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KF27 G634 1981d ptia
COMMITTEE ON GOVERNMENT OPERATIONS
JACK BROOKS, Texas, Chairman L. H. FOUNTAIN, North Carolina
FRANK HORTON, New York DANTE B. FASCELL, Florida
JOHN N. ERLENBORN, Illinois BENJAMIN S. ROSENTHAL, New York CLARENCE J. BROWN, Ohio DON FUQUA, Florida
PAUL N. MCCLOSKEY, JR., California JOHN CONYERS, JR., Michigan
THOMAS N. KINDNESS, Ohio CARDISS COLLINS, Ilinois
ROBERT S. WALKER, Pennsylvania JOHN L. BURTON, California
M. CALDWELL BUTLER, Virginia GLENN ENGLISH, Oklahoma
LYLE WILLIAMS, Ohio ELLIOTT H. LEVITAS, Georgia
JOEL DECKARD, Indiana DAVID W. EVANS, Indiana
WILLIAM F. CLINGER, JR., Pennsylvania TOBY MOFFETT, Connecticut
RAYMOND J. MCGRATH, New York HENRY A. WAXMAN, California
HAL DAUB, Nebraska FLOYD J. FITHIAN, Indiana
JOHN HILER, Indiana TED WEISS, New York
WENDELL BAILEY, Missouri MIKE SYNAR, Oklahoma
LAWRENCE J. DENARDIS, Connecticut EUGENE V. ATKINSON, Pennsylvania JUDD GREGG, New Hampshire STEPHEN L. NEAL, North Carolina
MICHAEL G. OXLEY, Ohio
WILLIAM M. JONES, General Counsel
ELMER W. HENDERSON, Senior Counsel
COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE
BENJAMIN S. ROSENTHAL, New York, Chairman JOHN CONYERS, JR., Michigan
LYLE WILLIAMS, Ohio EUGENE V. ATKINSON, Pennsylvania HAL DAUB, Nebraska STEPHEN L. NEAL, North Carolina
WILLIAM F. CLINGER, JR., Pennsylvania DOUG BARNARD, JR., Georgia
JOHN HILER, Indiana PETER A. PEYSER, New York
FRANK HORTON, New York
STEPHEN R. McSPADDEN, Counsel
Cochran, Thomas, senior staff scientist, Natural Resources Defense Coun-
Leland, Marc E., Assistant Secretary for International Affairs, Depart-
Rosenthal, Hon. Benjamin S., a Representative in Congress from the
State of New York, and chairman, Commerce, Consumer, and Mone-
Assessment, accompanied by Alan Crane, Project Director, OTA study,
Ukropina, James R., senior vice president and general counsel, Santa Fe
West, J. Robinson, Assistant Secretary for Policy, Budget, and Adminis-
tration, Department of the Interior, accompanied by Jack Campbell,
Betts, Richard, senior fellow, Brookings Institution: Prepared statement. 203-209
Gallagher, James, president, Pacific Stock Exchange: Prepared statement. 45-63
Article from the Wall Street Journal of October 22, 1981, entitled "Do
Letters, statements, etc., submitted for the record-Continued
Leland, Marc E., Assistant Secretary for International Affairs, Depart Page
301 Prepared statements ....
23, 32, 307–311 O'Brien, Thomas J., Director, Defense Investigative Service, Department of Defense: List of cleared corporations with foreign stockholders isolated by voting trust or proxy agreement and related material.
232-243 Prepared statement...
..250-260 Rosenthal, Hon. Benjamin S., a Representative in Congress from the
State of New York, and chairman, Commerce, Consumer, and Mone-
150 Rowberg, Richard E., Energy Program Manager, Office of Technology Assessment: Attachment to statement...
.175-180 Van Doren, Charles N., former Assistant Director for Nonproliferation,
U.S. Arms Control and Disarmament Agency: Prepared statement........184-198
..281-287 Security clearances or access authorization versus the need to know... 275 West, J. Robinson, Assistant Secretary for Policy, Budget, and Administration, Department of the Interior: Prepared statement..
Kuwait purchase of Santa Fe International..
ing Act reciprocity determination on Kuwait ......
under the Mineral Leasing Act... Appendix 5.-Department of the Interior materials relating to reciprocity
provisions of the Mineral Leasing Act.. Appendix 6.—Miscellaneous Department of Energy, C. F. Braun contracts and
materials. Appendix 7.-1976 U.S. Government policy paper on OPEC government in
vestment in U.S. energy sector..
