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San Mateo, Calif., January 18, 1974.


U.S. Senator,

Committee on the Judiciary,
Washington, D.C.

DEAR SENATOR TUNNEY: Your letter of January 11, 1974, postmarked January 14, 1974, requesting testimony before the Subcommittee on Representation of Citizen Interests hearing, entitled "Citizen Redress Under the Fuel Allocation Program", in San Diego on January 21, 1974, was received in this office on January 16, 1974.

I am personally committed to attending a workshop on that date in the Company's Bartlesville, Oklahoma office, for the purpose of studying, interpreting, and planning for implementation of the final Mandatory Petroleum Allocation and Price Regulations which were not received until January 15, 1974. As you are aware, these differ substantially in many respects from the proposed regulations. I trust that you will understand that at this time we are hardly prepared to comment on problems that may be encountered under the new regulations and the administration thereof. It would also seem inappropriate to send an alternate to the hearing as that person, too, would not yet be able to offer meaningful testimony or answers to questions, pending further study and clarification of the new programs and administrative procedures.

We sincerely regret the unfortunate timing and conflict in schedule. We are always happy to contribute what we can to hearings of this nature in order to better inform your constituents and our customers.








San Francisco, Calif.

The subcommittee met, pursuant to notice at 9:05 a.m., in Courtroom No. 15, U.S. Court of Appeals, Seventh and Mission Streets, San Francisco, Calif. Senator John V. Tunney (chairman) presiding.

Present: Jane Frank, chief counsel; W. Dean Drake, chief clerk, Joan Samuelson, staff assistant.


The Honorable JOHN V. TUNNEY. Today is the 2d day of hearings by the Subcommittee on Representation of Citizen Interests to explore procedures available to citizens in securing fuel allocations, protesting allocation decisions, and compelling enforcement. Yesterday, in San Diego, we heard some disturbing facts about how the program has been working.

We heard that no provisions are made to allow fishermen to refuel in ports other than their home port. This means that, if they can't fill their tanks in their home ports, they must trust luck or pay grossly inflated prices in foreign ports. Given the seasonal nature of fishing, and the pressures of the "conservation period," problems in getting fuel can mean economic disaster;

We heard of fuel suppliers who have imposed discriminatory credit terms on fuel distributors in clear violation of the regulations. These same suppliers have revised their delivery system of fuel to force the distributor to bear additional transportation costs which may also drive him out of business;

We heard the plight of farmers who don't get fuel to meet current requirements, face uncertainty that crops planted won't be able to be harvested, and are running out of fertilizers and pesticides because manufacturers of those products are given low priorities under the allocation program;

From almost every witness, we heard about the thriving black market in which, for example, at an auction sale in the Imperial Valley, a truck and trailer loaded with diesel fuel had a sign posted

on it which read: "Diesel-50 cents a gallon." In the same vein, witnesses described phone calls from Texas offering 80,000 gallons of fuel at a high price, diesel hauled from Los Angeles to the farms in the Central Valley, and so forth.

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A witness testified.. "it would help if crops and cows could understand Government delay we've filled out all the forms; we've sent in the forms; and, then, nothing. . ." Another statement was: “... where do we go? ... what do we do?... I am out of fuel.”

I am personally familiar with the January 15 regulations and feel that they attempt an equitable allocation program for scarce fuels, except with respect to certain special cases like the need for fishing vessels to refuel at different ports and receive fuel from different suppliers.

However, the essential problem seems to be that the regulations are not adequately enforced. Suppliers are calling the shots-not the Federal Energy Office. Suppliers are deciding the prices-not the FEO or the IRS, which, as I understand it, have responsibility to investigate price violations. Lots of fuel is being distributed on the black market at exhorbitant prices-to the wealthy and not to those who need it.

The point I made yesterday, and the point I want to re-emphasize today is that the American people can be expected to continue to cooperate, if and, only if, they believe that the fuel allocation program is working fairly and even-handedly. If it is operated with favoritism, with black marketeering, and price gouging, they can be expected to rebel. They can be expected to hoard and to "get their's while the getting's good," perhaps wrecking the allocation program and intensifying the energy shortage.

The subcommittee holds this hearing this morning to find out just how the program has been administered, why problems have occurred, and what is going to be done to ameleorate them.

I would like to add that I am fully cognizant of the fact that the men who have been put in charge of this program were presented with a most difficult task. After all, there was no history of administrative experience for a program that just recently came into being, and which, even after it came into being, was subject to constant change.

So, I approach the hearing this morning not in the spirit of recrimination but in the spirit of inquiry: to find out where the problems are. In the next couple of months then-assuming that the allocation program must continue, and that we will have continued fuel shortages-we will be able to see a program which is working smoothly and, most important of all, which gives to the people who are the consumers-who are at the end of the line, and who are dependent upon the allocation program to receive fuel-a program that is fair, is even-handed, and that makes it pay to work within the program rather than trying to move outside the program and purchase fuel in the black market.

With that in mind, our first witness is Mr. William C. Arntz, Regional Administrator, Federal Energy Office.


Mr. WILLIAM C. ARNTZ. Senator Tunney, I have a short statement I would like to read for the record and then be available for any questions you might have.

My name is William C. Arntz. I am the Regional Administrator for region IX of the Federal Energy Office.

The Federal Energy Office is organized with national headquarters in Washington, D.C., and 10 field regions. Region IX is located in San Francisco and is responsible for the States of California, Nevada, Arizona, Hawaii, also American Samoa, Guam, and the Trust Territories of the Pacafic Islands.

I was appointed Regional Administrator by William E. Simon, Administrator for the Federal Energy Office, and I assumed the role in San Francisco on December 11, 1973. My staff then numbered 20, having grown from two in October. Presently, my staff numbers 100. It should also be noted that 82 of these 100 are on temporary detail from other Federal agencies; 26 agencies are represented. I would like the record to reflect, Senator, our thanks for their support and wholehearted cooperation of the Federal family in San Fran


Under the authority of section 203 (a) (3) of the Economic Stabilization Act of 1970, as amended, the mandatory propane program (38 FR 13, Oct. 3, 1973) and the mandatory middle distillate program (38 FR 3, Oct. 16, 1973) were promulgated. On November 27, 1973, the President signed into law the Emergency Petroleum Allocation Act of 1973 which directed the President to exercise temporary authority to alleviate supply shortages of crude oil, residual fuel oil, and refined petroleum products. On Dec. 4, 1973, the President established the Federal Energy Office, and on Dec. 13, 1973, proposed new mandatory allocation regulations were published in the Federal Register (38 FR 34414).

After comments were received on the proposed regulations, they were substantially rewritten and again promulgated in two parts. The first on January 2, 1974 (39 FR 744) and the second on January 15, 1974 (39 FR 1924). Both had an effective date of January 15, 1974, last Tuesday. The present set of regulations place the following under the mandatory allocation program: propane; butane; motor gasoline; middle distillates; aviation fuel; residual fuel oil; petro-chemical stocks; and all other refined petroleum products (not covered by one of the above).

The regulations divide the responsibilities for program management according to the produce covered. The following outlines these program responsibilities:

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