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THE IMPACT OF THE ENERGY AND FUEL CRISIS ON

SMALL BUSINESS

TUESDAY, OCTOBER 6, 1970

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON SPECIAL SMALL BUSINESS PROBLEMS
OF THE SELECT COMMITTEE ON SMALL BUSINESS,
Washington, D.C.

in room

The subcommittee met, pursuant to call, at 10:05 a.m., 2359, Rayburn House Office Building, Hon. Neal Smith presiding. Present: Representatives Smith, Evins, Addabbo, Hungate, Conte, and Horton.

Also present: Representative Broyhill of the full committee; Howard Greenberg, staff director; Charles E. O'Connor, general counsel; T. J. Oden, subcommittee counsel; Myrtle Ruth Foutch, clerk; and John M. Finn, assistant minority counsel.

Mr. SMITH. The meeting will come to order.

We are beginning these hearings on the electric energy crisis in this country. I guess that everyone knows that man does not create energy, man only transforms energy from one form to another, whether it is mineral or plant energy coming in directly from the sun. We have arrived at the place where we depend very heavily upon electric energy and people are concentrated in the areas with electric appliances and a real catastrophe occurs when there is not enough electric energy available.

I assume that these hearings at a later time will probably get into other forms of energy and try and determine the supply and demand situation. But to begin with, we wanted to concentrate on the electric energy aspects.

So we are having, in the course of the morning, representatives of the private power companies and the public power companies. We will later ask the Federal Power Commission for their comments. We want to determine if we can what the supply and demand situation is, and what the estimates are for the future, and what they intend to do to meet their problems.

Mr. SMITH. Mr. Évins.

Mr. EVINS. Thank you, Mr. Chairman, these hearings beginning today are timely, appropriate and in the national interest. Many are predicting a critical shortage of fuel and electric power in many areas of the Nation. Official projections indicate that this could be demoralizing and disastrous.

Our energy consumption is increasing at something between 7 and 8 percent a year and is doubling every 10 years. This is a tremendous increase in demand. We hope these hearings will provide some answers to these vital questions.

Electric power is a necessity for urban, rural, and suburban life, and, I might add, this power must be economical enough to justify and encourage its usage.

We are now being informed that there is a shortage of coal, fuel oil, and natural gas in many sections of the country today. The world's largest coal user, the Tennessee Valley Authority-in my area-is presently experiencing a critical shortage of coal in their stockpiles. In certain sections of the northeast, there have already been serious questions concerning the feasibility of rationing fuel oil this winter. Fossil-fuels are presently used to generate 75 percent of this country's electric power, and a shortage of any one fuel immediately creates accelerated demands upon the others. Today, however, the situation is much worse. Rather than experiencing a shortage of one fossil-fuel, we are presently facing shortages of all such fuels-coal, fuel oil, and natural gas.

This crisis is not limited simply to one State, or one area of the country. It is quickly becoming nationwide in scope and some shortterm and long-range answers must be provided.

There must be a national commitment to meet the energy needs of the Nation in the public interest.

Mr. SMITH. Mr. Addabbo.

Mr. ADDABBO. Thank you, Mr. Chairman.

These hearings have been called at a very opportune time. Potential fuel shortages are now of critical concern to my district, my State, and many regions of the country. Coal shortages in Tennessee are affecting TVA, and it appears that large sections of the Midwest will also have difficulty in obtaining necessary quantities of fuel oil. This shortage threatens schools, hospitals, and other public accommodations, not to mention residential housing.

This situation is not new, and has been lingering on the horizon now for several years. Drastic action must be taken, and taken immediately, to resolve this problem. An increase in import quota allotments is only a stopgap measure to a terminal disease afflicting millions of citizens throughout this country. I, for one, am sick and tired of having to go through each winter not knowing whether there is sufficient fuel, and waiting each summer for that inevitable power failure.

