I know that you have discussed the short-term energy outlook in detail during the past two days, so I shall not review it in this statement, other than to refer to the opening paragraphs of the statement of September 29 which I have just placed in the record. Rather, let me deal briefly with the relationship of the Oil Import Program and the Oil Policy Committee to the short-term energy situation. The Oil Import Program exists for the purpose of furthering our national security. Because of this, its operation in normal times does limit imports of crude oil and its products into the United States. In fact, however-and Î underline this point—the operation of the Oil Import Program is not, under current circumstances, acting to limit the actual imports of overseas crude oil into the United States. The disruption of the world oil situation (specifically the closing of a pipeline through Syria and cutbacks in production by Libya) has resulted in a temporary reduction of overseas imports to a volume significantly below that permitted by the quota. Fortunately, we have had in existence a reserve U.S. production capacity which is meeting the need for the quantity of crude oil required.

As to overland imports, last March we did place on Canada a formal quota which was significantly above the amounts provided for import in the voluntary agreement. We have taken four actions which moderate controls on Canadian imports and also improve the management of the Oil Import Program.

a. We have placed awards by the Oil Import Appeals Board for exceptional hardship outside the Canadian quota but within the overall quota.

b. Because overseas quota tickets may be hard to exchange in the current international situation, we have enabled those ticket holders who are recipients of Canadian oil to apply these tickets against "hardship" allocations by the Appeals Board.

c. We have exempted overland importation of Canadian natural gas liquids from the Canadian crude-oil quota, thereby making room under that quota for additional imports of crude oil.

d. We have permitted this importation of Canadian crude oil and products along inland waterways.

In the current situation, I believe that the Oil Import Program is no significant bar to the provision of crude oil to meet our energy needs this winter. Rather, its effect in the past now leaves us less captive to the current disruption, including high tanker prices and shortages of tankers, than we otherwise would be.

Turning to products of crude oil the two products most likely to be in a tight supply situation, for energy fuels, are residual oil and No. 2 heating oil. Here I wish to underline two points.

First, as to No. 2 heating oil, the studies of the National Petroleum Council conclude that the supply this winter will be adequate. Nevertheless, we are continuing the experimental program next year of permitting import of an average of 40,000 barrels per day from the Western Hemisphere into the East Coast. And to give further insurance for this heating season, we are requiring that all of the first half of the 1971 quota be imported during that heating season-the first three months of 1971.

Second, the Oil Import Program does not restrict, or affect in any way, the import of residual heating oil into New England and the East Coast. Such import has been quota-free, for all practical purposes, since 1966. New England and the East Coast have since that time become over 93 percent dependent on foreign sources for residual oil. Hence this part of our country is for all intents and purposes part of the world market for residual oil-and is therefore now paying the price for delivery within that international market.

We are now changing the proclamation to facilitate burning of imported crude oil for fuel-a course of action that up to now was so uneconomical that it has, to the best of my knowledge, rarely been considered. The course of action amounts to using all, or as much as possible, of the barrel of crude oil as "residual heating oil." In summary, on the oil import program, I repeat my previous conclusion that it now does not significantly affect our energy fuel situation for the coming winter. That situation must be handled by producers-labor and industry—and by consumers through reasonable conservation, and by coordinated guidance of the responsible Federal agencies. The Joint Board established by the President is an instrument of such coordination.

There is likely to be a tight fuel situation in some parts of the country this winter. If the disruption of the international oil situation increases, the situation will be tighter; if disruption decreases, the situation will be eased somewhat. Hence the prudent course is to prepare to take some special actions. One of them, in the area of coal supply, has already been taken by doubling demurrage charges.

The pattern of interagency coordination, now directed by the President, has been informally in being during the summer to guard against, and handle, the danger of brownouts and blackouts. Except for a few locations, the winter problem, when one exists, is a problem of fuel supply rather than generating capacity.

The operating agencies of the Federal Government-the Department of the Interior, the Department of Commerce, the Federal Power Commission, and the Interstate Commerce Commission-are members of the Joint Board. So also is the Council on Environmental Quality, which provides advice concerning our environmental programs. The CEA Chairman advises the Board on the interests of our economy as a whole; since he is also Chairman of the Domestic Council study on longer-range energy problems, this provides for an interlock of short-term operations with longer-term policy development.

