Chart 3 shows the effect of cold year conditions upon Edison's oil requirements. Under these conditions Edison's 1970-1971 winter season oil usage is expected to be approximately 13,600,000 barrels, of which 6,900,000 barrels would be supplied from storage. If possible under such conditions, it would be desirable to have supplementary oil deliveries made from oil suppliers to avoid drawing the oil storage below the minimum desired storage levels. (Mr. Wall's written statement previously accepted for the record follows:) STATEMENT OF WILLIAM E. WALL, VICE PRESIDENT, PUBLIC AFFAIRS, Mr. Chairman, may it please the Committee, my name is William E. Wall. I am Vice President, Public Affairs, Consolidated Edison Company of New York, Inc. I appreciate this opportunity to comment on one relatively narrow-but critically important-aspect of the subject of these hearings. I refer to the importation of residual fuel oil and its use in New York City in the production of electricity. Con Edison, under the regulatory jurisdiction of the New York Public Service Commission, has the privilege and duty of supplying electrical energy to the nine million people of New York City and Westchester County. Last year we produced and distributed over 30 billion kilowatt hours of electricity. We project future customer demand will grow by an additional 375,000 KW annually. Put differently, and allowing for adequate reserves, we will need to build a new plant of 1,000,000 KW capacity every two years to meet the growing demand for power in this region. The electricity used in New York City is produced in 12 production plants, all of which, including even our nuclear plant at Indian Point, burn oil, some exclusively, some as an alternate to coal and/or natural gas, and, in the case of our nuclear unit, to provide supplemental heat. In all, Con Edison will burn over 35 million barrels of residual fuel oil in 1970. Virtually all of this oil will be burned in plants located within the city. And the products from this combustion will enter an atmosphere already overburdened with effluents from countless furnaces, incinerators, and vehicles. It has been observed that if Los Angeles, given its weather and physical setting, had the same amount of air pollution as New York, it would have long since become uninhabitable. No case need be made against air pollution. It constitutes a clear and present danger to the public's health and safety and is so recognized. Just last week, on March 12, 1970, the New York Times, on page 27, reported: "The fastest growing cause of death among New Yorkers is pulmonary emphysema, a mortality rate that has risen 500 percent in the last 10 years, according to the New York Tuberculosis and Health Association. During the same period, the association says, deaths from chronic bronchitis have increased 200 percent. "A city medical examiner, talking of health effects of air pollution, puts it more pungently. "On the autopsy table it's unmistakable,' he remarked the other day. "The person who spent his life in the Adirondacks has nice pink lungs. The city dweller's are black as coal.'" Con Edison has done much to eliminate its contribution to this urban scourge. Over the years the company has made capital expenditures of more than $150 million for air pollution control equipment. Another major move has been in the direction of low sulfur fuel. In 1965, a special committee of the city council reported that Con Edison was responsible for a major portion of the sulfur dioxide present in New York City's air. This was the result of using fuels with a relatively high sulfur content. Immediately thereafter, 3 years before any legal requirement to do so, Con Edison, at an annual increase in fuel cost of $15 million, began switching to the exclusive use of oil and coal with sulfur contents of 1 percent or less. This was accomplished by 1968 and cut by half the amount of sulfur dioxide we had formerly put into the air over New York City. We have also greatly reduced the amount of soot, or particulate matter, leaving our stacks. This has been accomplished by the use of electrostatic precipitators, in which we have invested over $70 million, and by the use of low sulfur oil, which has a greatly reduced ash content. In all, we have reduced by 40 percent particulate emissions in 5 years. It is now our intention-and by law we are required with respect to new plants to burn only oil with a sulfur content of 0.37 percent. This year we expect to burn nearly 4 million barrels of this very low sulfur fuel. If a supply of this premium fuel can be obtained, we expect further dramatic reductions in our particulate and SO2 emissions. In addition, we will be in the market for 1,300,000 barels of very low sulfur No. 2 oil for use in our gas turbine units now being installed to provide peaking capacity during times of maximum demand. The oil import program has great potential to help in the fight for clean air. This was recognized in July 1968, by former Secretary Udall when he said: "Air pollution is one of this Nation's most dangerous environmental hazards. and the Federal Government is totally committed to control this hazard with all of its available resources, including the oil import program." [Emphasis supplied.] President Nixon was quoted in the January 2, 1970, New York Times, on the occasion of signing into law the National Environmental Policy Act of 1969, as follows: "The nineteen-seventies absolutely must be the years when America pays its debt to the past by reclaiming the purity of its air, its water, and our living environment". And in this context, it is relevant to recall the congressional declaration of policy of that act. "The Congress *** declares that it is the continuing policy of the Federal Government, in cooperation with State and local governments, and other concerned public and private organizations, to use all practicable means and measures *** to create and maintain conditions under which man and nature can exist in productive harmony, and fulfill the social, economic, and other requirements of present and future generations of Americans." The Cabinet task force report on the oil import program, however, contains recommendations that would, if accepted, serve to make low sulfur oil more expensive just at the time when its use is in increasing demand for air pollution control purposes. As this committee is aware, nearly all the residual fuel oil, No. 6 oil, used on the eastern seaboard comes from foreign sources. In Con Edison's case, our supply comes in the main from Libya, which has large reserves of naturally occurring low sulfur crude, something unique to it and