The states in complying with the Clean Air Act set regulations on the sulphur oxide emissions from fuel combustion sources to meet air quality standards. Each state has different regulations and in about half the states, regulations vary from region to region. In many cases the state plans were designed to meet both primary and secondary air quality standards simultaneously in 1975, although the Act allows for a reasonable time to meet secondary standards. Many states set stringent sulphur oxide emission limitations in areas already meeting both primary and secondary ambient air quality standards.

If all state regulations were put into effect by 1975, roughly one-third of our present steam coal production could not be burned without sulphur removal equipment. If all of this coal were to be displaced, about 26,000 miners would be out of work.

Utilities have several alternatives for compliance with the state regulations, the most significant of which are burning low sulphur fuels and installation of stack gas cleaning equipment. Increased low sulphur coal production can be attained from accelerated production from existing mines or by opening new mines. The regions where such low sulphur fuel would be mined include Appalachia where most current production of low sulphur coal exists, and in the states west of the Mississippi which have vast, largely untapped reserves.

Stack gas cleaning technology is being rapidly developed. Two stack gas cleaning installations in Japan have shown high efficiency of sulphur oxide removal and very little lost operating time. These units were developed by U.S. manufacturers. Nine U.S. stack gas cleaning units have been installed in this country, and these are in various stages of solving operating problems. Nineteen additional installations are currently planned or under construction. This technology should begin to become available in relatively small quantities to help meet clean fuel needs in 1975.

The President has urged the states to adopt the policy of the EPA Administrator announced last December to delay implementation of state secondary sulfur oxide regulations beyond 1975 where stringent controls are not needed to meet primary standards. Roughly 40% of current coal cosumption occurs in areas already meeting both the primary and secondary standards. This action will insure that limited supplies of clean fuels and sulphur removal technology will be utilized first in areas which need them to meet health protective standards. It should also allow continued use of existing high sulphur coal supplies to meet energy needs until sulphur removal equipment is available in greater quantities.

Geothermal energy

Geothermal energy is the natural heat of the earth. Water and steam serve to transfer the heat to the earth's surface. These areas of heat concentration may be tapped and utilized as a source of energy.

The present uses of geothermal resources include power generation, space heating and industrial processing. There are a few facilities in operation worldwide which utilize geothermal steam for electric energy, particularly in Europe. In the United States, the Geysers area in California presently has a 298 magawatt (MW) electric generation facility supplying about one-third of the electric power needs of San Francisco and plans are being developed for additional facilities of 404 MW and 510 MW.

About 1.8 million acres of land in our western states have now been classified as being within Known Geothermal Resources Areas (KGRA's), according to the U.S Geological Survey. An additional 96 million acres are listed as having prospective value for geothermal resources.

Geothermal energy could contribute significantly to our future power needs at the local level. Nationally, geothermal energy will be less significant because our resources are located only in the western states.

It is anticipated that about 4,000 MW of geothermal electrical capacity will be available by the year 1985, less than 0.1% of our total energy needs. By the year 2000, geothermal energy is expected to contribute as much as 1.5% of our total energy needs. Technological breakthroughs may increase the contribution of geothermal energy to our total power supply.

The Geothermal Steam Act of 1970 was signed by the President on December 24, 1970. This Act provides for the leasing of public lands for geothermal resource development under the management of the Department of the Interior. The Administration's program, as emphasized in the President's Energy Message of June 4, 1971, is intended to provide for the utilization of geothermal resources under environmentally safe conditions and sound resource management practices.

It is expected that the leasing of geothermal resources on public lands will stimulate development of this resource. The Department of the Interior is making progress in the preparation of the evironmental statement for the geothermal leasing program and the proposed geothermal development and operating regulations. It is anticipated that the final environmental statement will be issued in the near future. If it is decided to proceed with the program, competitive leases incorporating environmentally safe operating and development practices may be offered within a few months after publication of the final evironmental statement.

Nuclear power

The world's first nuclear reactor achieved initial operation in Chicago on December 2, 1942, launching a new technology. The Atomic Energy Commission, organized in 1946 to direct the nation's nuclear programs, proceeded with reactor development and in 1951 an experimental unit produced for the first time a small amount of electric power. Three years later, the AEC formally inaugurated a developmental effort looking toward commercial power reactors. In 1957 the Shippingport (Pa.) plant began operation as the first reactor producing power for commercial consumption.

