As you can see, most of these problems are absolutely and completely beyond our control. I must say again, however, that the basic intent and desire of the government and the industry itself to control tailpipe emissions can be accomplished, and has been proven so with mechanical devices currently available which would eliminate an additional economic burden on the consumer and without the catastrophic effect on the refining industry, both large and small. Thank you, Mr. Chairman. Mr. Chairman, if I may there was a question raised this morning by Mr. Byrnes on which I would like to comment if I may be permitted.

Mr. Byrnes posed the question that he had some difficulty in reconciling in his own mind why the oil industry was today producing an unleaded gasoline when it is not really required and trying to sell it at a premium price.

The only reason in my discussions with the major oil companies, the only reason I can conclude that would have motivated the major to be precipitous in his indulgence in the unleaded market is more or less a pure and simple sales gimmick.

It was apparently a decision of the sales and advertising department and I am not speaking critically-this is merely an objective observation-that legislation goes-was forthcoming which would prohibit the use of tetraethyl lead in gasoline. A decision was made at the top level that they had better get on the bandwagon now and start advertising low lead and/or unleaded gasoline.

This is the only motivation anyone within the industry can determine as being the motivating force behind this move.

Mr. ULLMAN. We appreciate those comments, Mr. DeMaras. Your testimony, originating in California where there has been more furor over this problem then anywhere else, has been particularly valuable.

I have attended most of these hearings and as far as I can recall the administration did not at any time present any concrete evidence that lead in itself did create the problem.

As far as I can see the main argument they used was that lead prevented the use of the catalytic exhaust devices for the purification of the air. I have a great deal of concern about this problem.

There is no question the consumer would pay the tax but how it would be applied to the consumer is a great big question mark as far as I am concerned.

Mr. Betts.

Mr. BETTS. Mr. Byrnes is not here now and I will not try to argue his position, but I think he did make the point that Amoco had been putting this unleaded gasoline on the market for many years.

Mr. DEMARAS. That is right, Mr. Betts, but I think there is a little peculiar position here in the response of Mr. Gammelgard, with respect to that question. Amoco is a premium gasoline.

The unleaded gasoline of the American Oil Co. is a premium 100 octane leaded gasoline. The comparison being made was between a 91 low-lead gasoline and/or unleaded with 100 octane premium unleaded gasoline and you cannot make that comparison with respect to sales volume.

You can always sell a premium gasoline because it will operate in current automobiles on the road with high compression engines.

When you try to compare that with low leaded gasoline you cannot make the comparison because these automobiles will not operate on that gasoline.

I can say with respect to that particular question and speaking of the west coast only it has been my determination based on discussions with major oil companies and those people currently in the low-lead market that the sales results have been extremely disappointing.

I have heard no one espouse any enthusiasm over the market acceptance of low-lead gasoline and this is even with only 1 penny over regular gasoline.

If the public is regular users they will go to the regular grade pump and based on experiments and tests run by the Automobile Club of California, they ran 12 automobiles on low lead 91 octane gasoline.

They were designed to run on 91 octane gasoline. It was the lowest compression car that Chrysler made and they experienced difficulty with all but three of the automobiles in trying to make them function properly on 91 octane gasoline. I think what I am saying is the public maybe in trying the unleaded in the current automobiles that run on regular gasoline that it has not worked to their satisfaction. That is the only conclusion I would reach.

Mr. ULLMAN. Thank you very much, Mr. DeMaras. Mr. Juren?

STATEMENT OF DENNIS JUREN, VICE PRESIDENT, REFINED PRODUCTS MARKETING, COASTAL STATES MARKETING, INC. (PRESENTING STATEMENT OF JESSE D. WINZENRIED, VICE PRESIDENT, COASTAL STATES GAS PRODUCING CO.)

Mr. JUREN. Mr. Winzenried was unable to be here today. Mr. ULLMAN. Please identify yourself clearly for the record again and we will be happy to hear you read Mr. Winzenried's statement. Mr. JUREN. My name is Dennis Juren and I am reading the statement of Mr. Jesse D. Winzenried. I am vice president of Refined Products Marketing, Coastal States Marketing, Inc.

