Mr. HALL. Let me point out to you, while our position has been in this document that no evidence has been given, that there is no proof of either thing happening, part of what I have said is my assumption.

It is not based on the record of figures, but the point I am making is that this, whatever the cost of the import of oil, it has no real bearing at all on what the people are charged in any event.

If the charter market is way down, and it costs you a lot less money to bring your oil in, you do not think the guy at the gas pump gets the difference, and you know the domestic prices to the consumer are paid the same way to the foreign, in other words, everything is pegged at the absolute maximum.

My own prediction would be to find out what is going on out here, what is really going on in this would tie up again with what the previous Congressman asked me.

I would suspect they are making an awful lot out of transportation on this transportation bill, one part of the corporate structure, billing the other.

I would rather suspect that.

When you are talking about whether it would result in a cost savings or not, I do not think you could really be definite until you get the facts in the case.

I again suggest to you that it does not matter how cheap they get their crews, and how little taxes they pay. It does not reflect in the cost of the consumer, and that is what really matters.

I would suggest on that basis that probably the gentleman whom you refer to is more than correct, but we will not really know until we have availability of information.

It is ridiculous when you think about it, you know. You think about such a vital matter as energy in this country, and you do not know the first damn thing about it.

All Mr. Simon has to work on is what the oil companies give him. believe it or not, so how can you honestly deal with the situation of this sort until you do have access to the record?

Mr. ANDERSON. Mr. Hall, do you have any estimate of jobs that are lost to U.S. seamen as a result of U.S. firms employing ships of convenience?

Mr. HALL. You have approximately 300 vessels, totaling about 20 million tons, and I am talking about shipboard operations.

If you take the absolute minimum of 25 men, it probably runs far greater than that. You are talking about 10.000 sailor jobs, at the least. That does not include the provisioners, does not include the guy who built the ship, or who repairs the ship, or who maintains the ship.

It does not include the pilot who comes onboard to pilot it into Hampton Roads, or where have you.

Literally in that area in terms of jobs you are talking about tens and tens of thousands, because for every job on a ship created by a ship there have been anywhere from five jobs up behind that ship. For example, in the city of Baltimore, when a ship goes out of Baltimore under the American flag, if it is built in Bethlehem, first it supplies thousands of work days to the guys in Baltimore who

live over there on whatever street, Broadway, or Light Street, or whatever.

Now, at that point it relates itself to the local grocery stories, and he buys from the corner store, the gin mill, the bars.

When you are talking about terms of employment, yes, there are literally tens and tens of thousands of jobs that are being lost, direct, as well as indirect.

Mr. ANDERSON. Thank you. You also referred to a loss of balance of payments.

Do you have any estimate of how much that would be?

Mr. HALL. Yes, we have some ballpark figures.

We estimate that within the period of a very few years that this will be one, probably the second biggest area of the loss of balance payments.

You remember again that this is a service available to the operator, to the owner, to the shipper under American or foreign, and we estimate it is up to $1 billion now.

If you took those cargoes we are talking about and ship American it would be right at $1 billion on the plus side of the balance of pay

ments.

Incidentally, as the need of fuel goes along on the assumption that we will still import, the balance will continue to grow.

Again, we have no regulation on it, whatsoever.

You see, what you are going to have happen is that the Arabs and the owners are going to control the transportation. The way they have hijacked the price of oil to the consumer, it is going to be precisely when you form this Arab Maritime Transport Company, the exact position on the transportation rates.

There is nothing like keeping a free market, like competition. We are believers in the free market system, and there is nothing like competition to keep it that way, but this is a closed market for them. Mr. ANDERSON. Thank you.

Mr. CLARK. Mr. Kyros?

Mr. KYROS. Thank you, Mr. Chairman.

Mr. CLARK. We do have a quorum call, but we will be sitting until we are finished.

Mr. KYROS. Mr. Hall, one of the things you say which I think is particularly interesting, is your discussion of the reliability of the socalled effective controlled fleet of American-owned foreign flag tankers.

In the API statement they say absolutely that the impact on national security would be very adverse if we pass this legislation, and they point out in their statement that the proponents of this legislation do not take into account all the ships that are under U.S. effective control. It seems to me that the argument you raised today was made in 1959 about imposing the oil import quotas on the East Coast.

You know precisely what happened there. First, we sucked all the oil out of our own country. We never developed any effective refinery capacity in the Northeast, and today we are hostage to the Arab nations.

I think they are well intentioned, but the oil companies do not see with their television sometimes the other kinds of problems that develop, and that is why I think your views have been helpful.

Why does the administration support this theory about effective controlled fleet idea?

