Mr. CONTE. I have seen some of that.

Mr. LINCOLN. Nevertheless, we are continuing the experimental program next year of permitting the importation of an average of 40,000 barrels per day of No. 2 oil 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 3 months of 1971.

For all practical purposes, the people who are going to import know who they are, and one of these has assured me he is currently negotiating for it.

Now, as a second point I wish to underline, 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, known as district 1. And for those who have not seen it, this [indicating] is residual oil. And it does not pour, at least at the temperature in this room thus far. It does not move through pipelines. It is somewhat difficult to handle. Because of that, inventories of residual oil are generally kept low by the refiners; whereas the No. 2 oil is easy to handle, and inventories of No. 2 oil, for that reason and, of course, other reasons, tend to run quite high. The import of residual oil 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. Parenthetically, I have seen a figure that this adds up now to about 50 percent of what is called static energy. In other words, meaning by "static," I suppose, that it does not include automobiles. 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 by some people.

This 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 both 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, that 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, for instance by doubling demurrage charges.

The pattern of interagency coordination, now directed by the President, has been in being informally during the summer to guard against, and handle, the danger of brownouts and blackouts. In fact, it worked reasonably well until we got past the last day of summer, and then people thought summer was over and shut down the plants for maintenance, which added to the shortage. Except for a few loca

6

tions, the winter problem, when one exists, is a problem of fuel supply rather than generating capacity. I know that Chairman Nassikas went into this point in considerable detail with you, gentlemen.

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 shortterm operations with longer-term policy development.

The joint Board operations are already underway. In fact, they started the same day as the press release and had been underway in bits and pieces before. 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. For instance, as an example, I have felt thus far that the best way to keep a knowledgeable hold on the supply of fuel for utilities is to charge the Chairman of the Federal Power Commission with that type of survey.

There have been a considerable number of expressions of concern from New England. New England is probably more dependent on foreign imports than any other part of the country and is therefore most 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 do submit for the record my office circular establishing this regional board, and I will give that circular to the recorder. (The circular referred to follows:)

OEP CIRCULAR 1200.19

EXECUTIVE OFFICE OF THE PRESIDENT,
OFFICE OF EMERGENCY PREPAREDNESS,
Washington, D.C., September 28, 1970.

Subject: Region 1 Field Board on Fuel and Energy Problems.
To: Federal Departments and Agencies.

1. Purpose. This Circular establishes a Field Board on Fuel and Energy Problems for the area covered by OEP Region 1. This Field Board is a counterpart of the Joint Board at the national level established by the President. Field Boards will be established in other Regions by revisions to this Circular as necessary.

2. Membership.-The Board is composed of representatives designated by the Secretaries of the Departments of the Interior and Commerce, the Chairmen of the Interstate Commerce Commission and the Federal Power Commission, and the Director of the Office of Emergency Preparedness. The Regional Director of OEP Region 1 will be Chairman of the Board. The Council on Environmental Quality will not have a member but will be kept informed by the Board and will provide assistance as required.

3. Functions.

a. The Board maintains surveillance over the situation in fuel supply and fuel transport in the Region in order to determine present and potential problem

areas.

b. The Board receives and assesses situation reports on fuel shortages with particular attention to whether local and other direct arrangements to obtain fuels have been exhausted.

c. The Board provides to the Joint Board in Washington a coordinated assessment of the problems of fuel supply and fuel transport.

d. The Board maintains liaison with the appropriate representatives of State and local governments and of industry in order to receive requests for assistance and to provide such assistance.

e. The Board surveys problem areas and coordinates remedial action by the appropriate Federal agency.

f. Where the Board determines that remedial action is not possible at the Regional level, it refers the problem to the Director of OEP who is Chairman of the Joint Board in Washington.

4. Procedures.—

a. The Board meets at the call of the Chairman, Regional Director, OEP Region 1. Any member of the Board may request that the Chairman call a meeting. Direct consultation between and among members will be maintained between meetings.

b. Summary notes and logs of deliberations and actions will be maintained. c. A weekly report of problems and remedial actions will be supplied by the Chairman to the Director of OEP with special reports as required by the situation. Copies of the reports will be supplied by the Director of the Office of Emergency Preparedness to each member of the Joint Board.

d. The detailed working procedures developed by the Field Board will recognize the following responsibilities of the individual members:

(1) The OEP member will receive information from Governors, Mayors and other officials, assess the general situation, and pass on information to other members and national authorities.

(2) The Federal Power Commission will maintain contact with utilities and power companies affected and with the State Utility Commissions to verify levels of inventory and efforts being made to obtain supply, referring unresolved problems to the Interior member.

(3) The Interior members will attempt to arrange supply to meet requirements through direct contact with representatives of industry.

(4) The ICC member will arrange for any reroutings or diversions of fuel supply in transit and expedite the movement and turn around of cars.

(5) The Department of Commerce member will determine the general and specific effects on industry of reported shortages and seek voluntary arrangements for diversions where public welfare will be best served.

e. Telephonic contact will be maintained by the Chairman of the Field Board with the Office of the Chairman of the Council on Environmental Quality. 5. Effective Date.-This Circular is effective the date of issuance.

