Foreign Relations of the United States, 1969–1976, Volume XXXVII, Energy Crisis, 1974–1980

91. Telegram From the Department of State to Selected Diplomatic Posts¹

Washington, December 31, 1975, 1730Z.

305385. Subject: Impact of US Energy Bill.²

1. Please deliver following message from Assistant Secretary Thomas O. Enders to head of host government delegation to IEA Governing Board. Brussels for Davignon. OECD Paris for Lantzke.

2. Begin message. “You will have heard that President Ford signed the Energy Bill into law on December 22. The authorities contained in this legislation will make it possible for the United States to adhere permanently to the Agreement on the International Energy Program. We are now in the process of preparing to deposit the formal notification of our consent to be bound by the IEP.³

This legislation also contains many of the essential portions of the administration’s energy program.

It establishes a number of important conservation measures which will have increasing impact over the next five years.

—It sets average fuel economy standards for automobiles for 1980 and 1985;

—It extends the authority of the Federal Energy Administration (FEA) to direct power plants and other major fuelburning installations to convert to the use of coal;

—It requires energy efficiency labeling of major appliances and certain other consumer products and sets energy efficiency standards for certain categories of appliances;

—It requires FEA to set 1980 conservation targets for the ten major energy consuming industries, thus establishing a program to encourage increased efficiency in US industrial energy use;

—It provides for development and implementation of state energy conservation programs with Federal financial and technical assistance.

We estimate that these measures will have a substantial impact on energy demand over the next decade and will make a major contribution to the ability of the US to meet its goals for reduced dependence on imported oil by 1980 and 1985.

The oil pricing provisions fall short of what we had originally proposed to the Congress. The Act sets an average price of $7.66 per barrel for all domestically produced oil. With the removal of the $2 per barrel import fee on December 21, we estimate that prices will decrease about $0.40 per barrel as a result of the rollback. The law gives the President authority to adjust the composite price upward by as much as ten percent annually, with Congressional approval.

The Act also contains the following provisions supportive of our joint efforts in the IEA:

—It authorizes prompt initiation of a strategic oil storage program; an early storage plan to build additional stocks up to 150 million barrels or 25 days of imports by 1978, and a long-range reserve of up to one billion barrels, which will be completed by 1982. This is over and above present stockpiling levels of about 100 days under the IEA definition.

—It requires the President to submit to Congress mandatory conservation plans within six months. After Congressional approval, these plans can be used to carry out US obligations to restrain demand under the IEP.

—It authorizes the President to promulgate rules for oil allocation as necessary to carry out US obligations under the IEP. This would not be subject to approval by Congress.

—It establishes a legal basis for US industry cooperation with the IEA under a voluntary agreement.

—It provides authority for collection of oil market data and authorizes transmittal to the IEA of information required under the IEP.

Although it only partly meets our original targets, I believe this legislation provides a solid foundation for a continuing U.S. effort to reduce our dependence on imported oil to an acceptable level. Over the next two years we estimate that US oil imports will increase marginally (about 250,000 barrels per day) because of the effect of this legislation. After that, however, the impact of the bill will become much more pronounced and our import levels will decline. By 1985 US imports are projected at five million barrels per day—compared to eight million barrels per day under our prior estimates. In addition, legislation now close to passage by Congress for production and exploration of our Naval Petroleum Reserves and other measures proposed by the President should reduce US oil imports even further.

This bill reinforces the US commitment to joint cooperation in the IEA. The Long Term Cooperation Program, on which we achieved tentative agreement earlier this month, is essential to ensure that our individual and collective efforts are adequate to achieve our energy objectives. I look forward to completing this agreement at our next meeting. With best regards.”

Robinson

1. Source: National Archives, RG 59, Central Foreign Policy Files, D750451–0625. Confidential; Priority. Drafted by Raicht; cleared by Katz, Preeg, and Phillip Trimble (L/EB); and approved by Enders. Sent to Ankara, Bern, Bonn, Brussels, Copenhagen, Dublin, London, Luxembourg, Madrid, Oslo, Ottawa, Rome Stockholm, The Hague, Tokyo, Vienna, Wellington, and USOECD Paris. Repeated Priority to USEC Brussels.
2. See footnote 4, Document 89.
3. Sent on January 7, 1976, in telegram 4007 to Brussels. (National Archives, RG 59, Central Foreign Policy Files, D760006–0262)