Page images
PDF
EPUB

APPENDIX

LETTER FROM JAMES WEST, FEDERAL ENERGY ADMINISTRATION, TRANSMITTING RESPONSES TO QUESTIONS CONCERNING THE INTERNATIONAL ENERGY PROGRAM AND CONSERVATION, PREPARED JOINTLY BY THE FEDERAL ENERGY ADMINISTRATION AND THe DepartmentT OF STATE, APRIL 25, 1975

FEDERAL ENERGY ADMINISTRATION,
Washington, D.C., April 25, 1975.

Dear Mr. InGRAM: In response to your requests, and following my draft response of April 4, I am providing herewith the answers to your questions concerning the International Energy Program and conservation, prepared jointly by the Federal Energy Administration and the Department of State.

The responses are grouped according to three areas:
Answers to the first eight questions of March 27 letter.
Reply on export controls questions in same letter.

Reply on oral questions about foreign energy conservation.
Sincerely,

JAMES A. WEST,

Associate Assistant Administrator,

International Energy Affairs.

ANSWERS TO THE FIRST EIGHT QUESTIONS OF MARCH 27 LETTER

TITLE XIII OF H.R. 2650

Question 1. Section 1303 (5) defines the term "international agreement" as the "Agreement on an International Energy Program, signed by the United States on November 18, 1974, including related annexes and protocols, as those documents may be amended from time to time in accordance with their terms."

(a) What are those annexes and protocols (would you please provide the subcommittee with copies for the record).

(b) This legislation is the only chance the Congress has to give even partial consideration to an international agreement of great importance, and the addition of "as those documents may be amended" gives the administration blanket authority to change that agreement in any way it deems fit and still utilize the authorities provided in Title XIII. What would be the effect of removing that provision?

Answer 1(a). There is one annex to the Agreement on an International Energy Program, entitled "Emergency Reserves." It is an integral part of the Agreement. a copy of which is enclosed. No protocols have been concluded.

Answer 1(b). We have no intention of agreeing to substantive amendments to the Agreement without appropriate consultation with Congress. Deletion of the words "as those documents may be amended" would not create substantial difficulties for us, however, if at the same time it is made clear that minor amendments of a nonsubstantive nature, and technical amendments which might be necessitated by the adherence to the Agreement of other members of the Organization for Economic Cooperation and Development, do not affect the authorities provided in Title XIII.

Question 2. Title XIII includes no provision for congressional review of actions taken under the authorities provided. Would it not seem appropriate to provide

a period of time after the promulgation of an action during which the Congress could consider and disapprove such action?

Answer 2. The Administration believes that the proposed statute contains sufficient limitations and standards with respect to the exercise of the discretionary authorities contained in the bill so that Congressional review and opportunity for veto of actions taken is not necessary. As a general principle, we believe that authorities delegated by the Congress to the Executive Branch should be granted in such a fashion that the authorities can be implemented effectively without the necessity for Ad Hoc review by one House of the Congress, which alters the traditional roles of the legislative and executive branches of the government. Under the Administration bill, the Congress would have every opportunity to pass a joint resolution disapproving any implementation of the conservation allocation or rationing measure.

Question 3. Section 1311 provides the President with the authority to allocate internationally "all petroleum destined, directly, or indirectly, for import into, or produced in the United States."

(a) This section provides the President with authority to ship petroleum out of the United States, with no guidelines under which the authority can be used and no apparent restrictions on that authority.

(b) Mr. Enders, last year in briefing the Committee on the International Energy Program, indicated that oil sharing would actually occur only under the most drastic conditions. Congress might be more willing to grant this authority if it was tied to a definite formula as to under what conditions and how it could be utilized. Is this matter set forth in any of the annexes or protocols to the International Energy Agreement?

Answer 3(a). The President's request in Section 1311 for authority to allocate petroleum internationally would permit the United States Government to ensure that U.S. oil companies comply with the provisions for oil allocation in the International Energy Program (IEP). Since the authority contained in Section 1311 is limited to carrying out the IEP, the guidelines and restrictions in the IEP itself would govern the use of the authority. In the event of a moderate crisis– one in which the participants in the IEP as a group lost at least 7% of normal consumption due to a supply interruption the IEP provides that "oil supplies available to the group," including imports and domestic production, will be allocated in accordance with supply rights determined on the basis of the IEP allocation formula. This formula is defined in Chapter III, Article 7 of the Agreement.

