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CONTENTS

759

(III)

DEPARTMENT OF ENERGY FISCAL YEAR 1979

AUTHORIZATION
(Energy Conservation)

THURSDAY, APRIL 13, 1978

U.S. SENATE,
SUBCOMMITTEE ON ENERGY CONSERVATION AND REGULATION,
OF THE COMMITTEE ON ENERGY AND NATURAL RESOURCES,

Washington, D.C. The subcommittee met, pursuant to notice, at 10 a.m., in room 357, Russell Office Building, Hon. John A. Durkin, presiding.

Present: Senator Durkin. Also present: Benjamin S. Cooper, professional staff member; James T. Bruce, counsel; and Danny Boggs, deputy minority counsel.

Senator DURKIN. We don't have a gavel in this room so I will dispense with the formalities. I think everyone knows what we are here for. I want to point out that Senator Johnston's statement, and not mine, will be printed in the record. [The prepared statement of Senator Johnston follows:]

STATEMENT OF HON. J. BENNETT JOHNSTON, A U.S. SENATOR FROM THE STATE

OF LOUISIANA

The Subcommittee hearing this morning will be devoted to the programs of the Economic Regulatory Administration (ERA) of the Department of Energy. This Administration is responsible for a broad range of programs, including crude oil and refined product price and allocation regulations; the entitlements program; the coal conversion program; the Federal contingency programs for use during energy supply emergencies; the public utility rate reform advocacy and assistance programs of the Federal government; and substantial portions of the Federal regulation of imports of crude oil, electric power and liquified natural gas. The President's request for fiscal year 1979 appropriations for ERA, including all pesonnel costs for 2,000 ERA positions, is just under $100 million. Substantial funding requirements to accommodate programs authorized by the energy legislation pending in conference committee are not included in this budget request. I expect that the Subcommittee will want the programs in the conference committee bill to go forward, but this does not mean that we automatically endorse the $100 million level of the President's original request. We will want to see this request rigorously justified. In my opinion, many of the decisions made by ERA are open to serious question. For example, I am in strong disagreement with the program establishing a "trigger" for prices of home heating oil. The Congress established a mechanism for removing price and allocation controls for individual petroleum products. That mechanism was used to decontrol home heating oil. If the law is to have any meaning at all, it should not be used to retain controls in the guise of a system for monitoring petroleum prices.

I am deeply concerned by reports that a trigger-monitoring system, perhaps in even more complex form, will be proposed by the Department in connection with gasoline decontrol. In my view, we either have Federal controls on these products or we remove those controls. There ought to be no ambiguity and no residual Federal harassment of individual petroleum marketers.

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Other problems with policies of the Department of Energy will find their way into the debate on the DOE authorization bill. These issues include DOE policies with respect to

replacement of crude oil price ceilings with an entitlements-driven price control scheme;

granting of a 100 percent entitlement to importers of residual fuel oil to the U.S. East Coast;

the export—to Japan or to the Caribbean-of crude oil produced in Alaska or California ;

mechanisms to encourage the construction of domestic refinery capacity; and the retroactive application of interpretations of regulations.

I hope that, in addition to discussing the President's budget, Mr. Bardin will address some of these policy issues faced by the Department.

Senator DURKIN. I would like to call Mr. John Buckley, please.

STATEMENT OF JOHN G. BUCKLEY, VICE PRESIDENT, NORTHEAST

PETROLEUM INDUSTRIES, INC.

Mr. BUCKLEY. Mr. Chairman, my name is John G. Buckley. I am vice president and director of Northeast Petroleum Industries, Inc. of Boston, Mass.

I am appearing today on behalf of the Independent Fuel Terminal Operators Association, the Independent Gasoline Marketers Council and the Society of Independent Gasoline Marketers of America. These three groups, independent marketers of gasoline and fuel oil, cover the United States.

And I would like at this point to submit my entire statement together with the eight attached documents for the record.*

[The prepared statement of Mr. Buckley follows:] STATEMENT OF John G. BUCKLEY, VICE PRESIDENT, NORTHEAST PETROLEUM INDUS

TRIES, INC., BEHALF OF THE INDEPENDENT FUEL TERMINAL OPERATORS ASSOCIATION, THE INDEPENDENT GASOLINE MARKETERS COUNCIL, AND THE SOCIETY OF INDEPENDENT GASOLINE MARKETERS OF AMERICA

My name is John G. Buckley. I am a Vice President of Northeast Petroleum Industries, Inc. of Boston, Mass. Northeast is an independent marketer of fuel oils and gasoline at the wholesale and retail levels in Eastern New England.

