in unlimited amounts of fuel oil from Libya or Kuwait, or Saudi Arabia. Because a commercial plant of Cressup's size producing liquid hydrocarbons would require a capital investment of about $350 million, and management is going to take a very hard look at long-range before they make that type of investment.

Mr. KEE. In conclusion, I would like to state that everyone who is dependent upon the production of coal either directly or indirectly has deep gratitude to Mr. McClanahan and to you, Mr. Brennan, both of you, for the unsurpassed testimony that you have presented to us today. And I thank both of you very, very much.

Mr. BRENNAN. Thank you.

Mr. McCLANAHAN. Thank you.

Mr. EDMONDSON. The gentleman from Pennsylvania?

Mr. SAYLOR. Thank you, Mr. Chairman.

First let me apologize to both witnesses for not being here earlier in the hearing. I was unavoidably delayed. However, I have had a chance to read both your statements.

Mr. McCLANAHAN. We know your heart is with us, sir.

Mr. SAYLOR. The first question I have I expect both of you to an

swer.

Mr. Brennan, on page 9 of your statement you have the following conclusion:

National welfare demands a reexamination of the present structure of the residual oil program.

I would like to know from you, just what do the United Mine Workers want? Do they want an import program, do they want a tariff program, a weaker program than it is now, or a stronger program? Do you want the programs that existed originally? Or what would you like to see in effect?

Mr. BRENNAN. Mr. Saylor, as an objective we want a restriction of the importation of residual oil to an amount which would permit the domestic coal industry to expand and to retain at least that share of the market which it now enjoys?

Mr. SAYLOR. Percentage wise?

Mr. BRENNAN. Percentagewise, yes, sir.

Mr. ASPINALL. Would the gentleman yield?

Mr. SAYLOR. Yes.

Mr. ASPINALL. That does not answer the gentleman's questions. The gentleman wants to know what procedures you want. We know from your statement what you want as far as your business is concerned. We want to know if you have thought this thing through far enough to know if you want to go the tariff route, as the majority of the task force has suggested, or if you would like to have a tightening of the present import control program; mandatory imports?

Mr. BRENNAN. I was going to get to that as a second part, Mr. Aspinall.

In our judgment the quota system, with a significant tightening, represents the best approach. In our judgment the use of tariffs as such runs afoul of a great many of the questions concerning international trade. Therefore we would have a more difficult time in main

In addition to that, our investigation of the impediments to the movement of energy into cther nations of the world indicates that they are fundamentally impediments of a quota type, and they are far more effective than the tariff type.

Mr. SAYLOR. In other words, the tariff system is less elastic than the quota system?

Mr. BRENNAN. Yes, sir.

Mr. BURTON of Utah. Will the gentleman yield?

Mr. SAYLOR. Yes.

Mr. BURTON of Utah. I still think your answer falls short of answering the gentleman's question, at least it does in my mind. You said you favor the quota system over the tariff system, but with significant tightening. What does that mean, "significant tightening?"

Mr. BRENNAN. If you will review what has happened in the case of residual fuel oil, in 1966 for all practical purposes there was an elimination of a quota system. Now residual fuel is permitted into the east coast region, at least, free of any real restrictions. We would like to see a reimposition of effective restrictions such as we had in the period 1959 through the mid-part of the 1960's.

I hope, Mr. Saylor, that has answered your question.
Mr. SAYLOR. Mr. McClanahan?

Mr. MCCLANAHAN. That is exactly the position of the conference. We have for some years-in fact even 1 year we did have introduced a bill, but it got nowhere-we have recommended that a quota system be reimposed which would be based on recognizing the realities. We cannot roll back a great deal of the present usage, although we would hope that that normally would occur over a period of time. But recognizing that the present imports of residual are being used and are needed by the people who are using them, start with that as a base, and limit the increase in these quotas to a percentage of the total anticipated growth in the competitive fuel market on the east coast which we are now talking about. And by competitive fuel market I mean those who are furnishing stationary source energy, which would be natural gas, residual oil and coal, a percentage of that growth minus any increase or plus any decrease anticipated in domestic residual production.

Now, domestic residual production has about leveled off at around 6 or 7 percent of the total through-put of refineries. But as the total through-put increases, as our demand for fuel and energy increases, then the total amount of this domestic residual may become larger. So that would then be subtracted from any increase that would be granted.

Mr. SAYLOR. Just so that we may have it right with your testimony. Mr. McClanahan, what was the 1957 level which was established for importation.

Mr. McCLANAHAN. The 1957 level-I am going to have to beg off that one and supply it to you. I do not recall it offhand. It was considerably lower than we were importing in 1958. The first 3 months they attempted to roll it back to that period, and in no more than 3 or 4 months they moved it up again. And they did, then, try to hold it for perhaps a year, and then they began increasing it from there on

Mr. McCLANAHAN. The oil import control program began on April 1, 1959 after a very heavy period of imports in the first quarter. For the 9 months of 1959 covered by the program imports were at a rate of 359,000 barrels day or at almost the 1957 level. For the year 1960 imports increased to 422,000 barrels daily or 154 million barrels.

Mr. SAYLOR. And in 1969 I understand it was about 450 million barrels?

Mr. McCLANAHAN. Four hundred and fifty million barrels, yes, sir. Mr. SAYLOR. In the past

Mr. MCCLANAHAN. I see here on my testimony at page two that it was 172 million in 1959. And my recollection is that it was 145 or something like that in 1957.

Mr. SAYLOR. In the past 12 years there has been a tremendous advance as far as the electric industry is concerned in the transmission of power without appreciable loss. Now, if this is true-and I have been assured by the people in the electrical industry that it is trueand we can now transmit power in larger blocks over thousands of miles, why, Mr. Brennan, do you say that the east coast is written off with the advent of mine mouth operations?

