self-imposed shortages, built-in inefficiencies, burgeoning bureaucracies and regulatory proliferation, and demoralizing disruptions in the life of all American citizens. And most of them would also involve though their advocates often ignore or are ignorant of the fact-higher costs to everyone. Gasoline taxes, for example, would have to be about 40¢ to 50¢ per gallon to save 1 milion barrels of oil per day-so those critics who complain of the higher prices implicit in the President's Program should not be heard taking the floor in favor of a straight gasoline tax. Nor is rationing a device that could provide adequate savings without higher prices. So, those critics who have just sat quietly through debate on a gas tax should be well prepared to exercise the same restraint when we get to rationing.

At present the average motorist in this country uses 50 gallons of gasoline per month, and pays $27.50 per month for it.

Under the President's Program, if a driver still wanted to use 50 gallons, it would cost him a total of $32.50 for the month.

Under the free-market rationing system developed last year, there would be only enough for the average driver to use 36 gallons per month. Beyond the first 36 gallons, each additional gallon would cost (including the purchased coupon) a total of $1.75, so that 50 gallons would have a total cost of $44.30.

Nor would those be the only costs. There would be a 15-20,000 man bureaucracy, the return of long lines at the gasoline pumps, and equally long lines at the coupon-distribution centers. Further, the income transfer effect would be very largely from the larger, rural states where people drive twice as many miles per capita, to the East Coast and other urban centers. And it would all last for ten years.

I think it's unnecessary for me to dwell on this at any greater length. Suffice it to say, many of the same faults lie with quotas or allocation schemes. Rather than continue the debate over preferences for the gasoline line or the coupon line, we must allow the free market to work to the maximum extent possible. This is what the energy conservation taxes and fees would do.

MID-RANGE-1975-1985

The second of the goals addressed in our energy program is the elimination, by 1985, of our Nation's vulnerability to economic disruption by foreign supplies. In other words, by then our petroleum imports should amount to only about 3-5 million barrels per day of our consumption, and we should be able to implement standby measures and draw from storage enough to make up for any supply disruption. This is not much less than we import right now, but if we were to do nothing, we would be importing 12 or 13 million barrels per day by 1985!

To attain such a goal, we must start immediately to remove constraints and provide new incentives for domestic production and conservation because most of the measures will take 5-10 years to reach fruition after the necessary laws are enacted. And all of these things must be accomplished through a single program that has the balance to bring about the required reduction in our energy use, the necessary increase in our domestic production, and equally important among our national goals-the continued economic well-being, environmental quality, national security, and social welfare that the American people demand and deserve. There is no piecemeal program which can provide the balance that is required. Hard decisions must be made from the very outset within the framework of our overall structure. And those decisions must begin now.

I have already mentioned the need for deregulation of new natural gas, which must be approved in this session of the Congress to reverse the trend of dwindling natural gas reserves, production and continued unemployment due to natural gas shortages.

The decline in domestic petroleum production can also be reversed, and higher prices will provide a strong incentive to produce more oil from known fields. But the largest part of increased production will have to come from wells drilled in major new frontier areas, including the Gulf of Alaska and the Atlantic.

The President has reaffirmed the intent of this Administration to move ahead with exploration, leasing and production in those frontier areas of the Outer Continental Shelf where the environmental risks are judged to be acceptable. He has also asked the Congress to authorize oil production from the largest

leum for the domestic economy, with 15 to 20% earmarked for military needs and strategic storage. According to some estimates NPR-4 could produce 2-3 million barrels of oil per day and commensurately large quantities of gas by 1985. But in addition to finding more oil and gas, we must take steps to take advantage of our most abundant energy resource, coal. The President vetoed the strip mining legislation passed by the last Congress, but it remains a valuable piece of work. With a minimum of changes to make the bill more precise, I am prepared to recommended that he sign a revised version into law. And I am prepared to work with the Congress so that those changes can be expedited and the law placed on the books as rapidly as possible.

The Congress must also act on the Administration's amendments to grant the Environmental Protection Agency authority to suspend emission limitations for powerplants until low sulfur coal can be obtained or stack gas scrubbers can be installed. The nation would thus be permitted to reap the enormous benefit of increased use of domestic coal under appropriate environmental safeguards.

