Dr. Wilson and Peter Chumbris, minority chief counsel, discuss the ramifications of the bill..
Dr. Wilson and Senator Abourezk discuss concentration ratio measurements, divestiture schedules, and price determinations. Mr. Chumbris and Dr. Wilson discuss the price of fuel and Government policy-.
The subcommittee was called to order___
Senator Clifford P. Hansen presents a statement to the subcommittee.
He and Senator Abourezk discuss the worldwide cutoff of oil to the
United States____.
Senator Hansen feels the only way of avoiding dependency of foreign oil
is to increase our own energy resources. He points out that neither
FTC nor Justice ordered any oil company to divest itself of a coal
acquisition. He indicates the interrelationship of the two types of com-
panies and the need for them to work together. The Senator indicates
that the entire energy industry has been in a state of uncertainty
because of legislation such as that proposed here---
Senator Hansen summarizes his thoughts on the adequacy of existing
legislation to deal with this problem___
Statement of Dr. Thomas G. Moore, professor of economics, Hoover In-
stitute, Stanford, Calif. Dr. Moore expresses his belief that the pro-
posed legislation is biased against oil companies. He and Senator
Abourezk discuss this matter__.
The Senator and Dr. Moore discuss competitiveness in the oil industry. Senator Abourezk states that it is only the independent companies which cause competition in the industry; Dr. Moore disagrees, feeling that the major corporations compete in many ways. They discuss whether the majors or independents are responsible for initiating price cuts
Dr. Moore reenforces his beliefs that the industry is not overly concentrated
The Senator and Dr. Moore discuss Thomas Duchesneau's "Competition in the U.S. Energy Industry".
The Senator and Dr. Moore discuss the cost of oil and the effect of decontrol on the cost.
The committee staff economist, Dr. Measday, questions Dr. Moore about
the cost increase in decontrolled old oil. Senator Abourezk and Dr.
Moore discuss competition as it might occur between an oil company
with a coal subsidiary. They then speculate as to how OPEC would
react if U.S. (domestic) oil prices were cut__.
The Senator and Dr. Moore discuss the future between and relationship
of the two industries to fuel prices--
Statement of Aubrey J. Wagner, Knoxville, Tenn. Mr. Aubrey reviews
the recent history of the relationship between the TVA and its coal
suppliers. The cost of coal to TVA has increased as those coal sup-
pliers were acquired by non-coal interests. He states that there are
other factors involved, but that in great part the increase must be at-
tributed to the concentration of energy ownership____
Senator Abourezk seeks to ascertain if there was any pressure brought
to bear on TVA by OMB to soften the statement just presented. Mr.
Wagner assures the Senator that there was no such pressure_.
Senator Abourezk questions Mr. James Williams, Director of Purchasing
for TVA, about incidents where coal suppliers failed to deliver tonnages
called for in their contracts__
The Senator and Mr. Wagner discuss the cost of coal and the various
factors that contribute to its high cost. They speculate as to the rea-
sons for and behind the acquisition of coal companies by energy pro-
ducers; also, how a company that holds various fuel resources will
react to the needs of the market____
Statement of Dr. Edward W. Erickson, Department of Economics, North Carolina State University. Dr. Erickson expresses his belief that the petroleum industry is competitive, and that this bill is therefore based on a mistaken premise..
The Senator and Dr. Erickson discuss the impact of and ramifications of the domestic competition picture when applied to the larger world__ 169-73 Dr. Erickson discusses net and gross reserves; also, what would be the effect on OPEC prices if the United States lowered its price on oil in the world oil market; and also, whether additional oil would be forthcoming if the price of old oil was decontrolled__.
Statement of Senator Roman Hruska of Nebraska. Senator Hruska
indicates his displeasure with the excessive amounts of time he feels
are being devoted to these hearings, and other hearings of a similar
nature__
Statement of C. Howard Hardesty, president, Eastern Hemisphere Petro-
leum Division, Continental Oil Co. Mr. Hardesty expresses his opposi-
tion to the bill. Senator Abourezk questions Mr. Hardesty about the
price of oil, particularly the composite cost of producing old oil_----- 182–85
Senator Abourezk attempts to obtain statistical data on the amount of
OPEC oil imported to this country, and also to isolate specific causes
for the price increase of oil. He questions Mr. Hardesty as to whether
domestic oil companies are at all to blame for the price increase___
Senator Hruska and Senator Abourezk discuss the best manner in which
to examine the witness__.
