in the way we put that package together that it won't be too difficult. Mr. YATES. Anything else you should tell us, Mr. Rhett? Mr. RHETT. I don't believe so, sir. Mr. YATES. Thank you very much. [Questions and answers for the record follow:] Additional Committee Questions by Congressman Regula Question. Budget justification estimates that the pipeline will be completed sometime in the early 1990's, "within a few years, the gas markets will have stabilized and the financing prospects improved enough to permit the second phase of ANGTS construction to proceed." What is this assumption based on? What happens to the Office of Federal Inspector if the gas market has not stabilized and financing prospects have not improved? How long will we continue to wait for this to occur and finance this federal agency? Answer. There is no consensus at this time as to when the gas will be needed; however, the project sponsors believe it will be sometime in the 1990's, with the early 1990's as the soonest estimate. Each year the OFI would be evaluated as to size and funding based on the workload and the prospective timing of the need for the gas. As time progresses, and if the need for gas is stretched out, the amount of activity and cost should continue to reduce. Since the costs are minimal and the regulatory advantage of keeping the statutory authority are great, this Federal Agency should be kept until such time as the sponsors abandon the project. Question. The OFI has made a decision to affilitate, on a temporary basis, with another Federal department. With whom is OFI affiliating and what are the benefits of this arrangement? Given the low level of staff and work load, would it not be better to turn over, on a temporary basis (i.e., until these favorable conditions emerge) the functions OFI is currently performing to the department they intend to affiliate with? Answer. The choice of agency for affiliation of the OFI has not been settled by the Administration and a number of agencies are being considered. The selection will be based on the Agency most allied to the functions expected during the next few years and to minimize cost. When selected, the Committee will be notified and we are presently working on this with the Committee Staff. There appears to be no advantage, at this time, of turning the statutory functions of OFI over to the Agency with whom OFI is being affiliated. The costs would be the same and the statutory authority would have to be changed by law. Since there appears no budgetary advantage and this action might well have a tendency to weaken the regulatory franchise, it does not appear that a congressional change in statutory authority is desirable. Question. There are going to be about ten staff left to "focus on special technical analyses and updates; review of the remaining environmental plans and design criteria sections; advance planning for Phase II; liaison with the sponsors, Federal, State and local groups, and the Canadians; and administrative and management functions to keep the Agency running smoothly." This level does not maintain a minimum of employees who have the skills essential for remobilizing the OFI. Are we not just wasting the little money you are requesting? Answer. When the affiliation arrangements are worked out we expect a considerable reduction in the proposed budget, both personnel and funds. There will be certain regulatory and coordination actions still required for this staff and as workload is reduced, so would the staff. This size staff does not leave an adequate number of people for remobilization, but it does provide for the essential project continuity and the few people necessary for implementing the detailed remobilization plan prepared. The accomplishment of these actions would protect the franchise and the regulatory and engineering process to date. If these processes are retained they will cut years off the remobilization process of the sponsors and is well worth the minimum expenditure. Question. $150,000 of your budget is for administrative support contracts required to maintain the agency personnel, payroll and financial management support and technical support contracts. Couldn't this be done in-house by the department/ agency they affiliate with? Answer. With the planned affiliation, the administrative support costs would be greatly reduced and these figures would be furnished to the Committee. We are working with the Committee staff on this. Question. What would be the savings/cost if all of the current functions were turned over to say DOE or another department with the understanding that if the project were ready for reactivation the independent agency would be reestablished? What would be the downside of such an option? Answer. In the short run, there would be little if any savings by turning over all the functions of OFI to another Department. In fact, the costs of new legislation and indoctrination of new staff could far outweigh any savings in personnel, administrative and contract costs. In the long run, the cost savings have to be weighed against the political, regulatory and technical factors such as our project commitment to the Canadian government, and the ability of the government to react when the project is reactivated or when other issues arise. In our opinion, as long as the sponsors are pursuing and do not abandon the project, there is need for a minimal, independent ÒFI presence. THURSDAY, MARCH 7, 1985. STRATEGIC PETROLEUM RESERVE WITNESSES HON. JACK BROOKS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS WILLIAM A. VAUGHAN, ASSISTANT SECRETARY FOR FOSSIL ENERGY DONALD L. BAUER, PRINCIPAL DEPUTY ASSISTANT SECRETARY FOR FOSSIL ENERGY Mr. MURTHA [presiding]. The committee will come to order. The chairman will be here in a few minutes. Today we are conducting hearings on the Strategic Petroleum Reserve and the 1985 deferral for Fossil Energy Research and Development. Our first witness will be the distinguished, distinguished senior dean of the Texas Delegation, the gentleman, Mr. Brooks. SPR BIG HILL SITE Mr. BROOKS. I want to thank you very much, Mr. Chairman, my distinguished friend, Mr. Regula, and my beloved friend, Tom Bevill. I want to thank you for the opportunity to appear before your subcommittee as you conduct hearings on appropriations for the nation's Strategic Petroleum Reserve. I have a great interest in this matter, both as it relates to our overall energy security needs and as it pertains to the Big Hill storage facility, located in my Congressional District in Texas. As you know, the Administration has recommended a tremendous reduction in SPR funds in its fiscal year 1986 budget and has asked to indefinitely defer the expenditure of funds appropriated for fiscal year 1985, already appropriated for Big Hill. Ten years ago, it was clear that we had to take measures of sacrifice to protect our own nation's economy and security, as well as those of our allies, from possible