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The previous year, their large freeze had been in the San Joaquin Valley, therefore, they would have an allocation during the months. of, say, December. They came in and said, could they transfer this? And I said that I would try, but we could sure find out first, but I said before we start checking around, we had to look at the options. One option was to buy up through the farmers and put in a large storage tank, and they're doing this in the Goleta area.

There is a problem with this, they are liable to wind up with quite a large volume of stored fluid, and then it is very difficult, because you bought this from different sources, to give it sort of a license of quality to be able to resell it to be reused.

If there was a problem, would it be Venture, Orange County, San Joaquin Valley, where would it be?

We actually got down to calling a couple of vice presidents of major companies, and they said they recognized the problems, and that they would like to meet with Sunkist, they can't meet together but they can meet with them individually, and try to get the problem solved, because they knew what the problem was, they had to solve it in previous years, the shipping.

I have not heard back from Sunkist, so I would imagine what they are doing in Goleta, that they feel secure at the present time. Now, this does not answer the problem of the grower who does not belong to Sunkist and whose storage will only last him for a day and a half.

I think you have to recognize that in some things time, if you got a real problem, transportation will kill you trying to get a product into an area.

Senator TUNNEY. Are you capable of helping that kind of grower at your office with its nine employees?

Mr. MATTHEWS. To the limits that transportation can, yes.

If everyone suddenly decided that they wanted a paper given to them in their hands before they would move, we would be slowed up appreciably.

We have been able to do an immense amount of good, and immediate good, by telephoning and sending the paper work on to substantiate after the redirection order.

Senator TUNNEY. In other words, what you're saving is, it is going to take the cooperation of the oil companies in this?

Mr. MATTHEWS. If we have to mail something to Bakersfield and it is Friday afternoon, and the guy has got a problem Saturday night, nothing against the U.S. mails, but they're not going to get it by that time.

Senator TUNNEY. So it requires the cooperation of the oil companies, right?


Senator TUNNEY. I want to thank you, Mr. Matthews, for your testimony. I assume that you are satisfied with the relationship that you have had with the Federal Energy Office and the IRS, the U.S. attorney's office?

Mr. MATTHEWs. Yes, sir. They have had a person in our office, as I said, up to this time, who controlled to a degree what we did. The State set-aside now is a responsibility of the State. It would

be at their discretion. We have no particular quarrels with them at the present time.

I am probably like everyone else, I am glad when the staff gets moving. As I said earlier, our ability to move on a very short period of time has given us more work over the early stages than we will get when the program gets smoothed out.

[The testimony resumes at p. 117. Mr. Matthews' prepared statement follows.]


My name is John F. Matthews, Jr. and I am the State Oil and Gas Supervisor for the State of California. I also have the duties to act as the State Fuel Allocator. I have a Bachelors and a Masters Degree in petroleum engineering and am a licensed petroleum engineer in the State of California.

On November 1, 1973, acting under the Federal Mandatory Allocation Program, the State of California established a fuel allocation office and became active in the distribution of the state set-aside for middle distillate fuels. It should be remembered that the Mandatory Allocation Program is a federallymandated program and that in essence the rules of operation were set by them. A Federal Allocation Officer had to countersign approval of each redirection. In the early weeks of operation the unit, except for one employee, consisted of personnel borrowed from other state agencies. To date this unit has redirected middle distillate fuels to over 2,000 end users in amounts in excess of five million gallons of which, for the period January 1 through January 14, the total is 798 end users and 2,453,350 gallons. It is our firm belief that we have helped to alleviate a great number of problems of various persons throughout the state. The acceptance of the program by the petroleum industry generally was good, there being a few exceptions due to the legal interpretation of the language contained in the regulations by several suppliers. The new regulations should resolve these exceptions. In addressing any problems at this time, it should be remembered that the program under which we were and still are operating is being modified effective the first of February. This modification was based upon input for the experience gained to date.

