GEORGE H. MAHON, Texas, Chairman JAMIE L. WHITTEN, Mississippi EDWARD P. BOLAND, Massachusetts ROBERT N. GIAIMO, Connecticut FRANK E. EVANS, Colorado EDWARD R. ROYBAL, California LOUIS STOKES, Ohio J. EDWARD ROUSH, Indiana GUNN MCKAY, Utah TOM BEVILL, Alabama EDITH GREEN, Oregon ROBERT O. TIERNAN, Rhode Island BILL D. BURLISON, Missouri ELFORD A. CEDERBERG, Michigan J. KENNETH ROBINSON, Virginia C. W. BILL YOUNG, Florida NOTE. This Surveys and Investigations supervisory staff is supplemented by selected personnel borrowed on a reimbursable basis for varying lengths of time from various agencies to staff up specific studies and investigations. The current average annual full-time personnel equivalent is approximately 42. OOKBINDING CO. 17237 QUALITY CONTROL MARK 2001 PUBLIC WORKS FOR WATER AND POWER DEVELOPMENT AND ATOMIC ENERGY COMMISSION APPROPRIATION BILL, 1975 MONDAY, APRIL 8, 1974. FEDERAL POWER COMMISSION WITNESSES JOHN N. NASSIKAS, CHAIRMAN ALBERT B. BROOKE, JR., COMMISSIONER RUSH MOODY, JR., COMMISSIONER DON S. SMITH, COMMISSIONER WEBSTER P. MAXSON, EXECUTIVE DIRECTOR JOSEPH N. DiMARINO, ASSISTANT EXECUTIVE DIRECTOR LEO FORQUER, GENERAL COUNSEL DREXEL D. JOURNEY, DEPUTY GENERAL COUNSEL HASKELL P. WALD, CHIEF ECONOMIST RICHARD F. HILL, ENVIRONMENTAL ADVISER CHARLES A. BERG, CHIEF ENGINEER T. A. PHILLIPS, CHIEF, BUREAU OF POWER FRANCIS C. ALLEN, CHIEF, BUREAU OF NATURAL GAS RUSSELL D. THORELL, DEPUTY CHIEF, BUREAU OF NATURAL GAS MARSH H. MOY, COMPTROLLER JOHN R. MATSON, OFFICE OF THE COMPTROLLER (BUDGET OFFICER) JOHN F. KING, OFFICE OF THE COMPTROLLER OFFICER) (PROGRAM RICHARD E. KEAR, OFFICE OF THE COMPTROLLER (ADP) CLAUDIUS L. FIKE, DIRECTOR, OFFICE OF PERSONNEL PROGRAMS Mr. EVINS. The committee will come to order. We have with us our friends of the Federal Power Commission, a very distinguished group. Mr. Chairman, I have looked over your statement. You can present it in full to the committee, or you can summarize it in your usual able way, if you wish, and we will be pleased to hear you. We will place in the record the justification material and your full statement. STATEMENT OF JOHN N. NASSIKAS Mr. Chairman, for fiscal year 1975 the Federal Power Commission is presenting a budget estimate totalling $32,393,000 and 1,337 positions. This includes an increase of $3,697,000 and 40 positions over the agency's fiscal year 1974 budget. At the outset it is to be noted that $2,230,000 of the $3,697,000 increase is for office space and related requirements. For the first time, in fiscal year 1975, this item is to be included in each agency's appropriation instead of in the appropriation for the General Services Administration, pursuant to the "Public Buildings Amendments of 1972," Public Law 92-313. This major item aside, the rest of the dollar increase, amounting to $1,467,000, is for increased pay cost and the cost of additional personnel, in the amount of $922,000, and increases for travel, contractual services, printing, supplies; and equipment, estimated to be $545,000. The following summary table shows the distribution of the $32,393,000 estimate among Federal Power Commission programs and indicates the application of the increases among the programs. (1) When the Federal Power Commission was established in 1920, its functions were to collect information concerning the use of water resources for electric power generation, to license hydroelectric facilities, and to establish a uniform system of accounts for all licensees. Over the 54 years since that time, there has been a considerable accretion of functions and responsibilities relating to such matters as wholesale electric rates, watercourse and river basin development, corporate regulation, environmental quality, natural gas pipeline certification and rate regulation, natural gas producer certificates and rates, electric systems coordination and reliability, resource allocation, and energy conservation. Today the Agency is a principal governmental reliance in meeting U.S. energy problems. Yet all of the developments of the last 54 years affecting this Agency are insignificant by comparison with the recent dramatic reversal of our energy supply-demand situation. Post World War II population growth, shifting patterns of population concentration, new energy reliant technologies and mechanization, basic changes in the economy, the emergence of new values and life styles, and a host of other factors have raised the Nation's demand for energy above the deliverable supply, threatening productivity, employment, price stability, and the economy generally. Although the present energy situation was many years in the making, and although the evidence for some time has pointed toward potentially crippling shortages, it is only in recent months that the situation has become a matter of grave public and private concern. The potentially disastrous effects of widespread electric power shortages are not yet fully appreciated. The effective performance of the Federal Power Commission's functions in fiscal year 1975 is a matter of critical importance to the country. As in previous years, I am today presenting a budget which represents the minimum resources necessary to meet this Agency's responsibilities in a manner which will best serve the public interest. Natural gas constitutes one-third of the Nation's total energy consumption. I testified to the deepening natural gas shortage in the fall of 1969 before the Senate Interior Committee and have underscored the necessity for policies to reverse the trend of diminishing supply and increasing demand before the Congress, in decisions of the Commission, and in various public forums both here and abroad. Due to the inherent interrelation and interdependence of the various energy forms, the recent shortages of fuels which ordinarily can be substituted for natural gas, such as fuel oil and propane, have intensified the problem. Demand for natural gas has been outstripping additions to supply for several years. The anticipated deficiency in meeting firm contract requirements for the current 12-month period ending August 1974, exceeds the actual deficiency for the preceeding 12-month period by 53 percent. The extent of shortages vary among pipelines, but the imbalance on a nationwide basis between natural gas supply and demand has resulted in curtailment by major pipelines of deliveries to consumers by 10 percent short of national demand. The inevitable result is economic