There is a crisis all right, and it is not simply limited to fuel or power shortages. The crisis is whether the Government is willing to take the steps necessary to assure that its citizens, no matter from what section of the country, are supplied with the basic necessities of life. Simply stating that the Federal Government is going to allow economic conditions to provide the impetus for securing necessary fossil-fuel products is not sufficient, in my opinion. As far as I am concerned it is simply a living example of the three monkeys who hear, speak, and see no evil.

The President and his advisers are simply ignoring the realities of this situation and allowing the industry to commit legal larceny on people throughout the country. Action must be taken immediately, and it must be more than stopgap in nature.

Mr. SMITH. The heaviest concentration of people who depend upon electrical and fossil-fuel energy in the United States, and in the world, would be in New York City.

In order to accommodate to the mayor's schedule, we are putting him on first this morning. And we do want to hear from the mayor because we have had a catastrophe or crisis recently, and he, as one of the leading citizens of the United States, should know about the aspects of that crisis, and what it may portend for the future.

And so we are very glad to have with us this morning, one of our former colleagues, the mayor of the great city of New York, Mayor Lindsay.

TESTIMONY OF HON. JOHN D. LINDSAY, MAYOR, CITY OF NEW YORK; ACCOMPANIED BY MANUEL CARBALLO, ASSISTANT Mayor LINDSAY. Thank you very much, Mr. Chairman. I appreciate your kind accommodation on the time problem.

Mr. Chairman and members of the committee, I would like to express my appreciation to each of you for having this hearing, and moving on this matter as expeditiously as you are, and in such timely fashion, particularly as we face the oncoming winter.

I should like at the outset to express my appreciation for the leadership that the members of this committee have shown in alerting the country to the problem of shortages of fuel energy. And members of this committee, like the chairman, have met the battle on import quotas. Congressman Silvio Conte has been, for as long as I can remember, a very lonely voice from the well of the House. Congressman Addabbo has joined the fight, and as a member of this committee I think he has done a great service.

As the Congressman from Massachusetts, Mr. Conte, pointed out not too long ago, the chickens are coming home to roost. We are beginning now to discover how important it was some time ago from the point of view of the public interest to pay some attention to the question of fuel supplies and the quality of that fuel.

Just recently we have been talking about the availability of clean fuels for the protection of the environment, and to make these great urban centers livable. And now the conversation has had to take a step backward because we are talking about the availability of any fuels, much less clean fuels.

So the question now is, What do we do about it?

To put that in the proper framework, at least from my position as the mayor of the country's biggest city, with 8 million consumers in it, and another 3 million that come into our town every day to work or to visit, perhaps it may be helpful if I just lay out in a couple of minutes the dimensions of the problem and what will happen if we face a shortage in the coming winter months.

First of all, you should understand that the city of New York has ordinarily a storage capacity of about 300 million gallons of fuel. During the average cold winter day, the city consumes about 20 million gallons of fuel, half of that to produce electric power.

This means that we have about 2 weeks' supply of fuel oil on hand in the normal situation. I would suspect that that is not too different from most other parts of the country. Anything more than a 2-weeks' supply obviously depends on a constant, steady flow of delivery.

But with only a few weeks supply, and thinking in terms of this kind of quantity, 20 million gallons of fuel a day, you have to understand that if the spigot gets shut off just a tiny little bit, you are in

instant trouble. That is now dependent we are on the constant flow. Even if we are able to double the whole city storage capacity, it wouldn't make that much difference, because a 4-week storage capacity could disappear very rapidly in the event there was a real shortage of supplies in the pipeline.

If something happens this winter, and if there isn't enough fuel to go around, that means, of course, that in a great city like New York, you are going to be in trouble in heating homes and apartment buildings. That means possible trouble in voltage reduction and shortages of electricity; all of the summer problems that you have would recur in the wintertime.

It would mean that air pollution is going to increase as utilities switch to coal reserves and turn to higher sulphur fuels.

In Boston, the Commonwealth Edison has already asked for, and was denied, an air pollution variance.

It would mean massive inconvenience. It would mean damage to business, and economic loss, in addition to personal hardship that would be suffered.

These conditions that I have described obviously are not confined to New York City. The U.S. Conference of Mayors has recently sent out an alert to all its membership, pointing out that shortages are most acute with respect to natural gas in the Northeast, Middle Atlantic, and Upper Midwest States.

