacturers will be for those which
i.e., distributed among all taxpayers. the proposed standards, this alternative produce air conditioning and
while the benefits would be derived would result in smaller energy savings refrigeration products. The overall
only by the purchasers of covered and reduced progress toward national competitive effect of standards is
products. Thus, on an individual-by- energy self-sufficiency. expected to be a slight increase in
individual basis, the costs would DOE proposes to require industry to concentration in this 300 firm industry.
outweight the benefits for those meet a prescribed performance standard Burdens on manufacturers will be
taxpayers who do not purchase the rather than a specific design standard, kept to a minimum through careful
covered products. leaving the manufacturer free to find the consideration of potential impacts. In
DOE has not rejected the alternative most cost effective means of compliance addition, firms with sales under $8
of a consumer or public education while maintaining the desired level of standards million for 2 years exemption
program. Rather, DOE believes that a overall quality.
strong. viable education program is an promulgation, upon successful petition
important facet of any approach Summary of Benefits to the Federal Government.
undertaken to achieve energy efficiency Sectors Affected Manufacturers and Regulations and Actions
of the covered products. DOE's users of major household appliances; Related d Reguatio Pererformance
education program will focus on and the general public. Standards IInterval: for New Buildings.
educating consumers to read energy The improvement of consumer
efficiency labels when purchasing product efficiencies will decrease the Residential Conservation Service
covered products, and on the most amount consumers pay on their monthly Program,
energy efficient use of the covered utility bills and the overall amount of External: Minimum Property
products. The concept of energy energy consumed in the Nation. We also Standards for One- and Two-Family
efficiency does not only relate to the expect that implementation of Federal Dwellings, Department of Housing and
design of a product, but also to how the standards will accelerate adoption of Urban Development.
product is used. The benefits of a well- high efficiency consumer products by 10 Federal Trade Commission Appliance
designed energy efficient product may years. Standards will be effective Labeling Program.
be completely lost if users are not aware b+-ginning in 1981. All products below Active Government Collaboration
of how to operate and maintain the the prescribed level of standards will be Federal Trade Commission and
product to achieve the desired eliminated. Energy savings are
performance. For example, some National Bureau of Standards.
refrigerators provide an antisweat e iimht between 13.4 quadr2l1n,
heater to use during damp or humid British thermal units (Btu's) and 24.1 Timetable
weather. Proper use of the heater will quadrillion Btu's over the period 1982 Final Rule for Nine Products-January
reduce energy consumption of the through 2005. The discounted value of 1981,
these energy savings will be between NPRM for Four Products-March 1981, Other refrigera
alr. $18.8 and $24.4 billion, in 1975 dollars. Final Rule for Four Products-
considered d include e include s the that DOE possibility of For the year 2000, annual energy savings November 1981.
d arse, expected to be between 0.8
prescriptive standards based on specific e,ii.1d ?illion 11tu's and 1.9 quadrillion ;lvailable Documents
energy efficient design elements rather Btu's. `t'his translates to energy savings
than the proposed performance in the range of 3"6,100 to 993.000 barrels
standards. We rejected this approach
because of the potential for reducing of C oil equivalent per day by the year
i.
manufacturers' options to use innovative
technology to achieve the energy Summary of Costs
efficiency requirements. Sectors Affected Manufacturing of
The original version of the Act (SPCA, major household appliances; and
P.L. 94-163) called for the industry to set users of these appliances.
up voluntary energy efficiency targets The costs resulting from
for the covered products. Congress
specifically changed this section when implementation of the program will be
h t f r borne by consumers in the form of
L4. o
t
A
d
Draft Regulatory Analysis.
Test Procedures:
Refrigerators, Refrigerator-freezers--
42 FR 46140, September 14, 1977.
Freezers-42 FR 46140, September 14.
1977.
Dishwashers--42 FR 39`964, August 8,
1977.
Clothes Dryers-42 FR 46140,
September 14, 1977; 45 FR 46762, July 10,
1980.
Water Ileaters--42 FR 54110, October
4, 1977; 43 FR 48986, October 19, 1978; 44
FR 52632, September 7. 1979.
Room Air Conditioners-4Z FR 27896,
June 1, 1977; 45 FR 2632, January 11,
1980.
Home Heating Equipment-not
including Furnaces, 43 FR 20108, May 10.
1978.
Television Sets--42 FR 46140,
September 14, 1977.
o grou
c
ing t o
amen
immediate establishment of Federal increased consumer product prices. This
standards. DOE rejected the voluntary cost over the 1982 through 2005 period is
program in order to achieve energy expected to be between $8.3 and $11.1
efficient products as rapidly as possible. billion in discounted 1975 dollars.
The "no regulation" alternative However, the overall program will have
assumes that standards are not a positive net present value between
implemented for any of the covered $10.5 and $13.3 billion.
products. If DOE chooses this Adverse impacts will be minimized
alternative, some energy efficiency because we will prescribe separate
improvements would result in the standards for each category of consumer
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Kitchen Ranges and Ovens-42 FR
20106, May 10, 1978.
Clothes Washers-42 FR 49802,
September 28, 1977.
The problem of energy shortages can
be addressed by a number of
conservati
Th
Standards should use between 22
percent and 51 percent less energy than
current practice. Commercial and
multifamily residential buildings
complying with the standards should
use between 17 percent and 52 percent
less energy. Economic impacts are
small, i.e., at a 10 percent real discount
rate (which adjusts for the effects of
inflation), the Standards may, by 1991,
increase the Gross National Product by
0.1 percent, increase employment by 1A
percent, and improve the balance of
trade by 5 percent. The building industry
could benefit by increased demand for
their services.
Summary of Costs
Sectors Affected- The building
industry (architectural services,
construction, and manufacturing of
construction materials); the building
market (realtors, purchasers, and
users of buildings): DOE; HUD; and
State and local governments.
As a result of the standards, the cost
of new commercial buildings is expected
to increase about 2.5 percent. The cost
of new residential buildings is estimated
to increase $.75 to $1.00 per square foot
or $1,200 to $1,600 for a 1.600 square foot
one-story home. The added cost to
enforce the Standards varies with the
method used to implement the
standards, but assuming State and local
governments choose to make existing
code mechanisms equivalent, we ,
estimate that the enforcement costs for
Federal, Stato, and local governments
will be $55 million.
Related Regulations and Actions
luternul: DOE is developing a Model
Building Energy Code which translates
the Standards into code language.
Extetrnal? Minimum Property
Standards for One- and Two Family
Dwellings, Department of Housing and
Urban Development (HUD); Minimum
Property Standards for Multifamily
Dwellings; I IUD handbook 4910,
Revision 5, April 1977; Proposed
Increase in Thermal Insulation
Requirements for the Minimum Property
Standards for One- and Two-Family
Dwellings, 43 FR 17371, April 24, 1978;
Farmers Hume Administration, Form
424.1; 7 CFR Part 1861, Subpart A.
Appendix D, Construction Standards.
Active Government Collaboration
The Department of Housing and
Urban Development and National
Bureau of Standards are actively
involved in the development program.
Timetable
NPRM-August 1981.
Public Comment Period-Will follow
on measures.
e intent of
humidifiers and Dehumidifiers--42 FR
this regulation is to reduce the amount
55599, October 18, 1977. f
Central Air Conditioners, including
l feat Pumps-42 FR 60150, November 25,
1977; 44 FR 76700, December 27, 1979.
Furnaces-43 FR 20108, May 10, 1978;
45 FR 53714, August 12, 1980.
NPRM Regarding Provisions for the
Waiver of Consumer Product Test
Procedures, 45 FR 14188, March 4, 1980.
Sampling Requirements of Consumer
Products Test Procedures-44 FR 22410,
April 13, 1979.
Public comments (including comments
from public hearing held August 1980).
Representative Average Unit Cost of
Electricity, Natural Gas, No. 2 Heating
Oil, and Propane--44 FR 37534, June 27.
1979.
Standards:
ANPRM Regarding Energy Efficiency
Standards for Nine Types of Consumer
Products--44 FR 49, January 2, 1979.
ANPRM Regarding Energy Efficiency
Standards for Four Types of Consumer
Products-44 FR 72276, December 13,
1979.
ANPRM Regarding Energy Efficiency
Standards for Heat Pumps-45 FR 5602,
January 23, 1980.
NPRM Regarding Energy Efficiency
Standards for Nine Types of Consumer
Products-45 FR 43976, June 30, 1980.
Agency Contact
James A. Smith, Chief
Consumer Products Efficiency Branch
Conservation and Solar Energy
Department of Energy
1( ){) Independence Avenue, N.W.
Room GIi-065
Washington, DC 20585
[phone]
Energy Performance Standards for
New Buildings
Legal Authority
Energy Conservation Standards for
New Buildings Act of 1976,42 U.S.C.
? ? 6831-6840; Department of Energy
Organization Act, ? 304, 42 U.S.C. ? 7101
et seq.
Reason for Including This Entry
This entry is included because it
imposes significant costs on the building
and residential housing industries, and
because it involves energy conservation
issues of great public interest.
o energy consumed to new buildings.
One-third of all energy consumed in the
U.S. is used in buildings. Inefficient
building designs and equipment waste
about 40 percent of this energy.
The Department of Energy (DOE) is
developing design energy consumption
budget levels, measured in units of
British Thermal Units (Btu's) of design
energy consumption per square foot of
floor space per year (Btu/sq. ft./yr.).
These design energy budgets will take
into account the differences in energy
consumption required by climate and by
different building functions. This
regulation will require all new buildings
to be designed not to exceed the
corresponding energy budget.
Buildings which meet these energy
budgets will consume about 45 percent
less energy than recently constructed
buildings. This will mean aggregate
energy savings of 26 quadrillion Btu's
through the year 2000, in addition to the
other energy saving programs under
consideration.
In the NPRM (44 FR 68120, November
20, 1979), Proposed Building Energy
Performance Standards are expressed in
Btu's per square foot and are multiplied
by "weighting factors" to account for the
different values of fuels. The
measurement of design energy is made
using a Standard Evaluation Technique.
Alternatives Under Consideration
(A) Revising the building
classification.
(B) Replacing the "Weighting Factors"
with dual site budgets.
(C) Adding alternate evaluation
techniques to the list of certified
evaluation tools.
(D) Adding "certified equivalent
energy codes" as an alternative means
of complying with the Standard.
Also, an examination of non-
regulatory approaches to achieving the
Standards has been conducted and is
now being refined.
Summary of Benefits
Sectors Affected: The building
industry (architectural services,
construction, and manufacturing of
construction materials); buildings
workers (professional, management,
skilled, and operative); the building
market (realtors, purchasers, and
users of buildings); and the general
public.
Singh: family residential buildings
designed to comply with the proposed
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NPRM.
Final Rule-April 1983.
Available Documents
In support of this proposed rule, the
Department has developed ten
Technical Support Documents. These
documents provide detailed information
on important aspects of the proposed
rule and are referred to throughout the
preamble. All documents may be
obtained from the National Technical
Information Service, 5285 Port Royal
Road, Springfield, VA 22150, and the
Technical Information Center, Oakridge
National Laboratory, P.O. Box 62,
Oakridge, TN 37830.
Tech-
ncal
Sup- Adminis-
pod Title trative
rkx.u- Record
most Number
her
1........... The Standard Evaluation Technique........ 961.00
2........... Slatisucal Analysis_ .................................... 9562.00
3 ........... Energy Budget Levels Selection .............. 9563.00
4 ........... Weighting Factors ....................................... 9564.00
5........... Standard Swirling Operating Conditions.. 0565 00
6........... Draft Regulatory Analysis ........................... 9560.00
7........... Draft Environmental Impact Statement .. 9567.00
8........... Economic Analysis ...................................... 956800
9........... Passive & Active Solar Heating Analy, 9569.00
era.
10......... Climate Classification Analysis ................. 9570.00
Additional documents are the phase
one/base data for the Development of
Energy Performance Standards for New
Buildings (Final Report, PB-286 898;
Climatic Classification, PB-286 900; Data
Collection, PB-286 902; Residential Data
Collection and Analysis, PB-286 899;
Data Analysis; PB-288 901; Building
Classification, PB-286 904; and Sample
Design, PB-288 903), January 12, 1978.
ANPRM-43 FR 54512, November 21,
1978.
NPRM--44 FR 68120, November 28,
1979.
