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I have a short prepared statement and if you don't mind, I would like to read that, sir.

Mr. BINGHAM. Surely.

Mr. MONTGOMERY. Thank you.

I appreciate the opportunity to be here this afternoon to discuss the administration's Standby Energy Authorities Act-title XIII1of the Energy Independence Act of 1975, and in particular section 1316 of the bill dealing with control over certain energy-related exports.

TITLE XIII-STANDBY ENERGY AUTHORITIES

The provisions contained in title XIII, in conjunction with those of title II, the national strategic petroleum reserves, would give this country the ability to deal with disruptions of petroleum imports and also constitute the legislative authority which this Government is obligated to seek under the agreement on an international energy program executed last fall by the United States with most of the other major consuming nations.

Before discussing the export control provision which I understand is of particular interest to this subcommittee, I would like to outline the scope of the standby legislation in general. In this regard, it is necessary to bear in mind its relationship to the comprehensive program submitted by the President to the Congress in his state of the Union message. As you know, he has outlined three time-phased energy goals.

First, in the short term, a reduction in our oil imports of 1 million barrels per day by the end of this year, and 2 million barrels per day by the end of 1977.

Second, by 1985, import levels no greater than 3 to 5 million barrels per day and the capability to withstand a total disruption of imports. for 1 year by the use of standby authorities and strategic reserves. Third, accelerated development of energy technology and resources so that the United States can meet a significant share of the energy requirements of the world by the end of this century.

The second goal would eliminate by 1985 this country's vulnerability to economic disruption should foreign suppliers of petroleum be interrupted. If the legislation required to carry out all of the President's program is enacted, it is expected that by the end of the next decade our petroleum imports will be 3 to 5 million barrels per day.

Should those imports be curtailed, 3 million barrels per day could be drawn from a strategic petroleum reserve for a period of 1 year. and the remaining short fall could be dealt with through the selected imposition of the conservation, allocation, or rationing measures that would be authorized by this legislation.

So it is clear that these bills must be considered in the context of the entirety of the President's program, and their effectiveness would depend in large measure on the implementation of the balance of the program.

There are several criteria which we believe a standby energy authorities bill must meet.

One, the standby authorities must be limited to emergency situations caused by acute national energy shortages threatening the military or economic security of this Nation.

1 Title XIII appears on p.

Two, the authorities must be clear, unambiguous and immediately available in an emergency. In that regard, there should be self-contained standby rationing, allocation, and conservation authorities available. Sufficient flexibility must be present in order to allow the President to tailor his actions to the situation, the particular situation that exists at the time of an emergency.

Three, authorities must meet our obligations under the international energy program-IEP. Various provisions of this bill deal with the Nation's obligations under the IEP. We believe it is critical that the United States have adequate authority to completely implement these obligations.

Title XIII meets all of these requirements.

Before exercising any of the standby authorities, including the export control authority contained in section 1316, the President would be required to transmit to the Congress findings that:

Because of interruption in the supply of imported petroleum or as a result of acts of God or sabotage national energy shortage conditions exist or are impending which threaten United States national security so as to require the exercise of the standby energy authorities provided for in this title, or *** that their exercise is required to fulfill obligations of the United States under an international agreement.

This delicately drawn triggering mechanism balances the ability to act with the requirement that this ability be limited to circumstances absolutely necessitating such action.

Among the authorities which could be invoked upon such a finding are the authority to allocate and control the price of petroleum and petroleum products, promulgate and enforce mandatory energy conservation programs, ration petroleum products, order increases in domestic oil production, and allocate critical materials needed for the maintenance, contruction and operation of critical energy facilities. In addition, section 1316 would provide authority to restrict exports of energy materials.

Section 1316 would authorize the President to restrict exports of coal, natural gas, petroleum products, and petrochemical feedstocks, and of supplies of materials and equipment which he determines to be necessary to maintain or further exploration, production, refining, transportation, and conservation of domestic energy supplies and for the construction and maintenance of energy facilities within the United States.

