JOINT EPC/DPC MEETING ON ENERGY SECURITY, 29 APRIL

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89B00224R000602030001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 22
• Document Creation Date: December 22, 2016
• Document Release Date: September 1, 2011
• Sequence Number: 1
• Publication Date: April 28, 1987
• Content Type: MEMO

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i
`fEMORANDI'M FOR: Distribucion
SUBJECT:
23 April 1982
Inter-Agency Meeting
TYPE OF MEETING
DATE
TIME
PLACE
CHAIRED BY
ATTENDEE(S) (probable)
SUBJECT/AGENDA
PAPERS EXPECTED
INFO RECEIVED
DISTRIBUTION:
DCI
DDCI
ExDir
DDO
DDI
C}1/\ IC
D/Exec Staff
ES
SDO/CPAs
ER
Cabinet Room
President
ADCI
Energy Security
By COB 23 April
Per Cabinet Affairs, 1000
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 STAT
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Next 4 Page(s) In Document Denied
Q
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. - EXECUTIVE SECRETARIAT
ROUTING SLIP
Compt
NIO ECON
STAT
STAT
Executive Secretary
28 Apr '87
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THE WHITE HOUSE
S~E~
AMEN-~~-
87-1706X
CABINET AFFAIRS STAFFING MEMORAND ~---
Date:Aprii 28, 1987 Number: 317,314 Due By:
SUbJECt: Joint DPC/EPC Meetin
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ALL CABINET MEMBERS
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Vice President ,,,___,,,/// ^
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State ~ ~
NSF ~ ^
Treasu
ry
^ ^
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Defense
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^ ^
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Justice AQ
^ ^
Interior ~ ^
Agriculture ^
.........................................................................................
Commerce
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Carlucci
~
Labor
~ ~
Cribb
HHS ~j ^
Bauer (~ ^
HUD ([a~ ^
Dawson (forWHStaffing) [~ ^
Transportation ~ ^
^ ^
Energy ~ ^
^ ^
Education ^
^ ^
Chief of Staff ^
~
^ ^
OMB [
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^ ^
UN
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USTR
.......................................................................
.........................................................................................
Executive Secretary for:
CIA (~ ^
OPC
EPA (~ ^
EPC [~ ^
GSA ^ D
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NASA ^ ^
^ ^
OPM ^ ^
^ ^
SBA ^ ^
^ ^
VA ^ ^
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REMARKS:
RETURN TO:
A joint meeting of tre Domestic and Economic Policy Co ncxils
will be held on Wednesday, April 29, 1987 at ~-:-8~~/? in
the Cabinet Room. The President will chair the meeting.
The agenda will be Energy Security. A background paper is
attached for your review.
Plancy 1. Risque
Cabinet Secretary
456-2823
(Ground Floor, West Wing)
^Associate Director
Office of Cabinet Affairs ,_--
456-2800 ;~,-~, ~~~,,
(Room 235, OEOB) ~~~;=~~
-,
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April 27, 1987
Executive Secreta ~, DPC
EUGENE J. MCALLISTER ~
Executive Secretary, EPC
RALPH C. BLEDSO
SUBJECT: Joint Meeting on April 29, 1987
A joint meeting of the Domestic and Econo i ~Pc~l`icy Councils will
be held on Wednesday, April 29, 1987 at ~~ in the Cabinet
Room. The President will chair this meeting, in which we will
discuss Energy Security.
A paper outlining the issue is attached for your review.
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DOMESTIC POLICY COUNCIL AND ECONOMIC POLICY COUNCIL
JOINT MEETING
Wednesday, April 29, 1987
AGENDA
1. Energy Security -- Secretary Herrington
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UNCLASSIFIED WITH SECRET ATTACHP'iENT
April 27, 1987
FROM: THE DOMESTIC POLICY COUNCIL
THE ECONOMIC POLICY COUNCIL
SUBJECT: Energy Security
Last October, you promised to conduct a review of our
energy-related national security concerns. Shortly thereafter,
Congress included in the Consolidated Omnibus Reconciliation Act
of 1986 a provision requiring Secretary Herrington to conduct a
study of domestic crude oil production and petroleum refining
capacity and the effects on oil imports. The legislation also
requires that within forty-five days of receiving Secretary
Herrington's study, you shall report your views:
concerning the levels at which imports of crude oil and
refined petroleum products become a threat to-the national
security and advise the Congress concerning [your] views of
the legislative or administrative action, or both, that will
be required to prevent imports of crude oil and refined
petroleum products from exceeding those import levels that
threaten our national security.
