10. Permit unrestricted entry of foreign oil into foreign trade zones for manufacture for export.

11. Reject future special arrangements favoring individual companies that have been established in Puerto Rico and the Virgin Islands.

12. Clarify the authority of the Oil Import Appeals Board, but confines its responsibility to problems of individual companies.

13. Continue administration of the oil import program under the Department of the Interior, with policy recommendations made by a policy committee consisting essentially of the present agency members of the task force. Review oil import policy broadly again at the Cabinet level in 1973 or 1974.

14. Provide incentives to encourage imports to crude and unfinished oil and residual fuel oil from Western Hemisphere producing countries.

At this time I am unable to comment on the administrative arrangements under which the oil import control program is to be operated. The details are still being worked out, and it will be some time before we know just what our new duties and responsibilities are, and how they are to be coordinated with the new Oil Policy Committee.

Mr. Chairman, I thank you for the opportunity to come here and state some of my most earnest thoughts about a matter of great importance to us all. From what I have said this morning, it is apparent to us that a great deal more is involved here than oil import policy. The issues are not oil or oil imports, consumer prices and need, but energy, of all kinds, and the degree and timing we shall choose to make ourselves dependent upon other nations for our energy supply. And choose we must-for in a dynamic situatioon even drift and indecision represent a choice of sorts. But there are better ways of deciding, and I am sure the proceedings of this committee will contribute importantly to the quality of the decisions that must and will be made. You have my best wishes for a productive hearing.

1 Preliminary estimates.

ASSUMPTIONS FOR ENERGY RESOURCE DEMAND FORECAST

1. The rate of growth in energy consumption will lessen compared with the last several years as the economy moves toward a more stable pattern of growth. 2. Progressively increasing requirements for electric power at rates more than twice that of total energy demand.

3. Fossil fuels will generally decrease their share of gross energy inputs as the use of nuclear energy for electricity generation increases.

4. No substantial changes in resources consumption patterns due to technological developments before 1985, other than continued strong growth in nuclear capacity and generation. By 1980, nuclear energy is expected to supply slightly more than 20 percent of the Nation's generating requirements. Possible commercial developments before the end of the forecast period include the production of synthetic fuels from coal, such as pipeline gas and gasoline, and electricity generation from an advanced fossil-fueled MHD (magnetohydro-dynamics) generating system.

5. Absence of major limitations or curtailment in the use of coal resulting from anti-pollution controls, enforcement of the new Mines Health and Safety Act, and manpower shortages.

6. Forecast for petroleum includes natural gas liquids and refinery processing gain.

7. Continuation of current petroleum import program is assumed.

Mr. EDMONDSON. Thank you, Mr. Secretary, for a very fine statement, a very thought-provoking statement. It has brought up several points that up to this time at least have not had much emphasis. I am particularly impressed by the way you summarize the issues before us, the fact that the real issue is energy, and the degree and the timing that we should choose to make ourselves dependent upon other nations for our energy supply.

I believe you really summed it up very, very well with those words, and with the conclusion which you state on page 14, that we can trade long-term security for short-term advantage, which it seems, to this Member of Congress at least, is what is being proposed by some of the members of the President's task force.

I would like to go back with you for just a minute, if you will, to the statement.

On page 6 you speak of the necessary cost to the Nation as a whole right now of maintaining the mandatory oil import program. And you put that net cost at a figure apparently of about a billion dollars a year. I find that figure a new figure so far as the data that is before us, which represents the overall work of the task force concerned. And I just wonder if you would elaborate upon it a little bit.

We have had arguments presented to us, that the consumer is taking it on the nose now at the rate of $3 to $5 million a year, and we have had a Commerce Department presentation in which the pluses and the minuses of our present program are put side by side, and the average cost, when you put gas and oil together, are placed at about $2.10 a barrel.

How do you arrive at your figure of a billion dollars a year net cost? Would you elaborate upon that and let us know just how you reached that figure?