The Congress also needs to amend the Clean Air Act to deal with the issue of "significant deterioration" of air quality. In this case, as in that of the stripmining legislation, we want Congress, rather than the courts, to make the essentially legislative decisions that are required.

To assure rapid coal production from existing leases and to make new, low sulfur supplies available, the President has directed Secretary Morton and the Interior Department to adopt legal diligence requirements for existing Federal coal losses and to design a new program for accelerated leasing of Federal coal lands.

The first of the Secretary's meetings with the Governors to explore regional questions associated with new Federal coal leases has already taken place, so this program is underway.

Of course the market for coal, as well as the availability of all electric power, depends upon the health of the electric utilities industry, and we must address its problems as well. In recent months, utilities have cancelled or postponed more than 60 percent of planner nuclear expansion and 30 percent of planned additions to non-nuclear capacity. The delay and difficulties this industry is current experiencing could well lead to higher oil import levels and inadequate supplies of electricity 5 to 10 years from now.

The President has, therefore, proposed legislation to assist the electric utilities through higher investment tax credits; mandated reforms in State Utility Commission practices; and other measures. And to rejuvenate our drive toward more effective use of the potentials of nuclear power we have markedly increased our budget request for nuclear waste disposal and for continued improvements in safeguards. In addition, the President will resubmit the Nuclear Facility Licensing Act for prompt Congressional action.

As we take these actions to increase our energy supplies, we must be aware of some potential problems. Before we achieve our goals of energy sufficiently, actions of oil producing nations, or economic conditions, could result in lowerbut unstable price levels that could weaken our continued commitment to greater self-sufficiency. The Federal Government must take actions to encourage and protect domestic energy investment in the face of significant world price uncertainty. To foster such investment, the President has requested legislation to authorize and require the use of tariffs, import quotas or other measures to maintain energy prices at levels that will achieve full national capability for self-sufficiency and protect our energy industry and jobs.

All of the actions I have mentioned would have the effect of increasing our available domestic supplies of energy. Oil production could reach 13 or 14 million barrels per day versus approximately 9 million today, coal production could double and nuclear generation could increase from a 4 to 30 percent share of our electric generation capacity by 1985.

But, as in the short-term, supply actions are not enough. We must dramatically cut our historical demand growth. We have signed agreements with major domestic automakers to improve gasoline mileage by 40 percent on average by 1980, as compared to 1974 model cars, provided that the Clean Air Act automobile emission requirements are modified for five years.

The Energy Resources Council is developing energy efficiency standards for major appliances and will seek agreements from manufacturers to achieve an

legislation has been submitted that would require labels on automobiles and major appliances disclosing energy use and efficiency. To move quickly where the problem hurts most, the Federal Government will provide money to the States for the purchase of insulation and other energy conserving devices in homes owned or occupied by low-income citizens, who might otherwise not be able to have such improvements made in their homes. The President's Program also sets forth proposals to mandate thermal efficiency standards for all new buildings in the United States. Since energy savings are even greater for existing homes it also includes a proposal to institute a 15 percent tax credit for insulation investments up to $1,000.

These numerous proposals and actions taken together, can reduce our dependence on foreign energy supplies to 3 to 5 million barrels of oil per day. To ensure that we could meet any supply disruption of the remaining imports we must establish legal authority for emergency measures that can be readily implemented to guarantee the equal sharing of shortages and the equitable allocation of supplies at Home, and to meet our obligations under the International Energy Agreement abroad. To do this, we must begin as soon as possible to develop a strategic storage capacity of 1 billion barrels of oil for domestic use and 300 million barrels for military use. To further insure stability as we move toward reduced vulnerability, we have requested legislation to authorize the use of tariffs, import quotas or other measures to maintain energy prices at levels that will protect domestic energy investment. Only by taking such precautions can we act responsibly both at home and in the international community in a time of future supply interruptions.

ACTION TO MEET THE LONG-TERM (Post 1985) GOAL

For the longer term, our goal is to sustain a position of energy independence, and to enhance it so that the United States will again be capable of supplying a significant share of the Free World's energy needs.

