Mr. McISAAC. Might I add as a rejoinder we did not touch on the uranium resource assessment program. Let me say we will be happy to submit any answers to questions you might have on that program for the record.

Mr. DINGELL. We are interested in that and may generate some questions.

The subcommittee stands in adjournment until the call of the Chair.

[Whereupon, at 3:45 p.m., the subcommittee adjourned, subject to the call of the Chair.]

DEPARTMENT OF

OF ENERGY AUTHORIZATIONS

(FISCAL YEARS 1979 AND 1980) AND ENERGY EMERGENCY PREPAREDNESS

FRIDAY, FEBRUARY 23, 1979

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON ENERGY AND POWER,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C. The subcommittee met at 9:30 a.m., pursuant to notice, in room 2123, Rayburn House Office Building, Hon. John D. Dingell, chairman, presiding.

Mr. DINGELL. The subcommittee will come to order.

Today we continue our hearings on the Department of Energy authorizations for fiscal years 1979 and 1980. This morning we will consider the authorization for the Economic Regulatory Administration and the Office of Special Counsel.

I want to commend the Economic Regulatory Administration, particularly the Office of Special Counsel, for its efforts in completing audits of the 34 major refiners. For several years, this subcommittee was very critical of the Federal Energy Administration for failing to complete even one audit of the major refiners. Under our prodding, a study was initiated in 1977 which resulted in the issuance of the so-called Sporkin report. That report highlighted these failures and urged establishment of the Office of Special Counsel. Since its establishment, that temporary office has shown a more vigorous and imaginative approach to enforcement. There have been two very large settlements and several litigation initiatives.

In response to our questions, the Department states that the field portion of the audits of the 34 major refiners will be completed in fiscal year 1980 and enforcement actions will continue through fiscal year 1981 for the 1973-76 period. The audits of the 15 largest refiners should be completed this year. Clearly, this effort deserves the support of our subcommittee. This temporary special counsel's effort is working and should be continued until the entire program is completed.

At the same time, I am disturbed at the continuing backlog of over 1,100 open audit cases within the Office of Enforcement as of January 15, 1979. Our review of a computer printout of these cases showed that the last action in over 380 of these cases occurred in May 1978. In fact, in 275 cases there was no action since 1977 or earlier. In several instances, work was suspended at the audit level because of insufficient staff. There are 18 entitlements cases located in the national office which have not been acted upon since

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1977. In addition, we found 25 cases located in either the general counsel's or the regional counsel's offices, which have been there since 1977 or earlier. More importantly, there is little evidence of the establishment of new cases.

Despite this large backog of cases, the Department, under prodding by the OMB, is planning to reduce its enforcement force by 400 positions in the last quarter of fiscal year 1980. I think that such a planned reduction is clearly premature, particularly since the total positions for enforcement have already dropped from 787 in March 1978 to 653 positions in February 1979. We want to know the reasons for that cutback and wish to be informed on it today. The Department will continue to have crude oil enforcement responsibilities, and may get more cases as a result of recent oil shortages and potential overcharges. Additionally, new enforce ment responsibilities can be expected as a result of recent legislation.

Our subcommittee will consider a number of other matters today. Among these are the ERA's manpower situation to handle the National Energy Act responsibilities and its recent award of a contract to the firm of Stone & Webster. That contract was awarded in September 1978 to provide technical support in preparing a comprehensive package of guidelines and related resource materials to assist State public utility commissioners and major nonregulated utilities in evaluating the applicability of a wide range of electric utility rate design and regulatory practices. The firm has considerable experience in electric utility matters. Indeed, its personnel appear as witnesses before FERC on ratemaking matters and has over 150 electric clients, including such giants as Duke Power, American Electric Power, Consolidated Edison of New York, Pacific Power & Light, and Northern States Power Co.

