July 26, 1972
Page 25456
Mr. McINTYRE. Mr. President, I rise in support of the position taken by Senator COTTON, my good friend, and the distinguished senior Senator from our great State of New Hampshire, which I understand to be in opposition to the inclusion of section 3 in this bill.
I commend my distinguished senior colleague for what the Senator from Virginia (Mr. SPONG) referred to as "vigilance," because in matters concerning oil industries and the ramifications thereof, and what they do to consumers in New England we in New England had better be alert.
I must support this motion with some reluctance. Two groups that I have given my strong support to during my service in the Senate, consumers and this Nation's merchant marine, are forced into conflicting positions with regard to this legislation.
The issue here is not the need to strengthen this country's merchant marine – that I have consistently supported. The State of New Hampshire is a coastal State and the fine harbor at Portsmouth has a long and recognized history as a seafaring city. The issue here – as I see it – is not whether there is need to give assistance to our merchant marine but the manner in so doing.
The bill that we are discussing today has taken the importation of foreign crude oil as a vehicle. I am firmly convinced this is not the correct approach. The basis for my position is that crude oil imports into this country are now controlled by a very discriminatory and unfair quota system with a $5 billion to $7 billion cost that is not borne equitably by all the citizens of this country.
To attach a 50 percent U.S.-flagship requirement on the import of crude oil on top of an outdated and unfair quota will only increase this unjust burden on consumers.
The operation of the mandatory oil import quota system is particularly unfair to New England and my state of New Hampshire. Since there is no oil production in close proximity to New England and our region is not serviced by any major oil pipeline, we must rely almost totally on ships to bring us our much needed oil supplies. This is not true in other regions of the country which are fortunate enough to have vast quantities of oil close at hand or are serviced by large pipelines.
An amendment offered by the able Senator from Virginia (Mr. SPONG) exempting residual fuel oil and home heating oil from the legislation, was accepted by the committee. This amendment will have a very beneficial effect on the impact of this legislation on consumers of those products.
However, a substantial amount of the oil products used along the eastern seaboard, which includes gasoline, are produced at refineries along the east coast from foreign crude oil. The result of the legislation, if passed, will result in higher prices on literally hundreds of petroleum products and even though Senator SPONG's amendment will somewhat mitigate the impact of the proposal the cost and burden is still too much to justify passage.
The proponents of this proposal are stating that its enactment will not increase cost to consumers.
I understand that the main proponents are the maritime unions and shipbuilders. Their basis for this argument is that prices in the United States are controlled by domestic crude oil prices and not by foreign imports. This is essentially true and has been one of the main considerations in my opposition to the Mandatory Oil Import Quota System. This quota system allows those refiners fortunate to import foreign crude oil to pocket the difference between the cost of foreign crude oil and domestic. This price difference at the present time, I understand, is between 75 cents and $1 a barrel.
Currently, oil producers throughout the United States are pushing for increased crude oil prices on domestically produced oil. The price of domestic oil today is around $3.50 a barrel. If the flagship requirement is passed, the result will be immediate pressure for substantial increases in domestic crude oil prices. So, the end result, in my opinion, of accepting this provision will inevitably result in price increases to consumers for their petroleum products.
The President's Cabinet-level task force that studied the oil import quota system in its 1970 report to President Nixon clearly stated that the cost of this quota is not shared equally among all the citizens of our country. And because of the fact that New England must rely on ships to supply its petroleum needs, this bill today would only add to that unfair and unjust burden.
Recent statements by the Secretary of the Interior, Mr. Morton, have given greater emphasis to what has been termed "our pending energy crisis." It is now estimated that between 1980 and 1985 this country must rely on foreign sources to meet up to 50 percent of its oil demand. The mandatory oil import quota system was implemented in 1959 to discourage reliance on foreign oil sources and to encourage domestic exploration and production. The facts, however, clearly show that this has not been the case.
While crude oil production in this country and exploration expenditures have remained fairly constant, the opposite is true outside the country. Major international oil companies have greatly expanded their worldwide search for oil, and we are now informed that over the next several years we must increase crude oil imports by 1 million barrels per day per year.
In fact, just recently, the President issued a proclamation increasing crude oil imports by an additional 230,000 barrels a day for 1972 which will mean that for the remainder of this year there will be additional imports of over 400,000 barrels a day.
With regard to this legislation before us, the issue must be raised as to whether it is not time for the President to accept the advice given him by the majority of his Cabinet-level task force to abolish the quota and to replace it with a tariff. This, in my opinion, would be much more equitable for all the citizens of this country.
With regard to the dire situation facing our merchant marine, revenues generated by a tariff could well be used to strengthen the U.S. merchant flagship fleet. But I say again that as long as the mandatory oil import quota system is in existence, it is unfair to place an additional burden on consumers that would result from enacting legislation as reported out by the committee.
Another point should be raised with regard to this legislation and that is the appropriateness of requiring a set percentage of the import of any product that must be brought in by U.S. flagships.
Traditionally U.S.-flagship requirements have dealt with exports not imports. While it may be that this approach is necessary, I think we must be cognizant of the possibility of retaliation by the trade partners. If we can impose such a requirement on their imports into our country then what is to stop them from placing similar requirements on goods they purchase from us?
