President Carter yesterday proposed giving the nation's utilities $10 billion to convert from oil and gas to coal or other energy sources, a switch he said would save the nation 1 million barrels of oil per day by 1990.
Senate Majority Leader Robert C. Byrd Jr. (D-W.Va.), who unveiled the program with other coal-state senators and coal industry officials, promised high-priority action on the Senate floor. Stuart Eizenstat, President Carter's domestic affairs adviser, called the proposal "the centerpiece of the president's national energy program."
The two-phase program would first require 50 northern and eastern power plants to make the changeover, with $4 billion in federal encouragement, in order to save 400,000 barrrels of oil per day by 1985.
The second phase would offer $6 billion as inducement to all other oil and gas burners to change voluntarily, saving another 600,000 barrels by 1990. Funding would come from the proposed crude oil tax.
However, the plan is already under attack from environmental groups, who foresee a major increase in air pollution and acid rain from increased coal burning. The Environmental Protection Agency was known to have been arguing as late as Wednesday for the inclusion of tighter controls as part of the bill, but no new controls were included.
Some members of Congress question whether the idea would accomplish its goal, while others worry about the effect on railroad shipping prices and roadbeds of moving the additional 30 million to 50 million tons of coal expected to be needed.
"No other sector of the economy can achieve as great a near-term savings of oil and gas" as the utilities, which now burn 3 million barrels of oil or gas equivalent per day to produce 16.5 percent of the nation's electricity, President Carter said in his statement.
"Consumers would benefit both from lower capital requiremenets for utilities and from reduced fuel costs after conversions," he said.
Phase I of the plan would order an end to oil and gas use at 50 power plant sites, most of them in the Northeast, which together have 107 boilers. Four sites are in Virginia and four in Maryland.
The Department of Energy would disburse $3.6 billion to help cover the costs of new machinery and equipment, boiler changes and pollution control devices, once the state governor involved had ruled that the conversion plan was cost effective and acceptable. Most plants would be expected to convert to coal, although other energy sources would not be prohibited.
Another $400 million would be made available to help finance voluntary air pollution controls beyond those required to meet applicable state and federal standards.Eizenstat said that was included as President Carter's recognition of the acid rain problem, and he called on Congress to look closely into acid rain as "quite a new phenomenon."
Phase I would cut oil use nationwide by 400,000 barrels per day by 1985, Deputy Energy Secretary John C. Sawhill said. Phase II would provide $6 billion to encourage voluntary conversion away from oil and gas by power plants that cannot easily convert to coal, and would aim to save 600,000 barrels of oil per day by 1990.
No utility could recover more than $4 per barrel of oil saved under the voluntary program, and the grants would have to be refunded if the savings goals were not met.
DOE officials stressed that the $10 billion would be recovered quickly in fuel cost savings. Difficulty in accumulating capital to make the conversions had stymied the existing Fuel Use Act, and the plan would amend the act to meet that problem with the federal aid, the officials said.
Railroad rates, said DOE's Jerry Pfeffer, "will definitely go up" as a result of the plan, while roadbed conditions and repair needs are still not known. He said the administration is working with the Interstate Commerce Commission to deal with the situation.
Environmental Protection Agency air quality chief David Hawkins, who fought hard for tighter pollution control wording, said the end product recognized the need to consider the acid rain problem as well as the need to convert from oil. "EPA is prepared to help in both those objectives," he said.
Robert Rauch of the Environmental Defense Fund said the administration plan, in requiring that existing state and federal rules be met, ignores the fact that tighter restrictions exist for oil burners than for coal. "This will wipe out the little gain that has been made in the past 10 years," he said.
Richard Ayres of the Natural Resources Defense Council predicted the proposal would fail in Congress because of the combined opposition of environmental groups and those who will see it as another industry bailout. "The big loser is going to be the coal interests themselves," he said.
Rep. Bob Eckhardt (D-Tex.), whose investigations subcommittee held hearings recently on acid rain, said the bill ignored the fact that utility fuel is residual oil, with only 12 percent of each barrel refined for motor fuel and heating. The plan may not work if cuts are not made in those areas as well, he said.
The Maryland plants involved in the mandatory switch would be Baltimore Gas and Electric's Brandon Shores, C. P. Crane, Riverside and H. A. Wagner sites. In Virginia they would be Virginia Electric Power Co.'s Chesterfield, Portsmouth, Possum Point and Yorktown sites.