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\'3;↓Q\CSTANFORD UNIVERSITY
\F3\CSTANFORD, CALIFORNIA 94305
\F4



ARTIFICIAL INTELLIGENCE LABORATORY\←L\-R\/'7;\+R\→.\→S   Telephone:
COMPUTER SCIENCE DEPARTMENT\←S\→.415-497-4430
\F0\C10 January 1975




Mr. Peter G. Peterson
Citizens for a Strong Energy Program
1 William Street
New York, N.Y. 10004

Dear Mr. Peterson:

\J	I have read the statement in favor of a \F2strong energy policy\F0
as published in the \F1New York Times\F0.  While I would emphasize
supply relative to conservation more than your statement does, I
recognize that the statement is a compromise, and the compromise is
one that I can support.

	In early November, a group of Stanford Faculty
developed the enclosed statement which we presented at the Federal
Energy Administration hearing in San Francisco on \F1Project Independence\F0.
I hope you will find it interesting.

	In my opinion, the group that signed our statement would support
yours as a reasonable compromise.  \F2If this is of interest to you, I
will try to get them to do it.\F0

	My colleagues in composing the statement were Professor Thomas
Connolly - Mechanical Engineering, Professor William Reynolds -
Mechanical Engineering and Director of Stanford's program in energy,
and Professor Holt Ashley - Aeronautics and Astronautics,
but about 25 faculty members signed it, and more would have, had
there been time.

	One goal mentioned in the President's recent energy
program that merits special emphasis is that of phasing out
the use of oil and gas for electric power generation.  Eventually
the use of oil and gas will have to be given up completely, but
it is much easier to do this for electricity than for transportation,
because coal and nuclear energy are already cheaper for this
purpose.  However, this phaseout will require the replacement
of some present plants, and this means that the investment in
them must be written off with a resulting rather long term
increase in electric bills.  This cost must be accepted.
However, while I don't know this from contact with utility people,
I imagine that a utility would be taking a risk if it planned
that a regulatory commission would disallow the cost of writing
off an operable plant if it were called for by government policy.

	The reduction of investments in nuclear power
plants by utilities is alarming.  While the growth rates of
the recent past cannot continue much longer without energy costs
becoming an unreasonable fraction of the GNP, we may be caught quite
short if natural gas has to be replaced by electricity as seems
likely in twenty years or so.

	A major reason given for the slow-up is that inflation
makes it impossible to obtain longterm loans at reasonable interest rates.
However, the  payoff of a power plant in material terms is the same as it
ever was, and therefore it would seem that if utilities could
\F2borrow money where the principal was indexed\F0, they would have
just as much reason to borrow it as they ever had.  As an
investment banker, you might consider this.

	I have just read your personal statement in the January
3 \F1New York Times\F0, and I agree with it even more than
with the ad.
However, I have some remarks.

	1. You don't mention the possibility of a real crash
project to expand supplies.  It might include reducing the
time to build reactors to four years, as it is said to be
in Japan, and also giving high priorities to opening new
coal mines.  In my opinion, the \F1Project Independence\F0
report was negligent in not studying this, and as far as
I can tell, no responsible group has studied the crash program
possibilities.  I have no special knowledge, but it seems to
me that the crash programs during World War II were undertaken
with much less preparation and with much smaller resources than
are available today and produced much larger increases in production
in the industries that were emphasized than are required to solve
the energy problem.

	2. The OPEC position is that their high prices are
justified because the world will run out of oil before
alternate supplies are developed, so that price-dictated economy now is
needed to avoid ruining our children.  In my opinion, nuclear
energy can be sufficiently developed before the year 2000
to completely take over from oil with the aid of some combination
of hydrogen and nuclear aided coal conversion as proposed by
Haefle of the Vienna based International Institute of Applied
Systems Analysis.

	If this is true, then OPEC is wrong from a world point of
view.  The right world strategy is to use up the cheap energy while
putting money into building world productive capacity and
developing the advanced energy technology so it will be ready in
time.  With the world becoming more productive, high cost energy in the
year 2000 will be much less of a burden than high cost energy is today.
However, their rationalization of high prices can be overthrown
only when it becomes clear what the long range price of energy will
be.  \F2Therefore, it is important to develop technology now that
may only be used on a large scale 20 to 50 years from now.\F0
The availability of such technology puts a ceiling on the price
that can justifiably be asked now.  We would also feel much
better about using up the Elk Hills reserve and the Western
Alaska reserve if we knew better where our future energy was
coming from.

	3. Finally, let me say a word about the attitude of the
science and engineering faculties of Stanford and other universities.
Engineers are quite ready to sign statements such as the enclosed,
and I am sure they would be quite glad to support yours.  Scientists
are in a more hesitant position.  What affects both groups
are the liberal, anti-growth, and environmental ideologies, and
in many cases the effect is one of intimidation rather than
conviction; engineers make many concessions in trying to avoid
the accusations of being soulless and materialistic.
This leads to trying to put into the social utility functions
the values of people whose real attitude is, \F1I don't know
much about energy, but I know whom I hate\F0.  When the hatee
is yourself, it requires real groveling to take the haters' values into account.
Both businessmen and technologists have been doing a lot of groveling
lately.

	4. Kissinger's statement that the U.S. might use force if the Arabs
threatened strangulation of the Western industrialized countries puts the
burden of the decision in the wrong place.  It should be that if the
other Western industrialized countries were compelled to use force, the
U.S. might help them.  Since the U.S. is far less threatened than Europe,
it should be that Europe has to take the initiative.

	I apologize for the length of this letter; if I had more
time it might have been shorter.

	I am ready to help in any way I can.\.

\←L\→S\←R\-L\/'2;\+L\→L
Sincerely yours,




John McCarthy
Director, Artificial Intelligence Laboratory
Professor of Computer Science
\←S\→L
JMC:pw
peters.le1[let,jmc]

cc: Prof. Holt Ashley, Prof. Tom Connolly, Dr. Hans Mark, Prof. William Reynolds