So I close my remarks at this time, and thank my distinguished colleague from New Hampshire for his vigilance and watchfulness in this matter.
Mr. MAGNUSON. Mr. President, will the Senator yield me 5 minutes?
Mr. LONG. I yield 5 minutes to the Senator from Washington.
Mr. MAGNUSON. I did not want to belabor this matter too much, but I think many matters that have been put into the RECORD today should be cleared up.
I just heard the Senator from New Hampshire express some fear of retaliation. Retaliation from what? All these countries have almost 90 percent of their quotas, their shipments and their cargoes, in their own bottoms. When we ask for something for ourselves that we do not have now, what are they going to retaliate with?
Retaliate? It is like suggesting, when someone has been robbing you for a long time and evading taxes for a long time, and he is told, "Wait a minute. We are going to have you pay your fair share and share the burden," what is he going to retaliate?
The oil companies do not want this amendment and they have done a pretty good job lobbying since we put it in the bill. Perhaps it does not belong in the bill, but unless we start to do something, we are going to find ourselves in a dangerous position. We are now 16th in the world in shipbuilding. I expect to pick up a paper some day to see that the Belgian Congo is ahead of us.
The distinguished Senator from New Hampshire says we have provided for shipbuilding in the bill. We have. That is what this amendment is all about. When we do that, we are going to give them some cargo to carry, so they can pay taxes and pay American seamen.
Something has been mentioned here about security. It has nothing to do with security, believe me.
I have a letter here from Admiral Zumwalt saying just the opposite from what the Senator said. I do not know where the Senator from New Hampshire's letter came from, but they have always gone on the theory that what we want is control over our ships and our allies' ships in the world; therefore that we need to build a merchant marine and tanker ships.
The oil companies want to haul under foreign flags. Panama has a bigger merchant marine than we do, tonnage wise. So does Nicaragua. So does Liberia. Who finances them under foreign flags? The oil companies.
The Senator from New Hampshire was there when we used to meet in the little room over here, when we tried to do something about foreign flags, runaway flags, and we were told that most tankers were under foreign flags so they could evade taxes.
The Panamanian Oil Co., which was then owned by them – and this is true of all of them; they have these foreign companies, and when they make a profit, they keep it and bring it in in the year when it is most propitious for them, taxwise. That is your foreign fleet.
But the Defense Department says, "Oh, we have them under control." Some control, shipping in the Gulf and in the Indian Ocean, financed by American oil companies, flying a Greek flag, with an Italian captain and an Indian crew. Some control they will have over that, if something happens.
In World War II, all our allies said, "Oh, we will have a big fleet, everything is under control, with the joint military people all over the world." Those were our allies. And we found, after 2 months, that they wanted all their tonnage for themselves, and we spent $9 billion building up a merchant marine of Liberty ships and other ships that are now obsolete; $9 billion, and we had to do it – sometimes we built them in as little as 60 days. If Senators want to get into that with foreign flags again, that is all right with me.
I do not know about the State Department; they are always against anything. Some days I think maybe we ought to appropriate some money in one of our appropriation bills to hire about six Greyhound buses and take them on a Cook's tour of the United States, to find out what is going on. It would do them good to give them a leave of absence. Sure, they are opposed to this because they might have to dicker with some countries. Those guys might get mad about it.
Retaliation? Retaliation against what? They have been retaliating against us, these foreign countries, with ships' fees, harbor fees, and all kinds of insurance, and they are government subsidized. So let us talk about our own business for awhile.
I am concerned about the balance-of-trade deficit which has been mentioned here. I will not belabor it, but it is the highest it has been in the history of our country, and this has a lot to do with it. If I had my way, I think I would bring them in 100 percent in American ships. We pay money for that oil.
I do not know about the evidence – we did not have any evidence that there was going to be any change in the consumer prices. There may be. I know, as my friend from New Hampshire has said, that when something goes higher, the consumer pays in the long run. But if we make these American oil companies pay, and tell them to bring their own ships back under the American flag and employ American people, it will not hurt the consumer, I will tell you that, and we will get the taxes from them that they are now evading all over the world, every place.
Mr. LONG. Mr. President, will the Senator yield at that point?
Mr. MAGNUSON. Yes.
Mr. LONG. The Senator knows that right now the domestic price of oil is about $3.50, and the foreign price is about $2.50. There is a dollar difference. Will the Senator tell me how much the consumer is saving out of that dollar?
Mr. MAGNUSON. None of it.
Mr. LONG. He is not saving one penny of that dollar, none of it.
Mr. MAGNUSON. No.
Mr. LONG. So that if the foreign cost goes up somewhat, so that the difference is, let us say, 90 cents instead of a dollar, it still will not make any difference to the consumer.
What is the explanation? When you understand the fact that these little people domestically are competing with these larger companies, that is what is holding the price down. As far as these little people are concerned, their price is as low as it always was, for every domestic producer. They have to use American labor. They have to use these same American working people the major oil companies do not want to hire.
Mr. MAGNUSON. And they do not hire them.
