gasoline in Springfield, it is delivered out of tanks in Hartford, Conn., so physical presence in the Commonwealth, in the wholesalers' tanks, means not a single thing.

What is significant is the 1972 allocations, and what is done with those allocations, and this is the gap. I submit, that the Federal Energy Office has not properly analyzed and has not properly processed, and I ask you to carry our cause once again in Washington, to carry our cause against the major oil companies, to prohibit them from being in the retail business, to prohibit them from getting a profit layer off every stage of the production and distribution of gasoline and heating fuel, and to carry our cause against the Federal Energy Office to legislate very firm conditions and criteria for fuel allocation and gasoline allocation throughout the Nation.

Senator KENNEDY. Finally, could you review, perhaps very briefly, some of the reasons that stimulated you to file a petition with the DPU recently?

Attorney General QUINN. Yes; indeed. We first started with the action-with the petition before the DPU a month or so ago, on the basis that everyone was urging conservation, and the department of public utility rates for electricity had built in an inducement to waste. They were giving a far better unit cost to major users of electricity, encouraging them to waste so that a building like this, for example, would be better off burning electricity all night than hiring a night custodian to go around flipping the switches off and on, and so we filed that petition and we are still waiting for a date to be heard.

Last week, I filed a petition before the public utility commission asking that it reanalyze its fuel adjustment formula that it gave to all of the electric companies in 1970, I believe it was, putting in a variable for increasing fuel oil costs to these companies; that it reanalyze that because we think, again, the utility commission's permission and the action taken by the electric companies under that, discriminates against the homeowner and the individual consumer, in favor of certain large business users.

I am hopeful that we can get to the bottom of this so that if the utility commission decides to give the benefit to the electric companies for their increased fuel oil costs, then those costs will be passed on to the big users and not to the homeowner.

Thank you very much, Senator.

Senator KENNEDY. Fine, I want to thank you for your presentation. I recall that you were on a panel of attorneys general that appeared before the Antitrust Subcommittee in the U.S. Senate. That hearing was on the anticompetitive operations of the major oil companies, and the squeezing out of the small independents. I don't think it was a coincidence that following those meetings, the Federal Trade Commission actually filed a complaint. They are moving ahead. I think they will help provide some relief and we will continue to press forward in these areas.

I want to thank you very much for your appearance.

Attorney General QUINN. Just keep the pressure on those oil companies and on that FEO for all the people of Massachusetts. Thank you, Senator.

Senator KENNEDY. Very good. Thank you very much, Mr. Attorney General.

I am pleased to call before the subcommittee, the representatives of

William Simon, the Administrator of the FEO. They are Mr. John Weber, Assistant Administrator of FEO, for Operations and Compliance, and Lawrence Rogers, New England Federal Energy Office Regional Director.

I want to welcome both of you, and particularly express my appreciation for your attendance. Mr. Weber, I know you flew here from Washington, after a full day in court yesterday, and Mr. Rogers, I believe, has returned from a meeting in Dallas.

Mr. Weber was instrumental in setting up the entire petroleum allocation system. With regard to home heating oil, I believe, he did an excellent job, and the results are very satisfactory. He can be commended for that job and for his efforts in tackling an extremely difficult problem. I would add with regard to the two tier pricing system, it appears that some action, after several months of requests of the New England representatives, is now underway. I am sure you understand the enormous problems that we face with the two tier system, the very considerable inequity. This is something that consumers are concerned about, and we appreciate that you are continuing to work in this area.

I want to extend my thanks to Mr. Rogers for his assistance when we were up here earlier in January. We had a series of meetings in various communities in Massachusetts about the energy crisis. We had participation from the FEO office, and those meetings, I think, were very useful and helpful. A lot of points were raised which I thought were very worthwhile.

I have seen some newspaper reports of your impending departure from FEO and I want to wish you the best in whatever the future holds.

Right now, we have some important business at hand. We will look forward to hearing from you gentlemen.

Mr. Weber, will you start off?

STATEMENT OF JOHN W. WEBER, FEDERAL ENERGY OFFICE, ASSISTANT ADMINISTRATOR FOR OPERATIONS AND COMPLIANCE, ACCOMPANIED BY LAWRENCE ROGERS, NEW ENGLAND REGIONAL DIRECTOR, FEDERAL ENERGY OFFICE

Mr. WEBER. I have just a brief statement, Senator, and then we can get on to the questions that I think will be of more interest.

