1 Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut. Prices are average of those quoted monthly for Portland, Boston, Providence, Hartford, New Haven.

2 New York, New Jersey, Pennsylvania. Prices for New York are weighted 50 percent for New York City and 25 percent each for Albany and Syracuse. Prices for New Jersey and Pennsylvania are average of those quoted for Montclair and Philadelphia.

3 Maryland, North Carolina, and Virginia. Prices are average of those quoted monthly for Baltimore, Wilmington, N.C., and Richmond.

4 Illinois, Michigan, Ohio, Minnesota, Missouri, Indiana, Wisconsin, and lowa. Prices are average of those quoted monthly or Chicago Detroit, Cleveland, Minneapolis, St. Louis, Indianapolis, Milwaukee, and Des Moines.

Source of all price data: "Fuel Oil and Oil Heat."

Senator MCINTYRE. Senator, is the thrust of your bill to do what has been done with residual oil, to exempt it from the oil quota program?

Senator PROUTY. Yes; it would eliminate the quota provisions insofar as New England home heating oil is concerned.

Senator MCINTYRE. I note that the Task Force Majority Report seems to take issue with this. It seems to claim that the action that was taken on residual was not well grounded, and therefore they do not seem to approve of this type of action.

Senator PROUTY. Well, to me it makes a great deal of sense. It is a simple approach, perhaps, and whether the Task Force or others agree, I would like to see the legislation enacted.

Senator MCINTYRE. It want to thank you very much, Senator. I would like to indulge in colloquy here, but I know you have other important commitments. We appreciate your interest.

There is one question, though. What about the constitutionality? Has this been studied on this proposal of yours?

Senator PROUTY. I am informed that research has been done by the Library of Congress. They maintain that it is constitutional. Senator MCINTYRE. Thank you very much, Senator Prouty. Before we continue I will insert in the record, at this point, statements of Congressman Hastings Keith of Massachusetts, and Congressman John S. Monagan of Connecticut.

(The statements follow :)

STATEMENT OF HASTINGS KEITH, REPRESENTATIVE IN CONGRESS FROM THE STATE

OF MASSACHUSETTS

Mr. Chairman, I appreciate this opportunity to submit my views on our Nation's oil import quota system and the inequities associated with it.

Competition is a fundamental principle of our free enterprise system economy. As a nation we have accepted it as our economic law because it reduces costs, spurs innovation, and benefits consumers and the public welfare. The oil industry, however, which prefers to have the public bear the burden of protecting the special interests of the industry apparently disagrees with this principle. The heavy pressure exerted on Congress and the Administration by the oil industry is aimed at preserving an arrangement which has saddled our nation with an expensive, muddled and unseemly complex of import quotas-quotas defended by no one but the oil interests through appeals to patriotism and

fair play. But, I submit, how patriotic can any legislation or proclamation be when it unnecessarily increases the cost of living for the American public as well as the cost of government operations through inflated oil prices? And how fair is a system which increases the tax load on American working families because of a special and unequal variety of tax advantages for the oil industry? Obviously such favoritism is neither patriotic nor fair. On the contrary, it is a thinly disguised attempt to protect special interests at the expense of the public. Mr. Chairman, there is no justification for the continuation of this system on the basis of previous administrations' having ignored a rational economic policy. There is no justification to preserve this system even if the present administration fails to recognize that its plans to institute a mutually beneficial trade policy with the world should be buttressed by a publicly beneficial economic policy at home.

It would seem that signs of disappointment and consternation among a large segment of the public and industry in our Nation would be reaching the White House, especially after the release of the report of the Presidential Task Force on Oil Import Control last February. This Task Force, under the chairmanship of the distinguished Secretary of Labor, found that "the present import control program is not adequately responsive to the present and future security consideration". The majority of the Cabinet members participating in the study made a devastating case against the present quota system. It has, the report observed. "spawned a host of special arrangements and exceptions for purposes essentially unrelated to national security, . . . imposed high costs and inefficiencies on consumers and the economy, and . . . led to undue government intervention in the market and consequent competitive distortions."

The cost to consumers runs to astronomical sums. Even the oil industry admits that the amount is in the billions of dollars. My own state of Massachuetts, together with the other New England states, has not only been paying exorbitant prices for oil products derived from some of our domestic production of oil, but it has also been denied some of the advantages available with the importation of low-sulphur content oils from Africa. With free trade in petroleum products, we would not only benefit from lower costs of heating our homes during our long, cold winters but also would enjoy cleaner air the year around because of the lower concentration of pollutants in some of the imported residual oils used in the generation of electricity.

The economy of our region is so heavily dependent on residual oil that over half of our electricity is generated in plants using this product. However, only a quarter of our needs of residual oil are currently imported. As a result, our citizens are obliged to pay nearly a ransom on that imported tonnage besides being forced to accept for three quarters of our consumption the higher-cost residual produced domestically which is not always readily available.

