34. Minority Report1

Separate Report on the Oil Import Question by the Secretary of the Interior, the Secretary of Commerce and the Chairman of the Federal Power Commission

We do not agree generally with the analyses and conclusions in the “Task Force Report”2 and specifically oppose the program which it recommends.

[Page 85]

Our broad reasons, elaborated in this separate report, are these:

1.
The program would substitute a tariff for the present quota system. A tariff is highly undesirable in many respects and would lead to domestic and international problems of great significance.
2.
The program would result in price fixing. Stripped of its foliage, the recommendation of a tariff of $1.45 is designed to produce a domestic price of $3.00 a barrel for oil. The control of imports based upon any predetermined price for domestic oil is not only impractical, but would be a further retreat from a free market.
3.
The program would risk the national security in fundamental respects. It would make us dependent on insecure foreign supplies by discouraging the exploration and development necessary to build our own reserves of oil and gas. Because of its adverse impact on the natural gas industry the proposed program would disrupt energy resource utilization and consumer demand for 75% of our current energy base.
4.
The program would involve substantial economic loss to the industry, to its 1.2 million employees and to the 31 oiland gas-producing states, so as to weaken our internal economy and impair the national security within the meaning of the statute.

These objections to the majority program are multiplied by the intimation that the recommended tariff of $1.45 a barrel is to be followed by further liberalization. The analyses in the majority report are directed toward a proposition that the price of domestic oil should be forced down toward $2.50 a barrel. Whether or not such further actions do occur, the uncertainty that they present to the industry must necessarily involve a significant reduction in oil and gas exploration and development. The record shows that at a price of $2.50 a barrel the United States would be at the mercy of distant supplying countries within ten years.

It is neither desirable nor timely to consider a major change in the quota approach of the oil import program. We do not have adequate data at this time on the reserves in Alaska and the Canadian Arctic, or on the costs of developing and marketing the production from such reserves. Under these circumstances, we should await efforts of the next three or four years in order to have the basic information on which to formulate a long-range program. The present Mandatory Oil Import Program, based upon import quotas, has in fact worked effectively over the past ten years. Such criticism of it as is appropriate relates not to the program, but to the unevenness of policy guidance and administration. There is no need for a fundamental change in the structure of this program at this time.

Nevertheless, some increase in oil imports is appropriate, since the probability is that we will need to bring more oil into the United States over the long term. Better policy guidance for the present Mandatory [Page 86]Oil Import Program can be supplied by an improved administrative structure. Accordingly, we propose that two steps be taken now:

1.
Improve the administration and policy guidance for the Mandatory Oil Import Program and eliminate some of its undesirable working features.
2.
Provide for an annual increase in the percentage of oil imported for each of the next five years, moving it up gradually from the present level. This would result in increased imports into the area east of the Rockies ranging from 100,000 barrels per day in 1970 to almost 600,000 barrels per day in 1974.

Our alternative program will serve the national interest best. It will effectively protect national security by stimulating further development of our own resources and reduce reliance on historically uncertain distant sources of supply. It will protect the consumer and provide opportunity for a gradual reduction in price of oil products. It will avoid major shock to the oil producing and refining industries, to their stockholders and landholders, and to the states dependent upon them for tax revenues.

Walter J. Hickel

Secretary of the Interior
Maurice H. Stans

Secretary of Commerce
John N. Nassikas

Chairman, Federal Power Commission

Attachments:

I.
Effectiveness of the Present Oil Import Program
II.
Reasons Why a Tariff System is Not Workable
III.
Other Fundamental Disagreements with the “Task Force Report”
IV.
Alternative Plan for Revision of the Present Mandatory Oil Import Program

Appendix:

Supplementary Views of the Chairman, Federal Power Commission: Impact on the Natural Gas and Electric Utility Industries

  1. Source: National Archives, RG 174, Records of Secretary of Labor George P. Shultz, 1969–1970, Subject Files, Box 179, Separate Reports on the Oil Import Question, Separate Reports by Hickel, Stans, Nassikas. No classification marking. All attachments are attached but not printed. The Minority Report is also referred to as the Stans-Hickel report.
  2. See Documents 32 and 33.