Mr. LONG. Let me put it this way: When a little independent company in my State or any other State of this Union produces its oil, it cannot haul it away to the ship, he has got to pay some fellow with a truck, and pay 10 times as much for transportation as these big companies are paying, and that trucker is an American working man. He has got to pay his own people to haul the oil. Suppose he can put it in a ship, he has got to pay an American union at American wages, and he has the same problem of negotiating with a labor union that these major oil companies do not want to be bothered with. He does not have that choice.
As far as any little fellow producing oil in this country is concerned, paying American taxes and American wages, he has got to comply with all of these American standards, and he is having a difficult time competing with these foreign oil companies, many of them American-based, which have all the advantages. That is where the big profits are, but they are not giving the consumer any advantage of the fact that it costs less to produce over there. They are coming in and selling it for the same price as this little fellow can get for his oil, who is paying the American scale of wages every step of the way.
Mr. MAGNUSON. We are just subsidizing cheap labor; that is all we are doing. And the cheapest you can find someone said, "That's fine, because then the consumer might get a better deal." But if we work on that theory all the way down the line, we should not manufacture one thing in this country, should we, because it would be cheaper to ship it in. Not a thing.
Mr. LONG. But the point is–
Mr. MAGNUSON. We should take everything and ship it all in, because they have cheaper labor, and it will be cheaper if we operate on that theory night down to the end of the line.
Mr. LONG. The Senator and I know that if the consumer was the fellow who had to pay the $25 million, we would not have all this work by the larger oil companies to defeat this amendment. If the consumer were paying it, rather than the oil companies, the oil companies would not have done all this work to try to defeat it.
Mr. MAGNUSON. And another thing I think they ought to take into consideration, if this keeps up, is that we are now down to 4.2 percent of all our exports and imports being shipped in American bottoms – 4.2 percent, and we are 14th in shipbuilding.
If they would bring their ships back and pay taxes, we would not have had this situation. They do not want to do that; and they do not want us to pass this little bill. That is the whole nubbin of this thing, and I just think we ought to. I do not particularly like it on this bill, but it is germane to the bill, we have held hearings on it, the Commerce Committee reported it out. But in the meantime, oh, boy, they have been pretty busy.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. LONG. Will the Senator yield me half a minute?
Mr. MAGNUSON. I Want 1 more minute, to take another shot at them.
Mr. COOK. Mr. President, will the Senator yield?
Mr. MAGNUSON. They get the benefit of oil depletion, but they do not want to fly American flags or employ American workmen. No, they want the benefit, and they want the second benefit of hiring the cheapest labor they can find in the world. Then they con people into saying, "Well, it will be cheaper for you." Well, I say let us quit making anything here, and it will be cheaper for everybody.
I appreciate what the Senator from New Hampshire has said about me and my Commerce Committee activity. For all of us in the committee, I say I think this is the best bill to take care of the people up in New England. And we will make the oil companies buckle down to pay the difference.
Mr. LONG. Mr. President, will the Senator yield me 1 additional minute?
Mr. MAGNUSON. I yield the floor.
Mr. LONG. I would just like to ask the Senator a question. As much as we are interested in consumers, is it not true that we have done everything that we could conceive of to be assured that the consumer would not in any way be injured by this bill? He is protected by price controls as it is, but what is really protecting him is domestic competition, and not the foreign price. And it is not true that that consumer also needs the benefit of a little money to spend?
Mr. MAGNUSON. Yes.
Mr. LONG. We are trying to provide him with 100,000 good jobs.
Mr. MAGNUSON. To pay some taxes, which the oil companies do not pay.
Several Senators addressed the Chair.
Mr. COTTON. Mr. President, I yield myself 2 minutes.
Mr. MAGNUSON. Oh, may I put in the RECORD one more thing?
Mr. COOK. Regular order, Mr. President.
Mr. MAGNUSON. Will the Senator yield me a minute? I want to put in the RECORD something that bothers me considerably up in my country.
I do not want a lot of foreign tankers that are not built right coming into Puget Sound with oil. We get some of them, and the pollution problem is one that the people around here had better think about, because an American tanker is better built and better manned.
Mr. CRANSTON. Mr. President, will the Senator yield me 10 minutes?
Mr. LONG. I yield.
Mr. CRANSTON. Mr. President, I ask unanimous consent that during the time yielded to me I may offer an amendment.
The PRESIDING OFFICER. Is there objection? The Chair hears none, and it is so ordered.
Mr. CRANSTON. Mr. President, I send to the desk an amendment and ask that it be stated.
Mr. COTTON. Mr. President, was there a unanimous-consent request?
Mr. CRANSTON. Yes. I asked unanimous consent, after consulting Senator LONG, that I may bring up an amendment which will not consume any substantial time.
Mr. COTTON. Mr. President, we have a debate here
Mr. LONG. I suggest to the Senator that he withhold the unanimous-consent request until he has offered his amendment and everyone has had a chance to hear it.
The PRESIDING OFFICER. The amendment would not be in order without the unanimous- consent request.
Mr. COTTON. As a matter of fact, I would like to wind up some of these points. Some assertions have been made, and other Senators want to be heard. I am sure the Senator from California will have ample opportunity to present his amendment and to argue his amendment. We are on the committee amendment. I am sorry, but I am constrained to object.
