Answer 7. The authority of Title XIII is designed as a 10-year authority for two specific reasons. First the Title itself focuses almost exclusively on standby authorities, and these authorities would only be needed at some future date. A relatively brief period of authorization would be inconsistent with the very nature of standby character of Title XIII. Many other statutes have shorter expiration periods to ensure an automatic review of the operation of whatever program has been established pursuant to the statute. In the case of standby legislation, however, this rationale obviously does not apply since the bill's provisions only become operative if an emergency occurs. Thus, Congressional re-evaluation after three or four years absent an intervening emergency would do nothing more than create uncertainties concerning long-term standby authority without any counter-balancing benefits in terms of Congressional program review, since no programs would have been undertaken. Second, the International Energy Program is an Agreement of ten years duration. If the U.S. is to implement that Agreement through this legislation, the legislative authorization should be for the term of the Agreement. Question 8. Title IX of H.R. 2650 would grant the President blanket authority to establish a floor price for petroleum in order to protect domestic energy sources against price cutting. Why should such sweeping authority be given the President, especially when world petroleum prices are currently at least 50% ($11-12/barrel) above what might be considered a reasonable floor price ($7-8/barrel)? Furthermore, there are other, possibly more attractive means of protecting domestic energy sources— direct subsidy or tax benefits. Would not it be preferable for Congress to delay granting such authority until it is more certain that domestic energy sources need to be protected and then allow Congress to consider the alternative approaches? Answer 8. The President should be given authority to establish the minimum price at which imported petroleum could be sold in order to stimulate investment to develop domestic energy sources. In the absence of such protection, domestic investors face a price threat from foreign suppliers of petroleum, espeically those in the Middle East where production costs are well below costs in the United States. A price break could stem from either deliberately predatory motives on the part of OPEC producers or from a collapse of the cartel in the future when policies in the consuming countries succeed in improving the supply/demand balance in world energy markets. This threat is a serious deterrent to domestic energy investment. It should be addressed now with a specific, public commitment rather than deferred because long lead times-typically of several years duration-are involved in energy investments and investment decisions must be made now to bring about the necessary reduction in our future dependence on imported oil. Unlike direct subsidies or tax benefits, a minimum safeguard price at which imported oil would be sold involves no loss to the Treasury. It would also prevent a dangerous resurgence in energy demand and oil imports in the event of a fall in the world price. Without such protection, a drop in the world price of oil to $4.50 (1974 dollars) in 1985, for example, would cause us to import more than 75% of the 27.2 mmbd of petroleum we would consume, according to data developed for the Blueprint for Project Independence. By comparison, a minimum safeguard price pegged at $7.50 would hold consumption to 22.5 mmbd of oil with less than one-fourth of it imported. REPLY ON EXPORT CONTROL QUESTIONS IN MARCH 27 LETTER Question 1. Regarding export controls on petroleum products, what is the difference between the authority provided in section 1316 of Title XIII and that provided: (1) In Section 4 (d) of the Emergency Petroleum Allocation Act of 1973, which directs that ". crude oil, residual oil, and all refined petroleum products which are produced or refined within the United States shall be totally allocated for use by ultimate users within the United States." and (2) In the Export Administration Act of 1969 whereby the export of items in short supply can be restricted? Answer 1. The authority provided under Section 1316 of Title XIII is a broad authorization that relates to a range of energy materials, not simply petroleum as addressed in Section 4(d) of the Emergency Petroleum Allocation Act. We do not believe that the Emergency Petroleum Allocation Act is the appropriate vehicle for long-term standby authorities. If another embargo were to occur, Section 1316 of Title XIII, as well as the allocation authority contained in Title XIII, could be utilized to accomplish the same ends now accomplished by Section 4(d) of the Emergency Petroleum Allocation Act (thus, the question of the limitation to domestic allocation only can be rendered moot). With respect to the differences of Section 1316 and the short supply controls under the Export Administration Act, the differences are as follows: 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. 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, i.e., 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 of 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 Administration Act. An independent authority, tied to the same standards as the other emergency authorities contained in Title XIII, is both necessary and appropriate to allow the President to marshal the resources of the nation to deal with the serious energy shortages. Question 2. Export Controls on Coal-The Department of Commerce recently established a monitoring system on coal exports. Exports of coal account for some 9% of total U.S. coal production and bring $2 billion to our balance of trade. Is there any near-term need for export controls over coal? Might not such controls have a disadvantageous impact on our trade balance? Answer 2. The Federal Energy Administration has reviewed the situation with respect to coal exports and we do not believe that export controls are justified at the present time. We do believe, however, that the current monitoring system should be continued. Question 3. Export controls on natural gas, petrochemical feedstocks, and materials and equipment for energy production: (a) What is the need for such authority? (b) Are exports currently taking a significant portion of U.S. supplies of these items? If not, then the authority is for use at some future date, at which time the Congress could grant such authority? Answer 3. With respect to authority to control exports of natural gas, petrochemical feedstocks and materials and equipment for energy production, the need for such authority is, in part, the same as the need for the other standby authorities that Title XIII is designed to address, i.e.. should a severe supply disruption occur, it may be necessary to marshal all available resources to ensure adequate domestic energy supplies. Although exports do not appear to be taking a significant portion of domestic production of natural gas or petrochemical feedstocks, it is impossible to predict what the future might bring. This is particularly true with respect to materials and equipment for energy production such as drilling rigs and platforms where the demand worldwide has increased tremendously. With respect to part (b) of the question above, Section 1316, like all of the energy authorities contained in the bill are for use at some future date and could only be used in a situation of extreme emergency as set out in Section 1302 (c). If there were sufficient time for Congressional consideration for these issues should an embargo occur, then the standby bill would not be necessary at all. However, if an embargo should occur, quick action will be necessary including perhaps quick action with respect to export controls. REPLY ON ORAL QUESTION ABOUT FOREIGN ENERGY CONSERVATION Question. Since the embargo, what are the results of petroleum conservation efforts in other industrialized countries as compared with the United States? Answer. Attached are tabulations of conservation results in the various countries. In general, petroleum consumption in most other industrialized countries has fallen somewhat further than in the United States. Cause and effect relationships of such factors as the economy, weather and allocation bottlenecks are easier to identify than to quantify. Attachments: A. Petroleum consumption (MB/D). B. Petroleum production consumption trends from second half 1973 to second half 1974. C. Product Price Increase from October 1973 to December 1974. PETROLEUM PRODUCT CONSUMPTION TRENDS FROM 2D HALF 1973 TO 2D HALF 1974 LETTER FROM HON. THOMAS O. ENDERS, DEPARTMENT OF STATE, TO HON. DONALD M. FRASER, CONCERNING ACTIONS TAKEN BY VARIOUS MEMBER NATIONS OF THE IEA SINCE THE OIL EMBARGO WITH RESPECT TO CONSERVATION DEPARTMENT OF STATE, Washington, D.C., May 2, 1975. Hon. DONALD M. FRASER, Chairman, Subcommittee on International Organizations, Committee on International Relations, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: During the subcommittee hearings on the IEA which you chaired on March 26, you requested a description of actions taken by various member nations of the IEA since the oil embargo with respect to conservation. The information set forth in the attached charts is the latest compilation prepared by the IEA. It summarizes the types of measures that are being applied in various consumer countries to promote energy conservation. Some IEA members did not respond in time to the survey taken under the system of “constructive confrontation" that has been developed to evaluate country programs. As a result there are some gaps in the data. Sincerely, THOMAS O. ENDERS, Assistant Secretary for Economic and Business Affairs. (52) |