So there seems to be little doubt that the problem is a real one, and that the U.S. east coast will be confronted by a serious undersupply of fuel during the coming winter.

I do think that the severity of the shortage will have its most specific impact on the whole metropolitan area around New York. Most critical to New York during the coming season is the availability of No. 6 residual oil. As you know, No. 6 residual oil is a heavy fuel that is used by powerplants, by industry, manufacturing and by large apartments and schools. The National Petroleum Council, in a report submitted to the Office of Emergency Preparedness, has forecast just recently a potential national shortage of 200,000 barrels per day of this fuel. And most of that is projected in its report for the New England region.

So if we have an unusually severe winter or a further threat to deterioration of the international supply-and, obviously, events in the Middle East have heightened the focus of attention on this real crisis-if you have an unusually severe winter or a deterioration in international affairs, this can lead to an even greater shortage of residual oil.

The No. 2 fuel oil, which is a lighter and a cleaner fuel which is used in home heating, obviously should be in adequate supply in order to make sure that we don't run into the same kind of problem here. And to appropriately assess the projected crisis, I believe it is necessary to subject the National Petroleum Council's estimates to some qualification. The absolute supply of residual oil should be significantly greater than the acceptable supply. Recently, low sulfur quality standards in many of the east coast areas have resulted in an inadequate supply of residual fuels with less than 1 percent sulfur content. So strict adherence to the quality limits will compound the absolute undersupply of residual oil generally, and will concentrate shortages in the regulated metropolitan areas.

If we can agree as to what the facts are-it may be that they will be argued, I don't know, by representatives of the industry-but if we agree as to what the facts are, what do we do about a solution?

During some kind of an emergency in which there is a real fuel shortage, there is a serious question as to what kind of ultimate legal powers there are to force the kind of priorities and allocations of fuel that somebody would have to make. We in local government have some police powers that can be used during emergency periods to protect the health and welfare of the citizens. And we would certainly be required, of course, to exercise those police powers to give priority in fuel deliveries to essential services.

That could be tested in court. And we are not sure how you are going to come out in a court battle of that kind when you are saying: "Fuel over here, but no fuel over there." You are going to take care of the utilities and other essential services to the people first, but from there on it is anybody's guess as to who is most in need.

The State is in about the same position. They have wider powers, more extensive powers. These powers, however, for the most part are negative. They can't expand the supply, they can only limit the

demand.

So it really comes down to the Federal Government. And only the Federal Government can make those key decisions that will produce an adequate supply of fuel, which includes fuel for New York City. It is simply unacceptable to be in the position where local governments are required to go through the battle of allocating a short supply of fuel and choosing and picking between consumers. You have to talk to the problem, rather, of what to do about an adequate supply.

Federal inaction at this time can result in the kind of a crisis that I spoke of-heatless homes and stores, threats of air pollution, increased costs, personal inconvenience, sickness, and the rest.

I believe it can't be denied that when you turn to the Federal Government it is almost impossible to find any single agency that one can say is responsible for national clean fuel policy. The Chairman and the members of the Federal Power Commission are responsible for regulating our natural gas and the public utilities. The Secretary of the Interior is responsible meantime for the extraction of natural gas and oil, and administers the oil import quota program. The decision as to how much oil is available at any given time in the United States is primarily made by the Office of Emergency Preparedness, by the Secretary of the Interior, State regulatory bodies in Texas and Louisiana, and by the oil industry itself.

So you see here complicated network of governmental and private institutions, each of which have some responsibilities. It can hardly be called a machine for the rational development of fuel policy for the Nation. It is even less appropriate for developing a national "clean" fuel policy, since the agency previously responsible for air pollution control, HEW, plays no formal role in the decisionmaking process. The same is likely to be true of its successor, the newly created Environmental Protection Agency.

I found that there are numerous barriers to an adequate supply of any kind of fuel, and especially to a supply of low-pollutant fuel. One of them undoubtedly is the administrative fragmentation that I have just described.

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