I yield myself 2 minutes, and then I will yield to the Senator from Kentucky. I must object at this point. I certainly will yield later.
Mr. President, if I am permitted to do so by the manager of the bill, if he does not object, I yield myself 2 minutes.
The PRESIDING OFFICER. The Chair had already ruled that objection had not been heard.
Mr. CRANSTON. Mr. President, I will be glad to withdraw my request.
Mr. COTTON. I did not hear the request.
The PRESIDING OFFICER. The Senator has withdrawn the amendment.
Mr. COTTON. I thank the Senator. Mr. President, if I am permitted to do so, I would simply say that I was very thrilled by the able speech of the distinguished and beloved chairman of the committee, and the dialog with the distinguished Senator from Louisiana, to the end that what we should do is to haul these oil companies in here and make them pay taxes and make them sail under our flag. If there is one Senator who is in a position to deal with the oil companies and plug up the great loopholes we hear so much about, it is the distinguished Senator from Louisiana, the chairman of the great Committee on Finance. If that is what we should do, let us do it, and we will raise the flag and follow his noble leadership.
But this amendment is not going to do that. This amendment is going to force the oil companies to provide bottoms. And who is going to pay for it? Do not try to tell me that it is not going to be passed on to the consumer.
I am not representing the oil companies here. The Senator from Kentucky is not representing them. The Senators from New England who have spoken and are going to speak are not representing the oil companies. They can take care of themselves. We are interested in the consumer.
Under this bill ships are going to be built, and all the taxpayers will pay for them, not just the people who buy oil. If you want to get hold of the oil companies, go right ahead and do it, instead of putting this amendment into this maritime bill. Go ahead, in the great Committee on Finance, and let us have responsibility and let us have taxes paid by people who are making the money, and let us plug up these loopholes.
It is news to me, and it amazes me, to have my good friend charge us with something which, obviously, if it is true – of course, I would not know anything about those things – could have been handled long ago.
Mr. STAFFORD. Mr. President, I am opposed to the provision of H.R. 13324, the maritime authorization bill, that would extend the 50 percent U.S.-flag requirement of the cargo-preference law to the importation of crude oil.
I oppose the amendment for two major reasons:
It has not been fully considered.
It would force substantial increases in oil prices in New England and throughout the country.
The amendment being considered by the Senate today marks a radical departure from prior procedure and policy. What we are considering is direct interference in the private transactions and shipments of private companies. To be sure, the commodity involved, oil, is subject to import quotas, but we are still interfering unnecessarily, and imposing restrictions that cannot be justified under previous precedents with respect to the cargo preference laws.
The amendment has not been fully considered. I understand that hearings were recently held by the Commerce Committee on a separate bill containing the cargo preference provision. Many questions were raised; many were left unanswered. In brief, I do not believe that the Senate has been given enough information on which to make a decision. We are being asked to vote on a bill with major implications without having answers to some very critical questions.
I have several major ones that have not been answered, and I am sure that other Senators do as well.
A prime question involves the impact of the bill on petroleum product prices. Proponents of the bill say that importers could absorb the cost and realize a reduced value for their import licenses;
I believe this will not and probably cannot happen so easily and that the increased costs of shipment will be passed on to consumers in the form of higher prices. The point is that no one knows, and we are being asked to pass a bill that may force American consumers to pay hundreds of millions – perhaps billions – each year in additional fuel oil and gasoline costs. Past trends would seem to indicate that the consumer would be the victim.
Another question involves the impact on the cost of domestic shipments of oil from the U.S. gulf coast to the northeastern States. Obviously, the amendment would create a tremendous demand on U.S. tankers, far in excess of the present carrying capacity. This will surely force the cost of domestic shipments of gasoline and No. 2 fuel oil up sharply. The impact on New England, where most oil comes in by tanker and much of it comes from the gulf coast, would be severe.
The provision exempting imports of No. 2 fuel oil will be of no help, since only 4 percent of the No. 2 fuel oil consumed in the Northeast is imported; the cost of shipping the remaining 96 percent will, as I have indicated, go up. Once again, the point is that we simply do not know what the impact on shipping costs – both domestic and foreign – will be.
A second critical question involves the administration of this provision. How will it be applied – by company, by ship, by port? Once again, we have no answers.
This is a major piece of legislation, with profound impact. I cannot support it on the basis of so little information, and its tendency for adverse impact on the consumer.
Third, the impact on New England. As I have already indicated, this bill is certain to force petroleum prices up. At a minimum, I believe that the price of gasoline and heating oil in New England will increase by 1 to 2 cents per gallon; if prices increase by 1 cent, the consumers of New England alone will be forced to bear added expense of $100 million per year.
In New York State alone, a 1-cent increase will cost consumers more than $100 million per year.
Nationwide, the added costs are likely to be several billion dollars per year, adding to the already artificially high oil cost to the consumer.
Mr. President, the implications of this bill for every American citizen are immense. As responsible legislators, we have an obligation to take a closer look, to demand all the facts before we act.
I urge that this provision be deleted from H.R. 13324.