Thank you very much for the opportunity to appear before you with respect to the energy matters and particularly those dealing with gasoline allocation.

Problems of inflation, unemployment and balance of payments have been our major economic concerns for many years. They have now been joined by another problem-shortage of energy-which will dramatically affect all the others if we permit it to do so. All of us are well aware of the energy shortages precipitated by the oil embargo. However, these are merely symptoms of long-term problems which have been building for many years and they are simply not going to vanish when the embargo is lifted.

We have been rapidly depleting our non-renewable petroleum fuels while failing to develop any adequate alternative sources of energy.

We have been operating under the assumption that cheap, abundant energy would always be available. This has contributed to wasteful patterns of energy consumption and insufficient incentives to develop adequate domestic resources. As recent events have shown, this has left us very vulnerable to any interruption of the imports we have come to rely upon.

The Federal Energy Office is consistently studying the effects of short-term problems caused by the oil embargo and what our national policy ought to be to minimize its effects. Fortunately, our mild winter has reduced the problem so far as the shortage of heating oil is concerned a shortage that loomed even more ominously here in Massachusetts last fall. Partly as a result of this, FEŎ Administrator William Simon has been able to announce the establishment of voluntary guidelines to major U.S. refineries increasing the amount of gasoline as a percentage of refinery output. Nevertheless, major conservation efforts continue to be essential, particularly in the consumption of gasoline and, I might add, residual fuel.

Our attention at FEO is now focused on increasing the supplies of gasoline as well as aviation jet fuel and residual fuel oils to prepare for the summer demand increases. Presuming the oil embargo remains in effect, our first forecast of overall shortages for the second quarter of 1974 is about 16 percent or 2.8 million barrels per day. This figure is based upon unrestrained demand and does not give the effect of price elasticity or embargo leakages.

The short-term strategy of the FEO has been to allocate our fuel resources as equitably and as effectively as we can, and to respond decisively to exceptions not covered by our regulations as they arise. The 1974 Economic Report stresses the administration's determination to manage the energy shortage so as to keep loss of jobs and production to a minimum. To do this, it will be essential to provide, or permit, incentives to maximize imports, domestic exploration and production, as well as providing rapid fuel shifts to key industries. Different strategies, however, will be necessary to provide a long-term solution to the energy problem.

A recent study by the FEO showed that if the embargo were lifted and pre-embargoed shipments resumed beginning in April, the total petroleum product short-fall, based on unrestrained demand, would still be about eight percent, and that the shortage for gasoline would still be about 4 percent.

In an effort to determine the current situation of gasoline supplies in the various States, teams of investigators from FEO last weekend were sent to several States throughout the country.

Massachusetts was selected as one of the 19 States given immediate attention due to an apparent critical shortage of gasoline. These teams had several objectives:

First, they worked with the Governors and State energy directors to assist them in using the three percent State set-aside to meet more effectively the shortages that have been occurring within the States. Second, to review special supply problems and localized shortages. Third, to review FEO and State data to insure accuracy, and I might say, consistency between them, because in many states that has been a problem.

Fourth, to help speed action on the request for base period adjustments, which is so important to the working of this system.

And lastly, to improve the linkage between the States and the FEO, both at the regional level and at the national level.

The Massachusetts team consisted of a representative each from the FEO regional office, the FEO National Office, and the OMB. The team met with Governor Sargent and other key State and Federal officials, and thoroughly reviewed the situation in Massachusetts.

Emanating from this task force were recommendations that the State be given a capability to adjust allocation levels between its own urban and rural areas to compensate for changed demand patterns. The report indicated that the most severe shortages in Massachusetts were in major urban areas. Shortfalls are evidenced by the long customer waiting lines, the very ones we have all unfortunately grown accustomed to, and shortened station operating hours and also, closed stations. Traffic counts revealed urban traffic down 5 percent and rural traffic down 24 percent. Of the 13 States surveyed by the American Automobile Association in a recent report, Massachusetts reported the lowest number of stations opened on Sunday, 1 percent, which I might add, is good. Other statistics indicated—

Senator KENNEDY. Good for who? Not good for the people who are depending upon tourism for their livelihoods. It isn't good for the people out in Sturbridge, or Stockbridge, or in the ski areas of western Massachusetts. It is not good for them.

