EPA-600/2-76-044a
March 1976
Environmental Protection Technology Series
                                                :IJ,
                                           tosettefc

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                RESEARCH REPORTING SERIES

 Research reports of the Office of Research and Development, U.S. Environmental
 Protection Agency, have been grouped into five series. These five broad
 categories were established to facilitate further development and application of
 environmental technology. Elimination of traditional grouping was consciously
 planned to foster technology transfer and a maximum interface in related fields.
 The five series are:

     1.    Environmental Health Effects Research
     2.    Environmental Protection Technology
     3.    Ecological Research
     4.    Environmental Monitoring
     5.    Socioeconomic Environmental Studies

 This report has been assigned to the ENVIRONMENTAL PROTECTION
 TECHNOLOGY series. This series describes research performed to develop and
 demonstrate instrumentation,  equipment, and methodology to repair or prevent
 environmental degradation from point and non-point sources of pollution. This
 work provides the new or improved technology required for the control  and
 treatment of pollution sources to meet environmental quality standards.


                     EPA REVIEW NOTICE


 This report has been reviewed by the U.S.  Environmental
 Protection  Agency, and  approved for publication.   Approval
 does not signify that the contents  necessarily reflect the
 views and policy of the Agency, nor does mention of  trade
 names or commercial products constitute endorsement or
 recommendation for use.
This document is available to the public through the National Technical Informa-
tion Service, Springfield, Virginia 22161.

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                                  EPA-600/2-76-044a
                                  March 1976
             ENERGY SUPPLY, DEMAND/NEED,

                AND THE GAPS BETWEEN;

                VOLUME I—AN OVERVIEW
                           by

      J.  W.  Meyer, W,  J.  Jones, and M. M. Kessler
Energy Laboratory, Massachusetts  Institute of Technology
            Cambridge, Massachusetts  02139


                          for

               The M.  W.  Kellogg  Company
               1300  Three Greenway  Plaza
                 Houston, Texas   77046
            Contract No.  68-02-1308,  Task 27
                   ROAP No.  21ADE-010
               Program Element No.  1AB013
           EPA Project Officer: I. A.  Jefcoat

      Industrial Environmental Research Laboratory
        Office of Energy, Minerals, and Industry
            Research Triangle Park, NC  27711
                      Prepared for

          U.S. ENVIRONMENTAL PROTECTION AGENCY
           Office of Research and Development
                 Washington, DC  20460
                                                ''•n bal Protection

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                                                                   iii
                             TABLE OF CONTENTS
                                                        	...1
INTRODUCTION.	'
     Energy Consumption	2
     Forecasting Methods, Factors, and Problems		• • •
     The National Energy Kaleidoscope	^
     Imports	''    g
     Fuel Flexibility.	' ''	     g
     Indigenous Supply and Utilization	• •	^
     Fuel Supplements........ •	'	,Q
     Distributed Storage	•	'	'	11
     Project Independence: "Blueprint" and Economics	^
     Petroleum Price  and Cost	j,
     Substitutes	>	• • • •    '	jg
     Problems: Near Term and Long Term	
                                                                  13
 ENERGY  SUPPLY — ENERGY RESOURCES	•	
                                                              	.13
     Some Def initions	         j^
     The Evolving Supply Picture	•	'^
     Estimates  of Proven Reserves	^
     Associated  Nature  Gas,  a  Bonanza	•    •
     The Cloudy Crystal Ball..	• •		•		-Q
     Production of  Energy  Fuels	 •	• •	'^
     Alternative Fuels  from Coal..	23
     A Basis  for Comparison	*
     Building U.S.  Synthetic Fuel Capacity	
     An Example from History	„„
     Oil from Shale.	•		"		
                                                                   QO
 UNCONVENTIONAL  ENERGY SOURCES		• • • '**
                                                                   32
      Conservation as a Source of Supply	•£
            ,                                             	ilft
      Incentives	•- *  *              oo
      Conservation/Productivity in Industry		• ^
      Operational Methods	-....Ob.

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                                                                    IV
      Consumer  Conservation	,37
      Regional  Factors	 . 37

 ALTERNATIVES AND SUPPLEMENTS'.	38

      Urban Solid Waste:	".....'	38
      Pros and  Cons of Direct  Combustion	39
      Clean Fuels from Urban Solid Waste 	 39
      Rural Waste to Supplementary Fuels.	40
      Solar Energy Supplements	40
      Distributed Energy Storage	 41
      Solar Electric Power	41
      Wind, a Solar Derivative	42

NATURE' S SOLAR COLLECTORS	43
      Solar Ponds.	43
      Ocean Termal Gradients	43
      Ocean Currents	43
      Other Geophysical Sources	43

ELECTRIC POWER PRODUCTION:  AS A SOURCE OF ENERGY SUPPLY
AND . AS AN ELEMENT OF ENERGY DEMAND	45

      Electricity, a Domestic and Commercial "Fuel"	......45
      Storage to Broaden Base Load Utilization	46
      Waste Heat Utilization	47
      Hydroelectric Power	48
      Nuclear Fission Electric Power	49
      Utilization of Nuclear By-product Heat	50
      Some Nuclear Power Issues. . .	50

DEMAND/NEED. . ,	53

     Demand Factors	54

SUPPLY ,  DEMAND/NEED AND THE GAPS BETWEEN		55

CONSERVATION AS A MEANS FOR ENVIRONMENTAL  CONTROL	55

TECHNOLOGIES  FOR CLOSING THE GAP	 . , ;	57

BIBLIOGRAPHY. .	 60

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                               LIST OF FIGURES
FIGURE 1:  SOURCES OF ENERGY - 1972 ......... . . . ......... . ---- .....  4

FIGURE 2:  ELECTRIC GENERATION FUEL SOURCES - 1972 ......... .. . .....  5

FIGURE 3:  SECTOR FUEL USE - 1972. . ........... . '. ----- • • •  • ....... • • •  6

FIGURE 4:  UNITED STATES OIL IMPORTS - 1973 ................. . .....  7

FIGURE 5:  CRUDE OIL PRICES AND RESULTING GASOLINE PRICES -  1974..  9

FIGURE 6:  U.S. CRUDE OIL PRODUCTION ......... .. ---- . ........... ---- 16

FIGURE 7:  COMPARISON OF COMPLETE CYCLES OF U.S. CRUDE-OIL
           PRODUCTION BASED UPON ESTIMATES' OF 150-200 AND
           590 BILLION BARRELS FOR QM, ............................. 17
FIGURE 8:  COMPLETE CYCLE OF CRUDE-OIL PRODUCTION IN
           CONTERMINOUS UNITED STATES AS OF  1971 .............. ---- 18

FIGURE 9:  COMPARISON OF PREDICTED CYCLES OF NATURAL-GAS
           PRODUCTION FOR CONTERMINOUS UNITED STATES BASED
           ON ESTIMATES AS OF 1961 OF 1,000  X lO1^  ftj AND
           2,650 X 1012 ft3 FOR Q» ........ ......... ............. ..20

FIGURE 10: THE PETROLEUM SITUATION IN THE UNITED STATES,
           1938-1951, WITH PROJECTIONS TO  1965... ................. 21

FIGURE 11: CLEAN FUELS FROM COAL ................. ......... ---- .... 24

FIGURE 12a   EXAMPLE OF LARGE EQUIPMENT USED  IN  AREA TYPE
             SURFACE MINING IN WEST KENTUCKY ....................... 25

FIGURE 12b   AREA VIEW OF CONTOUR  STRIP-MINING IN TENNESSEE ........ 26

FIGURE 13: EQUIVALENCY OF DOLLARS PER Btu  TO DOLLARS PER
            BARREL OF  OIL.
                                                                    28

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                               INTRODUCTION

Energy Consumption

     In 1972 the U.S. consumed over a half billion tons of coal, nearly six
billion barrels of oil, over twenty two trillion cubic feet of natural gas,
over fifty four billion kilowatt hours of nuclear power.  Utility electricity
(derived from all sources fossil fuel, hydro, nuclear and geothermal) amounted
to 1.6 trillion kilowatt hours.  Average rates corresponding to the above
figures are 1.44 million tons per day of coal, 16.4 billion barrels per day
of oil, and 61.5 billion cubic feet of gas a day.

     It is a little difficult to bring such large numbers into one's personal
context.  For example our annual consumption of coal would cover the District
of Columbia to a depth of about ten feet!  The Catskill Aqueduct of the New
York City water supply with a capacity of 600 million gallons of water a day
would not be able to handle the nearly 700 million gallons of oil a day.  The
container for our annual natural gas consumption would be a tank 10  miles in
diameter and 2 miles high.

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     Energy consumption grew at an average rate of 4.5% annually from 1965
reaching 75.6 quadrillion (10  ) Btu's* in 1973.  Per capita energy consump-
tion in the United States exceeds by a factor of two or three that of simi-
larly developed nations.

Forecasting Methods, Factors, and Problems
     Forecasting of growth of energy consumption has often been based on pro-
jections of historical trends—past experience in population growth and in-
creases in the gross national product.  In the absence of disruptions such
projections can be reasonably accurate; with disruptions which increase
differences of opinion as to probable population growth rates, uncertainties
about saturation of markets for energy consuming products and lead to irreg-
ular or no growth,  accurate projections become  extremely  difficult.  The  1973
embargo had a major impact on our economy, producing a $10-20 billion drop in
GNP and a half million additional unemployed at its peak.  The subsequent
increase in world oil prices continues the depressing effect on economic
activity.  The past year has seen dramatic changes in patterns of supply  and
demand growth.  Orderly growth which allowed simple projections into the
future has been replaced with highly interactive supply/demand patterns.  We
have observed effects without fully understanding their causes; because in
reaction to the embargo, multiple crises  actions were taken.  There has been
little chance to disentangle the interactions of these numerous actions,  to
disaggregate the effects.  We do^ know  that consumption has been reduced,  but
we do not know the  relative importance in reducing consumption of factors
such as price, anticipated scarcity, conservation, availability, patriotism,
or emergency atmosphere.  The current, substantially zero, growth in total
petroleum consumption and in electric  power production, the declines in home-
 *  The British Thermal  Unit  (Btu)  is  a measure  of heat  energy  in  common  use by
 engineers  in England and the  United  States.  A Btu  is  the  amount of  heat
 required to raise one  pound  (about a pint)  of  water one  fahrenheit degree in
 temperature.   One Btu  is equal  to 252 calories (the amount of heat required to
 raise one  gram of water one  degree Celsius  in  temperature1)-

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building starts, automobile sales, and motor gasoline sales, are striking
examples of problems facing today's forcaster of future energy demand and the
growth or dimunition of that demand.

     A search of the literature reveals that very few of the forecasts pre-
pared during the past few years were truly original.  Most refer to the same
basic data sources.  One of the contributions of the work on the Project
Independence Blueprint has been to vastly improve the data base needed for
energy analyses and forecasts.  Studies prepared by the fuel industry are
usually limited in that they do not consider the possibility of alternate
sources, conservation and improved efficiency of utilization.  Their growth
projections are traditionally on  the high side.  All demand projections must
be reevaluated in  light of current price conditions and the growing interest
in conservation, efficiency and diversification of fuel sources.

The National Energy Kaleidoscope
      In considering the sources of energy from fuels it can be misleading  to
take  only the aggregated whole of the United States.   In Figure 1, for
example, where energy sources for New England and for  the United States  are
compared, striking differences are revealed.  New England is 85% dependent on
petroleum products compared with  only 46% for the country as a whole.  Simi-
lar differences are shown in Figure 2 illustrating electric power  generation
fuel  sources.  Sector fuel use, Figure  3, also shows dramatic differences
between New England and the United  States as a whole.  New  England's heavy
dependence on petroleum products  combined with a lack  of regional  petroleum
resources make it  particularly vulnerable to disruption of  imports.

