Now I would like to address the specific actions underway for alleviation of a potentially severe natural gas shortage this winter.

As Chairman of the Energy Resources Council, I have directed the establishment of an interagency task force to be led by the Federal Energy Administration. This group is charged with the responsibility of providing an initial forecast in early July as to the extent of the anticipated shortage and the associated economic impacts during the coming winter. The name of this group is the Natural Gas Policy and Contingency Task Force.

Simultaneously, they are commencing a data-gathering survey aimed at more clearly ascertaining anticipated curtailments to energy consumers this coming winter. The survey questions will be directed to the intrastate pipelines and distributors who in turn are requested to furnish information pertinent to their customers.

In order to avoid duplication of effort, the FEA and the FPC are coordinating their actions very closely; in other words, the FPC is working with the interstate market and the FEA is working with the intrastate.

The schedule calls for the data to be returned to the task force around the first of August. It will be closely checked and verified as appropriate for accuracy; after which, it will be used to pinpoint specific areas and regions projected to undergo the most serious economic impacts of the shortage.

I might add that plans call for this forecasting system to continue indefinitely, or at least so long as the problem of natural gas continues to be severe. By the end of September, the task force will finalize the results of policy analyses and have developed an operational contingency plan which will be delivered to the ERC and, subsequently, to the President.

The Commerce Department is lending vigorous support to the interagency task force. We are participating at all levels and are bringing to bear the industrial and analytical expertise existing within the Department. With full knowledge that industry can be crippled by this winter's situation and knowing that such could retard the recovery of the nation from its economic recession, we are committing full support to the interagency effort.

We are in close communication, and will continue to be, with industry representatives to keep them informed as to what is going on, obtain their ideas and recommendations, and to get their reaction to possible policy options.

We are working on a program of public awareness designed to acquaint both industry and the general public with the criticality of the situation, the urgent need for wise use of gas as an energy source and the costs involved in getting the situation back to normal.

We are looking into successful community action programs which occurred last winter: those which enabled areas of extreme curtailment to ward off a disastrous situation.

Danville, Virginia is one which readily comes to mind. We will have the full story soon and will give it wide distribution for the benefit of others.

There is a need for a close working relationship between the Administration and the Congress to keep industrial gas users fully informed. With timely information, they can begin searching for means to minimize this winter's gas shortages as much as possible. Quite possibly, this will mean the use of alternate fuels. As you know, the Federal Energy Administration has made provisions to allocate petroleum fuels to offset gas curtailments. Those having need of such assistance should contact their FEA regional office.

In closing, I want to again emphasize the urgent need for deregulation of new gas as the best overall solution to continued gas shortages. For the very short term, we must look to all feasible possibilities to increase the supply, reduce the demand, and make prudent use of the supplies on hand. The latter two seem to offer the most for this winter.

Mr. MOORHEAD. I have a staff memorandum of the curtailments in the Columbia Gas System. I would like to submit it for the record. Before I do that, I think that it would be significant to point out that, in the State of Kentucky, for example, in the Columbia Gas System, 135 manufacturing companies will be curtailed at 100 percent for 1975-76.

In New York, 59 industrial users will be curtailed 100 percent.
That means no gas at all.

55-778 O-75-29

Because of the membership of this committee, I will point out that Maryland is curtailing 24 users at 55 percent, in Pennsylvania 275 users will be curtailed at 55 percent.

This is just from the Columbia Gas System. I don't have the figures yet for North Carolina, but I am sure they are not going to be very happy news.

Mr. PREYER. We just had a hearing before the State's utilities commission last week. It was announced that overall there would be a 60-percent curtailment this fall.

Mr. MOORHEAD. Without objection, this memorandum will be made part of the record.

[The memorandum follows:]

[Memorandum]

June 25, 1975.

To: Hon. William S. Moorhead, Chairman.
From: Edwin W. Webber.

Subject: End-use curtailments within the Columbia Gas System, by state and by minimum percentage.

Kentucky.-49 users are now curtailed; 135 users will be curtailed at 100% for 1975-76.

Ohio.'-1,288 are now curtailed; 1,288 will be curtailed at a 60% minimum figure for 1975–76.

New York.-15 users are now curtailed; 59 users will be curtailed at 100% for 1975-76.

