is enclosed.) You will note that one of my proposals was that no. 2 fuel oil imports be completely decontrolled at least for the East Coast. I have now concluded that this step should be taken beginning in 1971.

If this step is taken, together with the immediate adoption of the Council's plan for New England, I believe the greatest part of the residual oil shortage problem can be solved. A long-range solution undoubtedly will also require the development of a New England refining capacity. Such refineries could be given the incentive to produce residual oil if a matching formula, permitting greater imports of crude oil, were adopted.

There can be no doubt that these proposed solutions run the risk of increasing the price squeeze on New England consumers. Already, in recent weeks we have een completely unjustified price increases in the wholesale Caribbean price of no. 2 oil, announced by Esso and Shell, amounting to an increase of over 30 percent. It is essential, theref ore, that, while our concern for adequate supplies must be paramount, we do all we can to minimize, if not reduce, the prices of these vital products. An Administration so concerned with overcoming the drastic impact of inflation can do no less.

In order to promote competitive pricing at the Caribbean source, I consider it important to provide access to Puerto Rico refineries which, I understand, have substantial additional reserves of no. 2 oil.

In closing, I want to make clear that my attention here has been directed to the crisis as it affects my New England region. I am well aware that this is truly a national problem. The complete solution to assist other areas of the nation will, at a minimum, require greater access to Canadian oil, and perhaps decontrol of residual and no. 2 oil imports for all sections of the country.

Thank you for your consideration of these suggestions. I will, of course, be available to give you and your committee any assistance I can provide, as you face this most difficult assignment. With my very best wishes, I am

SILVIO O. CONTE,
Member of Congress.

STATEMENT OF PAUL W. MCCRACKEN, CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS, AND GENERAL GEORGE A. LINCOLN, DIRECTOR, OFFICE OF EMERGENCY PREPAREDNESS, ON THE FUEL SITUATION FOR THE WINTER OF 1970-71 Last May, in anticipation of the tight electric power supply in some regions of the United States this summer, the Interagency Power and Energy Committee convened by the Office of Emergency Preparedness issued a report which identified the problem areas and suggested measures which the electric utility industry, consumers, and the appropriate agencies of the state and federal government should take to avoid a breakdown in service. The power supply problems in the East occurred as anticipated but the contingency planning primarily by the electric power industry itself, but assisted by federal actions-enabled the general public to continue to be served. We have had difficulties this summer, and as recently as last week, but considering the magnitude of the problem and the potential for truly disastrous consequences, the contingency planning has worked well.

We have continued to study the energy supply situation and find that as winter approaches the nation faces a potential shortage in the supplies of natural gas, residual fuel oil and bituminous coal. The potential shortage appears to be more serious in some regions of the country than in others, but no section is completely immune from concern.

The prospect of an energy shortage arises for many reasons. Demand for energy continues to grow more rapidly than in previous years. And the demand for clean fuels to meet air pollution controls has placed extraordinary demands on natural gas and low sulfur oil and coal. Some coal stockpiles are lower than normal and some electric utilities are unable to build up their inventories, in part because of railroad transport deficiencies. A sharp rise in the worldwide demand for residual fuel oil, especially low sulfur oil, and a shortage of oil tankers caused in part by production cutbacks in Libya and interruptions of an oil pipeline in Syria, have contributed to the tightness in U.S. fuel oil supply. Increased demand and inadequate exploration and development for natural gas are contributing to its scarcity. Nuclear power plants under construction as a source of electric power are behind schedule and this results in greater demands for fossil fuels.

To avert the threatened shortages and minimize their impact will require the combined efforts of all those involved in the production, distribution and consumption of fuels-which means industry, labor, consumers, and State and local governments, as well as the Federal Government. Basically, we rely upon the proven adaptability of the American economic system which must respond to the present and prospective demands for fuel by converting to the production of what is most needed and its delivery where it is most needed. The increased national requirements, and the changes in the price structure that arise from them, provide a powerful incentive to this adjustment of supply, which is in fact already taking place. We call upon the petroleum industry, the coal industry, the railroad industry and others, in the light of the national need, to increase the supply of fuels, as is made feasible by economic factors. We also ask the cooperation of the coal miners, the railroad workers and other fuel and transportation workers to help avert a fuel shortage.