Secretary Herrington issued his report cr. March 17, 1987. The
analysis has been very well received. Among the study's most
important conclusions is that the costs of an oil import fee
would clearly outweigh the benefits.
The White House Counsel advises that ~~cu are under r.o
constitutional obligation to recommend legislative or
administrative action and that you have substantial `lexibili*~~
in deciding how to report your views. The Domestic and Economic
Policy Councils believe it is in your interest to convey your
views and policies, because energy security is a very important
issue and the Administration has done much to improve that
security. The Councils recommend that you convey your views in
a May 1, 1987 letter, while not forwarding a speci_`ic legislative
proposal.
The Councils have reviewed the Department of Energy study and
have prepared several policy options for your consideration.
These options reflect the tension between competing Qoals of:
(1) improving national security; (2) preserving the principles
established in tax reform; (3) ~:aintaininq a free market Pnerq;~
policy; and (4) reducing the Federal budget deficit.
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NATIONAL SECURITY CONCERNS
The Department of Energy study concludes that by the mid-1990s we
may be importing more than half of our oil. This prospect raises
national security concerns about a potential supply interruption.
The national security community believes such an interruption is
a real possibility because of the the potential for political
instability in the Middle East and the ever-present Soviet threat
to this region.
A supply interruption (or threat thereof) might pose two dangers:
o Disrupting our economy and economies of our allies who are
also highly dependent on imported oil, more specifically
Persian Gulf oil; and
o Impairing our ability to conduct the desired foreign policy.
Although the danger of a supply interruption significantly
impairing our ability to mobilize our defense establishment is
small, it could cause severe distress to civilian sectors as
defense needs are gi~?en priority access to available oil
supplies. (A fuller description of the national security concerns
is attached.)
While there is disagreement about specific additional initiatives
you might seek, the Councils unanimously recommend that in your
letter to the Congress you establish the following broad goals
for U.S. energy and oil policy:
The United States should take steps to better protect ourselves
from potential oil supply interruptions and increase our e:.ergy
security. These steps should include:
increasing our domestic stockpiles, which we can draw down
in the evert of a supply interruption;
maintaining a string domestic oil industry;
expanding the availability of domestic oil and gas
resources; and
-- .promoting among c-ur allies the importar.~e of increasing
their stockpiles.
An additional. element of our U.S. "energy security" stratcc'~~ is
to promote the use of alternative economicall:: efficient ererq~
sources. The increased uGe of coal and the introduction of r.cw
types of nuclear re~ictors are among the most promising
alternatives.
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PREVIOUS ADMINISTRATION ACTIONS
The Councils believe it is very important to keep the idea of
energy security in perspective. You have already taken two
extremely important actions to increase our energy security by:
(1) fully decontrolling oil prices in 1981; and (2) filling the
Strategic Petroleum Reserve (SPR) to more than 500 million
barrels and committing to a 750 million barrel SPR. Some of the
other major steps this Administration has taken to strengthen our
energy security and maintain a strong domestic oil industry
include:
o Reestablishing the five-year Outer Continental Shelf (OCS)
leasing program and reducing the minimum bid for certain
offshore leases.
o Increasing Federal sperding for clean coal to X2.5 billion
over the next five years and reestablishing a Federal coal
leasing program.
o Preserving the favorable treatment of intangible drilling
costs in the Tax Reform Act and retaining the full-cost
accounting provisions.
o Lifting foreign policy controls on the export of petroleum
equipment and technology.
o Encouraging our allies to build up their stockpiles, which
amount to about 350 million barrels (mostly in Germany ar_d
Japan).
o Vetoing standby petroleum price control and allocation
legislation in 1982.
These actions, and their effects, should be cited in your letter
to Congress. They have substantially increased our energy
security and improved our capability to mitigate a future suppl}?
disruption of twice the size of historic disruptions, but would.
not be sufficient to completely mitigate a much larger
disruption.
CURRENT ADMINISTRATION PROPOSALS
In addition, the Councils believe your report to the Congress is
an excellent opportunity to re-emphasize the importance of a
number of initiatives that you have proposed but which have not
yet been adopted, including:
o Seeking comprehensive natural gas decontrol, including
wellhead price decontrol, and repeal of the Fuel Use Act.
