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of course, expires in 1976, and although it may be extended, a longterm standby export control authority specifically for energy materials provides an added degree of certainty that adequate authority will exist should a future emergency occur. In this connection, the authority is granted to the President, and could be delegated to any agency he deemed appropriate.

Second, and most importantly, the standards which must be met before export controls can be imposed differ markedly between the Export Administration Act and section 1316 of the Energy Independence Act. Under the Export Administration Act export controls are authorized for three basic policy reasons: National security, which in the context of the act relates chiefly to items of potential military use; foreign policy; and short supply. Of these three, the authority most analogous to the authority proposed in section 1316 is the short supply authority. In order to impose export controls under the Export Administration Act for reasons of short supply, a showing must be made that there is an "excessive drain of scarce materials" caused by foreign demand which has a serious inflationary impact.

This standard is not nearly as stringent as the test which must be met under title XIII. As I noted earlier, that test has been deliberately designed to allow implementation of the standby authorities only in the most serious energy shortage situations. Thus, under title XIII the "trigger" for imposition of export controls is the same as for the other major emergency authorities of the title, that is, a Presidential finding that

Because of interruption in the supply of imported petroleum or as a result of Acts of God or sabotage, national energy shortage conditions exist or are impending which threaten United States national security

Thus, under title XIII it is a finding of the existence or immediate threat of an overall national energy shortage which would allow the imposition of export controls rather than a finding that a shortage of a particular item is having an inflationary impact.

The distinction could be important should an emergency arise. If another embargo were to occur, for example, and if the very stringent finding could be made that the utilization of standby authorities were necessary, there should be no need for an additional standard to be applied. In such an emergency it could be necessary to limit exports of materials needed for oil exploration and development without reference to a separate test that there had been "an excessive drain" of the materials involved or that foreign demand had had a serious inflationary impact as would be the test under the Export Administration Act.

An independent authority, tied to the same standards as the other emergency authorities contained in title XIII is, we believe, both necessary and appropriate to allow the President to marshal the resources of the Nation to deal with serious energy shortages.

Mr. Chairman, that concludes my prepared statement. I would be happy to answer any questions you might have.

Mr. BINGHAM. Thank you, Mr. Montgomery.

First, I would like to ask you to explain how it is that the export control authority contained in section 1316 is linked to these findings since, looking simply at title XIII itself, I don't see that.

Mr. MONTGOMERY. Yes, sir. Can I direct your attention to subparagraph (c), which begins on line 7 of page 138, and in particular line 17, which is one of the last provisions of section 1302?

"Prior to exercising any of the authorities contained in any of the following provisions of this title" and section 1316 on exports is listed as one of the authorities with respect to which the required finding is


Mr. BINGHAM. All right.

Mr. MONTGOMERY. Which I did incorporate in the statement; in addition, I didn't incorporate in the statement but call your attention to the definitions at the top of page 139 where the term "national security" and the term "national energy shortage" are also defined.


Mr. BINGHAM. You were referring to the Export Administration. Act. What about the Emergency Petroleum Allocation Act of 1973 and particularly section 4(d)?

Mr. MONTGOMERY. Well, sir, section 4(d) does provide that the regulation issued under section (a), which is the primary regulation required by and described by the Allocation Act, shall require that crude oil and refined petroleum products, produced or refined within the United States, shall be totally allocated for use by ultimate users within the United States to the extent practicable and necessary to accomplish the intent of the subsection.

In our view, that provision taken with the legislative history which specifically is provided by a section in the conference committee report, dealing with exports suggests that it was not the intention of Congress that any dramatic or wholesale restriction of exports be implemented, but that some considerable discretion be left to the President to determine what restrictions might be necessary to balance the need to prevent a wholesale outflow of oil and related products and at the same time to maintain the historic trading relationships, particularly with respect to the needs of some of our long-term trading partners such as Canada and Mexico.

That is how we interpret that provision, but let me point out that that provision in no way authorizes the President, on a long-term basis, to restrict exports in the way that we would like to provide that authority under title XIII of our omnibus bill.

As you know, the Allocation Act would have expired in February had it not been extended, and it is presently scheduled to expire August 31 of this year. Even with the various proposals which are under consideration now to extend the act for another year or 6 months, the Allocation Act itself is viewed as a short-term emergency-type authority and is not in our opinion the same type of legislation as the standby bill, which doesn't have any immediate application at all, but which would be on the shelf and would satisfy both the need for authority to implement our international obligations and our need to have general authority should we have another embargo.


Mr. BINGHAM. I understand that during the latter parts of the months of August and September of 1973 and on into October and No

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vember our exports of gasoline actually increased very greatly from 16,000 barrels per month to 504,000 barrels in November.

Would you comment on that in the light of the proposals that you are making and also in the light of what statutory authority if any was applicable to those exports at that time?

Mr. MONTGOMERY. Yes, sir. First of all, let me try to give you an idea or expand on your own knowledge of what the supply situation was in August and September.

As you know, embargo was instituted in October of 1973 and was in full force and effect through about February and into March of 1974. By the time April and May of 1974 arrived our import levels were virtually backed up to pre-embargo levels or slightly less, due to slightly lower demand-the petroleum was certainly there if we wanted it.

By the time August and September rolled around, we had a fairly serious gasoline surplus in this country and the number of gallons of gasoline consumed during the summer was substantially below projected levels and substantially below what previous trends would have indicated the demand should have been, absent the higher price, the 50-miles-an-hour speed limit, and other conservation factors, so, while I wouldn't have been able to tell you exactly what the level of exports was without consulting with Mr. Goodwin and perhaps with the Commerce Department, it doesn't surprise me at all that there were substantial exports at the end of the summer.