While primary responsibility for fuel supply rests with the industry under our private enterprise system, responsible government should take effective action to avert a shortage of so critical a resource.

It must be recognized that solutions in which the government can play the greatest role are more long-term in nature. Those possibilities are under study by the Energy Subcommittee of the Domestic Council. For the moment we have considered what government can effectively do now-this fall-to facilitate supply. We have concluded that certain actions by the Federal Government can help both to assure the adequacy of supplies and thereby to moderate the increase of prices. We are, therefore, taking the following actions which we believe are necessary to give reasonable assurance of the adequacy of fuel supplies this winter. In view of numerous uncertainties, no one can now be sure that these steps will be adequate. We will keep the sutuation under continuous observation to be prepared with further measures if they appear to be necessary.

(1) Action is being taken to:

(a) Continue the importation through calendar year 1971 into the East Coast (District I) of an average of 40,000 barrels per day of No. 2 fuel oil with up to 80,000 barrels per day concentrated in the first quarter heating season.

(b) Exempt natural gas liquids from the Canadian crude oil quota limitations. (These natural gas liquids are associated with the production of natural gas which we are importing from Canada.)

(c) Permit the importation of liquified petroleum gas from the Western Hemisphere.

(d) Permit topping of imported crude oil used for fuel into District I (East Coast) if all of the topping is used for fuel.

(e) Permit topping of crude oil imported for fuel overland from Canada and the use of such topping product for fuel or for reexport to Canada.

(f) Relax restrictions on viscosity requirements of crude oil used for burning. (g) Permit transportation of oil from Canada by waterway.

(It should be noted that, for all practical purposes there are currently no restrictions on importation of residual oil into District I (the East Coast) or on importation of crude oil for burning into District I and overland from Canada.) (2) In order to increase the availability of railroad cars for moving coal, the Interstate Commerce Commission has doubled the demurrage charge for all general service and coal hopper cars standing idle in loading or unloading zones. In addition the ICC will take the following actions as conditions require:

(a) Divert the use of general service hopper cars from alternative loads to the movement of coal; and

(b) Require the return of all hopper cars within a specified period of time. (3) We will continue to work closely with the electric power industry through the Federal Power Commission along the lines of our program for the summer to assure that interruptions in electric service are minimized. We urge the State and local governments to meet with the utilities in their respective service areas to review contingency plans for meeting loads this winter in those areas of tight supply identified.

(4) We are continuing to urge the consuming public to practice conservation in the use of energy. The Special Assistant to the President for Consumer Affairs will issue suggestions to the public for doing this. Federal agencies will set an example by instituting programs to conserve fuels in federal installations.

(5) We are establishing a Joint Board composed of the Director of the Office of Emergency Preparedness (Chairman), the Secretaries of Interior and Commerce, and the Chairmen of the Council of Economic Advisers, the Council on Environ

mental Quality, the Interstate Commerce Commission and the Federal Power Commission, to identify emergency problems in fuel supply and fuel transport and coordinate prompt and appropriate remedial action by the responsible federal agencies.

These steps are in addition to a number of measures already taken, or in the process of being prepared for implementation, to use the transportation and power systems more efficiently and respond to local shortages.

Appropriate federal agencies will be meeting with State and local authorities to discuss this winter's problems in detail. We also expect to maintain close contact with the enrgy industry in order to assist in averting shortages.

We are taking the actions announced today to avert serious shortages. We believe that with the cooperation and initiative of industry, labor, and consumers an energy crisis can be averted. There are certain other measures we have considered. And, if the measures taken today together with the initiatives of industry fail to avert a crisis, we shall not hesitate to resort to any additional actions necessary.

[From the New York Times, Oct. 2, 1970]

MANMADE FUEL CRISIS

It comes as a stunning surprise to most Americans to realize that a temporary shortage of coal, oil and natural gas may produce power blackouts and brownouts this winter. That surprise is heightened by the state's notice to New Yorkers that fuel rationing might be necessary here for the first time since World War II. The ordinary citizen's astonishment is justified. If ever there was a man-made crisis, this is it.