This means that, as a Nation, we must reaffirm our commitment to a strong energy research and development program, aimed not only at developing the capability to tap all our major domestic energy resources but also at improving the efficiency of energy utilization in all sectors of our economy.

Last year, the United States committed itself to a five-year, $10 billion energyR&D effort. Our 1975 energy R&D budget was twice that of 1974 and three times that of 1973. In 1976, this acceelrated effort must continue, and the President has pledged to make available whatever funds are needed for future R&D activities.

Now that we have an Energy Research and Development Administration, a Federal Energy Administration and an Energy Resources Council, we have, for the first time, both the unified Federal organization and the financial commitment to get the job done.

But Energy R&D funds and organization are not enough; we also need new incentives to assure that emerging technologies are not only developed in the. laboratory, but brought into use in the marketplace. Therefore, the President has announced a National Synthetic Fuels Program which will assure the equivalent of at least one million barrels per day in synthetic fuels capacity by 1985. It will entail a program of Federal incentives designed to reduce prices uncertainty, raise capital and overcome unnecessary delays in bringing existing or nearly developed technologies into commercial use. The program will result in the demonstration of technologies of several types and the construction of major news plants, using both oil shale and coal resources. Conclusion

A great deal has happened to change the energy outlook of this country since the first Energy Message to Congress in 1970. The changes have come more rapidly since the onset of the 1973 oil embargo. But now, since the President's state of the Union Message earlier this month, the time has come for all of us to stop for a moment and to put things into perspective. We can all agree on the goals that have been set forth-and I believe the American people agree with them too. Starting from that agreement, we must get to work so that we move rapidly and wisely toward the goals implementing this program will be hard-but we all sit in these seats because we are supposed to be able to make hard decisions and carry through on them. The people of this country can accept diffi

one will. Everyone will hurt a little, it is true; and various special interests will object to parts of the program that cause them distress. But if we listen to all of those special interests, if we think we can do away with the particular pains of every pressure group; then we will be left with no program, no improvement, and much greater pain for the country.

We cannot delay moving on the administrative and legislative parts of this comprehensive program. We can work together-we must work together-but on the whole program, and not on bits and pieces. Only a comprehensive program will meet the needs of the nation and the international community. We owe no less to those who are relying on us.

STATEMENT OF HON. CHARLES ROBINSON, UNDER SECRETARY OF STATE FOR

ECONOMIC AFFAIRS

Mr. Chairman, I welcome this opportunity to meet with this Committee today and to discuss with you the international aspects of the President's Energy Program.

I want to emphasize the need for prompt implementation of this program. It is now more than 15 months since the shock of the embargo demonstrated graphically our vulnerability in excessive dependence on imported oil. We must demonstrate that we are capable of taking the difficult decisions necessary to cut back our import dependence and reduce our economic and political vulnerability. There is acute public awareness of a need for action, and the Government must demonstrate that it can act.

The U.S. simply cannot continue to accept the political and economic vulnerability which is an inevitable consequence of our excessive dependence on imported oil. The economic costs are obvious: Huge balance of payments deficits, the intensification of inflationary pressures, and a serious adverse impact on economic growth and employment. The international political costs are equally high: Constraints on our ability to exercise world leadership and serious strains on the Western Alliance. The President's program responds to these critical problems. It encompasses a mix of the most effective short-term and long-term policies to reduce our import dependence recognizing the importance of supporting our domestic economic system.

The prompt establishment of an effective U.S. conservation program is particularly essential. It will provide an immediate reduction in our oil import requirements. Early implementation of a serious conservation program will begin to reduce our vulnerability to interruptions in oil supplies and begin to ease the strain on our balance of payments.

At the same time, we must begin now to initiate policies to accelerate the development of new domestic energy supplies. The lead time in developing new energy projects is considerable. But unless we act now we will not be able to count on new energy supplies being available by the late 1970's and early 1980's when our need for them will be critical.

In International terms, the prompt implementation of the President's program is vital. As you are aware, our international response to the world oil crisis has concentrated on the creation of a framework of close consumer country cooperation. There is a pressing political need to act to counter the widespread notion that the industrialized countries are drifting helplessly, unable to respond to the abrupt and massive escalation of oil prices which so clearly threatens their economic well-being.