Mr. DOLE. Yes, I will elaborate on it, Mr. Chairman, a little bit. As you know, I am not an economist. And if I do not do a sufficient job on this, I will be glad to furnish the figures for the record.

Our view on this is that not only, as Commerce has stated, is it the

that would be displaced by bringing in lower cost oil that would wipe out some of our higher cost fields.

Furthermore, there would be a net loss of oil and gas that would not otherwise be produced if we had to go to a lower cost.

So when you add together the loss of transportation, the loss of employment, the loss of reserves, the cost of gas and oil, we come up with this figure.

Mr. EDMONDSON. Do you have any breakdown to the factors that point to that billion-dollar-a-year figure?

Mr. DOLE. We prepared a paper for this in the task force committee. And I would be glad to submit this paper to you for the record if you wish.

Mr. EDMONDSON. I think it would be very interesting to the committee. How long a paper is it?

Mr. DOLE. I am informed that this is a fairly short paper.

Mr. EDMONDSON. If there is no objection it will be made a part of the record at the conclusion of your testimony.

(Information for the record including nine papers prepared by the Bureau of Mines appear beginning on page 161.)

You spoke on page 8 of your testimony of the requirements of the Armed Forces for foreign oil, and stated that in calculating the share of foreign oil in the full U.S. supply these offshore listings by the Armed Forces are usually excluded. Do you have a figure as to what the total purchase of foreign oil by the military is, and just exactly what it does amount to annually?

Mr. DOLE. I beg your pardon?

Mr. EDMONDSON. Could you supply at this time or for the record what the total purchase of foreign oil by American military forces amounts to annually?

Mr. DOLE. It is about 500,000 barrels per day, or around 2 to 3 percent of our total.

Mr. EDMONDSON. I think the point which you make about Canada's position as a net importer is a point that needs to be elaborated upon a little bit here today. Is this picture of Canada as a net importer a picture that is likely to continue into the indefinite future? Do your studies indicate that Canada is likely to remain in this position with increasingly heavy reliance upon imported Middle-Eastern and Caribbean oil?

Mr. DOLE. Of course, Mr. Chairman, in answer to that we have to make forecasts, and this is where we run into disagreements with others. But they have chosen to supply their nation east of the Ottawaline by imports. Depending upon the discovery of oil on Canada's north slope along their arctic slope, we would anticipate that as the country grows, as their energy requirements grow, that they probably will continue to be a net importer.

Now, I add this caveat, that if they are successful in finding large reserves along their arctic slope as we have been, and there is every reason to believe that they might-this condition might change. But under our present forecast it would appear to be that they would still continue to be a large importer.

Mr. EDMONDSON. The President today has taken an action which statistically at least, looking at the figures which you presented us

This new oil import regulation, I think, if there is no objection will be made a part of the record at the conclusion of the testimony today. If there is no objection the release that has been made available to us by the Secretary of the President's proclamation and the new regulation that has been promulgated by Mr. Simmons, will be made a part of the record.

Mr. DOLE. Mr. Chairman, the proposed rulemaking will be published in the Federal Register tomorrow.

Mr. EDMONDSON. Without objection the regulation and the proclamation will be made a part of the record at the appropriate point in the record today, assuming they were not incorporated yesterday. And I have no reason to believe that they were as I asked General Lincoln yesterday if this was about to take place. He said it was. And he said he would furnish it to us as soon as it did take place. As a matter of fact, he was supposed to hand it to us yesterday in conference. Isn't that right, Mr. Shafer?

I do not care where it goes in the record. I just don't want it in the record twice.

I think the unanimous-consent agreement will insure an absence of repetition. If it appeared in yesterday's record the unanimousconsent agreement will not allow repetition.

(See p. 65 for proclamation No. 3279, relating to imports of petroleum and petroleum products and oil imports regulation 1 (revision 5) entitled "Canadian Overland Imports-Districts I-IV Allocations," issued by the Department of the Interior dated March 10, 1970, and signed by J. J. Simmons, III, Administrator, Oil Import Administration.)

