Implementation of Federal Coal Conversion Program

Gao ID: 115033 April 23, 1981

The Energy Supply and Environmental Coordination Act (ESECA) and the Powerplant and Industrial Fuel Use Act (FUA) were enacted to increase coal use and decrease the use of oil and natural gas in large utility and industrial boilers. The developing trend toward voluntary conversion by electric utilities should lessen the regulatory effect needed to achieve existing federal coal conversion goals. GAO identified several matters in Department of Energy (DOE) regulations which it referred to the Office of the General Counsel for an opinion on their consistency with congressional intent. These include DOE claims that: (1) the FUA provides the authority to impose environmental control measures beyond those required by other federal laws; (2) the act provides the authority to regulate units which are not the subject of an exemption petition; and (3) it does not necessarily consider any exemption to be permanent. GAO found that the site specific economic and environmental analyses, which were required by the ESECA prior to issuing conversion orders, were time consuming and expensive and that better coordination was required between DOE and the Environmental Protection Agency. The FUA provided DOE with additional authority to prohibit the use of petroleum and natural gas in new electric powerplants and industrial installations, limit increases in the amounts of oil and gas used in existing boilers, and prohibit the use of natural gas in existing boilers starting in 1990. Since the program started, it has focused on the largest boilers, those owned by electric utility companies. Industrial boilers have received little attention. Fourteen utilities are attempting or planning to convert to coal by 1988. If completed, these conversions are projected to save about 24,000 barrels of oil per day. It would be speculative to estimate to what extent industry would choose to purchase oil and gas fired boilers absent the FUA prohibitions. Many nonregulatory factors influence boiler fuel decisions which are subject to a variety of conditions such as the security of fuel supply, maintenance and operating costs, and physical space requirements. The price of fuel is the controlling factor.

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