In uranium, the situation is similar. Thirteen of the top twenty uranium reserve holders, 6 of which are also among the 20 owners of coal holders, are oil companies or oil company affiliates. Five major oil companies control 62 percent of our domestic uranium milling capacity. Four of those five firms are also among the top 20 in coal. Mr. Chairman, the supply protections in the national energy plan are based on the assumption that higher energy prices will stimulate greater fuel production. That assumption is perfectly reasonable when free market conditions prevail. But given the dominant position of major oil companies in coal and uranium, there is good reason to doubt that higher prices will, in fact, bring us the supplies that we need. We simply cannot afford to permit a few large companies to control all of our energy alternatives.

The bill before us today would restore competition in the energy industry by preventing the major oil and gas companies from securing additional holdings in competing fuels and by requiring them to divest their current coal and uranium assets within 3 years. Twenty-two companies, 16 oil companies and 6 major natural gas producers, would be covered by this bill.

Mr. Chairman, horizontal divestiture is the vital missing element in the national energy plan. Instead of creating evermore cumbersome bureaucracies to regulate ever more gigantic energy companies, the divestiture approach reaffirms our traditional commitment to free market solutions to our economic problems. Only by insuring vigorous competition between independent producers of coal, uranium, oil, and natural gas can we hope to develop our domestic resources in a timely and cost-efficient manner. I am a strong believer in the free enterprise system. I know from my own experience in business that competition is the heart of that system.

I have seen this country's oil companies spend enormous sums of money on slick television commercials and full newspaper and magazine ads to assure Americans that they, too, are devoted to free enterprise principles. The bill we are considering today is appropriately entitled "The Energy Industry Competition and Development Act." It proposes to use the market, rather than the Government, to solve our problems. It is a conservative measure in the best sense of the word.

Mr. Chairman, if those who shout the loudest about free enterprise truly believe what they have been telling the world, they would be here today to support this bill. I think it is time for the business community to abandon its traditional head-in-the-sand attitude toward change of any kind. It is time to come forward in support of legislation to preserve and maintain our free market economy. Thank you. Senator KENNEDY. Thank you very much, Senator Metzenbaum. With the indulgence of my colleagues, I will ask Senator Bayh to make a comment.

OPENING STATEMENT OF SENATOR BAYH

Senator BAYH. Mr. Chairman, let me apologize to you and my colleagues for the fact that I was not here at the beginning of these hearings and will have to leave shortly because I am chairing another subcommittee meeting downstairs.

To minimize the inconvenience of this subcommittee, I ask consent, if I may, to have my entire statement placed in the record after my informal remarks.

Senator KENNEDY. So ordered.

Senator BAYH. I just wanted to say a word or two and by my presence to show a continued interest in the problem which brings us to gether. It is a critical problem. I think it is characteristic of our distinguished subcommittee chairman, a man with whom I have served for a number of years, that he is continuing to pursue his long-term interest in this particular area. For years this subcommittee was in the able hands of our late beloved friend, Senator Hart, and this leadership role has now been transferred to equally capable hands with Senator Kennedy's chairmanship.

I listened with a great deal of interest to the statement of my colleague from Ohio and concur in his views. I think it is appropriate for our friend and colleague, Congressman Udall from across the way, who has also had a long-time interest in this area, to be the key witness.

Mr. Chairman, the timing of these hearings could not be more appropriate. It is a time when our country and people all over the world are confronted with an energy crisis. It is a time when the President and the Congress are working together to move away from a petroleum-oriented society and decrease our reliance on this energy source. This matter is extremely important. If we are to move to alternative fuels, it seems imperative that all of us work together and that the President and Congress undertake the steps necessary to see that those alternate fuels do not automatically increase in price as petroleum does. It seems to me that this is a major thrust of the horizontal divestiture legislation that Senator Kennedy is sponsoring and we are here to support.

Horizontal divestiture legislation is the only vehicle I see that guarantees that we go ahead and develop alternative fuels on their own merits, without their pricing and distribution tied inextricably to that of petroleum. This is especially crucial when we are trying to remove ourselves from heavy reliance and dependence on petroleum.

This subcommittee has had a long-term interest in divestiture. We are now studying the problem of horizontal divestiture. I think it is extremely important. I want to offer my support to the chairman and others who are similarly concerned. This subcommittee has also looked into the issue of vertical divestiture. In fact, several of us have introduced a piece of legislation-I think it is S. 795-which deals with promoting competition through vertical divestiture.

