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California counties; and 48 in the Los Angeles district for southern California.

From the moment agreement was reached between the IRS and the Federal Energy Office, the regional office of the Internal Revenue Service has been working closely with the regional office of the Federal Energy Office. As pointed out earlier, the western region of the Internal Revenue Service is made up of the 10 Western States; this includes all of Federal Energy Office regions IX and X and part of region VIII; that is, Montana and Utah come under region VIII in Denver, but under my jurisdiction.

The Assistant Regional Commission, Stabilization. for the IRS is acting as my direct liaison with the two Federal Energy Office regions headquartered in Seattle and San Francisco. Appropriate liaison arrangements are being worked out with FEO's region VIII. Numerous telephone calls and personal conferences have taken place. Additionally, key senior level stabilization personnel have been detailed from our function to assist the FEO regional offices in Seattle and San Francisco. This will provide valuable assistance for a smooth transition in the coming months. A meeting of the stabilization officers is underway today in our regional office which is being attended by an FEO representative from Mr. Arntz' office in San Francisco.

I believe that the IRS will again effectively meet the challenge of new program responsibilities. We are committed to the successful completion of our function, and to the encouragement of the highest level of voluntary compliance.

Thank you.

Senator TUNNEY. Thank you, Mr. Short. How long have you been involved in the enforcement of price stabilization for petroleum products?

Mr. SHORT. We took on the stabilization program August 19, that is when we were errand boys for General Lincoln when he was head of the Office of Emergency Preparedness. On November 15, the IRS was given primary responsibility by the Cost of Living Council. Senator TUNNEY. How many people have you had working on price investigation?

Mr. SHORT. At our peak, Internal Revenue had 3,000, and we had 446 in the western region, and that interpreted into 274 for the State of California.

Right now, we have instead of 446, 400. 300 IRS employees are working on energy, 44 in this region and 26 in California. Of our stabilization team, that is the number we have working on energy pricing and allocation.

Senator TUNNEY. How many suppliers, distributors and others have you cited for violations?

Mr. SHORT. Well, when you say "cited," if you mean going to the assistant U.S. attorney, when we find a violation. in the spirit of obtaining voluntary compliance, we try to get a rollback and an agreement to refund the overcharge and to change legal prices from then on. If we can get this agreement, we move on to the next case. However, if we have a flagrant violation in the situation which looks rather blatant and gouging, like 75 cents a gallon, or a $10

membership fee in order to be able to buy gasoline at this station, or forcing you to buy another product, like windshield deicing material before you can buy gasoline, or when the dealer tears up the notice that we give him right in front of our agent, then we get more excited and decide we should proceed toward a more severe penalty.

Senator TUNNEY. And those penalties are how much?

Mr. SHORT. Civil penalty is $2,500, and we have referred five of those cases, three in the State of Oregon and two in the State of Arizona.

We have had no referrals of that type in the State of California, to my knowledge, to date.

Senator TUNNEY. You don't think it has been needed in California? There has been no situation in California which would justify it?

Mr. SHORT. We have had the overcharges here; they have to my knowledge run more in the nature of a few cents, up to 6 cents or so, and when we refer a case to the assistant U.S. attorney, we like to succeed and have judge issue the restraining order and put the operator out of business until he complies with the law, and we wanted to get the most flagrant violations we could get.

Senator TUNNEY. We heard some testimony yesterday about matters of this kind. How much price gouging do you think there is is California, not only in retail gasoline but in other areas as well? Mr. SHORT. Well, our experience has been mainly with diesel truck stops and with gasoline.

If you say, "How much price violations are there," we have had complaints. In the past 2 weeks, ending last Friday we had 2,468 complaints, of which 623 were in California. That would be about 250 per day.

Senator TUNNEY. They have all been investigated?

Mr. SHORT. No, we are not able with the manpower we have assigned to investigate all complaints. We investigate the ones which appear to be the most serious, and we investigate situations where we have multiple complaints on the same individual or on the same business.

Senator TUNNEY. Will the additional manpower you are getting enable you to make investigations on all complaints that seem to be justified?

Mr. SHORT. We are recruiting nationwide 1.000 people, which we will turn over to the Federal Energy Office. Our share here in this region is 152, our share for the State of California would be 89.

Our job is to recruit them, train them, and get them ready to move over to the Federal Energy Office July 1, and that would put Internal Revenue in a position to remove itself from the program at that time.

Senator TUNNEY. Inasmuch as you have so few people involved in the enforcement program compared with the number of charges that are being made and will continue to be made over the next few months, don't you think that you ought to set some examples. Instead of consulting with an individual who has been price gouging, that you ought to refer it to the U.S. attorney's office, so there

could be some publicity and some examples made. Thereby at least some warning would be given to the potential price gougers in the community that if they proceed, they will be conceivably prosecuted or sustain civil liability?

Mr. SHORT. That is right. I can certainly follow that line of reasoning, but we don't think it will be a very good example if the Judge refuses to go along with us and did not consider three or four cents a gallon over the legal prices gouging. We don't think it would be a good example if we lost the case.

Senator TUNNEY. I agree with that. Let me relate some specific examples of the testimony that I received regarding price gouging in California.

In testimony yesterday in San Diego, an Imperial Valley distributor stated that the cost of weed oil rose from 13 cents a gallon in early January 1973 to 40 cents per gallon this week. He says that he doubts sincerely that the increase is wholly the result of increase in cost to the supplier.

Mr. SHORT. I would have to agree. I don't have any knowledge, but it sounds to me like that would be gouging.

