A year ago I cosponsored the Conte Bill to phase out the Mandatory Oil Import Control Program over a ten-year period. The wide, bipartisan support this bill generated (almost all New England congressmen and a total now of 66 sponsors) gave me hope that at last action might be taken so that we would have lower, more realistic prices on the heating oil which is so necessary for New England. Towards this same end I have also given my full support to the proposal to establish a free trade zone at Machiasport, Maine. The pervasive influence of the oil industry is clearly demonstrated by the fact that these proposals are getting no further than ones of previous years.

No other industry is protected and subsidized like the oil industry. Not only does it have the oil quotas to keep prices high, but it has highly preferential depletion allowances and intangible drilling costs to keep its taxes low. But unbridled protectionism is not what has made this country great; fair competition in our free enterprise system has. Efficiency and lower prices would both be served by the competition which would follow the end of the oil import quotas.

Our ten year-old system of quotas which restricts oil imports to 12% of domestic production is a type of protection afforded to no other industry. It goes far beyond the request of other industries for tariff protection, voluntary restraints on the expansion of the rate of imports, limited quotas or orderly marketing proposals. Just as I support meeting those needs, so that our domestic industry will not be unfairly inundated with imports without adequate opportunity to adjust to the new circumstances. I am willing to support reasonable protection for the oil industry. This might take the form of a limited quota system or, more likely, a system of tariffs to keep prices at a realistic, reasonable level. Tariffs have the advantage of providing much-needed tax revenue to finance needed Federal programs, instead of inflated profits for the oil companies. But one thing remains clear: at present the protection and subsidy afforded the petroleum industry is all out of proportion to what is justfied in the national interest.

A side benefit of imported oil is that much of it is of low sulfur content, which is needed to lessen the air pollution currently choking our urban areas. While the petroleum industry is opposing imports, it is often nable to meet the special needs of or cities for low sulfur oil even at the present artificially-induced high prices.

The people of my District have a constant reminder of the tribute they are paying to the oil industry, since the northern-most county borders on Canada. Solely because of the quota system, the residents of Coos County pay 3 to 4¢ a gallon more for heating oil than do the residents of the Province of Quebec. At this time, when the Federal Government's own statistics described Coos County as a disadvantaged area, with a disproportionate share of poverty and outmigration, the residents are forced to pay higher prices to heat their homes than is either necessary or fair, industry is obviously hurt and economic development retarded. What a cruel demonstration of the injustice of the present system this is.

With one hand Washington dispenses anti-poverty funds and concocts economic development programs, and with the other it holds heating oil prices and the cost of energy at exorbitant levels. This is a classic example of the results of "Washington Knows Best"-thinking, and the problems and inefficiencies of centralized power.

Senator MCINTYRE. Would the Congressman from Massachusetts be willing to yield at this time, so we may hear from Senator Muskie, who is a member of this committee, not the subcommittee, but the full committee?

Senator MUSKIE. No; please proceed, Congressman.

You have been waiting here. I came in a little late and I can wait. Senator MCINTYRE. All right.

Congressman Conte, we are glad to welcome you here.

We know of your deep and long concern over this problem, the fact that you have been fighting to try to get this thing out in the open, get some results, get some help for your constituents and ourselves. You may proceed to testify in anyway you wish.

STATEMENT OF SILVIO O. CONTE, REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS

Mr. CONTE. Thank you, Mr. Chairman.

In regard to the question you propounded on residual oil, I want to clarify the record and point out that there was some direct relief there. In 1966, we were paying $2.20 a barrel for residual oil; today it is $1.55.

If we can get the same kind of deal on No. 2 fuel oil it would be very helpful. I remember Senator Muskie and I am going down to the Interior Department demanding relief and predicting if they did take the quotas off residual, it would have an economic impact on New England, and it has.

Senator MUSKIE. The drop was even greater than we predicted, I think.

Mr. CONTE. That is right.

Mr. Chairman, I appreciate this opportunity to testify today on the subject of the anticompetitive and inflationary effects of the proposed oil import program as it applies to No. 2 heating oil in the Northeast. As the senior Republican on the House Select Committee on Small Business, as well as one deeply concerned about the plight of the consumer in my region, I am most anxious to share my views with you and your colleagues.

I want to commend you, Senator McIntyre, and the committee, not only for arranging these hearings, but also for your longstanding involvement in this battle against what you have so aptly described as the secret government of oil.

