The facts presented in the individual petitions, the analysis made by the Board in the Consolidated Decisions of September 22, 1967, and February 27, 1968, and the recent decision in the case of one member, Patchogue Oil Terminal Corporation (Q-9) (fp) September 30, 1968, underscore the critical competitive situation facing independent terminal operators. We know that you are familiar with these facts, but, in brief, the operators have faced and continue to face: -an unfair competitive situation in the wholesale and retail markets; -cut-backs in assured supply at wholesale level from major oil companies in spite of greater inventories than a year ago; -increasing competition at the retail level from the same major oil companies that supply us; -high prices for No. 2 fuel oil, which have held up despite the existence of greatest distillate inventories in several years; -refusal of major refiners to provide long-term assurance and contracts for supply at competitive prices; -decreasing sources of supply due to acquisition and mergers of independent refineries by the majors; -decreasing availability of American flag tankers to independent operators; -decline in profits; and actual losses for some operators; -loss of customers; -increasing reliance on emergency purchases of wholesale supplies at premium prices in the open market. The cost of the American consumers, especially the homeowners of the Northeast, has been amply documented. We, the independent terminal operators, face an even more serious cost. If the trends of the past continue, many of us will soon be forced out of business, as have many other independents along the East Coast in recent years. Our survival as independent businessmen is at stake. The survival of competition in the home heating oil market is equally at stake. Obviously we cannot compete against the accumulated economic power of the major oil companies and the strong competitive advantage given them by the United States Government through the Oil Import Proclamation. The solution lies in a change in that Proclamation. We, therefore, submit the following proposal and urge your consideration and approval: 1. Amendment of Presidential Proclamation 3279, as amended, to make independent (non-refiner affiliated) deepwater terminal operators in Districts I-IV who were not importers of record in 1957 eligible to receive finished product import licenses. 2. Amendment of the Proclamation to allow the Secretary of the Interior to allocate a portion of the finished product quota for Districts I-IV to such operators for imports of No. 2 fuel oil only, on a sliding scale of up to 25% of the input of such operators in the preceding calendar year. 3. Amendment of the Oil Import Regulations to establish allocations according to the following scale: -25% for the first 5,000 b/d -15% for the next 5,000 b/d -10% for the next 10,000 b/d -5% for the next 10,000 b/d -no additional allocation for input above 30,000 b/d. The effects of this proposal would be as follows: a. small operators would remain competitive; b. the Oil Import Program would be freed from the anachronistic, anti-competitive principle that only importers of record in 1957 may bring in finished products; c. no increase in total finished product imports into District I-IV would be required; d. an estimated maximum 30,000 b/d of No. 2 fuel oil allocations would be required for independent deepwater terminal operators under the formula outlined above. Mr. Secretary, we have presented an equitable proposal; it is limited in scope, is consistent with the basic premise of the Oil Import Proclamation, and will remove many of the anti-competitive features of that Program. Under present restrictions, our members, with very large investments in tankage and equipment, are faced with almost certain extinction. After having exhausted every avenue of relief, we have no place to turn but to the Federal Government. We desperately need a formalized plan to permit us to fit into the products import picture on a regular basis. This is the only way we can survive and as independent businessmen, we seek your assistance. If there is any further information that you might need, we will be pleased to provide it to you, and we urge your favorable consideration. Thank you very much. Sincerely, ARTHUR T. SOULE, President. Attachment A LIST OF MEMBERS INDEPENDENT FUEL TERMINAL OPERATORS ASSOCIATION Belcher Oil Co., Miami, Fla. Burns Brothers Oil Co., Brooklyn, N.Y. Colonial Oil Industries, Savannah, Ga. Deepwater Oil Terminal, Quincy, Mass. Eastern Seaboard Petroleum Co., Jacksonville, Fla. Meenan Oil Co., New York, N.Y. Northeast Petroleum Corp., Boston, Mass. Northville