Article 7 describes a country's supply right as equal to its permissible consumption the average daily rate of consumption less demand restraint of 7% or 10% depending on the supply curtailment-minus its emergency reserve drawndown obligation-the ratio of the country's emergency reserves to the group's total emergency reserves times the group's supply shortfall which is measured by the total permissible consumption of the group less the total supplies available to the group.

In a given situation, the supply right calculation and the actual level of domestic and imported oil available would determine whether the U.S. had a right to receive additional imported oil or was obligated to supply some of its available oil-most likely through import diversion-to other IEP members. If the U.S. supply right exceeded the sum of normal domestic production and actual net imports available during an emergency, its allocation right would equal the amount of the excess and would entitle the U.S. to additional net imports from oil supplies available to the group. Conversely, if the sum of normal domestic production plus actual net imports was greater than the U.S. supply right, the U.S. would have an allocation obligation requiring it to supply the quantity of oil equal to that excess to the other IEP countries with allocation rights. This

1 A country's supply right as defined above can be shown algebraically as follows:

[blocks in formation]

balancing of countries' allocation rights and obligations within the group requires flexible adjustment in oil company supply plans, inter-company exchanges and ultimately governmental authority to ensure that the balancing takes place.

Answer 3(b). Only in the most severe supply interruption, for example a total OPEC embargo on oil exports to the IEA rather than the more limited Arab embargo that occurred between October 1973 and March 1974, would the U.S. allocation obligation require the export of domestically produced oil. In most situations, the United States' allocation obligation, if any, would be met by sharing oil which might otherwise have been imported into the United States. At a level of severe oil export curtailment-below the point where the U.S. supply right calculated under the IEP formula equalled the level of U.S. domestic oil production-the U.S. would be required to share domestically produced oil. Such an eventuality is extremely unlikely given the current level of U.S. import dependence or any level of dependency likely to be achieved during the ten year life of the agreement. At 35% import dependence, roughly our current level, 85% of the oil imports available to the group would have to be lost before the U.S. would be required to export domestic oil. An 85% reduction of imports to the group would be equivalent to a total OPEC embargo against the IEA. The implications of such a loss for Western Europe and Japan are staggering.

In comparison, during the 1973-1974 Arab oil embargo, total oil imports available to the U.S., Canada, Western Europe and Japan were reduced only 14%. Under the IEP formula, the U.S. would have received about 75% of its normal imports-it actually received about 74%-and Western Europe and Japan would have received about 89% of normal imports.

In conclusion:

U.S. crude oil production is in theory available for sharing in a crisis and would be shared in a catastrophe;

Because of our import dependency and the IEP allocation system, under present conditions we would probably not be called upon in practice to export U.S. produced crude oil;

Lowering U.S. import dependence theoretically increases the likelihood that the U.S. might be required to share its crude in the event of a severe curtailment of supplies.

Even with lower import dependency, the IEP will offer protection against selective embargoes directed against the U.S. and prevent panic buying and cutthroat bilateral deals with the producers such as occurred during the last crisis.

Question 4. Sections 1312 and 1313 grant the President the authority to authorize voluntary agreements and programs by persons engaged in petroleum commerce in order to carry out the objectives of any international agreement, and such action shall be immune to the antitrust laws.

Section 6(c) (4) of the Emergency Petroleum Allocation Act of 1973 provides for similar meetings and agreements by persons engaged in petroleum commerce, except that it directs that (1) the President must "specify and limit the subject matter and objectives", (2) such meeting "shall take place only in the presence of a representative of the Antitrust Division of the Department of Justice", and (3) a verbatim transcript shall be taken and made available for public inspection. Would it not be appropriate to include these safeguards in Sections 1312 and 1313?