Imports
      In Figure 4,  major sources of  import in 1973 are  shown.  Of the  1,847
million barrels imported, over half comes from Canada, Venezuela,  and the
Netherlands Antilles.  Saudi Arabia supplied less than 10%  of our  imports  and
less  than 3.5% of  the total national  consumption.  However, New England's
dependence on petroleum, and indeed on  imported petroleum, makes the region

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                                 SOURCES  OF  ENERGY
                                            1972
               NEW ENGLAND
                 UNITED STATES
                                   HYDROPOWER a NUCLEAR
                                          5%
                                      COAL 1%
PETROLEUM
 PRODUCTS
   85%
PETROLEUM
PRODUCTS
  46%
                                                                                    HYDROPOWER
                                                                                     a NUCLEAR
                                                                                        5%
                                          Figure 1*

     *  Federal Energy Administration,  Boston, Massachusetts

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                   ELECTRIC  GENERATION FUEL  SOURCES
                                      1972
           NEW ENGLAND
                                                        UNITED STATES
                                                             NUCLEAR 3%
                        NATURAL GAS 1%
      XNUCLEAR', *
    :-'-:.'  14%   :
                                                PETROLEUM
                                                 PRODUCTS
                                                   16%
                                   Figure 2*
*  Federal Energy Administration, Boston, Massachusetts

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                                     SECTOR  FUEL  USE
                                               1972
                NEW ENGLAND
 HOUSEHOLD
a COMMERCIAL
    54%
      INDUSTRIAL 14%
PETROLEUM 8%
    IATURAL GAS 3%
      LECTRICITY 3%
                                       UNITED STATES
                                                                         COAL 1%
                       HOUSEHOLD
                      a COMMEI
                          31%
INDUSTRIAL
   39%
                                          TRANSPORTATION
                                              32%
                             ELECTRICITY 6%
                      TRANSPORTATION
                           30%
                                                                                          ELECTRICITY
                                                                                             4%
                                                                                        NATURAL GAS 1%
                                             Figure 3


     *  Federal Energy Administration, Boston, Massachusetts

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            UNITED STATES OIL  IMPORTS
                             1973
                      DOMESTIC PRODUCTION 65%
                      -IMPORTS  35%
                     MAJOR SOURCES OF IMPORTS
                        MILLIONS OF BARRELS
          ITALY 45
          ALGERIA 49
           LIBYA 60
            INDONESIA 78
             IRAN 81
            ITRINIDAD 91
                  INIGERIA is?
                    SAUDI ARABIA 178
                      NETHERLAND ANTILLES 209
                                     VENEZUELA 410
                                          CANADA 479
                          Figure 4*
*  Federal Energy Administration, Boston, Massachusetts

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                                       8
 especially susceptible  to  embargoes.   As  is  illustrated  in  Figure  5  the  30%
 more  New  England  paid for  energy  than  the United  States  is  more  a  result of
 New England's  exceptional  dependence on oil  than  the  differences in  oil
 prices.   This  specific  comparison has  been made to  illustrate  the  importance
 of using  detailed local  or regional considerations  when  assessing  energy
 problems.

 Fuel  Flexibility
      Because natural gas and oil  have  been cheap, the trend has been  toward
 specialization  rather than diversification in energy  fuels.  Most  large  users
 of fuels  with  diversification can switch  only between natural  gas  and resid-
 ual oil.   Many  electric  utilities formerly able to  bum  coal have  switched to
 oil for environmental or other reasons and no longer have the  facilities for
 a return  to coal.

      To many of the users,  the logical way to increase the substitution  of
 coal  is to convert it into gaseous or  liquid fuel meeting the  requirements of
 both  the  installed facilities and the  environment.  There has  been essentially
 no growth  in coal production since the forties.   If, for example,  synthetic
 natural gas from  coal is to be a  significant factor, say 20% of current  con-
 sumption,  coal  production  would have to be doubled  over  current levels and
 about 60  coal gasification plants would have to be  built requiring capital of
 an estimated $25  billion.

      As we face the problems of converting coal to  clean fuels to meet the
 needs of existing plants,  we must not  ignore the potential for converting
 existing  plants to burn moderately benefLciated coal in  an environmentally
 acceptable way or for using coal  to produce feedstocks for industry.

 Indigenous Supply and Utilization
     The intensely urbanized Hastern Seaboard of the United States  has little
proven petroleum and gas reserves.  To correct this, pressures are  mounting
 to do exploratory drilling on the outer continental shelf.   Some geologists

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                                  9
   CRUDE  OIL  PRICES a  RESULTING GASOLINE  PRICES
                  (GASOLINE  PRICES INCLUDE TAX)
                            MAY, 1974
 CRUDE OIL
$ PER BARREL
      $25.00
      20.00
       15.00
       10.00
       5.00
               55*
                                      GASOLINE
                                    tf PER GALLON
                                    60.00(2'
                                                        - 50.00
                                                        - 40.00
                                                        - 30.00
                                                        - 20.00
                                                       - 10.00
            TOTAL
              US
            CRUDE
              OIL
            AVERAGE
IMPORTED  DOMESTIC
 CRUDE     CRUDE
  OIL
AVERAGE
  OIL
AVFRAGE
  STICDOMESTIC
 OLD      NEW
CRUDE     CRUDE
 OIL      OIL
             ICRUDE OIL PRICES
                   |   [GASOLINE PRICES
                              Figure 5*
   *  Federal  Energy Administration, Boston, Massachusetts

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                                        10
  believe  that  major  finds will  be made,  others do not.  Environmentalists are
  concerned  about  the hazards of such development.  The discovery of large
  reserves and  safe production on the outer continental shelf could make a
  radical change in the import requirements of the region and could have a
  major influence  on  the national picture.

  Fuel Supplements
      With urbanization comes the concentration of vast quantities of solid
 waste and sewerage.   Both represent a small but significant source of energy.
 Both have to be disposed of in an environmentally acceptable manner which is
 becoming increasingly difficult by conventional methods.   These sources have
 little sulfur content.   Their conversion to synthetic fuels can be accom-
 plished by many of the  same processes  utilized for coal.   Other by-product
 sources  such as industrial  process  waste,  waste heat, and  used lubricating
 and industrial oils  are  also potential  energy sources for  urbanized  areas.
 Yet,  none  of these sources  can  be  considered more  than  supplementary  sources
 to the  basic energy  supply.

      Solar  energy, too,  has  to  be viewed as  a supplementary source, albeit  a
 potentially important one.   This basically renewable  resource  has  several
 manifestations  other than direct radiation,  such as wind and ocean temperature
 gradients.   The distributed  nature  of solar  energy and its  variability make
 it  one requiring  some form of storage.

 Distributed  Storage
     Geographically  distributed storage  can be important to the temporal
 smoothing of energy  or fuel demand.  One of the major problems of electric
utilities is full utilization of capital intensive installed capacity.  Their
basic load is often  little more than half their peak load.   Localized storage
such as pumped water, compressed air,  or fuel is now used to help meet peak
demands.   Distributed storage at end-use locations, installed for other pur-
poses, such as storage of heat from solar collectors could  also be used to
reduce peak demand on electric utilities and to foster more efficient  utiliza-

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                                     11
tion of the plant installed capacity.

     The doubling of the storage capacity of fuel oil at individual resi-
dences is another form of distributed storage than can improve efficiency
(by reducing the number of delivery truck trips per heating season) in fuel
use and lessen the vulnerability of the householder to supply interruptions.
Ideally, each residence should be able to store a heating seasons supply of
fuel oil.

Project Independence:  "Blueprint" and Economics
     The recently released results of the FEA Project Independence Study
does not, as anticipated by some, provide a "blueprint" for reaching zero
imports by 1980.  It is rather an evaluation of the nation's energy problem
contrasting broad strategic options, viz.
               o Increasing domestic supply
               o Conserving and managing energy demand
               o Establishing standby emergency programs
which  are evaluated  in terms of their impact on:
               o Development of alternative energy sources
               o Vulnerability to import disruptions
               o Economic  growth, inflation and unemployment
               o Environmental effects
               o Regional  and social  impacts.
No  policy  recommendations  are made.   Rather the  analytical  and  factual  bases
are presented  for illuminating  choices  and alternatives  in  selecting  a
national energy  policy.

      The Policy  Study  Group* of the M.I.T. Energy Laboratory  made  an  economic
evaluation  of  Project  Independence and  concluded  that "Complete independence
 from foreign energy supplies  is a  form  of  insurance  against energy disruption
 *The Policy Study Group,  "Energy Self-Sufficiency:   An Economic Evaluation,"
 Technology Review, May 1974 pp.  23-58.

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                                      12
 or price increase which the U.S.  could purchase only at very high cost."
 There is growing concensus  that reduction  of imports to an acceptable risk
 level rather than to attempt their elimination  is  the preferred  course.

 Petroleum Price  and  Cost
      The political climate  for  the oil importer today produces highly uncer-
 tain  world oil prices.   Economic  pressures  on many major oil  exporters  are
 minimal  because  greater revenues  are not needed to support their economic
 growth.   World oil prices are currently far above  production  costs  of the  key
 suppliers in  the Middle East who  have  60% of the world reserves.  Foreign
 sources  of oil and their prices are likely  to be quite unpredictable  through
 1985.  The development  of domestic substitutes  in  the  U.S...will  be  costly,
 requiring revenue for the product  approaching or exceeding current  world
 crude prices  at  $11  per barrel.   With  such  foreign  leverage on world  oil
 prices the U.S.  will be forced to  subsidize  in  one  form  or another  the
 development of domestic substitutes.

      If  world oil prices remain at or  near $11 per  barrel  the FEA study pro-
 jects total demand growth at less  than  3% per year  until  1985 when  the
 expected  demand  will be  about 175  billion barrels  (103 quadrillion  Btu's or
 "quads"*),  20-37  billion barrels  (12 to 22 quads) below  earlier forecasts.
 Electric  demand  growth  is also expected to be below its  recent high rates and
 petroleum  demand  is  expected to remain constant until  1977 and thereafter to
 grow only  1-2% per year.

 Substitutes
     Synthetic fuels  and shale oil are not expected to be major contributors
before 1985.  Neither will  be geothermal,  solar and other advanced technol-
ogies.  Nuclear electric power could increase its share of generation from
4.5°6 to 30%.  At this writing,  the magnitude of contribution by nuclear gen-
eration is still  speculative.  Quite a few orders for reactors have  been
*The term "quad" is often used to represent a quadrillion or 1015 Btu's.

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                                      13
cancelled and many that were contemplated are being replaced with coal-fired
units.

Problems:  Near Term and Long Term
     An immediate problem facing the nation is how to deal with emergencies
in the near term.  Programs would involve conservation, both voluntary and
mandatory, fuel switching and fuel allocation, storage and stock-piling
capacity, shut-in reserves of oil and gas, and short term measures to increase
energy productivity.

      The  long range approach must include a return to diversification of
energy supply as  an essential feature.   The past concentration on single  fuel/
energy sources,  the inflexibility of our machines  and processes with regard
to  acceptable fuels must be  countered with increasing versatility and
multiple  options  in fuels.   This diversification can be  approached  from two
directions:   the  development of alternate  fuels  for existing equipment and
the development  of versatile equipment  or  the modification  of existing equip-
ment for greater flexibility in fuel use.  Alternate  fuels  can be utilized
 immediately upon becoming  available, but the  time  lag  for new versatile  and
use equipment puts  that approach farther into the  future.   The production of
 alternate fuels  will  require new plants too,  hence there will be delay in
 their widespread availability.
                      ENERGY SUPPLY --- ENERGY RESOURCES

 Some Definitions
      Critical to reasonable projection of future energy supplies is an under-
 standing of the nature and extent of our energy resources.  There is a com-
 plicated and often confusing terminology associated with estimates of our
 resources.  A few definitions are in order.  There is a distinction, for
 example, between resources and reserves.  Reserves are known, identified
 deposits of minerals that can be extracted profitably with existing

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                                       14
 technology and under present economic conditions.  Resources include, in
 addition to reserves, other deposits that may eventually become available	
 either known deposits not now economically or technologically recoverable, or
 presently unknown deposits that may be inferred to exist but as yet have not
 been discovered.  For most minerals, current reserves are only a small part
 of the total resource.  However, no potential resources can be produced until
 they have been converted into the category of reserves by discovery, improve-
 ments in technology, or by changes in economic conditions.  Supplies are the
 quantities that could be produced per day or per year.  Many factors influ-
 ence, for example, the supplies of domestic oil and gas that can be developed
 and produced economically and among them are the drilling rate and the find-
 ing rate.