Dock Corp., Northville, Long Island, N.Y. Patchogue Oil Terminal, Brooklyn, N.Y. Ross Terminal Corp., Bayonne, N.J. C. H. Sprague and Sons, Boston, Mass. Tappan Tanker Terminal, Hasting-on-Hudson, N.Y. Webber Tanks, Bucksport, Maine Wyatt Coal and Oil Co., New Haven, Conn. Total Annual Volume, No. 2 fuel oil, 50,315,000 bbls. No. 2 fuel oil, 9,001,000 Total, 20,569,000 [Department of the Interior news release] For release January 18, 1969. INTERIOR PROPOSES PLAN FOR OIL IMPORT ALLOCATIONS FOR MARKETERS OF HOME HEATING OIL The Department of the Interior today proposed a plan which would permit fuel oil marketers on the East Coast (District I) to obtain allocations to import crude oil which in turn could be exchanged for home heating oil (No. 2 Fuel Oil). Under the proposal, an applicant for an allocation would have to be in the business of selling No. 2 oil and have under his management and operational control a deepwater terminal located in District 1. Persons in the business of selling No. 2 oil who have a warehouse agreement with a deepwater terminal operator would also be eligible under certain conditions. For the purposes of the proposal, 30,000 barrels per day of crude oil imports would be set aside in 1970 to be divided among those eligible. The suggested formula for computing individual allocation is as follows: Applicant's qualified X (times) Crude oil available for allocation (30,000 B/D) Total qualified terminal inputs While imported crude oil shall be exchanged for No. 2 fuel oil, no allocation could be sold, assigned, or transferred, and the fuel oil received in exchange must be sold as fuel oil. Interested parties can submit written comments (six copies) on the proposal to Administrator, Oil Import Administration, Department of the Interior, Washington, D.C. 20240, within 45 days following publication of the proposal in the Federal Register. The text of the proposal is attached. U.S. DEPARTMENT OF THE INTERIOR, OIL IMPORT [32A CFR, Ch. X] [Oil Import Regulation 1 (Revision 5)] ALLOCATIONS TO MARKETERS OF No. 2 FUEI. OIL-DISTRICT I NOTICE OF PROPOSED RULEMAKING There is set forth below, in the form of a section of Oil Import Regulation 1, a proposal for the making of allocations of imports of crude oil to marketers of No. 2 fuel oil in District I. The proposal is addressed to the competitive status of such marketers. Interested persons are invited to submit written comments upon the proposal to the Administrator, Oil Import Administration, Department of the Interior, Washington, D.C. 20240, within a period of 45 days from the date of publication of the notice in the Federal Register. STEWART L. UDALL Secretary of the Interior. Sec. Allocations to marketers of No. 2 fuel oil-District I (a) For the purposes of this section "No. 2 fuel oil" means an oil which is manufactured from crude oil and which has the following physical and chemical characteristics: Closed Cup Flash point, °F., Min., 100 Pour point, F., Max., 20 Water and sediment, percent, Max., 0.10 Carbon residue on 10 percent residuum percent, Max., 0.35 Distillation temperatures, °F., Max., 640; 90 percent point, Min., 540 Viscosity, Saybolt Universal seconds, Max., 37.93; at 100° F., Min., 32.6 Gravity A.P.I., Min., 30.0 (b) For the allocation period January 1, 1970 through December 31, 1970, 30,000 B/D of imports of crude oil are available in District I to persons having qualified terminal inputs of No. 2 fuel oil in this district. (c) To be eligible for an allocation of imports into District I of crude oil under paragraph (e) of this section a person must: (1) be in the business in District I of selling No. 2 fuel oil and have under his management and operational control a deepwater terminal located in District I into which there has been delivered No. 2 fuel oil which he owned at the time of delivery, such delivery being the first delivery of that oil into a deepwater terminal in District I; or (2) be in the business in District I of selling No. 2 fuel oil and have a throughput agreement (warehouse agreement) with a deepwater terminal operator in District I under which agreement the person has delivered to the terminal No. 2 fuel oil which he owned when it was so delivered, such delivery being the first delivery of that oil into a deepwater terminal in District I. For the purposes of this section, "throughput agreement" means an agreement which provides for the delivery to a deepwater terminal by a person of No. 2 fuel oil which he owns and for a right in such person to withdraw on call an identical quantity of such oil from the terminal. A bona fide throughput agreement will be deemed to exist (1) only if the person operating under the agreement owns the oil at the time it is delivered to the terminal and only if that delivery is the first delivery of that oil into a deepwater terminal in District I; and (2) only if the person has delivered at least 100,000 barrels of No. 2 fuel oil into terminal under the agreement during the 12 month period ending September 30, 1969, or any subsequent 12 month period ending September 30. However, no person who is eligible for an allocation of imports of crude oil into Districts I-IV under sections 9, 10 or 25 of this regulation shall be eligible for an allocation under paragraph (e) of this section. 