Despite this long list of utility clients, it appears that no one at the Department required additional information to determine if a conflict of interest exists. The request for a proposal did not require a disclosure statement, as required by section 33 of the Federal Energy Administration Act of 1974. When it was apparent that some conflicts may result, a clause was added to the contract by the contracting officer, but, at the urging of Stone & Websterarticle 5.7, which, on its face, indicated that a potential conflict of interest exists.

The provision states agreement by the Department, "That the rendition of these present and future services by the contractor" and its law firm "do not constitute a violation" of the organizational conflicts of interest clause of the contract. This article renders ineffective the clause added by the contracting officer. I find this provision alone to be outrageous. The witnesses today will be required to explain its origin. I am convinced that the Department is determined to ignore section 33 of the 1974 act. I am equally determined that it be enforced. The Chair is convinced that the Department has shown strong inclinations to ignore section 33 of the 1974 act. The Chair advises that I am deeply determined that it should be enforced.

The Chair is happy to welcome Hon. David J. Bardin, Administrator, Economic Regulatory Administration and Mr. Michael J. Egan.

If you will identify yourselves, we will recognize Mr. Bardin and then Mr. Egan.

Mr. Bardin, we recognize you.

STATEMENT OF HON. DAVID J. BARDIN, ADMINISTRATOR, ECONOMIC REGULATORY ADMINISTRATION, DEPARTMENT OF ENERGY, ACCOMPANIED BY HAZEL R. ROLLINS, DEPUTY ADMINISTRATOR; PAUL L. BLOOM, SPECIAL COUNSEL FOR COMPLIANCE; LYNN COLEMAN, GENERAL COUNSEL; BRIAN KILDEE, DEPUTY ASSISTANT GENERAL COUNSEL FOR PROCUREMENT; AND MICHAEL J. TASHJIAN, DIRECTOR OF PROCUREMENT AND CONTRACTS MANAGEMENT

Mr. BARDIN. Mr. Chairman and members of the committee. I appreciate this opportunity to appear in support of President Carter's fiscal year 1980 budget request for the Economic Regulatory Administration. I am accompanied at the table by the Deputy Administrator, Hazel R. Rollins, the Special Counsel for Compliance, Paul Bloom, both of whom serve in the Economic Regulatory Administration, and by Lynn Coleman the General Counsel of the Department. We have with us experts, other public servants who will be able to help us in answering your questions.

The President's request is for $156.6 million. It represents a $26 million increase over the amended fiscal year 1979 estimated budget authority of $130 million. The amended fiscal year 1979 estimate includes a request for a supplemental $42.1 million. I have attached table 1, to my statement which enumerates the particulars of both the 1980 request and the fiscal year 1979 supplemental and the total for that and I request that table 1 be included in the record as if read.

Mr. DINGELL. Without objection it is so ordered.

Mr. BARDIN. I also attached chart 1 which displays the organization of the Economic Regulatory Administration for the convenience of the committee and I request that this one page chart be included in the record.

Mr. DINGELL. We thank you. Without objection that will be inserted in the record at the appropriate place.

Mr. BARDIN. The Economic Regulatory Administration implements economic regulatory laws, plans for energy emergencies with the Assistant Secretary for Policy and Evaluation, and exercises emergency responsibilities. ERA's ongoing programs are designed to prohibit the use of oil and gas by powerplants and major industrial installations, and to convert them to coal or other abundant fuels; to control imports or exports of oil, gas, and electricity; to achieve equitable pricing and allocation of crude oil and petroleum products; to support adoption of utility rate structures which foster energy conservation; and to enforce existing Federal energy laws pertaining to the pricing and allocation of crude oil and petroleum products.

Our major tasks in fiscal year 1979 and fiscal year 1980 are to help implement the new national energy legislation, particularly the Powerplant and Industrial Fuel Use Act, as well as the Public Utility Regulatory Policies Act; to uncover and remedy petroleum pricing violations; to eliminate unnecessary petroleum regulations and simplify the remaining controls; to help develop appropriate