Answer 4. There is a major difference between the authorities contained in Sections 1312 and 1313 and those contained in Section 6(c) (4) of the Emergency Petroleum Allocation Act of 1973. Section 6(c) (4) contemplated situations where oil companies might be required by the Government to carry out cooperative actions necessary in the context of domestic allocation programs. The section has never been used for Voluntary Agreements and we do not believe that there is a need for authority to formulate Voluntary Agreements with respect to domestic allocation programs. The section's limitations are entirely appropriate for the types of activities which might arise in the domestic context. With respect to Voluntary Agreements to carry out the International Energy Program, however, the limitations contained in Sections 6(c) (4) are not appropriate. For example, with respect to the requirements that the Attorney General "specify and limit the subject matter and objectives" of meetings, this would be difficult to accomplish in the emergency situations covered by Title XIII and would seem inappropriate in the multinational setting where discussion may center on activities within the territorial jurisdiction of other countries. Certainly, the Government should have notice of meetings and the opportunity to attend, and also limit in advance any disclosure of confidential data. But the particular problems which may need to

be addressed, and the speed with which such meetings may need to proceed in an embargo situation woud preclude the type of system contained in Section 6(c) (4).

It is envisioned that Voluntary Agreements to carry out the International Energy Program would involve a number of clearances and reviews by the Antitrust Division, but that the presence of a representative of that Division should be at the discretion of the Attorney General. Many meetings will involve only technical issues and the Attorney General may prefer to rely on the review of the minutes of such meetings rather than attendance of a representative at every single one. There could be a significant practical and financial problem in attending a number of such meetings, most of which are likely to take place overseas. With respect to verbatim transcripts, it is appropriate that full and complete notes and minutes of all such meetings be kept. Since such meetings are in the international forum, however, involving foreign companies and foreign officials as well as U.S. companies, a requirement for a verbatim transcript would involve the U.S. in a needless controversy on this issue. In terms of the public availability of any minutes, much of the discussion at such meetings would presumably relate to methods to effectively counter an embargo imposed by oil producing nations. Making such records available for public inspection would, of course, mean that they would also be available for inspection of representatives of oil producing nations, and the effectiveness of efforts to counter the embargo would be compromised. Frank discussions would also be severely inhibited.

Finally, it should be noted Section 6(c)(4) was designed to cover a broad range of circumstances, but did not include Voluntary Agreements to carry out international allocation. Sections 1312 and 1313 in contrast do not cover a broad range of circumstances but deal only with Voluntary Agreements necessary to carry out the International Energy Program.

Question 5. Section 1314 directs that "The President, in cooperation with participating countries of the International Energy Agency, is authorized to encourage, support, and promote the planning and conduct of appropriate joint projects and cooperative programs. . ."

What is the purpose of this section? It would not appear to give the President any authority he does not already have?

Answer 5. Section 1314 is basically intended to express the support of the Congress for activities of the type described.

Question 6. Section 1315 grants the authority to transmit information to an international organization or foreign country the confidentiality of which is otherwise protected by law.

Is this a necessary abrogation of measures which have been passed by previous Congresses?

Answer 6. The authority of Section 1315 to transmit data and information relates only to that data and information which is required to be supplied by the Agreement on an International Energy Program. The IEP specifically excludes from its requirements a large amount of information which is traditionally considered to be confidential or proprietary under U.S. law.

For example, the Agreement specifically excludes the necessity for providing information on individual sales, tax returns, customer lists, patents, trademarks, scientific or manufacturing developments or processes, geological and geophysical information, and information which would prejudice competition or conflict with legal requirements of the U.S. relating to competition. Since, under U.S. law, the definitions of what constitutes business and proprietary information are not necessarily congruent with these categories, it is necessary to provide an authorization to supply data as required by the Agreement. For example, the Agreement calls for the submission of certain pricing information which might not necessarily divulge individual sales. In such a case, if the U.S. Government were to decide that submission of this information would not prejudice competition, then the U.S. should be able to submit such data without concern that a court could find such submission to be a violation of a prior criminal statute (18 USC 1905). Section 1315 is a clarification of FEA's authority in this regard. The U.S. Government has no intention of providing information or data except as called for by the Agreement and would evaluate submissions in terms of whether submission of such data would have an adverse impact on competition.

Question 7. Section 1323 provides that the authority of the Title XIII shall terminate June 30, 1985.

Would not a three or five year authorization be adequate?

« PreviousContinue »