transportation except from the pipelines and tankers owned by the major oil companies.

By establishing a requirement that 20 percent or more of the imports of oil into the United States be shipped on U.S.-flag tankers, independent oil producers and refiners will be able to obtain tanker services from a source other than the integrated oil companies with which they compete.

Third, the oil-producing nations are in the process of building or buying their own fleets of tankers to carry the crude oil they produce. Would these nations have any difficulty in obtaining business for their ships?

Would they not only dictate the price of oil but also the price at which it can be carried?

An American-built, American-crewed, American-flag fleet of modern tankers at fair and reasonable rates is the only way to respond to this danger.

Fourth and last, I think it important that the committee consider the importance of maintaining an adequate and sufficient Americanflag fleet of tankers in terms of national security.

The national security concern has been one of the primary justifications for all of the legislation designed to encourage the construction and operation of U.S.-flag tankers.

With currently increasing reliance on foreign imports of crude oil and products, accompanied by unlimited reliance on foreign-flag vessels and foreign crews to carry such crude products to the United States, the national security consequences are obvious.

By assuring the participation of U.S.-flag carriers for a portion of the oil imported into the United States, an affirmative step would be taken to assure sufficient transportation of such crude oil and products to the United States.

One must consider that Congress has determined that the national defense requires 100 percent of cargoes moving for the Department of Defense to move on U.S.-flag vessels.

Surely, if all defense movements are required to go on U.S.flag ships, how can we turn our backs on vital oil movements and permit ourselves to be subject to the whims and wishes of foreign powers, foreign ships and foreign crews?

This is a nation with an accelerating demand for oil and for tanker transportation. The demand for ships derives from the demand for cargo, building these ships does not create cargo for those ships.

The legislation pending before this committee to provide an assured supply of cargo to U.S.-flag tankers will go a long way toward the realization of the policy embodied in the Merchant Marine Act, 1970.

H.R. 8193, however, will get the job done at virtually no cost to the Government and will further serve to prevent ships built under the 1970 act from going into bankruptcy or otherwise reneging on their obligations under title XI.

We believe that it is intended that the preference created by H.R. 8193 be given only to American-flag ships built in the United States.

We suggest that the bill be amended to provide in unequivocal terms that the "U.S.-flag commercial vessels" be "built in the United States."

It is our view that the standard for U.S.-flag participation under H.R. 8193 be no different than the standards contained in the Jones Act for U.S.-flag participation in the coast wise trades.

On behalf of Seatrain and the independently owned U.S.-flag tanker fleet, we urge prompt passage of H.R. 8193.

Again I thank you for giving me the opportunity to appear before you today to present our views.

Thank you.

Mr. CLARK. Thank you very much, Mr. Kahn, for an excellent statement and, of course, your background is such that it is a professional statement, too.

If this legislation is enacted, Mr. Kahn, do you anticipate that Seatrain Lines would have to pay back the construction subsidy received to date for the construction of tanker vessels; and, if not, would not this amount to some sort of a double subsidy?

Mr. KAHN. No, sir, I do not think so.

I believe the preference legislation for American-flag vessels is necessary even for those ships which have received CDS.

The allocation of cargo, in my judgment, which this legislation would provide would be somewhat more advantageous perhaps to the few ships that have been constructed with CDS, but in light of what we are discussing for the future, it would not be a major situation.

Mr. CLARK. As you know, for a number of reasons, we may not be able to get a clear idea of the projected amounts of our oil imports.

If this is the case, would it make any sense to enact the bill, and would you construct new tanker tonnage in such a situation?

Mr. KAHN. In answering to the first part of the question, there is no way of knowing what our oil imports will be.

I agree fully with that. But what this legislation provides is a percentage of our oil imports irrespective of what the absolute quantities are, and I am here to commit my company, and I am sure an awful lot of other people in my position feel likewise, we will build ships and we will commit to build ships if this legislation is passed in spite of the uncertainty as to the quantities of oil that we will be importing.

Mr. CLARK. On page 9 you mentioned "fair and reasonable rates", what is a fair and reasonable rate?

Mr. KAHN. Mr. Chairman, I believe that the Maritime Administration has had a great deal of experience in judging fair and reasonable rates in the administration and shipment of AID and P.L. 480 cargoes.

I think they are highly qualified to establish fair and reasonable rates for American tankers, should this legislation pass, and I think that they would consult with some industry members, but left to the Maritime Administration I think every one would be satisfied. Mr. CLARK. Does Seatrain Lines operate any foreign-flag vessels, and how would this bill affect their operation?

