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the data, that this is one of the ways, all of this data collection is one of the items, that they will be coming back to the State with, to tell us what our set-aside is.
The refineries will be giving them the runs, and that will dictate as to the end products before the first of the month, so that we will know what we will have for a State set-aside for each of these fuels for the next month's period.
We have several bills which are in the State legislature, which are supported by the administration, to have some refinery information input, output, and the products which we run, et cetera, as information which we can get ahold of at a very early date. We are very hopeful that one of the bills, which is an emergency, will be passed within the next 15 or 20 days and will be signed.
Senator TUNNEY. It appears that the State is going to be responsible for assignment of suppliers and allocations for small end users. If this program is in any way similar to the allocation program implemented for middle distillates, you anticipate that there could be a very heavy caseload of this type needing resolution, as I understand your testimony?
Mr. MATTHEWS. Right.
Senator TUNNEY. Are you now staffed to handle a heavy load of this type? What is the size of the staff?
Mr. MATTHEWS. We have nine people, Senator, working in there
The general flow-in is a Federal Form 17 or it is a Federal Form 20, which is State user, also for the State hardship.
Initially, our program was geared to the farming community. We felt that they were in more of an emergency in December than anyone. I am certain you have heard the sad tale of woe of change of weather between December 1, and the allocation period for the month of September 1972 was very poor for the farming area. This is where probably 70 or 80 percent of our redirection went to.
When the program came out the 1st of November, the State of California requested, it was verbally granted, approval for California to be out of the program for 1 month. Apparently, every other State ran into the same thing. Attorneys felt the best thing to do was to stay with the program, and during the month of November. the letters came out, advisory letters, saying that first, "Forget about it," and then saying any fuel utilized by the farmer would go against his allocation for the next year.
It was rather difficult for most people to understand and it was not a program which was followed very well, because of the worries of whether they were right or wrong.
I had many independent distributors call and say, "Five thousand dollars a day is a large fine. I need some guarantee, I need something firm."
It probably would have helped if these advisory letters would have been put into the Federal Register; they would have carried a little more import to the legal profession.
We have asked for an additional 12 people. I feel that with the administration's viewpoint of the necessity of this program and the reception from both sides in the assembly and the State senate, that we will have no trouble getting the emergency funds which will
come from the administration. I don't see any trouble with their budget for the next year, so we are talking of between 18 or 20 people.
We also have some people within the Division of Oil and Gas that we can push over there on a moment's notice, if we run into a situation.
It should be remembered that, thank goodness, this program only calls for an allocation program to bulk users. Any other type of program will certainly be under rationing, so this is where we end. We have no ability to supply anything to anyone who is having problems who is not a bulk user.
Senator TUNNEY. What happens to the former who is not getting his allocation?
Mr. MATTHEWS. Well, this is an area, since this is a Federal program; the people you have been talking to earlier are the ones who are responsible. We would have to put the problems back to them.
It might be interesting for you to note here that the Federal Government asked several of the States to send representatives to Washington to discuss and help with regulations, have input directly, rather than by mail.
There were six States, including California, represented. All of us pushed for some way to have the States to have injunctive rights incases that they wanted to move on. We explained to them that we felt that the county district attorney for a farming community might move very rapidly on something which would affect his county, and he would be able to get much better either compliance or timing to getting them into courts, and getting the problem solver. This did not show up in the regulations.
Senator TUNNEY. You did not get that authority?
Mr. MATTHEWS. No, we did not.
Senator TUNNEY. So the only recourse of the end user, then, is to go to the Federal Energy Office. He can't go to your office, only the bulk users can?
Mr. MATTHEWs. Well, if he is a bulk end user, if the person who buys it at the service station, I don't believe anyone at the present time has control to be able that he gets a supply.