I would be remiss if I did not also compliment Senator Muskie who has appeared with me on dozens and dozens of occasions before different agencies of the Government in trying to do something about No. 2 oil.

I have long been on record against the inequitable oil quota system. As long ago as March 16, 1959, I was the first to take the floor of the House condemning the Presidential proclamation which created it. I warned then of the heavy burdens the quotas would impose on the consumer, and suggested that we were entitled to some greater justification for its creation than "a general conclusion hidden under the pious hoopskirt of national security."

In the early sixties, I spoke out time and time again against this program. Finally, my efforts, and those of many of our New England colleagues, produced the partial success of gaining an exemption from the quota system for residual fuel oil.

As a strong advocate for the construction of a refinery in a foreign trade zone at Machiasport, Maine, I was disappointed with last year's delay in that decision.

Nevertheless, I was one of those who held out some hope that the Cabinet Task Force on Oil Import Control, created in March 1969, would produce a fair study of the whole oil import problem, and present some useful recommendations.

In May of 1969 I introduced a bill to gradually phase out the quota system over a 10-year period. This legislation, I am proud to say, was cosponsored then by 53 of my colleagues, from both sides of the aisle

and all sections of the country. Last August I submitted this legislative proposal to the task force for its consideration.

When the task force finally made its report to the President in February of this year, I was most impressed with its findings. It is without a doubt the most thorough analysis ever made of the oil import question.

The President's failure to implement the recommendations of his own task force is, in my view, a tragic mistake. He lost not only an opportunity to bring some equity to our oil policy, but also an important means of reducing inflation.

Furthermore, his decision to create another study group, the socalled Oil Policy Committee, seems to offer little promise for anything but further delay. The first decision of this group, to recommend an unjustifiable quota on Canadian oil, offers us little reason to expect it will meet the true needs of the consumer.

Perhaps, I am too pessimistic, Mr. Chairman—and I certainly hope that I am. In any event, I am convinced that the record to be made here will be of great value to the Oil Policy Committee, which now has under consideration this serious question of what should be done regarding the importation of No. 2 fuel oil.

And may I add my voice to yours and others, Mr. Chairman, in urging General Lincoln, chairman of the new committee, to act with as much dispatch on behalf of the heating oil consumers in the Northeast as was regrettably shown in the recent, unjustifiable Canadian decision.

The major focus of our concern today, of course, is the burden which No. 2 oil import restrictions impose on northeastern independent marketers and fuel oil consumers. Once the dimensions of the present problems are fully appreciated, we can address ourselves to determining the most appropriate remedy.

Before turning to these major questions, however, I would like to make a few comments on the subject of the entire mandatory oil import program and its effects nationwide. For, as serious as the problem facing our region is, Mr. Chairman, we must recognize that this is no mere regional problem.

If there were any doubts about this in the past, surely there can be none today. The recent Canadian decision, so detrimental to consumers in the northern Midwest, dramatically illustrates this. And the even more recent decision by most of our major oil companies to raise gasoline prices by a cent a gallon across the Nation provides further proof that we are facing a national problem. I might add at this point, Mr. Chairman, that the gasoline price hike is a further indication of the majors' arrogant disregard for the needs of the consumers. It also suggests to me that an investigation is warranted by the Antitrust Division of the Justice Department.

Because I am convinced, as I have said, that we are facing a truly national problem, and also because of my disappointment at the failure of the executive branch to exercise the initiative needed to bring about reform, I have concluded that there is an urgent need for much greater congressional leadership on this issue.

I am pleased to announce today that my good friend and colleague, Henry S. Reuss, of Wisconsin, has agreed to join me in calling for the

creation of an informal bipartisan House Committee on Oil Import Reform. This committee will serve as a clearinghouse for the gathering and dissemination of its members' views in this field, and provide a useful forum for considering the views of task force members, other Federal officials, and members of the public and industry. Ultimately, this committee should serve as a vehicle to make known our united position to the public, the Congress, and the executive departments. Mr. Reuss and I have today sent out a letter soliciting the membership of our colleagues.

I should also acknowledge, at this point, the growing voices for oil import reform that are being heard in this body from regions beyond the Northeast. I want to commend Senator Hartke and his colleagues who last week introduced Senate Resolution 382, which calls upon the President to implement the majority report of his Cabinet task force. Mr. Reuss and I have today announced our intention to introduce a similar resolution in the House, in a letter seeking the support of all our House colleagues.

