tion, and he will discuss the Agency's role in development of our international energy policy and also offer insights into specific questions regarding H.R. 2650. You have a prepared statement, Mr. Conant, so you may proceed. STATEMENT OF HON. MELVIN A. CONANT, ASSISTANT ADMINISTRATOR FOR INTERNATIONAL ENERGY AFFAIRS, FEDERAL ENERGY ADMINISTRATION Melvin A. Conant, age 50; married to Christa Maria Gaul; children, Amy, Ian and Alan. Educated Harvard University majoring in International Law, Far Eastern and Russian Studies. M.A. Degree 1949. Subsequently a number of visits to South and Southeast Asian countries attempting to determine the extent of Communist movements. 1951 to 1955 Executive Director of the Pacific and Asian Council, a political and economic research group founded by Hawaiian business interests; founding trustee of the then territory's First Economic Development Committee; acted as go-between Oriental and Western business and banking interests. 1955 to 1960 on the directing staff on the Council on Foreign Relations in New York responsible for strategic studies and the meetings program involving largely experts from all over the world. 1960 to 1961 Professor International Security Affairs at the U.S. National War College, Washington, D.C. 1962 to 1973 Senior Government Relations Counselor for Exxon Corporation (formerly Standard Oil of New Jersey) on political and inter-governmental relations with regard to energy supplies, at varying periods on the Middle Eeast, Far East and Europe. January 1974 to December 1974, Deputy Assistant Administrator, International Energy Affairs, Federal Energy Administration. Nominated by President Ford to the position of Assistant Administrator for International Energy Affairs on December 13, 1974. Author of strategic studies and annual lecturer at the Royal Naval College (Greenwich), the Canadian National Defence College and U.S. Senior Defense Colleges. Mr. CONANT. Thank you, Mr. Chairman. I apologize for the fact that you didn't get the prepared statement until shortly before this meeting. Mr. Chairman and members of the committee, I appreciate this opportunity to appear before you to discuss the role of the Federal Energy Administration in the development and carrying out of U.S. international energy policy and our evaluation of the International Energy Agency. In addition, I will address some specific questions on title XIII of H.R. 2650, the administration's Standby Energy Authorities Act.5 To assist in your inquiry, Mr. Chairman, with your permission, I would like to introduce two associates from FEA who are deeply versed in this whole experience. Mr. Wynne James, who is Director for Consumer Country and International Organization Affairs, and Mr. Joseph Bell, Assistant General Counsel, International Conservation and Resource Development. Mr. DIGGS. Do you want the gentlemen to join you at the witness table? Mr. CONANT. I would appreciate it. Mr. DIGGS. Gentlemen, you may do so. Mr. CONANT. Thank you. See text of title XIII of H.R. 2650 in appendix at p. 70. The FEA Act of 1974 contains numerous charges and provides the necessary authority for FEA to be a principal participant in the area of international energy policy. The principal references to international energy matters in that legislation are as follows: Section 5(a) *** the Administrator shall be responsible for such actions as are taken to assure that adequate provision is made to meet the energy needs of the Nation. Section 5 (b) (1) (the Administrator shall): *** advise the President and the Congress with respect to the establishment of a comprehensive national energy policy in relation to the energy matters for which the Administration has responsibility, and, in coordination with the Secretary of State, the integration of domestic and foreign policies relating to energy resource management *** Section 5(b) (3) (the Administrator shall): *** develop and recommend policies on the import and export of energy resources *** In other sections of the FEA Act, there is a recognition that domestic and international distinctions are difficult to draw. For example, in the basic data needed to assist in policymaking, world supply and demand figures are essential. In this and other areas, the energy responsibilities placed on FEA are not limited by geography. As you know, the Project Independence Blueprint published last November constituted a major research and analytical framing of the area in which policy decisions would largely need to concentrate. In the months required to complete the review, virtually every energyinterested department and agency in Washington participated in executive groups, working groups, subgroups and so forth. Many of the U.S. officials and staff personnel who were later to be involved in the 18-nation international energy program were engaged in that effort. I make this point, Mr. Chairman, because I find sometimes that I forget that the Project Independence effort did constitute perhaps the largest and most comprehensive effort ever made by this Government to enunciate the parameters of of energy policy. And in contacts that I have had and my colleague, Mr. James, has had, we know that from the viewpoint of other governments who are seized with many of these same problems that the precedent set in that particular activity has been an important ingredient