So those are the main thrusts of my questions. I have some other questions but I won't delay the questioning any further. Thank you, Mr. Secretary, very much. Secretary HERRINGTON. Thank you, sir. STRATEGIC PETROLEUM RESERVE Mrs. Boggs. Mr. Chairman, may I pose a question, please? In response to Mr. Rudd, Mr. Secretary, you indicated that you would be looking at a long-range program about the SPRO in times of emergency to our allies, and what we did about the various programs we have onhand now and apply them to that goal. You also indicated that you were going to have a continuing study about the filling of the Strategic Petroleum Reserve. Because this is going to be an ongoing study with you and program development forthcoming from the study, wouldn't it be responsible to go ahead with the construction in the SPR at a time when the industry that is utilized within the construction is really in a recession, and the prices that we can receive for that construction are lower than they probably would be when we need them very desperately at another time. Secretary HERRINGTON. I think the program that we are submitting is not irresponsible. If we wanted all things, we obviously could go ahead and finish it off. All the piping and all the pumps and everything is ready for leaching to go up to 610 million barrels. As you recall, the Big Hill facility is an additional 140 million barrels above that. I think we have flexibility, even at the current flow rate, to proceed on existing structures. What you lose by putting a moratorium on Big Hill is probably six months, to get contractors back on the job, begin leaching, and put the additional enhancements in there. During that time, you could be filling over at existing facilities before you got to the Big Hill. I see very little risk on a critical time line to holding back for this year. If you had to restart, I think everything is in place to do it. We would take precautions to make sure that everything is warehoused the way it should be, and that we keep our options open. Mrs. BOGGS. Wouldn't that be more costly, to restart than to complete? Secretary HERRINGTON. I think the payoff is you save more money on the fill if we eventually decide that we have enough in the ground. If we restart, there would be an incremental cost, certainly, to bring contractors back on, renegotiate power contracts, standby charges-yes, I think there would be. But it is not a lot compared to the amount of money you could save by holding up one year's filling. You have to bear in mind, in my estimation, that even 50,000 barrels a day, which is the lowest that anyone has suggested publicly from the Congress, is half a billion dollars a year. And it goes up from that. It is a very expensive project. If we think we have the options and if we think the risk is reasonable, I think we ought to, at this budget time, take a year to look at it. Mrs. BOGGS. Thank you, Mr. Secretary. Thank you, Mr. Chairman. Mr. BEVILL. Mr. Fazio. OIL IMPORT FEES Mr. FAZIO. Thank you, Mr. Chairman. Just last week in the Budget Committee. Secretary Baldrige and Federal Reserve Chairman Volcker both advocated that we consider oil import fees as a possible source of revenue to deal with our deficit situation. Do you have any personal or official position on that, and has the Department done any analytical work that we can have that may have already occurred over there? Secretary HERRINGTON. I don't know if we have done any work. We will ask the question and put it in the record. Personally I have read the same articles you have and heard the same things. I just don't think we have a position at this time. Obviously a lot of people are anxious to have import quotas, importation fees. The two arguments obviously are that we get a great deal of revenue for the Treasury, stabilize the world oil prices, and save the refining industry. We have heard all the arguments. I just don't think the Department of Energy can be classed as having an opinion at this point. It is that versus a number of other tradeoffs we have to consider. [The information follows:] OIL IMPORT FEES Yes, DOE opposes the imposition of a tariff or a quota on crude oil or petroleum product imports. We have analyzed a number of such proposals and feel that at this time, the unfavorable consequences outweigh possible favorable effects. A petroleum import tariff or quota could enhance our energy security be reducing oil imports and our dependence on insecure sources of supply. On the other hand, such a policy would hurt consumers and industry, damage trade relations with our neighbors and allies, and threaten the pace of our economic growth. We are particularly concerned about the effect a tariff or quota would have on consumers. Not only would oil prices rise, but the prices of may other essential goods and services would rise because the energy needed to produce them would be more expensive. DOE will continue to monitor this issue because we recognize that unfair trade practices or the erection of protectionist barriers abroad, may require some government measures to preserve the competitiveness of U.S. industry. However, we hope that other countries will recognize as we do, that world and national economic interests are best served by international trade unrestrained by government intervention. Mr. BEVILL. Mrs. Smith, I understand, is on her way. Each of us have several questions we are going to submit to you for the record. While we are waiting for her to get here, I will go ahead and ask some of these I was going to submit for an answer on the record. Mr. CONTE. Mr. Chairman, I would make one observation. If the Department is considering that oil import fee, that they consider a very substantial fee on maybe oil coming in from Alaska or some place going to California. They have a balanced budget out there. They ought to be in a good position to pay for it. URANIUM ENRICHMENT Mr. MYERS. Mr. Chairman. Mr. Secretary, you mentioned the reduction in number of SWUs produced this year. We all recognize this. Part of the problem, world competition-not only are we not expanding the number of nuclear civilian reactors in this country, the number of them or the operation-notwithstanding the fact I just read the other day we have 3500 years of operation of nuclear reactors without any serious accident. What do you foresee as a possibility of us ever recapturing part of the export market in nuclear fuel? Secretary HERRINGTON. All of the projections that I have seen in my short time in the Department project us holding even in world demand. Not once has it been suggested that we can capture any part of the foreign market for enriched uranium. All initiatives, according to the programs that have been developed over the past few years, are aimed at staying steady. I have not gotten deeply enough into this question. It seems to me that it is being put out that if we don't do anything, there are great projections on us falling off on our share of the market, and that all enhancements allow us to keep where we are. Mr. MYERS. That is what concerns me. It is true in agriculture today. We can produce agricultural products, but we cannot meet world competition as far as price is