In the 1950's several utilities began building reactors in the 200,000 kilowatt (KW) size range. The next scale up, to 400,000 to 500,000 KW, came in the early 1960's and by the late 1960's reactors on order had advanced to the 1,000,000 KW size as utilities took advantage of improvements in the economics of larger plants.

At present, 30 nuclear power plants are in operation, 60 are under construction, and 75 others have been ordered.

With 150 reactor years of operating experience in the United States, the safety of nuclear power has been clearly proved.

Nuclear power, now providing about 4% of the nation's electricity, will account for up to 25% by 1985, and up to 60% by the end of the century. Thus, the current nuclear capacity of about 14,700,000 KW is expected to grow to 1,200,000,000 KW by the year 2000.

The AEC has major developmental programs underway in the energy fieldthe fast breeder reactor, which holds the promise of making reserves of uranium fuel last for centuries, and controlled thermonuclear fusion which, if harnessed in a reactor, would use the virtually limitless supplies of deuterium in seawater as fuel. Mandatory oil import program

A voluntary oil import program was begun in 1957. The Mandatory Oil Import Program was initiated in 1959 on the basis of a national security finding to limit low priced imports, thus providing protection for development of higher cost U.S. production and refining capacity. It was clear that, without regulation, market forces would encourage U.S. integrated oil companies to exploit cheaper foreign reserves of crude oil despite the risk of disruption to supply. This, in turn, could jeopardize the viability of the U.S. domestic oil industry. În the 1960's, the program did serve a useful purpose, maintaining a healthy domestic petroleum industry which could not have survived in dirsct competition with low cost Middle Eastern imports.

Within the industry, the independent refiners, terminal operators, jobbers and marketers have historically all received the great majority of their supplies (crude or products) from the major oil companies, not other independents. Sale of import licenses (tickets) is prohibited under the program. Exchange of tickets, however, have been common. Exchanges of tickets were attractive to both parties, i.e., inland independent refiners used domestic crude produced by the major oil companies and the major oil companies imported and refined the foreign crude using the inland refiners' tickets.

In 1972, prorationing reached the 100% level; U.S. production capacity had peaked and began declining. Between 1969 and 1972, total oil imports rose by 52% to 4.7 million barrels per day. Imports for 1973 of both crude oil and products are projected to 6.0 million barrels per day. In early 1972, landed foreign crude prices were still lower than domestic prices and the sum of domestic production plus imports was equal to demand. The ticket still had value and could be traded, thus facilitating full operation of inland, independent refineries and providing ample products for the independent marketers.

In 1973, landed foreign crude and product prices rose significantly, This was due to increased OPEC ownership participation in production companies, devalution of the dollar, high tanker rates, and high spot market prices for scarce low sulphur fuels. With increased ticket allocations (56% increased in 1973), there

is now no shortage of tickets. These two factors have made import tickets of little or no value. Under these circumstances, some major oil companies have been less willing to trade tickets. Thus, many independent refiners and marketers have had problems obtaining supplies.

To respond to the need for increasing importation of crude oil and products, the President in 1972 raised the import quota levels twice to ensure adequate supplies. Quotas were totally lifted on heating oil in December, 1972, until April 30, 1973, and the 1973 import quota is 56% higher than in 1972. In addition, in March of this year, the President removed all limitations on the amount of import licenses which can be issued by the Oil Import Appeals Board (OIAB). The OIAB now issues these licenses to any party, usually a refiner, terminal operator, or marketer, based on hardship. These actions, coupled with the longer range actions announced today, are expected to reduce the possible near term fuel shortages.

The President has instituted the most sweeping changes since the Program was begun in 1959. The Program is being restructured to meet both the current needs for fuels at the lowest cost to the consumer by removing the current tariffs, while at the same time, providing longer term stability and additional incentives for increased domestic exploration and production and new refinery construction and expansion by providing for license fees to be imposed on imports above the 1973 levels.

Those presently holding tickets under the 1973 program will be able to trade these valuable, license fee exempt import licenses for domestic crude oil or products. This should help alleviate some of the current distribution problems affecting primarily the inland independent refiners and marketers. The licensee fee exempt import rights will be phased out over seven years, to minimize Federal involvement and provide for more efficient market operation. The President also announced specific provisions to stimulate the construction of domestic refineries and plants to provide for increased storage to minimize the impact of possible supply interruptions.

