equipped to make 100 percent unleaded gasoline. The actual amount of unleaded gasoline production is continually adjusted to meet sales demand. During 1977, Union Oil marketed only leaded premium and unleaded regular grades of gasoline but because of low sales they resumed leaded regular production in 1978. Union Oil was able to meet all of its unleaded demand in 1978. MOBIL The Mobil Beaumont refinery has been producing maximum gasoline since this past summer. All downstream gasoline-producing units were operated at capacity. In August 1978, Mobil expanded its unleaded production capacity by reactivating an idle isomerization unit which had been shut down since 1974. In its letter, the OCAW stated that Mobil had two 42,000 B/D hydroformers which had been running between 21,000 and 22,000 B/D each. There are actually three reformers at the Beaumont plant with a total capacity of approximately 90,000 B/D. According to operating records the combined throughput for these reformers was 91,700 B/D in November and 85,900 in December. The OCAW letter stated further that the unit which blends unleaded gasoline was run one 8-hour shift instead of the normal two 8-hour shifts. Mobil has two blender units in the Beaumont refinery, one for leaded and one for unleaded gasoline. These units are capable of blending up to 400,000 B/D while the refinery gasoline production capacity is only 180,000 B/D. The blenders operate only as required to meet product shipping schedules. These schedules are staggered and thus the units are manned 24 hours per day. During the months of November and December each of the blenders averaged over 16 hours per day of operation. SHELL Shell has maintained maximum production of unleaded gasoline through the summer and fall. Its overall gasoline volume was reduced sightly by the shutdown of a hydrocracker in late October. This shutdown was part of the refiner's Olefin plant expansion and octane improvement plan. The shutdown reduced leaded regular gasoline production; however, following the startup of the Olefin plant facilities, high octane by-product will be produced, which will increase unleaded gasoline production capability. The statement by the OCAW claimed that Shell's unleaded gasoline production was controlled by the throughput of the Deer Park reformers which were running below capacity. According to Shell less than one-third of the Deer Park reformate can be used in their unleaded gasoline because volatility specifications limit the blending volume of this high-boiling-range component. All the available high-octane, low-volatility components produced in the refinery are blended to produce Shell's unleaded gasoline along with the maximum permissible volume of reformate. Any excess reformate produced is then used for leaded gasoline. Mr. DAVID J. BARDIN, [Telegram] DECEMBER 19, 1978. Administrator, Economic Regulatory Administration Pursuant to your letter of December 15, 1978, our comments relative to Mr. L. Calvin Moore's assessment of Texaco Refinery operations included in his December 14 letter to Senator Henry M. Jackson are as follows: Several processing units that produce gasoline components are located in Texaco's Port Arthur, Texas Refinery. Our three catalytic reforming units, each with a charge capacity of 20,000 bpd, have been operated at capacity except during shutdowns for mechanical repairs which have not been above normal. We assume Mr. Moore is referring to these three reformers when he mentioned "hydroformers". Since February, 1978 Port Arthur Refinery has operated in a maximum gasoline mode, except during October when maximum furnace oil operations were established to meet historical seasonal demands for furnace oil. The maximum gasoline mode was reestablished after October in response to the unseasonal gasoline demand. With regards to other Texaco refineries, maximum gasoline mode operations generally have paralleled the Port Arthur operation, and all have operated at capacity except for shutdowns for mechanical repairs. If we can be of further assistance, please do not hesitate to contact us. ANNON M. CARD, Texaco, Inc. DAVID J. BARDIN, UNION OIL Co. OF CALIFORNIA, UNION OIL CENTER, Los Angeles, Calif., December 18, 1978. Administrator, Economic Regulatory Administration, Department of Energy, Washington, D.C. DEAR MR. BARDIN: This letter is a response to your request of December 15, 1978, that we advise you of the accuracy of the statements given Senator Jackson by L. Calvin Moore of the Oil, Chemical & Atomic Workers International Union in his letter of December 14. The Union Oil Co. refinery is referred to as "Port Neches." This is what we call our Beaumont Refinery which is located in Nederland, Texas. This refinery has facilities for making all fuel products, lubricating oils and greases, specialty naphthas and aromatics. Listed below is some of the data concerning the operation at our Beaumont Refinery: Our Beaumont Refinery is now equipped to make 100% unleaded gasoline when all equipment is operating normally. There is no fixed policy on the amount of unleaded gasoline that we will manufacture at this plant in any one month. We adjust the manufacture constantly to meet the sales demand. Our customers' unleaded requirements were fully met with this production. If this had not been the case, the unleaded manufacture would have been increased. It is interesting to note that we tried to push the sales of unleaded regular last year and ended up with very low sales