203. Memorandum From Philip A. Odeen and David Elliott of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1

    • Energy R&D

In response to your request, this memorandum gives the status of the U.S. Government’s energy R&D effort.

[Page 551]

Budgetary Status

The President’s budget for fiscal year 1974 originally provided for a 20 percent increase in funding for energy R&D, from $642 million in FY 73 to $772 million in FY 74. Within this budget, greatest emphasis is to be given to the continued development of the liquid metal fast breeder reactor ($323 million), followed in priority by an expanded effort to produce more efficient and cleaner energy from coal ($120 million).

In terms of general categories, the $772 million was split as follows:

Nuclear fission (e.g., breeder reactors) $475 million
Controlled thermonuclear fusion 89
Coal 120
Oil and Gas 9
Solar Energy 12
Geothermal Energy 4
Electrical Generation, Transmission and Storage 4
Pollution Control 48
Miscellaneous 11

In his energy statement of June 29,2 the President announced that an additional $100 million would be devoted to new or accelerated high priority energy R&D projects in FY 1974. Half of this $100 million is to be used for coal R&D, and AEC Chairman Dixie Lee Ray has submitted to Governor Love a detailed proposal for spending these funds.

The President also announced his intention to allocate $10 billion for energy R&D over the 5 fiscal years beginning FY 75. This represents roughly a 70% increase over the previously projected spending. Dixie Lee Ray is to come up with recommended longer range energy R&D programs by December 1, so that these can be reflected in the FY 75 budget. Again, Love is primarily responsible for overseeing this effort but OMB, Interior and others will also be involved in its review.

There are many skeptics who doubt that we can effectively spend some $2 billion annually on energy R&D, especially in FY 75. However, it may well be that a radical approach which admittedly wastes money is necessary if we are to achieve major breakthroughs.

The management of the governmental R&D programs is to be vested in the proposed new Energy Research and Technology Administration (ERDA). Since, initially, nuclear research will be the largest part by far of ERDA’s activities, it will be necessary to avoid underattention to the [Page 552]other energy areas. For example, it would be inadvisable though tempting to move the AEC management over as a body to fill most of the ERDA leadership positions. The plans for ERDA’s organization and management structure are being honed with this concern in mind.

In addition to federally funded energy R&D programs, there are significant amounts of privately funded energy R&D by large industrial concerns. This is an important difference from the situation that existed with the space program or in the early stages of the nuclear program.

When Could the R&D Pay Off?

There are a number of specific areas of energy R&D which, if they were to pay off, could contribute significantly to meeting our increasing energy needs and, thereby, to reducing our dependence on oil and gas imports. The specific areas of energy R&D can best be considered in terms of time required to begin contributing significantly to our energy needs. They can be grouped in four “pay off periods”:

1. The short run—the 1970’s. There is little alternative during this period to meet our energy needs except with conventional fuels. By relaxing air quality standards—or alternatively, by developing the technology to remove sulfur, the major air pollutant in coal—domestic coal utilization could increase late in the decade, with significant impact in the 1980s. Some $30 million is being spent in FY 74 on research related to reducing air pollution from sulfur.

An energy conservation program, however, could have great short run benefit by significantly reducing domestic consumption. An Office of Emergency Preparedness study has estimated that vigorous conservation measures could reduce U.S. energy demand by as much as the equivalent of 7.3 million barrels (MMB/D) per day by 1980, cutting forecasted imports by about 60 percent and holding them to about 25 percent of total oil consumption (the 1972 level).

These conservation measures would include expansion of: mass transit systems; smaller more efficient automobiles; better insulation for homes and offices; more energy efficient appliances; increased recycling and reuse of materials; and smoothing out the daily electricity demand cycle to reduce the use of inefficient generating equipment.

To accomplish this conservation some stringent governmental measures would have to be instituted, many having important socioeconomic implications. We should not, therefore, be too sanguine about the prospects of achieving a significant portion of these energy savings.

