280. Memorandum for the Files, by the Officer in Charge of Economic Organization Affairs, Office of European Regional Affairs (Moline)1
SUBJECT
- District V Oil Imports and Possible Effect on Canada
Last Thursday night as I was leaving the building I met Mr. Hoover who is in Washington in connection with the study being given to the District V oil import situation.2 I told him that I had been reading about the developing problems on the West Coast arising from increased imports and understood that consideration was being given to finding some way to deal with the situation, perhaps under a voluntary agreement similar to the one in effect for Districts I–IV. I told him that I would like to speak to him about the problem because I feared repercussions in the field of U.S.-Canadian relations.
Last Friday Mr. Hoover called me to his office to discuss the District V situation. He had some statistics which showed a decline in U.S. imports of oil from Canada and an increase in imports from other sources into District V. He explained that the imports from Canada went entirely to two refineries in the State of Washington which were, however, operating at only 68% of rated capacity. By way of comparison, he pointed to figures showing the level of activity in four refineries in British Columbia which were operating at some 50% of rated capacity. (Today he said that he had learned that one reason for the very low refinery activity in British Columbia was that one refinery had been on strike.)
Mr. Hoover said that the principal reason why Canada was falling behind in supplying oil to District V generally was the fact that the law in Alberta operated to penalize the major companies which might otherwise have been interested in exporting the oil. Not only was Alberta oil relatively high priced, its price being set in relation to U.S. prices, but it was required that exports from Alberta be on a pro rata basis. Thus if a major company wished to export a barrel of its own oil it might have to purchase several additional barrels of some other company’s oil, which thereupon became very expensive especially in relation to oil produced in Sumatra or the [Page 750] Middle East from which major companies could import their own supplies.
As for the problem generally California required approximately 200,000 barrels a day of imports to supplement its domestic production plus oil expected from the Four Corners area. Imports, however, were running over 300,000 barrels a day and promised to increase still further rather than to decline. Stocks were being increased at the rate of 100,000 barrels per day and there was every prospect for a disruptive price reduction if this situation continued.
Mr. Hoover said that he doubted any plan which might be worked out would penalize the Canadians. The companies which imported from Canada had good historical positions in the import picture and, moreover, had some public relations incentives for trying to bring their oil from Alberta to Washington. I called his attention to the assurances given by the Secretary to Prime Minister Diefenbaker at the time of their first meeting in July when the Secretary noted the care we were taking not to harm Canadian oil interest. Mr. Hoover replied that the conversation referred to the plans then being considered for Districts I–IV and observed that imports from Canada into this area had indeed been very fairly treated. He also noted that the Secretary had said that other measures would be required if the voluntary agreement did not prove successful. The voluntary agreement, according to Mr. Hoover, has been eminently successful east of the Rockies and most of the heat has gone out of the criticism previously engendered by the import situation. He stated that it was essential, in his judgment, to find a similar solution to the District V problem before the Congress reconvened in order to avoid restrictive action by that body. He noted that serious controversy regarding oil imports could be a substantial hazard to the renewal of the trade agreements program.
He said that he had given some consideration to the possibility of arrangements favoring Canada but had concluded that any of the possible preferences would be too patently discriminatory to make them practical.
Mr. Hoover said that he was willing to talk to Canadian Embassy people about the West Coast problem and, accordingly, arrangements have been made for Messrs. Ritchie and Chappell to meet with him tomorrow.3
- Source: Department of State, Central Files, 411.006/12–957. Official Use Only.↩
- Hoover, who left the Department of State on February 5, was serving as consultant to the Department of State on the Turkish pipeline.↩
- A.E. Ritchie was Minister and Norman R. Chappell was Defense Production Attaché of the Canadian Embassy in Washington.↩