as our jobbers went to our competitors to buy leaded regular. If you have any questions, please direct them to me, or Joseph Byrne of our company. Mr. Byrne will be available for discussions in Washington on December 19, and you may reach him at our Washington office-telephone: 659-7600. Very truly yours, Mr. DAVID J. BARDIN, W. S. MCCONNOR, President, Union 76 Division. SHELL OIL CO., Washington, D.C., December 19, 1978. Administrator-ERA, Department of Energy, DEAR MR. BARDIN: This refers to your letter of December 15, 1978 to Mr. J. H. DeNike, Vice President, Oil Products, and the attached letter to Senator Jackson from Mr. L. Calvin Moore of the Oil, Chemical & Atomic Workers International Union, concerning operations at our Deer Park facility. This facility, incidentally, was incorrectly referred to as Deerfield by Mr. Moore instead of Deer Park. We are not aware of the source of information concerning operations at Deer Park reported by Mr. Moore, but I can assure you that it is generally misleading and inaccurate. The production of Super Regular unleaded gasoline is not controlled by the operation of our catalytic reformers (CR). CR operation is continually adjusted to optimize the production of all grades of motor gasoline. Less than one-third of the Deer Park CR product (reformate) can be used in blending Super Regular unleaded gasoline because driveability and volatility specifications limit the blending volume of the relatively high boiling range platformate. The information reported for CR-1 is not correct. CR-1 does have a nominal rated capacity of about 20,000 b/d but this figure is irrelevant. Throughputs generally vary between 8,000 b/d and 16,000 b/d, depending on quality of feedstock and severity of operation. At high severity, throughputs are low but octane quality of the product (reformate) is high. At low severity, throughputs are high but product octane quality is low. CR-1 was not shut down on December 9th because of gasoline leaks or any other reason. The unit was shut down on December 13, 1978 because of lack of feed to operate both of the Deer Park catalytic reformers. The availability of reformer feed had been reduced by the shut-down of the hydrocracker on October 27, 1978 and the requirement to meet furnace oil commitments. We wish to reemphasize as stated above that the catalytic reformer operation was not limiting Super Regular production. The capacity information as stated for CR-2 also is incorrect. CR-2 capacity varies between 13,000 b/d and 24,000 b/d, depending again on quality of feedstock and severity of the operation. On November 1, CR-2 was operating at 19,000 b/d instead of the 28,000 b/d as stated. The feed rate to CR-2 was reduced to 13,000 b/d on November 9, 1978 to make a 5-day high-severity, high-octane run. The feed rate was increased to 17,000 b/d on November 14, 1978. On November 28, 1978, CR-2 feed rate was reduced to 13,000 b/d because of low feedstock availability. At that time, we had only enough CR feed in storage to run the units at a minimum feed rate for less than 30 hours. The CR-2 feed rate was not reduced because product storage was full. On November 28, 1978, storage of low octane reformate was 35% full, and of high octane reformate was 61% full. These levels were appropriate for the conditions under which we were operating at the time. As we have stated previously, our supply problems are primarily related to Super Regular unleaded gasoline, but the operations mentioned above did not impact the supply of this product. I trust this will answer the questions you may have regarding Mr. Moore's allegations. We would be pleased to discuss this matter further if you so desire. Sincerely, DAVID B. Gross, Vice President. MOBIL OIL CORP., Mr. DAVID BARDIN, New York, N.Y., December 18, 1978. Administrator, ERA, Department of Energy, DEAR MR. BARDIN: As requested in your letter of December 15, 1978, we have reviewed the statements made by OCAW with regard to operations at our Beaumont refinery. Those statements are not true. For some time Mobil's Beaumont refinery has operated in a maximum gasoline mode with emphasis on the production of leaded gasoline. During the month of November and thus far in December, the refinery has reformed all naphtha available from crude-approximately 90,000 b/d (not 42,000 b/d as stated by OCAW). The gasoline blender, which OCAW stated was operating only one shift, is and has been operating in excess of 16 hours per day which is adequate to blend all the gasoline produced. Beaumont Refinery has maintained maximum cracking and coking rates to optimize gasoline production, and a number of other steps have been taken specifically to improve unleaded gasoline availability: A pentane isomerization unit was restreamed to increase unleaded gasoline production. This unit was built at a cost of $20 million and initially brought on stream in 1974 to meet the existing lead phase-down program. It was idled that same year when EPA regulations were changed. Gasoline costs from this unit are high. During the period in question, we have purchased toluene for octane blending at prices substantially in excess of its value in gasoline. This permits increased production of unleaded gasoline. It is unfortunate that the OCAW statements received such wide-spread publicity. As you probably know, the Mobil/OCAW labor contract (which includes the Beaumont Refinery) expires January 7, 1979, and negotiations are underway. In this context, public statements