Draft Final Environmental Impact
Statement, Building Energy Performance
Standards (DOE, April 1980).
Draft Regulatory Analysis.
Agency Contact
James L. Binkley
Buildings and Community Systems
Division
Office of Solar and Conservation
U.S. Department of Energy
Forrestal Building
Washington, DC 20585
[phone]
Federal Price Support Loan Program
for Energy from Municipal Waste
Resource Recovery Facilities (10 CFR
Part 485)
Legal Authority
Energy Security Act (ESA) Title II,
Subtitle B, P.L. 96-294.
Reason for Including This Entry
The regulations to he developed by
DOE will establish policy and set forth
procedures whereby municiptiliti,es may
submit applications for price support
loans for energy produced and sold by
municipal waste resource recovery
facilities. These regulations are
precedent-setting. The regulations will
be issued in two phases.
Statement of Problem
in 1980, approximately 156 million
tons of municipal solid waste and dry
sewage sludge solids are potentially
available for energy recovery. Should all
these wastes be utilized for energy
production, they could produce the
equivalent of over 200 million barrels of
oil annually.
In addition to municipal solid waste,
about 14 million barrels of oil equivalent
are potentially recoverable from the 30
million tons of process wastes generated
by U.S. industry annually. Also,
appreciable amounts of energy can be
conserved through waste materials
recycling processes. The magnitude of
the potential energy production from all
facets of wastes indicates that resource
recovery systems could make a major
contribution to national energy goals.
The proposed rulemaking will provide
inducements to recover a substantial
portion of the energy potential of solid
and industrial process wastes. The
initial phase of the regulations (phase 1)
will establish the components for setting
the amount of price support loans. The
main regulations (phase 2) will cover the
remaining components of the price
support loan program, including
procedures for filing applications,
criteria for proje,_.t eligibility and
approval, deadlines for filing, etc.
A price support loan program for
municipal waste to-energy sy:items
could encourage projects to go forward
that might otherwise be deferred
b,ic3use projected initial project costs
resulted in disposal fees that were not
competitive with the prevailing costs of
landfill at the time the project was
initiated. A price support loan affects
the operational costs of a plant, having
the effect of reducing the disposal fee.
Without a price support loan in the early
years, a project with a high initial
disposal fee might not go forward
despite its economic feasibility when
calculated on a life cycle basis.
Alternatives Under Consideration
DOE is considering several options for
the application of proposed price
support loans. These include support
based upon the quality of product, the
quantity of product, the unit price
received for product, and full or partial
purchase of product by the Federal
Government.
DOE is also considering other
mechanisms for support of municipal
solid waste energy recovery projects as
specified in the Energy Security Act.
These mechanisms include loan
guarantees, construction loans, and
price guarantees.
Summary of Benefits
Sectors Affected: Municipalities,
counties, and special authorities
(State and local); private industries in
the role of energy buyers, waste
disposers or project developers;
investor-owned and municipally-
owned utilities and their customers;
investment banking companies and
financial underwriters; waste
processing equipment and systems
manufucturere, and wholesale and
retail traders; project engineering
consultants; consumers of petroleum
products; and the general public.
This regulation will significantly
accelerate municipal waste
reprocessing. Although these
technologies may be economically
marginal today, on a life-cycle basis
they are attractive and will reduce our
vulnerability to petroleum supply
disruptions.
The proposed regulation will tend to
reduce costs and prices of end products
from municipal waste reprocessing
facilities for individual levels of
government, industries, and regions. In
addition to contributing to the
displacement of a significant amount of
fossil fuels, primarily oil, this regulation
also has the effect of creating both
construction and permanent jobs. The
facilities assisted under this price
support program will also divert
municipal wastes from landfills and
reduce the volume for ultimate disposal
by communities by 85 to 95 percent.
Pollution of ground, water, and air will
be significantly reduced.
Summary of Costs
Sectors Affected: The Federal
Government.
The total Federal assistance available
under this program is $160 million.
Existing facilities may apply for a 5-year
price support loan; new projects may
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apply for a 7-year loan, No payment can
be based on a unit ' ilue of support
greater than $2.00 per thousand Btu's
(MBtu) of energy produced and sold.
Beginning in the second year, the
amount of the loan declines in each
succeeding year, to zero at the end of
the 5- or 7-year loan term. For example,
with a 7-year loan, the payment in year
2 would equal the per unit value
multiplied by ?/v; in year 3 the proportion
delines to si'i; etc. Repayment begins in
year 8.
Related Regulations and Actions
Internal: Urban Waste Demonstration
Facilities Guarantee Program (10 CFR
495).
Municipal Waste Reprocessing
Demonstration Program Facilities
Evaluation and Assessment Guidelines
(10 CFR 492).
Loan Guarantee for Alcohol Fuels
Biomass Energy and Municipal Waste
Energy Programs (10 CFR Part 799).
Proposed August 19, 1980.
External: None.
Active-Government Collaboration
Environmental Protection Agency;
Department of Commerce.
Timetable
NPRM (Phase 2)-November 1980.
Public Comment Period (Phase 1)-
November/December 1980.
Final Rule (Phase 1 and 2)-January/
February 1981.
Available Documents
NPRM (Phase 1)-45 FR 63822,
September 25. 1980.
Public comments (Phase 1 public
comment period was September/
October 1980) and comments from Phase
't public hearing (October 14, 1980) are
available from Agency Contact.
Environmental Assessment, July 19.
X979; this document can be obtained
from Room 1F-059, 1000 Independence
Avenue, S.W., Washington, DC 20585,
[phone].
Agency Contact
Ronald K. Walter, Acting Director
Energy from Municipal Waste
Office of Conservation and Solar
Energy
M.S. 1H-031, Room 1E-276
1000 Independence Avenue, S.W.
Washington. DC 20585
(202) 25.2--9397
Standby Federal Emergency
Conservation Plan (10 CFR 477)
Legal Authority
The Emergency Energy Con, ervation
Act of 1979, Title 11, P.L. 96-10', 93 Stat.
757, to be codified at 42 U.S.C. ? 8501.
Reason for Including This Entry
'The Department of Energy (DOE)
issues this rule to conform to the
requirements of the Emergency Energy
Conservation Act of 1979 (EECA). The
Standby Federal Emergency Energy
Conservation Plan (the Federal Plan) is
one element in the framework provided
by EF,CA for a coordinated national
response to a severe energy supply
interruption.
State of Problem
Serious disruptions due to continued
high dependence on Insecure crude oil
imports have occurred recently in the
gasoline and diesel fuel markets of the
United States. Because it is likely that
such disruptions could recur, and urgent
need exists for Federal, State, and local
governments to establish emergency
energy conservation measures for
gasoline, diesel fuel, home heating oil
(middle distillates), and other energy
sources which may be in scarce supply.
The EECA, passed by Congress on
November 5, 1979, provides the
framework for national, statewide, and
local responses to serve energy supply
disruptions. Under the terms of the Act,
if the President finds that a "severe
energy supply Interruption" exists or is
imminent, or that actions are necessary
to restrain domestic energy demand
under the terms of international energy
agreements, he may establish
emergency energy conservation targets
for the Nation generally, and for each
affected energy source (e.g., gasoline).
Within 45 days from the publication of
the targets, the Act requires States to
submit to DOE emergency conservation
plans containing measures designed to
meet or exceed the energy savings
targeted by the President. Set-lion 213 of
the Act requires that DOE establish a
Standby Federal Emergency Energy
Conservation Plan containing measures
designed to reduce the consumption of
targeted energy sources. If, after a
period of not less than 90 days, a State
is not substantially meeting its target,
and a shortage of 8 percent or greater of
the targeted energy source will persist
for an additional 80 days, the President
may impose upon the State all or a
portion of the measures contained in the
Federal Plan.
3B09/ .CQA1 ' A1;i P9Ua19 77719
Because the transportation sector
accounts for almost one-half of the
Nation's petroleum consumption, and
the greatest potential for fuel savings
within this sector is related to the use of
passenger automobiles, DOE gave
primary emphasis in the Federal Plan to
measures which are designed to reduce
the demand for gasoline and other motor
furls. However, DOE included one non-
motor fuel measure (mandatory building
temperature restrictions) because it has
already demonstrated the potential for
savings of 200,010 to 400,000 barrels per
day of oil equivalent.
Several of the measures referred to
above are interim final rules, while
others are proposed rules. Included in
the interim final rules are:
1. Public information measures,
intended to inform motorists about fuel
conservation actions they can take,
including efficient operation and
maintenance of vehicles, alternative
means of travel, and trip planning.
Additionally, the rules require gasoline
station owners to have available
working air pumps and tire pressure
gauges and informative, prominently
displayed signs regarding the energy
efficiency of proper tire pressure;
2. Minimum automobile fuel purchase
restrictions, which set forth restrictions
on any minimum gasoline purchase
scheme implemented under Federal
authority (i.e., the minimum amount of
gasoline which may be purchased for a
vehicle with B or more cyclinders shall
be $7.00, and for vehicles with fewer
then 8 cylinders, the minimum amount
shall he $5.00);
3. Odd-even motor fuel purchase
restrictions, which set forth restrictions
on any odd-even gasoline purchase
prof;ram adopted by the Federal
Govi.ernment;
4 Portions of the employer-based
conimuter and travel measure, which
requires private and public employers of
a certain size to undertake measures to
encourage the use of energy-efficient
mode of transportation by their
employees in commuting to work:
5. Speed limit enforcement measures,
which require States to increase
immediately the compliance level for the
55 mph speed limit, and take additional
steps to reduce speed limits depending
on the severity of the shortage.
6. Mandatory temperature restrictions,
which prescribe thermostat levels for
heating, cooling, and hot water in most
nonresidential buildings.
Included as proposed rules are:
1. Portions of the employer-based
commuter and travel measure, including
employer subsidization of employees'
cost for mass transit, and "work-at-
home" arrangements;
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 7. The compressed workweek
measure. requiring all but exempted
Government and business activities to
reduce their work week by one day; and
3. The vehicle use sticker measure,
which prohibits the operation of certain
motor vehicles on either one, two. or
three preselected days of the week.
Most of the measures are much more
intricate than can be captured in this
brief analysis. DOE suggests the Federal
flan be read in order to gain a better
appreciation of each measure. In
addition to the demand reduction
measures, the Federal Plan also contains
it section which describes the contents,
review, and approval of State
emergency conservation plans.
Alternatives Under Consideration
The Act requires that DOE develop
emergency conservation measures
designed to reduce the public and
private demand for certain fuels in the
event of an energy supply emergency.
The legislation also establishes criteria
to judge the suitability of various
measures for inclusion in the Plan.
Demand reduction measures may be
implemented by Federal, State, or local
government officials. Measures may be
voluntary or mandatory, designed to
achieve three goals: a reduction in
energy use through a reduction in
product or service output; improvements
in efficiency which will reduce the
energy required for the same output; and
switching from a fuel in short supply to
one that is more abundant.
DOE employed a systematic process
in selecting demand restraint measures
for inclusion in the Federal Plan. First,
we analyzed the specific characteristics
of U.S. energy demand in order to
ascertain which sectors were likely to
experience the most severe impact of an
energy supply interruption. Next, we
analyzed past shortages and devised
demand restraint measures to meet it
probable future shortage. We reviewed
existing literature and surveyed the
measures already in operation in
various States to develop a catalogue of
measures for inclusion in the Federal
plan. Finally, we subjected these
measures to an increasingly rigorous
review to eliminate those which
conflicted with statutory requirements.
Other reasons for eliminating measures
included their relatively minor energy
savings, or their perceived unacceptable
impacts on public health, the national
iconomy, and the environment.
However, some measures not selected
for inclusion within the Federal Plan
may well be appropriatq for inclusion in
State plans in States where they could
result in significant energy savings and
could be readily enforced. Examples of
these measures are:
1. school schedule modification;
2. electricity end-user measures;
3. electric utility conservation
measures;
4. commercial and industrial boiler
efficiency improvements;
5. industrial and utility fuel switching;
6. reductions of lighting energy use;
and
7. building insulation and
weatherization measures.
Because the transportation sector
accounts for nearly one-half of the
Nation's average daily consumption of
petroleum products, we targeted this
sector for concentration in the Federal
Plan. The greatest potential for fuel
savings in transportation exists in the
use of gasoline in passenger
automobiles, which now account for
more than 50 percent of all
transportation energy consumption. For
these reasons, all but one of the
measures contained in the Federal Plan
address the consumption of gasoline and
motor fuels.