Mr. BRENNAN. Mr. Saylor, I said that the one specific area that was written off was New England. I said that the entire east coast region was in jeopardy. I said that for a very good reason. In my judgment, given the present trend in residual fuel oil imports, it is cheaper for Pennsylvania Power & Light to build a powerplant of 1 million megawatt size on Tidewater using residual fuel oil, and ship the power back to their system, than it would be for them to build a plant of million megawatt size in central Pennsylvania and ship the power east to their system. The amount and the price levels at which foreign residual fuel oil is available, not only from the Western Hemisphere sources, but more importantly, from Eastern Hemisphere sources, is such that a utility consumer can get cheaper B.t.u.'s, short-term perhaps, but cheaper B.t.u.'s from imported sources than they can hope to get from indigenous sources.

Now, obviously from where I sit it is foolhardy for that utility system to rely upon foreign sources. However, looking at it from their standpoint, and answering to their board of directors and their stockholders, it is hard for them to explain away not utilizing this very large amount of relatively low-cost energy.

From that standpoint, strictly objectively, their planning and their attitude and their management viewpoint has to be looking outward

In addition to that, our investigation of the impediments to the movement of energy into ether nations of the world indicates that they are fundamentally impediments of a quota type, and they are far more effective than the tariff type.

Mr. SAYLOR. In other words, the tariff system is less elastic than t'e quota system?

Mr. BRENNAN. Yes, sir.

Mr. BURTON of Utah. Will the gentleman yield?

Mr. SAYLOR. Yes.

Mr. BURTON of Utah. I still think your answer falls short of an swering the gentleman's question, at least it does in my mind. You sad you favor the quota system over the tariff system, but with signeti ant tightening. What does that mean, "significant tightening?"

Mr. BRENNAN. If you will review what has happened in the case of residual fuel oil, in 1966 for all practical purposes there was an el ination of a quota system. Now residual fuel is permitted into the east coast region, at least, free of any real restrictions. We would'« to see a reimposition of effective restrictions such as we had in t. period 1959 through the mid part of the 1960'-.

I hope, Mr. Saylor, that has answered your question.

Mr. SAYLOR. Mr. McClanahan?

Mr. McCLANAHAN. That is exactly the position of the conferet, e We have for some years in fact even 1 year we did have introduced a bill, but it got nowhere we have recommended that a quota system be reimposed which would be based on recognizing the realities. We cannot roll back a great deal of the present usage, although we won i hope that that normally would occur over a period of time. But recognizing that the pre-ent imports of residual are being used and are needed by the people who are using them, start with that as a base, and limit the increase in these quotas to a percentage of the total anteipated growth in the competitive fuel market on the east s which we are now talking about. And by competitive fuel market. I mean those who are furnishing stationary source energy, which word be natural gas, residual oil and coal, à percentage of that growth minus any increase or plus any decrease anticipated in domesti p dual production.

Now, domestic residual production has about leveled off at aro 6 or 7 percent of the total through-put of refineries. But as the tori through put increases, as our demand for fuel and energy in res then the total amount of this domestic residual may become larger. So that would then be subtracted from any increase that would granted.

Mr. SAYLOR, Just so that we may have it right with your test me a Mr. McClanahan, what was the 1957 level which was established fr Importat on.

Mr. McCLANAHAN. The 1957 level I am going to have to leg off that one and supply it to you. I do not recall it offhand. It r coderably lower than we were importing in 1958. The first 3 mon• they attempted to roll it back to that period, and in no more ti or 4 months they moved it up again. And they did, then, try to lo' for peri..ps a year, and then they began increasing it from t'ere on

Mr. McCLANAHAN. The oil import control program began on April 1, 1959 after a very heavy period of imports in the first quarter. For e9 months of 1959 covered by the program imports were at a rate of 59,000 barrels day or at almost the 1957 level. For the year 1960 imjors increased to 422,000 barrels daily or 154 million barrels.

Mr. SAYLOR. And in 1969 I understand it was about 450 million Farrels?

Mr. McCLANAHAN. Four hundred and fifty million barrels, yes, sir. Mr. SAYLOR. In the past

Mr. McCLANAHAN. I see here on my testimony at page two that it was 172 million in 1959. And my recollection is that it was 145 or Something like that in 1957.

Mr. SAYLOR. In the past 12 years there has been a tremendous i.ance as far as the electric industry is concerned in the transmission of power without appreciable loss. Now, if this is true- and I have h assured by the people in the electrical industry that it is true and we can now transmit power in larger blocks over thousands of Te, why, Mr. Brennan, do you say that the east coast is written off sth the advent of mine mouth operations?

Mr. BRENNAN. Mr. Saylor, I said that the one specific area that was written off was New England. I said that the entire east coast region was in jeopardy. I said that for a very good reason. In my judgment, ven the present trend in residual fuel oil imports, it is cheaper for Pennsylvania Power & Light to build a powerplant of 1 million megaatt size on Tidewater using residual fuel oil, and ship the power k to their system, than it would be for them to build a plant of Won megawatt size in central Pennsylvania and ship the power est to their system. The amount and the price levels at which foreign idual fuel oil is available, not only from the Western Hemisphere sources, but more importantly, from Eastern Hemisphere sources, is

h that a utility consumer can get cheaper B.t.u's, short term perhaps, but cheaper B.t.u.'s from imported sources than they can Lone to get from indigenous sources.

Now, obviously from where I sit it is foolhardy for that utility System to rely upon foreign sources. However, looking at it from their standpoint, and answering to their board of directors and their stock"olders, it is hard for them to explain away not utilizing this very large amount of relatively low-cost energy,

From that standpoint, strictly objectively, their planning and their attitude and their management viewpoint has to be looking outward