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o Repealing the Windfall Profit Tax.
o Continuing to improve access to OCS and Federal lands.
o Seeking nuclear licensing .reform, reauthorization of the
Price Anderson Act, and developing a nuclear waste
repository.
o Continuing to push hard for higher levels of oil stockpiles
among our allies, particularly at the ministerial meeting of
the International Energy Agency in May and the Venice
Summit.
If all these proposals that are currently on the table were
enacted, they could yield additional domestic production of
375,000 barrels per day of oil equivalent by the early 1990s.
The Domestic and Economic Policy Councils reviewed a number of
additional proposals for improving our. energy security. These
proposals can be divided into three general categories: {1) tax
incentives; (2) Federal lands leasing policy; and (3) the SPR.
Tax Incentives
The Councils considered four tax proposals designed to increase
U.S. oil production. The first two proposals remove restrictions
on the use of percentage depletion by independents. This will
reduce early well-abandonment and will stimulate additional
drilling activity. The last two proposals are incentives
targeted toward exploration and development of new oil andgas
reserves and toward helping to maintain the domestic oil and gas
exploration infrastructure.
1. Repealing the transfer rule to permit use of percentage
depletion for proven properties that have changed ownership.
2.
Increasing
the ret income limitation
on
the
percentage
depletion
property.
allowance from 50 percent
to
100
percent per
3. Providing for faster tax-write off of geological and
geophysical expenses.
4. Providing a non-refundable tax credit for oil exploration
and development on new properties which would be fully
creditable against the alternative minimum tax.
These proposals are arrayed below according to cost and expected
additional production. The additional production would peak in
1992 and decline thereafter.
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Additional
Tax Change Five-Year Revenue Loss
Production by 1992
Transfer Rule
~ 142 million
55,000 b/d
Net Income Limitation
$ 212 million
58,000 b/d
GAG expensing
with $21-25 barrel
phase out
$ 1.9 billion
200,000 b/d
with three-year sunset
$ 1.1 billion
125,000 b/d
Tax Credit for Exploration
and Development
with $25 barrel sunset
$ 2.9 billion
325,000 b/d
with three-year sunset
$ 1.7 billion
230,000 b/d
Federal Lands Policy
Federal lands have tremendous potential for new significant oil
and gas discoveries. Offshore has a potential of more than 11
billion barrels of recoverable oil. Onshore, the Arctic National
Wildlife Refuge {ANWR) alone has a potential of up to 30 billion
barrels of oil in place with a recoverable reserves potential of
up to 9.2 billion barrels.
On April 20, Secretary Hodel announced that the Department of
Interior would forward a report and environmental impact
statement to Congress seeking authority for full leasing of ANWR
in a manner reflecting wildlife valuPS.
An additional initiative the Administration might take in lands
policy that would lead to more exploration ar.d development
without anv budget costs is reducing the minimum bid requirement
for Federal leases from $150 per acre to $25 per acre.
The Administration might also eliminate the royalty requirement
on new competitive leases, except in the case of ANWR.
Strategic Petroleum Reserve
One of the most important steps we have taken to strengthen our
energy security is to commit to building up our strategic
petroleum reserve to 750 million barrels. The 1988 budget calls
for a SPR fill rate of 35,000 barrels a day, with a budget cost
of $233 million in 1988 and $1.3 billion over five years. By
1995, the SPR would reach almost 640 million barrels, providing
63-83 days of import protection. The Councils have developed
three proposals for accelerating the SPR fill rate.
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1. Increasing the SPR fill rate to 75,000 barrels per day,
resulting in completion of 750 million barrel reserves in
1995. This would provide 18 percent more days of import
protection by 1995 than does the 35,000 fill rate. Outlays
would be increased by $30~ million in 1988 and $2.1 billion
over 1988-1992.
2. Increasing the SPR fill rate to 100,000 barrels per day.'
This would complete the 750 million barrel reserve by 1993.
Outlays would be increased by $482 million in 1988 and $3.2
billion over 1988-1992.
3. Studying the possibility of providing a special oil-based
security that would be sold to investors to finance up to
100,000 barrels per day in the SPR at lower cost than if DOE
purchased the oil for SPR.
The Councils have developed two options based on these proposals.
Option 1 has been fashioned to be revenue neutral and avoid
reopening basic issues considered in tax reform.