Summary of Benefits
SectorsAffected;- All sectors of the
economy, particularly transportation
related industries; and the general
public.
The benefits accruing from the
Federal Plan are difficult to measure
because it is a standby plan. We will
implement it only after the States have
been given an opportunity to develop
and administer their own emergency
conservation plans. The State plans may
include elements of the Federal Plan.
Publication of the interim final rule in
February, 1980 has sparked an intense
debate at all levels of government and
the private sector as to the efficacy of
various emergency conservation
measures. It is clearly in the national
interest that a standby plan be prepared
so that our Nation will be able to
respond within a coordinated
framework to a severe energy supply
interruption.
The average daily demand for
gasoline in 1979 was just over 7 million
barrels per d:ay (BPD). Estimated energy
savings (primarily gasoline) for the
measures contained in the Federal Plan
are:
Estimated
reduction (in
thousand
BPD,
Public information.-.. 10-200
Minimum fuel purchase restrc:on5... . Unknown
Odd-even purchase Unknown
Employer based corr:nwttrg _._......_... _.. 55
I
E sbn ?atoi I
r^-rfdCtmn inn
thou:.and
BPC))
Speed Ilrrdt (the range indicated depends on 30a00
the degree of enforcement end designated
speed limits).
Compressed workweek. ............ ....................... 300
Building temperature restrictions (measured in ?00. 400
barrels/oil equivalent).
Vehicle use sticker (the range indicated dc- ?65 1.350
ponds on the number of non-driving days
from t to 3).
Summary of Costs
Sectors Affected: All sectors of the
economy, particularly transportation
related industries; and Federal and
State government.
The actual costs associated with this
plan depend on the eitent of the energy
shortfall, how long the shortfall lasts,
and which of the standby measures are
actually implemented. Implementation
costs will be borne by all units of
government as well as by the private
sector. To give an indication of how
much it might cost to implement portions
of the standby plan in an energy
shortfall, consider the following
example. A minimal program to reduce
gasoline consumption by 8 to 10 percent
could include the public information,
employer-based commuting, and 55 mph
speed limit enforcement measure:;. We
estimate that the costs to the Federal
Government of implementing these three
measures would total roughly $100
million.
Under the public information measure,
gasoline station owners will be required
to have available tire pressure gauges
and operating tire pumps. According to
the employer-based commuter and
travel measure, employers over a certain
size will be required to develop for each
affected worksite a program to reduce
work-related travel by employees. It
should be emphasized that these
substantial costs are incurred only in thi,
event of an energy shortfall.
Administrative cost:; associated with
developing State.standby plans will
total about $10 million.
Related Regulations and Actions
Internal: On July 18, 1979, the
Emergency Building Temperature
Restrictions became effective. The
regulations, which prescribe heating and
cooling limits for most nonresidential
buildings, were extended until January
16, 1981 by Presidential Proclamation on
April 15, 1980. .
External: Many State Energy Offices
have begun to design emergency
conservation plans. We are encouraging
States to submit plans to DOE prior to
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2 ~ 'T(f'oncisV. November 4, 19110 f U. , egulatory Council 77721
MMORMEMNSM
the actual publication of matidatory
emergency conservation targets.
Active Government Collaboration
An interagency task force has been
created to ensure that effective input
from all Federal agencies is heard in the
development of the Federal Plan.
Included on this task force are
representatives from the Departments of
Defense, Labor, Agriculture, Health and
Human Services, Transportation, and
Cormmerce; the General Services
Administration; and the Postal Service.
Timetable
Final Rule-DOE expects to publish
the Final Rule in December 1980.
The Final Rule may incorporate
both the interim and the proposed
rules.
Regulatory Analysis-will accompany
Final Rule.
Available Documents
Standby Federal Emergency Energy
Conservation Plan-interim Final and
Proposed Rules (10 CFR 477), published
February 7, 1980.
Standby Federal Emergency Energy
Conservation Plan Docket CAS-RM-79-
507. Transcripts of all public hearings
and supporting documents are available
for review In the Freedom of Information
Office. Correspondence should be
addressed to: Milton Jordan, Director.
Freedom of Information Office,
Department of Energy, 1000
Independence Avenue, S.W., Room 511--
t311, Washington, DC 20585,
Agency Contact
I lenry G. Bartholomew, Acting
Director
Office of Emergency Conservation
Programs
Conservation and Solar Energy
Department of Energy
1000 Independence Avenue, S.W.
Room GE-004A
Washington, DC 20585
[phone]
DOE-Economic Regulatory
Administration
Amendments to Puerto Rican Naphtha
Entitlements Regulations
(10 CFR Parts 211' and 212*)
Legal Authority
Emergency Petroleum Allocation Act
of 1973, as amended 15 U.S.C. ? 751 et
seq.
Reason for Including This Entry
The regulation could have a'
significant impact on the competitive
position of the Puerto Rican
petrochemical industry in relation to its
main competitors, the petrochemical
producers on the United States
mainland. Additionally, any increased
entitlement benefits to this segment of
the industry would result in
corresponding increased crude oil costs
to the domestic refining industry.
Statement of Problem
During the 1950s and 60s the Federal
Government and the Puerto Rican
government encouraged the
development of a refining and
petrochemical Industry in Puerto Rico.
Commonwealth Oil Refining Company
(CORCO), Phillips, Sun, and Union
Carbide were among the major firms
that invested large amounts of capital in
refinery facilities, based on the tax relief
afforded by the Puerto Rican
government and the allocation of
substantial quantities of low cost foreign
crude oil and naphtha (a volatile,
colorless, distillate product between
gasoline and refined oil) by the Federal
Government. Both naphtha and crude oil
are "feed-stocks" convertible into one or
more end products in the process of
refinery operations and petrochemical
production.
Two major considerations governed
the joint policy of the Puerto Rican and
the Federal governments towards the
establishment of this refining capacity.
First, the policy was based on the
availability of low-cost imported
feedstock, purtictdnrly naphtha, which
provided a cost advantage over
petrochemical producers on the
mainland. This advantage was needed
to offset the higher shipping and other
costs of starting up the Industry in the
relatively underdeveloped economy of
Puerto Rico. A second major
consideration was that the new refinery
facilities would expand employment and
provide Puerto Rico with fuel for
manufactur/, transportation, and
agriculture.
Since the 1900s, the petrochemical
industry in Puerto Rico has grown to
such an extent that it now contributes
greatly to U.S. petrochemical capacity
and to the economy of Puerto Rico. In
1977, petroleum-related Industry in
Puerto Rico contributed more than $2
billion to the island's economy,
approximately one-third of Its total
income. In addition. 10 percent of U.S.
petrochemical output is now located in
Puerto Rico.
Despite these gains, Puerto Rican oil
refineries have been severely affected
by the world-wide increase in the price
of imported crude oil, coupled with the
imposition of price controls on domestic
crude oil by the Federal Government.
The combination of soaring prices for
imported naphtha and crude oil, coupled
with Federal regulatory policy which
enabled mainland refiners to purchase
cheaper domestic crude oil, has reversed
the feedstock cost advantage that the
Puerto Rican petrochemical industry
formerly enjoyed. Mainland competitors
now pay less for feedstocks than Puerto
Rican refiners.
To lessen the competitive
disadvantage to Puerto Rican companies
of higher feedstock costs, the Federal
Energy Administration (FEA) amended
the entitlements program on July-20,
1976, to permit Puerto Rican
petrochemical producers to receive
entitlement benefits for imported
naphtha feedstocks. (An "entitlement" is
a credit given by DOE to a refiner, and
Is equivalent to the difference between
the average (volume weighted) delivered
cost per barrel of uncontrolled crude oil
and the average (volume weighted)
delivered cost per barrel of domestic
price-controlled crude oil.) The
maximum value of the per-barrel
naphtha entitlement for any month
cannot exceed the value of a single
crude oil runs credit. Entitlement
obligations are imposed on domestic
price controlled crudes so as to raise
their cost to that of comparable
decontrolled crude oils. Each refiner
receives a runs credit for every barrel of
crude. oil processed, which is the
uniform distribution of entitlement
monie:r collected. The entitlement credit,
used In this manner, would reduce the
price of purchased feedstocks. FEA
determined that it would be
inappropriate to grant the full crude oil
entitlement benefit to naphtha imports
in mouths when the differential between
the prices of imported and domestic
naphtha is less than that month's per-
barrel crude oil runs credit. Accordingly,
the rules the FEA adopted tie the
entitlement credit for naphtha imported
into Puerto Rico to the difference
between the average (volume weighted)
cost for imported naphtha and an
imputed domestic naphtha price, divided
by a modified crude oil runs credit (See
? 211.67(d)(5)(iii)). This imputed value is
set at 108 percent of the average
(volume weighted) cost of crude oil to
refiners. (It is necessary for the
Government to impute this price
because very little naphtha is sold
domestically.)
These rules are now the responsibility
of the Department of Energy (DOE), and
are administered by the Economic
Regulatory Administration (ERA) within
DOE. DOE believes that two factors in
the current regulations are causing
problems: (1) the naphtha entitlement
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 77722 Fedkpt ved Fu iReIi%a tl2A0WQ8,14L
RQR -p gp ~, ~at1~Q38-9
value is limited to a crude oil
entitlement runs credit, and (2) the
factor used to impute the domestic
naphtha price is too low. FEA never
expected that it would need to grant
more than a full crude oil runs credit,
since world naphtha prices historically
have paralleled crude oil prices.
However, during the last year, the prices
for imported naphtha have increased
much faster than those for crude oil.
Further. ERA's review of current data on
naphtha prices and crude oil costs show
that the factor presently used to impute
the domestic naphtha cost is much too
low. As a result of these factors,
approximate feedstock costs
equalization of Puerto Rican
petrochemical producers with their U.S.
mainland competitors has not been
achieved under the existing regulations.
In recognition of the problems facing
the petrochemical industry in Puerto
Rico, DOE's Office of I learings and
Appeals (OHA) has provided
exceptional relief to two of the three
petrochemical companies in Puerto Rico
that import naphtha. This interim relief
was given in order to provide the
Economic Regulatory Administration
(ERA) with sufficient time to address
these issues through the rulemaking
process. One firm has been granted
relief that allows it to earn two
entitlement runs credits for each barrel
of imported naphtha run in its
petrochemical plant, and the second
firm is eligible for increased
entitlements for each barrel of imported
naphtha processed in excess of a certain
monthly level.
Alternatives Under Consideration
DOE will consider several options for
better calculating the imputed cost of
domestically produced naphtha. The
cost of naphtha to the mainland
domestic petrochemical industry is a
central issue in determining the
appropriate level of price protection that
should be afforded through the
entitlement program to maintain a
competitive petrochemical industry in
Puerto Rico. These Puerto Rican
producers find it difficult to compete
with mainland domestic firms because
the mainland firms have access to
naphtha produced from lower cost
domestic crude oils.
The possible approaches to imputing a
domestic naphtha price that we are
examining include:
Retaining the current program of
imputing a price based on domestic
crude oils.
? Adopting a means of imputing the
value of domestic naphtha based on its
value as a major component in the
motor gasoline pool.
? Calculating an imputed price for
domestic naphtha by subtracting a fixed
cost adjustment from the wholesale
price of unleaded regular gasoline. The
fixed cost adjustment would be derived
by comparing wholesale gasoline and
imputed naphtha prices (calculated
according to the formula in the above
alternative) during a recent 12-month
reference period.
? Retaining the current approach of
imputing a price based on domestic
crude oils, but periodically changing the
factor to reflect changes in world market
naphtha prices.
In addition to examining changes in
the ways of calculating the imputed cost
of domestically produced naphtha, DOE
has proposed increasing the maximum
naphtha entitlement benefit to two run
credits, rather than the single runs credit
ceiling which currently applies.
Summary of Benefits
Sectors Affected- Puerto Rican
petrochemical industry and economy;
and users of naphtha derived petro-
chemicals.
