Coalcon Co.

B-178205.80: Apr 13, 1976

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This document describes: (1) an opinion on whether the Coalcon plant and the products thereof can be disposed of by Energy Research and Development Administration (ERDA) without regard to the requirements of the Federal Property and Administrative Services Act of 1949, as amended, 40 U.S.C. 471, et seq., (The Federal Property Act); and (2) our review of a reprogramming request made on February 19 by the Energy Research and Development Administration (ERDA). ERDA proposes to transfer $20 million of operating expense funds from the Coal Direct Combustion and Coal Demonstration Plant programs ($18 million and $2 million respectively) to the Magnetohydrodynamics (MHD) program. These three programs are part of ERDA's "Fossil Energy Development" activity. The reprogramming action is intended to provide funds for the design and construction of a "Component Development and Integration Facility" (CDIF), an intermediate-scale facility for the developmental testing of MHD components and subsystems. The CDIF, conceived as a Government-owned and contractor-operated facility with an estimated life (including follow-on research programs) of 15-20 years, will be a complex of several buildings--main test building, operations building, office building, warehouse, and various supply buildings, To provide a site for the CDIF, ERDA plans to acquire three parcels of land, totaling 93 acres in the Industrial Park area of Butte, Montana, The questions to be considered may be summarized as follows: (1) Does ERDA's current (fiscal year 1976) authorization legislation limit the use of fossil energy operating expense funds insofar as land acquisition in concerned? (2) May operating expense funds reprogrammed to the MHD program for the CDIF be used acquisition purposes? (3) May ERDA use the unobligated balance of funds appropriated for MHD in fiscal year 1975 to acquire land for the CDIF? (4) In addition, Congress asked GAO to "review and comment on the adequacy of the arrangements proposed by ERDA for acquisition of the three parcels, and on the value and cost of these parcels." (5) Finally, Congress asked whether ERDA has prepared an Environmental Impact Statement on the CDIF construction project, and if not, whether it plans to do so.

(1) Opinion on property and product disposal: We concur in the view expressed by ERDA that that agency has authority, inherent in the enabling statutes, to dispose of any products generated by such demonstration plants. Therefore, we believe that the products generated by the Coalcon plant may be sold without regard to the requirements of the Federal Property Act. Although this contractual provision seems to contemplate that ERDA may sell the Government's interest in the plant property to the contractor, such a sale is not mandatory under the contract. In addition to the fact that Article XXI does not set forth the specific terms of such a sale, the last paragraph of that article allows the Government to sell the property in any manner other than sale to the contractor, thereby leaving open the manner in which the property may be disposed of. The General Services Administration expressed that the demonstration plant property must be sold in accordance with the Federal Property Management Regulations, which are promulgated pursuant to the Federal Property Act. We believe that sale of the Coalcon demonstration plant property under Article XXI of the contract is subject to the requirements of the Federal Property Act. (2) Review ERDA's proposed funds transfer: (1) Both the ERDA authorization and appropriation acts clearly provide separately for operating expenses and capital expenses, the latter specifically including land acquisition. It necessarily follows that operating expense funds subject to these statutes are generally not available for capital expenditures such as land acquisition. However, operating expense funds may be made available for capital items by appropriate congressional action. (2) Information presently available to us indicates that the CDIF will be operated by contractor personnel. Accordingly, we do not believe that section 315 provides authority to acquire land for the CDIF. We conclude that "funds appropriated pursuant to" Pub. L. No. 94-187 for operating expenses for fossil energy programs would not be available to acquire land for the CDIF. (3) We found the following: (l) 1975 funds were no-year funds, (2) the 1975 appropriation was a single appropriation which could accommodate both capital and uncapital items, and (3) the congressional desire to accelerate the MHD program, combined with the awareness, certainly implicit if not express, that construction of test facilities would be a future stage of the programs--we do not believe the lack of specific budget justification for land acquisition in connection with this appropriation is necessarily controlling. Accordingly, the use of the unobligated balance of 1975 funds to proceed with CDIF construction, including site acquisition, appears to be legally proper. (4) ERDA plans to acquire three parcels of land in the Industrial Park area of Butte, Montana. Two of the parcels (30 and 23 acres) are currently owned by the Butte Local Development Corporation (hereinafter referred to as "Butte"), which has offered to donate the 30-acre parcel to ERDA and to sell the remaining 23 acres. The Anaconda Company owns the third parcel (40 acres), which ERDA plans to lease with option to purchase. Construction apparently will involve the first two parcels only, with the third being reserved for possible future expansion. Of the 53 acres presently owned by Butte, 50 were acquired from Anaconda by deed dated November 14, 1973. Our investigation has revealed no corporate connection between Butte and Anaconda. The appraisal report, dated March 1, 1976, states the estimated market value of the 53-acre site as $90,000, and of the 40-acre site as $50,000 (surface rights only in both cases). (5) ERDA officials advise us that they have not prepared an Environmental Impact Statement (42 U.S.C. 4332(2)(C)) on the CDIF and do not plan to prepare one.

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