Mr. KAZEN. And these wildcatters and the independents would be the first to be dissuaded from exploring any more if the recommendations of the task force are put into effect and you depress the price of oil? Mr. TUNNELL. I think it would affect an independent more quickly than it would affect a major, for example, but it is just simply a matter of economics, that you will spend a number of dollars to go look for $3 oil, and you will only spend a number of dollars to go looking for $2 oil. And you are just not going to explore or spend your money looking for $2 oil as quickly as you would if the price was maintained at a higher level. And if you do not go looking for it you are not going to develop it, notwithstanding the statement of that New Jersey Commissioner that said that Bill Murray cited in the paper-when he said that we had plenty of proven reserves, it is just a matter of locating them. Mr. KAZEN. Mr. Chairman, the House is in session now. I want in closing to commend all of these gentlemen for a very, very excellent presentation. They each have made a very factual and forthright presentation. Mr. EDMONDSON. I thank the gentlemen too. There are two colleagues on the committee who want to make brief statements. I want to ask one final question to the panel and ask them to individually respond to it. Did any of you find in the majority report any evidence of having considered the impact of the 1969 tax laws upon the domestic industry and the impact of those tax changes upon the domestic industry's capacity to continue to develop reserves and to expand its production? May I start with you, Mr. Ferguson. Mr. FERGUSON. No; I do not believe they considered it all right. Mr. BYRD. Not in the majority report. Mr. WINGER. No, sir. Mr. EDMONDSON. Mr. Tunnell? Mr. TUNNELL. No, sir. Mr. EDMONDSON. Mr. Clay? Mr. CLAY. No, sir. Mr. EDMONDSON. It is unanimous that they did not appear to consider the impact of the 1969 changes in their reports. The gentleman from Washington? Mr. FOLEY. Mr. Chairman, I would just like to thank the witnesses for their testimony. They have been very helpful to the committee. My own feeling is that the work of the task force has been helpful in bringing out some important questions about our petroleum policy. If we stay with import quotas and controls, as it now appears we will, I hope that the industry will devote its considerable talent to seeking ways of improving a system which admittedly has many deficiencies. In doing so, I think that the industry should move beyond consideration of national security, which is going willy-nilly as we rely more. and more on imported oil sources. Hopefully, the American oil industry will frankly enunciate and defend its own economic interests, for it has a very legitimate stake in oil programs and policies, and at the same time provide ways of assuring that American consumers will obtain oil products at reasonable prices. My only criticism of the oil industry up to this point is that, in my view, it has devoted insufficient effort to appreciating the deficiencies that exist in the present program and making positive recommendations for consideration. Thank you, Mr. Chairman. Mr. EDMONDSON. The gentleman from West Virginia? Mr. KEE. Mr. Chairman, one observation. We want to encourage the production as much as we can. I represent the Fifth Congressional District of West Virginia, the largest coal-producing district in the United States. The coal industry has gone through a very serious economic slump. Now we have run into a situation where we have a much larger demand than we have the capability to produce for coal. They are opening new coal mines down in my district. And we are advertising in the paper and doing everything we can to attract qualified people in. Now, in times past the Federal Coal Mine Health and Safety ActI have had a task force organized in my congressional district down home, labor, management, doctors, educators, public school officials, and everybody else. And I find that for your top men in producing coal-I have got four colleges in my district that are establishing special programs to train those men to do their job. And also we have the help of the Bureau of Mines in training coal inspectors. And furthermore, as to the location of the coal, we are in the first phases now of establishing training programs to train men to come into the mines starting at the bottom. I do not want to see all you in a position where you get into such a financial bind that you lose the talent that you once had, because when you lose you cannot get them back. Thank you, Mr. Chairman. Mr. EDMONDSON. The gentleman from Texas? Mr. KAZEN. No. Mr. EDMONDSON. Thank you again for your cooperation with the committee. We appreciate it very much. You have made a great contribution to our hearing. The subcommitee is now recessed. We will meet tomorrow morning in this room at 9:45. Thank you. (Whereupon, at 12:15 p.m. the House of Representatives Subcommittee on Mines and Mining of the Committee on Interior and Insular Affairs recessed, to reconvene the following day at 9:45 a.m. Tuesday. April 7, 1970.) OIL IMPORT CONTROLS TUESDAY, APRIL 7, 1970 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON MINES AND MINING OF THE Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m. in room 1324, Longworth House Office Building, the Honorable Ed Edmondson (chairman of the subcommittee) presiding. Mr. EDMONDSON. The subcommittee will come to order. In accordance with our procedure yesterday, the statements from our two witnesses today will be made a part of the record in full. We will call the first witness who is listed, Mr. W. W. McClanahan, Jr., executive vice president of the National Coal Policy Conference, Inc. Mr. McClanahan, do you want to have anyone sit with you? Mr. McCLANAHAN. Mr. Raleigh is our representative for the Hill. I am sure you all know him. Mr. EDMONDSON. We know him. Will you give your full name and title for the record, please, Mr. Raleigh. Mr. RALEIGH. Yes. The name is William Raleigh. I am a director of Government relations for the National Coal Policy Conference. STATEMENT OF W. W. McCLANAHAN, JR., EXECUTIVE VICE PRESIDENT, NATIONAL COAL POLICY CONFERENCE, INC.; ACCOMPANIED BY WILLIAM A. RALEIGH, JR., DIRECTOR OF GOVERNMENT RELATIONS Mr. McCLANAHAN. Mr. Chairman, did I understand you to suggest that the entire statement not be read? Mr. EDMONDSON. Mr. McClanahan, the entire statement will be placed in the record, and you may read it in its entirety, or you may summarize it, as you please. Mr. McCLANAHAN. I can do it as you like. I had not prepared to summarize it, but I think I could probably talk extemporaneously for a few minutes. But I will go ahead with it. Mr. EDMONDSON. Go right ahead. We are not under any time limit. Mr. McCLANAHAN. Mr. Chairman, my