     Drilling rates are expressed in millions of feet per year drilled both
 for exploratory and development purposes.  The finding rate is the volume of
 oil and gas found per unit of drilling effort.

The Evolving Supply Picture^
     Early in the development of an oil or gas field the finding rates are
 characteristically high.  Within three years after World War II, domestic
petroleum was plentiful.  A much lower cost source of oil then became avail-
 able in the Middle East in the 1950's.   Drilling activity logically followed
 the high finding rates overseas so that over the last 10 to 15 years, drill-
 ing in the U.S. has declined at a rate of about 4 to 5 percent per year.
 Production costs in the Middle East were so low that crude oil could be
delivered to the United States more cheaply, including transportation costs,
 than could crude from domestic fields.   To protect domestic oil producers,
 oil import quotas were established in 1959 and maintained until 1973.

Estimates of Proven Reserves
     Proven reserves, by definition,  are a strong function of market price.
Most current estimates however, based on prices substantially lower than  the
 current world market, are lower than they should be.   Moreover, there are

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                                     15
striking differences in estimates of total petroleum reserves in the United
States causing 30 to 35 year differences in the peaks of cycles of crude oil
production.  Figure 6 shows U.S. crude oil production in barrels per year up
to 1972.*  Figure 7 projects production rates into the future for different
estimates of the total resource base.  An estimate of total reserves based
on finding rate came quite close to the figures obtained from the analysis of
production, discovery, and proved-reserves data.  The complete cycle of crude
oil production in the conterminous United States as of 1971 is shown in
Figure 8.

Associated Natural Gas, a Bonanza
      In the early days of the U.S. petroleum industry, as it is in the Middle
East  today, natural gas was produced as an unused byproduct of crude oil
production.  There were no pipelines covering substantial distances and only
a small fraction of the gas produced could be marketed locally.  The remainder
was burned in the open air  (flared)  at  the field.  Flaring continued as late
as  1945 until the laying of the  "Big-inch" pipelines opened markets in  the
Midcontinent, Northeast, North-Central, and  Pacific Coast areas to Gulf Coast
natural gas.  A  Supreme Court decision  in  1954  required  the Federal Power
Commission to regulate prices at the wellhead of natural gas to be sold in
interstate commerce.  The Federal  Power Commission  initially set prices at  an
average  level of about  16 cents  per  1,000  standard  cubic feet  (at a pressure
of  14.73  lbs/in2 and  60 degrees  fahrenheit).  These prices were gradually
increased to  about  20 cents per 1,000  cubic  feet by  1973.  The cost of  energy
from  natural  gas at  17  cents per thousand  ft was  about  10%  less than  from
bituminous coal  at  $4.79 per ton,  but  only a third  that  of crude oil at $2.90
per barrel.   This cost  advantage,  in addition  to  the  ease  of transportation
and utilization  and  the pollution free character  of its  burning, produced an
accelerated growth  in natural  gas consumption.  This  aberration made it
necessary to  estimate ultimate  gas reserves  on  the  basis of  a  gas to oil
 *U.S.  Energy Resources,  a Review as of 1972,  Serial  No.  93-40 (92-75),  Senate
 Committee on Interior and Insular Affairs,  Committee Print.

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1880
           1890
                     1900
                               1910       1920        1930
                                       TIME (YEARS)
1940
           1950
                     1960
                                1970
                                          1980
                        Figure 6:   U.S.  Crude  Oil Production

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                            PRODUCTION RATE (109bbls/yr)
   o
   c

   K

   ^j
   o
   3
   TJ
   o
   3
   o
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-------
                                                    80 PERCENT (67 YEARS)
1860
1880
                                                                                                     2040
                                                                                                                2060
           FIGURE  8:  Complete cycle of crude-oil production in conterminous United States as of 1971.

-------
                                      19
ratio.  Experience has shown a fixed ratio of gas to oil produced by a field.
Multiplying the number for resources of barrels of oil by this ratio^gives an
estimate of the resources of gas expected.  Figures between 6,250 ft /bbl and
7 500 ft3/bbl were used for the conterminous United States to estimate ultimate
resources at one quadrillion ft3.  Figure 9 shows the predicted cycles for
2.65 x 1015 ft3 and lor J0" "  ft' total resources.

     An attempt to derive a gas-to-oil ratio for another region, the Middle
East  for example, will be confused by an  undeveloped  gas market or  transport
facilities or both.  Unlike in  the United States where  gas, oil, and mixed
gas and oil wells of promise are brought  into  production,  a gas well,  or  one
with  little oil,  is not brought  into production  in  the  Middle  East.  Gas
associated with the production  of oil  is  either  flared, pumped back into  the
ground  to  repressurize the  field, or used locally  as  a  fuel.   One  could use
the ratio  derived for  the United States  in  estimating gas  reserves  elsewhere
but such  an  estimate  might  be  very  unreliable.

The Cloudy Crystal  Ball
      To give some perspective  to the uncertainties of such predictions let us
 go back to the petroleum situation  as  of 1951  and projections as of that  time
 for the period 1952-1965.   As  shown in Figure  10,  the U.S. supply was to have
 begun a decline in  about 1955  and to  have dropped from  7 million barrels per
 day to 5.5 million  barrels  per day by 1965.   In fact, U.S. production in
 creased over that period to about 7 million barrels per day.   The point we
 wish to make is that we should not give undue credence to forecasts (and be-
 come alarmed or reassured as the case may be)  nor should we ignore the
 results of the forecasts if we truly understand the bases upon which they
 were made.

 Production of Energy Fuels
      There are many common factors in fuel production  and consumption.   They
 may be listed as:
                o Location

-------
    50
    40
    30
 cc
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 t
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    20
                 1920
                              1940




s
*
/
1
/
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1
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\
\
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\
\
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USGS Estimate \
2650xlOI2ft3


•h
\
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\

Hubbert Estimate
1000xl012ft3





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^
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                                                                                               \
                                                                                                 \
                                                                                                                          to
                                                                                                                          O
                                          1960
                                                      1980         2000

                                                            YEARS
2020
2040
                         2060
                          2080
    FIGURE  9:  Comparison of predicted cycles of natural-gas production for conterminous United States based on esti-
                                mates as of 1961 of 1,000 x io« ft' and 2,650 x 10" ft' for Qx.

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                                        21
MILLIONS OF BARRELS PER DAY
                                                   MILLIONS OF BARRELS PER DAY
8  —
7  —
                   U.S.DEMAND

                      NET EXPORTS
            /;./    U.S. DEMAND
 5   —
 4  —
  1938 1940
1945
1950
     1955
YEARS
1960
1965
 SOURCE OF DATA. OFFICE OF DEFENSE PRODUCTION . JUNE . 195V.
   1938-1950. N.S.R.B.
   1951 ESTIMATE OF P.A.D.
   1952M965 I AVERAGE ESTIMATES OF U.S. BUREAU OFMINES AND A.L. SOLLIDAY,
            EXECUTIVE VICE PRESIDENT. STANOLIND OIL AND GAS CO
                                                                         —  8
                                                                         —  7
                                                                         —  6
                                                                         ^^  C
                                                                         —  4
1970
   10:   The  petroleum  situation  in  the  United  States,  1938-1951,  with
                            projections  to 1965.

-------
                                       22
                o  Extraction
                o  Transportation
                o  Physical  and/or Chemical Processing
                o  Refining
                o  Storage of Product
                o  Transportation to User
                o  Storage at User Site
                o  Utilization
                o  Use or Disposition of By-Products.
 In  considering  the production of alternate fuels to those in common use, the
 existence of and  the commonality of some of the factors can have important
 implications to the viability of the alternates.  Those fuels that can
 exploit existing  facilities have a better chance of early acceptance.

     There will also be inter-fuel competition for production resources:
                o  Capital
                o  Manpower
                o  Materials
                o  Manufactured Products
                o  Energy or Other Fuels
                o  Transport and Storage.

     All alternatives under consideration will require vast amounts of
 capital, much the same skilled manpower for the construction of plants, and
 many of the same  materials, for example steel.  There will also be competi-
 tion for pipe, valves, compressors, boilers, and similar components of the
 modern processing plant.  This competition directly affects costs of con-
 struction and can escalate them.   There will be some projects which can
 begin and finish on schedule some which will be delayed and others not
 started at all.

Alternative Fuels from Coal
     Coal can be converted to either gaseous or liquid form.  Routes to

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                                      23
clean fuels from coal are shown in Figure.11.*  If the simple gasification
step involves combustion with air, the result is low Btu gas containing con-
siderable nitrogen from the combustion air.  If oxygen is introduced for com-
bustion, medium Btu gas results as it does in the case of hydro-gasification.
These products can be converted to synthetic natural gas through a methana-
tion step, to a clean liquid by conversion to methanol, or to liquid hydro-
carbons by the so-called Fischer-Tropsch process.

     Liquefaction can be accomplished through pyrolysis and hydrotreating to
remove sulfur and improve the hydrocarbon product.  The coal can also be
dissolved  in a solvent from which ash, including pyritic sulfur, can be
filtered.  The solvent is then removed leaving  a heavy synthetic crude oil
which can  be treated with hydrogen to remove  organic  sulfur and to  improve
the product quality.  The various techniques  for making  fuels from  coal are
difficult  to compare because some processes produce very different  mixes  of
products which might vary over a  considerable range,  while  others primarily
make synthetic natural gas or primarily  synthetic  crude  oil.

     All  these processes  involve  environmental  problems  associated  with the
enormous  plants  that must be  located to  have  access to huge quantities of
coal and  the necessary process water.  Run-off  waters from  wastes will
carry  dissolved  contaminants which  also  represent  an  environmental  problem.

     The  associated mining  facilities will be correspondingly large,  espec-
 ially  when strip mining Is practiced.  See Figures 12a,b.   Large  quantities
of coal ash must be disposed of.   The coals used will produce five  to twenty
percent of their weight  in  ash.

A Basis for Comparison
      For comparison purposes,  synthetic  fuel plants are generally taken to
 * W.W. Bodie, and K.C.  Vyas,  "Clean fuels from coal", The Oil and Gas
 Journal, August 26, 1974, pp. 73-88.