The Joint Board operations are already under way. Monitoring and coordination actions will be shaped to the nature of the problems rather than attempting to devise any standardized procedure for consultation with industry and surveys of the supply requirements situation.

There have been a considerable number of expressions of concern from New England. New England is probably most dependent on foreign imports affected by the international oil situation. Hence we have established a Region 1 Field Board on Fuel and Energy Problems for the Northeast, with regional membership paralleling that of the Joint Board, to give us field assistance in monitoring the situation and coordinating any action needed. (I submit for the record OEP Circular 1200.19, establishing the Region 1 Board.) In general, however, I believe we can monitor the needed actions, which are going to be the actions of industry in great part, and coordinate Federal action through our regular arrangements here in Washington.

In the statement made by Chairman McCracken and myself on September 29, we stated, and I quote: "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."

That which the Federal Government can do in this fuel situation is very much dependent on the intelligent cooperation and effort of the other portions of our great national community.

Since that statement by Dr. McCracken and myself from which I quoted, we have had a very heartening initial response by the petroleum industry. I am releasing this morning at 11:00 am a press statement, an advance copy of which was furnished to each member of this Committee, and which I would like to enter in the record, which summarizes the results achieved thus far. I call attention to the fact that a number of major oil producers have already publicly announced their intention to produce increased amounts of residual fuel for this winter, and that the total of these increases amounts to more than 100,000 barrels per day of additional residual fuel. I stress that this is only the initial industry response, and that further announcements are expected as the oil companies continue to examine their production capabilities.

As to the area of the country expressing most concern, our Federal Regional Board in Boston, working with State and local governments and industry, has eliminated a good portion of the alarms, I believe. The Regional Office has investigated forty or so specific reports of fuel problems, and the Chairman of the Regional Office informs me that all but two of these have been satisfactorily resolved. One action has been the arrangement, on the day before yesterday, for the provision of 500,000 barrels of low-sulfur residual oil to the city of Boston, on terms, so I am informed by the Chairman of the Federal Regional Board, acceptable to the city.

Gentlemen, the events in the energy field during the past six months have impressed upon me how sensitive our economy is to relatively small, even undramatic, changes in the complex energy supply and demand situation.

These changes are sometimes hard to foresee; most persons do not even notice the change in the current disruption of delivery of oil across the Mediterraneanonly 3% of the world's oil-for it is not so dramatic as a military interruption. But a political or a political-economic interruption can be just as effective in restricting supply and raising prices. The argument for adequate insurance is there.

I have brought with me members of my staff. We will do our best to answer your questions and at the same time also seek your counsel in this matter of energy supply-a problem likely to continue for at least several years.

STATEMENT BY THE PRESIDENT

OFFICE OF THE WHITE HOUSE PRESS SECRETARY

THE WHITE HOUSE, February 20, 1970. In March of last year I created a Cabinet Task Force, headed by the Secretary of Labor and including the Secretaries of State, Treasury, Defense, Interior and Commerce, and the Director of the Office of Emergency Preparedness, to study the Federal government's oil import policy. The Task Force Report the first Cabinet-level study of the oil import quota system since its inception in 1959was submitted to me by Chairman Shultz on February 9th.

Reasonable men can and will differ about the information, premises and conclusions contained in the report. None, however, can fail to be impressed by the depth and breadth of this study. The wide response from the oil industry and other interested parties, running to 10,000 pages of testimony, is evidence of the broad interest in this endeavor. I compliment all members of the Task Force and the staff for their devoted and discerning effort. Their report substantially increases our understanding of this complex problem.

It is not surprising that the members of the Task Force did not reach unanimous agreement on a set of recommendations. The conclusions reached by the Secretary of Commerce and the Secretary of Interior differ sharply from those reached by the remaining five members of the Task Force. Among the majority there is also a divergence of views with the Secretaries of State and Defense expressing particular concern over the implications of the Report's conclusions for the nation's security and our international relations.