in U.S. leadership in the energy area. One message began to evolve very early in the work on Project Independence, and we began to hear the term Project "Interdependence." It was becoming increasingly clear, from our preliminary study, that narrow U.S. isolationism on energy matters would not be a practical alternative. In a number of areas, the Project Independence Blueprint turned out to be a document of major importance to the international energy policy of the United States. By January of this year, the President and his key advisers, including the Federal Energy Administrator, had assembled a number of proposals into the omnibus economic and energy message and associated legislation. FEA is involved, in varying degrees, in the large area of the international energy policy of the United States. As the energy agency, that is, with responsibilities to help assure adequate energy supply, the FEA-and my branch of it, IEA- has played a significant role in ongoing discussions with Canada on a very broad range of energy issues. At the other end of the spectrum, we are largely an observer as far as relations with other countries in the area of research and development, with one exception-R. & D. on energy conservation measures. In between, there are widely differing levels and intensity of FEA participation in policy matters involving the President's total energy interests. My opening remarks today on how the Federal Energy Administration participates in and contributes to international energy policy will focus on FEA's part in the 18-nation International Energy Agency (IEA), including how we were involved in the policy process beginning with the Washington Energy Conference of February 1974. I will conclude with some observations on the status of the IEA as it appears today and in the period ahead. INTERNATIONAL ENERGY AGENCY In January and February 1974, as you heard from Secretary Robinson, the preparatory phase of the Washington Energy Conference moved toward a new objective in U.S. international energy policy. Let me add, at this point, Mr. Chairman, the emphasis is on a new objective in U.S. international energy policy. Those of us who have been involved in earlier years with questions of emergency supply were always haunted by the fact that, while the U.S. Government was a member of the OECD in Paris and a member of the Oil Committee, we had never formally and fully involved ourselves in the planning considerations of that group. We had always remained somewhat apart, relying upon the fact that we had a domestic production that was perhaps more than adequate to our needs and, if an emergency occurred, we could weigh in at that time. The subsequent change in the U.S. picture and our greater vulnerability made it imperative that we have a new objective, and that was to involve ourselves formally and fully in a new undertaking which would commit governments in advance to the kinds of steps that would be taken, and this is the significance behind the use of the words "new objective" in U.S. international energy policy. The then Administrator of FEO-this was back in the very early part of 1974-William Simon, had met with Secretary Kissinger and AEC Chairman Dixy Lee Ray frequently to discuss the ways that the conference might promote solidarity among the oil importing countries. Producer-country policies, as you will recall, had touched off almost hysterical bidding among importers of oil, reaching as high as $25 a barrel. It was clear to all three U.S. officials and their support staffs that the whole apparatus of the U.S. Government must be represented in the background and follow-on work of the conference. Therefore, by the time the conference opened in February 1974, FEO and other departments and agencies were fully at work, as the United States moved toward a new relationship in the international energy framework. As Secretary Robinson mentioned, 12 of the 13 countries at the Washington Energy Conference agreed to establish an Energy Coordinating Group and to pursue the new goal of increased solidarity. The 13th country-France-decided not to join, but did not invoke any clauses of the Common Market agreement which might have prevented the other eight European countries from joining. 53-813-75--3 The 12 governments then sent delegations, headed by Assistant Secretaries, to prepare the cooperative program. Normally, I or my deputy attended the sessions, which occurred monthly throughout much of 1974. Although State chaired the U.S. delegation, FEA, Treasury or AEC frequently took turns as the U.S. spokesman, depending on the emphasis of particular portions of the Energy Coordinating Group's meetings. All policy matters in the negotiations in Brussels were, of course, subject to referral to Washington and other capitals, but much of the groundwork could be safely done, given the policy-level representation on the scene in Brussels by major U.S. agencies. You will recall that the sense of urgency at that time made this particularly high-level representation, perhaps, unusual, but it worked well as a technique. Technical and legal experts of FEA and other contingents were also of help in avoiding pitfalls in the policy area, for example, (i) in assuring an allocation formula that would be largely self-policing, and (ii) in determining levels of mandatory restraint that would least