The Senator and Mr. Hardesty discuss the domestic oil shortage and the
difficulty involved in obtaining oil from overseas_.
Mr. Hardesty rejects arguments to the effect that the oil industry is
withholding other forms of energy supplies___
Mr. Hardesty, Senator Abourezk, and Senator Hruska, discuss energy as
a measure of competition for antitrust purposes; the effect on competi-
tiveness of an oil company entering another energy field; the ability of
a large oil company to manipulate prices among its subsidiaries; and,
the need to provide incentives for the exploration of new sources of
coal, and other energy sources.
Mr. Hardesty and Senator Hruska discuss the effect of this legislation,
and the effect of other factors, on capital availability--
Senator Abourezk and Mr. Hardesty discuss the alleged need for reliance
of the petroleum industry for the financing of coal development. Mr.
Hardesty attributes ahe need to two reasons: compatibiilty of the
industries and the availability of capital__.
Mr. Hardesty discusses Continental's contributions to increased supplies of coal and uranium: Senators Hruska and Abourezk and Mr. Hardesty discuss potential investors in the energy field, and the percentage of interest that the oil industry holds in the various energy markets--- 204-09 Mr. Hardesty concludes his statement by reaffirming his opposition to to the bill at question. Senator Abourezk questions Mr. Hardesty on the means of financing the opening of a new coal mine, and the amount of capital neecssary to do so; they also discuss the cost to Continental of its acquisition of Consolidation___ Richard Jones, Minority counsel, questions Mr. Hardesty on behalf of Senator Thurmond, who had earlier left the subcommittee hearing. Mr. Hardesty again expresses his opposition to the bill. He feels that the bill would hurt, not help, in the process of developing new energy
Statement of Wallace W. Wilson, vice president of the Energy and Mineral Resources Division of Continental Illinois National Bank and Trust Co. of Chicago-
Mr. Wilson indicates his opposition to the bill_.
Senator Abourezk, Mr. Wilson, and Mr. Chumbris discuss the presence
or absence of competition among the major oil companies_-_.
The Senator and Mr. Wilson discuss price controls on oil and the cost of
oil, per barrel____
Mr. Wilson concludes his statement by reviewing the performance of the coal industry over the last 50 years. He feels that participation by oil companies is critical to the success of efforts to double coal output by 1985. He also reviews the status of other fuel industries and their relation to the oil industry-
Senator Abourezk and Mr. Wilson discuss the Bank's policies regarding loans to conglomerate energy companies__.
Senator Abourezk, presiding, opens the second set of hearings on S. 489,
which provides for horizontal divestiture of oil companies__.
Senator Abourezk says, "In 1960 oil companies controlled minimal
amounts of coal. In 1975, they have control over about 44 percent of the
noncaptive coal production. *** I believe it may be useful to ask
whether oil ownership of coal companies has already limited competi-
tion between the two fuels. *** The advances in profits by coal com-
panies come from higher prices rather than from increased volume of
sales. *** If natural gas were produced by an entirely different
group of companies, I wonder if there would have been the desire and
the cushion of revenues to sit on production the way the oil companies
have. I doubt it. I have no desire to see the same thing happen, event-
ually, to coal".
Statement of Harry Patrick, secretary-treasurer, United Mine Workers
America
UMW supports the bill because "a handful of giant corporations have
effectively assumed control of most of our energy resources".
Mr. Patrick cites seven points to bear in mind: One, between 1948 and
1963, the oil and gas industries effectively destroyed the viability of the
coal industry; two, in addition to purchasing operating coal companies,
oil and gas companies also acquired vast coal reserves, giving them a
large degree of control over future production; three, the oil companies
tell us that oil money will be used for investment in the coal industry
to increase production. * * * This has not happened; four, the oil in-
dustry * * * has actually retarded the development of coal conver-
sion technology; five, monopoly control of resources used in the pro-
duction of such diverse products as fertilizer, medicines, plastics, and
chemical feedstocks will disrupt the price structures of the products
dependent upon them, including the price of the food we eat; six, eco-
nomic concentration produces concentration of political influence; seven,
the process of economic concentration continues while we debate its
significance
S. 489 is necessary because section 7 of the Clayton Act does not break up mergers by itself; the job has to be done by the Department of Justice or the Federal Trade Commission; they have been unable to do it efiectively
S. 489 flatly prohibits oil and gas producers from acquiring coal busi-
nesses, and forces those companies that have done so already to get rid
of their holdings within 3 years. *** We would suggest 5 years
as being more realistic___.