dislocations. I do not envision any immediate increase in supply to meet demand. At best we will be forced to further deplete our diminishing inventories of natural gas, while stimulating supply to the maximum extent possible, and increasing all supplemental sources of natural gas in order to prevent production levels from declining. To date, 37 jurisdictional pipeline companies have filed with the Commission proposed curtailment plans relating to firm contracts. Eight of these filings have resulted in final Commission orders. The remaining 29 are in various stages of analysis as pending formal proceedings. Due process requirements of the Natural Gas Act and the Administrative Procedure Act necessitate extensive data gathering and submission upon a record in the hearing phase of each curtailment proceeding. Since interstate natural gas pipeline systems traverse distances frequently exceeding 1,000 miles, the needed market information is extensive. Additionally, since many pipelines sell natural gas to other pipelines, a comprehensive market analysis of each pipeline's direct and indirect sales is necessary. Petitions for emergency or extraordinary relief from curtailment have been filed by 72 parties to date, and the disposition of these petitions involves separate expedited formal hearings on the record in which all parties are given an opportunity to participate. The continuing decline in the supplies of natural gas undoubtedly will result in the filing of many more petitions for such relief from curtailment plans. Notwithstanding the tight supply situation overall, some pipeline companies have quantities of natural gas available for market expansion. Applicants seeking authority to expand their markets are required to submit detailed market analyses similar to those required in a curtailment proceeding, to enable the Commission to determine the appropriateness of the end-uses to which incremental supplies might be applied. In addition to the increased manpower requirements associated with formal proceedings concerning these matters, a rapidly increasing amount of staff effort is expended in responding to inquiries made by the consuming public regarding the supply situation generally, by Members of Congress, by State public utility commissions regarding the status of proceedings, and by those seeking relief from curtailment. Necessary coordination with other Federal agenceis responsible for fuel allocation, including the Federal Energy Office, and with the Departments of Agriculture and Commerce for purposes of securing information within their respective capabilities has added also to the Commission's workload. Since 1969, the Commission has taken a wide range of actions to elicit additional supplies of natural gas, to reverse the downward trend in exploration and development. In 1973, natural gas exploration increased sharply in response to Commission policies increasing wellhead prices, advanced payment program, release of small producers from rate ceilings, emergency measures for short-term sales and other policies designed to improve the efficient allocation of our limited gas resources. Preliminary data indicate that the total gas well completions last year surpassed by about 17 percent the all-time high reached in 1961. This level of drilling is expected to be maintained in 1974 which may result in adding incremental supplies of gas adequate to stay even. It is doubtful that production can be substantially increased in the next three years due to the substantial lead times between an exploration and development program and delivery of gas to market. Early in 1971, the Commission initiated the National Gas Survey to provide a comprehensive study of all aspects of current natural gas industry operations in the United States. The survey's efforts included a staff study of the Nation's proved gas reserves, the first such study ever undertaken by a Federal agency. The results were published in 1973 as a staff report entitled National Gas Reserves Study, showing the Nation's proved gas reserves as of December 31, 1970, to be 258.6 Tcf compared to the American Gas Association estimate of 286.7 Tcf. The National Gas Survey for fiscal year 1975 will consist of two parts: (1) The major undertaking requiring the majority of the requested positions will be the independent continuing analysis of the Nation's natural gas reserves; (2) In-depth examination of policy issues relating to conservation, rate design, research and development, financing, import-export policy, supply-demand equilibrium, intercompetitive relationship of substituable fuels, environmental impact of resource development and utilization, and the evaluation of alternate methods of attainment of capacity for self-sufficiency. This country always has been accustomed to an abundant supply of electric energy at relatively low prices. The era of cheap electricity, coal, oil and natural gas has passed. We have been profligate in using electric power and energy resources. We have now established conservation as an essential policy to utilize our resources more efficiendly and eliminate unnecessary waste. In 1972, 25.7 percent of all primary resources in the United States was used in the generation of electricity. This percentage is expected to grow, and the 1970 National Power Survey estimated that electric power generation would require more than 30 percent of our energy by 1980 and as much as 41 percent by 1990, increasing to 50% by the year 2000. Eighty percent of electricity today is derived from fossil fuels, and the ade quacy of the Nation's electric power supply is therefore critically dependent upon maintaining an adequate supply of these fuels. In recent years it has been increasingly clear that there are threats to the supply of each of the fossil fuels used for electricity generation, and the Commission has implemented a series of information programs to define and anticipate fuel problems and to devise corrective actions. With the rise of environmental concerns, restrictions have been placed on the use of various fuels, and to ascertain the effect of those restrictions in reducing pollution and possibly impairing the adequacy of electric supply, both present and future, the Commission since 1971 has been gathering detailed information on fuel characteristics and air and water quality from all major electric generating plants. The information so gathered has been a basic resource for investiga |