Option 2 is designed to increase U.S. oil and gas production up
to 1 million barrels per day, to help make up the production lost
in the 1986 oil price collapse and to stimulate drilling activity
in the troubled oil service sector. The 1 pillion barrel
increment would increase domestic production by about six
percent, reduce projected imports by about ten percent, and
reduce world dependence on Persian Gulf oil up to five percent.
Secretary Herrington believes that a goal of 1 million barrels
new production is essential to curb rising imports and preserve
domestic oil industry infrastructure.
Option 1: Supplement current Administration proposals with a
revenue neutral program and tax changes of a relatively
technical nature. Elements included in this option
are:
opening up ANWR
reducing the minimum bid requirement
increasing the net income limitation
repealing the transfer rule
studying the possibility of private financing for a
SPR fill rate of up to 100,000. barrels per day
Advantages
o Does not increase the budget deficit and continues our
effective policy of relying on the market.
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o Avoids a major reopening n_? tax reform while en~'orsinc t??c
changes, which though technical in nature, have nevertheless
significantly discouraged marginal production.
o Focuses pressure on Congress to take the actions that are
very important for our energy security and a strong domestic .
eil industry: natural gas deregulation, opening up ANWR, and
repealing the windfall. profit tax.
o A private SPR may have a number of attributes, including
reducing Federal coy*_s and incorporating private sector
judgments about the possibility of supply interruptions.
Option 2: Supplement c~irrent Administration proposals with
additional proposals that may not be revenue neutral
(depending in part nn *_he budget savings resulting
From the private SPR) but which will lead to
significantly more domestic oil and gas production
*_ha.n option 1. This option includes the elements c+f
option t ~v.?h the following additional possibilities:
A. Providing fir faster tax write-off of G&G
expenses;
B. pro~~idinq a tax credit for c?~ 1_ exploration and
development;
C. Tncreasinq the SPR fill rate up to
75,000 barrels per day if the private GPR
financing is not feasible.
Advantages
o Pro~~i_des substantial new L'.S. oil production of up to a
million barrels per day and offers a credible alternative to
the oil import fP.P..
o Tax?proposals will help sustain the domestic oil industr?~
infrastructure so that it will be ab?.e to respond efFectivPl~~
when prices rise in r_he 1990s.
o Increasing the SPR fill rate to 75,000 b/cl will lead to a 750
million barrel SPR by 1995 when the rational security
projections show we will be most vulnerable.
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DECISION
Option 1: Supplement current Administration
proposals with a revenue neutral program and
only technical tax changes. Elements included in
this option are:
opening up ANWR
reducing the minimum bid requirement
increasing the net income limitation
repealing the transfer rule
studying the possibility of private
financing for a SPR fill rate of up to
100,000 barrels per day.
(The savings estimates for private SPR
financing range from zero to ;250 million per
year. OMB has concerns about the budget
intectrity of such a proposal.)
Option 2: Supplement current Administration
proposals with additional proposals that may not
be revenue neutral but which will lead to
substantially more new domestic oil production
than option 1. This option includes the
elements of option 1 with the following
additional possibilities:
A. Providing for faster tax write-off of G&G
expenses. (See page 5 for additional
estimated production and revenue loss.)
i. with $21 - $25 per barrel
phase-out
ii. with three year sunset
B. Providing a non-refundable tax credit for oil
exploration and development. (See page 5 for
additional estimated production and revenue
loss.)
i. with $25 per barrel sunset
ii. with three year sunset
C. Increasing the SPR fill rate to
75,000 barrels per day if the
private SPR financing is not
feasible.
Options 1 and 2 are mutually exclusive. Option 2, sub-options
B, and C are not mutually exclusive.
EDWIN MEESE III (/JAMES A. BAKER, III
Chairman Pro Tempore Chairman Pro Tempore
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SEGR~T
APPENDIX
Is There a National Security Threat?
The national security implications of projected levels of
dependence on insecure sources of oil are significant. The
following discussion has been prepared by the State Department,
the Department of Defense, the Central Intelligence Agency and
the National Security Council.
Growing Reliance on Insecure Oil Affects National Security
Interests
Over the next decade, the West, including the United States, will
become more dependent on insecure oil supplies, particularly from
the Persian Gulf. This poses a threat to U.S. national security
interests. The decline in surplus production capacity will leave
the West more vulnerable to supply disruptions, price
manipulation, and attempts to use oil as a political weapon.