We have already made solid progress in the achievement of consumer nation cooperation:

We have created the new International Energy Agency which provides an institutional framework for our cooperation and we have established an emergency program which substantially enhances our ability to withstand the economic impact of possible future embargoes;

We have taken the basic decisions necessary to establish a financial solidarity fund among the major industrialized countries; and

We are now developing in the International Energy Agency a framework of continuing cooperation in energy conservation and the accelerated development of new energy supplies aimed at the reduction of our joint dependence on imported oil.

I must caution, however, that these efforts will succeed only if the U.S. can provide dynamic and constructive leadership. This leadership can be expressed

U.S. in conservation and the development of new supplies. We cannot realistically expect other consuming countries to respond to our urgings to conserve oil and develop new energy supplies if we fail to demonstrate that we ourselves are taking these actions. The U.S. consumes roughly half the total oil consumed by the sixteen countries of the International Energy Agency, and we possess far more than half of the group's alternative energy resources. Clearly our efforts will have an overwhelming impact on the IEA's total posture. If we fail to take the hard decisions now before us in energy, effective consumer nation cooperation will be almost impossible to achieve. Conversely, if we take these decisions and act now to reverse the course of ever greater dependence on imports, we can expect the other consumers to follow suit.

The major advantage of the President's program is that it will produce rapid and substantial results, especially in the area of conservation. We will be clearly seen by other consuming countries and oil exporting countries to be firmly committed to a path of reduced import dependence and economic and poltical invulnerability.

It is clear that assurances from the producing nations of secure oil supplies at reasonable and predictable prices are not going to be obtained through jawboning. Nor can we expect that the oil producers will lower prices out of some altruistic concern over the future of the world economy. Obviously, the producers must come to recognize their own direct responsibility for world economic wellbeing.

However, in order to prepare for a constructive dialogue with producers, the consumers must act, through conservation and firm commitments to develop new supplies, to create the objective conditions in the world energy market, which will demonstrate our determination to reduce dependence on imports and which are essential pre-conditions to our effective consumer-producer dialogue. Here again, serious national action by the U.S. is urgent to our objective of creating a mutually beneficial equilibrium of interests between consumers and producers. If we fail to act now to commit the U.S. and other consuming countries firmly to this path of constructive dialogue, we will risk an escalating likelihood of confrontation rather than cooperation. We simply cannot continue to drift.

STATEMENT OF HON. GERALD L. PARSKY, ASSISTANT SECRETARY OF THE TREASURY FOR TRADE, ENERGY, AND FINANCIAL RESOURCES POLICY COORDINATION Mr. Chairman and members of the committee; it is a privilege to appear before you this morning to participate in this review of the President's economic and energy proposals. This morning, I would like to concentrate on certain aspects of the energy proposals. In so doing, however, I think it is important to view the entire legislative and administrative package as one entity. It is a balanced program aimed at reducing U.S. dependence on imported oil and increasing U.S. energy production.

BACKGROUND

To understand our proposals better, I think it is important to explain our current energy situation. Oil has become an increasingly essential commodity throughout our economy. In recent years, however, our capacity to produce oil has declined. We are now dependent upon foreign sources for nearly 40 percent of our needs. In the fall of 1973, we saw what could happen as a result of this reliance on foreign supply. The oil embargo created major disruptions throughout our economy. Further, the current price of foreign oil has contributed significantly to both the inflation and the recession that the U.S. is now experiencing. The fact of the matter is that we have lost the ability to allow the market to determine the price of oil, and we have no choice but to look to OPEC for supply. To retain control over our destiny, we must first achieve the ability to be independent with respect to supplies of energy. The President's energy program is designed to do just that and more he has said that within this century, we should strive to be able to supply a significant share of the Free World's energy needs. In order to accomplish this goal, we will need to develop alternatives for imported oil and we will also need to reduce our total demands for energy of all kinds.

Concurrently, we must work with other consuming nations to coordinate our energy policies and also to cooperate financially as we seek to adjust to higher