future disruptions in energy supplies. The Strategic Petroleum Reserve became a key element in gaining independence from foreign suppliers. Today, however, our reliance on imports is again on the rise. Studies show that our source of imports may again shift to the Middle East within the coming years. Many experts predict that we are already nearing the end of the recent fall in petroleum prices. We could find ourselves once more facing an energy crisis of monumental proportions, with equally devastating effects on our economy and our security. In short, we need a Strategic Petroleum Reserve, Mr. Chairman, as much today as we did in 1975, when it was created on a bipartisan basis. When Congress created the SPR, we made it clear that we envisioned a reserve of "up to one billion barrels." From the beginning, the Office of Management and Budget strongly opposed any significant SPR-even as our nation was reeling from the effects of the Arab oil embargo. President Carter set the doable goal at a 750 million barrel reserve, a goal for SPR supported ever since, even by President Reagan, until Congress received the Administration's fiscal year 1986 budget. In a sudden reversal, the Administration is now claiming that a reserve of less than 500 million barrels is sufficient. I object strongly to the President's desire to stop purchasing oil for SPR after the current fiscal year, thereby leaving the reserve at a level of 489 million barrels, for which we have more than adequate requirement. Not only is this figure well below the minimal 750 million barrel goal which we have been striving for, it also falls far short of our projected energy security needs for the late 1980s. ENERGY SECURITY You could project that nothing is going to happen, that U.S. production will increase, we will import a lot less. We won't need anybody, we will be down to ten percent imports. If you are crazy, you could do that. But if you are in the real world, you know that those energy imports may well rise steadily, as many experts now believe they will, and that they could be jeopardized at any time by unrest from Iran, Libya, Saudi Arabia, almost anywhere in that area. And anybody in their right mind knows that they are hot as a pistol all the time. Now, Mr. Chairman, the Department of Energy's own Energy Information Administration has issued recently its annual energy outlook. They say imports for 1990 are projected to be as high as 7.6 million barrels per day-a level which exceeds our Nation's dependence on imports at the time of the oil embargo. We will be importing more then than we were in 1973. Assuming we maintain, as they have, only 489 million barrels in reserve, we would become almost 200 million barrels short of our targeted 90-day supply of oil imports by the end of this decade. Just three years ago, a Department of Energy study, approved by OMB, reaffirmed the 750 million barrel goal as the one best suited to meet anticipated demands while still remaining cost effective. That conclusion was confirmed twice again last year. STATUS OF BIG HILL SITE That brings me to the second aspect of the Administration's proposed moratorium, namely, continued development of the Big Hill storage site, which is presently scheduled for completion in late 1990. As you are well aware, Big Hill is already partially completed. All of the land for the site, 271 acres, was acquired more than two years ago. All 14 caverns at the facility are being drilled, with completion anticipated within months. Surface structures have been built and piping and pumps are being installed so that the first five of 14 caverns are now ready for leaching. All of the longlead equipment for the site has been acquired and delivered. Finally, long-term electric power needs have already been contracted for and Gulf States Utilities Company is presently finishing installation of a major power line to the site. Big Hill is a working, progressing site, where roughly $150 million of the taxpayers' money has already been spent. According to the Department's own estimates, the site currently is estimated to cost between $150 million and $200 million less than when it was being planned earlier in this decade. In fact, Big Hill has realized such cost savings on construction that the Administration has been able to reprogram funds for planned enhancements to the SPR distribution system almost entirely from Big Hill's budget. Yet, Mr. Chairman, despite these savings and despite the commitment and investment made by both the Department of Energy and Congress, the Administration last December withdrew from availability $123 million that was in the process of being obligated for the final three major construction contracts at Big Hill. This money was withdrawn a full two months before the deferral message covering these funds was sent to Congress. Had the Department been permitted to use those fiscal year 1985 funds, approved by this subcommittee, by this Congress, it would have obligated, by the end of this fiscal year, enough duly appropriated funds to cover almost all of Big Hill's construction costs. This is the most important segment of our investment there, and well over half the total costs for full development of the site. In fact, if it hadn't been for the deferral of funds in the President's budget, Congress would have needed to appropriate only $55 million per year over the next five years to complete the entire development. DEFERRAL ISSUE Mr. Chairman, I know you and the members of this subcommittee are fully aware of the flaws in the deferral process. One is that the mere "proposing" of a deferral actually triggers the withholding of funds. Another is that there is no limit on the time a deferral proposal may pend. By far the most serious flaw in the deferral process is the apparent invalidation of the mechanism by which Congress objects to a proposed deferral. Mr. MURTHA. Could I interrupt you? Mr. BROOKS. Yes, sir. Mr. MURTHA. We have got a vote on. We have ten minutes. Mr. MURTHA. Okay. Mr. BROOKS. In 1983, the Supreme Court ruled in Chadha v. I.N.S. that all one-house legislative vetoes were unconstitutional. While the deferral mechanism in the Impoundment Control Act was not the specific target of the Supreme Court's ruling, it was listed in the Court's opinion as containing a suspect one-house legislative veto. I would like to revise and extend my remarks where I conclude on this deferral. It is a major problem for the Appropriations Committee. It affects whether what you do has any bearing on what is done by the government. We appropriate the money. They don't spend it. Nothing is done. Let me just close and say that it is really a bigger problem than Big Hill and SPR, this deferral problem. It has got to be resolved very soon because it affects the entire appropriation process across the board. And to close a site, such as Big Hill, will be enormously expensive and will increase the vulnerability of the U.S. to interna |