(C/NF)
Political Instability in the Persian Gulf
Increased dependence on the Persian Gulf for oii supplies is a
concern because of. the continuing volatility in the region and
the threat of a supply cutoff or a major supply disruption. The
course of the Iran-Iraq war, an almost certain power struggle in
post-Khomeini Iran, and Soviet competition for influence in the
region all influence Western access to Persian Gulf oil.
Furthermore, developments in the Arab-Israeli arena could again
bring Middle East politics to the forefront of oil policy
decisions as they did in 1973. (C/NF)
The countries in the Arabian Peninsula will face continuing and
perhaps increased political, economic, and social pressureG over
the next decade. The political stability of these states over
the past 30 years has been particularly remarkable in light of
their rapid economic and social development. Changing political,
economic, and social environments, however, are likely to
stimulate increased political activism that could lead to periods
of instability in some of these states before-the end of the
century. Ruling families will face gore complex challenges as
they try to meet the rising expectations of increasingly educated
and rapidly growing populations. Thus when combined with the
hostility between Iran and Iran the risk of political instability
in the Persian Gulf area will remain high. (S/vF)
Although political chznge on the Arabian Peninsula would not
necessarily be inimical to U.S. interests, instability could be
exploited by external elements hostile to the United States.
Radical domestic groups probably would receive external support,
Declassify: OADR F~ tr"'f~ f""- C"?'T
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SE~'~ET
and their antiregime activities may well include an anti-U.S.
focus. (S/NF)
U.S. Interests
Energy security policy must deal with two environments --
reducing our vulnerability to supply disruptions prior to their
occurrence and preparing us to cope with supply interruptions.
National security is affected by our energy situation in several
ways:
o Economic Impacts. Strong economies are essential to Western
security. Thus, national security is enhanced by the
contribution lower oil prices and a market-based energy
system make to economic growth and efficiency. Strategic
stocks give oil-importing nations the capability to mitigate
most of the economic impact of historic-sized disruptions.
However, as the cushion of surplus production capacity
diminishes, our ability to cope will be reduced. Under
these conditions, supply disruptions or price manipulation
could seriously damage the world economy and undermine our
ability to pursue our security objectives. (C/NF)
o Defense Requirements. Although defense needs are small
relative to overall oil consumption, disruptions can hamper
defense readiness and sustainability during periods of
international crisis or during times of war. Moreover,
defense needs in a major conventional conflict would include
industrial mobilization. Ensuring that defense demands are
met may mean that discretionary civilian consumption would
yield to security requirements in an emergency. (U)
o Foreign Policy Implications. Increasing dependence nn
insecure oil can hamper pursuit of U.S. security and foreign
policy interests. Heavy and growing reliance on the Persian
Gulf region requires that we continue to devote lir~i.ted
defense readinPSS resources to this area, stretching our
global defense capabilities. Our own political willinar.ess
to pursue fundamental long-term interests could be reduced
if special priority must be accorded to ensuring oil supply.
Support from Allies could also be reduced if they resperd to
perceived vulnerabilities and rivalries for oil supplies,
thus undermining Allied solidarity and complicating the
management of a major crisis. Heavy reliance on the Persian
Gulf may also reduce Allied willingness to provide access to
military facilities essential for U.S. capabilities to
respond to crises in the Middle East/Southwest Asia region.
Following the U.S. bombing of Libya, for example, Tripoli
pressed hard for an Arab oil embargo against the United
States and Allies who supported the effort. The Arab world
-- including Egypt -- strongly condemned the U.S. action,
O
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but did not pursue an embargo in part because of the
abundance of alternative supplies. In a tight oil market,
fear of unified Arab retaliation might have stiffened Allied
resistance to the bombing. (S/NF)
Energy security can be achieved only on a collective basis.
Measures aimed at ensuring our access to oil supplies at the
expense of our allies not only will fail, but also will encourage
them to pursue go-it-along strategies that are likely to be
harmful to our interests. In contrast, cooperative efforts to
reduce collective vulnerability give the United States greater
flexibility in foreign policy and add to our national security.