Senator TUNNEY. When you say "bulk," what are you referring to? Mr. MATTHEWs. That you have a tank on your property to store in. In other words, you are not getting it metered out into your tank for a truck or for your farming equipment. In other words, you are an end user at the gas station, but you are not a bulk purchaser. If you had a business and had a tank at your business and it was filled with gasoline, you would be a bulk purchased.
Senator TUNNEY. So you could be a bulk purchaser and still purchase very little?
Mr. MATTHEWs. Yes, on a very intermittent basis, or anything of that nature, yes.
Senator TUNNEY. Let's make sure that I understand which authority you requested for the local district attorney. You requested to refer these cases, where there had not been a compliance, to the local district attorney?
Mr. MATTHEWS. If we had a situation involved where we had redirected an emergency allocation out of the State set-aside, we would do this: actually we would gain some method of being able to get to the people.
It used to be we had to redirect the wholesale purchaser in the field to do this. This has been rewritten and this is why you say you do learn, they have been rewritten to allow us that we go directly to the supplier or refiner, and he's responsible for down through the system.
What we would like, if someplace within the refiner, the wholesaler, or the distributor, somplace in there the thing breaks down, that the end user does not get the product that we ordered delivered, that we get action. This would be in our own area of the State setaside.
Senator TUNNEY. You have to go now to the U.S. attorney?
Senator TUNNEY. Have you had occasion to go to the U.S. attorney?
Mr. MATTHEWs. We have. Quite frankly, as I said in the report, we have had what I considered to be good compliance. There is one company whose lawyers read the regulations differently, and this was a problem that was brought to the attention of the Federal Energy Office, whether the way the rules are written we have resolved it-the language differential is not there to interpret.
Senator TUNNEY. How much is in the State set-aside?
Mr. MATTHEWS. There is about 15 million gallons of diesel fuel in California per month, so we're talking about 600,000 gallons.
Gasoline is in the neighborhood of 600,000 barrels a day, and 3 percent of that is going to be, if I remember, some 2 million-plus gallons a day.
One of the things that has not been-the priorities of the Federal program are not the same; they are not put onto the State set-aside. It is for the State to set their priorities, and this will come through the Energy Planning Council."
At the present time, it is rather difficult to see that much gasoline being redirected, quite frankly, unles we begin to try to correct any imbalances that maybe a community might have, as opposed to just an individual station.
Senator TUNNEY. So you feel that the amount of the set-aside is adequate to handle emergency hardships?
Mr. MATTHEWs. With the particular situation now of the farming community not being touched by the allocation. They will be the only people who will not feel the bite. They have been so advised by the Department of Agriculture. They have also been warned that they have an understanding if they get all they need, they can't be using it to give to their friends of neighbors or doing any other illegal acts with it, or the roof is liable to fall in on them.
This is the one thing in the program that never seems to be addressed: there is a shortage and all we're doing is allocating a shortage, and underneath this, after everybody gets what they're supposed to, then it depends upon their supplier what his allocation percentage is.
This should be fairly even in California at an early date, because the Federal program calls for a transfer of crude oil to all the refineries, independents and majors, which are really hit by imports would be within 2 percent of each other for stocks.
Senator TUNNEY. Of course, we have talked to distributors down. in the southern part of the State who are responsible for supplying farmers, and they're saying they are not getting it.
Mr. MATTHEWS. No percentage, or low?
Senator TUNNEY. They received a percentage cutback from their major oil company supplier, and they just don't have enough fuel to give to the farmers that they are servicing. This is right now. I know, in theory, it sounds beautiful, but in practice, up and down the State, the distributors of the gasoline just are not getting enough of a supply, according to what they tell me.
Mr. MATTHEWS. These were some of the inputs that were put in the Federal program, saying what happens if one supplier or refiner happens to have a large percentage of agricultural customers and users, then his other people will get little or nothing, because he will be giving everything in that direction, and they had all these priority programs-this is the reason why one priority program would look good, and when it was attacked, then it would be changed.
