CITIZEN REDRESS UNDER THE FUEL ALLOCATION PROGRAM MONDAY, JANUARY 21, 1974 U.S. SENATE SUBCOMMITTEE OF REPRESENTATION OF CITIZEN INTERESTS San Diego, Calif. The committee met, pursuant to notice, at 9:10 a.m. in the auditorium, State Office Building, 1350 Front Street, San Diego, Senator John V. Tunney (chairman) presiding. Present: Jane Frank, chief counsel, W. Dean Drake, chief clerk, Doug Byrns, staff assistant. STATEMENT OF HON. JOHN V. TUNNEY, U.S. SENATOR FROM CALIFORNIA Senator TUNNEY. The Subcommittee on Representation of Citizen Interests will come to order. Today our hearing is on citizen redress under the fuel allocation program. In these 2 days of hearings by the subcommittee, we are exploring procedures available to citizens in securing fuel allocations, protesting allocation decisions, and compelling enforcement. Today, in San Diego, we will hear from critical industries, fishing, farms, and citizen services, fuel distributors and suppliers about the fuel allocation procedures and their problems in seeking redress. Tomorrow, in San Francisco, the location of the Federal Energy Office's Regional Office, we will investigate the procedures and enforcement policies of FEO and its relationship with the State energy agency, the Department of Justice, and the Internal Revenue Service. For the past 2 weeks, I have been traveling throughout this State, meeting with consumers, businessmen, labor leaders, workers at plant gates, municipal officials, farmers, and others on the impact of the energy crisis. I have heard widespread complaints about the effectiveness and the fairness of the fuel allocation program. In Los Angeles and San Francisco, I was told by harbor officials that the petroleum imports were higher in the closing months of last year than they were in the same period of 1972 before the Arab boycott. I was told that storage tanks were filled to capacity and that fuel supplies exceeded allotments under the fuel allocation program, thus giving rise to a thriving black market. A fuel oil distributor here in San Diego, who was not getting the supplies promised him under the program, told my staff that he was offered 80,000 gallons of fuel a day at a price between 12 and 16 cents a gallon over the market rate. Officials of a Solano County city reported massive stockpiling of fuel at abandoned storage tanks and gas stations. At the same time, suppliers were cutting off fuel supplies to the city. Management and labor leaders alike told me of factory layoffs and of pending layoffs, because they were unable to obtain scarce fuel legally, and because the black market price was exhorbitant. A rancher in Merced, unable to obtain adequate diesel supplies in the fuel allocation program, was offered all the black market fuel he wanted if he was willing to pay 62-cents a gallon cash and was willing to forego a receipt. I could offer many more examples, but others, certainly, will be outlined in testimony today. Even aside from the black market reports, charges are mounting that the new fuel allocation procedures work unfairly. They do not guarantee high priority and the use of the necessary fuel to meet current requirements. They peg allocations on a base period which penalizes users who conserved fuel last year, and fail to take into account the effect on unemployment. They fail to limit prices or provide mechanisms to stop price gouging. They sharply reduce the State set-aside for hardship cases and provide no official relief when the State's allocation has been exhausted. They provide inadequate enforcement machinery in the regional office. They provide neither funds nor enforcement mechanism for the State office, and, yet, force that office to handle complaints. These are just some of the problems I've been hearing about. What we must learn in these hearings is how the needy citizen can obtain redress in the face of any or all of the issues I've raised. If the procedures don't work, we must find out how to change them to make them work and work fairly. If additional legislation or enforcement power is needed, we must learn what is required. The President, on Saturday, called attention to the fact that voluntary energy conservation measures by the American people were succeeding even beyond expectations. I believe that the American people will continue to cooperate if they believe the fuel allocation program is working fairly and evenhandedly, but if it operates with favoritism and with black marketing and price gouging that works no hardship on the wealthy but penalizes the majority of Americans, they can be expected to rebel. They can be expected to hoard and to "get theirs while the getting is good," perhaps wrecking the allocation program and intensifying the energy shortage. The program must work equitably and must get the fuel to the services and industries in California that need it most. The program must provide sufficient flexibility so emergencies can be dealt with quickly. The program must let the voice of the small supplier or user be heard, not only the voice of the conglomerate, and the program must be easily enforceable. For these reasons, the subject of these hearings falls directly within the jurisdiction of this Subcommittee on Representation of Citizen Interests, which I chair, established by the Senate last May. The subcommittee is charged with investigating whether all Americans can obtain redress of