-------
  Gasifier
JHydrogasif ier
      Gas
       t
   Pyrolysis
      Char
  Dissolution
                       Low Btu
                       CO, H2,  CH4/

                       K2, C02,  H2S
                       Medium Btu
 CO,

 C02,
                             ,  CH
                                 4
     H2S
      t
Hydrotreating
                   -*»
 Filter and
Remove Solvent
                           T
                      Ash,  Pyritic  Sulfur
                           Cleanup
Cleanup
                                CLEAN FUELS FROM COAL
                                             Low Btu
                                              (100-250)
                                                                   Medium Btu
                                                                   (250-550)
                                          GAS
                                                                     GAS
Methanation
                                                                          I High Btu
                                                                           (950-1000)
                                                                      Methanol
                                                                      Synthesis
                                                                          Liauid
                     Fischer
                     Tropsch
                                                                           Liquid
                                                                           Liquid
                                                                          i
                      Hydro-
                      treating
                                                                                Liquid
                                                                   Solidification
                                                                                   Solid
                                                                         CO

                                                                         w
                                                                         D,
                                                                                              u
                         iQ
                         C

                         n>

-------
                       Example of Large Equipment Used in
                       Area Type Surface Mining in West
                       Kentucky.
                       Courtesy of Bureau of Mines, U.S.
                       Dept. of the Interior
                                                               CO
                                                               01
Figure 12 a

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                      Aerial View of  Contour  Strip-Mining
                      in Tennessee
                      Courtesy of Bureau  of Mines,  U.S.
                      Dept. of the Interior
Figure 12b

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                                      27
have a production capacity of a fuel having a total heating value of 250 x
109 Btu/day.  (The heating value required to operate a 1000 megawatt electric
generating plant full time.)  A synthetic natural gas plant of this capacity
(250 million cu. ft./day) would consume perhaps 16,000 tons of bituminous
coal daily.  A 40,000 barrel per day synthetic crude oil (syncrude) plant is
equivalent to the gas plant in heating value and would consume perhaps 10%
less coal.*  To produce a major fraction of our daily consumption of either
gas or crude oil, say 1/4 or 1/3, would require 100 each of the coal-to-gas
and coal-to-oil plants.

     The costs of synthetic fuel plants are remarkably similar for all
processes under consideration, with capital costs falling into a range of
$300 to $500-million for the plant size considered.

     These  capital, operating and feedstock costs of synthetic fuel plants
are pushing product costs to values between $1.50 and $2.00 per million Btu
which is equivalent to oil  in the $9.00 to $12.00 per barrel range.  See
Figure 13.  If one allows for profit and return on  capital investment, the
cost to the consumer is  estimated at between $12.50 and $16.50 per barrel
equivalent  of oil.  This is a high price indeed considering the far lower
production  costs of much of the world's natural crude and in particular that
of the Middle East.  In  light of this  foreign  leverage on the market place  it
is likely  that  if synthetic fuel plants are to be built using today's tech-
nology some form of subsidy will have  to be provided.

Building U.S. Synthetic  Fuel Capacity
     Because most of the "second generation" processes for synthetic natural
gas  (SNG)  and syncrude are  still in pilot  stages at best, design  and con-
struction  of  large  commercial size plants, using one of these processes with-
out benefit of  experience gained in incremental stages of size would involve
 *These factors  depend  upon  the  energy  contents  of  the  feed  coal  used  and  the
 efficiency of the  plant  as  operated.

-------
                Cost  of Equivalent Barrel  of Oil
  cn
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                                       29
serious risks.   Operations might limp along at a fraction of design capacity,
for example, and could thus incur very high costs.   In light of this there is
serious question as to the degree of process .scaling that can be done to en-
sure confidence in a plant size where economies of scale become effective.
What degree of scaling can we live with?  10:1 or 2:1?  We cannot expect to
get off scot-free with energy refineries on the scale contemplated.  There
is no experience in any related field that would lead us not to expect
developmental difficulties.  Nuclear power, for example, has been twenty years
in the maturing process and still has problems.

     The time to design and construct a typical syncrude plant, once proto-
type experience is available, is about five years and requires 1.5 million
man hours of technical labor and 10 million man hours of craftsman and manual
labor.  Because product costs are so similar for most of the processes now
being put forward there would be little benefit derived from exhaustive
development of them all.  The thrust of new technology should be in the
direction of the development of new processes which can substantially reduce
product costs.  One advance of extreme importance to the whole of the syn-
thetic fuel industry is the large scale, low cost production of hydrogen,
preferably  from water.  Not only is hydrogen a clean synthetic fuel, but also
it plays an important role in the synthesis of all other synthetic fuels and
many essential chemicals such as ammonia.

An Example  from History
     In 1924, Germany faced an energy crisis.  World petroleum supplies were
dwindling and were not expected to last more than a few decades.  Neither did
Germany want to become too dependent on foreign sources.  Germany's  largest
chemical concern,  I.G. Farben, with a strong background in  the development of
processes and production plants for synthetic ammonia and methanol decided to
make a heavy investment into development of processes for making gasoline
from coal.  Projections of gasoline price as of 1924 in light of forecast
dwindling supplies showed heavy increases.  Because problems had arisen with
the process, one far more complex than anticipated, it took five years of

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                                        30
 intensive work and heavy investment to surmount technological problems and to
 approach cost objectives.  However, the depression of 1929 and the discovery
 of abundant crude oil in Texas made the price in Germany of domestic syn-
 thetic gasoline many times the price of imported gasoline—an economic
 disaster for the company.  It was only the Nazi interest in an indigenous
 gasoline supply that saved the Farben project by guaranteeing them in 1933 an
 acceptable price for synthetic gasoline.

      Crude oil  is no longer considered abundant in Texas,  but the  state's
 energy reserves in the  form of lignite exceed by a significant margin its
 total oil reserves.

 Oil  From Shale
      There are  vast  resources  of  shale in  the western United States.   The
 Green River Formation of Eocene age in western Colorado, northeastern Utah,
 and  southwestern  Wyoming,  a total area of  about 16,000 square miles,  is  esti-
 mated to contain  1,800  x 109 barrels  of oil.   Of this, only  5%  (90 x  109
 barrels)  is  considered  sufficiently high grade and  accessible enough  to be
 worth present consideration.

      There  are  a  number  of  extraction  processes  under consideration.   In  one
 for  an assumed  capacity  of  105 barrels per day of synthetic  crude oil  produc-
 tion,  two mines of capacity 62,500  tons/day each would be required.  The
 shale  is  retorted at temperatures above 1,100°F which in addition to  releas-
 ing  the kerogen forms highly alkaline by-product waste.   The water require-
 ments are estimated to be 16,000 acre-feet (7.0 x 108 ft3) per year.*

     The above capacity would not support a very large fraction of present
 crude consumption.  If 10 such plants were operated, the production rate
would be 1 million bbl/day but would involve the mining  of 1.25 million tons
of oil shale per day which is almost the present annual  coal production of
the United States.  The  daily volume of shale required would be 523 000 m3
                                                                      °f

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                                      31
     What would be the effects of this exploitation on the local  environment
and upon water supply of the Colorado River drainage basin in which all of
the oil shale deposits are located?  Spent shale is highly alkaline and far
more water permeable than the kerogen impregnated shales.   There  is a good
chance that large amounts of alkaline-saturated water would find  its way
into local streams of the Colorado River system.
     The available water supply in the region is already doubtful for a
    s-oil production rate
ten or more times larger.
shale-oil production rate of 10  bbl/day to say nothing of an operation rate
     In light of the above, there is increasing skepticism about the viabil-
ity of extensive surface production of oil from shale expressed by companies
having bid hundreds of millions of dollars for their leases and by Montana
Governor Thomas L. Judge who warns that land and water supplies cannot sup-
port both an expanded agricultural economy and a full scale energy develop-
ment .
                 •
     Nevertheless, Morton M. Winston, President of The Oil Shale Corporation
(TOSCO) has announced that the first commercial oil shale complex located at
Parachute Creek, Colorado will begin operation by spring of 1975.* The plant
will produce 46,000 bbl/day of refined products which is equivalent to the
production of 51,000 bbl/day of crude.  Operation at this scale will help
evaluate the process and the technical and environmental problems involved.
The disposal of spent shale in an environmentally acceptable way may or may
not be demonstrated in this commercial scale operation.

     In situ retorting of shale, on the basis of very preliminary informa-
tion, appears to be essential to substantial growth of shale nil production
in the last decade of this century.  Fundamental to future success is the
development of an environmentally acceptable process of improved efficiency.
*Problems will delay start-up.

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                                      32
                       UNCONVENTIONAL ENERGY SOURCES

Conservation as a Source of Supply
     In the same sense that a penny saved can be considered a penny earned a
unit of energy saves is at least a unit of energy produced.  Since electric
generation by thermal processes (steam turbines, gas turbines, etc.) is only
about 33% efficient, a unit of electrical energy saved is in fact 3 units of
fuel (oil, gas, coal, etc.) energy.  The "at least" enters because we must
make an allowance for the environmental effects of our production of energy
and/or fuels.  Whether by frugal practice, improved efficiency, or an alter-
nate substitute, the fuel/energy saved can do more good for the environment
than tightening antipollution requirements.  Clearly more parsemony and less
prodigality is needed in our use of energy resources.

     Advances in efficiency and development of alternative sources will
permit economic growth in spite of reduced consumption of exhaustible
resources.  Improved efficiency also implies a lessening of the environmental
impact of energy use.  For example, a 10% improvement in efficiency, cer-
tainly a nominal improvement, of a previously 40% efficient plant means a 25%
savings in fuel.'  There is much to be gained by small improvements in the
efficiencies of our least efficient energy consuming devices.   Moreover, these
least efficient end uses offer the greatest opportunity for improvement.

Incentives
     Many believe that the increased price of fuels and energy is an adequate
incentive for conservation.   For the first time in many decades we have seen
a break in the trend of increased energy consumption in late 1973 and 1974.
Because oil has shown the greater reduction in consumption and has more than
tripled in price, it is tempting to infer price elasticity in  demand.   How-
ever, it is still too early to say how much of this curtailment of consumption
was a result of increased price and how much a result of shortage of supply.
The consumption of motor fuel in the U.S.  has shown the first  decline since
1943 and is expected to be about 100 billion gallons in 1974,  a decrease of

-------
                                      33
3.5% over 1973.  There were no shortages in the later months of 1974
yet daily average sales were consistently below those of a year
earlier.

     With gasoline shortages fresh in the public's mind, and with grave
uncertainties about future supplies and their cost, the American car
buyer decided to stand pat.  Inventories of unsold cars began to grow.
Cars built for inventory are frequently loaded with options, many like
air conditioning and additional weight, reduce fuel economy.  With many
production lines shut down, the customer faced a long wait for the small
car stripped of options he only recently decided he should have.  The
impact  of this on the automobile industry has been devastating.

Conservation/Productivity  in Industry
     Industry, it is believed, can and will be more responsive to
increased energy costs  than can the  individual or  small  group  consumer.
Potential savings in  five  of the most energy  intensive  industries have
been identified  in  a  report by the Thermo Electron Corporation.   A
summary of  their results is in Table I.   With today's  technology,  the
study  indicates  that  specific  energy consumption  can  be reduced  by  35%
in iron and  steel,  by  25%  in petroleum  refining,  by  39% in paper, by
 20% in primary Aluminum Production,  and by  over 40%  in  Cement.
 4Thermo Electron Corporation, "Potential for Effective Use of Fuel in Indus-
 try."  Thermo Electron Corporation, Walthatn, Mass., April, 1974.

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                                      34
                                   Table  I
                                           (4)
          COMPARISON OF SPECIFIC FUEL CONSUMPTION OF KNOWN PROCESSES WITH
                 THEORETICAL MINIMUM FOR SELECTED U.S.  INDUSTRIES
                                   (Btu/ton)
Iron & Steel

Petroleum
Refining

Paper
Primary Aluminum
Production***

Cement
                          1968
                        Specific   Potential
                        Fuel Con-  with 1973
                        sumption   Technology
 26.5


  4.4

*39.0



 190

  7.9
 17.2


  3.3

*23.8



 152

  4.7
        Theoretical
       Thermodynamic
          Minimum

        6.0 millions
        0.4 millions

**Greater than -0.2 millions
  Smaller than +0.1 millions
       25.2 millions

        0.8 millions
*Includes waste products consumed as fuel by paper industry
**Negative value means that no fuel is required
***Does not include effect of scrap recycling
+Thermo Electron Corporation,  "Potential for Effective Use of Fuel in Indus-
try."  Thermo Electron Corporation,  Waltham, Mass.,  April, 1974.