Deepwater ports

There are at least 60 ports or buoy facilities currently in operation worldwide which are capable of handling ships of 175,000 deadweight tons (DWT) or more. These facilities generally have water depths of at least 80 feet. There are no ports in the United States now capable of handling these large ships; consequently, the U.S. is currently not able to benefit directly from the significant economic savings and environmental benefits from the use of offshore ports and supertankers. With a few exceptions, the United States has a shallow continental shelf and no natural deepwater harbors. Most major U.S. ports are currently dredged to depths between 35 and 45 feet. It is generally not feasible to build deepwater ports in the United States by dredging or improving existing harbors. Thus, most deepwater ports would have to be built offshore beyond state waters in international waters, sometimes at distances of twenty or thirty miles from the shoreline.

At the end of 1971, more than one-fourth of the world's total oil-carrying capacity consisted of ships in the 175,000 DWT class and over. A total of 223 such ships were in operation and 321 more were on order. New orders represent approximately 50% of existing tanker tonnage of all registries.

Total tanker arrivals for the 48 contiguous states in 1971 was 67,770, with 56,700 (84%) of these in Petroleum Administration District I (PAD I) which is the Eastern Seaboard. West Coast arrivals totaled 4,420 and Gulf Coast arrivals were 6,650. Most of the shipments were products from the Gulf Coast and the Caribbean to PAD I. The average size of the ships currently carrying imported crude is about 29,000 DWT.

By 1980, Eastern Seaboard (PAD I) imports of foreign oil by very large crude carriers (VLCC) are expected to average between 1 and 3.5 million barrels per day, virtually all of which will come from Africa or the Persian Gulf. If the U.S. does not rapidly develop deepwater port capability, foreign transshipment terminals in the Bahamas and the Canadian Maritime Provinces will probably be developed by U.S. and foreign companies. The U.S. will then be serviced by increasing numbers of small and medium sized transshipment vessels, increasing the risks of pollution from vessel casualties and operations and requiring expansion of conventional port facilities.

Significant economies can be achieved from use of larger vessels. Dollar per ton freight costs could be reduced nearly 30% by increasing tanker size from 65,000 to 250,000 DWT. Greater economies can be realized utilizing bigger ships.

The environmental advantage of offshore deepwater ports is that they reduce the risks of collision and grounding and minimize the probability that spilled oil will reach beaches or estuaries. The most valid environmental concern involves the impact of primary and secondary economic development, such as refineries and petrochemical plants, associated with the port. These risks are recognized and can be controlled through land use planning and adequate local zoning. Dispersion of facilities versus concentration with only a few ports would probably significantly reduce the environmental impact on any particular region.

The President has proposed legislation which will provide authority for the Secretary of the Interior, in consultation with other concerned Federal agencies and state governments, to issue a license in waters beyond state jurisdiction for the construction and operation of deepwater ports. The legislation is intended to simply provide a complete legal regime for licensing beyond the three mile limit, under strict environmental safeguards and with provisions for navigation and safety. The President recognizes the importance of the states in developing ports and associated onshore facilities. The legislation does not preempt state authority, but extends state laws to any deepwater port licensed by the Department of the Interior, as long as those laws are not in conflict with Federal laws.

The President's legislation makes provision for issuance of the necessary license for the rights-of-way for an associated pipeline by amending the Outer Continental Shelf Lands Act (OCSLA). Under the OCSLA, the Secretary of the Interior currently grants rights-of-way for pipelines constructed to bring oil and gas ashore from offshore drilling operations.

Energy conservation

Current Federal energy conservation programs are diffused in many Federal departments and agencies. The President has directed the establishment of an Office of Energy Conservation within the Department of the Interior. That Office will coordinate Federal energy conservation programs, conduct research on issues related to energy conservation, and work to educate the public on energy efficiency and costs.

Energy demand is growing more rapidly than in the past, now at levels of 4.8% annually. Some sectors, such as consumption of fuels for electricity and transportation, are growing at significantly faster rates. Besides the impact of the continually increasing U.S. standard of living and the availability of more labor saving devices to more Americans, environmental regulations have significantly increased energy consumption. This is particularly apparent with the automobile, where pollution control devices have reduced engine operating efficiencies.