G. A. LINCOLN, Director.

Mr. LINCOLN. 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 o'clock a press statement, an advance copy of which has been furnished to each member of this committee, and I would like to enter into the record this press statement which summarizes the results thus far achieved. 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 and analyze their needs, because they have some problem in getting hold of what the requirements are. In fact, walking through the door to this meeting, I met one of these gentlemen who is charged with the responsibility of production. And I asked him what he had to offer. And he handed me a press release. This was not, by the way, foreordained. Maybe he did not intend to be there. And I said: "Have you got a press release of what you are doing?"

I would also like to enter this in the record.

It reads:

Standard Oil Company of California, responding to the potential shortage this winter, has taken steps to increase its production of residual fuel oil.

O. N. Miller, Chairman of the Board, announced that fuel oil yields will be increased by about 15,000 barrels daily at the Pascagoula, Mississippi, refinery operated by Standard Oil Company-Kentucky-a subsidiary. To provide the extra fuel, Standard will increase crude runs at Pascagoula by about 25,000 barrels daily. The crude will be processed in a new distillation unit recently placed in operation. Standard also said that the new 250,000-barrels-per-day refinery at Freeport, the Bahamas, which it owns jointly with New England Petroleum Corporation, and which came on stream in mid-August, is progressing toward full operation.

Standard's 35 percent share of this facility will augment fuel supply by about 35,000 barrels per day.

(The press statement, released by Mr. Lincoln at 11 a.m., this day, follows:)

ENERGY BOARD CHAIRMAN SEES IMPROVED WINTER FUEL SITUATION

Fuel supply prospects for the coming winter heating season are vastly improved, according to the Chairman of the Joint Board charged by the President with monitoring the nation's energy situation. George A. Lincoln, Director of the Office of Emergency Preparedness and Chairman of the new Board, said there has been a heartening initial response following last week's statement on the winter energy situation. At that time Director Lincoln and Paul W. McCracken, Chairman of the Council of Economic Advisers, called upon petroleum and other industries to increase the supply of fuels.

Lincoln noted today that a number of major oil companies have already announced improvements in the supply of residual oil, which is the principal energy fuel likely to be in short supply this winter. These include additional imports of 30 million barrels by Asiatic (Shell), production increases of 60,000 barrels a day by Humble and of 10,000 to 20,000 barrels a day by Gulf, and provision for the next month at least of 25,000 to 30,000 barrels by Mobil from their refinery in Texas which had been damaged by Hurricane Celia. This total exceeds 100,000 barrels per day. Lincoln also noted that these announcements constitute only the initial industry response to avert a possible shortage of residual fuel, and that he anticipated further announcements as these and other companies evaluate their production capabilities.

The members of the Joint Board, consisting of the Director of the Office of Emergency Preparedness, the Secretaries of Interior and Commerce, and the Chairman of the Council of Economic Advisers, the Council on Environmental Quality, the Interstate Commerce Commission, and the Federal Power Commission, have consulted with industry and received encouraging assurances concerning fuel supplies, particularly for New England, where the experience of last year's cold winter undoubtedly accounts for at least part of the expressions of concern from that area.

The Joint Board has established a Federal Regional Office in Boston under the chairmanship of the local regional director of the Office of Emergency Preparedeness, with regional membership paralleling that of the Joint Board. The

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mission of this office includes the systematic investigation of all reports of fuel shortages and monitoring assistance in solving any real problems that develop. Director Lincoln commented that practically all of the approximately 40 supply problems in New England reported thus far to the Regional Board had already been resolved. Last Tuesday, for example, an arrangment was completed with Gulf to provide 500,000 barrels of low sulfur residual oil for the City of Boston, which was very nearly out of oil for some activities. The Federal Power Commission estimates that New England is in better condition this year both with regard to gas supply and the supply of fuel for utilities than last year. A greater supply of No. 2 home heating oil is assured, and inventories on the East Coast for this product are considerably above last year's levels.

Director Lincoln commented that the Joint Board's monitoring and coordinating activities are still not complete. A close check on the tanker situation is being undertaken, and consultations with industry designed to make fuel available to potential short-supply areas before a fuel crisis can occur will continue.

Lincoln also commented that he had written to the governors of every state asking their cooperation with the efforts of the Federal Government, and that the action of Governor Sargent of Massachusetts in moving to set up community energy committees is a helpful measure. He said that as of now he did not believe the current estimates indicated a crisis situation for the winter. However, there are likely to be tight fuel situations in some areas and it is only prudent to take reasonable preparedness actions early.

Mr. LINCOLN. 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 great portion of the alarms, I believe. The Regional Office has investigated 40 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. I told him to go on working on those two. He has hopes of having them resolved by the end of the week.

One action has been, for instance, the arrangement made 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.

This Board provision may need a footnote. I do not know exactly the arrangements, but I believe it amounts to a guarantee that they can have it if they want it.

Gentlemen, the events in the energy field during the past 6 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 Mediterranean-only 3 percent 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 two members of my staff. Elmer Bennett and Anthony Smith. We will do our best to answer your questions, hoping that you will keep in mind that my position is a policy position more than a detailed analytic position, and that the Department of the Interior, the Federal Power Commission, the Interstate Commerce Commission, and the Department of Commerce people are the operating people. We do seek your counsel in the matter of energy supply, which is a problem which is likely to continue for at least several years, for several reasons, one reason being the unexpected acceleration in energy demand, starting, I think, about 2 years ago.