Any of the alternative proposals
should increase the competitive position
of the Puerto Rican petrochemical
industry with petrochemical producers
located on the mainland. The Puerto
Rican petrochemical industry maintains
that if no regulatory changes are. made
to equalize their naphtha feed0ot.k
costs with those of firms operating on
the Gulf Coast, they will be forced either
to seriously trim their operations or
incur large operating losses. In fact, one
major Puerto Rican petrochemical plant
has already closed. As we formerly
stated, the development of refining, and
petrochemical facilities has had a great
impact upon the economy of Puerto
Rico. Thus, the proposed changes, in
making the Puerto Rican petrochemical
industry more competitive, would have
a direct positive effect on Puerto Rico's
economy.
The proposal should reduce the costs
of naphtha-derived petrochemicals to
U.S. consumers by a small amount.
Summary of Costs
Sectors Affected.- Domestic petroleum
refining industry; and U.S. consumers
of petroleum products.
None of the proposed changes to the
Entitlement Program will increase ERA's
compliance or administrative costs.
There will be no added reporting
requirements for the petroleum industry.
However, by allowing naphtha
feedstocks imported into Puerto Rico to
earn increased entitlement benefits.
credits available to domestic refiners of
crude oil are reduced. This would
increase the cost of crude feedstock to
domestic refiners and, in turn, this could
result in a small price increase in oil
products to U.S. consumers.
An increased naphtha entitlement
value might also have the adverse effect
of increasing the price of naphtha in the
world marketplace.
Related Regulations and Actions
None.
Active Government Collaboration
None.
Timetable
Final Rule-December 1980.
Final Rule Effective--30 days after it
is Issued.
Available Documents
NPRM-45 FR 59818, August 28, 1980.
Draft Regulatory Analysis, Septembee
4, 1980.
Public comments (public comment
period ended November 10, 1980).
Agency Contact
John W. Glynn, Industrial Specialist
Office of Regulatory Policy
Economic Regulatory Administration
Room 7202, 2000 M Street, N_W.
Washington, DC 20461
[phone]
Crude Oil Resales Pricing Revisions
(10 CFR Parts 211? and 212?)
Legal Authority
Emergency Petroleum Allocation Act
of 1.973, as amended, 15 U.S.C. ? 751 et
seq.
Reason for Including This Entry
Apparent violations of price
regulations by companies buying and
reselling crude oil have received
considerable attention from the media
and the Congress. At the same time,
members of the crude oil reselling
industry have complained of inequities
and ambiguities in the regulations
affecting them.
Statement of Problem
With the exception of the group of
resellers who entered into business after
December 1977 (Class C), who are
allowed a uniform maximum markup of
20 cents per barrel in accordance with a
rulemaking issued July 29,1980, firms
are limited to the profit or loss
experienced in a base reference period.
Companies in existence in May 1973
(Class A) may earn the net (except for
income taxes) per-barrel markup they
earned in the month of May 1973.
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Companies beginning business after
May 1973 and before December 1977
(Class B) may earn the net per-barrel
markup they earned in November 1977,
With each Class A and Class B
company setting its own Permissible
May 1973 and November 1977, it would
calculate its allowable permissible
markup on the basis of November 1977
sides. If such a reseller had no sales in
that month, there is no basis on which it
would know whether it is in compliance
a particular month, one company way they could be enforced against him.
earning an average of a few cents a DOE's Economic Regulatory
barrel might be in violation, while Administration (ERA) has proposed the
another earning perhaps 50 cents per last month prior to November 1977 in
barrel might be in compliance. Average which the reseller sold crude oil as a
markups for the industry in recent years substitute base period. This rule will be
have been in the order of 9 cents to 14 retroactive and will apply until uniform
cents per barrel. mn..4?r,e ti,,, op, ..: r. a i... cn A
profit on each transaction is likely to Summary of Benefits
encourage superfluous transactions, Q.,/ A d? C d
ors f
t
investigations show that numerous
"paper transactions" have been inserted
in crude oil supply chains in order to
lower average markups into compliance
with the regulations,
fec
e . ru e OIL
wholesalers; petroleum refiners; and
consumers of petroleum products.
Under the present regulations, each
reseller of crude oil--except post-
Alternatives Under Consideration November 1977 firms affected by the
amendment adopted on July 29, 1980-
Various uniform Permissible Average has its own individual price limitation.
Markups ranging from 1 cent to 25 cents The complexity and inequity of this type
per barrel were proposed in an NPRM of price control probably contributes to
(October 1979). Comments were violations and makes enforcement
requested on the alternatives. difficult. Changing to a uniform markup
A Permissible Average Markup of 20 limitation for all resellers will bring the
cents per barrel was proposed. This benefits of clarity, simplicity, equity,
alternative would be consistent with the and increased competition to the
currenty regulatory scheme and would reseller industry. If competition allows,
not require extensive revisions to the some crude oil resellers would increase
regulatory structure In the short period profits. For buyers of crude oil and for
remaining for price controls, which will ultimate consumers of petroleum
expire September 30. 1981. Thus, it products, there will be benefits if
would be less burdensome on the violations are reduced.
industry and would not require changes Administrative and enforcement costs
in industry practices. It would also be to the Department of Energy will be
consistent with the 20 cent markup lowered under a uniform markup
currently in effect for Class C resellers regulation.
and would provide equitable treatment
for all resellers. The allowable markup Summary of Costs
for Class C resellers is presently above
the median average markup of 12-13 Sectors Affected: Crude oil resellers.
cents per parrel for Class A resellers in While adoption of a standard average
May 1973, where 99 percent of crude oil permissible markup for all firms would
was resold at average markups of less allow some crude oil resellers to
than 20 cents per barrel. Therefore, we increase profits, others would bear costs
conclude that a 20-cent-per-barrel
markup for Class A and Class B
resellers to match Class C markups
would be fair and compare favorably
with historical average markups.
As an alternative to establishing a
maximum average permissible cents-
per-barrel markup, we have also
proposed a maximum markup for each
transaction. In addition, we proposed a
tow markup or no markup at all for
transactions in which the reseller
neither transported nor received crude
oil into his storage facilities.
if DOE requires them to reduce markups.
However, under a 20-cent-per-barrel
average allowable markup, probably
markup increases by resellers
constrained by the current regulations
would be approximately matched by
reductions by resellers with markups
above 20 cents per barrel. The reason is
that in the current moderately
competitive market, few resellers realize
their legal maximum net markup month
after month.
In a fully competitive market, crude
o
ld h
reseller price re
ulations
w
u
ave
g
base period for Class B resellers which _ r4y
had no sales in November 1977. If a Related Regulations and Actions
reseller carne into business between None.
Active Government Collaboration
None.
Timetable
Final Regulatory Analysis-Fourth
Quarter 1980.
Final Rule-December 1980.
Available Documents
NPRM-44 FR 62848, October 31, 1979.
Transcript of public hearings held
December 6, 12, and 13, 1979.
Public comments on above NPRM.
Draft Regulatory Analysis.
ERA Docket No, ERA-R-n-48.
All documents are available in'the
DOE Freedom of Information Reading
Room, Forrestal Building, Room 517-180,
1000 Independence Avenue, S.W.,
Washington, DC 20585.
Agency Contact
Ralph A. Rohweder, Program Analyst
Division of Petroleum Price
Regulations
Economic Regulatory Administration
2000 M Street, N.W., Room 7116
Washington, DC 20461
[phone]
Domestic Crude Oil Entitlements (10
CFR 211.67?)
Legal Authority
Emergency Petroleum Allocation Act
of 1973, as amended, 15 U.S.C. ? 751 et
seq.
Reason for Including This Entry
This proposal has a significant
economic effect; it would distribute the
benefits of access to price controlled
crude oil more equitably by reducing the
post-entitlement cost differences
between price-controlled (except Alaska
North Slope controlled crude till) and
equivalent uncontrolled domestic crudes
in Production Allocation for Defense
Districts (PADDs)1-IV and PADD V.
This would reduce the competitive
advantage of refiners with access to
above average proportions of; ontrolled
crudes in PADDs I-IV. This proposal
would reduce the approximate $170
million cost advantage to refiners from
refining controlled crudes in PADDs I-
IV and reduce the approximate $45
million cost disadvantage to refiners for
refining controlled crudes in PADD V.
Statement of Problem
The net cost of crude oil to a refiner is
its delivered cost plus any entitlement
obligation, less the runs credit.
Entitlement obligations are imposed on
price controlled crudes so as to raise
their cost to that of comparable exempt
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 77724 Federal Register / Vol. 45 'u. 22
crudes. The runs credit is a uniform
distribution of the money collected
under the obligation and is applied to
every barrel of crude oil processed by
refiners in the United States.
The entitlements program is designed
to equitably distribute the benefits of
access to price-controlled crude oil. This
is fully accomplished when the net costs
of comparable price controlled and
exempt crudes are equal. When first
adopted in 1974, the entitlement program
approximately equalized these net costs.
Changes in relative market values of
crude, due to restrictions on sulfur
content in refined products, the reduced
consumption of fuel oils, and foreign
crude pricing and supply, no longer
permit the equalization of net costs
under the system adopted in 1974.
The net costs of controlled crudes
have differed from the net costs of
equivalent exempt domestic crudes,
which are the most comparable to the
price-controlled crudes. For example, in
January 1980 the net cost of controlled
crude was $6 to $9 less than that of
equivalent exempt crudes in PADDs I-
IV, and $2 and $4 more than the exempt
crudes in PADD V. These differences
had changed to $3 to $6 and $5 to $7
respectively by June 1980. In PADDs I--
IV (essentially all of the United States
east of the West Coast), the price
controlled crudes had a total not cost
approximately $170 million less than the
net cost of an equivalent volume of
exempt domestic crudes in that region.
In PADD V (essentially the West Coast),
the controlled crudes had a total net
cost of approximately $45 million more
than a comparable volume of exempt
crudes in that region."These net costs
differences are a measure of the degree
to which the entitlements program does
not accomplish equitable distribution of
the benefits of access to price controlled
crude oil.
Alternatives Under Consideration
We are developing a proposal to
establish separate entitlement
obligations for controlled crudes refined
in PADD V and for those refined in
PADDs I-IV. These separate obligations
would equalize average controlled crude
oil costs with average exempt domestic
crude oil costs in each region, and
achieve equitable distribution of the
benefits of access to price-controlled
crude oil.
In addition to the regional program,
we are developing a proposed
adjustment to the entitlement
obligations in PADDs I-IV which would
compensate for the price differences in
high and low sulfur content crudes.
We are also considering taking no
action at this time, Crude oil prices have
recently declined, and these net cost
disparities may be essentially removed
by market actions. The traditional crude
oil market, in which prices reflected
differences in quality and location, may
be restored. In That case, the domestic
price disparities other than in PADD V
would be essentially eliminated without
changes to the ent tlur.,ants program.
Decontrol of price-controlled crude oil is
also eliminating the impact of the
disparity.
Summary of Benefits
Sectors Affected: Crude oil refiners;
and marketers and consumers of
petroleum products.
Refiners with below proportions of
controlled crudes in PADDs I-IV and
refiners of California, Nevada, Arizona,
and Southern Alaska crudes in PADD V
would obtain lower costs. Some
marketers of products refined by these
refiners may obtain lower costs, but the
entire cost difference may not be passed
on to these marketers as some refiners
may not reduce selling prices. Similarly,
reductions in costs to marketers may not
be passed on to consumers.
Summary of Costs
Sectors Affected: Crude oil refiners;
and marketers and consumers of
petroleum products.
As the entitlements program
redistributes costs among refiners, those
firms that do not receive benefits incur
costs equal to the total benefits.
Therefore, all refiners other than those
in the benefiting group would incur
added costs. If market conditions allow,
some of these added costs may be
reflected in increased costs t? marketers
who in turn may increase prices to
consumers.
The proposals do not require
significant changes in data collection,
reporting, or computation and should
not impose any significant added
administrative or enforcement burden
on DOE or refiners.
Related Regulations and Actions
Internal: None.
External: None.
Active Government Collaboration
None.
Timetable
Public Comment Period-W days
following publication of NPRM.
Final Rule--January, 1981.
Available Documents
Regulatory Analysis-With M'RM.
NPRM-
Agency Contact
Daniel J. Thomas, Chief
Crude Oil Resales, Entitlements, and
Transfer Pricing Branch
Office of Regulatory Policy
Economic Regulatory Administration
2000 M Street, N.W., Room 7116
Washington, DC 20461
(202) 653--3233
Gasohol Marketing Regulations (10
CFR Parts 211* and 212*)
Legal Authority
Emergency Petroleum Allocation Act
of 1973, as amended 15 U.S.C. O 751 et
seq.