Some of us who have been equally concerned with this matter, including our chairman, can take some comfort from the Department of Justice's report to the President pursuant to the Alaskan Natural Gas Pipeline Act, in which the Justice Department came to the conclusion that there are serious inequities involved when producers of natural gas also control the pipelines that transport that gas to

consumers.

So, I would hope that, as in the past, the committee would give attention not only to horizontal, but also to vertical, divestiture. It seems to me that when we talk about free enterprise, we have to address ourselves to free enterprise in fact and not just in name. When we have a handful of large companies which totally control

the supply of vital energy commodities, either through horizontal or vertical control, the country and our economy suffer. If you really have competition within various component parts of an industry, the consumer benefits, and interestingly enough, so does the corporation. Some of those very corporations that our distinguished colleague from Ohio mentioned have spent huge amounts of money extolling the virtues of their corporate structure. But I submit that they would benefit if that corporate structure were broken into its component parts.

It is interesting to me to see some of these commercials which do not say, "Buy Texaco" or "Buy Standard" but talk about the virtues of some of the things that the companies are doing which have nothing to do with whether their product is better than somebody else's product. They have done a very effective job. They have done perhaps the most sophisticated and effective job of selling that I have ever seen. I have to give them credit.

But I would like to add this, Mr. Chairman. Some of these ads have been used in mass mailings, sent out to retired schoolteachers or others dependent upon the stock they own as scare tactics. The sponsors paint some of us as villains because we dare to question their present corporate structure.

Mr. Chairman, the only evidence that we have ever had that is conclusive relevant to the measure of divestiture, is the impact that divestiture had on the Standard Oil Corp. of John D. Rockefeller. The record is unequivocable that when that company was divestedwhen it was broken into its component parts-in less than 1 year the individual parts of that large giant were worth more money. Consumers and stockholders were better off after Standard had been broken up than was the case before.

So, Mr. Chairman, I salute you in your efforts and want to cooperate with you in any way I can. Hopefully after this measure is addressed we can resume our efforts on the issue of vertical divestiture. I think this would benefit the country. It would benefit the consumer. It would benefit the corporation. I salute you for your efforts. Senator KENNEDY. Thank you very much.

STATEMENT OF SENATOR BIRCH BAYH

Mr. Chairman, it is a pleasure to be here this morning as you open the subcommittee's hearings on S. 1927, legislation to prevent the Nation's major oil companies from extending their control beyond oil and gas holdings to holdings in coal and uranium.

The hearings this morning continue more than a decade of interest by this subcommittee in promoting competition and free enterprise in the Nation's energy industry. They are extremely timely given the emphasis in the President's energy plan on moving the Nation away from heavy reliance on oil and gas toward the use of alternative fuels by the use of the price mechanism. If this strategy is to work, and if reasonably priced fuels are to be available to our Nation's industries and utilities, it is imperative that coal and uranium prices do not automatically rise to the price of oil. The Congress would be remiss in its responsibilities if it did not act now, as we are embarking on a major effort to change energy consumption patterns, to ensure competition between the alternative energy sources of the future. If we permit the petrogiants to gain a predominant interest in alternative fuels, we are practically guaranteeing that the price of coal and uranium will be pegged to the price of oil.

The warning signs are there for us all to see. The major oil companies of this country are hedging their bets-as all smart businessmen do-by spreading their investments out over even the most exotic of potential future energy sources, and have already established a majority position, or close to it, in the coal and uranium mining industries.

Oil and gas companies now control approximately 44 percent of all coal reserves leased or owned by private companies. This share rises to about 50 percent if one omits coking coal which is reserved for steel-making. Six of the top ten holders of U.S. coal reserves are now oil companies; 14 of the top 20 are. Oil and gas companies currently control 51 percent of uranium reserves and 62 percent of the uranium milling capacity, the process which converts uranium ore to fuel.

Beyond coal and uranium, the oil companies are also involving themselves in more exotic forms of energy research and development. They have established a commanding position in the synthetic fuels field. In the decade between 1964 and 1974, seven oil companies were the recipients of 49 of the 52 patents covering new technological development in the process of converting coal into synthetic fuels. In addition, they are buying up leases for geothermal and oil shale resources on Federal lands and increasing their share of the solar research and development industry.

The possibility of an already concentrated and vertically integrated petroleum industry spreading its control over all future energy sources is further indicated by our own government's research and development efforts, which allocate the lion's share of research money to the largest oil companies. While these research efforts are badly needed, the funneling of this money to the large petrogiants virtually assures, as one reporter recently wrote in the Washington Post, "that there will always be an Exxon, no matter what happens to the natural supply of petroleum."