Maryland.2-11 users are now curtailed; 24 will be curtailed at a 55% minimum for 1975-76

Pennsylvania.3-175 users now curtailed; 275 users will be curtailed at a 55% minimum figure for 1975-76.

Virginia.-38 users are now curtailed; 51 users will be curtailed at a 50% minimum figure for 1975-76.

West Virginia.'-84 users are now curtailed; 128 users will be curtailed at a 60% minimum figure for 1975-76.

Mr. MOORHEAD. The subcommittee would like to hear now from the Honorable Jack W. Carlson, Assistant Secretary for Energy and Minerals, Department of the Interior.

Mr. Carlson, as is the custom with this investigative subcommittee we administer the oath to witnesses.

[Whereupon Mr. Carlson was duly sworn in.] Mr. MOORHEAD. You may proceed, Mr. Carlson.

STATEMENT OF JACK W. CARLSON, ASSISTANT SECRETARY FOR ENERGY AND MINERALS, DEPARTMENT OF THE INTERIOR

Mr. CARLSON. Mr. Chairman and members of the subcommittee, I appreciate this opportunity to appear before this committee to discuss elements of the natural gas preparedness program in the Department of Interior.

You have already heard from Rogers Morton in terms of the administration's stance on this very critical problem. A critical problem that will match the impact that we had from the cartel itself as we

face this winter ahead.

1 Major Pennsylvania curtailments include Lukens Steel (2.028 mmcf), and Jones/ Laughlin Steel (1.763 mmcf).

2 Major Ohio curtailments include Vistron. Libby-Owens Ford. USS (Loraine). Wheeling Steel (Mingo), Conalco. Empire Detroie Steel.

3 Major Maryland curtailments include Celanese Corporation, PPG.

4 Major West Virginia curtailments include Dupont, Kaiser Aluminum, Weirton Steel.

As you are well aware, certain reports have predicted a significant shortfall in natural gas supply during the coming winter months clear across the country and, in the particular States represented on this committee, the curtailments will be disproportionately large.

In all candor, I must admit though that this problem will continue in future heating seasons, not just in this one. We will continue to have this problem until we face up to the longer term solutions.

So, the long-term solution is the real solution to this problem.

In the short-term we can only make very small modifications to alleviate the particular burdens on individuals but not, in fact, solve the problem.

The first solution has to be, as Secretary Morton indicated in his testimony, the deregulation of natural gas prices to induce the kind. of increased exploration activity we are now witnessing in the intrastate gas industry.

There should be prompt enactment of title III of the President's Energy Independence Act for the deregulation of natural gas.

I am frankly somewhat hopeful that the actions of the Senate in recent days—and there seems to be some considerable hope-will lead to a bill which will deregulate natural gas.

The President's proposal is designed to reverse the declining natural gas supply trend as quickly as possible and to insure increased supplies of natural gas at reasonable prices to the consumer.

Unless deregulation of natural gas prices occurs, we will continually be facing gas curtailments during the remainder of this decade as well

as into the next.

Second, we must continue our accelerated program to explore and develop the promising new area of the Outer Continental Shelf.

The leasing of Federal lands onshore and offshore has produced $15.6 billion in bonuses and royalties during the period 1960–73, representing a very significant source of revenue to this Nation as well as additional supplies in natural gas.

Natural gas production during this period, 1960-73, amounted to 17.2 trillion cubic feet from Federal properties onshore and 20 trillion cubic feet from the Outer Continental Shelf.

That is equivalent to about twice the consumption level of natural gas in the economy today.

The annual production, however, stands at 4 trillion cubic feet or 18 percent of our total consumption.

Since 1971, gross production of natural gas from the OCS has increased at an annual rate of 8.6 percent. It is this increase in production that we would like to enhance and enlarge, and our best chances of doing just that are in the new frontier areas that hold promise.

Accordingly, the Department of the Interior believes our present energy needs require a strong program to develop the oil and gas resources of the Outer Continental Shelf, where this can be done with reasonable protection of environmental values and without other seriously undersirable impacts.

We, in the Department of the Interior, have been pursuing and will continue to pursue such a program.

We anticipate the doubling of production if we do continue this program during the next 10 years or the output of the OCS rising to 8 trillion cubic feet as opposed to the 4 trillion cubic feet we see now. That could rise to 30 or 40 percent of the total consumption.