Reason for Including This Entry
The Department of Energy (DOE)
believes that amendments to the motor
gasoline allocation and price regulations
may be necessary to clarify the rights
and responsibilities of refiners and
marketers that enter the gasohol market.
The amendments also are significant
because of the degree of public interest
in the further development of gasohol.
Statement of Frobfem
Gasoline supplies can be stretched
further if increased use is made of
gasohol, which is a blend of ethanol (a
kind of alcohol) and unleaded gasoline.
Because the ethanol in gasohol can be
produced from domestic resources such
as grain, the President has set increased
use of gasohol as a national goal. This
would reduce our dependence on foreign
oil.
Existing Federal regulations on the
allocation of motor gasoline control the
distribution of gasoline in the United
States. Price regulations control the
methods by which (1) refiners allocate
costs to gasoline in total and to
individual grades of gasoline, and (2)
marketers set selling prices for
petroleum products. Unless these rules
are appropriate to the growth of the
gasohol market, It will be difficult for
new and existing businesses to plan
production and distribution of gasohol.
Therefore, DOE is considering
amendments to the regulations which
will clarify the criteria under which DOE
will assign supplies of unleaded gasoline
to blenders for gasohol production,
clarify the responsibilities of gasohol
producers in marketing gasohol pursuant
to the regulations, and amend the
methods by which refiners must allocate
ethanol costs and marketers set pricx3s
for gasohol.
The current regulations do not specify
criteria to be employed or procedures to
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 lane followed to assign unleaded gasoline,
To potential blenders. The only recourse
under the current regulations is to apply
for an exception through DOE's Office of
4earings and Appeals (OHA). As the
may be an inappropriate device to deal
,with increasing numbers of applications
Furthermore, unless the allocation
regulations were amended, gasohol
Saasohol would have to be allocated by
applying the regulations to the unleaded
gasoline which constitutes 90 percent of
the gasohol blend. This, however, may
be entirely inappropriate to the
development of a strong and viable
market for this product. Finally,
application of the current refiner price
rules to gasohol requires that the
refiners allocate ethanol costs among all
barrels of a grade of gasoline (e.g.,
unleaded regular gasoline). To the
extent that the costs associated with
blending and marketing gasohol must be
attributed to other grades of gasoline
and cannot be recovered in the price of
gasohol alone, a disincentive exists for
refiners to enter the gasohol market.
Correction of these problems would
supplement the strong position
previously taken by DOE in support of
the development of gasohol.
Alternatives Under Consideration
(A) DOE could do nothing at this time,
in which case the Office of Hearings and
Appeals would still provide an avenue
of relief for firms entering the gasohol
market. But there are major
disadvantages in inaction, including
continued uncertainty over rules
applicable to gasohol, possible unleaded
gasoline supply dislocation, and a
possibly unmanageable caseload for
()I IA,
!T3) Deregulation of gasohol must be
considered as an alternative, since price
and allocation controls on motor
gasoline will expire on September 30,
1981. This would allow gasohol blenders
and marketers to compete in the market
for the unleaded gasoline blend stocks
they need to mix with ethanol and
would not require a large bureaucracy to
ianplement. However, deregulation of
unleaded gasoline for gasohol blending
suggests enforcement problems with
other unleaded gasoline continuing
under controls.
(C) DOE could amend the allocation
and price regulations to provide for an
appropriate pasathrough of ethanol costs
to gasohol, specify the criteria by which
DOE will assign supplies of unleaded
gasoline to a potential gasohol marketer,
and create new provisions for the
allocation of gasohol within a refiner's
system.
Summary of Benefits
Sectors Affected: Gasohol refiners,
ethanol producers, gasohol marketers,
retailers, and users; and the general
public.
Allocation of unleaded gasoline for
blending with ethanol to produce
gasohol could provide a regulatory
framework within which ethanol fuel
production could increase, perhaps from
the present 60 million gallons per year to
as much as 300 million gallons per year
by 1982. Gasohol use may eventually
reach 3 billion gallons per year, or 3
percent of present gasoline
consumption, as a result of this and
other measures. In addition, use of
gasohol would also reduce dependence
on foreign oil (see the Report of the
Alcohol Fuels Policy Review, DOE, June
1979).
Summary of Costs
Sectors Affected: Refiners which
manufacture unleaded gasoline;
resellers and retailers marketing those
refiners' unleaded gasoline
production; ethanol producers; and
gasohol consumers in some areas.
Allocation of unleaded gasoline to
gasohol blenders reduces the amount of
unleaded gasoline available to other
distributors. Because we expect ethanol
production and blending to occur
primarily in the Midwest, near resources
to produce ethanol, this rule could result
in a shift of gasoline supplies to the
Midwest at the expense of other regions.
DOE has not yet determined whether
the gasohol, once blended, would flow
back to the regions affected by reduced
gasoline supplies. However, since the
proposed amendments are expected to
serve largely as a codification of certain
procedures, or modification of those
procedures, which are now undertaken
by the Office of Hearings and Appeals
to avert these costs, we are unable to
state definitely that direct costs will
occur or, if so. in what magnitude.
Related Regulations and Actions
Internal. DOE has already provided
certain price incentives for the
marketing of gasohol. DOE price
regulations permit gasohol resellers and
retailers to pass through as product
costs the cost of nonpetroleum-based
alcohol blended with gasoline (45 FR
20104. June 13, 1980), DOE has also
issued a rule to permit refiners to
allocate all of the coats of alcohol
among the various grades of gasoline (44
FR 69594, December 5, 1979). DOE has
issued a rule offering an entitlement
benefit (a payment related to the
difference in costs between imported
and domestic crude) to alcohol
producers of ethyl alcohol derived from
biomass that is blended with gasoline
for use as fuel (44 FR 63515, November 5,
1979). An Environmental Assessment
(EA) has been prepared and published
for public comment (45 FR 44961, July 2,
1980). On the basis of the Environmental
Assessment, DOE has made a finding of
no significant impact and determined
that it is unnecessary to prepare an
Environmental Impact Statement in
conjunction with this rulemaking.
Lxternal.? Gasohol marketing is
encouraged by the National Energy Act
motor fuel excise tax exemption on
gasoline/alcohol blends, which is worth
4 cents per gallon of gasohol (qt a 9 to 1
ratio) and 40 cents per gallon of ethanol
if blended with gasoline. This is
equivalent to $16.80 per barrel of
ethanol. This exemption will continue
through the year 1992 under the terms of
the Crude Oil Windfall Profits Tax Act
(P.L. 96--223, April 2, 1980, ? 232(a)).
Provisions of various State governments
permit whole and partial exemptions
from State motor fuel taxes for gasohol,
in an attempt to ensure that gasohol is
competitively priced.
Active Government Collaboration
DOE is cooperating actively with the
Alcohol Fuels Commission on this issue.
Timetable
Final Rule-Fourth quarter. 1980.
Final Rule Effective--30 days after
final rule issuance.
Available Documents
Regulatory Analysis (DOE/RG-0032).
Environmental Assessment (DOE/
EA-0107).
NPRM-45 FR 34846, May 22, 1980.
Draft Analysis issued May 1980
(DOE/RG-0032).
Environmental Assessment--.(DOE/
EA-0107), 45 FR 44961, July 2, 1980.
Transcript of Public Hearing-
Washington, DC, July 8 and 9, 1980; Des
Moines, Iowa, June 23, 1980.
Agency Contact
James 11. Berry, Analyst
Office of Regulatory Policy
Economic Regulatory Administration
Room 216E
2000 M Street, N.W.
Washington, DC 20461
[phone]
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 ~77~nnr~PlF~~l4~l~a~ ~O~A/A~/14~'~~21~t-iRd@~$~0~9$~Rd(1t~F(~>1~$~At3~~ncil ~~,*
Maximum Lawful Price for Unleaded
Gasoline (10 CFR 212.83*)
Legal Authority
Emergency Petroleum Allocation Act
of 1973, as amended, 15 U.S.C. ? 175 et
seq.
Reason for Including This Entry
These proposed regulations could
have an annual economic effect of over
$180 million.
Statement of Problem
The present regulations may
contribute to unleaded gasoline price
differentials between refiners which
may lessen the competitiveness of
independent marketers. Also, the
current rules may encourage refiners to
market a premium unleaded gasoline
with an unnecessarily high octane
although the production of an
unnecessarily high octane gasoline is
economically inefficient. Also, lack of a
satisfactory higher unleaded octane
gasoline could lead to fuel switching and
contribute to unnecessary pollution of
the environment.
Generally, under the current price
regulations, the maximum lawful price
refiners may charge for unleaded
gasoline is the May 15, 1973, selling
price of unleaded gasoline plus
increased product and nonproduct costs.
If a refiner did not sell unleaded
gasoline on May 15, 1973, or 30 days
prior thereto, as was the case for most
refiners, the maximum lawful selling
price is imputed. This imputed selling
price is the weighted average selling
price charged for leaded gasoline on
May 15, 1973, of the same or nearest
octane as the unleaded gasoline, plus
one cent.
Experience has shown that some
automobiles do not function
satisfactorily on the minimum required
grade of unleaded gasoline, 87 octane
(R+M)/2
(Research Octane Number + Motor Octane
Number)/2.
Research shows that a 90 octane
(R+N,!)/2 unleaded gasoline would meet
the requirements of almost all of these
automobiles. However, a refiner newly
marketing this grade would have a base
price which still would be imputed from
the May 15, 1973 selling price of the
nearest octane leaded regular grade of
gasoline. The current regulations
encourage a refiner to increase the
unleaded gasoline octane to bring it
nearer to the premium leaded grade,
generally 94 octane (R+M)/2, sold on
May 15, 1973. By consuming more crude
oil than is necessary, this increase, this production is that motorists
which will vary among refiners based on
their refining capabilities, is wasteful
and unnecessarily expensive to refiners
and thus to motorists.
For most refiners, the comparable
leaded grade to 90 octane (R +M)/2 was
their "regular" leaded grade of gasoline,
usually 89 octane (R+M)/2. However,
some refiners were marketing a
subregular grade whose octane was
closer to the minimum unleaded grade
and, in at least one instance, a refiner
was marketing only a premium leaded
gasoline. Those refiners with actual May
15, 1973 sales of unleaded gasoline
generally had actual base prices which
were higher than those imputed by other
refiners, making their prices, for
unleaded higher.
This proposal would tend to remove
inequities imposed by the prior
regulations by decreasing base price
differentials for unleaded gasoline
among refiners and thus improve the
competitive positions of independent
marketers by removing price disparities
in their purchase price.
Alternatives Under Consideration
The proposal provides for two
alternatives for refiners to calculate a
price for unleaded grades of gasoline.
One proposal would recognize the
higher cost of improving unleaded
octanes by permitting refiners to
allocate increased costs to different
grades of unleaded gasoline at their
discretion. Under current regulations,
refiners may not automatically treat
new grades of unleaded gasoline as
separate product categories. DOE
believes that the proposal will remove
the disincentive for the introduction of
new grades and will encourage the
production of unleaded gasoline with
more efficient octane ratings. Firms that
introduce new grades of unleaded
gasoline will automatically be permitted
the pricing flexibility to apportion
increased costs as the refiners deem
appropriate to meet market conditions.
This approach would not provide any
additional potential revenues because it
involves the reallocation of product and
non-product costs. It would not provide
any additional incentive to refiners to
market a higher grade of unleaded
gasoline.
The second alternative offers several
options for refiners to use in establishing
a higher base price for octane increases
over the minimum required grade of
unleaded gasoline. We based these
options on the assumption that it higher
base price, which includes a profit
element, is necessary to encourage
production of a premium unleaded
gasoline. The rationale for stimulating
requiring this grade will otherwise
purchase a higher octane grade of
leaded gasoline and increase air
pollution. Any of the base price increase
options, however, are less costly by .5 to
I cent a gallon to the public than the
present regulation would be if the
refiner needlessly raised the unleaded
octane to benefit from higher pren,iur
leaded gasoline base prices under the
present regulation. These options
remove the disincentive for the
production of unleaded gasoline with
octane ratings close to the regular
leaded gasoline sold on May 15,1973
because current regulations require that
the imputed selling price for such
unleaded be calculated on the basis cif
the lower priced, lower octane leaded
gasoline.
