Mr. BURLESON. Mr. Rogers, you make a most interesting point when you refer to other pollutants categories. Why not tax those? In testimony before your Interstate and Foreign Commerce Committee, did you have testimony from the experts as to the effects of other additives to gasoline which may be a greater pollutant and more harmful to human beings than lead?

Mr. ROGERS. Yes; of course that is true. But the catalytic devices can remove those other pollutants. But the life span of the catalytic device is extremely limited if it is leaded gasoline.

So you have to approach it from two ways: By trying to clean up all of the gasoline exhausts with the catalytic devices to take care of any additional additives if you take lead out, or let the lead stay in and pollute the air, or else the catalytic device does not work if you leave the lead in.

I think the automobile and companion oil companies have made the decision-oil is coming out. It is just a question of whether the administration is going to say "We are going to get behind the Clean Air Act and got lead out promptly," or have Treasury come in and say "Don't make that decision, HEW, and let us tax this business." Well, they are really going to be taxing people, not the oil companies. Mr. BURLESON. Do you feel there has been enough scientific evidence presented to your committee to pass on this very complicate question at this time?

Mr. ROGERS. As to whether it should be taken out or not?

Mr. BURLESON. Yes; the effects of omissions attributed to lead. Mr. ROGERS. Yes; I personally do. I am sure that that viewpoint may not be shared with some, but I feel there is a sufficient amount of the evidence to show we should get it out. And over and above that I think the decision has already been made by the automobile companies.

They are putting out the lower compression engines. All of your major companies have said they are now going into nonleaded gasoline, and the Department of HEW, the Under Secretary testified before this committee that it is a health hazard.

So I think the record shows that lead is coming out. Now as to the timing, passing a tax on lead simply builds a conflict in the administration and says, "Well, we will let the air be a little dirty a little longer if we will get some taxes."

Mr. WATTS. Are there any further questions?

Thank you again, Mr. Rogers.

Our next witness is our esteemed colleague, the Honorable Frank N. Ikard.

STATEMENTS OF HON. FRANK N. IKARD, PRESIDENT; AND PETER N. GAMMELGARD, SENIOR VICE PRESIDENT, AMERICAN PETROLEUM INSTITUTE

Mr. IKARD. For the record my name is Frank Ikard. I am President of the American Petroleum Institute and I appear here this morning on behalf of the Institute with Mr. Peter N. Gammelgard, who is a senior vice president of the American Petroleum Institute and he directs our rather considerable environmental activities.

With your permission, Mr. Chairman, I would ask that Mr. Gammelgard make the statement for the institute.

Mr. WATTS. We are delighted to have you here with him and you may proceed.

Mr. GAMMELGARD. My name is Peter N. Gammelgard. I am senior vice president for public and environmental affairs, American Petroleum Institute.

On behalf of the institute and the Western Oil & Gas Association, I would like to thank the committee for this opportunity to comment on the administration's proposed Clean Air Tax Act of 1970.

The petroleum industry is in complete accord with the administration's announced objective of accelerating progress in the control of air pollution from automobiles. We pledge our continued full cooperation with the automotive industry and the Federal Government in this effort.

I would like to call the committee's attention to the table attached to the copies of this statement. As shown in the table, six petroleum companies are now marketing or soon will market unleaded gasolines. Nine companies are marketing or plan to market low lead fuels-that is, fuels containing half a gram of lead alkyl per gallon as compared with the former national average of 212 grams per gallon. (The document referred to follows:)

Note: This does not purport to be an all-inclusive list. There may well be other companies which have introduced low-lead or no-lead gasolines which have not come to our attention.

Mr. GAMMELGARD. The automotive companies have announced that all but a few of the 1971 model cars will have engines with reduced compression ratios, designed to operate and on a 91 octane fuelan octane level significantly lower than that of today's "regular" grade gasolines. These 1971 model cars, Detroit claims, will be able to operate on either an unleaded 91 octane gasoline or a low lead 91 octane gasoline.

It should be clear, from the steps already being taken by petroleum companies, that low lead fuels and no lead fuels will be available for these new cars-without Government regulation or special tax incentives.

Some unleaded gasoline of high octane to power present generation automobiles has been available for years in some market areas. In addition, some of the new low lead gasoline will satisfy all but the highest compression ratio engines. We see no way in the near future, however, that enough low lead or unleaded gasoline could be made

available to satisfy the fuel needs of the millions of motorists who own cars with these high compression ratio engines. For some time to come, these motorists will have little choice but to continue burning gasoline containing normal amounts of octane building lead compounds-and to bear the brunt of the proposed tax, if it is enacted.

We also believe the proposed tax would have an adverse inflationary effect on the Nation's economy. It would tend to encourage refiners to embark upon a crash program to remove all lead from all gasoline. This could be accomplished only by a multi-billion-dollar program of refinery construction, which would severely overtax the construction industry and would take several years to complete. Based on the industry's past experience, we know that such crash construction programs can be highly inflationary because of reduced productivity and increased costs.

We hope that Congress will recognize that if a conversion to the production of low lead or unleaded gasolines is found to be desirable, the industry should be allowed sufficient time to conduct an orderly program of investment that will not overtax the capabilities of any part of the industrial community.

I would like to point out what we consider to be an especially inequitable feature of the proposed tax. As drafted, the proposal would exempt from taxation the first million pounds of lead used by a refiner in the first year and smaller amounts in succeeding years.

The effect of the tax on the added cost of producing a gallon of gasoline would vary from zero to 2 cents or more in the first year, depending on the refiner's volume, and would change in succeeding rears. Such a variation in the tax burden borne by competing products would not only be discriminatory, but also could create chaos in the marketplace.