Mr. HANSEN. Mr. President, I fully support the views of the distinguished senior Senator from New Hampshire, and am greatly concerned about the adverse impact on the United States which would result from passage of the cargo-preference provision of the maritime authorization bill.
I believe it can be demonstrated that the provision would inevitably result in increased costs to the U.S. consumer, an argument which has already been convincingly made. I also believe that the provision would of necessity create serious difficulties for our international trade and foreign policies generally, and I would like to draw your attention to some of the problems in these fields.
First, the provision would place the United States in the position of being the first major trading nation which, by law, imposed an outright flag preference on privately owned commercial cargoes. This would, of course, violate provisions in more than 30 treaties with other nations to which the United States is a party. But, even if we were to accept the breaking of these treaties with equanimity – which I am sure we are not – we would in fact be setting a pattern which would be contrary to our interests.
Already, some oil-producing countries are talking about building their own flag fleets. Any action that we might take to restrict the movement of oil may well be the catalyst that precipitates drastic action by the oil-producing countries. Such action would inevitably reduce the availability and flexibility of tanker tonnage we need to insure our ability to meet U.S. demand for oil supplies in the future. At a time when the oil-producing nations are showing an increasing ability and determination to control world markets for their crude oil, it would be foolish indeed to force an extra weapon for this purpose into their hands.
Such countermeasures by foreign countries could easily cancel out any balance-of-payments gains we might achieve by use of U.S.-flag vessels in our international oil operations, apart from the real danger that American ships could be subject to political boycotts in the Middle East and elsewhere.
Certainly no one can disagree that an adequate supply of energy is vital to the American economy and to our Nation's security. To maintain such security may call for such steps as emergency storage, faster siting of nuclear plants, as well as increased American-flag shipping capability.
But we must not delude ourselves into the belief that relying on American-flag tankers to supply half our oil imports will automatically give us greater energy security – especially if the proposed action forces a serious migration of ships of the U.S. effective control fleet to the flags of less friendly nations.
Historically, there have been frequent, crippling labor interruptions on American ships and docks. The question is: Can this Nation afford that risk when, in a mere 8 years, one-half of all the oil used in the United States will probably be brought in from overseas?
Also, Mr. President, as the Department of Defense has pointed out in a letter to the able ranking minority member of the Commerce Committee, Mr. COTTON, the burden of "cargo-preference" will fall unevenly on various groups of firms in U.S. petroleum refining and marketing.
The small refiners have enough problems now in competing with the integrated companies who have their own crude production, both domestic and overseas. These smaller refiners will be more damaged than the large ones because they now receive a relatively larger share of crude oil import quotas, and they will correspondingly lose more when their import rights, burdened by "cargo-preference"' costs, lose some of their value.
I yield to no one in my contention that the United States needs a strong merchant fleet. But we need to achieve this objective without creating international crises and encouraging retaliation against U.S. shipping interests. I believe that construction remedies for the ills of the U.S. merchant fleet can be found. I do not believe that this piece of legislation will accomplish our objectives.
Mr. BROOKE. Mr. President, I rise to state my agreement with the remarks of my distinguished colleague, the Senator from New Hampshire (Mr. COTTON), who seeks to strike section 3 of H.R. 13324. This section would require that at least 50 percent of oil imported into the United States be transported in U.S.-flag tankers.
For reasons relating not only to the national interest in broad security terms but also to the interests of taxpayers and of all consumers of oil products, I am opposed to the provisions of this bill requiring that 50 percent of our oil imports be shipped in American bottoms.
The Senate is being asked to approve an authorization involving some $555 million for subsidies and other expenses under section 1 of the bill. However, this may not be the only cost involved. Even though we are told that section 3 will not result in additional cost to the Government at least in the near term, section 3 could involve literally billions of dollars of costs in future years – much of it borne by the American consumer. In fact, the Department of Interior has estimated that the additional cost to the consumer could reach $1 billion by 1985.
The committee report says that this cost will be borne by the oil companies who allegedly can afford it. This may be true in the immediate future, but it will not be long before the costs will necessarily be passed on to consumers.
The costs as estimated in the committee report of approximately 10 cents per barrel of oil for using higher-cost American-flag ships, are valid only if the oil comes from nearby places like Venezuela or North Africa. The real cost may be five times as much, it seems, if most of the oil has to come from the Persian Gulf or points in the Middle East. By 1985, we may have to import as much as half of our total oil consumption largely from those areas.
I think it is fair to say that the cost of our oil products is going to go up in the future, for a variety of reasons, and some of the causes may not be under our own control. I will not say that passage of this bill, as amended, would be the cause of all those increases. But this bill will help to increase those costs, and that burden will not simply be borne by the oil companies and their stockholders.
Section 3 carefully exempts residual in home heating oil from the 50-percent limitation.
However, we still must recognize that substantial quantities of these products are refined domestically from foreign crude oil. Therefore, the price of these products will increase as the cost of foreign crude oil from which they are derived also increases. Every citizen who heats his home with oil must eventually feel the effect of this crude oil cost increase.