43-328-70-10 (d) A person seeking an allocation under paragraph (e) of this section must file an application with the Administrator no later than 60 days prior to the beginning of the allocation period for which the allocation is requested. The application shall disclose in detail such information as the Administrator may require. (e) Each applicant eligible under this section shall receive an allocation of imports of crude oil into District I computed according to the following formula: crude oil available for allocation Applicant's qualified X total qualified (f) (1) Only those inputs of No. 2 fuel oil which are made as provided in this paragraph (f) are qualified terminal inputs for the purposes of allocations under paragraph (e) of this section. (2) In order to constitute a qualified terminal input, a delivery of No. 2 fuel oil into a deepwater terminal must have been made during the year ending three months prior to the beginning of the allocation period for which an allocation is requested. (3) An eligible applicant may count as qualified terminal inputs a quantity of No. 2 fuel oil which was delivered into a deepwater terminal in District I under his management and operational control or into a deepwater terminal with which the eligible applicant has a throughput agreement, if he owned the oil when it was placed in the terminal and if the delivery constituted the first delivery of that oil to a deepwatr terminal in District I. (4) An eligible applicant may also count as qualified terminal inputs a quantity of No. 2 fuel oil which the applicant (i) owned and (ii) sold to a person who was not in the business of selling No. 2 fuel oil and (iii) delivered to a deepwater terminal in District I under the management and operational control of the buyer, if such delivery constituted the first delivery of that oil to a deepwater terminal in District I. (5) An eligible applicant may count as qualified terminal inputs a quantity of No. 2 fuel oil which the applicant (i) owned and (ii) sold to a Federal agency. or to an agency of a State or a political subdivision of a State, and (iii) delivered to a deepwater terminal in District I for the account of such agency, if such delivery constituted the first delivery of that oil to a deepwater terminal in District I. (6) For the purposes of this paragraph (f), delivery of No. 2 fuel oil produced in a refinery and placed in storage at that refinery shall not be deemed to be a delivery to a deepwater terminal. (7) If any part of a deepwater terminal is removed from the management and operational control of an eligible applicant by sale, transfer, lease, or any other means, the part so removed shall not constitute a separate deepwater terminal for the purpose of computing allocations based on terminal inputs. An allocation will be computed as if the transaction had not taken place. After the allocation for a particular allocation period has been so computed, the Administrator may, in his discretion, divide the allocation between the eligible applicants from whose management and operational control the part of the terminal was removed and the person who assumed management and operational control, if these persons agree upon, and request, a division. (g) No allocation made pursuant to this section may be sold, assigned, or otherwise transferred. All crude oil which is imported under an allocation made pursuant to this section shall be exchanged in District I for No. 2 fuel oil which shall be sold for use as fuel in that District. () As used in this section "deepwater terminal" means a permanent land installation which (1) consists of bulk storage tanks having not less than 100,000 barrels of operational capacity, pumps, and pipelines used for the storage, transfer and handling of No. 2 fuel oil, (2) is adjacent to waterways that permit the safe passage to the installation of a tanker rated 15,000 cargo deadweight tons, and (3) has a berth that will permit the delivery of No. 2 fuel oil into the installation by direct connection from a tanker rated at 15,000 