276. Memorandum of a Meeting of the Special
Committee To Investigate Crude Oil
Imports, Washington, September 10, 19571
Washington, September 10,
1957
PARTICIPANTS
- Assistant Secretary of Commerce Mueller, Acting Chairman
- Secretary of the Treasury Anderson
- Deputy Secretary of Defense Quarles
- Major General Catulla, Defense Department
- Secretary of the Interior Seaton
- Mr. Gordon Gray, Director,
Office of Defense Mobilization
- Under Secretary of Labor O’Connell
- Mr. Fowler, Consultant to Office of Defense
Mobilization
- Judge Hansen, Justice
Department
- Dr. Arthur Flemming, Consultant
to the Committee
- Captain M. V. Carson, Jr., Interior Department
- Mr. Loftus Becker, Legal
Adviser, State Department
- Mr. Willis C. Armstrong,
Director, Office of International Resources, State Department
The meeting opened with the report of Captain Carson concerning the operation
of the import restriction program. Captain Carson presented the main points
of the report orally, and distributed copies to the various agencies.
(Copies of the report are attached to this memorandum.)
Imports during the second half of 1957 will be somewhat higher than the
target, but this is natural in view of the fact that the program was not
announced until July 29, and that procurement schedules cannot be quickly
changed. The decline in import levels has begun, however. Certain problems
have emerged. One of them, the fact that there are six or eight small
importers who were not listed at all at the time the report was prepared.
Another problem arises from the fact that several of the companies listed
object to their quotas and have obtained the right to formal hearings to
protest the quotas assigned to them. A third problem consists of the fact
that such companies as Superior, Ashland, and Crown, have all announced
their intention to become importers at the rate of about 25,000 barrels a
day each, beginning quite soon. If the total quota may be increased, perhaps
these problems can be resolved, but otherwise it will be very difficult. It
will be awkward to persuade other importers to reduce their amounts so as to
make room for “new” importers”. If adjustments are made to allow for all
“new” importers a very substantial increase in imports over the recommended
level will occur.
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Assistant Secretary Mueller presented the case of Socony Mobil which has
cooperated fully with the program, but which has requested that certain
crude oil from Venezuela, which is of a very high asphalt content, and which
Socony imports for processing at an asphalt plant in East Providence, Rhode
Island, be exempted from the crude oil quota. Captain Carson had ruled that
it could not be exempted, because of the definitions used by the Committee.
Assistant Secretary Mueller had felt that this was inequitable. There was a
long discussion of this matter. It was recognized that imports of high
asphalt crudes were logical for road-building materials and for the chemical
industry. It was also recognized that in many cases there was no domestic
crude available instead, but that the alternative was to import residual
fuel oil. Consequently, it was quite clear that no benefit to the domestic
crude oil industry would accrue from restriction on a certain portion of the
high asphalt crudes. It was recognized that some 120,000 barrels per day of
such asphaltic crudes are normally imported. It was finally agreed that a
letter would be written to Socony Mobile by Mr. Mueller
which would indicate that no exception would be made in the definition of
crude oil, but it would leave the door open to some form of adjustment, in
view of the fact that Socony has fully cooperated, and in view of the merits
of the case.
There was a general discussion of how to handle “new” importers, and it was
recognized that increases in demand could not really be counted upon to
satisfy the requirements of the new importers, and that there would,
therefore, have to be cutbacks in scheduled imports, by both the new
importers and the more established ones.
Under Secretary Quarles brought up the
question of Defense Department purchases of jet fuels. The Defense Petroleum
Agency has gone out for bids for 35 million barrels of jet fuels, and has
received bids from American companies for delivery from a variety of
sources. From the standpoint of cost, the arrangement which is most
satisfactory is to obtain 8 million barrels off shore. Of this amount
800,000 will be used off shore, and another 800,000 will be delivered on the
West Coast. The Defense Department will save around $3 million by this
procurement process as against what would happen if it procured all the jet
fuel domestically. The law requires it to buy competitively at the lowest
price, and there is an exemption of petroleum from the provisions of the Buy
American Act. The question was the extent to which it was appropriate for
the Defense Department to procure from abroad about a quarter of its
requirements for jet fuels, in view of the fact that the government is
engaged in trying to limit imports of oil. A general discussion followed,
and it was agreed that the Defense Department had no alternative but to
proceed with its procurement. It would, however,
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issue a public statement explaining its action in
terms of saving money and the requirements of competitive bidding. It was
also agreed that the announcement would not be of such a nature as to
involve any question of possible change in the Buy American Act so as to
make it apply to petroleum.
[Attachment]
Memorandum From the Administrator of the Voluntary Oil Import Program,
Department of the Interior (Carson), to
the Chairman of the President’s Committee To Investigate Crude Oil
Imports (Weeks)
Washington, September 9,
1957.
SUBJECT
- Progress of the Voluntary Oil Import Program
1. On July 30, 1957, I was appointed by the Secretary of the Interior as
Administrator of the Voluntary Oil Import Program. The Program is that
recommended by the President’s Special Committee to Investigate Crude
Oil Imports on July 29, 1957, and approved by the President on that same
date.
2. On August 2, 1957, telegrams were sent to all of the companies listed
in Table II2 of the above-mentioned report, advising them
of the quantity of crude oil they should import, on a thousand barrel
per day average, during the year ending June 30, 1958. Responses were
received from all the companies addressed, and only one company, Sun Oil
Company, stated that it could not participate in the program; however,
its reply indicated that it would reduce its imports to the figure
recommended by the Committee for that company by April 1, 1958. Other
replies varied from statements of unreserved cooperation with the
Government in the program to noncommittal statements regarding adherence
but requesting a hearing on the quantities recommended.
