Document Type: 
Document Number (FOIA) /ESDN (CREST): 
Release Decision: 
Original Classification: 
Document Page Count: 
Document Creation Date: 
December 9, 2016
Document Release Date: 
June 28, 2000
Sequence Number: 
Case Number: 
Publication Date: 
November 24, 1980
Content Type: 
PDF icon CIA-RDP85-00988R000100110038-9.pdf5.58 MB
7771%2pr- rtiedl Rusk el sle42MOIO9//144ptQIA- 4S91$ 0O61DOI S ncil Sl1~IA 71W~Mggtlil'~k'MPGIMM~nC.1,IgR11~'AIRO. q(gICq~W.'. 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 1 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: (202) 853-7095). 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 (202)653-7695 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 - = Feb~r~,ei$n~4~-~0~~)~UR[~P869~@a14~40~88-9 77713 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. Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 1 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 (202) 252-9161 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, Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 App1bD ed P 1aeVe' 420'0.0I0?/rl4IorGIA1-00a tR400($1)Q1il 3Oo?ncil 77715 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 (202) 252-4966 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. Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 77716 A~ ~~ ~F~q R~ele 2 0`/0~/fl x, 4~~i4 ? 51 ds Q~ tAt ,~^ + '-la ...~. 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 nnr~i@F~F~~iFI~A~O~/='~~?'-f~'~5e0~QQ_.Q>~u~t~+tncil 77717 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 (202)252-9127 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 e'7718 Federal Register / Vol. 4" 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 (202)252-9213 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 a r/ ftlea t>? i0j4RA1AY. PA5 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, (202) 252-9397. 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; Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 F ~rQY reFV'o`l. 9 ?r_ ReII 9nn,,nn9/14 ? C IA-RDD85-00984000100110038-9 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 (202) 252-4966 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 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 (202) 653-3274 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. Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 n?0JO9mA ,a5a0Q t$?~LQ1 ~mJ -9 77723- 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 (202) 653-3263 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 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 $16.80 per barrel of ethanol. This exemption will continue through the year 1992 under the terms of the Crude Oil Windfall Profits Tax Act (P.L. 96--223, April 2, 1980, ? 232(a)). Provisions of various State governments permit whole and partial exemptions from State motor fuel taxes for gasohol, in an attempt to ensure that gasohol is competitively priced. Active Government Collaboration DOE is cooperating actively with the Alcohol Fuels Commission on this issue. Timetable Final Rule-Fourth quarter. 1980. Final Rule Effective--30 days after final rule issuance. Available Documents Regulatory Analysis (DOE/RG-0032). Environmental Assessment (DOE/ EA-0107). NPRM-45 FR 34846, May 22, 1980. Draft Analysis issued May 1980 (DOE/RG-0032). Environmental Assessment--.(DOE/ EA-0107), 45 FR 44961, July 2, 1980. Transcript of Public Hearing- Washington, DC, July 8 and 9, 1980; Des Moines, Iowa, June 23, 1980. Agency Contact James 11. Berry, Analyst Office of Regulatory Policy Economic Regulatory Administration Room 216E 2000 M Street, N.W. Washington, DC 20461 (202) 653-3274 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 ~77~nnr~PlF~~l4~l~a~ ~O~A/A~/14~'~~21~t-iRd@~$~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, Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 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 (202) 853-3220 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 FefJEfk{~pTjtt d~ Fa oReAe L29C WiQ /W,4+doreA4RPPi?Ar90@ Jru~t~c~i(~$-~7729 .aw 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 (202)653-3256 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. Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 1 7773Appl ed FeWsReNz42MMO/A 41o QiA-14DMPQ6k3$,$ r00%19~~t~Qii ~ rtcil 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 (202) 653-3256 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 Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 Fed,SdffMVM f Cl? 82b0 d 4 *Pt RDPB5-0G 8 Q(GQ1Ft3&@O38-9131 :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. Approved For Release 2000/09/14: CIA-RDP85-00988R000100110038-9 ~7Fi r~JJ : ' 4 /19Ifl 4 FA-RD 5' GG9&&RIOII($1 O 3g $ncil (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