Senator TUNNEY. Can you help that distributor who does not get what he should be getting of the supplies he needs to the end user? Mr. MATTHEWS. The State set-aside in some of these cases would not be applicable in this.
The way that I read the regulations is that if a distributor has these type of people, if he needs up to 20 percent, his supplier is supposed to be able to look at it and say, "Yes, you need 20 percent more. "If he needs over 20 percent, he has to go to the Federal Energy Office to get his base allocation changed.
Senator TUNNEY. But in the case of agriculture, there is no base allocation.
Mr. MATTHEWs. But the distributor has to get his total supply changed in order to meet his downward output.
Senator TUNNEY. I'm not sure that I quite understand you. If I am a distributors of gasoline and middle distillates to farmers, that is my only business?
Mr. MATTHEWs. I think there are very few. OK, he should be able to go back and if the supplier-actually, I don't know.
The rules, you have to read it the way it says, and if you need an increase of up to 20 percent, you can go to your supplier direct and you and he can agree on this, and it will be given to you.
Now, if you had a distributor who is, in round numbers, 100,000 barrels or gallons of distillate a month, and his pro-rated deal was he was on a 70-percent allocation, and he would only get 70,000, 20 percent more would put him up to 84,000. Let's say the farmers and he agree that they need 120,000. He has to go back; that 20 percent won't do it; he has to go back to the Federal to get the base allocation changed.
Senator TUNNEY. So as I understand it, if I am a farmer and I go to my distributor or supplier, and he tells me he just does not have the fuel, "Sorry, I am cut back, I don't have the fuel," and I am
saying, "I need the fuel next week. Look, I am going to be planting the crop, I need the fuel." He says, "I am sorry, I don't have it. My supplier won't give it to me."
Then I cannot go to you and get help?
Mr. MATTHEWS. No, one of our problems has been, it is not a problem, one of our attacks of looking at things is when somebody says they have a problem, we try to take care of the matter.
We recently, just as an example, had a gentleman who called me from La Jolla, he was down where you were. His message was he had a piece of property around Banning, and the year before he had it custom harvested, and he had no allocation because he had bought a DC-6 cat, he was going to do his own work. Now he needed 700 gallons, and it had rained, it was time to disc the land.
If you have to hide behind paperwork, you say, "I'm sorry you have to get a new allocation, you have to fill out this form, and you go off and do that."
We asked if he approached anyone, and he said, yes, he had a fellow who had been willing to supply it if he had an order to. So we called the fellow up and verified it.
One of our problems, you have to realize and I don't want to say that people are doing this too much, but we have to check people, whether it is legitimate or not.
So we called this distributor and he said, ves, he knew of the situation and could verify it. So he delivered the fuel the next day. The fellow called me the next day and said, "Thank you." I said, "Well you needed it today."
The very thing that you're talking about here, the program should take care of, but that is what an emergency hardship is for, and it is as much an emergency to have a paper bottleneck as it is to not have the supply.
I would say in this area for a very short-term period we would try to get something so that the fellow can get started farming. If you don't farm it the right time, you are out of business.
Senator TUNNEY. That is the point, and if they can't get bunker for the boats
Mr. MATTHEWS. It is not so much bunker with them as it is diesel, they use jimmies, you can't cut them very short, because they don't take a rope to get towed back with, you have got to get them there and back.
Senator TUNNEY. You can help them?
Mr. MATTHEWS. I wondered why I had not heard from them, at the tail end of December I heard they were on strike. We were quite concerned and we are trying to do some preplan with them in regard to the yellow fin treaty situation, and, of course, it did not come to bear because they're still tied up.
Senator TUNNEY. What about the owner of an orchard. He suddenly around about February gets a weather forecast that there is going to be a freeze, and he needs to get oil for his smudge pots. Can you help him?
Mr. MATTHEWS. This has been one of the banes of existence of the oil industry for many years. This is a large volume, short term, you guess where type of a program. Here again, we have tried to do some preplanning with all of the growers who are represented by Sunkist.