We should know what the long-term costs will be and who will bear them. Unfortunately, the Committee on Commerce in its report on this bill – page 31 – did not really face up to this issue. It stated that its cost estimates were based on U.S.-flag vessels built and operated without construction-differential and operating-differential subsidies. It went on to say:
Of course, to the extent that such subsidies were utilized in building and operating vessels carrying cargoes subject to this legislation, the cost differential between foreign and U.S.-flag vessels would be reduced.
It would have been more accurate to say that the cost to the taxpayer would be increased. The report concluded:
The issue of whether vessels built and operated with these subsidies may carry cargoes reserved to U.S.-flag vessels is currently the subject of an administrative proceeding before the Maritime Subsidy Board. Docket S.244.
The committee did not express views on this issue in light of the pending administrative proceeding.
Little more than a year ago, Congress overwhelmingly approved the Merchant Marine Act of 1970, the administration's program to help rebuild our merchant fleet, and in so doing agreed for the first time to subsidize the construction and operation of a bulk carrier fleet under the U.S. flag. Previously, for 35 years, we have subsidized only regularly scheduled liner services. We also accepted two important principles; that our merchant fleet, after receiving subsidies to put it on a competitive basis, should compete for new business, throughout the world; and that indirect, hidden forms of subsidy, such as cargo preference, should be phased out in favor of direct subsidies.
Section 3 of the bill would do just the opposite. It would expand the area of hidden subsidy, which is already very large, and it would give tanker operators a monopoly position with respect to a large part of our imports.
It has also been pointed out that this legislation offers significant additional benefits to our shipbuilding industry, to employment and to the Nation's balance of payments. Benefits which I completely support. However, these benefits can also be received if our tanker fleet is built up through subsidies as contemplated under the President's program. The difference is that the cost, and how it will be borne, will be known and can be evaluated and will have to be approved. I believe that it is the proper way to proceed.
The most persuasive arguments which have been advanced by proponents of section 3 are those that relate to our national security requirements. The committee report deals with this subject at some length. But to the extent that these arguments are valid, they do not support the conclusion that a 50-percent cargo reservation is the only way or the best means to achieve the objective.
On the contrary, it would appear that a direct subsidy program would be a far better solution than a cargo reservation requirement, because the latter would certainly encourage other countries – particularly the oil producing countries who already control the sources of supply – to adopt similar measures and extend their control to the transportation of their oil.
Moreover, the 50-percent requirement posed by section 3 of this bill could create a new trade barrier at a time when the United States is urging other countries to dismantle their restrictions against U.S. imports. If such a cargo reservation precedent is set with petroleum products, it would also be applied to other bulk cargoes, for example, farm products. This would increase the cost to the American consumer of many more goods than simply oil and its byproducts.
As matters now stand, we and our NATO allies control about 90 percent of the world's tanker fleet, and this has served us well in emergencies. But if the oil-producing countries insist upon carrying half of their exports in tankers under their own control, we will be faced with a completely new situation. Any such possibility has even greater security implications for our allies, who are more heavily dependent upon oil imports, than it may have for us.
The administration, through Secretary Peterson, has promised to review the security aspects, to evaluate the various alternative ways to sustain an appropriate tanker fleet, and to submit its findings and recommendations to the interested committees of both Houses not later than September 15 of this year.
Given the complexity and the undoubted importance of this matter, I believe the Senate should not act without hearing those recommendations.
Mr. President, anything I say now is anticlimactic, after the very deeply felt speech delivered by the distinguished Senator from New Hampshire (Mr. COTTON). He has practically said it all. He speaks not only for himself but also for the junior Senator from Massachusetts; and though I cannot speak for the other members of the New England delegation. I think he spoke for all the members of the New England delegation when he so clearly and forcibly set forth the position of the New England delegation in regard to the plight of the consumer, the cost of oil over the years, and the continued increases in petroleum prices.
I hope that the eloquent plea of the distinguished Senator from New Hampshire will be listened to and adhered to by all Senators.
Mr. COTTON. Mr. President, I have only 1 minute remaining on the amendment. I yield that 1 minute and 1 minute on the bill to the Senator from Kentucky.
Mr. COOK. Mr. President, I listened intently to the distinguished Senator from Washington talk about all the lobbyists. I want to get the record straight, and I want it in the RECORD, so far as this Senator is concerned, because this Senator has not been talked to by any major oil company in the United States. They have not discussed this matter with me at any time, under any circumstances.
The only conversation this Senator had with anyone other than Members of this body and members of the Committee on Commerce was with a representative of one of the major international seamen's organizations in the United States, who discussed this matter with me in the Senate reception room. I invited the gentleman to come by my office, because I wanted to talk to him about this matter, I wanted his ideas on it. He said that he absolutely would come by, and he did not come by.
So, relative to the great discussion of the distinguished chairman of the Committee on Commerce, that they are all over the halls and have been to see everybody, I want him to know that they did not come to see me.
Therefore, I suppose that if I owe them some allegiance, I wrote a nine-page speech for nothing, because none of them came by to see me.
As a matter of fact, the one organization in the United States that the Senator from Louisiana and the Senator from Washington said would be vitally interested in this, and that is the American workingman, the gentleman who said he would come by my office, but did not come by.
Mr. CRANSTON. Mr. President, will the Senator from Louisiana yield?
