Senator Long of Louisiana) which had the wholehearted support of virtually all independent domestic crude oil producers, specifically excluded residual fuel oil from its proposed statutory limit of imports to 12.2 percent of domestic production in districts I-IV. We would emphasize that no restrictions whatever are now put on importation of residual oil into the U.S. east coast, and none should be. Furthermore, in view of rising concern over the problem of air pollution caused by sulfur emission from burning of most fossil fuels, the substitution of low-sulfur fuel oil for the high-sulfur variety should be encouraged. CARRYOVER ALLOCATIONS The committee report lists "carryover of the 1967 allocations not used" among "the exceptions to the program granted since 1965." The inclusion of these carryovers in the list of exceptions "both within and outside the 12.2-percent limitations" without explanation can only reflect the committee's apparent desire to criticize every feature of the import program regardless of its true purpose and merit. The carryover of unused import licenses from 1967 is of course not a regular exception to the program but reflects a special nonrecurrent situation created by the Middle East crisis which, incidentally, greatly benefitted U.S. domestic oil producers. The import allocations in districts I-IV for 1967 had been set at a total of 1,060,000 barrels daily, which was equal to 12.2 percent of the estimated production of 8,724,000 barrels daily in districts I-IV. Because of the dislocation caused by the Middle East crisis, imports in 1967 amounted to only 900,000 barrels daily while production rose to 9,083,000 barrels daily. Thus, in 1967, imports into districts I-IV equalled less than 10 percent of production, instead of the permissible 12.2 percent. In order to protect importers who were unable to use their allocations in 1967 against losses, the Government established a 2-year carryover program. The carryover program will still leave total import allocations for the 3-year period 1967-69 below the 12.2-percent ratio so that domestic producers during that period will have a larger share of the U.S. oil market than they would have had if importers had actually imported an oil volume equal to 12.2 percent of production in 1967 in districts I-IV. Nor does the carryover program grant any additional or new allocations to some importer at the expense of others. The carryover program was an imaginative scheme developed by the OIA to cope with an unusual and unforesee able situation. To list it among the examples of the "special treatmen situations which are of concern to this committee" is an indication of the tendentiousness of the committee report. PUERTO RICO AND THE VIRGIN ISLANDS In dealing with the application of the oil import control program to Puerto Rico and the Virgin Islands, the committee report accu rately reflects the criticisms voiced by several segments of the U. oil industry against the granting of mainland import licenses to ney refiners located in those areas. However, it all but ignores the explana tions given by officials of the Interior Department before the committe for granting the import licenses. The creation of a large-scale petrochemical and petroleum refining industry in these U.S. offshore areas was of great importance to the economy. The request to permit the establishment of such plants (which would probably have been uneconomical without access to the U.S. mainland market for a share of the products made in those plants) came not from private industry but from the governments of these territories. Had the Secretary of the Interior rejected their request this would not only have significantly retarded the economic growth of the areas but it might also have been viewed as a discriminatory act on the part of the U.S. Government. The potential national security implications of both the economic and the political consequences of a flat denial of the applications are obvious, particularly in the case of Puerto Rico which represents the U.S. "showcase" in Latin America. It is unfortunate that the committee did not address itself to these aspects of the Puerto Rican oil import issue, which are certainly not unrelated to our national security. Furthermore, in discussing oil imports from Puerto Rico into the U.S. mainland the committee report refers to "uncontrolled items of imports." This is misleading since all imports from Puerto Rico, whether within or outside the 12.2 percent limitation, are strictly controlled by the OIA and cannot increase under existing regulations. Finally, regarding the awarding of import licenses to refiners in U.S. offshore areas, we believe the question is not whether the awards were justifiable on the basis of some national security criteria but whether the Interior Department's method of selecting the companies which received the award satisfied customary standards of equity in all cases. There are indications that some oil companies believe this was not the case. Unfortunately, the committee report does not address itself to this subject. DISTILLATE FUEL OIL IMPORTS We agree with the committee report that the domestic distillate fuel oil supply situation "is unlike that of residual fuel oil, for economics will permit refiners to turn out all volumes required to meet the demand for No. 2 fuel oil." However, we regret that the committee report completely failed to take note of the unsual counter-seasonal increase in No. 2 fuel oil wholesale prices at the U.S. east coast last April, although this increase was the subject of considerable discussion at the hearing. While the undersigned recognize the possibility that the special circumstances of the Middle East crisis may have had an indirect effect on east coast prices, we nevertheless are concerned with the price increase in domestic heating oil and so should be the administration under the aforementioned directives contained in the Presidential proclamation establishing the import control program. Perhaps adoption of the proposal made at the hearings that refiners be given added flexibility to exchange crude oil imports for distillate heating oil imports within the limits of their total import quotas, would reduce the possibility of temporary supply tightness during the heating season with its consequent threat to the stability of heating oil prices. STOCK LEVELS The committee report states that "adequate amounts of oil cannot be stockpiled, as can some other minerals, and any interruption of our source of supply, even for a few days or weeks would paralyze the commerical and industrial life of this Nation." The