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                                      35
     A former British Government body established in 1954 to assist in the
improvement of efficiency of energy use is now a successful private company.
The National Industrial Fuel Efficiency Service. Ltd.   Activities over two
decades permit the company to offer an enormous amount of experience in fuel
saving techniques.  In their first 15 years of operation it is estimated
that measures implemented or recommended by them saved at least 20 million
tons of coal equivalent.  Heat and power surveys carried out over a reasonable
sample of industrial groups indicate the potential savings realizable in a
number of British industries:*
                         Potential Fuel Savings

           Industrial Group                    Average Savings (%)
           Ceramics , brick, glass                  15.0
           Chemicals                                18.0
           Iron, and steel                           20.0
           Engineering and metals                   18.0
           Textiles and leather                     15.0
           Food, drink and tobacco                  15.0
           Other manufacturing                      21.0
*W. Short, "Making energy value for money," Nature, Volume 249, June 21,
1974, p. 715.

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                                      36
     Petroleum refiners have committed themselves to reducing internal fuel
consumption 15% or about 200,000 barrels daily by 1980.  The FEA is seeking
similar commitments from producers of cement, aluminum, chemicals, steel and
paper.

Operational Methods
     Substantial progress has been reported by industry in using essentially
operational methods of reducing energy use per unit of production.  These
efforts are described in Senate Commerce Committee, Print 35-814, "Industry
Efforts in Energy Conservation."

     Most industries have established energy management programs which are
considered by the National Petroleum Council to offer the major potential
for energy conservation.  The NPC identified conservation constraints as:
               o Capitol
               o Technical Manpower
               o Environmental Standards
and incentives as:
               o Increased Fuel Costs
               o Potential Shortages.
An appropriate conservation program for individual industries can only be
established on the basis of a detailed and comprehensive energy audit of
operations.   There is a need to develop further field measurement technology
that will permit reliable, rapid, accurate, and inexpensive audits of energy
use.

     In increasing numbers, operators of commercial buildings are establish-
ing building energy management systems which result in significant energy
savings.   The EXXON building in New York and One IBM Plaza in Chicago are but
two examples of this growing trend.   In the EXXON building electrical demand
(kilowatts)  was reduced by 27%, electrical energy (kilowatt hours) by 32%,
and steam quantities (used in heating, ventilation and air conditioning)  by
about 40%.  At the all-electric IBM building in Chicago annual savings of

-------
                                      37
$140,000 for electric power and $73,000 for manpower were realized with a com-
puter controlled conservation system.  There was an $18,000 charge for com-
puter maintenance, supplies and power.  Net annual savings came to $195,000.

Consumer Conservation
     It will be more difficult to develop and implement conservation
strategies in the consumer market.  A first step is to develop information on
consumer energy use patterns and on causes of excessive use.  Generalized
recommendations are to be avoided.  If the resources the consumer has to
lessen his energy needs are limited, as they undoubtedly are, it is essential
that he use these resources to correct his most serious problems.  It would
be inappropriate, for example, for a homeowner to install additional insula-
tion when air infiltration was his major problem and weatherstripping, caulk-
ing, or other measures to improve building tightness would produce a greater
return in fuel savings for his investment.

     Unfortunately, the consumer does not have a technological advocate.
His purchasing power for conservation techniques is neither concentrated nor
adequately identified to represent an attractive enough market to foster the
development of a conservation service industry.  There is no "product" in
the ordinary sense.  Improved energy productivity techniques  (getting more
for less) at the individual consumer level apparently does not appear to
many as a "marketable item".  In aggregate he consumes a substantial fraction
of our energy, but in detail his needs can be diverse.

Regional Factors
     New England, the Middle Atlantic and East North Central states consume
about half the petroleum and natural gas used in the Household/Commercial
sector.  In New England, for example, 75% of residential and commercial space
heating is done with oil.  As was pointed out earlier, the region is heavily
dependent upon imported oil.  Improvements in the efficiency of operation of
oil burning furnaces can be a major source of "saved" oil for the region.   It
is important that attention be paid to the extant furnace stock because it

-------
                                      38
would take twenty to thirty years for codes and efficiency requirements for
new buildings to have a significant effect on fuel consumption.  This is but
one example of the need to examine energy use on a regional basis to identify
those areas where improved energy productivity can have a most important
effect on regional fuel consumption.
                       ALTERNATIVES AND SUPPLEMENTS

Urban Solid Waste
     In areas of high population density, urban solid waste can be an impor-
tant supplementary source of energy.  We already have in operation electric
generating plants that use solid waste to supplement regular fossil fuels,
and solid waste is used as a source of energy for a municipal district heat-
ing/cooling system.

     It is estimated that Americans produce between 200 and 300 million tons
of solid waste a year, about a ton for every man, woman and child in the
country.*  At present we dispose of 90% of our waste in landfills, 8% in
incinerators, and 2% by other means.  Urban solid waste consists typically
of 40-45% paper, 20-25% organic materials, and the remainder, metals and
glass.   Experience at the St. Louis-Union Electric Co.* has shown that solid
waste,  sampled over a 10-month period with only magnetic metal removed, had
an average heat content a little less than half that of Illinois coal.  Union
Electric Co. currently fires a mix of 10% solid waste with coal to produce
electricity.  Solid waste is a supplement.  The large power generating facil-
ities frequently cited as the best example of refuse burning, usually obtain
less than half their total heat input from refuse.  The new $70-million plant
*Heat equivalent to 80,000 tons coal, 300,000 barrels of oil.
*F.E. Wisely, "City of St. Louis-Union Electric Co.  Energy Recovery Process
Solid Waste as a Boiler Fuel", presented at the U.S./Japan Energy Conserva-
tion Seminar, San Antonio, Texas,  February 1974.

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                                       39
being built by Union Electric to derive about 6% of its electric power
production from solid waste will draw trash from St. Louis plus six adjoining
Missouri and Illinois counties.

Pros and Cons of Direct Combustion
     Solid waste must be considered a supplementary, not a substitute fuel.
Even in the most heavily urbanized areas, where solid waste is concentrated,
the energy to be drived from waste will be only a fraction, albeit an impor-
tant one, of energy needs.  Because of solid waste's low sulfur content, it
can be burned with higher sulfur coal (the percentage depending upon the
mix) and yet meet sulfur emission standards.  Solid waste is a growing prob-
lem for most major metropolitan areas because they are running out of places
to put it all.  New York City for example, expects to overflow its available
disposal grounds in the next few years.  More than twenty cities are looking
for solutions.

   .  The economics of solid waste management have to be considered in the
total context.  Environmental costs such as land use by continued expansion
of landfills, the failure to recycle resources, the effects of landfill
drainage on water resources and many others must be factored into cost-
benefit analyses.  Annual operating costs of the Union Electric facility are
expected to be about $11.00/ton of solid waste at a 100,000 ton yearly rate.
For this Ill-million annual operating expenditure Union Electric could save
up to $10-million in fuel, while helping solve the urban area's solid waste
disposal problem.

Clean Fuels from Urban Solid Waste
     Solid waste can be converted to other clean fuels with processes nearly
identical with those used for coal gasification or liquefaction.  The
chemistry is substantially the same, only the pre-processing and handling is
different.   Technological advances in coal processing can have an important
impact on the economic and technical feasibility of clean fuels from solid
waste plants.  It is not inconceivable that solid waste from the East Coast

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                                      40
megalopis could be transported to coal refineries near Appalachian mines for
concurrent transformation with coal to clean fuels.  The same transport that
delivered coal to urban industry might return to the mines loaded with solid
waste to be processed into clean fuels.

Rural Waste to Supplementary Fuels
     Rural waste products such as manure, crop by-products, tree farming by-
products are also potential sources of clean fuels.  Manure can be readily
converted to methane gas.  Because of the dispersed nature of these products,
their use in large scale energy plants is quite limited, though some farms
and feedlots could be energy fuel self-sufficient.  The converters, however,
would have to be designed, manufactured and distributed in a consumer
oriented market.  For widespread applications of such techniques, a whole
industry would have to be developed including marketing and servicing.  It
takes years under ideal conditions to develop such an industry.

Solar Energy Supplements
     Solar radiation can be used to generate electricity and heat.  The
application of solar energy closest to commercial practice is for domestic
hot water and space heating.  The use of solar energy for cooling of living
space is possible and a demonstration program in an elementary school in
Atlanta, Georgia has been begun.  These applications of solar energy are also
consumer oriented and require the development of a consumer oriented industry
to fully exploit the potential of solar space heating and cooling.

     The variability and availability of solar energy makes some form of
energy storage essential or else conventional energy sources must be avail-
able for "stand by."  Experience has shown that for most areas of the United
States it is not economical to build a large enough thermal storage system to
accommodate all the sunless days that might be encountered.  An auxiliary
heating system is needed.  Two of the most practical thermal storage media
are water and crushed rock.  Water storage is readily adaptable to hot water
heating systems and rock to hot air systems.  On the basis of first cost,

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                                      41
electric resistance heating is the most economical supplementary system.   As
reliable heat pumps become widely available, solar supplemented systems
operating in conjunction with heat pump heating and cooling could offer
significant reductions both in life cycle costs and in demand for convention-
al fuels.

     The development of reliable, consumer oriented components for solar
heating and cooling systems is required to realize the full potential of
solar energy in this sector.

Distributed Energy Storage
     If solar supplement heating were widely adopted, and electric power used
for make-up, the electric utilities would in fact have a form of distributed
storage for electrical energy in the form of heat.  Demand for supplementary
electric heat for storage could be limited to off-peak demand periods, and
use of heat from storage during peak demand periods could lighten the
utility's peak load and permit more economical production of electricity.
Electric heating systems with thermal storage are in use in Europe at the
present time.

Solar Electric Power
     Direct solar derived electric power is farther away.  Inexpensive,
reliable, mass-produced solar cells are needed.  Electric power conversion
equipment has to be developed to handle the transformations of power neces-
sary to run our domestic electrical equipment, and to store surplus electric
energy for the sunless periods.  Substantial progress is being made in these
areas, but the consumer oriented product is still years away.

     Solar energy converted to heat and thence to electric power requires
large areas of focusing collectors which have to track the sun in one dimen-
sion at least.  A central power plant to develop 1000 megawatts of power con-
tinuously would require a collector area of at least 22 square kilometers in
the relatively sunny southwest, and would be twice that large for a New

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                                      42
 England  location.  Focusing  collectors require direct rays.  Sunlight passing
 through  overcast conditions  can not be used.  Flatplate collectors can
 operate  on diffuse light but the temperatures achieved are too low for prac-
 tical  thermal electric power generation.

 Wind,  a  Solar Derivative
     The wind is a solar derived source of energy which is also diffusely
 distributed.  Unlike the sun, the wind can be present night and day.  The wind
 has greater average speeds in temperate and polar latitudes than in the
 tropics.  Wind driven electric generators for remote locations and farms have
 been used for years.  The aerodynamic design of efficient windmills is not
 difficult, but the mechanical design of windmill structures to withstand
 gusts, turbulence, and the wide range of wind speeds encountered is a chal-
 lenging problem.  The Rural Electrification Act, however, made conventional
 utility power available, and led to diminished use of windmills on the farms,
 even for pumping water.  Power conversion and storage problems for wind
 driven generators are similar to those encountered for solar electric power.
 The development of appropriate components for consumer use is required, as is
 manufacturing, distribution and servicing facilities.

     There appears to be an earlier opportunity to use wind to develop sup-
 plementary heat for space heating than for the electric power application.
 The windmill driven electric generator would be used to power an electric
 resistance heater which is coupled either to the domestic hot water system or
 to the thermal storage system as in the case of solar heating.   The generator
 could be simple and need not be controlled in output power, frequency, or
 voltage.   Unlike the sun, the wind is often available at night or when clouds
 are present.   Perhaps more importantly, when the wind is high most homes are
more difficult to heat.