Mr. KAHN. Seatrain Lines does operate foreign-flag vessels, but I must say the only reason Seatrain Lines and some of the other companies operate foreign-flag vessels is because the climate for ownership only of American-flag veasels has never yet been created. With this legislation on the books I believe that we, Seatrain, and many other owners will attempt to shake out every foreignflag ship we own.

Mr. CLARK. I am going to ask you the same question I asked the other witness, Mr. Maskin.

If you owned both U.S.-flag and foreign-flag vessels, why do you support this proposed legislation when American oil companies who also won American-flag and foreign-flag vessels oppose it?

Mr. KAHN. Well, the American oil companies' position is not always exactly the same as ours.

The American oil companies own fleets for different purposes than we do.

We basically consider ourselves 100-percent American owned. We have only found ourselves in foreign-flag operations because of lack of viable climate in which to operate only American-flag ships.

We want, as American owners, to have nothing but Americanflag ships, and that is why we seek this legislation.

Mr. CLARK. In view of the definition of privately owned U.S.flag commercial vessels in section 901 (b) (1), I really do not see the need for the amendment you propose on page 11 of your statement. Can you qualify your proposal?

Mr. KAHN. Yes, sir. The reason I suggested the modification is that I think one of the purposes of this legislation should be to make this cargo available to modern, American-flag ships. In other words, to encourage new construction.

If there are 25 or 30 vessels which are 25 years old, which have been built in the United States and are brought back here to participate in the carriage of this cargo as a result of the passage of this legislation, it would not be quite as good as creating brand new ships to participate in this legislation.

That is the only reason for the suggested modification.

Mr. CLARK. Thank you.

Mr. McCloskey, any questions?

Mr. MCCLOSKEY. No questions.

Mr. CLARK. Well, thank you very much for a very good statement and your forthright answers.

Mr. KAHN. Thank you, sir.

Mr. CLARK. Tomorrow we will have Shannon Wall, alternate cochairman of the Labor-Management Maritime Committee and Mr. Norman Polmar, U.S. editor, Janes Fighting Ships, as our wit

nesses.

The meeting stands in recess until tomorrow morning at 10 o'clock.

[Whereupon, at 11:20 a.m., the subcommittee recessed, to reconvene at 10 a.m., Thursday, February 7, 1974.]

ENERGY TRANSPORTATION SECURITY ACT OF 1974

THURSDAY, FEBRUARY 7, 1974

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON MERCHANT MARINE OF THE

COMMITTEE ON MERCHANT MARINE AND FISHERIES,

Washington, D.C.

in room

The subcommittee met, pursuant to recess, at 10:14 a.m., 1334, Longworth Building, Hon. Frank M. Clark (chairman of the subcommittee) presiding.

Mr. CLARK. Good morning.

The Subcommittee on Merchant Marine will please come to order. This morning we continue hearings on H.R. 8193, a most vital piece of legislation.

Our first witness is our distinguished colleague, Robert O. Tiernan from Rhode Island.

STATEMENT OF HON. ROBERT O. TIERNAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF RHODE ISLAND

Mr. TIERNAN. Madam Chairwoman and Mr. Clark, and members of the Merchant Marine and Fisheries Committee, I thank you for this opportunity to express my views regarding H.R. 8193.

In 1972 when I was a member of this committee I joined with a majority of the committee members in voting to report H.R. 12324— a bill which would have required that no less than 20 percent of waterborne oil imports be carried in U.S. flag vessels. At that time we felt that the United States could not afford to be almost totally dependent on foreign nations for both transportation and supply of our foreign petroleum needs. Unfortunately, the bill died because the Senate defeated by a narrow margin a similar measure.

Today the committee is again considering legislation which would dictate that a minimum amount-20 percent in 1974, 25 percent in 1975, and 30 percent after June 1977-of U.S. oil be imported in American ships and manned with American crews.

The Arab oil embargo and its ramifications have convinced me that we must be less dependent on foreign nations for our supplies of oil and raw materials as well as for transportation of those items which are vital to our economic well-being.

H.R. 8193 is certainly a step in the right direction. In addition to assuring the United States of a minimal degree of self-sufficiency with respect to the transportation of energy supplies it would give the workers in America a guarantee that some of the dollars which are being spent to transport fuel which they are buying will be spent in the United States and will guarantee jobs for American workers.