Mr. LONG. Mr. President, I yield 10 minutes to the Senator from California.
Mr. CRANSTON. Mr. President, I renew my request and ask unanimous consent to bring up my amendment at this time.
Mr. LONG. May I suggest that the Senator ask that his amendment be read? He can then ask unanimous consent.
Mr. CRANSTON. Fine. Mr. President, will the clerk please state the amendment?
The PRESIDING OFFICER (Mr. KENNEDY). The amendment will be stated. The assistant legislative clerk read as follows
On page 3, line 10, after the words "Number 2 fuel oil" insert a comma and the following: "and that portion of imports of crude oil required because of environmental considerations for electric power generation or low sulfur residual fuel oil refined therefrom to meet environmental standards imposed by law in generating electric power and sold for use by electric utilities".
Mr. CRANSTON. Mr. President, if I may briefly explain the amendment–
Mr. COTTON. Mr. President, I assume that we have unanimous consent that such time as is left on the pending amendment will be used by the Senator from California on his amendment; is that correct?
The PRESIDING OFFICER. A request has not been received or granted yet.
Is there objection to consideration of the Cranston amendment at this time?
Mr. LONG. He is using my time right now.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CRANSTON. I thank all Senators for their cooperation.
The PRESIDING OFFICER. The Chair rules that there is 1 hour on the amendment.
Mr. CRANSTON. I shall not take more than 10 minutes, probably less.
Mr. LONG. Go ahead.
Mr. COTTON. The time is being used on this new amendment, but we do not lose our night to whatever time is left on the amendment which is pending; is that correct?
The PRESIDING OFFICER. The Senator is correct.
Mr. LONG. Mr. President, I ask unanimous consent that notwithstanding the unanimous consent agreement, we might consider this amendment an amendment to the amendment. I believe it can be disposed of in short order.
The PRESIDING OFFICER. Will the Senator please state his unanimous consent again?
Mr. LONG. I ask unanimous consent that, notwithstanding the present unanimous-consent agreement, we consider the amendment of the Senator from California at this time.
The PRESIDING OFFICER. The amendment is under consideration.
Mr. CRANSTON. Mr. President, I thank all Senators and the Presiding Officer for their cooperation.
Mr. COTTON. Mr. President, I am very sorry, but a parliamentary inquiry
The PRESIDING OFFICER. The Senator from New Hampshire will state it.
Mr. COTTON. Is this an amendment to the committee amendment?
The PRESIDING OFFICER. The Senator is correct.
Mr. MANSFIELD. Mr. President, I ask unanimous consent to suggest the absence of a quorum with the time not to be taken out of anyone's time.
Mr. COTTON. We do not need that now. Go right ahead.
Mr. MANSFIELD. Mr. President, I withdraw my unanimous-consent request.
Mr. CRANSTON. Mr. President, this amendment would exempt public utility companies engaged in the business of generating, transmitting, and distributing electric energy for heating and electric power purposes from the provisions of the section 3 of H.R. 13324.
Electric companies have an obligation to provide at the lowest reasonable cost, indispensable and reliable electric service to meet the requirements of their customers.
In order to fulfill this responsibility they must be able to procure suitable fuels at reasonable prices which will meet stringent air pollution control requirements. The enactment of section 3 of H.R. 13324 in its present form would have the net effect of a significant increase in rates to east and west coast customers of electric companies for the following reasons:
First. Economists have shown that there will be an increase in transportation cost through the use of U.S.-flag vessels. Major oil companies and refiners will absorb this cost on the import quota ticket rather than pass the cost on to the consumer.
Second. Most oil purchase contracts between refineries and utility companies include escalation provisions which automatically pass on to the utility company the increase in crude prices and in transportation cost.
Third. Utility companies do not have oil import quota tickets available to them under import regulations. They would not be able to absorb the increased cost in transportation because the value of the tickets has been included in the price the refiner quotes in his contract with the utility company.
Fourth. The end result of an increase in transportation cost would be reflected in the cost that utility consumers pay for electricity.
Presently the cost impact on the west coast would be greater than on the east coast. However, as eastern utilities convert more and more plants from residual fuel oil to crude, and air pollution requirements become more restrictive, this conversion will have a similar impact on use of crude oils by utilities on the east coast later in this decade.
The situation in the West coast is different, and the problem is immediate. The pollution regulations require that utilities burn crude oil with 0.5 percent maximum sulfur content. The principal supplies of low sulfur oil of the quality required to comply with air pollution control regulations which are available to west coast utilities are manufactured from crude oil imported from Indonesia. The cost of this oil will increase as more and more U.S.-flag ships are used to transport foreign oil.
It is estimated by Southern California Edison that the 50-percent quota requirement would result in a 20 to 30 cents per barrel increase in cost. To the consumer this would represent an increase cost of $30 to $50 million per year. The study of the National Association of Electric Companies, an association which consists of 137 electric light and power companies, agrees that the
impact of section 3 will be greatest on the west coast where the supply of low sulfur crude is deficient.
Mr. President, I respectfully urge my colleagues, and address my remarks particularly to the distinguished and able Senator from Louisiana (Mr. LONG), urging support of my amendment which will exempt needed low sulfur fuels from flag ship restrictions, and protect the American consumer from this enormous increased cost.