3. On August 16, 1957, the administrative procedures for the conduct of
hearings to correct inequities or to act on applications for the
commencement of operations by new importers, were announced. On August
19, 1957, all those companies who had indicated in their responses to my
telegram of August 2, 1957, that they desired a hearing or wanted to
discuss a revision in the figures set by the Committee were invited to
name two alternative dates for a
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hearing of their petitions. Until now, of the 10 who had previously
indicated that a hearing was desired, only 6 companies have asked for
definite hearing dates. These have been fixed as follows:3
| September 10 |
Standard Oil Company (Indiana) |
| 9:30 AM |
Chicago, Illinois |
| Room 6618 |
|
| September 11 |
Tidewater Oil Company |
| 9:30 AM |
San Francisco, California |
| Room 5160 |
|
| September 11 |
Standard Oil Company (Ohio) |
| 2:30 PM |
Cleveland, Ohio |
| Room 5160 |
|
| September 16 |
Northwestern Refining Company |
| 2:00 PM |
St. Paul Park, Minnesota |
| Room 5160 |
|
| September 17 |
Eastern States Petroleum Company, Inc. |
| 9:30 AM |
Houston, Texas |
| Room 5160 |
|
| September 18 |
International Refineries, Inc. |
| 2:00 PM |
Minneapolis, Minnesota |
| Room 5160 |
|
The lack of requests for hearing dates for other companies who had
previously stated they desired hearings cannot be explained with
certainty.
4. It was to be expected that imports of crude oil into Districts I
through IV during the last half of 1957 would exceed the quantities
recommended by the Committee. The Committee’s recommendations were, of
course, directed to a daily average during the year ending June 30,
1958. Several factors are responsible for an overage during the last
half of 1957. First of all, the Committee’s recommendations were not
made public until July 29, 1957, and were, therefore, retroactive in
application to July 1. Adjustment in tanker schedules could not be made
overnight, and the relatively heavy imports during the month of August
can in large measure be attributed to tankers loading for or already
enroute to the United States when the
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program was announced. Furthermore, some time must
elapse to adjust commitments for the purchase of crude oil overseas.
5. Despite these factors, crude oil imports into Districts I through IV
have shown a decline since the inception of the program from a high of
1,045,700 barrels a day for the week ending August 9, 1957, to a low of
880,000 barrels daily for the week ending August 30, 1957. West Coast
imports have averaged 289,900 barrels daily for the six-week period.
Table I shows crude oil imports into the U.S. for that period.
6. Tables II and III summarize the data supplied by the named importing
companies relating to their actual imports during July 1957 and
projected imports, by months, for the remaining five months of 1957.
Again, it is interesting to note that the daily average for the last
half of 1957 is 839,800 barrels. This figure compared with the
Committee’s recommendations for the year ending June 30, 1958, of a
daily average of 755,700 barrels imports into Districts I through IV
shows an excess of 84,100 barrels daily. As stated before, an overage is
to be expected during the last half of 1957, but the greater part of the
expected overrun, even for this period, can be attributed to two
companies, named in the Committee report—Tidewater Oil Company and
Standard Oil Company (Indiana), and to several importers such as Bay
Refining Company whose past and programmed imports were not included in
the Report.
7. At this time, it is too early to predict with accuracy the success of
the Voluntary Program. Both Standard of Indiana and Tidewater, whose
petitions are being heard during the week of September 9, 1957, could
have a most serious adverse effect on the program in the event they
failed to keep their imports closely in line with the decision of the
Administrator after their cases have been heard. Such an event could not
but result in other importers taking the position that the program has
failed and that they, in turn, are justified in increasing their imports
to maintain a relative competitive position.
8. Another potential source of danger to the program is the coming of new
importers into the field who neither desire to submit their case for a
hearing, or having so submitted, refuse to abide by the decision of the
Administrator as to approved import allowables. At least three
companies—Superior Oil, Ashland Oil and Refining Company and Crown
Central Petroleum Company—have indicated that they each intend to begin
crude oil imports of up to 20,000 to 25,000 barrels daily. This quantity
would certainly have an unfortunate effect on other present importers
who are now adhering to the plan. It is quite possible, of course, that
there will be others who want to enter the import field in addition to
those mentioned.
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9. While the Committee recognized that new importers should have the
opportunity to begin importing crude oil, it appears that with a normal
annual increase in domestic demand of 3.4% to 3.8%, imports could
increase in a year 30,000 to 35,000 barrels daily and still maintain a
ratio of about 12% of imports to domestic production. However, it is not
clear at this time whether the increase in allowable imports should all
go to new importers (those not now importing) or should be prorated
between them and those who are now importers. In any event, it appears
most unlikely that an increase in domestic demand will provide room for
additional imports in the quantities foreseen. The alternative, named by
the Committee, for the older importers to make room for the new
importers (by further curtailment of programmed imports) appears to have
negligible chances of success. It might also present a serious question
of possible antitrust violations as the older importers could, in
effect, determine what a newcomer would be allowed.
10. Succeeding reports of the status of the program will be submitted
regularly at intervals of about sixty days or oftener if directed by the
Chairman of the Committee.