There is no shortage of coal, oil and gas as such. The nation's reserves of all three are still enormous. Foreign sources are also available. But several special circumstances have developed at the same time to cause disruptions in the normal marketing of these fossil fuels.

The United States is a coal-exporting country, and coal exports have risen this year. Heavy exports have tied up railroad coal cars at seaports where they wait for days to be unloaded. The new Federal Coal Mine Safety Act-long overdue and still slackly enforced-has pinched production because companies are closing small mines rather than making the capital investment necessary to bring them up to the new Federal safety standards. But, basically, the shortage is not of coal but of railroad cars.

The international oil market has been upset because Libya is restricting production in an apparent effort to get a higher royalty for its oil. Syria, bringing pressure for higher transit fees, has refused since May to repair a break in a major pipeline. But the United States could easily overcome these adverse factors if domestic oil production were not rigged low to keep the price stable and imports Venezuela not rigidly restricted.

Natural gas has moved temporarily into short supply, partly because gas producers and distributors did not foresee the extent to which the public outery for clean ir would send the demand for their product skyrocketing. Unfortunately, however, another part of the explanation is that the major oil companies, which own the lion's share of gas leases, are not averse to an artificially induced gas shortage which would heighten the pressure for a hefty increase in gas prices.

The Council of Economic Advisers' first "inflation alert" noted that fuel prices have been advancing with "exceptional rapidity" this year. The cost of bituminous coal climbed at a 34.4 per cent rate in the first quarter, then shot up at an 81 per cent rate in the second quarter. Residual fuel prices went up at a 36 per cent pace in the first quarter and 60 per cent in the second.

The Administration's instinctive response to this many-sided problem was to let it drift. Dr. Paul W. McCracken, the President's chief economic adviser, said several weeks ago: "I think the most helpful solution from what very little I have been able to see of this problem at the moment would be to pray for a benign weatherman this winter."

With the seriousness of the problem becoming more apparent every day, however, the White House has now announced some small measures. They seem more designed to take the political heat off the Administration than to provide real heat to anyone else.

The Interstate Commerce Commission has doubled the charge for railroad cars standing idle in loading zones. The import quota of 40,000 barrels a day on fuel oil used for home heating on the East Coast is to be doubled in the first quarter of 1971, but with a compensating reduction in the last nine months of

next year to maintain the over-all average. Other import restrictions are eased in minor ways. "In view of numerous uncertainties, no one can now be sure that these steps will be adequate," the Administration spokesmen observed.

The Administration has spent a year and a half marching up the hill and then down the hill on oil import quotas. It is time to march back up the hill and stay there. Oil import quotas make no sense at any time, as the President's own task force has made plain. In a time of fuel shortage, they constitute nothing less than an attack by the Federal Government on the welfare of millions of its own citizens to safeguard oil industry profits. The Eastern Seaboard should routinely meet much of its energy needs by imports of oil from Venezuela. The quota changes announced this week amount to mere trifling with the issue.

The regulatory commissions in the oil-producing states could be prodded to increase the number of days on which oil is pumped from existing wells. The doubling of charges on idle railroad cars is a step in the right direction, but the Department of Transportation could work with the coal-carrying railroads to devise new procedures and, if necessary, new incentives and stiffer penalties to get them to cut their "turnaround time" on unloading coal cars.

If fuel rationing is necessary this winter, homes and stores will have to take precedence over heavy industry. But this is a choice which should not have to be made. Aggressive Government leadership can still make it unnecessary.

Mr. CONTE. I would like to extend a special welcome, personally, as well on behalf of all of the minority members of this committee to my good friend, John Lindsay, whom I have had the good fortune of knowing since we both came to Congress in 1959.

Mayor Lindsay, who holds the second most important elective office in the land, has not only provided unparalleled leadership to the city of New York, but has been an inspiration to all of us in govern

ment.