Mr. EDMONDSON. Will not the effect of this new oil import regulation be, by limiting export to the United States to a figure substantially below present exports, to transform Canada's position as a net importer into a position of relative self-sufficiency, to the extent that their exports to the United States are reduced?

Mr. DOLE. The limit to which they were supposed to be held during 1969 was 306,000 barrels per day. They were running much higher than that at the end of the year, and the first part of this year they were going considerably higher. So the allocation of 395,000 barrels per day is really an increase to the 332,000 barrels per day which they were supposed to have been allowed for 1970.

As I mentioned, greater imports than that were coming into the northern tier States during the latter part of 1969 and the first part of 1970. And so it became incumbent upon us to give them a larger allocation than they had been originally allotted, and put on controls. Now, Mr. Simmons has been very close to this for a long time, and I would like to have him, with your permission, expand on that. Mr. EDMONDSON. Very good.

Mr. SIMMONS. Mr. Chairman, we have been in negotiations with the Canadians for some time. And as you probably know, there was a 1967 agreement between both nations. And the Canadians were not able to assure us that they could keep, or would not keep, the overland imports to the agreed amount. And at that point we felt it incumbent to institute controls, because the figure, beginning in November of 1969, was around 367,000 barrels, which was approximately 40,000

that would be displaced by bringing in lower cost oil that would wipe out some of our higher cost fields.

Furthermore, there would be a net loss of oil and gas that would not otherwise be produced if we had to go to a lower cost.

So when you add together the loss of transportation, the loss of employment, the loss of reserves, the cost of gas and oil, we come up with this figure.

Mr. EDMONDSON. Do you have any breakdown to the factors that point to that billion-dollar-a-year figure?

Mr. DOLE. We prepared a paper for this in the task force committee. And I would be glad to submit this paper to you for the record if you wish.

Mr. EDMONDSON. I think it would be very interesting to the committee. How long a paper is it?

Mr. DOLE. I am informed that this is a fairly short paper.

Mr. EDMONDSON. If there is no objection it will be made a part of the record at the conclusion of your testimony.

(Information for the record including nine papers prepared by the Bureau of Mines appear beginning on page 161.)

You spoke on page 8 of your testimony of the requirements of the Armed Forces for foreign oil, and stated that in calculating the share of foreign oil in the full U.S. supply these offshore listings by the Armed Forces are usually excluded. Do you have a figure as to what the total purchase of foreign oil by the military is, and just exactly what it does amount to annually?

Mr. DOLE. I beg your pardon?

Mr. EDMONDSON. Could you supply at this time or for the record what the total purchase of foreign oil by American military forceamounts to annually?

Mr. DOLE. It is about 500,000 barrels per day, or around 2 to 3 percent of our total.

Mr. EDMONDSON. I think the point which you make about Canada's position as a net importer is a point that needs to be elaborated upon a little bit here today. Is this picture of Canada as a net importer a picture that is likely to continue into the indefinite future? Do your studies indicate that Canada is likely to remain in this position with increasingly heavy reliance upon imported Middle-Eastern and Caribbean oil!

Mr. DoLE. Of course, Mr. Chairman, in answer to that we have to make forecasts, and this is where we run into disagreements with others. But they have chosen to supply their nation east of the Ottaw i line by imports. Depending upon the discovery of oil on Canada's north slope along their aretie slope, we would anticipate that as the country grows, as their energy requirements grow, that they probably will continue to be a net importer.

Now, I add this caveat, that if they are successful in finding large reserves along their aretic slope as we have been, and there is every reason to believe that they might this condition might change. But under our present forecast it would appear to be that they would stil! continue to be a large importer.

Mr. EDMONDSON. The President today has taken an action which statistically at least, looking at the figures which you presented us