PETROLEUM MARKETING WITHDRAWALS

WEDNESDAY, SEPTEMBER 22, 1976

U.S. SENATE,

COMMITTEE ON INTERIOR AND INSULAR AFFAIRS,

Washington, D.C.

The committee met, pursuant to notice, at 11 a.m., in room 4200 Dirksen Office Building, Hon. Richard Stone presiding.

Present: Senators Stone, Haskell, and Leahy.

Also present: Benjamin S. Cooper, professional staff member.

OPENING STATEMENT OF HON. RICHARD STONE, A U.S. SENATOR FROM THE STATE OF FLORIDA

Senator STONE. The committee will come to order. Senator Haskell has asked me to convene and start this hearing which is to discuss S. 3486, a bill which would amend the Emergency Petroleum Allocation Act of 1973.

At this point I will insert in the record a copy of the bill, S. 3486. [The text of S. 3486 follows:]

(1)

94TH CONGRESS 2D SESSION

S. 3486

IN THE SENATE OF THE UNITED STATES

MAY 26, 1976

Mr. LEANY introduced the following bill; which was read twice and referred to the Committee on Interior and Insular Affairs

A BILL

To amend the Emergency Petroleum Allocation Act of 1973, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That section 4 of the Emergency Petroleum Allocation 4 Act of 1973 is amended by adding at the end thereof the 5 following new subsection:

6 "(e) (1) Not later than sixty days following the date 7 of the enactment of this subsection, the President shall pro

8

mulgate and put into effect a rule which shall be deemed a

9 part of the regulation under subsection (a) of this section 10 and which shall provide, consistent with the objectives of

11 subsection (b) of this section, that no marketer or distributor

II

2

1 who, on or after the effective date of such rule, is engaged in 2 an operation involving the marketing or distribution of a 3 refined petroleum product in any State shall, in any twelve4 month period, reduce or otherwise curtail such operation 5 within that State (except on the basis of a substantial de6 crease in the demand for such products so marketed or dis7 tributed) by an amount in excess of 10 per centum of the 8 total amount of refined petroleum products so marketed or 9 distributed by such marketer or distributor within that State 10 during the base period as determined in accordance with 11 paragraph (3) of this subsection, except that, if such 12 marketer or distributor has notified the Governor of that 13 State, in writing, of such marketer or distributor's intent to 14 reduce or otherwise curtail such operation in excess of 10 15 per centum, such marketer or distributor shall, after the 16 expiration of the one-hundred-and-eighty-day-period follow17 ing such notification, be authorized to reduce or otherwise 18 curtail such operation within that State by an amount which 19 does not exceed, within any six-month period, an amount 20 equal to 25 per centum of the total amount of refined petro21 leum products so marketed or distributed by such marketer or 22 distributor in that State during such base period.

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"(2) Such rule shall not be applicable with respect to

24 any such marketer or distributor engaged in any such opera

25 tion, if the total amount of refined petroleum products so

3

1 marketed or distributed by such marketer or distributor 2 in that State during the base period determined in accordance 3 with paragraph (3) of this subsection did not exceed 1 per 4 centum of the total amount of refined petroleum products

5

so marketed or distributed by all marketers or distributors 6 within that State during such base period, or to any marketer

7 engaged solely in the selling of refined petroleum products 8 on a retail level to end users.

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"(3) As used in this section, the term 'base period'

10 means

"(A) with respect to any such marketer or distributor who is engaged in any such operation within a State on or after the effective date of such rule and who,

during the entire twelve-month period comprising calen

dar year 1975 was so engaged in such operation within

that State, such twelve-month period; and

"(B) with respect to any such marketer or distributor who, although engaged in any such operation within a State on or after the effective date of such rule, was not so engaged in such operation within that State during the entire twelve-month period comprising calen

dar year 1975, the first full twelve-month period during

which such marketer or distributor was so engaged after

Senator STONE. I also will put Senator Haskell's statement in the record. As usual, it is a well-prepared, well-thought out statement. [The prepared statement of Senator Haskell follows:]

STATEMENT OF HON. FLOYD K. HASKELL, A U.S. SENATOR FROM THE STATE OF COLORADO

I am pleased to be able to chair this hearing this morning on the bill introduced by my distinguished colleague from Vermont, Mr. Leahy.

Senator Leahy's bill, which would amend the Emergency Petroleum Allocation Act of 1973 to require prior notice by a major oil company which sought to withdraw petroleum marketing operations from a State, is timely and necessary. By requiring early warning prior to a pullout by a major gasoline or fuel oil supplier, S. 3486 would mitigate the potentially serious economic and social consequences of such an action on those who can least afford to cope with them at this time.

Most of those who would be affected by the withdrawal of major gasoline suppliers live in sparsely populated rural states and the rural areas of urban states. The automobile and a reliable gasoline supply are crucial to their livelihood and to their day-to-day activities. Rural people need their cars to get to and from work, to buy groceries, and to obtain basic social services.

In addition rural residents frequently depend for heating on propane and fuel oil and on a distribution system which cannot be easily adapted to other fuels. Home heating oil has been removed from mandatory price and allocation controls by the FEA. While propane users at this time continue to be assured an equitable distribution of supply by these regulations, the FEA's aim of removing all price and allocation controls from refined petroleum_products is obvious to everyone. In particular, FEA Administrator Frank Zarb has indicated his intent to suspend this year the mandatory gasoline allocation regulations promulgated pursuant to the Emergency Petroleum Allocation Act. These regulations guarantee that the supplier-purchaser chain will remain intact, and that gasoline will flow to these low-volume retail outlets in our sparsely-populated areas.

Unfortunately, the fact that we are now experiencing a temporary petroleum surplus is obscuring the continuing need for some kind of short-term safeguards to cope with a time of scarce supply. The surplus has been cited as the prime excuse for the current FEA rush to remove federal controls. However, we should not forget that the oil embargo which dramatically illustrated the need for a strong federal presence in our energy policy is only three years behind us. We should also remember that our dependence on imported oil has not decreased, so that this surplus must continue to be considered a temporary one, subject to rapid and disruptive change. I therefore feel strongly that the concerns raised by S. 3486 are very real and very urgent concerns for millions of Americans, and will be for some time to come.

Senator STONE. The first witness will be Hon. Patrick Leahy, from Vermont.

STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE STATE OF VERMONT

Senator LEAHY. Mr. Chairman, I want to thank you and Senator Haskell for having this hearing. I know your committee schedule is already heavy this morning. I appreciate the fact you have taken time to chair this hearing at my request and the request of others so late in the session.

As you know, there is every likelihood that in the coming months the Federal Energy Administration will recommend the suspension of mandatory allocation regulations for motor gasoline. This could have serious implications for millions of Americans, particularly