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                                      43
                         NATURE'S SOLAR COLLECTORS

Solar Ponds
     There are a number of natural solar collectors receiving attention by
investigators.  Shallow ponds appear to work well for modest temperatures.
In salt ponds with a strong gradient in salinity it is possible to get a tem-
perature inversion in the pond, i.e., the hotter more saline water is at the
bottom.  Most of these are investigatory in nature with an occasional feasi-
bility test being planned or under construction.

Ocean Thermal Gradients
     There is a natural thermal gradient in ocean water which can be large in
tropic and subtropic oceans.  The temperature difference encountered is
about 20 -25 C.  With such a small difference, the efficiency of any heat
engine will be quite low.  It is expected that practical efficiencies would
be the order of 2%.  To produce much electric power from this system, say
1000 megawatts, would require a water flow in the heat engine over one third
that of the Mississippi River.  Feasibility studies are in progress.  A major
problem is the design of efficient heat exchangers capable of handling huge
flow rates and not be susceptible to fouling.

Ocean Currents
     Solar heat in the ocean also creates currents.  The Gulf Stream is an
example.  It has been suggested that a series of turbines anchored in the
Gulf Stream could develop energy from these ocean currents.

Other Geophysical Sources
     Other geophysical energy sources are waves, tides, and geothermal heat.
Tidal power operates the 240 megawatt Ranee project in France.   A few sites,
the Bay of Fundy (Canada and U.S.),  the Severn Estuary (England) and the He
de Chausey (France) have spring tides in the 14-15 meter range  and neap tides
of about half that.  Compared with solar, wind and wave sources, the tides
are more predictable, but not much more available.  Nor can one, without

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                                       44
storage, make tidal power available during peak demand periods.   If tidal
power were to be used to feed electric power distribution networks equivalent
capacity electrical generating system would have to stand by to  carry the
load when the tide was not suitable for generation.  The combination of tidal
power and pumped water storage has been suggested,* but costs are high, and
environmental problems could be severe.  Passamaquoddy Bay is a  most fre-
quently investigated potential site in the United States.

     Many ideas have been brought forward for the harnessing of  wave energy.
Recent "successful applications have been to supply small amounts to buoys  and
lighthouses.*  Measurements of waves off the Hebrides have indicated an
average power potential of nearly 100 kilowatts per linear meter of wave
frontage.  It would be difficult to design a system to exploit all that wave
energy because some of that average is made up of very large waves in severe
weather which would endanger the integrity of the wave power plant.  The
basic problem of harnessing wave power is the hydromechanical conversion of
dispersed, random, alternating forces into a concentrated direct force with a
machine that is both efficient and can withstand the wide range  forces and
frequencies it will be subjected to.

     While wave power uses well known and relatively simple technology, no
system has been designed or built and tested on a large enough scale to
demonstrate the feasibility of wave power to meet a significant  fraction of
our energy needs.  Again there is need of storage.  The conversion of wave
power to hydrogen has been suggested.**

     Geothermal energy, in the broadest sense, is the natural heat of the
*T.L. Shaw, "Tidal energy from the Severn Estuary",  Nature (London),  Vol.  249,
June 21, 1974, pp. 730.
*S.H. Salter, "Wave Power", Nature (London) Vol.  249, June 21,  1974,
pp. 720.
**S.H. Salter, Loc. cit.

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                                      45
earth.  The normal heat flow of the earth is about 1.5 calories per square cen-
timeter per second and occurs everywhere on earth.  Because of morphological
anomalies such as hot rock intrusions which make substantially more energy
available near the surface of the earth there are areas called geothermal
resource areas in which steam or hot water emerge from the surface, or hot
regions can be reached by drilling to not more than 9000 feet.  Geothermal
resource areas in the continental United States are in Alaska, the West
Coast, and the Virginias.

     Currently there is geothermal energy powered electric generation in
three areas:  Larderello in Italy, The Geysers in California, and Wairakei
in New Zealand.  World-wide geothermal powered generating capacity is about
0.1% of the world generating capacity.  Because typical geothermal systems
operate at temperatures under 500°F, efficiencies of these generating plants
are low, less than half that of fossil fuel plants.  The low efficiency can
contribute to high sulfur emissions from the plant because the much larger
volumes of low temperature steam with only 0.05%  sulfur have emissions
equivalent to the same output capacity fossil fuel plant burning about 2%
sulfur content oil.  Geothermal plants have to be operated at the "wellhead".
Geothermal energy is not widely available in the United States but where it
is, it can provide significant amounts of electric power.  Like many other
sources, geothermal must be exploited with appropriate environmental pre-
cautions and constraint.  If such resource development is encouraged, other
fuels can be released  to regions without such resources.
     ELECTRIC POWER PRODUCTION: AS A SOURCE OF ENERGY SUPPLY AND AS AN
                         ELEMENT OF ENERGY DEMAND
 Electricity, A Domestic and Commercial "Fuel"
      In the Project  Independence Blueprint it has been suggested that elec-
 tricity in time should become the universal domestic and commercial "fuel".
 One way to encourage this trend would be to require that all new housing be

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                                        46
 electrically heated.  This suggestion has predictably drawn the fire of the
 oil and gas industry who point out that electric power generation facilities
 are currently about 35% efficient while domestic heating plants operated on
 oil or gas can be 80% efficient.  The contrast cannot be that great for a
 number of reasons.  One, home heating systems rarely operate at or near their
 design efficiencies at the consumer's location.  Two, heat transfer effici-
 encies between the combustion chamber and the living space are not included
 and can be substantially lower than heat transfer from electric resistance
 heating elements installed in individual rooms and having individual controls.
 Three, electric power transmission losses are significantly lower than  home
 heating oil distribution costs particularly where the consumer has limited
 available  storage (typical storage capacity is only 275  gallons)  and somewhat
 less than  distribution costs  of natural  gas.   With these factors  taken  into
 consideration,  the overall fuel efficiency of all these  systems is about  the
 same.
      With  electric  heating  there  are  opportunities  for  improved  efficiencies
 coming  from  improved  fossil  fuel  generating plant efficiencies,  and  the
 potential  availability of reliable heat pumps.  These factors  coupled with
 the provision  of  some thermal storage at the consumer's  location can provide
 badly needed load-smoothing  for the electric utilities as discussed  in con-
 nection with solar  and wind  above.  (The storage system  can also store "cold"
 which would  help  immensely to diminish peak air conditioning demand  in summer.)

     If the  electric power is derived from sources other than scarce or
 depletable fossil fuels, electric heating is a bonus.  As pointed out
 earlier, electric heat is an ideal complement to solar or wind heating
 systems.

 Storage to Broaden  Base  Load Utilization
     The electric power industry is currently emphasizing large "base load"
installations in their construction plans.   Economies of scale tend to
dominate, particularly for nuclear plant construction.   Typical capacities

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                                      47
are in the 1000 and 2000 megawatt range.   Storage,  principally pumped water,
has also been located at or near the generating plant.   These factors produce
the concentration of central power stations.   In the future it will be poss-
ible to complement this centralized system with a distributed system both
for storage and for generation capacity to meet local peak needs.   Storage as
sensible heat has already been discussed.  Fuel cell systems of 26 megawatt
capacity are nearing commerical availability.  These systems are ideally
suited to a distributed generating system for meeting peak loads.   If fuel,
such as hydrogen is produced on site during off peak periods and stored for
later fuel cell use, distributed storage is accomplished and valuable by-
products, oxygen and water, are produced.

     The developments of reliable, high capacity storage batteries will pro-
vide further options for distributed energy storage  and load smoothing.

     Maximum plant utilization  is  a most important  factor  in a  capital inten-
sive  industry  such as  the  electric power industry.   Load factors for  the  in-
dustry  as a whole  have  varied between  60%  and  65%  for the  past  decade.  The
reduction of  idle  time  can increase the  effective  capacity of  the  installed
plant  and ensure  full  utilization  of the more  efficient "base  load"  installa-
tions.

Waste Heat Utilization
      All  large electric power plants produce  large quantities  of waste heat,
 the disposition of which presents  a major  environmental  challenge.   There
 have been numerous suggestions  for utilizing  this  waste  heat,  or  at  least a
 significant  portion  of it, as process  heat for manufacturing,  as  district
 heat for industrial,  commercial or residential complexes,  and as  heat to gen-
 erate a fuel  or additional electricity with so-called "bottoming  cycle".

      If the  technical  heat transfer problems  of harnessing the ocean thermal
 gradient for electric  power production are solved, the system would also have
 immediate application  to the further  utilization of waste heat from large

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                                      48
power plants.  The remote siting of power plants has made extensive utiliza-
tion of waste heat in the form of district heating difficult.   A closed
transport system using the surplus heat, has been suggested* whereby methane
and water are converted to hydrogen and carbon monoxide.   These gases are
then piped to the consumer where they are "burned" to produce water and
methane once more, with the liberation of heat.  Both the water and the
methane can be recycled to the plant or only the methane returned and the
water added on site.  No methane is consumed in the process, it is only used
as a transport mechanism for the waste heat.

Hydroelectric Power
     In mid-1974 the total conventional hydroelectric power developed in the
contiguous United States averaged 260 billion kilowatt-hours annually from a
capacity of 55,000 megawatts.   Almost one-half of this capacity and more than
one-half of the generation is  in the Pacific states (Washington, Oregon and
California).  Nearly 7000 megawatts of capacity are now under development,
90% of which is in the same Pacific states.

     A review of potential sites* for hydroelectric development with capac-
ities of 100 megawatts or more, or additions of 25 megawatts or more found
44 new sites and 26 potential  additions that might be completed through 1993.

     Forty existing hydro facilities could be expanded to add 12,700 mega-
watts of capacity.  Most of these facilities use all available water now, so
that expanding capacity could  only be done at the cost of reduced operating
time.

     The number of favorable sites available for conventional development is
limited.  There are many issues involved in the development of remaining
*Wolf Haefele, "Energy Choices that Europe Faces:   A European View of
Energy", Science, Vol. 184, 19 April 1974, pp.  369.
*Staff Report on the Role of Hydroelectric Developments in the Nation's Power
Supply, Federal Power Commission, Bureau of Power,  May 1974.

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                                      49
potential such as the production of power without consuming fuel versus the
replacement of flowing streams with reservoirs and changing the character of
a scenic valley.  Hydro plants are especially suited for providing peak and
reserve capacity for utility systems.

     Pumped storage, a form of hydro power, offers the opportunity to store
energy using excess capacity from fossil  fueled or nuclear plants to fill
the reservoir (the total developed pumped storage capacity in the contiguous
United States is just over 8,000 megawatts).  Pumped storage also presents
controversial issues.  Consolidated Edison Company of New York has been in-
volved for a decade in proceedings and litigation over its proposed 2,000
megawatt hydroelectric facility in the Hudson River highlands, the "Cornwall
Project".*

Nuclear Fission Electric Power
     Nuclear fission power is the only mineral, but non-fossil fuel, source
currently available that is backed by a fully developed industry structure to
manufacture, install, operate and deliver power to consumers.  The past
twenty years of development and operating experience had brought this indus-
try to a point of maturity where it can be  a major energy supply source.
There are problems of siting, licensing, safety, construction costs, and
social acceptance which must be solved for  this industry to fully develop
its potential.

     It has been observed that "any developing technology looks worse the
farther we get into it!"  We must keep this truism in mind as we are tempted
to abandon a technology in late stages of development for one which has as
yet not had all its problems uncovered.  To the present heated and often
irrational dialogues on both sides, there is  little that can be added in a
short paragraph other than to draw a comparison between this developed indus-
try with most of its problems glaringly revealed and the as yet infant
 *Luther J. Carter, "Con  Edison:  Endless Storm  King Dispute Adds to  its
 Troubles", Science, Vol.  184, June  28,  1974, pp.  1353-1358.