Summary of Benefits
Sectors Affected., Refiners, reseller:;,
retailers, and consumers of unleaded
gasoline; and the general public.
The effect of the proposed changes
would be to decrease base price
differentials for unleaded gasoline
among refiners. This should translate
into prices to independent marketers
and resellers which are more
comparable to prices being charged 1-y
other marketers and contribute to the
improvement of their competitive
positions. In addition, motorists shunts
have a second grade of unleaded
gasoline available at a lesser price than
would otherwise be the case if they
purchased an octane that is
unnecessarily high. The availability of
the second, higher octane grade may
help prevent misfueling (the switching of
a'regular grade for an unleaded ones) :grid
the resultant pollution of the air.
Misfueling occurs because motorists
desire a higher octane gasoline to
improve engine performance. The
Environmental Protection Agency (E1 'A)
contends that misfueling significantly
contributes to air pollution.
Summary of Costs
Sectors Affected: Refiners, resellers.
and retailers of unleaded gasoline.
The proposed changes could result in
no increased costs to the consumer.
Additional information is required to
confirm this and will be incorporated. if
a final rule is adopted, in a final
Regulatory Analysis. We currently
believe that the proposed revisions will
be less costly to the public than the
present regulations and that they will
restrain potential waste of petroleum
products.
Related Regulations and Actions
None,
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 Fed4 I$d fFvm. llQ i2PPAIA904ov94AT'2PF,Ai7 PRB esul'aP10Co 10. 38 X97727
None.
Timetable
Final Rule-December 1980.
Final Regulatory Analysis-Fourth
Quarter, 1.980.
Available Documents
NPRM---45 FR 54094, August 15, 1980.
Public comments on above NPRM,
.and comments from public hearing
(September 11, 1980).
All documents are available in the
DOE Freedom of Information Reading
Room, Forrestal Building, Room 5B-180,
1000 Independence Avenue, S.W.,
3,'t 'ashington, DC 20585.
Draft Regulatory Analysis-August
1980.
Agency Contact
Chuck Boeh), Acting Director, Price
Regulation
Office of Regulatory Policy
Economic Regulatory Administration
t000 M Street, N.W.. Room 7116
Washington, DC 20401
[phone]
Motor Gasoline Allocation Regulations
Revision$ (10 CFR Part 211*)
Legal Authority
i aiergency Petroleum Allocation Act
r ,f 1973, .as amended, 15 U.S.G. ? 751 et
Fc:cf.
.laason for Including This Entry
The Department of Energy (DOE)
motor gasoline allocation program has a
ignificant influence on the energy
vector of the Nation's economy, Changes
o the overall regulatory scheme can
save potential impacts upon every level
,f supply (lawn to retail outlets and their
,ustonaers. In addition, if the changes we
)ropose succeed in reducing gasoline
ines at retail stations during any future
apply shortages, motorists will benefit
is they will lose less time from work
nil waste less fuel waiting in lines.
iatcment of Problem '
DOE's Mandatory Petroleum
Xocation Regulations apply to all
omestic transactions in motor gasoline.
he regulations operate to allocate the
rotluct to historical purchasers as
ieasured during the base period of
lovember 1977 .through October 1978.
')here supplies are inadequate to meet
asp period obligations, suppliers are
squired to recognize certain priority
ses; and to apply prorated reductions
suitably among their customers.
Motor gasoline markets are constantly urban and suburban areas. These areas
changing to reflect new marketing appear most prone to gasoline lines
techniques, evolving consumer because travel and gasoline demand
preferences, improvements in efficiency, paterns appear to have actually shifted
and competitive advantages among during the generalized shortfall that
firms. In this context, a rigid allocation occurred in 1979. This shift apparently
system based on historical relationships was the result of reduced intercity
cannot respond smoothly to recent shifts travel and travel to vacation and other
in demand, and this can result in rural areas by motorists who became
inadequate allocations of gasoline to concerned about the availability of
areas of greatest need. The principal gasoline. There was relatively less of a
means to reflect such shifts and changes reduction of driving within urban
in marketing practices are contained in regions where a lower percentage of the
procedures available under the program
for allocating gasoline to new retail
outlets and increasing allocations to
existing firms. Additional flexibility is
available through the program's State
set-aside provisions, under which State
Governors are authorised to allocate up
to 5 percent of gasoline delivered to the
State to meet emergency supply
conditions. The allocation program also
permits large or "prime" suppliers to a
State to redirect a portion of supplies to
areas in need as they see fit. However,
the evidence to date suggests that these
provisions have not been used to
equalize regional impacts resulting from
localized shortfalls.
A further contributing factor relating
to regional supply disparities that have
been experienced has been the relative
differences in suppliers' allocation
fractions. The allocation fraction is the
primary measure of a supplier's ability
to meet the needs of its historical
customers. Each month, a supplier to
required to offer to its historical
purchasers a volume of gasoline equal to
the volume purchased during the same
month of the November 1977 through
October 1978 base period. When a
supplier's total available supply is less
than its total obligations, the firm -must
reduce on a pro rata basis the amount
supplied to its non-priority purchasers
by the application of an allocation
fraction. The numerator of the allocation
fraction represents a supplier's
allocation supply less obligations to
priority use customers and State set-
aside volumes. The denominator
represents the supplier's base period
obligations. If the allocation fraction is
less than 1.0, all purchasers whose
allocation level is subject to the fraction
are offered only that portion of their
base period volumes.
During the 1979 summer driving
season, 18 States and the District of
Columbia experienced moderately
severe or severe gasoline lines at the
retail level, according to DOE's Energy
Liaison Center, The available evidence
suggests that gasoline lines and
apparent shortages at the retail level
occurred mainly in densely populated
driving is discretionary.
present allocation system remains
unchanged, the same parts of the Nation
which suffered most of the gas lines in
1979-mainly urban areas-may again
experience lines during a future supply
shortage. To date, the allocation system
has not provided sufficient flexibility to
respond to these apparent demand
shifts, and motorists in urban areas have
had to bear a disproportionate share of
the hardships associated with gasoline
shortages.
On June 0, 1986, an NPRM was issued
presenting for public comment
alternative proposed revisions to the
motor gasoline allocation program (45
FR 40078, June 12, 1980). The pending
rulemaking proceeding is intended to
identify and explore the extent of such
inequities and to provide a public forum
to consider the merit of proposed
alternative revisions. This rulemaking
proceeding is based upon a belief that it
is prudent to identify and explore
various options for improving the ability
of our regulations to minimize the
adverse effects of future shortages
experienced at the retail level.
In addition, we have also become
aware of certain unintended effects of
our regulations. We are concerned that
certain independently operated retail
stations may be experiencing
competitive difficulties as a result of
their relative inability to obtain
increased allocations for increased
demand as easily under our regulations
as many wholesaler- and refiner-
operated stations. The pending
proceeding is also intended to identify
and explore the extent of such inequities
and to provide a public forum Jo
consider the merit of proposed
alternative revisions.
Alternatives Under Consideration
Each of the alternative proposals that
has been offered is being explored
thoroughly and extensive opportunity
for public comment and discussion will
be provided. On the basis of full
consideration of each, DOE may
determine to adopt some or all of the
following proposals, or may determine
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 that no action is warranted and
terminate the proceeding.
Among the possible alternative
regulatory changes that have been
proposed are:
(A) More restrictive standards for
making allocation assignments for new
retail service stations and methods of
limiting present interim supply
procedures.
(B) More equitable standards for
making allocation adjustments to
existing service stations.
(C) Increased flexibility for refiners
and retail marketers to shift volumes
within their own distribution system in
response to changing demand.
(D) Clarification of existing
regulations to authorize State set-aside
officials in emergencies to require a
supplier of one brand of gasoline to
deliver gasoline to other firms selling a
different brand in order to meet
emergency supply conditions.
(E) Authorization of resellers
supplying more than one brand to
maintain and base deliveries on
separate allocation fractions.
(F) Substitution of an improved
mechanism for providing allocations to
geographic areas that have experienced
unusual growth.
(G) Increased authority for State
Governors to require intrastate
redirection of gasoline in order to meet
emergency supply conditions.
(H) Designation of vehicle leasing
firms as consumers rather than resellers
of gasoline (for purposes of the
allocation regulations only).
Summary of Benefits
Sectors Affected: Refiners producing
gasoline; wholesale and retail
gasoline suppliers; wholesale and
retail gasoline purchasers; and State
governments.
The objective of the pending
proposals to revise the allocation
regulations is to reduce the distortions
that may be occurring as a result of the
program's inability to respond to long-
term and temporary demand shifts. All
of the identified sectors affected can
benefit from improvements in the
regulatory scheme that permit
competition to direct supply toward
demand. The qualitative benefits of
adopting several of the proposed
alternative revisions described above
(A-Ii) are summarized briefly as
follows:
(A) and (B)-The proposals to restrict
new station access to increased
allocations of gasoline and to expand
existing station access to increased
allocations would tend to alleviate
apparent inequities being felt by certain
independent gasoline station dealers
tinder the current provisions. These artifical effects of the regulatory
changes would grant access to increased program.
supplies to these groups on an equal (F)--The proposal '.o modify the
basis and would tend to lend to currently available adjustment to reflect=
increased economic efficiencies. The unusual growth could, if adopted,
h
l
c
anges wou
d remove a disincentive
that may currently exist against
upgrading and improving existing retail
stations. This would lead to lower cost
operations at the retail level and
ultimately to lower prices paid by (H)--The proposal to reclassify
consumers. Adoption of these proposals vehicle leasing firms as consumers
would also introduce increased rather than as resellers under the
competition among firms operating at allocation program would tend to
the retail level and remove any artificial conform with the actual business
advantages that the current program fractions of such firms and enable them
makes available to firms in a position to to obtain adequate supplies of unleaded
enter a market by constructing new gasoline for their essentially new car
stations. fleets.
(C)-The proposal to permit ref iners
and other retail marketers increased
flexibility to shift allocations within
their own distribution systems would
enhance these firms' ability to respond
to demand changes since the base
period. Added flexibility to respond to
real changes in the marketplace could
contribute to more efficient distribution
systems and decreased costs.
correct a seasonal bias that may be
present. Whether the correction would
be worth the administrative costs
associated with this change, however. is
Summary of Costs
Sectors Affected: Refiners producing
gasoline; wholesale and retail
gasoline suppliers; wholesale and
retail gasoline purchasers; and State
and Federal government.
(A) and (B)-The proposals to restrict
new station access to increased
allocations and to expand existing
(D) and (G)-The proposals to station access to increased allocations
authorize State officials in implementing could disrupt supplier/purchaser
relationships State set-aside program to require administrative tcots a added
suppliers to make the product available identified ed eosts among the
to firms operating under a different sectors affected and the
brand and to ingr refiners if redirect Federal Government. It Is estimated that
granting supplies could improve the opportunity i apply existing service the
capability of the set-aside program to allocations for increaser)
respond to emergency supply conditions. significantly could administrative Currently, many States have adopted y to admrative costs of
branding laws that prohibit such "cross applications. Regional I It is is in re estigiprocessing such
branding" and the proposal would apply percent rcent increincr. in reonal staff a a a 25
only to States that have no such increase gional may be
restrictions. The increased flexibility required to respond to existing station
provided to States under the proposals applications.
nc eased
could be useful In resolving unusual or and other retail proposal markeetters inc permit
extreme supply y problems. flexibility to reassign allocations within
(E)-The proposal to authorize their own distribution systems could
wholesalers that supply more than one result in increased administrative costs
brand of gasoline to maintain separate to such firms in aceoan`ing for changed
allocation fractions would provide allocations. Some suppliers may be in a
added flexibility to such firms under the position to use the flexibility to exert
program. Currently, firms supplied by competitive pressure on other firms
more than one brand must apply a within a market. To some extent, this is
uniform allocation fraction to all a benefit that, if abused, could lead to
purchasers irrespective of brand. Under increased concentration.
the proposal, such firms would be (D) and (G)-The proposals to
permitted to place their customers on authorize State officials to assign
separate allocation fractions according suppliers to make the product available
to brand of gasoline. If adopted, this to firms operating under a different
proposal would tend to relate a firm's brand and order refiners to redirect the
supply condition as measured by the product to respond to emergencies
allocation fraction to the actual supply within their States would also add
position of the ultimate refiner whose needed flexibility during,; a shortage. If
brand is associated with its gasoline exercised, the cross branding authority
products. This would operate to make could be inconsistent with the brand
the allocation program more in line with identity objectives of larger firms. Motor
actual supply conditions among firms gasoline, however, tends to be a readily
and could thereby tend to reduce the exchangeable product and making this
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authority available to States in an
emergency could be a benefit to respond
to a gasoline shortfall within a State.