The possibilities inherent in a horizontally integrated energy industry are frightening, particularly in unregulated sectors such as coal and uranium: price manipulation, production control, denial of access to independent refiners and marketers, and opposition to energy research that would threaten established energy sources that currently yield the majors' their largest profits.

One does not have to impute sinister motives to oil executives to imagine this scenario, but only put oneself in the shoes of a high level corporate manager. His job is to make a profit for his company, pure and simple. But our job here is to serve the public's interest. And experience has taught us over and over again that what is good for Exxon Gulf or Standard Oil is not necessarily good for the country.

We have seen our major oil and gas companies cooperate with the OPEC cartel to raise profits and restrict supplies in order to assure themselves huge profits, a guaranteed world market and a continued supply of oil; we have seen them sink their profits back into overseas drilling and hold down domestic exploration and production because it is the profitable thing for them to do; we have seem them participate in an international uranium cartel that has driven the price of uranium sky high; we have seen coal production drop when major oil companies have acquired coal reserves; and we have seen major oil companies refuse independents access to their pipelines in order to squeeze them out of business and eliminate price competition at the gas pump.

This type of behavior has happened in the past and will happen again so long as the structure of our major energy supplying industries is such that the industry's interests diverge from the interests of our consumers and our nation. As oil companies increase their control over alternative fuels they will peg the price of all fuels to the price of oil-or natural gas if deregulated-and there will be no competition left in the industry as a whole. Prices will bear no relationship to costs, and consumers will not be able to use their market power to keep prices down. The incentives built into the energy package for conversion from foreign fuels to plentiful, domestic fuels will have been eroded. For this reason, Mr. Chairman, I am appreciative of this opportunity to lend my support to these hearings this morning, and to reaffirm my faith in the principles that underlie this effort the restoration, maintenance and promotion of competition in the energy industry.

I am glad to see my friend Congressman Udall here, representing the interest of a large number of House members in this issue and supporting our efforts.

I also hope that we will be able to have the cooperation of the Administration in combating the anticompetitive practices engaged in by the oil companies. I was most pleased to see the recent Department of Justice report to the President, pursuant to the Alaskan Natural Gas Transportation Act which dwelled in the inequities that can result when major, concentrated producers also own the pipelines that transmit their product to consumers. I have addressed a similar concern about the impact of vertical integration on oil prices and supplies by introducing the Petroleum Industry Competition Act, S. 795, which is presently pending before the Subcommittee.

As the debate on the President's energy plan proceeds in the coming months, I urge the Subcommittee to give this measure serious consideration, along with the issue of horizontal divestiture, so that we might have the greatest amount of competition possible in all sectors and functions of the energy industry, a principle which lives up to the long-standing commitment of this Nation to a free market economy.

Senator KENNEDY [continuing].

Senator Mathias?

Senator MATHIAS. Mr. Chairman, I have reached the point where my curiosity has outrun my urge for self-expression. [Laughter.] I would like to reserve the right to make a statement later.

Senator KENNEDY. Since we have a quorum of the subcommittee, we can move for the bill. [Laughter.]

Senator Laxalt, any statement?

Senator LAXALT. No; I have no statement. I look forward to the testimony of the Congressman.

Senator KENNEDY. Congressman Udall, we welcome you as Chairman of the Interior Committee of the House and also as an old friend and a distinguished leader in the House of Representatives. We know this has been an area that you have given great attention and great thought to. It has been a matter that has been debated before your committee and on the floor of the Congress. I do not think there has been an issue involving the subject matter that you have not been very much involved in. We welcome you here as a colleague, but I think more precisely, as a real expert in this subject matter. We look forward to learning from you. We welcome you here before this subcommittee.

STATEMENT OF HON. MORRIS K. UDALL, A REPRESENTATIVE FROM THE STATE OF ARIZONA

Mr. UDALL. It is a proud day for me to be the leadoff witness in the hearings on legislation which I think is among the most important before the Congress. It is a happy day for me to see you pick up the banner of one of my personal heroes, Senator Phil Hart, and to continue the efforts that this subcommittee and its distinguished members have made previously to bring some competition into the energy industry.

I have a brilliant prepared statement of 5 pages here. I will not read it. I think I can summarize it and most of the points that I wanted to make. That might save a little time for exchange with the members.

Senator KENNEDY. Without objection, your written statement, in its entirety, will be inserted into the record.

Mr. UDALL. I begin by saying that some say it is doomsday if we pass this legislation, doomsday for the American economic system. I