fact is that total U.S. crude oil and products stocks are currently equal to 78 days of demand. Assuming that about 30 percent of these stocks are not available for shipments because they are required for the continuous operation of equipment, our readily available inventories are equal to about 55 days of current consumption. The committee's statement exaggerates therefore the short-term risks of dependence on foreign oil supplies. HAWAII Considerable testimony has been received during the hearings regarding the special situation of Hawaii within district V. Located 2,300 miles west of the mainland and devoid of any indigenous fuel supplies, all of Hawaii's fuel needs must be delivered by tanker across the open sea, whatever their source of origin. Hawaii also has no access, obviously, to overland oil sources from Canada and Mexico. Testimony has shown that over 90 percent of the State's oil supplies are of foreign origin. The crude oil refined in Hawaii by Standard Oil of California comes from Iran, Saudi Arabia, and Indonesia. Yet, because of the workings of the oil import control program, Hawaii enjoys none of the economic benefits of this lower-cost foreign oil. On the contrary, retail prices of most petroleum products, even though produced in Hawaii, are higher in Hawaii than anywhere on the U.S. west coast; the price is arbitrarily set as though produced on the west coast and includes a fictitious transportation cost as though it were shipped to Hawaii. We believe it is regrettable that the committee has ignored the massive testimony presented by all segments of the Hawaiian economy to the effect that Hawaii should be exempted from the oil import control program. We believe the Interior Department and the Office of Emergency Planning should be requested to undertake an investigation into the oil import control program as it applies to Hawaii, to determine whether this State, in view of its geographic location, should be treated differently under the mandatory oil import program than the rest of district V. We are aware that counter arguments to the above were presented to the committee. The claim that the situation in Hawaii is essentially not unlike that of the U.S. east coast, which is also an oil deficit area and must receive all its crude oil supplies and a large part of its oil products by ocean tanker, is the failure to recognize the point in issue. Furthermore, it is said that as part of district V Hawaii could fully count on oil supplies produced within that district if foreign oil should become unavailable. This difference of opinion underscores the need for an investigation. While the committee report has gone to great lengths to include the thinking in the past on the oil import program, it has seriously neglected consideration of the future. We believe that the national security this program was designed to protect includes not only preparation for defense in unforeseen emergencies, but also the daily well-being of all America's people. Therefore, we regard such objectives as abating air pollution, promoting consumer interests, and à alleviating economic hardships in a U.S. offshore territory as intrinsic-not alien-to our national security. The oil import program was established and should continue to exist for the achievement of the best possible, and most secure, balance of foreign and domestic petroleum supplies. But in so doing, it must be recognized that other areas of national security are and will be affected and should be taken into consideration if the broad objective of the program is to be fulfilled. We, the undersigned members of the House Committee on Interior and Insular affairs, for the reasons stated above, hereby oppose the views and comments in the committee report on the mandatory oil import program. JOHN V. TUNNEY. HUGH L. CAREY. ADDITIONAL DISSENTING VIEWS ON THE MANDATORY OIL IMPORT PROGRAM AS IT RELATES TO THE DOMESTIC PETROCHEMICAL INDUSTRY We disagree with the committee's findings that "the import program legally has only one basis for its existence, i.e., to protect the Nation's security by promoting a strong domestic oil industry capable of dealing with unforeseen emergencies." The national security determination is based on many factors including, but not limited to, the many sectors of the domestic oil industry. The need for a strong, healthy, domestic petroleum producing industry, one capable of quickly increasing domestic production, is recognized. But, a growing and vigorous and competitive domestic petrochemical industry is just as essential to our national security. If governmental policies protect the domestic petroleum industry, these same policies must protect and not hinder our third largest manufacturing industry, the domestic petrochemical industry. In a recent report prepared by the National Academy of Sciences and submitted to the Office of Emergency Planning in December 1967, the importance of the petrochemical industry to our Nation's security was succinctly stated as follows: Because of its tremendous technical capabilities, the petrochemical industry (PCI) would be a prime source of strength to the Nation in a time of emergency. It is contributing to every facet of the economy and is uniquely suited to supply the imagination and broad perspective for quickly finding alternate sources of supply and producing substitute materials during an emergency in the critical areas of (a) food and agriculture, (b) clothing, (c) shelter, (d) transportation, (e) communications, and (f) medical supplies. This basic industry marshals an investment of $19 billion and a large and skilled work force of more than 320,000 employees for the production of thousands of chemical and plastic products essential to our national defense and to almost every aspect of our national existence and is a major, positive contributor to our country's balance of trade. This industry must, however, have access to the same lowcost raw materials which its foreign competitors enjoy in order to maintain its domestic and international markets and to expand its domestic facilities. As a result of the oil import program, the price of U.S. crude oil is 60 percent above the world market price. This price differential has the same significant effect on the feedstock cost of petrochemical producers. Petroleum products are the fundamental raw materials of the petrochemical industry. Natural gas liquids, the feedstocks on which the domestic petrochemical industry is largely based, are moving higher in price because the demands of the petrochemical industry are expanding more rapidly than the availability of natural gas |