damage the economy in the event of another embargo. The result of many months' efforts was a solid program, a structure for an international agency and provisional acceptance by the countries involved. To provide a clear delineation of additional legislation that would make its implementation achievable, Administrator Zarb has been particularly active, as you know, in working with various committees of the Congress. In particular, title XIII of the Energy Independence Act is intended to authorize complete implementation of the emergency provisions of the International Energy Program (IEP), and thereby to fulfill the commitment that I mentioned on preparation in advance of a possible emergency. Meanwhile, the work of the IEP has to proceed at a considerable pace to build a deterrent capability with respect to another embargo. FEA is directing much of this effort as a "lead agency" within this Government. In addition, FEA actually chairs three of the multinational working groups of the IEP itself, mainly relating to conservation, as well as the difficult question of bunker supply. We are also very active in the Industry Advisory Board of the Standing Group on Emergency Questions, and in the Standing Group on the Oil Market. The Washington machinery for handling major policy matters associated with work in the IEP and other energy areas consists of two bodies: the Energy Resources Council, which is far and away the most important, and the International Energy Review Group. 1. The Energy Resources Council is chaired by Secretary of Commerce Rogers Morton, and its Executive Director is Administrator Frank G. Zarb. It meets regularly on energy issues-domestic and international-where resolution is needed at the cabinet level or with the President. No distinction is made-and it would be difficult indeed to make one-between our domestic and international energy policies. The ERC also has a Subcommittee on International Energy Policy, chaired by Mr. Zarb and consisting of an Assistant Secretary of State and of Treasury, as well as myself. 2. The International Energy Review group is a separate mechanism under the chairmanship of the Secretary of State. Its work has been carried out almost exclusively by a working group headed by an Assistant Secretary of State and, again, I am FEA's representative. As for the workability of the Agency, in the 14 months since the Washington Energy Conference, the 18 major oil-importing nations of the non-Communist world have succeeded in reaching, or moving toward, agreement on emergency and long-term programs of cooperation, including oil sharing, conservation targets, and price protection. In addition, IEA is seeking improved relations with oil-producing nations. And your question then is how workable is this ambitious undertaking? The effectiveness of the emergency program for the protection of the IEA members against a future embargo is vital if IEA solidarity is to continue. Many elements of the emergency machinery are in place, but implementing details are expected to take considerably longer. For example, one major element of the program-creating true emergency oil stocks-will take the 18 nations well into the late 1970's to complete. Procedural issues are currently on track to solve the problems of international allocation of oil. The 18 nations have agreed (1) that IEA governments, through the Governing Board, should provide the overall guidance on an international allocation policy during an emergency; (2) that industry would actually carry out the international allocation program in an emergency; and (3) that competition in the industry must be maintained and fostered. At present, four IEA governmental groups-attended by representatives from the 18 capitals-are working on aspects of the emergency programs. We expect that toward the end of this year, or early into the next, they will begin to turn their work over to the IEA Secretariat in Paris. Concurrently, the IEA's Industry Advisory Board and three subgroups are proceeding to prepare plans for international allocation and associated issues to have in place as early as possible. The IEP is also proving useful in mutual efforts to set conservation and other targets for its members, as each of us seeks to lessen our dependence on imported oil. Difficulties do arise at times because of varying views and needs of each member country, for example, in conservation targets and in the protection of investment in higher cost energy. In the conservation area, the IEA nations have agreed to: (1) Reduce by 2 million barrels daily their target for oil imports by the end of 1975; and (2) set further targets in future years. Specific countryby-country quotas were not set for 1975, but European members are, of course, aware of the President's goal of a 1-million-barrel daily cut in U.S. oil imports by the end of 1975. For protection of investment in higher cost energy, the 18 nations are currently discussing means to set a price below which they will not market outside oil for a specific period. And as we had in the earlier discussion between you and Secretary Robinson, the intention is to diminish the threat to higher cost conventional energy if OPEC prices were cut significantly. The key issue in establishing such a price is the determination of what it might cost the importing countries in terms of commitments to |