name is W. W. McClanahan, Jr., and I am vice president and chief executive officer of the National Coal Policy Conference, Inc., for which I appear today. The conference, as many of you know, represents the broad spectrum of industry and labor concerned with the production, distribution and consumption of coal. Futhermore, the conference has the responsibility for making certain that our Nation will have available the coal-produced energy to meet ever expanding coal based energy requirements, when and where it is needed. Specifically, the conference represents the major bituminous coal producers, the coal hauling railroads, and barge lines, many of the larger coal burning utilities and manufacturers of coal mining machines and, of course, the United Mine Workers of America. I appreciate the opportunity to appear before you and to discuss the question of residual oil imports. I also appreciate your making it possible for Mr. Brennan and myself to appear at the same time. Although the United Mine Workers constitute an important part of the membership of the National Coal Policy Conference, union President W. A. Boyle, and Mr. Brennan felt that this matter is of such importance it justified a separate presentation on the part of the labor union which is involved in the production of America's bituminous, anthracite, and lignite coal. I am sure most of you are familiar with the tremendous growth of residual imports into the east coast of the United States in the past 10 years. I will not dwell on this except to give specific statistics which serve to put my testimony in perspective. You will recall when the oil import control program was adopted, in 1959 residual oil was included as an important factor in the national security aspects of the program. Originally, it was decreed that the 1957 level of imports of residual should not be exceeded without threatening to impair national security. However, this philosophy was soon abandoned and a quota system was substituted under which imports were permitted to increase to reflect the decline in domestic residual production and to permit residual a proportionate share of the growth of the east coast competitive fuel market, irrespective of the 1957 level. In 1966, this approach was abandoned by the Secretary of the Interior and for all practical purposes all import controls were abandoned on residual. As a result, imports which in 1959 totaled approximately 172 million barrels and which by 1966 had grown to 322 million barrels per year, have since increased at an even faster rate. In 1969 they increased by 69 million barrels over the previous year to a total of around 450 million barrels for the year. The significance of this development is that these imports displaced the market for domestic fuels, principally domestic coal, and in displacing the market they also had the tendency to dry up the productive capacity. The impact on the production and use of coal is dramatically shown in figures which the National Coal Policy Conference recently published for 1969 covering the consumption of competitive fuels on the east coast. For the first 9 months, the last period for which complete statistics are available, coal consumption in the Atlantic seaboard States declined by 6.3 million tons or 4.4 percent, while the use of residual oil increased by the equivalent of almost 12 million tons of coal, or 15.2 percent. The use of natural gas also increased by 7.8 percent, making coal the only fuel to experience a decline in consumption. The significant point of these figures concerns the use of coal and competitive fuels for electric power generation. This is the largest market for coal and is expected to be the principal growth market for several years in the future. Yet, we found that total consumption of coal by utilities on the east coast declined by 1.5 million tons during 1969, the first time that such a decline has been noted during the 1960's. I might interpolate here that these figures I am now giving are figures for the entire year; we do have the utility consumption figures available for the 12 months, but total fuel consumption figures for all uses are available only for the first 9 months. This utility use decline compares with an average annual increase in coal consumption by utilities for the past 5 previous years of almost 7 million tons annually. At the same time, consumption by residual oil used by the utilities in 1969 increased by the equivalent of 14.3 million tons of coal over 1968 and natural gas by the equivalent of 3.3 million tons (C.E.). In the Midwest, consumption of coal by electric utilities continued to increase during this past year by 13 million tons, which is slightly less than the total increase the previous year. Natural gas increased by about double the 1968 figure to 4.4 million tons coal equivalent in 1969. The use of residual oil in this area did not show any major increase, but a very significant development is taking place there which must be very seriously considered relative to our future fuel security. I will discuss this later on. I think it is only proper at this point to make it clear that the decline in coal consumption and the increase in residual consumption, particularly along the east coast, has not been limited to a matter of economics. In fact, it has been to a great extent attributable to Federal policy which has tremendously influenced the direction the fuel market has taken in the past few years. I am often asked in discussing this matter whether, if residual imports were suddenly cut off or the government acted to reduce them substantially, the coal industry could immediately fill the gap. The answer, of course, is that it could not. As a matter of fact, we are having difficulty in meeting some of our commitments today, not only on the east coast but also in the Midwest. The reason for that is twofold. In fact, there are several reasons, but two principal ones. First of all, in the mid-1960s particularly after the Oyster Creek nuclear plant was announced with projected costs of less than 4 mills per kilowatt hours, a tremendous rush toward nuclear power, encouraged by government, was followed by other utilities. Dr. Wilson Laird, Director of Interior Department's Office of Oil and Gas, in a recent speech, described the result of this development as follows: "The headlong rush into nuclear power in 1966 and 1967, threw the expansion plans of both the coal and the electric power industries into disarray. Now both are off schedule; perhaps as much as two years have been lost by the premature commitment to nuclear power, and it shows in the reduced margin between demand for electric power and the capacity to supply it." I might add that the demand has been growing at a somewhat higher figure than was predicted a few years ago also. |