There are, however, areas of agreement concerning actions that can be taken immediately. All Task Force members agree on the need for a new management system to set policy for the oil import program. After considering the views set forth in the Report, I am directing the Director of the Office of Emergency Preparedness to chair an interdepartmental_panel which will initially include the Secretaries of State, Treasury, Defense, Interior, and Commerce, the Attorney General and the Chairman of the Economic Advisors. While most day-to-day administrative functions will continue to be performed by the Oil import Administration of the Department of Interior, the policy direction, coordination and surveillance of the program will be provided by the Director of the Office of Emergency Preparedness, acting with the advice of this permanent Oil Policy Committee.

All members also agree that a unique degree of security can be afforded by moving toward an integrated North American energy market. I have directed the Department of State to continue to examine with Canada measures looking toward a freer exchange of petroleum, natural gas and other energy resources between the two countries.

The State Department has already discussed informally with Mexico the possibility of entering into arrangements with that country on energy exchange and I am instructing the State Department to explore more fully the possibility of reaching an agreement with Mexico to this end.

While generally agreeing with the recommendations of the majority of the Task Force, the Secretary of State indicates a concern that changes in the oil import program might provoke adverse international reactions which could have a bearing on national security. He therefore conditions his agreement on consultations with other governments before any final decisions are reached.

The Secretary of Defense also recommends that the security implications of the program proposed by the majority be brought to the attention of our allies and affected nations at the earliest possible moment.

Accordingly, I direct the Secretary of State to continue our consultations on petroleum matters with Venezuela and our other Latin American suppliers, who have proven to be secure and dependable sources of oil during the crises we have experienced since the Second World War.

The State Department will also review with producing nations of the Eastern Hemisphere and with our NATO allies and Japan the findings and recommendations of the Report. I further direct the Secretary of Defense to join in these discussions when they include our NATO allies and Japan.

The Congress properly has a vital interest in this program which affects every area of our country and many facets of our economy. Committees of both the House of Represenatives and the Senate have indicated interest in holding hearings on the oil import program and any recommended changes in it. I expect

that much additional valuable information will result from these Congressional hearings, and I direct the Oil Policy Committee to carefully review all such information.

I expect the Oil Policy Committee to consider both interim and long-term adjustments that will increase the effectiveness and embrace the equity of the oil import program. While major long-term adjustments must necessarily await the outcome of discussions with Canada, Mexico, Venezuela and other allies and affected nations, as well as the information developed in the proposed Congressional hearings, I will direct the new Committee to begin its work immediately. An Executive Order for this purpose will be issued shortly.

PRESS CONFERENCE OF PAUL W. MCCRACKEN, CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS

OFFICE OF THE WHITE HOUSE PRESS SECRETARY

THE WHITE HOUSE, August 6, 1970.

THE BRIEFING ROOM

At 4:20 P.M. EDT

Mr. ZIEGLER: You have been handed an announcement concerning the initiation of a Domestic Council study on national energy policy. The Domestic Council has been asked by President Nixon to examine both the likelihood of a severe shortage of clean fuels this winter and the longer term problems affecting the country's fuel situation during the next five years.

Dr. McCracken, Chairman of the Council of Economic Advisers, has been appointed Chairman of the group which will undertake the study and will propose for Presidential consideration actions to avoid or alleviate the short and long-term problems.

Dr. McCracken will discuss this with you briefly at this time and answer your questions.

I should say that many aspects of the study are still to be worked out and so, therefore, to a certain degree he may fall into the same pattern of answering questions as I did yesterday on the memorandum on paperwork. Hopefully this will not occur, but he is here to take your questions.

Q Dr. McCracken, what are clean fuels?

Dr. MCCRACKEN. Primarily low sulfur coal and oil; in other words, fuels that will meet the requirements, the anti-pollution requirements.

I might just make a few comments about the background of this. Obviously, what the Council will be doing and what kinds of actions they will ultimately come up with are matters which we are getting into business to try to find out.

The background of this, however, is something along the following lines: We have had a concentration of developments both on the supply side and on the demand side which are raising the question about the possibility of some power problems this coming winter.

This is, first of all, the possibility that in certain areas if power demands are extremely heavy, the power requirements might go beyond the limited reserves which exist now in these areas. This would be particularly true in certain areas of Florida, possibly true in New England and possibly elsewhere.

