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Mr. FLANIGAN. It is a recommendation subject to other things, and therefore it seems to me it would be more important that you know what has to be done first.

Question. Did you help write the report, or clear it?

Mr. FLANIGAN. I did not. I did not clear it. I was neither a member of the task force nor was I an observer nor am I a member of the staff. I was aware of what happened, but I was not a participant.

Question. In the most comprehensive oil import study for ten years, in the past eleven months didn't anyone take any international opinions?

Mr. FLANIGAN. The international ramifications of the report were brought to the task force by the Secretary of State. However, he did not, I presume, since he suggests that there now be discussions abroad before we do anything else. He did not prior to coming to the conclusions in the report, discuss the various possible conclusions with our allies.

Question. Mr. Flanigan, doesn't the fact that the President has ordered the management change and the talks to go on with the foreign countries, indicate that he would prefer the tariff system barring any strong objections from our allies?

Mr. FLANIGAN. I think you could say that it indicates that the President believes that the subject deserves very careful continued investigation as recommended by the members of his task force.

Question. Weren't discussions started about a week ago with the Canadian government on the subject in Ottawa?

Mr. FLANIGAN. As you know, we have been laboring under a voluntary system of imports from Canada and the extent of the import quotas are determined after subtracting therefrom the amount of crude oil that comes in from Canada. There has been coming into this country-and I don't mean to indicate that it is a Canadian problem-an excess of the amount of those voluntary limits. So we were discussing last week with Canada what we could do to avoid a completely unrestricted flow of Canadian oil under the current system, into the United States. Those were the essential discussions that were carried on with Canada.

Question. Do you anticipate any significant changes within the quota system in the near future?

Mr. FLANIGAN. I can't answer that. I can't say I do or I don't.

Question. Would the common energy policy with Canada include water and would it include unimpeded passage through the Northwest Passage or by pipeline down the Mackenzie?

Mr. FLANIGAN. It is my understanding that water would not be included, but that crude, natural gas, coal, electricity, uranium, would be included, and that passage through the Northwest Passage and pipelines would be included.

Question. Mr. Flanigan, you have had discussions with the Canadians. This proposal seems to be very favorable to them. Have they expressed any concern about the tariff arrangement which would eventually allow unlimited exports in this country? In other words, what is the nature of their objections? Mr. FLANIGAN. This report has not been given to the Canadians. There have been, as you well know, some comments regarding tariffs and they may have made an expression to the State Department, but I know of no expression by the Canadians on tariffs.

When you say this seems particularly favorable to them, I think you have to recognize that obviously our security is best served by having contiguous sources of supply. They are contiguous and they have oil. They have a lot of oil.

If you read this report and the projections of supply, you will see that there are rather substantial amounts of oil that are projected to be imported from Canada. For instance, there is a million and a half barrels a day from the so-called frontier areas of Canada where oil has not yet been found, but it is assumed that oil will be found in those areas giving the findings that have been made in the Prudhoe Bay and the other northern slope areas.

Mr. HOMET. May I add a qualification to what you said before?

The agenda for the discussions with the Canadians has not been fixed. That will be a matter for consultation with them. I don't think we can give an inventory of what it will include at this time.

Question. Does that mean it might include water?

Mr. HOMET. No, it is not likely to.


Question. Mr. Flanigan, under the majority recommendation is that $1.45 tariff. How much will it increase Canadian imports and how much over current? There is a figure in here of 650,000 for July of 1970. How much is that an increase over current levels?

Mr. FLANIGAN. Over the levels of this month, I think it is in effect no increase. They are importing into this country at about that level at this time.

Question. Has it been at that?

Mr. FLANIGAN. No. It has built up over the last several years to about 300,000 barrels a day.

Question. Assuming that the levels for the imports recommended were accepted and went into effect for each area, how would you control that level, aside from the tariff? Would there be allocations?

Mr. FLANIGAN. There would be reserve powers so that if more oil were to come in under those tariffs than the Oil Policy Committee felt was consistent with national security, they would have the power to raise the tariff and it is suggested here that the tariff would be raised.