The hope for the Nation in the future, next to deregulation of natural gas, is this strong effort in the Outer Continental Shelf. I might indicate that we expect a disproportionately large amount of gas in the Atlantic area in relationship to oil.

Let me repeat: Deregulation of gas prices coupled with expansion of domestic exploration and production offer us the best hope of arresting declines in natural gas supply and the inevitable curtailments that come with this decline in supply.

The Department of the Interior has several efforts in operation which deal with enhancing the short-term supply of natural gas and improving the present situation.

The Department is an active participant in the natural gas policy and the contingency task force of the Energy Resources Council, which Secretary Morton identified. We are cooperating with all the agencies involved. We are heavily involved with the Federal Power Commission and the Federal Energy Administration.

The outlines of the task force have already been indicated. I mean, the outlines of the activities of the task force.

First, they develop the initial forecast and the magnitude of the natural gas shortage. They are also establishing a continuing data collection reporting system for natural gas and are establishing a more permanent short-term natural gas forecast and economic analysis capabilities to be operational for the problems associated with this fall heating season.

They will assess the impact on industry and, thereby, upon jobs in the communities. They will analyze and develop policies to mitigate this shortage including an operational contingency plan.

This is the mandate of that particular task force under the Energy Resources Council.

Within the Department of the Interior we have the Geological Survey, the Bureau of Land Management, and the Bureau of Mines as prime sources of factual information concerning energy fuels both in terms of the reserves that we anticipate, the production from those reserves, and the probable resources in which we can expect reserves and production in the future.

In another short-term area. we are reviewing the possible use of Federal royalty gas to alleviate short-term shortages. It has been suggested that the Federal Government collect gas in kind, that is, take delivery of the gas instead of the money it represents.

The royalty payments are about 16% of the natural gas produced in the Outer Continental Shelf.

Our review to date would appear to indicate that this would be of very limited help, however. The gas involved is already going into the interstate market as opposed to the intrastate market.

If the Federal Government were to take its share in gas and allocate it to a pipeline system which is having curtailment problems, one result would be a curtailment problem in the pipeline system from which gas was taken.

the

In the majority of cases, we cannot cure our shortage by taking gas out of one pipeline and putting it into another. All pipelines lead to

the market.

I might just indicate, in terms of the curtailments, if you were to take a royalty gas away from those areas that are curtailed 10 percent or less and give it to those areas that are curtailed more than 10 percent, you are talking about adding only 1 percent of their needs on 3 percent of their curtailment level if that would have happened. That is, of course, assuming that you have the pipeline connections and other problems to be able to ship that kind of gas around.

In conclusion, in my mind, we can expect very, very little relief from the approach that some people have advocated of allocating royalty gas.

A better and more efficient mechanism than taking Federal royalty in kind would be the change in the Federal Power Commission's priority system or the use of extraordinary relief procedures of the Federal Power Commission.

It is indicated in Secretary Morton's statement: There is considerable concern about the priority system that does exist in the Federal Power Commission.

The Department of the Interior also has responsibilities for resource emergency preparedness plans for electric power, petroleum and gas, solid fuels, minerals, and water in cooperation with many other agencies within the Government.

In carrying out this responsibility for oil and gas the Department has established a standby organization, the Emergency Petroleum and Gas Administration.

A memorandum of agreement between the Department of Interior and the Federal Power Commission provides for the Commission to assist the Department in the resolution of national defense-related emergencies with respect to electric power and natural gas.

However, in a situation that is not a national defense-related or major emergency, the Federal Power Commission has authority and responsibility to act to resolve the problem unless, of course, the Congress changes that situation.

The Emergency Petroleum and Gas Administration and the Defense Electric Power Administration would be available to assist the Federal Power Commission in less than emergency conditions.

The Emergency Petroleum and Gas Administration and the Defense Electric Power Administration were originally developed for defense preparedness and subsequently broadened to include natural disasters. The Defense Electric Power Administration would have limited capability in a natural gas problem. In 1974, approximately 17 percent of the electric power in the United States was generated from natural gas.

The Department is being assisted in its development of emergency plans for natural gas by an industry advisory committee, the Emergency Advisory Committee for Natural Gas (EACNG).

This Committee has been asked to study the problem of natural gas curtailments and ways to reduce the adverse impacts of such curtailments. A copy of my letter of April 7, 1975, to the Chairman of this Committee is attached for the record.