ORAL AND PREPARED STATEMENTS OF SUBCOMMITTEE MEMBERS Abourezk, James, a U.S. Senator from the State of South Dakota, opening statement

1

Prepared statement__.

3

Statement

261

Hruska, Roman L., a U.S. Senator from the State of Nebraska

178

ORAL AND PREPARED STATEMENTS OF WITNESSES

Bartlett, Dewey, a U.S. Senator from the State of Oklahoma_

8

Prepared statement__.

13

Brinegar, Claude S., senior vice president of the Union Oil Co. of Califor-
nia, accompanied by panel members John Hopkins and Carel Otte-‒‒‒
Buchanan, DeWitt W., president, Old Ben Coal Co., accompanied by Rich-
ard Donaldson, vice president, Standard Oil of Ohio__.
Prepared statement..

358

316

321

Davidson, Paul, professor of economics and associate director of the Bureau of Economic Research at Rutgers, the State University of New Jersey

52

Prepared statement__

74

Erickson, Edward W., professor of economics and business, North Carolina
State University-

166

Hansen, Clifford P., a U.S. Senator from the State of Wyoming-
Prepared statement__.

119

127

Hardesty, Howard, president, Eastern Hemisphere Petroleum Division,
Continental Oil Co-----

182

Prepared statement--

216

Hopkins, John, acting president, Synthetic Fuels Division, Union Oil Co. of
California (see also Brinegar, Claude S.).

360

302

Johnson, Owen M., Jr., Director, Bureau of Competition, Federal Trade
Commission, accompanied by James Olson, Assistant to the Director____
Kasch, John E., vice president, Standard Oil Co., Indiana---

Kauper, Thomas E., Assistant Attorney General, Antitrust Division, De-
partment of Justice, accompanied by William E. Swope, Deputy Di-
rector of Operations----

Kurland, Norman G., Washington counsel of Kelso Bangert & Co., investment bankers__

373

345

385

Prepared statement_.

391

Max, Peter, vice president, National Economic Research Associates, Inc--
Prepared statement_..

26

31

Prepared statement-

Moore, Thomas G., professor of economics, Hoover Institute, Stanford, Page Calif.

O'Leary, John F., Mitre Corp., McLean, Va‒‒‒‒

135

152

85

Otte, Carel, vice president and manager of Geothermal Division, Union Oil
Co. of California, (see also Brinegar, Claude S.) –

361

Patrick, Harry, secretary-treasurer, United Mine Workers of America, accompanied by Messrs. Woodruff, Bethell, Nathan, and Lawson, UMWA associates

Prepared statement..

Wagner, Aubrey J., chairman of the board, Tennessee Valley Authority,
Knoxville, Tenn., accompanied by Robert H. Marquis, general counsel;
William L. Osteen, Jr., assistant general counsel; and James J. Wil-
liams, Jr., director of purchasing---.

Wilson, John W., economic counsel, J. W. Wilson & Associates, Washing-
ton, D.C_____

262

267

154

94

Prepared statement_

107

Wilson, Wallace W., vice president, Continental Illinois National Bank &
Trust Co. of Chicago--

234

MATERIAL SUBMITTED FOR THE RECORD

"Oil Supply and Tax Incentives," by Edward W. Erickson, Stephen W. Millsaps and Robert M. Spann_-_.

419

"Oil: Its Time Allocation and Project Independence" by Paul Davidson, Laurence H. Falk, and Hoesung Lee‒‒‒‒‒

449

Charts:

Decline in years of supply of U.S. gas reserves_.
Natural gas finding rate in the United States-.
TVA coal costs (by months).

TVA term coal supply contracts_

"An Economic Analysis of Price Increases in the U.S. Coal Industry"Paper prepared for: American Public Power Association, Emergency Committee for the Tennessee Valley National Rural Electric Cooperative Association, and Tennessee Valley Public Power Association, by James R. Barth and James T. Bennett__

FTC, Bureau of Competition-Attorneys currently assigned to Exxon, et al-----

Correspondence between Senator Philip A. Hart and FTC re coal, oil, and natural gas, 1970-73--

488

489

490

491

498

522

523

Perry, Harry, senior consultant, National Economic Research Associates,
Inc.

564

23

Fannin, Paul J., a U.S. Senator from the State of Arizona_

116

Aidlin, Joseph W., vice president and general counsel of Magma Power
Co.

Answers to questions asked of Peter Max during hearing on June 17, 1975, which he referred to Mr. Netschert for responses..

704

Responses to questions asked of Mr. Kasch during the hearing on October 22, 1975-

709

DIGEST OF THE HEARINGS

TUESDAY, JUNE 17, 1975

Senator Abourezk convenes the hearing___
Senator Abourezk presents reasons justifying the passage of S. 489, a
bill that would prohibit persons engaged in the production and refining
of petroleum or natural gas from owning any interest in the coal, oil
shale, uranium, nuclear reactor, geothermal steam, or solar energy
business. He asserts a lack of the existence of a free market in energy
resources, and alleges that the market is controlled by eight oil com-
panies. The Senator expresses his belief that to allow these companies
to gain control over other energy sources would be to permit them to
structure a large proportion of our economy to meet their needs and
assure their continued corporate well-being. Senator Abourezk pre-
sents statistical data to back up these contentions (the data if found
at pages 4-6 in his prepared statement)