In fact, it is suggested that there be a substantial raise in the tariffs if more than half of the oil comes from the Middle East.

Mr. HOMET. Actually, the recommendation is that if nominations for eastern oil for a six-month period were to exceed 10 percent of demand that 10 percent would be set as a ceiling and there would be an auctioning system.

Question. What about the level for Canadian and Latin American oil?

Mr. FLANIGAN. Once we entered into a system with Canada there would be no level.

Question. Same way with Mexico?

Mr. FLANIGAN. Same way with Mexico.

Question. What about Venezuela?

Mr. FLANIGAN. Venezuela would have a differential tariff as compared with the Middle East.

Question. How do you control the level?

Mr. FLANIGAN. You control the level by the level of the tariff and if we found that the tariff was not effective either in letting in enough or letting in too much, the Oil Policy Committee would recommend a change.

Question. Is the $1.35 a barrel quota going to raise the price of foreign oil to the same price as domestic oil now?

Mr. FLANIGAN. No. There is a 10.5 cent quota now and that would be a total tariff of $1.45. That would be the equivalent of $3.00 per barrel at the well head in Louisiana. The current price in the well head in Louisiana is $3.30.

Question. Well, you are using here a price of $2.00 a barrel, the price for no controls at all?

Mr. FLANIGAN. That is correct.

Question. So you would add $1.45 on top of that?

Mr. FLANIGAN. That is a computation that includes the cost of getting the oil from the Middle East to the Gulf Coast and the cost of bringing oil from the well head to the Gulf Coast.

Question. The conclusions on the national security are sharply different from the presentations of the oil industry in all those hearings and so on. This is one of the most optimistic things I have ever seen from an official government source as to what would happen if we lose oil.

Would you characterize the national security thing?

Mr. FLANIGAN. That is right. This report says that the national security can be protected if additional imports are brought into the United States. The minority report strongly disagrees with that. The conclusion of the majority is based on the fact that there will be substantial imports, substantial additional imports from Canada, including 1.5 million barrels a day from these frontier areas.

It is conditioned by the two Cabinet Members responsible for our national security on discussing what would happen with our joint security with regard, for instance, to NATO, if we took these steps because this clearly says that if you take the step, for instance, of reducing the price of oil to $2.50 a barrel, there will be a 2.5 million barrels a day less production in the North American continent. Mr. ZIEGLER. Some of the ladies and gentlemen here are on very tight deadlines. This is embargoed until 11:30. For those of you who would like to leave, you are welcome to do that.

Question. How soon is the earliest time that we can see some change in the Consumer Price Index as a result of changes in this program?

Mr. FLANIGAN. I cannot answer that question, as I said before, because I cannot estimate by what time the negotiations that are directed by the President will be concluded and then the subsequent decision-making process will be completed.

Question. Do you think as soon as those negotiations are completed with the countries mentioned that the President will make a prompt decision because of his war against inflation?

Mr. FLANIGAN. I would certainly think he would move as promptly as he can when he has that additional information.

Question. Mr. Flanigan, you have discussed a great deal about the impact on national security. I wonder if there is anything in the report that indicates the impact on the oil-producing States as a result of this.

Mr. FLANIGAN. The national security criterion says that national security is to be construed as an effect on our economy that would be so strong as to endanger the national security. The report says that we could expect severe local dislocations by virtue of taking these courses, but that they would not be sufficient on a national basis to endanger the national security. It does not attempt to quantify how severe those effects would be on any single State.

Question. Mr. Flanigan, Mr. Homet mentioned a minute ago the term "nominations for eastern hemisphere oil.” Is that a part of the proposal that imports be allocated as a result of nominations or anticipated levels be decided in that way? And is this unique to that area and to the system?

Mr. HOMET. If you give me a minute, I can answer that question.

Question. While you are waiting, can you explain why Mr. Areeda, who directed this survey, is not here? I am rather surprised and it seems to me perhaps he is being kept out because his views perhaps are too strong.

Mr. FLANIGAN. Mr. Areeda, during the entire time he directed this survey, taught a class on Thursdays and Fridays at Harvard. He did that every Thursday and Friday and determined that he would not change that practice for today. If you like, you may get his views. The shuttle is waiting.