This export control authority contained in the bill is a necessary complement to the bill's other emergency provisions. In times of emergency we must have the ability to act quickly to insure that domestic energy needs are met; and the authority to restrict exports is a necessary component to this ability.

BASIS FOR EXPORT CONTROL AUTHORITY

One question which might arise is why a separate export control authority is being proposed in this bill rather than reliance on the existing authority of the Export Administration Act. There are two basic reasons for proposing this separate authority. First, the bill is a long-term standby authority. It is proposed that the bill's authority would be for a period of 10 years. The Export Administration Act,

of course, expires in 1976, and although it may be extended, a longterm standby export control authority specifically for energy materials provides an added degree of certainty that adequate authority will exist should a future emergency occur. In this connection, the authority is granted to the President, and could be delegated to any agency he deemed appropriate.

Second, and most importantly, the standards which must be met before export controls can be imposed differ markedly between the Export Administration Act and section 1316 of the Energy Independence Act. Under the Export Administration Act export controls are authorized for three basic policy reasons: National security, which in the context of the act relates chiefly to items of potential military use; foreign policy; and short supply. Of these three, the authority most analogous to the authority proposed in section 1316 is the short supply authority. In order to impose export controls under the Export Administration Act for reasons of short supply, a showing must be made that there is an "excessive drain of scarce materials" caused by foreign demand which has a serious inflationary impact.

This standard is not nearly as stringent as the test which must be met under title XIII. As I noted earlier, that test has been deliberately designed to allow implementation of the standby authorities only in the most serious energy shortage situations. Thus, under title XIII the "trigger" for imposition of export controls is the same as for the other major emergency authorities of the title, that is, a Presidential finding that

Because of interruption in the supply of imported petroleum or as a result of Acts of God or sabotage, national energy shortage conditions exist or are impending which threaten United States national security

Thus, under title XIII it is a finding of the existence or immediate threat of an overall national energy shortage which would allow the imposition of export controls rather than a finding that a shortage of a particular item is having an inflationary impact.

The distinction could be important should an emergency arise. If another embargo were to occur, for example, and if the very stringent finding could be made that the utilization of standby authorities were necessary, there should be no need for an additional standard to be applied. In such an emergency it could be necessary to limit exports of materials needed for oil exploration and development without reference to a separate test that there had been "an excessive drain” of the materials involved or that foreign demand had had a serious inflationary impact as would be the test under the Export Administra

tion Act.

An independent authority, tied to the same standards as the other emergency authorities contained in title XIII is, we believe, both necessary and appropriate to allow the President to marshal the resources of the Nation to deal with serious energy shortages.

Mr. Chairman, that concludes my prepared statement. I would be happy to answer any questions you might have.

Mr. BINGHAM. Thank you, Mr. Montgomery.

First, I would like to ask you to explain how it is that the export control authority contained in section 1316 is linked to these findings since, looking simply at title XIII itself, I don't see that.

Mr. MONTGOMERY. Yes, sir. Can I direct your attention to subparagraph (c), which begins on line 7 of page 138, and in particular line 17, which is one of the last provisions of section 1302?

"Prior to exercising any of the authorities contained in any of the following provisions of this title" and section 1316 on exports is listed as one of the authorities with respect to which the required finding is

necessary.

Mr. BINGHAM. All right.

Mr. MONTGOMERY. Which I did incorporate in the statement; in addition, I didn't incorporate in the statement but call your attention to the definitions at the top of page 139 where the term "national security" and the term "national energy shortage" are also defined.

PROVISIONS OF EMERGENCY PETROLEUM ALLOCATION ACT OF 1973

Mr. BINGHAM. You were referring to the Export Administration. Act. What about the Emergency Petroleum Allocation Act of 1973 and particularly section 4(d)?

