Foreign Relations of the United States, 1955–1957, Foreign Aid and Economic Defense Policy, Volume X

248. Memorandum for the Files, by M. Robert Rutherford of the Fuels Division, Office of International Trade and Resources¹

Washington, April 11, 1957.

SUBJECT

• April 9 Meeting of the Advisory Committee to Consider Oil Imports²

The meeting was attended by Mr. Murphy representing the Department, accompanied by Mr. Beckner and Mr. Rutherford of FSD.

Mr. Gray opened the meeting by referring to his extended informal consultation last week (Wednesday, April 3) with Messrs. Hoover, Flemming, Anderson and Warren. The following represented the substance of the advice and conclusions of that group:

1. Answered affirmatively Mr. Gray’s query as to whether, at some level, imports would become a threat to the domestic industry. Agreed that the level of imports indicated for the second half of 1957, 14 per cent (the figure for imports into total U.S. but excluding Canadian or, alternately, for imports into Districts I–IV, with no exclusions), was too high.

2. Believed that District V as a deficit area should continue to be left outside of any formula. Thus, the Committee should continue to concern itself only with Districts I–IV.

3. Was at first inclined to recommend the continuance of exceptions for imports from Canada and Venezuela. Concluded, however, that it would be best to have no named exceptions, by region or by country. Instead, an arrangement should be devised which would establish priorities for the several regions within the overall formula; first priority to be given to Canada; second priority to Venezuela and/or the other Western Hemisphere countries; third priority to the Middle East; fourth priority to the Far East.

4. Suggested that a proportion then be arrived at to be applied to Districts I–IV, applicable to imports from any and all sources. The figure of 11.4%, representing the record for the first quarter of 1956, appealed to the group as a reasonable and acceptable figure. (Presumably this was a period when imports had been pretty much in line with the objectives of the Committee; on the other hand it is seen to represent a certain increase over the 1954 ratio of 11.26).

5. A new element in the arrangement would have to be some sort of an assigned allowable for each importing company. Such assignments would be made by the Government (ODM). The allowables would take into consideration: historic import pattern for each company; and amount of investment overseas; relationship of imports to own domestic production or domestic purchases; whether company was taking advantage of cheap imports only for short-time gain; etc. Additionally, a “kitty” would need to be set aside to allow for the growth factor of new importers.

6. This plan, or arrangement, would be in lieu of a certification to the President under Section 7. Mr. Warren questioned how the promulgation at this time of such a plan could be consistent with the December 4 statement of Dr. Flemming, that scheduled imports for 1957 were at that time too high and that a certification would have been made except for the Suez crisis. Finally however, Mr. Warren agreed that it was preferable to do something or anything—if a certification to the President could thereby be avoided.

(Mr. Gray himself had an opportunity within the last day or so to mention this matter to the President; the President made it clear that he does not want the oil import problem on his desk.)

Mr. Gray went on to mention that on Thursday of last week Mr. Brownlee had volunteered to convene the industry task force which had worked in 1954–55 and last fall with the Advisory Committee. The next day Mr. Brownlee had to withdraw this offer, because of pressure from his business associates.

Mr. Gray mentioned that Mr. Hoover and Mr. Warren are currently discussing the oil import question with the independent and the major oil companies to see what their feelings are at this time. At a meeting with Mr. Hoover (subsequent to the group meeting last week), Mr. Hoover’s final suggestions to Mr. Gray were as follows:

(1) Any new statement on oil imports should be announced prior to the April 27–28 meeting of the IPAA;

(2) The standards set forth in the February 1955 report of the Advisory Committee must be maintained in substance;

(3) The plans of the importing companies for 1957 must be reduced;

(4) Otherwise (as a threat), the issue would be certified to the President under Section 7 with recommendation that “semi-voluntary” restrictions, as outlined above, be placed in effect by the Government.

Mr. Gray thereupon summed up his understandings of his own present possible courses of action and of the Committee:

1. Immediate certification to the President under Section 7, following up the procedures initiated by Dr. Flemming or,

2. Attempt once more to obtain “voluntary” compliance with an import formula. This is to be done with the threat of certification looking forward to the imposition of “semi-voluntary” controls.

At this point Mr. Gray offered the matter to the Committee for discussion.