Mr. ZIEGLER. Since we have received this report we have wanted to make it available. We made the decision to make it available today. There have been a great number of requests from a number of you gentlemen to have the report. We felt although we would like to have had Secretary Shultz and Mr. Areeda here for the presentation of the report, that we would go ahead and release it, understanding that they would not be here. But that is the reason for it.

Mr. FLANIGAN. But they will be available for discussions with you gentlemen in the future should you wish to have those discussions.

Question. In Boston?

Mr. FLANIGAN. I don't know when he will be down here again.

Mr. HOMET. Perhaps I should express my appreciation for the implication that by contrast I am the "staff marshmallow."

Chapter 35 expresses the adjustment.

Question. The equilibrium tariff level would be a matter of decision by the new management system. Does that mean the ultimate tariff level? Mr. FLANIGAN. That is right.

Question. There was a recommendation by the staff that the task force itself recommend an equilibrium level. That is what Secretary Shultz recommends. Mr. FLANIGAN. I don't believe that is correct, although I don't know what the staff recommended as apart from the task force. Secretary Shultz feels that based on the discussion in the report, that it would be prudent now to say that within five years or three years we could go to a tariff level of $1.00. But I don't know, I am not suggesting that as a staff versus a task force report.

Question. The clear implications of the questioning here are that the President's decisions here are an effort to study this to death. Is there likely to be some decision before the election? Has the President had consultations on this question with the oil-producing State Congressmen?

Mr. FLANIGAN. Number One, with regard to the suggestion that the question is being studied to death, I don't agree with that at all. This is a problem of the utmost importance. It relates to our national security and it obviously relates to the national security of our allies.

In order to proceed with prudence and care, it is necessary that we discuss it with our allies and our neighbors and the affected nations. I would think that that takes a considerable amount of time, but whether or not it takes so much time that it goes by the election, I don't know.

With regard to discussions with the Congressmen or Senators from the oilproducing States, the President, as you know, sees Congressmen and Senators fairly regularly. Whether they have discussed this with him, I don't know. But

I do know that the President had a policy of not meeting with people to discuss the oil import problem and that includes Governors of oil-producing States. It includes businessmen and it would include groups of Senators and Congressmen who would ask to see him in order to discuss this subject. He has not met with them to discuss this subject.

Question. What about the President of Standard Oil who was reported as visiting the President several times? He didn't discuss this with him?

Mr. FLANIGAN. I don't believe he visited him "several" times. Just before his retirement, Mr. Haider did come in to see the President. I believe it was last June that he came in in his capacity both as that and as the head of the API. It was a practice prior to that visit that the President of the United States did neet with the head of the API once a year.

Question. Didn't the President discuss this with Congressman George Bush Lefore he announced for the Senate from Texas?

Mr. FLANIGAN. I was not with the President and I seriously doubt the President discussed this with Mr. Bush.

Question. Presumably the quota system will continue while the studies are going forward. Is there any reason why this permanent Oil Policy Committee the President is creating today could not grant some kind of temporary relief in the interim time, say, to New England where they seem to need the oil?

Mr. FLANIGAN. The responsibility of the Oil Policy Committee will include the policy direction of whatever system is currently in effect and that, of course, would include policy decisions with regard to the oil import quota system while it is in effect.

Question. I am sorry to say it, but I am not precisely clear on the steps that are now going to be taken to enable the President to reach his decision. Will this new policy committee participate in this? Will White House staff members study this report and so on?

Precisely what is the mechanism by which the final alternatives will be put before the President?

Mr. FLANIGAN. As you know, the Office of Emergency Preparedness is part of the Executive Office of the President. Therefore, the Chairman of the Oil Policy Committee is a member of the Executive Office of the President, as is the Chairman of the Council of Economic Advisers, who I believe is on that committee. He will receive information from his fellow members, State and Defense, and together they will make recommendations direct to the President as to what steps should be taken when they feel that sufficient information has been gathered to warrant those steps.

Question. In effect they will feed into this committee the information of these conversations that have been recommended by the Oil Policy group. The Oil Policy group will meld them with the recommendations, whatever they may pick out of this, and that is how the President's final decision will be made?

