54. Letter From the Director of the Office of Emergency Preparedness (Lincoln) to President Nixon1

Dear Mr. President:

Approximately six months ago you established a new management system for the Oil Import Program.2 That system has been proceeding, in accordance with your instructions, with interim actions directed to improving the program. Actions have included proclamation changes by you on my recommendation and regulatory changes by the Secretary of the Interior with my concurrence. These actions have been taken with the advice of the Oil Policy Committee.

The greater part of historical allocations stemming from the voluntary program which ended in 1959 will be eliminated at the end of the year. The anomaly of shipment of Mexican oil imports out of, and then back into, the United States will also be eliminated.3 A formal regulatory system has been instituted for Canadian imports at a considerably expanded level of imports over 1969.

With the advice of the Oil Policy Committee that the action will not adversely affect national security, the level of foreign imports of crude oil has been raised for 1970. A program of importation of No. 2 heating oil has been instituted for the East Coast. The Oil Import Appeals Board has been given authority to allow increased importation of residual fuel oil for the mid-continent area to alleviate hardship and reduce pollution, and to permit increased importation of asphalt for the East Coast.

Arrangements have been made for the Oil Import Appeals Board to provide relief for hardship cases, by authorizing imports of crude oil from Canada above the level of the Canadian quota but within the overall quota. Also, a recent action will permit those refineries which [Page 125]receive Canadian allocations and which prove a hardship situation to use their offshore quota allocations for imports from Canada.4

The Oil Policy Committee has concurred in my recommending to you that exchange of quota allocations be permitted through sale of quota tickets or of imported oil. The need for this reform, which strengthens the free market aspect of the program, has been emphasized by the current disruption in the international oil and tanker markets.

The type of international disruption mentioned above raises a potential management problem of major proportions. Other problems have become more evident since last February when you established the new management system for the oil import program. These include the increasingly apparent effect of the environmental programs and the effect of the coal and gas supply situation on the requirements for oil and on the composition of these requirements. Undoubtedly, these factors will be considered in the study of the national energy situation which you have recently directed the Domestic Council to undertake.

Six months ago, I joined with other members of the Cabinet Task Force in recommending that we should proceed at the beginning of the next year to a transition to a tariff system.5 I did not consider that this change would necessarily result in any significant decrease in costs to the consumer. I hoped the system, while continuing to provide the needed support to national security, could provide a freer market for oil, and be made simpler and more easily understood.

Recent developments have increased misgivings about moving to a tariff system at this time and about a tariff system as a feasible method of controlling oil imports.

The recent interruption in the flow of oil to Europe, while comparatively small in quantity, has caused significant disruption of the international oil situation.

Two other considerations are at least as important to me. First, it appears that our country will be in a transitional situation for some time with regard to oil, if only because of the uncertainty as to the date Alaskan oil will be available and the effects of the environmental programs. Secondly, new estimates indicate we have a more severe problem than we estimated six months ago in preventing an unwise dependence on relatively insecure sources of supply by even as early as 1975.

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The individual members of the Oil Policy Committee are impressed in varying ways by each of the three considerations mentioned above. All of us recognize that the method of control is a means to the national security end, which includes limiting U.S. dependence.

Because of these factors, the Oil Policy Committee concurs with my judgment that we discontinue consideration of moving to a tariff system of control, but rather continue with our efforts to improve the current program. I provide this advice to you now since planning for the next oil allocation year must soon get under way.

I would be remiss if I did not express to you my concern about the long run and even mid-term outlook for assuring the achievement of the national security objectives on which the oil import program is based. From a management viewpoint the program faces the danger of being gravely weakened by special actions and exceptions urged by both critics and supporters of the current system. More importantly, we also face the growing danger of not having adequate supplies from reasonably secure sources—a vast problem which cannot be separated from our overall energy policy. National security must be a central consideration in working out that overall policy.

We look to the further definition of policy, which you are now seeking, in the overall energy area to give a more reliable base for our national security oil import program.6

Respectfully,

G. A. Lincoln
7
  1. Source: National Archives, RG 56, Records Relating to the Tenure of Secretary of the Treasury David M. Kennedy 1969–71, Office of the Assistant Secretary for Public Affairs, Accession 56–73–7, Box 9, Oil Import Committee. No classification marking. In an August 7 letter, Lincoln provided Kennedy with a more detailed version of his concerns on the oil import question. (Ibid.)
  2. See Document 43.
  3. The so-called “Brownsville Turnaround,” was a mechanism for avoiding import quotas. In Brownsville, Texas, oil was offloaded from the tankers onto trucks, which then crossed into Mexico, made a U-turn, and proceeded back to Texas. Oil handled in this fashion thus became “imported” from Mexico, which had a higher quota due to its geographic location.
  4. See Document 44.
  5. A reference to the Task Force Report; see Documents 32 and 33.
  6. Lincoln’s letter was leaked before Venezuelan officials could be notified, necessitating instructions to McClintock as to how to reassure the Venezuelan Government that the United States “officially recognized dangers of becoming dependent on insecure sources for its oil and will move toward reducing this dependence.” (Telegram 133220 to Caracas, August 17; National Archives, RG 59, Central Files 1970–73, PET 17–2 US)
  7. Printed from a copy that bears Lincoln’s typed signature with an indication he signed the original.