not present in the Western Hemisphere. Under the present quota system residual oil if used in the United States as a fuel can be imported without limitation. The Cabinet task force report recommends changing this, substituting for the free importation of residual fuel oil a tariff against Eastern Hemisphere residual oil. The purpose of the tariff, in the words of the report, section 25, would be to: "*** assure Latin America a minimum share in the U.S. market and protect Latin America from growing imports of Eastern Hemisphere residual. Because Latin America residual tends to be higher in sulfur content than that made from Libyan crudes, its chief competitor, this restriction might mean some increase in the price of residual fuel oil for municipalities limiting sulfur content, to cover the cost of desulfurization." We submit that the tariff would inevitably increase the cost of very low sulfur residual oil by thirty cents a barrel. This cost, like all expenses incurred by utilities, must eventually be borne by our customers through their electric bills. Thus, an argument could be advanced that the proposed tariff should be rejected because of the inevitable inflationary effect it will have in New York and other eastern cities where very low sulfur residual fuel oil is now-or soon will be-used in quantity for producing electricity. But even if this were an era of deflation, the proposed tariff would run contrary to the public interest. To artificially add to the cost of an essential product possessing properties that can improve the breathable atmosphere in our largest eastern cities is in direct opposition to expressed Government policies. Indeed, the reverse is called for, that is steps should be taken encouraging larger supplies of low sulfur residual fuel oil in the interests of air pollution control. The people of New York, and other large east coast cities, now enjoy an environmental benefit from the natural economic advantage Eastern Hemisphere suppliers of low sulfur residual fuel oil hold over their Western Hemisphere competitors. This economic advantage cannot be erased without, at the same time, eliminating the environmental benefit. In short, the tariff if adopted would only serve to make the fight for cleaner air more expensive. The present quota system has been modified in the past to provide incentives to encourage a greater supply of low sulfur residual fuel oil along the east coast. Rather than a tariff penalizing such imports, even further steps in this direction are required to stimulate an adequate supply to meet soaring demand. As noted above, Con Edison proposes installing within the city of New York for both peaking and emergency power purposes, jet turbine engines with an aggregate capacity of over 1,000 megawatts. These machines, similar to aircraft jet engines, can use kerosene or No. 2 oil. Kerosene is more expensive, in the order of $5 a barrel, making No. 2 oil, all other factors equal, the preferred fuel at about $4.50 a barrel. However, for operation within New York City, it is essential for environmental reasons that the No. 2 oil be of the lowest sulfur content obtainable. Recently we invited bids from 27 suppliers of petroleum products, included in whose ranks are numbered the largest oil companies in the Nation. We were seeking bids to supply approximately 1,300,000 barrels of No. 2 oil for consumption in our jet turbines. Only seven of the 27 submitted bids. None of the seven, either separately or collectively, were prepared to meet the full requirements of our order. Measures should be initiated to induce suppliers to meet this urgent demand, including, if necessary, additional foreign imports of No. 2 oil. The issue here goes beyond environmental considerations to the very reliability of essential electric energy supply to the Nation's largest city. We urge the tariff recommendation against Eastern Hemisphere residual fuel oil be rejected and that, instead, incentives be provided to stimulate additional supplies of very low sulfur residual fuel oil and No. 2 fuel oil for powerplant consumption. Mr. KEE. The Subcommittee on Mines and Mining is adjourned until April 6. (Whereupon, at 4:30 p.m., the committee adjourned, to reconvene on Monday, April 6, 1970.) OIL IMPORT CONTROLS MONDAY, APRIL 6, 1970 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON MINES AND MINING OF THE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS, Washington, D.C. The subcommittee met, pursuant to recess at 9:55 a.m. in room 1325, Longworth House Office Building, the Honorable Ed Edmondson (chairman of the subcommittee) presiding. Mr. EDMONDSON. The Subcommittee on Mines and Mining will come to order. This is the fifth in a series of hearings on the oil import control program and on the proposals that have been made for modification of that proposal. This morning we have a group of distinguished witnesses whom we are hopeful we can hear during the morning hours in order to clear the way for the support of the Senators out there this afternoon at the ball park. I think they are going to need all the support we can give them. If there is no objection from the committee, the statements from the five witnesses who are programing for today that have been supplied to the committee will be made a part of the record at the appropriate place and the witnesses will be free to testify from them when they appear, and the statements will be made available to the press at this point. Mr. ASPINALL. Mr. Chairman, reserving the right to object-but I of course do not object—I would suggest that we not only have this unanimous consent request, but a unanimous consent request to the effect that we give each one of these witnesses this morning 10 minutes to make a direct presentation with respect to the statement to which he is making reference, and then question them all at the same time. This will permit us to meet the deadline that the chairman has suggested. Mr. EDMONDSON. Is there objection to the request by the chairman? Hearing no objection, it is so ordered. I think the chairman makes that request with the understanding that if it is impossible to make the full presentation in 10 minutes, that the Chair will be understanding and cooperative on the subject. It is the understanding of the chairman that it is agreeable to the witnesses who have been notified of their appearance here this morning to have Mr. Herbert D. Clay, chairman of the American Gas Association, appear first. So, Mr. Clay, will you come forward. Your statement has already been received for the record. But you are at liberty to read it in its entirety or to summarize as you wish. |