Mr. FLANIGAN. That is how the recommendations to the President will be made.

Question. Mr. Flanigan, in answer to a previous question you were able to extrapolate the per gallon effect on gasoline prices if the majority proposal were accepted. Can't you do that on home heating oil on a per gallon basis?

Mr. FLANIGAN. I was only able to do that with the help of the Staff Counsel. Mr. HOMET. Same answer. It would be about a half a cent on a gallon. Question. Is that oil or gas?

Mr. HOMET. Home heating oil was the question.

Question. One-half a cent a gallon less is what you were saying? How much do you think we consume?

Mr. HOMET. There are consumer cost estimates throughout the report. In Part IV there is a summary paragraph of what the savings would be in a gross figure.

Question. Is that paragraph 328? That doesn't give the gross figure.
Mr. HOMET. If you will wait a minute I will give it to you.
Question. How about the increase in the natural gas?

Mr. FLANIGAN. That figure is a gross figure on the cost of petroleum products derived from the cost of crude oil. It does not include what it would cost the consumer because he loses certain incomes through current transfers of payments as is suggested in this summary statement and is suggested in Point One.

Mr. HOMFT. Paragraph 407 is the gross savings at various assumed levels of protection. Then in Part II, Paragraph 207, it develops that at some length, taking into account some of the offsets that Mr. Flanigan mentioned. I would also refer you to Appendix G.

THE PRESS. Thank you.


Washington, D.C., February 23, 1973.

Chairman, Subcommittee on Legislation and Military Operation, Committee on
Government Operations, Rayburn House Office Building, Washington, D.C.
DEAR CHET: I understand that your subcommittee is reviewing President
Nixon's Reorganization Plan No. 1 of 1973 which, among other things, would
transfer responsibilities of the Office of Emergency Preparedness to other
agencies of the Federal government. The President's message to Congress of
January 26, 1973, states in part that:

"All OEP responsibilities having to do with preparedness for and relief of civil emergencies and disasters would be transferred to the Department of Housing and Urban Development. This would provide greater field capabilities for coordination of Federal disaster assistance with that provided by States and local communities, and would be in keeping with the objective of creating a broad, new Department of Community Development.”

The American Public Power Association, which represents more than 1,400 local publicly-owned electric utilities, is keenly interested in OEP functions relating to solution of problems of inadequate supplies of fuel for generation of power.

In recent months, a growing number of APPA members in many parts of the United States have found that they are unable to secure sufficient quantities of natural gas or oil to guarantee continuing reliable electric service. Some of these systems have faced emergency situations where fuel reserves were so short that the community actually reduced consumption or anticipated loss of its power supply, with attendant adverse effects on homes and businesses. I have attached to this letter some examples of difficulties encountered by certain utilities and reported to APPA.

Where the efforts of the utility or local and state authorities have been unsuccessful in resolving a fuel supply problem and the situation has escalated to the status of an emergency, APPA and its member systems have called upon OEP for assistance. In certain instances, OEP action has been of aid in helping the utility to obtain needed supplies of fuel.

President Nixon asserted earlier this month that: "One of the highest priorities of my Administration during the coming year will be a concern for energy supplies a concern underscored this winter by occasional fuel shortages." Work carried out by OEP in this area has proved of value in fulfilling this priority. APPA urges that in your study of Reorganization Plan No. 1 of 1973 you (a) ascertain that the fuels functions previously carried out by OEP will be effectively implemented by the Department of Housing and Urban Development, (b) identify the particular office and personnel in HUD responsible for such activities, and (c) ascertain the policies, plans, and procedures which HUD proposes to deal with emergency fuels problems.



Washington, D.C.

DAVID CITY, NEBR., February 12, 1973.

DEAR MR. RADIN: In answer to your letter of February 9, 1973, we have not been able to purchase any diesel fuel for our plant.

We had a contract with Standard Oil Division of American Oil Company, which expired December 31, 1972 and we have not been able to get any fuel since that time.

Yours truly,

MERWIN E. WRIGHT, Superintendent of Utilities.

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