(E)-The proposal to authorize
wholesale purchaser-resellers that
supply more than one brand of gasoline
to maintain separate allocation fractions
could grant supplier flexibility that
could he used to the detriment of those
of his purchasers who do not sell a
major branded product. Possible effects
of discrimination among such farms' non-
branded purchasers are being examined
and compensating limitations are under
consideration.
(F)-The proposal to modify the
current unusual growth adjustment
could entail significantly increased
administrative costs to suppliers and
purchasers of gasoline and to the DOE.
The large number of base period
relationships that could be affected by
the new provisions could result in
significant disruptions that may not be
worth the mitigating effects of the
proposal modification.
(H)-The proposal to classify vehicle
leasing firms as consumers of gasoline
under the allocation regulations could
potentially affect a large number of base
period relationships. The modification, if
adopted, would have little or no Impact
on the supply rights of these firms
except for unleaded gasoline
entitlements during a severe shortage.
Otherwise, the modification should
result in minimal increased
administrative costs.
Related Regulations and Actions
Internal: An NPRM entitled "Motor
Gasoline Allocations; Adjustments and
Downward Certification" (44 FR 69962)
was issued on December 5, 1979. On
April 26, 1980, DOE issued a notice of
intent not to adopt as a final rule its
principal proposal on downward
certification. A draft Regulatory
Analysis was published at 45 FR 58788
(September 4, 1980). The alternative
proposals remain under consideration.
External: None known.
Active Government Collaboration
DOE is actively cooperating with the
Small Business Administration in the
portions of this proposal concerning
assignments for new retail outlets and
adjustments for existing retail outlets,
timetable
Final Rule-December 1980.
Final Rule Effective-30 days after
issuance,
. vailable Documents
Draft Regulatory Analysis (DOE/RG-
1037).
NPRM--45 FR 40078, June 12,1980,
Public comments (hearings held July
17, 21, 24, 28, 29 in Atlanta, Kansas City,
San Francisco, Washington, D.C.).
Agency Contact
William E. Caldwell, Assistant
Director
Petroleum Allocation Regulation
Office of Regulatory Policy
Economic Regulatory Administration
2000 M Street, N.W., Room 7202-F
Washington, DC 20461
[phone]
Motor Gasoline-Downward
Certification (10 CFR 211.107')
Legal Authority
Emergency Petroleum Allocation Act
of 1973. 15 U.S.C. 1751 et seq.
Reason for Including This Entry
This proposed rulemaking is of great
public interest; it will examine possible
revisions to the Mandatory Petroleum
Allocation Regulations that could
improve the capacity of the gasoline
marketplace to distribute available
supplies in an equitable manner during a
shortage. The pending proposals present
alternative provisions that would
require certain wholesalers of gasoline
to report or certify to their suppliers
reductions In their supply obligations
attributable to closed service stations or
other customers they previously
supplied.
Statement of Problem
Under the allocation program, DOE
determines a wholesaler's allocation
entitlements by referring to the firm's
purchases during a historical base
period, which is currently November
1977 through October 1978. When a
wholesaler's base period allocation
obligations are increased by an
Economic Regulatory Administration
(ERA) assignment or adjustment, the
firm may adjust upward Its allocation
entitlements by certifying to its suppliers
the corresponding increase. Ilowever,
when a wholesaler's obligations
decrease because a relationship with a
base period purchaser is terminated
(e.g., a retail outlet it supplies goes out
of business), there is no equivalent
mandatory procedure to certify to its
suppliers the corresponding decrease,
except where previous upward
adjustments have been granted to the
firm.
The downward certification proposals
are designed to assure that a
wholesaler's entitlements from suppliers
match more closely the firm's actual
obligations to its purchasers under the
program. The changes proposed are
intended to restore this balance and to
resolve the distortions the absence of a
downward adjustment is having on the
program's effectiveness as a measure of
actual supply conditions.
Alternatives Under Consideration
On November 30, 1979, an NPRM (44
FR 69902, December 6, 1979) was issued
presenting several alternative
downward certification proposals. After
reviewing the extensive public
comments received on the alternative
proposals, ERA announced on April 21,
1980 that it would not adopt the
principal proposed provision and that
the rulemaking proceeding would be
continued to consider the merit of
adopting the alternative proposals (45
FR 28148, April 20, 1980). The alternative
proposals remain under consideration,
and on August 28, 1980, ERA issued a
draft Regulatory Anaylsis of the
alternative proposals (45 FR 58788,
September 4, 1980). The alternative
proposals under consideration are as
follows:
The first would require downward
adjustment only as a condition
precedent to receiving an allocation
increase. Under this alternative, certain
wholesalers referred to as "wholesale
purchaser-resellers" under the
regulations would not be required to
decrease their allocations when their
supply obligations decrease except to
the extent that they wish to certify
allocation Increases to their suppliers.
. The second would require
adjustments to reflect an allocation
decrease when retail outlets close but
would not require an adjustment to
reflect an allocation decrease when a
reseller is relieved of its obligation to
supply certain wholesale or bulk
purchaser customers.
The third would require a wholesaler
to report it decreased obligation only
when a supplier's base period
obligations are assumed by another
supplier in accordance with the
regulations. To a varying extent, ERA
requlres applicants to account for the
reduced obligation when its Regional
Offices approve applications for such
reassignments.
The fourth would require a wholesaler
to report a decreased allocation _
obligation only for decreased
obligations due to station closings that
occurred subsequent to the end of the
current base,period.
The fifth would apply prospectively
from the date of the adoption of a final
rule. Under this alternative, wholesalers
would be required to report to their
suppliers decreased allocations for lost
business occurring in the future.
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In connection with these alternatives,
ERA stated that none are mutually
exclusive, and that features from more
than one alternative could be included
in a final rule.
Summary of Benefits
Sectors Affected: Wholesale and
retail gasoline suppliers; and
wholesale and retail gasoline
purchasers.
If adopted, a procedure that would
require wholesalers to notify their
suppliers of reduced needs by certifying
a downward adjustment in the
allocations of gasoline would tend to
restrict the present ability that some
wholesalers have under the rule to
increase their share of a market solely
by a complex manipulation of the
allocation regulations. One objective of
the allocation program is to minimize
interference with market mechanisms
and this may be frustrated in cases
where wholesaler expansion is
permitted beyond that which would
occur in a free market. In the context of
a generally fixed amount of available
supply, the increases that some
wholesalers are able to obtain under the
present rules may often be made at the
expense of existing retail outlets that
have no comparable means of obtaining
allocation increases. No action in this
proceeding would continue the
favorable treatment wholesalers
receive, and this could. over the long
term, contribute to economic
inefficiency, The adverse impacts on the
independent retail segment of the
market would also continue.
A downward certification procedure
would reduce wholesalers' flexibility to
shift allocation volumes within markets
and divert the product unlawfully to
purchasers having no allocation
entitlements under the regulations.
These restrictions would operate to
contain motor gasoline within the
allocation program and thereby assure
that the product is available to firms
having supply rights under the program.
Adoption of a downward certification
requirement could increase the allocable
volumes of motor gasoline to certain
independently operated retail service
stations.
The various proposed downward
certification provisions that are under
consideration are being reviewed in
conjunction with the pending revisions
to the motor gasoline allocation
programs as set forth in the Calendar
entry herein entitled "Motor Gasoline
Allocation Revisions (10 CFR Parts 205
and 211.)"
Sectors Affected.- Refiners producing
gasoline; wholesale and retail
gasoline suppliers; and wholesale and
retail gasoline purchasers.
Administrative costs to affected
wholesalers, suppliers of wholesalers,
and the ERA would be increased if a
procedure were adopted to require
wholesalers to report and certify to
suppliers decreases in supply
obligations attributable to closed service
stations and other lost accounts.
Wholesalers subject to such reductions
would lose their flexibility under the
present program to shift product to
areas experiencing stronger demand,
and this could lead to distortions and
inefficiencies in the marketplace.
Adoption of such a procedure would
also restrict certain wholesaler
increases in market share that have
been occurring as a direct result of the
absence of a downward certification
procedure. Some costs could be
associated with this result because an
expanding independent marketing
segment can operate to assure that
competition achieves its goal of
improving distribution of supplies and
restraining price.
Related Regulations and Actions
Internal- An NPRIIM entitled "Motor
Gasoline Allocation Regulations
Revisions" was issued on June 6, 1980
(45 FR 40078). These proposals remain
under consideration and any action
taken thereon may take into account
possible aspects of the downward
certification proceeding.
External: None.
Active Government Collaboration
None.
Timetable
Final Rules To be determined.
Final Rule Effective-30 days after
issuance.
Available Documents
Draft Regulatory Analysis (45 FR
58788, September 4, 1980).
NPRM-44 FR 6996 December 6,
1979.
ERA decision to continue rulemaking
proceeding to consider merit of adopting
alternative proposals (45 FR 28148, April
28, 1980).
Public comments on NPRM and
comments on public hearings (January
31 and February 1, 1980).
Agency Contact
William E. Caldwell, Assistant
Director
Petroleum Allocation Regulations
Office of Regulatory Policy
Economic Regulatory Administration
Room 7202-F
2000 M Street, N.W.
Washington, DC 20461
[phone]
DOE-ERA
Natural Gas Curtailment Priorities for
Interstate Pipelines (10 CFR Part 580')
Legal Authority
Natural Gas Act, 15 U.S.C. ? 717 et
seq; Natural Gas Policy Act of 1973,
? ? 401, 402, 403, 15 U.S.C. ? ? 3391-3393;
Department of Energy Organization Act,
?? 301(b), 402(a)(1)(E), and 501. 42 U.S.C.
?? 7151(b), 7172(a)(1)(e), and 7191; E.U.
11790 (39 FR 23185), E.O. 12009 (42 FR
46287).
Reason for Including This Entry
The Department of Energy
Organization Act (DOE Act) makes the
Secretary of Energy responsible for
reviewing and establishing natural gas
curtailment (rationing) priorities. This
rule will implement the curtailment
priorities established by the Natural Gas
Policy Act (NGPA) and will address, as
indii,ated by our review, any other
changes we determine to be necessary.
We are including thia.nile because of its
potentially far-reaching effects on
interstate pipelines and local
distributors and their natural gas
customers.
Statement of Problem
Natural gas curtailment priorities deal
with the manner in which natural gas
will be allocated to customers of
interstate pipelines when there are
supply or capacity shortages. Under the
DOE Act, the Secretary of Energy is
responsible for establishing and
reviewing priorities for curtailments.
The Secretary of Energy has delegated
this authority to the Administrator of the
Economic Regulatory Administration
(ERA). Under the DOE Act, the Federal
Energy Regulatory Commission (FERC)
administers and implements the
curtailment policies developed by the
ERA.
Historically, FERC's predecessor, the
Federal Power Commission (FPC), had
exclusive Federal jurisdiction under the
authority of the Natural Gas Act (NGAI
for curtailment of natural gas in
interstate pipelines. The FPC dealt witY
curtailment of natural gas on a case-by-
case basis. From the rulings issued in
these cases by the FPC, a priority
system developed which ranked end-
users of natural gas from high (last to be
curtailed) to low (first to be curtailed).
The FPC priority system generally
placed residential and small commercial
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:users in the highest priorities and
interruptible, large-volume, industrial
users in the lowest, first-curtailed
"priorities.
Several considerations shaped FPC's
approach to the curtailment priority
system: first, the importance of gas used
to protect health, safety, and other
human needs; second, the operational
difficulty of physically cutting off or
reducing service to residential and small
commercial customers; third, the
differences in the costs that different
kinds of end-users would experience in
converting to an alternate fuel.
This review and rulemaking process
will implement the provisions of the
NGPA that mandate the establishment
of certain curtailment priorities.
Additionally, the rulemaking provides
an opportunity for review of gas -
curtailment priorities, adopted by the
FPC in 1973, in light of current
circumstances and requirements.