Mr. Patrick submitted a paper entitled "Acquisition of Coal-Producing
Companies by Oil Companies: Principal Developments 1963–1975"-
Senator Abourezk questons Mr. Patrick about his statement. Tom Bethell,
UMWA research director, and Tom Woodruff, UMWA staff economist,
also respond_.
Senator Abourezk asks Mr. Patrick for his reaction to the allegation
that the Coal Mine Health and Safety Act has caused the productivity
of the industry to drop sharply. Mr. Patrick responds that that is a
fallacy; that the coal companies are making more money now than ever-
Senator Abourezk asks Mr. Patrick to comment on the positive benefits
of oil ownership of coal. Mr. Patrick responds that "conflicting state-
ments * * * come out of both sides of the mouth of the oil industry
and the coal industry. *** They say production is down; that the
1969 Health and Safety Act has completely tied their hands as far as
production, and then on the other hand when it is to their benefit, they
say that since the oil company got in there, profits and production has
went (sic) up"---
In response to Senator Abourezk's request, Mr. Walter Measday, staff economist for the Antitrust Subcommittee, comments on exactly how divestitures can take place without huge infusions of capital that the opponents of divestiture talk about____.
Senator Abourezk and Mr. Patrick discuss an American Petroleum In-
stitute press release opposed to the divestiture bills____
Mr. Vaughn and M. Bethell discuss the possible effect of the bill on
union-management relationships in the coal industry____
Mr. Vaughn and Mr. Bethell discuss coal price increases and competition
in the coal and oil industries_.
Statement of Mr. Owen Johnson, Director of the Bureau of Competition
of the Federal Trade Commission__
Mr. Johnson discusses whether the energy market is a relevant market
in terms of interfuel competition: "A definition of the relevant market
or markets is quite often the key to an antitrust prosecution. * * *
A violation exists if there are anticompetitive effecs in any market or
submarket. The classic exposition of this theme appears in the Supreme
Court's opinion in Brown Shoe v. United States." He concludes that
there is both an overall energy market and various submarkets within
it
Mr. Johnson mentions that the Energy Study Unit of the Commission has
"sent detailed subpenas or compulsory special report forms to the Na-
tion's leading coal, uranium, and natural gas companies. The companies
are being asked to provide information on their corporate structure,
reserves, production, profitability, research expenditures, and patents."
The aggregate figures will be released to the public---
Mr. Johnson comments on S. 489: "The bill appears to be overly broad.
As drafted, it would make it unlawful for any
company
to own *** any interest in a coal, oil, shale, uranium, nuclear
reactor, geothermal or solar business if the *** company
*** is
also engaged in the production and refining of petroleum and/or natural
gas. The bill contains no provision which would allow an evaluation
of the competitive effect of the *** ownership * * *” Senator
Abourezk suggests that with such a provision the bill would be no im-
provement over existing antitrust laws, which make it virtually im-
possible to require divestiture. Mr. Johnson defends the FTC's record
in enforcing antitrust laws__
Mr. Johnson gives suggestions for narrowing the scope of the bill__
Mr. Johnson is questioned about reports which were due the committee
from the Commission‒‒‒‒‒
Mr. Johnson is questioned about cases before the Commission. Mr. Olsen,
assistant to the Director, also responds____
Oral statement of DeWitt Buchanan, president of Old Ben Coal Co.: "The continuing regulation of natural gas at unrealistically low levels had a great deal to do over the years with the coal industry (sic) not growing to the extent we might otherwise have hoped *** As a result of this regulation, the development of new gas supplies has not come forward. And this, together with the pricing actions of the OPEC countries with respect to petroleum, has brought the coal industry's potential back into focus.".