The President directed the Department of Commerce, in cooperation with the Council on Environmental Quality and the Environmental Protection Agency, to develop a voluntary labeling program which would apply to major energyconsuming home appliances, automobiles and auto accessories. Automobiles and home appliances account for approximately 20% of current energy demand. Manufacturers could voluntarily display labels providing data on energy use, as well as a rating based on the product's efficiency relative to other similar projects. Standard testing procedures for appliances would be developed by the National Bureau of Standards and for autos by the Environmental Protection Agency. As a first step toward this goal, the Environmental Protection Agency will shortly release the results of its tests of automotive efficiency.

In the last two years, the President has twice directed the Department of Housing and Urban Development to strengthen FHA insulation requirements for single and multifamily housing. The President has now directed HUD to evaluate extension of insulation standards to mobile homes.

The President directed all Federal agencies to develop programs to conserve energy. These programs include building design and construction, procurement of energy conserving products and through taking into account the energy impacts of their major actions. The new Office of Energy Conservation will work closely with the Federal agencies to implement this directive.

The General Services Administration is constructing a new Federal office building in Manchester, New Hampshire, using advanced energy conservation techniques. The GSA has established a goal of reducing energy use by 20% over typical buildings of the same size. The National Bureau of Standards is now evaluating energy use in an actual full size house in its laboratories in Gaithersburg, Maryland. When this evaluation is complete, analytical techniques will be available to help predict energy use for new structures. This effort, combined with the experience gained in the construction and operation of the demonstration Federal building,

will provide guidance for construction of Federal buildings and assist architects and contractors to help them conserve energy.

Energy research and development

The President indicated today that funding for energy R&D would continue to be monitored carefully and when additional funds are essential those funds would be provided.

A detailed summary of the specific programs is attached. The highlights of the President's energy R&D program follow.

Coal. The President's FY '74 budget includes a 27% increase to $120 million for coal R&D or a 300% increase since 1970. Additional funds to be requested would further increase this level. Major programs at the Department of the Interior to expand the use of coal in a mannner compatible with the environment are: ―liquefaction and precombustion removal of pollutants.

-high BTU coal gasification to produce pipeline quality gas. -low BTU coal gasification for industrial and utility use.

Nuclear Fission. The FY '74 budget provides for a $63 million increase for AEC's nuclear fission R&D programs.

Highlights are:

-a $51 million increase to maintain the pace of the Liquid Metal Fast Breeder Reactor program toward the goal of commercial demonstration by 1980. -an 11% increase in R&D to further ensure the safety of the current generation of light water reactors.

Nuclear Fusion.-The AEC's thermonuclear fusion program is increased 35% to $88 million in the FY '74 budget. This program includes:

-a 19% increase to develop controlled thermonuclear fusion reactors through magnetic confinement.

-a 59% increase to develop the capability to initiate a thermonuclear reaction using a high powered laser.

Solar Energy.-The solar energy program would triple, from $4 million in FY '73 to $12 million in FY '74. The program will be administered by the National Science Foundation and emphasize the development of solar energy for:

-heating and cooling of buildings.

-producing and converting organic materials to fuels.

-generating electricity.

Additional Environmental Control R&D.-In addition to the substantial efforts to develop cleaner fuel from coal, the FY '74 budget provides for a 24% increase, from $38 to $47 million, for other environmental control research with expected near-term benefits. This includes a construction of the TVA demonstration SO, removal plant as well as continued R&D aimed at minimizing the thermal effects of power plants.

Other R&D Programs.-Other energy R&D programs include:

-an accelerated effort in utilization of geothermal energy.

-development of magnetohydrodynamic (MHD) devices, in cooperation with the Soviet Union, to produce electric power more efficiently from heat. Electric Utility Participation.-The President also cited the importance of non-Federal energy R&D and noted with pleasure the formation of the Electric Power Research Institute. He indicated that this utility R&D organization, with a budget in 1974 exceeding $100 million, would provide additional capability to accelerate and influence the development of energy technology. The President also urged all State utility commissions to consider permitting increased R&D expenditures to be included in utility rate bases.

International

The President called for greater cooperation between all nations on energy matters. He specifically noted the need for consuming nations to cooperate to ensure that ample supplies are available to all nations.

Most of the world's oil producing nations have been organized into a cartel in 1960 called the Organization of Petroleum Exporting Countries (OPEC). The member nations provide over 90% of the world's current oil trade and 75% of the free world oil reserves. Revenues to these nations in 1970 were approximately $7 billion; and are growing.

1 The charter members were Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Joining later were Qatar (1961), Libya and Indonesia (1962), Abu Dhabi (1967), Algeria (1969), and Nigeria (1971).