Mr. HALL. For the same reason that all the administrations have supported it.

Really, it is a State Department concept, and always has been. I have known people in various administrations, not simply in this one, and I want to make that very clear. This has always been any administration's attitude, and it is based on the bureaucracy in the State Department.

You see, Mr. Kyros, in the Western Allies in the NATO structure, many of our friends nationally are also maritime nations, and they have a great interest in this area as well, and they want access to the American market.

For example, take the British. They are for earning the hard dollar, from their point of the economy is in shipping. That is the greatest area.

Now, when the State Department therefore sits down to make its arrangements, and trades, and what have you, the thing that matters most to some of the Western Allies is maritime.

Frankly, the State Department could care less about the maritime. They are prepared, and constantly do, give it all away.

Mr. KYROS. They have given away fishing, I knew that, but I did not know they gave up maritime also.

Mr. HALL. When I say by that it surprised me, Mr. Congressman, because I was on a commission appointed by Lyndon Johnson some few years ago, and we sat for 14 months, and we had thousands and thousands of pages of hearings, and I was really amazed at the State Department position.

As a seaman, I knew we had our problems. I am not talking about the entire State Department, of course. There are about 16 State Departments over there. I am talking about that particular one that deals with international shipping, and they are always ready to concede American shipping to the chopping block.

They always have been. They have been one of the strongest arguers for the effective flag control. Unfortunately, we have not had any administration who would go past that veil, although there has been ample evidence that this is a fact.

I hope someday that they take a good look at this. What does it really matter, you know, to give all the concessions maritimewise to the NATO Allies on the basis of keeping friends, and then have them drop you on your head in a moment of need, and I do not say that with any viciousness, but I think it is high time we reviewed our relationships with them, and in those areas where we have been giving away blue chips, and maritime is just one.

Mr. Congressman, I think it is time for a thorough review.

Mr. KYROS. Why are the oil companies so violently opposed to this legislation?

Mr. HALL. They want to run their own little private world.

Mr. KYROS. Thank you.

Mr. CLARK. Mr. Studds?

Mr. STUDDS. Thank you, Mr. Chairman.

Mr. Hall, that is the best answer you have given all morning.

The quorum call, unfortunately, will not permit me to ask any questions.

Your testimony, and that of the last 2 days, has been devastating to the opposition to this bill. I cannot resist a light reply to the gentleman from Mississippi.

I am aware you have had problems with too many ship contracts. We have been looking for work for ours for some time.

Thank you very much for your fine testimony, Mr. Hall.

Mr. CLARK. Mr. Hall, we thank you very much for coming here today.

Mr. HALL. Thank you very much, Mr. Chairman, and to your distinguished colleagues. It has been a privilege and a pleasure.

Mr. CLARK. The hearing is adjourned subject to the call of the Chair.

[The following material was supplied for inclusion in the record:]

STATEMENT OF MOBIL OIL CORP.

Mobil Oil Corporation believes that it is in the national interest to encourage the development of a strong, competitive U.S. flag merchant marine fleet. Such development should include tankers for the transportation of petroleum and should be based on principles which provide for the orderly development and operation of the desired fleet at a reasonable cost.

The real goal of H.R. 8193 is to bring about an increase in the number of U.S. flag tankers. The authors of H.R. 8193 have apparently concluded that pending laws, including the Merchant Marine Act of 1970 which permits a citizen to build and operate vessels with government aid, have not sufficiently encouraged the building and operation of U.S. flag tankers and thus, if we are going to achieve that goal, additional legislation is necessary. MOBIL agrees and believes that the goal may be achieved on a voluntary basis by amending the Merchant Marine Act of 1970 as advocated by witnesses who have previously appeared before this committee. However, the authors of H.R. 8193 have apparently further concluded that mandatory legislation is necessary and that H.R. 8193 is the most practical method of causing an immediate increase in the number of U.S. flag tankers.

MOBIL believes that while H.R. 8193 will mandate that goal, it will do so at an unreasonable cost and will create an uneconomical U.S. flag tanker operation. MOBIL therefore wishes to suggest an alternative program to mandate the building of a substantial U.S. flag tanker fleet.

There are certain basic facts which H.R. 8193 does not provide for and which MOBIL believes must be, at all times, kept in mind when attempting to develop legislation to mandate the creation of a U.S. flag tanker fleet.

(1) This country, for many years to come, in order to meet its energy needs, must import increasing quantities of crude oil from the Middle East. (2) The most economical method to transport oil over long distances is by Very Large Crude Carriers of 169,000 Dwt. or larger (V.L.C.C.'s) to deepwater ports.