grievances and enforcement of the laws. Unless the fuel allocation procedures work fairly and well, we face economic dislocation of vital California services and industries and skyrocketing prices to the consumer. These hearings should point out ways for all of us to prevent these dire consequences and provide an equitable and efficient system. Our first witness will be Mr. August Felando, general manager, American Tunaboat Association. He'll be accompanied by a second witness, Mr. Jack Bolin, Western Fishboat Owners' Association. Both of you gentlemen could come forward. STATEMENT OF AUGUST FELANDO, GENERAL MANAGER, Mr. FELANDO. Thank you, Senator. I'm August Felando, the general manager of the American Tunaboat Association, a nonprofit fishery cooperative association, incorporated under the laws of the State of California with its principal office of business in San Diego, Calif. I have prepared a rather long, detailed statement that I have submitted to the subcommittee and I hope that it will be part of the record so that I won't have to read all of the statement, because I understand that the subcommittee is pressed for time. To my right is Mr. Jack Bolin, who is the general manager of the Western Fishboat Owners' Association, and he will supplement some of my remarks. In 1973, 183 U.S. tuna clippers, that is, vessels classified either as seiners or baitboats, fished for the tropical tunas in the eastern Pacific. Mr. Bolin, representing the Western Fishboat Owners' Association, represents primarily those vessels that fish for albacore ranging from California to Canada, so that's a different class of vessels, and the number is quite significant. It exceeds 400 or 500 vessels and I think Jack will talk about that and indicate a special type of problem those vessels have. The vessels I'm talking about are those that fish in the eastern Pacific south of California, and also some vessels that fish in the Atlantic. I have detailed a number of background problems concerning our fuel shortage difficulties in the U.S. tuna fleet. For instance, I detailed the early warning signals of a diesel fuel shortage problem for the fishing industry. We received those signals in late 1972, which indicated problems in the Gulf of Mexico, the States of Texas, Mississippi, and Louisiana, where shrimp vessels were having problems of obtaining fuel, and there seemed to be an allocation program worked out by the oil docks, and, if you were from Texas, you were getting fuel, but if you were a shrimp boat from Louisiana visiting Texas, you were told that since you were not a regular customer, you would have enough fuel maybe to get back to Louisiana, but you were not going to get all your fuel needs in Texas. After receiving reports from the shrimp industry, I advised our representatives that were on Government advisory groups that I thought that we were going to have problems. As you recall, Senator, in early 1973, we had difficulties in Panama and in Costa Rica and in Nicaragua, and, at that time, with your assistance and others, temporarily, we overcame a little difficulty. In any case, this prompted us to learn a little bit more about the voluntary fuel mandatory program. That was our first confrontation with that type of program and my statement, again, details the difficulties that we had with the then Office of Oil and Gas in Washington, D.C., and the problem of communicating not only with our members but also with fuel dock operators about the regulations and how to work within the regulations and really a determination who was a wholesale fuel consumer and what that meant under the regulations. I am trying not to read the statement, but trying to make a summary of it, but I will say on the basis of that experience in 1973— let's say up until November-I was convinced that if the tuna fleet had to depend on the then procedures of working with the Office of Oil and Gas in Washington, D.C. or with the regional office in San Francisco, that we would not have fuel in our vessels. The problems of new vessels entering the fleet, particularly those that were coming in in late 1973, would be tremendous, and somehow, some way, we had to get out of the fuel program as it was then constituted and obtain an exemption. I noted that the farmers were having the same problem, and they were receiving an exemption and that they were having the same difficulties that we had experienced in San Francisco at the regional office, working with the what I would call confusion because of the new procedures, and, at that time, we felt, "Let's make a move to get out of the program," just as the farmers did, and, indeed, with representatives of other fishing groups in Washington, D.C., as well as representatives of the National Fishery Service and a representative of the Office of Oil and Gas, we felt that the best approach was to seek at least a 60-day exemption from the program. I also reached this conclusion after trying to seek relief through the office of the Lieutenant-Governor in the State of California, and I have a copy of the petition that was forwarded to the office of the Lieutenant-Governor at that time, outlining our problems indicating that the procedures set up in the mandatory fuel allocation program were totally inadequate. The use of the 1972 base period was totally unrealistic in a number of counts, one, that the peculiarities of the fishing business are such |