Mr. LONG. Mr. President, I have no objection to the amendment.
Mr. COTTON. Mr. President, I yield myself 2 minutes.
The PRESIDING OFFICER (Mr. BURDICK). The Senator from New Hampshire is recognized for 2 minutes.
Mr. COTTON. Mr. President, I welcome the amendment. It is a good amendment. However, I want to have the RECORD show one thing so that we will not forget it. When we started out in the Commerce Committee with section 3, it was all inclusive, and then within the Commerce Committee it was amended by exempting No. 2 fuel oil and residual fuel oil.
Now we come to the Chamber this afternoon and we have had an amendment offered and adopted exempting the petrochemical industry. Now our good friend from California has come along with a further list of exemptions. That is all good.
But I just want the Senate to remember that eloquent speech by the Senator from Louisiana (Mr. LONG) and other Senators, when they said that this great amendment would produce 100,000 jobs and help our balance of payments by $5.5 billion.
I ask the Senate to remember that every amendment we add will bring down the 50 percent of oil to be carried in American bottoms – I do not know to what percentage – 40 percent, 30 percent, 25 percent. We cannot have our cake and eat it too.
I am almost tempted to object, Mr. President, so that the 100,000 American jobs and that $5.5 billion in balance of payments does not go out the window with this and every amendment.
So, I welcome this amendment. I am for it. Let us have some more. [Laughter.]
Mr. CRANSTON. I thank the Senator.
Mr. TUNNEY. Mr. President, will my colleague yield to me?
Mr. CRANSTON. I am happy to yield to my good friend.
Mr. TUNNEY. I want to compliment my senior colleague from California for introducing this amendment. It demonstrates clearly his great concern for environmental problems in California.
The effect of the amendment will be that air pollution control regulations in California will be met. I am proud to be a cosponsor of this amendment because I think it is critically important to the environmental needs of California.
Mr. CRANSTON. Mr. President, I thank my colleague for his help on this as on so many other matters.
Mr. President, I am prepared to yield back the remainder of my time.
Mr. LONG. Mr. President, I yield back the remainder of my time.
The PRESIDING OFFICER. The question is on agreeing to the amendment of the Senator from California (putting the question).
The amendment was agreed to.
Mr. MUSKIE. Mr. President, I will vote to strike the oil cargo preference provision from the maritime authorization bill for two primary reasons – such a provision would most likely result in higher fuel prices for Maine and all of New England, and it would further entrench the oil import quota system which I have been trying to alter or abolish for years.
We, in New England, have suffered from high fuel prices for too many years. They have eroded family budgets and retarded the economic development of our region. I simply could not sanction any proposal which might intensify these problems.
I have carefully considered the arguments of those supporters of the cargo preference provision who contend that its passage would strengthen the shipbuilding industry. The health of that industry, particularly as it affects Bath Iron Works, concerns me deeply. I have concluded that expansion of our domestic tanker fleet, a worthy national goal, should be accomplished through a program of direct subsidies, financed out of general revenues, that distributes the cost among all taxpayers. That expansion, if indeed it would be fostered by the cargo preference provision, should not be financed solely by oil consumers through increased fuel costs.
We must protect the interests of consumers and promote our shipbuilding industry. These goals can be pursued without conflict. The cargo preference provision needlessly creates such conflict, jeopardizing the interest of consumers. I cannot support such a measure.
Mr. MATHIAS. Mr. President, today I rise to express my support for the committee amendment to the maritime authorization bill which has ben advocated by my colleague from Maryland (Mr. BEALL) and by the Senator from Virginia (Mr. SPONG) providing that 50 percent of crude oil imported into the United States be carried in American-flag vessels.
I have long felt that in a period of national economic strain, it is important to shape policies which will maintain the strength of our Merchant Marine and help American vessels compete effectively in the world's markets. While we should never shrink from healthy competition, we cannot ignore the impact of challenges from foreign flag ships which are directly or indirectly subsidized by their governments. To do so is to overlook the tragic object lesson now visible in Baltimore harbor where some of our greatest passenger liners, the pride of our merchant fleet, built with Government assistance, now lie idle and rusting because there is no competitive role for them on the high seas. It is a sad sight to replace the memory of the great Baltimore Clipper ships.
If this is the fate of ships whose construction was subsidized, how much more perilous is the fate of ships built in American yards, to American standards at American rates if there is no preference given them in carrying American cargoes? The fact that the tankers contemplated by the bill will be built privately with the efficiency that characterizes unsubsidized construction and operated without subsidy, should make it possible to grant a preference at minimum cost. And the cost, whatever it is, will be obvious and honest, and not hidden in Government budgets and tax bills.
There are today about 27 private tankers laid up for lack of cargoes. If we cannot find a way to put them to work neither they nor any other ships built under this or any other bill will survive. They will soon go to the wreckers or to foreign flags.
I have examined the effects the committee amendment would have on our employment, industrial production, national security and balance of payments. While its effect will bring some pluses and some minuses, I think that, on balance, it is a necessary part of our program. I am convinced that it will go far toward assuring that the American shipping industry remains vital, competitive, and healthy.