(3) It is more expensive to build and operate U.S. flag vessels than foreign flag vessels.

(4) Tanker owners can minimize the cost of ship operations if they are free, in accord with the evershifting worldwide levels of supply and demand, to schedule their vessels to various sources and/or refineries.

With these facts in mind, MOBIL proposes some practical and specific alternatives to the language of H.R. 8193 which it believes will bring about at an acceptable cost the orderly development of an efficient U.S. flag tanker operation.

(1) Each importer, or its affiliate, of crude oil over water to the U.S. would be required to employ V.L.C.C.'s of U.S. flag registry of sufficient tonnage to provide carrying capacity of at least 10% of its yearly crude oil imports into the U.S. based upon a pro forma voyage from the Persian Gulf to the U.S. East Coast. (Note: MOBIL's 10% formula approximates in ship tonnage H.R. 8193's 30%).

This tonnage would be in addition to any vessels required by the importer for U. S. coast-wise trade. These U.S. flag tanker vessels would be free to transport petroleum anywhere in foreign commerce.

(2) There would be available a construction subsidy at a level sufficient to construct the tankers needed in U.S. yards at a cost equal to foreign construction.

(3) The 10% requirement would become effective upon a date established by the appropriate government agency provided that:

(A) a sufficient number of V.L.C.C.'s of U.S. construction and flag are available to meet the 10% requirement and

(B) at least one deepwater unloading facility located in a major refining center capable of handling V.L.C.C. class tankers is operational in the coastal waters of the U.S.A.

(4) Non-oil company tankers will be entitled to transport for each importer at least 30% of each importer's 10% so long as the rates for said charter hire shall be competitive.

(5) The owner of each U.S. flag tanker operated pursuant to the requirements stated above shall receive from the U.S. Government a remittance equal to the present license fee payable to the U.S. Government for the barrels of crude oil which would be transported and imported per month on the pro forma voyage from the Persian Gulf to the U.S. East Coast up to 100% of its actual imports. The remittance would not be payable for any days that the vessel included within the aforementioned 10% is in lay-up, drydock or otherwise not operating.

DISCUSSION:

MOBIL believes that any mandatory program for the development of a U.S. flag tanker fleet must be predicated upon the construction of V.L.C.C.'s and U. S. deepwater ports. Accordingly, MOBIL makes both of these factors integral parts of its plan. H.R. 8193 does not address itself to either of these practical considerations. Further, MOBIL believes that since there are now no U. S. deepwater ports in major refining centers, H.R. 8193 will necessarily encourage the building of inefficient or soon-to-be obsolete tankers of less than 100,000 deadweight tons. Thus, any legislation to mandate tanker construetion must also provide for the construction of deepwater ports.

MOBIL's plan by requiring an importer to use V.L.C.C.'s provides for the addition to the U.S. flag tanker fleet of the new competitive-sized tonnage which will be needed to economically import large quantities of crude from the Middle East. H.R. 8193 does not require the use of such tonnage.

MOBIL'S 10% formula will result in the utilization of tonnage only slightly less than the 30% quota of H.R. 8193. This is so because MOBIL's quota formula requires an importer to utilize tonnage sufficient to carry 10% of his total imports on a pro forma voyage from the Persian Gulf to the East Coast of the U.S.-a voyage of approximately 11.500 miles. Thus, because of the longer distance and time of the voyage, MOBIL'S 10% quota will, in fact, mandate the use of ship tonnage only slightly less than the total needed to comply with the 30% set forth in H.R. 8193. More importantly, the quota of H.R. $193 can be met by the use of existing vessels to carry large amounts of nearby crude over short distances and thus frustrate the real goal of this legislation. MOBIL's quota formula will prevent such a frustration. The cost of operating American flag vessels exceeds that of foreign flag vessels. No amound of sophisticated economical theories or predictions will change that fact. MOBIL can refute the premises, method, statistics and logic of the theory presented to this committee in an attempt to avoid that fact wherein it was claimed that H.R. 8193 will result in a saving to the consumer of one cent a gallon. It is therefore important that American shipowners be given financial assistance in operating vessels under the U.S. flag. Without financial assistance U.S. flag vessels will not be able to remain competitive in world commerce. H.R. 8193 makes no provision for such assistance. MOBIL's plan does. It provides for the remission to the shipowner of a sum equal to the license fee presently payable to the government for the barrels of crude oil which would be transported per month on the aforementioned pro forma voyage. The remittance would not be payable for any days that the vessel is not operational. The remittance would be payable regardless of the trade in which the vessel is operating.