Mr. MONTGOMERY. Well, sir, section 4(d) does provide that the regulation issued under section (a), which is the primary regulation required by and described by the Allocation Act, shall require that crude oil and refined petroleum products, produced or refined within the United States, shall be totally allocated for use by ultimate users within the United States to the extent practicable and necessary to accomplish the intent of the subsection.

In our view, that provision taken with the legislative history which specifically is provided by a section in the conference committee report, dealing with exports suggests that it was not the intention of Congress that any dramatic or wholesale restriction of exports be implemented, but that some considerable discretion be left to the President to determine what restrictions might be necessary to balance the need to prevent a wholesale outflow of oil and related products and at the same time to maintain the historic trading relationships, particularly with respect to the needs of some of our long-term trading partners such as Canada and Mexico.

That is how we interpret that provision, but let me point out that that provision in no way authorizes the President, on a long-term basis, to restrict exports in the way that we would like to provide that authority under title XIII of our omnibus bill.

As you know, the Allocation Act would have expired in February had it not been extended, and it is presently scheduled to expire August 31 of this year. Even with the various proposals which are under consideration now to extend the act for another year or 6 months, the Allocation Act itself is viewed as a short-term emergency-type authority and is not in our opinion the same type of legislation as the standby bill, which doesn't have any immediate application at all, but which would be on the shelf and would satisfy both the need for authority to implement our international obligations and our need to have general authority should we have another embargo.

GASOLINE SURPLUS AFTER THE 1973 EMBARGO

Mr. BINGHAM. I understand that during the latter parts of the months of August and September of 1973 and on into October and No

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vember our exports of gasoline actually increased very greatly from 16,000 barrels per month to 504,000 barrels in November.

Would you comment on that in the light of the proposals that you are making and also in the light of what statutory authority if any was applicable to those exports at that time?

Mr. MONTGOMERY. Yes, sir. First of all, let me try to give you an idea or expand on your own knowledge of what the supply situation was in August and September.

As you know, embargo was instituted in October of 1973 and was in full force and effect through about February and into March of 1974. By the time April and May of 1974 arrived our import levels were virtually backed up to pre-embargo levels or slightly less, due to slightly lower demand-the petroleum was certainly there if we wanted it.

By the time August and September rolled around, we had a fairly serious gasoline surplus in this country and the number of gallons of gasoline consumed during the summer was substantially below projected levels and substantially below what previous trends would have indicated the demand should have been, absent the higher price, the 50-miles-an-hour speed limit, and other conservation factors, so, while I wouldn't have been able to tell you exactly what the level of exports was without consulting with Mr. Goodwin and perhaps with the Commerce Department, it doesn't surprise me at all that there were substantial exports at the end of the summer.

In our view, the embargo and the short supply conditions which characterized the embargo really terminated in April or May of 1974, and thereafter there was no need to or logical reason for exercising any restraint at all on gasoline exports. If you translate that situation into the terms of the standby bill, I would say that there would be no way the President could have maintained export controls under our proposed standby bill through the summer of 1974 because the short supply situation and the resulting threat to national security certainly did not exist at that point.

You did ask what present plan or program authority exists to regulate petroleum exports and the answer is that under the Export Administration Act the President has the authority, which he has delegated to the Department of Commerce, to restrict the export of those items which, among other things, are in short supply and the serious drain of which is having an inflationary impact.

Now, through negotiations and discussions between FEA and the Commerce Department a program was initiated by the Commerce Department in early 1974 to restrain the export of petroleum and all petroleum products, roughly to maintain historical patterns. In other words, it was not our view and it was not the view of the Department of Commerce that the situation was so severe that we should clamp down and eliminate all exports, but it was definitely our view and that of the Department of Commerce that the shortage was sufficiently severe that we should not allow any new outflow or any substantial increase in exports. Thus, there was a system promulgated by regulation by the Department of Commerce to allocate export rights, roughly, in accordance with historical shares in terms of countries.

We exported to various countries approximately what they had been. receiving and then within each share the firms desiring to export were

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