Mr. Chairman, members of the committee: Thank you for giving me this oportunity to appear today. My name is Jesse D. Winzenreid. I am vice president of Coastal States Gas Producing Co. and chief operating officer of its subsidiary Coastal States Marketing, Inc. I would like to discuss the proposed tax on lead additives in gasoline. It has been estimated that the proposed tax of $4.25 per pound on lead additives is the equivalent of increasing the cost of leaded gasoline by 2 to 3 cents a gallon. Although the tax would be paid by the lead producer, he would be forced to pass it on to refiners. If refiners were to absorb this added cost, it would generally reduce their revenue from a gallon of gasoline to less than the posted price of the crude oil from which it is made. Obviously the tax will have to be passed on to the consumer.

EFFECT ON CONSUMER

One stated purpose of the tax is to provide an incentive for a switch to the unleaded product. Unleaded gasoline sells at a higher price than leaded regular, and presumably, the tax would bring the leaded gasoline price to the same level. But what happens to the consumer? If he switches to unleaded gasoline, and if he owns a pre-1971 automobile,

he will find he gets fewer miles per gallon, reduced engine performance and higher operating costs. In addition he may be faced with engine modification costs of up to $300. On the other hand, if he stays with leaded gasoline, he has to pay about 7 percent more for fuel. Clearly the effect is totally inconsistent with the administration's avowed promise to curb inflation.

If a switch to unleaded gasoline could help solve the Nation's pollution problems, it might be worth such a cost increase. But it is totally unproven at this time that unleaded gasoline will produce the benefits claimed by the auto industry. For example, the aromatics that must be blended into gasoline to provided the desired octanes are some of the greatest producers of photochemical smog.

On the other hand, there may be effective economical means of eliminating auto pollutants without removing lead. Experiments now underway by producers of lead additives and some oil companies should be carried to conclusion and evaluated before consumers are forced to bear the burden of increased gasoline costs. It would be unfair to force such a sacrifice on the public when so little is known about the necessity for it.

EFFECT ON GASOLINE MARKETS

We expect that there may be other oil company representatives who will come before this committee to speak in favor of the proposed tax. If so, they will represent companies with substantial sources of high octane materials who market over wide areas. We urge you not to be misled by the motives of such companies. The tax will force an extreme hardship on smaller independents who will be hard pressed to make the required capital investment for unleaded gasoline in the time required. Therefore, to some companies, this tax proposal represents another opportunity to extend their control over the gasoline market at the expense of the less affluent independents. Fortunately for us, Coastal States is able to make the switch without undue hardship, so we will continue to compete vigorously with or without lead. But we do not think this committee should condone a tax measure which will drive other independents to the wall and imperial their ability to provide the competition on which our economic system depends. Independent refiners are essential in times of national emergency because they provide the security of wide geographic dispersion of refining facilities.

ALTERNATIVE INCENTIVES

The proposed tax has a stated purpose of acting as an incentive for refiners to produce unleaded gasoline and for motorists to buy it. If further research eventually should prove conclusively that some change in gasoline specifications is a partial answer to auto pollution, there are other more positive ways of providing incentives. Instead of taxing specific components, an incentive such as the investment tax credit could be given to refiners to stimulate investment in facilities to produce gasoline of required specifications. Such a positive stimulation would permit independent refiners to install the necessary equipment without the severe penalties of the lead tax and would not penalize the motoring public.

Another incentive would be to allow accelerated depreciation on equipment necessary to produce acceptable gasoline on the grounds

that such equipment comes under the definition of pollution abatement devices. Such facilities would make no contribution to refinery profit. Therefore, they are analogous to pollution abatement equipment designed to handle refinery wastes.

Existing legislation could be amended to permit construction of the necessary facilities to qualify as pollution abatement devices.

RECOMMENDATION

In the light of these considerations, it is our recommendation that the proposed tax on lead additives not be enacted at this time. If the administration cannot control Government spending to avoid producing unforeseen deficits, then surely there are better, more straightforward methods of increasing tax revenues. We believe this lead tax proposal is totally unjust and uncalled for. I respectfully ask this committee to reject the proposal.

Mr. ULLMAN. We thank you very much for bringing us Mr. Winzenried's statement. Are there any questions? If not, we appreciate your appearance.

The committee will stand adjourned until 10 a.m. tomorrow.

(Whereupon, at 2:30 p.m. the committee adjourned, to reconvene at 10 a.m., Thursday, September 17, 1970.)

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