Specifically, the review of curtailment
priorities has focused on the following:
(1) High priority and essential
agricultural uses. Section 401 of the
NGPA requires the Secretary of Energy
to prescribe a rule restricting interstate
pipelines from curtailing the
requirements of "high priority users"
(e.g., schools, hospitals, residences) and
of essential agricultural uses that the
Secretary of Agriculture has certified as
necessary for full food and fiber
production. Essential agricultural uses
may be curtailed only to meet needs of
"high priority users" or when FERC
determines in consultation with the
Secretary of Agriculture that an
alternate fuel is economically
practicable and reasonably available.
DUE has previously issued a rule
implementing these priorities (see CFR
Part 580, 44 FR 15642, March 15, 1979).
DOE anticipates that the substance of
that rule will be incorporated into the
present rulemaking.
(2) Industrial process and feedstock
uses. Section 402 of the NGPA directs
the Secretary of Energy to prescribe a
rule limiting the circumstances in which
an interstate pipeline may curtail gas
supplies used in an industrial process or
as a feedstock. Use as a feedstock refers
to gas employed as an ingredient of the
and-product, as distinguished from gas
used to power production machinery.
(3) Emergency allocation authority.
lelevant sections of the National Energy
kct (NEA) authorize the President to
ieclarc a natural gas supply emergency,
n,hich could trigger various
;onsequences. As an example, the
)resident could authorize an interstate
sipeline to make emergency purchases
rom intrastate pipelines under short-
erm contracts. This authority, while
outside the scope of the curtailment
priority system itself, must work in
concert with it. Therefore, this rule will
consider the effects of the NEA
emergency authorities on the
curtailment priority system. Decontrol of
natural gas prices will not affect the
curtailment priorities established by this
rule.
Alternatives Under Consideration
(A) Maintain a system similar to the
present system as developed by the
FPC, while making those changes
required by the NGPA and improving
the present system by facilitating free
flow of gas between systems. As
compared to making no change in the
present system, this alternative would
have economic effects on the order of
magnitude of $1 billion. These effects
would be offset by $0.9 billion, which is
the estimated cost of establishing the
essential agricultural priority required
by the NGPA. If the present system is
also improved by allowing a
"percentage limitation" option, in.,
allowing lower priorities not to be
curtailed completely before a higher
priority is curtailed, this would provide
further reduction in the cost of the
curtailment system. The net benefit of
this alternative would be on the
estimated order of magnitude of $1.2
billion ($1 billion plus $1.1 billion minus
$0.9 billion).
The present curtailment system also
has the advantage of being familiar to
both gas suppliers and users, which
would minimize the uncertainty that
could otherwise lead to additional costs
if the system were changed and could
offset most of the benefits of a newer
and more complicated system such as a
"pricing" system. However, a pricing
system could allocate natural gas to
users more precisely on the basis of cost
benefit analysis.
(B) Develop a curtailment system as in
alternative (A), but updating the base
period from which requirements are
measured. Systems using a fixed base
period instead of rolling or updating the
base period are likely to cause increases
in shortages costs if they switch to
another fuel under the present Federal
curtailment approach. A rolling base
period involves updating the index of
gas requirements from which
curtailments are measured. In rolling the
base period, the total supply of gas
available to all distribution companies
served by a pipeline would not be
affected, but the supply would be
reallocated in proportion to the current
end-use profiles of the pipeline
distribution companies' customers
which may have changed over time.
Although this updating process may
give a more current picture of the end-
use of the gas delivered, it would
increase the costs of curtailments by
about $0.2 billion per year, if there were
a complete shift to a rolling base period
in the present Federal plans. Suppliers
and users have instigated self-help
measures obtaining their own supplies
of gas under the present curtailment
system, and the cost of disrupting these
self-help projects would most likely
offset any benefits derived from the
updating process.
(C) Develop a pro-rata system that
reduces all users' deliveries by a
percentage equal to the percentage of
supply reduction. It Is tempting to think
that the apparent fairness of pro-rata
curtailment justifies this alternative and
that users with low conversion costs
would switch to another fuel, allowing a
gradual evolution to an optimal
curtailment system based on pro-rata
allocation, but this is not the case.
Unfortunately, switching to a pro-rata
system would destroy good parts of the
present system and eliminate the
benefits from users who have already
adjusted to curtailments under the
present system.
The present FERC curtailment policy
provides for pro-rata allocation within
each priority category. Since the present
categories have been formed by an end-
use system that does recognize
differences in shortage costs, a full pro-
rata plan is bound to Increase costs. It
will lump all users into one category
even though surveys show that there are
widely different costs. The 1976-1977
shortage had impact costs of $54/Mcf
(thousand cubic feet) of shortfall in
higher priorities and only $2/Mcf in
lower priorities. Pro-rata is less precise
than the end-use approach in present
curtailment plans for identifying uses
which have high costs of conversion to
other fuels.
In addition to causing higher shortage
costs, pro-rata is not practical and not in
accordance with now legislation. For
example, pro-rata cannot be applied to
residential and small commercial users
for operational reasons. It cannot be
applied to "agricultural uses" and
"essential industrial process or
feedstock uses" because of stipulations
in the NGPA.
Weather and price controls combined
create shortages that cause high
shortage costs under pro-rata. There are
high costs of fuel switching, and there
are high impact costs for users who
cannot justify fuel substitution. Even
when feasible, fuel substitution is
expensive when the investment is only
for infrequent shortages.
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(D) Use some form of "pricing" or
bidding approach to distribute available
gas supplies during periods of
curtailments instead of a rationing
system, e.g., end-use customer bidding
for available gas supplies. Fuel
substitution costs vary greatly, even
among users within the same carefully
designed end-use priority categories;
precise ranking of users in line with
substitution costs may not be possible
except under some type of pricing
approach. Surveys reveal that
substitution costs range from $2/Mcf to
$20/Mcf even within one end-use
category, as presently constituted; in
addition, shortage impact costs range
from $0.10/Mcf to $100/Mcf among users
within one end-use priority class due to
large impacts as curtailment reaches 100
percent.
To be practical, a pricing system must
be implemented at the end-user level.
This would involve changes in concepts
for State regulation and would require
distribution company participation.
There appears to be no practical
implementation plan for a pricing
system with present Federal constraints
and using only interstate pipeline
participation.
Additional studies are necessary to
determine if a practical pricing approach
could be developed and whether it could
attain most or all of the $3.6 billion
savings estimated in our Regulatory
Analysis as the net national benefit of
switching from the present system to
some type of pricing system. These
studies could also determine if
implementation of a pricing approach
would have significant costs that might
affect the annual gains. A thorough
study of a pricing approach prior to any
major change in curtailment policy
would be valuable for outlining the best
long-run solution to managing natural
gas curtailments.
We are also considering whether the
guidelines should apply strictly to all
interstate pipelines which transport gas,
or whether FERC should be allowed to
depart from strict application of the
general policy under the ERA rule to
account for the differing circumstances
of individual pipelines, making
adjustments where they are necessary.
Individual pipelines vary as to number
and types of customers and suppliers of
gas, as well as to the conditions under
which they operate, such as weather
conditions in their particular service
areas.
The present Federal approach to
curtailment priorities is based on end-
use; it reflects costs of substitution and
has the benefit of being familiar to
suppliers and users after years of
operation. NGPA mandates some
changes in priorities, but no further
changes are warranted because benefits
will not justify the greater costs and
uncertainty from changing priorities.
However, there are worthwhile
modifications that can be made to the
overall functioning of the present
system. For example, the total costs of
natural gas curtailments could be
reduced if priority systems and natural
gas policies in general could encourage
freer flow of gas from users with low
costs of fuel substitution to users with
high costs of substitution.
The proposed rule concerns all
priority-of-service categories related to
curtailment of natural gas deliveries by
interstate pipeline companies. The rule
is consistent with the majority of the
comments responding to our Notice of
Inquiry (NOI) and the findings of our
Regulatory Analysis, and adopts in
substance our previously issued final
rule regarding essential agricultural
uses. Priorities established by the
proposed rule, with Priority One to be
the last curtailed, are as follows:
(1) high-priority, which includes
residential, small commercial (less than
50 Mcf on a peak day), schools,
hospitals, plant protection, and
institutions such as prisons.
(2) Essential agricultural uses,
certified by the Secretary of Agriculture,
without alternate fuel capability.
(3) Essential industrial process and
feedstock uses as defined by the
proposed rule, without alternate fuel
capability.
(4) All gas use less than 300 Mcf per
day not included in Priorities One
through Three, including large
commercial users.
(5) All other users not included in
Priorities One through Four, with
volumetric subcategories, i.e., larger
users would be curtailed before smaller
users.
The first three priorities are defined in
accordance with the language in Title IV
of the NGPA and our final rule
governing priorities for essential
agriculture use. The 300 Mcf per day
cutoff level of Priority Four is based on
comments from the NOI indicating that
it is logistically almost impossible to
curtail such uses on a short-term basis.
These uses may be presumed not to
have alternate fuel capacity. -
The rule provides more flexibility for
priority categories Four and Five by
providing that curtailment of volumes
within any priority category or
subcategory below the statutorily
mandated categories (Priorities One,
Two, and Three) may be limited to some
percentage of the total requirements in
circumstances where such treatment
would reduce shortage costs (i.e., cost of
substitute fuels, lost production, etc.)
and where more precise end-use priority
classification is not possible.
Imprecision in present curtailment plans
might be reduced in two ways. First,
individual suppliers and users could
more precisely classify uses within the
base period requirements for each
priority category. Second, a Federal rule
could give higher priority to more
critical volumes within categories, e.g..
by establishing subdivisions within
intermediate priorities, such as the
'"percentage-limit" option. Priority Five
is subdivided into volumetric ranges for
requirements over 300 Mcf per day
based on findings in the Regulatory
Analysis that large users have lower
curtailment costs per unit of gas.
The proposed rule should give the
FERC ample flexibility to take into
consideration a pipeline's specific
circumstances in implementing the rule.
While the proposed rule sets out a
curtailment priority system which the
comments to our NOI and our draft
Regulatory Analysis say should reduce
the overall national costs of
curtailments, other costs from
implementing changes for the sake of
change may outweigh any benefits.'To
prevent this, the proposed rule states
that "nothing requires that a curtailment
plan in effect on the date of the adoption
of this rule be changed, except to the
extent that changes are necessary to
protect Priorities One, Two, and Three
from curtailment."
Summary of Benefits
Sectors affected.- General public.
Any reduction in the economic costs
of curtailments under improved
curtailment options helps to reduce the
inflationary effects that would otherwise
result from cost increases stemming
from delayed production and from
shifting production among producers.
Studies and analysis show that the net
macro-economic effect of using any
alternative that reduces curtailment
costs is a reduction in the amount of
inflation equal to the reduction in total
costs resulting from the use of such
alternative.
Summary of Costs
Sectors affected.- Interstate pipelines:
natural gas distribution companies;
low priority direct users of natural
gas, such as large-volume industrial or
electric utility users; high priority
users, such as residential users;
customers of Industrial users and
electric utilities; and the general
public.
The selection of a curtailment option
has significant effects on real Gross
Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9
 Federak 9Ml / vat. 1 02ai 79aCY, AveM r' '290 .g.W.Ag r"G'oIIPQ38 77733
,,*RUonat Product. Curtailment impacts
'gas users are offsetting because any
, rianently lost production of goods
8de asp by other establishments, and
ppporarily lost production is made up
is is usually not a problem because of
e short duration of critical gas
stages.
t ,;'Clie following types of costs have
oen analyzed.
T.1) Users' shortage impact costs:
Use are all users' costs that can be
jjjtiributed to a specific shortage of
? atui?al gas, e.g., the higher costs of
jtubstitute fuels, cost of interrupted
production and unemployment.
(2) users' shortage coping costs: These
are all users' costs to prepare for natural
gas curtailment whenever it might occur,
.g? the investment costs of having dual-
fuel capability to prevent interrupted
production during curtailment.
(3) Suppliers' operating costs: All
costs that pipeline and distribution
company suppliers incur to supply and
allocate gas, e.g., the cost of maintaining
underground storage, liquefied natural
gas, propane storage to meet sharp
peaks on abnormally cold days, and the
cost to operate In a spot market during
potential shortages.
(4) Non-users' pollution costs: The
costs of different pollution levels, e.g.,
the additional pollution damage when
dirtier fuels are substituted for natural
gas.
For example, the "users' shortage
impact costs" that could result from
doing nothing about the present