Mr. Buchanan discusses the effects of his company's being owned by an
oil company for the last 7 years. He feels that the results have been
positive
Senator Abourezk questions Mr. Buchanan about his statement--.
Mr. Buchanan states his belief that S. 489 "would seriously cripple
the ability of the coal industry to meet this country's energy challenge."
Mr. Johnson and Senator Abourezk discuss the effect divestiture and
merger have on the morale of coal company employees___
Mr. Buchanan cites six needs of the coal industry: 1, expansion; 2, re-
search; 3, a Federal coal leasing program; 4, a realistic way to comply
with the National Environmental Protection Act; 5, the proposed
Clean Air Act Amendments; 6, a realistic approach to the Coal Mine
Health and Safety Act__
Mr. Buchanan concludes with the opinion that allegations that there are
little competition within the petroleum industry are untrue__.
[Prepared statement of Mr. Buchanan]
Mr. Buchanan discusses the history and current state of the coal industry. He cites the National Environmental Policy Act and the Federal Coal Mine Health and Safety Act as having inhibited devlopment of the coal industry
Mr. Buchanan discusses the history of Old Ben and the positive results of its control by an oil company.
Mr. Buchanan discusses why he feels competition, particularly between
petroleum and coal, is not decreased by individual companies producing
more than one form of energy--.
Mr. Buchanan states his disagreement with "the thrust of S. 489 because
it appears to be directed toward imaginary problems related to "poten-
tial" limits to competition between energy forms".
Mr. Buchanan discusses the six needs of the coal industry he mentioned
in his oral statement. He includes methods to improve and expand coal
transportation facilities and the absence of Federal reclamation legis-
lation that precludes the surface mining of western lands-
Senator Abourezk questions Mr. Buchanan on his statement_-_-
Mr. Donaldson, vice president of Government and public affairs of Old
Ben Coal Co., makes additional comments: "While there have been
divestitures, voluntary and involuntary in the past, they have come
one at a time. *** Second, even if a stock spinoff of some sort can
be engineered, that does not drag with it the credit obligations that
are tied in with all financings that have been done".
Senator Abourezk questions Mr. Donaldson__
Senator Abourezk and Mr. Banta question Mr. Buchanan_.
Mr. Chumbris questions Mr. Buchanan and Mr. Donaldson_.
Dr. Vaughn questions Mr. Buchanan_-_-
Senator Abourezk, presiding, calls the hearing to order__
Statement of Thomas E. Kauper, Assistant Attorney General, Antitrust
Division, Department of Justice_-_
The first issue to which Mr. Kauper will speak is "whether the energy
market is a relevant market in terms of interfuel competition." His
answer is, "It depends." He elaborates: "There are two basic elements
to relevant market analysis: the products which should be included
and the geographic areas which must be considered”.
Mr. Kauper comments on "whether ownership in various sources of en-
ergy by the same firm creates a potentially anticompetitive situation."
His answer is, "Yes, the potential for adverse competitive effects exists.
Whether this potential will become actual * * * cannot be answered
in the abstract".
Mr. Kauper gives the Department's overall views on the bill. He recommends against passage..
Senator Abourezk questions Mr. Kauper about his statement..
Mr. Chumbris continues the questioning of Mr. Kauper---
Statement of Mr. Claude S. Brinegar, senior vice president of Union
Oil Co. of California__.
Mr. Brinegar describes Union Oil Co-‒‒‒
Union Oil Co. opposes S. 489 "totally." It would cause new monopolies to appear and it would hurt the economy. Mr. Brinegar makes three key points:
1. The U.S. oil industry is "intensely competitive" and "quite
efficient"
2. The oil industry is not "a secret monopoly that can only be dealt
with by special legislative clobbering".
3. "Over the next several decades, assuming adequate incentives and freedom, America's petroleum industry can be expected to discover a great deal more oil and gas”. Statement of John Hopkins, acting president, Synthetic Fuels Division, Union Oil Co. of California: Congress should not prevent the oil industry from developing oil shale_-_.
Statement of Dr. Carel Otte, vice president and manager of Geothermal Division, Union Oil Co. of California: Oil companies with their skilled personnel and large sums of capital are needed to help the development of geothermal energy.
Senator Abourezk questions Mr. Otte about his statement_.
Senator Abourezk questions Mr. Brinegar-
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