Mr. WEBER. Granted, Senator, it is good insofar as conservation efforts are concerned. It has affected conservation. I have to say that the point you make is well taken. We have two things to balance, conservation on one side, and our objective of keeping jobs, production going on the other side, to permit things you mentioned.

Senator KENNEDY. So let us, when we use the word, "good", say just who it is "good" for.

Mr. WEBER. Well, that was a judgment on my part.
Senator KENNEDY. I understand.

Mr. WEBER. For the short term, an increased set-aside and a capability for the State to use the increase for urban supplies were recommended, and as you know, these supplies were distributed.

On February 20, Mr. Simon announced an addition of 2 percent to the Massachusetts set-aside, which amounts to about 34 million gallons. This will supplement the available supply of 162 million gallons. Massachusetts expects to fully use its increased setaside increasingly rapidly next week and in the coming weeks.

The task force here has found no tangible evidence of undue stockpiling by oil companies or distributors. A better indication of whether increased storage has been taking place will be known after gasoline sales tax figures are available at the end of the month. FEO is aware of increased storage by trucking companies which they claim is necessary due to difficulties of obtaining fuel on the road. You may be assured that any evidence of excessive storage of gasoline obtained by the FEO will be acted upon quickly.

In conclusion, I would like to say that Massachusetts, New England, and the Nation are going through a particularly difficult period. The Congress has provided some tools with which to deal with these prob

lems, and we hope that more will be forthcoming in the near future. As we all know, the allocation system is not yet working perfectly, but we are confident that time, and continued strenuous effort on the part of the FEO will improve the efficiency of the program.

Thank you for the opportunity to appear before you.
Senator KENNEDY. Thank you very much.

In the last part of your statement, you say that Congress provided some tools with which to deal with these problems. If the administration doesn't object to it, doesn't veto it, we are going to provide you with more good tools to deal with them as well.

Mr. WEBER. Some of which, we think, may be counterproductive. Senator KENNEDY. We differ on that.

You state, on page 2. "Partly as a result of this, FEO Administrator Simon has been able to announce the establishment of voluntary guidelines to major U.S. refineries increasing the amount of gasoline as a percentage of refinery output."

Why doesn't he mandate it? We have seen that the voluntary program has not worked. We have gone through voluntary programs time and time again, and every time, we find they don't work. It is always nice if we are able to do things by voluntary means, but we have seen that the major oil companies have not been willing to make these adjustments. Why do you think that it is going to be any different with voluntary guidelines now?

Mr. WEBER. A couple of reasons- —or at least a couple of comments on your question-first, is that they have responded. Almost every major oil company has moved to improve the yield of gasoline to which, I think, you are referring. That is No. 1. Number two, and it is clear that the stocks of middle distillates, some time ago, were reaching levels and it looked like we were going to get through the winter without any problem. The problem is not the distillates, the problem is residual fuel oil, on which, I might add, in this State, and the New England region are tremendously dependent, both for electric utilities, and for industry here which uses a lot of residual fuel oil.

The Nation's major shortfall is in residual fuel and as we face the summer with peaking loads, in terms of electric utilities, it is a concern

to us.

One way of alleviating the potential shortage of residual fuel oil is to use No. 2 oil, which is our good old home heating oil, and add to our diesel fuel, and blend it in to what stocks we do have of residual fuel oil, thereby swelling the stocks of residual fuel oil. This is why there was a delay, and this is why we delayed as long as we did before even releasing the companies to do it voluntarily.

Senator KENNEDY. Are you familiar with the recent court decision in Maryland?

Mr. WEBER. I was there.

Senator KENNEDY. You were there-what did you think of it? Mr. WEBER. Well, I was shaken, and very disappointed, Senator. Senator KENNEDY. What was the result of the case?

Mr. WEBER. The court ruled, as best I can state-I didn't copy it down

Senator KENNEDY. No, just in layman's language.

Mr. WEBER. Right. I left to get here as soon as I could get out there because it was about 7:30 or 8 when it was over.