I am appearing today on behalf of the Independent Fuel Terminal Operators Association (IFTOA), the Independent Gasoline Marketers Council (IGMC), and the Society of Independent Gasoline Marketers of America (SIGMA).' These organizations are composed of independent marketers of home heating oil, residual fuel oil and gasoline throughout the nation. The independent marketers share a number of common concerns and problems which we wish to call to the attention of this Committee in its consideration of the Department of Energy authorization bill for Fiscal Year 1979.

We should like to begin by introducing for the record eight documents, which will provide the factual and analytical basis for our recommendations to this Committee. The documents are:

1. White Paper on the Competitive Viability of the Independent Fuel Oil Marketer, prepared by the Fuel Oil Marketing Advisory Committee, Department of Energy, December 5, 1977.

2. Statement of New England Fuel Institute on the Impact of High Energy Costs and Federal Regulations on Home Heating Oil Retailers before the Subcommittee on Intergovernmental Relations, Committee on Government Affairs, United States Senate, Washington, D.C., September 21, 1977.

3. Statement of the Independent Fuel Terminal Operators Association on the Proposed Rulemaking on Extension of Record Keeping Requirements before the Economic Regulatory Administration of the Department of Energy, Washington, D.C., February 8, 1978.

* The attached documents are printed in the appendix, pg. 89.
1 A description of each organization is attached to this statement.

4. Statement of New England Fuel Institute on the Proposed Rulemaking on Extension of Record-Keeping Requirements before the Economic Regulatory Administration of the Department of Energy, Washington, D.C., February 8, 1978.

5. Letter to Mr. David J. Bardin, Administrator, Economic Regulatory Administration, from John H. Shenefield, Assistant Attorney General, Antitrust Division, Department of Justice, April 3, 1978.

6. Letter to Mr. David J. Bardin, Administrator, Economic Regulatory Administration from Senator Edward M. Kennedy, Chairman, Senate Antitrust Subcommittee, February 17, 1978.

7. Statement of Independent Gasoline Marketers Council before the Subcommittee on Energy and Power, Committee on Interstate and Foreign Commerce, House of Representatives, February 23, 1978.

8. Statement of Society of Independent Gasoline Marketers of America before the Subcommittee on Energy and Power, Committee on Interstate and Foreign Commerce, House of Representatives, February 23, 1978.

The White Paper is a particularly significant document. It was prepared by a Subcommittee of the Fuel Oil Marketing Advisory Committee of the Department of Energy and represents nearly two months of concentrated work by a group of independent marketers, refiners, state energy offices and consumer representatives. The conclusions and recommendations were accepted unanimously. The Paper presents a great deal of factual data and supporting analysis relating to the marketing of fuel oil at the wholesale and retail levels. For the first time there has been a close look at the competitive viability of the independent fuel oil marketer. The report is a grim one; the prospects for survival of many dealers are not encouraging.

I am appearing today to ask that this Committee, in its review of the activties and performance of the Department of Energy, consider the conclusions and recommendations of the Paper. I might note that these conclusions and recommendations are applicable in large measure to gasoline marketing as well as fuel oil marketing

In particular, we respectfully request that you determine what action is being taken by the DOE in response to the following recommendations : 2

1. Abandon proposals for any additional monitoring and indexing of middle distillate prices at all levels of distribution for this Winter.

6. Prior to submission to the Office of Management and Budget for clearance, DOE should publish all forms in their entirety (including instructions) in the Federal Register and allow adequate opportunity for public comment. Opon review of the comments submitted, the Department should more diligently make specific findings that the form is not unduly burdensome to small businessmen and that the information solicited is unavailable from another source in the government. Any form which is to be distributed to ten or more respondents for purposes of general information gathering or used in the course of individual investigations should be approved according to this procedure.

9. Implement a more even-handed approach to audits of independent marketers, particularly on sales made during the early period of the regulatory program. Refrain from initiating additional audits of that period, close pending audits of that period and resolve issues involving retroactive application of regulations in favor of the marketer.

10. Apply rules, rulings and interpretations of regulations prospectively only. The Congressional intent to prohibit retroactive enforcement of the regulations should be immediately implemented with regard to all pending and future audits. Compliance personnel nationwide should immediately be advised as to this policy.

11. Permit auditors to compromise amounts of overcharges determined, as is done by other enforcement agencies. Such authority is recommended by the Task Force on Compliance and Enforcement (July 14, 1977) and would permit DOE to assess the impact that restitution to the market would have on the marketers' viability, pursuant to the agency's Congressional mandate.

12. Permit the crediting of overcharges against undercharges in subsequent or previous pricing periods so that marketers are not compelled to make restitution twice.

13. Immediately establish a three year statute of limitations, similar to that established by the Internal Revenue Service regulations, on pricing and allocation regulatory violations from their inception in 1973.

? These excerpted recommendations are found on pp. 1x-xll of the White Paper.

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