cargo deadweight tons, drawing not less than 25 feet of water, and moored in the berth. Cargo deadweight tons represent the carrying capacity of a tanker in tons of 2.240 pounds, less the weight of fuel, water, stores, and other items necessary for use on a voyage. ADMINISTRATOR, INDEPENDENT FUEL TERMINAL OPERATORS ASSOCIATION, Oil Import Administration, Department of the Interior, DEAR MR. ADMINISTRATOR: On behalf of the Independent Fuel Terminal Operators Association, I respectfully submit comments pursuant to the Notice of Proposed Rule Making, Allocations to Marketers of No. 2 Fuel Oil-District I, Federal Register, January 22, 1969 (F.R. Doc. 69–775). Our Association is composed of independent deepwater terminal operators along the East Coast, from Maine to Florida. For your convenience, a list of the members is contained in Enclosure A. All members own or control deepwater terminal facilities capable of receiving tanker shipments, and none is affiliated with a major company. On October 30, 1968, the Association wrote to Secretary Udall outlining the problems facing the members and presenting a proposal for solution. A copy of that letter is enclosed. (Enclosure A.) There has been no improvement in the situation outlined at that time; in fact, there have been further cut-backs in assured supply from the major oil companies and a further erosion of the competitive position of the independents vis-a-vis those major oil companies. Because of the severity of the threat to our existence we are pleased that the first step has been taken toward granting relief that will enable us to remain competitive and remain in business. We are also pleased that some elements of our October 30 proposal are embodied in the proposed regulation. In brief, we support the general plan to provide import allocations to marketers of No. 2 fuel oil in District I. We strongly support the basic purpose-to strengthen the competitive position of independents-and urge prompt promulgation of the final regulations. However, four elements of the proposed plan cause concern and we recommend consideration of the changes outlined below. First, we urge that the regulations become effective on April 1, 1969, instead of January 1, 1970. The situation facing the independent marketers is serious and immediate; with each passing month, assured supplies are reduced and the competitive picture becomes darker. A number of petitions were filed in January before the Oil Import Appeals Board by independents seeking additional imports on the grounds of continuing hardship. As you know, the annual "heating season," the marketing cycle, for marketers of home heating oil begins on April 1. Contracts for deliveries of product during the winter of 1969-70 will be signed on that date, and marketing planning begins on that date. Therefore, if the proposed allocations are to have maximum impact, they should become available at the beginning of each "heating season," April 1— so that recipients may utilize the imports most effectively in their 12 month supply program. Second, we are deeply concerned with the provision in section (c) (2) which would enable persons with a "bona fide throughput agreement" of 100,000 barrels per year or more to be eligible to receive allocations for importation of product from foreign sources. We very strongly oppose this provision and urge, as we did in our letter of October 30, 1968, that eligibility for imports be limited to those who can receive such imports at deepwater terminal facilities which they own or control and in which they have made significant investments. We have no objection to the entry of newcomers into this category and would oppose any provisions that would limit participation to an historical basis. We do urge, however, that such newcomers be eligible to participate only after acquisition of control or ownership of a deepwater terminal. Thus, the ownership or control of a deepwater terminal would be the prime criterion for eligibility, coupled, of course, with the ownership of the No. 2 fuel when it enters into any deepwater terminal for the first time in District I. In this way, after establishing eligibility, the program would not restrict the operations of any quota recipient because inputs into any deepwater terminal would be included regardless of the location of that terminal in District I, and it would also obviate the necessity of limiting cargo-size receipts. The issue of throughputs involves, of course, the question of the proper and effective cut-off point for qualifications. The basic purpose of the proposed change in regulations is to strengthen the competitive status of independent terminal |