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                                       50
synthetic fuel industry.  There seems to be no inherent advantage of syn-
thetic fuel plants over nuclear plants in terms of costs, environmental
impacts, desirability to have in densely populated urban areas, etc.  To
believe that the synthetic fuel industry can develop faster with fewer
problems and be more acceptable is mixing fact with fantasy.  Past experi-
ence has proven many times over such fantasy is always expensive.

Utilization of Nuclear By-product Heat
     While electricity can be expected to play an ever increasing role in
the energy mix, we must look beyond the use of nuclear reactors solely to
generate electricity towards possible contributions elsewhere:
               o Waste heat generation of electricity using low
                 temperature, heat engine cycles
               o Direct and waste nuclear heat as process heat in
                 chemical industrial processes
               o Nuclear heat to directly or indirectly produce
                 synthetic fuels
               o Waste heat for distribution in district heating
                 and space conditioning.
The average efficiency of energy conversion of today's reactions is about
1/3.  There are, therefore, prodigious amounts of heat to be disposed of and
we must seek means of turning at least a portion of this environmentally
embarrassing surplus into a benefit.

Some Nuclear Power Issues
     David J. Rose has recently discussed* the major issues of nuclear power.
These issues involve comparison with alternatives, e.g., coal or other fossil
fuels, on the basis of:
               o Economic cost
               o Environmental and social impacts, site selection,
*David J. Rose, "Nuclear Eclectic Power", Science, Vol.  184, April 19, 1974,
pp. 351.

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                                      51
                 waste heat management
               o Accidents
               o Security and illegal diversion of nuclear fuels
               o Radioactive waste storage.
In terms of capital costs, nuclear electric power is the most expensive even
when compared with coal and oil-fired plants equipped with sulfur and partic-
ulate removal systems.  Operation and maintenance costs are expected to be
less for oil, but not less for coal than for nuclear.  It is in fuel costs
that nuclear shows its greatest advantage over both oil and coal, an advantage
that might be expected to improve with time.  To wipe out this cost advantage,
the cost of uranium oxide would have to increase nearly an order of magnitude
from the current $10 a pound to nearly $100 a pound. As is the case for most
of our resources, as was explained in connection with oil and gas reserves,
the magnitude of uranium reserves are a strong function of price.

     Siting problems and waste heat management are a result of the trend in
nuclear plant construction to take advantage of economies of scale.  Large
plants appear to require that the site be remote from urban areas.  A study
published in Sweden* in July deals with the implications of urban siting of
nuclear stations with special attention to both safety and to the potential
of the use of steam from nuclear stations for district heating in large popu-
lation centers.  The committee compared four different sites at distances of
5, 20, 40 and 100 kilometers between the nuclear power plant and the center
of a model city of 1 million population.  Risk probability multiplied by con-
sequence, was assessed.  Released radioactivity that causes serious injuries
in the neighborhood of a nuclear power plant occurs only for accidents in
which the reactor is almost totally destroyed.  The probability of such a
catastrophic rupture of the reactor is calculated to be between 1 and 10 per
million reactor-years.
     It must be understood that the quotation of probabilities does not pre-
*"Taking the Heat out of the Swedish Arguments", Nuclear Engineering Interna-
tional, September 1974, Vol. 19, No. 220, pp. 687.

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                                       52
 elude the accident happening in the first year, the first decade, or the
 first hour for that matter.  The whole matter of public acceptability of
 risk appears to revolve around differing acceptabilities for voluntary and
 involuntary risk.  We voluntarily accept far greater risk each time we drive
 an automobile, but are reluctant to accept a far lesser risk at the behest
 of others.

      We have little good data on the cost of pollution from non-nuclear
 sources, but in the Swedish study,  estimated environmental  costs of fossil
 fuel alternatives gave the nuclear  alternative a 60 million Swedish Kroner
 advantage.

      In  a study*  called an "Assessment  of Accident  Risks  in the U.S.  Commer-
 cial Nuclear Power Plants" by a team headed  by Norman  Rasmussen of MIT
 calculations indicated that the probabilities  of accidents  having ten or more
 fatalities is  predicted to be about  one in 2500 per year  per hundred  plants.
 For  fatalities  to reach a  hundred or more, the probability  is  about one  in
 10,000.   Other  findings concluded that  the consequences of  potential  reactor
 accidents  are no  larger and in  many  cases  much smaller than anticipated  by
 earlier  studies such as the Brookhaven  Report  of 1957; the  chances  of a  major
 nuclear  accident  are the same as that of  a meteor falling on a  large  U.S.
 city; society is  already exposed to  non-nuclear  accidents ten  thousand times
 more  likely  to produce  large numbers of casualties  than nuclear  accidents;
 and nuclear plants are  far  less  likely  (100 to  1000  times)  to cause
 accidents  resulting in  large economic costs than other sources.  These con-
 clusions are based on  the belief that people can be  evacuated out of  the path
 of the airborne radioactivity in the event of an acccient,  and it is  on  this
 point that substantial  controversy might ensue.

     Security against the diversion  of nuclear fuels, particularly the
*AEC Report WASH-1400, "Reactor Safety Study:   An Assessment of Accident Risks
in U.S.  Commercial Nuclear Power Plants" (August 1974).

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                                      53
plutonium resulting from breeder reactions, is a most serious problem for
world security as a whole.  Clandestine nuclear weaponry and blackmail, if
not destruction, could take place.  Additional security will be costly and
will depend heavily on international efforts (not the U.S. alone).  World
security in this matter is no better than its weakest part.  Present reactors
contain significant amounts of plutonium and breeders will contain far more---
nearly a million curies.  Security considerations may provide the main
urgency for developing fusion reaction.  Fusion cannot solve the radioactive
waste problem however because fusion reactor structures become radioactive in
use and will require periodic replacement and storage until they "cool off".

     Nuclear waste disposal is also a formidable problem whose solution be-
comes more urgent with each new nuclear plant coming into operation.  It is
essential that the heavier elements in the radioactive waste be recycled
where they can eventually become  fission products with lifetime short enough
to become innocuous in a reasonable period of storage.  This recycling will
add cost, but not  excessive  compared with  the benefits to waste disposal.

     The technical and social costs and problems described are but part of
the problem of expanding supply through the nuclear energy route.  The
extreme capital  intensiveness of  the nuclear-electric industry is well known.
The industry has had considerable difficulty of late in attracting the
necessary capital  investment for  plant expansion.  Long delays in licensing
can be costly—$50-million  a year in interest and other expenses on  a com-
pleted but non-operating plant.   It will take a lot of money, technology and
satisfaction of  social concerns to permit  the thirty- to forty-fold expansion
of our nuclear generating capacity by AD 2000.
                                DEMAND/NEED

     The  difference between  demand  and  need  can be  expressed  in  terms  of
 reducible waste  or misuse of our  energy resources.  The  elimination  of this

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                                        54
 waste or misuse will bring demand closer to actual need and our economy and
 national well being will be the better for it.  The difficulty of reversing
 trends and styles created by cheap energy is great, but the penalty for not
 doing so is worse.   The reversal can be accomplished without economic contrac-
 tion or social hardship, but to do so will require the dedication of all
 citizens to solving the problem not unlike that we require in time of war.
 Indeed,  we must declare war—-this time,  a war on waste.

 Demand Factors
      Demand is strongly influenced by cost and availability,  the  fuel  flexi-
 bility (versatility)  of user systems, convenience,  portability, existing dis-
 tribution  systems,  environmental,  institutional  and .historical  factors.
 Measures to reduce  demand  to be more closely  aligned with  need  must  be
 applied with care and planning.  We  already have an indication  of what  con-
 servation  can do.   The  potential for demand reduction is great, but  the
 potential  for concomitant  disruption is also  high.   As we  realign  our energy
 using  habits  we may provide  relief for  localized economic  disasters  in a
 manner comparable to  our relief programs  for  the victims of natural  disasters.
 If,  for example, we decide to eliminate conventional  sulfur mining as we
 meet our needs for  this  mineral by removing it from  fossil fuel, we  must be
 prepared to help those  affected meet  the  requirements of change.

     In transportation we have  a foremost example of  demand patterns affected
 by inflexibility in fuel use.  The motorist today either uses gasoline (a
 very few have other options) or he doesn't drive.  The trucking, railroad,
 and air industries are also tied to distillates or gasoline with few options
 for other fuels.  Technology can provide alternatives and can improve effici-
 ency in fuel use.   Modal shifts, operational/regulatory procedures, and load
 factor improvement in all vehicles can reduce demand.

     In the past few months we  have seen the difficulty of forecasting
demand.  The Federal Energy Administration forecast of energy demand through
 1985 is lower than most  forecasts published heretofore.   With oil  at $11  a

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                                      55
barrel demand is not expected to outpace supply.  However, if oil were to
drop  to  $7 a barrel, demand is expected to exceed supply and more than double
the required imports.  The high level of imports necessary at $7 is attributed
to:
               o High cost domestic petroleum production
               o Limited expansion of nuclear power
               o Little contribution by 1985 from new technologies
               o Limited increases in coal production
                 SUPPLY, DEMAND/NEED AND THE GAPS BETWEEN

     At  a price, $11 a barrel and upwards for oil or its equivalent,  there
 is  no  gap.   Supply has been stimulated and demand brought closer to need.
 The gap  at  $7  a barrel requires over twice the imports for  $11 oil.   We have
 discussed the  problems of nuclear expansion, and the present unlikelihood of
 a significant  contribution from shale or coal conversion technologies, par-
 ticularly at $11 a barrel.  Environmental protection regulations and  available
 facilities  will hinder expanded use of coal.  The problems  of expanding coal
 production  and transportation facilities are formidable.  A contribution by
 more exotic forms of energy will only be significant long after 1985.

               CONSERVATION AS A MEANS  FOR ENVIRONMENTAL CONTROL

     Business Week* quoted Carl Gerstacker,  chairman of Dow Chemical Co.,  as
follows:   "I cringe everytime I hear a  company  say how much it's costing to
clean up  pollution.   The opposite is true.   We  expect to make a profit at  it."
Other companies were not as optomistic.   Dow's  approach is  to reduce—
eliminate if possible	waste,  and to balance such gains against pollution
abatement costs.
* Anon.   Dow cleans up pollution at no net cost" Business Week,  January 1,
   1972, pp. 32-35.

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                                       56
      Conservation can be  a powerful  tool  in  environmental quality  control.
 The  fuel not  consumed because  conservation measures were taken cannot
 pollute  anywhere  in  its life cycle	from search, discovery and production
 through  to  the  rejection  into  the environment of the by-products of its end
 use.  The value of the marginal barrel of oil saved is equal to the value
 of the marginal barrel of  oil  produced.   Unfortunately, the costs  are not
 always equal	often because of the  differing ways we do accounting for
 energy supply and energy demand.  The incentives for saving	for  improving
 energy productivity	are  not  yet a match for those for increasing supply.
 Burgeoning  fuel costs  are  helping close the gap but with devastating effects
 on the economy.
     Improved energy  productivity is essential to our meeting national goals
 for both  energy and  the environment.  Consider, for example, the fuel
 burning process that  is 40% efficient.   Only two fifths of the fuel consumed
 in the process  is useful	three fifths is waste and must be disposed of.
 Suppose we  are  able  to improve the efficiency of that process by only ten
 percent.  Where ten units  of fuel were originally required,  eight will now
 do the job	a  twenty percent  saving of fuel, an identical curtailment
 of pollutants.
     From the above it is  clear that the most dramatic savings can be made
 by relatively small improvements in the efficiencies of our  least efficient
 processes.  Moreover, it is for these least efficient processes that we
might logically expect to be able to make the greatest improvements.
     Electric power production is another case in point.   Today's generating
 facilities convert only about one-third of the fuel consumed into useful
 electric power	two-thirds is wasted and adds to pollution.   A ten percent
 improvement would  mean a twenty-three percent saving of fuel!
     Peak demand for  electric power is  ordinarily met by  the least
efficient generating  capacity.   Efficiencies  of  peaking equipment can be as
 low as 20%-25%.  Curbing peak demand and leveling the load on generating
facilities by conserving,  load shedding,  storage or other means can,  in
effect,  increase the  efficiency of electric power generation by eliminating
the need of the lower efficiency equipment.