The ability of the state to move rapidly resulted in a deluge of applications early in the program, and if it had not been for the willingness of many suppliers to act on verbal requests followed up by paper work rather than the suppliers demanding proper serving of orders, it would be quite probable that your committee would be receiving and listening to a great multitude of end users' problems. There is still some backlog as 150 plus requests are filed daily. The complexity of the form causes some 80 percent of those filed to need a personal call back. This, plus a verification call to the distributor and supplier, severely limits the output of the unit.

There have been certain problems with gearing up to meet this almost instant need. This has, to a degree, been rectified with the influx of permanent employees. It would appear that we now face a new deluge of paper work as in the new regulations under Section 205.162, end users and wholesale purchasers serving end users may petition for an allocation from the state set-aside plus the state office will be the recipient of requests from those seeking relief under Section 211.13 for action which must be forwarded to the Federal Energy Office. In the state statutes for California there is a section which requires that any state mandated programs to the county level which result in an increased cost to the county shall require that sufficient funds be appropriated at the state level to cover these costs. The mandates of the federal government upon the state, although it should be recognized that the state has to request to be certified by the federal government to do this service, should certainly be funded from the federal level.

Many sections of the petroleum allocation program are vague and there is a definite need to be more definitive. As an example, under Section 211.13, appli

*United States Senate Committee on the Judiciary, Subcommittee on Representation of Citizen Interests. Senator John V. Tunney, Chairman, hearing in San Francisco on January 22, 1974, entitled "Citizen Redress Under the Fuel Allocation Program".


cations for increased base period volumes shall be filed with the supplier by June 1, 1974. If the supplier does not agree that the application is valid, he may request the Federal Energy Office to determine the validity, or if the supplier agrees that the application is valid, the supplier shall increase the base period volume. There are no rules to govern the decision of the supplier; indeed the entire situation is merely thrown on his back. Another example is the definition of emergency services-law enforcement, fire fighting, and emergency medical service. One county might interpret this as serving a subpoena in the Supreme Court under law enforcement; another county might not. This places county administrators in a position of making policy under the allocation program.

The State of California is presently reviewing the total program and its comments will be forwarded to the Federal Energy Office before the January 31, 1974, deadline. A copy of these comments will also be forwarded to your committee.

Senator TUNNEY. Thank you very much. This concludes 2 days of hearings held on a host of problems relating to the fuel allocation program and the price stabilization guidelines.

Today we had an opportunity to listen to Federal and State officials testify on these problems. I received promises that every specific case that I have heard which I referred to the IRS, to the Federal Energy Office, and to the U.S. attorney's office will be looked into.

I think that time will tell how well this program is implemented. However, very clearly there are enormous tasks which lie ahead for those who are responsible for enforcing the price and allocation regulations.

Mr. Short of the IRS tells us that he won't be able to begin investigating any of the alleged violations of the allocation regulations in the case of the withholding of substantial supplies of fuel, if such withholding exists, by the major oil companies until February 15 at the earliest.

Mr. Browning, the U.S. attorney, tells us his office has never been asked to look into a single case of black marketeering or deviation by suppliers from normal business practice in violation of the regulations.

Mr. Matthews, the State allocator, says that he has no enforcement authority whatsoever, and many violations are occurring. My office wouldn't have heard about them as frequently as they have, had this not been so.

Therefore, I think what we're going to have to have is an enforcement program which is based upon compliance in the first instance, but which also is prepared to move in swiftly with the full weight and authority of the law against those who would trade on the discomfiture of others, mainly the American consumer.

I would like to say is conclusion that I feel that the new program that has been announced by the Federal Energy Office and as it is being administered initially by the IRS and the Federal Energy Office and the State allocator, appears to be substantially better than what has existed in the past 3 months.

Thus, hopefully, we will have more expeditious redress of wrongs and injustices and problems which exist for farmers, industrialists, and others who are not able to get what the law states that they should receive.

But I think that these hearings have been valuable in laying out the problem, and the efforts that are being made to solve the problems, and speaking out for the committee, I am prepared to follow up in the next few months with open-site hearings to make sure that the program is working the way that it has been asserted today that it is going to work. And I expect to have full cooperation of all those authorities who are responsible for the administration of the program.

The hearing is adjourned.

[Whereupon the hearing adjourned at 12:35 P.M.]


BD 181

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