In view of the (1) voluntary moves already being made by a large segment of the petroleum industry to make available gasoline of reduced lead content, (2) the potential inflationary effect of the proposed tax on the economy, and (3) the discriminatory nature of the proposed tax exemption, we do not feel that the proposed tax is a good way to assure our common goal of clean air.

Thank you for your attention.

The CHAIRMAN. Thank you for bringing us your statement.

Mr. WATTS. Several days ago Secretary Kennedy said here that the adoption of the tax coupled with the regulation of fuel composition is the most appropriate way of achieving the objective of removal of lead from gasoline.

We have had some statements to the contrary. What is your thought on that statement? Do you have any comment about it?

Mr. GAMMELGARD. Yes, sir; I do. I don't think a tax is at all necessary to assure the production of fuels which Detroit claims will be necessary for them to have for their 1975 model year cars.

The petroleum industry will-already has indicated in large degree that they will make these fuels available when Detroit has the engines that require them.

There is not going to have to be any tax incentive or disincentive necessary to accomplish this. They are moving ahead of schedule actually to get in the field with low-lead or no-lead gasolines long before Detroit is going to have the cars that will actually need a lowlead or no-lead gasoline.

But this is a normal way. You cannot overnight equip about a quarter of a million service stations in the country with the facilities to make the transition to these required fuels of the future, we might

call them.

It has to be done in a pretty methodical way over a period of several years so as to not overstrain the construction industry. I think we are going to achieve, on schedule, the quality of fuel that will be needed, and we don't need any tax incentive or disincentive to prod us to go any faster.

Mr. WATTS. Do you feel that the oil companies intend to move into production of low-leaded gasoline and then lead-free gasoline? Will that be the steps?

Mr. GAMMELGARD. I think that could well be the steps. I think Dr. Ragone's panel, whose report was issued recently, and who was a witness last week, recommended that by 1972 one grade of low-lead gasoline be pretty universally available in the country as a preliminary to making a no-lead grade of gasoline available in the summer of 1974 so that when the 1975 model year cars come on the market in about September or October of 1974 they will have the fuel that Detroit has claimed will be necessary to run them properly.

Mr. WATTS. What prompted that question? In looking at your table I see there are many more companies that market a low-leaded gasoline than a nonleaded gasoline.

Does it require a lot of additional equipment to put out a low-leaded gasoline?

Mr. GAMMELGARD. It would not require as much additional processing as would the no-lead gasoline. The half gram of lead probably boosts the octane number about two and a half or three numbers depending on the quality of their stocks. They can attain 91 a little more economically than the people who are going the no-lead route. They are not all exactly the same octane numbers. Some of them are 93.5. One of them is even 96.

The CHAIRMAN. Are there any further questions?

Mr. Burleson.

Mr. BURLESON. Mr. Gammelgard, I note you made reference to the effects of additional cost of conversion in refineries to produce the nonleaded gasoline or low leaded as being inflationary.

I assume that the necessary conversion is a costly process. Mr. GAMMELGARD. Yes, sir. The API 3 years ago made a study as to the cost of making unleaded gasoline to the then existing quality of regular and premium grades. That study said there would have to be an investment in processing facilities of $44 billion in the U.S. refining industry and that would result in an incremental cost per gallon of gasoline of 2.15 cents if my memory serves me correctly. This was 3 years ago. Certainly that $414 billion figure would be by some 30 percent the way construction costs have gone.

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If every company is faced with the problem of overnight having this tax thrust upon them, and trying to avoid it, they will have to start a crash construction program. They will just have to. I don't think there are any two ways about it. That would mean they would also all go to the same group of contractors to get processing equipment built as quickly as possible.

This causes a labor shortage in the critical crafts. We saw this shortly after World War II when the industry went into a big building program to catch up for what they did not do during the war.

You guarantee craftsmen 10 hours a day, 6 days a week of work and obviously if a man is going to be on that job for 6 months or a year he is not going to put out the same output per hour on a 60-hour week as he is on 40.

You are not going to be paying overtime for 20 of those hours. If this is not inflationary, I don't know what is. You won't be getting enough for your money. The money will be misspent to begin with. This is the important point. As the cars on the road today that require a leaded fuel for high-octane phase out, I don't think we should be forced into a huge building program of billions of dollars for a vanishing market.

By the time the building program would be over, most of these older cars or at least half of them probably would be off the road. I don't think such a building program could be done within 5 years.

The reason I say that is normally the new investment per year in the refining industry in the United States is around $800 million. That is for refining, not for chemical plants, but for refining equip ment, replacements, new process units, additions, expansions, and so forth.

If we add a burden of $6 billion on top of a normal annual volume of $800 million, it is going to take years to get that kind of a program completed. By that time a lot of these cars will be off the road and this equipment will be pretty much a white elephant.

Mr. BURLESON. Mr. Chairman, I would like to observe in this connection with Mr. Gammelgard's comments that in my area, are a number of inland small refineries. I have not heard from them on this particular subject but it is reasonable for me to believe it is correct that they are having a pretty difficult time right now under various circumstances that we need not go into at this time.

I think this may put them out of business regardless of the time. permitted them to make necessary change to meet prepared require

ments.

I don't think they could convert to anything other than what they are doing now if my information is correct.

Mr. GAMMELGARD. I agree with you, I don't think the large companies or the small companies should be forced into this type of program. I don't think there is any justification for it.

Mr. BURLESON. I agree with you. It is a matter of economic life. I don't see how they could do it.

I have just one other question. I think it is agreed generally that we're under threat of a fuel shortage in this country.

Now, if producers of gasoline had to go into this conversion, this change all at once, how much additional fuel-how much additional gasoline would be required if lead additives were eliminated in the next 8 or 9 months or a year?

There would be an additional demand, would there not? Do I make myself clear?

Mr. GAMMELGARD. I think it would add to the problem by some modest degree.