Senator Bartlett expresses his dissatisfaction with and opposition to
the bill. Instead of promoting competition in the energy industry and
encouraging the development of energy supplies, Senator Bartlett
feels that the bill will have the effect of reducing available capital,
and retarding future development of all energy resources. He asserts
that the industry is competitive and feels that firms in the industry
have not made profits at a rate commensurate with monopoly status
(powers). He further maintains that no anticompetitive behavior has
ever been proven against the oil companies. The Senator attributes
the interest of petroleum companies in other energy fields to their
expertise and ability to deal with problems of this nature. Finally,
Senator Bartlett sums up a series of reasons as to how the bill would
deleteriously affect the economic status of the United States, and
do great damage to its position as a worldwide oil power__
Prepared Statement of Harry Perry, Senior Consultant, National
Economic Research Associates, Inc. Mr. Perry reviews the testimony
of three NERA witnesses that appeared before the committee in
1970__

He then details the effect of the OPEC oil embargo of 1973 on the oil
market in the world and, particularly, in the United States. He also
discusses the effect of the National Environmental Policy Act of 1969
(NEPA) on the energy situation in the United States. Mr. Perry
states several goals for American energy policymakers_---
Mr. Perry discusses the goals he has set forth: Reducing import de-
pendence; reducing total demand without reducing economic growth;
values__

Statement of Peter Max, vice president of National Economic Research
Associates, Inc___

Mr. Max expresses his concern over the tendencies of energy companies
to merge with one another. However, he questions whether the drastic
alteration of section 7 of the Clayton Act, as applied to oil companies,
would have the effect intended by the sponsors of this legislation. He
outlines the manner in which an economist analyzing a merger looks
at the corporations. The primary focus is on whether the effect on
competition will be beneficial, benign, or adverse. Mr. Max feels that an
economist should recommend against the merger only if it falls into
the latter category. (Note: A substantively similar but expanded
statement to this effect is presented at pages 31-34 of Mr. Max's
prepared statement)_.

Mr. Max discusses the interrelationships of different types of fuel. He notes the recent tendency of petroleum refiners to acquire interests in other energy sectors. He suggests that this is both logical and natural in view of their present needs and as future alternative fuel sources. He then expresses a basic quandary: The uncertainty as to whether existing fuel companies will delay the advent of synthetic fuels in order to protect their own interests, as opposed to the capital, resource, and management ability possessed by the larger firms---

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1-3

8-13

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23-24

24-26

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26-27

27-29

Page

Mr. Max concludes that the proposed bill is not needed, and in fact would do more harm than good. He feels that if the Department of Justice and the Federal Trade Commission were to litigate more frequently, section 7 of the Clayton Act would be sufficient to avoid the dangers geared by sponsors of this bill. He suggests a possible alternative to this bill as a means of controlling the acquisition of energy production property by petroleum producers-

Senator Abourezk and Mr. Max discuss his statement, especially as to the capability of the Clayton Act to perform the regulatory function desired. Mr. Max reaffirms his preference for case-by-case analysis rather than new legislation__

29-31

44-47

Mr. Max and the committee staff discuss various aspects of his testimony. Senator Abourezk asks several questions regarding the theory of competition in the fuel industries. (Note: Mr. Max's prepared statement contains a number of charts and graphs backing up his presentation) - 47-52 Statement of Professor Paul Davidson, professor of economics at Rutgers University

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53-55

Dr. Davidson believes that a central point in the oil crisis is really a redistribution of proved reserves away from this continent to the Middle East. He states that there are plenty of domestic energy resources. The real question is at what price can they be made available 52-53 Dr. Davidson believes that there is a withholding of production in order to enhance returns to producers and royalty owners. The best way to break the Arab oil cartel is to offer alternative sources of energy. It is his opinion that growth of monopoly power and not shortage of resources has caused the energy crisis.. Professor Davidson discusses price elasticity as it relates to the search for fossil fuels, independent producers, and conglomerate corporations_ Dr. Davidson is questioned by Senator Abourezk. They discuss theories of deregulation and the effect of deregulation on the price of oil-‒‒‒‒‒ Dr. Davidson discusses user costs and the price of oil--Dr. Davidson discusses the theory that only oil companies and energy conglomerates have the financial capacity to invest in and develop alternative energy resources. He states that if certain Government policies are changed, this will be less valid..

Dr. Davidson rediscusses price elasticity as it relates to oil

55-59

59

62-63

63-65

65-67

Senator Abourezk and Dr. Davidson discuss the relationship between
United States and OPEC oil prices-----

67-68

Committee staff members and Dr. Davidson discuss fuel reserves and various FPC studies.

68-74

WEDNESDAY, JUNE 18, 1975

Statement of John F. O'Leary, Mitre Corp., McLean, Va---.

85

Dr. O'Leary analyzes the benefits and drawbacks associated with the acquisition of coal and nuclear industries by the oil industries. He finds the supposed benefits to be illusory.

85-88

Senator Abourezk and Dr. O'Leary discuss the fact that petroleum companies have acquired the coal companies with the strongest management skills

87-88

The Senator and Dr. O'Leary discuss the relationship of the fuel industries to Government agencies----.

The Senator and Dr. O'Leary discuss synthetic fuel_.

88-90 90-91

Dr. O'Leary and the committee staff discuss various types of wells and
also the recent history of mergers in the fuel industry..
Statement of Dr. John W. Wilson, economic counsel, J. W. Wilson and
Associates

91-93

94

92-95

Dr. Wilson discusses the extent to which the oil industry controls the best coal resources and also the top coal industry management__. Dr. Wilson points out that the power of the top 20 firms stems from not a monopoly per se, but rather the fact that they are integrated with each other in many different ways; joint ventures, vertical integration, etc-- 95-98 Dr. Wilson discusses why Justice and FTC are unable to deal with the problem as presently constituted___.

98-101