And we also appreciate your being here despite your hectic weekend and the sleepless nights you have spent in resolving the problems in your city jails. I want to commend you not only for helping in this incident, but for your determination to show that life in New York City or in any large city can be not only bearable but enjoyable. You have done much to improve services for your citizens and consumers. That job has been made no easier, I might say, by the continuation of the oil import quota system, which the President's own Cabinet Task Force on Oil Import Control said could no longer be justified for national security reasons.

While on the subject of the task force, Mr. Mayor, I want to take this opportunity to thank you personally for your endorsement of the bill, H.R. 10799, that I filed to end the quota system, which you announced in your letter to the Task Force chairman, Secretary Schultz, last October. I have examined your recent memorandum on the fuel shortage. It contains a number of recommendations which you have mentioned here, and which I have also supported as well, and which I would like to explore with you further in your testimony today.

And, finally, in extending this welcome to you, if I may be permitted a partisan comment, I want to say that a great many of my Republican colleagues in the House share my great esteem for you as a former colleague and as one of the outstanding Republican leaders in the Nation today.

I agree with you in regard to he national security statement. I have long felt, since 1959, that this is really not a partisan issue because it was instituted during the Eisenhower administration, and we fought against it during the Kennedy administration, and then during the Johnson administration, and are now fighting with the present administration on this issue to do away with the oil import program.

But I agree with you Mr. Mayor, with regard to the national security issue. I think that that issue is as phony as a three dollar bill. This was proven during World War II when our Atlantic Fleet was completely dependent on Venezuelan oil.

Mr. Mayor, I have heard reports that the Consolidated Edison in your city and other utilities in the Nation are beginning to seek to use No. 2 oil in place of the very scarce residual oil that they have been burning. If this happens it will further tighten the squeeze on the No. 2 oil which is used by homeowners. Have you heard anything about this?

Mayor LINDSAY. Oh, yes. Consolidated Edison has been moving to No. 2 oil. And we have been putting tremendous pressure on them to do so. Mr. Luce has been entirely cooperative. The problem, as in the case of natural gas, is adequate supplies.

Mr. CONTE. Of course, the one thing that could ease this situation is a stroke of the President's pen, to do away with the mandatory restriction on No. 2 oil. Otherwise, if he doesn't do this and the utilities go into No. 2 oil, we are going to have a real crisis in this country.

At the present time the oil import restrictions cost the American consumer annually more than $5 billion a year, and this could double and triple, plus the fact that maybe you can't get it to heat your home. Is that right?

Mayor LINDSAY. That is correct. I think that at the present time, with this shortage of fuel oils in general, that Consolidated Edison is not planning to use No. 2 oil. Of course, if there is a disaster and it is available, it will be used. Consolidated Edison's position is that it will use the lowest sulfur content fuel available and obtainable, and they are working with us in order to do that. The problem is the supply. Mr. CONTE. It is all a question of supply and demand. The demand for No. 2 fuel oil in New England and New York is expected to be much greater than the supply this winter, and this has driven the price up. Of course, the supply is even lower for No. 6 low sulfur oil than it is for No. 2. But if we took the import quotas off and adopted some kind of a tariff system, we could lower that price of No. 2, so that in a crunch like the present one, where there is a worldwide shortage of No. 6, many No. 6 oil users could move over to No. 2 without endangering the supply of No. 2 used by homeowners. Mayor LINDSAY. Correct.

Mr. CONTE. Mayor, you advocate in your September 23 memorandum, and again here today, that a single national agency should be charged with the responsibility of formulating U.S. energy policy. Ever since the unjustified decision to impose quotas on Canadian oil last March we have come to know that our foreign neighbor does have a Minister of Energy, Mr. Green, a man who has not hesitated to express his displeasure with our new policy. Have you reached any conclusion at this point on the appropriate status of such an agency? Should it be cabinet level, or perhaps simply an expanded, more powerful version of our present Federal Power Commission?

Mayor LINDSAY. No; I have not reached any conclusions as to whether it should be cabinet level or not. My own conclusion is simply that the present structure needs to be rationalized and defined and its powers sorted out in such fashion that it has real power that you can point to, so it is held accountable to the Congress. You don't