Why should the Commonwealth of Massachusetts pay an estimated surcharge of $190 million annually because of the inefficiencies built into the present quota import program? Is it right or fair that every man, woman and child in my state has to lower his standard of living by about $35 a year only because nature has endowed other states of the union with oil that we don't have and the government does not allow us to buy in the open market at more competitive prices?

The inequities of this system are glaring and they are becoming increasingly intolerable to the citizens of the Northeast. In my view, the President should act on the recommendations of his Task Force and abolish the quotas on oil. If he does not act soon, then Congress should speedily adopt the pending legislation aimed at doing away with this unfair barrier to free trade in oil.

STATEMENT OF JOHN S. MONOGAN, REPRESENTATIVE IN CONGRESS FROM THE STATE OF CONNECTICUT

Mr. Chairman, first let me thank you and the Members of the Small Business Subcommittee of the Senate Banking and Currency Committee for affording me this opportunity to present my views on the inflationary impact of the mandatory oil import control program as it applies to number 2 home heating oil in the Northeast.

I appear before you today in opposition to the oil import program, and I am hopeful that the evidence and testimony offered in the course of these hearings will provide a new mandate for the abolition of this program. Under the mandatory oil import program, first implemented by President Eisenhower as a national security measure, total oil imports are limited to 12.5 percent of the total domestic production. If the program is abolished, Middle Eastern oil could be delivered to the East Coast for $2 a barrel as opposed to the present East Coast cost of $3.75 a barrel for oil shipped from the Gulf ports.

On May 1, 1969, several other Congressmen and I introduced H.R. 10800, a bill providing for the elimination of the mandatory oil import control program over a ten-year period. That bill is presently pending before the House Ways and Means Committee, and I am hopeful that action will be taken on the bill in this Session.

The mandatory oil import control program is nothing more than a thinly disguised subsidy for the oil industry. This subsidy program, which is in addition to the tax breaks which already allow the oil industry to reap profits with minimal tax liability, is conservatively estimated to cost American consumers $5 billion a year. The program has already cost American consumers $60 billion in the last ten years, and if the program is kept intact, the yearly cost to consumers in 1980 will be $8.4 billion. Presently the program costs my own State of Connecticut $88 million a year, and that works out, again this is a conservative estimate, to $29 per year for each man, woman and child in the State. Professor George A. Hay, a Yale economist, estimates that the program costs New England consumers $520 million per year, or $50 per capita in the region. If Professor Hay is correct, that means that every family of four in Connecticut and in New England proper is contributing $200 per year to the already fat oil industry coffers.

The cost of home heating oil in Hartford, Connecticut is the highest in the United States. While home heating oil costs Hartford residents 18 cents per gallon, our neighbors in Montreal, Canada are paying only 14 cents a gallon for oil shipped to Canada from Venezuela. Hartford residents are forced to pay almost 28 percent more for their oil than their Canadian neighbors because the vast bulk of home heating oil used in the Northeast is shipped from the Gulf ports in Texas and Louisiana where artificially high prices are maintained by tight State production limits and restrictions on exports from local fields.

Northeast industry similarly suffers from the discriminatory oil import control program. The industrial potential of the Northeast has not been fully exploited because industries which depend upon the accessibility of low cost fuel oil cannot afford to locate in the region. Presently operating industries are forced to bear the higher fuel costs and are put on a competitive disadvantage with industries in other areas of the United States and abroad which have access to cheap fuel oil.

It is significant that this Subcommittee is holding hearings on this subject on the heels of the President's Cabinet Task Force on Oil Import Control report which, after an exhaustive study of the present validity of the premises upon which the import control program has operated since its inception in 1959, namely, that the program is necessary for the national security and that a discontinuance of the program would seriously disrupt the national economy, flatly recommended that the program be scrapped. The Task Force completely stripped the discriminatory and outmoded import control program of its untouchable national security facade and found it to be first, tailored to the maintenance of fat oil industry profits; second, retarding the development of an efficient domestic oil industry; third, discriminatory upon Northeast consumers and industry; and fourth, as having an inflationary impact upon the entire United States economy. The Secretary of Labor, the Secretary of the Treasury, the Secretary of State, the Secretary of Defense and the Director of the Office of Emergency Preparedness all found that the program was not necessary for the national security of the United States and that the elimination of the program would not have a serious impact upon the domestic economy.

Despite the soundness of the Task Force recommendation, despite the obvious inflationary impact that this program has upon the domestic economy, and despite the pleas for fairness from residents of the Northeast, President Nixon has chosen not to act.

Instead of acting in the interest of a sound domestic economy, for lower consumer costs and against inflation, the Administration has decided to act for the oil industry and only for the oil industry.

