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EXPORT CONTROLS ON PETROLEUM

TUESDAY, MARCH 25, 1975

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERNATIONAL RELATIONS,

SUBCOMMITTEE ON INTERNATIONAL TRADE AND COMMERCE,

Washington, D.C.

The subcommittee met at 2:20 p.m. in room 2255, Rayburn House Office Building, Hon. Jonathan B. Bingham (chairman of the subcommittee) presiding.

Mr. BINGHAM. The Subcommittee on International Trade and Commerce is meeting today to consider the export control authority proposed in the President's energy package. Jurisdiction over export controls has recently been transferred from the Committee on Banking and Currency to the Committee on International Relations.

Most of the titles of the energy package have been referred to the Committee on Interstate and Foreign Commerce. The main purpose of this hearing is informative-to determine the basis and need for the export control authority in title XIII of the energy package.

Export controls are a matter with which this Nation has only scattered experience. The experience with export restrictions on soybeans during 1973 has left many people wary of their utility. Except for limitations on the export of items of strategic importance, the main product on which there currently are export controls is petroleum.

Our witness today is Mr. Robert E. Montgomery, General Counsel of the Federal Energy Administration. Mr. Montgomery has been requested to speak specifically to the request for export controls in section 1316 of title XIII of the administration's energy package. However, after dealing with that subject, I understand Mr. Montgomery is prepared to answer questions on other provisions in title XIII, especially those relating to the International Energy Agency. As Mr. Montgomery has a 4 o'clock commitment elsewhere, I suggest we move directly to his testimony.

We are glad to have you with us, Mr. Montgomery, and you may proceed as you see fit.

STATEMENT OF ROBERT E. MONTGOMERY, JR., GENERAL COUNSEL, FEDERAL ENERGY ADMINISTRATION

Mr. MONTGOMERY. Thank you, Mr. Chairman.

I would like to introduce a member of my staff, Mr. Robert Goodwin, Deputy Assistant General Counsel for International and Special Programs.

(1)

I have a short prepared statement and if you don't mind, I would like to read that, sir.

Mr. BINGHAM. Surely.

Mr. MONTGOMERY. Thank you.

I appreciate the opportunity to be here this afternoon to discuss the administration's Standby Energy Authorities Act-title XIII 1— of the Energy Independence Act of 1975, and in particular section 1316 of the bill dealing with control over certain energy-related exports.

TITLE XIII-STANDBY ENERGY AUTHORITIES

The provisions contained in title XIII, in conjunction with those of title II, the national strategic petroleum reserves, would give this country the ability to deal with disruptions of petroleum imports and also constitute the legislative authority which this Government is obligated to seek under the agreement on an international energy program executed last fall by the United States with most of the other major consuming nations.

Before discussing the export control provision which I understand is of particular interest to this subcommittee, I would like to outline the scope of the standby legislation in general. In this regard, it is necessary to bear in mind its relationship to the comprehensive program submitted by the President to the Congress in his state of the Union message. As you know, he has outlined three time-phased energy goals.

First, in the short term, a reduction in our oil imports of 1 million barrels per day by the end of this year, and 2 million barrels per day by the end of 1977.

Second, by 1985, import levels no greater than 3 to 5 million barrels per day and the capability to withstand a total disruption of imports. for 1 year by the use of standby authorities and strategic reserves. Third, accelerated development of energy technology and resources so that the United States can meet a significant share of the energy requirements of the world by the end of this century.

The second goal would eliminate by 1985 this country's vulnerability to economic disruption should foreign suppliers of petroleum be interrupted. If the legislation required to carry out all of the President's program is enacted, it is expected that by the end of the next decade our petroleum imports will be 3 to 5 million barrels per dav.

Should those imports be curtailed, 3 million barrels per day could be drawn from a strategic petroleum reserve for a period of 1 year. and the remaining short fall could be dealt with through the selected imposition of the conservation, allocation, or rationing measures that would be authorized by this legislation.

So it is clear that these bills must be considered in the context of the entirety of the President's program, and their effectiveness would depend in large measure on the implementation of the balance of the program.

There are several criteria which we believe a standby energy authorities bill must meet.

One, the standby authorities must be limited to emergency situations caused by acute national energy shortages threatening the military or economic security of this Nation.

1 Title XIII appears on p.

Two, the authorities must be clear, unambiguous and immediately available in an emergency. In that regard, there should be self-contained standby rationing, allocation, and conservation authorities available. Sufficient flexibility must be present in order to allow the President to tailor his actions to the situation, the particular situation that exists at the time of an emergency.

Three, authorities must meet our obligations under the international energy program-IEP. Various provisions of this bill deal with the Nation's obligations under the IEP. We believe it is critical that the United States have adequate authority to completely implement these obligations.

Title XIII meets all of these requirements.

Before exercising any of the standby authorities, including the export control authority contained in section 1316, the President would be required to transmit to the Congress findings 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 so as to require the exercise of the standby energy authorities provided for in this title, or * * * that their exercise is required to fulfill obligations of the United States under an international agreement.

This delicately drawn triggering mechanism balances the ability to act with the requirement that this ability be limited to circumstances absolutely necessitating such action.

Among the authorities which could be invoked upon such a finding are the authority to allocate and control the price of petroleum and petroleum products, promulgate and enforce mandatory energy conservation programs, ration petroleum products, order increases in domestic oil production, and allocate critical materials needed for the maintenance, contruction and operation of critical energy facilities. In addition, section 1316 would provide authority to restrict exports of energy materials.

Section 1316 would authorize the President to restrict exports of coal, natural gas, petroleum products, and petrochemical feedstocks, and of supplies of materials and equipment which he determines to be necessary to maintain or further exploration, production, refining, transportation, and conservation of domestic energy supplies and for the construction and maintenance of energy facilities within the United States.

This export control authority contained in the bill is a necessary complement to the bill's other emergency provisions. In times of emergency we must have the ability to act quickly to insure that domestic energy needs are met; and the authority to restrict exports is a necessary component to this ability.

BASIS FOR EXPORT CONTROL AUTHORITY

One question which might arise is why a separate export control authority is being proposed in this bill rather than reliance on the existing authority of the Export Administration Act. There are two basic reasons for proposing this separate authority. First, the bill is a long-term standby authority. It is proposed that the bill's authority would be for a period of 10 years. The Export Administration Act,

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