Mr. Chairman, I'd like to take this point of the truly national aspect of the oil import problem one step further. Because it is a national problem, and not just a regional one, we in the Northeast must take care that, in our zeal to protect the region we represent, we do not disregard the very real needs of those in other sections of the Nation.

It has been noted, both here and elsewhere, that many defenders of the present system, including the task force minority and some of your Senate colleagues, have advocated increased home heating oil imports for our region. While I too am glad for this support, we must not fail to consider its source.

I make this point, Mr. Chairman, because I feel there is a real danger that many who care little about genuine oil import reform, and who hope to preserve to the maximum extent possible the unprecedented collection of privileges that this industry has enjoyed for years, would be quite content to see some increase in No. 2 oil imports to the Northeast as the price for the continued enjoyment of their bounty.

I do not believe, Mr. Chairman, that we in New England and the Northeast should be taken in by such a strategy.

There can be no doubt, of course, that New England and the Northeast have suffered most from the inequitable quota system. I need not take up this committee's time to document this point. Three critical shortage dangers during the last four winters provide just one illustration. But I am convinced, Mr. Chairman, that the best long-range solution to the problem in the Northeast is also a national solution.

Last May, as I mentioned earlier, I introduced the identical bills, H.R. 10799, H.R. 10800, and H.R. 10801, which would gradually phase the quota system over a 10-year period without substituting a tariff or any other import restrictions in its place.

In addition to its 54 original cosponsors, I am hopeful of gaining increased support. In this connection, I am pleased to announce my intention to reintroduce this bill. Already it has an additional 12

cosponsors.

At this time I do not want to burden this committee with an extensive discussion of my bill. I might point out, however, that a number of experts, including Dr. Walter J. Mead, professor of economy at the University of California, have stated that the 10-year period pro

vided in my bill for transition is excessive. They feel that a 5-year period would be adequate. I have selected the longer period, however, to assure that such a change will be brought about in the most equitable fashion. I believe it is more than fair to our domestic oil industry.

I might also point out that the task force report itself, at paragraph 436 on page 138, even concedes, as I contend, that there may be no need for any type of import restrictions at all. With this in mind, the report calls for the study of stockpiling and other methods to assure adequate

reserves.

The basic premise of my legislation is that there is absolutely no national security justification for insulating our domestic industry from foreign competition. Perhaps the greatest achievement of the President's Cabinet task force is that it has laid to rest the notion that present levels of import restrictions are in any way justified for national security reasons.

Taking the most extreme situation imaginable, the isolation of North America from all foreign oil sources including Latin America—a situation none of us would consider to be remotely possiblethe task force members found that, under its proposed tariff system, the United States and Canada would be able to satisfy 92 percent of its demand for an entire year without any rationing. And with some slight rationing, more than 100 percent of our needs could be met.

While on the subject of the task force report, I would like to point out that the majority position was joined in not only by Secretary of Labor Shultz, the only professional economist among its members, but also by five of the six official observers, including the representative from the President's Council of Economic Advisors, Assistant Attorney General McLaren and Budget Director Mayo. Mr. Mayo, in recent testimony before the House Treasury Subcommittee on Appropriations, on which I serve, and in response to my question, reiterated his opposition to the present system. All of these gentlemen agree that the current program is costing the American consumer at least $5 billion annually in artificially high prices. To continue this program at a time when we are still caught in the grip of inflation is simply intolerable. While I intend to renew my request to Chairman Mills that the House Ways and Means Committee promptly consider my bill, I would be less than candid to suggest there is a good chance for its swift. enactment. For this reason, as I have said, I also intend to introduce and seek support for a resolution similar to that put forward last week by Senator Hartke, urging the President to promptly implement the recommendaions of his task force.

Even this action, however, will not provide the more immediate relief necessary for our region. One solution that would do this, of course, is the proposal to extend the present residual oil exemption to No. 2 oil. I question, however, whether even this modest and sensible proposal is politically feasible.

I, therefore, urge this committee to recommend to General Lincoln's Oil Policy Committee that the quota for No. 2 fuel be increased, and that an allocation on the order of 150,000 barrels per day be granted to the independent, deepwater terminal operators in the Northeast. Without the kind of far-reaching reform that I have urged, this is the minimum action necessary to end an unjustified condition of discrimination which our region has been forced to bear for far too long.