2. The mid range—the early to the mid 1980’s. Payoffs in this period are expected to come from developing technologies to extract and utilize existing fossil and nuclear fuel sources in a way compatible with environmental concerns. The chief areas of interest in the mid-range are coal and nuclear fission:

  • Coal is the most plentiful domestic source of fuel and the most promising source for future development. The United States has approximately 150 billion tons of easily recoverable coal that could fill many needs well into the next century. But increased utilization of coal depends upon future air quality standards and the technology to remove the sulfur and to make strip mining more acceptable. The National Petroleum Council estimates that with a maximum development effort and some relaxation of environmental standards we could increase the use of coal as an energy source by about 50 percent in 1985 over current projections. If this were done, we could reduce oil imports by 7 MMB/D.
  • Nuclear fission reactors are expected to increase sharply as a major source of energy, rising from today’s level of generating less than two percent of our total energy supply to about 15 percent in 1985 (about half of our electrical power generation). The technical capability exists to make even further increases in nuclear power generation. However, there are major non-technical problems associated with sharply increasing the contribution of nuclear power. For example, the processing of siting applications for nuclear power plants adds two to four years to the six or seven years needed to construct a nuclear plant. In addition, the number of sites appropriate for nuclear plant construction are limited. Nevertheless, the National Petroleum Council and AEC believe nuclear power could be expanded sharply by 1985, contributing the equivalent of about 15 MMB/D of oil. This expansion could reduce oil imports by some 5 MMB/D. An effort of this magnitude would require an immediate decision and major government support with the highest priority given to its further development.

3. The longer-range—the mid 1980’s through the 1990’s. R&D efforts which could pay off in this period include increased development of existing fossil fuel resources and full development of the liquid metal fast breeder reactor. Utilization of solar and geothermal energy may occur, though these two sources together will never be more than a minor source (perhaps 5% of total energy by the year 2000). This is the pay off time-frame at which most of the FY 74 energy R&D is aimed, with emphasis on the more expensive nuclear R&D.

The fast breeder reactor is seen as a necessary development to solve the problem of the depletion of our scarce uranium supply. However, the possibility of laser separation of uranium may stretch our supply for several years—perhaps to the point where we could transition directly from the thermal reactors of today into controlled fusion, thereby avoiding the severe safety problems of the breeder. The R&D on the breeder must of course continue since laser separation and controlled fusion may not work out.

4. The very long-range—beyond the year 2000. Current R&D efforts which could begin to offer significant payoffs in the very long term include nuclear fusion, a potential source of virtually unlimited supplies of clean energy. Nuclear fusion R&D is funded at $89 million in FY 74.

[Page 554]

For all of the four periods discussed above, price will be an important determinant in the implementation of new energy technologies. For example, in the area of conventional fuels, as oil exceeds about $3 per barrel (the present price range is $3–5) desulfurized coal becomes competitive at the present level of technology. At $7–8 per barrel coal gasification would be a competitive source and, at $7–10, domestic oil shale extraction might be economically substituted. R&D programs would be designed to bring these prices down, to facilitate some currently difficult conversions (e.g., coal into oil), to ameliorate environmental impact and, of course, to develop new sources.

International Cooperation

Some active research is being carried out in the USSR on breeder reactors and controlled fusion, and the FRG has fairly well developed programs in the use of coal. We are attempting to tap these R&D sources, and others elsewhere, through energy R&D bilateral agreements. However, in the majority of cases our activities are better funded and more advanced and thus the net information flow will be outward. As new technologies are evolved we may find commercial developers unwilling for proprietary reasons to continue to be a party to international programs and joint ventures.

Next Steps

Given the fact that Dixie Lee Ray has been asked to come up with recommendations for the accelerated energy R&D programs, it is important that coal R&D—which has greater shorter term payoff than nuclear power—does not get short changed. We are discussing with Governor Love’s Office the criteria by which the increased funding is determined. We will ensure that a decreased dependence on imported energy sources—as quickly as feasible—is an important determinant of our accelerated energy R&D efforts.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 251, Agency Files, National Energy Office, Vol. III, Aug 73. Confidential. Sent for information. Kissinger initialed the memorandum.
  2. See Document 177.