Senator TUNNEY. That is gouging, yes.

It is rather interesting that this was brought to my attention and not to your attention, or if it was brought to your agency's attention, and so far I suppose nothing has been done about it.

If I give you the name of this individual and the example that he gave to us, could you do an investigation?

Mr. SHORT. We will certainly follow through on that.

Senator TUNNEY. A representative of the Farm Bureau testified yesterday that at an auction in Fresno County recently, a truck and trailer load of diesel fuel was parked next to a big sign saying "50 cents a gallon."

In Fresno last week, I was told of six examples in which farmers in that area have been offered vast amounts-sometimes unlimitedof diesel fuel at prices ranging from 52 cents to 62 cents a gallon, cash, no receipt, against the 21 or 22 cents a gallon that is being charged legally through the normal allocation procedure.

The Nevada County School District has informed me that its contract price for gasoline has doubled in the past year from 20.9 cents to 40 cents a gallon. It is my understanding that diesel fuel is usually marked at approximately 30 cents a gallon, thus, even with great variables in price, these Nevada County prices are from 60 to 100 percent greater.

Wouldn't you consider that you probably have price violations here?

Mr. SHORT. It sounds like it, yes.

Senator TUNNEY. For instance, does the County of Nevada School District complain to your office on matters of this kind, or do they just complain to me?

Mr. SHORT. It has not been called to my attention.

Senator TUNNEY. I'm going to give you some of the facts here and ask you to do an investigation on these particular matters, and then report back to me.

I would like to make sure that the laws are being complied with

in general, but particularly in those cases where a complain is registered with my office. I would hope that you publicize your role, so people would realize that the IRS and the Federal Energy Office are the agencies to which people should go to receive assistance when they get into difficulties of this kind.

What kind of a publicity program do you have or are you preparing, so that people will know?

Mr. SHORT. Since we are joining with the Federal Energy Office, and these delegations have been very recently, we are just in the planning stage.

I have a man back in Washington, he went back yesterday, to design a training program for our people.

Now, if you talk about publicity, we have public affairs officers who design and see that the publicity gets aired. We got big headlines in Portland on these three restraining orders. The general public was aware, well aware, of the action we took.

We think that that is the kind of deterrent that we need to get the compliance, the voluntary compliance, that we need.

Senator TUNNEY. Have you investigated the possibility that oil companies or distributors are keeping substantial supplies from the market?

Mr. SHORT. Not yet. We have not received any complaints on allocation yet, at the Internal Revenue Service.

We will have that responsibility by this very recent delegation, which the Secretary of the Treasury gave to the Commissioner of Internal Revenue January 8.

I have not even yet to this minute received a field delegation to me as Acting Regional Commissioner from the Commissioner of Internal Revenue.

What we are doing is working with Mr. Arntz, the Federal Energy Office, and Mr. Robertson of the Federal Energy Office in Seattle, working out arrangements as to how we will meet our responsibility, working with them, being their enforcement arm. But we have not yet got involved in investigating the allocation complaints.

We are, as I said in the statement, starting refinery audits, with the purpose of ascertaining that the cost increases are cost justified, that the increase in prices is cost justified, and the audits will include a check on the allocations to make sure the allocation are in accord with the regulations.

Senator TUNNEY. What you're saying is that there has been no check by any Federal arm?

Mr. SHORT. We in the Internal Revenue Service have not made those checks.

Senator TUNNEY. Nobody else has, either. Nobody has checked on the availability of supplies, and you are not doing it yet. What you're saying is, even if there was a substantial withholding of

fuel from the marketplace, there is no way that the Federal Govment can be knowledgeable of it.

Mr. SHORT. As of this moment.

Senator TUNNEY. How long would it take you to find out?

Mr. SHORT. We are designing a training package in Washington. The training package is going on right now. We feel our first job is to train our people. We are studying the energy regulations, which we only received Tuesday afternoon, a week ago. We have a lot work to do.

Senator TUNNEY. How long do you think it will be before you are able to find out the amount of available fuel in the State, and whether or not people have been stockpiling, illegally?

Mr. SHORT. Whatever I say in the way of an estimate would only be an estimate, and I would say we are going to do the best job we can. We have trained people before in a new and unheard of program, and I would suspect we can do it again this time.

Senator TUNNEY. Are we talking about January of 1975 or what are we talking about?

Mr. SHORT. I would hope not. We had the advantage in the stabilization program of having a 90-day freeze, which gave us really 90 days to decide how to set up the rule and the procedures, and how to run phase II of the stabilization program. I thought phase II was a fairly successful operation.

We don't have that kind of gap here. We are having to start with these regulations and run with them, but we still want our people to know what they're doing, and we need to get a training package designed. I have one many back there; he comes back to the regional office in a week, and he trains people here. Then we recruit and train, and we are training the people on the rules now.

I would say we will be doing investigations-today is January 22— I would hope we will be investigating by February 15, possibly even flagrant situations that are brought to our attention before that by some of our "know-how" from the stabilization program and some of the people who have been working with Mr. Arntz.

Senator TUNNEY. The way to find out the amount of fuel that was was available in the State it would seem to me, would be to check the imports into the State from overseas as well as, of course, the State lines.

If you knew the amount of production in the State and if you had a reading on the amount of product that was being refined as the result of new crude coming into the system, you could contrast that with the amount of demand, say, in the third quarter of 1973. You would be able, then, in general terms, to tell whether or not there was adequate fuel to supply everyone within the allocation formula that have been developed by the Energy Office. Now, nobody has those figures yet.

Mr. SHORT. That is the way I understand it.

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