by OCAW may be aimed primarily toward improving the Union's negotiating position. We have informed OCAW that their statement was in error; a copy of the Beaumont Refinery Manager's letter to Mr. Moore is attached. Very truly yours, Attachment. B. H. TEMPLETON. MOBIL OIL CORP., Mr. C. CALVIN MOORE, Director, Citizenship Legislative Department, Oil, Chemical & Atomic Workers International Union, Washington, D.C. DEAR MR. MOORE: Your letter of December 14, 1978 to Senator Jackson contained comments supplementing Mr. McClain's testimony to the Senator's Energy Committee regarding Mobil's Beaumount refinery operation. It is shocking that persons holding responsible positions in OCAW would make clearly erroneous public statements about Mobil in an attempt to influence possible legislation. To put the most charitable interpretation on the matter, OCAW officials failed to check the accuracy of these statements with me or any responsible management person. Your comments reveal either complete ignorance about our operation or an alternative which is even worse. It is particularly disturbing at this time as we initiate good faith contract negotiations at Beaumont with Local 4-243 of OCAW. In Mr. Templeton's attached response to Mr. Bardin we have corrected the record on Mobil's Beaumont refinery operation. Yours truly, R. J. RIEDERSTADT. STATEMENT OF VICTOR CINO, PRESIDENT, NEW JERSEY RETAIL SHELL DEALERS ASSOCIATION, TENAFLY, N.J. Mr. CINO. Mr. Chairman, I must apologize for not having prepared a written statement. The CHAIRMAN. Can you make it brief and precise? I am not trying to cut anyone off. Tell us the problem as you see it. Mr. CINO. First of all I would like to clarify one thing you had a problem of the price differential, and I think The CHAIRMAN. You are talking about unleaded? Mr. CINO. The price differential between the unleaded and the leaded gasoline at retail in the marketplace. The CHAIRMAN. My big concerns are the terrible gyrations in price on unleaded. Let's take one at a time. I am talking about within the unleaded market. Mr. CINO. At the retail level, which is the only one I can respond to because that is what I know best. We have had a situation in the last 3 years where the dealer has not been able to have the margin on leaded gasoline which he has been capable of taking in the past, as far back as 8 or 9 years ago. The result of this is he has kept his margins on unleaded premium and leaded premium at near ceiling levels, in order to have a pool averago margin which will allow him to survive. Consequently, what he has done in the marketplace is compete at the retail level with the leaded regular gasoline and that has been the crux of the competition among retailers across the country. They have utilized the leaded gasoline and not the unleaded gasoline. That has been the reason for this wide difference in gasoline prices at this level. Now, by the way, we have lost over 40,000 dealers in the last 4 years over this. The CHAIRMAN. You know this committee has taken a very active interest in trying to protect the small entrepreneur, the jobber, and the retailer, branded and unbranded. Mr. CINO. I understand that, but the material I have read which the Department of Energy has prepared for the Congress, specifically the largest report to the oversight subcommittee, failed to mention clearly why a dealer is making 1012 cents or near ceiling prices on unleaded gasoline, failed to mention that same dealer is probably making 3 cents a gallon on leaded regular gasoline and has been doing that for the last 3 or 4 years, the result of which has been he has been literally overwhelmed by competitive forces; namely, the independents, and the jobbers who have been working with the price discounts available to them under the current pricing regulation which has allowed them under the May 15 The CHAIRMAN. But that is not true on the unleaded. In effect, what you are saying here is the leaded becomes a loss-leader. Isn't that what you are saying? Mr. CINO. Yes, sir. The CHAIRMAN. The margin there, the cost of handling, it is at a loss. But on the unleaded the margin is greater and they offset the leaded price-I mean the profit loss on the leaded. Mr. CINO. That brings you into two areas which are apropros to this hearing. No. 1, the question of fuel switching which the EPA has made a strong case of in citing studies they have set which would account for 10 percent fuel switching. I know that is not the case in New Jersey. There is not anywhere near that percentage of fuel switching. The CHAIRMAN. What is your recommendation here? You have heard all of the testimony here this morning-well, it is afternoon. Mr. CINO. My recommendation is you have to intensify the competition for unleaded high octane premium gasoline by allowing the major refiners and the secondary majors to increase their production of high octane unleaded premium gasoline. The CHAIRMAN. They are at capacity now. Mr. CINO. Yes; but they are not being allowed to recoup any profit as a result of any costs they spend in refinery catalytic reformation. The CHAIRMAN. They are allowed to, fundamental costs, the cost of the raw materials, the indirect costs which are labor and associated costs. They are not allowed to take into consideration the cost of a new refinery, additions or reformation of the refinery. What you are recommending is the third point, is that it? The CHAIRMAN. For expansion? Mr. CINO. To produce the high octane unleaded premium. |