MANDATORY OIL IMPORT CONTROL PROGRAM, ITS IMPACT ON THE (TOGETHER WITH DISSENTING AND COMMITTEE ON INTERIOR AND INSULAR AFFAIRS OF THE HOUSE OF REPRESENTATIVES AUGUST 1968 Printed for the use of the Committee on Interior and Insular Affairs 4-356 U.S. GOVERNMENT PRINTING OFFICE WASHINGTON: 1968 PURCHASED THROUGH constantly undergoing change. Exceptions and deviations from longestablished rules and procedures have become increasingly common. These departures from established policy include such matters as allocations for petrochemicals, allocations because of "tight" supply situations, allocations because of economic hardship, establishment of foreign trade zones, proposals for auctioning off or selling import allocations by competitive bidding, and increased import allocation as a reward or incentive to produce low-sulphur residual fuel oil. All of these actions and proposals, as well as others, were taken under 8 program which owes its very existence to safeguarding the US national security by the preservation of the domestic petroleum industry. If a meaningful program is to be continued, it is imperative that clear and definite policy be established under which the domestic petroleum industry and all other interested parties are fully informed as to the future of the program. If national security is of paramoun consideration, and this subcommittee firmly believes that it is together with the preservation of the domestic petroleum industry then no further exception should be granted. If, on the other hand the program has outlived its usefulness or if considerations other tha national security are to be given equal or greater weight, whethe these be situations of hardship, price, or temporary shortage, the the new criteria should also be clearly spelled out and defined in orde that all may follow the newly established policy. Before proceeding further it appears appropriate to point out tha the subcommittee is not unmindful of the role of the consumer an his desire to obtain products at the lowest possible price. This desire while temporarily beneficial, is not, however, always consistent wit national security nor with long-term benefits. Unquestionably domestic consumers are utilizing an ever-increasing amount of pe troleum products for transportation, fuel, heating, and other use necessary to maintain a high standard of living. In the event of national emergency, it is essential that there be adequate supplies s reasonable cost, both now and in the future. The lower cost of importe oil is highly attractive, but clearly an excessive reliance upon import and a shortrun advantage may not be to this Nation's best long ter benefit. Imports could be cut off in an emergency. One has but t look to last year's Middle East crisis for a recent example of the sudde unavailability of foreign oil supplies. If this Nation had been witho adequate sources of petroleum, and an industry capable of quickl increasing domestic production, the situation could have been e tremely critical for us and for our European neighbors. Additionally this vulnerability could easily, and quite likely would result in a muc higher cost or even to the complete unavailability of oil to consumer It, therefore, appears that the best interests of domestic consumer as well as the national security, can be best served by a reasonab balance between domestic and foreign supplies. The interest of this subcommittee in the mandatory oil impo program comes about as a result of the House Committee on Interi and Insular Affairs' overall responsibility for the stability and wel being of the domestic mining industry generally, of which petroleun natural gas, coal, and other energy fuels, are a most important par Consequently, to the extent that the mandatory oil import progra has an impact upon the domestic petroleum and coal industries an heir ability to produce energy fuels in time of war or peace, the House Committee on Interior and Insular Affairs, and this subcomittee, have an interest in the policies, procedures, and operations f the program. It appears appropriate to point out that the following report deals hiefly with the oil import problems as they relate to the domestic etroleum industry in districts I-IV. This is not to say that the Committee is not aware of the very serious problems that exist in istrict V. However, this district, which consists of Alaska, Arizona, California, Hawaii, Nevada, Oregon, and Washington, has condions and problems that are unique to this particular geographic area and are not generally found in the other four districts. These roblems, notwithstanding the fact they are not covered as exensively in the report as those in districts I-IV are nevertheless nificant and deserve careful consideration. The committee wishes emphasize that consideration should be given to the problems and conditions unique to this district. The committee also wishes to take this opportunity to indicate that is fully aware of the many complex problems and the many varied terests confronting the administrators of the mandatory oil import program. While the following report is sometimes critical of many pects of the program and its administration, the committee wishes. to state that this criticism in no way reflects upon the integrity or ability of those associated with the administration of the program. I particular, the committee wishes to commend those individuals in The Department of the Interior associated with the program and to recognize fully the integrity and ability they have exercised in carrying at their difficult responsibilities. BACKGROUND LEADING TO THE ESTABLISHMENT OF THE MANDATORY OIL IMPORT PROGRAM IN 1959 Few major national policies have received more study and conderation over the past 19 years than has the matter of petroleum ports and their impact on the domestic petroleum-producing indusand national security. During the initial years of this period there emerged, as a direct lt of the thorough and exhaustive consideration by the legislative and executive branches of the Federal Government, a firm national licy on petroleum imports. In the interest of national security this hey calls for the maintenance of a proper balance between petrolea imports and domestic petroleum production in order to insure a amic and vigorous domestic petroleum-producing industry-an dustry which at all times would be capable of producing the petroin needed to successfully prosecute wars, stave off and deter war Treats, help other friendly nations with their petroleum needs in e of crisis, and to supply at reasonable prices the petroleum ducts so necessary for an ever-expanding national economy. This basic national policy on petroleum imports did not just happen. Kther it evolved as a result of careful consideration by all branches The Federal Government with the cooperation and assistance of the roleum industry. As far back as January 13, 1949, the National Petroleum Council, ablished under the auspices of the Federal Government as the |