Mr. Humphrey immediately and emphatically stated that the Government must continue its efforts to obtain the desirable import relationship through “voluntary” efforts. He said that the alternative—Government control—is so tremendous in its implications that it can only be the very last resort.

Judge Hansen stated that, although he had not participated in the early deliberations of the Committee, he did not at all agree with the basic philosophy of attempting to restrict imports. In his view it is much more desirable to conserve United States reserves and to use imports liberally to satisfy our current demands.

Mr. Murphy stated that any arrangement would be attractive which would relieve the Government of the necessity of acting under Section 7. He expressed the view of State that imports are not yet at such a level as to threaten the national security; he agreed with Judge Hansen that the conservation, rather than the depletion, of United States reserves might be desirable—if they are in fact not limitless.

Mr. Humphrey pointed out that it is imperative that the United States industry keep up its incessant search for new discoveries, and that it is thereby imperative that the domestic industry continue to be provided with adequate incentives for exploration.

Mr. Gray inquired how the Committee would go about devising a new formula. Mr. Humphrey suggested that an earlier procedure be followed and that a task force be set up to develop ideas. Mr. Stewart (Director, Office of Oil and Gas of Interior) suggested that Messrs. Hoover, Anderson and Warren could block out the broad outlines of a new plan and that his own office could then fill in the statistical details.

Mr. Gray inquired whether the attempt should be made to put the new plan into effect without the company allocations. Mr. Humphrey strongly recommended such a course of action.

In regard to the forecasts for 1957, which indicate substantial excess, Mr. Stewart observed that it had always been the case that actual imports were considerably lower than the forecasts had indicated.

Mr. Gray inquired whether an effort should be made to meet the deadline of the IPAA meeting later this month. Mr. Humphrey and Mr. Wormser said that this was not necessary and that it would be much preferable for the Committee to work along in an unhurried manner.

Mr. Gray referred to the question of his authority or power: could he tell the companies what to do, or could he merely recommend to them? Could he call them in to consult, and ask their advice? Judge Hansen made it clear that the companies could not come together to devise plans on a joint basis. Mr. Humphrey noted that suggestions could be elicited from the companies on an individual basis. He went on to observe that both sectors of the industry, the independent producers and the importers, would accept any moderate, reasonable plan because of their very acute realization that Government controls would be harmful to all concerned.

In regard to the one new element in the plan now to be devised—the establishment of regional or country limitations—Mr. Gray remarked that he had already received a telegram from Ambassador Richards in the Middle East pointing out that restrictions which would work against the Middle East countries would prejudice the spirit and the implementation of the Eisenhower Doctrine. Mr. Murphy remarked at this point that such allocations might be advantageous because they would show the countries of the Middle East that the United States is not at all dependent on that area as a source of supply; this would thereby serve to deflate some of the ideas current there as to the strategic importance of their oil.

In connection with the possibility that it might be necessary to eliminate the preferential position which Venezuelan oil has occupied in the past, Mr. Gray asked Mr. Murphy whether the Department of State would continue to be in a position to take care of Venezuelan sensitivities; Mr. Murphy replied in the affirmative and indicated that he did not believe that this would be an insurmountable problem.

Mr. Kendall (ODM Counsel) attempted to summarize the deliberation: The Committee is undertaking to devise a new or modified formula in regard to the desirable import levels to be achieved in Districts I–IV; this will include imports from all sources of supply, but will set up certain limitations to be applied to these various sources. Ideas for such a new plan are to be suggested by the working group which has contributed significantly to the Committee’s efforts in the past: a group composed of Mr. Gresham, Mr. Beckner of State and members of the Office of Oil and Gas of Interior. It was hoped that the Committee could meet again next week to consider some tentative plans to be developed by that working group.

1. Source: Department of State, Central Files, 100.4/4–2557. Confidential; Limited Distribution. This memorandum and Document 251 were sent to Murphy under cover of a memorandum from Kalijarvi dated April 25. Kalijarvi noted that since the Advisory Committee did not maintain official minutes of its proceedings, the attached Memorandum for the files, which was prepared at Murphy’s request, should be considered as unofficial and for Departmental use only. (Department of State, Central Files, 100.4/4–2557)
2. Reference is to the President’s Advisory Committee on Energy Supplies and Resources Policy.