When, as in this Congress, the Administration in its fight against inflation, finds it necessary to make severe cuts in appropriations for health, education, and anti-pollution programs, but refuses to curtail this program that will cost American consumers at least $60 billion in the next ten years, I must seriously question the wisdom of the Administration's priorities and policies.

Instead of acting against inflation by curtailing the oil import control program, the President's immediate response to the case against the mandatory control program was to establish a new Oil Policy Committee, an obvious tactic to take the pressure off of him to make a decision on this matter.

I think that these hearings are an appropriate response to this delay tactic, and they give notice to the Administration that we are not going to allow this discriminatory and inflationary program to continue, and we are not going to sit quietly by while the Administration unnecessarily delays taking the necessary corrective action.

The Northeast has been taking it on the chin for over ten years, and we should not allow the moderately taxed oil industry to hamper industrial growth and development in the Northeast and continue to reap profits from Connecticut

consumers.

Senator MCINTYRE. We will call as our next witness the Honorable Kenneth Curtis, Governor of the great State of Maine.

STATEMENT OF KENNETH CURTIS, GOVERNOR OF MAINE

Mr. CURTIS. Senator McIntyre.

Senator MCINTYRE. I am delighted to see you here, Governor, and. of course, appreciate your original interest in trying to get some help for the section of the country we come from, New England. I want to assure you that we here in the Senate and House have not given up this contest by a long shot, and I think we are making some progress. So I am delighted to have you come down here and testify on this No. 2 fuel oil situation and anything else you may feel will be helpful to the committee as we press onward in our struggle for equity.

Mr. CURTIS. Thank you very much, Senator. I am delighted to see you again and appear before you.

At the outset, I would just like to say I am here as Governor of Maine and as chairman of the New England Governors' Conference. and while the testimony is my own, I am supported very strongly in principle by all the other five governors of the New England States, as I am sure you well know.

It is true that it was 13 months ago that I appeared before this same committee, and I know you will recall that the subject discussed at that time was governmental action and inaction which imposed artificially high heating oil prices on New England consumers and which subjected our region to the dangers of supply shortages during our cold winters.

And, Senator McIntyre, despite your own efforts and those of this committee and those of other senators concerned with nationwide consumer needs, I must regretfully note that this administration remains unresponsive to our urgent problems.

Indeed, by its recent decision to restrict the flow of Canadian oil, a decision which was made with a speed astonishingly different from the snail's pace at which our efforts to provide consumer relief have been treated, this administration has again shown a desire to protect

the domestic oil industry more strongly than it protects the U.S. consumer and more vigilantly than it presses the allegedly urgent fight against inflation.

However, Mr. Chairman, something has changed since my last appearance before this committee.

In the intervening time a cabinet-level task force has conducted a very thorough, a very honest review of the oil import program. Many of the conclusions of that review read like a restatement of the New England position of the last 2 years.

Generally, the task force concluded that the oil import program is extremely costly. It is estimated to cost American citizens $5 billion per year today. This amounts to $24 per person, and it will cost even more over the next decade.

In return for this $5 billion subsidy to the oil industry, the task force, including the Secretary of Defense and the Director of the Office of Emergency Preparedness, concludes that our country gets virtually no protection against the most likely forms of disruption and only a little against some very remote dangers.

The task force report also makes clear, sometimes explicitly and sometimes by implication, that we in New England pay the highest costs and get less protection than any area except, perhaps, Hawaii. With regard to the issue before this committee, the price and supply of home heating oil in New England, the report states, and I quote:

No. 2 fuel oil is probably in artificially short supply in the Northeast relative to the rest of the country because the quotas have their greatest effect there. There seems to be general agreement that with free importation, No. 2 fuel oil would retail for about 3 cents per gallon less in New England than it does now.

And put another way, the task force report indicates that the program as a whole is costing the average Maine family $164 per year. Of that sum, approximately $85 is attributable to the effect of the quota program on home heating oil.

Furthermore, because home heating oil is an essential product in Maine and New England, this burden falls hardest on the poor who cannot go without oil. Thus, Maine's low-income wage earners and poor people, already hard hit by rising prices and failing industries, are being asked to contribute $41 per person to subsidize the oil industry in which the average wage is more than double their own.

That this state of affairs is permitted at all is shameful; that the task force report which lays it bare and recommends changes should be ignored is inexcusable.

To fully appreciate the extent of the inequity, we should consider that this is not the only subsidy paid by the American citizen to the oil companies.

In 1968, a survey of 23 of the largest oil companies showed a net income before taxes of over $8 billion on which Federal taxes were paid at a rate of 7.7 percent. In fact, three companies had a total net income of over $1.5 billion and didn't pay one dime in Federal income

taxes.

Contrast this with the married mill worker in Maine with two children, earning $4,600 a year who was not only forced to subsidize the major oil companies but paid Federal income taxes at a rate of 14 percent.

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