concerned. You mentioned the value of the dollar being one of the contributing factors. There are a great many others, too. Nevertheless, when our foreign competitors are subsidizing production how in the world will we ever be competitive in the world? Aren't we now importing for our own domestic use part of our enriched nuclear fuel? Secretary HERRINGTON. I think to a certain extent we are. Secretary HERRINGTON. Ten years ago we had a lock on the market, like in many other things. We are down to about $135. We are going to get more competitive at some of the management initiatives. A business plan is being suggested. I don't see this any different than the other industries-textile, steel, petroleum imports. We are under severe pressure from foreign sources, and in many cases subsidized foreign sources. I think especially in this uranium enrichment we are looking at a severe threat. There is reason to believe no matter what price we produce a SWU at, that certain suppliers will beat that price. We are going to submit the management plan for the uranium enrichment program here very shortly. And I think it is something that deserves all our attention. Mr. MYERS. That was the reason for my question. I think this is one of the big responsibilities you have. We spoke earlier about energy independence, energy security. Certainly this is one of the areas. We are going to be having increasingly more imports of nuclear fuel. We are not going to be energy independent or secure either. I don't know how we are going to meet that world competition. Maybe the report will help us to find a better enrichment process, a cheaper way. Secretary HERRINGTON. Basically, the demand is down. That is one of the major problems. Mr. MYERS. Would you provide for the record how much of our nuclear fuel we do import today? Secretary HERRINGTON. Yes, sir. I could guess at it. But I would like to give you an accurate figure. Mr. MYERS. Put it in if you will. [The information follows:] IMPORTED NUCLEAR FUEL The Department prepared a report on this subject and sent it to this committee on February 20, 1984. In summary, the report identifies the purchase by U.S. utilities of 929,000 separative work units of foreign-origin enrichment. This represents about 12 percent of the total 1984 enrichment purchases by U.S. utilities. The report also provides our best estimates of future imports. To date, about 7 percent of 1985-1995 enrichment purchases have been contracted from foreign suppliers. Given the current uncommitted market, this amount could increase to about 30 percent as utilities finalize purchase decisions; however, it is the Department's intent to aggressively compete for this uncommitted market. Mr. BEVILL. Are there any other questions? I think it is commendable that we have had almost a perfect attendance here today-even though Congress is not in session. Mr. Secretary, we appreciate your fine presentation. The committee will have additional questions for you to answer in the record. We appreciate your fine testimony. The committee will now stand adjourned until ten o'clock tomorrow morning. [The following questions and answers were provided for inclusion in the record:] SYNTHETIC FUELS Mr. BEVILL. Mr. Secretary, what is your opinion on the need to continue development of the synthetic fuels industry in the United States? Secretary HERRINGTON. I believe that in the long-term, perhaps during the early part of the next century, the nation may begin to increase the substitution of synthetic fuels for conventional fuels. At that point, market forces will determine the mix and rate of synthetic fuels development. Government can assist in the development of a broad base of commercial-scale technology by funding high-risk, long-range, generic research with the principal goal of reducing costs and improving performance. This is an appropriate federal role and is an integral part of the Department's research and development programs. Government can also assist in building a base of commercial synthetic fuels experience through support of a limited number of "first-of-a-kind" plants, but we must balance the scope and pace of such assistance against the potentially substantial costs to the taxpayer particularly during a time of moderate oil prices. Ultimately the private sector must take the initiative in reading market signals and acting accordingly. Therefore, I believe that in any synfuels development effort, the private sector should share a major portion of both the risks and costs. This will not only ensure successful transfer of synfuels technology into the private sector but would also serve to limit potential federal outlays. The technical, environmental, regulatory, and financial experience gained from pioneering projects will be valuable to future commercial ventures. I believe it is important, however, that such experience be gained without placing an unnecessarily large, detrimental burden on our economy. REORGANIZATION Mr. BEVILL. Do you have any plans at this time to reorganize the Department? Secretary HERRINGTON. I have decided to reestablish the position and attendant organization of the Assistant Secretary for Conservation and Renewable Energy which recently had been aligned with the Under Secretary. Beyond this action, I have no specific plans at this time to modify the DOE structure. I am not inclined to reorganize the Department just for the sake of instituting a reorganization. MANAGEMENT INITIATIVES Mr. BEVILL. The fiscal year 1986 budget assumes significant savings can be achieved by various improvements to management, governmental efficiency and cost effectiveness. Will you describe the management efficiencies that the Department is planning to undertake in FY 1986? Secretary HERRINGTON. The Department's management initiatives program covers a wide range of management efficiency savings. In FY 1986 the Department is planning the following efforts to achieve savings: continued review and oversight of our organizational structure and management systems to improve our span-ofcontrol and supervisor to employee ratios and reduce staffing devoted to administrative support activities; increased audit coverage to realize increased recoveries; improve ADP planning, reporting and utilization; completing installation of our automated PAY/ PERS system throughout the Department and an improvement of the ratio of personnel staff to employees serviced; systematic examination of selected activities to identify opportunities for cost savings through contracting and productivity improvements; improvement in billing and collection procedures; improved management of deobligations resulting from contract close-outs, modification, etc.; completing installation of a new and more efficient accounting system; increased utilization of commercial services for activities such as printing and travel; revision and simplification of patent policies; reducing the paper-work burdens on contractors and providing expanded opportunities for contractor initiated cost savings; reducing the amount of space utilized per employee; intensified position management efforts to control average grade and salary; funding of the Technical Information Center through user fees; |