This grows primarily out of the fact that what would be normally apparently considered as a safe reserve does not exist in those areas.

But primarily this problem arises out of what has been happening in the relationships between supplies available and enormously increased demands for certain types of fuels. And here we see in a sense one thing leading or moving into another aspect of the situation here and creating a problem here.

On the demand side, or on the supply side first, the supply of natural gas is really below what the current demand is and since the supply of gas to some public utilities is interruptable, this creates a possibility that if we were to have an unusually cold winter there might be residential requirements in some areas that would result in having the public utilities cut off their supply of gas.

World-wide there is an enormous demand for metallurgical coal, coals that are appropriate for steel production and that sort of thing.

For example, one of the important markets for metallurgical coal produced in the United States is Japan. Now, it also happens that metallurgical coal tends to

be a clean coal and therefore, the kind of fuel, the kind of coal that the public utilities have increasingly turned to in order to try to meet the anti-pollution requirements.

We have seen in the coal market, of course, what happens when you get extremely heavy demands converging on limited supplies. The price of coal on the average is something like 35 percent above a year ago, and we have an unbalanced situation there.

The supply for residual oil and residual oil has its attractions apparently as fuel, because it is easier somewhat to deal with the resulting pollution problem there than with ordinary coal, but the lengthened delivery problems incident to residual fuels from the Middle East has created a rather tight supply situation there.

This in turn has prompted some utilities to supplement residual oil with number two heating oil. Number two heating oil happens to be residential heating oil and the supplies there now are low. You can see that one thing tends to lead to another or the solution to one problem tends to create a problem some place else.

The objective of this report, of this study, is to-it is really two fold: One, to see how we can get through or minimize the danger that there may be some problem in the short run here this winter; and of course, looking beyond that, to try to develop a more orderly program for the longer run.

Q. Are you aiming here for an overall national energy policy?

Dr. MCCRACKEN. There is a short run and a long run focus. There is the very practical short run problem of trying to sort things out so that we minimize the danger of a problem next winter.

But, looking beyond that, yes, the answer is yes, we are looking toward a more full-blown study of national energy requirements and policy.

Q. Doctor, two questions, if I might: Did I understand-I want to be sure, and I am not sure whether I understood you that it was actually Japanese requirements for metallurgical coal that were creating a shortage or contributing to a shortage in this country?

Dr. MCCRACKEN. I am glad you asked that question. I didn't mean to imply that it was the Japanese demand. I merely meant that the demand for metallurgical coal generally was very high, of course, steel production here is high. Then I merely cited incidentally that one of the important customers for our metallurgical coal happens to be Japan.

Q. I really didn't follow your analysis of the residual oil shortage. In what sense were you tying this in with the Middle East situation?

Dr. MCCRACKEN. The cutting of the pipeline there has forced a longer tanker run to go around South Africa in order to get to the East Coast. World-wide, the supply situation for residual oil is pretty tight. You have seen this, of course, in the price of shipping fees and in the price of oil.

So, the basic point is that it isn't easy to relieve the pinch of supply and say clean coal by shifting into residual fuel because the supply condition there is pretty tight. There is a tendency for them therefore, to mix number two heating oil into residual oil and that is raising a question as to whether reserves of number two heating oil will be adequate for next winter, too.

Q. What is residual oil?

Dr. MCCRACKEN. Heavy oil.

Q. How is it used? For power plants?

Dr. MCCRACKEN. For power plants, heating, heating industrial buildings, that sort of thing.

Q This is a fuel we don't produce ourselves in this country?

Dr. MCCRACKEN. Yes, we do. But, of course, there is an incremetnal supply from outside that is important, too.

Q Will you also be looking at the supply and demand of electricity, Dr. McCracken? Does that fall within your compass of fuels?

Dr. MCCRACKEN. It does, of course, in the sense that the damand for fuel here is really derived from the demand to an important extent for power.

Q What is the place of atomic energy in the picture, Doctor?

Dr. MCCRACKEN. I think atomic energy-you mean atomic energy, that is, atomic power plants?

Q Yes.

Dr. MCCRACKEN. This does play a role in this picture. There was, I think, a few years ago the assumption that atomic power plants were probably going to account for a larger proportion of power products than is now the case.