In our view, the embargo and the short supply conditions which characterized the embargo really terminated in April or May of 1974, and thereafter there was no need to or logical reason for exercising any restraint at all on gasoline exports. If you translate that situation into the terms of the standby bill, I would say that there would be no way the President could have maintained export controls under our proposed standby bill through the summer of 1974 because the short supply situation and the resulting threat to national security certainly did not exist at that point.

You did ask what present plan or program authority exists to regulate petroleum exports and the answer is that under the Export Administration Act the President has the authority, which he has delegated to the Department of Commerce, to restrict the export of those items which, among other things, are in short supply and the serious drain of which is having an inflationary impact.

Now, through negotiations and discussions between FEA and the Commerce Department a program was initiated by the Commerce Department in early 1974 to restrain the export of petroleum and all petroleum products, roughly to maintain historical patterns. In other words, it was not our view and it was not the view of the Department of Commerce that the situation was so severe that we should clamp down and eliminate all exports, but it was definitely our view and that of the Department of Commerce that the shortage was sufficiently severe that we should not allow any new outflow or any substantial increase in exports. Thus, there was a system promulgated by regulation by the Department of Commerce to allocate export rights, roughly, in accordance with historical shares in terms of countries.

We exported to various countries approximately what they had been receiving and then within each share the firms desiring to export were

given a share of that business. So we roughly maintained the status quo throughout that time period.

Mr. BINGHAM. If it were only for petroleum products wouldn't this authority be adequate without the addition of the standby authority? Mr. MONTGOMERY. Well, sir, if the Export Administration Act were extended beyond 1976 in its present form, it arguably might be adequate. The problems are those that we raised in the statement that first of all the trigger mechanism that is provided for there is really not at all relevant to the kind of emergency that we envision taking place and with respect to which the standby bill is directed.

The standby bill is a piece of legislation directed toward a major energy shortage of national dimensions, something that is caused by an embargo or something of that magnitude. The finding required by the President under the standby bill is a very tough finding in our opinion. It could only be made if there were a serious across-theboard interpretation of imports. But it doesn't have any particular focus on one product.

For example, we might very well, for some strange reason, have plenty of one particular product and yet we would under that bill have authority to control exports generally. Now, the Export Administration Act, the trigger there focuses on the particular product and on the existence of a severe drain, presumably something that has happened over a period of time. I think that part of our problem with that test is that it envisions some period of observation of a level of exports, a determination by the Department of Commerce that the level of exports that it is seeing happening, experiencing, is a severe drain and that it has an inflationary impact.

Absent a congressional finding such as we had in the Allocation Act which made it reasonably easier for Commerce Department last time to find that there was a short supply situation, it is not at all clear to us that the Commerce Department under the Export Administration Act would be able to say that the drain was severe and that it had an inflationary impact.

We might want to control imports to prevent that very drain from happening and that very inflationary impact from happening.


Mr. BINGHAM. Is it your thought that the controls envisaged under section 1316 would be implemented through your agency or through the Trade Division of the Department of Commerce?

Mr. MONTGOMERY, it is our thought that the bill gives the authority to the President. It specifically, in subsection (b) recognizes that the President may direct the Secretary of Commerce to impose restrictions pursuant to the Export Administration Act and we really don't have a thought as to what he would do where the legislation is designed to give him flexibility.

FEA might not even exist at that point. In fact, FEA is a limited-life agency so there is no interest here in the kind of transferring the authority from Commerce to FEA. It is simply that we are dealing with a package of authorities here in an omnibus bill, all of which to my knowledge-there may be an exception somewhere-are to be given to the President. So it is even envisioned that should a

renewed emergency arise, at that time, depending on which of the authorities he was implementing and what the organizational situation was in the executive branch, he would have the flexibility to delegate the authority to the appropriate agency.


Mr. BINGHAM. In view of the fact that we have substantial coal exports and they contribute mightily to our exports and therefore help achieve a favorable balance of trade, what is the need for including the authority of controlling exports of coal?

Mr. MONTGOMERY. I would say that the need is strictly a need in our view to provide a tool that can be used flexibly in any eventuality. It is correct that today we have plenty of coal and we do export substantial quantities of coal. On the other hand, this last winter we went through a time period during which a major coal strike looked very likely and we were under a great deal of pressure to consider at least restricting exports.

I think, from the FEA standpoint, we see the Nation on the verge of a major shift to coal. We see more and more emphasis on coal in terms of power generation and we think that this is the only way we are ever going to achieve any relative degree of security from the kind of oil interruption we are talking about. So somewhere in the 5- to 10-year range it may very well be that coal is in short supply and that in the event of an interruption of energy imports of some kind or another or a major crisis, would need to restrict coal exports. I agree under present facts it doesn't seem very likely.


Mr. BINGHAM. It seems to me that in some respects your triggering conditions may be too tough. For example, might there not be a time-might it actually not now be desirable to have export controls on scarce energy producing equipment which is in short supply in this country and which we need very badly to develop our energy resources?

Mr. MONTGOMERY. It is true that some energy-related equipment is in short supply. We have, along with the Commerce Department, been monitoring for a number of months the situation with regard to such things as rigs and tubular goods, and I think it is our position and I hesitate to speak completely without qualification because, you know, the Commerce Department is a major figure in this and they would have to give their own answer, but certainly I think it is FEA's position that the levels of exports of the materials involved do not at the moment constitute a serious impairment of our capability to conduct the kind of exploration activities and increased production that we are trying to foster.

We think that if the levels of exports of those products were to increase substantially that it would probably be necessary to look carefully at direct export controls. But we think we have the authority right now to dea! with that kind of a problem, because that again. is the kind of a problem where you have a continuous drain of some. critical material and it seems to fall almost squarely within the scope. of the Export Administration Act.

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