Fe International takeover
Braun Hanford Co.......
FEDERAL RESPONSE TO OPEC COUNTRY
(Part 2–Investment in Sensitive Sectors of the U.S.
Economy: Kuwait Petroleum Corp. Takeover of Santa Fe International Corp.)
TUESDAY, OCTOBER 20, 1981
HOUSE OF REPRESENTATIVES,
Washington, D.C. The subcommittee met, pursuant to notice, at 10:15 a.m., in room 2154, Rayburn House Office Building, Hon. Benjamin S. Rosenthal (chairman of the subcommittee) presiding.
Present: Representatives Benjamin S. Rosenthal, John Conyers, Jr., Stephen L. Neal, Hal Daub, William F. Clinger, Jr., and John Hiler.
Also present: Peter S. Barash, staff director; Theodore J. Jacobs, chief counsel; Stephen R. McSpadden, counsel; Andrew W. Savitz, professional staff member; Faye Ballard, clerk; and Jack Shaw, minority professional staff, Committee on Government Operations.
OPENING STATEMENT OF CHAIRMAN ROSENTHAL Mr. ROSENTHAL. The subcommittee will be in order. Today and Thursday, the Commerce, Consumer, and Monetary Affairs Subcommittee continues its oversight review of foreign investment in the United States by examining the proposed $2.5 billion acquisition of Santa Fe International by Kuwait Petroleum Corp. [KPC], a wholly owned subsidiary of the Government of Kuwait. If the merger is approved, it will be Kuwait's fifth direct investment this year in a U.S. oil and gas enterprise.
Last year, Kuwait was unsuccessful in its attempt to purchase a 15-percent interest in Getty Oil Co., the 15th largest American oil firm. Within the last few days, it has been reported that Kuwait is seeking to purchase some of the refining capacity of Ashland Oil Co.
Over the past 2 years, including hearings several weeks ago into OPEC investment in the United States, this subcommittee has been studying the foreign investment issue and assessing the performance of the interagency Committee on Foreign Investment in the United States, chaired by the Treasury Department. Under stat
utes and Presidential orders, CFIUS has primary responsibility in the executive branch for monitoring and analyzing the impact of foreign investment on U.S. national interests. A subcommittee report, approved by the Government Operations Committee in the last Congress, found CFIUS' performance seriously deficient.
It also found strong evidence that the United States lacks a clear, consistent and coherent policy on inward foreign investment. U.S. laws limiting the nature and extent of such investment in very few industry sectors do exist. But these laws and our entire system for monitoring and analyzing inward foreign investment lack effectiveness and credibility because the true identity of foreign investors is frequently unknown, because of significant loopholes in U.S reporting requirements and the inadequate exchange of data among Federal agencies and because of lax enforcement within the executive branch.
While some see all inward foreign investment as necessarily beneficial, I believe the Kuwait purchase of Santa Fe International raises the most fundamental questions about the adequacy of our foreign investment policies in sensitive sectors of the U.S. economy, such as energy. Because a major oil producing member of OPEC is acquiring a sizable U.S. company engaged in a similar business, the Kuwait-Santa Fe merger requires the most careful scrutiny.
We hope that this hearing and responses to the following questions will assist the Congress and the administration in reaching decisions about this most important issue:
What is the administration's policy regarding the ownership of U.S. energy companies by foreign governments, in general, and OPEC governments, in particular? Is this policy consistent with the U.S. goal of energy independence?
Is the Committee on Foreign Investment in the United States seriously reviewing the Santa Fe investment and its national interest implications? In this regard, did Kuwait provide the committee with advance consultation as required, and are Kuwait and Santa Fe International cooperating with the CFIUS review?
Does Santa Fe's ownership of Federal oil and gas leases place it in violation of the Mineral Leasing Act which requires Kuwait to be on the Interior Department's reciprocal ownership list, and has our State or Treasury Department intervened in the process for putting Kuwait on the list?
What is the status of the Securities and Exchange Commission's investigation of charges of insider trading in Santa Fe International stock options immediately prior to the merger announcement? What types of problems is the Commission experiencing in piercing the veil of secrecy that surrounds stock orders emanating from Switzerland and other jurisdictions that provide secrecy to investors?
On Thursday, a representative of Santa Fe will provide details on the merger. The managing director of Kuwait Petroleum Corp. will discuss KPC's plans for Santa Fe and for any future energy investments in the United States, and the Assistant Secretary of Interior will describe the impact of the Mineral Leasing Act on the proposed takeover.