National security is enhanced when the U.S. and its Allies
minimize, in a cost-effective way, the risks of a supply
disruption (and maintain the capability to mitigate its impacts
should one occur). (U)
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' EXECUTIVE SECRETARIAT
ROUTTNG SLIP
Chm/NIC
Compt
NIO/ECON
STAT
STAT
?xecutrv ecretary
29 Apr '81
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E>1~IA ~ iS
THE WHITE HOUSE 87-1706X/1
WASHINGTON
CABINET AFFAIRS STAFFING MEMORANDUM
Date: April Z9, 1987 Number: 317, 315 Due By:
Subject' Energy Security Issues
ALL CABINET MEMBERS
Vice President
State
Treasury
Defense
Justice
Interior
Agriculture
Commerce
Labor
HHS
HUD
Transportation
Energy
Education
Chief of Staff
OMB
UN
USTR
CIA
A
GSA
NASA
OPM
SBA
VA
Action FYI
a o
~ ^
t~ ^
l~ ^
Ll ^
^ ^
^ ^
C~7 ^
^ ^
CEA
CEQ
OSTP
Carlucci
Cribb
Bauer
Dawson (For WH Staffing)
Executive Secretary for:
L.
EPC [~ ; ~~
~ ;.
^ ::
REMARKS' The attached memorandum from Jim Miller is forwarded
for your review prior to today's EPC/DPC meeting with
the President.
RETURN TO:
Nancy J. Risque
Cabinet Secretary
456-2823
(Ground Floor, West Wing)
^ Associate Director
Office of Cabinet Affair
456-2800
(Room 235, OEOB)
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 Declassified in Part - Sanitized Copy Approved for Release 2012/05/14 :CIA-RDP89B00224R000602030001-5
D.pril 29, 1987
NOTE FOR ECONOMIC POLICY COUNCIL
DOMESTIC POLICY COUNCIL
FROM: NANCY J. RISQUE /phi
Jim Miller asked that I send the attached materials to you before
today's EPC/DPC meeting.
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 Declassified in Part - Sanitized Copy Approved for Release 2012/05/14 :CIA-RDP89B00224R000602030001-5
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, G.C. 20503
April 28, 1987
Over the past few days, I have had several conversations
with Secretary Baker and Secretary Herrington regarding
potential offsets for the increased budgetary costs of the
two options presented in the EPC/DPC issue paper. Based on
subsequent staff analysis, I have prepared the attached
table summarizing the production estimates, budgetary costs,
and our best estimate of the potential offsets for the two
options. (This does not include the option of increasing
the Strategic Petroleum Reserve (SPR) fill rate through
direct Government outlays.)
The table makes three points:
1) The full cost of Option 2 can be fully offset
in FY 1988, but not over the five-year period.
2) Option 1 can be more than fully offset.
3) Achievement of the offsets depends heavily upon
Secretary Herrington's ability to sell the
Great Plains facilities in FY 1988, and most
importantly, upon the Administration's ability
to develop a viable private financing mechanism
for the SPR that will result in no net cost to
the Government. This will require relinquish-
ment of some of the current Government controls
over SPR drawdown and use.
I look forward to reviewing the issues with you in our
meeting with the President.
Declassified in Part - Sanitized Copy Approved for Release 2012/05/14 :CIA-RDP89B00224R000602030001-5
 e Declassified in Part - Sanitized Copy Approved for Release 2012/05/14 :CIA-RDP89B00224R000602030001-5
ENERaY BECORITY OPTZONB
Summary of Production Effects, Budgetary Costs,
and Potent al Offsets
Attachment
Budget Costs ($ in Millions) Incremental CY
FY 1988 thru 1992 Oil and Gas
FY 1988 FY 1992 Production (B/D)
Current Administration
Proposals (Natural Gas
Deregulation and Expanded
OCS Leasing) .............. (Already in the budget.) 375,000
Option 1 (Current proposals
plus repeal transfer rule
and increase net income
limitation) ................
+65 +318
488,000
option 2 (Option 1 plus G&G
expensing and production
credit) .................... +592 +5,172* 1,013,000*
Potential Offsets
o Lease Arctic Wildlife
Refuge (ANWR). ... ...... -- -425
o Private SPR Financing.... -233 -1,273
o Sale of Great Plains
Synfuels Plant........... -360 -450
Total -593 -2,148
* This cost could be reduced by approximately $2 billion through a
three-year sunset of both items, resulting in 170,000 B/D of less
production.
Note:
All estimates of budget costs are based on oil price forecasts contained in
the budget, and are generally consistent with those in the House Budget
Resolution and the Senate (Chiles) Resolution. Use of the higher price
forecasts contained in the Energy Security Study would result in lower
costs. However, higher energy prices would also increase the baseline
budget deficit estimates by a larger amount, so the effect would be to
increase the deficit overall.
Declassified in Part - Sanitized Copy Approved for Release 2012/05/14 :CIA-RDP89B00224R000602030001-5