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                                       57
     The fuel efficiency of the automobile is also very low.  The reasons
for this include inefficiencies in converting energy in the fuel into
tractive power on the road, poor payload to gross vehicle weight ratios,
poor passenger load factor, and the grossly inefficient performance of
gasoline automobiles in urban traffic patterns.
     The three examples just cited, combustion of fuels for heat (process
heat and space conditioning), electric power generation, and transportation
in gasoline driven automobiles comprise major components of U.S. energy
use and are major contributors to environmental pollution.  Because their
efficiencies are low, small improvements can effect substantial savings
in fuel and therefore pollution.  Such low efficiencies are attractive
targets for both energy management and technological fixes.  The rewards
can be great.

                      TECHNOLOGIES FOR CLOSING THE GAP

     Conservation and improved energy productivity are having,  and can have,
a major effect on demand and thereby help close the gap.  The energy saved
by improving process efficiencies is a continuing saving for as long as the
process is used.  Plentiful alternative fuels can reduce the demand for
scarce supplies.  Substantial technical advance is required to build the
necessary versatility into our fuel consumption patterns and to provide the
alternative fuels.
     The costs of domestic fossil fuel production and processing are high.
In the past these costs have diverted search and refining operations to
foreign countries.  Plant costs for synthesizing petroleum and gas equiva-
lents from coal or waste are also high.  Clean, direct combustion of coal
needs immediate attention.  Of the many second generation coal liquefaction
or gasification techniques being investigated none stands out as the most
economical and most productive.  Product costs for all appear to be about
the same.   What is needed now is a commercial scale plant for one or two of
these processes, no more, to really uncover the technical and environmental
problems associated with full scale production technology.  Research effort

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                                      58
is needed into low cost processes to produce clean fuels from coal.  The
production of low cost hydrogen, more than a fuel	a basic ingredient in
fuel synthesis and conversion, and development of distribution and handling
facilities, would contribute greatly to the clean fuels from coal as well
as Others.  Forecast costs of synthetic gas and oil do not compete with the
"saved fuel" cost from conservation measures taken to close the demand/
supply gap.

     Post combustion cleaning equipment is being demonstrated and is being
adopted with increasing frequency.  Proving this equipment at commercial
capacity level will provide operational facts to help convince current
on-lookers that stack gas scrubbing is both reliable and economical.

     Nuclear energy will have problems expanding at the rate necessary to
make it an effective gap closer.  The technology needed here is that to
promote this expansion in a socially and environmentally acceptable way.
We must attack the problems uncovered by a maturing technology and solve
them satisfactorily rather than turn away to a technology far less mature
with problems as yet not very evident.

     Unconventional sources can make important contributions to closing the
supply/demand gap by the turn of the century.  By their very nature, unconven-
tional sources must play the role of supplements rather than substitutes.
Their application will have important regional implications.  We must use
solar energy where it is most appropriate, geothermal where it is available,
fusion when it becomes commercial, wind where a supplementary source is
needed and wind is prevalent.  Among all the unconventional sources waste,
while limited in its potential, but ubiquitous in its availability, must
be reclaimed for its energy or clean fuel content plus the essential
raw materials it can provide.

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                                      59
     There need not be a gap, but the gap cannot be closed with a single
approach.  Diversity is called for, each effort becoming a part of the
whole—a marshaling of our human, technical, and natural resources to
achieve a goal.

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                                     60
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 124.   U.S.  Office of Emergency  Preparedness (Oct., 1972).  "The Potential for
        Energy Conservation — A Staff Study."

 125.   U.S.  Office of Emergency  Preparedness (1973).  "The Potential for Energy
        Conservation:  Substitution for Scarce Fuels — A Staff Study."  Wash-
        ington,  D.C.:  U.S.  Government Printing Office.

 126.   Veerhoff, Alfred B.  (Aug. 27, 1973).   "Energy Crisis:  Fuel Shortage
        Characterized  by Many Causes, Few Solutions."  Transport Topics Vol.  15.

 127.  Weidenfeld,  Edward L. (1972).  "This Nation's Supply of and Demand for
       Fuel and Energy Resources."  Washington,  D.C.: Committee on Interior
       and  Insular Affairs, U.S. House of Representatives.

 128.  Weinberg, A.M.  (1972).   "Social Institutions and Nuclear Energy."
       Science Vol.  177,  p. 27.

129.  Whittemore,  F.  Case  (Sept.,  1973).  "How Much in Reserve?"  Environment
       Vol.  15,  no.  7,  pp.  16-20 and pp. 31-35.

130.  Wilson,  Richard (April,  1975).   "Notes on  the Case  for  the  Fast  Breeder
       Reactor." Expanded version of  remarks at  the European  Nuclear Confer-
       ence, Paris.

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                                      70
  Books


  1-  Atomic Fundamentals.  DASA,  Field  Command  Saudia  Base, New Mexico  (1963).
      Washington,  D.C.: U.S.  Government Printing Office.

  2.  Clark,  W.  (1974).  Energy for Survival.   Garden  City, N.Y.: Doubleday-
      Anchor Press.


  3.  Dupree, Waslter G. and West, James A.  (1972).  United States Energy
      Through the  Year 2000.  Washington, D.C.: Dept. of the Interior.

  4.  Edlund, Milton C., and Glasstone, Samuel  (1952).  The Elements of Nuclear
      Reactor Theory.  New York: Van Nostrand.

  5.  Fischer, John C.  (1974).   Energy Crisis  in Perspective.  New York: Wiley-
      Interscience.


  6.  Hottel, Hoyt  Clarke,  and Howard, J.B.  (1971).  New Energy Technology—
      Some Facts and Assessments.  Cambridge, Mass.: M.I.T. Press.

  7.  Hubbert, M. King (1969).  "Energy Resources," National Research Council,
      Committee on Resources and Man.  San Francisco, Calif.: W.H. Freeman,
      pp. 157-242.


  8.  Lapp, Ralph E. (1973).  The Logarithmic Century.  Englewood Cliffs, N.J.:
      Prentice-Hall.


  9. Macavoy, P. W. (1969). Economic Strategy for Developing Nuclear Breeder
      Reactors.   Cambridge, Mass.: M.I.T.  Press.

10. Macrakis, Michael S., ed. (1974).   Energy, Demand.  Conservation and Insti-
      tutional Problems.   Cambridge,  Mass.:  M.I.T.  Press.

11. Manne, A. S.  (1974).   "Electricity Investments under  Uncertainty:  Waiting
      for the Breeder," in Energy Demand.  Conservation and Institutional Pro-
     blems, ed. M. Macrakis.   Cambridge,  Mass.: M.I.T.  Press.

12. National Geographic  Society (1971).   As We Live and Breathe —  The Chall-
     enge of Our Environment.  Special Publications Division, Lib.  of  Cong.
     14-141945.

13. Odum, Howard T.  (1970, 1971).   Environment. Power,  and Society.   New York:
     Wiley-Interscience.


14. Power Generation and  Environmental Change; Symposium  of  the Committee on
     Environmental Alteration.   American  Association for  the Advancement of
     Science (Dec. 28, 1969).  Cambridge, Mass.: M.I.T. Press,  1971.

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                                      71
Books

15.  Resources for the Future.  U.S. Energy Policies; on Agenda for Research.
      Baltimore, Maryland: Johns Hopkins Press, 1968.

16.  Ridgeway, James (1973).  The Last Play; The Struggle to Monopolize the
      World's Energy Resources.  New York:  E.P. Button.

17.  Ridgeway, James (1974).  "The U.S. Energy Crisis."  Britannica Book of
      the Year 1974.  Chicago, Encyclopedia Britannica, Inc., pp.  259-260.

18.  Rocks, Lawrence, and Runyon, Richard P. (1972).   The Energy Crisis.   New
      York: Crown Publishers.

19.  Sporn, Philip (1971).  The Social Organization of Electric Power Supply
      in Modern Societies.  Cambridge, Mass.:  M.I.T.  Press.

20.  Weinberg, A.M., and Wigner,. E.P.  (1958).   The  Physical  Theory of Neutron
      Chain Reactors.  Chicago, Illinois: University of Chicago Press.

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                                     72
Bibliographies

1.  Averitt, Paul,  and Carter,  M.  Devereux (1970).   Selected  Sources  of  Infor-
      mation on United States and  World Energy Resources;  An  Annotated Biblio-
      graphy.   Geological Survey  Circular 641.  Washington,  D.C.

2.  Dean, Flora (1971).  A Bibliography of Non-technical Literature on Energy.
      Prepared at the request of Henry M.  Jackson,  Chairman,  Committee on
      Interior and  Insular Affairs,  United States Senate,  pursuant  to S.  Res.
      45, a National Fuels and Energy Policy Study.   Washington, D.C.: U.S.
      Government Printing Office.

3.  Ellingen, Dana  C. (1972).  A Supplemental Bibliography of Publications on
      Energy.  Prepared at the request of  Henry M.'Jackson, Chairman, Committee
      on Interior and Insular Affairs, United States Senate,  pursuant to S.
      Res. 45, a National Fuels and  Energy Policy Study.  Washington, D.C.:
      U.S. Government Printing Office.

4.  The Energy Index: A Select Guide to Energy Information Since 1970 (1973).
      New York: Environmental Information  Center, Inc.

5.  Landsberg, Hans H., and Schurr,  Sam H. (1968).   Energy in the United
      States; Sources, Uses, and Policy Issues.  New York: Random House.

6.  Perry, Harry, and Weidenfeld,  Edward L. (1972).   Selected Readings on the
      Fuels and Energy Crisis.   Washington, D.C.: U.S.  Government Printing
      Office.

7.  Saskatchewan, Provincial Library.  Regina (1973).  Bibliographic  Services
      Division.  Regina.

8.  Suggested Energy Readings from the Energy Information  Center of the  Batt-
      elle Energy Program (Dec., 1973).  Columbus,  Ohio: Battelle Memorial
      Institute.

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                                      73
Additional Sources of Information

1.    American Petroleum Institute Library
      1801 K Street, N.W.
      Washington, B.C.  20006

2.    Energy Information Center
      Battelle Memorial Institute
      505 King Avenue
      Columbus, Ohio  43201

3.    Federal Energy Office
      New Executive Office Building
      Washington, D.C.  20506

4.    National Petroleum Council
      1625 K Street,  N.W.,  Suite 601
      Washington, D.C.  20006

5.    Office of Public Information
      U.S. Federal Power Commission
      825 North Capitol Street,  N.E.
      Washington, D.C.  20426

6.    Technical Information Center
      U.S. Atomic Energy Commission
      P.O. Box  62
      Oak Ridge,  Tennessee   37830

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                                   74
                               TECHNICAL REPORT DATA
                         (Please read Instructions on the reverse before completing)
1. REPORT NO.
 EPA-600/2-76-044a
                          2.
                                                     3. RECIPIENT'S ACCESSIOWNO.
4.TITLEANDSUBT.TLE Energy Supply, Demand/Need, and
the Gaps Between; Volume I—An Overview
            5. REPORT DATE
             March 1976
                                                     6. PERFORMING ORGANIZATION CODE
7.AUTHOR
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